Bitcoin: Censorship-Resistant Digital P2P Currency

[Z-Corn]

I was fixing the laptop of one of The Bank's investment officer dudes yesterday (easy fix, his network cable was sketchy and popped out of his dock... really Help Desk, I gotta drive 30 miles there to figure THAT out? ) and he took a call from a customer wanting to invest in Bitcoin.

He explained to her that Bitcoins were owned by North Korea and, "No way do you want to get involved with anything North Korea is involved in."

After he hung up I told him about coin mining and how a couple years ago you could have "sold shovels to miners" by investing in GPU companies...his eyes glazed over and then we changed to subject to the antique railroad stock certificates he collects and displays on his office walls.

[Matrix]

I don't care anything about blockchain at the moment. I couldn't care less that a document can be notarized and digitized and hashed into a QR code. There isn't a crushing problem in the world over when documents were notarized.

Also, I can't buy blockchain technology, can I?

And when I say that "trust" has no value, what I mean is that currently the value of the USD isn't "trust". The value of the USD is the backing by the full faith and credit of the United States.

There is nothing behind bitcoin (or any cryptocurrency). Which is why the cost fluctuates so wildly. The cost is based on speculation, not value.

Now now, you will be surprised but most banks are pissing themselves silly about blockchain tech. And surprisingly enough, the old tech we have now, especially with amount of data that being created daily is creating issue for goverments. This is one of the reasons, a lot of governments want to move to blockchain.http://fortune.com/2017/04/27/estonia-d ... -startups/
You can buy blockchain technology now aka ICO, but i personally, wouldn't recommend it. It is shit show and thats probably a best term at the moment.
This is not why cost fluctuates so widely, cost fluctuates this much because most of crypto investors at this point is retail. Easily scared, and with no real strategy. It is risk reward, and when both equations in place, if it was as safe as blue chips, it would take a year to generate 10-20% return if you are lucky. In crypto it can be daily, also if you are lucky. There are no clarity right now, and there wont be for next good while.

We are very early stages, and if you are (anyone reading) in crypto, you are in for some "crap your pants" type of ride and if you are not, dont be an arm chair general. There is gamble in next 3-6month (and i dare not to predict further, i guess no pants ride would be most closest" , it might go down to nothing or it will go much much higher. The later part, will require other people believing in it. Institutional investors putting serious money into this. Actual applications of tech need to happen.

[RunningMn9]

Cryptocurrency costs vary so wildly because their cost is based purely on speculation. Which is the only thing that their cost could be based on since there is no inherent value to the coins.

And I don’t care about blockchain tech simply because it doesn’t matter to me whether it is adopted or not. It being adopted won’t prevent a catastrophic crash of cryptocurrencies. Any more than the internet changing the way the world works prevented the dot com crash.

[malchior]

There is nothing behind bitcoin (or any cryptocurrency). Which is why the cost fluctuates so wildly. The cost is based on speculation, not value.

I think this analysis is partially flawed. Meaning I agree that speculation has powered the swings but it does have some value. It is implied and hard to price. The value added service is transaction processing. You even hint at it about with the comments about notarization. You might not care about it but there are party's who certainly do and would put a price on it. And if I were to get super fundamental the cost of that service goes back to how much computing power is required to process that transaction. Which is fundamentally what the forks are about - perceived flaws in the blockchain in use and how it scales.

[RunningMn9]

Meaning I agree that speculation has powered the swings but it does have some value. There is however an implied but hard to price service built in - transaction processing - that provides some value.

There is a difference between inherent value in the asset itself, and the perceived value that exists outside of the asset. You are talking about the latter.

To go back to my earlier example - if I buy a stock, there is inherent value in the share of stock that I have purchased. It has *actual* value equal to 1/Nth ownership of the underlying company and all of its assets (physical and intellectual).

Purchasing one bitcoin doesn't buy me anything at all. There is no inherent value. There is no objective thing to measure against to say that regardless of anything else, the real value of this one bitcoin is X.

You are describing the very nature of speculative value - which is subjective. It's not that this doesn't happen with stocks - it's just that when it happens to stocks, it happens *in addition to* the underlying inherent value.

[RunningMn9]

I should amend my statement to be that I don't see the inherent value in any cryptocurrency. And every time someone tries to answer that - they answer it with something that isn't actually inherent value.

[malchior]

Meaning I agree that speculation has powered the swings but it does have some value. There is however an implied but hard to price service built in - transaction processing - that provides some value.

There is a difference between inherent value in the asset itself, and the perceived value that exists outside of the asset. You are talking about the latter.

