Topic: Bitcoin and Cryptocurrency

[Sangria]

They created a pool of 21 million bitcoin that has to be mined. It gets progressively more difficult to mine over time. Once the 21 million is mined, its mined  No adding extra to the pool and diluting its value as happens with fiat.

Wouldn't a fixed amount of currency run into the same problems as the Gold Standard?

[Gnurglan]

Wouldn't a fixed amount of currency run into the same problems as the Gold Standard?

Wasn't the problem with the gold standard that people tried to bend the rules? There was a fixed rate, but the amount of gold backing it all was unknown.

If you had one ounce of gold, you could turn that in and get say 35 USD for it. And you could buy an ounce of gold for the 35 USD. Then people started to run the printing press and circulated more USD, but the rate was kept the same. Basically, the US claimed to have more gold than it did. France called the bluff and said 'here's your USD, now we want to get our gold for it'. The US wouldn't part with the gold and the system broke.

If you keep the number of Bitcoins the same, but stay away from a fixed rate that could solve the problem. In theory, if you print more USD you'd have to use more to get a Bitcoin. I just don't think countries would allow Bitcoin to be the new world currency and I think people put way too much faith in Bitcoin as a store of value. It's based on a few years of hype. If you give me a Bitcoin or the equivalent amount of money in a piece of gold jewellery, I know which one I'd bet on to keep its value 50 years from now. It's not the Bitcoin. If Bitcoin works and becomes a success, I'd lose out on the increase in value, but I'd still be able to use gold in some form. If Bitcoin fails, I'd have nothing.

[Alan_X]

Wasn't the problem with the gold standard that people tried to bend the rules? There was a fixed rate, but the amount of gold backing it all was unknown.

If you had one ounce of gold, you could turn that in and get say 35 USD for it. And you could buy an ounce of gold for the 35 USD. Then people started to run the printing press and circulated more USD, but the rate was kept the same. Basically, the US claimed to have more gold than it did. France called the bluff and said 'here's your USD, now we want to get our gold for it'. The US wouldn't part with the gold and the system broke.

If you keep the number of Bitcoins the same, but stay away from a fixed rate that could solve the problem. In theory, if you print more USD you'd have to use more to get a Bitcoin. I just don't think countries would allow Bitcoin to be the new world currency and I think people put way too much faith in Bitcoin as a store of value. It's based on a few years of hype. If you give me a Bitcoin or the equivalent amount of money in a piece of gold jewellery, I know which one I'd bet on to keep its value 50 years from now. It's not the Bitcoin. If Bitcoin works and becomes a success, I'd lose out on the increase in value, but I'd still be able to use gold in some form. If Bitcoin fails, I'd have nothing.

The US broke with the Gold Standard to get out of the Great Depression.

[Sangria]

How does any currency based on a fixed amount of currency deal with a growing population? This is especially acute with gold, as there is only a small amount above ground, but Britain had this problem with silver as well in the 18th century. If the fixed currency goes abroad to pay for imports, how do you facilitate internal trade? If you only have a fixed amount of currency, what happens when the population grows?

[Gnurglan]

The US broke with the Gold Standard to get out of the Great Depression.

True. Nixon broke the Bretton Woods, the last time gold was the anchor.

[Gnurglan]

How does any currency based on a fixed amount of currency deal with a growing population? This is especially acute with gold, as there is only a small amount above ground, but Britain had this problem with silver as well in the 18th century. If the fixed currency goes abroad to pay for imports, how do you facilitate internal trade? If you only have a fixed amount of currency, what happens when the population grows?

Let's assume people trade with gold as the currency. Let's say there are 100 coins in circulation and a population of 100 and then the population grows to 200, the purchasing power would double for every gold coin. If the population stays at 100 but someone finds gold to make 100 new coins, you'd have inflation and the purchasing power of each coin would be cut in half. In a simple, transparent system, this would happen over time.

If you have a shortage of gold, you could try and use silver for trade instead. If you run out of silver, you could turn to cupper. Or you could do what FDR did in the 1930s. He collected gold to $20 per ounce and sold it back for $35. So he devalued the dollar. But knowing this, it's easy to see that if Bitcoin became a threat to the USD as some sort of world currency, it could be banned, just like FDR banned people from owning gold.

[deano2727]

Bitcoin is on fire. $12,257.00 at time of posting.

Whatever your opinion on it as a currency, this year and next year will prove to be a massive opportunity for wealth building through cryptocurrencies and Crypto utility tokens. There is a halving coming up next year for Bitcoin, which historically has led to big price jumps. Institutional money is coming in and institutes are starting to get firmly involved with Crypto and Blockchain and on top of that projects are further ahead now than what they were the last bull run.

[LiverBirdKop]

So if one wanted to buy crypto in large amounts. Say $50-$80k for example. Where would one go?

[plura]

So if one wanted to buy crypto in large amounts. Say $50-$80k for example. Where would one go?

Depends where you live. If in the UK you have Coinbase of course which is legit. Binance Jersey allows for Fiat deposits too and have GBP trading pairs. It's easy to register (some KYC elements is necessary) you then deposit via a bank transfer which takes 1-2 days and then you buy either BTC, ETH, LTC, or other. There is Coinbase Pro too which doesn't take out as big trading / conversion fees like everyday Coinbase.

The question is which crypto do you want to buy? If BTC or ETH then the two above works easily for that. If it's some more obscure 'altcoin' you need to probably register at either Binance (not Binance Jersey) or another altcoin crypto exchange at some point.

[Jake]

Its been years and I still don't understand bitcoin and all that other stuff.

