Bitcoin

alb

relaxed wrote: »

And that's what will possibly happen, it may be banned.

I'm not worrying about every country banning it until at least one country bans it. (and I don't care about basket cases like North Korea). With Germany and the US actually talking about it and openly being non-hostile towards it, this actually seems like less of a risk than it did a year ago.

Graham

alb wrote: »

I'm not worrying about every country banning it until at least one country bans it. (and I don't care about basket cases like North Korea). With Germany and the US actually talking about it and openly being non-hostile towards it, this actually seems like less of a risk than it did a year ago.

If I set policy in a central bank I think I'd be taking the same approach at the moment. All they need to do is sit back, watch and wait.

The current value of Bitcoin is going up dramatically, not because it's utility value is increasing, not because more and more people are trading using Bitcoin, not because transfers are easier/faster/cheaper.

Bitcoin 'value' is going up because more and more people are buying Bitcoin because the value of Bitcoin is going up. Rinse, repeat, rinse, repeat, rinse, repeat POP.

It's a speculative bubble. After it bursts we may see the true utility of Bitcoin. Until then, plenty of people may become wealthy or go broke speculating on the basis that there is always a greater fool.

AtomicHorror

Graham wrote: »

If I set policy in a central bank I think I'd be taking the same approach at the moment. All they need to do is sit back, watch and wait.

The current value of Bitcoin is going up dramatically, not because it's utility value is increasing, not because more and more people are trading using Bitcoin, not because transfers are easier/faster/cheaper.

Bitcoin 'value' is going up because more and more people are buying Bitcoin because the value of Bitcoin is going up. Rinse, repeat, rinse, repeat, rinse, repeat POP.

It's a speculative bubble. After it bursts we may see the true utility of Bitcoin. Until then, plenty of people may become wealthy or go broke speculating on the basis that there is always a greater fool.

How do you know it hasn't burst already? Maybe $1200 was the bubble, and $900 is the current base value.

Or maybe it's not really a bubble, or at least not a speculative one. BTC had its biggest price surge after Baidu started accepting BTC for digital downloads. The price of BTC had it's most dramatic fall after Baidu suspended that. Does that not suggest that a significant proportion of the value of BTC is based on its utility? Speculation is surely a factor, but it's hard to establish how dominant it is.

AtomicHorror

Graham wrote: »

Nope, quite simple. Issue edict, job done.

Where will we issue this edict? In the US, to prevent exchange to dollars? The US government does not have a say on whether companies based in other countries can exchange BTC for dollars. You'd need a ban in every country in the world, which still wouldn't prevent people from doing private exchanges illegally.

Graham

AtomicHorror wrote: »

The US government does not have a say on whether companies based in other countries can exchange BTC for dollars.

i'm sure you're right. I remember when the US banned most online gambling it had almost no effect on businesses involved in online gambling. Oh wait...

AtomicHorror wrote: »

How do you know it hasn't burst already?

If the bubble had burst already, the fanatics wouldn't still be talking up Bitcoin to everyone that would listen.

Either Bitcoin would be gone or conversation would be predominantly between people who stand to benefit substantially from a secure electronic currency that can be traded internationally for ultra-low cost.

Bitcoin would be money rather than an investment opportunity.

AtomicHorror

Graham wrote: »

i'm sure you're right. I remember when the US banned most online gambling it had almost no effect on businesses involved in online gambling. Oh wait...

That's some unhelpful sarcasm right there. It doesn't address my point either. I never said that exchanges wouldn't suffer from a US ban- they would. That still wouldn't kill BTC. Didn't kill online gambling either. Also, I said that people would continue to makes exchanges peer to peer.

Graham wrote: »

If the bubble had burst already, the fanatics wouldn't still be talking up Bitcoin to everyone that would listen.

Odd, most bubble proponents I've talked to disagree. They reckon the fanatics will get louder after the pop, causing a rally in value which will then collapse again to below base value. They fanatics will shut up at that point, I suppose.

Maybe that's whats happening now- the rally after the peak. Care to call which way BTC will go next?

Graham

AtomicHorror wrote: »

Maybe that's whats happening now- the rally after the peak. Care to call which way BTC will go next?

No, which is why I wouldn't be looking at Bitcoin as anything other than an extremely high risk speculative punt, a bet, a gamble. I'm not saying I won't have a punt either, the greater fool theory still appears to be holding water in this bubble BUT if I do it will be with the understanding I risk loosing my stake.

I briefly said it before so I'll say it again, at the moment the utility value of Bitcoin is nil. Its major purported benefits are completely nullified by the fact that its value is so volatile.

