Bitcoin

Clemenza posted:

Thanks for the explanations fellas. It's fascinating stuff, but I think I'll follow Buffet's advice and stay out of anything I don't understand.

Gaining a decent understanding of Bitcoin & the underlying Blockchain technology can be achieved over a weekend. The highly technical aspects of the protocols are not really important for most people. [The math behind the cryptographic components may require a graduate level understanding of number theory BUT all the crypto components are "off the shelf", have been proven "secure", and have been in use years before Bitcoin appeared.]

Just for fun I'll give a list of terms to google:

Hash, SHA2, one way function, asymmetric encryption, public/private key, Blockchain, Satoshi Nakamoto, Bitcoin mining, Bitcoin 

Once you learn, on a high level, how a hash is generated and why it is "statistically" unique, you will be 70% towards understanding Bitcoin.

Probably the best introduction is Satoshi's original paper.

Hook, interesting post, when using block chain tech as Crypto currencies I think the big change with fiat money is the de centralised and distributed nature of the worth of most Cryptos .. i.e. the value is determined by a community, essentially a global community rather than a state or an appointed body.. anyway for those who want to know more, here are some basic introductory videos about Cryptocurrencies based around Bitcoin.

General:  https://youtu.be/kubGCSj5y3k

Technical and how the distributed trust, ledgers and transactions work:  https://youtu.be/l9jOJk30eQs

The concepts are rather straightforward, the underlying computer and cryptographic algorithms are more challenging but not specific to cryptocurrencies (peer to peer networking, distributed decision making algorithms and crptography), but of course like with most technology you don't need to understand it to use it... 

Hook, I can also recommend the Trezor hardware wallet... very easy to use and as secure as your private key hygiene ... and of course as with most/all block chain cryptocurrencies you only need to open your hardware  'wallet' to spend... you can receive coins with your wallet shut, disconnected and safely stored.... a lot more secure than fiat money.

I really think the Bitcoin hope is a game for the rich. Yep, ride the hype and jump out before it could crash. To be losing sleep over the rise and fall, or even worse feeling depressed, is not a good idea in my mind. The rich could make more money or lose a small portion of their wealth. I doubt they'll cry over it. In one hour today, it lost 10%. 

I'm receiving Bitcoin emails, seeing Facebook posts from odd people generating Bitcoin hysteria with quotations laid over a background of Richard Branson from 2014 in which he didn't say the claimed quote. It's a bit like seeing a religious cult.

Hype like this was peaking 1997-2000 with tech stocks. Many of those same stocks crashed to 1% of their value within a few months and people still were saying they'll pick up again. 17 years later, they haven't. These techs were huge companies with proven earnings. Many other companies disappeared altogether.

I wish I was rich enough to play the Bitcoin game and not have a care in the world, but with the amount I would be willing invest today, I'd be more annoyed if I lost it, than the multiples that would need to be generated to make me interested. Looking back, the time for me would have been up to $50 and then I'd be out by now. Should have put £5,000 in then, now I'd be laughing.

Like I indicated in my other post, the issue is not whether it's going up/down to $******, it's the risk attitude and whether you have the money and mentality for it. Looking at internet posts, I fear some people are going to be burnt out if it goes up or down, whilst others will be enjoying their healthy lives.

Adam Meredith posted:

I'm presuming two motives for splashing out on these spiffy currencies - greed and/or security. 

On the greed front - you can ride any bubble, get out before the bigger mugs and make a profit - weirdly, measured in terms other than the miracle investment 'instrument'. 

I was once offered the opportunity to get in on Arun Isle Oil as they didn't find oil in the Porcupine. Or - a girlfriend's father was enough in the know to be sure that an announcement was about to be made which would cause a rise in 'value' of shares. Value that would soon be wiped off again when it was discovered that there was no oil. 

Things happened as planned and a few rich people made a profit at the expense of a lot of mugs. I found it all loathsome and am, today,  consequentially impoverished.

Security - go online and search the world of Preppers.

These fearful types invest ridiculous amounts of their disposable income in the items that will retain value when - 'The Shit Hits the Fan' and we arrive at 'The End of the World as we Know It'. 

