Cryptocurrencies

[rkbabang]

 

My post was about forks being dilutive (if they have value). No sure how any of that answers that.

 

The rest is the usual story. I'm saying it's too early to tell if that'll work out that way. Some new fork or brand new coin could come out in 10 years that has characteristics so much more attractive than bitcoin that it could effectively compete away a lot of demand for bitcoin and make price drop, affecting the "store of value" part and the "supply is limited" part.

 

Yes, that is the bear case.  But without some new thing with some much more attractive properties applicable to being a good store of value, none of the altcoins will have a long term effect on Bitcoin.  They may have small short term dillutive effects for a while, but as they become valueless and disappear those small effects will disappear with them.  Without substantial new properties/benefits, first mover advantage is everything.  Why would you switch from bitcoin if everyone is already using bitcoin and go to a coin almost no one uses that isn't substantially better?  It is like facebook, anyone can create a competing social network, but unless there is some feature that is massively better that FB can't copy, why would you switch when everyone you know (and a few billion people you don't know) are already using FB?  Any dilution will turn out to be minimal and short lived.  I do think there will be an endless number of app coins, which will not dilute BTC because they serve a different purpose altogether.  I don't consider Ether, for example, to be a bitcoin competitor, because ETH will never be a store of value.

 

Of course it is all supply and demand.  Everything is, including your stocks which you think have "intrinsic" value.  It only has that value if the market eventually agrees with you.  The same goes for Bitcoin.

Not really. Productive assets can return cashflow to shareholders via dividends, special dividends, or buybacks, or from an outright sale of the company for cash or some other stock, and if the company does well, those streams can increase over time. That's part of why someone else might want to buy it off you. Gold won't ever give you a cent, so it's all relying on someone else buying it.

 

And you value this "cash" why?  It doesn't have intrinsic value and is only "valuable" because other people value it and will give you stuff for it.

Maybe in the future you will be saying that companies have intrinsic value because they have coinflow.

 

Try paying your federal taxes in bitcoins. You will find out why cash is valuable.

 

Taxation is theft.  I don't value things simply because violent thieves prefer them.  As a matter of fact, holding your wealth in something the worlds most powerful and organized thieves do not want is a benefit.

 

Wow man very edgy; I was a libertarian in high school too. You may not value freedom from prison, but the vast majority of people do. Extrapolating your extreme ideology onto the rest of the world is a laughably naive behavioral bias. It's like the miser who thinks AAPL is worthless because he uses a $50 Android smartphone.

 

I don't want to pay taxes, but I value my freedom, hence I pay taxes and value dollars. Dread Pirate Roberts similarly believed taxation was theft and that bitcoin was a way to fight the man from behind a computer screen.

 

I pay my taxes for the same reason.  I don't want to die. I don't want to be kidnapped and locked in a cage like an animal.  That doesn't make them not theft. You were a libertarian in high school?  What are you now?  Someone who thinks violence and theft is OK?  How edgy.

 

 

[rkbabang]

 

My post was about forks being dilutive (if they have value). No sure how any of that answers that.

 

The rest is the usual story. I'm saying it's too early to tell if that'll work out that way. Some new fork or brand new coin could come out in 10 years that has characteristics so much more attractive than bitcoin that it could effectively compete away a lot of demand for bitcoin and make price drop, affecting the "store of value" part and the "supply is limited" part.

 

Yes, that is the bear case.  But without some new thing with some much more attractive properties applicable to being a good store of value, none of the altcoins will have a long term effect on Bitcoin.  They may have small short term dillutive effects for a while, but as they become valueless and disappear those small effects will disappear with them.  Without substantial new properties/benefits, first mover advantage is everything.  Why would you switch from bitcoin if everyone is already using bitcoin and go to a coin almost no one uses that isn't substantially better?  It is like facebook, anyone can create a competing social network, but unless there is some feature that is massively better that FB can't copy, why would you switch when everyone you know (and a few billion people you don't know) are already using FB?  Any dilution will turn out to be minimal and short lived.  I do think there will be an endless number of app coins, which will not dilute BTC because they serve a different purpose altogether.  I don't consider Ether, for example, to be a bitcoin competitor, because ETH will never be a store of value.

 

Of course it is all supply and demand.  Everything is, including your stocks which you think have "intrinsic" value.  It only has that value if the market eventually agrees with you.  The same goes for Bitcoin.

Not really. Productive assets can return cashflow to shareholders via dividends, special dividends, or buybacks, or from an outright sale of the company for cash or some other stock, and if the company does well, those streams can increase over time. That's part of why someone else might want to buy it off you. Gold won't ever give you a cent, so it's all relying on someone else buying it.

 

And you value this "cash" why?  It doesn't have intrinsic value and is only "valuable" because other people value it and will give you stuff for it.

