Cryptocurrencies

[clutch]

I have expressed this argument at length before but will repeat again much more directly.

 

Money, stocks, bonds, loans, BTC..  basically all non-hard assets are massive fantasies.

 

It's not my argument but of a renowned philosopher John Searle. And no, he is not some French postmodernist, he is as realist and naturalist as you could get as a philosopher. But basically, all these assets are forms of institutional reality that is created via a series of speech acts (nowadays "document acts").

 

You may argue... but some of these assets are "backed" by something else. My stock certificates represent ownership of the factory, the money is backed by the government, etc. Well how do you establish such backing? Document acts... but there is nothing tangible and physical about this backing.

 

How do we know? Suppose a dictator comes along and instructs all financial records to be wiped out. All of the assets above will be worthless. So really, investing in such assets all require some level of faith.

 

Now, the chance of US currency or treasury bills facing such events will be very low... at least compared to BTC. So you can estimate your confidence. Maybe I have 99% confidence in traditional assets and 1% confidence in BTC (relatively). So I decide to invest 99% in traditional assets and 1% in  BTC. But then I realize the asymptomatic nature of that 1% in terms of the return. If BTC establishes itself as a stable store of value, my gain will be significant so I decided to invest a bit more.

 

(As an aside... I have a feeling that many economists and those with the traditional business school mindset have a harder time grasping this "massive fantasy" notion... I think it's largely because they'd like to think of their discpline as scientific and objective... they want to treat things like money, yields, institutions as the same ontological category as molecules, chemical elements, and gravity... I'm sorry they are not. In a way, I think they are resentful of the fact that they are not scientists, engineers, nor doctors dealing with objective reality... and perhaps their discipline is not as important... so they need some ground to stand on and argue that traditional assets are backed by institutions as if planet motions are governed by gravitational forces.)

[rkbabang]

Thank you Clutch, very well said.  I would add gold your list as nothing but a fantasy, a construct of the human mind rather than anything in reality.  It cracks me up when people say its value comes from its usefulness. Aluminum has every useful feature that gold has and is better at most of them, yet it isn't used as money and isn't "worth " thousands of dollars per oz.  Why? Because it doesn't have the mythical history that gold has going back thousands of years, it isn't a pretty yellow color that humans fancy, and it isn't as rare.  But again it is more useful and worth practically nothing. All value is subjective, seeing people trying to come up with post hoc reasoning for why we value one thing and not another is often hilarious. The easiest people to fool is often ourselves.  Bitcoin solves some problems and why will people value it over any other crypto which can also solve such problems? For the same reason people don't hoard aluminum coins. Its history, its story, its rarity, and because everyone else values it.

[Libs]

GBTC is currently at a 6% discount to BTC. I believe that's unprecedented.

[TwoCitiesCapital]

GBTC is currently at a 6% discount to BTC. I believe that's unprecedented.

 

Part of me wants to load up in my IRA since I've been swing trading the premium in GBTC for the last 18-24 months and -6% is CHEAP compared to the +40% we saw in December.

 

The other part of me recognizes that the premium plays an important role in short, and intermediate, term demand for physical BTC and the discount to NAV might mean that physical BTC will have less support and provide better entry points even if at higher premiums to NAV.

 

Anyone with more experience on flows/technicals have thoughts on this other me?

 

 

[SharperDingaan]

Deduct commission and wind-up costs, and a 6% discount to the BTC value is about right.

 

Rather than use BTC options; we opted to swing trade the dips up to our original investment, and take the gains/losses off the table. As/when the volatility dies down, there are commission savings if the BTC is simply sold for a BTC-ETF, and trading confined to the ETF instead. So far, it has worked very well  :)

 

SD

[TwoCitiesCapital]

Deduct commission and wind-up costs, and a 6% discount to the BTC value is about right.

