Results 1 to 12 of 12

Thread: Cryptocurrency

  1. #1
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119

    Cryptocurrency

    The most famous cryptocurrency is Bitcoin but now there are several and some are allegedly to be linked to national currencies.

    The most prolific commentaries are about investing in these, as a way of profiting from the demand for crypocurrency.

    This reminds me of the rise of investment in so called derivatives, which is a form of gambling based on the performance of stocks or currencies. It is very distinct from investing in a company to share future profits.

    Money has been with us a long time and evolved into paper money, ie promissory notes from a bank or a country’s bank, then into advance credit, borrowing and lending with a view to future business success. It is said the modern economies of the capitalist world advanced because people could borrow against their land and buildings to form businesses. From farming to aerospace. These are risk based investments on future production.

    Then the invention of financial instruments meant that people could bet on the flow of money. Not on future profit, but on what you predict other people will think is profitable.

    All the time the money being used has been underwritten by the banks of countires, so the money is useful to buy goods and services and can be exchanged for other currencies. Banks used computers more and more to keep records and to facilitate transactions. This allowed credit cards to be invented. In most countries these are regulated and part of their appeal is the insured security of using them. For a fee off every transaction, you avoid handing over cash which can be lost or stolen or not even accepted by a vendor. Cash is rapidly becoming unpopular, first with legitamate banks and then trading corporations or indeviduals.

    Enter Bitcoin. Bitcoin is mined by anyone with enough computer power to solve algorithms. It has mysterious origins, but makes big claims. Transactions are recorded and stored, “for ever” on multiple computers. This is to prevent obvious fraud and hacking of a computer based currency. But this is so secure that if a holder of Bitcoin (standing here for all cryptocurrencies) loses their computer or password, they have nobody to appeal to. Many examples have been publicised. No government or police force will help if Bitcoin is lost or vanishes into the cloud of remote anonymous computers.

    Then there is the exchange value. You can buy Bitcoin with conventional cash, and you can sell again. This is not through conventional banks although there is progress in making this more like conventional exchange.

    You can spend Bitcoin, for example on a Tesla car. But not yet on many goods and services available through a credit card backed by a bank account.

    But the most interest is because the cash value of Bitcoin has leaped up, and sometimes down in extraordinary ways.
    I admit when I first heard, I considered blowing £100 on Bitcoin, and if I had, it would be worth a fortune today. I didn’t. But then I would probably join the ranks of disappointed punters who lost their hard drive one way or another.

    Is a currency freed from conventional backing by the economy of a country worth considering apart from as a wild gamble?

    You can bet on the dollar or the Euro, legally and with little risk. This is to bet on your judgement of an economy versus other economies. Because of derivatives, you can do this without actually holding the currency. To bet on Bitcoin is to judge how many Punters will buy or sell. to me, there is a difference there.

    Perhaps others, like Headrush , would like to paint a rosier picture?. Do people think cryprocurrencies will stabilise to a slowly changing stable value, not worth betting on, but worth holding versus a fiat currency? Will they be a way of buying a coffee?

    I meant to mention Paypal and other modern payment methods, but mainly I want to learn what others think of cryptos.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  2. #2
    Join Date
    Jul 2005
    Posts
    21,226
    You can already buy coffee with cryptocurrency. If you can be bothered.

    Grant Hutchison
    Science Denier and Government Sponsored Propagandist. Here to help.
    Blog

  3. #3
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119
    I had forgotton that I saw something about Starbucks, but there you go. So you buy credit at Bakkt or Flexa or another, then spend it via an app on your phone. OK . Point taken.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  4. #4
    Join Date
    Jan 2005
    Location
    New Zealand
    Posts
    11,172
    Quote Originally Posted by profloater View Post
    ... but now there are several ...
    Several? My finance company in a recent newslatter pointed out that Bitcoin are partly supposed to be valuable due to scarcity as the number of coins is limited. But there's no limit to the number of digital currencies. At the time of writing there were something like 4,000.

    Seems clear they are simply jumping on the hype bandwagon, and there's little real intrinsic value in any of them.

    Quote Originally Posted by profloater View Post
    ... Bitcoin is mined by anyone with enough computer power to solve algorithms. ...
    As it gets harder and harder to mine, the computing power needed rises. That consumes more and more electricity, and Joe Average isn't going to compete with the big server farms.

    Bitcoin was supposed to democratise the mining, but it's big players who really get the benefit now.

    Quote Originally Posted by profloater View Post
    ... You can spend Bitcoin, for example on a Tesla car ...
    Actually Tesla had stopped accepting payment in bitcoin due to environmental concerns. There are claims its (Bitcoin energy use) gotten better and they will start accepting Bitcoin again.


    The same newsletter mentioned above, noted that Bitcoin is largely about https://en.wikipedia.org/wiki/Greater_fool_theory
    Measure once, cut twice. Practice makes perfect.

  5. #5
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119
    Quote Originally Posted by pzkpfw View Post
    Several? My finance company in a recent newslatter pointed out that Bitcoin are partly supposed to be valuable due to scarcity as the number of coins is limited. But there's no limit to the number of digital currencies. At the time of writing there were something like 4,000.

    Seems clear they are simply jumping on the hype bandwagon, and there's little real intrinsic value in any of them.



    As it gets harder and harder to mine, the computing power needed rises. That consumes more and more electricity, and Joe Average isn't going to compete with the big server farms.

    Bitcoin was supposed to democratise the mining, but it's big players who really get the benefit now.



    Actually Tesla had stopped accepting payment in bitcoin due to environmental concerns. There are claims its (Bitcoin energy use) gotten better and they will start accepting Bitcoin again.


