Bitcoin, Altcoin and Cryptocurrency Thread

[Danoff]

Just a question because I don't know the answer to it....

Does the viability of cryptocurrency as a genuine long term currency depend on governments (basically all of them, but particularly the big players) ceding their ability to control the production & supply of money? Also, does cryptocurrency viability depend on lack of regulation from said governments?

For instance: in 2030 is bitcoin (or whatever) supposed to be living along side the US dollar or is it supposed to replace the US dollar while remaining unregulated? The former seems at odds with fundamental principal of crypto, and the latter I don't see as being particularly realistic, owing to how important monetary policy is to a governments economic strategy.

I think that cryptocurrency advocates often describe it as being a replacement for "fiat" currencies. But of course governments can prevent that, with guns. What government can't really prevent though, especially in the US, is an effective use of cryptocurrency as a replacement. For example, I was in Hong Kong recently, and was invited to pay for something in Hong Kong dollars, which I had none of. I offered US dollars, and the person I was purchasing from explained that they would have to do an exchange for Hong Kong dollars on the fly, but that they could accept my US dollars. So even though they didn't accept US dollars directly, they performed an exchange and purchase in a single transaction. In the end, I handed them USD, they gave me the product. You can imagine a scenario where you hand over bitcoin and an exchange is done for USD in the background and you're handed the product you purchased.

Beyond that though, currency isn't something that wealthy people tend to own a ton of. They usually exchange it for other things, like gold, property, or stocks, and hold those. That's because government monetary policy makes holding currency a long-term loser. When they want to buy something, they simply sell those things in exchange for currency, which they hold for a shot period of time before handing it over in exchange for whatever they were buying. You can imagine that holding cryptocurrency might someday be a common alternative to gold, property, and stocks as a place for wealthy people to store wealth, even if it can't be used directly at all points of sale because of local laws.

I don't have the time to tabulate it right now, but I would estimate that approximately 1% of my net worth is in currency at this moment.

 

[NLxAROSA]

I think that cryptocurrency advocates often describe it as being a replacement for "fiat" currencies. But of course governments can prevent that, with guns.

It's actually much easier right now and doesn't require bloodshed. Some governments are already doing it: ban the exchanges. Another method (also already used by some governments): ban mining or make it so expensive that it's no longer a valid business case.

You can imagine a scenario where you hand over bitcoin and an exchange is done for USD in the background and you're handed the product you purchased.

That's exactly what happens right now if you pay for something in a store that takes crypto as payment.

And this is exactly where the problem lies: unless crypto is accepted 100%/everywhere you can kill the system simply by bleeding it dry of fiat currency inflow. A shop owner needs to pay his suppliers in fiat, a miner has to pay his GPUs and electricity bills in fiat, etc. etc. Wanna buy that Lambo? -> fiat. So fiat must flow out if you want to cash in on the value. And in order for it to flow out it must also flow in. Stop the flow = kill the system. The only way to stop this is to get rid of the dependency on fiat. Something that I don't see happening in the near future. Most people in crypto are in there to get rich (in crypto) and then cash out (in fiat).

 

[Danoff]

And this is exactly where the problem lies: unless crypto is accepted 100%/everywhere you can kill the system simply by bleeding it dry of fiat currency inflow. A shop owner needs to pay his suppliers in fiat, a miner has to pay his GPUs and electricity bills in fiat, etc. etc. Wanna buy that Lambo? -> fiat. So fiat must flow out if you want to cash in on the value. And in order for it to flow out it must also flow in. Stop the flow = kill the system. The only way to stop this is to get rid of the dependency on fiat. Something that I don't see happening in the near future. Most people in crypto are in there to get rich (in crypto) and then cash out (in fiat).

Gold is not much different. It has some inherent utility of course, whereas cryptocurrency doesn't, but a lot of people who own gold own it as a means of storing wealth. Cryptocurrency can behave very similarly. Of course it is also pretty difficult for governments to track cryptocurrency exchanges, which may perpetuate its popularity as an international currency.