To go back to my earlier example - if I buy a stock, there is inherent value in the share of stock that I have purchased. It has *actual* value equal to 1/Nth ownership of the underlying company and all of its assets (physical and intellectual).

Purchasing one bitcoin doesn't buy me anything at all. There is no inherent value. There is no objective thing to measure against to say that regardless of anything else, the real value of this one bitcoin is X.

You are describing the very nature of speculative value - which is subjective. It's not that this doesn't happen with stocks - it's just that when it happens to stocks, it happens *in addition to* the underlying inherent value.

I totally disagree - this is not a subjective value at stake. The required transaction processing has an inherent cost to the service - the mining itself. If no one is mining then there is no service provided. The mining has costs associated so I argue there is an inherent value to that. If the miners aren't getting paid then no one would bother. That is the floor cost basis of the entire thing. I'd further argue that this is very different from other costs of currency (i.e. printing them / tracking them / etc.). This service is value added.

I should amend my statement to be that I don't see the inherent value in any cryptocurrency. And every time someone tries to answer that - they answer it with something that isn't actually inherent value.

I think because you have a very particular definition of inherent value. I'd argue that the inherent value of a bitcoin is the cost of all future processed transactions of that bitcoin and storage costs of the blockchain.

Edit: Amending a little to add in the storage costs which are small right now but add up over time.

[RunningMn9]

I totally disagree

That is your right.

The required transaction processing has an inherent cost to the service - the mining itself. If no one is mining then there is no service provided. The mining has costs associated so I argue there is an inherent value to that.

What?

There is an inherent value to a bitcoin because there is an inherent cost to the service - the mining itself? When arguing that there is an objective value inherent to an asset, it helps to explain exactly what that objective value is. So - what is the objective value of one bitcoin? Strip it all down - what is the "actual" value of one bitcoin? Show me the math. I don't believe you can, because I don't believe that it exists. I argue that the cost of a BTC is determined by rampant speculation on the part of investors looking to strike it rich. And my evidence for that is the wild fluctuation in value. But if you have math that shows me how to properly value the cost of one bitcoin, I'll be happy to concede.

[Moliere]

Are you intentionally ignoring my replies about Ripple/XRP providing an inhernet value to banks by lowering the transaction costs for cross border money transfers and speeding up their processing time? Swift is running scared. You keep lumping all cryptocurrencies into "Bitcoin" like there is no difference.

[RunningMn9]

Are you intentionally ignoring my replies about Ripple/XRP providing an inhernet value to banks by lowering the transaction costs for cross border money transfers and speeding up their processing time? Swift is running scared. You keep lumping all cryptocurrencies into "Bitcoin" like there is no difference.

I thought I did reply to you, so no.

You have made the case for the inherent value of the Ripple technology itself, and why banks would want to deploy it. As I thought I said to you when I thought I replied to you, the inherent value of the Ripple technology confers no actual value on the cryptocurrency that Ripple uses (as an asset).

I'm lumping all cryptocurrencies together like there is no difference, because as currencies, there is no difference between them. There is no inherent value behind any of them. The value is completely arbitrary and subject to spikes and crashes due to speculation.

If the value of XBR is not completely arbitrary - then what sets the value of one XBR coin? The value of one XBR coin, not the cost. Let's say that the technology behind Ripple takes off, and it becomes the defacto standard of how all international banks conduct international business. What do you think that will mean for the "value" of XBR?

[RunningMn9]

So what? That doesn't confer inherent value to the coin itself. Does the value of that digital currency fluctuate significantly? If I buy that coin do I get to own part of the underlying technology?

See? I responded to you. You didn't follow up.

[malchior]

I totally disagree

That is your right.

The required transaction processing has an inherent cost to the service - the mining itself. If no one is mining then there is no service provided. The mining has costs associated so I argue there is an inherent value to that.

What?

There is an inherent value to a bitcoin because there is an inherent cost to the service - the mining itself? When arguing that there is an objective value inherent to an asset, it helps to explain exactly what that objective value is. So - what is the objective value of one bitcoin? Strip it all down - what is the "actual" value of one bitcoin? Show me the math. I don't believe you can, because I don't believe that it exists. I argue that the cost of a BTC is determined by rampant speculation on the part of investors looking to strike it rich. And my evidence for that is the wild fluctuation in value. But if you have math that shows me how to properly value the cost of one bitcoin, I'll be happy to concede.

Perhaps I'm not explaining this clearly. I wrote a master's level economics paper about this topic and it is hard to abstract that on a message board; nonetheless I think I'm on solid ground. I found other references to this valuation method as well. Again you are trying to assign objective value in a very particular sense. You liken the inherent value of a share for example as being ownership of 1/x of a company. A company may be worth $0, or the paid in capital, the future value of all its earnings. There are many different valuation models. One of which could be the amount invested into it. This is just another way of assigning a value. It could be wrong but it is fairly straightforward in many ways.

