Bitcoin falls from $266 • Hacker News Board

Re: Bitcoin falls from $266

#261

Post by khuey » Wed, Apr 10, 2013, 9:38 PM UTC

encoderer wrote: post #245

jessriedel wrote: post #217

Earlier quoted context omitted.

> the US dollar is backed by the full faith and credit of the US Government Huh? What does this mean? This phrase can be applied to government bond ("The US gov't promises to pay you back") or to FDIC insurance ("The US gov't promises to refund your money if your bank closes"). But it doesn't have any meaning for dollars, unless it were to mean that the gov't would exchange it for gold, which of course is false.

Not true. The fact that you're somewhat informed on these matters is working against you here. If the US Gov't stopped collecting taxes -- or had some other substantial liquidity crisis -- the very real issue is debt service. Since the USD is the global reserve currency, we are in the rather unique situation of having our debt denominated in our own currency under control of our own central bank. This is where the "f…

That situation is not rather unique at all. Most developed nations issue debt in a currency controlled by their central bank, with the notable exception of the Eurozone.

Re: Bitcoin falls from $266

#262

Post by khuey » Wed, Apr 10, 2013, 9:39 PM UTC

tomkarlo wrote: post #153

hcho wrote: post #110

Earlier quoted context omitted.

So you too are saying government is there by populations consent. Taxes and USD are by products of that consent. So is bitcoin, or any other medium of exchange really.

Yes, but the implications of not consenting are grossly different. If folks don't consent to taxes and USD, they're essentially giving up on things like Social Security, the value of their homes (both in terms of security and transaction value), the value of their income, etc. ... all kinds of secondary effects. If they give up on Bitcoin, they might lose the value of their holdings (which could be zero) but they don…

No, if you don't consent to taxes you get put in a cage. If you don't consent to bitcoin you don't get caught up in a speculative bubble.

Re: Bitcoin falls from $266

#263

Post by nhaehnle » Wed, Apr 10, 2013, 9:39 PM UTC

jessriedel wrote: post #111

richardwhiuk wrote: post #71

Earlier quoted context omitted.

USD are backed by the fact that US citizens have to pay in USD to pay their taxes. Bitcoins have no such imperative.

My Econ 101 understanding is that the value of USD is not primarily due to taxes, i.e. if the government stopped collecting taxes (or started forcing people to pay taxes in gold or Euros) the value of the dollar would not tank. Instead, we're in a Nash equilibrium where we're all accepting dollars as a means of exchange and it would be costly and have little benefit for individuals to defect. The intrinsic value of t…

You are talking about slightly different things. A lot of the reason why fiat money has value is obviously circular logic: You can use it to buy money at the store, because the store needs to pay its suppliers in the same currency, who needs to pay its employees in the same currency, who are happy (more or less) to work for the same currency because they can use it to buy the things that they need.

The vast volume of why the value is there is clearly because of such thinking, so you are right.

But the parent post is also right, because circular logic tends to be awfully inadequate at explaining things. This is where taxation comes in, because it serves as the "induction base case", so to speak. Taxation is what sets the wheel in motion initially; the additional momentum then builds gradually, but the continued existence of the base case is what gives it stability.

Take taxation away, and the wheel will still continue because loan repayment acts as a "secondary base case". But once that secondary base case disappears as well, it is just a matter of time until collapse - kind of like the cartoon characters that keep running over the edge of the cliff, until they look down and notice gravity.

So if you want to understand why money has value in the first place, the parent comment gives the better answer. But that doesn't mean your reply is wrong, either.

Re: Bitcoin falls from $266

#264

Post by entropy_ » Wed, Apr 10, 2013, 9:40 PM UTC

jdludlow wrote: post #227

phreeza wrote: post #196

Earlier quoted context omitted.

At some point it would probably be easier to mine one, if the value and interest drops low enough.

That's backwards. As the value approaches zero, the relative cost of mining grows not shrinks.

That's true, but as value drops, there is less incentive to mine bitcoin so there'll be a lot less mining going on(not cost-effective with respect to the cost of electricity).

Re: Bitcoin falls from $266

#265

Post by baddox » Wed, Apr 10, 2013, 9:43 PM UTC

sliverstorm wrote: post #181

aarongolliver wrote: post #154

Earlier quoted context omitted.

The intrinsic value is the bitcoin protocol which provides a framework where transactions become effectively irreversible in about an hour, you don't have to go through a middle-man to pay someone, and it provides anonymity if you need it.

Not sure you can consider that an intrinsic value. I could be wrong, but my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero. The bitcoin protocol does you no good if the market value of a bitcoin is zero. You do present an interesting conundrum though.

