6 Myths About Bitcoin And How To Bust Them

Authored by Vincent Launay via CoinTelegraph.com,

Given all the negative press that Bitcoin has to fight against, the arguments in favor of Bitcoin may sometimes be lost in all the noise. So let’s have a look at the typical attacks on Bitcoin and how the community could respond to them.

image courtesy of CoinTelegraph

The price of Bitcoin is too high

Despite being down more than 60 percent from its all time high, the price of 1 Bitcoin - around $7,000 at the time of writing ($7,116 at press time - Cointelegraph) - still deters many people from entering the market. Even though Bitcoin is on the main page of many online newspapers since mid-2017, most people still do not know they can buy a fraction of a Bitcoin. So let’s set the record straight: 1 Bitcoin can be divided into 100 million satoshis (the smallest Bitcoin unit). Just because one cannot afford a full gold bar - which are $600,000 a piece - does not mean one cannot buy a gold coin or invest as little as $126 through a Gold ETF to get exposure to gold. The same thing can be done with Bitcoin.

Assuming a world population of 7 bln people, it means that there are 300,000 satoshis available per human being, or 0.003 Bitcoin. Since several studies have estimated that 3 to 4 mln Bitcoins have been lost in the early years, the true number is probably closer to 220 - 250,000 satoshis per person.

This problem led to an exuberant rally at the end of 2017, when all the coins below $1 suddenly started going up as many thought they were “cheap”. As each coin has a different supply, the price of one coin is irrelevant, what matters is the market capitalization of the outstanding supply and whether a particular coin has a future or not. Since this rally, most of these coins have gone down 80 percent + as these increases never made sense in the first place.

Remember that there are more millionaires in the world than there will ever be Bitcoins, so the price of 1 Bitcoin will soon not be the right metric, but rather 1 mBTC (1 thousandth of a Bitcoin) or even 1 satoshi. The current market capitalization of Bitcoin is $120 bln, while the US Dollar M2 Money Supply is $14,000 bln and the value of all the gold ever mined is $8,000 bln, so there is still plenty of upside left. At $7,000 per Bitcoin, the price of 1 satoshi is  0.007 US cents - at this price anyone can invest.

The price of Bitcoin is too volatile to invest any money in it

There is no debate that the price of Bitcoin is very volatile, but it is so for good reasons. For the first time in the history of mankind there is a cryptographically secure, decentralized currency not backed by any central bank nor any physical asset. It would actually be even more surprising if Bitcoin were already stable. The volatility issue will likely sort itself out with time when the market capitalization of Bitcoin becomes comparable to that of the assets it is competing with - fiat currencies or gold - or if it goes to zero!

Cryptocurrencies are the most volatile and speculative asset class in the world, so if you invest in Bitcoin or other cryptocurrencies, you should know what you are in for and you should only invest what you can afford to lose. Investing only what you can afford to lose gives you something very valuable: time. If you have time, then you will never be forced to sell when the price is low and you can weather market cycles, including severe downturns.

Bitcoin is bad for the environment

When Bitcoin started being mined by Satoshi Nakamoto back in 2009, mining it could be done on a simple laptop and it took on average 10 minutes to mine a block just like it does today. The Bitcoin algorithm is such that it automatically adjusts the difficulty of the cryptographic puzzle that miners have to solve to validate a block and receive the reward such that it always takes 10 minutes to mine a block on average. The more resources are added to the Bitcoin network, the higher the difficulty. This difficulty is what makes the Bitcoin network the most powerful and hence most secure on Earth.

The reason miners have invested billions of US dollars in specialized mining equipment is because Bitcoin is so valuable - it is not as a result of an increase in the number of users nor the number of transactions. As long as Bitcoin is valuable, companies will invest in mining equipment to get the reward that comes with successfully mining a block. These miners consume large quantities of electricity to run their operations, and this is what has been heavily criticized. But since the cost of electricity is the main operating cost for miners, they are always looking for cheap electricity around the world. Electricity is cheap where there is a surplus of it, and this usually happens in countries that have large renewable resources, so the net impact of running a mining operation in a country that has excess hydro capacity for example may not be as bad as what has been written.

At $7,000 per Bitcoin, the current annual cost of the Bitcoin network is $4.6 bln, and a sizable portion of it spent on electricity bills. But what the Bitcoin network provides for this cost is a Blockchain that is unhackable by any existing computer or technology on the planet.

While Bitcoin has been targeted by environmentalists, the legacy fiat system is not perfect either. A lot of resources are also dedicated to running datacenters, building and powering bank branches and printing banknotes just to name a few.  The US Federal Reserve alone spends $700 mln a year just to print dollar bills. What makes Bitcoin an easy target is simply that it is relatively easy to figure out how much electricity it consumes.