To boil that down it isn't just the cost of providing the service. Bitcoin *can not exist* without miners. The inherent value therefore has a floor. It can't be zero (at a particular moment) because then there would be no miners. The miners have to derive a profit or there is no point to mining. There is an investment being made into the currency in other words in computing power and electricity. And like I said this is extremely hard to quantify. Several firms have gone broke trying to get ahead of it. Now you can certainly argue that the return on that investment is going to long-term be zero and prove it is worthless but that is sort of a cheat. In the end though, there is almost certainly an inherent value to it separate from a market value.

As an aside I find it interesting that this is the area of focus always. When I was researching my paper I kept coming back to an idea that most of these inherent value arguments were used against fiat currency about a hundred years ago. They were similarly flawed. Another thought point is that there are far bigger risks to bitcoin than a 'lack of value'. There are other risks and vectors of "attack" that I think are way more relevant.

[Moliere]

So what? That doesn't confer inherent value to the coin itself. Does the value of that digital currency fluctuate significantly? If I buy that coin do I get to own part of the underlying technology?

See? I responded to you. You didn't follow up.

Missed that.

Nine Things You Need to Know About XRP

3. XRP enables faster, cheaper and more reliable cross-border payments

XRP offers banks and payment providers a reliable, on-demand source of liquidity for cross-border payments. Today, it takes about 3-5 days to send money from one country to another through a bank, which usually involves high fees the risk of the payment being delayed (or never go through altogether). Alternatively, businesses can pre-fund nostro accounts in the recipient’s country, which ties up capital. XRP is part of a solution that fixes all these shortcomings, with an average settlement time of 4 seconds, at a fraction of the cost. By allowing financial institutions to source liquidity on demand, in real time, without having to pay foreign transaction fees or pre-fund nostro accounts, XRP will help them to expand into new markets, lower foreign exchange costs and provide faster payment settlement for its customers.

4. It is part of an overall network solution for faster cross-border payments

Ripple is committed to solving the issues with cross-border payments and create an Internet of Value where we move money as efficiently as we exchange information. Our solution involves creating a common standard for payments and using XRP as the digital asset that will bring together currently disconnected ledgers and blockchains.

5. XRP operates at a scale and speed far greater than Bitcoin

Bitcoin can process up to seven transactions per second, any of which can take more than two hours to clear. Compare that with a traditional payments service like Visa that averages 2,000 transactions per second and you can see that Bitcoin does not have the scalability to meet typical customer demands. The XRP Ledger processes more than 1,000 transactions per second and can scale to the same throughput as Visa, all in real-time.

[RunningMn9]

Perhaps I'm not explaining this clearly.

Perhaps. Perhaps you just aren't getting what I'm driving at? Perhaps the thing that you are explaining is correct, but just not relevant to what my issue is? Or at least isn't an explanation for what I am talking about.

I wrote a master's level economics paper about this topic and it is hard to abstract that on a message board but I think I'm on solid ground.

We'll see.

I found other references to this valuation method as well. Again you are trying to assign objective value in a very particular sense. You liken the inherent value of a share for example as being ownership of 1/x of a company. A company may be worth $0, or the paid in capital, the future value of all its earnings. There are many different valuation models.

Keep in mind that I was just providing an example, not the only specific way to calculate value. To expand out on the stock front - of course there are very different ways to determine value. That's why some people buy a share of stock, and others sell a share of stock. For that transaction to occur, there usually is a difference of opinion on the actual value of the stock (the seller thinks it's worth less, the buyer thinks it's worth more).

HOWEVER, that's where speculation comes in and impacts the cost of a stock. Tesla stock is almost certainly overpriced, and is driven in large part based on speculation rather than any reasonable valuation fundamentals. However - when I buy a share of Tesla - there is a value to that share that is intrinsic to itself. I'm buying a share of Tesla, Inc.

That is what makes investing in some assets completely different than investing in currency (fiat or crypto). When it comes to currency - there is no value intrinsic to the asset itself. What makes currencies valuable to hold as an asset class is their relative consistency. Typically an asset like that can either be invested in a money market vehicle which moves the assets between currencies to realize comparatively small but consistent gains (to combat inflation), or is used as the basis for capital loans that pay returns (to combat inflation).

Bitcoin *can not exist* without miners.

I don't see why you believe that to be a strength rather than a very critical flaw?

The inherent value therefore has a floor. It can't be zero because then there would be no miners. The miners have to derive a profit or there is no point to mining.

