Deflationary spiral possible for Bitcoin? - BeyondBacktesting

30+ Reasons Why Cryptocurrencies Are Worthless

1)It is possible to change the code through a miner vote or a fork and change the total supply or anything. DASH did it : they reduced the total supply from 84M to 18.9M a few years ago. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.

2)You can also fork bitcoin anytime , start over from 0 and claim it's the real bitcoin. (BCH , BSV , BTG , LTC , BCD etc)

3)Why would you pay $10,000 for a digital collectible unit called BTC when you can use BCH or TRX or LTC .. you name it. They work just as fine and cost less. There is no rarity like in gold.

4)Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You’d rather hold a wal mart gift card or even simply cash.

5)Private keys may be bruteforced as we speak. Quintillions entries a second. When they’ll have enough bitcoins under control , they could move them all at once instantly.(At least 45,000 ETH have been stolen this way for now through ethereum bandit)SHA 256 is too old , bitcoin is 10 years old , it is not secure enough , quantum computing could potentially break it.

6)And that’s if people don’t find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc..

proofs :

“Bitcoin , Coindesk : “The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret”an attacker could have actually used it to create new Bitcoin — above the 21 million hard-cap of coin creation — thereby inflating the supply and devaluing current bitcoins.”

Stellar : “Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed”

Monero : “A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post”

Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.

EOS : “Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX “

Zcash : “Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug” etc..

7)Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.

8)Then miners may be losing millions so they will stop mining , blocks may be so slow , almost no transaction will come though , and bitcoin may not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved may crash hard.

9)Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous “parity wallet”.

10)It is NOT trustless. you have to trust the wallet you’re using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..

11)Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly every 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.

12)Bitcoin price may artificially be inflated by Tether.

13)It’s an energy waste , an environmental catastrophy.

14)The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.

15)Governments will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies. Trump could kill bitcoin with one tweet , force fiat exchanges to cease activity.

16)Most cryptos are scams , the rest are just crazy speculative casino investments.

17)It is pyramidal : early adopters intend to profit massively while last comers get crushed. That's not how money works. The overwhelming majority of crypto holders are buying it because they think they will be able to sell it to a higher price later. Money is supposed to be rather stable. That's why the best cryptocurrencies are USDT USDC etc..

18)The very few stores accepting bitcoin always have the real price in the local currency , not in bitcoin. And prices like 0.00456329 BTC are ridiculous !

19)About famous brokers listing bitcoin : they have to meet the demand in order to make money , it doesn't mean they approve it , some even short it (see interactive broker's CEO opinion on bitcoin)

20)People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it , it's accepted everywhere , you can buy more things with it.

21)Everybody in crypto thinks that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it might not happen. The truth is past performance doesn’t indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun. The markets are unpredictable.

22)Also BTC went from about $0.003 to the price it is today , so don’t think it’s cheap now.

23)There is no recourse if you’re scammed/hacked/made a mistake in the address etc. No chargebacks. But it might be possible to do a rollback (blockchain reorganization) to reverse some transactions. BSV did it.

24)In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governments might ban it to prevent fiat inflation to worsen.

25) Having to write down the private key somewhere or memorize it is a security flaw ! It’s insane to think a system like this will gain mass adoption.

26) The argument saying governments can not ban it because it is decentralized (like they banned drugs) doesn’t work for cryptos. First , drugs are much harder to find and much more expensive and unsafe because of the ban , and people are willing to take the risk because they like it. But if crypto is banned , value will drop too much , and if you can’t sell it for fiat without risking jail , goodluck to find a buyer. Fiat exchanges could close. Banks could terminate every crypto related bank account. And maybe then the mining death spiral would happen and kill all cryptos.

27) Crypto doesn’t exist. It’s like buying air. It’s just virtual collectibles generated by a code. Faguzzi, fugazzi, it’s a whazzie, it’s a whoozie.. it’s a.. fairy dust. It doesn’t exist. It’s never landed. It’s no matter, it’s not on the elemental chart. It… it’s not fucking real!

28) Most brilliant guys have come out and said Bitcoin was a scam or worthless. Including Bill Gates , Warren Buffet , The Wolf Of Wall Street…

29) Inflation is necessary for POW , BTC code will have to be changed to bypass the 21M cap or mining will die ! If BTC code is not changed to allow for miners to be paid reasonably , they will cease mining when the bitcoin block reward gets too low.Even monero understood it ,the code will have to be changed to allow for an infinite bitcoin supply (devaluating all current bitcoins) or the hash will decrease and the security of bitcoin will decrease dramatically and be 51% attacked

30) Don’t mix up blockchain and cryptos. Even blockchain is overrated. But when you hear this or that company is going blockchain , it doesn’t mean they support cryptocurrencies.

31) Craig Wright had a bitcoin mining company with Dave Kleinman (he died) and on january 1 2020 he claims he will be able to access the 1.1M BTC/BCH/BTG from the mining trust. He may or may not dump them on the market , he also said BTC had a fatal flaw and that by 2019 there will be no more BTC.

32) Hacks in cryptos are very common and usually massive. Billions of dollars in crypto have been stolen in the last 6 years. In may 2019 Binance was hacked and lost 7,000 BTC (and it’s far from being the biggest crypto hack).

33) Bitcoin was first. It's an ancient technology. Newer blockchains have privacy, smart contracts, distributed apps and more.Bitcoin is our future? Was the Model T the future of the automobile? (John Mc Afee)

34) IOTA investiguating stolen funds on mainnet. IOTA shuts down the whole network to deal with trinity wallet attack.


While the native language of the writter is not english , I think you get the point and it doesn't make it any less relevant.
submitted by OverTheRedHills to u/OverTheRedHills [link] [comments]

30+ Reasons Why Cryptocurrencies Are Worthless

1)It is possible to change the code through a miner vote or a fork and change the total supply or anything. DASH did it : they reduced the total supply from 84M to 18.9M a few years ago. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.

2)You can also fork bitcoin anytime , start over from 0 and claim it's the real bitcoin. (BCH , BSV , BTG , LTC , BCD etc)

3)Why would you pay $10,000 for a digital collectible unit called BTC when you can use BCH or TRX or LTC .. you name it. They work just as fine and cost less. There is no rarity like in gold.

4)Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You’d rather hold a wal mart gift card or even simply cash.

5)Private keys may be bruteforced as we speak. Quintillions entries a second. When they’ll have enough bitcoins under control , they could move them all at once instantly.(At least 45,000 ETH have been stolen this way for now through ethereum bandit)SHA 256 is too old , bitcoin is 10 years old , it is not secure enough , quantum computing could potentially break it.

6)And that’s if people don’t find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc..

proofs :

“Bitcoin , Coindesk : “The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret”an attacker could have actually used it to create new Bitcoin — above the 21 million hard-cap of coin creation — thereby inflating the supply and devaluing current bitcoins.”

Stellar : “Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed”

Monero : “A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post”

Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.

EOS : “Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX “

Zcash : “Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug” etc..

7)Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.

8)Then miners may be losing millions so they will stop mining , blocks may be so slow , almost no transaction will come though , and bitcoin may not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved may crash hard.

9)Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous “parity wallet”.

10)It is NOT trustless. you have to trust the wallet you’re using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..

11)Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly every 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.

12)Bitcoin price may artificially be inflated by Tether.

13)It’s an energy waste , an environmental catastrophy.

14)The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.

15)Governments will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies. Trump could kill bitcoin with one tweet , force fiat exchanges to cease activity.

16)Most cryptos are scams , the rest are just crazy speculative casino investments.

17)It is pyramidal : early adopters intend to profit massively while last comers get crushed. That's not how money works. The overwhelming majority of crypto holders are buying it because they think they will be able to sell it to a higher price later. Money is supposed to be rather stable.

18)The very few stores accepting bitcoin always have the real price in the local currency , not in bitcoin. And prices like 0.00456329 BTC are ridiculous !

19)About famous brokers listing bitcoin : they have to meet the demand in order to make money , it doesn't mean they approve it , some even short it (see interactive broker's CEO opinion on bitcoin)

20)People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it , it's accepted everywhere , you can buy more things with it.

21)Everybody in crypto thinks that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it might not happen. The truth is past performance doesn’t indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun. The markets are unpredictable.

22)Also BTC went from about $0.003 to the price it is today , so don’t think it’s cheap now.

23)There is no recourse if you’re scammed/hacked/made a mistake in the address etc. No chargebacks. But it might be possible to do a rollback (blockchain reorganization) to reverse some transactions. BSV did it.

24)In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governments might ban it to prevent fiat inflation to worsen.

25) Having to write down the private key somewhere or memorize it is a security flaw ! It’s insane to think a system like this will gain mass adoption.

26) The argument saying governments can not ban it because it is decentralized (like they banned drugs) doesn’t work for cryptos. First , drugs are much harder to find and much more expensive and unsafe because of the ban , and people are willing to take the risk because they like it. But if crypto is banned , value will drop too much , and if you can’t sell it for fiat without risking jail , goodluck to find a buyer. Fiat exchanges could close. Banks could terminate every crypto related bank account. And maybe then the mining death spiral would happen and kill all cryptos.

