Topic: "Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws) - page 6. (Read 43189 times)

I don't, and never have.  I've been using bitcoins as a medium of exchange for 4+ years now, and have bought all range of items; from hats for my avatar on TF2 to handmade jewlry on Etsy to game & ebook licenses to about 16 months straight of cell service.

How does that fit into your investment vehicle model?

Bitcoins are actually a pretty crappy investment vehicle, despite the historic returns.  Like gold, there is no dividend.  You're not actually investing in anything, and the scarcity that speculators have been chasing is artificial.  There are simply too many substitutes for that to be a good idea long term.  Bitcoins are not a commodity, so they can't be made into anything, and nothing requires them to operate.  Wild swings due to speculation aside, bitcoins derive all of their fundamental value from their (current and future) usefulness as a value transfer over distance mechanism.  If you're holding onto them solely in the hopes that they will rise in exchange value, I would have to recommend that you reassess your portfolio.

Mine have more than doubled.

Bitcoin users actually use fiat as their currency of choice.  They use bitcoin as an investment vehicle - dollars, euros, etc. are the medium of exchange by which they either buy bitcoins on exchanges or use to buy mining equipment which generates bitcoins, the investment.  Let's contrast the difference between something used as a medium of exchange, such as a dollar, and something used as a store of value which is expected to appreciate over time ("investment"), such as bitcoins.

A dollar is a good example of a currency.  Most people hold on to a small amount of dollars at any given time, and readily swap those dollars out for things they need - products or services.  Most people are also receiving dollars at the rate they spend them.  For example, your average person's checking account doesn't hold much currency at any given time - something like $1,000 - but that person might have received $3,000 in income and spent $3,000 over a single month.  The person uses the dollar as an exchange of value, because he is exchanging the vast majority of his dollars for things he needs as he receives dollars for providing services or goods for other people.  The average person doesn't let his dollars sit around because they don't gain value over time relative to anything else - they tend to slightly lose value.  Therefore, dollars are constantly and rapidly moving from person to person, business to business.  The average American starts and ends the year with about $3,000, yet receives $35,000 through the course of the year and spends $35,000 through the course of the year.  95% of dollars are spent quickly on something else.  People expect their $1.00 to be worth 3% less at the end of the year, so it's readily exchanged for other things.  If that $1.00 was expected to be worth more at the end of the year, it would be held onto.  The dollar would cease being a medium of exchange, since people would hoard them.

Let's compare this to a bitcoin.  The average bitcoin user uses his currency of choice - typically dollars, euros, or other fiat - to either purchase bitcoins or purchase mining equipment to generate bitcoins.  The average joe with a job who is into bitcoins might be able to buy 1 bitcoin a month from an exchange, or generate 1 bitcoin a month with a decent mining setup.  At the end of the month, this typical bitcoin user has gained 1 bitcoin, but has spent virtually none of the coins on products or services.  It's likely he's donated 0.05 a couple of times for some apps that he downloaded which offered a donation, possibly paid back a friend, etc.  But 95% of the bitcoins are just sitting there in his possession.  After two years, the average bitcoin user has acquired 24 bitcoins, yet only spent at most 1-2 of them.  Contrast this to the poor dollar - 95% of dollars are spent on something just as soon as they are received.  The dollar (a currency) and bitcoin (a commodity/investment) are total opposites.

Bitcoin is not fundamentally designed to behave as a currency.  Its value increases rapidly over time, and there are a fixed maximum number of coins which can be in circulation, ever, so this phenomenon will continue as long as demand for bitcoin increases.  95% of 'transactions' are either users acquiring bitcoins from exchanges or simply moving bitcoins from one wallet to another in their possession, with the intent and purpose of holding bitcoin over a long period of time with the expectation that their value relative to goods or services will increase, or selling coins that have appreciated in value.  Contrast this to any currency, where 95% of 'transactions' are exchanges for goods or services, or investments.

This thread, and every other bitcoin discussion, seems to really be an endless debate about bitcoin's strengths/weaknesses as an investment.  The bigger point is missed.  The fact of the matter is that bitcoin simply cannot function as a currency, and the behavior of users on the network confirms this, more and more so over time.

Tying into the original post, I suppose, is the fact that Bitcoin's a horrible, HORRIBLE long-term investment.  When AES is rendered obsolete or any of the potential flaws discussed in this thread are exploited, all value in the network will be lost.  Seeing as how at least 8% of all bitcoins in circulation have been stolen at least once, well....

Shadowstats is probably the most trustworthy source of information available in the United States today.  Basicly, their metrics are the most similar to those used prior to WW2, so they would be the best to compare to the official statistics for the Great Depresssion, as an example.  The data that comes out of official US government channels are only slightly more trustworthy than those that come out of official Chinese channels, or official Cuban channels.  It is unwise to trust the word of the institution that is most likely to benefit from an unrealisticly positive image.

While that is likely a fairly accurate statistic, it's still very misleading.  There is a fable that is told (sometimes) to economics students to illistrate the nature of debt like this.  Here is one version of it I quickly found with google...

