How many deaths of Bitcoin are we on now? I can remember 3, at least, the first of which was when it came down from its peak of $30/btc.
Personally, I hope this drives out most of the speculators. They have, in my opinion, done little for Bitcoin except make it difficult to use as an actual currency.
The speculation has created a LOT more attention from bitcoin; it's possible speculation is the majority of bitcoin use, in which case hardly anyone would be paying attention to bitcoin without it. Which might be just fine, of course, it's just another thing the speculation has done for bitcoin.
I think the interesting thing the article points out is that bitcoin mining itself is inherently a form of speculation though -- you are counting on the value of the bitcoins you mine being at least as high as the money you had to expend to mine the bitcoins (hardwar, power, network access), or mining is a losing proposition.
> And that's not necessarily true. It assumes that everyone mines bitcoin for the purpose of obtaining bitcoin, not to support the network.
Like someone is intentionally donating money in hardware and electricity in order to support the project? How many dollars a month would you personally spend to do this? Maybe there's some rich people involved who have the money to spare? At the current cost of mining, how many dollars a month are are required to keep the economy going (I have no idea), and would it be possible to get that much as "charity" donations to support the bitcoin project (I have no idea either)?
If the Bitcoin network is valuable to someone, they would likely invest to keep it running and secure. I would be more than willing to pay to run my mining equipment (bought with previously-mined bitcoins, about $1/day to run) to keep the network up.
Speculation has driven the cost of mining way up, but the speculation isn't inherent to mining. If the network was run entirely on a "charity" basis, the costs to mine would be much, much lower.
Mining bitcoin is a speculative lottery. The bitcoins actually be transferred around were given originally to those who won that lottery, but after that, they're just traded like money. In the future, the winnings from the lottery is a percentage of each transaction instead of bitcoins, but that's relatively a long ways away. Basically, with each transaction, a person posts what percentage of the transaction goes to the winner, and the winner chooses which transactions to honor onto the blockchain. The giving out of synthetic bitcoins is a way to bootstrap this process and to make sure that there's no single point of ownership.
To be clear, the speculative lottery that I was talking about is the BTC-USD daytrading on the exchanges. A significant fraction of that speculation is due to press hype that is due to rapid price spikes caused by earlier speculation.
Mining involves some speculation about future difficulty and future exchange rates (since you have to pay for electricity in real money), but at least there are some fundamentals that you can build a model around. With simple calculations (that ignored transaction fees BTW) I was able to correctly predict when mining would and would not be profitable and mine accordingly.
33, by last count[0]. This will drive out the last set of speculators only to herald in a slew of new ones. Speculation has determined the price for the last 2+ years and will continue to do so into the foreseeable future. The problem is that the value of bitcoin is not fundamentally tied to anything except the cost of maintaining the network, and it's clear at this point that hashpower responds to speculation, not the other way around. I'm curious to see how some of the new cryptos perform, like Nubits and Bitshares, which have a split between the crypto commodity, subject to wild fluctuations in price, and a crypto currency which is pegged to e.g. the dollar, at least in theory. The problem is, as usual, the network effect with bitcoin - nothing is likely to supplant it without some big real-world demand. If it can't find any real use case other than black market transactions, we can easily count on another 33 deaths ahead.
What's wrong with speculation? Pretty much every single transaction is a form of speculation. Bitcoin isn't pegged to any real resource, precious metal, or fiat currency. Its value is 100% dependant on the market and speculation is a 100% valid use of it. Maybe the bitcoin authors should have worried about that, if it actually matters. I'm always amused that speculators are ruining everything. When gas goes up, its speculators, but when it goes down its just a magical gift. The same way when a patient dies its because the doctor is an incompetent, but if the patient survives, it was Jesus.
Personally, I see speculation as a feature, not a bug. It brought attention to the currency and probably raised its value from a doge-coin-like joke to a legitimate way of exchanging value and having it become the defacto electronic currency.
I keep hearing these arguments from bitcoin supporters and its ridiculous. Currencies are constantly being invested into, speculated, etc. If your currency can't handle that, then your currency sucks. The people trying to make a profit aren't going away. Heck, they may be the vast majority of bitcoin users! I imagine bitcoin's volatility is just never going to go away. Any cryptocurrency is going to have the same issues. Using bitcoin is making a risky gamble. This is why we're not paying our mortgages with it.
"I imagine bitcoin's volatility is just never going to go away. Any cryptocurrency is going to have the same issues. Using bitcoin is making a risky gamble. This is why we're not paying our mortgages with it."
Blaming its problem strictly on speculation is ridiculous. I don't know how to address this. You're saying there needs to be some gentlemen's like code for bitcoin users to never invest it or it doesn't work? Yeah, your currency is broken then. Bitcoin is designed for profitability and investment, that's why people mine it!
This is like saying the ghetto is great, its just the criminals and poor ruining it. Uh, yeah, that's a problem with the ghetto. The criminals and poor aren't going away, as the ghetto favors them. The ghetto is not fine.
While I agree about the speculators, they are not the reason BTC is hard to use as a currency. Rather, BTC is the reason BTC is hard to use as a currency. Let's see here:
- BTC tends to fluctuate a lot. I could buy a pizza with it today, or a car tomorrow, or a house in a week. Therefore, I am going to think twice about buying a pizza today.
