It will always be a drain on society, and it scares me that it hasn't failed because we see it draining our GPU industry to the point that market prices have gone insane and availability is practically non-existent / all left up to chance.
It does take a rocket science to see the trends, as long as it's tied to needing hardware to compute arbitrary calculations to work... It's going to waste computer resources and energy. Both which are finite resources... Yes finite, solar cells aren't free to make, they don't last forever after you make them. Same with any other green technology. Maybe if fusion was our only power source it would be less of a concern, but we still haven't cracked Q=1, so... Yes it is a waste of finite resources.
Grandparent's wider assertion is absolutely true, the GPU market is skewed by miners. Purchasing a 3000 series GPU is not easy right now.
I'm pretty sure GPU mining btc is inefficient even with free electricity (depreciation of the PC/GPU will outweigh benefits)
edit: was curious so checked the math
Using a 3060TI GPU (one of the most cost-efficient for performance gpu's available) would generate about $0.0002/day, or take ~5000 years to pay itself off even with free electricity
Mining bitcoin with a GPU would take around 5000 years in the best case scenario to pay off _with free electricity_
This is an equilibrium that should eventually fix itself, but while Bitcoin and crypto mining is growing they are making a material dent in the global semiconductor economy.
https://en.wikipedia.org/wiki/Price_elasticity_of_supply
With insufficient demand, a market does not develop into a sustainable market. "Rule of three (economics)" says that markets are stable with 3 major competitors and many smaller competitors; nonlinearity and game theory.
https://en.wikipedia.org/wiki/Rule_of_three_(economics)
We've always had custom chip fab, but the prices used to be much higher. Proof of Work (and Proof of Research) incentivize microchip and software energy efficiency; whereas we had observed and been most concerned with doublings in transistor density.
FWIU, it's now more sustainable and profitable to mine rare earth elements from recycled electronics than actually digging real value out of the earth?
Compared to creating real value by digging for gold, how do we value financial services?
You guys are so hung up on energy consumption, a meme, that you're forgetting the real intrinsic value of Bitcoin.
Intrinsic: belonging to the essential nature or constitution of a thing [0].
Bitcoin, being a series of bits proving you or one of your financial forebears burnt some spare energy without any material return, has no intrinsic value. Its value is entirely extrinsic and intersubjective, in that it only has value if a quorum believes it has value.
In a macroeconomic sense, this is a strength of the dollar and a weakness of Bitcoin.
Also, "blockchain" is just a data structure that has practically no use besides bitcoin.
Bitcoin's "intrinsic value" is really value unto itself for the most part, at this point in time. Maybe in the future it'll be used more as a currency, and we've seen that with Tesla, Bovada, etc., but I don't think most governments will allow such a threat to their currency without additional controls.
> Also, "blockchain" is just a data structure that has practically no use besides bitcoin.
I've always felt the other way around actually; I think blockchain will be used more widely and longer-term than Bitcoin. Blockchain as a technology has already been invested in and deployed by firms like IBM and JPMorgan.
Nobody can steal your bitcoin if your private keys are well protected. And of course, the best protection is a brain wallet.
If a State attempts to implement an EO6102 equivalent for Bitcoin, they will be unable to enforce it.
The end result of this is that a huge portion of humans cannot safely store their wealth in btc. I sure as hell don't trust myself to keep that much cash in a brain wallet.
"If your private keys are well protected" might as well mean "if you can do four backflips in a row" to most people.
You can leave a small amount of coins in the wallet using the same seed phrase but with no passphrase as a decoy. This way, if somebody "stumbles upon" your seed phrase, they'll attempt to recover this small amount of money, and you can monitor using only the xpub to discover it has been compromised. You then have some time to move the other coins before anybody could potentially brute-force your passphrase (Since they need to compute PBKDF2 for each attempt).
You can reuse the same seed phrase for multiple wallets, using a different passphrase for each. There is no way for somebody to determine if you have surrendered all passphrases for a give seed, since there could be infinitely many. This offers plausible deniability in the case your thief is the government.
But those of us who do, can.
Under fiat, we can't.
Recall that for the first 2 years of its life, bitcoin had no market price. Bitcoin acquired a price because it has value to some people. That is, its having value preceded it having a price. What that should tell you is that even if a lot of people lost interest, bitcoin would still be valuable. The key insight arrives if you figure out what is valuable about Bitcoin that caused btc to acquire a price.
" It might make sense just to get some in case it catches on. If enough people think the same way, that becomes a self fulfilling prophecy. " https://satoshi.nakamotoinstitute.org/emails/cryptography/17...
I work in information security, and have seen first hand how our existing financial infrastructure is held together with string and scotch tape. For 10 years or so, every time I heard about some big credit card theft, or wire fraud, or SWIFT hack, I would go see if anyone had figured out how to do cryptocurrencies yet. Then 2009 rolled around and I got an email forwarded to me from someone named Satoshi who had apparently figured out a really solid mitigation for the double spend problem, and had actually released some working PoC code in the form of Bitcoin.
Yes, there are a ton of problems with Bitcoin. I've been extremely critical even since that first email, but those problems are nothing compared to the existing systemic problems plaguing traditional finance.
Getting rich was never a draw for me. I'm not quite retired (though this year has been pretty good) but I have spent 10s of thousands of Bitcoins over the years building up various aspects of the economy in order to maximize the utility of the network. I could easily be living on my own private island if I had held onto the coins I CPU mined in the early days, but I have no regrets at all about how I spent those coins. I'm more passionate about this than most, I know, but I 100% believe that legacy finance is a massive hindrance to the sustainability of our species, and crypto-economics will be a key aspect in building healthy incentives for a technologically driven society.
And what about losing 100% of my funds when my key is lost or stolen? All keys are lost/stolen - it doesn't take a rocket degree to have observed that from human behavior.