Maybe in the future you will be saying that companies have intrinsic value because they have coinflow.

 

Try paying your federal taxes in bitcoins. You will find out why cash is valuable.

 

Taxation is theft.  I don't value things simply because violent thieves prefer them.  As a matter of fact, holding your wealth in something the worlds most powerful and organized thieves do not want is a benefit.

 

Wow man very edgy; I was a libertarian in high school too. You may not value freedom from prison, but the vast majority of people do. Extrapolating your extreme ideology onto the rest of the world is a laughably naive behavioral bias. It's like the miser who thinks AAPL is worthless because he uses a $50 Android smartphone.

 

I don't want to pay taxes, but I value my freedom, hence I pay taxes and value dollars. Dread Pirate Roberts similarly believed taxation was theft and that bitcoin was a way to fight the man from behind a computer screen.

 

I pay my taxes for the same reason.  I don't want to die. I don't want to be kidnapped and locked in a cage like an animal.  That doesn't make them not theft. You were a libertarian in high school?  What are you now?  Someone who thinks violence and theft is OK?  How edgy.

 

Ha, a libertarian on FB just accused me of sounding like an 18 year old trying to be edgy because I don't believe in his god.  I'll say here what I said there.  Edgy or boring, there is no god and taxation is theft. 

[Sportgamma]

Found this talk on Crypto by Hyun Song Shin from the Bank of International Settlements quite informative:

• 
  

 

Wow, that wasn't very good. His main research question is the wrong one (store of value is the right topic here). His first limitation is both irrelevant (doesn't matter if not solved) and very likely solved or at least mitigated by second layer solutions. His second limitation is actually a much stronger limitation of the current monetary system.

 

I do admire your conviction.

 

If, as you say, the store of value thesis is "the correct topic" when it comes to crypto, would you then also say that crypto should be seen more as an asset rather than money?

 

If the first limitation has to be mitigated by second layer solutions, would that not entail that the finality/settlement of the cryptocurrency (the second limitation) would start to resemble the current monetary system?

[wachtwoord]

Found this talk on Crypto by Hyun Song Shin from the Bank of International Settlements quite informative:

• 
  

 

Wow, that wasn't very good. His main research question is the wrong one (store of value is the right topic here). His first limitation is both irrelevant (doesn't matter if not solved) and very likely solved or at least mitigated by second layer solutions. His second limitation is actually a much stronger limitation of the current monetary system.

 

I do admire your conviction.

 

If, as you say, the store of value thesis is "the correct topic" when it comes to crypto, would you then also say that crypto should be seen more as an asset rather than money?

 

If the first limitation has to be mitigated by second layer solutions, would that not entail that the finality/settlement of the cryptocurrency (the second limitation) would start to resemble the current monetary system?

 

What do you consider gold? I consider that primarily an asset but it can be used as money if needed (but not very efficiently). Bitcoin is an improved version of gold. That is the whole thesis.

 

The current monetary system doesn't have a finite but infinite supply giving the monetary units marginal value at best. Secondly the control of the monetary system is highly centralized giving these actors the power of censorship. Thirdly the current system isn't very secure (balances are simple entries in databases that can be altered by people with access to these databases).

 

Edit:

 

To clarify: you are asking questions about crypto here. I'm answering them with Bitcoin in mind. Most of this doesn't hold for the vast majority of altcoins.

[writser]

Bitcoin is an improved version of gold. That is the whole thesis.

 

Bitcoin uses a shitload of energy and depends on internet access. Bitcoin doesn't have the thousands of years of history gold has had as a store of value and the underlying idea is completely generic so there will always be alternative coins / spinoffs pushed by other market participants trying to make a new 'store of value' out of thin air.

 

And the worst thing: if you ever get robbed, suddenly die, forget your password or if your computer is compromised you can lose all your wealth without any recourse. I'm not so sure that that's an improvement.

[wachtwoord]

A lot of energy compared to what? Cause that is what provides the enormous level of security.

 

The no recourse thing is a direct consequence of the absence of a censoring gatekeepers and the direct control you have over your assets. Choose your poison I guess, but to me that's well worth it. (There's also solutions for some of the problems you mention with multisig and/or timelocked transactions).

[writser]

A lot of energy compared to what? Cause that is what provides the enormous level of security.

 

The no recourse thing is a direct consequence of the absence of a censoring gatekeepers and the direct control you have over your assets. Choose your poison I guess, but to me that's well worth it. (There's also solutions for some of the problems you mention with multisig and/or timelocked transactions).