 

Rather than use BTC options; we opted to swing trade the dips up to our original investment, and take the gains/losses off the table. As/when the volatility dies down, there are commission savings if the BTC is simply sold for a BTC-ETF, and trading confined to the ETF instead. So far, it has worked very well  :)

 

SD

 

Yea - I mean a discount to NAV "makes sense" - particularly once we get a BTC ETF in the U.S.  But historically it's traded at fairly significant double-digit premiums despite the discount "making sense" and I don't quite yet understand what's changed unless if this is just a temporary dip in sentiment and we can expect a return to double-digit premium in the near future. 

 

I know Canada just launched a BTC ETF, but I  don't imagine most investors in the U.S. having a broker that allows them to trade Canadian equities, so I don't think was what did it.

 

But it is somewhat concerning to me because institutional investors buy physical BTC, sell to Greyscale for GBTC, and get to sell GBTC for a hefty premium and roll that back into more physical BTC sales to do it all over again. The loss of the premium COULD impact near term demand if not offset by a matching increase in retail demand like you'd expect to see from a new BTC ETF in the U.S.

 

This is my main concern - the reduction in institutional roll demand with no offsetting increase elsewhere.

[SharperDingaan]

Think of the roll as 1) buy BTC, 2) buy out-of-the money BTC calls, 3) sell BTC at a higher price to GBTC, 4) then take BTC delivery on those now in-the-money calls. Guess at how much of that notional outstanding call volume was naked ;) inflating the quantity actually available for sale.

 

That naked volume doesn't hit the market until the contract settles, when it ratchets up price - pushing more options into the money. Manage that 'push', and you essentially 'corner' the market (at total available BTC float well <21M ... you don't need much volume } The volatility isn't just because of BTC going mainstream.

 

SD

 

 

[Parsad]

I have expressed this argument at length before but will repeat again much more directly.

 

Money, stocks, bonds, loans, BTC..  basically all non-hard assets are massive fantasies.

 

It's not my argument but of a renowned philosopher John Searle. And no, he is not some French postmodernist, he is as realist and naturalist as you could get as a philosopher. But basically, all these assets are forms of institutional reality that is created via a series of speech acts (nowadays "document acts").

 

You may argue... but some of these assets are "backed" by something else. My stock certificates represent ownership of the factory, the money is backed by the government, etc. Well how do you establish such backing? Document acts... but there is nothing tangible and physical about this backing.

 

How do we know? Suppose a dictator comes along and instructs all financial records to be wiped out. All of the assets above will be worthless. So really, investing in such assets all require some level of faith.

 

Now, the chance of US currency or treasury bills facing such events will be very low... at least compared to BTC. So you can estimate your confidence. Maybe I have 99% confidence in traditional assets and 1% confidence in BTC (relatively). So I decide to invest 99% in traditional assets and 1% in  BTC. But then I realize the asymptomatic nature of that 1% in terms of the return. If BTC establishes itself as a stable store of value, my gain will be significant so I decided to invest a bit more.

 

(As an aside... I have a feeling that many economists and those with the traditional business school mindset have a harder time grasping this "massive fantasy" notion... I think it's largely because they'd like to think of their discpline as scientific and objective... they want to treat things like money, yields, institutions as the same ontological category as molecules, chemical elements, and gravity... I'm sorry they are not. In a way, I think they are resentful of the fact that they are not scientists, engineers, nor doctors dealing with objective reality... and perhaps their discipline is not as important... so they need some ground to stand on and argue that traditional assets are backed by institutions as if planet motions are governed by gravitational forces.)

 

In the long run, we are all dead.

- John Maynard Keynes

 

Clutch, I suspect Keynes would agree with your sentiment and belief.  That being said, when we are investing, we are generally talking about events occurring in the next 5-10-50 years out at best. 

 

You suggested that these pieces of paper have no real ownership.  Yet, we know that is not true.

 

Stocks - Buffett would completely disagree with you here.  They are pieces of businesses, including the underlying assets within those businesses.  If you own enough pieces of paper, you directly control the assets.  So, as long as the businesses are operating and generating cash flow, and the balance sheet is reasonable, the pieces of paper have some real value.

 

Bonds/Loans - We've seen enough examples where owning the bonds of a business, mean you own the actual business...especially if it defaults.  So they are backed.