27) Crypto doesn’t exist. It’s like buying air. It’s just virtual collectibles generated by a code. Faguzzi, fugazzi, it’s a whazzie, it’s a whoozie.. it’s a.. fairy dust. It doesn’t exist. It’s never landed. It’s no matter, it’s not on the elemental chart. It… it’s not fucking real!

28) Most brilliant guys have come out and said Bitcoin was a scam or worthless. Including Bill Gates , Warren Buffet , The Wolf Of Wall Street…

29) Inflation is necessary for POW , BTC code will have to be changed to bypass the 21M cap or mining will die ! If BTC code is not changed to allow for miners to be paid reasonably , they will cease mining when the bitcoin block reward gets too low.Even monero understood it ,the code will have to be changed to allow for an infinite bitcoin supply (devaluating all current bitcoins) or the hash will decrease and the security of bitcoin will decrease dramatically and be 51% attacked

30) Don’t mix up blockchain and cryptos. Even blockchain is overrated. But when you hear this or that company is going blockchain , it doesn’t mean they support cryptocurrencies.

31) Craig Wright had a bitcoin mining company with Dave Kleinman (he died) and on january 1 2020 he claims he will be able to access the 1.1M BTC/BCH/BTG from the mining trust. He may or may not dump them on the market , he also said BTC had a fatal flaw and that by 2019 there will be no more BTC.

32) Hacks in cryptos are very common and usually massive. Billions of dollars in crypto have been stolen in the last 6 years. In may 2019 Binance was hacked and lost 7,000 BTC (and it’s far from being the biggest crypto hack).

33) Bitcoin was first. It's an ancient technology. Newer blockchains have privacy, smart contracts, distributed apps and more.Bitcoin is our future? Was the Model T the future of the automobile? (John Mc Afee)

34) IOTA investiguating stolen funds on mainnet. IOTA shuts down the whole network to deal with trinity wallet attack.


While the native language of the writter is not english , I think you get the point and it doesn't make it any less relevant.
submitted by OverTheRedHills to u/OverTheRedHills [link] [comments]

TOP 20 Reasons Why Cryptocurrencies Are Worthless

https://medium.com/@quizas_869/20-reasons-why-cryptocurrencies-are-worthless-b38f34e4d6b3

1)Private keys are being bruteforced as we speak. Quintillions entries a second. When they’ll have enough bitcoins under control , they can move them all at once instantly.(At least 45,000 ETH are known to have been stolen this way for now through ethereum bandit)SHA 256 is too old , bitcoin is 10 years old , it is not secure enough , quantum computing can break it.
2)It is possible to change the code anytime and change the total supply or anything. DASH did it : they reduced the total supply from 84M to 18.9M a few years ago. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.
3)You can also fork bitcoin anytime and start over the pyramid scheme from 0. (BCH , BSV , BTG , LTC , BCD ETC etc)
4)And that’s if people don’t find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc..
proofs :
“Bitcoin , Coindesk : “The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret”an attacker could have actually used it to create new Bitcoin — above the 21 million hard-cap of coin creation — thereby inflating the supply and devaluing current bitcoins.”
Stellar : “Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed”
Monero : “A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post”
Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.
EOS : “Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX “
Zcash : “Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug” etc..
5)Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.
6)Then miners will be losing millions everyday so they will stop mining , blocks will be so slow , almost no transaction will come though , and bitcoin will probably not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved will crash hard.
7)Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous “parity wallet”
8)It is NOT trustless. you have to trust the wallet you’re using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..
9)Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly every 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.
10)Bitcoin price is artificially inflated by Tether
Other major non-technical problems :
11)It’s an energy waste , an environmental catastrophy
12)The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.
13)Governements will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies. Trump could kill bitcoin with one tweet , force fiat exchanges to cease activity.
14)Most cryptos are scams , the rest are just crazy speculative casino investments
15)Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You’d rather hold a wal mart gift card or even better simply cash.
16)It is pyramidal : early adopters intend to profit massively while last comers get crushed.
17)The very few stores accepting bitcoin always have the real price in the local currency , not in bitcoin. And prices like 0.004563298 BTC are ridiculous !
18)About famous brokers listing bitcoin : they only want to give people an opportunity to short it , and make money on it as brokers do.
19)People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it. The governement the police the taxes etc. Cryptos are so much worse it’s printed out of thin air we could change the algorythm of bitcoin to instantly mint an infinite amount of bitcoin , it is technically possible..
20)Everybody in crypto think they’re smart traders and that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it won’t. The truth is past performance doesn’t indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun.
21)Also BTC went from about $0.003 to the price it is today , so don’t think it’s cheap now.
22)There is no recourse if you’re scammed/hacked/made a mistake in the address etc. No chargebacks
23)In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governements might ban it to prevent fiat inflation to worsen. If prices would rise , whales stuck with cryptos would dump and cause an immediate huge drop.
24) Having to write down the private key somewhere or memorize it is a security flaw ! It’s insane to think a system like this will gain mass adoption.
25) The argument saying governements can not ban it because it is decentralized (like they banned drugs) doesn’t work for cryptos. First , drugs are much harder to find and much more expensive and unsafe because of the ban , and people are willing to take the risk because drugs are probably the best feeling in the world , but cryptos are nothing it’s all virtual. If crypto is banned , value will drop too much , you can’t sell it for fiat without risking jail , and goodluck to find a buyer. Fiat exchanges could close. Banks could terminate every crypto related bank account. And maybe then the mining death spiral would happen and kill all cryptos.
26) Crypto doesn’t exist. It’s all virtual. It’s like buying air. It’s just virtual collectibles generated by a code.
27)The overwhelming majority of crypto holders are buying it because they think they will be able to sell it to a higher price later. This is clearly the greater fool theory.
updating..
submitted by OverTheRedHills to zec [link] [comments]

TOP 20+ Reasons Why Cryptocurrencies Are Worthless

-Private keys are being bruteforced as we speak. Thousands of quadrillions entries a second. When they'll have enough bitcoins under control , they can move them all at once instantly. (At least 45,000 ETH are known to have been stolen this way for now through ethereum bandit) Quantum computing is coming. bitcoin is using SHA 256. It's pretty old , it was already old in 2009 , it will be broken.
-It is possible to change the code of a crypto anytime to change the total supply or anything really. DASH did it : they reduced the total supply to 18.9M from 84M when it wasn't called DASH yet. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.
-You can also fork bitcoin anytime and start over the scheme from 0. (BCH , BSV , BTG , LTC , BCD ETC etc)
-And that's if people don't find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc proofs :
"Coindesk : "The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret"an attacker could have actually used it to create new Bitcoin – above the 21 million hard-cap of coin creation – thereby inflating the supply and devaluing current bitcoins."
Stellar : "Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed"
Monero : "A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post"
Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.
EOS : "Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX "
Zcash : "Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug" etc..
-Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.
Then miners will be losing millions everyday so they will stop mining , blocks will be so slow , almost no transaction will come though , and bitcoin will probably not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved will crash hard.
-Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous "parity wallet"
-It is NOT trustless. you have to trust the wallet you're using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..
-Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.
Other major non-technical problems :
-Bitcoin price is artificially inflated by Tether
-It's an energy waste , an environmental catastrophy
-The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.
-Governements will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies.
-Most cryptos are scams , the rest are just crazy speculative casino investments
-Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You'd rather hold a wal mart gift card or even better simply cash.
-It is pyramidal : early adopters intend to profit massively while last comers get crushed.
-The very few stores accepting bitcoin always have the real price in $ , not in bitcoin.
-About famous brokers listing bitcoin : they only want to give people an opportunity to short it , and make money on it as brokers do.
People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it. The governement the police the taxes etc. Cryptos are so much worse it's printed out of thin air we could change the algorythm of bitcoin to instantly mint an infinite amount of bitcoin , it is technically possible..
-Everybody in crypto think they're smart traders and that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it won't. The truth is past performance doesn't indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun.
-There is no recourse if you're scammed/hacked/made a mistake in the address etc. No chargebacks
-In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governements might ban it to prevent fiat inflation to worsen. If prices would rise , whales stuck with cryptos would dump and cause an immediate huge drop.
submitted by OverTheRedHills to eos [link] [comments]

What's Holding Bitcoin Back

I've previously posted some of my writings here and garnered a positive response. Since then I've abandoned steemit and created a dedicated website dubbed graspbitcoin.tech that ventures to explain how bitcoin will change the world. Included below is the full text of the 3rd article in this series, but there are already a number of other post on my site that go further. This information is geared towards the general public and may seem largely like review to this community.

What’s Holding Bitcoin Back

Money should be a good store of value, medium of exchange, and unit of account. There are a lot of barriers preventing bitcoin’s widespread use by the aforementioned criteria, let’s take a look and see how they might be solved.