 

Define 'enormous security'. Yes, it is computationally infeasible to steal your bitcoins. But no matter how you slice or dice it, you have to store your private key somewhere. On your computer: can be hacked / compromised or I can simply smash your pc with a hammer. On a USB stick: it drops out of your pocket and suddenly you are broke. In a safe in your house? People can steal that too .. I guess the safe thing is to engrave your private key on a bar of gold and put that in a bank safe. But at that point you are back at the beginning: trusting the bank to keep your assets safe. You might as well open a bank account at that point. I think that's something a lot of fanatics overlook. In theory the system is fantastic and super secure but in practice bitcoins get lost / stolen a lot because the weakest link is not the theoretical security of the blockchain itself .. How many bitcoins have been lost / stolen the past few years? Would you call the whole ecosystem enormously secure?

 

On top of that there is the horrible fact that I mentioned before: IF something goes wrong, i.e. I smash your computer or you lose your USB stick, you lose your wealth permanently, with no recourse. You can't go to the judge, can't call the bank to send you a new PIN number, can't claim your money back from your insurer. Given that 99.99% of all people are absolutely clueless about computer security, are stupid and will at some point run into one of the issues described above and will then lose ALL their money I think it is, from a practical perspective, extremely unlikely that a private key on a USB stick will replace existing stores of wealth any time soon. Yes, Bitcoin has advantages so it might have some niche uses (contract killers and IT nerds love it) but for the vast majority of people it is a terrible store of wealth. Keeping a private key private is basically the same problem as keeping a pouch of diamonds private and on top of that you have the inherent problems of Bitcoin itself (i.e. power usage, lack of recourse, majority attacks, internet required, possible emergence of alternative coins, extreme historical price volatility, etc.). So, the worst of two worlds.

[wachtwoord]

I mostly agree with what you write above. It's extremely secure, no system in human history has ever been so secure, but at the cost of having your own responsibility. You seem to also use the term security for that and I don't agree with that use of the word. So yes the ecosystem is inherently secure. Humans may not be.

 

Further, you say losing your private keys would destroy all your wealth but that is what diversification is for. You can spread your wealth over more than just one investment and your Bitcoin can be spread over as many wallets as you choose. I imagine many people will indeed choose custody solutions for holding Bitcoin, undoing some of the benefits.

 

I also don't think it's the best store of wealth for the majority of people (but neither is gold). I think it's (potentially) an important store of wealth for a significant portion of the world's wealth (and with the very unequal division of wealth this does not translate to the majority of people).

[writser]

If we’re talking about wealth storage I don’t really care about theoretical security. I want to know how likely it is that my wealth gets stolen or lost. In that sense a bar of gold in a bank is, in my opinion, far more secure than a bitcoin on a pc or a USB stick.

 

I agree with you on diversification. However, having 10 private keys instead of 1 is basically the same thing as having 10 pouches of diamonds instead of 1: you can store them in different places but the inherent (dis)advantages of the method stay the same.

 

Funny to see our points of view aren’t that different. Main difference is in our estimate of the size of this niche market I guess.

[UNF2007]

If we’re talking about wealth storage I don’t really care about theoretical security. I want to know how likely it is that my wealth gets stolen or lost. In that sense a bar of gold in a bank is, in my opinion, far more secure than a bitcoin on a pc or a USB stick.

 

I agree with you on diversification. However, having 10 private keys instead of 1 is basically the same thing as having 10 pouches of diamonds instead of 1: you can store them in different places but the inherent (dis)advantages of the method stay the same.

 

Funny to see our points of view aren’t that different. Main difference is in our estimate of the size of this niche market I guess.

 

I tend to agree with this line of thinking, and the portion of bitcoins that have been lost due to lost keys is staggering, some reports say its like 23% of all the mined coins have been lost. Could you imagine if 23% of the gold reserve disappeared. 

[wachtwoord]

This reply is to writser:

 

That and on your opinion on the first point. I think theoretical security can equal actual security for those willing to be diligent and educate themselves sufficiently. Nothing in this world comes completely without risk (although we often like to tell ourselves differently).

 

About the pouch of diamond (or rather gold as to me carbon doesn't have much value) comparison: realize that those take space and are far harder to move and conceal.

[wachtwoord]

If we’re talking about wealth storage I don’t really care about theoretical security. I want to know how likely it is that my wealth gets stolen or lost. In that sense a bar of gold in a bank is, in my opinion, far more secure than a bitcoin on a pc or a USB stick.

 

I agree with you on diversification. However, having 10 private keys instead of 1 is basically the same thing as having 10 pouches of diamonds instead of 1: you can store them in different places but the inherent (dis)advantages of the method stay the same.

 

Funny to see our points of view aren’t that different. Main difference is in our estimate of the size of this niche market I guess.

 

I tend to agree with this line of thinking, and the portion of bitcoins that have been lost due to lost keys is staggering, some reports say its like 23% of all the mined coins have been lost. Could you imagine if 23% of the gold reserve disappeared.

