It can all go to zero • Hacker News Board

Re: It can all go to zero

#301

Post by Jtsummers » Tue, Jan 16, 2018, 10:27 PM UTC

adamnemecek wrote: post #292

Jtsummers wrote: post #283

Earlier quoted context omitted.

> Is it really that unbelievable that bitcoin breaks certain economic rules and that some economic theory might have to be rethought? Yes, yes it is. It's incredibly remarkable that bitcoin could rewrite our economic theories so completely. It offers nothing novel in any way economically.

Didn't say completely nor all. "breaks certain economic rules and that some economic theory might have to be rethought?" > It offers nothing novel in any way economically. Ok, can you explain bitcoin in economic terms?

Sure. It's an overvalued, speculative commodity in a bubble. Ostensibly a currency, but without any of the useful features of a currency (effectively unusable for common transactions due to high fees, slow transaction confirmation rates, and highly unstable value). As a currency, assuming that its value stabilized, it suffers from being deflationary which will impede its ability to survive as either a global currency or a multi-generational currency.

Its current status is essentially a speculative commodity. But in that regard it has no utility. Most commodities are, well, something tangible or valued based on something else in the world. Bitcoin as a commodity has nothing backing it up other than its distributed ledger and the massive amount of computational power behind that. But the distributed ledger will see a drop in miners as the value of BTC drops, or an increase in fees to make it even less tenable as a currency than it already is. If BTC were a useful currency, then BTC the commodity would at least have that as a backing. In theory the commodity price and currency price would move towards each other (with one leading or lagging behind the other). But BTC the commodity has made BTC the currency essentially impossible to use due to the present overvaluation.

Regarding deflation and its inability to survive more than one or two generations, assuming some stability, if it maintains a modest 2% deflation rate the real value of a nominal amount of BTC would double every 32 years. So someone receiving 1 BTC as salary today would receive 0.5 BTC for the same work in approximately 32 years. Halved again 32 years later, the 3rd or 4th generation would receive 1/4 the salary of the first generation (in nominal terms) and have a fraction of the buying power.

I suppose a novel aspect of this is that it virtually eliminates the need for pensions as the mere presence of money in your wallet means you'll have more buying power in the future than now. Unfortunately this only makes financial inequality even worse than the situation we have today. Lending would be eliminated, or the terms would be so dreadful only the most desperate would seek it. Savings would go up, but in the "under the mattress" sense rather than the "in the bank" sense, where the money can at least continue to have some utility by being lended out to others by the bank. A massive economic drag.

None of this is novel stuff, from an economics standpoint.

Re: It can all go to zero

#302

Post by qsucvatz » Tue, Jan 16, 2018, 10:28 PM UTC

stcredzero wrote: post #36

fortythirteen wrote: post #25

At this point, Bitcoin is not much more than a phantom object. Too overpriced to use for any reasonable purchase, people are literally trading nothing but zeros and ones, no more or less valuable than the bits making up this comment. All that can change, but only if the price drops back down to its 2016 to early 2017 values, and there are too many people invested at this price to let Bitcoin survive as an actual curr…

Too overpriced to use for any reasonable purchase Could one have a cryptocurrency which is always subdividable? Are there any which already have this feature?

Bitcoin can change it's divisibility any time.

Re: It can all go to zero

#303

Post by qsucvatz » Tue, Jan 16, 2018, 10:29 PM UTC

paulmd wrote: post #221

adamnemecek wrote: post #206

Earlier quoted context omitted.

Are you saying this will happen to all crypto or just Bitcoin? Ok if Bitcoin goes away, it might over time, exponential decay and what not. Or might also go up. But crypto overall will most likely go up. Like you can't go back. And I feel like people for example aren't talking about the fact that technology doesn't really go away. Like any technology we've ever invented is still used somewhere. This will very much be…

Specifically Bitcoin, other coins have more robust difficulty readjustment mechanisms.

