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Bitcoin Price Pressure

blog.samaltman.com

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Re: Bitcoin Price Pressure

#51

Post by nullc »

dragontamer wrote: post #21
VMG wrote: post #18

> And even if bitcoin itself fails, I think the blockchain will be one of key technical innovations of this time period. A blockchain is only useful if it is heavily secured by hashing power. This is only the case if there is significant mining equipment devoted to validating blocks. That in turn only happens if there is a reward for validating a block. Long story short, it's currently very difficult to use a secure…

Or not? Proof-of-stake is arguably better than Proof-of-work. Peercoin, NXTCoin and so forth have fundamentally moved forward from the "waste more energy than the next guy" approach that is innate to Proof-of-work.

Unfortunately, this doesn't appear to be true. So far all proposed proof of stake systems suffer from problem that miners don't consume a resource to attempt to contribute to the consensis. In other words, the problem of proof-of-statke is that there is nothing at stake. There is no reason for a miner to not attempt to extend every chain that they can— or at least every that they don't hate— and, in fact, doing so is the solution maximizing behavior. In proof of work, by comparison, miners must choose to expend a resource for every attempt and so an effort to try to mine on one fork requires a choice to not spend that resource on other ones. The best strategy then becomes putting all your effort on one chain which you think most likely to survive. Optimal POS strategy is to mine all forks you can, just in case any survive. This issue seems fundamental, but perhaps someone someday will find a clever way around it be changing assumptions.

Peercoin was attacked this way— a miner grinding out alternative histories and finding ones where they were awarded almost every block— _immediately_ when POS mining became possible on it. The attack was thwarted because PPC has a central control mechanism where its developer cryptographically signs blocks to force the network to accept them over longer, otherwise better, chains... and it was later closed off by requiring POW blocks to select the POS blocks that can mine. (But now, the security of that coin reduces to the security of POW and the security of the signing key controlled by its pseudonymous developer).

See also section 5 of https://download.wpsoftware.net/bitcoin/asic-faq.pdf

Re: Bitcoin Price Pressure

#52

Post by boyaka »

flatline wrote: post #47
boyaka wrote: post #37

Earlier quoted context omitted.

Can you provide reasons/evidence for why I should not trust Coinbase?

Bitcoin was meant to be a trustless system. You are handing over your private keys to a third party, and hence all the direct control over your funds. How do you know they are solvent? How transparent are their security measures? There are many, many examples of this going horribly wrong with people who could supposedly be trusted by the community, and there are more popping up on a regular basis. You are asking the…

Ease of use. Exactly the same thing all the bitcoin fanatics are talking about improving. Exactly the reason Coinbase was created. I'm lazy.

Re: Bitcoin Price Pressure

#53

Post by jnbiche »

bdcs wrote: post #32
VMG wrote: post #18

> And even if bitcoin itself fails, I think the blockchain will be one of key technical innovations of this time period. A blockchain is only useful if it is heavily secured by hashing power. This is only the case if there is significant mining equipment devoted to validating blocks. That in turn only happens if there is a reward for validating a block. Long story short, it's currently very difficult to use a secure…

With merged-mining[1], any alt-coin can hijack Bitcoin's security via PoW without any additional mining, see, e.g., Namecoin (which is unfortunately defunct for unrelated reasons). [1] http://bitcoin.stackexchange.com/questions/273/how-does-merg...

Namecoin isn't defunct:

https://github.com/namecoin/namecoin

Re: Bitcoin Price Pressure

#54

Post by loopdoend »

IvyMike wrote: post #35

> Anecdotally, I hear from merchants who start taking bitcoin that after an initial spike they see almost no volume. To me, this is one of the biggest problems with adoption--bitcoin doesn't offer much benefit to the typical consumer for mundane transactions. I'm about to buy a coffee machine on Overstock.com. There's no practical reason that bitcoins are better than what I'm going to do which is put it on my masterc…

It doesn't benefit consumers for any transaction. Unless you consider the deed itself to be a benefit, outweighing all the negative. I don't.

As a consumer, I don't like getting fucked by the spread on exchange rates on the buy AND sell sides when I try to pay in bitcoin. Want to buy some bitcoin? Unless you're doing it face-to-face you're going to get jacked a few percent. Want to spend them? Unless it's at a bitcoin-only merchant, jacked again.

Add in the fact that I'm not getting whatever points my credit card would have given me, that I've got absolutely no recourse against the merchant, and that I have to worry about hackers stealing my money... there's no reason for me to use it.