If I made 21 million personalised Jake pogs, and distributed them around the world based on who could burn the most electricity for no fucking reason, and people chose to trade those Jake pogs for goods and services, that's essentially the same thing, right? It just happens to be that because bitcoin got trendy lots wanted to use it. And there's zero difference between any cryto?

Seems like a big waste of leccy to me in a world thats going to burn to death soon.

[CraigDS]

Where can I get said Jake pogs?

[Red-Soldier]

Where can I get said Jake pogs?

Conman will know 

[Jake]

You have to burn eight bags of coal per pog. Just like you have to burn electricity for no reason to get your magic computer money.

[Craig S]

Its been years and I still don't understand bitcoin and all that other stuff.

If I made 21 million personalised Jake pogs, and distributed them around the world based on who could burn the most electricity for no fucking reason, and people chose to trade those Jake pogs for goods and services, that's essentially the same thing, right? It just happens to be that because bitcoin got trendy lots wanted to use it. And there's zero difference between any cryto?

Seems like a big waste of leccy to me in a world thats going to burn to death soon.

There does not seem to be any crypto methods in your crypto currency.

[conman]

Conman will know 

ha, i haven't been on here for  a while. I see i have a few replies above to answer!

[conman]

Even using the lesser amounts of data from 2009 - 2012, it's still on track for 50k, 100k, 400k, etc..

https://pbs.twimg.com/media/D_w11jbWsAAjmYh?format=png&name=4096x4096

(cant seem to post that image)

[conman]

Its been years and I still don't understand bitcoin and all that other stuff.

If I made 21 million personalised Jake pogs, and distributed them around the world based on who could burn the most electricity for no fucking reason, and people chose to trade those Jake pogs for goods and services, that's essentially the same thing, right? It just happens to be that because bitcoin got trendy lots wanted to use it. And there's zero difference between any cryto?

Seems like a big waste of leccy to me in a world thats going to burn to death soon.

The electricity argument is a moot point. Everything uses electricity. We can produce as much electricity as we want, it doesn't really matter how much Bitcoin uses. But the fact that the bitcoin protocol forces miners to use cheaper electricity is a good thing, as it pushed mining to green energy (+70% is green energy). I mine bitcoin and it's mined next to two hydroelectric dams.

Mining Gold uses vast quantities of electricity and 85% of Gold is used for monetary use, similar to bitcoin.
Running banks, foreign exchange and so forth uses absolutely incredible amounts of electricity which no one talks about, and the reason we have FX is because Governments decided they wanted to be more frivolous with their money and not be tied to gold. So foreign exchange must be a waste of electricity too.
What common features gives bitcoin & gold value. Well, they are incredibly difficult to fake, incredible expensive & therefore difficult to mine, Meaning that the cost of electricity has a strong influence on price.

Oh, and the other cryptocurrencies by n large don't have the value of the network bitcoin has created, Bitcoin in-fact has a strong correlation with Metcalfe's law, which states that the value of a network is proportional to the square of the number of connected users of the system.

Most other crypto currencies are centralised and have an abundance of supply. This makes them less hard than Bitcoin & Gold, as the supply is either abundant or it's easy to fork and create more (similar to governments printing more money to get themselves out of trouble again). This is what makes Bitcoin different.

[Gnurglan]

Even using the lesser amounts of data from 2009 - 2012, it's still on track for 50k, 100k, 400k, etc..

https://pbs.twimg.com/media/D_w11jbWsAAjmYh?format=png&name=4096x4096

(cant seem to post that image)

You are positive, so let me ask a few questions. I am sceptical, but I also admit I don't know a lot. Maybe this is just the start of a new era. The way people talk about cryptos remind me of how people spoke about the Internet some 20-25 years ago. And while there was a lot of hype, followed by a crash, we now have Internet as an integrated part of our lives. So...

Why is Bitcoin, or cryptocurrencies in general, useful?
How should we think of cryptos in relation to the USD, Euro etc? As a replacement/complement?
What is the main reason people should get excited about cryptos?

[conman]

Why is Bitcoin, or cryptocurrencies in general, useful?
How should we think of cryptos in relation to the USD, Euro etc? As a replacement/complement?
What is the main reason people should get excited about cryptos?

There's a lot to answer here! Though great questions and I feel the answers are not entirely understood for all of them, yet. As would have been the same with the internet circa 1995, which is a great comparison. It's how I see it too. Cryptocurrencies fit into the Web 3.0 bracket, and are part of the same evolution which began all those years ago.

One could argue that the internet still hasn't finished gobbling up the "off line world", as banks continue to close branches, governments close post offices, retail shops shut down, and so forth, all of which are investing online or were negatively affected by online and have to close.

Why is Bitcoin, or cryptocurrencies in general, useful?

So first of all, we must understand that no two cryptos are the same. Many of them are scams, many of them are trying to solve particular problems, such as privacy, accountability, financial services and so on. Bitcoin is the only true store of value coin that I know of. Whilst many people argue against it because of its volatility, well, volatility is a factor in all new currencies (or stores of value) and volatility is good for its medium to long term health.




How should we think of cryptos in relation to the USD, Euro etc? As a replacement/complement?

So first of all, money has traditionally had three facets:

1. It must function as a medium of exchange
2. It must store value*
3. A unit of account.

* FIAT holds value in the short term, but fails spectacularly in the medium to long term
* There also have been an estimated 56 hyper-inflations in the past 100 years! So FIAT money doesn't store value too well.



Sound money, also requires salability (“the ease with which a good can be sold on the market whenever its holder desires, with the least loss in its price”) and a high stock-to-flow ratio (the ratio of existing captured supply to what’s added to it over a given time period). For this reason, Bitcoin is most similar to gold, but it will prove itself to be better than gold, as it's easier & cheaper to secure and exchange. A good book to read about all this is "The Bitcoin Standard" by Saifdean Ammous.