Bitcoin can fork to change it's Difficulty Adjustment Algorithm.

Re: It can all go to zero

#304

Post by Jtsummers » Tue, Jan 16, 2018, 10:29 PM UTC

adamnemecek wrote: post #279

Jtsummers wrote: post #247

Earlier quoted context omitted.

Someone buying for $1000 and not selling for $500 will not keep the price afloat. It just means they're stuck with something they refuse to sell and no one else wants to buy. Other people will sell at the lower price (to get out and write off their losses rather than incur more) and the price will drop anyways.

It's not someone. It could be large part of the market.

"Could be"? Dude, this is why people bought fucking Beanie Babies 20 years ago and held them. Hell, I have 10 in my apartment because my grandfather was buying and trading them in the late 90s. Thank god he traded enough for a profit, he was essentially break even at the end of that bubble. Some people bought them expecting the absurd valuation to continue. See also comic book and baseball card bubbles that started in the 1990s. People held them until they were valueless. Now there's a glut on the market and no one wants the damn things.

Re: It can all go to zero

#305

Post by drvdevd » Tue, Jan 16, 2018, 10:33 PM UTC

CPLX wrote: post #231

tbabb wrote: post #50

Earlier quoted context omitted.

I have seen comparisons to the .com boom/bubble, and I don't buy it. There was a lot of economic movement while the entire economy moved over to the internet. Those who didn't adapt failed. Those who tried models which didn't translate also failed. Lots of experimentation, and lots of reinventing things from scratch. So lots of failure and lots of speculation-- but ultimately around a real sea change. I don't see how…

I keep asking people this simple question, which goes something like this: Before the internet, I would wake up in the morning and have to go to a store and buy clothes, then the travel agent to book flights, then Blockbuster to get a movie to watch. After the internet I could wake up in the morning and do all that myself. That was valuable. Before smartphones I would wake up in the morning and print out my airline t…

Here's my morning sea change: I receive payments from my boss, client, friend, whatever - instantly - and I never talk to a payment processor again. I never open a banking app again. Hell, maybe I never even think about money again and it all just happens transparently for some of us.

I know that's not what crypto currency currently is, but that's what I personally want it to be. I could care less about its' fluctuation in respect to fiat.

Re: It can all go to zero

#306

Post by em3rgent0rdr » Tue, Jan 16, 2018, 10:34 PM UTC

oreo81 wrote: post #252

em3rgent0rdr wrote: post #188

Earlier quoted context omitted.

Governments outlawing of numbers has been going on for a long time: https://en.wikipedia.org/wiki/Illegal_number

All those of those are examples of numbers that have already been discovered, not preemptively banning numbers yet to be found.

They still pre-emptively ban numbers, for instance if they represent something illegal: "Any image file or an executable program can be regarded as simply a very large binary number. In certain jurisdictions, there are images that are illegal to possess, due to obscenity or secrecy/classified status, so the corresponding numbers could be illegal."

Also, the concept of "numbers yet to be found" is philosophically questionable.

Re: It can all go to zero

#307

Post by tbabb » Tue, Jan 16, 2018, 10:40 PM UTC

Jtsummers wrote: post #301

adamnemecek wrote: post #292

Earlier quoted context omitted.

Didn't say completely nor all. "breaks certain economic rules and that some economic theory might have to be rethought?" > It offers nothing novel in any way economically. Ok, can you explain bitcoin in economic terms?

Sure. It's an overvalued, speculative commodity in a bubble. Ostensibly a currency, but without any of the useful features of a currency (effectively unusable for common transactions due to high fees, slow transaction confirmation rates, and highly unstable value). As a currency, assuming that its value stabilized, it suffers from being deflationary which will impede its ability to survive as either a global currency…

I would also add to:

> As a currency, assuming that its value stabilized

by pointing out that without a central bank, a stable value is literally impossible, because its price becomes entirely demand-driven.

That alone is enough to bring its hope of being a meaningful currency in stable society to zilch.

