Bitcoin, Cryptocurrency and Blockchain Discussion Thread

[EVWatcher]

I feel that tension too. From the ethics side, I think there are serious problems with financializing any natural commodity. Consider how much human and ecological damage has been done to fill vaults with gold. Gold functions primarily as a token of value and valued too highly for much practical use. During the last oil glut, new oil storage systems had to be created just to hold the billions of barrels that investors wanted, but consumers had no use for. Moreover, cheap oil kept the global economy stuck on burning oil for extra years. So really bad things happen to people and the ecosystem when there is too much cash circulating in the economy looking for some store of value. We should not be using commodities to store excess fiat currency that can be create by central banks faster than use value of the commodities grow.

It is frustrating that bitcoin has a stupid "mining" operation, but I think it pales in comparison to commodity based schemes. Moreover, it does accomplish a few useful things. It exploits excesses of renewable energy and pushes computer technologies to become more energy efficient via learning curve effects. Additionally it motivates advances in cybersecurity. I also think there are opportunities to define future cryptocurrencies that capture the value of existing bitcoins without replicating the inefficiencies of bitcoin. For example, image a new blockchain that you could write cryptoassets to for a certain exchange into a new crypto asset. That is, suppose I could transfer my 0.001BTC to the blockchain for uBTC and get 1000 uBTC in exchange where uBTC has a lower transaction cost than BTC. This exchange transaction would take my 0.001BTC permanently out of circulation. So if the transaction cost is lower and the quality of security and other features are just as good or better, then every actively user of BTC makes the exchange to uBTC. But none of the value of the original BTC ever gets lost (except cases where users forgot password or accounts). Something like this ought to make for a compelling transition, and may be absolutely necessary if some security weakness comes into being. It trust there are much more clever crypto technologists than me who can figure this out. A key point though is with trillions of dollars worth of bitcoin and other crypto at stake, you don't just lose interest in the value that has already been tokenized, even if you invent a better token. You take care to transfer value into superseding tokens. Some really small cryptocurrencies could fall into disuse, but too much value is a stake with the larger ones. So in the long run, the most efficient and trustworthy cryptos will win and will perpetuate the value of bitcoin. Inefficient mining practices will be abandoned along the way.

It will be interesting to watch what happens to gold. The token value of bitcoin could eclipse the token value of gold. This could mean that gold prices will fall. If they fall far enough, gold mining comes to an end. Vaults full of gold bricks could begin to circulate to make more electrical components. Strip the token value from gold and the use value of gold will dictate how we make best use of it. Hoarding is perhaps the most absurd use of all.

I’m comfortable with fiat currency managed with MMT. To me golds value is as a manufacturing component, for which there are a number of things it is uniquely good for.

Gold to me is totally irrelevant to the monetary discussion. As is any other commodity not priced based off its demand as a manufacturing component.

So the only relevant comparison there is fiat money. Which from an energy and environmental impact standpoint is no contest.

The rest of the points you make to me don’t feel like they stand on their own.

 

[jhm]

Per Musk

 

[cusetownusa]

Several good points in this video.

Bitcoin as a bank: If I put $1B into a bank, that does not overvalue the bank by $1B. It just means that the bank is storing more money. The bank operates at a larger scale.

Bitcoin is property not a security: Is there a problem with an executive personally owning BTC directing her company to then buy bitcoin? Is this insider trading? Security laws apply to securities. But conflict of interest still must be considered.

Scale matters: Is there a scale above which these conflict of interest issues don't matter? The larger bitcoin is, the harder it is for anyone player to move the price of BTC. We don't really ask those questions of gold ownership and gold is at a market cap of $10T.

Volatility declines with scale: Scale really matters! With scale you have a larger, more diverse community trading bitcoin. With scale, it becomes harder for individual micro shocks to move the prices. Even macro shocks within national or regional economies can wash out as that community of traders becomes more geographically diverse.

Saylor believes bitcoin will over take gold at $10T and become increasingly stable going to $100T. Volatility and growth rates decline as bitcoin marches to $100T. It becomes a stabilizing influence on the global economy.


