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Beyond the Bitcoin bubble

nytimes.com

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Re: Beyond the Bitcoin bubble

#221

Post by thanatropism »

todd_wanna_code wrote: post #103
nabla9 wrote: post #86

Earlier quoted context omitted.

A derivative is a security with price that depends on the value of the underlying asset. Bitcoins are derivatives for the blocks in the blockchain. You find a new block and you have a coins. Bitcoin value depends on the value of the underlying, the blockchain network.

Bitcoins are asset, plain and simple. Fiat currencies are derivatives, gold is not. There are derivative instruments on top of gold that let you make money on its market trends, but saying gold is derivative is totally meaningless. The bitcoin protocol gives bitcoin asset value. Now the speculative price market is a derivative, but that's not bitcoin, that's an instrument for people to make money on top of bitcoin.

> The bitcoin protocol gives bitcoin asset value.

* sigh *

You can't math something into having value.

Bitcoin is structurally deflationary fiat, but it's still fiat. It's not scarce if no one wants it.

Why would people want it? Possibly because mathematical limits suggest it's going to be a store of value -- people want gold because of a kind of civilization-scale madness. But Gresham's law might just kick in, everyone hoards bitcoin to the max and then it has no value because it has no liquidity.

Thus the value of bitcoin is either zero or infinity.

Re: Beyond the Bitcoin bubble

#222

Post by acdha »

krrrh wrote: post #218
acdha wrote: post #183

Earlier quoted context omitted.

I don't think that comparison holds so tightly, but if it did it seems to make it worse: ARPANET had significant dependency delays in availability since computers cost a fortune, modems were slow, and you had to pay by the minute for phone calls. In contrast, despite Bitcoin being available to everyone on the first day most people have never had a reason to use it other than speculation. That said, there were still p…

> and that's assuming that VISA, et al. wouldn't just lower their rates They easily could, their current rates contribute a lot toward cashback and points rewards and other marketing programs. Australia regulated a cap on rates at 0.4% iirc, and Visa still covered its costs.

Their profit margins seem like a good estimate for how low they could go without much pain, and given the size of the revenue stream I’m sure they could go lower.

Re: Beyond the Bitcoin bubble

#223

Post by thatthatis »

v64 wrote: post #169
DenisM wrote: post #158

Earlier quoted context omitted.

So your point is that some technologies take a lot longer to mature than average, for example {some examples}, and the delay itself should not be held against such late-blooming technologies. I'm onboard with that. Although your argument may benefit from better phrasing, because it actually does come across like that, which is a disservice to your advocacy effort. Back on topic, I don't see a lot of people in this th…

> I'm onboard with that. Although your argument may benefit from better phrasing, because it actually does come across like that, which is a disservice to your advocacy effort. In the end I'm just a programmer, not an essayist :) I appreciate the feedback. > So where is the potential? What is the use case? I work in fintech and can speak firsthand about the potential use of this technology to reduce costs and relianc…

So far, the best use case of the block chain tech is to remove the necessity for a variety of industry associations few people have ever heard of.

That's not world changing.

Digital nearly frictionless currency is another use case, but so far it seems there is a vicious cycle of value, scarcity, hoarding, boom, and bust in most of these that makes them unsuitable for use as a medium of exchange.

To go a bit further, I'm willing to wager that there is an inherent tradeoff in crypto between usefulness as a currency (stability vs fiat) and usefulness as an investment (appreciation). a stable store of value is also useful, just not as an investment.

The crypto currency that eventually works won't make anybody rich.

Re: Beyond the Bitcoin bubble

#224

Post by thatthatis »

v64 wrote: post #163
replicatorblog wrote: post #161

Earlier quoted context omitted.

My main issue with the blockchain hype is the inability of its proponents to explain what the future landscape will look like. Twenty years from now, what will the top three benefits of widespread blockchain adoption be? It shouldn't be that hard to offer concrete descriptions: In 1984, middle managers at Sears and AT&T were able to accurately predict how we'd use the internet in 2014. In 1999 a now-defunct ISP expla…

From a fintech perspective, I'll make a thirty year prediction that blockchains will be used to reduce costs associated with third party clearinghouses and auditing firms by strengthening assurances that data hasn't been manipulated while reducing the amount of staff necessary to carry out the required verifications.

While an excellent use case, how big on an overall economic level is this? $20 billion?

