Bitcoins in 2014?

[Edwin]

http://www.marketoracle.co.uk/Article44647.html

interesting article

It's quite right. You need all the miners working to verify transactions in order to actively use the currency, but there's less and less incentive to do so since the mining cost per Bitcoin is skyrocketing.

Interesting to think about what happens when there are no more Bitcoins left to mine - who's going to be doing the (algorithmically incredibly costly at that point) verifications needed to actually spend/transact with the currency, when there's no prospect of anything in return?

 

[Retired_Member38]

That article is a joke, its obvious he just has a problem with bitcoin for whatever reason and then sets out to make stuff up to prove his point. Its a shame as his point about when mining is done and who maintains the network is a fair one.

Look how much money people like Bitstamp are making - $50k+ a day by the looks of things. People like that with a financial incentive will need to maintain the network even if they aren't getting free bitcoins for doing it.

Obviously its all a speculative gamble - but it seems less risky to me than buying domains. I'm in for £12k or so. Same ballpark that you are asking for those 15 domains.... I know which one of those I'd bet on being worth more a year or two down the line and its bitcoin. With the huge advantage of that I can get rid of them on the open market at any point in time should I want or need to.... you're stuck with those domains.

 

[websaway]

That article is a joke, its obvious he just has a problem with bitcoin for whatever reason and then sets out to make stuff up to prove his point. Its a shame as his point about when mining is done and who maintains the network is a fair one.

Look how much money people like Bitstamp are making - $50k+ a day by the looks of things. People like that with a financial incentive will need to maintain the network even if they aren't getting free bitcoins for doing it.

Obviously its all a speculative gamble - but it seems less risky to me than buying domains. I'm in for £12k or so. Same ballpark that you are asking for those 15 domains.... I know which one of those I'd bet on being worth more a year or two down the line and its bitcoin. With the huge advantage of that I can get rid of them on the open market at any point in time should I want or need to.... you're stuck with those domains.

You shouldn't take it so personal.
It's not about you it's about what could amount to the biggest scam of all time.
Nobody can be sure at the moment how it will end up, although my personal view is that if it cannot be rigorously controlled then it is bound to fail, it's a money wild west, yet if it is regulated it will be less attractive to the target market and so will not have the investment potential that it currently has and therefore will not work for those who have already invested.
I see it as not a method of exchange but an investment vehicle and therefore it has nowhere to go indefinitely.
It's not illegal so for anyone who can get in and out at a profit good luck to them, even though someone's gain will have to eventually be someone else's loss.

 

[Retired_Member38]

I'm not taking anything personally. I've posted exactly what I've bought and how much for - I don't mind if anyone wants to call me an idiot for doing it

Not being able to be controlled is part of the attraction for some people though (I appreciate its a downside for some others). If I was in Cyprus, Argentina or Ukraine, etc etc I'd far rather have my money out of the control of the government completely. For UK there probably isn't any massive need for that unless you want to use it to order drugs in the post...

 

[Edwin]

Look how much money people like Bitstamp are making - $50k+ a day by the looks of things. People like that with a financial incentive will need to maintain the network even if they aren't getting free bitcoins for doing it.

If people aren't being paid to maintain the network because there are NO Bitcoin left to mine, then that means the maximum Bitcoin supply point has been reached.

So the only way that Bitcoin will appreciate in value is if people want to buy the existing coins at a premium price. And for it to continue to appreciate in value, MORE people will have to want to buy the existing coins at an even higher premium price. This scenario repeats forever - the ONLY "driver" of increasing value is the availability of people wanting to buy Bitcoin. Once there are no more people waiting to jump in, the price CANNOT rise further.

And that is the absolute perfect definition of a bubble.

 

[Retired_Member38]

It won't/can't keep appreciating though - at some point it will stabilise (or collapse completely)

There will be a massive number of people with a financial incentive in the use of bitcoin.... picking up the bill to maintain the network will need to be done by them.

The increase in number of people wanting to use bitcoin will come if/when more and more merchants start accepting it, and people realise its cheaper than using credit cards or Paypal. Of course it needs a stable price for this to be viable too.