Let me illustrate this idea that volatility declines with scale. Tesla bought $1.5B in bitcoin when prices was about $33k/BTC and the market cap was $610B. So it was about 0.25% of the market cap, and now the market cap is about $938. But if Tesla had attempted this when the market cap was just $61B, it would have had a much bigger impact on. Maybe that would have nudged the market cap to $120B in as many days later. But what about when the market cap is $6.1T? Tesla buying a mere $1.5B would hardly budge the price higher. Would that size purchase even move it to $6.2T? So then what happens with bitcoin is at $61T? Pretty much zero impact.

So now why would the growth rate decline with scale? We should probably expect some sort of logistic growth cure (S-curve) for bitcoin market cap. Saylor says the globe has about $500T in total assets and thinks that bitcoin will reach $100T or 20% of total asset. Naturally some asset classes like real estate, stock and debt can't really be displaced by bitcoin. So it reasonable to think that long run share of assets is bounded. I don't now if it should be 20% or 2%, but let's follow Saylor's line of thinking. Growth starts exponential and slows down as bitcoin as a share of total assets approaches 20%, and in the long run bitcoin grows with the size of total assets. So we could model it this way: RelChgBTCmarketCap = alpha + beta*(1 - BTCmarketCap/TotalGlobalAssets/0.20). So you hardly notice any slowing of growth rate while market cap is below $10B or 2% share, at that point the grow rate is still 90% of what it was early on, alpha + 0.9*beta. But once it hit $50T, its growing at alpha + 0.5*beta. And as it approaches $100T it slows to just alpha, the growth rate of total global assets. The insight here is simply that bitcoin is still very early on in it adoption curve. This is not much different that trying to understand the growth rate of EVs. Right now its nearly exponential while EVs have about 2.3% share of the new auto market, but the growth rate will slow down as EVs approach 100% of the auto market.

Random thought. I have just started learning more about it and don’t own any myself. I know one person that owns Bitcoin and if the above is true he will be filthy rich. He is probably one of the laziest and unproductive people I know but he bought 20 coins forever ago for nothing and if it goes to 100T then he will have $100,000,000...that would be just crazy. Lol

Here I am busting my arse all of these years to make a living and save, while he sits on is arse and does nothing and he could end up the richest person I know on like a $100 investment. Not sure why this bothers me. Lol

 

[jhm]

I’m comfortable with fiat currency managed with MMT. To me golds value is as a manufacturing component, for which there are a number of things it is uniquely good for.

Gold to me is totally irrelevant to the monetary discussion. As is any other commodity not priced based off its demand as a manufacturing component.

So the only relevant comparison there is fiat money. Which from an energy and environmental impact standpoint is no contest.

The rest of the points you make to me don’t feel like they stand on their own.

Fiat currency is a wonderful advance over any token backed by a commodity. Some economic thinkers point out that fiat is backed by taxation. That is, a government imposed a tax that can only be paid by a certain currency and that is what makes the currency real. But even the tax value theory is a vain attempt to base the value of currency on something.

The more radical idea is that value of money needs not be based on or derived from anything, not gold, not taxation, not government fiat. Tokens are units of value, but are not inherently valuable. What makes tokens valuable is that a community uses them.

For example, when you play the game Monopoly, the monopoly money is a token, a unit of value. It is not inherently valuable or based on anything else that has value. But during the course of playing Monopoly, these tokens have value to participants in the game. They enable participants to play the game and to determine who's winning and by how much. This is token value.

Fiat money is token value where a government gets to set the rules of the game. This has worked great for the US Dollar, but less well for counties like Argentina. A government can fiat their money but that need not make the money terribly valuable beyond those obligated to pay takes to that government. The US Dollar is a bigger game than the Argentine Peso. Around the world more people and institutions are willing to hold USD than ARS. They are both fiat currency, but that does not make them equal value. You have to look at the size of the USD and ARS games and exchange rates to under the relative value of the two currencies.