There can be no chickens without chicken eggs, yet there can be no chicken eggs without chickens? That's the circular sentence you just said to me.

We don't live in a world where there must be bitcoin miners until the Earth is consumed by the Sun. And therefore it seems logically intuitive that some day there will be no more miners. And on that day, bitcoins will fail completely. Or bitcoins will have failed completely and there will be no more bitcoin miners. Either way - there won't be bitcoin miners from now until the end of eternity - and therefore the failure is obviously inevitable.

So if it's possible for there to be no more bitcoin miners in a million years, how do you find it to be impossible that there will be no more bitcoin miners in 5 years or 25 years? The day will come. And that means that the inherent floor is zero. Because at some point everyone will realize that bitcoins are made up and aren't actually worth anything.

There is an investment being made into the currency in other words in computing power and electricity. And like I said this is extremely hard to quantify. Several firms have gone broke trying to get ahead of it.

Ok, maybe I can work with this. Correct me if I'm wrong, but it *sounds* like you are saying that if someone spent $X in time, computing power and electricity in order to mine a bitcoin - that investment into mining that bitcoin provides intrinsic value to that bitcoin. Do I have that right?

If that's what you are saying - than we have very fundamental differences in how we understand value and cost. I will expand more on that, but I don't want to get ahead of myself in case I am totally reading your statement wrong.

As an aside I find it interesting that this is the area of focus always. When I was researching my paper I kept coming back to an idea that most of these inherent value arguments were used against fiat currency about a hundred years ago. They were similarly flawed.

As noted above - there *is* inherent value in the full faith and credit of the United States and the economy. Do you think that would be true if tomorrow a USD was worth $4, and two days after that it was worth $0.48?

The USD will also fail someday. But in the mean time, it only works because of the relative consistency of its cost. In the event of runaway inflation or deflation, that will be every bit as catastrophic.

Another thought point is that there are far bigger risks to bitcoin than a 'lack of value'. There are other risks and vectors of "attack" that I think are way more relevant.

Of course. These things aren't aren't mutually exclusive. And you are free to talk about any other flaws you'd like to as well.

[malchior]

That is what makes investing in some assets completely different than investing in currency (fiat or crypto). When it comes to currency - there is no value intrinsic to the asset itself. What makes currencies valuable to hold as an asset class is their relative consistency. Typically an asset like that can either be invested in a money market vehicle which moves the assets between currencies to realize comparatively small but consistent gains (to combat inflation), or is used as the basis for capital loans that pay returns (to combat inflation).

See I think this is where your analysis goes off the tracks. You are talking about market value issues and portfolio management concerns. None of which are really about inherent value. Currency is a store of value and has utility. The lack of "inherent value" has been a point of debate for a hundred years and might not ever be "solved". That is why I find it perplexing as an avenue of attack against bitcoin. Some people even argue gold has no intrinsic value which seems silly since there are definite productive uses for it besides as 'currency'. It is sort of a waste of time but also fun to debate about at times.

Bitcoin *can not exist* without miners.

I don't see why you believe that to be a strength rather than a very critical flaw?

It is one of the weaknesses I am talking about but it is more part of the whole logical argument. "Mathiness" in other words. Let x > 0 be the number of miners || bitcoin does not exist.

The inherent value therefore has a floor. It can't be zero because then there would be no miners. The miners have to derive a profit or there is no point to mining.

There can be no chickens without chicken eggs, yet there can be no chicken eggs without chickens? That's the circular sentence you just said to me.

First off the egg hatched years ago. And also it is part of the same logical argument. If number of miners > 0, then there must be a value > 0 to make mining worth doing. Speculation distorts this naturally but let's say it was perfectly priced then there must be a breakeven value or else the currency fails.

We don't live in a world where there must be bitcoin miners until the Earth is consumed by the Sun. And therefore it seems logically intuitive that some day there will be no more miners. And on that day, bitcoins will fail completely. Or bitcoins will have failed completely and there will be no more bitcoin miners. Either way - there won't be bitcoin miners from now until the end of eternity - and therefore the failure is obviously inevitable.

So if it's possible for there to be no more bitcoin miners in a million years, how do you find it to be impossible that there will be no more bitcoin miners in 5 years or 25 years? The day will come. And that means that the inherent floor is zero. Because at some point everyone will realize that bitcoins are made up and aren't actually worth anything.

And in the long term as Keynes would say we are all dead. It has little to do with this type of analysis. You have to look at *now* when looking at this problem. Again this is really hard to deconstruct. It literally was a 20-page paper. The speculation serves to obscure how successful the currency is in negative and positive ways. It hides the true cost of 'operating the currency' but also shows the level of interest. It is a bit of a mess.

