Elon Musk is going to have to step up his roof to energy game to keep up with the energy demand Bitcoin is creating. One transaction consumes as much energy as your house in a week.
https://motherboard.vice.com/en_us/article/ywbbpm/bitcoin-mining-electricity-consumption-ethereum-energy-climate-change
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Key phrase being "in part". And definitely not the primary driver, but is required to sustain value.
Water = high utility, virtually zero scarcity.
Sand from Mariana Trench = high scarcity, zero utility.
If you pair the two together, you have a valuable asset.
I didn't expect that would be a controversial point when I typed it haha.
The value is not at all in the coins themselves, but the networks the coins grant access to. For Bitcoin, it could be a secure place to store money. For Monero, a place to transact anonymously. For Ethereum, a way to execute contracts without rent-seeking middlemen. To participate, you have to buy the coins.
High Demand + Fixed Supply = Increase In PriceLeave a comment:
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The value is certainly not driven by the scarcity. Value comes from its utility. Its utility is that as long as its legal anyone can move money around in ways they could not before, either nefariously or to escape state capture.
The whole idea is proven wrong on its face with the litany of new coins introduced into the market. Itd be like saying the value of some tiny countries currency is more valuable than a dollar because there is less overall supply. Thats not what drives value.
This is where my head starts to hurt when talking about crypto-currencies.
I can agree with the first paragraph about the utility. Fair enough – it allows the secure and hopefully untraceable movement of money. So the follow up question relates to your second paragraph – “What makes BTC more valuable than ETH, XRP, XMR, etc?”
One could argue that Monero, Ripple, or Ethereum provides even more utility as you’ve defined it. Why is Bitcoin leading the pack in value? I believe the answer to that is because of its adoption…. there’s a scarcity. Which leads back to the scarcity = value issue.
I’m not being contrarian, I just can’t wrap my head around btc’s current valuation based on its actual utility. Especially since, as you pointed out, there are plenty of other alternatives out there. Speculators have driven the price of bitcoin up ridiculously high. I just don’t think it’s a true value.
Totally could be mistaken though if you can break it down simple style for me.
Dont confuse me participating for pretending to know what its true value may be, I have no idea. The space is weird to me. It has more value because thats what people have placed it into, maybe its the coke of crypto and has the best name recognition. I dont buy the scarcity argument at all, its the same thing goldbugs talk about, it neither has any logical nor monetary backing. Things are not necessarily valued on their scarcity nor the effort required to obtain it. All kinds of things are exactly opposite of those ideas, wildly abundant yet expensive like water or hard to obtain but worthless like say sand from the mariana trench, still just sand. No one will pay you for how hard you worked for it.
Why do Kardashians make more than doctors? Value is not scientific and changes.Leave a comment:
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The value is certainly not driven by the scarcity. Value comes from its utility. Its utility is that as long as its legal anyone can move money around in ways they could not before, either nefariously or to escape state capture.
The whole idea is proven wrong on its face with the litany of new coins introduced into the market. Itd be like saying the value of some tiny countries currency is more valuable than a dollar because there is less overall supply. Thats not what drives value.
This is where my head starts to hurt when talking about crypto-currencies.
I can agree with the first paragraph about the utility. Fair enough - it allows the secure and hopefully untraceable movement of money. So the follow up question relates to your second paragraph - "What makes BTC more valuable than ETH, XRP, XMR, etc?"
One could argue that Monero, Ripple, or Ethereum provides even more utility as you've defined it. Why is Bitcoin leading the pack in value? I believe the answer to that is because of its adoption.... there's a scarcity. Which leads back to the scarcity = value issue.
I'm not being contrarian, I just can't wrap my head around btc's current valuation based on its actual utility. Especially since, as you pointed out, there are plenty of other alternatives out there. Speculators have driven the price of bitcoin up ridiculously high. I just don't think it's a true value.
Totally could be mistaken though if you can break it down simple style for me.