The dumb sequester gold, slightly wiser - bullets. A good argument was made for screws, machine steel and nails. When it comes down to basics, barter is the exchange of goods or services for other goods or services. What you offer has to really, really be worth something to the person who has what you want.

Under less Apocalyptic circumstances you may have a while when people perceive your rare, but essentially worthless, crypto crap as of intrinsically higher worth than the, essentially worthless, fiat crap, that they've been muddling along with up to now.

It doesn't make your rare, guarranteed no one can print any more, crypto tokens exchangeable for anything with an intrinsic worth. 

In addition - how do I sell you a Maserati ( which has a relatively stable purchase price in the vanilla world) in Bitcoins when, as you boast, it's value is inflating at a rate that makes Greece look stable? And why would you buy anything with yours when you could, apparently, buy two of the same the very next day?

The volatility of BTC will decrease over time. We are still in the early stages and +/- 30% is the price of admission. Remember when people would only accept gold coins when you tried to pay with bank notes? Neither do I but that was a problem in the 19th- early 20th centuries. In the US we still have silver coins in circulation. [I used to go to the banks in my neighborhood and buy all their silver coins at face value! (Even when the silver value was 20x face)] My point is that people adapt and the next generations will likely view Cryptocurrency the same way we view debit cards.

Right now most do not want to sell. There is likely still exponential appreciation to be had in the next 10 years. There are many people with 1,000 - 20,000 BTC who  have enough wealth to not miss 30-50 BTC and might want your Maserati.

The free market will ultimately decide the real "value" of Bitcoin. There is a chance I'll lose "everything" and I'm fine with that. I can survive with just my SN2. If I become a billionaire I'll upgrade to a 282.

Kevin Richardson posted:

Everything has "worth" based on supply and demand. The market participants create demand. Supply is limited. Why does Bitcoin need to break widely accepted economic theories to be on par with other commodities?

Anything can hold "value" if people decide the thing is better than other things [USD]

We will reach a point where conversion to USD is unnecessary. Merchant adoption is accelerating. Ten years from now I wouldn't be surprised if you can easily buy cars/boats/homes with Bitcoin. The fact people denominate prices in local fiat does not impair the growth potential of Cryptocurrency. Once the exponential price appreciation period ends [10 years?] volatility will decrease to the point pricing "big ticket" items in BTC may become much more common.

I'm not comfortable with the long-term prospects for USD. Gold should be a good hedge but Bitcoin offers potential for continued appreciation well beyond the "total US stock market index fund" typically held in 401k accounts. [Dont even get me started on the ticking time bomb known as fixed income] A mere 1% allocation to Bitcoin may greatly increase annual ROI over the next 10 years. 

 

Everything has a "price" based on supply and demand. Bitcoins are not "worth" anything expect in the context of faith that someone will allow you to exchange them in the future for something of value. I'm not saying that digital currency isn't going to be a significant way of exchanging value - hell, 99% of the transactions I do are simply shuffling bits around. But are bitcoins a store of value or an investment? Nope.

Other than Bitcoins can be used to purchase directly in some parts of the world. There are Bitcoin credit cards in the US, and Bitcoin ATMs in many major conurbations around the world, not to mention some online services offer BTC as a payment type... yes still very much a minority for fiat type transactions, but is more common for purchasing other Crypto tokens and currencies, along with ETH.

winkyincanada posted:

Kevin Richardson posted:

Everything has "worth" based on supply and demand. The market participants create demand. Supply is limited. Why does Bitcoin need to break widely accepted economic theories to be on par with other commodities?

Anything can hold "value" if people decide the thing is better than other things [USD]

We will reach a point where conversion to USD is unnecessary. Merchant adoption is accelerating. Ten years from now I wouldn't be surprised if you can easily buy cars/boats/homes with Bitcoin. The fact people denominate prices in local fiat does not impair the growth potential of Cryptocurrency. Once the exponential price appreciation period ends [10 years?] volatility will decrease to the point pricing "big ticket" items in BTC may become much more common.

I'm not comfortable with the long-term prospects for USD. Gold should be a good hedge but Bitcoin offers potential for continued appreciation well beyond the "total US stock market index fund" typically held in 401k accounts. [Dont even get me started on the ticking time bomb known as fixed income] A mere 1% allocation to Bitcoin may greatly increase annual ROI over the next 10 years. 