 

[Eunos_Cosmo]

Gold is not much different. It has some inherent utility of course, whereas cryptocurrency doesn't, but a lot of people who own gold own it as a means of storing wealth. Cryptocurrency can behave very similarly. Of course it is also pretty difficult for governments to track cryptocurrency exchanges, which may perpetuate its popularity as an international currency.

In order for it to be a useful store of wealth, it would need to appreciate ahead of inflation, correct? If it becomes the de-facto currency, then it will become the rate of inflation. Won't that defeat the purpose? If it doesn't become the de-facto currency, then what is the point? The blockchain technology is solid, but I don't see why there needs to be a new currency. Just use blockchain (on bank servers or distributed networks or whatever) to verify USD transactions. Bitcoin mining ROI will just continually decrease until there is no incentive for anyone to do it anymore, aside from maybe nuclear power stations in idle situations. I feel like there are MUCH BETTER uses of distributing computing power. I wonder how much global electricity is wasted on bitcoin mining attempts that do not succeed? I wonder how much C02 that produces? Am I the only one who sees how wasteful mining seems to be?

I'll give an example of a possible better/more productive use of distributed computing: I work at an architecture firm, and we happen to do a significant amount of CPU/GPU intensive rendering. It is not financially viable for us to have a render farm on-site, so we use the autodesk cloud (which uses amazon + other servers). The "cloud" is doing actual, real, productive work. But it's limited. If there was a way to connect many computers together over a large network (the internet) and utilize unused processing power of all volunteer devices on that network for such a purpose (or other things like research), that seems more productive to me. Printing currency (bitcoin) doesn't seem very productive to me. And it could be even similar to mining in that you receive money for the CPU work being done...and unlike blockchain, you are actually always doing something productive, so you are always getting paid. You're basically creating a global supercomputer that anyone can pay to use, and everyone can get paid to participate in.

edit: Gold is a good store of wealth because it is rare (finite) and it has utility (industrial use, jewelry, etc). I would argue that bitcoin doesn't have much utility (it's basically Fiat) and it is not finite (just like money, it can be made at will). I'll ask another question I don't know the answer to: If bitcoin's valuation was stable (I realize it's not, but bear with me), would each new coin mined dilute the value of the other bitcoins? What I mean is if there were 10 bitcoins in the world, would making 10 new bitcoins decrease each bitcoins value by half? If so, wouldn't that make it not very well suited for storing value? If Gold was the most common element on earth, it would not be valuable, you could just dig it out of the ground if you wanted it. Real estate is similar.

 

[Danoff]

In order for it to be a useful store of wealth, it would need to appreciate ahead of inflation, correct? If it becomes the de-facto currency, then it will become the rate of inflation. Won't that defeat the purpose? If it doesn't become the de-facto currency, then what is the point?

Inflation is created by the introduction of new currency into the existing currency pool. Deflation is caused by an expanding number of goods and services to be purchased by the existing currency pool. The value of the USD is determined by the set of things that the USD needs to buy divided by the number of USD in circulation. Adding USD to circulation (which the government does), causes inflation (decrease in USD value). Adding goods and services that USDs need to buy (which the US economy does), causes deflation (increase in USD value).

Once it is completely adopted (assuming that ever happens), cryptocurrency is designed to be inflated at a rate slower than the overall growth of human productivity. As a result, cryptocurrency should become deflationary and remain deflationary at a certain point, constantly gaining value. That relies, of course, on its continued use to purchase existing goods and services. If its adoption decreases, the pool of goods and services it buys decreases, and it becomes inflated.

 

[Eunos_Cosmo]

Inflation is created by the introduction of new currency into the existing currency pool. Deflation is caused by an expanding number of goods and services to be purchased by the existing currency pool. The value of the USD is determined by the set of things that the USD needs to buy divided by the number of USD in circulation. Adding USD to circulation (which the government does), causes inflation (decrease in USD value). Adding goods and services that USDs need to buy (which the US economy does), causes deflation (increase in USD value).

