OT: Bitcoin
- Thread starter Dawgpoundrock21
- Start date
Money SHOULD inflate
There's a reason the dollar has lost value over time... it's intentional. Inflation rates above 0% allow for more policy in regards to interest rates, improve the odds that banks can operate profitably (which is very important for the economy) and helps avoid deflation (if inflation is targeted at 2% instead of 0%, it takes a greater shock to cause deflation).
The fact that Bitcoin's value is rising is interesting, fun, and potentially profitable, but it also clearly shows that Bitcoin is not true money. I don't know what it is... but it certainly isn't money.
There's a reason the dollar has lost value over time... it's intentional. Inflation rates above 0% allow for more policy in regards to interest rates, improve the odds that banks can operate profitably (which is very important for the economy) and helps avoid deflation (if inflation is targeted at 2% instead of 0%, it takes a greater shock to cause deflation).
The fact that Bitcoin's value is rising is interesting, fun, and potentially profitable, but it also clearly shows that Bitcoin is not true money. I don't know what it is... but it certainly isn't money.
Reraise.
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What I personally don’t understand is who exactly is assessing the value of a completely unregulated currency and converting it into USD for sale onto the open market. Whoever is doing it cannot be under the jurisdiction of the SEC (the other one). That uncertainty, to me, is much more concerning than whether or not Bitcoin itself remains viable. Too much opportunity for corruption or overvaluation / insider trading.
I have a hard time believing it's gonna last. China just a few months ago passed a law banning it or something to that effect. Basically it's taking a piece of the pie from the federal reserve and that won't last long. Big money players with a lot of power there. I actually like it and wish we would get rid of the federal reserve. Crazy that we pay so much just to print our money and then the interest on it. Bitcoin bypasses a lot of that. I wish I would have dropped a grand on it back at 2.50. I told myself I would never miss another opportunity and damn it I did again.
i don't think you understand what money is. Money is something of value that people use as a tool to aid in the exchange of goods. You can buy and sell stuff with bitcoin. Thus it is money. From a tax standpoint it is being viewed as an asset. The Chicago Board of Exchange begins futures trading on Sunday. If you don't know what that is... it is the largest... well f i'm not even gonna try anymore. You guys have fun.
Oh, I guess I will take my cash down to the court house and trade it in for "faith and credit" whatever that is. Can you eat it?
I'll simplify it even further:
Bitcoin uses some math that is easy to perform but hard to perform in reverse called hash functions. These hash functions are used both for summarizing transactions to be signed and for performing proof of work for mining.
You can take all the data for a transaction, perform the hash function on it, and then digitally sign the hash value (much like digitally signing an email message). Everyone on the network can verify that you signed the hash and no one else can create the correct signature for the transaction. The 'output' of a transaction has a bitcoin address and a value associated with it. A transaction can have multiple outputs, which is useful for making change if the inputs into a transaction are greater than what you need to spend, much like how you can buy a stick of gum with a $5 bill even though the gum only costs $0.50. The store gets $0.50 and you get $4.50 back. The 'input' into a transaction is a reference to an unspent transaction output that has been digitally signed by the owner of said output (whoever holds the key to the address). A transaction can have multiple inputs, much like how at a store you can buy $100 worth of groceries with a $50 bill and $50 on your Visa card, or you can pay for $50 of the groceries and your roommate can pay for the other $50.
For bitcoin, the two things really need to happen for a transaction to take place. The first is that the transaction is valid. This means that all the inputs have valid signatures and that the total of the inputs is greater than or equal to the total of the outputs. If the input total is greater then the bitcoin miners can claim the difference as a transaction fee. The second is that the transaction appears in the ledger. The ledger is the list of all transactions that are valid. One key aspect of the ledger is that it includes blocks that are computationally hard to produce. Finding these blocks is what the miners do. When they come up with one of these blocks, they claim the mining fee and any transaction fees. The updated ledger gets broadcast out to all nodes. If all the nodes (mining nodes and other nodes) on the network accept this block (which they should normally), they use this ledger as the basis for the next block of transactions, and the process repeats.