 

Everything has a "price" based on supply and demand. Bitcoins are not "worth" anything expect in the context of faith that someone will allow you to exchange them in the future for something of value. I'm not saying that digital currency isn't going to be a significant way of exchanging value - hell, 99% of the transactions I do are simply shuffling bits around. But are bitcoins a store of value or an investment? Nope.

Why do you need a "trusted 3rd party" if you are just shuffling bits around? We are so accustomed to giving away our wealth to the "bankers" that people get a form of cognitive dissonance by the idea that banks are unnecessary. We have a family business which is now 95% credit card. Up to 5% of each transaction is paid to the cc processor for "moving some bits". Think about that.... These companies take 5% of 95% of all  purchases not involving a transfer of title. Of course we pass on this fee * 1.5 to our customers. So.... I'm just going to ballpark this... I'm guessing an average family pays 25% income tax, 60% post tax income goes to "bills", 20% to savings and 20% spent on "stuff". => 1.4% post tax income paid to banks so we don't have to use an ATM. [Meanwhile that 20% savings is losing 2%/year from inflation.]

Now imagine a system where that wealth transfer from consumers=>bankers does not exist. Consumers win. Small businesses win. Banksters lose. It's a win-win-win.

How can you exchange value without using a "thing" having value = the amount you wish to exchange?  [Interbank transfers currently rely on trusted 3rd parties to "guarantee" the funds. This 3rd party just updates two ledger enteries. The value exchanged is simply a ledger adjustment. This is exactly what Bitcoin does but without the need for a "trustworthy" intermediary.]

Kevin Richardson posted:

Clemenza posted:

Thanks for the explanations fellas. It's fascinating stuff, but I think I'll follow Buffet's advice and stay out of anything I don't understand.

Gaining a decent understanding of Bitcoin & the underlying Blockchain technology can be achieved over a weekend. The highly technical aspects of the protocols are not really important for most people. [The math behind the cryptographic components may require a graduate level understanding of number theory BUT all the crypto components are "off the shelf", have been proven "secure", and have been in use years before Bitcoin appeared.]

Just for fun I'll give a list of terms to google:

Hash, SHA2, one way function, asymmetric encryption, public/private key, Blockchain, Satoshi Nakamoto, Bitcoin mining, Bitcoin 

Once you learn, on a high level, how a hash is generated and why it is "statistically" unique, you will be 70% towards understanding Bitcoin.

Probably the best introduction is Satoshi's original paper.

It's not the underlying mechanics of how it works that I don't understand. What I don't understand is the value of something that is only a method that someone used and called a coin. Like paper or metal, anyone can generate a cryptocurrency, hence the proliferation of them. Why should I trust a given cryptocurrency to maintain its value is what I don't understand. Is it FDIC insured? No. Is it backed by a government? No. Is it backed by a contract that if defaulted upon can bring suit? No. Does it have other currency reserves? No. None of the ways people establish faith are being employed here and there are no consequences for the principals for failure because they, conveniently, are anonymous. If people think this kind of underpinning is unimportant, it is that that I don't understand. People now distrust gold, real estate and their government to the point that they will put up things of readily convertible value to buy something at a high price, supported by nothing but the promise of people on the internet that someone else will continue to buy it when there has already been a proliferation of competing cryptos? This is sounding more everyday like a pyramid scheme with blockchains for books. It isn't that I don't trust blockchain over Vito's notepad for book, it's that I don't trust a pyramid scheme, because at this point, that's all it is and we know how those go. The way I understand it, I shouldn't be buying BitCoin, I should be selling ClemenzaCoin.

Everything is at bottom a confidence game. But this is closer to gambling than investment at this point. I like gambling, but I'd rather be the house in this case.

Clemenza posted:

Kevin Richardson posted:

Clemenza posted:

Thanks for the explanations fellas. It's fascinating stuff, but I think I'll follow Buffet's advice and stay out of anything I don't understand.

