[mutteraloo]

They didn't know what they were buying; bits in a database. A very poorly implemented database that was

- not scalable

- not rare

- didn't have any government backing or big institutional backing in case the price dropped from 19,000 to 11,000

- easily hackable (tether, fake trades, scam exchanges, etc)

- too expensive to do a single transaction

this applies to most crytocurrency

[bogomipz]

>"- not rare"

Its not a commodity it's a currency. Why does it need to be "rare"? The US dollar is also not backed by anything "rare" and hasn't been since Nixon abandoned the gold standard in 1973.

>"didn't have any government backing or big institutional backing in case the price dropped from 19,000 to 11,000"

You realize this is the exact reason it was created right? That's the whole point. It's not coincidence that bitcoin was released on the heels of the 2008 financial crisis.

[apcragg]

The dollar is essentially backed by oil and the fact that it's needed to trade with the largest economy in the world, not to mention the country with the largest military.

[em3rgent0rdr]

Sure those things help give value to the dollar by increasing its demand. Whether of not this constitutes "backing" depends on the definition of backing. There is no underlying asset that directly backs the dollar, which is the whole point of fiat currencies.

The fundamental source of demand is the requirement that US Taxes must be paid in dollars. The utility of using dollars to trade with the US economy is simply a consequence of this fact.

[em3rgent0rdr]

If such a loose definition of "backing" is going to be used, then one could also say that bitcoin is "essentially backed" by its utility as a medium of exchange. That utility is a consequence of:

(1) the infaliabilty of its public ledger (which means it is especially useful where trust is low and where trust is needed).

(2) The ease of making a transaction.*

*Aside: since the bitcoin transaction volume currently exceeds the limits it was specifically designed to handle, that means that transactions currently either cost a lot of money or take a long time to be confirmed. But those are issues that could be resolved either with lightning network (or other off-chain solutions), side-chains, forks (soft and hard), or even by a whole new variation of the blockchain concept. Although bitcoin transactions admittedly currently aren't cheap or fast doesn't mean blockchain necessarily will always be like that.

[lurr]

> (1) the infaliabilty of its public ledger (which means it is especially useful where trust is low and where trust is needed).

Except when they roll it back because people with more money than you demanded it after they got screwed somehow.

[em3rgent0rdr]

How can they possibly "roll it back"?

[Retric]

You must pay US taxes in USD which collectively must equal a large percentage of the US economy. So, the USD is backed up by everything made in the US.

The downside is the US government's outlay is larger than it's income, but in practice that's less important than you might think.

[Mankhool]

The dollar is essentially not backed by anything - except debt.

[vec]

The thing about dollars is that I can pay my taxes with them.

Let's say I think dollars are worthless, and my whole community works off something with real value, like shiny rocks. I'll still have to pay the IRS next April. They may take shiny rocks, but instead I could trade just one or two rocks for a big pile of worthless dollars and get Uncle Sam of my back for next to nothing. Unfortunately for me, every other shiny rock user in town is going to have the same idea, so they'll bid up the price of dollars until trading rocks for dollars doesn't feel any better than just paying my taxes in rocks directly.

The only faith that "full faith and credit" requires is faith that I'll have to keep paying taxes.

[lurr]

You don't think the fact that the other 99.99% of the population is perfectly happy using dollars is more of a reason?

[vec]

No, although that is nice.

Taxes are why I think a piece of paper with a bad portrait of George Washington has some intrinsic value to me, whether or not there's a secondary market for them. It's why I think the purchasing power of that piece of paper is anchored to a real phenomenon in the real world, and why I don't expect that purchasing power to move around much.

Think of it like this. If the dollar lost 20% of it's purchasing power overnight, I would be pretty damn sure something important has happened in American governance. Bitcoin just moved 20% because...?

[altern8tif]

The dollar is only "backed by oil" if you can take your dollar bill to the US Treasury and get it exchanged a dollop of crude of an equivalent value.

The last time the dollar was backed by any asset was when it was under the gold standard. Boy was that a mistake.

