Duke of Marmalade
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You seem to equate the mind blowing trial and error of blockchain to normal R&D trial and error but possibly I misunderstood you.
Big jump in Bitcoin...
- Thread starter Brendan Burgess
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I'm not sure what it is that you have in mind in truth. What I can tell you is that regardless of what any of us believe will become of the technology, the sector has attracted some very smart and intelligent people. Bitcoin is already out there in the ether. It's not in an R and D lab. Therefore, work on that network doesn't quite happen in the same way as something that is offline if that is what you were getting at. There is so much work ongoing - on every conceivable aspect of cryptocurrency and blockchain - and blockchain as it pertains to a whole host of industries that I can't possibly keep up with it.
Ok, so if someone is working the commodities markets professionally, how do they determine the value of gold?
Duke of Marmalade
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The mindless solving of crypto puzzles is not to be compared with genuine R&D
Perhaps I should declare my interest at this point. I could easily be described as FOMO or a zealot, a nerd, because I hold a small amount of bitcoin.
But I am also a skeptic insofar as the price fluctuations bear no reasonable reflection on what bitcoin is (or at least what I perceive it to be).
So for me, the jury is out. Bitcoin will ultimately be valued on what it is in the future rather than what any speculative market says it is worth today.
I do agree that the mining aspect is crude, but then again so was mining for metals and minerals thousands of years ago, even tens of thousands of years ago. And as much as such metals and minerals held some value to those miners it is simply inconceivable that they could have ever envisaged the value and usage of such mining to the extent that it is used today.
So what is bitcoin? Or rather what is its use?
It is an immutable sequence of algorithms that verify proof of work/ownership. It is blockchain. This is new technology, its ultimate usage is for the future. Its prospective usage is what drives the market speculation.
I dont buy the email analogy, my brother is soon to become a grandad and it was he who introduced me to bitcoin around six years ago through a magazine article. Grandads and grannies will be on top of this in the near future.
I do like the reference to AI. Im not sure what AI is but apparently it is here, and here to stay. I do find the concept of having my car drive itself, built by robots, my house cleaned by robots, my job taken by automation, heart surgery performed by machines etc all a bit too scientific and star-trekish.
But apparently it is here, we are on the cusp of another technological revolution. Such revolutions have in the past been the great disruptors to social norms and practices in the past.
If such a technological revolution comes to pass in the form of AI and all of its capabilities, how will anything else we do be valued? Who will determine the value of anything? Critically, who will determine such valuations?
The dollar, the yen, the euro, the yuan?
Or perhaps, an immutable sequence of algorithms that verify proof of work and transaction?
But I am also a skeptic insofar as the price fluctuations bear no reasonable reflection on what bitcoin is (or at least what I perceive it to be).
So for me, the jury is out. Bitcoin will ultimately be valued on what it is in the future rather than what any speculative market says it is worth today.
I do agree that the mining aspect is crude, but then again so was mining for metals and minerals thousands of years ago, even tens of thousands of years ago. And as much as such metals and minerals held some value to those miners it is simply inconceivable that they could have ever envisaged the value and usage of such mining to the extent that it is used today.
So what is bitcoin? Or rather what is its use?
It is an immutable sequence of algorithms that verify proof of work/ownership. It is blockchain. This is new technology, its ultimate usage is for the future. Its prospective usage is what drives the market speculation.
I dont buy the email analogy, my brother is soon to become a grandad and it was he who introduced me to bitcoin around six years ago through a magazine article. Grandads and grannies will be on top of this in the near future.
I do like the reference to AI. Im not sure what AI is but apparently it is here, and here to stay. I do find the concept of having my car drive itself, built by robots, my house cleaned by robots, my job taken by automation, heart surgery performed by machines etc all a bit too scientific and star-trekish.
But apparently it is here, we are on the cusp of another technological revolution. Such revolutions have in the past been the great disruptors to social norms and practices in the past.
If such a technological revolution comes to pass in the form of AI and all of its capabilities, how will anything else we do be valued? Who will determine the value of anything? Critically, who will determine such valuations?
The dollar, the yen, the euro, the yuan?
Or perhaps, an immutable sequence of algorithms that verify proof of work and transaction?
