Bitcoin's Rise May Reflect a Monumental Transfer of Trust From Human Institutions Backed By Gov't To Systems Reliant on Well-Tested Code, Says Tim Wu (nytimes.com) 365
Tim Wu, a law professor at Columbia, writing for the New York Times: Yet as Bitcoin continues to grow, there's reason to think something deeper and more important is going on. Bitcoin's rise may reflect, for better or worse, a monumental transfer of social trust: away from human institutions backed by government and to systems reliant on well-tested computer code. It is a trend that transcends finance: In our fear of human error, we are putting an increasingly deep faith in technology (Editor's note: the link may be paywalled). What gives the Bitcoin bubble significance is that, like '90s tech, it is part of something much larger than itself. More and more we are losing faith in humans and depending instead on machines. The transformation is more obvious outside of finance. We trust in computers to fly airplanes, help surgeons cut into our bodies and simplify daily tasks, like finding our way home. In this respect, finance is actually behind: Where we no longer feel we can trust people, we let computer code take over. Bitcoin is part of this trend. It was, after all, a carnival of human errors and misfeasance that inspired the invention of Bitcoin in 2009, namely, the financial crisis. Banks backed by economically powerful nations had been the symbol of financial trustworthiness, the gold standard in the post-gold era. But they revealed themselves as reckless, drunk on other people's money, holding extraordinarily complex assets premised on a web of promises that were often mutually incompatible. To a computer programmer, the financial system still looks a lot like untested code with weak debugging that puts way too much faith in the idea that humans will behave properly. As with any bad software, it can be expected to crash when conditions change.
No, it is not a shift in trust (Score:5, Insightful)
People are buying bitcoins because of the increase in price. However, bitcoin has a lot of similarities to a Ponzi scheme. When the value of bitcoins plummets, that trust will go away.
Re:No, it is not a shift in trust (Score:4, Insightful)
Indeed. I doubt most people buying bitcoin today even really understand exactly what it is. They just see "skyrocketing investment".
Re:No, it is not a shift in trust (Score:5, Insightful)
Maybe Tim Wu thinks that people in the 1600s trusted tulips more than their government. Let me try:
... The transformation is more obvious outside of finance. We trust in tulips to brighten our homes, help cycle carbon dioxide, and lift our spirits. In this respect, finance is actually behind: Where we no longer feel we can trust people, we let flora take over.
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I don't think trust is a major factor in this increase in price. Trust was a factor when it got around the $100 range, being that we know the transmission is secure and private. However now it is pure bubble, People are buying them because they know they are valuable, and are hoping to sell them right before the pop and make out like a bandit. I expect the pop will bring them down to the $200 per bitcoin range. But this excess amount isn't based on trust, as when the bubble pops people know they will ha
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Pork Bellies (Score:2)
Bitcoin is nothing more than Pork Bellies, except you can't make bacon out of them.
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When the value of bitcoins plummets, that trust will go away.
For idiots, yes. There's always going to be folks who jump on a bandwagon, just because the bandwagon exists. There's an obvious need for a pure fiat currency not controlled by any government, that was demonstrated long before all the crazy investors jumped on. I get everyone is salty now that they're here, but it literally happens to every new fad so at some point in your life you just have to stop getting angry at that kind of thing and just move on with your life. Yes, bankers and investor will do du
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People are buying bitcoins because of the increase in price. However, bitcoin has a lot of similarities to a Ponzi scheme. When the value of bitcoins plummets, that trust will go away.
Some are. I'm pretty sure most are buying it to try and hide illegal activities from their government.
"To really foul things up requires a computer" (Score:5, Insightful)
People are buying bitcoins because of the increase in price. However, bitcoin has a lot of similarities to a Ponzi scheme. When the value of bitcoins plummets, that trust will go away.
"To err is human, to really foul things up requires a computer"
Or their wallet gets lost or corrupted and they have no backup (we know how good people are at backups)
Or they forget their wallet passphrase.
