Topic: Why Bitcoin changed the world... and its price will crash - page 5. (Read 6876 times)
I agree strongly with the arguments about infrastructure. Just to add in another analogy and comparison; currently, facebook has such a large userbase and guaranteed infrastructure that even the internet giant Google is finding it very hard to implement its Google+ to compete. I'm sure I'm like many more; I'm on facebook, everyone I know uses it, it does the job I need it to do, why would I choose to move to google+. Mybe the same will be true for bitcoin.
Very interesting read although I would have to disagree with some of the main fundamentals of the arguments you have put forward.
However only time will tell.
However only time will tell.
The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.
This is a specious argument. There are other cryptocurrencies that COULD offer the same functionality, but without bitcoin's marketing, brand name, momentum, and established infrastructure in its miners and its holders. So then they don't really offer the same advantage after all. A currency 's value is not solely determined by its technology and features.
Very well said.... when bitcoin already has the brand name, literally hundreds of millions are being invested into startups and building out infrastructure and adoption. It's doesn't seem all that likely bitcoin would suddenly dissappear and everyone takes all that time and effort spent growing out bitcoin only to do it a second time around for something that isn't that much different.
On the flipside of things one could argue that if a large company like say a Google was to step in and create their own world cryptocurrency it could still have the potential of over shadowing bitcoin if it was done soon enough that bitcoin is still so small. Based on the same reasons you mentioned, the brand name and in the case of google actually having the finincally and technical and business support to actually make adoption happen much quicker than the more grass roots bitcoin community. Of course something like tht would probably have to happen sooner than later. Once bitcoin adoption grows to a certain level it would be very hard to switch to something else.
Only read the first couple sentences but 1) I would agree that right now bitcoin is overvalued in comparssion to how much adoption and usage it currently has .... however...... 2) Bitcoin has a ton of potential in the future and it's still in such it's early stages that I don't think it's unreasonable to think in coming years bitcoin could be more properly valued and still be quite a bit higher than it is currently.
So even if it is overvalued currently, a lot of people would argue they don't care because they are investing based on it's valued 5-20 years down the road.
So even if it is overvalued currently, a lot of people would argue they don't care because they are investing based on it's valued 5-20 years down the road.
The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.
This is a specious argument. There are other cryptocurrencies that COULD offer the same functionality, but without bitcoin's marketing, brand name, momentum, and established infrastructure in its miners and its holders. So then they don't really offer the same advantage after all. A currency 's value is not solely determined by its technology and features.
Some questions, though: You mentioned that the bank's crypto-currency would be backed by gold or fiat currencies. How exactly would they be backed? Would the banks maintain a peg, such that I could exchange 10 of my JPMorgan coins for $10 USD?
they would say it's backed by gold but will refuse to be audited - it'll never happen, there'd be no support because most bitcoin holders know these pricks should be in jail.
Well written post, CryptoPhilanthropist.
Some questions, though: You mentioned that the bank's crypto-currency would be backed by gold or fiat currencies. How exactly would they be backed? Would the banks maintain a peg, such that I could exchange 10 of my JPMorgan coins for $10 USD?
Secondly, you mentioned that the coin would still use decentralized mining (you mentioned CPU mining). Does this coin still have a block reward to entice miners to mine? Now, if the coins are backed like you said by fiat currency, where does the fiat currency come from to back the newly mined coins? Or does the bank just adjust the peg in order to revalue the coin as needed?
Thirdly, do you think if banks were in control of such systems, then they may be required by law to add AML/KYC features such that irreversibility and world-wide transfers are difficult/impossible? For some reason, I just have this gut feel that any "controlled coin" would not be nearly as free as bitcoin, because there is a central point that governments could regulate in order to extract fees/taxes and reverse "bad" transactions.
Some questions, though: You mentioned that the bank's crypto-currency would be backed by gold or fiat currencies. How exactly would they be backed? Would the banks maintain a peg, such that I could exchange 10 of my JPMorgan coins for $10 USD?