 

If you account for the dollar value of the loss at the time of loss the numbers are far less impressive. People will try harder for millions than for a few dollars.

[Sportgamma]

Found this talk on Crypto by Hyun Song Shin from the Bank of International Settlements quite informative:

• 
  

 

Wow, that wasn't very good. His main research question is the wrong one (store of value is the right topic here). His first limitation is both irrelevant (doesn't matter if not solved) and very likely solved or at least mitigated by second layer solutions. His second limitation is actually a much stronger limitation of the current monetary system.

 

I do admire your conviction.

 

If, as you say, the store of value thesis is "the correct topic" when it comes to crypto, would you then also say that crypto should be seen more as an asset rather than money?

 

If the first limitation has to be mitigated by second layer solutions, would that not entail that the finality/settlement of the cryptocurrency (the second limitation) would start to resemble the current monetary system?

 

What do you consider gold? I consider that primarily an asset but it can be used as money if needed (but not very efficiently). Bitcoin is an improved version of gold. That is the whole thesis.

 

The current monetary system doesn't have a finite but infinite supply giving the monetary units marginal value at best. Secondly the control of the monetary system is highly centralized giving these actors the power of censorship. Thirdly the current system isn't very secure (balances are simple entries in databases that can be altered by people with access to these databases).

 

Edit:

 

To clarify: you are asking questions about crypto here. I'm answering them with Bitcoin in mind. Most of this doesn't hold for the vast majority of altcoins.

 

I would consider gold a scarce asset.

 

As money, gold has pretty severe limitations. In fact, I would think that one of the key reasons why gold did not survive as a medium of exchange was due to the inelasticity of supply. The infinite elasticity of fiat money that is often so bemoaned by crypto proponents is, in my amateurish opinion, not a bug but a feature.

 

In regards to centralization and lack of security, I don't think that it would be relevant to compare Bitcoin to monetary systems if Bitcoin is an improved version of gold, as opposed to a form of money. 

 

 

[rkbabang]

If we’re talking about wealth storage I don’t really care about theoretical security. I want to know how likely it is that my wealth gets stolen or lost. In that sense a bar of gold in a bank is, in my opinion, far more secure than a bitcoin on a pc or a USB stick.

 

I agree with you on diversification. However, having 10 private keys instead of 1 is basically the same thing as having 10 pouches of diamonds instead of 1: you can store them in different places but the inherent (dis)advantages of the method stay the same.

 

Funny to see our points of view aren’t that different. Main difference is in our estimate of the size of this niche market I guess.

 

I tend to agree with this line of thinking, and the portion of bitcoins that have been lost due to lost keys is staggering, some reports say its like 23% of all the mined coins have been lost. Could you imagine if 23% of the gold reserve disappeared.

 

If you account for the dollar value of the loss at the time of loss the numbers are far less impressive. People will try harder for millions than for a few dollars.

 

I was going to say that very thing, the vast majority of the lost bitcoin was lost when they had little to no value not in the last two years. It was only after the price went way up that people started saying "oh crap what happened to those thousands of bitcoin I mined in 2010?"

[wachtwoord]

The infinite elasticity of fiat money that is often so bemoaned by crypto proponents is, in my amateurish opinion, not a bug but a feature.

 

Oh it is a feature, to those in power of influencing the monetary supply. It's detrimental to everyone else. Due to that asymmetry it undermines the free market (and is therefore by definition bad in my opinion as I consider the free market to be the optimal system).

 

For those mentioning power waste, perhaps this recent study is an interesting read. It's on the price and sources of Bitcoin mining (both geographically and how the power is produced). The main conclusions are that at least 77.6% of the power consumption is from renewables and that a large part of this comes from stranded assets: power that is otherwise wasted.

https://coinshares.co.uk/wp-content/uploads/2018/11/Mining-Whitepaper-Final.pdf

 

(Note the source of the study is unlikely to be impartial based on the name alone)

[SharperDingaan]

If you want the better asset (Bitcoin vs Gold), responsibility for your actions is the price. It's that simple.

You lose your private key, you compromise that key, you screw up - and you wear it. There is no 'un-do', no 'cancel', or correction of 'fat finger' error. And there shouldn't be.

 

We know that there are at least 1,040,000 BTC that are lost (creators Baltic boat-cruise story). There are a great many more that are essentially locked (the wallets that all those BTC computer ransom payments were going to), or were simply forgotten. Derive your own number.

 

But it does NOT mean they are nullified.

To get the money out, Mt Gox just has to be able to pledge them as loan collateral. Which Mt Gox can do, because it was the Oracle that originally issued those wallets - and the keys that went with them.

 

Welcome to the world of cryptocoin  ;)

 

SD

 

 

[DeepSouth]

 

My post was about forks being dilutive (if they have value). No sure how any of that answers that.