 

[websaway]

I'm not taking anything personally. I've posted exactly what I've bought and how much for - I don't mind if anyone wants to call me an idiot for doing it

Not being able to be controlled is part of the attraction for some people though (I appreciate its a downside for some others). If I was in Cyprus, Argentina or Ukraine, etc etc I'd far rather have my money out of the control of the government completely. For UK there probably isn't any massive need for that unless you want to use it to order drugs in the post...

I for one am certainly not judging you, if you lost your stake I would not think you an idiot, I'm sure you don't intend losing.
I'm only looking at the big picture, the issue, the principal of something which rises in price with new investment but has no underlying asset value.

 

[Edwin]

But Bitcoin can't remain virtually fee free, because the transaction fee is going to have to cover the insanely high difficulty of validating the transaction.

You may well be able to make money on price appreciation as other speculators pile in, but the inexorable rise in difficulty level coupled with the guaranteed finiteness of coin supply (which instantly makes mining pointless) combine to make any "actual usefulness" of Bitcoin time limited.

 

[Murray]

Just out of interest, do people sell bitcoins offline?

I know you can store them offline, can you not just sell them on whatever storage device you have them on?

That would obviously mean that a miner wouldn't need to be involved right..

 

[topcat]

But Bitcoin can't remain virtually fee free, because the transaction fee is going to have to cover the insanely high difficulty of validating the transaction.

You may well be able to make money on price appreciation as other speculators pile in, but the inexorable rise in difficulty level coupled with the guaranteed finiteness of coin supply (which instantly makes mining pointless) combine to make any "actual usefulness" of Bitcoin time limited.

Actually, the rewards of mining are maintained through its difficulty. If people find that mining is not profitable, they stop doing it. Therefore, less people are mining and so the difficulty decreases making it easier to make a profit (thus giving more people the incentive to begin mining).

The perfect balance is met as it's perfectly competitive.

 

[Edwin]

There are no rewards at all for mining when all Bitcoin have been found.

 

[Retired_Member38]

Just out of interest, do people sell bitcoins offline?

I know you can store them offline, can you not just sell them on whatever storage device you have them on?

That would obviously mean that a miner wouldn't need to be involved right..

If you sold a bitcoin 100% offline and kept it offline (ie just handed someone a paper wallet and they never transferred it) they'd have no way to stop you retaining a copy of it and spending it themselves.

There are no rewards at all for mining when all Bitcoin have been found.

There is 30 years or so before we need to worry about a tech solution to that problem.

 

[Retired_Member38]

But Bitcoin can't remain virtually fee free, because the transaction fee is going to have to cover the insanely high difficulty of validating the transaction.

How is it going to be insanely difficult to validate the transactions? I don't think you really understand it tbh. Plus even if it were difficult/expensive now, it wouldn't be with 30 years tech advance - look at the speed things improve.

You may well be able to make money on price appreciation as other speculators pile in, but the inexorable rise in difficulty level coupled with the guaranteed finiteness of coin supply (which instantly makes mining pointless) combine to make any "actual usefulness" of Bitcoin time limited.

Its not time limited at all - in fact the real value of bitcoin comes when the price levels out. At that point it can be used for 'real' business as you don't need to worry about losing your margin (or more) on a deal due to fluctuating prices.

If everything goes as it should the price will rise up till a certain amount, then stay relatively stable, and at this point it is a viable Paypal/credit cards alternative for major businesses.

 

[topcat]

There are no rewards at all for mining when all Bitcoin have been found.

But then there are rewards for processing the transactions right?

 

[Retired_Member38]

But then there are rewards for processing the transactions right?

Yes there is but lets not let facts get in the way of some Bitcoin bashing :lol:

I've no idea how well that scales though. I would expect some of the big bitcoin earners to need to get behind things to keep it all going but who knows.

 

[grantw]

at this point it is a viable Paypal/credit cards alternative for major businesses.

Buying a few coins to hold or trading with them to try and make a profit is fun, but as someone who's used them as intended for a long time I can honestly say that every transaction from start to finish is an un-user friendly pain in the ass. Unless an incredibly simple way to buy bitcoin appears and the insanely slow transaction speeds can be vastly improved, it's hard to imagine it ever really being a viable option for the average person on the street. Nobody will want to dick around getting coins from an exchange then waiting for up to an hour plus for their transaction to complete when they could just login to paypal and achieve the same result in about 30 seconds.