Lack of Understanding

Bitcoin is complicated and unfamiliar. This is a huge barrier to entry because people distrust what they don’t understand, and ease-of-use and simplicity is what usually sells a new technology. If you have read this series from the beginning though, you may now see some potential upsides to such a drastically different system than what we are used to. Many resisted smartphones for a time (and a few still do). The benefits have to outweigh the costs of adoption, so we may see niche cases being the early adopters (like citizens of Venezuela or remittances payments). Also, when a new complicated technology rolls around, it sometimes takes a generation before it becomes widespread; young people are particularly adept at adopting new tech.

Volatility

The tendency of bitcoin’s price to change rapidly or unpredictably is what comprises volatility.
When you search for bitcoin you may find that most of the results you get (and the discussions happening on forums) are about it’s price. This is understandable, it has seen some crazy moves both up and down over the years facilitating the potential for huge gains (and huge losses). Still, over time the price certainly is increasing. Unless you bought in a single 2 month period in 2013, holding bitcoin for longer than 2 years at any point in its history would land you in a better position than when you started. And, when viewed on a logarithmic scale (used in long-term stock charts), the trend is quite clear:
(Bitcoin Price 2012-2018, Logarithmic Scale (bitcoincharts.com))
There is a risk/reward to adopting new tech, and this is no exception. But, my goal is absolutely not to “sell” it to you as an investment by any means.

This is not financial advice. We’re simply looking at the pros and cons of this space, and I encourage everyone to do their own research and come to their own conclusions. Never invest anything you aren’t prepared to lose.

This meteoric rising (and crashing) of the “price” (which, I’ll point out, might just as well be considered an exchange rate) understandably makes it pretty difficult to use bitcoin as a currency. If it moves a few percent in a day, and can move a few hundred percent in a month, purchasing a car or a house could cost you significantly more by the time your finished closing. That’s just not viable, and certainly not a good unit of account.
However, I see the volatility in price simply as growing pains. It is the market that dictates the price of bitcoin, quite literally, it’s traded like a stock. This is referred to as speculation (“the purchase of an asset with the hope that it will become more valuable at a future date”). Speculation happens between national currencies already, but they are generally stable in comparison so it’s not lucrative. People are unsure of how this whole bitcoin thing is going to play out. It’s not like anything we’ve ever seen, it’s difficult to understand (and use), and it’s not accepted at every corner store or online business. Many in the space are just here for a quick buck, and they sell it when the price rises to get back “real” money we are used to, that is “stable” in price against other currencies, and can predictably buy goods and services.
The way I see it, all of these will concerns diminish in time.
Though Amazon or Target don’t yet accept bitcoin, Microsoft and Overstock.com do. Some cities and towns across the world are embracing it a lot more than others. It’s not surprising to see San Francisco accommodating the new technology. But, other cities like Portsmouth in New Hampshire with numerous cafes and shops accepting bitcoin (and “Dash coin”) might surprise you. There are maps available to see where crypto-currencies are accepted at locations near you, and the amount of them are increasing, albeit slowly. It’s a bit of a chicken-and-egg situation, but that hasn’t stopped revolutions from happening before.
Consider when cars first came about, roads were dirt and mud which cars didn’t do well with. It took building massive infrastructure before cars could ever become mass-adopted, but we spent the time, money, and effort because we saw the potential advantages. It will be trivial for businesses to accept bitcoin compared with pouring hundreds of millions of dollars in asphalt to connect our world. Other parallels include train tracks, phone lines, electricity lines, communication satellites, etc. Each of these replaced or iterated on previous functional technologies, and required massive upfront costs before the benefits were available. It’s clear now that we made some good choices there but there were doubts at the time.
Despite some pretty major setbacks, bitcoin’s trend is up. Interest is growing and more businesses and individuals are actually using it. But due to the trading mentality, the uncertainty with regulations, uncertainty in the technology itself, uncertainty that the price will not drop, and other factors, emotion and greed encourages people to sell in flocks if the price climbs high enough.
Furthermore, right now with a large enough stack of money one can influence this market in drastic ways, and cries of manipulation of the price are not unfounded. So-called “whales” can buy and sell huge amounts of coins and the price can jump a bit each time. Coupled with uncertainty in the space, and so many “investors” trying to time the markets, we end up with a pretty volatile landscape where the price is not stable. My argument is that this is diminishing as it gains in popularity, and it is gaining value because its utility is growing (see the network effect”) and the utility itself is slowly becoming more apparent.

Volatility is actually decreasing.

Bitcoin Volatility Over Time(bitvol.info)
In the period from 2011 to 2014 bitcoin’s volatility often spikes into the 15% range. But from 2014 to the present, volatility has only just spiked above 7% twice, spending most of it’s time below 5%. Even the large boom and bust in price at the end of 2018 seems tame compared to the early years.
The trends show the price going up over time, and volatility going down. The more actual use the coin has (people saving and buying with bitcoin), the percentage of people entering the space to use it the way it was intended increases, the percentage of “stock traders” declines. And as more capital enters the space, the less influence whales have (because the current against which they swim is getting stronger). And as the price stabilizes, traders will become less interested.
There is a critical point where this becomes a negative feedback loop. I could be wrong, but the idea is at least founded in reality, and it would solve the unit of account issue if the price could stabilize to within a few percent per year.
Similarly, as a store of value, bitcoin becomes more viable in this scenario. This is coupled with the fact that although bitcoin is somewhat inflationary now as the supply is increasing (bitcoins are “discovered” as rewards for mined blocks), the amount of discovered coins are cut in half every few years. This “halving” is logarithmic, meaning eventually the amount of coins discovered is infinitesimally small, and total supply will asymptotically approach 21 million coins (the maximum supply that we will ever see).
This model of supply is actually meant to mimic gold because it’s a well-known store of value and monetary device throughout history (though it is not easily divisible, and not as portable as bitcoin). In both bitcoin and gold, mining is more fruitful in the beginning, and as we extract the low-hanging-fruit, mining requires greater effort and yields less return.
World population is increasing which leads to bitcoin becoming deflationary in the future if demand continues (the supply won’t increase beyond 21 million). And, I argue that it will become more valuable in time due to the network effect as bitcoin use becomes more widespread (the value of being able to exchange with more people anywhere, any time, and without permission from anyone).
This is a positive feedback loop, and shows how bitcoin is deflationary long-term. While deflation is generally considered negative by economists, the main reason is based around debt which isn’t possible in the same way with bitcoin because bitcoins cannot be created out of thin air like fiat currency.
The discussion of deflation vs inflation is an important one, and bitcoin’s monetary policy is an outlier compared with national currencies which are typically inflationary. The US dollar for example averaged 3% inflation since the year 1900. That means that over the last 100 years, a dollar has lost over 95% of its purchasing power. You could buy 95% more stuff with $1,000 last century, or, saving $1,000 from 100 years ago would buy you 95% less stuff at present. Put another way, purchasing power is cut in half after about 25 years, a concern for anyone retiring for over 20 years with a fixed retirement sum.
Some other national currencies have higher inflation rates, and there are numerous cases of inflationary spirals over the years. A few examples include Germany 1923, Hungary 1945, China 1947, Vietnam 1988, Peru 1990, Yugoslavia 1992, Zimbabwe 2008, and right now in Venezuela 2018. Entire countries of people have lost essentially all of their money, and it keeps happening over and over. A wise man would tell you it’s dangerous to say “it could never happen here”.
*UPDATE: Turkey is also now in financial crisis. This is our money with which we hold and exchange value, our earnings, our savings, our livelihoods. Maybe it’s time we had, at least, another option outside of government control. An option that governments can’t destroy through mismanagement. A neutral option that ignores all borders, is open to everyone, and can be accessed anytime from anywhere.

The Fear of “Hacks”

It’s a very real threat to have all your money stolen, if your bank was robbed you are protected by FDIC (in most cases only up to $100,000). The vast majority of coins that have been stolen have come from hackers attacking “exchanges” and getting away with millions. These exchanges are websites where you can trade bitcoin for other crypto-currencies (or “alt-coins”). You can also buy and sell bitcoin on them, and subsequently people end up storing a lot of coins on these exchanges, and the exchanges hold the “private keys” so they can execute trades.
Cryptographic private keys are analogous to a key that opens a door, or, a key that locks a message in a box before it is sent to the recipient. In our case the door opened allows you to sign your message and spend coins, and the message is your transaction on the bitcoin network. Anyone with your private keys can spend your coins. Exchanges are a honey pot of thousands of private keys that represent a lot of money. If a hacker can break into the exchange and steal the keys all at once, their work will pay off.
This is why any crypto guru will advise you not to store large amounts of coins on exchanges, and rather transfer them in your own wallets where you hold the private keys. The mantra is “your keys, your money; not your keys, NOT YOUR MONEY!” Of course your own computer can be hacked, but you are not as big a target as an exchange which may hold vast sums of money. There are also some pretty safe ways to store your coins if done right.
Centralized exchanges are a necessary evil for many people because they facilitate acquiring and trading coins easily. But decentralized exchanges are becoming more common because they allow you to trade while keeping your coins in your control at all times. They need some work and more users, but it’s a promising solution to this problem. Summarizing the above, the big hacks you read about are virtually eliminated if your keys are in your control and you keep them safe.