[bogomipz]

>"The dollar is essentially backed by oil ..."

No, the petrodollar system effectively ended with the 2008 financial crisis[1]. The US dollar is just backed by debt now.

EDIT(wrong URL): https://uk.reuters.com/article/uk-usa-bonds-petrodollars/com...

[thinkling]

I'm missing how your link supports your claim. The linked article says nothing about the financial crisis and discusses petrodollar behavior in recent years. Much of the reduction in export of petrodollars to asset markets is blamed on sanctions on Russia.

[bogomipz]

Sorry I pasted the wrong URL I've since corrected it.

[purple-again]

The US dollar is backed by the most rare entity in the world. The Hegemon.

[yellow_postit]

I’m not sure Bitcoin knows if it’s a currency or a commodity yet. Seems to be in flux depending which interest group is currently commanding the headlines.

[lurr]

> Its not a commodity it's a currency.

I don't see how this is justifiable at this point. With rampant speculation, $30+ transaction fees, the slow nature of the network, devs who keep putting off dealing with the slow nature, forking, etc...

[Retric]

You need to pay US taxes in dollars that instantly creates trillions in demand every year.

[bogomipz]

If you are being paid in dollars you are already holding dollars. Paying tax on dollars you are already holding does not create a demand.

[Retric]

If a US company is paid in euros or gold it still needs to pay taxes in dollars. Further, property taxes for example are independent of your income stream. As owning land creates a liability, but land in no way creates money from thin air.

People do transactions in USD specifically because they need to pay taxes in USD not the other way around. Thus, these transactions are simply a multiplayer on top of the Tax demand.

[bogomipz]

>"If a US company is paid in euros or gold it still needs to pay taxes in dollars"

And similarly if a European company is paid in dollars they still need to pay taxes in Euros. Why is this relevant?

>"As owning land creates a liability, but land in no way creates money from thin air." Owning land creates money out of thin air by appreciating in value. People have gotten fantastically wealthy by doing nothing except letting time pass.

>"People do transactions in USD specifically because they need to pay taxes in USD not the other way around."

This is not unique to the US. Where else can you pay local taxes in a foreign currency?

[Retric]

> This is not unique to the US

Sure, and Euros are also backed by the EU economy. The point is 'national' currency's are actually backed up by enforced demand unlike say Ethereum.

People talk about hyper inflation as if it can actually happen without the backing government printing money. The reality is taxes limit inflation as long as the currency is not printed endlessly and the government does not over spend you can't sustain hyperinflation.

[mutteraloo]

when you talk to a bitcoin enthusiast, at first it was 'well it's a currency'. then after seeing the transaction fee and time, it was 'well it's a store of value'. then after seeing the 80% price drop, it was 'well it's rare'. then after seeing hundreds of cryptocurrencies on coinbase it was '......?'

[Klathmon]

It sounds like you are talking to different people, who all think different things...

I personally see cryptocurrencies as a decentralized way to transact money. Yes, bitcoin is failing in this area currently, and while they have plans on how to fix it, they are not going to get here soon enough to keep this valuation up in my mind. If you ask a friend of mine, he will tell you that he has always thought of cryptocurrencies as a way of storing value, since the inability to do chargebacks means he doesn't want to use it as his daily currency ever.

Both of us can be right, because it's an opinion.

And there hasn't been an 80% price drop at this time, and coinbase doesn't have "hundreds of cryptocurrencies", they have 4 (3 up until a day or 2 ago).

[bogomipz]

>"Yes, bitcoin is failing in this area currently, and while they have plans on how to fix it, they are not going to get here soon enough to keep this valuation up in my mind."

Can you elaborate on this? What exactly is the plan?

[bogomipz]

>" then after seeing the transaction fee and time, it was 'well it's a store of value'"

Whats the connection between the transaction fee and time and the "store of value" justification. I didn't follow that.

[tanilama]

> not rare

Interesting. Don't really know how crytos work, but isn't rarity is guaranteed by the BitCoin algorithm itself?