Who enforces splitting of equity when some rich dick beats his wife into submission? The courts don't control any bitcoin keys.
The problems of bitcoin are proportionately larger than then problems with fiat. The only people saying otherwise are those that are profiting from the opposite perspective.
If we are not a bitcoin miner, then how will we get the funds to begin with? Right now I can trade fiat for it, but in the future my children would not be able to trade fiat for it (assuming it's as good as you say it is). So, they will become indentured servants to the bitcoin miners.
> refunds when corporations rip us off?
Easily implemented in various ways. One old scheme is a simple 2-of-3 multisig, where the keys are buyer, seller, and arbitrator. If buyer and seller agree, the arb doesn't have to be involved, otherwise the arb decides where the funds go.
> what about losing 100% of my funds when my key is lost or stolen?
Hence Vitalik's advocacy of social recovery wallets: https://vitalik.ca/general/2021/01/11/recovery.html
> Who enforces splitting of equity when some rich dick beats his wife into submission? The courts don't control any bitcoin keys.
No, but courts have effective ways to make you pay up even when they don't directly control your funds, including putting you in jail for contempt.
> my children would not be able to trade fiat for it
If Bitcoin or whatever isn't available to anyone besides miners, then I don't see why it would have any value at all. Cryptocurrency that succeeds is out in the economy, not locked up in a small group of professionals. There are plenty of cryptocurrencies owned only by a small group of enthusiasts, and they are nearly worthless.
I’m also in the grandparent’s boat and I just want to get another view on this.
Who is the arbiter? Who pays for the arbiter? Do I have to negotiate for an arbiter for every purchase I make? There's a candy store down the street that takes Bitcoin. Am I really supposed to figure out an arbitration scheme just to buy a tub of popcorn?
How do you do it with traditional financial instruments? You probably sign a long-term contract with some agency just as you would if you were signing up for a credit card. Or you could simply not worry about arranging any kind of arbitration for such a low-value purchase, or simply just use fiat currency for those things (there's no reason it can't continue to coexist with cryptocurrencies).
>> If we are not a bitcoin miner, then how will we get the funds to begin with? Right now I can trade fiat for it, but in the future my children would not be able to trade fiat for it (assuming it's as good as you say it is). So, they will become indentured servants to the bitcoin miners.
I don't quite understand the point you are trying to make here? Cash just don't magically appear today either. Why wouldn't they be able to trade fiat for crypto in the future?
With fiat controlled by banks, most liquid assets are frozen during these sorts of disputes for the above reason. A threat of jail in the future also doesn't really help the other person during that timeframe.
Cash does magically appear, actually. It's printed by mints and released via monetary control.
Consider how it'd be easier to catch criminals without the fourth and fifth amendment, but it is thought to be more important that we provide protections against government overreach.
Cash doesn't, but money does. The principal function of central banks is controlling the rate of money creation to ensure that the money supply supports economic activity.
Asymmetric cryptography is a completely separate, much older technology that has nothing directly to do with cryptocurrencies.
Furthermore, Bitcoin does nothing to solve the kind of fraud problems you are talking about, and in fact makes the consequences of them much worse, since you no longer have a central authorities that can reverse fraudulant transactions and the like. The "double spend" problem refers to a problem in distributed systems, not applied security.
It does, Bitcoin wouldn't work without it, the whole thing relies on cryptographic signatures.
> The "double spend" problem refers to a problem in distributed systems, not applied security.
Is it not both? It's a security issue present in distributed systems.
Only by you. Read more carefully.
It's just another comment by someone who tries to fabricate a self-fulfilling prophecy.
Efficiency improvements on the base chain, 2nd layer technologies like Lightning Network and ultimately increasing the base block size limit.
> What happens when the mining phase completes, or if there is a drop in value?
Mining doesn't "complete". There have been many massive drops in value in Bitcoin's history, not sure what you're asking about, it just keeps working?
> What is a sustainable transaction fee for miners to take absent mining incentives?
Anything above 0 is sustainable, you can mine for free if you're using the energy to heat your house.
The question is how much energy the network needs to spend to remain secure, that I don't know, depends on how much any potential attackers are willing to spend to attack it.
> What happens over long periods of time from hardware failures where wallets are lost?
Bitcoin deflates? If some coins are lost but demand remains the same the value of the remaining coins goes up.
Could you please expand on that? Why?
It's also easy to look back at Amazon and say you should have invested back when they were an online bookstore that talked a big game. With the information available at the time it arguably would have been a stupid decision.
For everyone who won big on Amazon and everyone who's winning big on Bitcoin, there are thousands if not millions of investors who bet on something with legitimate confidence and lost it all or under-performed.
As for what it is, as far as I'm concerned it's just another commodity. The value of said commodity can be debated, the same way people can talk about how silver is not only a precious metal but has substantial industrial demand driving it, unlike gold. They're still all commodities.
Now plenty of people have played the commodity lottery and gotten crazy rich in crazy circumstances that are hard if not impossible to repeat. If you want to try and be one of them by speculating on bitcoin, don't use any money you can't lose.
For my perspective, my financial goals for my family haven't been met yet and probably won't be for a couple of decades given that we've yet to buy a house and the wife and I are hoping to give our future kids a full ride through college. I can invest the money I make in cheap, diversified funds based on Fama/French factors and have nobel-winning math and statistics saying I have a positive expected return over time given 100 years of stock market history, or I can gamble it in the various single-stock/commodity/sector lotteries with large amounts of uncompensated risk and hope I win big, but more likely lose and never meet my goals.
My current solution to "more money" is I'm seriously looking into trying to get some sort of lifestyle business going on top of my day job. Worst case scenario it sharpens my technical skills and makes me even more employable. I like sets of outcomes that don't include (or at least minimize the likelihood of) "zero".
Today Elon Musk chooses BTC and it goes up. Tomorrow the US government could crack down on BTC and it could go down. Maybe a technical weakness arises. Maybe the dollar breaks and it goes to a million. That doesn't mean it has potential, nor that it's useful. It just means there's uptake.