Up to this point the value of bitcoin has in part been driven by silk road users but largely by hype, and people seeing a way to get rich quick due to the hype. It's not a great basis for a future alternative currency and that's without mentioning the hacks/exchanges being robbed etc.

You only need to watch the troll box on btc-e for 5 minutes to see how lawless, greedy and immature the whole 'investment' side of it is. If I was a major business and went on one of the biggest exchanges in the world to see pump and dumps being openly organised and kids shouting 'BTC to da moon!!!!!' I'd laugh at the idea of going anywhere near bitcoin.

I've got btc and I hope it does go towards the moon, I just really don't see it happening!

Grant

 

[Retired_Member38]

If they can take a slice of the porn, gambling and drugs market without ever going mainstream, that alone would be massive.

The exchanges will settle down - it seems like wild west at the moment. But the exchanges that take VC backing and so on, aren't going to do a mtgox.

 

[Edwin]

Yes there is but lets not let facts get in the way of some Bitcoin bashing :lol:

I've no idea how well that scales though. I would expect some of the big bitcoin earners to need to get behind things to keep it all going but who knows.

From https://en.bitcoin.it/wiki/Myths#21_million_coins_isn.27t_enough.3B_doesn.27t_scale

When operating costs can't be covered by the block creation bounty, which will happen some time before the total amount of BTC is reached, miners will earn some profit from transaction fees. However unlike the block reward, there is no coupling between transaction fees and the need for security, so there is less of a guarantee that the amount of mining being performed will be sufficient to maintain the network's security.

From https://en.bitcoin.it/wiki/FAQ#Does_Bitcoin_guarantee_an_influx_of_free_money.3F

Won't loss of wallets and the finite amount of Bitcoins create excessive deflation, destroying Bitcoin?

Bitcoin seems to be faced with a unique problem. Whereas most currencies inflate over time, Bitcoin will mostly likely do just the opposite. Time will see the irretrievable loss of an ever-increasing number of Bitcoins. An already small number will be permanently whittled down further and further. And as there become fewer and fewer Bitcoins, the laws of supply and demand suggest that their value will probably continually rise.

You only need to have the thinnest veneer of a grounding in economics to see how crazy that argument is, yet it's being put out on the "official" Wiki.

 

[Edwin]

This was an interesting comment about Bitcoin mining (from a December 2013 article when the Bitcoin price was around $900 - it's at just $600 today):

And according to Blockchain, an organization that monitors the peer-to-peer currency, today bitcoin miners spend approximately $17 million on this task daily—and, at current valuations, only make bitcoin worth $4.4 million

For most people to actually profit off their bitcoin-mining efforts, the asset needs to continue to dramatically increase in value.

http://qz.com/156479/miners-spend-17-million-a-day-for-a-shot-at-4-4-million-of-bitcoin/#/h/34134,1/

There's a very important word that seems to be missing from that second quote. That word is "forever". Bitcoin need to go up in value forever. As soon as they stop going up in value for a significant length of time, that's game over as the influx of new speculators will dry up.

Remember, as I said, the above article was written at a time when Bitcoin were around $900. They're now sitting at $600 (and have traded in about a 20% band around that price for a while, which is highly stable for Bitcoin). At the same time, the network hash rate has gone up roughly 8 times since the article was written. In other words, there's significantly MORE electricity being burned up now in mining than there was in December last year, yet the rewards are even less.

 

[websaway]

If they can take a slice of the porn, gambling and drugs market without ever going mainstream, that alone would be massive.

The exchanges will settle down - it seems like wild west at the moment. But the exchanges that take VC backing and so on, aren't going to do a mtgox.

But that is not going to be a reality, at least in the uk and usa because it will probably be regulated either as a currency or an investment.
The underlying creativity of a scam is to make it complicated, and this one is made out to be much more complicated than it really is. It's basically a sophisticated money pyramid scheme and as happens with all of these types of schemes people already invested will ignore the reality for fear it does not keep rolling.