40 percent of All Bitcoins Are Controlled by 1,000 people

Another myth is that supposedly 40 percent of Bitcoins are held by only 1,000 people. The reality is that this is pure speculation. What we know for sure is that there are currently 24 mln Bitcoin wallets. However, one person may have hundreds of wallets while one wallet may hold Bitcoins belonging to thousands, or millions of people, which makes any analysis of the concentration of wealth among Bitcoin holders quite impossible.

The two wallets holding the most Bitcoins have been identified as being the cold wallets of Bitfinex and Bittrex, but someone looking a the raw data would simply infer that the owners of these two wallets are billionaires, while the Bitcoins in these wallets belong to thousands or millions of clients of these exchanges. Coinbase alone claims to have more than 10 mln users. When you trust an exchange with your Bitcoins - you should not - the exchange does not create a wallet specifically for you on the Blockchain, it simply allocates some of the Bitcoins that have been deposited with them from one user to another one.

On the other hand, most wallets create a new address every time there is an incoming transaction. This means that someone with a hardware wallet would have received 5 times 0.2 Bitcoin will own 1 Bitcoin spread over 5 different addresses. There is no way to know that these 5 addresses actually belong to the same person. The heavy concentration of wealth in the Bitcoin world may or may not be a reality, but convincing evidence has yet to be produced to close the debate on this point.

Bitcoin Is used to buy drugs and for money laundering

With Bitcoin, every single transaction is public, which is not exactly ideal if you are looking to engage in illegal activities. Two reports were recently released claiming that only 1 percent of all Bitcoin transactions were used for money laundering or  44 percent for illegal activities. Needless to say there is no consensus on this issue.

The problem with using Bitcoin or any other cryptocurrency for illegal activities is that you cannot do much with those yet if you have acquired them illegally. If you are running a large illegal operation and you suddenly decide to collect Bitcoins instead of cash, how are you going to pay for your expenses? You will most likely need to go through an exchange to get good old fiat currency in exchange for your cryptocurrencies, and you cannot do this anonymously as many exchanges follow Know Your Customer (KYC) and Anti Money Laundering (AML) procedures when registering users. This is where criminals using cryptocurrencies will get caught as law enforcement agencies are monitoring these exchanges. So cash will probably remain the currency of choice for criminals for the time being.

Bitcoin transactions are slow and expensive

Ever since the SegWit soft fork got implemented about 6 months ago, the theoretical maximum number of transactions per second increased from 5 to 7 per second to close to 20 per second, or 1.7 mln per day. This number is of course very far from what it should be to compete with the legacy payment systems. But it has never been the objective of the Bitcoin Blockchain to record every single transaction. Many of the smaller transactions could be recorded off chain, and this is precisely what the upcoming Lightning Network will make possible.

The whole Bitcoin network has been designed around incentives. Fees are necessary to prevent spam attacks on the network. Without fees any malicious attacker could simply send millions of tiny transactions just to fill up the blocks and paralyze the system. The fees make sure that the most important transactions - those for which high fees have been paid - are processed first. And even if it takes a few blocks to get a transaction validated, it is still much faster than a wire transfer that may take up to 10 days (in the case of international wire transfers).

A long road ahead

Most people still misunderstand what Bitcoin is and how it works, and it is going to take time for them to figure it out. When the internet went mainstream more than 20 years ago, many people did not even see the point of having an email address as they did not know anyone who had one. Bitcoin and cryptos in general are there. Bitcoin adoption is still increasing - even in the middle of a bear market which saw the price of 1 mBTC fall from $20 down to $6 - and it is all that matters. Bitcoin has had its fair share of booms and busts in its 9 years of existence, but what makes Bitcoin different from other bubbles is that even though its price went down many times, it has always recovered.

Comments

lester1 Wed, 04/11/2018 - 12:59 Permalink

Bitcoin is a ponzi scheme. It has no intristic value and the price is too unstable to ever be accepted widely by businesses. Is "digital gold" supposed to crash -65% in just 3 months? How the heck can you plan a business aceepacce Bitcoin with a very unstable price?

 

The dollar is at least backed by a democracy with the most powerful military in human history. What's bitcoin backed by?.. 🤔

 

Vote me down if I brought you back to reality and hurt your feelings.

 

https://youtu.be/kZpMS_r5eKI

USisCorrupt SethPoor Wed, 04/11/2018 - 13:13 Permalink

Lester1 are you really that Clueless?

Do you even know what open source and decentralized MEAN?

Are you CONTENT on being a SLAVE for LIFE?