 

[EVWatcher]

Fiat money is token value where a government gets to set the rules of the game. This has worked great for the US Dollar, but less well for counties like Argentina. A government can fiat their money but that need not make the money terribly valuable beyond those obligated to pay takes to that government. The US Dollar is a bigger game than the Argentine Peso. Around the world more people and institutions are willing to hold USD than ARS. They are both fiat currency, but that does not make them equal value. You have to look at the size of the USD and ARS games and exchange rates to under the relative value of the two currencies.

I do see the intent with taking power away from countries where government goes wrong. The argument is that crypto currency will help people in those countries overcome their bad governments and that in countries where it isn't necessary nothing will go wrong.

I see this as incredibly optimistic. Naively so. Social media was heralded as giving a voice to the people when the Arab Spring started.

The reality was China figured out how to block social media from the rest of the world from their citizens and created clones that serve the government.

The Arab spring made things worse than ever in the middle east.

And in developed nations its brought democracy to its knees.

I see the far more likely future of crypto being that countries that already have power structures that would allow for it would block access defeating the purpose it was intended for.

And countries that don't have that power structure, like the US, will see dark crypto money enter politics - making a bad money in politics game far worse that it already is -, ultra rich sending more money offshore, tax revenues crash, and wealth inequality increase.

 

[jhm]

I do see the intent with taking power away from countries where government goes wrong. The argument is that crypto currency will help people in those countries overcome their bad governments and that in countries where it isn't necessary nothing will go wrong.

I see this as incredibly optimistic. Naively so. Social media was heralded as giving a voice to the people when the Arab Spring started.

The reality was China figured out how to block social media from the rest of the world from their citizens and created clones that serve the government.

The Arab spring made things worse than ever in the middle east.

And in developed nations its brought democracy to its knees.

I see the far more likely future of crypto being that countries that already have power structures that would allow for it would block access defeating the purpose it was intended for.

And countries that don't have that power structure, like the US, will see dark crypto money enter politics - making a bad money in politics game far worse that it already is -, ultra rich sending more money offshore, tax revenues crash, and wealth inequality increase.

Crypto seems to hold forth the separation money and state. Politicians of course can be corrupted by any offering of a thing of value.

Recent disruption to stock and crypto markets seems to be based on testimony of the Fed Chair before Congress. The US system tries to have some separation between monetary and fiscal policy, but in practice politics and policy are intertwined. Generally, I think the Fed does a better job than Congress. I do like that the Fed generally does manage to limit unemployment and inflation. And this is beneficial to the US economy and much of the global economy. So I am not ideologically opposed to the Fed, ECB or other central banks.

But if I lived and worked in Argentina, I may have a very different experience and outlook. So one of the virtues of bitcoin is that it has a fixed monetary policy. This can be a refreshing alternative to dysfunctional politics eroding one's national currency. If I lived in Argentina, I would definitely want to hold some USD and dollar denominated assets, and of necessity I would hold some ARS pesos. In such a context, bitcoin and other crypto hold a more compelling value proposition than they do within the US.

National currencies do fail from time to time. Some countries move to a eurodollar economy, essentially where the economy runs on the USD. For example in DR Congo, there is a Congolese franc (DCF), but if I were to send remittance to my friend in DRC it would be USD. Exchanging it to DCF would only reduce the value as most of the economy prefers USD to DCF. Such a eurodollar system works better for trade inspite of the fact that the Fed pursues monetary policy that is focused on the needs of the US economy, even though that can disadvantage the local economy. So the prospect of having a strong global currency that fixed and not catering to the needs of any specific country could hold great promise to countries with failed currencies.

Additionally many of these economies are highly dependent on remittances and the transaction costs for remittances is very high. For example it costs $30 to send $200 USD to DR Congo. So just cutting the cost of remittances is pretty important for economic progress in such areas.

So this takes me back to the idea that we need to watch how big the crypto game gets. The market cap of BTC is really key to how strong it is. The low hanging fruit for any crypto comes from people and businesses in countries with weak or failed currencies. Fussing over ideological preferences is privilege in affluent countries. Any country where the people depend on remittances for basic survival will simply pursue whatever works. So the bar is actually very low for crypto.