These things are irrecoverable. There is no one to appeal to in order to recover your coins. Its not like you can take your ID and visit the bank manager or government agency to regain control of an account.
Or their exchange or online wallet provider gets hacked.
No too big to fail government bailouts. You wanted independence from governments, here is the downside.
Or a 51% attack occurs, one mining pool got to 50% a few years ago.
Or a government intervenes, 70% of miners are in a single country not known for a hands off approach.
Bitcoin has deviated from its design, its security compromised as a result. It assumed a large group of decentralized miners, we don't have that. Bitcoin must abandon its currently proof-of-work algorithm which is dominated by specialized and expensive ASIC hardware, it needs to switch to a GPU friendly ASIC resistant alrgorithm (repeat as necessary) or switch to proof-of-state as etherium will do. Only such changes can decentralize mining and get security back on the designed path.
Its not "ponzi", its "greater fool" (Score:5, Informative)
"The greater fool theory states that the price of an object is determined not by its intrinsic value, but rather by irrational beliefs and expectations of market participants. A price can be justified by a rational buyer under the belief that another party is willing to pay an even higher price. In other words, one may pay a price that seems "foolishly" high because one may rationally have the expectation that the item can be resold to a "greater fool" later." https://en.wikipedia.org/wiki/... [wikipedia.org]
Re:No, it is not a shift in trust (Score:5, Informative)
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That assumes that Bitcoin plummeting won't have a chain reaction to other crypto-currencies.
If Bitcoin slowly drops, say, a daily decline of 0.25%-0.50% of it's daily opening value, the markets of other crypto-currencies could adjust. But if Bitcoin drops, say, 30%-40% in a day, how do you think other crypto-currencies are going to fare?
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That assumes that Bitcoin plummeting won't have a chain reaction to other crypto-currencies.
If Bitcoin slowly drops, say, a daily decline of 0.25%-0.50% of it's daily opening value, the markets of other crypto-currencies could adjust. But if Bitcoin drops, say, 30%-40% in a day, how do you think other crypto-currencies are going to fare?
That's every other Wednesday in the virtual currency market.
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And that's the problem. It's fine when bitcoin is an experiment and most of the players "mined it for free." When real idiots who debt financed their holdings start losing their shirts, the game changes abruptly. The wider world already things "crypto" is some kind of new wonder investment called bitcoin. If bitcoin crashes, "crypto" is going to get a generally bad name.
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If bitcoin crashes, "crypto" is going to get a generally bad name.
Why did you think the banksters are encouraging this bubble in the first place? They get to destroy something that would take away from their power and fleece the rubes while they're at it. Win win.
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Yeah, because investor money never runs away from entire sectors when a leader in a sector takes a shit.
No wait, that happens like every week.
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This is why people who are seriously worried about economic collapse that falls back on gold would hoard ammo and not 'caps' (gold). Ammo has tangible value outside of money and of course can be used to take anything that starts to develop value.
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It used to be you could buy a gallon of gasoline for about a quarter. Until 1964, quarters (and dimes, half-dollars, and dollar coins) were 90% silver.
Right now, the silver in one of those old quarters is worth $3.21. The last time I bought gas, I paid $2.39 per gallon. That silver quarte
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A couple of wrinkles more. The gragage must be able to proof the gold, weigh it accurately, and then adjust for factors such as driving to the shop which will buy it, in my case in my area 5% under spot.
Cash is simpler
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Yes, gold would still have value. it is something everyone on the face of the planet is conditioned to covet -- and that would take generations to change..
(if ever, as we tend to covet things that are hard to acquire, regardless of their actual utility)
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Well, I for one wouldn't sell you my spare mirelurk meat for gold post-apocalypse. You'd be best advised bring something I can eat, drink, or shoot at mirelurks.
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do you accept caps? I found a crate of nuka-cola in a file cabinet out in primm.
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you will take my bottle caps and like it ;)
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Well, I for one wouldn't sell you my spare mirelurk meat for gold post-apocalypse. You'd be best advised bring something I can eat, drink, or shoot at mirelurks.