This is a bit nihilistic. Bitcoin’s value has reallocated a huge amount of technical talent and resources in the global economy. It also has a growing carbon footprint. These give the public, and by extension its members, legitimate exposure to its downsides. Given that exposure, it’s valid to consider managing it.
To flesh this out: I'm not arguing that BTC has no value, nor that it has no externalities, so I really don't understand what motivates your reply. I don't feel that there's anything nihilistic about pointing out the logical flaw in saying, "oh the concept of Bitcoin has 12% more inherent value now than yesterday because the price went up by that much." I recognize that the article is about electricity, but I'm not sure how you get from my comment to electricity. If Bitcoin crashes tomorrow, does that mean that the inherent value (or conversely, the societal burden) of the concept went down?
Not at all. But in this case, the broader cost of Bitcoin scales with its price.
When you say "the broader cost of bitcoin" you're talking about electricity right? Aside from the important fact that "cost" isn't "value", there are a couple problems with that. First of all, many people are finding arbs in energy (eg, you live or work in a dorm, lab, or other building where don't pay an electric bill) and using free electricity to mine. That provides liquidity/fungibility by contributing to transactions, without incurring any cost to the miner. Second, people and entities with large early reserves of bitcoin have an incentive to mine even when the energy cost is greater than the mining return, because a better functioning bitcoin is more likely to attract further inflows that impact the price upward.
What's the intrinsic value of Bitcoin then? $10000? $100? $1?
This argument doesn't make any sense. I prefer BTC over gold. This does not negate the intrinsic value of gold in any way.
But the point is that saying that "it has intrinsic value" doesn't really mean anything if one cannot even given an order of magnitude of what it is.
I won't say that the price of gold is directly related to its intrinsic value (there is no way to do "financial valuation" on it) but the situation with bitcoin is even worse. At least there are some industrial uses of gold that can be used to assign an objective value to an ounce of the metal.
What does that mean? That if you had some amount of gold you would sell it and buy bitcoin instead?
It’s a very interesting experiment in social engineering but I find it difficult to find a concrete example of bitcoin being useful. Making some people very rich at the cost of others is not sufficient justification. If anything fewer people are actually using bitcoin now for real transactions not involving speculation on prices than in 2015 say.
Are you sure? In fact it seems like quite a few people want that, as evidenced by the entire crypto space.
Hardly anyone is using these currencies to actually perform transactions or store value because they are awful in so many ways for that (volatility, treated and taxed like an asset, unpredictable fees, slow settlement, no fraud protection etc). All the transactions, all the new accounts flooding into exchanges are there for one reason - to strike it rich in the new gold rush.
Coins intended to be a valueless joke are worth SIX BILLION DOLLARS and nobody is actually using them as a currency or a consensus mechanism or anything useful - this is pure speculation on finding a greater fool later on when you want to sell, if you're even thinking about later on, because perhaps this will never end and it's different this time.
People are buying and selling cryptocurrencies as they did beanie babies or tulips...
https://theweek.com/articles/461977/great-beanie-baby-bubble
Wanting to get rich is an excellent incentive for anyone. Most other incentives (e.g. altruism) quickly become perverse as they devolve into status-seeking or coercion through force or in subsidisation and centralised planning.
In fact, without that desire to get rich (acquire resources), it's hard to imagine businesses being incentivised to provide value to the largest number of people in the most efficient way possible. The profit motive is the best incentive humans have encountered because, in a society that respects individual freedom and property rights, the profit motive forces us to innovate to provide others with value in order to receive value from them.
I like you was severely brainwashed to believe that inflation and debasement of a currency is great! My father's friend worked at the IMF and would dismiss my notions of deflation as childish. I studied Finance and Mathematics and never once was your view of money seriously questioned.
But it's a lie. In fact, if you think from first principles, you realise that saving, not spending, is the key to economic growth and individual prosperity.[0]
Think about what you were saying: you're effectively claiming that money should be worthless, in which case, why bother trying to earn it? You want to work for and to be paid something valuable not something worthless which you want to throw away as soon as you get it. You want your money to be good enough to save. Saving allows us to defer present consumption for future benefits.
The idea that people will never spend their bitcoin is absurd. Humans have needs that they can't get away from. They also have desires to indulge. They will buy stuff and at the same time they will be incentivised to be prudent if they adopt a Bitcoin Standard. We should want our communities to be prudent.
[0]: https://mises.org/wire/saving-not-spending-engine-economic-g...
I don't think bringing in "brainwashing" is helpful to discussion.
I'm sure you've travelled around the world. In underdeveloped countries, most people don't have bank accounts and they hold what little currency they can as cash savings. In developed countries, many individuals hold currency in bank accounts with a 0% real rate of interest. In aggregate this is a lot of depreciating money being held. Bitcoin has been appreciating at an average annual rate of 200% over the past decade and anyone can choose at any time, to begin saving their wealth in it.
> I don't think bringing in "brainwashing" is helpful to discussion.
I did not mean to insult you or claim it's your fault. Mea culpa. If you've had a typical western education, especially if you've been to business school or taken a business and economics course somewhere, or even read a modern economics textbook, then you've been brainwashed. We all were. The reason I use that word is to emphasise that we're indoctrinated to never question a system that keeps us in a rat race, wondering why we can't get ahead. I mean, my god, just look at the IMF twitter account https://twitter.com/imfnews/status/1297152792403103745 and the Bank of Jamaica twitter account https://twitter.com/centralbankja/status/1299127633364557826
Bitcoin, at minimum, provides us with a way to measure the value of our fiat currencies and the performance of other assets we might want.
You don't need to :)
Can someone define this term? Do we ignore P2P bootstrapping issues? Do we ignore the roll of IANA, RIRs, and other authorities that manage IP address and ASN assignments?