[carry_bit]

Bitcoin itself is rare, but cryptocurrency as a whole is not because it's easy to create another blockchain.

[aviv]

This right there is exactly why long term it's doomed and cannot be a reliable store of value. You don't see banks and random geeks inventing new precious metals out of thin air. So you have gold, silver, platinum and palladium and that's about it as far as store of values are concerned.

[stinkytaco]

I mean, I suppose anyone can create a currency out of thin air. In fact, I'd wager there's hundreds of currencies, as nearly every sovereign state has one. It's not meant to be a store of value, which is why this bubble will burst, but that doesn't mean it's doomed. It has the characteristics of a currency: 1. scarce. 2. useful.

[vec]

But not 3. fast and easy to transfer ownership of or 4. stable in value over time. Plenty of things (houses, human toes, pre-release copies of films, etc.) Are both scarce and useful without also being good candidates for a medium of exchange.

[stinkytaco]

Fair enough, but Bitcoin certainly can be either of those things, even if it's not right now. History shows us any currency can have those problems. Inflation can become so high that as a medium of exchange it's pointless. It can become so unstable in value that people use something else.

Bitcoin is no panacea, but the "fake money" argument seems misplaced to me. It's current failings are not failings of crypto-currency in general.

[sowbug]

Same is true about Facebook. Someone could clone the features and create facebook2.com, and everyone would flock to it. That's why Facebook stock is a Ponzi scheme. Anyone who thinks Facebook has a value above $0 is insane.

[aviv]

Nope. People use Facebook. People simply don't use Bitcoin for payments or any other use that benefits from its "network effect".

[Klathmon]

Look, i'm not convinced that bitcoin is worth the price it's at right even right now either, but that's just not true.

The network effect is extremely strong in the cryptocurrency space. Everything in the cryptocurrency space supports bitcoin, and fractions of everything support anything else. Payment processors, exchanges, hardware wallets, software wallets, secure storage and backup systems, etc... All of it is focused on bitcoin first, and adds others later (if ever).

If you want to buy or sell bitcoin, you've got tons of repudible options, you want to buy or sell monero? You've got 1/3 of the options, and most of them are small and shady or don't deal with fiat currencies in any way.

If that's not a network effect, I don't know what is.

[sowbug]

Speak for yourself. We do.

It took a while for 28.8K modems to catch up with bandwidth needs, and that's part of the reason people thought the internet sucked and was a joke compared to all its promises. I think even today people snort about pets.com as the poster child of the dot-com boom. Then their Amazon Pantry order arrives, which they consume without irony.

[Analog24]

You could say that about any company that doesn't have crucial IP. It doesn't seem like you understand the value of a brand.

>Someone could clone the features and create facebook2.com, and everyone would flock to it.

This is flat out false. if it was actually that easy don't you think we would have seen it happen already? There are numerous social media platforms that have tried to dethrone Facebook and none of them have succeeded.

in addition, Facebook practically prints money through advertising, which very clearly has value (multiple billions of dollars a year).

I don't really use Facebook anymore and I don't work there but to think it's value is $0 is insane. I'm not sure how you can conflate a multi-billion dollar company with proven profit streams and the current hype in the current crypto market

[sowbug]

Perhaps you would have benefited from an explicit /s in this conversation. We're in agreement. I was taking OP's point and extending it to demonstrate its weakness.

[cm2187]

Isn't that instagram?

[sowbug]

A little. It is somewhat like Bitcoin Cash, which I'll admit surprised me by not dying immediately. The way I reconciled it with my view of the world is that it's a different feature set (larger ledger pages) that was too hard to integrate with the main product (Bitcoin), so they did a market test with a different brand and found out it resonated with some people. ("they" is an odd term to use because it was actually two viciously opposed groups, but the same kind of infighting happens in corporations as well, and people on the outside think corporations are all singular hive minds, so oh well).

I continue to view Bitcoin Cash as a prototype for different features that validates the need for Bitcoin to address that market segment, either by fixing the block size problem outright, or by the lightning network. I don't see a world where both BTC and BCH coexist long-term.

