The Off Topic Topic

[crazy canuck]

If I read it correctly, one bitcoin transaction takes 275 kwh.  In total bitcoin uses as much energy as Morocco. Yikes.

I mentioned this a couple years back, but as an alternative form of currency, bitcoin was horribly designed from the outset in a unifixable way.  But by design (if successful) it was designed to be an inflating asset.  The two characteristics are related.  The very factors that cause bitcoin's value to inflate make it unsuitable as an alternative form of money, assuming you don't want a monetary regime with brutal deflation built in.

But all the characteristics that make it a terrible alternative currency have made it an attractive investment.  Supply is vastly outstripped by demand and, the investors are betting, will continue to be.

[frunk]

But all the characteristics that make it a terrible alternative currency have made it an attractive investment.  Supply is vastly outstripped by demand and, the investors are betting, will continue to be.

But if it isn't useful as a currency, what is it for?  I mean, beyond separating people from their money.

[CountDeMoney]

But all the characteristics that make it a terrible alternative currency have made it an attractive investment scam.

[CountDeMoney]

But all the characteristics that make it a terrible alternative currency have made it an attractive investment.  Supply is vastly outstripped by demand and, the investors are betting, will continue to be.

But if it isn't useful as a currency, what is it for?  I mean, beyond separating people from their money.

Hiding real money in places where law enforcement, sanctions, regulations and other busybodies can't find it.

[crazy canuck]

But all the characteristics that make it a terrible alternative currency have made it an attractive investment.  Supply is vastly outstripped by demand and, the investors are betting, will continue to be.

But if it isn't useful as a currency, what is it for?  I mean, beyond separating people from their money.

Similar to gold.  Gold's value has no material connection to its practical use just as bitcoin has no practical use as a currency.

It really all depends on whether there is a demand into the future.  With all the professional investors piling in, crypto currencies now have a patina of legitimacy.

[Admiral Yi]

But by design (if successful) it was designed to be an inflating asset.

I don't follow.  It's a bubble.  How can that be a feature of its design?

funk: money laundering, illegal transactions.

[dps]

Russia just got owned by the IOC of all things lol

I was wondering if they would have the balls to do so

I was extremely surprised by the news as well

Yeah, I didn't think that they'd have the balls to do it.  Or even if they did, that they'd be bribed not to.  IOC is about as bad as FIFA when it comes to corruption.

[crazy canuck]

But by design (if successful) it was designed to be an inflating asset.

I don't follow.  It's a bubble.  How can that be a feature of its design?

It was designed so that it would inflate in value.  I am not sure the designers dreamed it would inflate at such a rapid rate.

[frunk]

Similar to gold.  Gold's value has no material connection to its practical use just as bitcoin has no practical use as a currency.

It really all depends on whether there is a demand into the future.  With all the professional investors piling in, crypto currencies now have a patina of legitimacy.

Except that Gold has a much larger buy in from a much larger percentage of the population.  Any given cryptocurrency has a relatively small (and potentially fickle) base of support.  Also there aren't new forms of Gold popping up all the time.  There are literally thousands of different cryptocurrencies running around, since all you need is a computer and an internet connection to start one.

A cryptocurrency that doesn't do the second part of its name well is just an example of the greater fool theory.

[The Minsky Moment]

But by design (if successful) it was designed to be an inflating asset.

I don't follow.  It's a bubble.  How can that be a feature of its design?

The processing power required to mine increases steadily over time (i.e. marginal cost to create a unit constantly increaes) and there is a cap on total issuance.

The cap is really the killer.  Imagine a monetary system where the the supply of money is permanently fixed.  Such a system can't accomodate growth in transactions without suffering brutal deflationary spirals.  Now imagine a monetary system where the supply is permitted to grow, but at a asymtoptically slowing rate terminating in a hard cap (i.e. bitcoin).  The effect is essentially the same - users know that there is a deflationary cliff on the horizon where the value of the currency unit increases indefinitely, and so using backward induction start hording in the present in anticipation of the known end state.   I.e. its a self-fulfilling prophecy. 

The only way to avoid the outcome is if at some point prior, bitcoin collapses and no one wants to use it anymore.  But as long as people keep want to use it  - i.e. as long as it "succeeds", it's still doomed to fail.

[The Brain]

Sounds like a successful design to me.

[crazy canuck]

Similar to gold.  Gold's value has no material connection to its practical use just as bitcoin has no practical use as a currency.

It really all depends on whether there is a demand into the future.  With all the professional investors piling in, crypto currencies now have a patina of legitimacy.

Except that Gold has a much larger buy in from a much larger percentage of the population.  Any given cryptocurrency has a relatively small (and potentially fickle) base of support.  Also there aren't new forms of Gold popping up all the time.  There are literally thousands of different cryptocurrencies running around, since all you need is a computer and an internet connection to start one.

A cryptocurrency that doesn't do the second part of its name well is just an example of the greater fool theory.

You are correct that there are a lot more people buying into gold, but there is also a lot more gold than crypto currency and so the effect is that the crypto currency will be wildly variable as we have seen.   A rough analogy is that there are many different metals one could own, but the secret is to identify the one or ones that people will assign value to over the longer term.

[The Minsky Moment]

If you take gold, strip it of all of its use values, and make it even less desirable as a monetary base, you get bitcoin.  Not a ringing endorsement.

[Grey Fox]

There is also the bet that the supply from a successful solution might be more, way more in the next one.

[crazy canuck]

If you take gold, strip it of all of its use values, and make it even less desirable as a monetary base, you get bitcoin.  Not a ringing endorsement.

Yeah, that is exactly what it is.  And If I had indulged my boy's interest in it a few years ago, I would be typing this from my private island rather than my office.