Or perhaps more to the point, why would it not work to have a consortium of banks set up and operate a distributed public ledger (thus avoiding the energy-intensive "mining" process)?
Yes, because Bitcoin doesn't have those issues. It follows the chain with the largest amount of PoW, it doesn't matter where it comes from.
But this only solves a problem specific to bitcoin that no one else has, because no one else keeps a centralised database with every transaction, so I'm not sure it counts as an advantage.
Michael Saylor from Microstrategies: $1B.
Elon Musk from Tesla: $1.5B.
GrayScale: not sure how many dollars, but they own >550,000 bitcoins.
Big money is of the opinion that bitcoin is an excellent store of value.
Only a matter of time before it becomes a medium of exchange.
And later on, a unit of account.
By that time, you won't be asking yourself what 1 bitcoin is worth anymore.
Things will be priced in bitcoin. And those who have it, have it good.
By that same logic, I should be able to pay for my groceries with Apple stocks by now.
Bitcoin isn't at that phase yet.
For any new money, it goes like this:
1. Store of value. 2. Medium of exchange. 3. Unit of account.
In that order. Cumulatively.
If you look for graphs showing the growth of merchants accepting bitcoin over time, you'll notice they're all out of date. That's because at some point after 2016 it stopped growing and people lost interest in this metric. This happened when the block size limit was reached: the result was higher transaction fees and unpredictable confirmation times. In 2018 it got so bad there was basically a civil war in the community about it and bitcoin cash forked. Today the average transaction fee is $19.
So I don't think we're on the path you envision. If bitcoin continues to be successful, I expect it will be used as an international settlement system by large corporations and financial institutions only.
Ignore Lightning Network's development at your own peril.
Increased and decreased interest are part of the normal market cycle, the chart of which I'm betting you don't know by heart.
You have to be extremely & wilfully ignorant to claim 'medium of exchange' is off the table, just now that PayPal & Mastercard are embracing cryptocurrencies.
But whatever, man. You don't wanna belong to the future's 1%, that's fine with me.
You're reading things into my comment that I didn't say. Note that I didn't claim that my opinion is more important than yours, nor did I claim that bitcoin will not be successful. It very well might be. I just pointed out some inconsistencies in the path to success that you envision. (Or rather, the path that Dan Held envisions, because your comment was an almost verbatim copy of what he recently said in a "What Bitcoin Did" podcast episode.)
> Ignore Lightning Network's development at your own peril.
Lightning will help with scaling, but it's not a silver bullet. To give one example: a lightning channel's state management involves composing precommitted transactions, which are not broadcast but can be used to unilaterally close a channel (see section 3.3.2 of the lightning paper[1]). That means the transaction fee also needs to be chosen in advance. That can be problematic when the transaction fees spike, because there is only a limited window for such a transaction to go through. If it takes too long to confirm, it will not be able to override an attempt by the other party to maliciously close the channel with outdated state.
> You have to be extremely & wilfully ignorant to claim 'medium of exchange' is off the table, just now that PayPal & Mastercard are embracing cryptocurrencies.
Paypal does not currently support using bitcoin as a medium of exchange. See Paypal's FAQ "Can I use Cryptocurrencies to pay or send money with PayPal?"[2].
Even if they do enable "sending bitcoin" within paypal in the future, I'm not sure we can say that that's bitcoin being used as a medium of exchange. The medium would be paypal, while bitcoin would act as a unit of account (numbers in paypal's database).
[1] https://lightning.network/lightning-network-paper.pdf
[2] https://www.paypal.com/us/smarthelp/article/cryptocurrency-o...
2. Like with every solution suggested in the bitcoin ecosystem, LN attracts a lot of FUD. The weakness you observe in LN seems to me like arguing in 1995 we'll never be able to stream movies via the Internet. "X Doesn't exist now, so it never will.". Present this argument to one of LN's creators, and they'd likely wipe it off the table.
The fact of the matter remains that any scaling solution has 2 minimum requirements:
A. It needs to be done off-chain. B. All transactions need to be verifiable from the genesis block.
LN satisfies these 2 conditions. If you'd design LN from the ground up, you'd probably end up with LN again. Just like you'd end up with bitcoin again, if you'd design that from the ground up. So these solutions will have to do.
3. Just because PayPal doesn't support this now, it doesn't mean they won't support it in the future. Matter of fact, it's fairly likely they will. Once again... "X Doesn't exist now, so it never will" is an inadequate argument.
I’m struggling to think of a currency that started as a store of value and then became a medium of exchange. Most currencies [1] started out worthless for good theoretical reasons. If they started valuable, they’d be subject to Gresham’s law and not transacted.
[1] The U.S. dollar, pounds Sterling, the Euro, the Swiss franc, money in the free banking era, Song Dynasty jiaozi, et cetera
But the part where it tries to explain why Bitcoin is the answer is laughable.
Almost as laughable as the part where he blames every societal ill from the degeneration of art and onwards on fiat currencies.
Argument irrelevant.
I'm not going to ban you right now because you've posted some good comments too, but if you keep posting comments like these ones we're going to have to. Please correct.
https://www.aclu.org/blog/privacy-technology/consumer-privac...
Bitcoin is a public ledger. It is AT BEST pseudonymous. At best.
Then I will make two other secret transactions with the CC and the BTC wallet. You can each then try to identify the targets and the sums spent in the secret transactions.
Whoever identifies gets some sum of money from the other. I'm happy to escrow for you.
> The finite supply is a feature, not a bug.
Finite supply means that a guy who mined a bunch of bitcoin in his dorm room in 2011 because the university gave him free electricity can move the price when he decides to sell.
State actors have good handle on violence. And then you better be on the same chain as they are, or it's jail time...
You can change the bitcoin source code to have more coins and deal out half to yourself first. That's the easy part.