If that scenario, you're not looking for someone buy your spare mirelurk meat, you're looking for someone to trade/barter for it.
...but in a post-barter scenario, where you need an actual currency - e.g. you want to sell it to Person B so you can turn around and buy something from Person C - It
Gold has little value in a pure barter scenario.
Planet Money (Score:5, Insightful)
Planet Money did a great pieces on the intrinsic value of gold. It's intrinsic value is that it is an excellent metal for use as a store of value. It doesn't degrade. It doesn't react with anything. It's easily worked into coins. It's not poisonous. It's relatively easy to mine and extract from rock. It's common, but not too common. If you factor in all the requirements for a store of value / unit of trade, you end up with silver, gold, palladium... all the precious metals that are commonly used as stores of value.
It's almost as if thousands of years of economic activity figured out that these metals are valuable as a store of value.
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Intrinsic value, for it to have any meaning at all, should place some limits on the price of the item in question.
Intrinsic value has little to do with market price. It's the inherent value of a product/commodity/stock/etc... divorced from market value.
You could say the intrinsic value of a company is it's profit margin, or the sum of it's assets, or it's future ability to generate profit.
The intrinsic value of steel can be derived by it's demand as a component in products. The intrinsic value of gold is in it's ability to fulfill a specific need, that need being to store or exchange value. This has been borne out by t
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You're correct that, at present, any randomly selected service provider is unlikely to take bitcoin. That could easily change though, given the extremely low entry barriers to doing so, and as I recall is already beginning to do so in some nations where governments are subjecting local currencies to extreme inflation. (I think bitcoin specifically has its own issues that would work against it becoming common to use for everyday transactions, but that's not an inherent problem with decentralized digital cu
Re:Correct (Score:4, Insightful)
This is true. But it's also only a problem with the choices currently built into the Bitcoin network itself, not with the basic technology, nor with distributed digital currencies in general.
Bitcoin strikes me as something like the moon landing - it proved that a decentralized currency really could be created, and changed the perceptual landscape of the world. All that remains is to figure out how to do it well enough to be more generally viable. Bitcoin even proved itself extremely useful for a while as a medium for wiring money, before it's value skyrocketed based on speculation. We'll see if it ever recovers, but in the meantime many other cryptocurrencies are drawing on it's technology and/or fame and attempting alternate solutions to the problem that will hopefully find better solutions than Bitcoin did.
And hey, unlike the space industry, the barriers to creating a new cryptocurrency are extremely low, so there's lots of room for experimentation and failure to let the good ideas rise rapidly to the surface.
Not reliable on global stage (Score:2)
Currency that is backed by the power of a government is far more reliable than an abstract currency like bitcoin.
That's certainly true in recent history but not if you look back further back. For example, the Knights Templar had an international banking system which allowed pilgrims to deposit cash in their home country, carry a letter of credit and then withdraw the cash when they got to Jerusalem. This was replaced in the 16th century by private banks allowing merchants to purchase notes in a private currency called "ecu de marc" which they could then travel with and convert into the local currency wherever they we
Re:Yes look at all the excellent examples (Score:5, Insightful)
Are you kidding me? People all over the world accept the US Dollar too. Far more than accept Bitcoin. You know how I know that? I can walk into any store in the United States and buy something with US Dollars. Can you go buy your groceries with Bitcoin? Can you fill a perscription, or pay for a medical service with Bitcoin? Can you use Bitcoin to ride public transit? When is the last time you walked into a shopping mall and seen even over 25% of the retailers accepting Bitcoin?
There are other countries that accept US Dollars as their second unofficial currency as well. Cambodia, for example, basically only uses their own currency as a replacement for coins to represent fractional dollars, and US Dollars are accepted as the standard. When I was there recently, I didn't see a single place accepting Bitcoin. Good luck getting a ride from the airport using Bitcoin, but they'll give you a lift for $3 no problem.