Secondly, you mentioned that the coin would still use decentralized mining (you mentioned CPU mining). Does this coin still have a block reward to entice miners to mine? Now, if the coins are backed like you said by fiat currency, where does the fiat currency come from to back the newly mined coins? Or does the bank just adjust the peg in order to revalue the coin as needed?
Thirdly, do you think if banks were in control of such systems, then they may be required by law to add AML/KYC features such that irreversibility and world-wide transfers are difficult/impossible? For some reason, I just have this gut feel that any "controlled coin" would not be nearly as free as bitcoin, because there is a central point that governments could regulate in order to extract fees/taxes and reverse "bad" transactions.
there have been many technologies that have won out against competitors not because they are the best but simply because everyone else used it.. as long as bitcoin adapts to changing requirements I don't see a huge move to alternatives.
oh and the main reason bitcoin is so popular is because there is no trust for financial institutes so that prediction is way off.
oh and the main reason bitcoin is so popular is because there is no trust for financial institutes so that prediction is way off.
All of us are tired of hearing the same weak arguments made against Bitcoin by reporters and mainstream economists who don't understand the fundamentals of cryptocurrency. Two weeks ago, I began my own exhaustive research into BTC valuations, because I was trying to determine whether to make a significant investment after the China-induced price dip. Unfortunately, I have come to believe that Bitcoin is significantly overvalued.
In order to understand why, we need to recognize that Bitcoin challenges two distinct aspects of the existing financial order: (1) the issuance of banknotes and (2) the use of centralized clearinghouses to transfer funds electronically. The vast majority of public attention has been focused on the first factor. The perception of Bitcoin as a deflationary alternative to fiat currencies has contributed to its ideological popularity and caused many people to drive the price up by hording it like gold.
But what is actually revolutionary about Bitcoin is the second factor: the creation of an alternative electronic network for authenticating transactions. That network has been extremely secure and reliable, while offering two giant advantages over legacy competitors like PayPal: transparency and irreversibility. For the first time ever, there is a form of online payment that is as reliable as cash. Clearly, that was an unmet need in the marketplace, and it is the most thrilling and satisfying part of conducting transactions with Bitcoin.
The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.
The primary argument in Bitcoin's favor is the network effect — i.e., that it will obtain an insurmountable advantage by being the first cryptocurrency accepted by most merchants. But once merchants understand how to integrate cryptocurrencies into their businesses, they won't have any incentive to remain loyal to BTC instead of also accepting the 2nd or 3rd most popular cryptocurrencies. That will only require a Bitpay clone to make it easy and remove most of the risk.
Worse, Bitcoin's design actually creates a sort of 'reverse network effect' in which its success makes it impossible for most miners to participate in authenticating transactions. The use of alternative proof-of-work algorithms to allow CPU mining of alternative coins will allow them to claim a potential security advantage by building diverse networks full of competing nodes. It also remains to be seen whether the absence of any proof-of-stake algorithms will come to be viewed as a significant flaw in Bitcoin. Even if Peercoin's divided block structure proves suboptimal, there may be other ways to implement proof-of-stake that increase security while also decreasing future transaction costs by limiting energy expenditures.
Some believe that the dominance of ASIC rigs in BTC mining is advantageous because it increases the expense of interfering with the BTC network. But competing currencies can make themselves attractive to the same ASIC miners simply by adopting the hashcash proof-of-work standard.
I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies. Those will not be ideologically appealing to most people who post here, but the business model makes perfect sense. The fear that the public and media have about BTC is that it is an attempt to create wealth out of thin air. Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine. These bank-backed cryptocurrencies would look to many like the 'best of both worlds': the guaranteed value of a traditional bank note with the transparency and irreversibility of distributed block-chain logs.
The nature of all attempts to disrupt existing power structures in society is that the elites first resist and then join and co-opt. Bitcoin will go down in history as the first proof-of-concept for distributed financial authentication, which is going to emerge as a serious competitor to PayPal and its ilk. But the financial establishment is not going to sit back and accept the idea that a bunch of anarcho-libertarian first adopters are entitled to be millionaires. The very things that attract most people on this forum to BTC, like its edginess and anti-authoritarian image, will be its downfall when it has to compete for mass market support against bank-issued cryptocurrencies that will pay miners/stakeholders handsomely for their authentication services.
