Topic: Watching amateur finance types flail - page 6. (Read 35334 times)

I use it primarily to purchase goods.  I have some savings, but I spend as many as I can.  Being able to buy food for bitcoins has moved a significant portion of my spending into the bitcoin economy.  I just buy replacement coins with the fiat I would have spent.  It is sometimes a little more expensive (<5%) but it helps the value of my savings to encourage the real economy.  Quit complaining no one does it and join us.

Finally, someone with common sense.  Nagle put so elegantly into words what I've been thinking more and more this past week.

I call bitcoin more of a "digital commodity" as opposed to a "currency" and most of its value is speculative.  It's not being used for purchasing goods.  It's being used to generate more wealth.

right. and if you take into account that there is a monetary inflation of bitcoins of 40% this year alone, or an (exponential) 18% each year for the next 5 years, you can make your own judgement whether the "bitcoin economy" grows accordingly (after it started existing) to maintain bitcoin's value relative to other assets.

You do realize the irony in your nick though, right? Dig Dug blowing up and popping monsters like a bubble, er, balloon

And I've just been reading this highly entertaining thread thinking that bitbot got cut off in mid sentence until your post The whole ensuing grammar discussion became a kind of fascinating ongoing cognitive dissonance.

Exactly. What a stupid, stupid argument. There is no other way to describe it. To say bitcoin needs more dollars to keep it going is to ignore the purpose of bitcoin. What bitcoin needs is more people willing to accept BTC in exchange for goods/services. It is not a "flaw", and it is not specific to bitcoin. It is a simple economic fact.

This line alone shows you don't fundamentally understand the currency. The Cryptographic hash of the transaction block exhibiting specific, tunable properties (matching a number less than 'x'): was not chosen at whim. You should read the first reference in Shatoshi's Paper:
W. Dai, "b-money," (1998)

It explains that you can't do useful work while protecting the integrity of the system. The requirement to do "useful work" would allow dishonest participants to "cheat" by not actually doing the "useful" part of the computation.

people do all sorts of irrational stuff, or might even just have been investing for the future in this case.
this doesnt make the hash rate a fundamental of bitcoin.
this is a fallacy you see quite often here and in articles about bitcoin. people think that bitcoins are created from computing power and that's what gives them value because computing power is expensive.
even if bitcoins were created from hashing this wouldnt give them value. and they aren't.

The "no backing" argument doesn't really fly with me, because it's voluntary participation. You should understand all the things you mentioned about Bitcoin before you part with any hard earned cash (haha) for some - if you didn't go in with your eyes open, you're just another chump. About the "ponzi" thing, I don't think it's the same thing - to my knowledge no one authoritative is claiming any type of guaranteed return in the way ponzi marketers do. Everyone I see promoting it in a big way is saying the same thing: this is a huge risk, with the potential of a huge reward. Disregard Rick Falkvinge being authoritative on Bitcoin.

About the "no economy" - well of course there's a scarce economy (it's not accurate to say there's no economy, it's just paled by the rampant speculation). It's a currency without inherent worth, with no authority telling you you must accept it. Businesses are rightfully nervous about entering into it, particularly with the demonstrated ability to swing wildly in value in a matter of hours.

It's a bit of a catch-22 that most of the speculation revolves around it having a useful economy, and that useful economy is being strangled by the speculation. Many of the heavy investors seem to simply want to buy as many as they can to hoard, expecting that someone else will do the heavy lifting of bootstrapping an economy.

I still think the project has merit as a currency, but I'm not going to hold any long term. I will leave it to others to speculate, though I have been having a pretty good time being a wannabe day trader. I'll keep accepting it in manageable amounts, liquidating it as I get it (or trading it off as quickly as I can for something else of value) and only gambling with what I can afford to lose.

Yup - an economic carrier needs to derive its value from the rest of the world (unless it grows in complete isolation).

Its a core problem BTC shares with every other asset: dollars, houses, gold, silver, sugar, gasoline, etc..

Cool, so if we trade above 30 you're wrong?

I'd just like to hear the qualifier of where your thesis falls apart.

