Cryptocurrencies

[SharperDingaan]

1 hour ago, wachtwoord said:

 

LOL Reacting NOW because this actually IS an interesting discussion point different from what's been discussed before (and you have point).

 

Yes, in the current situation Bitcoin from any address can be taken when a quantum computer with sufficient qbits is developed Not with zero effort mind you! But then it becomes doable in polonial time to brute force private keys. The first one's to fall would be the old P2PK addresses (as these make the public key destination of the tx public) and addresses that do use P2PKH (or newer) but have at least one outgoing transaction are also easier to attack.

 

Note that these addresses being beatable in polynomial time is highly unlikely without a quantum computer (and hence why I only consider quantum attacks). Compare the situation to the question whether P=NP. It's almost certain not the case but proving it is very very difficult. Highly unlikely in this field should be interpreted as "impossible" in this field for practical applications.

 

Anyway before the time quantum computers have enough qbits to be a real threats people will see it coming because of the sublinear progress in this field. The code to make Bitcoin quantum resistant has already been written (but would require a hard fork).

 

By the way, even if you have access to a quantum computer today with sufficient qbits it's harder than you think to get money out of it by taking Bitcoins at will. If this is noticed by the market price would race to zero and how do you explain the origin of funds at whatever off ramp you're using? Only a limited amount of money can be extracted with this.

 

Finally while I do believe it's an effective canary for a sudden breakthrough in quantum computing power it's highly unlikely the CIA or anyone else planned this. Much more likely to be an emergent characteristic.

 

Glad you're back 

 

SD

[Sweet]

17 hours ago, RichardGibbons said:

(I doubt that it's actually the case that the CIA created blockchain for this reason, because when bitcoin was first created, it would have been unreasonably optimistic to believe it would become as popular as it has become (and using it as a "canary in the coal mine" requires it to become popular. ) Nevertheless, I like this theory because it's a very elegant solution to the question, "how can we tell when someone's cracked our encryption?")

I don’t think anyone knew it would become this popular, or that it was intended to be popular.  I see characteristics though that make me think, dam, wouldn’t it be crazy if this was a government honey trap for all the criminals.  Who knows though.

[RichardGibbons]

9 hours ago, wachtwoord said:

By the way, even if you have access to a quantum computer today with sufficient qbits it's harder than you think to get money out of it by taking Bitcoins at will. If this is noticed by the market price would race to zero and how do you explain the origin of funds at whatever off ramp you're using? Only a limited amount of money can be extracted with this.

 

I don't think I'd take bitcoins at will because that would be theft. Rather, I assume that proof-of-work is also an NP-Hard problem. So I'd just find the hash every 24 hours or so, with a Poisson distribution or something, with each win allocated to a different key.

Doing that wouldn't make you rich as fast as stealing a billion dollars overnight, but you'd be approaching revenue of $50M/year.  (And you could also branch out to other proof-of-work coins with large enough capitalizations.)

[rkbabang]

26 minutes ago, RichardGibbons said:

 

I don't think I'd take bitcoins at will because that would be theft. Rather, I assume that proof-of-work is also an NP-Hard problem. So I'd just find the hash every 24 hours or so, with a Poisson distribution or something, with each win allocated to a different key.

Doing that wouldn't make you rich as fast as stealing a billion dollars overnight, but you'd be approaching revenue of $50M/year.  (And you could also branch out to other proof-of-work coins with large enough capitalizations.)

 

 

The thing is that if you have a quantum computer which can do this it is only a matter of time until someone else does as well, so you probably wouldn't have a year.   

 

As @wachtwoord said the code to harden Bitcoin against this already exists, as quantum computers get better it will be adopted long before there is a real risk.  Anyway I'm not too worried about this. Quantum computers are kind of like nuclear fusion, it is always 30 years away.

 

 

[jfan]

Just a random thought...

 

If I purchase a bunch of BTC at $15K/coin, the price runs up to $100K/coin.

 

I use that BTC to purchase a house by transacting fully in BTC with the seller.

 

Do I pay capital gains tax on my BTC purchases? What is the Canadian tax law surrounding this?

Does the home seller declared capital gains or losses at the point they convert to the local currency?

 

[TwoCitiesCapital]

24 minutes ago, jfan said:

Just a random thought...

 

If I purchase a bunch of BTC at $15K/coin, the price runs up to $100K/coin.

 

I use that BTC to purchase a house by transacting fully in BTC with the seller.

 

Do I pay capital gains tax on my BTC purchases? What is the Canadian tax law surrounding this?

Does the home seller declared capital gains or losses at the point they convert to the local currency?

 

 

Can't speak to Canadian taxes, but in the US you'd be expected to pay the capital gains on the BTC disposed. 