Jim White said it best "You can't Fix Stupid."

Why is education LACKING so bad in this world today?

Don't you worry though, the world will always need good little Slaves that OBEY their Masters. I personally LOVE real FREEDOM!

In reply to by SethPoor

TruthHammer USisCorrupt Wed, 04/11/2018 - 13:52 Permalink

Bitcoin is not a currency, and never will be (it would be legislatively destroyed if it ever became one)

 

It is a commodity, and a speculative bubble, and should be traded as such.

 

This article is just coinTARDs angry they didnt sell the high, or bought in too late.  Even IF you believe in the bubble longer term, then you should have sold, and then buy in for cheaper, re-investing your profits.

BTC believe-tards should be riding the BULL and day-trading the Bear.

Anyone who bought the tulips, I mean penny stocks, I mean "coins" early on and hasnt cashed out for millions of free money is an idiot.
 

In reply to by USisCorrupt

lookslikecraptome TruthHammer Wed, 04/11/2018 - 16:51 Permalink

sssshhhhh! the truth hurts.

damn Lester get the shit rolling, caps and all. way to go Lester. 

had to sign in from NASA.

I am blasting off for the moon in the rocket i bought with bitcoin which is where bitcoin is going. probably have a party with some hookers and blow when i get there. the rocket is made by the lambo factory.  

Eff u coineratti. I got me a rocket. u only got a car. pssst i no longer HODL!!!!!!!!!!!  use that word to look cool right? or maybe a moron. 

BTW. each of the "myths" about cryptos are not myths. 

In reply to by TruthHammer

LetThemEatRand RedBaron616 Wed, 04/11/2018 - 13:35 Permalink

Aside from the possibility that blockchain itself is an NSA creation, here is another thing that would worry me as a crypto "investor":  "More than 20 percent of students report that they've invested in cryptocurrencies with their student loans."  https://studentloans.net/financial-aid-funding-cryptocurrency-investmen…

The proverbial shoe shine boy thinks cryptos are going to the moon from here, including many who presumably bought in when they were well above current levels.  Of course the shoe shine boy is sometimes right, so there's that.

In reply to by RedBaron616

centipede RedBaron616 Wed, 04/11/2018 - 16:35 Permalink

Not only that. There was lot of nonsense written in the article right from the start. The number of coins is totally irrelevant. They could have create just one bitcoin coin, trade only fractions from the very beginning and it would not change anything on the real worthlessness of the whole concept. There can be countless number of better or at least as good cryptocurrencies as bitcoin created by countless anonymous individuals or private or  public companies. The code is public domain. Anybody can use it and even improve it.

If bitcoin cryptobelievers are scared of inflated fiat - few hundred of world state currencies with potentially countless coins it really amazes me why are they not scared of potentially countless cryptocurrencies even if they can have restricted number of coins. The whole thing doesn't make any sense and to guess what will be the next expensive super coin is just as wild as to gamble in a casino.

In reply to by RedBaron616

rphb USisCorrupt Wed, 04/11/2018 - 14:19 Permalink

Apparently thou art the clueless one, if thou think that any of that can contain value. I mean seriously. "Open source" means that it is freeware, meaning that the only thing that possibly could have been worth something, aren't, because its not copyright protected.

And by the way, it isn't exactly Windows that Satoshi have invented. Give me one example of something useful we can do with it, other then of course run a pyramid scheme.

In reply to by USisCorrupt

spqrusa lester1 Wed, 04/11/2018 - 13:09 Permalink

You must be surprised that Overstock keeps 50% of all Bitcoin accepted for savings. Their "savings" have earned them 3000% over the last 4 years. Such a mess for planning.

The real volatile currency is USD and related fiats which all move in unison. Bitcoin destroys fiat in terms of store of value on any timeline greater than 1 year.

In reply to by lester1

RedDwarf lester1 Wed, 04/11/2018 - 13:34 Permalink

"Bitcoin is a ponzi scheme."

No matter how many times that is stated, it is not true.

"It has no intristic value"

Value is the regard or utility a person has for someone or something else.  The phrase 'intrinsic value' is an oxymoron.  How arrogant of you, to assume that YOUR value system is THE ONE TRUE VALUE SYSTEM for everyone.  Like most authoritarians and religious fanatics, you know the the TRUE TRUTH.

"and the price is too unstable"

The article dealt with this and you don't bother to refute it.

"The dollar is at least backed by a democracy with the most powerful military in human history."

The fact it takes the most powerful military in the world to make people use USD is proof of how little value it actually has.  You don't need guns to make people use something they like.  It's very funny how you think something you are forced to use at the point of a gun proves it has value.  You are Stockholm Syndrome personified.