Fees

Transaction fees are generally negligible in a bitcoin transaction, but in many ways “fees” are holding us back. Interestingly, this is a symptom of being in the very early days.
Firstly, there is a lot of work on “scaling” crypto-currencies (making fees even lower than they already are and increasing transaction speeds). This is just an engineering problem, and many people are working on solving it in many different ways. Other currencies like NANO or IOTA have different underlying tech and have zero fees and instantaneous transactions.
In fact, most fees people encounter aren’t fees from bitcoin transactions; instead, they get hit with fees when exchanging between national currencies and bitcoins. In order to electronically trade USD($), EUR(€), or YEN(¥) with bitcoin, we need to hook into the closed-off for-profit banking network and we need third-parties to do so (and they take their cut).
But even these fees could be avoided in time. For example, you can buy bitcoins with cash directly from a person (localbitoins.com). And, it might seem distant, but in the future you may end up receiving bitcoins as your salary, from a friend, or from accepting them in your place of business. Likewise you can spend your bitcoins directly to other bitcoin users. Getting coins directly eliminates all the exchanging and associated fees because once your money is on the bitcoin network, fees will be negligible (especially as these networks evolve).

Usability

Right now it’s easier than ever to acquire some bitcoin. People can download “Coinbase” or “Square App” on their smartphone and purchase some using a credit card in a few minutes. Depending on which service you use and how much you want to buy, you may need to send a picture of your license for KYC regulations. However, as I mentioned above, there are risks to storing all your coins on exchanges, especially with large amounts. I always recommend transferring them to a wallet where you control the private keys.
But using wallets and storing private keys (and “seeds”) securely, is not as straightforward as we would like. This is a major factor holding back adoption, because if it’s not easy to use, people will consider it too much effort.
The next post in this series digs into wallets and storing your coins.
submitted by mrcoolbp to CryptoTechnology [link] [comments]

19 myths about Bitcoin

19 myths about Bitcoin
Let me clarify common misconceptions about Bitcoin.

Myth # 1. It's just something similar to other virtual currencies, nothing new

All other virtual currencies are controlled by their regulatory center.
This means that:

they can be printed on the subjective whims of the currency regulator;
they could be destroyed by an attack on this regulatory center.;
arbitrary rules can be imposed by the currency regulator.
Bitcoins, being initially a decentralized currency, solve all these problems.

Myth # 2. Bitcoins do not solve any problems that gold and/or Fiat money cannot solve

Unlike gold bitcoins:

easy to carry and store;
easy to authenticate.
Unlike Fiat money, bitcoins:

have predictable and decreasing emissions;
not controlled by any regulatory center.
Unlike Fiat electronic money, bitcoins:

can be anonymous (like cash);
there's no way the accounts can be frozen.

Myth # 3. Bitcoins are secured by CPU time

It is incorrect to say that bitcoins are secured by CPU time. When it is said that a currency is "secured" by something, it is meant to be centrally tied to something at the exchange rate. You can not exchange bitcoins for the computing power spent on their generation (it is too high). In this sense, bitcoins are not secured by anything. This is a self-valuable product. Think, unless gold is provided with something? No, it's just gold. It's the same with bitcoins.

Bitcoin currency is created with the use of processor power: the integrity of the block chain is protected from all sorts of attacks by the existence of a large computer network. That's it.

Myth # 4. Bitcoins are worthless because they are not secured by anything

Gold is not secured by anything, but is used and valued everywhere. See the previous myth.

Myth # 5. The value of bitcoins is based on how much electricity and processing power is required to generate them

This myth is an attempt to apply labor value theory to bitcoins, which is not applicable to them and is probably false. Just because something requires X resources to create doesn't mean that the final product will cost X. it can cost more or less X, depending on the usefulness to users.

In fact, there is a broken causal relationship (this applies to the above theory as a whole). The value of bitcoins is based on how valuable they are. If bitcoins rise in price, more people will try to generate them (because bitcoin generation becomes more profitable), this will increase the difficulty of generating, which in turn only leads to the difficulty of mining them. If bitcoins fall in price, then the reverse process occurs. These processes maintain a balance between the cost of generation and the cost of bitcoins generated.

Myth # 6. Bitcoins have no value of their own (unlike some other things)

Many things have their own value, but it is usually well below the market value of the thing. Consider gold: if it were not used as an inflation-resistant value, and used only for industrial purposes, it would not have today's value, since the industrial need for gold is much lower than it is available.

Historical value has helped establish some things as a means of exchange, but it is certainly not a necessary condition. Perhaps bitcoins will not be used as a raw material for industrial purposes, but they have many other useful qualities that are necessary for the means of exchange.

The value of bitcoins is determined solely by people's desire to trade them - supply and demand.

Myth # 7. Bitcoins are illegal because they are not a legal tender

Short answer: chickens are not a legal tender, but bartering with chickens is not illegal.

There are many currencies that are not legal tender. Currency, after all, is just a convenient unit of account. Although national laws may vary from country to country (you should definitely check the laws of your state), in General - trading with any commodity exchange, including digital goods (e.g.: bitcoins, virtual worlds second Life or WoW game currencies), is not illegal.

Myth # 8. Bitcoins are a form of domestic terrorism because they only harm the economic stability of the state and the state currency

Read the relevant Wikipedia article. Action will not be considered terrorism if it is not violent. Bitcoins are not imposed on anyone with violence, so they are not terrorism.

Also, bitcoins are not "internal". It's a worldwide product. Look at the auto-generated node map.

Myth # 9. Bitcoins will only facilitate tax evasion, which will lead to a possible fall of civilization

It's up to you whether you follow the laws of the country or face the consequences of breaking the laws.

Myth # 10. Bitcoins can print/mint everyone, therefore they're useless

To generate coins requires significant computing power, in addition, over time, all the coins will be generated.

Myth # 11. Bitcoins are useless because they are based on unverified / unproven cryptography

The Sha-256 and ECDSA algorithms that are used in the #Bitcoin program are well-known industrial encryption standards.

Myth # 12. First bitcoin users are unfairly rewarded

The first users were rewarded for taking on a higher risk of losing their time and money.

From a more pragmatic point of view, the term "equity" is a conditional concept, making it unlikely to be agreed upon by a large number of people. Establishing "fairness" is not the goal of the Bitcoin project, as it would be simply impossible.

The vast majority of the 21 million bitcoins still haven't been distributed among people. If you start generating or purchasing bitcoins today, you can become one of the "first users"yourself.

Myth # 13. 21 million coins is not enough, it is not commensurate with the needs of mankind

In fact, the Bitcoin project will exist 2099999997690000 (just over two quadrillions) of the maximum possible indivisible units.

One bitcoin is 100 million (one hundred million) of them. In other words, each bitcoin can be divided into 10^8 parts.

If the value of bitcoins rises too much, then people for convenience can start working with smaller pieces such as Milli-bitcoins (mBTC) and micro-bitcoins (µbtc). However, it is possible and denomination with coefficients 1:10, 1: 100 and so on.

Myth # 14. Bitcoins are stored in wallet files, just copy the wallet and get more coins!

No, Your wallet file contains secret private keys that give you the right to dispose of your bitcoins. Imagine that you have a key issued by your Bank to manage your account. If you give it to someone else, it will not increase the funds in your Bank account. The funds will be spent either by You or by this third party.

Myth # 15. Lost coins cannot be replaced, which is bad

The minimum bitcoin unit is 0.00000001, so this is not a problem. If you lose coins, all other coins will rise in price a little. Consider this a donation to all other bitcoin users.

There is a related question (and the answer to it).

Why is there no mechanism to replace lost coins?
It is impossible to distinguish between the lost coin and the one that is simply not used at the moment and waiting in someone's purse of his time to be useful.

Myth # 16. It's a giant pyramid scheme.

In financial pyramids (see Ponzi scheme and MMM), the founders convince investors that they will be in profit. Bitcoins do not give such guarantees. There is no regulatory center, there is just a group of people who are building a new economy.

However, one should not confuse bitcoins by themselves with various projects on the Internet, which can accept bitcoins as a contribution and be financial pyramids.

Myth # 17. Limited emissions and lost coins generate a deflationary spiral

Both deflationary forces can manifest themselves, and economic factors such as hoarding counteract the human factor, which can reduce the chances of a deflationary spiral.

Myth # 18. The idea of bitcoin may not work because there is no way to control inflation

Inflation is simply an increase in prices over time, which is usually a consequence of currency depreciation. It is a function of supply and demand. Given the fact that the supply of bitcoins is fixed (due to the peculiarities of their issue), unlike Fiat money, the only way out of control of inflation is the disappearance of demand for bitcoins.