> my understanding of intrinsic value is essentially that it is the value of an item when the market value is zero

That seems like a fairly artificial mental exercise. Why would market value be zero if intrinsic value is greater than zero? I suppose the only situations would be if a good has a unique property that can provide utility to you but no one else, like a food that for some reason only provides nutrients for you, or any good in a truly post-scarcity society or region, or if the market is extremely uninformed or irrational.

I think the real problem is with the metaphysical implications inherent in the word "intrinsic." You can always go "one level higher" and say that the value at the previous level was not intrinsic or "as intrinsic." Does an apple have intrinsic value if there are no humans alive anymore, and if not, is the value really "intrinsic" in the apple?

As far as I can tell, the specific term used in finance is based on predictions of the future value that can be derived from the good, regardless of its current market price. Of course, I would suspect that most market participants already make predictions about the future and that those predictions affect the price they are willing to buy or sell a good at. Granted, some people will be able to predict the future more accurately than other people, but does that mean we can only tell what the intrinsic value of something was in hindsight?

Re: Bitcoin falls from $266

#266

Post by Wonderdonkey » Wed, Apr 10, 2013, 9:44 PM UTC

dubfan wrote: post #179

dia80 wrote: post #169

Earlier quoted context omitted.

On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic. The attackers unload their bitcoin before the price gets smashed and presumably buy it all back again from frightened speculators. If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it! On another note, mtgox.com the main…

Do you have any evidence at all of a coordinated attack against Bitcoin, or is this just an unsubstantiated conspiracy theory?

Tradehill reported it was a DDoS. http://www.itnews.com.au/News/339410,virtual-currency-bitcoi...

Re: Bitcoin falls from $266

#267

Post by icebraining » Wed, Apr 10, 2013, 9:45 PM UTC

sliverstorm wrote: post #59

baddox wrote: post #52

Earlier quoted context omitted.

> Intrinsic value is derived from what you can do with something So then, the market price of any good is its intrinsic value? Under this definition, if I can sell a bitcoin for x USD, then its intrinsic value is x USD.

The ability to sell an item for x USD is not one of the "things" you can do with it that contribute to intrinsic value. Let's put it a different way; if the market value for a bitcoin was $0, what could you do with it? Compare that to an apple. If the market value for an apple was $0, you could eat it. Thus (unless someone has a clever use for bitcoins outside of currency) an apple has greater intrinsic value than a…

I'd say that's use-value. Intrinsic implies it's not relative to each person, which clearly isn't true in that case (e.g., I could be allergic to apples, then the value would be nil to me).

Re: Bitcoin falls from $266

#268

Post by dsrguru » Wed, Apr 10, 2013, 9:45 PM UTC

andylei wrote: post #255

dia80 wrote: post #169

Earlier quoted context omitted.

On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic. The attackers unload their bitcoin before the price gets smashed and presumably buy it all back again from frightened speculators. If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it! On another note, mtgox.com the main…

> aggressive selling attacks what's the difference between a "selling attack" and just "selling"?

The parent is referring to people selling their bitcoins, then launching a DDOS attack on the exchange server to get the rest of the world to sell in panic, and then buying back bitcoins at the lower rate. I haven't been following the bitcoin news carefully, but presumably that's been going on recently.

Re: Bitcoin falls from $266

#269

Post by tyw » Wed, Apr 10, 2013, 9:45 PM UTC

mathattack wrote: post #258

Here is the thing I can't get around... If Bitcoin is open source, what's stopping someone from setting up a competing currency? Perhaps it could have the promise of a more optimal growth mechanism over time, or some other feature. Once it's in use, the value of Bitcoin drops quickly, no? And what if there are many Bitcoin-like currencies?

There are. Probably the #2 most popular coin is 'litecoin' (http://litecoin.org/). It uses scrypt instead of sha256 in order for it to be harder/more expensive to use GPU clusters and FPGA/ASIC hardware to mine them. Mining using GPU is still somewhat quicker/more efficient than CPU, but the delta is much less than exists for bitcoin.

There are other coins as well, but I'm less familiar with them.

Re: Bitcoin falls from $266

#270

Post by baddox » Wed, Apr 10, 2013, 9:46 PM UTC

wcoenen wrote: post #201

dia80 wrote: post #169

Earlier quoted context omitted.

On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic. The attackers unload their bitcoin before the price gets smashed and presumably buy it all back again from frightened speculators. If anything it might be a positive sign for bitcoin that the attackers are keen to acquire it! On another note, mtgox.com the main…

> On the contrary this is just the most pronounced in a series of recent coordinated DDOS / aggressive selling attacks designed to (successfully) inspire panic. The bitcointalk forums and /r/bitcoin are full of paranoia like this. After months of stress trying to divine market patterns, people see market manipulation and conspiracies everywhere. The simple truth is that there was an agressive bubble. The doubling per…

DDOS attacks are fairly common, even for completely unprofitable endeavors, right? Why is it unreasonable to assume that potentially lucrative DDOS attacks would also occur?