Now, with regular money, you can't spend it twice without engaging in larceny. Once that $5 bill is in the cash register, it is out of your control. You can freely spend the $4.50 you got in change, but that $5 is gone. That is easy to see in the real world, but in the digital world, the data for you bitcoin is still out there. It's really easy to copy data and reuse it; just ask the RIAA. I used the word unspent in the previous paragraph, but making sure only unspent digital currency could be spent was a really hard problem until bitcoin came along. Previous solutions relied on centralization, but Bitcoin avoided that with the ledger. The nature of the ledger makes it easy to check if a transaction output has not been used as an input into another transaction. An output from one block can only be used only once as an input into another block, even if you do not need to spend all the bitcoins in an output. This is much like spending regular money. If I have a $20 bill and need to pay you $10, I cannot rip the $20 bill in half. I have to give you the $20 bill and you give me back $10. With bitcoin, the original $20 bill would no longer exist as spendable currency in the network since it has already been spent. Instead, I have a crisp new $10 bill and you have a crisp new $10 bill. This may look like counterfeiting, but with Bitcoin the new $10 bills can be traced back to the previous $20 bill, which can be traced back to some other transaction, and so on.
A few key things to realize are.
1) Knowing the private key to an address is necessary and sufficient for owning the bitcoins associated with that address. If I calculate your private key based on your public key (which is the same as a bitcoin address), create a new private/public key pair that matches an existing address (extremely unlikely), or obtain your private key through nefarious means, I own your bitcoins. If you lose your private key, the bitcoins will never be spendable, even by you. When you hear about people losing bitcoin, it's because they lost a hard drive with their private key or their private key was held on a server which got hacked.
2) Transactions are irreversible when they become part of the ledger. To undo a transaction, I would have to grab a copy of the ledger before the transaction (trivial, since current ledger contains all previous ledgers, much like a diary that contains your life story will include your life story up until 1 year ago), calculate a new block based on the old ledger plus all transactions that have taken place since then but without the transaction I want to reverse, and then get the bitcoin network to accept this new ledger (which could not happen unless I gain control of over 50% of the network).
3) Bitcoins cannot be seized, even by governments, unless the private keys are compromised. If you store your private key unencrypted on your computer or anywhere else, it is vulnerable. If it is encrypted but someone else is able to decrypt it, it is vulnerable. The bitcoin ledger is digital data that can be copied indefinitely, but owning a copy of the ledger does not help you in the least for obtaining the private keys for bitcoin addresses. If the government gained control of more than 50% of the bitcoin nodes, it could create havoc, but even then the remaining bitcoin nodes could form a fork on their own when they realize what has happened and they continue along with their own copy of the ledger.
4) Bitcoin addresses are easy to generate. An individual can have a thousand bitcoin addresses so long as he has the thousand private keys that go along with them. This makes anonymization easier. You could even combine dozens of inputs with dozens of outputs and it is hard to tell whose transaction went with whom. You could use a unique address for every single transaction.
5) Bitcoin's major drawback for daily use is how long it takes for a transaction to show up in the ledger. The hard to calculate blocks are created about every 10 minutes, and the nature of decentralization means that your transaction may mean that the next ledger may not contain your transaction and you have to wait another 10 minutes (or longer)for your transaction to show up in the ledger. Do not consider the transaction complete until it shows up in the ledger. After all, I could double spend in that time frame and only one transaction would complete. Don't expect grocery stores and gas stations to just let you drive off.
As far as bitcoin as an investment goes, that's a whole other issue.
Bitcoin uses some math that is easy to perform but hard to perform in reverse called hash functions. These hash functions are used both for summarizing transactions to be signed and for performing proof of work for mining.
You can take all the data for a transaction, perform the hash function on it, and then digitally sign the hash value (much like digitally signing an email message). Everyone on the network can verify that you signed the hash and no one else can create the correct signature for the transaction. The 'output' of a transaction has a bitcoin address and a value associated with it. A transaction can have multiple outputs, which is useful for making change if the inputs into a transaction are greater than what you need to spend, much like how you can buy a stick of gum with a $5 bill even though the gum only costs $0.50. The store gets $0.50 and you get $4.50 back. The 'input' into a transaction is a reference to an unspent transaction output that has been digitally signed by the owner of said output (whoever holds the key to the address). A transaction can have multiple inputs, much like how at a store you can buy $100 worth of groceries with a $50 bill and $50 on your Visa card, or you can pay for $50 of the groceries and your roommate can pay for the other $50.
For bitcoin, the two things really need to happen for a transaction to take place. The first is that the transaction is valid. This means that all the inputs have valid signatures and that the total of the inputs is greater than or equal to the total of the outputs. If the input total is greater then the bitcoin miners can claim the difference as a transaction fee. The second is that the transaction appears in the ledger. The ledger is the list of all transactions that are valid. One key aspect of the ledger is that it includes blocks that are computationally hard to produce. Finding these blocks is what the miners do. When they come up with one of these blocks, they claim the mining fee and any transaction fees. The updated ledger gets broadcast out to all nodes. If all the nodes (mining nodes and other nodes) on the network accept this block (which they should normally), they use this ledger as the basis for the next block of transactions, and the process repeats.