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This value is driven in part by it’s scarcity
This is the part I have trouble with, though I’m always willing to have my mind changed on the matter. If value is driven more so by scarcity rather than utility, I wonder about the long-term viability. I’ve heard the argument that part of the utility is the scarcity itself, but I still have a hard time justifying that to myself without some other form of utility. Even diamonds have commercial uses outside of jewelry. I love the idea of blockchain and its ‘potential’ utility is incredible. Without some actual utility though, I don’t see the value as justified. At the end of the day, would we even be having this conversation if it wasn’t for btc’s meteoric rise in value based primarily on speculation?
As an aside, when btc mining first started getting popular, I was overseas for years on a military installation with a ton of spare computing and free electricity. I do kick myself for not jumping on that train, speculation or not.
The value is certainly not driven by the scarcity. Value comes from its utility. Its utility is that as long as its legal anyone can move money around in ways they could not before, either nefariously or to escape state capture.
The whole idea is proven wrong on its face with the litany of new coins introduced into the market. Itd be like saying the value of some tiny countries currency is more valuable than a dollar because there is less overall supply. Thats not what drives value.Leave a comment:
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This value is driven in part by it’s scarcity
This is the part I have trouble with, though I'm always willing to have my mind changed on the matter. If value is driven more so by scarcity rather than utility, I wonder about the long-term viability. I've heard the argument that part of the utility is the scarcity itself, but I still have a hard time justifying that to myself without some other form of utility. Even diamonds have commercial uses outside of jewelry. I love the idea of blockchain and its 'potential' utility is incredible. Without some actual utility though, I don't see the value as justified. At the end of the day, would we even be having this conversation if it wasn't for btc's meteoric rise in value based primarily on speculation?
As an aside, when btc mining first started getting popular, I was overseas for years on a military installation with a ton of spare computing and free electricity. I do kick myself for not jumping on that train, speculation or not.
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This is due to the fact that since its decentralized, it cant be censored by anyone. They get gaga over that. However, the other side of that coin comes with a ton of limitations. Currently its an irrational exuberance as almost all participants do not understand it well or its eventual applicability (obviously unknown).
Yeah, as libertarian as it sounds, the innovation behind blockchain is that they are decentralized. Basically, they are able to provide trustless facilitation of trade, without a trusted intermediary -- if an individual, company, or government controlled a blockchain, it wouldn't be all that interesting. To that end, blockchains and tokens are virtually inseparable -- The crowd won't give you what you want (verify transactions) unless you give them something in return (tokens).
The tokens require value in order for people to accept them as payment for providing service to the network. This value is driven in part by it's scarcity -- it is fundamentally difficult and costly to produce, and it is limited in supply. And also by the desirability of participation in the network itself, which can be approximated by the size of current markets for a particular use case (A good starting place for Bitcoin = unseizable store of value).
And you're exactly right - there's currently a massive trade-off to decentralization, namely scalability. But that's a current issue, and it's still very early, so it could potentially be overcome if they could get their governance issues under control. Or perhaps not, and some other network overtakes Bitcoin. In either case, I think the idea has satisfied itself as a proof of concept, now it's just a matter of who the winner will be.Leave a comment:
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I think of bitcoin as a commodity rather a currency. It’s like gold in that there is a fairly fixed supply, no government control, and regular price fluctuations. As others have pointed out, unlike gold there’s no inherent value in bitcoins.
It also seems that many of those who are otherwise anti-Fed libertarian goldbugs have become enamored with cryptocurrencies. Not all of course, but I think it fits into the worldview of many anti-government types who would love to return to the gold standard. Needless to say, I’m not invested in cryptocurrencies.
At the same time, I think there’s potential in blockchain technology. The idea of using the wisdom of the crowd to verify transactions could lead to a better system for tracking titles, money transfers or loan payments. The key thing here is all of this is based on the idea of blockchain, not the merits of the individual cryptocurrencies. There’s a network effect for cryptocurrencies with lots of users, but nothing to stop every big company from creating a new one.