Much broader support. Hilarious.
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It may be an old argument, but it's still a good one. Does your cryptobit collection actually have value as a currency if you can't buy real things with it easily?
Note: there is a difference between an investment, and currency. You can't buy groceries with stocks and bonds either, but they don't pretend to be a currency.
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People all over the world accept bitcoin, so it has a much broader base of support than any state sanctioned currency, and is also immune to the inevitable gaffes all states make.
What are you smoking and can I get some! People all over the world accept USD, Eur, and Yen. USD probably being the most widely accepted. I can assure you the number of people who will accept bitcoin for a given transaction is immeasurably small compared to the number of people would would accept dollars!
Not at all (Score:5, Insightful)
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Ignore the biggest one, the social security trust fund. Government is no better than Madoff.
While I agree with your sentiment, at least with the SSTF you know who is stealing the money while with Bitcoin who knows? The big difference is a government has ways to make good on its promises while with Bitcoin if an exchange goes bust you are out of luck.
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Printing presses are a feature? No, they are a bug.
Exchanges would be analogous to banks. The blockchain would be analogous to the fed.
Re: Not at all (Score:2)
The SS trust fund would have been fine if Congress didn't say in the 70's or 80's that all surplus gets returned to the general fund. (Ala pensions). The issue is now Congress owes SS 20 trillion dollars on a 3.5 trillion dollars a year budget.
In the late 90's a rebulican Congress forced the Democrats to balance out that budget. It was negkatied and widely praised. As we knew then that by 2010 SS would be taking a chunk of the general budget. Guess what. When Republican had control they undid that budge
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That bullshit again? There was never a balanced budget. There was one budget that was projected to balance. That went away with the .com bubble.
We're still waiting on the spending cuts the Ds promised Bush 1 to get him to agree to tax increases. The deal was taxes now, spending cuts later. Cuts never happened.
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Just like blaming Madoff's funds would be wrong. So we don't blame the fund, we blame the Government and Madoff respectively.
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I hope you completely depend on SS and don't save a penny for your own retirement. I also hope you like the taste of cat food.
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Spoken like someone who doesn't have any pets. Have you seen the cost of cat food per lb.? Trust me if you can afford cat food, you can afford something designed for human consumption like soylent green.
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I think I speak for all other /. users when saying we don't give a fuck what you hope for.
How about you do a fact based response to the parent post instead of going on a irrelevant rant while hoping for misfortune for others? Yeah, I get it - you are a narcissistic asshole and want to show it to everyone.
But being an asshole doesn't make you right when calling social security a pyramid scheme. It isn't by any reasonable definition. It may be crap but it wasn't that you claimed, right?
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It's a Ponzi scheme, not pyramid. Get it straight.
You should also not save for your retirement. Enjoy your life and spend 110% of your income, the government will take care of you.
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For that reason, the most important date for Social Security is 2018, when taxpayers must begin to repay the IOUs
...or just get more of the under-the-table workforce to start paying in, or let in more legal immigrants to start paying in. Basically the only two things actually threatening its solvency are demographic ripples and Paul Ryan.
Doubtful. (Score:2)
The meaning of Bitcoin's rise (Score:5, Insightful)
>Bitcoin's rise may reflect, for better or worse, a monumental transfer of social trust: away from human institutions backed by government and to systems reliant on well-tested computer code.
No. It represents the dreams of foolish cryptoanarchists, libertarians, gamblers, and scam artists. The mainstream financial involvement currently underway is the industry safely siphoning some money from the bubble.
Any techie who is a proponent of a cryptocurrency is one who should not be employed in any capacity beyond desktop support.
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I don't mean this in a snarky or typical Internet way, but do you have sources for those metrics? I'd love to read how someone came to those figures.
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Aside from the abysmal mis-allocation of resources the issue of power also belies TFA... cryptocurrencies rely on an advanced infrastructure, made up of "Human Institutions" to support their ongoing operations. There's no getting away from that shakey foundation. One big energy crisis and mining could become prohibitively cost-ineffective... and since mining and transactional ledgers go hand in hand, instead of making them more valuable for rarity, that'll make them pretty useless.