There is an investment being made into the currency in other words in computing power and electricity. And like I said this is extremely hard to quantify. Several firms have gone broke trying to get ahead of it.

Ok, maybe I can work with this. Correct me if I'm wrong, but it *sounds* like you are saying that if someone spent $X in time, computing power and electricity in order to mine a bitcoin - that investment into mining that bitcoin provides intrinsic value to that bitcoin. Do I have that right?

If that's what you are saying - than we have very fundamental differences in how we understand value and cost. I will expand more on that, but I don't want to get ahead of myself in case I am totally reading your statement wrong.

You are correct and there is definitely a scenario where inherent value = 0 and everyone is dumping money into an ethereal pit. In the near term though the expectation is I can take my newly minted bitcoin and get at least what I invested into it. The algorithm doesn't ensure that but competition does a pretty good job of it...up to a point where competition breaks down. I'll talk about this at the end.

As an aside I find it interesting that this is the area of focus always. When I was researching my paper I kept coming back to an idea that most of these inherent value arguments were used against fiat currency about a hundred years ago. They were similarly flawed.

As noted above - there *is* inherent value in the full faith and credit of the United States and the economy.

This statement is interesting. I agree and wonder how that is different than relying on the full faith that miners want to make profit and that people see usefulness of it in the "real" economy? There are way more parallels than differences there.

Do you think that would be true if tomorrow a USD was worth $4, and two days after that it was worth $0.48?

Again this is where I believe you go off track. You keep conflating speculative bubbles with inherent value. They aren't necessarily tied.

Another thought point is that there are far bigger risks to bitcoin than a 'lack of value'. There are other risks and vectors of "attack" that I think are way more relevant.

Of course. These things aren't aren't mutually exclusive. And you are free to talk about any other flaws you'd like to as well.

As alluded to before competition may breakdown and is a potential existential risk. That is the theoretical case that one actor gets big enough to control 51% of the mining. Especially by concentrating their power - say subsidization of computing/electricity in a nation state. Then they can control the growth of the mining algorithm and therefore the cost of mining and influence that inherent value. Theoretical again but a plausible risk.

[RunningMn9]

If number of miners > 0, then there must be a value > 0 to make mining worth doing. Speculation distorts this naturally but let's say it was perfectly priced then there must be a breakeven value or else the currency fails.

Yes, speculation distorts this. This was the entire point.

The idea that there are miners, as being logical proof that value > 0 (otherwise mining wouldn't be worth doing), falls apart immediately when value is being set by a speculative bubble. There could certainly be NO inherent value in continuing to mine at great expense of computing power and electricity - and you would never know that because of the speculative bubble. What happens when the bubble bursts?

You keep conflating speculative bubbles with inherent value. They aren't necessarily tied.

Speculative bubbles exist when speculative demand drives cost up without respect to inherent value. What started this all was the assertion that these coins are generally speaking operating in a speculative bubble because their value has nothing to do with the inherent value of the thing. Sure, this is a currency bubble, which will have differences between it and a dot com stock bubble, or a real estate bubble, or a tulip bubble.

The point that I was making is two-fold: 1) The speculative bubble exists (in cryptocurrency in general); and 2) It doesn't matter whether or not the underlying technology is viable and world-changing - the bubble will still pop, and it's going to take a tremendous number of people down with it when it does.

In other words, there is nothing different about this bubble than any of the bubbles that came before it. Except a different group of people think that this bubble is different than the group of people that thought the last bubble was different, which was different than the group of people that thought the previous bubble was different.

As I said to Moliere - it doesn't matter to me in the slightest whether or not Ripple becomes the backbone of every international financial transaction. That won't prevent the bubble from bursting (or make it not a bubble).

[malchior]

If number of miners > 0, then there must be a value > 0 to make mining worth doing. Speculation distorts this naturally but let's say it was perfectly priced then there must be a breakeven value or else the currency fails.

Yes, speculation distorts this. This was the entire point.

The idea that there are miners, as being logical proof that value > 0 (otherwise mining wouldn't be worth doing), falls apart immediately when value is being set by a speculative bubble. There could certainly be NO inherent value in continuing to mine at great expense of computing power and electricity - and you would never know that because of the speculative bubble. What happens when the bubble bursts?

Like I said you are conflating two different problems. Underneath it all there is a breakeven cost. It is dependent on the number of miners, computing power available, etc. but it is there underneath it. Just because it is obscured doesn't invalidate that it exists.

You keep conflating speculative bubbles with inherent value. They aren't necessarily tied.

Speculative bubbles exist when speculative demand drives cost up without respect to inherent value.