Once it is completely adopted (assuming that ever happens), cryptocurrency is designed to be inflated at a rate slower than the overall growth of human productivity. As a result, cryptocurrency should become deflationary and remain deflationary at a certain point, constantly gaining value. That relies, of course, on its continued use to purchase existing goods and services. If its adoption decreases, the pool of goods and services it buys decreases, and it becomes inflated.

How?

(also, see edit above)

 

[NLxAROSA]

How?

(also, see edit above)

Most cryptocurrencies have a finite pool of coins (or it's infinite but the effort to mine new ones becomes increasingly expensive) so creation of new coins is either non-existant or becomes extremely slow over time. So they're deflationary by nature. The big problem with that is that it hinders adoption as an actual currency because it's more worthwhile to save/hold it than to spend/trade with it. So in order for it to be a real currency it will need (close to) 100% adoption, but that's basically made impossible by its deflationary nature.

There is one exception to this as far as I know and that's Monero. It's a privacy coin that has 100% adoption on the dark web/black market. It's the only crypto I truly consider to be close to an actual currency. And the reason is that it's actually used and not hoarded (as much). But it's the only one AFAIK. And it still suffers from the same drawbacks as all other crypto's: you need some other crypto (e.g ETH or BTC) to be able to buy it.

 

[Eunos_Cosmo]

Most cryptocurrencies have a finite pool of coins (or it's infinite but the effort to mine new ones becomes increasingly expensive) so creation of new coins is either non-existant or becomes extremely slow over time. So they're deflationary by nature. The big problem with that is that it hinders adoption as an actual currency because it's more worthwhile to save/hold it than to spend/trade with it. So in order for it to be a real currency it will need (close to) 100% adoption, but that's basically made impossible by its deflationary nature.

Isn't this an inherent contradiction though? If bitcoin ever reached 100% adoption, it would not be a good investment, because it could no longer possibly be deflationary. It could be a good currency, but yet again, that depends entirely on people mining it.....for essentially no purpose? Meaning that if it were to hypothetically achieve 100% adoption, its value would be far, far, far lower than the cost of mining it. Even if that doesn't occur, doesn't the exponentially more difficult mining significantly reduce the benefit/incentive to each new comer while immensely rewarding the early adopters? Isn't that awfully similar to a Ponzi scheme?

And....if it never reaches widespread adoption, there is really no reason for it to be valuable, right? Other than hype? It literally serves no other purpose.

apparent contradiction 1: It's value depends on the idea that it will achieve widespread adoption, but widespread adoption would render it not valuable.

apparent contradiction 2: Its ability to be deflationary is fundamentally at odds with its ability to achieve widespread adoption. It can't be rare and not rare simultaneously, essentially.

apparent contradiction 3: The benefit of mining (the key mechanism behind the entire system) decreases over time inversely proportional to the cost of mining, perhaps exponentially so.

 

[Danoff]

Isn't this an inherent contradiction though? If bitcoin ever reached 100% adoption, it would not be a good investment, because it could no longer possibly be deflationary.

Huh? No that's not correct.

It could be a good currency, but yet again, that depends entirely on people mining it.....for essentially no purpose?

The purpose of mining it is to make money. If you can mine cryptocurrency, you're creating money that you can then use to purchase goods and services.

Meaning that if it were to hypothetically achieve 100% adoption, its value would be far, far, far lower than the cost of mining it.

Huh? If the pool of goods and services that cryptocurrency can purchase directly expands drastically (to all goods and services in the world), it means roughly the same amount of currency must be able to purchase more goods and services, which means that its value will skyrocket. Skyrocketing value creates higher demand for mining.

Even if that doesn't occur, doesn't the exponentially more difficult mining significantly reduce the benefit/incentive to each new comer while immensely rewarding the early adopters? Isn't that awfully similar to a Ponzi scheme?

It's kind the opposite of a ponzi scheme actually. A newcomer miner is benefiting from the work that the previous miners have done and is not paying them for their prior participation.

And....if it never reaches widespread adoption, there is really no reason for it to be valuable, right? Other than hype? It literally serves no other purpose.