    The same newsletter mentioned above, noted that Bitcoin is largely about https://en.wikipedia.org/wiki/Greater_fool_theory
    I take it you are Not in favour.? I am trying to understand the big issue, which seems to me to be that some folks trust their money and hence the authorities which regulate it, while some folks don’t. There is plenty of history of wild inflation, wheelbarrows full of paper money to buy bread and the consequent collapses. On the other side, a currency limited to reserves of some asset cannot cope with economic growth. I have watched the Euro experiment favour productive countries over others, the ability to use an exchange rate seems useful sometimes. If a nation decided to use block chain as an accounting system, a ledger, and decided to issue currency directly equivalent to paper money, would that solve any of the issues of inflation, deflation? Would it still use crazy amounts on energy on computers to keep track?
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  6. #6
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119
    Thanks also for pointing to the greater fool theory. That seems to apply to non fungible token sales of artwork.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  7. #7
    Join Date
    Aug 2005
    Location
    NEOTP Atlanta, GA
    Posts
    3,681
    At least NFTs have something tangible to value. The cryptocurrencies have nothing backing them; no metals, no GDP, zilch. As a currency investment the CCs are beyond risky and subject to the whims of a few key stakeholders.

  8. #8
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119
    Quote Originally Posted by schlaugh View Post
    At least NFTs have something tangible to value. The cryptocurrencies have nothing backing them; no metals, no GDP, zilch. As a currency investment the CCs are beyond risky and subject to the whims of a few key stakeholders.
    Well the NFTs may have a tangible intrinsic value but depend completely on rarity value to collectors who are brutally called the greater fools, in this financial sense. Of course many or most currencies have little backing past the trust of the issuing government. Devaluation by government just slices chunks off any holdings. In the good old capitalist sense, money and credit were to allow risky but productive ventures to proceed. To allow trade without carrying a fortune in coin, but it seems to me we do have that with a combination of trading documents and insurance, with records kept. Cryptocurrency promises to make all that cheaper but does that include the energy cost? Where is that deducted from transactions?. (Genuine question)
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  9. #9
    Join Date
    Aug 2005
    Location
    NEOTP Atlanta, GA
    Posts
    3,681
    Quote Originally Posted by profloater View Post
    Well the NFTs may have a tangible intrinsic value but depend completely on rarity value to collectors who are brutally called the greater fools, in this financial sense. Of course many or most currencies have little backing past the trust of the issuing government. Devaluation by government just slices chunks off any holdings. In the good old capitalist sense, money and credit were to allow risky but productive ventures to proceed. To allow trade without carrying a fortune in coin, but it seems to me we do have that with a combination of trading documents and insurance, with records kept. Cryptocurrency promises to make all that cheaper but does that include the energy cost? Where is that deducted from transactions?. (Genuine question)
    Energy cost? I suppose it could be significant but so what? Is that a reason to stop using CCs? Or that people would want to stop? (Maybe the latter)

    Looked at another way the CCs are simply another payment method and not as a currency; PayPal or Google Pay writ large (well, the investors hope). It is good to see mainstream usages popping up rather than CCs being used strictly for ransoms and human trafficking. Long way to go though. And yes, "trading documents and insurance, with records kept" is part of the CCs but at the end of the day the crypto currency is swapped for dollars or pounds or Euros. I struggle to see an organic economy solely made up of CCs.

  10. #10
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119
    Yes I can see it can be another payment method to join direct debit, credit cards, Paypal, applepay and others, and if it were to be accepted more internationally than those, it could be useful. We still see international trade asking for USD or EURO, depending on the day of the week, it seems, and there are new services to buy those or indeed any national currency without using banks. I read about specialist scams involving Bitcoin “investment” and of course the raft of other CC, and so there is still a trust issue when no major bank nor country stands behind CC. That could change. I have seen reports of the high energy use, but no comparison with conventional trade energy use in guaranteeing payment. Some countries are hanging on to cheques, that must be expensive.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

  11. #11
    Join Date
    Sep 2004
    Posts
    16,473
    The energy cost of Bitcoin and similarly constructed cryptocurrencies is not just in the mining, but also in the calculations done to the ledger for each and every transaction. For quite a few cryptocurrencies these are so significant that they are not only a problem from an energy point of view, but also a limitation on speed of transactions.

    btw a big Youtuber recently bought every type of cryptocurrency he could buy and lost on nearly all of them. So many of these currencies are pyramid shaped hot air. If you know how even the big ones aren't backed by anything and can swing wildly due to a single tweet, you know just how stable the little ones are...

    I won't stop you if you want to speculate on cryptocurrencies. If you make profit, all the better. Just don't call it "investing". You're not investing in anything.
    With sufficient thrust, water towers fly just fine.

  12. #12
    Join Date
    Apr 2011
    Location
    Norfolk UK and some of me is in Northern France
    Posts
    10,119
    . A US company has turned a former coal plant into a gas-fired Bitcoin mine https://www.bbc.co.uk/news/technology-58020010
    This article is about a converted coal mine, running on gas, solely to produce Bitcoin on thousands of computers. The high current value of Bitcoin makes this viable, apparently. It is printing money but it is a commercial venture. It makes enough money to buy carbon offsets.

    Can this really be a good idea? It seems to be the kind of activity Gulliver found on his travels, and those travels were a mockery of Jonathon Swift’s world. Computer energy gets used in many vacuous ways, there are many potential targets for satire in this information age, but cryptocurrency is trying to keep a straight face while mocking us, IMO.
    sicut vis videre esto
    When we realize that patterns don't exist in the universe, they are a template that we hold to the universe to make sense of it, it all makes a lot more sense.
    Originally Posted by Ken G

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •