Most drug markets have moved on from Bitcoin to coins that offer strong privacy and because of the transparent ledger it is a poor choice for money laundering. Don't take my word for it though the UK Government issued a report recently placing the risk of people using Bitcoin for money laundering at low.
https://www.gov.uk/government/uploads/system/uploads/attachm...
Edit: There was a good article on Forbes.com about how to think about Bitcoin's value using the Network Value to Transaction Ratio.
https://www.forbes.com/sites/wwoo/2017/09/29/is-bitcoin-in-a...
I can transfer $5,000 to my brother in Ukraine for, essentially 0 using Bitcoin.
You are correct that the fees may be too high for typical consumer transactions like buying a soda from a vending machine. But for large transactions, and institutions moving money around Bitcoin provides a big advantage.
How does that compare to e.g. paypal?
The cost to transfer from wallet to wallet, is about $4.00 right now. This destroys Pay Pal where the cost which would be $145.00, if you do this wallet to wallet transfer at night it could take 30 minutes to move from person to person. This is fine for us, but obviously will never work for transactions in a store.
He can then use a site like Coinbase, to sell the Bitcoin and then withdraw the Bitcoin into his local bank/currency. This can happen in as fast as 4 days, but as much as a week. I'm not sure if that's on Coinbase or his local bank, but it actually has nothing to do with Bitcoin.
But the amount being transferred is fixed before the withdrawal starts, so it the time he is exposed to Bitcoin price fluctuations is only a few hours.
Basically it comes down to this. If you can afford to wait a week to access your funds Bitcoin is a great way to transfer large sums of money. If you need the money immediately you still need to pay a high fee to Pay Pal, or an even higher fee to Western Union to the less technically inclined.
http://mashable.com/2017/08/28/bitcoin-transaction-fees/#.7b...
Please correct me if I am wrong, but it very much looks like I need to pay minimum 1.49% to convert from USD to BTC and also your brother needs to pay minimum 1.49% before he has gotten his local currency. So this is more expensive than Paypal?
Most people who do significant transactions on Coinbase actually use the trading tool called GDAX. Which can be a little scary to look at first. It's a trading platform owned by Coinbase and transfers between the platforms are completely free.
Purchasing and selling directly through Coinbase has a similar fee to Paypal, especially if you are buying with a credit card.
Coinbase takes my money in U.S. dollars, then I transfer to GDAX, buy Bitcoin. You could actually skip Coinbase entirely and just use Gdax but the Coinbase interface is nice and its easy and I like to do it this way.
GDAX charges a .25% fee on the "taker" of a transaction. The maker/taker dynamic I am not equipped to explain, but only 1 of the parties pays that fee. If both my brother and I got hit with the taker fee on our transactions we would be losing .5% total, still much less than Paypal.
This fee could be avoided entirely by becoming the "maker" but that exposes you to some risk, because you are setting the price you think Bitcoin should be traded at, and you must wait for someone to agree to the price you are setting.
But still I fail to understand what is the case where bitcoin is a competitive option to get money from bank account to another. in addition to the possible 0.25% fee you are anyway facing the bid ask spread over two currency exchanges (usd-> btc and btc -> target currency) and if you compare those to bank transfer costs, I just don't see how looping through btc could be more economical.
Also, if you can afford to wait days, you do not compare to paypal, but to a normal international bank transfer. Haven't done that for a while, but I assume that cost is around 10-20 dollars.
People talk about Bitcoin as "digital gold", but in reality it's not even close, and no crypto ever will be. Gold is valuable because there is a fixed natural supply, and throughout human history, across many civilisations and societies, gold has always been worth something - unlike our fiat currencies who's supply can be altered and made valueless.
The problem with Bitcoin isn't it's supply, it's that it's value relies on it's demand remaining high (or at least maintaining current levels). Problem is there is no historic reason or intrinsic value to bitcoin to assume it will continue to have steady demand like gold.
More worryingly in my opinion is that bitcoin's current demand isn't really for bitcoin at all. The demand is to make USD fast. The moment people realise Bitcoin might not give them returns similar to other safe investments, it will crash like all other bubbles do.
I'm not saying people who get in early won't make loads of money, plenty of people made money from the dotcom bubble too, but you need to be smart about it and understand the risk. At $6,500 bitcoin's market cap is far beyond PayPal's which provides a genuinely useful service and processes millions of dollars of transactions every day.