The purpose of cryptocurrency is to enable a monetary exchange that is difficult to counterfeit, safe, and without the intervention of government. That actually doesn't go away in the absence of widespread adoption.

apparent contradiction 1: It's value depends on the idea that it will achieve widespread adoption, but widespread adoption would render it not valuable.

Widespread adoption would increase its value.

apparent contradiction 2: Its ability to be deflationary is fundamentally at odds with its ability to achieve widespread adoption. It can't be rare and not rare simultaneously, essentially.

Ah, I see the issue. Rarity stays the same. Widespread adoption means smaller and smaller pieces of it are being traded. Maybe you're trading 1/1000th of a bitcoin instead of 1 bitcoin for example.

apparent contradiction 3: The benefit of mining (the key mechanism behind the entire system) decreases over time inversely proportional to the cost of mining, perhaps exponentially so.

That depends entirely on the value of the currency. Mining 1 bitcoin is far more valuable if bitcoin is widely adopted, for example. It's a built-in check to the system. People will stop mining if the value doesn't go up (because mining gets harder). The currency stops inflating because mining has stopped, which reduces the downward pressure on the value - encouraging adoption, which encourages the value go go up, which ultimately encourages mining to begin anew.

It's a pretty well thought out system.

 

[PocketZeven]

People are greedy... and “greed is good”

 

[Dennisch]

Going back up. 👍

 

[WilliG]

I think buying Altcoins could be a good strategy, at least in the next few years. I try to follow the latest news and recently I found an article by ICO Pulse about Which altcoins to buy. Currently Ethereum is on the decline, Ripple is also falling. New cryptocurrencies are advantageous because during the ICO they are sold at a discount.

 

[PocketZeven]

I think buying Altcoins could be a good strategy, at least in the next few years. I try to follow the latest news and recently I found an article by ICO Pulse about Which altcoins to buy. Currently Ethereum is on the decline, Ripple is also falling. New cryptocurrencies are advantageous because during the ICO they are sold at a discount.

I presume you are fairly new to the game. Don't blindly buy into ICO's the majority are money grabbing scams. In essence they are unregulated IPO's. That is NOT what Cryptocurrencies are about. Most of these new coins have absolutely no usecase, but to raise money for the owners. You are probably going to make a profit by buying into these ico's but a lot riskier.

And about Eth and ripple "falling".... Just look at the price exactly 1 year ago... XRP= approx. 0.03 usd , Eth=approx. 259 usd. Hardly falling are they?

 

[boiltheocean]

Not much activity in this thread, but that isn't really surprising when we've been in this slump for quite a while. Curious what everyone else is thinking about the state of the market at the moment? Personally I think the sell off has finally run out of gas and we're about to see Bitcoin start a steady climb back to $10k again.

 

[Jarnokee963]

Not much activity in this thread, but that isn't really surprising when we've been in this slump for quite a while. Curious what everyone else is thinking about the state of the market at the moment? Personally I think the sell off has finally run out of gas and we're about to see Bitcoin start a steady climb back to $10k again.

Wouldn't say 10k, perhaps 8k is more realistic. Since I almost invested in Bitcoins in 2009 for €650, yes a mistake, i'm now more investing in Ethereum and Ripple. I see Ripple going back to €1 soon.

 

[Mike Rotch]

Curious what everyone else is thinking about the state of the market at the moment?

The one fundamental that has changed from the heady days is that Tether is no longer pumping the markets up via Bitfinex washtrading. The levels now are more sustainable, but a lot less exuberant then when Tether was running wild.

The recent "good news" of the SEC making noises that Eth is not a security pretty much had zero impact on the market. 6 Months ago a tweet of a tweet of an announcement would result in 25% gains. I think we're in for a longish period of sideways drift.

When/if Mike Novogratz starts appearing in the news, it's time to start buying.

 

[ildd]

Well, good news/bad news. I saw an XLM hike coming with a triple bottom over the weekend, and sure enough it's climbed nearly 50% since...bad news is I didn't buy up any more of it beforehand. But I suppose it's only the start with August coming up.

