What the hell is (a) bitcoin?

[AWvsCBsteeeerike3]

For cryptocurrency to have any real utility, the volatility needs to cool off. If that were to happen, there would be little reason for the public to speculate on cryptocurrency prices, given that there would no longer be the potential for massive returns. The smart money exits, the liquidity disappears and the bubble collapses. This is the inevitable fate of all cryptocurrencies, and we see this reflected in the simple fact that the median return on all these thousands of flash-in-the-pan coins is zero. Every crypto coin is just on a random walk to zero by a different path.

https://www.stephendiehl.com/blog/against-crypto.html

Thanks for sharing.

Wasn't the big tech breakthrough with bitcoin (not sure about any of the other ones) the blockchain tech? Not that that in and of itself makes bitcoin worth anything - blockchain tech doesn't need bitcoin to operate. But, I remember hearing a bunch about it, not that I pay allthat much attention.

[Arthur Dent]

Wasn't the big tech breakthrough with bitcoin (not sure about any of the other ones) the blockchain tech? Not that that in and of itself makes bitcoin worth anything - blockchain tech doesn't need bitcoin to operate. But, I remember hearing a bunch about it, not that I pay allthat much attention.

Yes, and it's kind of cool concept technically, but as that blog is arguing, it's been more than a decade now and no one has found a really useful application for this technology other than the list I posted earlier: creation of digital assets for pure financial speculation and a way to do (sort of) secret transactions online. It still seems like it might be possible someone will come up with a real application, which is why I asked earlier, but if they have, I haven't seen or understood it. Web3 stuff acts like it is this, but, incredibly vague book talking pronouncements aside, I don't see what the concrete proposals actually are. Definitely possible I'm just missing it, so I'd like to hear it if there's really something there.

[G. Keenan]

For cryptocurrency to have any real utility, the volatility needs to cool off. If that were to happen, there would be little reason for the public to speculate on cryptocurrency prices, given that there would no longer be the potential for massive returns. The smart money exits, the liquidity disappears and the bubble collapses. This is the inevitable fate of all cryptocurrencies, and we see this reflected in the simple fact that the median return on all these thousands of flash-in-the-pan coins is zero. Every crypto coin is just on a random walk to zero by a different path.

https://www.stephendiehl.com/blog/against-crypto.html

Thanks for sharing.

Wasn't the big tech breakthrough with bitcoin (not sure about any of the other ones) the blockchain tech? Not that that in and of itself makes bitcoin worth anything - blockchain tech doesn't need bitcoin to operate. But, I remember hearing a bunch about it, not that I pay allthat much attention.

Yes, in the future, all electronic activity will be computed using blockchain technology. Every time you swipe a credit card, send an email, get driving directions, or make a securities trade the blockchain will grind away and record the transaction in its "'ledger" which, we are told, is akin to some kind of liberation from the current tyrannies of proprietary databases or code operated by individual private actors and public government entities. This ledger will, we suppose, belong to all of humanity. As for who owns the servers that host the ledger and the series of tubes through which it passes, this will somehow be done, just like the rest of the internet, in a utopian fashion that definitely won't accrue to the benefit of a handful of guys in the Bay Area and Wall St.

What's that? You're telling me that crypto is primarily pushed by guys from the Bay Area and Wall St. as the future of money? That is purely a coincidence.

You see, in the future there will be no need for contracts, for courts to enforce them, or for governments to fine or imprison you for fraud. The blockchain does all that because The Ledger has recorded the sum total of human interaction and we'll just retrieve the log from The Ledger to know who is right and who is wrong. For some reason, this is a particularly appealing future to people who describe themselves as libertarian.

[Arthur Dent]

lol. Yes, that pretty much sums it up as far as I can tell.

I feel like the previous techno-utopian fantasy about the internet -- that it would make exchange free for all -- was a lot more compelling than this one, which seems to be something about how to create fake scarcity that I'm not able to make any sense of on its own terms even squinting real hard.

[MrCrowesGarden]

And The Ledger isn’t the least bit secure

[G. Keenan]

On a serious note, this paragraph from that post gets at what I personally have never been able to understand about Bitcoin:

For cryptocurrency to have any real utility, the volatility needs to cool off. If that were to happen, there would be little reason for the public to speculate on cryptocurrency prices, given that there would no longer be the potential for massive returns. The smart money exits, the liquidity disappears and the bubble collapses. This is the inevitable fate of all cryptocurrencies, and we see this reflected in the simple fact that the median return on all these thousands of flash-in-the-pan coins is zero. Every crypto coin is just on a random walk to zero by a different path.