The jurys out as to whether it will replace, underpin or compliment Fiat currencies. In my opinion, and truly it is only an opinion. I believe it will become a reserve currency, which is also suitable for payments as Gold used to be. I believe that central banks will begin buying bitcoin, if they haven't already begun to do so already. It's not inconceivable that the weaker FIAT currencies will begin moving over entirely to the digital standard, as if it were gold. As presently, almost all currencies are backed by the dollar or Euro. That could change! The Dollar and EURO themselves could change.

In 1984, Friedrich Hayek, an Austrian economist and philosopher lamented about the loss of the Gold Standard, “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

In a nutshell, he was describing bitcoin as the solution, before it was even conceivable or achievable. 

Bitcoin is not as new as it would appear though.

- E-Gold was created in 1996, which was basically a means to buy gold backed coins online, supported by Gold deposits of the same amount in the vaults of a safety deposit box in Florida. This grew in popularity, to the point that one million people were using it. At its peak, e-gold has a market capitalisation of $2 billion, but was then shut down by the patriot act after 2001.

- In 1998, Nick Szabo designed a decentralised digital currency, called "bit gold". Bit gold was never implemented, but has been called "a direct precursor to the Bitcoin architecture."

- Bit Gold, E-Gold & E-cash by David Chaum in the early 90's are considered precursors to Bitcoin.

The person(s) behind "Satoshi Nakamoto"  learned from of these attempts in creating Bitcoin, Satoshi created a system that would not have a single point of failure and its blueprint would be set in stone, because this will create value and keep is sacredly.

You can say Bitcoin is thousands of years in the making, as it's a more advanced form of money for this point in time, it's essentially the next evolution of money. But as i said, whether it replaces, underpins or compliments FIAT money is yet to be seen. I think it will take a long time for that to play out, but I am fully convinced it will hugely increase in value and we will be able to use it to make payments.

What is the main reason people should get excited about cryptos?

Initially, I was excited about Bitcoin as a new technology, just like I'd be interested in the latest new wave of technology, like social media, smart phones, and so on. I was also really into Bitcoin as it was created in the aftermath of the banks & governments, yet again fucking us over and stripping us of our wealth. For these two reasons, I became interested. I believed in the tech, i read up on it from numerous sources. A money solution created by cryptographers and computer scientist got me interested. Silicon Valleys hard push into this space keeps the juices flowing!

Now, fast forward many years and there's a new wave of people excited by the increasing value of bitcoin (I'd also consider myself in this bracket). It's essentially wealth generation, as trying to save in the traditional sense is a zero sum game. In this day and age, savings do not outgrow inflation. So the only possibility to retire early is to make your own success outside of the 9-5 (unless you are an entrepreneur). It's been shown that Bitcoin adoption is teaching the younger generation to save again, as our grandparents would have.

Outside of bitcoin, there are really good uses for cryptocurrencies, such as Ethereum with their smart contracts:

"A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties."

Smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.

Example:
Last month a $60,000 flat in Kiev, Ukraine, became the world’s first property to be sold using a blockchain. Michael Arrington, founder of tech news site TechCrunch, used real estate start-up Propy to help him snap up the home without setting foot in the country. The transaction took place entirely via smart contracts on the Ethereum blockchain using cryptocurrency. Blockchains are cryptographically secure ledgers that store every transaction made in a system across many different computers, protecting them from fraud.

https://www.newscientist.com/article/mg23631474-500-a-house-has-been-bought-on-the-blockchain-for-the-first-time/


There's a lot in there, i tried to answer your questions and provide some context too. So I hope it's sufficiently coherent.

If you want to learn more, I strongly advise you to do the following:
1. Read this: https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25
2. Listen to this (its about the article) https://stephanlivera.com/episode/67/ and this (part 2) https://stephanlivera.com/episode/86/
3. Buy this: https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861

I consider it more of a risk to not invest in Bitcoin, than to invest, as the maths & ten years of data behind bitcoin strongly point to it increasing in value, considerably.

However, it's equally important not to over expose yourself to any one means of securing your Wealth. So if you are to invest in Bitcoin, then also spread your risk by investing in Gold, Bonds, property and so forth. Also, don't invest in anything you don't understand. So research before you buy/invest in anything.

[CraigDS]

Whilst many people argue against it because of its volatility, well, volatility is a factor in all new currencies (or stores of value) and volatility is good for its medium to long term health.

Looking at the Euro rates to the pound from launch to now, it really hasn’t been that volatile over 20 years. Certainly absolutely nothing like Bitcoin.

Also, why is it good for medium to long term health?


The main benefit you seem to give is not of Bitcoin itself (it really isn’t a good store of value, in fact many people have lost a LOT of money thinking it would hold value) is the blockchain. Which is totally correct, but that’s a separate thing to Bitcoin in reality.

[conman]

Looking at the Euro rates to the pound from launch to now, it really hasn’t been that volatile over 20 years. Certainly absolutely nothing like Bitcoin.

Also, why is it good for medium to long term health?

The main benefit you seem to give is not of Bitcoin itself (it really isn’t a good store of value, in fact many people have lost a LOT of money thinking it would hold value) is the blockchain. Which is totally correct, but that’s a separate thing to Bitcoin in reality.

Volatility is important as it attracts new people to invest in these early stages, as they see the opportunity to make money. This is vital for the long term growth of any network based entity, as Bitcoin clearly is. As the size of the market & liquidity grows, along with the sophistication and the depth of the financial institutions dealing with Bitcoin, this volatility will almost certainly decline.