 

[mustafur]

Getting into cloud mining while the prices are slowly gone down, the difficulty on coins like Dash has gone down quite abit and it's very profitable now.

Bitcoin has gotten worse though, not even worth looking at.

 

[boiltheocean]

Wouldn't say 10k, perhaps 8k is more realistic.

Well you called the July run perfectly. Didn't quite see the break that could've taken us up to 10k but 8k held firm for a week.

Do we have any Doge holders in here? 162% up in 3 days...

 

[AlvaroF]

@Dennisch had some, last I remember. Don't know if he still has some Doge

 

[Dennisch]

Do we have any Doge holders in here? 162% up in 3 days...

I have 16000 of them.

@AlvaroF thanks for the tag

 

[boiltheocean]

Looks like we finally have a trusted, viable alternative to Tether.

 

[PocketZeven]

For the ones following this thread. XRP just peaked 100% ($ 0,76) today and is fighting ETH for the nr 2 spot. Anyone fearing to miss out dont worry the cryptomarket is still very young. Xrp peaked in the beginning of this year at $ 3,48 (currently around $ 0.60). What makes XRP different? It is one of the oldest (2012) and relatively stable crypto around and the one crypto that actually has a very clear usecase, that will begin rolling out soon on a larger scale, unlike other crypto. So I think XRP will at least end this year at $ 2,- and I think that is being conservative.

This is only my personal opinion. I have been holding XRP since march 2017 so tread carefully and as always Do Your Own Research!

 

[VolkswagenX]

For the ones following this thread. XRP just peaked 100% ($ 0,76) today and is fighting ETH for the nr 2 spot. Anyone fearing to miss out dont worry the cryptomarket is still very young. Xrp peaked in the beginning of this year at $ 3,48 (currently around $ 0.60). What makes XRP different? It is one of the oldest (2012) and relatively stable crypto around and the one crypto that actually has a very clear usecase, that will begin rolling out soon on a larger scale, unlike other crypto. So I think XRP will at least end this year at $ 2,- and I think that is being conservative.

This is only my personal opinion. I have been holding XRP since march 2017 so tread carefully and as always Do Your Own Research!

Was at work away from my ledger Nano S not being able to take some profits and being very nervous. XRP turned my portfolio from deep red to mega green.

 

[JohnBM01]

For the first time ever, I got to see and touch one of those Bitcoin things. I am still unsure and uneducated about the whole cryptocurrency thing, but at least I got to see those things in person. I only know of Bitcoin and Enjin Coin (which sponsors the Godot Game Engine). Oh, that and the Dogecoin thing as well.

I still don't know much about these things to properly discuss them, so I must apologize. Or at least don't fault me for trying.

 

[Dennisch]

but at least I got to see those things in person.

You saw a bunch of 0's and 1's?

 

[JohnBM01]

No. I went to a store and saw a shelf that had little Bitcoins that sold for about US$7.99 each. I know not much else about these things.

 

[mustafur]

No. I went to a store and saw a shelf that had little Bitcoins that sold for about US$7.99 each. I know not much else about these things.

You now know less.

A coin resembling what a bitcoin might look like if it was a real coin isn't Bitcoin.

 

[JohnBM01]

Come to think of it, I guess they were just little collectible coins in the form of a Bitcoin. So you all are right. I am still very uneducated on cryptocurrency.


[OMISSION/EXPLANATION] I was probably thinking you could buy one of those little coins to translate into Bitcoin currency. That was my mindset early.

 

[Touring Mars]

Facebook is to launch a new cryptocurrency called Libra and it already has the backing of some heavyweight companies such as Visa, Mastercard, eBay, PayPal, Uber, Spotify and cryptocurrency exchange Coinbase.

https://www.theguardian.com/technol...cryptocurrency-new-digital-money-transactions

A couple of questions spring to mind immediately: what effect will this have on other cryptos (I'm guessing it could result in most other cryptos bombing/being wiped out, but could also bring cryptocurrencies into wider user generally) and will it be possible to trade Libra coins in the same way as Bitcoin? (and how can one make a profit from it?!)