"What's bitcoin backed by?"

The free market, meaning voluntary choice of many people.  Unlike your beloved fiat, which IS a Ponzi scheme, it is chosen voluntarily.  Like all fervent statists, you worship those who have put the boot to your face.  Keep licking the bottom of those boots fool.

In reply to by lester1

centipede RedDwarf Wed, 04/11/2018 - 17:41 Permalink

Actually bitcoin on its own is not a ponzi scheme, but the whole concept of cryptocurrencies is quite close to exactly that. There are more than 1500 of them and nicely growing. And there can be countless new created out of thin air by the same anonymous people and countless others. It doesn't matter how many coins each cryptocurrency has if there can be zillions of cryptocurrencies.

No, intrinsic value is not an oxymoron. It is an oxymoron in the context of cryptocurrencies though. You can not escape intrinsic value of water, food and natural resources, which are necessary and irreplaceable for our survival. Who needs cryptos to survive?

You are missing the point of government acceptance and its use of force being important in value of a currency. No matter how we (including me) do not like government suppression the reality is, that if the government doesn't accept cryptocurrency as a legal asset we have very small possibility to protect it against fraud. How are you going to force somebody you paid for a product or a service he doesn't deliver to give you back your bitcoin if government outlaws it? Freedom and democracy alone without a possibility to enforce your rights to property will not solve it. Are you going to hire private company to enforce your rights in the environment where the forceful government doesn't allow it?

I consider myself libertarian but I do not think that "the free market, meaning voluntary choice of many people" is good enough to back the value of a cryptocurrency in the context of authoritarian and totalitarian state. But I do not believe that it would work in free society either without being backed by something real, like commodities.

In reply to by RedDwarf

RedDwarf centipede Wed, 04/11/2018 - 19:39 Permalink

"Actually bitcoin on its own is not a ponzi scheme, but the whole concept of cryptocurrencies is quite close to exactly that [because there are lots of cryptocurrencies and they are easily created]."

By that logic one company selling stock is not a Ponzi scheme, but a lot of competing companies all selling stocks somehow are a Ponzi scheme.

Cryptos are not fungible to each other.  A bitcoin is not a litecoin.  Most cryptocurrencies have valuations close to zero.  Finally anyone can make a new crypto and make an argument to the market for it.  That is the OPPOSITE of a Ponzi system, where a few at the top must control the pyramid.

"You can not escape intrinsic value of water, food and natural resources, which are necessary and irreplaceable for our survival."

First off how much you value your survival depends on the person.  Secondly even with essentials, the value changes with context.  To a person dying of thirst one bottle of water probably holds great value.  To a person with an ocean of fresh water, one more bottle of water likely holds no value.  If the value of the water was intrinsic (objective) it would not change based upon the person's context and value system. 

The WHOLE REASON we have markets is due to the subjective nature of value.  If I sell you a pen for $1, I valued the pen more than the dollar, and you valued the dollar more than the pen.  Furthermore we both can be right.  In this way the free market is not a zero-sum game, trade can be win-win.  If value was 'objective', like Marx and you claim, trade would always mean a winner and a loser or a wash at best.

"Who needs cryptos to survive?"

Well, who needs a Rembrandt to survive?  I guess no art has value either then.

Secondly crytpocurrencies are useful in a pragmatic sense.  The whole reason to have 'money' as a concept at all is to cut down the friction for performing transactions.  It is hard to run an advanced society on barter.  Cryptocurrencies improve on a couple of these aspects over current money technology.  This means a society using them can be more productive, which over time means they become wealthier and more powerful.

Also, you are aware right that most cryptos are not currencies?  Most of them are new utilities?  Games, applications, business models?  Steemit for example is a blockchain technology for a decentralized social media network like YouTube but outside of governmental control.  That has value to people as a UTILITY.  Populous if successful will allow the buying and selling of invoices with greater efficiency, making both the buyer and seller happier and richer than going through a middleman.

More efficient transactions, more secure transactions, new business models, these all come from blockchain.  Yeah, no value at all in that.

"Freedom and democracy alone without a possibility to enforce your rights to property will not solve it..."

Democracy is anti-freedom.  Democracy is the dictatorship of the majority.  It's better than an oligarchy or monarchy, but it's not at all the same as freedom.

"the reality is, that if the government doesn't accept cryptocurrency as a legal asset we have very small possibility to protect it against fraud."

Really?  What fraud is there in bitcoin for example?  What would government 'regulation' bring other than corruption?  Your faith in government is hopelessly naive.

"But I do not believe that it would work in free society either without being backed by something real, like commodities."

No one was forcing people to use bitcoin et al.  So a fully free market assigned value to them just fine.