 

Currency - backed by nation state assets and tax revenues.  Yes, a dictator could step in and change everything, but how often does that happen in stable, developed governments and economies...so while possible, the probabilities generally fall outside of the 5-10-50 year realm.

 

Hard Assets - generally some utilitarian purpose supports the underlying value...whether it is land, commodities, etc.

 

Bit Coin/Crypto in present form - nothing backing it in most cases.

 

Outside of the blockchain transaction technology, how is cryptocurrency different from something like gold? Why not just remove the t+2 settlement timing and trade fractional positions in GLD futures?

 

Gold is anonymous, whereas Bitcoin no longer is.  When you transact in gold the transaction is over, with Bitcoin there must be a network maintained in order to maintain the function.  Bitcoin is useful for very large transactions or transactions across borders. 

 

I see Bitcoin as an entirely separate asset class.  It is not money, it is closer to art or collectibles than it is to gold.

 

I agree it is a separate asset class presently...frankly not even akin to tulips, let alone art or collectibles.  Art and collectibles have a historical pedigree and scarcity that gives it a value.  People desire to own art and collectibles...you admire art...you drink wine...you drive antique/collectible cars...you marvel at the technical wonders of antique rifles...you listen to music...you play instruments.  So while the utility isn't as apparent as commodities or precious metals, there is still an underlying utility.  There is absolutely nothing utilitarian behind current crypto. 

 

There will be one day...but not behind the stuff we see out there now.  And when that stuff comes, this current crop will generally be worthless.  Remember Blue Chip Stamps!  Cheers!

[clutch]

I have expressed this argument at length before but will repeat again much more directly.

 

Money, stocks, bonds, loans, BTC..  basically all non-hard assets are massive fantasies.

 

It's not my argument but of a renowned philosopher John Searle. And no, he is not some French postmodernist, he is as realist and naturalist as you could get as a philosopher. But basically, all these assets are forms of institutional reality that is created via a series of speech acts (nowadays "document acts").

 

You may argue... but some of these assets are "backed" by something else. My stock certificates represent ownership of the factory, the money is backed by the government, etc. Well how do you establish such backing? Document acts... but there is nothing tangible and physical about this backing.

 

How do we know? Suppose a dictator comes along and instructs all financial records to be wiped out. All of the assets above will be worthless. So really, investing in such assets all require some level of faith.

 

Now, the chance of US currency or treasury bills facing such events will be very low... at least compared to BTC. So you can estimate your confidence. Maybe I have 99% confidence in traditional assets and 1% confidence in BTC (relatively). So I decide to invest 99% in traditional assets and 1% in  BTC. But then I realize the asymptomatic nature of that 1% in terms of the return. If BTC establishes itself as a stable store of value, my gain will be significant so I decided to invest a bit more.

 

(As an aside... I have a feeling that many economists and those with the traditional business school mindset have a harder time grasping this "massive fantasy" notion... I think it's largely because they'd like to think of their discpline as scientific and objective... they want to treat things like money, yields, institutions as the same ontological category as molecules, chemical elements, and gravity... I'm sorry they are not. In a way, I think they are resentful of the fact that they are not scientists, engineers, nor doctors dealing with objective reality... and perhaps their discipline is not as important... so they need some ground to stand on and argue that traditional assets are backed by institutions as if planet motions are governed by gravitational forces.)

 

In the long run, we are all dead.

- John Maynard Keynes

 

Clutch, I suspect Keynes would agree with your sentiment and belief.  That being said, when we are investing, we are generally talking about events occurring in the next 5-10-50 years out at best. 

 

You suggested that these pieces of paper have no real ownership.  Yet, we know that is not true.

 

Stocks - Buffett would completely disagree with you here.  They are pieces of businesses, including the underlying assets within those businesses.  If you own enough pieces of paper, you directly control the assets.  So, as long as the businesses are operating and generating cash flow, and the balance sheet is reasonable, the pieces of paper have some real value.

 

Bonds/Loans - We've seen enough examples where owning the bonds of a business, mean you own the actual business...especially if it defaults.  So they are backed.