It should also be taken into account that bitcoins are a currency with a predictable decentralized issue. If demand falls to almost zero, then bitcoins will be doomed in any case. However, it is unlikely that this can actually happen.

The key point here is that bitcoins cannot be impaired by a sharp increase in inflation by any person, organization or government, since there is no way to increase the supply too much due to the peculiarities of the issue.

In fact, a more likely scenario is an increase in demand for bitcoins due to the growing popularity, which should lead to a constant increase in the exchange rate and deflation.

Myth # 19. Bitcoin community is anarchists, conspiracy theorists, supporters of the gold standard and geeks

Confirm. However, it is necessary to consider that it is only a part of all color of community.
https://preview.redd.it/qkk7hybryqg21.jpg?width=1980&format=pjpg&auto=webp&s=a373d5483cc87c1e2c651ff864fc324273fa3f08
submitted by trip2crypto to u/trip2crypto [link] [comments]

Is Bitcoin in a "deflationary spiral"?

Typically the term is used for the whole economy but the same mechanism might apply to the bitcoin market: 1) Bitcoin exchange rate is rising 2) Bitcoin owners expect it to rise further so defer trading it 3) Shortage of bitcoins causes the exchange rate to rise 4) Rinse and repeat
Is this what is causing bitcoin's meteoric rise?
Edit: One more question. A traditional deflationary spiral goes hand in hand with ever falling production rates. Would the same be happening now to the (black) markets that only trade in bitcoin?
submitted by stenlis to AskEconomics [link] [comments]

Response to Bitcoin=Deflation=Fail

My grandparents emailed me an article in The Atlantic this morning: http://www.theatlantic.com/business/archive/2013/12/why-bitcoin-will-never-be-a-currency-in-2-charts/282364/
It's another attempt to demonstrate that bitcoin = deflation = fail.
Here's my response to them...
Hey Grandparents,
This is what's known as the "deflationary spiral" argument, and has been hurled at Bitcoin advocates since Bitcoin's inception. The argument is that when people expect their money to be worth more tomorrow, they won't spend it today. On the surface, it makes sense. In reality, it's at best entirely exaggerated, and at worst a complete fallacy.
The deflationary spiral argument has been used by inflationistas (people who believe in endless money printing to achieve prosperity) to justify their horrible central planning and monetary debasement. It is the main argument economists use to denounce gold as money (because gold isn't produced at the same rate as economic growth, thus meaning the value of gold may appreciate relative to goods - similar to Bitcoin). Of course, the fact that 19th century America was on a gold standard and saw its strongest period of wealth creation and economic growth ever hasn't seemed to bother gold's detractors.
Fortunately, now that Bitcoin exists, and exhibits not just deflationary tendencies but MASSIVE deflationary tendencies (it's up 10,000% this year, etc), we have an amazing real world laboratory to see if the deflationary spiral truly is as terrible as alleged.
From what I've seen in Bitcoinland, we can debunk it as a myth. People absolutely spend, even when they think the money will be worth more tomorrow. They may spend less... but that is not a bad thing. It means they spend only on the things they really want, instead of rampant consumption. It makes buyers think twice before buying. This is wise and prudent. It encourages saving, and discourages consumption. Indeed in my own experience, I buy things with Bitcoin all the time... and I KNOW it will be worth more in the future. Am I a fool? Or do I merely realize that money is not wealth - that its only value is in exchanging for real wealth. I need to eat. I need a home. I need a car and clothes and some entertainment. These things are wealth, and so I trade bitcoins for them. I'm just more prudent in how I do it.
Detractors would claim that when people are prudent with their own finances, that this is bad for the economy. I believe the opposite - when people are imprudent with finances, that is when the economy suffers. Of course, imprudence means exaggerated spending today, which boosts GDP figures (because GDP is just a measure of spending). This seems to have tricked most modern economists into thinking that consumption is the cause of economic growth. I disagree. Consumption doesn't drive an economy - it is the result of the economy. Consumption is the reward for production and savings.
Besides... if the deflationary spiral was actually a dire runaway phenomenon, then are the detractors saying that Bitcoin will rise in price forever? If so, why aren't they buying some? And if they aren't sure that it will rise forever, then this defeats their argument, because once it is no longer rising, people would be happy to spend it, thus correcting the deflation problem. Examined carefully, one should realize that to the extent the deflationary spiral exists, it is a self-correcting phenomenon (as are most pricing issues in an open market).
And for a final anecdotal nail in the coffin... last year on Bitcoin Black Friday, BitPay (the largest merchant processor for Bitcoin payments) processed 99 orders globally. This year on Bitcoin Black Friday, despite the fact that Bitcoin rose from $13 to $1000, BitPay processed 6,296 orders globally. I have not seen evidence that "deflation" is hampering growth... in fact, quite the opposite.
-Erik
BitPay article: http://www.washingtonpost.com/blogs/the-switch/wp/2013/12/02/black-friday-set-a-record-for-bitcoin-commerce-bitpay-says/
submitted by evoorhees to Bitcoin [link] [comments]

01-30 22:33 - 'So, this doesn't really track. A distributed, decentralized fixed supply currency would have several advantages, chief of which is that world governments can't continue to inflate them at whim, which effectively [robs] the...' by /u/paperraincoat removed from /r/Bitcoin within 0-10min

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So, this doesn't really track. A distributed, decentralized fixed supply currency would have several advantages, chief of which is that world governments can't continue to inflate them at whim, which effectively [robs]1 their populace of purchasing power (taxation without representation).
On the downside, they encourage [hoarding]2 . There was no way to fairly distribute coins here, we still have the vast majority, some 80%+ of coins in the hands of only a few hundred people and exchanges. Ideally we want Bitcoin to go to say, $100k a coin and chill there all cozy, co-existing with fiat, stocks, commodities and the like. If things go to $1,000,000+ a coin where Bitcoin is some financial black hole vacuuming up all the wealth in the world we'd be facing a very strange worldwide [deflationary spiral]3 . You can read up on Japan's woes over the past twenty years trying to get themselves out of a [deflationary economy]4 , it's pretty intense.
I don't want a future where the Winklevii own 15% of the world's wealth and start construction on their own private Death Star.
'''
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Author: paperraincoat
1: *ww*f**bes.com/s*te*/bil*fl*x/2011/03/03/*ou-*all*it-*nfla*i*n-i-*a*l-*t-*he*t* 2: steemit.*om/m*ne**@calab*r24p/*un*ing*ec**o*i*s-o*f-a-fixed*cu*re*cy-s**pl*-is-a-*e***b*e-*dea-h*re-s-why 3: *n.bitcoi*.**/*i*i/De*lationary***iral 4: www.***r.org*papers/w10*7*
Unknown links are censored to prevent spreading illicit content.
submitted by removalbot to removalbot [link] [comments]