I think you've totally misunderstood the rationale behind Bitcoin mining. It doesn't have an R & D function - but more importantly given your statement, that's not its objective, that's not what it's designed to do. It plays a very important function in ensuring that the Bitcoin blockchain network is secure. There may have been issues with centralised exchanges which deal in crypto but the actual decentralised blockchain network has NEVER been hacked and compromised and never been offline for one second in over ten years - despite daily attacks on the network. You can't say the same for visa/mastercard or any bank system.
In the main, I agree with you. In discussion with Brendan, when he asked about my methodology for determining the price of Bitcoin vs. his methodology for assessing stocks, I brought in gold into the equation as I see it as highly relevant to the context of this whole discussion. Gold may be considered a currency but its also a commodity. How are commodities valued? Is it less scientific than the assessment of the valuation of an equity stock? Is it based on the supply and demand dynamic? To me it's the latter - and it's the very same for Bitcoin as a digital asset. It has designed in scarcity. If it has NO utility, then that won't make a difference. There has been (and it seems will continue to be) a debate on here as regards whether it has utility. My view is that it has. My view is that whilst that utility is still coming forth - it will eventually drive pricing through that supply/demand dynamic. There are a number of factors leading into that - and next years halving also does so.
Is there a hype cycle around cryto? Definitely. Is there FOMO and over-exuberance? For sure. That doesn't mean that it doesn't have value. I have not seen a model of assessment for Bitcoin price that is in any way as efficient as Brendan presents for equity stocks. it doesn't exist. However, we know what the market cap of crypto and bitcoin is. We know what it is for gold. If you are to accept that bitcoin is becoming digital gold (and clearly many here don't...and within crypto circles, equally, many say its not), then to take just a percentile of that market is going to drive the price up. We are seeing institutional investment According to Fidelity, 22% of institutions now have exposure to digital assets with 50% saying that they are open to gaining exposure. We have seen the first pension funds gain exposure. Again, if we are to work on the basis of that market expanding, the demand on a scarce resource will increase - having a knock on effect on the price.
Those are just examples. Of course, there is a lot of clarity needed yet in all manner of ways. Regulatory clarity, clarity as regards to the effectiveness of lightning network and layer 2 protocols (to determine if Bitcoin can be effective at scale for micro-transactions). So, with some knowns and many unknowns, of course, it's speculative.
I've swayed a few times on the mining aspect. However, if mining companies themselves stake the capital and use stranded renewable power or non-renewables that are simply being wasted by the petroleum industry, then what's the harm? LINK.
Kudos to your brother. I didn't mean to be disrespectful to grannies n' grandads! However, I do stand by the email analogy. Here is what the understanding of email was like in 1994. Earlier than that still, it was incredibly complicated to send an email - by comparison with what we have to do to send an email today.
Blockchain is much more understandable to me than the questions you pose here! However, what I would say is that there will be a machine to machine economy that will implicate crypto/blockchain and internet of things. Machines will buy and sell data. The most immediate and obvious example is autonomous mobility. One project that's aimed at this from the crypto/blockchain perspective is IOTA. There are already a couple of european startups that have trialled/piloted the automatic payment for electric vehicle charging using IOTA tokens. Jaguar/Land Rover intend to include a digital wallet in their cars to make such payments as well as for parking and tolls, etc. The project has been collaborating with a number of car manfacturers including VW. Last rumour (unconfirmed) was that they are in talks with Ford.
As regards the value that's placed on stuff, it's always been determined by us relative to supply/demand. However, with AI, who the hell knows!
That's fair enough - everyone makes up their own mind, right?
Right, and do equity investors look for growth also? Do they look to diversify? Are growth opportunities the same as what they once were in other conventional asset classes? Would they look to a completely unconnected asset class?
It seems that your mind is made up - I'll keep mine open.
What marketing gimmick? Starbucks made NO announcement about this whatsoever. On this unit of account business, so what? You read earlier in this thread that there are plenty of people in and around the crypto economy that would happily spend Bitcoin given the opportunity. You think Bitcoin not being a unit of account would stop them? It's a complete non-argument.
Furthermore, you don't place value on this development. It's reasonable to think that there are others that share your view. However, it is foolish to think that there aren't others that don't and think this is a significant development.
I think that it has the potential to be very significant. Two of the largest U.S. grocery stores have been pushing back against visa due to fees. Kroger - the largest grocery retailer in the U.S. - recently withdrew visa payment from some of their stores in pushing back against the payment processor due to fees. Walmart did the same in Canada for 7 months.