> The world consumption of new gold produced is about 50% in jewelry, 40% in investments, and 10% in industry.
https://commons.wikimedia.org/wiki/File:Gold_price_in_USD.pn...
(And to be clear, I do not mean volatility against other currencies, but volatility against your consumption basket, bread, butter etc.)
IMO, most fan-fiction is worse than the original, the best fan-fiction is often better.
The transaction rate issue is 99% political in fighting and that has basically been solved or will be by mid November.
And if the simple transaction is me purchasing a pizza instead of transferring a million from one speculator to another? How much does it cost and how much it takes time?
In dirt-simple terms, the lightning network allows you to squash several transactions taking place over a long period of time into one of a much smaller size. It also allows instant payments. [1]
Another way to scale is using sidechains, which shift the transaction burden onto a complementing chain that has a two-way peg to bitcoin. [2]
Neither of these are production-ready yet, but should help improve scalability by a couple of orders of magnitude in the long run.
That being said the current price bubble is out of control and I would strongly warn you away from buying any--and for the sake of full disclosure and identifying my bias I do hold some cryptocurrency.
Here's a lazy copy/paste from the site:
> The Lightning Network is dependent upon the underlying technology of the blockchain. By using real Bitcoin/blockchain transactions and using its native smart-contract scripting language, it is possible to create a secure network of participants which are able to transact at high volume and high speed.
> Bidirectional Payment Channels. Two participants create a ledger entry on the blockchain which requires both participants to sign off on any spending of funds. Both parties create transactions which refund the ledger entry to their individual allocation, but do not broadcast them to the blockchain. They can update their individual allocations for the ledger entry by creating many transactions spending from the current ledger entry output. Only the most recent version is valid, which is enforced by blockchain-parsable smart-contract scripting. This entry can be closed out at any time by either party without any trust or custodianship by broadcasting the most recent version to the blockchain.
> Lightning Network. By creating a network of these two-party ledger entries, it is possible to find a path across the network similar to routing packets on the internet. The nodes along the path are not trusted, as the payment is enforced using a script which enforces the atomicity (either the entire payment succeeds or fails) via decrementing time-locks.
> Blockchain as Arbiter. As a result, it is possible to conduct transactions off-blockchain without limitations. Transactions can be made off-chain with confidence of on-blockchain enforceability. This is similar to how one makes many legal contracts with others, but one does not go to court every time a contract is made. By making the transactions and scripts parsable, the smart-contract can be enforced on-blockchain. Only in the event of non-cooperation is the court involved – but with the blockchain, the result is deterministic.
I haven't explored sidechains enough to give you a competent tl;dr but the security model is discussed in the whitepaper I linked.
I do not quite see how that increases the real world capacity by orders of magnitude. I mean if we assume that people actually spend their money to quite a few different places and everyone would require a significant overhead of a single transaction to be committed for unspecified time. Further, it requires a minimum of two transactions on the blockchain fore each lightning ledger, so if I buy pizza today, and need to close that ledger to buy a sandwich tomorrow, that brings three transactions to blockchain. Of course, you can optimize this, but still, orders of magnitude sounds optimistic.
I recommend you read the summary on lightning.network.
The issue it does not solve, though, is the volatility.
Facebook went 10x, from $50bn to $500bn, after it was added to the S&P500. A similar pattern can generally be seen for other stocks being added to the index. That's one company / stock.
There is only one Bitcoin. There is only one Ethereum. You have investors globally buying mostly those two assets. Want to buy the asset class? You buy one of those two (or both)
Pension funds manage around $300tn. If those allocate 1 or 2% to crypto, a sparkly new asset class, you'll have a $3-6tn market cap. Which they might, given the above average returns it's been generating.
Gold is worth $8.2tn globally. Bitcoin in my view qualifies as digital gold. Why was gold originally picked as a store of value? You could've picked other metals. Or diamonds, etc. But someone decided gold was the one. Gold in itself isn't very useful. It's been given its value by people, because they believe it to be a store of value. (I'm not a gold bug and I personally don't think gold is worth holding) But think about this: how high could gold and silver go in a speculative bubble? $13tn? $16tn? Higher?
There will be 20-30-40% corrections along the way, but in my view, it's going much much higher -- very much like the .com bubble (which went up to approx. $5.6tn). Wouldn't be surprised if this entire space achieves a multi trillion market cap ($2-4tn) over the next few years, with most of that ending up in Bitcoin and Ethereum.