 

[lascavarian]

Here I am busting my arse all of these years to make a living and save, while he sits on is arse and does nothing and he could end up the richest person I know on like a $100 investment. Not sure why this bothers me. Lol

It should bother you and a lot more. There are mystery “people” who hold millions and million of Bitcoins. They remain in the shadows and yet stand to rule us all.

Is Satoshi a person or a cabal of oligarchs? Why should this unknown entity deserve 1/21 of all the value flowing into Bitcoin? Has there ever been such a potential concentration of wealth in history? This is a tragic step backwards. Perhaps the greatest creation of inequality in history.

Such huge moral questions ignored in the rush for glitter. Greed is such a human frailty.

 

[Rarity]

Is Satoshi a person or a cabal of oligarchs? Why should this unknown entity deserve 1/21 of all the value flowing into Bitcoin? Has there ever been such a potential concentration of wealth in history? This is a tragic step backwards. Perhaps the greatest creation of inequality in history.

As a point of clarification, we don't know that any human being has real access to that 1/21 value. It may be lost to the shredder or to a crashed hard disk or thumb drive in the landfill, etc.

 

[StateoftheArt]

It should bother you and a lot more. There are mystery “people” who hold millions and million of Bitcoins. They remain in the shadows and yet stand to rule us all.

Is Satoshi a person or a cabal of oligarchs? Why should this unknown entity deserve 1/21 of all the value flowing into Bitcoin? Has there ever been such a potential concentration of wealth in history? This is a tragic step backwards. Perhaps the greatest creation of inequality in history.

Such huge moral questions ignored in the rush for glitter. Greed is such a human frailty.

It would be prudent to take these same questions and apply them to the central banking system.

 

[jhm]

Here is a mock up example of a financial problem crypto tokens can solve,

HELLO, MY NAME IS Henri MSELBENDE. BUSINESSMAN IN BENI DEMOCRATIC REPUBLIC OF CONGO. I NEED TO BORROW 500 USDT MAKE MY SOLARCART BETTER FOR BUSINESS. I AM AN HONEST PERSON AND WILL PAY BACK 500 + 100 INTEREST USDT IN 12 MONTHS. I CAN POST 0.006 BTC AS COLATORAL. PLEASE HELP ME!! BE A GOOD NDUGU!!!

So would you be willing to lend Mselebende $500? What kind of tokens would you need on a blockchain to make this a good contract with strong likelihood of repayment?

I actually think this could be a good, moderate risk micro loan. But there are no banks that would touch it. I'll share my solution later, but I want to give people an opportunity to think through this on their own and brainstorm. One hint not all tokens need have monetary value. For example, a notary service in DRC could issue a token that affirms that Mr, Henri MSELEBENDE has business license registered in Beni, DRC. Another token could confirm that he bought a solarcart a year ago. Such tokens do not transmit monetary value: they simple transmit certified facts the enable the lender to evaluate creditworthiness. What else is needed?

 

[EVWatcher]

Here is a mock up example of a financial problem crypto tokens can solve,

HELLO, MY NAME IS Henri MSELBENDE. BUSINESSMAN IN BENI DEMOCRATIC REPUBLIC OF CONGO. I NEED TO BORROW 500 USDT MAKE MY SOLARCART BETTER FOR BUSINESS. I AM AN HONEST PERSON AND WILL PAY BACK 500 + 100 INTEREST USDT IN 12 MONTHS. I CAN POST 0.006 BTC AS COLATORAL. PLEASE HELP ME!! BE A GOOD NDUGU!!!

So would you be willing to lend Mselebende $500? What kind of tokens would you need on a blockchain to make this a good contract with strong likelihood of repayment?