If lightning network continues to grow, then it could well be a good option for these guys.
I didn't commit to any one of what I listed as being the reason for the upswing. However, with the exception of the Ebay story which has since been denied, they're all positive developments. I'm not under any obligation to serve you up with such an account. There are two sides to a discussion. By all means, have at it with your own explanations.
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By separate regulations, you can only mean weaker ones. That can not be a good thing, making fraud easier should not be something the regular banking system are required to do. The regulation issues are the crypto world's to solve, but much of the crypto world are very much against the traceability and full audit trail requirements that responsible regulation demands.
He never actually bought any.
He was simply inquiring if anyone knew anything about it, and tried to explain it to me. We both ended up thinking there was nothing in it. I was bitcoins persistence, helped in no small measure by its increasing value, that kept me interested until I bought some.
But it wont be long before people of my generation will start becoming grandparents.
Or a third...internal manipulation of the market. There has been a lot of speculation of a number of exchanges engaging in large scale washes (illegal in conventional markets) to inflate transaction volumes.
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Duke of Marmalade
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I fully understand the rationale behind bitcoin mining, thanks to fpalb. Perhaps you misunderstood my point, it happens.
I ridiculed the zillions of running the SHA algorithm on a trial and error basis until you get an answer. You countered by pointing out that EVERYTHING comes from trial and error. I presumed you were referring to R&D but possibly you had something else in mind, please clarify. I counter countered that the progress garnered from R&D trial and error could in no way be compared with the mind numbing “Proof of Work” nonsense in the bitcoin protocol.
Also can you explain in more detail why the fully anticipated halving of the rate of increase in bitcoin supply would fuel bullish speculation as the halving approaches?
Intra-institution trading only, all transaction will have to be be able to prove regulatory compliance. Some might see this as a step on the journey to regularising bitcoin in particular, but others who see crypto as a means of escaping big brother or regulation won't like it.
Almost how dare you enforce your rules to prevent me from doing what I want in your club
Well we've already touched on it so I don't see what the confusion is. I believe that people should have the financial freedom to use unconfiscatable, borderless money anonymously. I believe that AML/KYC are an unnecessary evil - that cause regular people a lot of grief and don't stop the cartels in moving money. Who's going to agree to taking the very things that give Bitcoin utility and break them up on that inflexible approach? As I said before, government agencies need to make a decision - either ban it or embrace it.
Yes, there has been market manipulation and wash trading. It's a new market and its a small market so much easier to manipulate. As regards the illegal part, then regulate it already. (and just to head off any conversation about my request to regulate, anyone in this space wants centralised points in the ecosystem regulated - and cryptocurrency exchanges are centralised).
Ok, intra-institution is the reason it's a big deal as news. Not sure what the confusion is there. Remember his dukeness asked for reasons that were driving the price. You're coming back on this with regard to regulation - there are two discussions getting tangled up here. Bitcoin was designed for regular people. That we have institutions using it, I've no problem with that. If you're saying that Bitcoin as a protocol has to change in some way so that institutions can use it to fulfill some regulatory demand or other, well that simply won't be happening. The regulator or any government agency won't be walking in to the offices of Bitcoin or any other cryptocurrency - because there is no such office or central point. The code and the network runs and does so on a decentralised basis.
Do the original cipher punks who were behind efforts to get Bitcoin off the ground have any time for this aspect of things? Absolutely not. However, as I see it, I don't see the harm so long as those who want to use it as individuals - as it was originally intended can still do so. The inherent characteristics of Bitcoin can't be changed. Now, your regulatory friends can deem a centralised shítcoin like JP Morgan Coin as acceptable and Bitcoin not acceptable - but thats up to them. Bitcoin is already what it is - it cant be changed.
Whilst we're on the subject of institutions and regulation, in the U.S. a number of House Representatives from both sides of the Democratic/Republican isle have tabled a bill to bring about separate securities law regulation for cryptocurrency and blockchain on the basis that the current securities law is not fit for purpose when it comes to this technology. The SEC base decisions on law that dates back to the Howey test in the 1940's. Others have tabled bills looking to have the matter taken out of the hands of the SEC. At state level, there have been similar moves. Just because a new technology or industry comes along doesn't mean we have to force it into compliance with whatever's there already.