Of Wolves and Weasels - Day 187 - Guest Post: Confessions of a Bitcoiner

Hey all! GoodShibe... on Summer Vacation!
Please enjoy this post by Guest Writer Justlite and tip them well ;D)
Note: To tip them directly:
+dogetipbot @Justlite xxx doge verify
I've been part of this Dogecoin community since early January and I have to say the people here constantly amaze me. For me Dogecoin and this community is the future of cryptocurrency and I'm speaking as a long time Bitcoiner. Over a month ago I explained in a previous post why I believe Dogecoin price will rise again and correctly predicted Bitcoin to rise substantially shortly after my post against in the face of several counter arguments late last year. My thoughts have not changed on Dogecoin but I feel it's worth giving my experience on cryptocurrencies as a Bitcoiner in the early days of 2010-13 and how that compares with Dogecoin.
I bought Bitcoin and Litecoin in the early days and I can tell you the Bitcoin community back then was hopeful, cheerful and very welcoming...forgive us right now we are at the fighting stage with the established status quo wants to knock Bitcoin down.
In the early days we were only known for CPU/GPU mining discussions and tipping one another after each comment. In fact Bitcoin was only ever used to tip and trade but not to buy anything since we didn't have anything available for Bitcoin. We were very brave I mean wiring money to a company in Japan and getting these online things called Bitcoin which doesn't buy anything?!
Back then Bitcoin fans were seen as weird and Bitcoin as a complete joke we were idealist and we still are. Many of the people that fought us then were actually the libertarian precious metals community and because gold and silver were tangible and has been money for 5000 years Bitcoin wasn't and was barely a year old. It's hard to argue with them, after all some guy that called himself Satoshi Nakamoto, the Japanese equivalent of Jack Smith, created it but left after a year and no one saw how he looks like.
We could understand their concerns, a lot of early Bitcoiners like me also have gold and silver in the belief it will protect our wealth from the next financial collapse. But Bitcoin was created for this purpose too, no more will the 1% have economic power over the 99%, "1 CPU - 1 vote" said Satoshi in his white paper. We are also in the digital era and with all the success the internet is nowadays there still was no internet currency without the excessive charges of credit card companies.
Bitcoin changed all that it wasn't just an internet currency it was hoping to be money on every platform in every country, person to person, in at least 10 minutes between any country in any amount for free! Fast forward to present day and we are starting to see that.
Of course we have had many setbacks on the way, such as exchanges being hacked, wallets stolen. We weren't so security conscious back then and we learned the hard way.
Then we grew in price and popularity and quite recently the government fought us when our dark market Silk Road was shut down by the Feds. We have had 4 price bubbles a lot of sleepless nights I've personally ploughed in tens of thousands of dollars lost a lot of Bitcoins on the way (and also lost 15000 Litecoins) and forced to read articles with declarations of "Bitcoin is dead" after each major price drop.
Sound familiar?
"History doesn't repeat it self but it does rhyme" Mark Twain
That's all part of the growing pains of a disruptive idea.
Dogecoin, by comparison, has a whole economy after just 7 months of inception! It's remarkable as I am also a big Litecoin fan and even that community isn't as productive as this. People talk about Dogecoin's PR as it being behind its popularity but I honestly believe there is no intentional PR, I mean where is the PR team?
I believe it was a combination of a friendly meme encouraging positive kind people, a internet currency that's easily explainable to anyone, a very mineable coin using your PC/laptop so everyone can get involved in and great online platform such as Reddit to connect like minded users together and everything just snowballed from there.
Now Dogecoin is one of the most productive coins out there with several client and core devs, hundreds of retailers, apps, doge specific websites, blogs and charity fundraisers. That's why I believe Dogecoin is undervalued right now.
This doesn't mean you should put your life savings into Dogecoin or other cryptocurrencies as they are still a risk and early stage technology. Just buy with what you can afford to lose!
So where is Dogecoin heading? - The analysis
As long as we still use doge for goods and services and keep the positivity going then I can only see the price of doge going higher and reaching all time highs without the need for manipulation. Over what time frame?
Like Bitcoin it won't be overnight and granted there's no supply limit so it will never reach tens or hundreds of dollars but we don't need it to. I honestly want Dogecoin to be a currency and I personally like having whole doges. Ideally I would hope that 1 or even 10 doge will buy 1 loaf of bread or 1 litre of milk at my local grocery store some day.
Supply vs Demand
As I mentioned before the supply coming to the exchanges from multipools has been immense - it is thought about 160 million doge a day is being mined and sold on exchanges just from miners. This not only exerts a lot of selling pressure but it also encourages weak hands to sell forcing the price down further it's a downward spiral which we have been seeing.
Any other coin would have collapsed long ago but doge is no ordinary coin. After the next two halvings in October time it will be down to 40 million a day and low enough to allow for natural demand to outpace the supply causing the price to increase steadily which will give momentum and may then lead to a new all time high and the second bubble.
Network Hashrate
I'm of the belief that ASICs are a necessary evolution in cryptocurrencies by making a coin secure which will attract investment/adoption and environmentally friendly. With scrypt ASICs large and small coming online the network hashrate has more than doubled in the last 2 months from 40 GH/s to 90 GH/s and while we tend to see a jump in hashrate just before a halvening I attribute this rise to small miners also buying ASICs and a lack of more profitable altcoins. Again that's great for the stability of our coin and this will provide further confidence that Dogecoin is a good crypto to buy/adopt/invest.
Deflationary Inflation
Sounds confusing so let me explain unlike Bitcoin where there will only be 21 million coins mined, Dogecoin will reach 100 billion coins mined after block 600k and then see 5.25 billion coins mined each year forever which works out as 5.25% inflation in the first year and then 4.99% in the second year and so on.
While this may seem a lot I have come to the conclusion that it may be a blessing for Dogecoin as it is thought that 5 billion coins per year would be lost permanently anyway so this will 5.25billion coins would replace the lost coins. The extra 5.25 billion coins per year would be enough to incentivise miners to continue mining doge (which would hopefully be at a high enough price after the 600k block reward) and securing our network.
Because Bitcoin has a cap it is seen as a store of value like gold whereas Dogecoin has a infinite supply but at a predictably low yearly increase in fact from 2015 to 2020 Dogecoin will have less yearly inflation than Bitcoin. This can actually encourage people to treat Dogecoin as a true currency to buy everyday items with than as a store of value. I believe that is what Satoshi envisioned Bitcoin to be.
What are the whales doing?
The top 20 dogecoin addresses which account for 40% of all mined Dogecoin out there haven't sold any of their DOGEs.
The whales with large wallets have not sold their DOGE over the course of the last 4 months but the smaller wallets have! Why? The whales are happy to see their DOGE go to zero if they thought it was dying or they have been there and done that and know that perhaps Dogecoin is heading up? I can tell you I have no intention of selling my DOGEs as I believe interesting times are ahead.
The Bitcoin Effect
Bitcoin has paved the way for a crypto to go from $0.0001 to $1000+ and brought technological development, liberty and a sense of community all in a 5 year timespan.
While only $0.00023 Dogecoin has got an ecosystem, a following, funded several charity efforts and a burgeoning economy after only 7 months thanks in part to the network effect of Bitcoin and the rest down to you.
All I can say to you all is well done to all of you for being such a positive and productive community. Keep using Dogecoin and check the links at the side bar such as dogedoor.net and suchlist.com so that you can spend, buy, tip and mine doge and spread the word.
Now let's go to the moon!
TL;DR - Bitcoin had it's ups and downs and not short of haters over the years. Dogecoin is following the same path but in a shorter time frame. After the next 2 halvings Dogecoin price should be rising and adoption will speed up again which will make it a true currency so keep buying using and tipping doge wherever you can.
It's 8:09AM EST and we've found 87.24% of our initial 100 Billion DOGEs -- only 12.76% remains until our period of Hyper-inflation ends! Our Global Hashrate is up from ~76 to ~92 Gigahashes per second and our Difficulty is up from ~1196 to ~1351.
I Hope you enjoyed today's Guest Post by Justlite!
Note: To tip them directly:
+dogetipbot @Justlite xxx doge verify
GoodShibe
submitted by GoodShibe to dogecoin [link] [comments]

Krugman, trolls: to support your claim of deflation being bad in the context of bitcoin, please explain how we will see deflationary spirals like the Great Depression or 90s Japan if there is no bitcoin-denominated debt/wages/prices? If you don't, then stop using it as a handwaving argument plz thx.

Beyond using "deflation" as a simple boogeyman, I've never heard someone explain why this would be a systemically catastrophic as it has been in well known cases (US Great Depression, Japan's Lost Decade, etc.).
In those well-known cases the main problem, basically, was the deflationary spiral caused by the real value of the debt increasing, thus exacerbating the vicious cycle of lower output leading to lower wages, lower investment, lower spending, lower output, etc.
However, how does this apply to Bitcoin?
  1. How much debt is there denominated in bitcoins? Almost none.
  2. How many people have their wages denominated in bitcoin (not just paid in bitcoin, but set in bitcoin)? Almost none, and even if some do, it's probably readjusted to the dollar exchange rate every month or two or three.
  3. How many people set prices for their products in bitcoins? Besides the Bitcoin Trezor pre-order experiment, almost none, unless it's a trivial amount (for example, the price of embedding a hash of a document in the blockchain at www.proofofexistence.com) or temporary (for example, a price for a drink special at happy hour, as was the case in Miami yesterday).
"That describes the current state of the 'Bitcoin economy'", the skeptic/critic might say, "what about the future? One day there might be a lot of bitcoin-denominated debt, what then when those people can't pay it back when the value of the currency deflates?"
It's not that simple; the world is dynamic so we can't just imagine that suddenly people have bitcoin-denominated debt-- they actually have to take it on. Will they?
As our esteemed sage says in page 410 of his book Economics (Krugman, Wells, 2006), there's a difference between expected and unexpected deflation. He mentions it in the context of a liquidity trap and the inability of monetary policy to stimulate the economy due to the fact that nominal interest rates are zero bound (they can't go below zero). However, I'll use the distinction in the context of bitcoin to argue that we might never see a significant amount of lending denominated in bitcoin because agents expect deflation. Thus in only the most extreme cases, where a borrower knows that the investment they seek to finance is guaranteed to have a healthy ROI in bitcoin, will that borrower take out a loan in bitcoin at a >0% rate.
Now, perhaps these skeptics/critics might say they actually want a world with high amounts of debt, not low-debt as I've described. Fine, I'll concede that mass adoption of bitcoin as a currency might reduce the level of debt in society. (Though, I'll be happy to take that to the masses and see which side of the more-debt/less-debt argument most people fall under.)
But what I don't think they can casually say is that bitcoin adoption will lead to deflationary spirals. I'm all ears, though, if you have a more drawn out argument.
tl;dr Deflation was bad in during the Great Depression and Japan in the 1990's mainly because it was unexpected and, most importantly, debt was denominated in dollars and yen (respectively) and created a deflationary spiral. I reject the handwaving argument that "bitcoin is bad because it's deflationary", if critics/skeptics don't acknowledge that we are unlikely to see much if any bitcoin-denominated debt (nor bitcoin-denominated wages/prices.)
submitted by iwantathink to Bitcoin [link] [comments]

Is nobody really worried about long term negative affects of current Bitcoin deflationary cycle?