Re: It can all go to zero

#308

Post by nrhk » Tue, Jan 16, 2018, 10:42 PM UTC

InclinedPlane wrote: post #187

aitrean wrote: post #33

Time for the monthly cryptocurrency panic thread. While I fully agree that most cryptocurrencies are grossly overvalued, these articles always pretend a 20% selloff is the beginning of the end, when, in crypto land, 20% selloffs are a pretty standard bad day for the market.

Ah yes, "it's different this time". Sure, sure. The reality is that the nanosecond the zeitgeist changes and people start believing that there is going to be an extended period of decreased value in cryptocurrencies then there will be a massive selloff which will just cascade. This is how markets work, this is how speculative bubbles work. Bitcoin especially has almost no value other than speculative investment, it's…

Which is fine, there's plenty of people who believe in it enough to buy at lower price points and think the current level is a bubble. What about $100 billion for the entire market, all the miners, all the companies, venture capitalist, developers etc... Who says Bitcoin even needs to be worth anything, the faster that stuff dies the faster the rest of the crypto world can move on without it.

The market as a whole won't tank completely unless its revealed that blockchain or DAG tech can't ever scale and decentralized tech is just too slow and inconvenient to use for everyday purposes.

At some point during said panic sale-off people will think, hey have the fundamentals changed or is this just a panic sell-off? Then they won't sell or will sell with the intent of buying in lower.

Re: It can all go to zero

#309

Post by CPLX » Tue, Jan 16, 2018, 10:49 PM UTC

maehwasu wrote: post #269

CPLX wrote: post #231

Earlier quoted context omitted.

I keep asking people this simple question, which goes something like this: Before the internet, I would wake up in the morning and have to go to a store and buy clothes, then the travel agent to book flights, then Blockbuster to get a movie to watch. After the internet I could wake up in the morning and do all that myself. That was valuable. Before smartphones I would wake up in the morning and print out my airline t…

An anti-pattern that I see on HN is very smart people spending lots of energy thinking of all the ways that something can't work. Whenever you have a tough problem, there are usually only a couple ways it can be solved, and infinite reasons it's hard to solve. The fact that your imagination can't come up with killer use cases does not mean that those use cases don't exist. It means you haven't exercised your imaginat…

This is a bizarre ad homimen way of not answering a fairly simple question where a guy looks at a tool and says hey what can this tool be used for.

Especially when people have invested a couple billion dollars in the tool.

I actually asked this question of Joseph Lubin, a founder of Ethereum, when I interviewed him for a podcast. Unlike you he did actually have some answers for it, he mentioned peer to peer insurance markets, crowdfunding, seamless payments to content creators.

He fits your description and was happy to explain. It was an interesting discussion. I remain unconvinced, in the sense that I think the hype is out of control and 99.99% of the initiatives in this sector are essentially scams, but clearly there are some smart people working on it. Who knows.

As an investment I still think it's a dumpster fire, and my question is still an excellent one in my opinion.

Re: It can all go to zero

#310

Post by nlh » Tue, Jan 16, 2018, 10:50 PM UTC

qsucvatz wrote: post #299

coldcode wrote: post #179

Earlier quoted context omitted.

I've always wondered what Bitcoin would be worth if (1) Nuclear war destroys the internet or cloud servers (2) Mining costs more than its worth and no one mines any more (3) It becomes impossible due to legal or other reasons to convert bitcoin to a real currency without extra-legal efforts.

If mining is too difficult,the difficulty drops, until a single PC is finding every block on schedule. I'll mine, so that won't happen.

So I guess I'd say my point is that you say "I'll mine, so that won't happen" NOW, which is both fair and rational. But let's say tomorrow we discover a critical vulnerability in the bitcoin source that's been overlooked and causes the whole thing to be destabilized and, effectively worthless. Everyone moves on to BTC 2.0 (or whatever the fork is). Will you still mine original BTC? No. Why would you? It'd be a waste of resources.