Well, this is an interesting insight. Imagine the audacity to stop up and question what systems are in place and challenge them? You said yourself these are government mandated measures (KYC/AML). Government and regulation is supposed to work for the people. I don't see that happening with this nonsense. We have diametrically opposing views on that but that's alright.Almost how dare you enforce your rules to prevent me from doing what I want in your club
It's interesting that you use the word 'club' though. You can be turfed out of that 'club' at any time. As wikileaks found out. The U.S. put pressure on all financial institutions - meaning that the organisation couldn't accept donations from the public. There was only one other means for them to take donations - Bitcoin. Without it, wikileaks wouldn't have survived.
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You used the term "to solve a 'hashtag'". With that, I hadn't the foggiest as regards what you meant but know now that you were referring to the proof of work based mining process where an equation is solved every ten minutes in order to create sufficient randomness and ensure that the network can't be gamed and manipulated. That process has its detractors on the basis that its resource intensive. However, if it uses stranded renewable power (or non-renewable power that is being literally burnt up on oil and gas fields around the world as I type this), what's the harm? Most is renewable based - and where it isn't, by all means, regulate it out of existence. So, long story short, you can ridicule it all you want - I'm not in agreement with you on the subject.
Because I was around for the last halving and experienced the same thing. I witnessed it happen before - and its effect on my own BTC holding. However, I'm not here to justify anything to you Duke - you can make up your own mind - or you can present your own thesis on the subject. Have at it.
Duke of Marmalade
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The title of the thread is “The Big jump in Bitcoin…”
I accept that the price is a function of supply and demand. Usually we can identify the drivers of each side. Oil for example. Geo-politics largely drives short term supply and geo economics drives demand. There is a futures market so there is a small speculative aspect.
When it comes to bitcoin there is no mystery about the supply side. It is more or less cast in stone and has already achieved 83% of its ultimate destiny. So forget the supply side or any of this halving stuff.
So price movements are almost entirely driven by the demand side. So right off the top of my head here is a breakdown of the demand pie:
Nerds 1%
Anti establishment zealots 1%
Best currency for purchasing certain goods 0%
Criminal proceeds 1%
Hide money from the wife/other 1%
Diversification 1%
Refuge for distressed equity investors 0%
Speculation and/or market manipulation 95%
This huge share of the pie taken by this last is a surprise even to me
There is no other commodity/ asset class which comes anywhere near. So when we see wild gyrations it is to this last that we should look for an explanation. Two plausible explanations have been proferred.
tecate developments on the futures exchanges
Leo market manipulation
The former is reminiscent of the 2017 surge to 20$ which quickly reversed
The latter must also reverse quickly
Perhaps time for the Duke to renew his short position. Ironically the price is now roughly where it was when I closed out my 14k short position in early 2018
I accept that the price is a function of supply and demand. Usually we can identify the drivers of each side. Oil for example. Geo-politics largely drives short term supply and geo economics drives demand. There is a futures market so there is a small speculative aspect.
When it comes to bitcoin there is no mystery about the supply side. It is more or less cast in stone and has already achieved 83% of its ultimate destiny. So forget the supply side or any of this halving stuff.
So price movements are almost entirely driven by the demand side. So right off the top of my head here is a breakdown of the demand pie:
Nerds 1%
Anti establishment zealots 1%
Best currency for purchasing certain goods 0%
Criminal proceeds 1%
Hide money from the wife/other 1%
Diversification 1%
Refuge for distressed equity investors 0%
Speculation and/or market manipulation 95%
This huge share of the pie taken by this last is a surprise even to me
There is no other commodity/ asset class which comes anywhere near. So when we see wild gyrations it is to this last that we should look for an explanation. Two plausible explanations have been proferred.
tecate developments on the futures exchanges
Leo market manipulation
The former is reminiscent of the 2017 surge to 20$ which quickly reversed
The latter must also reverse quickly
Perhaps time for the Duke to renew his short position. Ironically the price is now roughly where it was when I closed out my 14k short position in early 2018
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Duke of Marmalade
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Yes I was in error in describing hash as hashtag but I think you knew what I meant.
As I have explained in another post there is no rational reason why halving should have any effect on the price but I take your word for it that this has been past experience. That is an empirical observation but I presume you have no rational explanation as to why it should be so. Why would I expect crypto pricing to be rational, silly Duke