BitCoin: an alternate currency

[bystander]

Speaking of bitcoin: has anyone gotten that scammy email stating that someone has hacked your account and caught you doing naughty stuff online and they have video of it and will send it your contacts if you don't send them a bitcoin payment?

It's a scam.

YES! I got that email. A-holes.

 

[Mr. Deez]

I have been pondering this idea of a non-sovereign currency. We all grew up with a money supply that is issued and controlled by the government, so that's what we know, but it hasn’t always been that way.

I think this is a core part of the Bitcoin thesis — the separation of money and state. A natively digital transfer of value that is fast, cheap, peer-to-peer, borderless, and secure.

Believe me. I see the appeal. It's a global currency that operates across national lines. Furthermore, I understand the worry about the dollar. Our debt is enormous, but even worse, we don't have a solution. The politicians don't care. The Right wants taxes low and defense spending high. The Left wants social spending high. Both have realized that they can "compromise" by both taking their spending and tax priorities and running up deficits. We can blame the politicians all we want, but the reality is that they only do that because the public is ok with it. Well, so long as that's the dynamic, our debt is going to continue to explode. We're not going default on it, because it would look bad, and people will stop buying our bonds. We're instead going to monetize our debt by printing money and inflating the debt until it's manageable. In theory, a non-sovereign currency gets you around that problem. However, I can see some major problems that I can't see being overcome.

First, Bitcoin will always have to compete with sovereign currencies, because governments will always do business in their own currencies and because countries will never want to share currencies with other countries that have different values and priorities. People in the United States, Europe, China, Japan, and Canada aren't going to share a currency with Somalia and Tanzania.

Second, the problems that are present with sovereign currencies can still happen with Bitcoin just for different reasons. Governments may not be able to use them to monetize sovereign debt, but somebody will figure out how to scam or "counterfeit" it. Once that happens, the house of cards falls apart and probably does so suddenly. At least the USD and the EUR are turning to crap gradually. Lol

 

[Monahorns]

We're instead going to monetize our debt by printing money and inflating the debt until it's manageable.

It's not that simple. Printing money leads to price inflation and economic bubbles bursting. If the Fed and US gov care about those things, they kind of do, then they will be constrained in how much money they can create to pay for stuff. The more they try it the more it will hurt the economy.

Also, not sure Bitcoin or similar alternatives will ALWAYS compete with legal tender. They currently do and that puts them at a disadvantage. I think that is enough to say.

Not sure why the US cares if Somalians use dollars. US banks don't want Somalian banks to create more dollars because they want to control the value. I think it is more correct to say that Somalian government doesn't want their people to use US$ because they don't control it and can't manipulate it. The countries with weaker currencies are the ones where the government will want to keep more valuable currency out of their markets.

Possible counterfeiting of bitcoin isn't a weakness currently. So it really isn't a factor in keeping it from being more widely used. Plus, governments already counterfeit. That is what monetizing debt is. That is one of the big reasons to find alternatives to legal tender, it isn't a reason to keep from using them, yet.

 

[Mr. Deez]

It's not that simple. Printing money leads to price inflation and economic bubbles bursting. If the Fed and US gov care about those things, they kind of do, then they will be constrained in how much money they can create to pay for stuff. The more they try it the more it will hurt the economy.

Of course it leads to price inflation and all kinds of problems. If it didn't, there'd be no reason not to monetize debt. Despite that, we're willing to take those risks.

Not sure why the US cares if Somalians use dollars. US banks don't want Somalian banks to create more dollars because they want to control the value. I think it is more correct to say that Somalian government doesn't want their people to use US$ because they don't control it and can't manipulate it. The countries with weaker currencies are the ones where the government will want to keep more valuable currency out of their markets.

You're nitpicking a little. No, we don't care if Somalis use US dollars. However, we're not going to share an official currency with them, because it would put us in the same situation with them that the Eurozone is in with Greece.

Possible counterfeiting of bitcoin isn't a weakness currently. Plus, governments already counterfeit. That is what monetizing debt is. That is one of the big reasons to find alternatives to legal tender, it isn't a reason to keep from using them, yet.

This is true. My point is that what is often claimed to be a Bitcoin advantage actually isn't - certainly not in the long term.

 

[Monahorns]

You're nitpicking a little. No, we don't care if Somalis use US dollars. However, we're not going to share an official currency with them, because it would put us in the same situation with them that the Eurozone is in with Greece.

Maybe I am but I am not trying to. Part of it is what does "share" mean to you? I was trying to describe the reasons why the US would care or not. The US central bankers would not want to give any power over to Somalian banks to affect the supply of dollars. So if you mean that US banks don't want to include Somalian banks in the US banking system I agree.