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Uuuuuhhhh, so aggressive.
Maybe, just maybe they were smarter than you and now they're cashing out like there's no tomorrow on account of the large mass of Average Joes buying BTC at very high prices, in which case who should not be employed in any capacity beyond desktop support?
Treasure to Tulip (Score:2, Interesting)
This has 1990s tech bubble written all over it.
In the 90s tech companies with no intrinsic value became extremely valuable. Bitcoin and its imitators seem to have exactly the same value as a tulip bulb, and at some point people will realize that paying $19,000 for a tulip is silly. That said, I wish I hadn't sat out Bitcoin's monumental rise. Would love to have some F.U. money right now...
Re:Treasure to Tulip (Score:4, Insightful)
At least a Tulip has intrinsic value as a pretty flower. Cryptocurrency just takes up space on a disk if there is no network left to exchange them with.
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FYI...$19k. A bargain. IIRC The worst deal recorded was the trading of the Carlsbad beer brewery for 6 tulip bulbs. Right before that bubble popped.
Oh please (Score:5, Insightful)
If anything, it's a testament of how much money is accumulated on the supply side and cannot be invested in anything sensible because there is no demand due to a lack of purchasing power. If there was an actual economy still going on, investors would probably gladly invest into something more stable, but given the choice, what else can they pump their money into?
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Good point, reinforced by Apple's inability to dispose of 680Bn in cash.
There's nothing they can buy that will multiply their investment.
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There's plenty that will multiply their investment. It's just that the time scale is longer than the attention span of their investors.
And some of their attempts to make more money by investing money might fail. There's no greater sin than losing a rich person's money.
Rich people believe they have the God-given right to get richer, as evidenced by their behavior, since, ooh, the beginning of time. To include feudal societies, theocracies, you name it. The form of government can shift and shift again, but the rich will always believe that the purpose of everything in the world is to make them richer. (Elon Musk appears to be the excepti
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I really like this theory and I have thought so myself. I feel like a lot of economic activity that does take place isn't real economic activity, either.
My question for you is, do you have any credible information that outlines this as a valid theory, ideally by someone with decent economics credentials? I've mentioned it to people with more economics understanding than I have and they poo-poo it.
Re:Oh please (Score:5, Interesting)
You expect them to admit that the Capitalist model could have flaws? For real?
Producing doesn't make you rich, selling does. Without being able to sell your products, there is no revenue worse, producing makes you poor because you have to front the cost of parts and labour. And if an investor doesn't consider your business viable, i.e. if an investor doesn't think you could make those sales, he won't back you and front those costs for you.
If an MBA can refute this, I'd be really interested to hear his arguments.
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You hit it right on the nose. The direct cause of inequality (counting information assymetry as a factor in this), is because all the money is in being a swindling asshole, and there is a direct disadvantage to actually producing something. We see this in how companies are run, we see this in the stock market, we see this in private investment capital, and we see this in banking. Try to get a loan to produce an innovative new product. Now try to get a loan to buy some crap and then resell it for a profit. S
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To keep long story short, that was the "mainstream" economics thinking from 16th century until 1970's, when the hoodoo men from Chicago took over and reality-based economics was shunned to make way for unhindered greed.
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I know I've heard actual economists describe Quantitative Easing as beneficial to people heavily invested in the stock market, but I never quite connected the dots that way.
I wonder if there's any way to correlate money created by central banks through special programs like QE and the increase in even just cash holdings by large corporations.
It's like they're printing money trying to stimulate demand in a consumer economy, but it gets snatched away by corporations before it ever gets to consumers.
Re:Oh please (Score:5, Interesting)
This is largely the case bacause the rate of return on capital exceeds the rate of growth.
