OT Bitcoin and quick wealth

[PQJ]

Originally Posted by Spaghetti Legs

Great discussion, thanks everyone.

If I may interject a moment, “loose” is the word for an object or animal that is not secured or contained, “lose” is the word I think to be of more use in this thread, I.e. “I may lose all my money buying crypto” although you might say “I’m going to set my money loose to buy crypto and hopefully it will come back home with a lot of new friends”

Kind of equivalent to using breaks to stop your bike.

Thank you and carry on!

Originally Posted by Spaghetti Legs

Sorry, didn’t mean to offend anyone. It was used incorrectly by several people, but never mind. I’d like to know if I used a word incorrectly.

Not to beet a dead hoarse or anything, but I think you should of used the word "brakes" in the quote infra. At least according to my humboldt opinion.

[fiamme red]

Originally Posted by Peter P.

What product or service is being provided? Who is the typical customer? What's the benefit to the consumer? If bitcoin has to do with money, how do I convert my real money to bitcoin, why would I want to, and how do I convert "my" bitcoin back to real money?

Bitcoin is very useful for ransomware hackers, because it's hard to trace the recipient of the payment.

https://blog.emsisoft.com/en/33977/i...ce-of-bitcoin/

Ransomware is a type of malware that encrypts a victim’s files. To regain access to the files, the victim has to pay a ransom, the cost of which can range from a few hundred dollars for home users, to hundreds of thousands of dollars for major corporations and public entities.

The ransom is usually paid in cryptocurrency, and that cryptocurrency is usually Bitcoin. Bitcoin accounted for about 98 percent of ransomware payments made in the first quarter of 2019, according to figures from ransomware recovery specialists Coveware. As a result, Bitcoin has become an inextricable part of the ransomware model.

There are a few reasons why Bitcoin has become the de facto currency of ransomware:

1. Accessibility: Bitcoin can be easily purchased via an exchange using a credit card, debit card or bank transfer. Accessibility and ease of use make it more likely for victims to pay the ransom.
2. Verifiable: Bitcoin transactions are publicly documented in the blockchain, which allows cybercriminals to verify that a payment has been made.
3. Anonymity: Bitcoin isn’t the most private cryptocurrency, but mixer and tumbler services allow criminals to essentially launder ransom payments and keep their identities hidden.

Bitcoin can also be demanded in bomb threats: https://forums.thepaceline.net/showthread.php?p=2469079.

[reuben]

Originally Posted by fiamme red

Bitcoin is very useful for ransomware hackers, because it's hard to trace the recipient of the payment.

Bitcoin can also be demanded in bomb threats: https://forums.thepaceline.net/showthread.php?p=2469079.

Oh, um, well. Great.

[bgymr]

I once wrote on the locker door of a high school adversary that "'he' is a looser". As a way of hiding that I penned it, I spent the following weeks making fun of the guy that misspelled it.

[MattTuck]

Originally Posted by Peter P.

That was so true that it wasn't funny!

The Economist magazine, in an article on cryptocurrency and the amount of energy it consumes (Huh?!), described cryptocurrency this way:

"Bitcoin's hunger for energy stems from its design. It forgoes centralised record-keeping in favour of a "blockchain", a transaction database that is distributed among users. The blockchain is maintained by "miners", who validate transactions by competing to cracc mathematical puzzles with solutions that are hard to find but easy to check. Eash successfully mined block of transactions generates a reward, currently 6.25 bitcoins ($357,000).

The system varies the difficulty of the puzzles to ensure that one new block is created, on average, every ten minutes. High bitcoin prices make it worthwhile to spend more computing powerand therefore electricity-chasing mining rewards. But bitcoin's automatic stabilisers will ramp up the mathematical difficulty in response."

I say again-HUH?

What product or service is being provided? Who is the typical customer? What's the benefit to the consumer? If bitcoin has to do with money, how do I convert my real money to bitcoin, why would I want to, and how do I convert "my" bitcoin back to real money?

To answer the last question first, there are exchanges (imagine etrade for cryptocurrency) such as coinbase, that allow you to go on there and buy crypto assets with your dollars, and sell your crypto assets to get dollars back.

Here are two videos that might help to explain the technology further.
https://www.youtube.com/watch?v=l9jOJk30eQs
https://www.youtube.com/watch?v=bBC-nXj3Ng4

At the end of the day, understanding what bitcoin could be (or another cryptocurrency could be) requires you to have an abstract understanding of what money is.

Imagine back in the day, people didn't have money. They had goods. So some farmer might trade a bushel of wheat to a fisherman in exchange for 20 pounds of cod fish. In that sense, both the fish and the wheat were "money", in the sense that they were a medium of exchange. The problem was, you might need fish, but if the fisherman didn't need your corn, an exchange might be difficult... or atleast not in your favor because your corn would not be valued, while his fish would. The so called price discovery mechanism was very inefficient.

Somewhere along the line someone realized that using cows/fish/wheat as the medium of exchange was not ideal, and that if we had some item that we all agreed on, we could transact our business in that. Different cultures found different materials, but many settled on metals like silver and gold, which were difficult to create (and thus scarce) so people believed there was real value in accepting it for payment.

That went along well for a while, and then some enterprising folks thought, "hey, what if we put all the gold in a vault, and then issue paper certificates that would allow you to exchange the certificate for a fixed certain amount of gold." That way, people can more conveniently carry around money and transact business, without having to (for instance) break a gold coin in half because the bill wasn't exactly divisible by the amount of gold you had. So, this system had some advantages -- mainly the value of circulating money was tied to the value of physical gold, and so creating more money meant adding gold to the vault. Notice this bill from 1933. At the time, I think the conversation rate was 1 oz of gold for $34 US Dollars. So, you could bring $34 dollars to the US treasury and get an ounce of gold. The term "as good as gold" seems appropriate here.