I agree and came in late but weren't you arguing there is no inherent value? That was what I took issue with. Everything else I agree with. There totally is a bubble. It is not different than other bubbles. There are risky opportunities to make some money on the swings but that is because there is a bubble.

As I said to Moliere - it doesn't matter to me in the slightest whether or not Ripple becomes the backbone of every international financial transaction. That won't prevent the bubble from bursting (or make it not a bubble).

In other words, I went down the theoretical rat hole for no reason. I mean unless someone is interested in a valuation model around crypto currency.

[LawBeefaroni]

Imagine if a delivery company started up and had this great on-time rate and low cost. Except all that they delivered was pieces of paper with their logo on it. Now let's say that people started "investing" in those pieces of paper.

Why?

1. Their delivery technology is the best. Their tracking system is flawless. And they are fully anonymous and you can ship anywhere, a physical address is not required. If I want to send a piece of paper to a homeless gangster in Uzbekistan, I can.

2. The tiny pieces of paper are printed on the finest counterfeit proof stock, with microprint and rfid security.

3. One day everyone maybe using this delivery company.


So these pieces of paper, which confer no ownership of the delivery company or the printing technology, start gaining value. Why?

People are greedy and easily fooled.

The delivery company is the block chain. The paper is the Bitcoin. And the cost of printing that fine piece of paper is the mining cost.


Maybe when the company figures it how to ship something other than their logo'd paper they will be the next big thing. If that happens the paper is still worthless.

[RunningMn9]

Like I said you are conflating two different problems. Underneath it all there is a breakeven cost. It is dependent on the number of miners, computing power available, etc. but it is there underneath it. Just because it is obscured doesn't invalidate that it exists.

I don't think I am. I think you are mistakenly conflating cost and value, but that's me.

Just because something costs something to produce (in time, computing cycles, and electricity) doesn't mean that that cost confers value. Particularly when there is absolutely no relationship between the product and the material cost. In other words, I can spend time, computing cycles and electricity to mine bitcoins. None of those things are contained within the bitcoins. I cannot convert a bitcoin back into time, computing cycles or electricity.

To make a different analogy, I can play 700 hours of Madden to unlock a particular achievement. That doesn't make that achievement inherently valuable. That it took time, computing cycles and electricity is effectively irrelevant.

That said - I *think* that I understand where you are coming from, even if I don't agree with you. You are effectively using the time, computing cycles and electricity as something of a BOM for the bitcoin that it produces. If it cost me $2000 to mine a bitcoin (as an example), why would I have done that unless I can sell that bitcoin for more than $2000? Where we appear to differ is that I don't believe that the cost of mining a bitcoin has any bearing at all on the actual value of the bitcoin. That someone spent $X to obtain something doesn't mean that that thing automatically has $X+ in value.

In any case, the point I was making was that this is inherently a speculative bubble, because there is no inherent value to these coins. You can take the position that this is a speculative bubble, but there is still inherent value to these coins. I can live with you believing that.

[malchior]

[To make a different analogy, I can play 700 hours of Madden to unlock a particular achievement. That doesn't make that achievement inherently valuable. That it took time, computing cycles and electricity is effectively irrelevant.

Right but couldn't that more be a function that an achievement doesn't have any utility. Let's say they made them trade-able. Wouldn't that suddenly made it worth something potentially? That breaks down a little but just talking philosophically.

That said - I *think* that I understand where you are coming from, even if I don't agree with you. You are effectively using the time, computing cycles and electricity as something of a BOM for the bitcoin that it produces. If it cost me $2000 to mine a bitcoin (as an example), why would I have done that unless I can sell that bitcoin for more than $2000? Where we appear to differ is that I don't believe that the cost of mining a bitcoin has any bearing at all on the actual value of the bitcoin. That someone spent $X to obtain something doesn't mean that that thing automatically has $X+ in value.

I'd normally agree but this is where crypto currency truly is different. There are a set of assumptions that likely have to be true or the currency fails. One being that it will be at least as valuable as the cost to produce it. I actually think that will become axiomatic or be a "law" of crypto currency whenever this hits textbooks. That doesn't mean it will have that value but then the currency will simply fail. To put this how I see it, this thing spun up about 10 years ago. I think we're getting to a point where outright currency failure is not a thing.

And I think that value is even a more obscure than that even because I'm thinking it'll be in aggregate. In effect, there will be some miners who lose money but they will lose money to others who are simply more efficient/have lower costs. My gut feeling is the value will be averaged across the population and will grow at some rate which is governed by the algorithm vs. computing/electricity cost.In any case, there are a bunch of "rules" to be figured out still. Still the value has to be greater than or equal to cost for the population or the currency fails. I get the disagreement that is value but it feels right.