-Thomas Piketty, Capital in the 21st Century
I remind you as a non-American that while wealth inequality and its continued rise is an issue faced by all advanced economies, the US is at a level of its own in this regard because nowhere in the world is the inequality as massive as it is in the States. The top 1 % owns nearly half of all national wealth and the rest is held almost exclusively by the following 9 %, because the bottom 90 % doesn't own much besides their residences. The bottom 90 % also owns almost 75 % of all privately held debt. (source [inequality.org])
And the trend shows no sings of stopping, in fact the current republican 'tax reform' is a massive handout to the ultra-rich at the cost of the bottom 90 % in the long term.
With these stats in mind it is exceedingly hard not to call the USA in its current socio-economic state an oligarchy. And the system they have setup to protect themselves ideologically speaking is massively effective. You had 1 left of center candidate in the presidential primaries that took this issue with any seriousness, and Sanders was labelled a lunatic and a 'communist' for merely talking about introducing systems that are already in place in many western societies like universal health care and education.
This just goes to show how effective of a grip the ruling class has on the society overall. The 2 party system, the primaries and the electoral college all appear to me as an outsider to be things which do not serve the interest of the general public but rather the interests of the above mentioned oligarchs in that they allow for a great level of control over what options are given to the american people in national elections especially.
I agree (Score:2)
I have come to the same tentative conclusion as an amateur.
Stagnating wages and rising cost of living. Risk-averse investors that does not direct funds towards productive investments. Hence the focus on speculation and real estate. I believe this is the result of the massive increase of the money supply. Forces a lot of folks to partake in speculation and investment indirectly, yet the winners are only the financial institutions which becomes indispensable.
And we are told that this is "good for us all". I d
Huh? (Score:2)
So, what will happen to this "trust" when the bubble bursts?
And that comparison of the financial system to untested code is rather cringe-worthy. Car analogies are much more insightful anyway.
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I don't think it will burst. Its continual increase is attributable to people being willing to spend their own hard-earned money on things that they don't need. And I don't imagine that is going anywhere.
That said, I still wouldn't bank on it. Largely because the amount of bitcoin that one would need to buy to see any kind of appreciable gain is simply prohibitively expensive.
And I have better things to spend my money on than something I don't really urgently need.
It's still about trust in humans (Score:3)
Bitcoin is.. (Score:5, Insightful)
Bitcoin is gambling meets unregulated financial market.
Even with that, the total global trading volume of bitcoin is approximately 1% of the NYSE. Given the performance, that's crazy low trading volume getting extrapolated to total value. Because it's a complete crapshoot. It's economy by mob rule, and history has shown that as we got more connected, unregulated economic systems swing very far and wide, which is great when it goes up, impossibly devastating when it inevitably corrects if it is important.
No, it does not (Score:5, Insightful)
Those who ignore the past... (Score:2)
Bitcoin's main service to humanity is avoiding capital controls, it does that well.
You seem to have forgotten that whenever we've tried poorly regulated currencies on any sort of meaningful scale the results have invariably been disastrous sooner or later. We have capital controls because not having them is worse. Read a history book sometime. Good economic policy requires good governance - not too much and not too little.
Fuck the governments.
What an eloquent argument.
Re:No, it does not (Score:4, Insightful)
People always like to berate government until they get a taste of life without one. You'd loose everything to the biggest bully on any given literal or figurative street.
interesting angle (Score:2)
Also: "Well-tested code" seems to be a bit leading. Is this a hedge against when things fall apart ("Well, it wasn't well-tested!" )? Or just simple leading?
LOL (Score:2)
> Systems Reliant on Well-Tested Code, Says Tim Wu
Tell that to Ethereum, how many times have they had to hard-fork to fix bugs in 'well-tested code'
The big and the small driving problem (Score:2)
We have already been blindsided by the unexpected ability of computers to drive road vehicles, a task at which they are already doing better than human drivers on on-road beta testing. We can call this the big driving problem.
The small, simpler driving problem is automating the piloting of trains. Many city fixed-rail systems already use automated train operation. We can be certain that a computer wouldn't do anything as boneheaded as driving at 81 mph on a 30-mile curve.