Then, through a series of decisions and policy actions, they decided you wouldn't be able to exchange your certificates for gold, or that the exchange rate would no longer be $34/oz. And, instead, the certificates were not freely exhchangeable. Notice this bill from 1934.. after the US withdrew the gold standard. Notice especially how the wording changed. Before 1934, you had the top read "This certifies that there have been deposited in the treasury of" then "the United States of America" then "10 Dollars". WIth some language backing up its redeemability. After 1934, it is a "Federal Reserve Note", the so called FRN...



And then, finally under Nixon, they basically shut the gold window down completely, and the money isn't backed by anything other than our collective acceptance and belief that others will accept it as payment for goods and services. It is created by the federal reserve and there are not obvious limits why they can't create more and more money, not backed up by anything physical. What you have in your wallet are now called


So, enter bitcoin. Instead of having a paper certificate representing a certain amount of dollars, imagine there is a big piece of granite, and on that granite everyone carves their transactions. ie. Matt gives Peter 20. Now, this would be terribly inefficient in a physical world, because you wouldn't be able to check it very easily if you were more than 100 or so feet from the big piece of granite. But, in a digital world, it is easy and fast.

All the cryptographic "stuff" is just a way to secure and distribute the authenticity of the granite slab so everyone trusts it. The other piece of bitcoin is that its supply (for lack of a better word, just imagine they are certificates) is limited and the system is decentralized. So, you don't have the risk of a powerful agency or country changing the supply of certificates in the system.

So, what good is it compared to dollars? Well, if you have faith in the way that the US monetary and fiscal system is going, it probably has very little value. If you, on the other hand, are suspicious of the US (or any other country for that matter) ability to maintain a policy of sound money, then it has some real value as a potential store of wealth.

As others have said, its utility as a medium of exchange is unproven but many are working to enhance it. For more information, look at the lightening network.

Ray, where ever you are buddy, I hope you're doing well.

[PQJ]

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[x] Like

[goonster]

Originally Posted by MattTuck

It is created by the federal reserve and there are not obvious limits why they can't create more and more money, not backed up by anything physical.

Nor should there be, because there is also no obvious limit to the growth of the economy, which is not limited by anything physical.

"If you have to explain that something is money, then it's not money." - Nouriel Roubini -

[Clean39T]

Originally Posted by bgymr

I once wrote on the locker door of a high school adversary that "'he' is a looser". As a way of hiding that I penned it, I spent the following weeks making fun of the guy that misspelled it.

I once saw graffiti on a billboard in Portland that read: “F*ck Capitolism”.


Sent from my iPhone using Tapatalk

[MattTuck]

Originally Posted by goonster

Nor should there be, because there is also no obvious limit to the growth of the economy, which is not limited by anything physical.

"If you have to explain that something is money, then it's not money." - Nouriel Roubini -

That is a demonstrably false claim.

Total output is determined by labor input, capital input and total factor productivity. Labor supply growth is most certainly a physical element (it is the people. so you have birth rates, death rates, immigration and emigration, etc.), and total factor productivity is primarily driven by physical things (infrastructure, machinery, computers, etc.)

[goonster]

Originally Posted by MattTuck

That is a demonstrably false claim.

There may be a practical limit to rate of growth, but not overall growth, as there is for the size of the pile of all the earth's gold.

[.RJ]

Originally Posted by MattTuck

That is a demonstrably false claim.

Total output is determined by labor input, capital input and total factor productivity. Labor supply growth is most certainly a physical element (it is the people. so you have birth rates, death rates, immigration and emigration, etc.), and total factor productivity is primarily driven by physical things (infrastructure, machinery, computers, etc.)

so why is tesla worth more than 10 car companies put together?

[Tony T]

Originally Posted by .RJ

so why is tesla worth more than 10 car companies put together?

Because the future is electric cars.
Yes, the other auto makers are moving towards this.
There was a time when I thought that an upstart on-line bookseller would fail as they would never be able to compete with Barns and Noble once they got their on-line presence. Not the last time I was wrong.

[MattTuck]

Originally Posted by .RJ

so why is tesla worth more than 10 car companies put together?

Great question. To be clear, it is not related to what you quoted, which discussed total output of an economy.

Tesla, as an individual company, has a high valuation because people have high expectations for its future growth (and eventual cash flows). I personally have never bought into Tesla's hype, though I openly admit that Musk and the rest of the people there have created an innovative car company from scratch. So, they deserve a lot of credit for that... even if I have strong disagreements with the ethics of how they've deployed self driving tech and am quite suspicious of the quality control they have.

As for valuation, a lot to unpack. You can tell yourself stories about how they'll change the business model, how they'll get tech industry (instead of auto industry) margins, how electric is the future and Tesla is going to sell a lot of cars, and if you are confident about those things, then you can justify high valuations. At this point, a lot of people believe those stories.

Only time will tell.

[goonster]

Originally Posted by MattTuck

Great question. To be clear, it is not related to what you quoted, which discussed total output of an economy.

In a discussion about monetary systems, total output is too narrow a boundary, because it excludes appreciating assets, such as real estate, traded securities and, indeed, non-traditional currencies.

[.RJ]

Originally Posted by MattTuck

As for valuation, a lot to unpack. You can tell yourself stories about how they'll change the business model, how they'll get tech industry (instead of auto industry) margins, how electric is the future and Tesla is going to sell a lot of cars, and if you are confident about those things, then you can justify high valuations. At this point, a lot of people believe those stories.

Yep, and you're right they are stories. If valuation was tied in to only whats physical our stock market would look a whole lot different

Originally Posted by MattTuck

Only time will tell.

Indeed. I think we're in for a wild ride in the next few years.