It is the month of August; a resort town sits next to the shores of a lake. It is raining, and the little town looks totally deserted. It is tough times, everybody is in debt, and everybody lives on credit.

Suddenly, a rich tourist comes to town. He enters the only hotel, lays a 100 dollar bill on the reception counter, and goes to inspect the rooms upstairs in order to pick one.

The hotel proprietor takes the 100 dollar bill and runs to pay his debt to the butcher. The Butcher takes the 100 dollar bill and runs to pay his debt to the pig raiser. The pig raiser takes the 100 dollar bill and runs to pay his debt to the supplier of his feed and fuel. The supplier of feed and fuel takes the 100 dollar bill and runs to pay his debt to the town’s prostitute that, in these hard times, gave her “services” on credit. The hooker runs to the hotel, and pays off her debt with the 100 dollar bill to the hotel proprietor to pay for the rooms that she rented when she brought her clients there.

The hotel proprietor then lays the 100 dollar bill back on the counter so that the rich tourist will not suspect anything. At that moment, the rich tourist comes down after inspecting the rooms, and takes his 100 dollar bill, after saying he did not like any of the rooms, and leaves town.

No one earned anything. However, the whole town is now without debt, and looks to the future with a lot of optimism.


Most of these derivitives are just like the debt that this small town had, interlinking trade debt that largely self cancels.  (Insert plug for Ripple here, if you like)  What the real fear is that, should one of the major players here, say the hooker, was also indebted to the tune of $100 to her drug dealer.  This whole story coudl come crashing down if the rich tourist didn't get his $100 bill back.  However, not all of it would come crashing down; some portion of the debt is real enough and back by real assets.  No matter how much of the derivitives can actually be paid, the assets are real.

EDIT::  Notice that in the story, the total indebtedness of the town was about $400

Perhaps this is why Third Reich was perfectly operational until destroyed militarily. Who is there to destroy this one? Or should we start to accelerate our prayers concerning Jesus' coming? 

While I agree that most of the brightest wouldn't work for the government as long as they can find income elsewhere, that's already the case.  Those that are ideologically opposed to government leave those services fairly quickly under any economic conditions.  However, there are always the remainder.  I've read that roughly 3% of the adult population are sociopathic to some degree or another.  Having worked in government 'enforcement' in the past, my own experiences tell me that government is significantly overrepresented by this demographic.  If you have ever really known a true sociopath, they are not motivated by economic gain so much as by personal power gain.  A society in decline would give many of them an increased opprotunity for power gains in the near term.  I just can't picture these people walking away from government 'service', and (unfortunately) almost all of them are quite intelligent.  Do not underestimate your enemy, and trust me when I say that they are, indeed, your enemy.

Operating the NSA requires quite bright people. Don't you think they will be increasingly hard to find when the U.S. descends towards being the Animal Farm?

My thinking goes like this: what people want the most is freedom, and working for a totalitarian state is the antithesis of freedom. Probably some will still choose to do it, but the brightest have the most choice and are the least likely to choose working for the govt.

F8ck the coming apocalypse is worse than I previously estimated...

At the end of my prior post, there is a link to an insightful Adam Back presentation. Skip also to the 113:00 min point in the video to hear him describe how potentially Ethereum could be infected with a virus!

How are there so many "no"s? Did I not understand the question?

If someone doesn't invest in Bitcoin because they don't understand it, they'll be missing out.
If someone does invest in Bitcoin when they don't understand it, unless they've got an honest friend to help them securely set up an encrypted paper wallet, they'll likely have their coins stolen.

About the imminent conflagrapocalpyse...


As I explained in an upthread post (which I am too rushed to go find the link to at the moment), the ledger of who owes whom is less important consideration than the fact that it represents $150 trillion of human capital that was misdirected in its activities since mid-1980s and especially since 1994 or so when the debt-based economy accelerated (1994 is when Clinton had the equations for official statistics changed so they can unleash the surge).



(note we have inflation of fractional reserve digits which is why official stats lie about inflation to hide its relevance, but simultaneously we have a deflation of M0 which official stats also lie about by including bank deposits held Federal Reserve (which should be monetary base MB not M0), thus MB is hockey stick but the Fed doesn't show us the true M0. The Fed is trying to hide from us the deflation that is really there. We can get a proxy for what is happening with M0 by looking velocity of MB which falling like rock! Go to this link then change the "a/b" to "b/a", click the "Redraw Graph" button, so that you get GDP / MB, then you will see velocity is falling off a cliff since 2008.)

So this is why technological employment is going to be so severe and massive overcapacity in manufacturing, fixed capital infrastructure, and conspicuous consumption, because all during the 1970s, 80s, 90s, and 2000s, while a few of us hackers were becoming 100000X more productive with our new found toy (the personal computer), the bulk of the population was able to stay in the old industrial economy thanks to increasing debt.

So what you are going to see when the $150 trillion debt bomb explodes 2016ish is that anyone who is not very technically relevant in the new Knowledge Economy will find themselves unemployable. The governments will try to appease this majority by taxation and confiscating everything, because they fundamentally don't understand the cause of the problem.