 

Currency - backed by nation state assets and tax revenues.  Yes, a dictator could step in and change everything, but how often does that happen in stable, developed governments and economies...so while possible, the probabilities generally fall outside of the 5-10-50 year realm.

 

Hard Assets - generally some utilitarian purpose supports the underlying value...whether it is land, commodities, etc.

 

Bit Coin/Crypto in present form - nothing backing it in most cases.

 

Hey Parsad...I repeat... those pieces of paper are worthless if some dictator or our society as a whole declare them to no longer represent ownership of companies.

 

BTW such events happened before... In almost all communist states once the ruling party comes in they abolish private ownership so all your property ownership papers are now worthless... they are not backed by anything but our social agreements.

 

We as a society has agreed to make certain pieces of paper to represent ownership in companies and therefore have value. In theory, we can decide to reverse this agreement anytime... And the nature of these social agreements are exactly the same whether they are for stock certificates or bitcoins. So fundamentally the only thing that's backing both stock certificates and bitcoins is our social agreement. It's just that one has longer history than the other so more stable.

[wachtwoord]

Fully agree with Clutch.

 

The psychological reason behind that people generally don't get this, is that most people deal very poorly with the notion of how little agency one can really have.

 

That's why both religion and socialism hold such power over people. People prefer the fake belief of being in control in a world in which they mostly can't, over reality.

 

You can't make a man understand something if his continued non-understanding is required to keep his sanity. His mind won't allow it.

[tooskinneejs]

Reading through this thread, it's interesting to see that even bitcoin advocates can't seem to agree on what bitcoin actually is.  Last week when the Microstrategy CEO was on CNBC talking his book after borrowing $1 billion to buy bitcoin, he said the following:

 

"bitcoin is a bank in cyberspace"

 

"it's a store of monetary energy"

 

"the price of bitcoin reflects the monetary energy of the bank in cyberspace"

 

"bitcoin is property not a security"

 

"bitcoin is the most widely held investment asset in the world"

 

"bitcoin is the dominant digital monetary network"

 

"bitcoin is an egalitarian progressive technology"

 

"it's the ideal institutional safe-haven asset"

 

"it will replace stock indexes like the S&P 500 and the Dow, bond indexes, and the like"

[TwoCitiesCapital]

Reading through this thread, it's interesting to see that even bitcoin advocates can't seem to agree on what bitcoin actually is.  Last week when the Microstrategy CEO was on CNBC talking his book after borrowing $1 billion to buy bitcoin, he said the following:

 

"bitcoin is a bank in cyberspace"

 

"it's a store of monetary energy"

 

"the price of bitcoin reflects the monetary energy of the bank in cyberspace"

 

"bitcoin is property not a security"

 

"bitcoin is the most widely held investment asset in the world"

 

"bitcoin is the dominant digital monetary network"

 

"bitcoin is an egalitarian progressive technology"

 

"it's the ideal institutional safe-haven asset"

 

"it will replace stock indexes like the S&P 500 and the Dow, bond indexes, and the like"

 

I don't quite see the point. People also disagree about stocks, the intrinsic value, and the best strategic direction for that company and yet both can own the stock. Take Google for instance, one person could think it would be worth dramatically more broken up into 5 separate companies while another could take the opinion the scale/synergies of keeping it all together is more valuable and both could own the stock and have different end state valuations while both still being bullish. 

 

I view Bitcoin as a superior payment network that has the potential to eat digital payments globally. Others believe it is a store of value. We might disagree on its use case and its terminal value, but can both be long BTC and could potentially both be right (the outcomes AREN'T mutually exclusive).

 

 

[tede02]

Reading through this thread, it's interesting to see that even bitcoin advocates can't seem to agree on what bitcoin actually is.  Last week when the Microstrategy CEO was on CNBC talking his book after borrowing $1 billion to buy bitcoin, he said the following:

 

"bitcoin is a bank in cyberspace"

 

"it's a store of monetary energy"

 

"the price of bitcoin reflects the monetary energy of the bank in cyberspace"

 

"bitcoin is property not a security"

 

"bitcoin is the most widely held investment asset in the world"

 

"bitcoin is the dominant digital monetary network"

 

"bitcoin is an egalitarian progressive technology"

 

"it's the ideal institutional safe-haven asset"

 

"it will replace stock indexes like the S&P 500 and the Dow, bond indexes, and the like"

 

There was an article in the WSJ within the last week that I thought said it best...ultimatley bitcoin is software. More specifically, it is a decentralized account ledger that tracks the finite digital coins & transactions within the network.