Risk-averse people & institutions avoid investments with high volatility, since they are more concerned about stability and preservation of wealth. Those who buy bitcoin, you could consider early adopters and leaning more to the risk taking side (I'm somewhere in the middle). Those who buy now, take on the risk, but are due the largest reward (assuming of course that it plays out as it's expected to)

Euro vs pound is not suitable comparison, as the Euro was a merging of many strong currencies and not a creation from infancy. Volatility is common in developing countries & infant currencies, which fluctuate into double/triple digit inflation rates.

For sure, many people have lost money on bitcoin, because many people are lazy, get greedy and hop onto the hype train, even though it's gone or is rapidly going past the last stop.

We lose money every day with pound sterling (and Euro) as it decreases in purchasing power year on year, to the tune of about 2.5-3% (about 25% over 10 years). But no one likes to talk about this. So for every person who has lost 25% of their money on bitcoin over two years, can be considered the same as a person who has lost 25% £ over 10 years. They just don't know it, conveniently ignore it and didn't understand what they were doing when buying BTC (at that time).

I'm up a fair bit of money on Bitcoin, by following the 4 year cycles, for which I've talked about on here for sometime. For those of whom invested at the peak of these cycles, then they lost money, for those that invested in the trough, then they made money. Those who invested in-between, predominantly made money. For those took an interest in what I was saying anytime in this last year, they could be up 200% - 400% right now. I'm sure in a years time, I'll have a similar stat with greater percentages.

My bullishness is based on ten years of data, it's not plucked out of thin air. I work with data every day, and consider data to be the answer. Should the trend continue as it has for the past ten years, then we are really reaching the point whereby doubters need to be the ones that disprove bitcoin, rather than me having to prove it, as the proof is in the numbers.

You could say the main benefit in Gold is Gold itself. You could say the main benefit in USD is USD itself, in Sterling is the Pound itself. That's a pretty flimsy argument to make to be fair. If people consider trading pigs as a means of exchange, then it has value. If people consider trading paper notes as a means to exchange a pig because not everyone wants to receive a pig, then paper money by proxy has value. If people buy virtual hats for their avatar on a computer game, then that virtual currency has value. What people use as a medium of exchange, has value.

I believe in the blockchain as much as bitcoin. The blockchain as a technology & bitcoin is what i consider to be the suitable for investment of good part of my funds.

You have a real interest in Bitcoin and Blockchain, but you are also a doubter. It's a strange juxtaposition to have. Have you read any of the articles that I posted? Especially the medium article by Plan_B?

If not, please take some time out to do so and listen to those supporting podcasts that I posted above.

[Jake]

The electricity argument is a moot point. Everything uses electricity. We can produce as much electricity as we want, it doesn't really matter how much Bitcoin uses. But the fact that the bitcoin protocol forces miners to use cheaper electricity is a good thing, as it pushed mining to green energy (+70% is green energy). I mine bitcoin and it's mined next to two hydroelectric dams.

Mining Gold uses vast quantities of electricity and 85% of Gold is used for monetary use, similar to bitcoin.
Running banks, foreign exchange and so forth uses absolutely incredible amounts of electricity which no one talks about, and the reason we have FX is because Governments decided they wanted to be more frivolous with their money and not be tied to gold. So foreign exchange must be a waste of electricity too.
What common features gives bitcoin & gold value. Well, they are incredibly difficult to fake, incredible expensive & therefore difficult to mine, Meaning that the cost of electricity has a strong influence on price.

Oh, and the other cryptocurrencies by n large don't have the value of the network bitcoin has created, Bitcoin in-fact has a strong correlation with Metcalfe's law, which states that the value of a network is proportional to the square of the number of connected users of the system.

Most other crypto currencies are centralised and have an abundance of supply. This makes them less hard than Bitcoin & Gold, as the supply is either abundant or it's easy to fork and create more (similar to governments printing more money to get themselves out of trouble again). This is what makes Bitcoin different.

Sorry you're obviously a bright bloke and well into bitcoin etc so I don't mean to come off as rude but your answer went over my head a bit.

Is the very short answer that bitcoin is valuable just because society deem it to be, like gold. Rather than currency which is valuable because government tells us to use it? So crypto is a new gold instead of a new dollar?

[conman]

Sorry you're obviously a bright bloke and well into bitcoin etc so I don't mean to come off as rude but your answer went over my head a bit.

Is the very short answer that bitcoin is valuable just because society deem it to be, like gold. Rather than currency which is valuable because government tells us to use it? So crypto is a new gold instead of a new dollar?

Is the very short answer that bitcoin is valuable just because society deem it to be, like gold.

No, gold isn't valuable because society deems it to be. It has value as it was the hardest money to date. Hardness is essentially a currencies ability to store value over time and it's been this way for thousands of years.

I'll explain this by way of an example.

Aggry (or glass) beads were used as a means of currency in Africa for hundreds of years, as they were relatively scarce, were difficult to produce, proved to be a store value and so they could therefore be used as a medium of exchange. That was until the Europeans came, and discovered they could trade cheaply with the locals using glass beads. Because unbeknownst to the Africans, Glass beads were easy to produce in Europe. So European's came back in droves and bought African valuables with cheaply produced "coin". It was too late before the natives figured this out, but when they did, their wealth was sttipped and their currency devalued.

If they had used Gold as a currency back then, Europeans would not have had such "luck". To date, nothing has proved to be harder than Gold. It's simply too difficult and costly to produce and there is a limited yearly supply. It cannot be destroyed and there is enough of it to be used as a medium of exchange (unlike say a painting, whereby there is only one).

The African example cannot happen with Gold, unless say some aliens invade with spaceships made from the stuff. Gold would want to be plentiful elsewhere and brought to earth with minimal cost for Gold to suffer the same sort of devaluation.