If there was an easy way to bet on that technology rather than on an individual company or currency, I would.
This is due to the fact that since its decentralized, it cant be censored by anyone. They get gaga over that. However, the other side of that coin comes with a ton of limitations. Currently its an irrational exuberance as almost all participants do not understand it well or its eventual applicability (obviously unknown).Leave a comment:
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I think of bitcoin as a commodity rather a currency. It's like gold in that there is a fairly fixed supply, no government control, and regular price fluctuations. As others have pointed out, unlike gold there's no inherent value in bitcoins.
It also seems that many of those who are otherwise anti-Fed libertarian goldbugs have become enamored with cryptocurrencies. Not all of course, but I think it fits into the worldview of many anti-government types who would love to return to the gold standard. Needless to say, I'm not invested in cryptocurrencies.
At the same time, I think there's potential in blockchain technology. The idea of using the wisdom of the crowd to verify transactions could lead to a better system for tracking titles, money transfers or loan payments. The key thing here is all of this is based on the idea of blockchain, not the merits of the individual cryptocurrencies. There's a network effect for cryptocurrencies with lots of users, but nothing to stop every big company from creating a new one.
If there was an easy way to bet on that technology rather than on an individual company or currency, I would.Leave a comment:
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I guess I should be more clear… There are arguments against Bitcoin, and then there are arguments against investing in bitcoin.
99.9% of people shouldn’t invest in bitcoin, simply because it isn’t suitable — i.e. they don’t understand it, it doesn’t fit their investment objectives, unnecessary risk, etc.
The point I wanted to make was in regards to the statements seemingly made about it’s viability as a new technology. While Bitcoin may (and is likely to) fail, it isn’t for any of the reasons listed above (no utility, too volatile to be a currency, zero intrinsic value, etc).
It’s one thing to say don’t invest in things you don’t understand, or not to chase returns that are far from certain. It’s another to say don’t invest in something for reasons that are unrelated to it’s primary use case.
That being said, we are definitely in agreement that people shouldn’t blindly invest in bitcoin.
But should people even waste time to become fluent on bitcoin at all?
I definitely think it's worth exploring, for those that think they may have interest. Blockchain technology is something unlike anything that has ever been seen before. These tokens (btc, eth, ltc...) are creating markets where there otherwise wasn't one -- think of what it would be like if you could own part of the TCP/IP protocol. And it's only recently been made possible by blockchains and the cryptographic protocols underlying them.
For anyone interested in at least seeing if it is something you may want to learn more about - I HIGHLY recommend Patrick O'Shaughnessy's 3 part podcast on the topic - Hash Power. You will know very early on if it's something you'd like to explore further.
Invest or don't - but it is a fascinating subject if you enjoy game theory, understanding incentive structures, etc.
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Read (finally) a very good breakdown of Bitcoin/Ethereum yesterday. Feel I have a lot better understanding of the whole thing. Most of my perceptions were echoed in it and did learn some new stuff. Bitcoin simply doesnt make sense for a lot of the stuff its currently hyped for, and has a very limited used profile, ie, non censored payments. While Ethereum is some sort of platform and should be judged by the apps created on it, which isnt anything useful yet.Leave a comment:
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I guess I should be more clear… There are arguments against Bitcoin, and then there are arguments against investing in bitcoin.
99.9% of people shouldn’t invest in bitcoin, simply because it isn’t suitable — i.e. they don’t understand it, it doesn’t fit their investment objectives, unnecessary risk, etc.
The point I wanted to make was in regards to the statements seemingly made about it’s viability as a new technology. While Bitcoin may (and is likely to) fail, it isn’t for any of the reasons listed above (no utility, too volatile to be a currency, zero intrinsic value, etc).
It’s one thing to say don’t invest in things you don’t understand, or not to chase returns that are far from certain. It’s another to say don’t invest in something for reasons that are unrelated to it’s primary use case.