Gaining a decent understanding of Bitcoin & the underlying Blockchain technology can be achieved over a weekend. The highly technical aspects of the protocols are not really important for most people. [The math behind the cryptographic components may require a graduate level understanding of number theory BUT all the crypto components are "off the shelf", have been proven "secure", and have been in use years before Bitcoin appeared.]

Just for fun I'll give a list of terms to google:

Hash, SHA2, one way function, asymmetric encryption, public/private key, Blockchain, Satoshi Nakamoto, Bitcoin mining, Bitcoin 

Once you learn, on a high level, how a hash is generated and why it is "statistically" unique, you will be 70% towards understanding Bitcoin.

Probably the best introduction is Satoshi's original paper.

It's not the underlying mechanics of how it works that I don't understand. What I don't understand is the value of something that is only a method that someone used and called a coin. Like paper or metal, anyone can generate a cryptocurrency, hence the proliferation of them. Why should I trust a given cryptocurrency to maintain its value is what I don't understand. Is it FDIC insured? No. Is it backed by a government? No. Is it backed by a contract that if defaulted upon can bring suit? No. Does it have other currency reserves? No. None of the ways people establish faith are being employed here and there are no consequences for the principals for failure because they, conveniently, are anonymous. If people think this kind of underpinning is unimportant, it is that that I don't understand. People now distrust gold, real estate and their government to the point that they will put up things of readily convertible value to buy something at a high price, supported by nothing but the promise of people on the internet that someone else will continue to buy it when there has already been a proliferation of competing cryptos? This is sounding more everyday like a pyramid scheme with blockchains for books. It isn't that I don't trust blockchain over Vito's notepad for book, it's that I don't trust a pyramid scheme, because at this point, that's all it is and we know how those go. The way I understand it, I shouldn't be buying BitCoin, I should be selling ClemenzaCoin.

Everything is at bottom a confidence game. But this is closer to gambling than investment at this point. I like gambling, but I'd rather be the house in this case.

Anybody can produce a new Cryptocurrency or asset. It really only takes an hour. The trick is getting millions of people to "get behind" your new coin.

Obviously most of the 1,000+ coins lack any real community or particularly interesting use case. These coins are often made by individuals for fun or to fleece the masses of their Bitcoin.

There is no guarantee that Bitcoin will not fail to achieve mass adoption. Conversely, there is an absolute 0 risk by holding US Treasuries. The USG will never default on its debt. The only problem is the bulk of future debt payments will be paid with USD worth less than when you bought the bond.

I would not trust 99% of all cryptos over the long-term. There are a few that stand out : Bitcoin, LItecoin, and maybe Ethereum. These 3 have very large/active community. There are 1,000's of developers working to expand the ecosystem for these coins. 100's of millions of $ are flowing into companies building products leveraging the distinct properties of these coins.

Failure is not a free option for people in this space. Many, if not all, are heavily incentivized by holding significant quantities of their coin. Bitcoin has a 70 billion $ market cap so it's not like a "side project that will go unattended".

You are thinking in conventional terms where "somebody else is responsible for controlling your money".  Bitcoin guarantees:

only you can spend your coins. 

A block every 10 minutes

Predetermined Max coins and annual inflation

All rules must be followed to have your block appended to the chain

The longest chain is the correct chain

Every node gets a vote regarding proposed changes to protocol.

If some group decides they want to change the rules, they can fork the chain but the fork is only as valuable as the hash power mining it.

Insurance in unnecessary as there is 0 counter party risk. Banks charge you $ to "insure" your deposits so they can then use your $ to make huge sums of $ without risking anything. [Right now FDIC "insurance" on a 500,000 USD account will cost you > $5,000 /year.] What a racket that you have to pay for insurance that only protects you from your own banks negligence.

Bitcoin currently has no real competition. Litecoin is faster and has lower transaction fees but it also is not as secure. [Not that it has some  design flaw but is more susceptible to a 51% attack. Of course that won't happen due to the relatively low value of the coin.] Maybe some coin in the future will usurp Bitcoin but my guess is that will not happen until after mass adoption occurs.

How is Bitcoin a pyramid scheme? I've seen so many people make that claim. To make $ on your Bitcoin you need to sell them to somebody else. At that point you have lost any future gains/income from the coins.  It's been a pretty crappy model for a pyramid scheme over the years since the 1st holders sold their coins for < $.01. It really is more like an "inverted pyramid scheme" [If such a thing exists] If Bitcoin is a pyramid scheme then so is the entire equities market.