Well, miners were installing hash power long before BTC even had a price.  And difficulty rose faster than the price.  There will always be some miners willing to hash at a short-term loss for the potential reward of long-term gains.  That's how all business works.

History does not show the hash rate to be a one-way function of BTC/USD.  They are correlated indicators demonstrating two-way causality.

I just wanted to +1 the OP / John Nagle.

If it helps - there have been people (me, e.g. but obviously also others, but I don't have their nick or posts atm) bringing up the same arguments (about lack of backing, ponzi nature, bubble look, no economy exists etc) BEFORE the 30$ => 10$ "pop".

I also recently posted the core problem of BTC again(i.e. someone has to keep propping the thing up with his own real world cash to continue the merry go round) in a thread that remained pretty much unaddressed.

agree.


don't agree.
my whole argument is that these prices are ridiculous. whether bitcoin as a technology holds any merit (aka is "not bad") remains to be seen. we still have railroads even though there was a mania.

my guess is that bitcoin isn't even the myspace of e-currencies but one of its predecessors.

I tried to treat botcoin as what it claims to be: a monetary system.
if you have a better way of judging a monetary system please add to that thread.

I don't claim to have the holy grail on bitcoin fundamentals and my thread was just rough estimates, but the hash rate definitely is not a "fundamental" (of the underlying value!) of bitcoin.

the difficulty results from the hash rate which is a function of the price, because miners (should) only install hashing power that is still profitable.
i.e. hash rate is a function of BTC/USD, not the other way around.

No, in the context that was used, that's a valid rebuttal. Anything that compares Bitcoin to centralized services that were shutdown or went bust obviously doesn't understand Bitcoin at all, because Bitcoin is not any more related to these services than it is Paypal.

What's fucktarded is people arguing about inane bullshit like the correct grammar for "an MMORPG" like it even has any place in the discussion. Ad hominem attacks make Bitcoin cheerleaders absolutely no better than the naysayers who can only say something like "well they're a Bitcoin user so honestly they don't know anything."

Apparently it is you who didn't read it. Top of the page at Nagle's site: Bitcoin looks like a Ponzi scheme.

Apparently, someone stealing a bunch of bitcoins and trying to sell them all at once, causing it to go bidless, is equivalent to a pump-and-dump or a Ponzi scheme. Except that neither is the case.

Just because bitcoin looks like X, Y, or Z, doesn't mean it is any of those. An analysis of the fundamental properties of bitcoin is necessary to determine what it is. But you won't fund any such deep analysis from Nagle. Just a stupid cherry-picked chart.

did you even read it? he said pump-and-dump, not ponzi.
if you wanna pick nits, the entire system qualifies as a pyramid scheme UNLESS bitcoin is hugely successful. I've gone into the likelihood of that happening, and how "huge" this success would have to be in my other thread.


well, people here treat it as all of that. if something is not "meant" to be for speculation, but all it is currently used for is speculation, I might just as well see whether this speculation might pay off and compare it to other "investments".

Do you agree or disagree with this line of argument?

P1:  If something's exchange-value is derived from what enough people believe it's use-value could be in the future, and enough people belief it will be more useful in the future, then it's exchange-value is greater than it's current use-value. (i.e. price is largely determined by speculation).
P2:  Bitcoin's exchange-value is derived from what enough people believe it's use-value could be in the future, and enough people belief it will be more useful in the future.
C1:  Therefore, Bitcoin's exchange-value is greater than it's current use-value.

And:

P3:  If something's exchange-value is greater than it's current use-value, then it is probably bad*.
P4:  Bitcoin's exchange-value is greater than it's current use-value.
C2:  Therefore, Bitcoin is probably bad.

*I'm using 'is probably bad' as shorthand for whatever negative thing you want to say about bitcoin.  So, you might replace 'is bad' with 'will probably fail' or 'will probably collapse in the near future', or whatever.

Then we should argue about what the "fundamentals" are of bitcoin.  Your argument seems to be that the fundamentals are some napkin estimates of money supply.

I argue the fundamental is the network difficulty, or hash rate:  http://bitcoin.sipa.be

Growth in the fundamental sustains the rise in price.  At least, it has thus far.