Now, with regular money, you can't spend it twice without engaging in larceny. Once that $5 bill is in the cash register, it is out of your control. You can freely spend the $4.50 you got in change, but that $5 is gone. That is easy to see in the real world, but in the digital world, the data for you bitcoin is still out there. It's really easy to copy data and reuse it; just ask the RIAA. I used the word unspent in the previous paragraph, but making sure only unspent digital currency could be spent was a really hard problem until bitcoin came along. Previous solutions relied on centralization, but Bitcoin avoided that with the ledger. The nature of the ledger makes it easy to check if a transaction output has not been used as an input into another transaction. An output from one block can only be used only once as an input into another block, even if you do not need to spend all the bitcoins in an output. This is much like spending regular money. If I have a $20 bill and need to pay you $10, I cannot rip the $20 bill in half. I have to give you the $20 bill and you give me back $10. With bitcoin, the original $20 bill would no longer exist as spendable currency in the network since it has already been spent. Instead, I have a crisp new $10 bill and you have a crisp new $10 bill. This may look like counterfeiting, but with Bitcoin the new $10 bills can be traced back to the previous $20 bill, which can be traced back to some other transaction, and so on.
A few key things to realize are.
1) Knowing the private key to an address is necessary and sufficient for owning the bitcoins associated with that address. If I calculate your private key based on your public key (which is the same as a bitcoin address), create a new private/public key pair that matches an existing address (extremely unlikely), or obtain your private key through nefarious means, I own your bitcoins. If you lose your private key, the bitcoins will never be spendable, even by you. When you hear about people losing bitcoin, it's because they lost a hard drive with their private key or their private key was held on a server which got hacked.
2) Transactions are irreversible when they become part of the ledger. To undo a transaction, I would have to grab a copy of the ledger before the transaction (trivial, since current ledger contains all previous ledgers, much like a diary that contains your life story will include your life story up until 1 year ago), calculate a new block based on the old ledger plus all transactions that have taken place since then but without the transaction I want to reverse, and then get the bitcoin network to accept this new ledger (which could not happen unless I gain control of over 50% of the network).
3) Bitcoins cannot be seized, even by governments, unless the private keys are compromised. If you store your private key unencrypted on your computer or anywhere else, it is vulnerable. If it is encrypted but someone else is able to decrypt it, it is vulnerable. The bitcoin ledger is digital data that can be copied indefinitely, but owning a copy of the ledger does not help you in the least for obtaining the private keys for bitcoin addresses. If the government gained control of more than 50% of the bitcoin nodes, it could create havoc, but even then the remaining bitcoin nodes could form a fork on their own when they realize what has happened and they continue along with their own copy of the ledger.
4) Bitcoin addresses are easy to generate. An individual can have a thousand bitcoin addresses so long as he has the thousand private keys that go along with them. This makes anonymization easier. You could even combine dozens of inputs with dozens of outputs and it is hard to tell whose transaction went with whom. You could use a unique address for every single transaction.
5) Bitcoin's major drawback for daily use is how long it takes for a transaction to show up in the ledger. The hard to calculate blocks are created about every 10 minutes, and the nature of decentralization means that your transaction may mean that the next ledger may not contain your transaction and you have to wait another 10 minutes (or longer)for your transaction to show up in the ledger. Do not consider the transaction complete until it shows up in the ledger. After all, I could double spend in that time frame and only one transaction would complete. Don't expect grocery stores and gas stations to just let you drive off.
As far as bitcoin as an investment goes, that's a whole other issue.
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Uhhh...I hate to break it to you, but the USD is fiat currency, so not backed by the full faith and credit of the USA. Think about what that phrase would even mean. If the fed or U.S. gov't hyper inflated the dollar away, and you brought it to the gov't and demanded that you be compensated because it has the full faith and credit of the USA, what would they compensate you with? The value of the dollar fluctuates compared to other currencies and stores of value all the time. There is no right day in time to look back to to determine what you are owed and nothing that would indicate which currency or store of value you would be paid in.
A dollar is worth a dollar, which is worth generally what people will trade you for it. that's all. Same as Bitcoin. The difference is whether you trust an independent (or mostly independent?) fed or some software, or maybe the difference is whether you expect other people to trust/maintain faith in the value of the dollar or the value of bitcoin.
Sounds like you're full of **** to me. I'll wait for Engie to explain the real way it works to you.**
So the fed prints more money so the government can make more regulations. What a great setup to those in charge.
Also Zimbabwe and the Weimar Republic would like a word regarding how good inflation is.
Also Zimbabwe and the Weimar Republic would like a word regarding how good inflation is.
