Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm • Hacker News Board

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#61

Post by danielweber » Mon, Apr 08, 2013, 4:31 PM UTC

rlpb wrote: post #35

throwawayG9 wrote: post #21

Earlier quoted context omitted.

Bitcoin needs more security than credit cards because transactions are irreversible. Say his mother has a significant part of her savings in BTC, and they get stolen. What's she gonna do then?

Cash needs more security than credit cards because transactions are irreversible. Say his mother has a significant part of her savings in cash, and they get stolen. What's she gonna do then? Answer: let a bank deal with it. Banks can be insured.

For physical cash, banks don't give a hoot, and their insurance doesn't either, because the sums stolen are so small.

Even the dollars a bank has uninvested, they are stored electronically, and it's very easy to undo electronic transactions. Plus, the limiting factor on stealing electronic money from banks is finding a stool pigeon who will do it with cash.[1]

With a system where transactions cannot be undone, you need life-or-death-level security on the entire holdings. No insurance company is going to underwrite a policy of "there is a completely unknown chance of 100% loss."

[1] A PDF of this was on HN recently but apparently I did not bookmark it. Help a brother out?

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#62

Post by danielweber » Mon, Apr 08, 2013, 4:33 PM UTC

vrotaru wrote: post #58

danielweber wrote: post #56

Earlier quoted context omitted.

The reason the value of bitcoins is going up is because people who buy bitcoins expect that others will pay a higher price for it in the future. That has a much shorter name: http://en.wikipedia.org/wiki/Greater_fool_theory The price of the Mona Lisa won't go down because the art community won't let it. It can do that because there is only 1 Mona Lisa . Such a force doesn't exist with Bitcoins.

There will be only 21 million bitcoins. Ever.

There are only 3 million copies of SUPERMAN #75.

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#63

Post by ramblerman » Mon, Apr 08, 2013, 4:38 PM UTC

myspace wrote: post #54

I'm surprised so many people in the tech community have fallen for this Ponzi Scheme. For example, many heard about "some guy bought a $25 pizza with 10,000 bitcoins", but no one has thought about what this means. It means someone now has that 10,000 "coins" (which is close to 2'000,000). This also means someone had this amount (and possibly much more). And, finally, no one questions who posseses the first "coins". T…

Click this guys name.

30 minutes old and he has posted this same blurb word for word on every post regarding bitcoins.

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#64

Post by kruhft » Mon, Apr 08, 2013, 4:41 PM UTC

danielweber wrote: post #55

kruhft wrote: post #48

Earlier quoted context omitted.

The value of bitcoins goes up because the entire system is a store of value. When bitcions are bought, people are transfering "real" value (USD or any other government backed currency) into the Bitcoin system where the value is being held. When they sell Bitcoins they are removing value from the system. Due to supply (limited) and demand (increasing), the amount real currency needed to purchase a unit of Bitcoin is g…

When bitcions are bought, people are transfering "real" value (USD or any other government backed currency) into the Bitcoin system where the value is being held. When they sell Bitcoins they are removing value from the system. These two sentences may be the perfect summary of how misguided the Bitcoin community is. There is no value transferred into or out of the Bitcoin system when people buy or sell Bitcoins from…

Try buying something with your APPL stock before converting it back to USD at the current market rate and tell me where your value went, especially when your probably don't even hold the paper the stock was printed on, if it ever was.

Maybe you put your money into a Stock Market system (buying stock), increasing its value, meaning that taking money out (selling your stock) would reduce the overall value of the system.

Maybe the Stock Market is just as misguided?

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#65

Post by danielweber » Mon, Apr 08, 2013, 4:42 PM UTC

lftl wrote: post #42

throwawayG9 wrote: post #21

Earlier quoted context omitted.

Bitcoin needs more security than credit cards because transactions are irreversible. Say his mother has a significant part of her savings in BTC, and they get stolen. What's she gonna do then?

Credit card transactions only appear to be reversible to the end user. If someone nicks your credit card and buys some gas, it may appear to you that the money just came back but someone in the chain (usually the gas station) is eating that cost. So the only functional difference between bitcoin and a credit card in this respect is that there's someone big (the bank) sitting in between you and the transaction that ha…

The money lost to someone buying some gas is minimal.

Transactions are completely reversible until someone involves physical goods, including cash. The system can deal with tiny levels of fraud. With Bitcoin, someone can do a complete transfer of my life savings in an instant, and then what?

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#66

Post by vrotaru » Mon, Apr 08, 2013, 4:49 PM UTC

danielweber wrote: post #62

vrotaru wrote: post #58

Earlier quoted context omitted.

There will be only 21 million bitcoins. Ever.

There are only 3 million copies of SUPERMAN #75.

yes, but for one thing

a) no one cares b) it is not a hard limit, actually

and, maybe, a) has something to do with b)

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#67

Post by danielweber » Mon, Apr 08, 2013, 5:11 PM UTC

kruhft wrote: post #64

danielweber wrote: post #55

Earlier quoted context omitted.

When bitcions are bought, people are transfering "real" value (USD or any other government backed currency) into the Bitcoin system where the value is being held. When they sell Bitcoins they are removing value from the system. These two sentences may be the perfect summary of how misguided the Bitcoin community is. There is no value transferred into or out of the Bitcoin system when people buy or sell Bitcoins from…

Try buying something with your APPL stock before converting it back to USD at the current market rate and tell me where your value went, especially when your probably don't even hold the paper the stock was printed on, if it ever was. Maybe you put your money into a Stock Market system (buying stock), increasing its value, meaning that taking money out (selling your stock) would reduce the overall value of the system…

Try buying something with your APPL stock before converting it back to USD at the current market rate and tell me where your value went

Why would I do such a thing? It sounds like a giant waste of time.