Is the very short answer that bitcoin is valuable just because society deem it to be, like gold.

Similar to gold, Bitcoin is very difficult to produce (because it is very costly), impossible to fake (because the protocol prevents it). It's practically impossible to hack, as the network is too large and the secure. It's decentralised, so no one can change how it operates. It's plentiful, as there will be 21 million bitcoins, each divisible into 100 million Satoshis. It's scarce, as there will only ever be 21 million bitcoins and nothing can change that. But it's also super cheap to send money. You can send millions of euros worth of money for the cost of a few mars bars.

The thing about FIAT currencies, is that they are backed by governments and because of that, they can be used as a medium of exchange. But governments are so frivolous with our money, that they don't want to have their currencies backed by anything of value (like Gold, Bitcoin, etc), as this would remove their ability to print money to get themselves out of trouble all the time. FIAT money in it's current capacity is basically cheat mode for governments, but we are the ones who suffer as our money that used to store value, no longer does. It loses value at an "acceptable rate", or so it's called.

Crypto is too broad a term. You could say Bitcoin is the new Gold (but will work along side it i believe), and could replace many FIAT currencies. If you are interested in learning about the history of money and why it has value, then pick up a copy of https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861

[Gnurglan]

There's a lot to answer here! Though great questions and I feel the answers are not entirely understood for all of them, yet. As would have been the same with the internet circa 1995, which is a great comparison. It's how I see it too. Cryptocurrencies fit into the Web 3.0 bracket, and are part of the same evolution which began all those years ago.

One could argue that the internet still hasn't finished gobbling up the "off line world", as banks continue to close branches, governments close post offices, retail shops shut down, and so forth, all of which are investing online or were negatively affected by online and have to close.

Why is Bitcoin, or cryptocurrencies in general, useful?

So first of all, we must understand that no two cryptos are the same. Many of them are scams, many of them are trying to solve particular problems, such as privacy, accountability, financial services and so on. Bitcoin is the only true store of value coin that I know of. Whilst many people argue against it because of its volatility, well, volatility is a factor in all new currencies (or stores of value) and volatility is good for its medium to long term health.




How should we think of cryptos in relation to the USD, Euro etc? As a replacement/complement?

So first of all, money has traditionally had three facets:

1. It must function as a medium of exchange
2. It must store value*
3. A unit of account.

* FIAT holds value in the short term, but fails spectacularly in the medium to long term
* There also have been an estimated 56 hyper-inflations in the past 100 years! So FIAT money doesn't store value too well.



Sound money, also requires salability (“the ease with which a good can be sold on the market whenever its holder desires, with the least loss in its price”) and a high stock-to-flow ratio (the ratio of existing captured supply to what’s added to it over a given time period). For this reason, Bitcoin is most similar to gold, but it will prove itself to be better than gold, as it's easier & cheaper to secure and exchange. A good book to read about all this is "The Bitcoin Standard" by Saifdean Ammous.

The jurys out as to whether it will replace, underpin or compliment Fiat currencies. In my opinion, and truly it is only an opinion. I believe it will become a reserve currency, which is also suitable for payments as Gold used to be. I believe that central banks will begin buying bitcoin, if they haven't already begun to do so already. It's not inconceivable that the weaker FIAT currencies will begin moving over entirely to the digital standard, as if it were gold. As presently, almost all currencies are backed by the dollar or Euro. That could change! The Dollar and EURO themselves could change.

In 1984, Friedrich Hayek, an Austrian economist and philosopher lamented about the loss of the Gold Standard, “I don’t believe we shall ever have a good money again before we take the thing out of the hands of government, that is, we can’t take it violently out of the hands of government, all we can do is by some sly roundabout way introduce something that they can’t stop.”

In a nutshell, he was describing bitcoin as the solution, before it was even conceivable or achievable. 

Bitcoin is not as new as it would appear though.

- E-Gold was created in 1996, which was basically a means to buy gold backed coins online, supported by Gold deposits of the same amount in the vaults of a safety deposit box in Florida. This grew in popularity, to the point that one million people were using it. At its peak, e-gold has a market capitalisation of $2 billion, but was then shut down by the patriot act after 2001.

- In 1998, Nick Szabo designed a decentralised digital currency, called "bit gold". Bit gold was never implemented, but has been called "a direct precursor to the Bitcoin architecture."

- Bit Gold, E-Gold & E-cash by David Chaum in the early 90's are considered precursors to Bitcoin.

The person(s) behind "Satoshi Nakamoto"  learned from of these attempts in creating Bitcoin, Satoshi created a system that would not have a single point of failure and its blueprint would be set in stone, because this will create value and keep is sacredly.

You can say Bitcoin is thousands of years in the making, as it's a more advanced form of money for this point in time, it's essentially the next evolution of money. But as i said, whether it replaces, underpins or compliments FIAT money is yet to be seen. I think it will take a long time for that to play out, but I am fully convinced it will hugely increase in value and we will be able to use it to make payments.

What is the main reason people should get excited about cryptos?

Initially, I was excited about Bitcoin as a new technology, just like I'd be interested in the latest new wave of technology, like social media, smart phones, and so on. I was also really into Bitcoin as it was created in the aftermath of the banks & governments, yet again fucking us over and stripping us of our wealth. For these two reasons, I became interested. I believed in the tech, i read up on it from numerous sources. A money solution created by cryptographers and computer scientist got me interested. Silicon Valleys hard push into this space keeps the juices flowing!