These are realities that people on Wall Street know and believe. But they aren't being priced into BTC right now because there is no real way to short the currency's value, at least not with the scale and reliability that hedge funds demand. If there were, I guarantee there would be a significant amount of money willing to take the opposite side of bets against the BTC community's true believers.
Ultimately, the entire Bitcoin story will reinforce the truest aphorism of all: "Nothing is ever as good or as bad as it seems."
In order to understand why, we need to recognize that Bitcoin challenges two distinct aspects of the existing financial order: (1) the issuance of banknotes and (2) the use of centralized clearinghouses to transfer funds electronically. The vast majority of public attention has been focused on the first factor. The perception of Bitcoin as a deflationary alternative to fiat currencies has contributed to its ideological popularity and caused many people to drive the price up by hording it like gold.
But what is actually revolutionary about Bitcoin is the second factor: the creation of an alternative electronic network for authenticating transactions. That network has been extremely secure and reliable, while offering two giant advantages over legacy competitors like PayPal: transparency and irreversibility. For the first time ever, there is a form of online payment that is as reliable as cash. Clearly, that was an unmet need in the marketplace, and it is the most thrilling and satisfying part of conducting transactions with Bitcoin.
The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.
The primary argument in Bitcoin's favor is the network effect — i.e., that it will obtain an insurmountable advantage by being the first cryptocurrency accepted by most merchants. But once merchants understand how to integrate cryptocurrencies into their businesses, they won't have any incentive to remain loyal to BTC instead of also accepting the 2nd or 3rd most popular cryptocurrencies. That will only require a Bitpay clone to make it easy and remove most of the risk.
Worse, Bitcoin's design actually creates a sort of 'reverse network effect' in which its success makes it impossible for most miners to participate in authenticating transactions. The use of alternative proof-of-work algorithms to allow CPU mining of alternative coins will allow them to claim a potential security advantage by building diverse networks full of competing nodes. It also remains to be seen whether the absence of any proof-of-stake algorithms will come to be viewed as a significant flaw in Bitcoin. Even if Peercoin's divided block structure proves suboptimal, there may be other ways to implement proof-of-stake that increase security while also decreasing future transaction costs by limiting energy expenditures.
Some believe that the dominance of ASIC rigs in BTC mining is advantageous because it increases the expense of interfering with the BTC network. But competing currencies can make themselves attractive to the same ASIC miners simply by adopting the hashcash proof-of-work standard.
I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies. Those will not be ideologically appealing to most people who post here, but the business model makes perfect sense. The fear that the public and media have about BTC is that it is an attempt to create wealth out of thin air. Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine. These bank-backed cryptocurrencies would look to many like the 'best of both worlds': the guaranteed value of a traditional bank note with the transparency and irreversibility of distributed block-chain logs.
The nature of all attempts to disrupt existing power structures in society is that the elites first resist and then join and co-opt. Bitcoin will go down in history as the first proof-of-concept for distributed financial authentication, which is going to emerge as a serious competitor to PayPal and its ilk. But the financial establishment is not going to sit back and accept the idea that a bunch of anarcho-libertarian first adopters are entitled to be millionaires. The very things that attract most people on this forum to BTC, like its edginess and anti-authoritarian image, will be its downfall when it has to compete for mass market support against bank-issued cryptocurrencies that will pay miners/stakeholders handsomely for their authentication services.
These are realities that people on Wall Street know and believe. But they aren't being priced into BTC right now because there is no real way to short the currency's value, at least not with the scale and reliability that hedge funds demand. If there were, I guarantee there would be a significant amount of money willing to take the opposite side of bets against the BTC community's true believers.
Ultimately, the entire Bitcoin story will reinforce the truest aphorism of all: "Nothing is ever as good or as bad as it seems."
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