The Mystery of Bitcoin

Discussion in 'Off-Topic Discussions' started by nosborne48, Aug 27, 2022.

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  1. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    It's almost like it serves some purpose for people with needs other than those on this thread!

    Stop, no, we don't say that around here.
     
  2. Johann

    Johann Well-Known Member

    Bumpity. That was 2 months ago. Bitcoin is now around $35,000 - gaining around $9,200 since Sept. 5th. That's a whopping gain. And as I see it, a huge mystery. The beast Bitcoin lumbers on, fuelled by sheer grit and an exaggerated sense of self-worth, eerily reminiscent of Donald Trump. Bitcoin and Trump - The bigger they are, the harder they'll fall --- but how long must we wait?
     
    Last edited: Nov 7, 2023
  3. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    The only similarity between Bitcoin and Trump is that you don't like either of them.
     
  4. Johann

    Johann Well-Known Member

    (1) Right, I don't like either. And that's putting it far too mildly.
    (2) I believe both are hugely over-valued, over-rated and over-praised by a very large number of people.
    (3) I also believe both get more news space and bandwidth that they deserve.
    (4) AND both are injurious to one's (mental) health. Especially mine, which is somewhat fragile to start with. :)

    That's four. That should do for now.
     
    Last edited: Nov 7, 2023
  5. Johann

    Johann Well-Known Member

    A fifth - couldn't resist.

    (5) Both are controversial -- and suspect. And are the fuel of conspiracy theories.
     
  6. Johann

    Johann Well-Known Member

    One difference. Bitcoin has never been charges with felonies. Trump, of course, has. Numerous felonies.
     
    Last edited: Nov 7, 2023
  7. Rich Douglas

    Rich Douglas Well-Known Member

    There is no mystery why it goes up or why it goes down. It just does.

    The value of crypto is in pure speculation. There is no basis for it. There is no way to predict its movement with any accuracy at all. Its value is based merely on perception; buyers who think they can sell it to someone else for more. But unlike stocks and bonds, it has no underlying activity generating wealth.

    In a training class, I once auctioned off a dollar bill. I got more than $5 for it. Why? The value was $1, the same as the dollars in everyone's wallets. It had no special qualities, no inherent value beyond what was already attributed to it by society. Yet, two class participants got into a bidding war, each not wanting to lose out to the other. Then, something about switching from Washington to Lincoln brought outside considerations to the bidding and it stopped.

    (Yes, I made the "winner" pay me. Gotta make the lesson stick, ya know?)
     
  8. Johann

    Johann Well-Known Member

    Agreed. I guess there are two kinds of speculations -- and corresponding differences in price movements.

    (a) The type represented by the South Seas Bubble, Tulip Mania etc. The price rockets up ... and suddenly down - an flat-lines forever.
    (b) The type represented by Stock markets in the 1920s. Rapid rise, catastrophic fall (1929) flat for a longish period and then rises again, lives on, prices fluctuate.

    Bitcoin looks like the second type. Maybe necessity is the driving factor. Bitcoin has established utility as a medium of exchange. It has many of the functions of regular money. Many people, businesses (and some governments) use it out of necessity, or to gain advantages over dealing in regular money.

    The stock market? Yes, necessary - for corporations and investors. I can't attribute the following quote. I think I read it in some "How To Get Rich" book (that didn't work for me), but I liked it: "There would have to be a Stock Market even if it were not an economic necessity. It's a psychological necessity."

    I'm hesitant to admit it, but likely, the exact same can be said of Bitcoin. I have no economic or psychological necessity for it - but so many do. I think I've been wrong in predicting the death of Bitcoin. Just like in 1956, when my parents were predicting (and eagerly anticipating) the death of Rock 'n Roll. :)
     
    Last edited: Nov 7, 2023
  9. Rich Douglas

    Rich Douglas Well-Known Member

    I think the use of Bitcoin as a currency is overstated. I also think there are no ways to predict--or explain--movements in its selling price. "Random" is the word that comes to mind. No, it hasn't collapsed like those quick fads, but a lot of people have been gutted with no discernable cause.