Now, fast forward many years and there's a new wave of people excited by the increasing value of bitcoin (I'd also consider myself in this bracket). It's essentially wealth generation, as trying to save in the traditional sense is a zero sum game. In this day and age, savings do not outgrow inflation. So the only possibility to retire early is to make your own success outside of the 9-5 (unless you are an entrepreneur). It's been shown that Bitcoin adoption is teaching the younger generation to save again, as our grandparents would have.

Outside of bitcoin, there are really good uses for cryptocurrencies, such as Ethereum with their smart contracts:

"A smart contract is a computer protocol intended to digitally facilitate, verify, or enforce the negotiation or performance of a contract. Smart contracts allow the performance of credible transactions without third parties."

Smart contracts help you exchange money, property, shares, or anything of value in a transparent, conflict-free way while avoiding the services of a middleman.

Example:
Last month a $60,000 flat in Kiev, Ukraine, became the world’s first property to be sold using a blockchain. Michael Arrington, founder of tech news site TechCrunch, used real estate start-up Propy to help him snap up the home without setting foot in the country. The transaction took place entirely via smart contracts on the Ethereum blockchain using cryptocurrency. Blockchains are cryptographically secure ledgers that store every transaction made in a system across many different computers, protecting them from fraud.

https://www.newscientist.com/article/mg23631474-500-a-house-has-been-bought-on-the-blockchain-for-the-first-time/


There's a lot in there, i tried to answer your questions and provide some context too. So I hope it's sufficiently coherent.

If you want to learn more, I strongly advise you to do the following:
1. Read this: https://medium.com/@100trillionUSD/modeling-bitcoins-value-with-scarcity-91fa0fc03e25
2. Listen to this (its about the article) https://stephanlivera.com/episode/67/ and this (part 2) https://stephanlivera.com/episode/86/
3. Buy this: https://www.amazon.com/Bitcoin-Standard-Decentralized-Alternative-Central/dp/1119473861

I consider it more of a risk to not invest in Bitcoin, than to invest, as the maths & ten years of data behind bitcoin strongly point to it increasing in value, considerably.

However, it's equally important not to over expose yourself to any one means of securing your Wealth. So if you are to invest in Bitcoin, then also spread your risk by investing in Gold, Bonds, property and so forth. Also, don't invest in anything you don't understand. So research before you buy/invest in anything.

Thank you.

I am sceptical about the actual store of value as I have mentioned before. We only have a short space of time to go by, even if we include those early tries. In a comparison with gold, gold wins just because of it's track record. That's not to say that Bitcoin is useless, it could be another option. That's what I am trying to understand.

It's interesting that you mention how the Patriot Act got to Bitgold. This is another concern I have with Bitcoin. If governments felt the need, they could easily ban transactions in Bitcoin. It's more widespread than Bitgold I assume, but here I'd compare to for example Piratebay. That was worldwide. Everyone was downloading music and films until the government got to them. Everyone I know used to download. Then they found a way to make it illegal. Once that happened, people began to prefer other sources. We got a market for the likes of Spotify, Netflix etc. No-one downloads today. I personally stopped for these reasons. Piratebay may exist, but it is a shadow of what it was.

When it comes to getting money away from the fiat system, I fully understand why that is wanted. There are quite a few people arguing that all we did in 08/09 was to put the crisis on hold. We didn't solve anything, we just delayed it, but the effects will be so much worse now. If we have another banking crises, people will run to safe havens. It could be anything, Bitcoin, property, precious metals, land etc. This gets back to my first point, that no-one knows how Bitcoin will behave due to it's short history. It could be a great place to be, but it could also be a disaster if it then is perceived to be a speculative investment, more like a stock than a currency.

If people see Bitcoin as the new gold, then I fully get it. Everyone accepts it as a currency/valuable thing, so it can be traded. Basically we'd mine every ounce of gold there is. Those who accumulate early will get very, very rich. As of now, I don't understand why people would give up gold for Bitcoin. For me that would be a very brave prediction. As a complement, maybe.

[conman]

Thank you.

You're welcome

I am sceptical about the actual store of value as I have mentioned before. We only have a short space of time to go by, even if we include those early tries. In a comparison with gold, gold wins just because of its track record. That's not to say that Bitcoin is useless, it could be another option. That's what I am trying to understand.

It is early days and we all most not assume unilaterally that it's rapid progress will continue and as investors, we must always diversify, as nothing is guaranteed. Just highly probable.

However, Bitcoin has a 95% RSI (Relative strength index) to date, compared to Gold's 99%. From a statistical point of view, the data doesn't get much more solid than this. The correlation in this data is super strong. Only gold and bitcoin have values this close to 100% and it's entirely based on stock to flow. Whilst it is possible that it won't continue, probability strongly sides with it progressing and hitting the heights I've set out above. Read the medium article to understand more about this by @100trillionUSD.

It's interesting that you mention how the Patriot Act got to Bitgold. This is another concern I have with Bitcoin. If governments felt the need, they could easily ban transactions in Bitcoin. It's more widespread than Bitgold I assume, but here I'd compare to for example Piratebay. That was worldwide. Everyone was downloading music and films until the government got to them. Everyone I know used to download. Then they found a way to make it illegal. Once that happened, people began to prefer other sources. We got a market for the likes of Spotify, Netflix etc. No-one downloads today. I personally stopped for these reasons. Piratebay may exist, but it is a shadow of what it was.

A store of value isn't a threat to governments, so i don't see them banning it. If they wanted to ban it, they would have done so years ago (ala Bitgold). They are stupid, but not that stupid. China just this week as a matter of fact officially approved Bitcoin as a virtual property.

https://www.ccn.com/news/court-bitcoin-legal-china-virtual-property/2019/07/19/

Bitgold could be shut down as it was centralised. It also didn't have the required licence to operate, which is part of the process they used to take it down. It had a single point of failure (the company itself). Bitcoin is decentralised and is software that is spread out around the world, nobody controls it. So similar to Bittorrent, it cannot be stopped.

