Crypto Bubble

[JohnB]

With an energy per transaction some 600000 times that of Visa, do not buy coffee with it. One transaction creates 2 golf balls of ewaste for example, as miners dispose of kit

https://digiconomist.net/bitcoin-energy-consumption

[TheMotorcycleBoy]

You don't. It's useless for making purchases.

GS

Did you try a web search? You can trade fractions of a btc.

The question wasn't about trading. Nor was my answer.

GS

GS, strictly speaking my question was about trading, not "trading" as in speculative buying and selling of capital assets, but using BTCs in the same way one uses pounds and pennies to buy goods.

My current contention is that the protocol associates bitcoins with bitcoin addresses (i.e. Common folk who use bitcoin as a currency). The blockchain locks, as far as my limited understanding goes, binds coins to addresses (owners). As such I dont see any provision to subdivide individual coins (currently worth £33k). I intend to presntly read UDs links to see if they illuminate.

Matt

[TheMotorcycleBoy]

My problem however is given that a btc is currently worth about £33k and the nature of the thing how one make low value purchases? How are lower denominations defined?

You don't. It's useless for making purchases.

GS

Did you try a web search? You can trade fractions of a btc. Each bitcoin is divided into, apparently, 100 million units. A bit like pounds are divided into penny's. Only in this case somewhat less than a penny.
https://btcgeek.com/buy-fractions-bitcoin/

Ah ha! But the devil is in the details.

Is a single satoshi really a discrete unit in the original protocol or is it a unit one now holds with an organisation e.g. Coinbase who are *always* destined to be the bicoin address?

This is an important point, if it is the latter, then ones satoshi is no longer entirely decentralised (coinbase are ones central bank so to speak), furthermore all it takes is one crook at coinbase and ones sats have all gone missing.

Matt

[TheMotorcycleBoy]

This is an important point, if it is the latter, then ones satoshi is no longer entirely decentralised (coinbase are ones central bank so to speak), ..

Actually this point is moot. The proposed issue which regular currencies being managed centrally is that the CB can increase its supply hence decrease its value. But if BTC is maxxed at 21M..

[TheMotorcycleBoy]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine.

Hence it can't be printed and devalued willy nilly by CBs the moment we all start to get a nasty cough, or investment bankers start doing naughty things with CDOs and mortgages etc.

Matt

[Urbandreamer]

Ah ha! But the devil is in the details.

Is a single satoshi really a discrete unit in the original protocol or is it a unit one now holds with an organisation e.g. Coinbase who are *always* destined to be the bicoin address?

This is an important point, if it is the latter, then ones satoshi is no longer entirely decentralised (coinbase are ones central bank so to speak), furthermore all it takes is one crook at coinbase and ones sats have all gone missing.

Matt

Indeed so, but you presume that there is one answer.

The blockchain will account for "Satoshi", the smallest bit coin fraction. So yes it's part of the protocol.
https://uk.search.yahoo.com/yhs/search; ... uxmint_com

However if you keep/kept your bitcoins (however many you own) with an exchange, like Mtgox or Paypal, then the exchange is the registered address.

By the way Mtgox was an exchange for trading Magic the Gathering cards that turned into a bitcoin exchange. Unfortunately their security wasn't up to scratch.

[Urbandreamer]

Oh, to add info to the thread, rather than get into an argument.

There are plenty of people working on the energy issue.

Ie.
https://www.fastcompany.com/90268985/a- ... -buildings
Heatmine are using the machines to heat buildings that need heat, using renewable electricity. In essence the mining activity becomes a bi-product of heating.

Or this guy heating his house.
https://medium.com/swlh/heating-my-home ... 7d2a29b62a

Given that in the UK new builds can not have gas heating, why not use a mining rig to heat it? Ok, this isn't going to happen. The capital costs and communication infrastructure work against the idea. However it would address the energy use issue wouldn't it.

[Leif]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine.

Hence it can't be printed and devalued willy nilly by CBs the moment we all start to get a nasty cough, or investment bankers start doing naughty things with CDOs and mortgages etc.

Matt

It’s not just mining that squanders energy, transactions are extremely energy inefficient.

[JohnB]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine

Guaranteed rarity is good, but do you want to make things rare because they require producing huge quantities of CO2?

If a bitcoin is worth £40000, someone will burn £39000 of coal if they can produce the energy to mine one.

[GoSeigen]

Did you try a web search? You can trade fractions of a btc.

The question wasn't about trading. Nor was my answer.

GS

GS, strictly speaking my question was about trading, not "trading" as in speculative buying and selling of capital assets, but using BTCs in the same way one uses pounds and pennies to buy goods.

My current contention is that the protocol associates bitcoins with bitcoin addresses (i.e. Common folk who use bitcoin as a currency). The blockchain locks, as far as my limited understanding goes, binds coins to addresses (owners). As such I dont see any provision to subdivide individual coins (currently worth £33k). I intend to presntly read UDs links to see if they illuminate.

I was swatting away an ad hominem attack MCB. I made a statement about purchasing using bitcoin and someone saw fit to imply I know nothing.