In any case, the point I was making was that this is inherently a speculative bubble, because there is no inherent value to these coins. You can take the position that this is a speculative bubble, but there is still inherent value to these coins. I can live with you believing that.

That is definitely where I live. I've actually been trying to pin down a guess at a cost and build a model around it but my actual job and class work keep getting in the way. I personally would be willing to make some (very small) bets on my theory.

[RunningMn9]

Still the value has to be greater than or equal to cost for the population or the currency fails.

Let's change the wording slightly, if you please. "Still, the reward has to be greater than or equal to the cost for the miners or the currency fails".

I would 100% agree with that. And I would further state that the "reward" in this case is fueled entirely by speculation. When the speculators leave, this particular currency will fail. At that point I would agree with Moliere that I only specifically talk about BTC. I have no idea whether or not other currencies force people onto electrical hamster wheels to create currency bits.

[Moliere]

I have no idea whether or not other currencies force people onto electrical hamster wheels to create currency bits.

The company Ripple created all the XRP currency and has it in escrow with a monthly allocation that gets sent out into the market. No mining involved. That makes a predictable allocation and total supply for the market to determine its value.

[RunningMn9]

The company Ripple created all the XRP currency and has it in escrow with a monthly allocation that gets sent out into the market. No mining involved. That makes a predictable allocation and total supply for the market to determine its value.

I had additional questions for you above.

[malchior]

I would 100% agree with that. And I would further state that the "reward" in this case is fueled entirely by speculation. When the speculators leave, this particular currency will fail. At that point I would agree with Moliere that I only specifically talk about BTC. I have no idea whether or not other currencies force people onto electrical hamster wheels to create currency bits.

I think the actual problem is many fold but *if* it fails the problem primarily will have been that cost to mine grew too fast and transaction time to process is far too long. That is why ethereum is interesting because they claim to have worked some of that out. We'll see but I don't think speculation is as huge a problem or as influential as you believe. I also don't think the 'hamster wheel' is a big problem. It is more of a feature than a bug. The supply control is one of the problems people have with Ripple. They are practically acting as the DeBeers of crypto currency and skepticism is mighty high there. For now at least.

[RunningMn9]

Maybe you'll answer my question about Ripple. Let's say that there comes a day when all international banking transactions are conducted through Ripple. Why does anyone (other than the international banks) need to own Ripple currency?

If I go to my bank and say I want to send $1000 to someone in Scotland, why do I personally need XRP? Why can't the bank just deal with that when it comes to actually executing the transaction?

I still don't understand why I would ever want to park actual assets into these currencies. And if I only ever need the currency for the purposes of conducting the transaction, it seems like that could be totally transparent to me, and I never need to own them at all.

Let the bank figure that out.

[malchior]

That actually is the use case that Ripple is pitching to the banks. Inter-currency transactions often have to go through intermediary currencies and is inefficient and fee heavy. The idea would be payor currency -> ripple -> payee currency so the bank is the only one who needs to care about that transaction. Theoretically it should result in lower fees to the bank and maybe would pass through to the customer. it should also reduce some of the currency arbitrage effects we see in finance. It is an interesting case which is why they may succeed but I doubt it becomes a mass market phenomenon like BTC. There is a lot of skepticism around the control that Ripple maintains. They can dump coins on the market at will and will eventually have to since coins are destroyed when used (though it is adjustable so they might not get there but again Ripple holds all the cards).

[Moliere]

There is a lot of skepticism around the control that Ripple maintains. They can dump coins on the market at will and will eventually have to since coins are destroyed when used (though it is adjustable so they might not get there but again Ripple holds all the cards).

No they can't. Their coins were put into escrow with a controlled amount being released each month.

[RunningMn9]

They can dump coins on the market at will and will eventually have to since coins are destroyed when used (though it is adjustable so they might not get there but again Ripple holds all the cards).

Why would there need to be a coin market?

[Moliere]

Maybe you'll answer my question about Ripple. Let's say that there comes a day when all international banking transactions are conducted through Ripple. Why does anyone (other than the international banks) need to own Ripple currency?

If I go to my bank and say I want to send $1000 to someone in Scotland, why do I personally need XRP? Why can't the bank just deal with that when it comes to actually executing the transaction?

One example use is so that you can send the money to Scotland without involving the bank. Companies could do the same thing by having, for example, a U.S. company pay their Chinese supplier directly using XRP currency. The transaction goes through immediately at a very low cost compared to an international wire transfer. Ironically, when I funded my account to start purchasing XRP it required an expensive international wire transfer. I waited 3 days before I had a confirmation that the money was received.