AtomicHorror

Graham wrote: »

No, which is why I wouldn't be looking at Bitcoin as anything other than an extremely high risk speculative punt, a bet, a gamble. I'm not saying I won't have a punt either, the greater fool theory still appears to be holding water in this bubble BUT if I do it will be with the understanding I risk loosing my stake.

That's my stance too- and what I say to anyone who asks if they should buy BTC. The difference being that I'm making a long term bet that BTC will see wide acceptance as a legitimate currency. I think the odds of that are good enough to make the bet a good one, so long as we assume the stake is lost.

Graham wrote: »

I briefly said it before so I'll say it again, at the moment the utility value of Bitcoin is nil.

That's just plainly untrue as long as even one business accepts BTC as a method of payment.

What about my comment on Baidu? Bubbles and bursts aren't supposed to happen exactly in line with changes in base value by my understanding.

Graham

AtomicHorror wrote: »

That's just plainly untrue as long as even one business accepts BTC as a method of payment.

If only one business accepts Bitcoin then doesn't the transaction become barter?

AtomicHorror wrote: »

Bubbles and bursts aren't supposed to happen exactly in line with changes in base value by my understanding.

I'd be interested in your theory as to why?

AtomicHorror

Graham wrote: »

If only one business accepts Bitcoin then doesn't the transaction become barter?

Whatever you call it is irrelevant. The point is that it has some utility. To say that it has "nil" right now is just nonsense.

Graham wrote: »

I'd be interested in your theory as to why?

Well, by my understanding a bubble is an increase in value out of line with base value. So we'd expect that events that change base value would have minimal effect on market price during a bubble. The BTC market price seems to have surged in reaction to a well-understood event which increased its utility and therefore its base value. Later, when that utility was reduced again, the base value and market price both fell. So the major price fluctuations we've seen since the start of November seem to be mostly related to the utility of BTC.

That doesn't mean that speculation is not a factor, but its clearly not as simple as that alone.

Stamply

What annoys me about this conversation is that is not an informed discussion about Bitcoin. Its a conversation between non-partisan Bitcoin proponents (there is a difference between being a proponent and being partisan) who openly say that it is a risky bet and that it may be the worst kind of bubble... But who are openly investigating, criticising & sometimes investing in its potential long-term utility... And those partisans who just dismiss it out of hand with strawmen arguments that they could easily investigate themselves by spending an hour on Google.

I am still on the fence with Bitcoin. I think there are serious security concerns, as are discussed by the proponent in this informative video posted previously by alb

So the proponents of Bitcoin openly say it is a very risky investment. And the partisan dismissives say it is a very risky investment... WE GET IT!

I would be very concerned that people will invest in Bitcoin and keep their Bitcoin savings on insecure home computers... Which will be hacked wholesale at some point in the future, whether by unscrupulous Governments like the US or China, to undermine the currency or by equally unscrupulous cyber-criminals around the world.

The speaker in the crash course embedded above gives a strong analogy with the evolution in peer-to-peer sharing, from Napster to BitTorrent, but this is weak because when the Napster/BitTorrent/MegaUpload community is attacked very few individuals lose anything significant. Normal downloaders were never under significant threat. But with Bitcoin the savings of individuals are under threat, and although it is possible to secure your Bitcoin by printing your codes onto paper and storing them in a physical safe, this is a very cumbersome process with a significant learning curve that normal Bitcoin holders with never go through.

The theory is that if Bitcoin fails one of the other 100 or so crypto-currencies will replace it by solving the problem that Bitcoin fails at. But if this happens evolutionarily in the manner of peer-to-peer sharing it may destroy the faith of non-technical users in the entire concept of crypto-currencies rather than cultivate and support the further evolutionary development. If one fails people may flock to another after losing some of the value of the previous, maybe resulting in a run on the currency causing significant loss in value. If that happens two or three times normal users may be too skeptical to invest in the fourth iteration. Once bitten, twice shy...

For now the industry in remittance & money transfer will be under continual attack by Bitcoin, as non-technical wealthy people in Venezuala, Argentina, China, etc... continue to see it as a credible way to extract wealth from controlled exchange economies and working expatriates in the West are able to transfer money back to their home countries cheaper and easier than conventional money transfers like Western Union.

It may transform into a real functional economy where trade in real products & services vastly outweigh the speculative investment market. With greater security & potentially incorporating multiple competing crypto-currencies that serve separate & complimentary functions (imagine one crypto-currency serves as a savings account, being cumbersome but more secure, and another crypto-currency serves as a current account, being flexible, easy to use & transfer, but more insecure). Denying the possibility is downright lazy-minded, dogmatic and irrational.