But then comes the part where you have to convince the whole world that your chain is the one, true bitcoin.
Good luck with that.
And there's been growing demand for bitcoin for 12 years and counting.
It's deflationary by design. But by all means, stick to your government money.
Printer goes brrrrrrrrr.
I sit on it while it appreciates.
Number go up.
The reason why it is capable of increasing, is because the number is fixed. Inflation would outstrip its value, if it weren't.
Bitcoin is useful. It has organic support. When it comes to storing value, other coins do not matter (nearly as much). Just ask PayPal, Mastercard, Microstrategies, Tesla, JP Morgan, GrayScale, etc.
Every design decision comes with trade offs. All the right trade offs have been made. If you'd reinvent it from scratch, you'd end up with the exact same thing.
The only thing about bitcoin that sucks, is that nocoiners don't have any. And they won't have any until it's $1M.
Nobody wants to be the first. But everybody wants to be second.
It's important that you do it yourself. Because when I tell you it, it isn't going to land.
Your ideologies don't matter. The world won't let you force them onto it. The reality of the situation, is that all the big money believes bitcoin has a large role to play in the future of the world economy.
And this is true.
Screenshot this. Message me in 2030. Let's reevaluate.
It is impossible for BTC to become a medium of exchange without significant technical upgrades that the core developers have so far been hostile to.
Although it was a goal of the original bitcoin project (and continues to be for BCH and others), it is not a goal of the BTC community and it is incredibly unlikely that it will ever happen.
As for BTC vs BCH... the market has spoken: BTC is the one, true bitcoin.
I unironically think Dogecoin has a much higher chance than Bitcoin of being a legitimate and popular medium of exchange in the future, in part because the supply isn't capped.
I think cryptocurrency may drive a lot of commerce in the coming decades as an actual payment mechanism rather than a speculative security, but, if so, I don't think it'll be Bitcoin that wins that race. I suspect the value will still be fluctuating frequently and violently in ten years.
I'm no tax expert but I think the point the OP was making is businesses have more options for writing off lossess - they can drum up other things to apply a loss towards. Thus, a business can effectively write off more of the loss than an individual can.
These are rich people/companies putting non-existential amounts of money into something new in the off chance it pays off. Best case scenario they get even richer, worse case scenario they pay a lot less in taxes. Either way their lifestyle/needs will be met and the business will continue.
For the average individual: Best case scenario they get rich. Worst case scenario their investment goes to zero or close to it and they get a max 3k tax deduction on their taxable income. Their lifestyle/future savings could be greatly impacted by the loss, certainly far more than the businesses/rich people in question would suffer.
In any case, if a corporate makes an investment and loses the money, you are correct that this will lower the tax base and hence the total taxes paid, but that will of course only cover a small part of the loss.
I don't know the tax implications for individuals in the US investing in stocks, but in Sweden there's not much difference if you're a company or an individual, you'll still be able to deduct losses.
Finally, if a company invest a large part of their capital in Bitcoin and it goes to zero, that is just as catastrophic for the company as it would be for an individual, it just depends on how much of the "savings" were invested.
I was just opposing the "Rich people and businesses are getting into it! That means the value is bound to go up and makes it a good investment for me!" attitude I was seeing in the comments. The super rich and large corporations have disposable incomes and options that make buying bitcoin considerably less risky than it would be for the average retail investor.
Hell the risks are in Tesla's own SEC filing: https://www.sec.gov/Archives/edgar/data/1318605/000156459021...
"We hold and may acquire digital assets that may be subject to volatile market prices, impairment and unique risks of loss.
In January 2021, we updated our investment policy to provide us with more flexibility to further diversify and maximize returns on our cash that is not required to maintain adequate operating liquidity. As part of the policy, which was duly approved by the Audit Committee of our Board of Directors, we may invest a portion of such cash in certain alternative reserve assets including digital assets, gold bullion, gold exchange-traded funds and other assets as specified in the future. Thereafter, we invested an aggregate $1.50 billion in bitcoin under this policy and may acquire and hold digital assets from time to time or long-term. Moreover, we expect to begin accepting bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis, which we may or may not liquidate upon receipt.
The prices of digital assets have been in the past and may continue to be highly volatile, including as a result of various associated risks and uncertainties. For example, the prevalence of such assets is a relatively recent trend, and their long-term adoption by investors, consumers and businesses is unpredictable. Moreover, their lack of a physical form, their reliance on technology for their creation, existence and transactional validation and their decentralization may subject their integrity to the threat of malicious attacks and technological obsolescence. Finally, the extent to which securities laws or other regulations apply or may apply in the future to such assets is unclear and may change in the future. If we hold digital assets and their values decrease relative to our purchase prices, our financial condition may be harmed.
Moreover, digital assets are currently considered indefinite-lived intangible assets under applicable accounting rules, meaning that any decrease in their fair values below our carrying values for such assets at any time subsequent to their acquisition will require us to recognize impairment charges, whereas we may make no upward revisions for any market price increases until a sale, which may adversely affect our operating results in any period in which such impairment occurs. Moreover, there is no guarantee that future changes in GAAP will not require us to change the way we account for digital assets held by us.
Finally, as intangible assets without centralized issuers or governing bodies, digital assets have been, and may in the future be, subject to security breaches, cyberattacks or other malicious activities, as well as human errors or computer malfunctions that may result in the loss or destruction of private keys needed to access such assets. While we intend to take all reasonable measures to secure any digital assets, if such threats are realized or the measures or controls we create or implement to secure our digital assets fail, it could result in a partial or total misappropriation or loss of our digital assets, and our financial condition and operating results may be harmed."
Add to that the fact that the people making the investment decisions at companies are not personally completely dependent on the outcome. Worst case scenario they can get another job.
Bitcoin can. And then it can move on to unit of account.
I worry that companies like PayPal are interested in btc precisely because they know it won't ever threaten them.
Thanks for playing.
