Bitcoin & Other Cryptocurrencies

INT21

Gone But Not Forgotten
(ACCOUNT RETIRED)
Joined
Jul 18, 2016
Messages
7,764
Reaction score
6,459
Points
279
Krepostnoi,

True. But, had these people been prescient enough to see that it would grow then drop dead would they have known when to get out ?

INT21
 

Tribble

Killjoy Boffin
Joined
Apr 21, 2015
Messages
2,991
Reaction score
6,853
Points
209
Russian security officers have arrested several scientists working at a top-secret Russian nuclear warhead facility for allegedly mining crypto-currencies.

The suspects had tried to use one of Russia's most powerful supercomputers to mine Bitcoins, media reports say.

The supercomputer was not supposed to be connected to the internet - to prevent intrusion - and once the scientists attempted to do so, the nuclear centre's security department was alerted.


http://www.bbc.com/news/world-europe-43003740
 

hunck

Antediluvian
Joined
Jul 13, 2011
Messages
5,626
Reaction score
7,862
Points
284
Location
Hobbs End
As if 50 Cent didn't have enough money, he accepted bitcoin for album sales back in 2014 and it is now worth millions! Jammy %&#@.
Or maybe not -

50 Cent admits in bankruptcy document that he never actually owned any bitcoin

TMZ originated the story but he now says

“so long as a press story is not irreparably damaging to my image or brand, I usually do not feel the need to publicly deny the reporting.”

He added, “This is particularly true when I feel the press report in question is favorable to my image or brand.”
Previously, 50 Cent bragged about his sudden bitcoin “wealth” on Instagram and Twitter posts, posting “Not bad for a kid from South Side, I’m so proud of me”

So it's bullshit one way or another.
 

ramonmercado

CyberPunk
Joined
Aug 19, 2003
Messages
51,413
Reaction score
26,021
Points
309
Location
Eblana
Before Bitcoin there was Cthulcoin.

Adam Roberts‏Verified [email protected]

INVEST IN CTHULCOIN. CTHULCOIN USES R'LYEHCHAIN TECHNOLOGY TO GUARANTEE YOU A RETURN OF ETERNAL HORROR.

Adam Roberts Retweeted Fossil Locator


Fossil Locator@FossilLocator
Silver coin from 450 BC featuring an Octopus, coin from the Greek city-state of Syracuse.
9:42 PM - 14 Mar 2018
 

Krepostnoi

That's the way to do it
Joined
Jul 9, 2012
Messages
3,655
Reaction score
7,728
Points
209
I'm still tickled by whoever it was on Twitter that, unimpressed by the libertarian arguments around cryptocurrency, dubbed bitcoin the dunning-krugerrand.
 

Tribble

Killjoy Boffin
Joined
Apr 21, 2015
Messages
2,991
Reaction score
6,853
Points
209
A Chinese headmaster has been fired after a secret stack of crypto-currency mining machines was found connected to his school's electricity supply.

Teachers at the school in Hunan became suspicious of a whirring noise that continued day and night, local media report.

This led to the discovery of the machines, which were mining the crypto-currency Ethereum.

They racked up an electricity bill of 14,700 yuan (£1,600).


https://www.bbc.com/news/technology-46150107
 

AlchoPwn

Public Service is my Motto.
Joined
Nov 2, 2017
Messages
2,568
Reaction score
4,045
Points
154
I know only this about Bitcoin. It was discovered by Bitcoin miners that graphics cards were far more efficient and faster than actual CPUs at mining Bitcoins. This in turn led to the creation of a number of viruses that hijacked graphics cards and basically overclocked them in the hunt for Bitcoins until they burned out. It also led to the creation of bitcoin boxes using graphics cards at their core. More recently, China, which has very cheap electricity these days had been allegedly cornering the bitcoin market, then the Bitcoin bubble burst. My advice? Keep your anti-virus software up to date and invest in something that you can actually touch, rather than a computer generated illusion.
 

Ringo

Less than 2m away
Joined
Feb 24, 2005
Messages
2,975
Reaction score
4,697
Points
184
Location
Stockholm
The really stupid people heard about it around 6 or 7 years ago, when you could get whole bitcoin for pennies. They thought "ooh, sounds intriguing, I should get twenty quids’ worth." And never got around to it... :horr:
Exactly. Worth a punt, I thought. But then I couldn't be bothered to get into the reading behind it. I like to know what I'm geting into and to fully understand it all seemed like it was not worth the effort. There was no quick way to buy back then. You had to know "how" to do it.

Imagine, a £20 "what-the-hell" outlay on October 22nd 2011 would have bought you 10 bitcoins. Today (Nov 14th 2018) that investment would be worth £48,000. But that's nothing compared to how you would have felt waking up on the morning of Dec 16th 2017 to find out that your £20 was now worth £147,500.

Or going further back, to July 17th 2010. 1 bitcoin cost 33 pence!!! Your £20 would have bought you 60 coins, valued at £290,000 today and on it's best day, £885,300!!!