The big four accounting firms bring in about $40 billion in revenue each. Thus $160 billion would seem to me to be a reasonable order of magnitude estimate for the max value audit-free fin-tech can create.

Is there a better estimate of total value this can create?

Re: Beyond the Bitcoin bubble

#225

Post by thatthatis »

krrrh wrote: post #213
v64 wrote: post #139

Earlier quoted context omitted.

> The end user doesn't care what database you're using. They care about utility. I agree, but this isn't just about the end user. Many businesses incur costs to third parties that could be reduced or eliminated by trustless systems whose validity of data can be verified mathematically without an auditing team. The blockchain of today can't do that yet, just like the internet of 1985 didn't allow you to buy books, but…

> Many businesses incur costs to third parties that could be reduced or eliminated by trustless systems The way you phrase this it sounds like a marginal reduction of costs, and maybe a marginal reduction in the auditor workforce. That’s great, and it will bring about some efficiency in the businesses it applies to, but it doesn’t sound like a story of transformational change and an unlocking of new value. Even in th…

moving electronic payment cost from 3% to 1% is a marginal reduction, but if we get that reduction across a few trillion in transactions it becomes real money.

Unfortunately, a lot of the cost of the 3% is providing fraud and chargeback protection that lets customers be comfortable paying online.

So, while it's conceivable that a stable block chain based payment method could revolutionize ecommerce payments, the present incarnations have trust math (before we even begin to discuss volatility's effect on suitability of a medium of exchange)

Re: Beyond the Bitcoin bubble

#226

Post by v64 »

thatthatis wrote: post #223
v64 wrote: post #169

Earlier quoted context omitted.

> I'm onboard with that. Although your argument may benefit from better phrasing, because it actually does come across like that, which is a disservice to your advocacy effort. In the end I'm just a programmer, not an essayist :) I appreciate the feedback. > So where is the potential? What is the use case? I work in fintech and can speak firsthand about the potential use of this technology to reduce costs and relianc…

So far, the best use case of the block chain tech is to remove the necessity for a variety of industry associations few people have ever heard of. That's not world changing. Digital nearly frictionless currency is another use case, but so far it seems there is a vicious cycle of value, scarcity, hoarding, boom, and bust in most of these that makes them unsuitable for use as a medium of exchange. To go a bit further,…

> So far, the best use case of the block chain tech is to remove the necessity for a variety of industry associations few people have ever heard of.

The same could be said of many of the early hardware and software makers of the early internet.

> The crypto currency that eventually works won't make anybody rich.

I think the bigger point I was trying to make is that we have a technology, and so far the killer app for it has been cryptocurrencies, but that we've not yet developed the technology to the point where its broader uses can come to fruition. We didn't have Facebook or Twitter in 1995, partly because of technological implications, and partly because the idea of social media hadn't been fully formed yet. These things take time, and I think there's a bright future ahead for these new technologies once they mature and people find more uses for them.

I don't think cryptocurrency will be the be-all-end-all use of blockchains, and the idea of technologies like Bitcoin may seem as quaint as services like CompuServe in the future.

Re: Beyond the Bitcoin bubble

#227

Post by v64 »

bitCromwell wrote: post #193
v64 wrote: post #108

It's strange to me how there are many among the Hacker News crowd who can read an article like this and have doubts about its thesis. You lived through the 80s and 90s right? I can't count how many times in my life I was told no one would ever need a computer in their house, we've gotten along for decades just fine without them. No one will ever buy books online, that's ridiculous, you can go to the store and have on…

this community has been reactionary to bitcoin since day 1. crypto is a generational shift, more so than web 2.0 and the glory days of hacker news. the audience here is predominantly the pre-crypto generation, much like slashdot is the voice of the dot com generation. we all need skepticism in our arsenal and that is what you can expect here, brilliant at times but hn is simply not the voice of this moment. you will…

Thanks for your observation. I was an old /. user who eventually found his way here and have always felt to be in likeminded company, but I understand that technology often outpaces culture, even among the tech vanguard. I hope that people remain openminded despite their criticism, and are willing to reevaluate cryptocurrencies and blockchains as the technology matures and becomes more widespread.

Re: Beyond the Bitcoin bubble

#228

Post by RealityVoid »

raiyu wrote: post #207
RealityVoid wrote: post #181

Earlier quoted context omitted.