Even if I were to, say, buy a Microsoft Tablet for 1 share of AAPL stock, no wealth has been transferred into or out of Apple Computer. Instead, the vendor now has 1 more share of AAPL and 1 less Surface, and I have 1 more Surface and 1 less share of AAPL.

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#68

Post by kruhft » Mon, Apr 08, 2013, 5:33 PM UTC

danielweber wrote: post #67

kruhft wrote: post #64

Earlier quoted context omitted.

Try buying something with your APPL stock before converting it back to USD at the current market rate and tell me where your value went, especially when your probably don't even hold the paper the stock was printed on, if it ever was. Maybe you put your money into a Stock Market system (buying stock), increasing its value, meaning that taking money out (selling your stock) would reduce the overall value of the system…

Try buying something with your APPL stock before converting it back to USD at the current market rate and tell me where your value went Why would I do such a thing? It sounds like a giant waste of time. Even if I were to, say, buy a Microsoft Tablet for 1 share of AAPL stock, no wealth has been transferred into or out of Apple Computer. Instead, the vendor now has 1 more share of AAPL and 1 less Surface, and I have 1…

And you have set the last sale price of APPL at 1 Tablet. If the current price of APPL was higher than the sticker price of a Tablet you have just gotten ripped off and vice versa. Some of the value just evaporated until the next sale, AKA arbitrage.

The point was that you can't do that even if you wanted to as the 'stock' is completely electronic without a way for you to transfer it's value to your seller of Tablets without first converting it to USD. The current system has no convenient general way to transfer their wealth in AAPL stocks from yourself to any person without going through an intermediary, which is the USD and the stock market itself. When you actually held the paper stocks you could give them to someone, now that value is stored in bits in a trading system.

I think your are confating my argument with 'giving' money to Bitcoin, which is a bit odd since nobody controls Bitcoin. Buying Bitcoin mean you are putting faith into the system, much like buying AAPL means you are putting faith into AAPL in hopes that the value of that stock with increase or at least not fall. If a large shareholder lost faith in AAPL and sold all their shares, the flux of money out of the system would devastate the investors, not APPL. Or at least not financially...the lack of faith might be quite devastating for APPL though.

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#69

Post by danielweber » Mon, Apr 08, 2013, 5:56 PM UTC

kruhft wrote: post #68

danielweber wrote: post #67

Earlier quoted context omitted.

Try buying something with your APPL stock before converting it back to USD at the current market rate and tell me where your value went Why would I do such a thing? It sounds like a giant waste of time. Even if I were to, say, buy a Microsoft Tablet for 1 share of AAPL stock, no wealth has been transferred into or out of Apple Computer. Instead, the vendor now has 1 more share of AAPL and 1 less Surface, and I have 1…

And you have set the last sale price of APPL at 1 Tablet. If the current price of APPL was higher than the sticker price of a Tablet you have just gotten ripped off and vice versa. Some of the value just evaporated until the next sale, AKA arbitrage. The point was that you can't do that even if you wanted to as the 'stock' is completely electronic without a way for you to transfer it's value to your seller of Tablets…

I chose "Surface" as something that was around the price of a share of AAPL stock. I didn't think that would become an issue, but apparently it did. So just do the same thing with gallons of gas measured down to the cc, if you wanted.

PS: There are such things as fractional shares of stock.

The current system has no convenient general way to transfer their wealth in AAPL stocks from yourself to any person without going through an intermediary

Why is this relevant at all? Are you trying to say that Bitcoin is a more convenient form of currency than stock? No kidding.

Buying Bitcoin mean you are putting faith into the system

And other people are selling, which means they are losing faith in the system.

A stock is priced by the market based on the current value of all expected future dividend payments. ("Growth stocks" are just one more abstraction removed but in the end it all comes down to expected future earnings.) One-tenth of a company that will earn $10 a year every year from now to eternity has a value you can work out on paper.

Re: Bubble or No, This Virtual Currency Is a Lot of Coin in Any Realm

#70

Post by SkyMarshal » Mon, Apr 08, 2013, 6:16 PM UTC

eric_bullington wrote: post #43

deepblueocean wrote: post #41

Earlier quoted context omitted.

I'm pretty sure the exchange price of Bitcoins is driven by the marginal supply and demand. So I think it's got to be what you call "investors" almost entirely (note that not all people buying in have to be speculators: if lots of people suddenly decided they'd rather have some Bitcoins because they want to use them, that would suffice). So the question is how are the marginal supply and demand determined? The margin…

Can you please show me the evidence you mention that shows that most Bitcoins are hoarded? I'm genuinely curious -- the main metric I'm aware of is Bitcoin Days Destroyed, and that metric seems to show that hoarding is actually steadily decreasing over time.

http://eprint.iacr.org/2012/584.pdf

~80% of BTC are dormant, eg being hoarded.

>and that metric seems to show that hoarding is actually steadily decreasing over time.

This is the big question, isn't it. It's completely understandable the early adapters are hoarding, expecting a med/long-term payoff on their investment via appreciation. But will that continue indefinitely, or change eventually?

And dumping even a portion of that into the system would have significant price effect, and given how so many people seem to value BTC by its price more than its unique utility, what effect will that have on the economy.