A friend of mine bought some bitcoin last year and watches it daily. Through an app on his phone, he can buy and sell instantly. The only downside I can see (apart from losing your investment if it all stops) is getting access to your digital currency should your hard-drive crash or you lose your phone etc. The digital wallet you have to use isn't cloud based and is local to your device (as far as I understand it). I think my mate has also some sort of back-up tool where you can reinstall something if it goes wrong but that is a long and tedious process.

My wife has a friend at work who bought a boat load of coins years ago and thew his computer away before it all took off.
 

Tribble

Killjoy Boffin
Joined
Apr 21, 2015
Messages
2,991
Reaction score
6,853
Points
209
The digital wallet you have to use isn't cloud based and is local to your device (as far as I understand it).
You can use a third-party to hold your currency, e.g. coinbase, but then there's the risk it'll all go mammaries-to-the-sky like Mt.Gox so famously did and you lose everything. Or the exchange gets hacked, like Bithumb and Coincheck, resulting in lost coins and big fluctuations in prices.
 

Ringo

Less than 2m away
Joined
Feb 24, 2005
Messages
2,975
Reaction score
4,697
Points
184
Location
Stockholm
Yeah, I've been looking at buying a certificte through Bitcoin XBT for a while now but the fees involved make any quick turn around impossible.
 

Krepostnoi

That's the way to do it
Joined
Jul 9, 2012
Messages
3,655
Reaction score
7,728
Points
209
Exactly. Worth a punt, I thought. But then I couldn't be bothered to get into the reading behind it. I like to know what I'm geting into and to fully understand it all seemed like it was not worth the effort. There was no quick way to buy back then. You had to know "how" to do it.

Imagine, a £20 "what-the-hell" outlay on October 22nd 2011 would have bought you 10 bitcoins. Today (Nov 14th 2018) that investment would be worth £48,000. But that's nothing compared to how you would have felt waking up on the morning of Dec 16th 2017 to find out that your £20 was now worth £147,500.

Or going further back, to July 17th 2010. 1 bitcoin cost 33 pence!!! Your £20 would have bought you 60 coins, valued at £290,000 today and on it's best day, £885,300!!!

A friend of mine bought some bitcoin last year and watches it daily. Through an app on his phone, he can buy and sell instantly. The only downside I can see (apart from losing your investment if it all stops) is getting access to your digital currency should your hard-drive crash or you lose your phone etc. The digital wallet you have to use isn't cloud based and is local to your device (as far as I understand it). I think my mate has also some sort of back-up tool where you can reinstall something if it goes wrong but that is a long and tedious process.

My wife has a friend at work who bought a boat load of coins years ago and thew his computer away before it all took off.
Yeah, thanks for doing the maths, Ringo. :eek: Right, you've forced me into it. I used to listen to the podcast Linux Outlaws amongst other things back when my daughter used to need to be driven to sleep. (Every night, for about 4-5 years. Oh, the gods know how pleased I am she can now fall asleep without motion involved.) I can still picture clearly setting off from a B&B in Howth up towards the gloriously named Swords, and listening to Dan and Fab talking about this new-fangled crypto-currency thing. And, yes, thinking £20 or so would be a reasonable punt - currency pun more or less intended. Gmail tells me this would have been end of June/start of July 2012. So let's take July 1 as the day of my awakening. According to this site, a whole bitcoin would have cost US$6. So my £20 would have got me a little over 5 BTC given historical exchange rate data. Let's call it exactly 5, to allow for commercial exchange rates rather than interbank rates, and also for ease of calculation.

So that means if I had actually bought my dunning-krugerrands that same evening, my $31 investment would have been worth $98 916.05 on Dec 17 last year. That's fine. I can live with that. It's only money. *drains vodka bottle*
 

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
To back a currency the asset really needs to be available but not overly-easily or freely manufactured, and not easily faked.

The inventors of Bitcoin got this economic/psychological equation just right: It takes significant real world effort to create Bitcoins which means that they are available but not overly-easily created, and cannot easily be faked.
 
Last edited by a moderator:

INT21

Gone But Not Forgotten
(ACCOUNT RETIRED)
Joined
Jul 18, 2016
Messages
7,764
Reaction score
6,459
Points
279
...The inventors of Bitcoin got this economic/psychological equation just right: ..

Bitcoin is the scam of the century.

Just watch.

INT21.
 

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
...The inventors of Bitcoin got this economic/psychological equation just right: ..

Bitcoin is the scam of the century.

Just watch.
No, it's not a scam. Or at least, if it is a scam, then all nation state currencies are as much or even more of a scam on the very same basis.

Bitcoin and other cryptocurrencies only look like scams because they are new and thus prompt people to consider them critically. But if people were to apply the same critical thinking to existing (usually implicitly-accepted) nation state currencies then they would have to conclude that they too are scams.

Can you explain why you think Bitcoin is a scam? If so, I'll point out how it is either not a scam at all or, if it is a scam, how it is no worse of a scam than conventional nation state currencies.
 
Last edited:

INT21

Gone But Not Forgotten
(ACCOUNT RETIRED)
Joined
Jul 18, 2016
Messages
7,764
Reaction score
6,459
Points
279
Why is Bitcoin a scam .