The pirate bay was hosting copyright infringing media and sharing them freely (still does mind you). I'm of the view that It wasn't the governments threats that drove the majority of people away, it was the advent of Netflix and similar platforms themselves that provided people with a better option. It's interesting that the Pirate Bay and it's ilk are growing again, as the alternatives are splicing up the movies & tv show market, fragmenting it & giving people poor choices. 



https://trends.google.com/trends/explore/TIMESERIES/1563712800?hl=en-GB&tz=-60&date=all&geo=GB&q=bittorrent,netflix,the+pirate+bay&sni=3

When it comes to getting money away from the fiat system, I fully understand why that is wanted. There are quite a few people arguing that all we did in 08/09 was to put the crisis on hold. We didn't solve anything, we just delayed it, but the effects will be so much worse now. If we have another banking crises, people will run to safe havens. It could be anything, Bitcoin, property, precious metals, land etc. This gets back to my first point, that no-one knows how Bitcoin will behave due to it's short history. It could be a great place to be, but it could also be a disaster if it then is perceived to be a speculative investment, more like a stock than a currency.

I'm one of those people who argue that same point. It was never solved, save for a few plasters here and there. People will jump to harder money, as you say like gold, but I am of the view that Bitcoin will be right up among them, as the hardest money. The perfect financial storm is brewing and because of that; Bitcoin will become hugely inflated over the next 1-3 years as people frantically try to get their money out of FIAT and into alternatives. gold will grow higher than before too, as gold has been opened up to a new audience (younger) and purchasing Gold has become so much easier now because you can do so by purchasing gold backed cryptocurrencies. My strategy is convert bitcoin to gold backed crypto when the market is reaching its peak (1-2 years), then buy property and more bitcoin in 2-4 years time. Strategies can change, but that's how I see my role in the impending recession playing out.

Property is where you put your money after the storm, not before it as it suffers huge drops in valuation. The subprime mortgage market in the US is still a huge issues, that was simply repackaged after the last crash.

The data is super strong though, as i said, it has 95% RSI, that means that 95% of its price is entirely driven by Stock to Flow. The remaining 5% of price is down to outside factors, such as the economy, media, governments, etc.

If people see Bitcoin as the new gold, then I fully get it. Everyone accepts it as a currency/valuable thing, so it can be traded. Basically we'd mine every ounce of gold there is. Those who accumulate early will get very, very rich. As of now, I don't understand why people would give up gold for Bitcoin. For me that would be a very brave prediction. As a complement, maybe.

I wouldn't advocate the people give up gold for Bitcoin. Gold is still pretty rate and very hard to change the stock levels. So it will remain very strong as it has for thousands of years. Bitcoin will take its place at the top of the pile though.

[Gnurglan]

A store of value isn't a threat to governments, so i don't see them banning it. If they wanted to ban it, they would have done so years ago (ala Bitgold). They are stupid, but not that stupid. China just this week as a matter of fact officially approved Bitcoin as a virtual property.

Bitgold could be shut down as it was centralised. It also didn't have the required licence to operate, which is part of the process they used to take it down. It had a single point of failure (the company itself). Bitcoin is decentralised and is software that is spread out around the world, nobody controls it. So similar to Bittorrent, it cannot be stopped.

It may not be a threat, but it's a place to hunt for money. One problem with cryptos has been that people sell for example Bitcoin, get a normal currency and then they get taxed on the profit they made.

The pirate bay was hosting copyright infringing media and sharing them freely (still does mind you). I'm of the view that It wasn't the governments threats that drove the majority of people away, it was the advent of Netflix and similar platforms themselves that provided people with a better option. It's interesting that the Pirate Bay and it's ilk are growing again, as the alternatives are splicing up the movies & tv show market, fragmenting it & giving people poor choices. 

Interesting. I didn't know it was growing. Most of the people I know stopped downloading once Pirate Bay lost in court and I haven't heard anyone say they're back doing it. Everyone talks about Netflix, HBO, Spotify etc.

I'm one of those people who argue that same point. It was never solved, save for a few plasters here and there. People will jump to harder money, as you say like gold, but I am of the view that Bitcoin will be right up among them, as the hardest money. The perfect financial storm is brewing and because of that; Bitcoin will become hugely inflated over the next 1-3 years as people frantically try to get their money out of FIAT and into alternatives. gold will grow higher than before too, as gold has been opened up to a new audience (younger) and purchasing Gold has become so much easier now because you can do so by purchasing gold backed cryptocurrencies. My strategy is convert bitcoin to gold backed crypto when the market is reaching its peak (1-2 years), then buy property and more bitcoin in 2-4 years time. Strategies can change, but that's how I see my role in the impending recession playing out.

Property is where you put your money after the storm, not before it as it suffers huge drops in valuation. The subprime mortgage market in the US is still a huge issues, that was simply repackaged after the last crash.

Yes, people seem genuinly concerned about that perfect storm. Heard recently that Deutsche Bank is in trouble and a crisis there would definitely have people run to anything 'safe'. That's a potential disaster on a scale we haven't seen in our life time. With Bitcoin being outside of the normal system, I can see the potential.

You say gold backed crypto. Never heard of it so I made a search. Apparently Iran are aiming to launch one.
https://www.asiacryptotoday.com/iran-announces-gold-backed-national-cryptocurrency

Iran seem to see Bitcoin as a transition option before they have their own crypto. Bitcoin used too much energy. Naturally, they want to be able to trade and with no access to USD they have to find something else.