[tooskinneejs]

I don't quite see the point. People also disagree about stocks, the intrinsic value, and the best strategic direction for that company and yet both can own the stock. Take Google for instance, one person could think it would be worth dramatically more broken up into 5 separate companies while another could take the opinion the scale/synergies of keeping it all together is more valuable and both could own the stock and have different end state valuations while both still being bullish. 

 

I view Bitcoin as a superior payment network that has the potential to eat digital payments globally. Others believe it is a store of value. We might disagree on its use case and its terminal value, but can both be long BTC and could potentially both be right (the outcomes AREN'T mutually exclusive).

 

The point?  The two investors in Google at least agree on what it is - a business.  With bitcoin, most advocates can't agree on what they've sunk their money into.  A payment network?  Software?  A bank in cyberspace?  An egalitarian progressive technology?

 

A few posts ago, I asked if someone could provide me another example of a currency whose price was solely stated in other currencies and no one could.

It's interesting to me that many advocates don't even refer to it as a currency anymore, despite that being the purported original intent.

 

I'm not arguing that this won't go to $100k or $1 million, what I'm positing is that the very fact that hardly anyone can actually articulate what they have sunk their money into isn't a good sign supporting the substance of their speculation.  BTW, I don't mean to insult anyone I just truly don't get what I'm seeing here and I am open to being educated.

 

Can I ask a question of the advocates - My understanding is that tracking bitcoin transactions requires a lot of computing resources.  Right now, there is an incentive to compute because new bitcoin is mined as a result.  What happens when substantially all bitcoin has been mined?  Will there be a continued incentive to do all the computing necessary to track what will then presumably be an exponentially higher number of transactions?  If not, will the premise behind the network (distributed ledgers) fall apart?

[rkbabang]

Bitcoin is an idea.  But so is any other money.  Money, corporations, stocks, governments, contracts, bonds: are all nothing in reality but stories people tell themselves.

[LC]

Can I ask a question of the advocates - My understanding is that tracking bitcoin transactions requires a lot of computing resources.  Right now, there is an incentive to compute because new bitcoin is mined as a result.  What happens when substantially all bitcoin has been mined?  Will there be a continued incentive to do all the computing necessary to track what will then presumably be an exponentially higher number of transactions?  If not, will the premise behind the network (distributed ledgers) fall apart?

 

This is a great question and one I never thought of - and I would be curious to hear the responses.

 

It's not just computing resources either. Electricity (and the heat it generates), not to mention the high performance processors required (already putting a strain on the GPU market) and the requirements needed to build those. Then you need space for datacenters, engineers to link and manage the operation.

 

At some point market forces would take over and specialized groups will emerge to manage this. So now while the ledger itself may be decentralized, the group or groups with all the expertise and processing power will be centralized. This creates a new slew of problems.

 

All this to replicate what bookies have been doing for millennia (based on an aforementioned system of trust - and enforced by  some metaphorical broken knees) seems like a bit of a stretch.

[clutch]

The point?  The two investors in Google at least agree on what it is - a business.  With bitcoin, most advocates can't agree on what they've sunk their money into.  A payment network?  Software?  A bank in cyberspace?  An egalitarian progressive technology?

 

Really? One investor might look at Google stocks as representative ownership of the business but another investor might look at it simply as a stonk that will go to the moon...

 

What is a stock these days? Is it ownership in a company? Is it simply an investment vehicle? Is it a store of value? Is it an institutional reality?

Most stocks traded are in electronic blips nowadays... So, is it in the form of a paper? is it just a data point? Does it even exist in reality?

 

You can ask the same existential questions about stocks, bonds, money, ...

 

Can I ask a question of the advocates - My understanding is that tracking bitcoin transactions requires a lot of computing resources.  Right now, there is an incentive to compute because new bitcoin is mined as a result.  What happens when substantially all bitcoin has been mined?  Will there be a continued incentive to do all the computing necessary to track what will then presumably be an exponentially higher number of transactions?  If not, will the premise behind the network (distributed ledgers) fall apart?

 

Transaction fees.

https://decrypt.co/33124/what-will-happen-to-bitcoin-after-all-21-million-are-mined

[SharperDingaan]

The fiat currencies of stable, developed governments and economies routinely collapse when under severe stress. Currency 'systems' are simply an agreed approach that work for a time - until they don't. While the times change, the 'system' doesn't; and it periodically gets an 'upgrade' (gold standard exit, Bretton Woods, change in reserve currency, etc.) . https://en.wikipedia.org/wiki/Gold_standard

 

To most people, it is quite obvious that post QE/Covid - there is going to have to be a system 'upgrade'. We don't know when, and we have no idea as to what that might entail, but in the meantime - we have a way of protecting ourselves against adverse change; BTC. BTC acting as both a global store of value, and as a global reserve currency. Not the preferred solution, but until there are better alternatives - a smart one.

 

Practical, vs beneficial, ownership are very different things; when push comes to shove - practical always wins. Blindingly obvious to anyone from the lands of dictatorships, but hard to see if you are from NA. Do you really think that an outstanding czarist imperial perpetual bond is still being honored today? or than your <2008 Icelandic bond is going to honored in full?  https://en.wikipedia.org/wiki/2008%e2%80%932011_Icelandic_financial_crisis

 

Hence the ongoing Yin/Yang of atheists vs believers, and the global rising concern of CB's.

The clock on the next system 'upgrade' has already begun.

 

SD

 

 

 

 

 

   

 

 

[TwoCitiesCapital]

 

The point?  The two investors in Google at least agree on what it is - a business.  With bitcoin, most advocates can't agree on what they've sunk their money into.  A payment network?  Software?  A bank in cyberspace?  An egalitarian progressive technology? [/Quote]

 

Ultimately it's a software/network. How it's used? That's up to the user. What is the internet? For some, it's cat videos. For others, it's investment forums. For others, social media. For others, a means to access the world's information. The user defines the use case - and we all agree the internet is HUGELY valuable. This is what decentralized networks are. They're defined by the users and can be many things at once.

 

 

A few posts ago, I asked if someone could provide me another example of a currency whose price was solely stated in other currencies and no one could. [/Quote]

 

This is just disingenuous. I responded to point out EVERY currency is valued relative to something. Whether it's another currency or the goods you can buy in it. You can't express the value of the dollar without first referencing the value of something else that the dollar can buy. BTC is no different, it's just fiat presents the most convenient comparison b/c that is what our financial system is currently built around. That may not always be the case - just like we've moved on from pricing things in gold/silver to fiat dollars.

 

I'm not arguing that this won't go to $100k or $1 million, what I'm positing is that the very fact that hardly anyone can actually articulate what they have sunk their money into isn't a good sign supporting the substance of their speculation.  [/Quote]

 

I won't defend the masses, but you have plenty of people here articulating what they think of it and why they bought it. You may not agree with them, but you can't simply ignore/discount their responses and then say "no one knows what they're buying".

 

Can I ask a question of the advocates - My understanding is that tracking bitcoin transactions requires a lot of computing resources.  Right now, there is an incentive to compute because new bitcoin is mined as a result.  What happens when substantially all bitcoin has been mined?

 

Transaction fees can be charged instead of receiving newly minted BTC. That's still likely decades away though. Also, as we've seen over time there is a HUGE incentive to locate these operations where energy is cheap and plentiful - which often means the use of renewable resources like hydro and solar. Something like ~40% of BTC energy consumption is estimated to come from renewables and that trend is growing.