- Tax implications of BTC are complicated. If you have never owned BTC, and this year decide to buy it to experiment with it, now you have additional paperwork to file about it. If you buy it via a BTC ATM, or some other cash method, you now have to keep track of all the records. (Presumably, places like Coinbase, etc. do this for you, I haven't checked). This is not insurmountable, but that's different than taking $20 out of an ATM and buying a slice of pizza.
- BTC is hard to acquire. Yes, yes it is. Coinbase requires a multi-day verification process.
- BTC is hard to keep secure. To do this properly, you have to know how to create an encrypted cold storage wallet and how to keep your computer safe so that when you unlock it, someone doesn't grab the wallet while you are using it. This is hard. It's so hard that intelligent people with domain knowledge get it wrong. I don't expect someone who is not a "computer person" to just get it. Coinbase and such are great for the "not computer persons", but are not secure (as in, you need to use 2 factor auth + strong password, which most people do not do; it's also not secure in that if someone does get into your account, you are done for. There is no reversal/insurance).
- BTC is weird when you are spending money. With fiat currency, I go on Amazon, punch in my credit card number, hit "buy" and viola! my order is all set. Theoretically, my credit card can get rejected later, but in practice it doesn't happen; if it does, I am familiar with the process. With BTC, I am suddenly shown number of confirmations, have to wait for minutes to know if my order went through, etc. Imagine buying Google IO tickets with BTC: by the time my confirmation comes through, someone else already paid with a faster method and got my reservation. (I know they recently changed it to a queue/invitation system, but my point stands for lots of purchases where the quantity is limited).
- BTC is weird to spend, again. If my BTC is in an encrypted cold storage wallet, as it should be, I now have to defrost it, decrypt it, push the BTC somewhere, then wait. Oh, and for some modes of spending, I then have to transfer BTC again, and wait again (localcoin for example).
So, where will BTC go from here? Well, I think it'll continue being a specialized currency. It's not great for buying pizza, and I don't think ever will be. It is great for transferring money in/out of restricted jurisdictions, or from person to person without leaving an obvious trail. That part works well. If you are a Snowden-type whistleblower and need your friend to get you money, this is as good a way to do it as any. Or if you are my grandfather who cannot get his money out of Ukraine due to the banks "not having enough USD on hand" to wire his balance to a US bank. Or if you want to make an anonymous donation. BTC is basically a faster and more secure version of stuffing cash into envelopes and mailing it.
2 & 3. Those are basically due to Bitcoin being so new. Governments don't really know how to deal with it yet.
4. That's true, though there will likely be a product that will solve that in the future (i.e. a USB key that contains your wallet and signs transactions for you).
5. The waiting for a confirmation is more a limitation of the service. There's no reason why Google IO wouldn't be able to reserve your ticket once it received the transaction (within a couple of seconds) and then give you the ticket once there was a confirmation.
6. You use a cold storage wallet to hold the bulk of your funds, then transfer them to a hot wallet as needed. (So, keep your $5k in BTC in your cold wallet, and transfer $500 to your hot wallet every week or something.) Decrypting a hot wallet shouldn't be much harder than entering a password.
Your mindset represent a trend that is rampant in the bitcoin community, and is a huge drag on bitcoin, in my opinion.
The mindset being that you're securing your life savings.
That mindset is prevalent in the bitcoin community, because many of them indeed hope that their bitcoin IS their life savings. They hope for the day when their bitcoin has appreciated to the point that it's a significant asset, worthy of significant pains to protect it. From that perspective, your mindset it rational and correct.
The problem is that when you advocate such complex storage and use methods, you are advocating unnecessary complexity for the people you are attempting to sway to bitcoin. The normal person who wants to send $50 to his mother in the Philipines, or wants to have $100 on his phone to buy beer and hotdogs with, does not need such complexity, and will quickly run the other way when bombarded by it.
Any normal person who looks in to bitcoin, is bombarded with crazy ideas that the self appointed bitcoin experts claim he must must jump through.
* Use multiple addresses for privacy. Nobody should reuse an address.
* Use offline storage
* Generate your addresses on computers not connected to the internet
* Use a trezor.
* Use a deterministic wallet
* Don't use coinbase or circle, or the government will track you
This barrage of advice, which does indeed make sense for aspiring bitcoin millionaires and criminals, doesn't make sense for normal people, but nobody tells them that. Instead, they tab their browser over to facebook and resume their day, secure in the knowledge that bitcoin is not for them.
If you insist on making bitcoin the domain of nerds, only nerds will use bitcoin.
All currencies and value systems have their own inherent strengths and weaknesses, depending on how and where they're being used. Bitcoin is no different.
The all or nothing thinking when it comes to currencies reminds me of hearing people talk about religions.
> Or if you are my grandfather who cannot get his money out of Ukraine due to the banks "not having enough USD on hand" to wire his balance to a US bank.
I'm guessing the exchange rate for ukranian currency to bitcoin (and then to USD) is not such to make this a particularly useful thing to do. But maybe?
In this particular case, it's mostly a problem of not actually being there physically to perform the transaction. The solution of "stuff it into an envelope and mail it" would actually work out incredibly well here, except it will never make it.
Personally, I hope this drives out most of the speculators. They have, in my opinion, done little for Bitcoin except make it difficult to use as an actual currency.