Banks would become an optional frontend on this transaction system, with security features built-in, etc.
All of this seems a lot easier and cheaper than bitcoin's distributed ledger.
The other day I walked into a shop where I couldn't pay by card because the banks didn't provide the service to them. Users don't see "without banks" as a feature, but businesses will. It will reduce their fees and their dependency to the whole industry.
There will still be an intermediary to whom the small business will pay fees for a turnkey solution. And absolutely those fees would be lower in a world where anyone can participate and compete on them. But that's definitely not the world we live in just yet, and even if/when it arrives, I don't think anyone at the retail level (either the consumer or the storefront) will have an appreciably different experience from what they have today.
EDIT: Just adding also, clearing times is the other huge barrier. Obviously no retail environment can tolerate a transaction delay of more than a few seconds, so the other function of the intermediary would be to manage that reality, by some combination of pre-clearing transactions for customers who look safe (classical CC fraud detection where de-anonymizing would be a key component), or maybe a pre-paying scheme (which ends up sounding a lot like a bank debit card).
Most people don't really need or want to take on foreign exchange rate risks.
[0]: https://louwrentius.com/cryptocurrencies-are-detrimental-to-...
Getting rich quickly. It might be the largest Ponzi scheme ever. I hope it's not..
Most people are perfectly happy entrusting their (fiat) money with the banks, and asking permission for accessing their funds. Bitcoiners, on the other hand, have tasted the freedom of self-custody and a permissionless payment system.
Whether it has value or not depends on how important it is to have a monetary good that is not issued by a nation state, and cannot be controlled/stopped/inflated/modified.
I can think of lots of reasons.
* Deflationary currencies are dangerous. Inflation is a feature, not a bug.
* If I screw up a bank transfer or have my credit card details stolen, I can have those transactions reversed. No such luck with Bitcoin. The idea of losing my life’s savings to a zero day or sophisticated hacker doesn’t sounds great to me.
* I can’t remember the last time my bank got DoSed.
* Bitcoin’s value fluctuates wildly, making it a poor medium of exchange.
* I like that my country can adjust monetary policy in response to world events like pandemics. That’s a feature, not a bug.
> Deflationary currencies are dangerous. Inflation is a feature, not a bug.
You may be right, but we can't stop a community from choosing something deflationary as their preferred currency.
> I can have those transactions reversed. No such luck with Bitcoin
I'd argue this is a feature in Bitcoin for many people.
> I can’t remember the last time my bank got DoSed.
You're fortunate. Last time I went to a bank (right after COVID hit), I was denied cash withdrawals due to liquidity issues. That's what happens when your money is in custody of someone else. Once you look outside first world countries, you'll see the demerits of centralised systems handling critical resources like money.
> Bitcoin’s value fluctuates wildly, making it a poor medium of exchange.
I'll agree with this point. Perhaps it's because of the nature of the market itself. Bitcoin trades globally, 24x7 and 365 days a year, without circuit breakers when there's extreme volatility. It's not appropriate for buying candies from a store, but maybe a good option for a Tesla?
> I like that my country can adjust monetary policy in response to world events like pandemics.
On the contrary, people holding Bitcoin during the pandemic were relatively well off in 2020. The stimulus package had negative impacts too, like asset inflation. But more concretely, Bitcoin is the first true alternative to central banking, and many people are happy to adopt it because it solves important problems for them.
edit:typos
Everybody here is missing out why Bitcoin was made in the first place: the 2008 crash.
The benefits of a globally liquid asset (not USD) will only be appreciated if you're living from a country that has a weak Central Bank.
- Nigerians use it to import goods from China. This guy can't source USD to purchase imports for his mobile phone business, so he uses BTC [0]
- Venezuela remote workers getting paid in BTC, because their central bank clamped down on USD inflow. They also didn't want to be paid in the worthless local currency. [1]
- Remittance shops in Hongkong are using BTC to settle remittances by batch. Buy and sell to the last mile instantly, no exposure to volatility. This gives them way better FX fees and faster settlement (30mins vs. 1-3 business days). They pass the savings down to their customers as marketing spend, or they pocket the change to increase profit [2]
- Argentina Central Bank is hoarding USD due to dwindling reserves. So they imposed a $200USD/month cap on individuals transacting with USD. People are flocking to BTC for remote settlement. [3]
- Iran hit with sanctions cant use USD. So they're working on laws to use BTC for settling imports with China. They even issued BTC mining licenses for private companies. [4]
I come from a country, where if you remit more than $10K outbound you'd have to: pay big fees ($200+), suffer bad FX rates, wait for 2-3 days, do a physical appearance at the branch for and pay documents/notarial stamps, sign forms, present and print out government ID's, just to say: "This is my money, I just want to send money to my dad overseas for medical purposes".
December 2020, my mom had received USD in her dollar account. She wanted to withdraw and convert it to help build float for the family business, the local bank didn't have enough USD. They told her it was a 6-week wait, lots of people lined up. Lol.
People from first-world countries have it good.
[0] https://www.reuters.com/article/us-crypto-currencies-africa-...
[1] https://www.bbc.com/news/business-47553048
[2] https://www.reuters.com/article/us-crypto-currencies-remitta...
[3] https://www.coindesk.com/crypto-is-booming-in-economically-c...
[4] https://asiatimes.com/2020/10/iran-to-use-bitcoin-to-fund-im...
1. As a medium of exchange. This was what the global community, and more particularly the techie community behind it wanted to use it as. We wanted a quick way to exchange payment across the globe without dealing with shitty companies like Paypal etc.
but at some point, it became instead
2. A store of value. I'm not sure the order of effect on this, but then rich people who had the ability to influence the network effect started dumping real money into it, further inflating the price. I theorized at one point the central banks might have even participated on the dl, just because it's an easy bet to hedge on if you can poof money from thin air like they can.