Fractions of bitcoins are irrelevant, a detail. There are far more fundamental problems with using it like a normal currency not buy a cup of tea, not least the 15 minute wait for the transaction to happen, the eyewatering fee ($20 for a cup of tea anyone?) and truckload of coal burned to approve the transaction. A bit of hyperbole there but you get the idea...

So it will never be a means of payment "immune from the interference of government" or whatever Tea Party justification lies behind the project.

GS

[GoSeigen]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine.

Matt

No, you've fundamentally misunderstood the difference. They are not exactly the same, they are not remotely the same.

Gold costs a lot to mine, yes, so supply is constrained, yes, but there is infinitesimally negligible frictional cost in transacting with gold (or other forms of money): receive a cup of tea, hand over the gold coin.

Bitcoin has a huge frictional cost for every transaction ever undertaken -- unless you depart from its core raison d'etre (the blockchain) and create bitcoin derivatives possessing none of the touted advantages of bitcoin itself. (Bitcoin derivatives are in fact what most people are trading at ever more stupid prices.)

GS

[GoSeigen]

Oh, to add info to the thread, rather than get into an argument.

There are plenty of people working on the energy issue.

Ie.
https://www.fastcompany.com/90268985/a- ... -buildings
Heatmine are using the machines to heat buildings that need heat, using renewable electricity. In essence the mining activity becomes a bi-product of heating.

Hilarious! No problem killing my wife because I'm going to use her as compost for my vegetables.

GS

[TheMotorcycleBoy]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine.

Hence it can't be printed and devalued willy nilly by CBs the moment we all start to get a nasty cough, or investment bankers start doing naughty things with CDOs and mortgages etc.

Matt

It’s not just mining that squanders energy, transactions are extremely energy inefficient.

Indeed.

But I'm actually not touting it as a replacement currency, in exactly the same way that I dont take my gold bullion down to tesco.

I'm merely analysing the hype and curious of its perceived use as a store of value.

And FWIW I'm neither for nor against.

Matt

[TheMotorcycleBoy]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine

Guaranteed rarity is good, but do you want to make things rare because they require producing huge quantities of CO2?

If a bitcoin is worth £40000, someone will burn £39000 of coal if they can produce the energy to mine one.

See viewtopic.php?p=386351#p386351

[TheMotorcycleBoy]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine.

Matt

No, you've fundamentally misunderstood the difference. They are not exactly the same, they are not remotely the same.

Gold costs a lot to mine, yes, so supply is constrained, yes, but there is infinitesimally negligible frictional cost in transacting with gold (or other forms of money): receive a cup of tea, hand over the gold coin.

See viewtopic.php?p=386351#p386351

[Urbandreamer]

Hilarious! No problem killing my wife because I'm going to use her as compost for my vegetables.

GS

I think that it's illegal for you to do that, and I don't really get the connection at all.

What's the harm in using renewable electricity to grow some strawberrys (saving the air-miles importing them) and mine some bitcoin as a bi-product.

BTW, Canada (where they are based) produces even less CO2 when generating electricity than we do. Only 18% of their electricity comes from hydrocarbon sources.

https://en.wikipedia.org/wiki/Renewable ... lectricity.

Even we produce more electricity from non hydrocarbons than from them.

Is it possible that the facts are not that important? I can't think of any other reason for arguing that mining bitcoin is like murder or for some to imply that mining bitcoins has to use coal or predominantly use coal. That every Watt used is wasted and is generated from hydrocarbon sources.

I just read Matt's response and I too would claim that I'm neither for nor against crypto-currencies. I do think that they are very interesting as currencies and can see the huge advantages of the technology behind them.

[TheMotorcycleBoy]

Bitcoin seems to be touted as a solution to problems that are not really problems at all and is absurdly energy inefficient.

Thats its strength. In exactly the same way precious metals are very expensive to mine

Guaranteed rarity is good, but do you want to make things rare because they require producing huge quantities of CO2?

If a bitcoin is worth £40000, someone will burn £39000 of coal if they can produce the energy to mine one.

I know. Crazy. But presumably that too would throttle supply, i.e. Law of diminishing returns, and push the price up.

The mind boggles.

[TheMotorcycleBoy]

Putting the energy consumption arguments to one side, what I'm also trying to get my head around is why there are indeed several crypto assets. I imagine that competition naturally gives rise to the multitude.

Why is the favourite BTC? Maybe its like a brand thing, like how I prefer Magnum ice creams over the tesco own brands. Perhaps BTC will be usurped by another.

I actually do not see BTC as necessary a crypto currency, but more a crypto asset. Its arguable that in times of crisis its an advantage for CBs to have the ability to inflate their balance sheets, and pay furloughed workers etc etc.

And BTC would also seem a poor choice as a currency, due to its volatility, with its worth potentially governed by emotional speculators.

I'm thinking its seen more as a new gold. But why did we need another one?

Finally its weakness....the algorithm eventually being devalued when Quant Compute starts to predominate?