In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it.
Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising.
The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed.
https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a
https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l
It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy.
The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play.
And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit.
I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them.
Thoughts, comments? Feel free to tell me why I'm wrong.
submitted by AnythingForSuccess to Bitcoin [link] [comments]

"Bitcoin's destiny is to fail" - article on a spanish newspaper

Link to original article in Spanish
(Note: not my opinion, just thought the article has an interesting point of view.)
Bitcoin is destined to fail
The degree of acceptability of the currency in question depends on the ability of the issuer to achieve (violently or peacefully) its use
All you have to do is look around: how many experiences of currencies issued and regulated solely by the private sector have triumphed? Very easy: none
by Eduardo Garzón Espinosa - Economist and member of IU
12/17/2017 - 8:21 PM
80% of Wall Street economists believe that bitcoin is "bubble", says CNBC Every time there is more talk about cryptocurrencies, and especially the most famous and used of all: the bitcoin. These types of currencies, created from the private sector, are essentially characterized by being digital and by being governed by a complex computer software that connects all its users in such a way that a distributed accounting model is originated for each transaction. The way to issue new currency is carried out through the resolution of a computer algorithm that is increasingly becoming more complex and in which any user can participate. In the case of bitcoin, the issuance of the currency is limited to a maximum of 21 million units.
Bitcoin was created in 2009, in the midst of the global economic crisis, and since then its use has been increasing. Used at first in very few regions and only in certain economic sectors, it has been increasingly extended to reach new countries and new economic branches. And, although today it is still a currency with a marginal use worldwide, it draws a lot of attention the importance that has reached a currency created by the private sector, since it has registered a success that has no comparison in history.
The advantages of using bitcoin for the user are several, but without doubt highlight 1) the use of a payment system outside the banking system and 2) the exemption in the payment of taxes. When transactions are carried out through a system that is out of sight of the tax authorities, it is impossible for them to claim the payment of taxes. This opacity is being used not only to evade taxes but to carry out illegal activities knowing that hardly any authority will find out what is happening. It is the perfect currency for economic liberalism: the public sector does not intervene either in its creation or in its regulation, so that any person can carry out their transactions without the need to render accounts to the Treasury or the Justice.
However, there are many reasons that lead to think that this experiment will not have a long way. After all, and as Hyman Minsky explained, everyone can create money, the problem is that it is accepted. And the degree of acceptability of the currency in question depends on the ability of the issuer to achieve (violently or peacefully) its use. That is, the more power the issuer has to get its currency used, the more robust it will be. That is why the most solid and used currency is the one that emits the most powerful State on the planet (in military, economic, technological and cultural terms) that is able to impose even by force its use: the dollar1. And that is also why the Venezuelan bolivar is left aside for a good part of the country: because the State of Venezuela is not capable of imposing its widespread use.
And what ability do bitcoin issuers have to make their currency widely used? Very little, considering that there is not even a single emitter, but that any user can (after a complicated and prolonged process) create new bitcoins. None of them-not even the company responsible for software-has the capacity to forcefully force people to use the currency. Today people use bitcoin because at the moment it seems to have utility and robustness, but that belief can be broken at any time because there is no powerful agent supporting the issuance of this cryptocurrency.
All you have to do is look around: how many experiences of currencies issued and regulated solely by the private sector have triumphed? Very easy: none. The case of the social currencies supposes a crystalline example: the only ones that have been successful have been those that have been endorsed by some type of public administration. As in Bristol, where the City Council supports the issue of social currency and gives confidence. People tend to distrust the "little papers" that a private company or association creates. On the other hand, when those same pieces of paper include the logo of a town hall or of a State, their degree of trust skyrockets. People know that public administrations are not an invention of a day and that they enjoy much greater solidity and stability than any private company. States rarely break, and even if they do, they do not cease to exist. The same does not happen with private companies.
The loss of confidence in the cryptocurrency can occur for many reasons, but there is a threat that stands out in front of all: the possibility of being persecuted by the authorities. For the time being Bitcoin does little damage to state farms, but as its use continues to spread, States sooner or later will begin to strongly regulate their use, even reaching the point of even prohibiting it, as is already happening in China. Needless to say that if this happened, the bitcoin boom would stop and it would only have to go back until it could even disappear.
To this we must add another non-negligible limitation: only 21 million bitcoins can be created. This is simply the result of a design devoid of economic sense, since an economy needs as much money as activities occur within it. If transactions in bitcoins continue to increase but the amount of currency stops doing so because it has a maximum limit, it will tend to suffer deflationary tensions. That is, each bitcoin will be revalued too much and the prices of the products nominated in that currency will fall, which is not at all positive for economic activity.
This is not all: the production of bitcoins consumes an exorbitant amount of energy. The methods of creation and operation of cryptocurrencies are purely electronic and require the use of countless computers around the world, which means a very high energy consumption. According to the studies of Power Compare, the international production of bitcoins consumes 29 terawatt-hours, equivalent to 0.13% of the energy needs of the entire planet (the consumption of 159 countries). And this trend does not stop increasing. A waste of energy in every rule, taking into account that conventional methods of creating money hardly require energy consumption.
And there is more: the development of quantum computers endangers the security of the storage and use of bitcoins. The cryptocurrencies have important security features that prevent them from being stolen or copied thanks to a series of cryptographic protocols that are difficult to decipher with current computer technology. However, it is estimated that the enormous computational power that quantum computers will acquire by 2027 will allow us to easily solve these security crossroads. And the first computers of this type are already in development.
Finally, as if it were not enough with weaknesses and threats of a structural nature, another one of a conjunctural nature has recently been added: the generation of a speculative bubble. Today, a lot of people buy bitcoins to sell at a more expensive price, making a quick profit on the road. The inflationary spiral is notorious: while in 2010 a bitcoin could be exchanged for 0.05 dollars, currently it can be done for more than 16,000. And we already know perfectly well what happens with the bubbles: that at some point they explode and all the artifice goes to hell.
submitted by ososxe to Bitcoin [link] [comments]

FAQ about Bitcoin(2)

FAQ about Bitcoin(2)
www.fmz.com
Legal
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions (such as Argentina and Russia) severely restrict or ban foreign currencies. Other jurisdictions (such as Thailand) may limit the licensing of certain entities such as Bitcoin exchanges.
Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system. For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Is Bitcoin useful for illegal activities?
Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.
Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures.
Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established. The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted. In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.
Can Bitcoin be regulated? FMZ
The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions. However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world.
It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country. Bitcoin use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban Bitcoin would prevent domestic businesses and markets from developing, shifting innovation to other countries. The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.
What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
What about Bitcoin and consumer protection?
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in a recourse against businesses with fraudulent practices.
It is also worth noting that while merchants usually depend on their public reputation to remain in business and pay their employees, they don't have access to the same level of information when dealing with new consumers. The way Bitcoin works allows both individuals and businesses to be protected against fraudulent chargebacks while giving the choice to the consumer to ask for more protection when they are not willing to trust a particular merchant.
Economy
How are bitcoins created? FMZ
New bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Why do bitcoins have value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
What determines bitcoin’s price?
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
Bitcoin price over time:

www.fmz.com
Can bitcoins become worthless?
Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing currencies, political issues and so on. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
Is Bitcoin a bubble? FMZ
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
Is Bitcoin a Ponzi scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.
Doesn't Bitcoin unfairly benefit early adopters?
Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they became valuable or bought only small amounts and didn't make huge gains. There is no guarantee that the price of a bitcoin will increase or drop. This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Bitcoin is still in its infancy, and it has been designed with a very long-term view; it is hard to imagine how it could be less biased towards early adopters, and today's users may or may not be the early adopters of tomorrow.
Won't the finite amount of bitcoins be a limitation?
Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases.
Won't Bitcoin fall in a deflationary spiral?FMZ
The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression.
Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same.
Isn't speculation and volatility a problem for Bitcoin?
This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability.
Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited.
What if someone bought up all the existing bitcoins? FMZ
Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
What if someone creates a better digital currency?
That can happen. For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
to be continued. FMZ
submitted by Ruby-Yao to u/Ruby-Yao [link] [comments]

FAQ about Bitcoin(2)