Those ledger IOUs are worthless to both lender and borrower. The capital now is all in the brains of hackers such as myself. We take over now. Checkmate. While we were busy sleeping under our desks for the past 3 decades, the rest of you were out enjoying yourself. Now the payback comes. Oxford U. admits 47% of the existing jobs will be replaced with robots over next 19 years (was 20 last year when study was published).


The government isn't run rationally. The vested interests want to suck as much blood out of a turnip as they can. They have no foresight on outcomes, especially they don't even understand.

However, I am one of those who do believe the Bilderbergs understand they must first collapse the economy in order to create the chaos from which they can get their one world government. They want to weaken local and national structures so they can get the economy-of-scale of control to compete with the technology which is rewarding bottom-up hackers.

It is really a defensive move for them and they while getting their world outcome are actually in retreat and losing the way ultimately.


The nation-state is being destroyed by this. The national institutions will be completely discredited and untrusted within a decade.

Out of the ashes the Phoenix will rise. The world will see massive new productivity once the youth take political control away from the boomers and we move to a high tech Knowledge Age where there are no more severe national barriers. You will be able to freely travel and invest in all countries, we will be headed towards a Jetsons level of lifestyle...


The constitutions aren't followed any more any way.

Government is reactionary. The owners of the government (the vested interests) only do what they need to maintain their position of privilege. They are preparing (e.g. the 2714 tank-like vehicles and 10 billion rounds of hollow point bullets for the Homelove Security dept in the USA, the 9/11 pretext to track everything we do, etc..) but just like in Ukraine and other places where there have been unrest, they will only act as necessary.

The peripheral economies blow up first. We see already Ukraine, Greece, Spain, Thailand, India, Indonesia, Egypt, even China has -18% drop in exports just this month over last year.

Then core of Europe 2015ish or so.

Then the USA will be last to fall 2016ish.

We are getting very close now. We might see a dead-cat bounce in 2017, and the severe SHTF hard down phase maybe 2018.


Well yeah that is why I've been screaming this in the Mad Max thread in the Politics forum. Check it out for more details. See also the Economic Devastation thread in the Economics forum.

There is no chance I am wrong. Zero. The only variability is in the timing. By 2020, I assure you we are in a shithole outcome.

AnonyMint, I realize you are a very intelligent man and I enjoy reading your posts because they address many glaring problems others might realize but either subconciously or deliberately ignore to protect their investments or agendas.
My question to you though is because I have read your prediction about the burst of a $ 150 trillion debt bubble multiple times in your posts how you think such an event will unfold.

To whom is the world in debt exactly and how does this creditor force the government(s) to act as his debt collector(s)? From my understanding of your scenario it will lead to a widespread pauperization of the world respectively the majority of the people. Do you predict a simultaneous increase in the creditor's wealth or is this a scenario where basically everybody gets poorer?

With both scenarios (further concentration of wealth/obliteration of wealth) I see several problems that make this scenario seem unlikely.

1) The widespread confiscation of wealth would inevitably weaken or even nearly eradicate consumerism which is one of the strongest motors to our society and one of the most effective measures for the elite to concentrate wealth at the same time by concentrating the production to satisfy consumerism.  What would the elite gain by basically wiping out most people's spending capacity?
This would in either case harm the creditor by either obliterating his own wealth or at least a lot of possibilities to spend his own wealth.
2) Do all relevant governments work on this collectively? From my current observations of international politics it seems as this is not the case most of the time. Why would it be the case in this event and wouldn't it create opportunities for backstabbing and breaking of the agreement to confiscate all wealth?
3) What boundaries are set for the governments in this scenario? Are concepts like democratic elections or consistency with the constitution still applicable in this case? If not what changes and what keeps governments from doing now what you predict for 2016?

I hope you can answer some of these potential problems/questions as the theory seems pretty far-fetched in my opinion. I would rather fear a global nuclear war at the moment.

Looking forward to hearing from you.     

What does that have to do with whether the technology exists to improve nuclear?

I hope you realize energy is regulated and taxed such that it is controlled by cartels. Getting rid of that doesn't imply a Dark Age, rather it frees us to realize innovations which were suppressed because they are paradigm shifts which compete with the cartels.

Toshiba is a centralist, hypercollectivist monster.

I believe the gains made by the super intelligent who are freed from the chains of socialism will rectify issues such as that, c.f. cryptographic expert Daniel Bernstein's struggle to be free to do research.

For example, Toshiba has a design for a 20MW solid-state nuclear reactor that doesn't need to be mechanically cooled.

"On a poetic note, I can dream can't I, and that is a start..."

You're a dreamer. You really believe that there will still be something like a hightech world around when all debt (=money) with its just-in-time economy and -society has gone? It means dark age, but with the difference of 500 nuclear reactors and fuel pools not being cooled anymore. That's not the same as the infrastructure in ancient rome, egypt, maya etc., where pyramids and aqueducts only were left behind.

https://bitcointalksearch.org/topic/m.5602408

Actually ya come to think of it ya just a few rpc calls would do it if there was an exchange built into
my node..  Hopefully it happens to help out the business side of things.