"I consider myself libertarian"

A libertarian who believes only the government can provide security and trust?  LOL.

In reply to by centipede

centipede RedDwarf Thu, 04/12/2018 - 02:58 Permalink

Not at all. If you own a shares of a company you own part of real assets of that company. If you own bitcoin you do not own nothing real, just a number.

Cryptos are not fungible but there is no real reason for many of them not to be. If let's say 10000 cryptogeniuses create 10000 new cryptocurrencies with different names but the same number of coins as bitcoin, using the same algorithm, what is the reason they are not fungible? Just a whim of those who buy them for whatever price. It is not exactly ponzi, of course, but not much better.

Sure that survival depends on willingness of the individual to live. There are suicides, but not that many in comparison to those who want to live. I did not say that intrinsic values can not change their prices, but they are irreplaceable with their physical and chemical properties. Bitcoin is easily replaceable.

No, the WHOLE REASON we have markets is due to be able to exchange values for better survival. The market is not a casino. Its purpose is not a game. The fact that many if not all values are subjective doesn't mean that they are not necessary for survival. Free market is not free because it is pure gambling with subjective values. It has serious consequences for survival.

No, paintings of Rembrant are irreplaceable unlike cryptos. We can survive without them though. They can serve apart from their beauty for some people as a storage of values. Exactly because of that irreplaceability.

I do not think that anybody sane wants to run market or society on barter. The concept of money is extremly useful for any society. But we do not agree what kind of money makes sense for that purpose. I think that it should be money backed with something real what can not be created out of thin air. Cryptos o not qualify. They are just a game with numbers.

I wrote somewhere else that I would be glad to use blockchain and cryptos if they are in fact shares in a company. That fits exactly the case when the money is backed by something real. I do not have problem with that at all, but that is not the case of bitcoin and many other cryptos. There is no backing whatsoever. And yes I have no problem to own a piece of a game or other utilities. But i want to own it, not just play it.

I will repeat once again just to make sure you understand me. I like the technology and its effectiveness, but if I use it, I want to use it for something meaningful. I prefer to own it rather then just play with it and feed the casino.

Fine, on democracy there is no argument between us. :-) I do not need democracy if I have freedom.

You misunderstood me. You took it out of the context. There doesn't have to be a fraud in bitcoin other then that it is worthless. And I am not naive to believe in government either. What I was referring to was the reality. Not just concepts. In reality there is a government whether we like it or not. The government is pretending to protect us and our assets. Sometimes they actually even protect our assets. For whatever reason and cost is another matter. The problem is, that if they decide not to protect our assets in the form of bitcoin and outlaw it, we do not have an alternative to protect ourselves. They do not allow private police. How are you going to get your bitcoins back in the case that somebody deceives you, doesn't deliver the product or the service you payed for by bitcoins or doesn't repays debt (in bitcoins) to you?

There is no problem with the free market. There is a problem with the unbacked cryptocurrencies. Free market doesn't turn a turd into chocolate.:-)

Can you read? Where exactly have you read that I " believe only the government can provide security and trust". Please, spare me and yourself that strawman. Just because I do not want to blindly believe in some irrational neoponzi schemas with another money out of thin air I believe in governments?

In reply to by RedDwarf

RedDwarf centipede Thu, 04/12/2018 - 13:49 Permalink

"Not at all. If you own a shares of a company you own part of real assets of that company. If you own bitcoin you do not own nothing real, just a number."

Absolutely incorrect.  You own that % share of the blockchain.  Others may own the physical network that supports said blockchain, but they have no choice but to accept your ownership of the very thing they are allocating and spending physical assets (electricity, computers, bandwidth, etc) to support.

"Cryptos are not fungible but there is no real reason for many of them not to be. If let's say 10000 cryptogeniuses create 10000 new cryptocurrencies with different names but the same number of coins as bitcoin, using the same algorithm, what is the reason they are not fungible?"

This has happened.  Bitcoin Cash is a fork of BitCoin.  BCH vs BTC.  Guess what, they are not at all fungible.  Might as well ask why if I printed copies of all the USD in existence on purple paper with cartoon characters for the faces on it why that would not be fungible with USD.

"Bitcoin is easily replaceable."

No, it is not.  Once something has been widely adopted it is not easily replaced.  There is now a massive amount of physical, technical, and social infrastructure dedicated to bitcoin.  Laws are being hammered out for it.  Applications have been written for it.  Marketing and acceptance by the public.  The list is endless.

"No, the WHOLE REASON we have markets is due to be able to exchange values for better survival."