I actually think this could be a good, moderate risk micro loan. But there are no banks that would touch it. I'll share my solution later, but I want to give people an opportunity to think through this on their own and brainstorm. One hint not all tokens need have monetary value. For example, a notary service in DRC could issue a token that affirms that Mr, Henri MSELEBENDE has business license registered in Beni, DRC. Another token could confirm that he bought a solarcart a year ago. Such tokens do not transmit monetary value: they simple transmit certified facts the enable the lender to evaluate creditworthiness. What else is needed?

I feel like I always run into this with crypto conversations. People totally ignore my comments about what could go wrong and talk about what good things might happen.

I feel like human history is full of far more bad things that happened because bad people used well intentioned systems than good things that happened because there was a novel idea that might work.

I understand your perspective via Argentina. But I feel like crypto protecting you from you government is like saying you have an assult rifle to protect you from your government. You may like that idea, and it may make you feel more comfortable. But I dont believe that assault rifle makes you any safer from your government or otherwise. Meanwhile the easy legal access to that assault rifle is a source of great harm.

 

[StateoftheArt]

I feel like I always run into this with crypto conversations. People totally ignore my comments about what could go wrong and talk about what good things might happen.

I feel like human history is full of far more bad things that happened because bad people used well intentioned systems than good things that happened because there was a novel idea that might work.

I understand your perspective via Argentina. But I feel like crypto protecting you from you government is like saying you have an assult rifle to protect you from your government. You may like that idea, and it may make you feel more comfortable. But I dont believe that assault rifle makes you any safer from your government or otherwise. Meanwhile the easy legal access to that assault rifle is a source of great harm.

I read this kind of nonsensical rhetoric and I buy more BTC.

 

[Rarity]

The more radical idea is that value of money needs not be based on or derived from anything, not gold, not taxation, not government fiat. Tokens are units of value, but are not inherently valuable. What makes tokens valuable is that a community uses them.

Isn't what makes tokens valuable is that they are believed to have value? It is a circular belief system reinforced with the "useful" boot program.

 

[lascavarian]

As a point of clarification, we don't know that any human being has real access to that 1/21 value. It may be lost to the shredder or to a crashed hard disk or thumb drive in the landfill, etc.

Correct. An “open” mystery with ZERO transparency. If it has been lost then gone forever and an enormous loss of earthly value and wealth.... poof! But there is no way of knowing so every day the uncertainty grows in the shadows.

 

[lascavarian]

It would be prudent to take these same questions and apply them to the central banking system.

Is the central bank supposed to keep track of Satoshi?

 

[heltok]

I see the far more likely future of crypto being that countries that already have power structures that would allow for it would block access defeating the purpose it was intended for.

I just don’t see how they would do it. Bitcoin is just information sent over the internet. If you block that then you need to block the entire internet. Good luck doing that in 2021. What you can do is block the USD being converted to Bitcoin. But that limits USD, not Bitcoin. People can still drive to Mexico and covert them there. You can make it illegal to invest in it, but some country that likes money, like Schwitzerland, Singapore, Cayman Islands will be happy to take the investments. You can make some specific use case illegal, for example buying drugs, but that is already illegal so will people really care that they now have to commit two crimes to get their Charlotte’s Web?

Sure it might happen, but it’s been like 9 years of silkroad and it still hasn’t happened. And now it is even more widely integrated into major companies and millions of user, banning it is getting more and more politically hard. If Biden tomorrow announces a ban on Bitcoin there will be so much negative press and so many angry influencers, can he even survive as a president after doing that? Would he risk it?

For good or bad, I think Bitcoin is here to stay...

 

[EVWatcher]

I just don’t see how they would do it. Bitcoin is just information sent over the internet. If you block that then you need to block the entire internet. Good luck doing that in 2021. What you can do is block the USD being converted to Bitcoin. But that limits USD, not Bitcoin. People can still drive to Mexico and covert them there. You can make it illegal to invest in it, but some country that likes money, like Schwitzerland, Singapore, Cayman Islands will be happy to take the investments. You can make some specific use case illegal, for example buying drugs, but that is already illegal so will people really care that they now have to commit two crimes to get their Charlotte’s Web?