 

To get to the energy consumption questions, you cannot say BTC has huge energy consumption while ignoring the energy consumption of the modern financial industry. How much energy does your bank use? What about their custodian for financial/physical assets? What about the third party admin or auditors who sign off on those balances? What about the Fed payment system for when you're trying to process the movement of those balances? It's exponentially more than what BTC uses, likely not derived in meaningful part from renewable resources, and BTC (and other tokens like ETH) stand to replace a lot of what it is these companies do which ultimately drives a reduction in energy consumption over the intermediate term.

[SharperDingaan]

At capacity, the two transacting parties collectively pay the miner out of their own wallets - who pays what % set by the design. An update becomes a fixed commission cost; favoring high value transactions, reducing the number of miners required, and creates an oligopoly. 'Regulation' enforced by the collective interest of the anonymous owners, in the manner they so determine.

 

SD

 

[LC]

To get to the energy consumption questions, you cannot say BTC has huge energy consumption while ignoring the energy consumption of the modern financial industry.

 

Well, who is being disingenuous now? :D

The finance industry does a lot more than clear transactions.

 

I am curious on your thoughts on whether you think eventual concentration of crypto-mining resources is a potential risk.

[LC]

At capacity, the two transacting parties collectively pay the miner out of their own wallets - who pays what % set by the design. An update becomes a fixed commission cost; favoring high value transactions, reducing the number of miners required, and creates an oligopoly. 'Regulation' enforced by the collective interest of the anonymous owners, in the manner they so determine.

 

SD

 

 

A tech question: At capacity, does incremental "mining" become more difficult? E.g. would the fee paid to the miner in your above scenario need to increase as each subsequent transaction costs slightly more resources to execute over the blockchain?

[rkbabang]

Did you know that by the year 2020 Bitcoin will consume all of the worlds energy?

https://www.newsweek.com/bitcoin-mining-track-consume-worlds-energy-2020-744036

 

[SharperDingaan]

At capacity, the two transacting parties collectively pay the miner out of their own wallets - who pays what % set by the design. An update becomes a fixed commission cost; favoring high value transactions, reducing the number of miners required, and creates an oligopoly. 'Regulation' enforced by the collective interest of the anonymous owners, in the manner they so determine.

 

SD

 

 

A tech question: At capacity, does incremental "mining" become more difficult? E.g. would the fee paid to the miner in your above scenario need to increase as each subsequent transaction costs slightly more resources to execute over the blockchain?

 

'Capacity' is a 'fuzzy' concept - to some this is the 21M issued, to others this is after 'adjustment' for 'lost' coin. Tech vs Business (Investors) have different views. Difficulty is controlled by an algorithm, controlled by the amount of CPU time currently being committed. The aim is 10 minutes; if there is too much CPU - difficulty is increased until some of it drops away.

 

If it costs more than it is worth to mine, the expectation is that miners stop. In pragmatic terms - it means fewer/bigger miners, and more possibility of a 51% attack. Against which the miners are now more likely to be 'known' to the collective security interest.

 

SD

 

 

 

 

 

 

[LC]

Did you know that by the year 2020 Bitcoin will consume all of the worlds energy?

https://www.newsweek.com/bitcoin-mining-track-consume-worlds-energy-2020-744036

 

Quite a sensationalized title and only if you extrapolate November 2017's monthly 25% energy growth rate over 3 years (as that part of the article mentions).

 

The full analysis is found here:

https://digiconomist.net/bitcoin-energy-consumption

 

Which estimates that today, the bitcoin network uses about as much energy as Chile.

 

On a per-transaction basis, each bitcoin transaction uses 741 kWH of energy as of 2020, up from 686 kWH in 2019.

(https://www.statista.com/statistics/881541/bitcoin-energy-consumption-transaction-comparison-visa/)

 

By comparison, 741 kWH would power approximately 497,000 transactions on Visa's network.

 

To get to the energy consumption questions, you cannot say BTC has huge energy consumption while ignoring the energy consumption of the modern financial industry. How much energy does your bank use?

Some further figures:

 

Bitcoin uses ~78 terawatt hours of energy as its current run-rate.

JP Morgan used 2 terawatt hours of energy in 2019.