 

I have used the VWAP or closing price on the day of a transaction to determine the gain/loss.  

[Castanza]

39 minutes ago, TwoCitiesCapital said:

 

Can't speak to Canadian taxes, but in the US you'd be expected to pay the capital gains on the BTC disposed. 

 

I have used the VWAP or closing price on the day of a transaction to determine the gain/loss.  

 

How does the IRS view forks? Do they consider it the same class as an equity spin off which is typically tax free? 

[TwoCitiesCapital]

9 minutes ago, Castanza said:

 

How does the IRS view forks? Do they consider it the same class as an equity spin off which is typically tax free? 

 

Better off asking a tax professional. 

 

I've never been through a fork myself and only personally have researched the tax ramifications that mattered to me for the activity I was doing. 

[TwoCitiesCapital]

On 1/14/2023 at 12:25 PM, TwoCitiesCapital said:

The general consensus seemed to be the low volatility of recent would spark a break-out/high volatility event. 

 

Though, most seemed to think to the downside with lows of 9-12k being thrown out all over the place. Now that we've bounced to 21k, a few questions. 

 

1) is BTC still going to be highly correlated with equities and we can expect this to be a leading indicator for positive stock returns in the near future? 

 

2) or has the available supply become sufficiently limited that BTC is now trading on its own supply/demand mismatch with little correlation to other risks assets

 

3) was 15.5k the low? Or do we get another drop in the event if a global recession? 

 

 

 

Have heard some interesting takes on this from BTC personalities

 

1) Tim Peterson says as long as institutions providing incremental flows treat this as a high beta stock alternative - it'll behave like one. Probably explains why prior periods of zero correlation stopped post 2020 when stimulus and big institutions were getting involved. Also means it's probably too soon to expect the correlation to break (and maybe it doesn't?)

 

2) Dylan LeClair has said something similar, but from a different perspective. His argument is that you gets these periods of intense correlation of risk assets because everyone is short dollars (i.e. has dollar denominated liabilities) and prices are measured and stated in dollars. As dollars come into demand, you're selling anything and everything else to reduce risk and service debts/pay rolls/mortgages/etc to meet these dollar denominated liabilities. So as USD goes up, nearly everything goes down and that's what is driving the correlation with equities and risk assets. 

 

One says it's the USD. The other says it's the institutional manager behavior. Both night be right and viewing the 'problem' from a different perspective. 

 

In either instance though, it seems unlikely the correlation will go away while USD remains the asset BTC is predominantly measured against (i.e. while USD is the global reserve currency). 

 

As far as lows being in, both seem to acknowledge additional risks and the potential for a lower price, but believe that 15.5k post-FTX was a likely cycle/capitulation low. 

Edited January 18, 2023 by TwoCitiesCapital

[Parsad]

https://finance.yahoo.com/news/bank-america-says-cbdcs-future-121752086.html

 

Cheers!

[ValueArb]

This is how big crypto still is. The DOJ arrests a founder of a crypto exchange they claim did $700M in money laundering, and its so small no one has ever even heard of it. 

 

https://www.reuters.com/business/finance/us-treasury-dept-says-has-identified-bitzlato-ltd-money-laundering-concern-2023-01-18/

[JRM]

8 hours ago, ValueArb said:

This is how big crypto still is. The DOJ arrests a founder of a crypto exchange they claim did $700M in money laundering, and its so small no one has ever even heard of it. 

 

 

we're still so early.

[Castanza]

16 hours ago, Parsad said:

https://finance.yahoo.com/news/bank-america-says-cbdcs-future-121752086.html

 

Cheers!

 

I think the closer something like this gets to implementation, the more it will drive up the price of BTC until govt says something directly against it. 

[UK]

 

[Dave86ch]

5 hours ago, UK said:

 

Are these the most wealthy and influential ppl in the US?

[SharperDingaan]

On 1/19/2023 at 9:07 AM, Castanza said:

 

I think the closer something like this gets to implementation, the more it will drive up the price of BTC until govt says something directly against it. 

 

The Chinese experience has been that it both raises the price of 'paper' bills in circulation (so that everyone can anonymously pay for their black market/drug purchases), and raises the local demand for BTC (so that you can keep the accumulated profit anonymous).

 

You are allowed to continue, in return for a portion of that anonymous BTC being paid to one of the states many anonymous BTC accounts. Fail to pay, and you are 'disappeared', along with your operation being shut down (subject to 're-opening' fee, paid by the highest bidder). Everyday business in most of the world.

 

SD

[giulio]

https://www.bloomberg.com/opinion/articles/2023-01-26/chatgpt-is-not-much-of-a-pitch-robot?leadSource=uverify wall

 

Matt Levine with an interesting story "DeWi rug pull". 