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Or sending a train at 55mph into a block occupied by a stopped train that it should have known was there.
https://en.wikipedia.org/wiki/... [wikipedia.org]
bitcoin is the new gold. (Score:2)
I agree that trust in national currency, which are governed by forces beyond citizen concerns, and backed by corrupt governments like our own, managed by inept financial institutions, etc is no longer bedrock. In times like these people would move to gold. So think of having bitcoin like having gold. And think of its price as bei
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>bitcoin is the new gold
No, it isn't.
>When the day of financial reckoning comes
Ah, you're one of THOSE Bitcoin weirdoes. The kind who think that the economy will dive so badly that government-backed currency will be worthless, but the Internet will still exist and you'll still be able to afford to access it and thus your precious eternal blockchain.
In an economic apocalypse, you'd still be better off with government money. Even under rampant inflation, it would have SOME value. In a bad enough scen
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exactly.. the environment that allows bitcoin to exist in the first place is absolutely reliant on the stability brought by government.
Economic collapse -> rioting, looting, mayhem..
hard currency, gold, guns/ammo .. that's what you'd need.. not fancy math problem pretend-bux.
Or...it may just be humans speculating once again (Score:5, Informative)
Just speculation (Score:5, Insightful)
Bitcoin is growing almost entirely due to speculation and its utility for illicit transactions. This has nothing to do with some abstract confidence in computer code. This is people who are greedy looking to make a fast buck. The simplest explanation is the correct one here and that is greed.
Cyprocurrency stops censorship (Score:2)
RIght now, Paypal and even credit card processors block donations to charities in the middle east because they "might have" ties to terrorism. Even if the groups are not a formally reconginizted terorrist group by governments, businesses are free to block support for these groups. Blocking funds to these groups is a form of censorship. If they are not identified by a government agency as a terrorist organization, they should be allowed to operate and have due process.
Now you can donate directly to them
Re:Cyprocurrency stops censorship ; Ha! (Score:3)
Now you can donate directly to them with crypto currency, and bypass the censorship.
You could donate directly by mailing the "charity" a wad of $100 bills.
Cryptocurrencies offer nothing that cash cannot provide. With the exception of an opportunity to make (or lose) a spectacular amount in a very short time. That is the only attraction of BTC: greed. Any other suggested use is mere rationalisation.
Nonsense claim (Score:3)
It's rampant speculation, period.
Another article justifying buying a bitcoin... (Score:2)
Read the Penny stock/OTC forums (Score:2)
its idiots buying in a frenzy thinking they are going to get rich and penny stock/otc companies stating they are getting into the Cryptocurrency Industry.
Well, yes, but.... (Score:5, Insightful)
The thing is, bitcoins are without intrinsic value. Government issued money is, indeed, untrustworthy, but it has intrinsic value: the government promises to accept payoffs in its own currency for taxes so it won't confiscate your property, etc.
Now the government is untrustworthy, but it does have to power to enforce it's threats. Bitcoins are more trustworthy (not totally), but they have no intrinsic value. Their only value is whatever people are currently willing to exchange for them. I wan to call them bitcons rather than bitcoins.
Money is not just about trust and not just about intrinsic value. Things which only have intrinsic value make lousy currencies, and so do things without trust. This is why so many people are into gold, but most of them don't realize that folding paper promises of gold don't directly count. You need the actual metal. And it needs to be of a specific purity. And this is likely to get lost or stolen. But banks have also had their vaults pilfered.
There is noting in the world that has perfect trust. Looking for such is futile. But things that have value can be exchanged for other things with value, where things without intrinsic value can become totally worthless.
OTOH, how much was a Confederate dollar worth after the South lost? Value can be transitory. My old disk drive is worth more as a paperweight than as a disk drive. But it wasn't a bad investment, because I got use out of it for years.