Sure it might happen, but it’s been like 9 years of silkroad and it still hasn’t happened. And now it is even more widely integrated into major companies and millions of user, banning it is getting more and more politically hard. If Biden tomorrow announces a ban on Bitcoin there will be so much negative press and so many angry influencers, can he even survive as a president after doing that? Would he risk it?

For good or bad, I think Bitcoin is here to stay...

The chinese seem pretty successful at it, while also growing control of 62% of the network

 

[MC3OZ]

I feel like I always run into this with crypto conversations. People totally ignore my comments about what could go wrong and talk about what good things might happen.

I feel like human history is full of far more bad things that happened because bad people used well intentioned systems than good things that happened because there was a novel idea that might work.

I understand your perspective via Argentina. But I feel like crypto protecting you from you government is like saying you have an assult rifle to protect you from your government. You may like that idea, and it may make you feel more comfortable. But I dont believe that assault rifle makes you any safer from your government or otherwise. Meanwhile the easy legal access to that assault rifle is a source of great harm.

This is a quality conversation, I'm very interested in the question of whether Blockchain can do something to make the world a more equal place, and leave humanity on balance better off.

That is a completely separate question to whether or not BTC of Blockchain can make investors money

A fundamental consideration IMO is "unwelcome guests" participating in a transaction and adding little value:-

• Real Estate Agents
• Car dealers
• Banks
• Charity Administration
• Stock Exchanges and Stock Brokers.
• EBay

When a transaction involves a willing buyer and seller, all other parties that want to be part of the transaction, should add value.

The added overhead is more of a consideration for developing countries where fees, commissions, exchange rates and middlemen can add up to a large slice of the transaction value.

Another related issue is, the internet isn't really fit for purpose in terms of security, privacy and identity verification.
The internet is more like the wild west where hackers are outlaws with guns, and scams of all sorts are abundant.

It isn't necessary for Crypto to replace currency, we still have hand writing, in spite of :- the Printing Press, Radio, TV, the internet, Streaming etc.

If instead of giving a charity donation I can fund a micro loan which goes straight to the loan recipient, and I may or may not get my money back, that is a step forward. Because if the money comes back, I can roll it over to the next loan.

 

[StateoftheArt]

Is the central bank supposed to keep track of Satoshi?

Why are there central banks in the first place? Do you really understand how they work? So here let me do it for you:

It should bother you and a lot more. There are mystery “people” who control and own the central banks. They remain in the shadows and they rule us all.

Are the central banks run by a person or a cabal of oligarchs? Why should this unknown entity deserve 1/21 of all the value flowing into the central banks? Has there ever been such concentration of wealth in history? Has there ever been such a creation of debt in history? This has been tragic step backwards. Perhaps the greatest creation of inequality in history.

Such huge moral questions ignored by those brainwashed by the system and in the rush for glitter. Greed and lack of critical thinking is such a human frailty.

 

[jhm]

I feel like I always run into this with crypto conversations. People totally ignore my comments about what could go wrong and talk about what good things might happen.

I feel like human history is full of far more bad things that happened because bad people used well intentioned systems than good things that happened because there was a novel idea that might work.

I understand your perspective via Argentina. But I feel like crypto protecting you from you government is like saying you have an assult rifle to protect you from your government. You may like that idea, and it may make you feel more comfortable. But I dont believe that assault rifle makes you any safer from your government or otherwise. Meanwhile the easy legal access to that assault rifle is a source of great harm.

You're reading an awful lot into my perspective. I never claimed that cypto would save you from your government or somebody else's government. I am definitely not second amendment person. I am saying that a cryptocurrency with a fixed, non-politically reactive monetary policy can provide a welcome alternative and may in fact attract a large, vibrant community traders.

Please don't expect that I can or will answer all your questions. These are inherently very subtle concepts and it can take generations before most people are comfortable with it. For example, there are still a great number of people who are still not comfortable with the US dollar going off the gold standard. I am unable to marshal compelling reasons why gold bugs should be satisfied with fiat currency. I generally don't even try.