Because it works on the principle that the people right at the beginning of the scheme sell a 'product' that has no basis.

It is a made-up currency. Anyone can do it. You can emulate the bitcoin game amongst your friends using Monopoly Money. It's a fun game.

But the trick is to get others to buy a few of your coins on the understanding that you can get enough people to accept the hype and want to buy your coins from you for more than you paid for them. Then other people have to see this happening and decide that it is an investment opportunity.

Open the pen gates and the sheep run amok.

So the price per coin starts to go up. You then sell any remaining coins you have when you judge that the price is as high as it if likely to get. Maybe buy some at a lowish price just to stimulate the market; then sell quickly at the first rise.

Note that the people buying the coins are doing it with real money.

So all those who sold coins have a real money equivalent in the bank.

All those who bought the coins can hope for one of two things. Either the value will go up further so they can sell at a profit, or they can hope to purchase some good or other thus turning their coins into a tangible asset.

But, it being an investment device, what happens when the value falls ?

The owner can read the tealeaves and sell as quickly as he can at a loss, or hold on and hope that some day the value will increase to the point where he/she can sell at a profit. He/she is in what the housing market would call 'negative equity'.

Why is it a scam ?

Well, all the people who got into it at the beginning have sold their holding as soon as the curve showed sign of topping out. They have real assets or cash in the bank.

And that is, in my opinion, what the scheme was all about right from the beginning.

Just look at the Bitcoin value chart.

On CNBC a few week ago, Jordan Belfort , the real 'Wolf of Wall Street' did an interview where he declared it a scam. And he said he should know.

INT21.
 

INT21

Gone But Not Forgotten
(ACCOUNT RETIRED)
Joined
Jul 18, 2016
Messages
7,764
Reaction score
6,459
Points
279
T
bit.jpg
oday's Bitcoin is worth £3,140.19
The chart shows what it was worth a few days ago I.e. 2,538.15

So it has changed value by £602.04 in those few days.

National currencies, Dollar, Pound Euro etc, only change by a fraction of 1 percent on average.

The Bitcoin is purely a financial plaything. It couldn't be used as a currency with that price fluctuation.

INT21.
 

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
Before I go on, I'll point out that there is a difference between objective errors of understanding and subjective opinions. I'll note which I think is which as I address your points.

Because it works on the principle that the people right at the beginning of the scheme sell a 'product' that has no basis.
No, this is objectively wrong. With Bitcoin, no one at "right at the beginning" is selling anything. There is no scheme, as such. No one owns it. Whilst one can buy or sell Bitcoins, just as with any other currency or commodity, it still doesn't work in the way that you seem to think here. It is not any kind of pyramid scheme, for example.

This is what I wrote a few years ago in response to the claim that Bitcoin is a pyramid/Ponzi scheme which is similar to your statement above (nothing has changed since I wrote it):

Bitcoin is not a pyramid scheme or Ponzi scheme. A pyramid/Ponzi scheme is predicated on the sale of a product that may not exist or may be worthless, and payouts to existing members come not from sales of the product but only (or mostly) from new members paying joining fees.

Bitcoin is a store of value. Just like a gram of gold, just like a US Dollar, just like a tin of sardines, just like a conch shell, just like a Pound Sterling, just like a watch, a Bitcoin is worth what a potential buyer thinks it is worth (which is reflected in the market price). The value of Bitcoin (measured in conventional national currencies) rises not because new entrants must pay an entrance fee (as in a pyramid/Ponzi scheme) but because buyers think that Bitcoins should be worth more. Another way to look at it is as a commodity. It is worth what people feel it is worth.​

I should add to the passage above that in general a currency can also be a commodity and vice versa.

It is a made-up currency. Anyone can do it. You can emulate the bitcoin game amongst your friends using Monopoly Money.
Yes, this is essentially so. But what of it? It's what governments do too with conventional nation state currencies.

All currencies are, of course, "made-up". Some are more successful than others.

What makes Bitcoin and some other cryptocurrencies successful (so far)? It is because they successfully fulfil the requirements of a currency: They are reliable, available, difficult to fake, and can be manufactured but not-overly easily so. Thus, just like any nation state currency, they allow people to have 'faith' in them and treat them as exchangeable stores of value on the basis that their value cannot be easily diluted (by faking or over-easy supply[1]) and that they have 'value' because everyone else is willing to accept that they do (just like nation state currencies).

But the trick is to get others to buy a few of your coins on the understanding that you can get enough people to accept the hype and want to buy your coins from you for more than you paid for them. Then other people have to see this happening and decide that it is an investment opportunity.
This is a subjective view. You're technically right, of course, but your interpretation of it is subjective. Let me remind you that this is exactly how nation state currencies work too. If you think that this makes Bitcoin a scam then you must accept that nation state currencies are also scams on the very same basis.

In fact, I would say that nation state currencies, on this basis, are worse scams than Bitcoin. Why? Because nation state currencies have even less to back them than Bitcoin does. Nation state currencies have no backing whatsoever nowadays whereas Bitcoin has real world energy usage and cost to back it. Real effort and energy goes into mining Bitcoins, unlike nation state currencies which can be manufactured on a whim by government (e.g. quantitative easing) or by banks under government policy.