 

Essentially some projects MIGHT make some sense...except for the token part! 

 

Still can't understand what Ackman sees in something like Helium 

[nwoodman]

Go Charlie

 

All this wild and wooly capitalism is much like that described in a remark often attributed to Mark Twain, who was thought to have said that “a mine is a hole in the ground with a liar on top.”

 

Such wretched excess has gone on because there is a gap in regulation. A cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity. Obviously the U.S. should now enact a new federal law that prevents this from happening.

 

Why America Should Ban Crypto - WSJ

[Dave86ch]

4 hours ago, nwoodman said:

Go Charlie

 

All this wild and wooly capitalism is much like that described in a remark often attributed to Mark Twain, who was thought to have said that “a mine is a hole in the ground with a liar on top.”

 

Such wretched excess has gone on because there is a gap in regulation. A cryptocurrency is not a currency, not a commodity, and not a security. Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity. Obviously the U.S. should now enact a new federal law that prevents this from happening.

 

Why America Should Ban Crypto - WSJ

 

I greatly admire Charlie and have learned much from him, but I may still consider his criticisms of cryptocurrencies to be beyond his area of expertise.

 

It's a shame, bitcoin is the greatest multidisciplinary effort I ever faced.

 

 

 

 

[dealraker]

Bitcoin is the need to be free of constraints.  Stopping or regulating it just means creating something else.  

Edited February 2, 2023 by dealraker

[rkbabang]

4 hours ago, Dave86ch said:

 

I greatly admire Charlie and have learned much from him, but I may still consider his criticisms of cryptocurrencies to be beyond his area of expertise.

 

It's a shame, bitcoin is the greatest multidisciplinary effort I ever faced.

 

 

 

 

+1  He doesn't get it, and that's ok.  Not everyone has to understand everything.  It is unfortunate, though, that he has such a strong opinion on something that is way out of his area of competency and trying to use his considerable influence to sway the opinions of others.

 

[TwoCitiesCapital]

3 hours ago, rkbabang said:

+1  He doesn't get it, and that's ok.  Not everyone has to understand everything.  It is unfortunate, though, that he has such a strong opinion on something that is way out of his area of competency and trying to use his considerable influence to sway the opinions of others.

 

 

+1

 

Charlie and Warren regularly make mistakes. Most of the time they're pretty good about admitting it and moving on. 

 

Not so with Bitcoin.

 

And they've regularly been committing the sin of omission when it comes to tech related investments by admitting they don't understand them. The dude was best friends with the CEO of Microsoft for decades and never got comfortable owning the stock?!?! Why would we expect BTC, which is akin to venture capital in a new payments network, to be any different? 

Edited February 2, 2023 by TwoCitiesCapital

[Dave86ch]

18 hours ago, rkbabang said:

+1  He doesn't get it, and that's ok.  Not everyone has to understand everything.  It is unfortunate, though, that he has such a strong opinion on something that is way out of his area of competency and trying to use his considerable influence to sway the opinions of others.

 

 

Sometime I wonder if they are simply attempt to protect what makes them wealthy, Bitcoin is clearly a threat in many ways to the establishment. Buffett, munger, Jamie Dimon, european central bank... all of them express naive judgement on Bitcoin that look to me as an attempt to preserve their mental model structure and source of power.

 

Aside from bitcoin I'm testing the governance of Aave and VITAdao and frankly, paraphrasing Balaji "a new Leviathan is coming"

Edited February 3, 2023 by Dave86ch

[Sweet]

I wouldn’t assume that Munger doesn’t understand crypto.
 

Just because his views don’t align with your own doesn’t mean he doesn’t understand it.

 

Conceptually crypto is not complicated.

 

[rkbabang]

31 minutes ago, Sweet said:

I wouldn’t assume that Munger doesn’t understand crypto.
 

Just because his views don’t align with your own doesn’t mean he doesn’t understand it.

 

Conceptually crypto is not complicated.

 

 

Indeed.  When I say "he doesn't get it," I am not saying he doesn't understand how it works.  Let me give you an example of what I mean.  In 1998 everyone pretty much understood how the internet worked.  It's a network of computers that everyone can join, every device has an address on the network, and the devices can communicate with each other via a multitude of protocols.  Conceptually not very complicated.  But while everyone understood what the internet was, some people didn't get it.  Paul Krugman wrote: "By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's."  He clearly didn't get it. He understood how it worked just fine, but he still didn't get its potential, what it would become, what this capability would enable, what people would do with it, and its potential future impact on the economy and how people live.  It is in this sense that I say Munger doesn't get it.

 

Of course as @Dave86ch said above, there is the possibility that he does get it and just doesn't like it, but I don't want to think that about him, so I give him the benefit of the doubt and say he doesn't get it.