The fundamental question is: Do we need governments to tell us what is and is not money? I guess your answer is yes. I say No. Millions of people have self-organized and are adopting a democratic "private currency" to eventually opt out of local fiat which steals their wealth and transfers it to the top .1%.

The price appreciation this year has been rapid and may head for a significant correction in the near future. Nobody knows for sure. In five years it could reach $50,000. If you don't want to "gamble" then don't time the market and just buy small amounts consistently.

If you want to be "the house" then setup a mining operation and get your coins "for free."

Kevin, not sure of your reasoning regarding Litecoin and Bitcoin security... effectively in real terms they are safe as each other to 51% attack despite mathematically Bitcoin having a higher block difficulty level because of its respective size to Litecoin... But on a large scale globally distributed Cryptocurrency a >50% attack is effectively a science fiction concept  but clearly technically possible, i.e. >50% of the world's supercomputer resources validating the blocks under a centralised malicious control....

However if one takes the current value of of each Crypto currency and their respective current blockchain difficulty values into consideration, the rewards from controlling >50% of the participating global block node computing resources against the cost of doing it (assuming you built a facility say in the desert somewhere to process and validate the blocks chains in an illicit way ) would currently be approximately twice as beneficial for Bitcoin to LItecoin, so in real world human greed terms, you could argue Litecoin is twice as secure than Bitcoin.... and this despite the increased costs required for the increased processing of Bitcoin

But away from the Dr Blofeld type fantasies they are effectively as safe as each other... and in real terms massively so compared to what we are typically used to for securities.

Simon-in-Suffolk posted:

Kevin, not sure of your reasoning regarding Litecoin and Bitcoin security... effectively in real terms they are safe as each other to 51% attack despite mathematically Bitcoin having a higher block difficulty level because of its respective size to Litecoin... But on a large scale globally distributed Cryptocurrency a >50% attack is effectively a science fiction concept  but clearly technically possible, i.e. >50% of the world's supercomputer resources validating the blocks under a centralised malicious control....

However if one takes the current value of of each Crypto currency and their respective current blockchain difficulty values into consideration, the rewards from controlling >50% of the participating global block node computing resources against the cost of doing it (assuming you built a facility say in the desert somewhere to process and validate the blocks chains in an illicit way ) would currently be approximately twice as beneficial for Bitcoin to LItecoin, so in real world human greed terms, you could argue Litecoin is twice as secure than Bitcoin.... and this despite the increased costs required for the increased processing of Bitcoin

But away from the Dr Blofeld type fantasies they are effectively as safe as each other... and in real terms massively so compared to what we are typically used to for securities.

 

The guy who created Litecoin, Charlie Lee (?), gave an interview recently where he said "Bitcoin is more secure than Litecoin". I inferred, perhaps incorrectly, that the basis for his claim was the network hash rate / unit (or USD value?) was substantially higher for BTC.

The current hash rate for LTC is < 20 TH/s while it is > 8 EH/s for Bitcoin. So... BTC has 400x the hash power  with 1/4 the coins and 20x market cap vs LTC. Also it is not just the current network strength that adds security. The longer the Blockchain gets the more "secure" it becomes. Length is a function of the cumulative work done on the chain. The length of BTC is probably something like 1,000,000,000 longer than LTC.  Maybe this explains his claim?

Hi Kevin, I am not sure one can say the longer a block chain is the more secure it is.... sure at the growing end of the chain, new additions to the chain from recent transactions from the pending pool are less secure, because they may be returned back into the pending state if the network rejects those locally confirmed transactions, because that particular block confirmation is rejected by the network of nodes... which is why when one is doing secure high value transactions one waits for multiple distributed network block confirmations before 'confirming' the transaction... which in Bitcoin can be quite lengthy, hence the attraction of other coins like LItecoin... which is much faster than Bitcoin. Being faster means all things being equal, one will get multiple network confirmations quicker in Litecoin than Bitcoin.. so the chance of double spending attacks are reduced with Litecoin compared to Bitcoin... but I think SegWit helps reduce this slight vulnerability of Bitcoin.