So the price per coin starts to go up. You then sell any remaining coins you have when you judge that the price is as high as it if likely to get. Maybe buy some at a lowish price just to stimulate the market; then sell quickly at the first rise.
Once again, this is objectively incorrect.

Whilst anyone can trade Bitcoin in the way you describe here, exactly as people trade other currencies (including nation state currencies) or commodities, the ability to trade Bitcoin in this way does not make it a scam.

And, as I observed above, the originators of Bitcoin do not have some sort of massive holding that was available only to them. Bitcoin was and is openly available to anyone from its very first day, to buy or mine. There is no hidden cabal, no secret controlling power.

Note that the people buying the coins are doing it with real money.
You have not identified a reason to think that Bitcoin is any less real than any other currency or commodity.

So all those who sold coins have a real money equivalent in the bank.
And all those who mined Bitcoins spent real money to make them. This is, in large part, why people are willing to attribute real value to Bitcoins.

All those who bought the coins can hope for one of two things. Either the value will go up further so they can sell at a profit, or they can hope to purchase some good or other thus turning their coins into a tangible asset.
Correct. This is just like any other currency or commodity, including nation state currencies.

But, it being an investment device, what happens when the value falls ?

The owner can read the tealeaves and sell as quickly as he can at a loss, or hold on and hope that some day the value will increase to the point where he/she can sell at a profit. He/she is in what the housing market would call 'negative equity'.
Quote so. Just like any other currency or commodity, including nation state currencies, current holders will lose money if the value of their holding as measured in other currencies or commodities drops. That's how investment works. It's normal.

Again, this is not indicative of a scam. It's just normal real life.

Well, all the people who got into it at the beginning have sold their holding as soon as the curve showed sign of topping out.
(a) This is objectively not a sign of a scam. It's just business.
(b) But it's not really true of Bitcoin anyway.
(c) You are still making the objective errors of thinking that there is some kind of inside cabal. No such thing exists in Bitcoin.

And that is, in my opinion, what the scheme was all about right from the beginning.
Do you have any evidence whatsoever to sustain such an opinion? Not someone else's view but your own, substantive, documented, evidence. If you examine Bitcoin in detail then I think you will find no such evidence. I can say this with some certainty as I have a reasonably good understanding of how Bitcoin works and there is simply no room that I have seen do far for such a conspiracy.

On CNBC a few week ago, Jordan Belfort , the real 'Wolf of Wall Street' did an interview where he declared it a scam. And he said he should know.
I'm afraid that his view doesn't matter. The objectively observable facts are otherwise. A scam needs someone, some inside group, to benefit. With Bitcoin, there is no inside group. It was not designed to be a scam as far as I can see.

Even if the inventors had benefited from it on a large scale, that would still not indicate that it was a spam. Anyone else was and still is able to take part and benefit from it. Unlike a pyramid or Ponzi scam, opportunities for investment in Bitcoin still exist (just as they still do with any other nation state currency or commodity, despite these things not being brand new, just as Bitcoin is no longer brand new).

The premises on which you think that it is a scam are objectively incorrect. You seem to misunderstand how it works and what it really is, and have used erroneous circumstantial evidence to label it as something it is not. And many of your concerns apply as much (or more) to conventional nation state currencies as to Bitcoin.

Study it in greater detail. You'll find that there is no systemic evidence of any kind of scam[2]. It's just a currency with no central control. It floats at values that the market ascribes to it and which are also dependent, to an extent, on real world energy costs.




Footnotes:-
1: Nation state currencies can actually fail on this point due to meddling such as quantitative easing. Bitcoin is better in this respect in that there is no central control; it is fully distributed.
2: This is not to say that there aren't scammers using Bitcoin but, again, this is not evidence that Bitcoin itself is a scam. Scammers use conventional nation state currencies to execute scams far more than they do Bitcoin.
 
Last edited:

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
TView attachment 13699oday's Bitcoin is worth £3,140.19
The chart shows what it was worth a few days ago I.e. 2,538.15

So it has changed value by £602.04 in those few days.

National currencies, Dollar, Pound Euro etc, only change by a fraction of 1 percent on average.
So what? This indicates that the price of Bitcoin measured in other currencies is volatile (which is exactly what I would expect at this stage in Bitcoin's 'life'). That doesn't make it a scam. There is nothing systematically dishonest about this. It is a volatile currency/commodity and that's just fine.

Perhaps you subjectively label Bitcoin as a scam because its price is volatile but I see no reason to agree with you on this. It is volatile in nature but there is still no substantive or objective evidence of it being a scam.