FAQ about Bitcoin(2)
www.fmz.com
Legal
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions (such as Argentina and Russia) severely restrict or ban foreign currencies. Other jurisdictions (such as Thailand) may limit the licensing of certain entities such as Bitcoin exchanges.
Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system. For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Is Bitcoin useful for illegal activities?
Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.
Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures.
Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established. The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted. In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.
Can Bitcoin be regulated? FMZ
The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions. However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world.
It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country. Bitcoin use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban Bitcoin would prevent domestic businesses and markets from developing, shifting innovation to other countries. The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.
What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
What about Bitcoin and consumer protection?
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in a recourse against businesses with fraudulent practices.
It is also worth noting that while merchants usually depend on their public reputation to remain in business and pay their employees, they don't have access to the same level of information when dealing with new consumers. The way Bitcoin works allows both individuals and businesses to be protected against fraudulent chargebacks while giving the choice to the consumer to ask for more protection when they are not willing to trust a particular merchant.
Economy
How are bitcoins created? FMZ
New bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Why do bitcoins have value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
What determines bitcoin’s price?
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
Bitcoin price over time:
www.fmz.com
Can bitcoins become worthless?
Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing currencies, political issues and so on. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
Is Bitcoin a bubble? FMZ
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
Is Bitcoin a Ponzi scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.
Doesn't Bitcoin unfairly benefit early adopters?
Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they became valuable or bought only small amounts and didn't make huge gains. There is no guarantee that the price of a bitcoin will increase or drop. This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Bitcoin is still in its infancy, and it has been designed with a very long-term view; it is hard to imagine how it could be less biased towards early adopters, and today's users may or may not be the early adopters of tomorrow.
Won't the finite amount of bitcoins be a limitation?
Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases.
Won't Bitcoin fall in a deflationary spiral?FMZ
The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression.
Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same.
Isn't speculation and volatility a problem for Bitcoin?
This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability.
Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited.
What if someone bought up all the existing bitcoins? FMZ
Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
What if someone creates a better digital currency?
That can happen. For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
to be continued. FMZ
submitted by FmzQuant to u/FmzQuant [link] [comments]

FAQ about Bitcoin(2)

FAQ about Bitcoin(2)
www.fmz.com
Legal
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions (such as Argentina and Russia) severely restrict or ban foreign currencies. Other jurisdictions (such as Thailand) may limit the licensing of certain entities such as Bitcoin exchanges.
Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system. For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Is Bitcoin useful for illegal activities?
Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.
Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures.
Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established. The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted. In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.
Can Bitcoin be regulated? FMZ
The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions. However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world.
It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country. Bitcoin use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban Bitcoin would prevent domestic businesses and markets from developing, shifting innovation to other countries. The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.
What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
What about Bitcoin and consumer protection?
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in a recourse against businesses with fraudulent practices.
It is also worth noting that while merchants usually depend on their public reputation to remain in business and pay their employees, they don't have access to the same level of information when dealing with new consumers. The way Bitcoin works allows both individuals and businesses to be protected against fraudulent chargebacks while giving the choice to the consumer to ask for more protection when they are not willing to trust a particular merchant.
Economy
How are bitcoins created? FMZ
New bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Why do bitcoins have value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
What determines bitcoin’s price?
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
Bitcoin price over time:

Can bitcoins become worthless?
Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing currencies, political issues and so on. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
Is Bitcoin a bubble? FMZ
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
Is Bitcoin a Ponzi scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.
Doesn't Bitcoin unfairly benefit early adopters?
Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they became valuable or bought only small amounts and didn't make huge gains. There is no guarantee that the price of a bitcoin will increase or drop. This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Bitcoin is still in its infancy, and it has been designed with a very long-term view; it is hard to imagine how it could be less biased towards early adopters, and today's users may or may not be the early adopters of tomorrow.
Won't the finite amount of bitcoins be a limitation?
Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases.
Won't Bitcoin fall in a deflationary spiral?FMZ
The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression.
Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same.
Isn't speculation and volatility a problem for Bitcoin?
This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability.
Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited.
What if someone bought up all the existing bitcoins? FMZ
Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
What if someone creates a better digital currency?
That can happen. For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
to be continued. FMZ
submitted by FmzQuant to u/FmzQuant [link] [comments]

Bitcoin is in a deflationary spiral and its bad for long term

In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it.
Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising.
The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed.
https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a
https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l
It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy.
The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play.
And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit.
I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them.
Thoughts, comments? Feel free to tell me why I'm wrong.
submitted by AnythingForSuccess to BitcoinMarkets [link] [comments]

Is nobody really worried about long term negative affects of current Bitcoin deflationary cycle?

In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it.
Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising.
The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed.
https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a
https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l
It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy.
The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play.
And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit.
I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them.
Thoughts, comments? Feel free to tell me why I'm wrong.
submitted by AnythingForSuccess to btc [link] [comments]

Re: Hoarding. Real-world behavior opposite of what economists say happens.

"Groynom hasn’t used Bitcoin since 2014 due to the price drop, but plans to save her stash until the price rises. "
http://www.marketplace.org/2016/01/07/business/shine-digital-currency-bitcoin-boulevard
Economists say the exchange rate rising causes people to hoard. And hoarding cause a deflationary spiral, they claim. This lady says for her a rising exchange is the trigger for her spending.
So is the tendency to spend when experiencing a wealth effect stronger than the tendency to hoard an inflating asset?
submitted by sgornick to btc [link] [comments]

Andreas Antonopoulos discusses "deflationary economics" in "Mastering Bitcoin"

Deflationary Money
The most important and debated consequence of a fixed and diminishing monetary issuance is that the currency will tend to be inherently deflationary. Deflation is the phenomenon of appreciation of value due to a mismatch in supply and demand that drives up the value (and exchange rate) of a currency. The opposite of inflation, price deflation means that the money has more purchasing power over time. Many economists argue that a deflationary economy is a disaster that should be avoided at all costs. That is because in a period of rapid deflation, people tend to hoard money instead of spending it, hoping that prices will fall. Such a phenomenon unfolded during Japan’s “Lost Decade,” when a complete collapse of demand pushed the currency into a deflationary spiral.
Bitcoin experts argue that deflation is not bad per se. Rather, deflation is associated with a collapse in demand because that is the only example of deflation we have to study. In a fiat currency with the possibility of unlimited printing, it is very difficult to enter a deflationary spiral unless there is a complete collapse in demand and an unwillingness to print money. Deflation in bitcoin is not caused by a collapse in demand, but by a predictably constrained supply.
In practice, it has become evident that the hoarding instinct caused by a deflationary currency can be overcome by discounting from vendors, until the discount overcomes the hoarding instinct of the buyer. Because the seller is also motivated to hoard, the discount becomes the equilibrium price at which the two hoarding instincts are match‐ ed. With discounts of 30% on the bitcoin price, most bitcoin retailers are not experi‐ encing difficulty overcoming the hoarding instinct and generating revenue. It remains to be seen whether the deflationary aspect of the currency is really a problem when it is not driven by rapid economic retraction.
This comes from pg 176 (I must hate Bitcoin so much I'll spend money and time on it! Wait....)
I will not frame this with an opinion - as it seems to make certain groups feel like they're being attacked - just presenting what was written.
submitted by AussieCryptoCurrency to Buttcoin [link] [comments]

WARNING! Dollar’s Death Spiral Has Only JUST BEGUN! The Great Deflation Hoax. Is Bitcoin deflationary? 5/18/2020 #BITCOIN ZAP — 630,868 Keiser Report  A Deflationary Spiral  E1534

Next, let’s look at why bitcoin is deflationary. To explain it we have to look at two things: Money supply and economic activity. The first is easy. Since bitcoin’s money supply algorithm is determined in its code, it is known to all and not subject to change (learn more here). This is one of the core principles of the bitcoin network: Deflationary spiral is an economic argument that proposes that runaway deflation can eventually lead to the collapse of the currency given certain conditions and constraints. It is a common criticism made against the viability of Bitcoin. The ‘deflationary spiral’ is a real condition that affects the popular fractional reserve backing system. A particular argument you hear repeated ad nauseum is that Bitcoin’s limited supply will produce a deflationary spiral. Now there are two forms of the deflationary spiral argument: A more intellectually serious form involving a hypothetical sudden collapse of aggregate demand coupled with sticky wages and an ill informed caricature of the Deflationary spiral occurs when the value of currency is relatively decreasing and people have an incentive to hoard the currency because they hope the value will increase further in the future. As a result, the amount of currency available in the market decreases and as people continue to hoard the currency, it can lead to economic depression. Because Bitcoin is a deflationary currency, you should expect it to only increase in value; especially because the rest of the world practices inflation. This is a reality I don’t ever expect to

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WARNING! Dollar’s Death Spiral Has Only JUST BEGUN!

A Deflationary Spiral - Keiser Report April 30, 2020 RT - Keiser Report In this episode of Keiser Report, Max and Stacy look at bond investors finally starting to debate whether the U.S. is ... The United States Dollar begins it’s DEATH SPIRAL & some of the world’s elite are looking to BITCOIN! Assets far & wide are backed by USD greenbacks and as investors look to secure their ... In the second half, Max interviews Samson Mow about the upcoming hardening of money as bitcoin experiences a halvening whereby the rewards per block gets cut in half. They also discuss privacy in ... He is the author of two books: “Mastering Bitcoin,” published by O’Reilly Media and considered the best technical guide to bitcoin; “The Internet of Money,” a book about why bitcoin matters. Let's compare the difference between Fiat currency which is issued by governments and their Central Banks vs Bitcoin. One is inflationary and the other deflationary. Watch this explainer video to ...

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