I can't explain why Instagram coexists with Facebook. It does feel like one is a superset of the other. Maybe Instagram's simplicity and ease of use is simply inconsistent with Facebook's engulfing experience, and they truly are two distinct features of a larger whole. If that's the case, then I'm looking at BTC/BCH the wrong way, and they're also part of a larger whole, and both will survive. So my original facetious point that Facebook is cloneable (which of course it isn't, because its value is in network effects, not its source code) would actually be somewhat true, except that it's different products serving the same overall network, just overlapping but distinct parts of it.

[spraak]

Those metals are only valuable because because people agree that they are. The price of gold etc. is just as inherently meaningless as BTC etc.

[dithering]

Algorithm is defined by consensus. Changing the algorithm just means gaining consensus amongst the miners.

"Would you like to continue printing free money?" sounds like an easy sell to me.

[IkmoIkmo]

I doubt it's that easy to gain consensus on that. Half a decade of billion-dollar incentives have already provided a real-life experiment in which this issue didn't come up, although it may in the future.

The reasons are that bitcoin's value is derived from its scarcity and decentralised properties. If you completely break that philosophy, it's sorta-kinda just a digital ledger controlled by a small group of powerful companies like any other system you could think of.

So you'd momentarily print money that'd soon lose much of its value. And you'd be doing it on specialised mining equipment which are purpose-built by all the big mining companies, that can just has a single algorithm that bitcoin uses (and is useless for mining many other coins), which then also all lose their value.

Again, it could happen, but the incentive structure certainly isn't designed for this to occur naturally. Even a small printing of money would be immediately noticed.

Rather, the rarity to me stems from the fact that indeed, anyone can run a blockchain. It's just software on 1 or more computers. I can run 100 blockchain clones on my computer with trillions of tokens. And bitcoin tokens themselves can be split to ridiculous numbers, as you can send 0.000001 bitcoin. That fraction of a bitocin is a token that can carry information and put it on the blockchain, and you can agree that this information represents any asset. As such, there's no scarcity of databases (blockchains) or tokens (bitcoin fractions), and thereby it isn't 'rare'. Of course, most blockchains have no security strength because there's not enough value to incentivise a large group of independent miners like with bitcoin. But the idea that you can clone/improve bitcoin, run your own and create a healthy market is reality, and it means that ultimately there's no real rarity for bitcoin usecases that couldn't happen on another chain that's supported by users.

[Robotbeat]

You know what? That's a good point, and a problem with the Bitcoin end game. As Bitcoin mining gets harder and more of the value ends up entirely in the already-mined BTC, those with all this mining infrastructure are going to realize they can maximize this otherwise-stranded-asset by monopolizing mining power and developing a consensus to allow them to continue printing money.

"But transaction fees!" Okay, but if transaction fees go way up, that will encourage people to move away from BTC anyway or find some other way to reduce their exposure to transaction fees.

Once mining draws to a close, miners will consolidate. Just like in every other industry after a bust.

Cryptocurrencies are still, of course, very interesting and powerful.

[dithering]

Of course it's a good point, it's one of mine ;)

My expectation is we'll end up with "to avoid a hard cliff between a network reliant on mining and one reliant on transaction fees (and the inevitable instability of the transition), and to ensure a robust mining ecosystem, we're going to extend mining, at a reduced rate, for just a few more months..."

And there's an apparent benefit for end-users, too - if you want Bitcoin to be a practical payments mechanism (as opposed to store of value), transaction fees have to be kept comparable to credit cards. But the electricity used by the network still has to be paid for. What could be more tempting than magicing a few more bitcoin out of thin air to pay the miners?

[fwdpropaganda]

Yes.

But anyone can create a blockchain exactly like that of Bitcoin and call it Bitcoin-B, Bitcoin-C etc, etc.

[monocasa]

Bitcoin Cash...