But even your example I think is backwards. Greece using the Euro doesn't hurt Germany or France it actually helps them. It hurts Greece. They were talking about leaving the EU for a while because they wanted to monetize their own debt but Germany didn't let the because they would get paid back in less valuable currency. They actually want Greece to be tied to their (the EU's) banking system.

Maybe I have it backwards but that is what I read a couple of years ago.

 

[Mr. Deez]

But even your example I think is backwards. Greece using the Euro doesn't hurt Germany or France it actually helps them. It hurts Greece. They were talking about leaving the EU for a while because they wanted to monetize their own debt but Germany didn't let the because they would get paid back in less valuable currency. They actually want Greece to be tied to their (the EU's) banking system.

It's not a simple thing. Keep in mind that Greece chose to adopt the Euro. It wasn't forced on them. It helps some in Greece and some in Germany, and it hurts some in Greece and some in Germany. It also depends on the situation. It helps Germany when it comes to trade. It doesn't help Germany when they have to bailout Greece to keep their screwups from damaging Germany's currency and fleecing German creditors. Trust me. The UK was happy not to be caught up in that mess.

 

[bystander]

Here's a poem I wrote that touches on human beginnings, barter, communes and the evolution of man:


Egalitarianism

Let there be light
Let there be man
Give him a garden
Give him a companion
It is all so very simple
A world just for two
Nature will provide
Now what should they do?

The seasons are learned
Along with day and night
There are dangers in the wild
What about wrong and right?
The beauty of one another
Bring them together
One day something happened
There was more to consider

There was a baby to feed
And other families emerged
They were drawn by need
Their problems converged
Food, shelter, water, safety
These things required action
Someone must do something
Reality caused a reaction

But who would do what?
Kill an animal, lift a stone
Are they a village?
Or to each his own?
Who would decide?
Who would object?
Did they accept?
Or did they reject?

One selfish man
And a plan will fail
One greedy man
And the garden is for sale
Can a man live for need
And not for wants?
Can a man save a life
And accept only thanks?

Will a man read a book
And study until he sleeps?
And then use his knowledge
And reject the reward he reaps?
Is this the way to achieve greatness
No discernment among men?
Everyone the same
No matter how driven?

The ocean beckons
As do the mountains
The lakes and the streams
Are natures fountains
Will they be cared for
If we live wild and free?
Will a man be happy
Not owning what he can see?

And so the rock must be lifted
And we look around the cave
A man’s back is broken
Another says, “I’m no slave”
So the rock remains
As do we in the cave
Who will get food tonight?
“It’s not my turn” he said with a wave

How much is too much
For you to have all you need?
How much is too much
Before you notice the greed?
Think of it this way
You ask a man to play a flute
He can make you smile
But will praise be enough fruit?

A good man will share what he has
And he will accept what he receives
But how many good men do you know?
And how many are thieves?
Would you rather wear a fur
Or harness the heat?
Would you rather live outdoors
Or in a home on a nice street?

And who will do this for you
Without their just reward?
Can you live like an animal
Or accept the monetary sword?
Where do we begin
If nobody will cooperate
Where do we begin
When it’s too late?

And so do you want my wool
In trade for your milk?
But the home I built for you
Requires that I receive silk
But milk is all I have
So then live on the land
How can we accommodate
If you reject what is in my hand?

It becomes a matter of trust
I say what I render
Equals what you accept
As this paper is legal tender
And you agree
Even though paper is not milk
Because now I will build your house
Because now I can buy my silk

And in this way
Our wants become cultivated
And the lazy man
Is suddenly motivated
As the thinking man observes
The power of the capitalist tool
And the rivers of paper
That once was milk and wool

He wonders how it came to pass
That a world of cows and sheep
Became one of oil and gas
It happened while some did sleep
In the fury of comfort and reward
And technological devices
Are we better off
Have we invented new vices?

I long for my children’s comfort
But at what cost to another?
Is it a zero sum game
With a winner and a loser?
Will the next big thing happen
Without their just reward
Should we just pray to God
And put down the monetary sword?

Is there consensus among men
That can ever be reached?
Or will we always fail
Will egalitarianism be breached?
Everyone the same
Everyone equal
Will we ever know
Are we God’s people

I wonder of these things
As we print more and more
The paper is all that matters
We want ours and all else we ignore
Is there a limit
On the value of wool and milk
Will we continue as we are
Or rather destroy all we ever built?

 

[bystander]

What I tried to do with the poem was start everything from scratch with a group of innocent good faith beings trying to forge a life together. The rhymes increased the difficulty a tad but I was trying to layer it up and up to get to the point of the piece of paper that we are now comparing to a light on the computer. I didn't take it as far as Bitcoin.

 

[Driver 8]

It is remarkable to me that people are willing to trade their real money for imaginary money.

I would submit that modern fiat like USD are no less imaginary, it's just that it is a familiar and well established fiction that we are all heavily invested in. And it works well enough for now.

 

[bystander]

I would submit that modern fiat like USD are no less imaginary, it's just that it is a familiar and well established fiction that we are all heavily invested in. And it works well enough for now.

I don't think he's saying that. CLEARLY the US dollar could be categorized the same as a Bitcoin but our history, the backing of the confidence factor, FDIC insurance, the valuation of our assets and oil in US dollars make the relative fiction the difference between lust and love; you feel both but only one means something (until it doesn't; ha).

 

[Mr. Deez]

I would submit that modern fiat like USD are no less imaginary, it's just that it is a familiar and well established fiction that we are all heavily invested in. And it works well enough for now.

It is imaginary in the sense that it's "just paper." However, it is backed up by something. We may not have a lot of faith in that something and may not always trust it, but it is something.

The Bitcoin isn't even paper, and it isn't backed up by any institution - trustworthy or not.

Frankly, the same argument could be made of gold. Gold is said to have "inherent value," but it really doesn't. Gold is valuable because people simply choose to value it. It's a largely subjective value.

 

[bystander]

It is imaginary in the sense that it's "just paper." However, it is backed up by something. We may not have a lot of faith in that something and may not always trust it, but it is something.

The Bitcoin isn't even paper, and it isn't backed up by any institution - trustworthy or not.

Frankly, the same argument could be made of gold. Gold is said to have "inherent value," but it really doesn't. Gold is valuable because people simply choose to value it. It's a largely subjective value.

That's how I feel about it. Bitcoin is a light on a computer. Gold can't do anything for you. Maybe we should go back to barter. What about shares of stock in Enron? My ex lost $100K and that was a company. There is so much we trust. Paper money is convenience because of the headaches inherent in barter. We'd all have to hang out at the farmer's market everyday and what would we trade for food? At least beautiful women can trade their bodies. The rest of would have to cultivate something with inherent value and it has to be inherent value that someone wants at the moment or else you're SOL.

Yes, we've all agreed on the paper. It has value because we believe in it. I'm 60 years old and my family came before me. It's always worked. Always.

 

[Dionysus]

Gold is said to have "inherent value," but it really doesn't. Gold is valuable because people simply choose to value it. It's a largely subjective value.

Money is just a technology humans have created, an abstraction of value. In the past it has been sea shells, clams, wampum beads, cattle — various artifacts that people agreed to value and trade.

Gold has value for certain industrial and ornamental uses, but its classification as money and a store of value is based on other key properties, namely its scarcity and difficulty to produce (“unforgeable costliness” -Nick Szabo).

The Bitcoin proposition (“digital gold”) is similar. Bitcoin miners have to invest huge amounts of computational power and electricity to order transactions, generate new bitcoins, and cryptographically secure the network. It is game theory in action: playing by the rules is incentivized and rewarded with new bitcoins; attempts to hijack the network and steal funds will quickly be recognized by other network participants (validating nodes), causing the miner to be rejected from the network, left with their high costs and no chance of reward. That’s the unforgeable costliness. The scarcity is the 21 million cap on bitcoin. As of April last year 17 million have been mined.

The argument is that, if bitcoin is “backed” by anything it is this difficulty/costliness and the security of the distributed network. To the extent that people trust this model it accrues value by consensus.

 

[Monahorns]

Frankly, the same argument could be made of gold. Gold is said to have "inherent value," but it really doesn't. Gold is valuable because people simply choose to value it. It's a largely subjective value.

Value is subjective. It is created in the will of human beings. Value is never inherent or objective.

This issue isn't there being inherent value. The issue is that people broadly see gold as having utility, from ancient times until now. Paper doesn't have the same utility and it is not as scarce.

 

[Joe Fan]

"John McAfee, the eccentric antivirus pioneer known for his brushes with the law, said he has spoken with Bitcoin creator Satoshi Nakamoto and plans to reveal the person’s identity."​

Bloomberg - Are you a robot?

 

[Clean]

McAfee is an interesting guy. But, he's also a prolific liar and attention *****. On his Wikipedia page he is quoted as saying that the price of one bitcoin would jump to $500,000 within three years, and, if not, he'd eat his own dick on national television.

 

[Dionysus]

I suspect the statement “Facebook would aim to keep the coin's value stable” means they would peg it to USD like some of the “stablecoins” out there.

------------------------

USA TODAY:
Facebook considering its own bitcoin for payments

SAN FRANCISCO — The Wall Street Journal reports that Facebook plans a cryptocurrency-based payment system that it could launch for billions of users worldwide.

The system would use a digital coin similar to bitcoin, but different in that Facebook would aim to keep the coin's value stable. Bitcoin and similar cryptocurrencies have been susceptible to wild fluctuations in value.

It could reportedly undermine credit cards by sidestepping the processing fees that generate much of their revenue.

The Journal report cited unidentified people familiar with the matter. It said Facebook is recruiting dozens of financial firms and online merchants to launch the network. Facebook's plans may include ways to financially reward users who interact with ads or other features.

Facebook says only that it is exploring many different applications for cryptocurrency technology.

 

[Statalyzer]

Speaking of bitcoin: has anyone gotten that scammy email stating that someone has hacked your account and caught you doing naughty stuff online and they have video of it and will send it your contacts if you don't send them a bitcoin payment?

It's a scam.

I've seen plenty times where a scammer's online threat is real and they still demand payments in bitcoin from people. It's pretty stupid as the average person getting caught by those is going to have no clue how to use bitcoin in the first place.

 

[Driver 8]

Bitcoin the last 3 months
Just crossed 10k
What's going on?

 

[Musburger1]

Bitcoin the last 3 months
Just crossed 10k
What's going on?

When there is instability and fear, people, especially wealthy people, tend to move assets toward what they perceive as a safe haven. Traditionally this might have been gold. Now it might be cryptocurrency. I expect that as either the economy deteriorates or the prospect of war increases, bitcoin will rise.

 

[Monahorns]

Bitcoin value increases shows why credit expansion/low interest rates is such a bad deal. Bitcoin value goes up because your pay check $s value is going down.

 

[Statalyzer]

I suspect that when it went up, after a surprisingly long amount of time that was both stable and much lower than its peak, a self-fulfilling prophecy happened. Confidence in Bitcoin rose, so people said "oh it's going back up, that means I should buy now", which kept it moving upward and made people more confident in it and thus even more people bought it. Which can work, but can also end up the complete opposite of Buy Low Sell High.

FWIW, I sold about half of mine when it hit 8k. Took me about two hours to do so, spread over the course of a week, with multiple support requests, and I ended up having to switch wallets to get it to work. And I'm in IT. So again I reiterate, if they can't make it far more intuitive and accessible to the average user, it's unlikely to take hold as something that people use as a regular means of transactions as opposed to essentially being a stock.

 

[Monahorns]

And I'm in IT. So again I reiterate, if they can't make it far more intuitive and accessible to the average user, it's unlikely to take hold as something that people use as a regular means of transactions as opposed to essentially being a stock.

Thanks for that detail. I don't have any bitcoin even though I am interested in alternative currency and crypt in particular.

For currency to be successful it has to have broad utility meaning, everybody has to know how to use it. The problems you describe sound like self-inflicted problems.

 

[Driver 8]

people said "oh it's going back up, that means I should buy now"

but can also end up the complete opposite of Buy Low Sell High

Classic FOMO (Fear of Missing Out)
In late 2017 retail buyers FOMO'd like crazy, buying at 10,000 and 15,000 and higher, and then when it dropped to 4,000 on the sell-off they were like nah, I don't want it at that price

If you believe it has fundamental value then 4k is a discount, but FOMO is short term price speculation, not investing for the long term

 

[Joe Fan]

Biden boosting BTC
$20,000

Good for BTC longs, but maybe not a great look for the USD

 

[Monahorns]

USD is suffering from the $3 Trillion printed on Trump's watch.

I have no doubt Biden is likely to do something worse.

Bitcoin value is going up for because 1) the $ is losing value, 2) demand going up as $ price is going up and seen as long term value store, 3) people coming around on accepting it is a currency.

 

[Dionysus]

Bitcoin value is going up for because 1) the $ is losing value, 2) demand going up as $ price is going up and seen as long term value store, 3) people coming around on accepting it is a currency.

And the institutions are coming in now. This is different from the 2017 run-up which was mostly retail and FOMO driven.

The past year’s chart, March low of $3,858

 

[Joe Fan]

trigger warning for a bad word in a cartoon

Spoiler

 

[iatrogenic]

Here is an actual name of one of the 4,000+ cryptocurrencies. Its value is up 97% in the last 24 hours:

Chimpion (BNANA)

Obviously, cryptocurrency is a serious asset and sound investment.

 

[Joe Fan]

If Warren Buffett had invested his entire net worth in bitcoin in 2009, he would be worth $719 trillion today