There are only two genuinely dumb positions and one of these positions is exhibited in this thread. One is investing blindly and without due-diligence, storing Bitcoin savings on insecure home computers. The other is dismissing Bitcoin & crypto-currency out of hand. None of the Bitcoin proponents here are calling it a "sure thing".

Here is some reading material for the dismissives (who are not even credible enough to call skeptics):

http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/
https://en.bitcoin.it/wiki/Securing_your_wallet

Rant over...

alb

Can't agrue with much in your post Stamply but I'll just add a couple of comments.

Regarding security, you're right, anyone storing any significant amount of BTC on an internet connected Windows PC runs the risk of anything they type including passwords being monitored by a virus, and of any files on their PC being stolen by one. This means any BTC stored in a wallet on an infected PC may be stolen. We're going to see lots of this until it gets safer.

There are two paths for a solution to this for the average Joe, one is to keep coins in a bank (when there is a BTC bank) or with an online wallet provider (such as blockchain.info) but both of these re-introduce the risk and/or cost of having to trust a third party. Probably the best solution will be a dedicated hardware wallet device like this: http://www.bitcointrezor.com/

I think 2014 will be a huge year, at the rate that every aspect of the Bitcoin ecosystem is growing, I think it will be fairly clear if it is failing or reaching a critical mass by the end of the year. The purpose of most of my posts is not to convince people to 'invest' their life savings, but to understand what it is, that it's not a scam/ponzi etc and that if it succeeds in gaining more adoption is going to present massive business opportunities and a huge transfer of wealth. What puzzles me is why some people seem to want it to fail.

I'll also add that if non-technical people do want to learn more, the best source I've seen are the Bitcoin 101 videos by James D'Angelo on youtube: https://www.youtube.com/results?search_query=bitcoin+101&sm=3

Graham

Stamply wrote: »

Here is some reading material for the dismissives (who are not even credible enough to call skeptics):

http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/
https://en.bitcoin.it/wiki/Securing_your_wallet

Rant over...

Could it be that the dismissives position may be related to (or in the context of) the forum that this thread resides in? Or have I mistakenly wandered into the possible future crypto-currency speculation forum by mistake.

Stamply

Graham wrote: »

Could it be that the dismissives position may be related to (or in the context of) the forum that this thread resides in? Or have I mistakenly wandered into the possible future crypto-currency speculation forum by mistake.

The ramifications of Bitcoin for business & entrepreneurialism are unquestionably massive, having the potential to change the landscape in online & global trade fundamentally.

Dismissing it out of hand by saying it should be removed from this appropriate forum is just the dumbest position to take. Go ahead and stick your head in the sand, Bitcoin, crypto-currency & this thread will be around for a long time to come...

relaxed

Stamply wrote: »

The ramifications of Bitcoin for business & entrepreneurialism are unquestionably massive, having the potential to change the landscape in online & global trade fundamentally.

Dismissing it out of hand by saying it should be removed from this appropriate forum is just the dumbest position to take. Go ahead and stick your head in the sand, Bitcoin, crypto-currency & this thread will be around for a long time to come...

No need to go calling people dumb.

The chances of Bitcoin becoming relevant to mainstream business and having unquestionably massive ramifications for them, as you suggest, is still quite remote.

Theres nothing to stop paypal, stripe, credit card companies, banks etc. responding with an alternative, thus killing the product.

srsly78

If the alternative has loads of fees and middlemen then it's not really an alternative! The whole point of bitcoin is that there is no central controlling entity.

So no, those companies will not provide an alternative - it is not in their interest.

Stamply

relaxed wrote: »

No need to go calling people dumb.

The chances of Bitcoin becoming relevant to mainstream business and having unquestionably massive ramifications for them, as you suggest, is still quite remote.

Theres nothing to stop paypal, stripe, credit card companies, banks etc. responding with an alternative, thus killing the product.

A) That shows a complete lack of understanding of what Bitcoin is

If those companies were to refine their services to better compete with Bitcoin it would have served to improve the market conditions for businesses and consumers, thus validating the product and nullifying the argument that Bitcoin has little impact on business & entrepreneurialism

relaxed

srsly78 wrote: »

If the alternative has loads of fees and middlemen then it's not really an alternative! The whole point of bitcoin is that there is no central controlling entity.

So no, those companies will not provide an alternative - it is not in their interest.

The objective of such an alternative would be to develop a rival product which eliminates some or all of the above mentioned fees, and if they can achieve the speculative growth rates the Bitcoin seems to be achieving then that's where there proficts come from.