 

The rest is the usual story. I'm saying it's too early to tell if that'll work out that way. Some new fork or brand new coin could come out in 10 years that has characteristics so much more attractive than bitcoin that it could effectively compete away a lot of demand for bitcoin and make price drop, affecting the "store of value" part and the "supply is limited" part.

 

Yes, that is the bear case.  But without some new thing with some much more attractive properties applicable to being a good store of value, none of the altcoins will have a long term effect on Bitcoin.  They may have small short term dillutive effects for a while, but as they become valueless and disappear those small effects will disappear with them.  Without substantial new properties/benefits, first mover advantage is everything.  Why would you switch from bitcoin if everyone is already using bitcoin and go to a coin almost no one uses that isn't substantially better?  It is like facebook, anyone can create a competing social network, but unless there is some feature that is massively better that FB can't copy, why would you switch when everyone you know (and a few billion people you don't know) are already using FB?  Any dilution will turn out to be minimal and short lived.  I do think there will be an endless number of app coins, which will not dilute BTC because they serve a different purpose altogether.  I don't consider Ether, for example, to be a bitcoin competitor, because ETH will never be a store of value.

 

Of course it is all supply and demand.  Everything is, including your stocks which you think have "intrinsic" value.  It only has that value if the market eventually agrees with you.  The same goes for Bitcoin.

Not really. Productive assets can return cashflow to shareholders via dividends, special dividends, or buybacks, or from an outright sale of the company for cash or some other stock, and if the company does well, those streams can increase over time. That's part of why someone else might want to buy it off you. Gold won't ever give you a cent, so it's all relying on someone else buying it.

 

And you value this "cash" why?  It doesn't have intrinsic value and is only "valuable" because other people value it and will give you stuff for it.

Maybe in the future you will be saying that companies have intrinsic value because they have coinflow.

 

Try paying your federal taxes in bitcoins. You will find out why cash is valuable.

 

Taxation is theft.  I don't value things simply because violent thieves prefer them.  As a matter of fact, holding your wealth in something the worlds most powerful and organized thieves do not want is a benefit.

 

Wow man very edgy; I was a libertarian in high school too. You may not value freedom from prison, but the vast majority of people do. Extrapolating your extreme ideology onto the rest of the world is a laughably naive behavioral bias. It's like the miser who thinks AAPL is worthless because he uses a $50 Android smartphone.

 

I don't want to pay taxes, but I value my freedom, hence I pay taxes and value dollars. Dread Pirate Roberts similarly believed taxation was theft and that bitcoin was a way to fight the man from behind a computer screen.

 

I pay my taxes for the same reason.  I don't want to die. I don't want to be kidnapped and locked in a cage like an animal.  That doesn't make them not theft. You were a libertarian in high school?  What are you now?  Someone who thinks violence and theft is OK?  How edgy.

 

If you pay taxes in dollars then you do value dollars because " violent thieves" prefer them. Your actions speak louder than your internet posts. Dollars are incredibly valuable, as like you said, refusing to use dollars can get you killed or locked in a cage like an animal. It doesn't matter if this is good or bad, evil or moral. It is what it is. Letting your political ideology cloud your investment judgment makes for a poor investor.

[rkbabang]

 

My post was about forks being dilutive (if they have value). No sure how any of that answers that.

 

The rest is the usual story. I'm saying it's too early to tell if that'll work out that way. Some new fork or brand new coin could come out in 10 years that has characteristics so much more attractive than bitcoin that it could effectively compete away a lot of demand for bitcoin and make price drop, affecting the "store of value" part and the "supply is limited" part.

 

Yes, that is the bear case.  But without some new thing with some much more attractive properties applicable to being a good store of value, none of the altcoins will have a long term effect on Bitcoin.  They may have small short term dillutive effects for a while, but as they become valueless and disappear those small effects will disappear with them.  Without substantial new properties/benefits, first mover advantage is everything.  Why would you switch from bitcoin if everyone is already using bitcoin and go to a coin almost no one uses that isn't substantially better?  It is like facebook, anyone can create a competing social network, but unless there is some feature that is massively better that FB can't copy, why would you switch when everyone you know (and a few billion people you don't know) are already using FB?  Any dilution will turn out to be minimal and short lived.  I do think there will be an endless number of app coins, which will not dilute BTC because they serve a different purpose altogether.  I don't consider Ether, for example, to be a bitcoin competitor, because ETH will never be a store of value.

 

Of course it is all supply and demand.  Everything is, including your stocks which you think have "intrinsic" value.  It only has that value if the market eventually agrees with you.  The same goes for Bitcoin.