The hashing algorithms are also very different.... and perhaps because Bitcoin uses the industry standard SHA-256, and is more easily processed with computing parallel processors.. which has sped up the rate at  which the hashing complexity has had to increase to main security and integrity in the network. Litecoin however uses Scrypt, an algorithm developed by Coiln Percival, and that allows a more optimum Crypto block hashing method and is less sensitive to  specialised  hardware processing...  and is therefore less susceptible to the block chain arms race.

Now this is the interesting bit ... one could argue having a quicker hashing algorith was weaker ... but in practice there is no evidence of this... and indeed the corollary  of this is that as Bitcoin gets more complex there are less and less suitable and powerful enough processing nodes in the network... which is a vulnerability in its own right, where as Litecoin encourages lesser hardware complexity and more distributed nodes, which is a security strength...

But as one can see this all gets very supposition like, and in the limit I think one can say they are as effectively as secure as each other, with Litecoin offering cheaper and quicker transactions.

interestingly I saw the Swiss municipality of Chiasso has just announced it will be accepting tax payments from its citizens in Bitcoin from early 2018 up to a fiat value of CHF250.

Kevin Richardson posted:

How is Bitcoin a pyramid scheme? I've seen so many people make that claim. To make $ on your Bitcoin you need to sell them to somebody else. At that point you have lost any future gains/income from the coins.  It's been a pretty crappy model for a pyramid scheme over the years since the 1st holders sold their coins for < $.01. It really is more like an "inverted pyramid scheme" [If such a thing exists] If Bitcoin is a pyramid scheme then so is the entire equities market.

 

If I'm trying to get a coin going, why not prime the pump by buying my own coins until I draw in others and get the value moving upward? It's not the mechanics of blockchain that resemble a pyramid to me, because that is indeed inverted in structure, it's the human behavior I'm worried about.

I'm as distrustful of governments and the 1 percenters as anyone else, so I'm not arguing that local fiat is better, but with blockchains we could be buying coins originally started by ISIS and subsequently primed by Saudi princes until a mania starts that lets human greed drive the price up because none of us want to miss out on the next big thing. Then there's the cash out and who cares what happens to it from there. It's all public record, but handled by nodes that are anything from physical machines to VMs in clouds, that can be broken down and redistributed into other clouds in seconds, so following it would be difficult and way too late. Has anyone been able to find out who was responsible for the Equifax breach? Right there you have all the data you need to repopulate anything. This may have an endgame no one is looking out for considering the large sums it is now drawing in, which leads me to the question do you think this can become a disruption to global currencies that will ultimately elicit government intrusion for the "peoples protection"?

I appreciate your responses Kevin. I'm not being a chop buster, Lord knows I've dropped money on dumber things, I'm just applying the same skepticism to crypto as a value holder for the common working man as I am of any other value form. I find this whole development fascinating.

Simon-in-Suffolk posted:

 

...interestingly I saw the Swiss municipality of Chiasso has just announced it will be accepting tax payments from its citizens in Bitcoin from early 2018 up to a fiat value of CHF250.

 

Simon, this is the kind of recognition I'm looking to see, an acceptance that will underpin valuation. I think when that happens and gains mojo, the currency sticks.

Indeed, and the motivation seems built on the Swiss banking heritage and there appears to be an appetite from some quarters for the Swiss to become leaders in  the evolving infant Cryptocurrency industry in recognition that banking and financial/contract transaction management is starting to evolve into this area.

Simon-in-Suffolk posted:

Hi Kevin, I am not sure one can say the longer a block chain is the more secure it is.... sure at the growing end of the chain, new additions to the chain from recent in than Bitcoin.. so the chance of double spending attacks are reduced with Litecoin compared to Bitcoin... but I think SegWit helps reduce this slight vulnerability of Bitcoin.