> Now absent speculation, the price of BitCoin would be reasonable, and determined by the effort of the miners, since they are exchanging their fiat currency for computers and energy, and that creates a stable layer for the price. You've got it backwards. The effort by the miners is determined by the price of Bitcoin, not viceversa. Also, I think requiring what you suggest is a fallacy, since I, as a user of some tec…

That would imply that Miners need an incentive in order to mine bitcoin, which would make sense. However, don't forget that there are also transaction fees that they get. So technically when mining is finished they will be making a return on their investment from transaction fees alone. I'm simply saying that the value of Bitcoin has outpaced what is it's potential intrinsic value through the above mentioned exchange…

The proof of work is destructive and it does not imbue some sort of magical value to bitcoin. The value of bitcoin should not come from the energy wasted in mining it but in its utility of moving value in a trustless medium. It's like saying a hammer is more valuable the more glass panes it shattered.

Mining is wasteful but the main thesis of BTC is that waste is less than the current monetary system maintenance waste. I think it might just be right but can't tell right now. If some sort of working secure alternative to POW comes up we should seize it, seeing as it would reduce the cost of transaction ans would make a currency more appealing and useful (the less a transaction costs, the more the currency can be used for smaller payments).

> If you removed the limit on the number of bitcoins and rearranged mining so that difficulty would increase more in parallel with the increase in performance of computers

But the mining difficulty _does_ increase in parallel with the computing performance. That is the beauty of it.

People can say all they want about cryptocurrency and greed and politics, but I think Satoshi was a fucking genius. I think he was a true visionary and I was stunned the clarity with witch he could see problems arising and the fixes and incentives for the actors in the system.

Re: Beyond the Bitcoin bubble

#229

Post by v64 »

CryptoPunk wrote: post #212
v64 wrote: post #211

Earlier quoted context omitted.

> AOL was a company, not a class of technology like cryptocurrency. You know this, but many users of AOL didn't. To them, AOL was equal to the internet, like many people believe that cryptocurrency is the only application of blockchains as a data structure. > Cryptocurrency is a vital component of the distributed blockchain architecture. It is now, but that doesn't necessarily have to be the case. Cryptocurrency is o…

You didn't respond to the fact that cryptocurrency is a technology class or my reasoning for my cryptocurrency is vital for blockchains to have the property of being distributed.

The way I view cryptocurrencies is that they're a service like HTTP or SMTP on top of a blockchain, which would be analogous to TCP/IP. Cryptocurrencies are only one of many uses of blockchains.

I disagree with the notion that a cryptocurrency is a vital property of the distributed nature of blockchains. The purpose they serve now is to incentivize individuals to participate in the network who wouldn't otherwise participate by paying them a currency to represent the value of the service they've provided.

But for instance, you could also have private blockchains where the incentive for running a node is access to that blockchain's data. There does have to be an incentive to run nodes, but it doesn't necessarily have to be monetary.

Re: Beyond the Bitcoin bubble

#230

Post by thatthatis »

iamwil wrote: post #145
v64 wrote: post #108

It's strange to me how there are many among the Hacker News crowd who can read an article like this and have doubts about its thesis. You lived through the 80s and 90s right? I can't count how many times in my life I was told no one would ever need a computer in their house, we've gotten along for decades just fine without them. No one will ever buy books online, that's ridiculous, you can go to the store and have on…

It's just really hard for people to see beyond the present. Innovators in one cycle are often blind to the opportunities in the next. I see it in a couple of my successful friends that built their own companies on the web and mobile when it comes to crypto. I'm reminded of the quote about the radio: “The wireless music box has no imaginable commercial value. Who would pay for a message sent to no one in particular?”…

I can't tell you how excited I am to have an aerial drone deliver a keto-friendly pizza to my driverless hotel room minutes after I get out of a hyper loop station.

Most world changing technologies have visionaries forecasting their effect, even in spite of the naysayers.

You are correct that the presence of nay-sayers has no impact on the viability of a technology.

But you're looking at the wrong variable.

Where are the visionary descriptions of the beautiful future? The absence of visionaries, I think that has a substantial impact on how we should estimate the viability of a technology.

When a technology has visionaries, technicians, skeptics, and speculators -- it has a real shot.

When a technology only has technicians, skeptics and speculators - well, we will see what that leads to.

As a technologist, the tech of blockchain is pretty cool. Distributed trustless consensus, Wow!

As an economist and futurist, I've searched for good uses for going on five years now. There's nothing I've found yet to be excited about.

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