Not really. Productive assets can return cashflow to shareholders via dividends, special dividends, or buybacks, or from an outright sale of the company for cash or some other stock, and if the company does well, those streams can increase over time. That's part of why someone else might want to buy it off you. Gold won't ever give you a cent, so it's all relying on someone else buying it.

 

And you value this "cash" why?  It doesn't have intrinsic value and is only "valuable" because other people value it and will give you stuff for it.

Maybe in the future you will be saying that companies have intrinsic value because they have coinflow.

 

Try paying your federal taxes in bitcoins. You will find out why cash is valuable.

 

Taxation is theft.  I don't value things simply because violent thieves prefer them.  As a matter of fact, holding your wealth in something the worlds most powerful and organized thieves do not want is a benefit.

 

Wow man very edgy; I was a libertarian in high school too. You may not value freedom from prison, but the vast majority of people do. Extrapolating your extreme ideology onto the rest of the world is a laughably naive behavioral bias. It's like the miser who thinks AAPL is worthless because he uses a $50 Android smartphone.

 

I don't want to pay taxes, but I value my freedom, hence I pay taxes and value dollars. Dread Pirate Roberts similarly believed taxation was theft and that bitcoin was a way to fight the man from behind a computer screen.

 

I pay my taxes for the same reason.  I don't want to die. I don't want to be kidnapped and locked in a cage like an animal.  That doesn't make them not theft. You were a libertarian in high school?  What are you now?  Someone who thinks violence and theft is OK?  How edgy.

 

If you pay taxes in dollars then you do value dollars because " violent thieves" prefer them. Your actions speak louder than your internet posts. Dollars are incredibly valuable, as like you said, refusing to use dollars can get you killed or locked in a cage like an animal. It doesn't matter if this is good or bad, evil or moral. It is what it is. Letting your political ideology cloud your investment judgment makes for a poor investor.

 

I value my life and freedom, not dollars.  If they asked me for sea shells, I'd get them sea shells.  It doesn't mean I value sea shells.  I'd still value gold, bitcoin, and stock in a good company far more.  Sea shells would simply be a means to an end.    Gold is valuable and yet you can not send in gold coins with your tax returns, because that isn't the store of value those particular thieves want.  So what.  You can convert from one store of value to another.  In a hyper inflationary environment you might store your wealth in something other than dollars and convert to dollars only to pay the tax man.  The definition of value isn't "I use it to pay taxes".

 

[DTEJD1997]

Hey all:

 

I think we've seen peak bitcoin & peak crypto-currency.

 

How do I know beside the huge sell off?

 

Well, in the summer time, I started to see some unusual pop-up ads on various sites on the inter-webs.  These ads were promoting some type of crypto-currency.  Not sure what it was, I was not going to waste my time.  I presume it was a serious ad, who would be paying money for it's placement otherwise?

 

Attached is a screenshot showing the pop-up add.  This is what I saw, and I am not making it up.  Did anybody else see these?

 

 

[SnarkyPuppy]

 

My post was about forks being dilutive (if they have value). No sure how any of that answers that.

 

The rest is the usual story. I'm saying it's too early to tell if that'll work out that way. Some new fork or brand new coin could come out in 10 years that has characteristics so much more attractive than bitcoin that it could effectively compete away a lot of demand for bitcoin and make price drop, affecting the "store of value" part and the "supply is limited" part.

 

Yes, that is the bear case.  But without some new thing with some much more attractive properties applicable to being a good store of value, none of the altcoins will have a long term effect on Bitcoin.  They may have small short term dillutive effects for a while, but as they become valueless and disappear those small effects will disappear with them.  Without substantial new properties/benefits, first mover advantage is everything.  Why would you switch from bitcoin if everyone is already using bitcoin and go to a coin almost no one uses that isn't substantially better?  It is like facebook, anyone can create a competing social network, but unless there is some feature that is massively better that FB can't copy, why would you switch when everyone you know (and a few billion people you don't know) are already using FB?  Any dilution will turn out to be minimal and short lived.  I do think there will be an endless number of app coins, which will not dilute BTC because they serve a different purpose altogether.  I don't consider Ether, for example, to be a bitcoin competitor, because ETH will never be a store of value.

 

Of course it is all supply and demand.  Everything is, including your stocks which you think have "intrinsic" value.  It only has that value if the market eventually agrees with you.  The same goes for Bitcoin.

Not really. Productive assets can return cashflow to shareholders via dividends, special dividends, or buybacks, or from an outright sale of the company for cash or some other stock, and if the company does well, those streams can increase over time. That's part of why someone else might want to buy it off you. Gold won't ever give you a cent, so it's all relying on someone else buying it.

 

And you value this "cash" why?  It doesn't have intrinsic value and is only "valuable" because other people value it and will give you stuff for it.

Maybe in the future you will be saying that companies have intrinsic value because they have coinflow.