The point is there is nothing to stop a group of vested interested coming up with something that torpedos Bitcoin.

Stamply

relaxed wrote: »

The objective of such an alternative would be to develop a rival product which eliminates some or all of the above mentioned fees, and if they can achieve the speculative growth rates the Bitcoin seems to be achieving then that's where there proficts come from.

The point is there is nothing to stop a group of vested interested coming up with something that torpedos Bitcoin.

And there is nothing to stop someone else from running faster than Usaine Bolt...

relaxed

Stamply wrote: »

A) That shows a complete lack of understanding of what Bitcoin is

If those companies were to refine their services to better compete with Bitcoin it would have served to improve the market conditions for businesses and consumers, thus validating the product and nullifying the argument that Bitcoin has little impact on business & entrepreneurialism

So how are the ramifications to mainstream business "unquestionably massive" as you put it.

So its another alternative to cash payments (already free), online bank transfers (already free) credit cards, debit cards, (some fees) paypal etc.

So its another free way of conducting a business transaction.

What are these massive ramifications for businesses, and telling people to stick their head in the sand as you put it, take Dunnes for example, if Supervalu take Bitcoin tomorrow what will Dunnes do only maybe follow suit if theres profit in it.

Most businesses are more worried about making money today than worrying about an additional payment method that might come along in the future.

relaxed

Stamply wrote: »

And there is nothing to stop someone else from running faster than Usaine Bolt...

Exactly, which is why the ramifications of Bitcoin for mainstream business are far from unquestionably massive.

Stamply

relaxed wrote: »

Most businesses are more worried about making money today than worrying about an additional payment method that might come along in the future.

Bored with this, statements like this are not worth a response...

relaxed

Stamply wrote: »

Bored with this, statements like this are not worth a response...

Good boy, stick to calling people dumb.

Stamply

relaxed wrote: »

Good boy, stick to calling people dumb.

I haven't called anyone dumb, sonny, I said that there are two dumb positions to take on Bitcoin, blind support and dismissing it out of hand.

srsly78

relaxed wrote: »

The objective of such an alternative would be to develop a rival product which eliminates some or all of the above mentioned fees, and if they can achieve the speculative growth rates the Bitcoin seems to be achieving then that's where there proficts come from.

The point is there is nothing to stop a group of vested interested coming up with something that torpedos Bitcoin.

You are right. All they have to do is stop charging fees. Do you see any reason they may not choose to do this?

CelticRambler

Like Stamply, I've been considering the pros and cons of bitcoin for a while, and had time during the last week to really dig into the detail. My conclusion? Thanks, but no thanks. I see one major problem and one severe flaw. The major problem is that more than half the total number of bitcoins have already been mined and we've only just seen dedicated mining hardware come on the market this year.

Once someone has mined the 21,000,000th coin, what then? If the Bitcoin organisation decides to generate additional coins, the value will inevitably fall because if they can do this once, they can do it any number of times. If they don't, then the notional value depends entirely on what you can do with this digital gold. What can you do with it, apart from online payments?

And therein lies the severe flaw. It is presented as a near-perfect currency for online payments because of its negligible transaction charges. BUT - and this is a big BUT - each and every transaction is being validated by the miners who receive a payout for their effort (and investment in hardware and the electricity consumed in running that hardware). What happens when there are no more bitcoins to be found, or the rate of discovery becomes unreasonably small. At a rough estimate, I estimate this to be within five years. So come Year 6, who is going to pay for the validation of a million penny transactions every day?

If we go back to your man who (supposedly) had 7500 BTC on a hard drive that he dumped in a landfill site. If that was real gold, sooner or later, someone would dig through the rubbish and find it; but because it's a digital currency, if the rats have peed on his disk and the methane has vaporised his data, that's it. Even Satoshi Nakamoto can't get them back. Eventually a huge quantity of BTC will be buried in various institutional investors' vaults, another sizeable chunk will be lost on dead hard-drives, USB keys and forgotten Dropbox accounts, and a relative handful circulating in the way they were intended.

All-in-all, even though I like the principle of a global alternative currency, I think BTC is too exposed to digital competition and not anchored enough in the real world.

srsly78

Nope, doesn't work like that. Miners don't validate transactions (rather they are the first to discover new valid blocks). EVERYONE validates transactions.

The only way the cap could be raised is if a new protocol was implemented, and everyone agreed to switch.

The mysterious inventors really did do their homework, after 4 years of trying to poke holes in it noone has found one.