I wrote this in 2013 about Bitcoin prices and I think I have been shown to be essentially correct so far:

I suspect that Bitcoin prices will continue rising in fits and starts (with relatively small mini-crashes along the way, some of which have already occurred) UNTIL the bulk of the possible supply of new Bitcoins has been mined. When the primary income for miners moves from the direct production of new Bitcoins to transaction validation fees, then I think we'll see a sudden drop in Bitcoin prices (but probably still to a level very much higher than today's prices) and thereafter they will cease to act like a bubble and will settle down to a more 'normal' cycle of price variations.​

The Bitcoin is purely a financial plaything. It couldn't be used as a currency with that price fluctuation.
You are subjectively presuming that, to be valid (according to an arbitrary set of validity criteria that you haven't specified), a price of a currency measured in other currencies has to be stable to be not a scam. I recognise no such validity criteria. Bitcoin seems to be doing fine to me.

Furthermore, you seem to me to be falling into the trap of assuming that you know what Bitcoin's aim is or should be. In truth, it has no real goal or aim. It is what it is at any one time. It is what the market makes of it. It is, at any one time, both a commodity and a genuinely functional currency (despite its value volatility measured in other currencies).

I wrote this in 2013 and I think it still applies today:

I don't think it can be said to have an ultimate aim. It has no de jure ruling body to set specific goals like that (although there is a group of core developers who are de facto leaders) and it can be forked by anyone who wants to start a new currency using the same or similar technology or who wants to do something different with it. This has been done many times so far, with varying levels of success. (N.B. Even though other currencies may use Bitcoin's technology, they are still not Bitcoin[1]).

My impression is that Bitcoin was originally launched as an experiment, albeit an experiment that was very cleverly and thoroughly thought through indeed and which was thus useable in the real world.

How Bitcoin ends up being used is anyone's guess. It is a natural and obvious expectation that it should be used in exactly the same way that conventional currencies are used (e.g. debit card in Next), and that is certainly a likely possibility sooner or later, but it could equally well be the case that Bitcoin, or some other cryptographically-backed currency not yet invented, will change the way that money is used entirely. What might happen in the longer run is not yet imaginable. That is the nature of disruptive technologies: Their outcomes are chaotically unpredictable.

Note that I don't suppose there are any significant technical barriers to the Visa or Mastercard payment authorisation networks being used to authorise payments on a bank account denominated in Bitcoin. From Visa's or Mastercard's perspective it would just be a currency like any other. Exchange rates, just as at present with EFTPOS payments, would be the responsibility of the issuing bank. I'd be amazed if someone wasn't working on just such a thing right now, although I expect the nation state regulatory hurdles would be horrendous. Nevertheless, it's a ripe area for an entrepreneur to exploit (even with variable exchange rates).

Note also that there are some nascent digital payment providers (which are effectively currency agnostic) which will in time potentially compete against the likes of Visa, Mastercard, and PayPal in a perhaps more decentralised fashion.

Lots of "potentially" and "perhaps" but that's how it is. It's all being made up as it goes along.​

As above, there's no scam. It's just a new currency (and/or commodity) and a new type of currency (and/or commodity).

Footnote:-
1: I am adding this footnote today for the text I wrote in 2013. Most forks of Bitcoin simply use Bitcoin's technology. However, since I wrote the above there have been two forks of Bitcoin itself, the first of which created Bitcoin Cash.
 
Last edited:

Mikefule

Abominable Snowman
Joined
Dec 9, 2009
Messages
583
Reaction score
1,749
Points
149
Location
Lincolnshire UK
Bitcoin is not a scam. A scam is something that is inherently dishonest from the beginning.

Bitcoin is, or has been a bubble, just like the tulip bulb bubble and others: a commodity that has, at times, risen more rapidly in price than the usual laws of supply and demand would suggest, and which is subject to the persistent risk of a sudden loss of value.

The combination of the possibility of rapid growth, allied to a sort of technocratic mystique, and poor public understanding of how it works makes it a fine opportunity for scammers. Most people are greedy, most want to appear to be "in the know" and few want to admit their ignorance.

Compare this with cancer charities, which have a real purpose and are, for the main part, run honestly. Everyone is in favour of a cure for cancer, most people wish to be seen to be generous, and many people don't understand the ins and outs of charity regulation. Therefore, it is a fine opportunity and every so often, someone runs a scam based on claiming that what they are doing is in support of a cancer charity.

All (or most) modern currencies are based on faith and shared fiction. I'm buying a car for my son today. The money will come from the sale of investments. That money will be transferred electronically into my bank account, and then from my account to the dealership. As a short term measure, we will have a small overdraft. No tangible items of value will change hands except the car. Everything else is digits moving from one column or one computer to another. We all agree that those digits mean something.

Periodically, people stop believing, and there is a crash.

Bitcoin at least has an objective basis in something, and the total eventual supply is finite by design. In some ways, it's better than a conventional currency; in other ways, perhaps not.
 

INT21

Gone But Not Forgotten
(ACCOUNT RETIRED)
Joined
Jul 18, 2016
Messages
7,764
Reaction score
6,459
Points
279
Mark,

Perhaps it would help if you explained just how Bitcoin came to be. And exactly how it is generated.

And just what you would mean by Bitcoin mining.

If the number of Bitcoins is indeed finite, then it seems to be a closed currency.