 

Try paying your federal taxes in bitcoins. You will find out why cash is valuable.

 

Taxation is theft.  I don't value things simply because violent thieves prefer them.  As a matter of fact, holding your wealth in something the worlds most powerful and organized thieves do not want is a benefit.

 

Wow man very edgy; I was a libertarian in high school too. You may not value freedom from prison, but the vast majority of people do. Extrapolating your extreme ideology onto the rest of the world is a laughably naive behavioral bias. It's like the miser who thinks AAPL is worthless because he uses a $50 Android smartphone.

 

I don't want to pay taxes, but I value my freedom, hence I pay taxes and value dollars. Dread Pirate Roberts similarly believed taxation was theft and that bitcoin was a way to fight the man from behind a computer screen.

 

I pay my taxes for the same reason.  I don't want to die. I don't want to be kidnapped and locked in a cage like an animal.  That doesn't make them not theft. You were a libertarian in high school?  What are you now?  Someone who thinks violence and theft is OK?  How edgy.

 

If you pay taxes in dollars then you do value dollars because " violent thieves" prefer them. Your actions speak louder than your internet posts. Dollars are incredibly valuable, as like you said, refusing to use dollars can get you killed or locked in a cage like an animal. It doesn't matter if this is good or bad, evil or moral. It is what it is. Letting your political ideology cloud your investment judgment makes for a poor investor.

 

So much irony in this post.  Love it

[Sportgamma]

The infinite elasticity of fiat money that is often so bemoaned by crypto proponents is, in my amateurish opinion, not a bug but a feature.

 

Oh it is a feature, to those in power of influencing the monetary supply. It's detrimental to everyone else. Due to that asymmetry it undermines the free market (and is therefore by definition bad in my opinion as I consider the free market to be the optimal system).

 

 

While I can certainly sympathise with the libertarian stance, the money-printing-is-100%-evil-argument just doesn't seem that convincing to me. Sure, the moral hazard is there, there is no free lunch and with great power comes great responsibility. I think most will agree to that. However, turning it into good vs evil dilutes the discussion and turns the focus away from discussing the actual trade-offs of different monetary policies and systems.

 

Let's, for a few seconds, assume that the central banks of the world are not some nefarious actors trying to transfer wealth to a select few, but rather trying to use the tools at their disposal, in order to ensure the smooth functioning of the payment system.

 

My first question would be: Is a central bank necessary?

The US was relatively late compared to Europe to establish a central bank. Prior to the Fed, banks would issue their own banknotes which were backed by each bank's gold reserves and there was a very limited secondary market for the commercial loans that the banks would make. In times of pessimism, the banks would reduce the supply of money, which in turn would have a deflationary effect on the local economy, much to the detriment of all affected.

 

I think it's hard to argue against the case that the adoption of central banks by the monetary systems across the world was not only an improvement but an absolute necessity.

 

The second question would be: Is infinite supply of money detrimental to the actors within the system?

The most common argument I hear against a free-floating fiat currency revolves around the "seniorage as illegal taxation" argument. In short: the government can dilute the purchasing power of others by creating money and spending it before the market has adjusted prices to the new denominator a.k.a. "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output".

 

Personally, the stance that I have come to adopt as I have delved deeper into the topic is that the monetary base does not really play a causal role in the determination of the money supply and that the money multiplier (M3 / M0) is not that useful as an analytical framework.

 

In the words of Claudio Borio: "In fact, in systems without reserve requirements, the multiplier is practically infinite; and nothing calamitous has ever happened. Increasing bank reserves (the means of payment) beyond what markets want simply pushes interest rates to the deposit facility or, in its absence, to zero. Increasing the monetary base is like pushing on a string and could result in loss of control over interest rates. Bank lending reflects banks’ management of the risk-return tradeoff they face, and bank transaction deposits the non-bank sector’s portfolio preferences. The ultimate anchor of the monetary system is not the monetary base but the interest rate the central bank sets."

 

It's not that I think the lunch is free, I just think the crypto-punks and libertarians overstate the actual cost/detriment of the lunch.

 

[SharperDingaan]

It's useful to recognise that cryptocurrency (Bitcoin) grew out of the cyberpunk manifesto of the 90's, and was located primarily in the former USSR states as the republic was breaking up. Anarchy was good, it was your only protection, and widespread state corruption was the norm. To many, central bankers were perhaps the biggest thieves there were; and there was a lot of objective evidence to support that.

 

To these folks, there is nothing one can say that might change their view; just as there is nothing one can say to the goldbug fixated on the pecious metal. Nothing wrong in that, but it's not going to be the everyday reality in most applications. There will be central bank issued digital currency (E-Krone), it will become increasingly common, and frankly it does many things better than the fiat cash equivalent (ie: AML/ATF tracking).