I think #2 has completely overtaken it's use as #1, and due to that and other factors, I expect a major collapse at some inevitable but undetermined point in the future.
My personal evaluation and why I skipped bitcoin was because I saw that it did not have privacy protections built in, which is what the early coin community wanted (or so I thought). I kick myself for not keeping a few blocks sometimes (at one point I think I spent ~20 btc on a food order!), but oh well.
That's it.
If you don't want that, you don't want that. Some of us do.
Similarly, any government which wants to can block the network entirely or require everyone exchanging into real currency to avoid transactions involving people who’ve violated local laws. Since Bitcoin by design helpfully gives them a full list of your past activities anyone considering ignoring those demands has to consider the risk of consequences for their participation at any point in the future.
Yes, I buy things with bitcoin, and no, you can't find it on the blockchain.
(Or do I? :))
Similarly, maybe you haven’t hit a transaction yet which a government made an effort to block but … are you certain that nobody will ever try to do so or be interested in your past history? If you’re trying to obscure your identity, consider how that would look under existing money laundering if any party led to your real identity being associated with those transactions. If you aren’t confident that no government with jurisdiction will ever care, that’s a factor to weigh on every transaction since you’re leaving an immutable public record.
They wouldn't be able to unless they had over 51% of the mining power, and it would be easily noticed.
Since the blockchain is public all of that can be retroactive, too, so any transaction has the risk that the other party will leak your identity, which similarly disincentivizes other people from taking them.
By that logic anyone in the world can "block" whatever they want by threatening consequences.
At the moment someone with a gun might stop me from going to have a cup of tea with my mother.
I learned long ago to ignore such things in order to maintain my sanity.
We're all criminals now. Such are the '20s.
With the trajectory our political system is on, a few more months of this and the outcome where the guy with the gun pulls the trigger may well be preferable.
The main escape valve at the moment is that the regulations aren't being enforced.
It’s a deflationary asset, meaning the less it gets used the more valuable it is.
There is no reason to speculate about Bitcoin, the same as there is no reason to speculate about real-estate land going up in Antarctica .
USD is backed by guns ( nukes ), what is BTC back's by? Large numbers, 10E77 (2E256), greater than the number of sub-atomic particles in the universe. You more likely to find a nickle lost in our galaxy, than to find a specific BTC private-key.
The problem with the question here, is nobody thinks like a rich guy, let's fall back to JP-Morgans famous "Only gold is money, all else is credit". I hate to admit it but BTC in most recent decade has largely vacuumed up all the paranoid money that would normally be in gold.
I don't even want to touch on the fact that SHA256 & ECDSA SECP256k1 are both NSA algos that are backbone of BTC. In my day the NSA didn't release an algo that they didnt' have a backdoor key.
IMHO BTC is a great way to move massive wealth, but only the rich can play this game. From a GUV point of view BTC has kept the paranoid money out of gold, let's remember the original Satoshi white-paper came out of IMF-NSA, in 1997.
I myself have played BTC since 2011, and have hacked it since then, as its always been more fun to hack Secp256k1 ( big prime numbers and such ) than thinking about 'money' of which I have no use.
The problem that I see is like Alfred H Proofrock in the famous TS-ELIOT 'women come&go speaking of Michelangelo', IMHO BTC requires a total classic knowledge of math, physics, computation, and economic history to 'get-it', and thus given that most are not masters of these four, they're not unlike the wisemen holding different parts of the elephant.
In summary BTC is a toy of rich men, and it will go away when the NSA-IMF decides open the backdoors of sha-256&secp256k1. Even then newer coins will come out using sha-512, and secp512k-n, and the game will continue, as the crypto-currency model has been proven, and road-tested.
My advice for little people is to diversify, say have a little of everything, some gold, some farm-land, some stock, some cash, and most important of all to hold a passport is 'good country' when the SHTF in the USA. Today, I think it much better to play ETH and/or ZEN, which have had better gains, and still are profitable to mine, which allows you to accumulate with privacy, as the coinbase (or any 'exchange') purhcase of crypto is just an IRS database. I would say like gold, 5% crypto, and as along as its a good crypto, it doesn't really matter. By good I mean backed by good-teams, which is why I like ETH and/or ZEN;
BTC is a barometer that's why my #1 hobby is cracking BTC ( factoring ECDSA primes using GPU farms ) its field-medal level math, that you will never get public recognition for solving.
Here is the most obvious one - true sovereignty over your capital. When you have bitcoin, you have have physical ownership of a digitally transferable asset. Not legal ownership where a custodian ultimately decides whether you can access it.
In theory nothing prevents individuals from carrying entire national budgets as seed words in their heads.
You can argue ethics, legality but surely you have to acknowledge the power it gives individuals.
This isn't really true though. At the end of the day, you're always subject to the powers that be who will come knocking on your door with guns if you stop paying your taxes. If they criminalize BTC, stick you in jail, it won't really matter that you have "physical ownership of a digitally transferable asset". Ultimately there's always a custodian who decides whether you can access it.
It might currently have some small benefits over traditional currency (in terms of not needing to operate via the banking system) but that doesn't mean it's somehow outside the boundaries of traditional society.
Hasn't happened so far though because Bitcoin disincentivizes this sort of behavior.
I was too. I told a friend who owns a data center about it, and mentioned maybe he could stress test servers by mining bitcoin (this was before 2011, mining was very reasonable on consumer hardware). He never did to my knowledge.
December of 2019 I ran into him and he thanked me for telling him about bitcoin all those years ago. He sold one for around $16,000, and still had 11 more. He literally didn't care if they dropped to $0, he considered it a win.
I should reach out and see if he has sold another one this week. He could buy a new SUV outright.
Now, the very first implementation (Bitcoin) kinda sucks, like most technologies in their first versions. But there are newer generations, each more interesting, and each unlocking more possibilities. We are for example getting:
* No-autority enforcement of contracts (Ethereum).