Bitcoin is a speculative currency play. So far a good one. I would argue that's not really an investment.
Holy **** man, this is nuts.
Before I continue, I am in no way arguing against bitcoin. I think its a really interesting experiment and am fascinated by it from a technology perspective, social perspective, and economic perspecitive.
How the 17 can you claim what you just did and not feel guilty after clicking 'REPLY'?
You claimed i can buy with bitcoin on Amazon, then said I first have to buy something else to then use as currency on Amazon. That isnt using bitcoin to buy on Amazon.
I could also make lemonade, sell it outside my house, and use that money to buy **** on Amazon. That doesnt mean I can buy stuff on Amazon with lemonade.
Damn.
Now to refute your claim that its easy to buy **** and there is a nice list...my comment was that GLOBALLY the number of places which accept bitcoin are extremely limited. To show this, one would compare the number of businesses which accept bitcoin to the number of businesses which accept Mastercard or Visa. Its a global currency with an extremely limited global marketplace in which to spend that currency. Your website doesnt refute my comment. Look at the number of businesses that accept bitcoin and compare that number to the overall number of businesses in the world. Guess what- bitcoin is accepted at an incredibly small % of businesses.
Also, just so we're clear here. From a payments market share perspective (not investing) Bitcoin is not even a blip of a blip as far as being relevant. The news and investing resources will have you believe so. Just something to keep in mind. I'm like many in the fact that I think it's a cool concept that could come to fruition one day but in terms of scope, it's laughable how tiny it is right now.
This story is of a guy who forgot his PIN to access his bitcoin...
https://www.wired.com/story/i-forgot-my-pin-an-epic-tale-of-losing-dollar30000-in-bitcoin/
I couldn't catch my breath during this story. Definitely made me hug my password manager a little tighter.
https://www.wired.com/story/i-forgot-my-pin-an-epic-tale-of-losing-dollar30000-in-bitcoin/
I couldn't catch my breath during this story. Definitely made me hug my password manager a little tighter.
My family's business has been going for over 80 years, and one of the main rules passed down from my grandfather to my father to me was, "If it sounds too good to be true, it's not good. Never invest in anything you don't completely understand"
The textbook definition of money is that it... (a) Is UNIVERSALLY accepted, which Bitcoin clearly is not. (b) It holds it's value relatively well, which Bitcoin does to some extent, but is far more volatile than successful monies. (c) It is a "unit of account"--when people think of value they think of it it in terms of the money. I have NEVER had anyone refer to value in Bitcoin. In fact, when we think of the value of Bitcoin, we think of its value in USD.
I have some Bitcoin. It is fun. But it is not money by any of the three textbook criteria.
The Fed prints money for a lot of reasons, but I don't follow how that impacts the viability of the government making regulations.
Yes, Zimbabwe and a few other developing countries have had hyperinflation problems in prior decades, but the US, UK, Canada, Australia, and virtually ever other developed country have clearly shown that inflation can be an ingredient of a healthy economy. Choosing two outliers and pretending they represent the typical case is such a pathetic argument. You're better than that.
I trust people trying to secure their wealth over people trying to take mine away (and as much as possible) every day.
By that same logic, someone could argue that collectivism works because those few "outliers" in the USSR, China, and Cambodia where hundreds of millions of people died shouldn't be a case against it.
I understand Bitcoin and I would not invest in it.
The biggest reason to not invest in Bitcoin is that Bitcoin is not going to be the money of the future. It has too many drawbacks to prevent wide-scale adoption.
1) When money is stolen from people, they want it back. The irreversibility of Bitcoin transactions and anonymity of Bitcoin addresses make it infeasible to get money back. Even if I track down who holds the address of where my Bitcoin first went, that person probably would have spent and/or transferred the bitcoin to other addresses. Does that person also hold the keys to those addresses? I don't know.
2) Bitcoin is too slow to be used as money. It takes on average over 5 minutes for a transaction to enter the ledger. And you thought the line at the grocery store was bad now. It can work for some online transactions, but even for things like in-app purchases, people want instant access. Amazon and the like will take it because they are going to wait a few hours before sending your stuff anyway.
3) People tend to not want to use currency whose value varies too much. In deflationary times, I will hold onto my dollars because they will be more valuable tomorrow. This is bad for money because it keeps it from moving (and hence it becomes more like an asset rather than currency). In inflationary times, I want to get rid of the money as quickly as possible and put it into something more stable.