So, someone trading for a Rembrandt needs it for survival?  You keep wanting to force everything into your own value system and only in the context Maslow's first two layers of need.  There are people who trade their labor for bombs to blow themselves up with.  There are people who buy and do drugs.  People trade based on their own internal value systems, and sometimes counter to survival.

"The market is not a casino."

Never said it was.

"Free market is not free because it is pure gambling with subjective values. It has serious consequences for survival."

Subjective does not mean arbitrary.  It just means each individual determines what has value to them.  As for survival, look around the world.  The less free places tend to be, the worse the people are off in all ways including survival.  Free markets promote survival among other things.

"No, paintings of Rembrant are irreplaceable unlike cryptos. We can survive without them though. They can serve apart from their beauty for some people as a storage of values. Exactly because of that irreplaceability."

There is an infinite sea of irreplaceable things that have no market value.  It does not matter if the supply is 1 if the demand is 0.  The market demand is an aggregate of subjective value judgements.

"[money] should be money backed with something real what can not be created out of thin air. Cryptos o not qualify. They are just a game with numbers."

Only about 5% of gold is used for a real purpose.  The other 95% is used as 'money'.  Objectively silver is magnitudes of order more useful than gold.  Silver is the foundation for most modern technology due to it's properties such as being the best conductor of electricity, allowing for cell phones and other micro-electronics.  Gold has a few critical uses, but mostly it's just pretty.

Yet for some reason gold is worth 50x to 70x what silver is worth, even though it is only 10x to 15x as rare.  Platinum, which is 10x more rare than gold, is worth about the same as gold.  Where then comes this huge difference in demand for gold despite it being LESS useful than either silver or platinum in a physical sense?

The answer is it's use for money.  Because humanity has decided to use gold as money, it gets a huge premium to it's price.  The vast majority of gold's value comes from a pure abstraction - it's use as a medium of exchange, meaning a network of people who have agreed upon this notion of gold as money.  Gold is not valued for it's critical importance in anything 'real'.

In fact, one of the things you want from money is that it NOT be used for other stuff.   Silver was money until it became a critical industrial metal.  Then it lost it's monetary premium, falling in value even though it's pragmatic uses exploded.

In other words, the fact that cryptos (the pure currency ones anyway) do not have another purpose makes them BETTER candidates for money, not worse.  Their scarcity is also more reliable than gold.  I know, you will argue since new cryptos can be made they are not scarce, but again that is false since they are not fungible and thanks to network effects one will be chosen to be the king.

Also we might discover a huge asteroid made of gold one day.  Just because gold is rare in a cosmic sense does not mean we will not find so much of it in terms of our puny earth and human society to render it moot.  Ditto for if a critical industrial use is found for gold.  It will cease to be money if that happens.

The fact that cryptos can have no other function, and they can be guaranteed to be of fixed supply, makes them better candidates for money than even gold.  They are also more divisible, nearly impossible to confiscate, and easier to transact.  It is why they will eventually win that role.

"I wrote somewhere else that I would be glad to use blockchain and cryptos if they are in fact shares in a company."

Most cryptos are exactly that, utility tokens and ownership tokens in government registered companies.  Even for those that are fully decentralized, the tokens still mean ownership of the functionality and even profits from said system.

"I will repeat once again just to make sure you understand me. I like the technology and its effectiveness, but if I use it, I want to use it for something meaningful. I prefer to own it rather then just play with it and feed the casino"

Let's take a look at the concept of the crypto named 'UTS'.  The purpose of this token is to create a reputation network for companies in South America.  Thanks to local and national governmental corruption, if one company trades with another across national boundaries and is ripped off, there is no real recourse and the bad actors get away with it.  It's also bad, though not as much so, for transactions within the countries.

All of this has greatly hindered trade in South America.  No one can trust each other.  With the UTS system, companies would register with it and as they made good on their transactions their reputation scores would improve, etc.  Bad actors will be noted, and have less business.  If the UTS system is successful, it will enable B2B transactions in South America and do the job government is not - regulating the market.

Now, UTS is a risky and speculative crypto.  More likely than not it will fail, but if it succeeds it will revolutionize South America's capital markets.

This is just one example of many potentially good ideas in the crypto space.  They are speculative, but they are very meaningful.  That you think it's all about 'casino' mentality just tells me you have not actually done much research or read many of the white papers for these cryptos.

"There doesn't have to be a fraud in bitcoin other then that it is worthless."

You state your subjective opinion like it is objective fact.  A perfect example of what I have been saying about 'value'.