Re: Bitcoin Price Pressure

#55

Post by vertex-four »

bdcs wrote: post #32
VMG wrote: post #18

> And even if bitcoin itself fails, I think the blockchain will be one of key technical innovations of this time period. A blockchain is only useful if it is heavily secured by hashing power. This is only the case if there is significant mining equipment devoted to validating blocks. That in turn only happens if there is a reward for validating a block. Long story short, it's currently very difficult to use a secure…

With merged-mining[1], any alt-coin can hijack Bitcoin's security via PoW without any additional mining, see, e.g., Namecoin (which is unfortunately defunct for unrelated reasons). [1] http://bitcoin.stackexchange.com/questions/273/how-does-merg...

Namecoin isn't defunct. In fact, it has several developers. The blockchain has been secured since the incident I assume you are talking about, and there's work on numerous things ongoing - a lite client, an implementation of Namecoin as a library, a proxy allowing any program to connect to Namecoin domains.

There is an IRC channel at [0], a mailing list, and a website with a wiki and forums at [1].

[0] irc.freenode.net#namecoin [1] http://namecoin.info/

Re: Bitcoin Price Pressure

#56

Post by gnaritas »

IvyMike wrote: post #35

> Anecdotally, I hear from merchants who start taking bitcoin that after an initial spike they see almost no volume. To me, this is one of the biggest problems with adoption--bitcoin doesn't offer much benefit to the typical consumer for mundane transactions. I'm about to buy a coffee machine on Overstock.com. There's no practical reason that bitcoins are better than what I'm going to do which is put it on my masterc…

Keeping your credit card number out of their database where it can't be hacked is a practical reason to use bitcoin. It reduces your risk of merchant's getting hacked, which happens all the time.

Re: Bitcoin Price Pressure

#57

Post by sanderjd »

IvyMike wrote: post #35

> Anecdotally, I hear from merchants who start taking bitcoin that after an initial spike they see almost no volume. To me, this is one of the biggest problems with adoption--bitcoin doesn't offer much benefit to the typical consumer for mundane transactions. I'm about to buy a coffee machine on Overstock.com. There's no practical reason that bitcoins are better than what I'm going to do which is put it on my masterc…

I think it could (or maybe "should") be totally great for tiny payments. Less like 0.5BTC for a coffee machine, more like 0.001BTC for a single API request. It seems uniquely suited for tiny, frequent, low-risk payments. That doesn't seem like a very widespread business model, but maybe that's because it's been tough to do without something like bitcoin.

Re: Bitcoin Price Pressure

#58

Post by joosters »

applecore wrote: post #10

There's no such thing as "default price pressure" (up or down) in financial markets. Every trade has both a buyer and a seller—for someone to have sold bitcoins, someone else has to have bought them.

'More buyers than sellers' is a perfectly reasonable statement, and v-v. If one side competes more for trade, then it will have a price pressure.

Say you ran an auction of goods (paintings, junk, whatever) with 10 potential buyers in attendance, do you think you'd get higher or lower prices than if you ran an auction with 1000 buyers in attendance?

Re: Bitcoin Price Pressure

#59

Post by panarky »

It's not worth much to speculate about upward or downward price pressure. People made the same arguments when the exchange rate was $5, $25, $50 on up to $1,150, and now back down to $440/BTC.

These arguments have zero predictive value.

What's interesting to me is the repeating boom-bust pattern that we see as more people learn about cryptocurrencies, and as the Bitcoin protocol holds its own against an onslaught of attacks.

In the summer of 2010, the exchange rate was $0.05/BTC. Over the next year the price increased by 60000%, then proceeded to decline 90%. Even after losing 90% of its value, it was still up 4500% from the summer of 2010.

By the spring of 2013, the exchange rate spiked to $250/BTC, up 10000% ... then crashed and lost 80% of its value. Its post-peak minimum was still twice as high as the previous peak.

Again in late 2013, the price zoomed up nearly 3000% ... and it's now lost 60% of its peak value, still twice as high as the previous peak.

The past doesn't necessarily predict the future, but we're not seeing anything today that we haven't experienced at least three times already.

Re: Bitcoin Price Pressure

#60

Post by dublinben »

jnbiche wrote: post #44
sillysaurus3 wrote: post #33

In a moment of some depression, reflecting back on sinking so much money into Bitcoin at close to the peak of its price history, I made this: http://i.imgur.com/f3tIJwK.png It's important to understand that Bitcoin is dangerous to you, and you need to respect its danger if you decide to buy some. You need to be using a secure cold storage wallet. You need to not trust services like Coinbase to hold onto your coins fo…

For many of us, Bitcoin represents far more than an opportunity to gain or lose money. For us, the freedom from financial and fiscal paternalism is worth the risk.

How does Bitcoin provide you any "freedom from financial and fiscal paternalism"?
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