 

The overall length adds security by preventing a possible attack to "take down the entire coin" [Not simply double spending]  Imagine a "State actor" mining bitcoins for years but never transmitting the new blocks to the network. If this chain eventually gets transmitted and the total work is > than the "real chain", the fake chain then becomes the real chain. This would effectively kill Bitcoin/Litecoin. If this State actor started mining back in 2010-11 the total computing power needed would be only slightly higher than the current network. If this actor started today.... They would need maybe 1000x. The longer they wait to start the more multiples of hash required. [I imagine even the USG would have difficulty building an 8,000 EH/s miner. The electricity requirements alone would require a few dedicated nuclear power plants.] 

LTC saw very little network growth over the period 2013- early 2017. [I shut off my Bitcoin miners when difficulty reached 16 million ish around 2013/14. Now the difficulty is something like 600 billion!]

Anway.... From a practical pov it probably doesn't matter. Double spending would probably cost more in resources than could be gained from reversing a transaction. Also governments are more likely to attempt to kill Bitcoin through regulatin than a network attack.

Fascinating topic and even more fascinating discussion. I will follow Kevin's advice and research the list of terms he provided.

Thanks to Kevin and Simon in particular, but all other contributors also ...

Clemenza posted:

Kevin Richardson posted:

How is Bitcoin a pyramid scheme? I've seen so many people make that claim. To make $ on your Bitcoin you need to sell them to somebody else. At that point you have lost any future gains/income from the coins.  It's been a pretty crappy model for a pyramid scheme over the years since the 1st holders sold their coins for < $.01. It really is more like an "inverted pyramid scheme" [If such a thing exists] If Bitcoin is a pyramid scheme then so is the entire equities market.

 

If I'm trying to get a coin going, why not prime the pump by buying my own coins until I draw in others and get the value moving upward? It's not the mechanics of blockchain that resemble a pyramid to me, because that is indeed inverted in structure, it's the human behavior I'm worried about.

I'm as distrustful of governments and the 1 percenters as anyone else, so I'm not arguing that local fiat is better, but with blockchains we could be buying coins originally started by ISIS and subsequently primed by Saudi princes until a mania starts that lets human greed drive the price up because none of us want to miss out on the next big thing. Then there's the cash out and who cares what happens to it from there. It's all public record, but handled by nodes that are anything from physical machines to VMs in clouds, that can be broken down and redistributed into other clouds in seconds, so following it would be difficult and way too late. Has anyone been able to find out who was responsible for the Equifax breach? Right there you have all the data you need to repopulate anything. This may have an endgame no one is looking out for considering the large sums it is now drawing in, which leads me to the question do you think this can become a disruption to global currencies that will ultimately elicit government intrusion for the "peoples protection"?

I appreciate your responses Kevin. I'm not being a chop buster, Lord knows I've dropped money on dumber things, I'm just applying the same skepticism to crypto as a value holder for the common working man as I am of any other value form. I find this whole development fascinating.

You could "prime the pump" by making fake trades to artificially increase the price of your coin. This happens all the time with  some of the 900+ coins. [Many are outright scams designed specifically for this purpose.] Many people have been burned by these small cap coins. Personally, I only invest in Alt coins that have: visible leadership, active communities, well defined use case that differentiates it from others, and has been around for a "long time" [relatively speaking]. [For most people I'd say Bitcoin, Litecoin, and Ethereum would represent a relatively "diverse" and "low risk" portfolio].

It really is not easy to create a Crypto that retains value. You could "hype" up a coin and quickly make a few million $ unfortunately by selling your holdings, the price will go down faster than you can get your sell orders filled. This kind of "pump and dump" usually kills the coin.

The only holder of Bitcoins that has enough to decimate the current valuation is Satoshi Nakamoto. He reportedly controls nearly 1 million coins. People are constantly monitoring his accounts and, to date, not a single coin has ever been spent. If he created Bitcoin to get rich it is hard to image he would just keep $4,600,000,000 "on the table". My theory is that those coins have been burned [The private keys were destroyed.] If I were Satoshi, I would have burned my coins while buying coins from others @ $.001 - $1. I would have placed them in a number of "accounts" each containing 1,000 or less coins. This way confidence in the coin would grow as the creator is seen as not using this as a "get rich quick scheme." I can only imagine some mass panic if his coins started getting spent. [Has he lost confidence? Has the price peaked for the long-term?] With my plan, I could have accumulated another million coins and may have started spending them without raising an alarm.