That being said, we are definitely in agreement that people shouldn’t blindly invest in bitcoin.
But should people even waste time to become fluent on bitcoin at all?Leave a comment:
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I guess I should be more clear... There are arguments against Bitcoin, and then there are arguments against investing in bitcoin.
99.9% of people shouldn't invest in bitcoin, simply because it isn't suitable -- i.e. they don't understand it, it doesn't fit their investment objectives, unnecessary risk, etc.
The point I wanted to make was in regards to the statements seemingly made about it's viability as a new technology. While Bitcoin may (and is likely to) fail, it isn't for any of the reasons listed above (no utility, too volatile to be a currency, zero intrinsic value, etc).
It's one thing to say don't invest in things you don't understand, or not to chase returns that are far from certain. It's another to say don't invest in something for reasons that are unrelated to it's primary use case.
That being said, we are definitely in agreement that people shouldn't blindly invest in bitcoin.
Leave a comment:
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I thought I had laid out a good number of the arguments against it. But, if you are looking for more, the White Coat Investor provides an articulate set of arguments in his article on this topic: https://www.whitecoatinvestor.com/5-reasons-i-dont-invest-in-bitcoins/. His most compelling point is this: "As a high income professional you’ve already won the game. You don’t need to invest in speculative instruments like Bitcoins to reach all of your financial goals. Don’t run risks you don’t need to run."Leave a comment:
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I think bitcoin is a disaster and would recommend that you stay far away from it. It’s not a viable currency, it’s a completely unpredictable as an investment, and it lacks any inherent utility.
It is difficult to imagine bitcoin as a useful currency because it’s price is so volatile. As a thought experiment, would you agree to accept your next year’s pay in bitcoin?
It is also difficult to imagine bitcoin as an investment because it lacks any intrinsic value. That is to say, it doesn’t produce any income, unlike a stock or a bond or real estate. It fits into the same category as gold, which is worth only what the next person will pay for it. However, it is much less useful than gold because it lacks any inherent use. At least you can use gold for jewelry. Bitcoin is useful for nothing.
And, as to the fact that the dollar is fiat currency: That is true, but it’s also the currency that everyone in the U.S. (and in many other countries) use. And, since it’s the only currency the IRS accepts, you can’t dismiss it in the same way that you can bitcoin just because it’s a fiat currency.
1. Bitcoin isn't a currency, it's an asset. Your argument goes back and forth between the two.
2. It's currrent utility isn't so much to transact value, but to store it. If you want a better thought experiment, think of the advantages bitcoin has to all the Swiss and Cayman bank accounts, the hidden gold bars, or cash under someone's mattress.. etc. Add that all up, and divide by 21M -- that's a good place to start trying to understand the potential for the value of a single BTC. Note: Potential. There are obviously huge obstacles to overcome, and it may only capture a fraction of the market.
3. All new technologies are inherently risky, and thus volatile. It's not even available to the retail investor at this point, without jumping through hoops. Stability will come with time. By the time it's stable, it won't be an attractive investment.
4. See #2. It's intrinsic value is as a scarce resource, and an unseizable store of value. Try taking millions of dollars in gold or cash across the border, and see what happens. Look at people's wealth eroded to nothing in countries like Venezuela or Argentina. Who might want to protect themselves from civil asset forfeiture, or oppressive governments? While this isn't a primary concern in the US, it is in much of the world. Even major corporations like Apple store their cash abroad in order to minimize taxes, etc.
5. It's not out of the question that eventually everyone will accept digital currency (may or may not be bitcoin), and perhaps not even realize it -- i.e. pay with fiat backed by crypto.
It's definitely not for everyone, and nobody should buy without first studying it a ton, and then coming to their own conclusions. But to suggest it has zero utility, or to dismiss it as a disaster waiting to happen, while clearly not having done much research, isn't very productive. There are a ton of arguments against bitcoin, none of which you have laid out.Leave a comment:
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