Note: this is not investment advice. Do your own research and make up your own mind.
Gold still has that value even though it’s price has been inflated and corrected many times.
Bitcoin on the other hand has no real world value outside of crime because it never evolved to a real currency. Which means that the only way to gain a net value on your investment, is for orher people to come in and buy bitcoin after you.
Which means you’ll also have to sell it before those people too.
I’m not telling you not to buy bitcoin. It’ll probably go much higher than it is now, but it will some day go to zero because it lacks any innate value.
Not true. Gold has its value mostly because it is rare. Jewelry can be made of silver, copper, and any number of other metals. Its "real" value exists because people believe in its "intrinsic" value, not practical value.
Now, what that means for the price is nothing really. Speculation commodities (like Bitcoin and gold) go up and they go down without a whole lot of rhyme or reason. But the analogy to gold is valid.
You’re right that you need to expend bitcoin to trade it, but this is more a weakness than a strength. It gives you a banking system of sorts, in that you’re guaranteed someone will handle your transaction for money. This also means that if the value of bitcoin drops then nobody will be around to do the calculations required to do transactions, making it an inherent risk.
You can downvote it all you want, but the value of the transaction is directly tied to the value of Bitcoin. This makes it profitable on the way up, and an outright danger in the way down because it'll prohibit you from selling your bitcoin when the value crashes.
Like I said, invest all you want, there are plenty of money to be made still, but at least be aware of the risks.
But at the same time I don't think the comparison to Facebook or any other listed stock is apt - they trade at a multiple of earnings, you can base the valuation on some underlying fundamental. That is not the case with bitcoin
I'm certainly willing to believe anyone at those times. But... everyone's been quite wrong.
I make a weekly purchase of a small basket of cryptocurrency (mostly BTC) and I actually mine XMR with some leftover hardware since it's price efficient currently. No different than hedging your retirement portfolio with commodities and other non-correlated assets with your equities basket.
Cryptocurrency isn't going anywhere anytime soon, that's about the only thing we can say for sure.
I'm worried people will lose money seeing all these gains in crypto and taking statements like yours at face value. Just because someone out there made 50x their initial investment in crypto from times t1 to t2 doesn't mean anybody will make this much money after t2.
Cryptocurrency might not go anywhere in general, but there's no reason coin X on chain Y will be worth anything in 10 years. Miners are already pretty ruthless about switching chains to whichever makes them the most money.
Was this foreshadowing? Because this statement absolutely is:
>>The same could be said of any bubble in history. Even though tulips reached $X, they still crashed in the end.
You've neglected to include every other asset appreciation model like the DJIA, NASDAQ, Nikkei, etc, solely to focus on... tulips.
BTC may very well be a bubble, just like real estate (or is it?), but like you cannot tell if you are in a bubble while you're in it, nor can you tell if it IS a bubble either. If you are authoritatively stating that we are in a BTC bubble, your opinion is worse than mine, which is to say it is inconclusive and the person I responded to - had they had any conviction to bet against BTC at $500 or other price points where his same argument was trotted out - would have lost his entire stake, or close to it.
>>but there's no reason coin X on chain Y will be worth anything in 10 years
If you could quote from my comment where I said BTC would be worth anything in 10 years, this statement would make more sense. As it is, you just knocked down a strawman. I specifically said I am willing to believe that BTC will go to zero USD tomorrow. Because it's totally possible that it will.
It just hasn't, yet, and anyone saying that it will has the same amount of information as the people saying it will go to $50,000: None.
With Bitcoin, your "asset appreciation model" relies on people continually buying bitcoin at a larger rate to usd. There is no underlying asset (a business) that has intrinsic worth that may drive the price. You could argue that there are some analogues, for example, the mining hash rate or the strength of the blockchain, but the actual value of these is extremely hard to define. That is why Bitcoin may be in a bubble, people may be overestimating how these intangibles may be affecting price; it is hard to say what the value may truly be.
I am not authoritatively stating that we are in a BTC bubble, just that I would be very cautious with bitcoin and think a bubble is likely. Nobody knows what will happen, but we certainly can't say that Bitcoin isn't in a bubble (as you seemed to originally suggested), and in my opinion bitcoin resembles a bubble, though I respect that it may not to you.
If BTC was the stock market, then it has crashed at one of those numbers. It gradually went from $1000 down to about $200. If the stock market did that, everyone would be in a panic.