"The problem is, that if they decide not to protect our assets in the form of bitcoin and outlaw it, we do not have an alternative to protect ourselves. "

How would they enforce that law other than with a totalitarian police state?  If it is to that point you should be taking up arms or accepting your role as a abject slave.  Furthermore jurisdictional competition will win the day in the end.  Places that go totalitarian and ban encrypted traffic on the internet will become 3rd world backwaters.  Totalitarianism and economic prosperity do not go hand in hand for long.  Those places that have free markets and liberty will out-compete those that do not and eventually the capital and even military might follows.

"There is no problem with the free market. There is a problem with the unbacked cryptocurrencies. Free market doesn't turn a turd into chocolate.:-)"

The free market however disagrees with your assessment of cryptos as turds, as do I.  To be blunt, you're just incorrect in your conception of value, your conception of money, and your understanding of what cryptos actually are.

"Can you read? Where exactly have you read that I " believe only the government can provide security and trust""

Yes, I can read.  You stated that:

"if the government doesn't accept cryptocurrency as a legal asset we have very small possibility to protect it against fraud"

In other words, to protect against fraud we need a government and we need it to accept X as 'legal'.  So no, I did not strawman you.  You may have not mean to make the point you made, but you did in fact make it.

In reply to by centipede

centipede RedDwarf Thu, 04/12/2018 - 17:55 Permalink

That is ridiculous. You own nothing more than numbers created out of thin air. You pay for the internet provider and his real expenses. If owning crypto doesn't mean at the same time owning a real asset for backing those numbers you own nothing. Owning peace of blockchain doesn't automatically mean owning an asset.

Actually Bitcoin Cash is not exactly what i described. It would have to have the same number of coins. And that example with copies of US dollars with cartoon characters is utter nonsense. US dollar is supported by the real force of the US government. That is the only reason that worthless peaces of paper can have different values from those fake ones.

No someone trading for a Rembrandt doesn't do it for survival. I am saying that main purpose of market existence was survival. It does not follow that nothing else can not be traded on the market. We need resources and products, services for survival and the market is necessary for it. There would be no market necessary if we could get them out of thin air like cryptos.

Agreement on the issue of free market. No problem there.

Irreplaceability does not mean automatically anything of a value. It is necessary condition for the value of money but not the only condition. Why is government using force against illegal counterfeiting of fiat? They know on the other hand very well that just the imitations with cartoon characters are no competition and can not replace fiat without any force.

Gold is an irreplaceable element because of its specific physical properties. It is real and can be used for real purpose and many different purposes. It is just too expensive to produce which makes it very good compact storage of "financial energy" but it would be wasteful to use it for those other purposes, which can be achieved using other elements. It is more expensive than silver, because it is 60x more expensive to produce 1 ounce of gold. It is not true that platinum is 10x more rare than gold at least according some sources. Here 

https://seekingalpha.com/article/2838276-platinum-cheaper-than-gold-may…

they claim otherwise. It is just less mined. Maybe because of the physical properties. It is too hard. Humanity hardly decided only based on some whim like it is with most cryptos. Yes, if something is good as a storage of value it will become more used for monetary purposes rather than for industrial. But it has to be real and it has to have real cost in terms of necessary energy associated with. Necessary energy doesn't mean artificial unnecessary mining of bitcoins. Why would anybody arbitrary waste huge amount of energy for generating numbers which could be generated without that energy is absurd and outright insane.

If we discover a golden asteroid and we actually get i gold may indeed become worthless. But it is much easier to generate zillions new cryptocurrenies than that right now. Your claim that cryptos can be guaranteed to be of fixed supply is an utter nonsense. Once again, can we not create thousands of equivalents of bitcoin currency? What can prevent us from it?

I have nothing against utility tokens but that is certainly not true about bitcoin. So there is nothing to justify its value other than pure whim.

I am really getting tied having to repeat it again. Those cryptos backed and representing ownership of real unique productive assets make sense. There is nothing like that in white papers of bitcoin and very likely in many others cryptos either.

No, I state my subjective opinion. That is all. For me the bitcoin is worthless if not outright fraud, which I can't prove. I am just reacting on many other subjective opinions about its value cryptocheerleaders are spreading.

Again strawman. What are you talking about? I am referring to the current reality of the state government. Of course it can enforce the law with the totalitarian police force only. I asked you what are you going to do if somebody deceives you of your bitcoins within totalitarian reality in the state where you live if they outlaw cryptocurrencies? Will you wait till "those places that have free markets and liberty will out-compete those that do not and eventually the capital and even military might follows"? How are you going get your bitcoins back till then?

Free market disagreed with many other people assessments of tulip bulb values as well. Even free market can get it wrong. Free market is not the best solution because we can prove it is economically best optimal solution. Nobody can prove it. It is the best ethical solution exactly because we can not prove that any other solution is better either and we have to adhere to presumption of innocence - not to use any force without the proof we are right.