If you found one today, what's stopping you from swapping from Bitcoin more or less immidiately? Because in a world where you have a crypto currency and one that is backed with gold (or anything else that you can use in real life), the latter has far more going for it. Even if the entire system would crash or lose credibility, you could get your gold etc out and put it some place else.

[conman]

The taxation thing is a problem. For instance, capital gains in ireland is 33%. In Portugal however, it's just 5%. So I wonder if there are going to be solutions to get around that. Or will people simply find good tax accountants to manage workarounds.

Deutsche bank and about 7 other European banks are on the brink. The ECB will print money soon (devaluing all our savings), which will give them a breather, but that will only prolong the inevitable. Deutsche has gone through 7 CEO's in 5 years i believe. They are truly fucked.

Bitcoin remember was born out of the last recession, it's core being is a means to be an alternative to FIAT. It's a hedge against banks, bankers, governments and recessions.

Everything is in balance, if the supply of gold increased due to increased demand, the price would fall, not increase. So gold isn't going to make a meteoric rise in comparison to bitcoin. As i said, bitcoin gets its power from trust (not being changeable), decentralised (unstoppable), having the sheer scale of the network and a decreasing supply. No other coin or commodity is likely going to be able to touch it for some time, if at all.

[conman]

Gnurglan, consider he hesitation that you, Craig and so many others have. It's probably leading to Bitcoin being undervalued, if anything. Considering Stock2Flow determines the price, just wait until stock-to-flow is 50+ (May 2020) or 100+ (2024).. We'll be calling it Boomcoin!

[SP]

Gold does not have the risk of being rendered worthless by a coding or cryptographic error.

[Gnurglan]

The taxation thing is a problem. For instance, capital gains in ireland is 33%. In Portugal however, it's just 5%. So I wonder if there are going to be solutions to get around that. Or will people simply find good tax accountants to manage workarounds.

Deutsche bank and about 7 other European banks are on the brink. The ECB will print money soon (devaluing all our savings), which will give them a breather, but that will only prolong the inevitable. Deutsche has gone through 7 CEO's in 5 years i believe. They are truly fucked.

Bitcoin remember was born out of the last recession, it's core being is a means to be an alternative to FIAT. It's a hedge against banks, bankers, governments and recessions.

Everything is in balance, if the supply of gold increased due to increased demand, the price would fall, not increase. So gold isn't going to make a meteoric rise in comparison to bitcoin. As i said, bitcoin gets its power from trust (not being changeable), decentralised (unstoppable), having the sheer scale of the network and a decreasing supply. No other coin or commodity is likely going to be able to touch it for some time, if at all.

I guess for most people taxation would be a problem, but if you've got the cash you can always escape.

Worrying about Deutsche Bank. If a bank of that size goes, I don't think there's a way to bail them out. They'll bring many more down with them. My guess is that we'd see a fall in asset prices because everyone would need to sell to raise cash to pay off debt.

USD, Euro, Bitcoin, gold,... they're all about trust. By the looks of it, the Euro is likely to be the first to lose that trust. I am not as convinced as you that Bitcoin will be the thing, though I understand the view of it as a safe haven.

[Gnurglan]

Gnurglan, consider he hesitation that you, Craig and so many others have. It's probably leading to Bitcoin being undervalued, if anything. Considering Stock2Flow determines the price, just wait until stock-to-flow is 50+ (May 2020) or 100+ (2024).. We'll be calling it Boomcoin!

I see your point, but I disagree. I don't understand Bitcoin (yet). If you gave me the choice of a Bitcoin, the equal value in a piece of gold or a piece of art, then Bitcoin would be my third pick. Because if we're talking that much money, I'd play it safe and go with either of the two options I know would have value 5, 10 or 50 years from now. That could be the biggest mistake of my life, but at least I'd be guaranteed to have something.

When things go up so fast in price, they have a tendency to go down fast as well.

You seem to have a plan, but are you not worried that Bitcoin is just suffering from the same symptom as the stock market? With all the money printing from the central banks, a lot of that money has been pumped into the stock market. Low interest rates have made people borrow to get yield, so they're taking on more risk to earn something. Some invest in Facebook, some in Uber and it's likely that some is going to Bitcoin too. If we hit a crisis like 08/09 there will be this demand for cash and asset prices could well go down a lot.

[Alan_X]

You are positive, so let me ask a few questions. I am sceptical, but I also admit I don't know a lot. Maybe this is just the start of a new era. The way people talk about cryptos remind me of how people spoke about the Internet some 20-25 years ago. And while there was a lot of hype, followed by a crash, we now have Internet as an integrated part of our lives. So...

Why is Bitcoin, or cryptocurrencies in general, useful?
How should we think of cryptos in relation to the USD, Euro etc? As a replacement/complement?
What is the main reason people should get excited about cryptos?

A better comparison is probably the hype over the Segway, 3D TV/film or Google Glass. Created by nerds who didn't understand human behaviour. Bitcoin is too volatile, too slow, too complicated and not intuitive for most normal people. From something that was going to bring down the reserve banks, it's become a niche way to transfer money and a modern version of the South Sea Bubble.

The technology will have its uses no doubt, but like the internet, it would need something like Berners-Lee's worldwide web technology to make it useful for the mainstream.

[Alan_X]

Volatility is important as it attracts new people to invest in these early stages, as they see the opportunity to make money...

And let's stop right there.

What a load of shite. You bang on about fiat currencies but your whole thrust is that bitcoin is just a basic, venal, capitalist money-making scheme.

I think we're done here. There are plenty of places to go if anyone's interested in this. People have lost a lot of money on Bitcoin and RAWK is not the place for it.

If there's any chance that we can habve a sensible discussion about the technology we may start a new thread.