If people are not using Bitcoin as a currency, and is increasing in value because of speculation, then it is purely an asset. And if it is an asset, what is its intrinsic value? It has none. Sure the proof-of-work is hard to calculate, but so what? I could have used the electricity used for that computation to do something else. At least gold is pretty to look at, can be made into jewelry, and has valuable industrial uses. A barrel of oil can be converted into a variety of fuels and plastics. A grain silo full of corn can be turned into food, planted to generate more corn, or turned into fuel. What can I do with a Bitcoin once no one wants to buy it?
The biggest reason to not invest in Bitcoin is that Bitcoin is not going to be the money of the future. It has too many drawbacks to prevent wide-scale adoption.
1) When money is stolen from people, they want it back. The irreversibility of Bitcoin transactions and anonymity of Bitcoin addresses make it infeasible to get money back. Even if I track down who holds the address of where my Bitcoin first went, that person probably would have spent and/or transferred the bitcoin to other addresses. Does that person also hold the keys to those addresses? I don't know.
2) Bitcoin is too slow to be used as money. It takes on average over 5 minutes for a transaction to enter the ledger. And you thought the line at the grocery store was bad now. It can work for some online transactions, but even for things like in-app purchases, people want instant access. Amazon and the like will take it because they are going to wait a few hours before sending your stuff anyway.
3) People tend to not want to use currency whose value varies too much. In deflationary times, I will hold onto my dollars because they will be more valuable tomorrow. This is bad for money because it keeps it from moving (and hence it becomes more like an asset rather than currency). In inflationary times, I want to get rid of the money as quickly as possible and put it into something more stable.
If people are not using Bitcoin as a currency, and is increasing in value because of speculation, then it is purely an asset. And if it is an asset, what is its intrinsic value? It has none. Sure the proof-of-work is hard to calculate, but so what? I could have used the electricity used for that computation to do something else. At least gold is pretty to look at, can be made into jewelry, and has valuable industrial uses. A barrel of oil can be converted into a variety of fuels and plastics. A grain silo full of corn can be turned into food, planted to generate more corn, or turned into fuel. What can I do with a Bitcoin once no one wants to buy it?
All this talk and I don’t think the word Blockchain has been mentioned. The key to all this is Blockchain technology, it’s the future.
Australia is about to have a blockchain based stock exchange. Look at Japan and what they are doing with their banks utilizing blockchain. This is a WORLD wide event. Everyone is so caught up just on BTC and not looking at what drives BTC (thats the value). Instead folks are focused on is it this is it that, when will it drop, when will it fork, what can I buy with, its not a real currency, who will buy it. This is about technology and the value of encryption, it’s here to stay and will only improve.
Australia is about to have a blockchain based stock exchange. Look at Japan and what they are doing with their banks utilizing blockchain. This is a WORLD wide event. Everyone is so caught up just on BTC and not looking at what drives BTC (thats the value). Instead folks are focused on is it this is it that, when will it drop, when will it fork, what can I buy with, its not a real currency, who will buy it. This is about technology and the value of encryption, it’s here to stay and will only improve.
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You can use your Bitcoin to buy some Real Coin...that way you don't have to worry what it is "backed up by".
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We talkin' bout "bitcoin" and "dollas"?.... so passe'...
Get with the times, fellas....
This ain't no fiat currency....
Get with the times, fellas....
This ain't no fiat currency....
Mine is on the shelf next to my Cabbage Patch kids and Doc Gooden rookie card.
Sorry to push this back to the top, but I wanted to add a link to this short video so anyone who is interested in learning about Bitcoin can get a short summary and also be introduced to Andreas Antonopoulos, who I think is the best advocate and speaker on Bitcoin...
https://www.youtube.com/watch?v=Cpj_P4Dp5kU
A lot of good information has been shared here, but also a lot of misinformation. Bitcoin and the blockchain technology are revolutionary and no one now knows how it will ultimately develop, no matter how sure they think they are about it.
If you learn about it and decide you want some, just understand massive moves up and down are common and this latest run will almost certainly reverse significantly at some point. That doesn't mean it's not still relevant and it also doesn't mean it may not be a great store of long term value for some small portion of your investing assets.
https://www.youtube.com/watch?v=Cpj_P4Dp5kU
A lot of good information has been shared here, but also a lot of misinformation. Bitcoin and the blockchain technology are revolutionary and no one now knows how it will ultimately develop, no matter how sure they think they are about it.
If you learn about it and decide you want some, just understand massive moves up and down are common and this latest run will almost certainly reverse significantly at some point. That doesn't mean it's not still relevant and it also doesn't mean it may not be a great store of long term value for some small portion of your investing assets.
Bought some etherium and lite coin the other day, but I think imma take it and buy Cardano which is an alt coin right now it's at .02 a share and expected to be $1 by the end of February