And value is very personal. What is valuable to one person is valueless to another, and invaluable to a third. So it's difficult to use value as a currency. A currency needs to have an agreed value, which means it's own intrinsic value is only a floor to it's effective value. Bitcoin sure proves this, as it's current effective value is immense, but its intrinsic value is closer to nothing than to that of a piece of paper the size of a piece of government currency.
The closest stab I have to a reasonable "thing of constant value" is a bottle of whiskey. That would become more valuable if the government collapsed. Small amounts are easily packaged for portability. etc. Of course, some people would only value it for trade, except in cases of medical emergency and not medications. Wheat doesn't work because it doesn't store well and is too bulky. Also the value fluctuates too much during the course of a year.
Bitcoins, though.... their only value is that they are more trustworthy than governmental currency. But that's all, and it's not sufficient. At some point they will collapse, unless some major vendor of values turns them into a fiat currency. (Also they are vulnerable to centralized control if most of them are bought up by a small enough number of parties to from an oligarchy.)
StopOverthinking (Score:3)
First of all, a small share of people own the majority of bitcoin - with the US Gov'T being the largest single wallet holder. In 2013 the FBI's wallet had 144,000 bitcoins- do the math.
na, this isn't a change in trust, it's a bubble. don't get popped.
BTC is a reaction to fear of human error? (Score:2)
In our fear of human error
Can anyone remind me what is the latest estimate for the number of BTC lost by their users?
Holding a BTC is much more like having a bearer bond. It is easily lost, destroyed or stolen. And when it is, there is no one to go crying to or who can help you. There is no buyer protection. If ever there was something vulnerable to human error it would be a BTC stash.
Faith? (Score:2)
You can lose faith or trust in humans, but who creates and maintains the technology you've decided to trust instead?
Re: (Score:2)
Here is the argument for bitcoin: It is mathematically finite and thus cannot be externally inflated away in value. Thus it makes an ideal currency.
You can still have inflation with a fixed money supply. In fact you can even contract the money supply and still have inflation in some circumstances. Furthermore bitcoin is already experiencing fairly rapid deflation which is possibly worse if anything.
Re: (Score:2)
The problem is, inflation isn't necessarily a bad thing. Having a LOT of inflation, or unpredictable inflation, is bad... but having small, consistent amounts of inflation basically ensures that people with lots of money are forced to actively invest it, instead of just locking it away in a safe and waiting for its value to go up. Inflation isn't good, but DEFLATION is DEATH to any modern economy.
With 2% annual inflation, an investment likely to pay 4%-6% dividends is attractive. With 2% annual deflation, t
Re: Shares in Apple of Google work better as curre (Score:2)
Lack of inflation is a bug, not a feature.
It costs money to maintain a monetary system. Why should this be a free service?
Also, why should economic activity that took place in the far past have the same "value" years later? Hoarding currency is not an economically neutral activity. Inflation "punishes" this in a fairly predictable and largely fair way.
Re: (Score:2)
An ideal currency is stable in purchasing power. Bitcoin is most certainly not.
Re: (Score:2)
Gold is finite and yet we still saw massive speculative booms and busts in its value. Manipulating markets isn't necessarily a bad thing. China has manipulated its currency with massive positive repercussions for its economy. Greece has arguably been devastated by its inability to dictate the value of its currency.
Sometimes printing money and becoming an inexpensive exporter is what an economy needs.
Neither inflation nor deflation are inherently good or bad, but they will do very different things to y
Re: (Score:2)
Not to mention, the apparent outright BUG in MtGox's wallet implementation that caused some large number of bitcoins to be outright LOST forever.
The last time I checked, not even a poorly-designed wallet for paper money is capable of insidiously shredding or destroying it upon insertion, and modern paper money contains enough cloth, plastic, and security threads to ensure that even paper money that's been through a washing machine is probably still good enough for a bank to exchange for new bills.
Dealing wi
Re: The government inflates away debt (Score:4, Informative)
And bitcoin actually has built in deflation. Which is a fucking horrible idea.