So I get that the value of the Dollar fluctuates relative to other currencies and that the cost of goods and services exchanged using Dollars fluctuates based on supply and demand. And I get inflation. A gallon of milk might cost 15% more this time next year when we're living through, by US standards, high inflation, for a variety of reasons.

But how can anyone conduct business with a currency that fluctuates hugely in value from one day to the next? How can I sell you something for 1 Bitcoin today when tomorrow that 1 Bitcoin may have decreased in value by 20%. Conversely, shouldn't I be reluctant to pay you my 1 Bitcoin for your hamburger today when tomorrow my Bitcoin might be 20% more valuable? And all the while, these percentages I'm making up are my 1 Bitcoin's swings in value relative to the Dollar. It just doesn't make any sense to me.

I feel like the strategy with crypto is to grow it so fast and get enough buy-in from the public that when the honeymoon is over and we all look around and realize we kind of hate it, it's too widely ensconced in our psychological reality and the interconnected web of online commerce, like a tumor, to cut it out. We're stuck with it for better or for worse, like social media. Tesla Intergalactic Bank has replaced the Federal Reserve. Elon Musk bought all the Bitcoin and then launched a solar powered quantum computing satellite into space that can mine all future coins faster, with free energy from the sun. Bezos's satellite, meanwhile, hosts The Ledger. Between the two of them they now own what we used to call "all the money."

That, or just pure gold rush speculation in which a few will get spectacularly rich before the bubble bursts but most will just be left kicking rocks.

[AdmiralKird]

I'm mostly worried what it will do now when it comes back to earth. There is, what, over 2 trillion dollars in bitcoin now? That's probably not enough to cause a recession alone in a crash when spread out around the world, but its liable to cause problems in real financial markets.

[Arthur Dent]

So I get that the value of the Dollar fluctuates relative to other currencies and that the cost of goods and services exchanged using Dollars fluctuates based on supply and demand. And I get inflation. A gallon of milk might cost 15% more this time next year when we're living through, by US standards, high inflation, for a variety of reasons.

But how can anyone conduct business with a currency that fluctuates hugely in value from one day to the next? How can I sell you something for 1 Bitcoin today when tomorrow that 1 Bitcoin may have decreased in value by 20%. Conversely, shouldn't I be reluctant to pay you my 1 Bitcoin for your hamburger today when tomorrow my Bitcoin might be 20% more valuable? And all the while, these percentages I'm making up are my 1 Bitcoin's swings in value relative to the Dollar. It just doesn't make any sense to me.

I feel like the strategy with crypto is to grow it so fast and get enough buy-in from the public that when the honeymoon is over and we all look around and realize we kind of hate it, it's too widely ensconced in our psychological reality and the interconnected web of online commerce, like a tumor, to cut it out. We're stuck with it for better or for worse, like social media. Tesla Intergalactic Bank has replaced the Federal Reserve. Elon Musk bought all the Bitcoin and then launched a solar powered quantum computing satellite into space that can mine all future coins faster, with free energy from the sun. Bezos's satellite, meanwhile, hosts The Ledger. Between the two of them they now own what we used to call "all the money."

That, or just pure gold rush speculation in which a few will get spectacularly rich before the bubble bursts but most will just be left kicking rocks.

You can’t conduct business with it for exactly the reason you stated, which is why there are very few actual business transactions conducted with bitcoin. The transactions are mostly speculators selling to other speculators, not buying goods and services. It drives me nuts when people claim btc is needed because of the debasement coming from the Fed’s magic money. That’s completely backwards. The current dollar inflation, the worst in 40 years, has prices increasing ~7% over a full year. That is nothing compared to btc’s random speculative fluctuations over short intervals. Argument is that Fed action produces “fake” value for a currency used approximately one bazillion times per day all over the globe to exchange real goods and services at pretty stable prices, but random crypto bros speculating by trading tokens with each other at values all over the map is somehow real value?

This is why I’m not too worried it will embed itself. Hardly anyone uses it for any real world purchases. Aside from stuff like buying drugs online where you’re willing to accept the higher prices and risk associated with using a poor substitute for dollars to get the perceived anonymity, it’s not a part of real commerce.

Maybe if the total value is large enough, a crypto crash could cause a recession just as an asset bubble collapse, but I don’t think cutting it out of commerce will be an issue, as I don’t see it getting in.

[ghostrunner]

The libertarian aspect of this is weird and I think it might effectively kill libertarianism as a weak political movement. Basically they’re more interested in this now. To the point where I saw enthusiasts on Twitter talking about the potential for digital rights management.

Man do they hate fiat currency too.

[ghostrunner]

Reese Witherspoon is turning into a tech bro