* A distributed computation (operating) system (EOS).
* Decentralised finance, for example lending platforms (AAVE).
* Cash-like payment system suitable for real-world payments (Monero).
We're only eleven years in so it's a bit too early to say if it's all rubbish or if it will change the world.
https://davidgerard.co.uk/blockchain/2018/04/05/debunking-bu...
Also: "the management of large amounts of money, especially by governments or large companies" it literally is shuffling money around.
this seems to mean "not actually revolutionary" in practice
Also, even if he had two or three Bitcoin it would be a nice windfall, but not an earth-shattering event that would cause eternal jealousy.
The dollar works plenty good for digital transactions, and with the right bank I can withdraw money anywhere in the world at a reasonable exchange rate without paying additional fees. Credit cards work worldwide. If you pay your taxes and don't partake in illegal commerce, it seems like a fairly good system. I can get around the inflation risk to some degree by buying commodities, securities, or property, and convert to cash when I need it.
I don't think the questions ever stop. We're questioning the dollar and yet we've used it for centuries. We're questioning gold and yet we've used it for millennia. We don't know what the world's cryptocurrency of choice will be in the long term, we don't know who we're helping by bidding up bitcoin (Musk? Cartels? Nerds from MIT and CalTech?), and we don't know the impact that future energy and computing technologies will have on cryptocurrencies.
It also appears to me that anyone who buys and holds bitcoin would make money in a global system that uses bitcoin, because (A) money cannot be created beyond a set limit but can be destroyed/lost, (B) the marginal cost of use goes up as more participants get involved, and (C) inflows to an asset with limited supply always bid up the price because of basic economics. What makes a currency good is that its price stays stable relative to the commodities for which it is used to transact. When the time value of money far exceeds the time value of human activity, you get deflation and that's a poor characteristic for a currency because it punishes those economic participants who are active.
Second, Bitcoin solves the problem of digital exchange between non-trusting parties, this is a very hard problem that didn't have a solution before Bitcoin came around, that's why it exists and it's useful.
Above, you do weave U$ Dollar throughout, let's use it to explain Bitcoin. Currently the trust-less exchange is solved by holding assets which others trust. This means that if you have $100 you can show it other people and they can see that you have it and test that it is really $100. The reason $100 is $100 is because USA makes sure that is true. Now, non-US people are not the happiest that the US dollar is effectively the world currency. This has roots in WW*, Bretton Woods, etc., beside the point for our needs. The biggest problem is that US controls the dollar supply, just in the last year the supply has increased by ~25%, making everyone else'$ cheaper. If instead the world currency was Bitcoin or some other cryptocurrency, one entity would not control the supply, the supply would be controlled by algorithms, which are easier to understand than some old white men. To me the last point, about algorithms, is enough to make bitcoin useful. No matter how much we fight it the world is going digital, and why would money be an exception?
This is where I stopped reading your reply.
The trustless exchange part was worked on for a long time and Bitcoin came around and solved it. This is why questions like that are completely ignorant of anything technology and really makes me question the instigator's motives.
Edit: adding a link to an answer provided to the same question on this site https://news.ycombinator.com/item?id=25256738
> when does it stop
It doesn't, because of the very obvious problems with it as a currency vs. existing currencies. If those magically go away, then people will stop questioning it. As it is, there is very little sign of that ocurring.
There is no disconnect there, no hidden motives. People use currency. Do the benefits of bitcoin outweigh what seem like huge downsides? Quoting the technical underpinnings of it as if it's some slam dunk -- how do you seriously think this persuades people?
Edit: also this
> The problem that you and others like you have is you don't have any BTC and now are struggling to understand why anyone else would have any. I think it's mostly from the fact you didn't get any when you should have and now there is no reason as it's expensive and again you don't have any. Simple really.
This reads as the reason people people have problems with it is envy, that they didn't buy some before it skyrocketed in value, and they now can't buy any.
For instance: I am great at writing web APIs in golang, but unfortunately for me the people coming to my house today to deliver a dumpster (we're doing some spring cleaning) do not accept "golang apis" as a method of payment.
So I find somebody wants "golang APIs", agree to exchange with them for some money, and then use that money to pay the dumpster guys.
Money is a hugely innovative concept which has obviously driven a huge amount of innovation (now you can do work like "write golang APIs" instead of only doing things like "grow potatoes").
Does that help you understand what the point of bitcoin is?
The problem is that money now is issued by governments. Governments are on average only governing one country, although sometimes more as with the Euro. In other words, it is not universal, so if you want to exchange some money for goods and services then you need to find the right money for the country the service is in.
Globalisation means we often want goods and services from other countries. But then we always need to find the right money for that country or use some de facto universal money like USD. But then you're always exchanging money or letting the US government (who control USD) exert some control over you, even though you could be outside the US buying a good/service from a non-US entity.
Bitcoin gives you a universal money. Once you have it, you can exchange it for goods or services without caring about where the recipient is. And you don't have to worry that you've now created a universal money that is controlled by one non-universal entity like the USA.
At least that is the idea
You already do that now. its called a job.
And then the coffee shop people give that money to their landlord, the power company, the coffee bean people, and also their employees.
---
It seems like such bad faith arguments to claim that bitcoin doesn't have a use. It has an obvious use. HNers might not agree that it solves the problem it claims to solve, but if that's what you think then argue that. Don't pretend like you "don't understand" what the purpose is.
Bitcoin is a crypto CURRENCY. It IS money.
As far as governments have ruled in tax law, Bitcoin and other cryptocurrencies are not treated as foreign currency.
You don't need to complicate this further.
The reason I have never mined nor bought into it is that I still, to this day struggle to come up with a real reason to do so.
Am I getting too old? Do I not see the "huge potential" what it may become? Don't I want to get freaking rich? I simply can't answer what BTCs and other crypto coins are actually good for. Can someone help me out here?