If you don't want to do that, maybe it isn't quite as certain as you suggest.
Even if bitcoin is certain to crash, without a deep understanding of when (and by extension, how) a naive futures trader still runs a good chance of being eaten alive, or making poor returns.
Stating bitcoin will crash is a bit like the conventional wisdom that smoking is bad for your health. One can reasonably be very confident in the truth of it without being confident in specific odds on any bad outcome.
Edit: Found it. https://rhsfinancial.com/2017/06/line-aggressive-crazy/
I hope you really think about applying the Kelly Criterion to trading bitcoin futures and hope you realize that the person completely ignores friction(transaction costs),and does not show a sharpe ratio( who cares if you beat a benchmark with 10x the risk).
"[In November 2000.] Those kinds of times… when everyone is running around like a chicken with its head cut off, that's pretty good for us… "~Jim Simons (https://en.wikipedia.org/wiki/Renaissance_Technologies)
If you're able to associate some timeframe to the idea that with p = 1 Bitcoin will be at half the value it currently is, the Kelly criterion suggests you should be quite a bit of the farm. Applying the Kelly criterion in supposed p = 1 situations (e.g. "Like it or not, [the market will crash]") is pretty invalid.
If the comment only suggested that the true value of Bitcoin is lower than the currently traded rate (and made no mention of what the market value would do), this particular observation would be relevant.
The funny thing about this is when the real smart ones get there hands on this contract (quants), watch out. Goodbye free lunch and hello very efficient pricing.(Low vol)
What I meant was, how they plan on "replicating", constructing the index value ,in which ,they( the CME) will base the value of bitcoin to be.
It is detailed here. https://www.cmegroup.com/trading/files/bitcoin-reference-rat...
CNBC stated that it is a weighted average of 4 index's in the video, but could not find anything of the sort in the article (https://www.cnbc.com/2017/10/31/cme-plans-to-launch-bitcoin-...)
http://www.cmegroup.com/media-room/press-releases/2017/10/31...
I didn’t, and I consider the profit I’ve made to be a satisfying amount of “free money”, so I’m just going to keep watching from the sidelines.
No judgement, I’m just out.
I couldn't agree more.
Why? What evidence do you have that a high hash rate causes high value?
I would argue that the hash rate follows value, rather than the other way round. A low hash rate and high value makes mining is more profitable, which results in more miners joining, raising the hash rate. Thus the hash rate adjusts to reach an equilibrium against the BTC to electricity exchange rate.
I do actually say that in the article, in almost those same words.
My (perhaps not very well articulated) point was that regardless of what follows what, the hash rate, or the amount of work, in terms of energy expended is by far greatest of all other crypto coins, especially considering the whole blockchain going back to beginning, which means to 51% attack Bitcoin is harder than anything else right now.
For this reason, if I wanted to park my money in a crypto currency, I'd probably choose Bitcoin as the safest, hardest reinforced as far as proof-of-work goes.
Of course there are other factors at play here, but it seems like amount of proof-of-work, or the difficulty, is an important factor in a crypto currency preciousness.
That doesn't mean that next year it should be worth double of what it is now. One would need a better index of miner capital costs and their increases to really track but my napkin says miner required value now is around ~$1200 (based on the value pump that happend just prior to the previous halving)
says everyone who has ever heard of bitcoin (except the lucky few who mined and or bought coins early and still have them). A $5000 super-duper giga-hash miner barely breaks even, takes forever to ship, and and in a year becomes a paperweight.
The fundamentals that make bitcoin so scarce and difficult to mine/acquire, are what gives it value.
I read stories here of people buying at $7 and selling at $35. Don't be that person. Buy a bit again and see where it can still go. The market cap says it still has a lot of potential.
Maybe, maybe not. Some people are convinced bitcoin will climb another 1000x or better within a short time frame (10 years or something). I am going to hold a little bet (3 digits) on this.
If you destroyed all the bitcoins but 1 today, that single bitcoin would be worth the entire market cap.
I'm sure I left cash on the table, but I was too late to the game to have really made a fortune on this stuff (curse my younger self for giving up on setting up a miner after a little difficulty ("it'll never be worth anything anyway", I said to myself), back when a cpu could still mine).
Good luck to everyone still playing - I'll believe bitcoin is going somewhere when the majority of it's transaction volume isn't speculation, drug dealing or money laundering.