Yes i stated that but it was in the context of the current reality of the totalitarian state. How many times do I have to repeat it? 

Not in other words. Those are your words, your strawman and demagoguery. Not mine. Nowhere am I claiming that "to protect against fraud we need a government". That is not an equivalent to what I said at all. That is simply a blatant nasty lie from you to repeat it even after I corrected you.

There is a totalitarian government  right here already. What are you going to do to protect your cryptos in case of a fraud? Are you going to answer or you will you again just repeat that evasive generic drivel about how the totalitarian police states will be driven out of business by the free market competition sometime in distant future?

In reply to by RedDwarf

RedDwarf centipede Thu, 04/12/2018 - 20:34 Permalink

"That is ridiculous. You own nothing more than numbers created out of thin air."

97% of fiat is digital as well and all of it is also created out of thin air.  At least with crypto I get:  1.  Highly limited and constrained quantity.  2.  No centralized control.  3.  Value based only upon voluntary choice instead of violence.

"Actually Bitcoin Cash is not exactly what i described. It would have to have the same number of coins"

At the time of the split it had the identical number of coins by definition.  Two blockchains, identical number of coins, not fungible the very nanosecond the fork was live.  The numbers slowly have diverged since then, but that is because of course.

" And that example with copies of US dollars with cartoon characters is utter nonsense. US dollar is supported by the real force of the US government."

You not only missed the point of that example, you just admitted that my example proved my point.  Exactly, obviously fake funny money is not fungible to US dollars even if I print one fake dollar per US dollar in existence.  They are different products even though there is an identical number of them.  Cryptos are no different, this is a universal rule.

"Gold is an irreplaceable element because of its specific physical properties. It is real and can be used for real purpose"

I argued that gold has a massive premium to it's cost relative to it's real use, using silver as the primary counter-example.  I then argued this proves it's use as money is the source of, not the result of, it's market value.  You still have not actually addressed that argument.

"Yes, if something is good as a storage of value it will become more used for monetary purposes"

Money is three things.  Unit of account, store of value, and medium of exchange.  Problem is that it is unlikely in the extreme that X can be the best thing in the universe at A, B, and C.  Gold is a great store of value, but it is a terrible medium of exchange and poor unit of account.  Go ahead, try to buy a pack of bubble gum with gold.  What, you're going to use some kind of futuristic gadget to remove a fraction of a gram?  Or are you going to cheat and use a paper representation for gold, meaning you're back to not actually using gold as money because it's too difficult to actually transact in?

I make no predictions as to which blockchain, if any, will become a long term store of value.  However blockchain is a great medium of exchange and unit of account, far better than gold at those two monetary functions.

"If we discover a golden asteroid and we actually get i gold may indeed become worthless. But it is much easier to generate zillions new cryptocurrenies than that right now"

The problem is you ignore the empirical reality for your beliefs.  There exist thousands of cryptos, yet only few handfuls have significant value in the market.  You are fixated on the fact that anyone can make a crypto and ignore the fact that the market does not give two shits about all those cryptos.  People are not as stupid as you seem to think.  They have brains and decide which cryptos have value to them and why.

You seem to think that if I make RedDwarfCoins and make my blockchain have the same number of coins as bitcoin does, that people will trade me bitcoins 1-for-1 for my RedDwarfCoins.  They won't, and it boggles my mind that you think they would.

Gotta go, got guests.

In reply to by centipede

cornflakesdisease lester1 Wed, 04/11/2018 - 13:53 Permalink

We promise at 21 million bitcoin to stop making them.

 

We promise you will be able to pay for more stuff on with your bitcoin, instead of just illegal things.

 

We promise to  . . .

 

"Were sorry but this website has been shut down,  bit coin has been banned in your country as well as owning, using, or exchanging them per order of Dollar, Inc."

In reply to by lester1

snblitz lester1 Wed, 04/11/2018 - 14:32 Permalink

Gold has a pretty small intrinsic value so I would not hold lack of intrinsic value against bitcoin or us dollars, but gold has lots of "value" that bitcoin and us dollars do not.

for example

  • 4000 year history of value retention

There is nothing wrong with us deciding what we want to use as currency and there is nothing wrong with whatever we choose having no intrinsic value.  However history has shown us that it should have some helpful properties, such as:

  • Can be exchanged without third parties
  • Can be held in your hand.

bitcoin fails big time on both.

Details as to gold vs "fiat" things:

https://www.finitespaces.com/2018/04/07/why-gold-is-a-terrible-investment-and-will-save-the-lives-of-your-children/

In reply to by lester1