[RunningMn9]

I understand what I *could* do.

Why would I want to? I either have to own or buy XRP to do it myself. The bank can do that for me, no?

[malchior]

There is a lot of skepticism around the control that Ripple maintains. They can dump coins on the market at will and will eventually have to since coins are destroyed when used (though it is adjustable so they might not get there but again Ripple holds all the cards).

No they can't. Their coins were put into escrow with a controlled amount being released each month.

I went and updated my out of date knowledge on this. I didn't realize they had actually implemented it. FWIW they still control at least 6B XRP that weren't put in escrow. XRP is a bit of a sideshow potentially anyway. Ripple has another big technology; unfortunately I don't remember the name. The block chain guys in my practice were saying that it was the real prize that the banks were thinking of using. It was not necessarily about investing in XRP as a currency. Again at the time people were very leery of Ripple's control of the currency. (And I doubt escrow alleviates that concern entirely). The idea was that the banks will use their own internal crypto currency and use the Ripple tech to bridge between institutions if I remember it correctly.

[Victoria Raverna]

So I guess people who invest in XRP are just beta testing the Ripple's transaction system. If or when bank are all using the transaction system, they don't have to use XRP.

Kinda like people who beta test MMORPG but on the release date, all start from zero so all time investment on the beta is lost.

[KDH]

...

... Russia Issuing ‘CryptoRuble’

Russian President Vladimir Putin has officially stated that Russia will issue its own ‘CryptoRuble’ at a closed door meeting in Moscow, according to local news sources. The news broke through Minister of Communications Nikolay Nikiforov.

According to the official, the state issued cryptocurrency cannot be mined and will be issued and controlled and maintained only by the authorities. The CryptoRubles can be exchanged for regular Rubles at any time, though if the holder is unable to explain where the CryptoRubles came from, a 13 percent tax will be levied. The same tax will be applied to any earned difference between the price of the purchase of the token and the price of the sale. Nikiforov said:

“I confidently declare that we run CryptoRuble for one simple reason: if we do not, then after 2 months our neighbors in the EurAsEC will.”

Embracing and rejecting
While the announcement means that Russia will enter the cryptocurrency world, it is in no way an affirmation or legalization of Bitcoin or any other decentralized cryptocurrency. On the contrary, Putin quite recently called for a complete ban on all cryptocurrencies within Russia.

The statement from Putin seemed apparently to contradict the earlier comments from other ministers who seemed pro-crypto, but only with regulations, as well as Putin’s recent meetings with Buterin and others. Now, with the issuance of the CryptoRuble, the apparent contradiction has been made clear.

[Moliere]

A crypto currency that is created and managed by the Russian government? Sounds legit.

[LawBeefaroni]

The same tax will be applied to any earned difference between the price of the purchase of the token and the price of the sale.

Hahahaha.

[Moliere]

Is Ripple for Real? A Closer Look at the Company Behind the Third Most Valuable Digital Currency

The Ledger: How does Ripple and XRP compare to other blockchains?

Brad Garlinghouse: For a period of time, Ripple wasn’t mainstream blockchain because because we weren’t bitcoin. We took a rather contrarian view at the time that we’re not anti-bank, we’re not anti-government, we’re not anti-fiat currency. For a while that took conviction to stay the course in the face of the more libertarian elements of crypto.

In 2017, people have realized there isn’t going to be one crypto to rule them all. You’re seeing vertical solutions where XRP is focused on payment problems, Ethereum is focused on smart contacts, and increasingly bitcoin is a store of value. Those aren’t competitive. In fact, I want bitcoin and Ethereum to be successful.

Why do banks need XRP?

It’s about liquidity. If you have a utility like XRP that has a real value proposition. The liquidity needs of banks today is managed with literally ten trillion of float that sits in these nostro and vostro accounts. We believe very strong this is an inefficient model. You can use digital assets to fund liquidity, and Ripple is uniquely positioned to capitalize on that. Bitcoin takes four hours to settle a transaction. XRP takes 3.6 seconds.

[Matrix]

Big conference for Ethereum Nov 1-4th(this is yearly biggest Ether conference). If it is anything like last one in May, we will see Ether likely to break new high.

[Matrix]

Nope, Ethereum stayed same. It is Bitcoin that went to $7500... dang.

[Moliere]

It is Bitcoin that went to $7500... dang.

This makes no sense to me other than RM9's tulip fantasy.

[RunningMn9]

Tulip fantasy? I’m aware of no fantasies that I have that involve tulips. But yeah, there couldn’t be any clearer evidence of wild speculation driving a bubble than this past week.