Mantel

CelticRambler wrote: »

At a rough estimate, I estimate this to be within five years. So come Year 6, who is going to pay for the validation of a million penny transactions every day?

That's a really rough estimate, really, really, really rough and considering the increase in mining power that's been appearing we really should have hit the total limit by now. We haven't because there's an adjustment mechanism built in. As more mining power is added to the network the work needed to find a block increases at set periods. If you dump a ton of processing power in to the bitcoin network you'll be a head for a week or two and then the adjustment hits and your back to finding blocks at the old rate.

If you really look at how a bitcoin is made up there isn't just 21 million "coins", that's old thinking. A bitcoin can be divided down to 8 decimal places, that means one of these coins is really made up of 100,000,000 separable parts. One of the larger market trackers has already switched over to mBTC (1 millibitcoin) and 1 mBTC is worth roughly 70c (US dollar) right now, if things go well it may even get the chance to change over to 1 μBTC = 70c in a decade or so and 1 μBTC is 1,000 mBTC.

Fees are built in and won't go away, as the transaction rate increases the fees miner earn will start to equal the amount they earn from finding blocks and then surpass it as the block reward continues to halve. The fees are there to keep the network going, to keep transactions going, to give the miners a reason (and reward) to keep mining.

As for alternatives, there are alternatives out there, the group name for them is altcoins. Namecoin has a use, the rest... The only big alternatives we'll see are from companies, any commercial altcoin will need a backing to prop it up and that will more than likely be the value/shares of said company. Google or Apple might pull it off but any bank that tries it will been seen to be making a new currency to compete with the local currency and will get kicked in the legals because they're a nice big target.

alb

You don't understand mining if you think all bitcoins will be mined in 5 years. You don't need to worry about when the last Bitcoin will be mined because it will be around 2140 and you'll already be dead. The difficulty of solving blocks adjusts as miner hashing power increases so that coins are produced at a more or less planned rate, and this rate specifies that they'll be mining new coins until 2140. The number of coins per block halves every 4 years, so the coin supply does gradually decrease over time, but as we've already seen value rises, so miners still an an incentive.

The 'Bitcoin Organisation' cannot increase the overall number of coins beyond 21 million, because Bitcoin is not centralized and no one entity controls it or can change it. In order to be changed the majority of miners/clients must implement a change, therefore it has to be agreed by consensus. Any increase in the number of coins, as correctly pointed out, would destroy the credibility of the system, so the majority will never agree to it.

This is part of the genius of the system, you don't have to trust anyone.

Stamply

CelticRambler wrote: »

Like Stamply, I've been considering the pros and cons of bitcoin for a while, and had time during the last week to really dig into the detail. My conclusion? Thanks, but no thanks. I see one major problem and one severe flaw. The major problem is that more than half the total number of bitcoins have already been mined and we've only just seen dedicated mining hardware come on the market this year.

Once someone has mined the 21,000,000th coin, what then? If the Bitcoin organisation decides to generate additional coins, the value will inevitably fall because if they can do this once, they can do it any number of times. If they don't, then the notional value depends entirely on what you can do with this digital gold. What can you do with it, apart from online payments?

And therein lies the severe flaw. It is presented as a near-perfect currency for online payments because of its negligible transaction charges. BUT - and this is a big BUT - each and every transaction is being validated by the miners who receive a payout for their effort (and investment in hardware and the electricity consumed in running that hardware). What happens when there are no more bitcoins to be found, or the rate of discovery becomes unreasonably small. At a rough estimate, I estimate this to be within five years. So come Year 6, who is going to pay for the validation of a million penny transactions every day?

If we go back to your man who (supposedly) had 7500 BTC on a hard drive that he dumped in a landfill site. If that was real gold, sooner or later, someone would dig through the rubbish and find it; but because it's a digital currency, if the rats have peed on his disk and the methane has vaporised his data, that's it. Even Satoshi Nakamoto can't get them back. Eventually a huge quantity of BTC will be buried in various institutional investors' vaults, another sizeable chunk will be lost on dead hard-drives, USB keys and forgotten Dropbox accounts, and a relative handful circulating in the way they were intended.

All-in-all, even though I like the principle of a global alternative currency, I think BTC is too exposed to digital competition and not anchored enough in the real world.

I'm in the process of reading this: http://www.michaelnielsen.org/ddi/how-the-bitcoin-protocol-actually-works/

While your concerns are valid, they are not accurate.

My favourite aspect of a Bitcoin future is how it affects the arts & music industry... Imagine a future where you can literally "busk" on YouTube, where fans can send micro-payments to musicians as easily as sending and IM!