 

Like any venereal disease; Bitcoin is probably going to be with us for a very long time, and impossible to eradicate. ;)

Except that this one gives you the ability to evade corrupt central bankers, & makes it very difficult to follow.

Insurance against seizure, valuable to just about everybody.

 

In the shipping world, it's customary to pay a 'fee' to ensure safe transit of your goods through some of the most corrupt ports in the world (& in everyone's interest). If 'breakages' exceed the agreed fee it's to the recipients to 'resolve' it, no questions asked. Bitcoin performs a similar function.

 

Just a different POV.

 

SD

 

 

 

[wachtwoord]

The infinite elasticity of fiat money that is often so bemoaned by crypto proponents is, in my amateurish opinion, not a bug but a feature.

 

Oh it is a feature, to those in power of influencing the monetary supply. It's detrimental to everyone else. Due to that asymmetry it undermines the free market (and is therefore by definition bad in my opinion as I consider the free market to be the optimal system).

 

 

While I can certainly sympathise with the libertarian stance, the money-printing-is-100%-evil-argument just doesn't seem that convincing to me. Sure, the moral hazard is there, there is no free lunch and with great power comes great responsibility. I think most will agree to that. However, turning it into good vs evil dilutes the discussion and turns the focus away from discussing the actual trade-offs of different monetary policies and systems.

 

Let's, for a few seconds, assume that the central banks of the world are not some nefarious actors trying to transfer wealth to a select few, but rather trying to use the tools at their disposal, in order to ensure the smooth functioning of the payment system.

 

My first question would be: Is a central bank necessary?

The US was relatively late compared to Europe to establish a central bank. Prior to the Fed, banks would issue their own banknotes which were backed by each bank's gold reserves and there was a very limited secondary market for the commercial loans that the banks would make. In times of pessimism, the banks would reduce the supply of money, which in turn would have a deflationary effect on the local economy, much to the detriment of all affected.

 

I think it's hard to argue against the case that the adoption of central banks by the monetary systems across the world was not only an improvement but an absolute necessity.

 

The second question would be: Is infinite supply of money detrimental to the actors within the system?

The most common argument I hear against a free-floating fiat currency revolves around the "seniorage as illegal taxation" argument. In short: the government can dilute the purchasing power of others by creating money and spending it before the market has adjusted prices to the new denominator a.k.a. "Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output".

 

Personally, the stance that I have come to adopt as I have delved deeper into the topic is that the monetary base does not really play a causal role in the determination of the money supply and that the money multiplier (M3 / M0) is not that useful as an analytical framework.

 

In the words of Claudio Borio: "In fact, in systems without reserve requirements, the multiplier is practically infinite; and nothing calamitous has ever happened. Increasing bank reserves (the means of payment) beyond what markets want simply pushes interest rates to the deposit facility or, in its absence, to zero. Increasing the monetary base is like pushing on a string and could result in loss of control over interest rates. Bank lending reflects banks’ management of the risk-return tradeoff they face, and bank transaction deposits the non-bank sector’s portfolio preferences. The ultimate anchor of the monetary system is not the monetary base but the interest rate the central bank sets."

 

It's not that I think the lunch is free, I just think the crypto-punks and libertarians overstate the actual cost/detriment of the lunch.

 

You basically state two premises that you hold true I don't agree with. Firstly I don't believe anyone  or any group of people can act in a non-corrupt fashion when given the enormous power central banks have (just like there is no such thing as a non-corrupt politician except the ones without power) and even if that were possible, no centralized entity would be able to outperform a properly decentralized decision making process where all actors are allowed to make decisions for their own benefit. (It's always hard for people to accept that doing nothing is optimal. This is why investing is so hard for most people).

 

Secondly I disagree central banks have added any form of value to the economic market. Quite the opposite, since the introduction (through British subterfuge!) of central banks in the USA in the early 1900s it never returned to the prior high standards (and directly caused the bubble that ended in 1929 and the following economic crisis). Central banks are a powerful tool used by very powerful people to preserve their current status. They're not going anywhere.

 

I don't think it is neccessary to agree with any of the above to see the value (to an individual) of Bitcoin though so perhaps it's too off topic. I mean gold has a very limited elasticity and I don't think you're arguing it has no value ;)

[Sportgamma]

I don't think it is neccessary to agree with any of the above to see the value (to an individual) of Bitcoin though so perhaps it's too off topic. I mean gold has a very limited elasticity and I don't think you're arguing it has no value ;)

 

True.

 

I actually have indirect exposure to both Bitcoin and mining operations, so I'm not arguing that the value isn't there.

[LC]

Bitcoin has been in the public eye for 3? 4? years now and has relatively no breakthrough public product to justify all the time and energy spent.

 

Where is the value?