From the American POV, I see the USG [or FED] in a difficult position. Currently Cryptos are not considered currencies in the USA. [Some are considered securities by SEC which means you need to be a "qualified investor" to buy. "Qualified investors" need to prove they have minimum $250,000 year income or $5,000,000 (?) in liquid assets. To me this just seems like a way to keep the non 1% from getting into deals that have enriched the wealthy over the past 40 years. Apparently the USG thinks 96% are not "sophisticated enough" to risk their $ on these investments. (Crazy since minimum investments are trivial like $1)] For the USG to step in and try to regulate "non security" coins, they would then have admitted that they pose a threat to the USD [Just my opinion]. A more likely scenario is that Bitcoin/Litecoin eventually get reclassified as currencies and will become subject to the same regulations in place for government issued currencies.

Thanks. Even if you were "busting my chops", I am used to it and am almost immune.

If you ever decide to "get some skin in the game", just stick with the big 3 Bitcoin, Litecoin, and Ethereum. They were all created by individuals in North America and are unlikely to have any significant connection to ISIS or other criminal elements. [Except of course like all currencies they have probably been used by these types to fund their operations.]

Crypto are still primarily speculative but the risk:reward is, in my estimation, fairly low. [Last i looked Amazon was trading at 150x earnings!] One of the great things about these coins is that the barrier to entry is very low. In the USA you can buy $1 worth of the big 3 at any time for 0% fee. Even people of modest means can allocate some of their monthly savings into them. Compare that to the lowest "cost" Index fund at Vanguard which has a minimum initial investment of $1,000. With this in mind, I believe Crypto is a good bet for "common working people". [Not 100% allocation but 1-10%]

Kevin and Simon, thanks much for your thoughtful and helpful responses. I'll definitely keep my eye out for an entry point and dip my toes a bit.

The whole concept conjures up a million scenarios in my head, so that alone is fun. Whatever happens currency wise, one thing that is clear is that blockchain as a methodology will, as Simon points out, find its way into a number of applications. This is the dawning of an accounting system that will be essential for young tech people to understand going forward. It will be applied in a great many areas of finance, contracts, and logistics and I can even see industry security standards requiring its use for transactions at some point.

https://www.theverge.com/2017/...-exchanges-crackdown

Rumours aimed at market manipulation or the real deal? Either way, it doesn't make me want to "invest" in crypto-currencies.

Is it true that in the latter half of 2016, 98% of BitCoin transactions were in Renminbi?

Yes it appears China has issues with fraudulent ICOs... or at best unregulated ICOs... not really related to Bitcoin, but I guess it's loosely associated in the layman view... I think countries like  Taiwan and Singapore are preying the heat of Cryptos gets cooled in China so they can get a bigger piece of the new tech action... however unfortunately it appears the Chinese government has a history of such proclamations and then nothing other than some make a small fortune from the resultant price changes.. and indeed that is happening right now... for me  the smart regions to watch are parts of Europe for Crypto development as well as Russia ... and its interesting Switzerland with its history of banking and transaction industries wants to become a global player in the tech.

I used to think there was something of the "Emperors New Clothes"  in the whole Bitcoin thing. Despite the extremely erudite postings by members in this thread, I readily admit I still don't properly understand it (and yes I accept that says more about my intelligence than yours)! However I was mildly amused to see the story in the Business Section of the BBC website...........

Bitcoin fell more than 10% on Wednesday as investors sold the cryptocurrency following a warning by JPMorgan chief executive Jamie Dimon that it "is a fraud" and will eventually "blow up".

I'm patently not the only one in the doubters camp.

Steve D

Oh dear wasn't it JPMorgan who were a key player in the CDO scandal and resultant collapse of the US finance industry in 2007.. which was the catalyst for developing non centralised crypto currencies in the first place.... what wonderful irony.... 

There will always be technology doubters, it's whether you shun it Luddite style, or embrace it and evolve it... I guess I fall into the latter... and yes with all technologies it can be abused, and nations with crime and money laundering challenges, Crypto currencies are a threat as there are currently very few controls in most of those countries at the fiat/Crypto exchanges... China being a case in point..

If JP Morgan warn against it I'm almost tempted to invest...