Matt

[Urbandreamer]

Putting the energy consumption arguments to one side, what I'm also trying to get my head around is why there are indeed several crypto assets. I imagine that competition naturally gives rise to the multitude.

Why is the favourite BTC? Maybe its like a brand thing, like how I prefer Magnum ice creams over the tesco own brands. Perhaps BTC will be usurped by another.

I actually do not see BTC as necessary a crypto currency, but more a crypto asset. Its arguable that in times of crisis its an advantage for CBs to have the ability to inflate their balance sheets, and pay furloughed workers etc etc.

And BTC would also seem a poor choice as a currency, due to its volatility, with its worth potentially governed by emotional speculators.

I'm thinking its seen more as a new gold. But why did we need another one?

Finally its weakness....the algorithm eventually being devalued when Quant Compute starts to predominate?

Matt

Right let's see if we can address those.

Back in the 70's the well known economist Hayek argued that people should be allowed to choose from competing currencies.

Hayek believed it was markets, not states, that guaranteed individual liberty. For Hayek, liberty is “a policy which deliberately adopts competition, markets and prices as its ordering principles”.

https://www.icaew.com/insights/viewpoin ... -of-crypto
Many since have made the same arguments.

Implementation and suppression have been the problem.

For example, in this thread there has been many comparisons to gold.
Well let us consider E-gold.
https://en.wikipedia.org/wiki/E-gold
Or the liberty dollar.
https://en.wikipedia.org/wiki/Liberty_d ... e_currency)

Bitcoin was the first of the crypto-currencies and it's success was due to it's decentralised nature (making suppression difficult) and it's strength at preventing double counting (the block chain).
The method was put into the public domain meaning that it could be examined for faults by many and any faults fixed.

However bitcoin is certainly not without it's faults or issues. Hence a number of alternative crypto-currencies have sprung up.

Some actually think that it's likely that bitcoin will be replaced eventually with a lighter cheaper alternative.

For example bitcoins block chain contains EVERY transaction of every unit. Obviously communication and processing requirements are likely to expand exponentially. One solution adopted is to limit the size of the transaction blockchain and forget older transactions once the number exceeds a certain size.

Other ideas are to change the algorithm to require less computing, making transactions cheaper. Ethereum are doing that.

I personally am dubious about some of the alternative. At least one of which was simply a fraud. Such thoughts are likely to lead to a preference for bitcoin over the alternatives.

Then again some may just be a joke.
There is one called Dogecoin. Is it pronounced Doj like the ruler of Venice? Or more likely, given it's mascot Dogy?
https://dogecoin.com/
Though I understand that Mr Musk quite likes it and got some for his son, so what do I know?
https://twitter.com/elonmusk/status/1359519541219500033

Currently I have no concerns that criminals will manage to spend nation state levels of money on quantum computing to attack crypto-currencies, though I suppose that it is something that some nation might consider.

[Bubblesofearth]

Putting the energy consumption arguments to one side, what I'm also trying to get my head around is why there are indeed several crypto assets. I imagine that competition naturally gives rise to the multitude.

Why is the favourite BTC? Maybe its like a brand thing, like how I prefer Magnum ice creams over the tesco own brands. Perhaps BTC will be usurped by another.

I actually do not see BTC as necessary a crypto currency, but more a crypto asset. Its arguable that in times of crisis its an advantage for CBs to have the ability to inflate their balance sheets, and pay furloughed workers etc etc.

And BTC would also seem a poor choice as a currency, due to its volatility, with its worth potentially governed by emotional speculators.

I'm thinking its seen more as a new gold. But why did we need another one?

Finally its weakness....the algorithm eventually being devalued when Quant Compute starts to predominate?

Matt

Firstly, I think it would be a mistake to assume that the majority of people trading bitcoins have significantly more knowledge than the people on here. Certainly when it comes to where it will end up, both price-wise and utility-wise. Given how limited this knowledge is I'm very much in the camp that the price is being driven almost entirely by speculation, i.e. the hope of quick profits. That rarely ends well for most.

What Bitcoin/blockchain has is a good story. It has many features in common with gold that made gold the perfect money for so long. In addition, the appeal of a currency more fit for the electronic age than gold (no need to handle messy 'stuff').

But it's just that, a story. In reality it is IMO almost impossible for Bitcoin to ever be accepted by Governments. Without that acceptance it can never replace the current crop of currencies we are all familiar with. Governments abandoned the gold standard because of its inflexibility. Debt issuance, for example, is not just something Governments do, it's an important part of the ability of individuals and businesses to expand. How will mortgages be issued with Bitcoin?

Another fundamental issue with Bitcoin, and where it differs from gold, is it is entirely man-made. Any supposed limit on supply can easily be circumvented by issuance of a different cryptocurrency even if Bitcoin supply is fixed (until someone decides the limit should be raised?).

Despite the seemingly endless rise in price I remain convinced Bitcoin will eventually prove to have been a huge speculative bubble. Not to say I'll be shorting it as I have absolutely no idea how high or long it can go! In some ways it's fun to watch from the sidelines...

BoE