[cm2187]

The algorithm is just a convention. The algorithm can be easily forked or modified by law / regulation / consensus among a few key market participants (mostly large miners).

Also Bitcoin is just one blockchain. Even with the same algorithm I can create an infinity of other bitcoin blockchains. Why would one have more value than the others? It's like if you generated an RSA key and then said, this RSA key is special, it has lots of value, you can't replicate it because you don't have the private key. No one else can recreate this key, it is enforced by cryptography. Well yes. But it's just a key. I can create a million others with an average laptop.

[castis]

In what context are you using rarity?

[mutteraloo]

there are hundreds of crytocurrencies. what makes one of them rare?

[Klathmon]

There are hundreds of elements, what makes some of them rare?

[UncleMeat]

Only a few of those are resistant to tarnish and shiny.

[mutteraloo]

there could be thousands of crytocurrency next month.

[Klathmon]

And I could make thousands of kinds of physical coins next month, it doesn't mean physical money is worth less...

I feel like I'm crazy here, how is the ability to make a new "thing" make something else less valuable? A toyota isn't worth less because I can make a new car company next week, Facebook isn't worth less because I could make a clone of it tomorrow, A company stock shouldn't be consitered "worthless" just because I can create a new company tomorrow...

What am I missing? Why would the ability to make something new affect the rarity of an unrelated "thing"? Why isn't the value determined by what that "thing" does, how it does it, the number of people that believe in it's ability to do the thing it says it will do, and more? Why do you think it matters that someone can create a new currency?

[UncleMeat]

There are two kinds of rarity. There is rarity of the thing itself and rarity of things like the thing. Consider an extremely rare thing used for some industrial application. It is very expensive because there is little supply. But if there is another thing that functions just as well then the price of the first thing drops, even though the supply of that thing is fixed.

The only differences between bitcoin and bitcoin2 after a fork are the miners. If the number of miners is sufficiently large to be confident in transactions, original bitcoins and bitcoin2s are just as good at being used for whatever. This is even worse if bitcoin2 has some new desirable properties that bitcoin does not have.

[root_axis]

> And I could make thousands of kinds of physical coins next month

No, you couldn't, not without literally tons of raw material, heavy machinery and infrastructure to mint the coins, laborers to run the operation, time to process the raw materials, and a practical mechanism to circulate the coins. These are serious barriers to the creation of physical money, unlike cryptocurrency which can be instantly and effortlessly minted in unlimited quantities by a single individual and easily distributed over the internet. There is no comparison.

> A toyota isn't worth less because I can make a new car company next week

This analogy makes no sense. A Toyota is valuable because it has an inherent utility in its ability to provide its owner with an effective method of transportation, crypo-tokens (as opposed to the network itself) have no inherent utility because they are not actually a thing and do not exist independently of the ledger that qualifies their distribution. Certainly, if any single individual could generate an unlimited supply of "effective transportation" instantly at near zero cost, the value of toyota's would very quickly decline.

> Facebook isn't worth less because I could make a clone of it tomorrow

First of all, no you couldn't. You could create a much crappier version of Facebook with an unmaintainable code-base that doesn't scale and supports a minuscule fraction of Facebook's feature set, and even that would cost you time, money, and effort. Even if you could just git clone Facebook's code, you still wouldn't be able to get it running and keep it running without a team of senior dev, ops, and network engineers, plus an annual server bill in the hundreds of thousands at the absolute minimum.

> A company stock shouldn't be consitered "worthless" just because I can create a new company tomorrow...

The point is that you can't just "create a new company" tomorrow that is in any way comparable to a successful business, otherwise everyone would do it... not to say that some don't try, but the ash heap of history is littered with the remains of companies that thought they could replicate a successful company's business model only to find out that its actually not that simple.

[edem]

What is the problem with Tether? Do you refer to USDT?

[ac29]

Read some of the posts here: https://medium.com/@bitfinexed/

[gruez]

>- didn't have any government backing or big institutional backing in case the price dropped from 19,000 to 11,000

in other words, the fed isn't going to bail you out?