I do understand that all national currencies are simply generated (at base) on the whim of central banks. Quantitative Easing is a very good example. Say the Federal reserve wish to stimulate an economy they simply print more money. Just like that. It goes out into the banking system and then to the users. The users convert it into a service or a good, and the government taxes it.

So if an economy was based on Bitcoin, how would QE be applied; assuming the quantity of Bitcoins to be finite ?

And to go back to my point about the value fluctuation,

At the moment my fuel is costing me £1.25 per Litre. It tends to vary with things like the oil price.

So, with the fluctuation I give above as an example, how will the cost of my litre of fuel be priced ?

Or my loaf of bread or pension come to that ?

INT21.
 

Swifty

doesn't negotiate with terriers
Joined
Sep 15, 2013
Messages
29,775
Reaction score
42,922
Points
284
I'm not aware of how bitcoin works as an entity but it somehow reminds me of pyramid marketing in its marketing approach in that if you get in early and can become an 'agent' to get other people into investing? .. a finite amount of early investment people will make a profit but only if they also know when to get out but, eventually, the whole scheme will come crashing down?
 

Mythopoeika

I am a meat popsicle
Joined
Sep 18, 2001
Messages
42,884
Reaction score
33,613
Points
309
Location
Inside a starship, watching puny humans from afar
I'm not aware of how bitcoin works as an entity but it somehow reminds me of pyramid marketing in its marketing approach in that if you get in early and can become an 'agent' to get other people into investing? .. a finite amount of early investment people will make a profit but only if they also know when to get out but, eventually, the whole scheme will come crashing down?
Somewhere along the chain, someone will lose money - if they buy high and end up selling low. You could say 'that's business'...
 

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
Bitcoin is not a scam. A scam is something that is inherently dishonest from the beginning.

Bitcoin is, or has been a bubble, just like the tulip bulb bubble and others: a commodity that has, at times, risen more rapidly in price than the usual laws of supply and demand would suggest, and which is subject to the persistent risk of a sudden loss of value.
I understand why it might seem this way but Bitcoin is not a bubble as I see it. People have shown charts that show a seemingly bubble-like growth in Bitcoin's value but these tell us nothing as things currently stand -- not enough time has gone by for the charts to be complete. Bitcoin's price rises seem to me to be entirely reasonable and are driven, in part, by supply and demand as well as the wider economy. By "wider economy", I mean that Bitcoin has, to an extent, taken over a part of the traditional role that gold offers as a safe harbour for money, but it is one one that is more flexible than gold.

It seems to me that there is in fact no chance of a Bitcoin "bubble". Bitcoin is actually way, way undervalued compared to its natural market value. I don't say this for purely subjective reasons; it is for technical reasons within a psychological framework.

Bitcoin (or any other new currency) may well fail such that no one wants it, and thus it would become valueless, but I'd say that even if this occurred it would not represent a bubble (where something is valued above its true value).

The dotcom bubble, for example, occurred because businesses were valued above what they could reasonably earn and were reasonably worth. The same sort of problem with tulip bulbs. Bitcoin, on the other hand, is still vastly undervalued compared to its natural eventual market value (if successful).

Possible or even actual failure, in and of itself, does not represent or indicate the existence of a bubble.

All of the above may seem like semantic quibbling but I think it is very important to understand that, even though Bitcoin or other cryptocurrencies could perfectly well fail in the marketplace, the term "bubble" is not applicable (at least not in the specific case of Bitcoin). Bitcoin is certainly not over-valued as it presently stands, which it would have to be to constitute a "bubble".

In other words, Bitcoin is not experiencing a bubble; it is merely experiencing a natural and normal progress towards its real value in the market.

The combination of the possibility of rapid growth, allied to a sort of technocratic mystique, and poor public understanding of how it works makes it a fine opportunity for scammers.
Oh yes, quite likely. But this is just life. It neither makes Bitcoin a scam nor a bubble. Scammers will scam.

All (or most) modern currencies are based on faith and shared fiction. I'm buying a car for my son today. The money will come from the sale of investments. That money will be transferred electronically into my bank account, and then from my account to the dealership. As a short term measure, we will have a small overdraft. No tangible items of value will change hands except the car. Everything else is digits moving from one column or one computer to another. We all agree that those digits mean something.

Periodically, people stop believing, and there is a crash.
Quite so. But a crash doesn't necessarily mean there was a bubble. And, in fact, I don't think most crashes represent a loss of faith in money, per se; I think they most often represent a loss of faith in what you get for your money and certainty of return. Instead of investing/spending it, people hold on to their money.

Bitcoin at least has an objective basis in something, and the total eventual supply is finite by design. In some ways, it's better than a conventional currency; in other ways, perhaps not.
Agreed.
 
Last edited:

Mikefule

Abominable Snowman
Joined
Dec 9, 2009
Messages
583
Reaction score
1,749
Points
149
Location
Lincolnshire UK
I'm not aware of how bitcoin works as an entity but it somehow reminds me of pyramid marketing in its marketing approach in that if you get in early and can become an 'agent' to get other people into investing? .. a finite amount of early investment people will make a profit but only if they also know when to get out but, eventually, the whole scheme will come crashing down?
That's not how it works. There is a very detailed article on Wikipedia as a starting point if you're interested.

A Bitcoin needs to be based on a multi-digit number with certain mathematical characteristics. Those numbers have not yet all been discovered. "Mining" is the process of using computers to search for further examples of those numbers.

Find one of those numbers and include it in a string of data relating to the numbers that have already been discovered and you have a Bitcoin. These packets of data can then be traded.

When the Bitcoin was set up, there was an upper limit imposed on the numbers, which means that the final number of Bitcoins is finite.

The Bitcoins are therefore a tradable commodity. Each transaction is recorded on independent registers. Once the bitcoins exist, the trading is "not unlike" the trading of other commodities such as futures, shares etc. Trading in shares, futures and so on is mainly legitimate, although there is always a scam going on somewhere.

You might think that a number and a string of code has no real value, but anything can be traded if the people concerned agree that it has value. The price of shares in big companies goes up and down with little or no link to the true value of the company. "Futures" are even more nebulous. Gold was the basis of currency for centuries because it is rare and beautiful and does not corrode. People were free to dig up new gold. Some non-European tribes used cowrie shells. Modern societies use pieces of paper with "I promise to pay" written on them, or — as I posted earlier — numbers in columns on bank computers. Gypsies traditionally use horses, often with "agreed values" that bear no relation to their actual value as horses — and these days, the horses don't have to exist.

You need to draw a distinction between the Bitcoin itself, which is a perfectly legitimate and rational basis for a currency, and two things:

1) The fact that it is particularly susceptible to being used for criminal transactions because it is "off the radar" of the banks and authorities, and

2) The fact that scammers use the "Bitcoin bubble" as an opportunity for ripping off the gullible and greedy.

The only level of "multi level marketing" that goes on is perhaps persuading people to invest in the "mining operation" with the promise of sharing the rewards.
 

Mikefule

Abominable Snowman
Joined
Dec 9, 2009
Messages
583
Reaction score
1,749
Points
149
Location
Lincolnshire UK
I understand why ...
Mark, it reads as if you know more about currency and economics than I do. My specialist area was fraud investigation, but in a different and less glamorous context.

I was trying to keep what I wrote fairly accessible rather than precise. After all, anyone who needs to know more can look up articles that already exist. Had I written more, there might have been fewer things to correct about the semantics.
 

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
Perhaps it would help if you explained just how Bitcoin came to be. And exactly how it is generated.

And just what you would mean by Bitcoin mining.
I wrote the passage below in 2013:-

Bitcoin mining is how new Bitcoins are issued (and how transactions are validated, more of which below). Mining works by someone (a 'miner'), working alone or in a group, computationally solving cryptographic puzzles. When one of these puzzles is solved, a new Bitcoin is created (or 'mined'). The term 'mining' is inspired by gold mining. The cryptographic algorithm on which Bitcoin is based limits the total number of Bitcoins that can ever be generated and it also ensures that the process of generating new Bitcoins gets harder and harder as time goes on, meaning that it costs more and more (in terms of real world energy requirements) to generate each Bitcoin. This aspect of the protocol is very clever (both technically and psychologically): It means that the 'resource' of Bitcoins can never be devalued due to over-easy supply. If it was too easy to get new Bitcoins then people would not value them and they (Bitcoins) would not be trusted as a medium of exchange or value storage.

Miners are rewarded for their increasingly significant energy investment in two ways. These two ways will vary in relative importance as time goes on. The first way is by the direct reward of a new Bitcoin. Direct reward of Bitcoin for mining is the form of reward that is most important at the moment. The second form of reward for miners is to collect fees for validating Bitcoin transactions. In time, as the supply of new Bitcoins is exhausted, transaction validation will become the most important source of income for miners. It is also crucial for the working existence of the network.

It will be when new Bitcoins have been exhausted (a couple of years away) that the success or failure of Bitcoin will truly be sealed. I am not sure how it will pan out.

Note that Bitcoins can be subdivided into very small chunks, so the relatively small limit on the total number of Bitcoins does not represent a constraint on the practical liquidity of Bitcoins in day to day use.

For further information it's probably best to start with the Wikipedia article and work from there: http://en.wikipedia.org/wiki/Bitcoin

We are now (compared to 2013) closer to the change over in importance from mining of new Bitcoins to validation. The long term effects of this changeover are not yet clear but could include (at least in the short term) either slow transaction validation or increased validation fees, potentially making Bitcoin more suitable as a commodity than a currency useful for small-value transactions. However, the situation is dynamic and undoubtedly will change. It could be that other cryptocurrencies become more popular over time due to dynamic factors in the market place, but this does not necessarily mean that Bitcoin will lose value. Indeed, I still feel that Bitcoin is vastly undervalued compared to a natural market value.

If the number of Bitcoins is indeed finite, then it seems to be a closed currency.
I'm not sure what you mean by a "closed currency" but the 21M limit was, I think, an intentional and necessary part of the psychological design of Bitcoin (which, along with its technical/cryptographic design, was very, very clever indeed).

The limit was I think needed to help ensure that Bitcoin's would be seen as valuable. I.e. if there is a limit, then they are potentially more valuable than something with no limit. This works hand in hand with the cryptographically-controlled mining algorithm which ensures that it gets harder and harder to generate each new Bitcoin as time goes on.

Note, however, that a hard limit of 21M Bitcoins does not represent a hugely significant limit to liquidity. Each Bitcoin can be divided to eight decimal places. This is 0.00000001 of a Bitcoin, known as a "satoshi". This in turn means that each Bitcoin contains up to 100 million units of value! This equates to a final total of 2,100,000,000,000,000 units (that's 2,100 trillion units, in US speak) of total available Bitcoin liquidity. This should be adequate to maintain market liquidity for a long time to come. For comparison, this number of units of liquidity is more than five times the total M0 liquidity of US Dollars.

But that's not a total limit, of course. Bitcoin can be (and has been) forked, meaning that new currencies based upon Bitcoin (either clean forks using Bitcoin technology from scratch or forks of 'live' Bitcoin itself) can co-exist and increase total possible liquidity (depending on their success in the marketplace). And this is only within the Bitcoin sphere; other cryptocurrencies can have their own limits.

So if an economy was based on Bitcoin, how would QE be applied; assuming the quantity of Bitcoins to be finite ?
Non-sensical question error. ;)

On the face of it, this seems like a good question but I don't think it can be meaningfully answered. I'll address it as best I can:-

(a) An "economy based on Bitcoin" doesn't truly make sense when considered in detail. One may choose to use Bitcoin (or Ripple, or Pounds, or Dollars, or Rolexes, or Ethereum, or sexual favours) as a payment medium but it is not really true to say that an economy is based upon them. The UK's economy, despite most transactions being denominated in Pounds, is not truly based on Pounds. One can choose to use any other payment medium at any time.

(b) You ask "how QE would be applied" but this makes no sense. Bitcoin (and most other cryptocurrencies) are distributed currencies. One of their key strengths and goals is that artificial meddling such as QE cannot be applied to them. There is no central control. They are independent of any government or financial 'regulator'. I.e. They are a solution to the bug of state meddling.

And to go back to my point about the value fluctuation,

At the moment my fuel is costing me £1.25 per Litre. It tends to vary with things like the oil price.

So, with the fluctuation I give above as an example, how will the cost of my litre of fuel be priced ?

Or my loaf of bread or pension come to that ?
Ask the vendor. :)

Yes, I understand that value stability is important in this context. But, as I pointed out, value fluctuation is nevertheless not a sign of a scam and does not make any currency or commodity any less useful in many contexts.

Some people who take Bitcoin as payment for products or services today do daily or hourly price fixes against a preferred local currency. But, over time, this will change as cryptocurrencies evolve and become more ubiquitous.
 
Last edited:

markrkingston1

Ephemeral Spectre
Joined
Aug 4, 2007
Messages
413
Reaction score
295
Points
79
Location
London, England
Mark, it reads as if you know more about currency and economics than I do.
I am flattered that you would say that but I certainly would not wish to make any such claim.

My view that Bitcoin is, as yet, vastly under-valued is based upon where it could logically (subject to certain assumptions) end up if it continues to be successful (by "successful" I mean "be the subject of shared acceptance as a store of value") . I can find my calculations if anyone is interested.

I was trying to keep what I wrote fairly accessible rather than precise. After all, anyone who needs to know more can look up articles that already exist. Had I written more, there might have been fewer things to correct about the semantics.
Apologies if it seemed like I was being overly pedantic.
 
Last edited:

Mikefule

Abominable Snowman
Joined
Dec 9, 2009
Messages
583
Reaction score
1,749
Points
149
Location
Lincolnshire UK
value fluctuation is nevertheless not a sign of a scam and does not make any currency or commodity any less useful in many contexts.
For clarity: I did not argue that value fluctuation is a sign of a scam. Values of all sorts of legitimate commodities fluctuate.

I argued that a number of factors make Bitcoin a ripe opportunity for scammers.

As for the definition of "bubble", I am not an economist, but I draw the distinction between:

1) Normal fluctuation in value, both up and down, due to the informed speculation of the normal players in the market.

2) The situation in which the reputation of a commodity comes to the attention of people who would not normally be players in the market and new, unskilled, investors hoping for an easy profit increase the demand. With increased demand comes increased price, which causes a number of "feedback loops" which cause the value to increase substantially faster than would be the case in normal circumstances. Wise investors ride the wave and bail out in time; unwise investors stay in too long and when the crash comes, they lose out. This is what I would call a "bubble": the accelerated inflation in value caused by a sudden increase in investment by people who would not normally be in the market. This may not be the standard definition, but it describes a phenomenon that can be observed to exist.

Yes, of course, a crash can be caused by other things, but the thread isn't about crashes.

Bitcoin is essentially a good idea, but as with all financial commodities, greedy and ignorant amateur investors are likely to be a target for scams riding on the back of the phenomenon. This is why so much of the spam that I receive has "B1tc01n" in the title, and comes from hidden email addresses.
 
Top