    Like with casinos, the best bet is to be the house.
     
    JBjunior likes this.
  10. Johann

    Johann Well-Known Member

    And where is the "house". And who exactly is in it? Bitcoin doesn't appear to run, or even have a "house." There is no central authority whatsoever. No person, no corporation. Even the (alleged?) originator of Bitcoin, pseudonym "Satoshi Nakamoto" has never been positively identified.

    https://www.investopedia.com/tech/three-people-who-were-supposedly-bitcoin-founder-satoshi-nakamoto/[/QUOTE]

    Google:

    "Bitcoin is not controlled by any single group or person. Instead, it is governed by multiple stakeholders — including developers, miners, and users. Developers write the code that makes Bitcoin run; miners validate transactions; and users put the software to work by trading, transacting, holding, and more."
     
    Last edited: Nov 8, 2023
  11. Johann

    Johann Well-Known Member

  12. Rich Douglas

    Rich Douglas Well-Known Member

    Assuming crypto currencies do not spontaneously generate, someone is creating them and possibly benefitting from their creation.
     
  13. Johann

    Johann Well-Known Member

    Computer-generated, Rich. No "somebody."

    "When computers on the network verify and process transactions, new bitcoins are created, or mined. These networked computers, or miners, process the transaction in exchange for a payment in Bitcoin."

    It's all here: https://www.bankrate.com/investing/what-is-bitcoin-mining/#
     
  14. Johann

    Johann Well-Known Member

    And yes - people profit, those who often own a shop full of maybe 500+ mining computers. They profit. by virtue of the bitcoin earned by their machines. They are not, however, employees of any Bitcoin entity.. No such thing exists.

    One of the drawbacks of Bitcoin is its environmental effect. Large mining operations draw huge power loads for large numbers of computers. This seriously contributes to pollution from power plants.

    It's a world-wide problem. US, Europe, China, Kazakhstan (13% of world total!) Huge amounts of power -and pollution. Forbes article here - very detailed. https://www.forbes.com/advisor/investing/cryptocurrency/bitcoins-energy-usage-explained/#
     
  15. Rich Douglas

    Rich Douglas Well-Known Member

    Unless A.I. has advanced to a point where a computer woke up one day and decided to create a crypto currency, this is almost certainly wrong.

    People create them, not computers. Once the systems are set up, yes, computers mine the data. But a person had to design the thing and put it in play, not a computer.

    Also, the major issue with crypto isn't how the "coins" are mined, but the trading on them. That's all done by humans, too.

    (Not to ignore the point about the impact on the environment, which appears serious.)
     
  16. Johann

    Johann Well-Known Member

    @Rich Douglas My point was, throughout: No Bitcoin entity - no Bitcoin people. The people who set up, own and program computers, trade, reap the rewards and take the hits - They're not not Bitcoin people. Bitcoin is not an entity. It doesn't have people. Bitcoin is blips and bleeps in a blockchain. Not something that can be prosecuted. (Its use can be outlawed and has been, in several countries.) The people? If they violate communications, fraud laws, or otherwise disobey the laws of their country, sure they can be prosecuted. BUT THEY ARE NOT BITCOIN. BITCOIN IS NOT AN ENTITY. IT'S NOT LIKE THE U.S. MINT. (But like the Mint, the presses can run at Mach 5 if needed. :))
     
    Last edited: Nov 8, 2023
  17. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    That's literally Bitcoin's main design feature. I realize that there are people who want government to control basically everything on this good green Earth and that such a decentralized system might horrify those people, but... too bad.

    This isn't true. Over time, the Bitcoin algorithm slows down the number of new coins that can be mined, to an overall limit of 21 million.
     
    Johann likes this.
  18. Dustin

    Dustin Well-Known Member

    Which has likely played a major role in its staying power. There are 576 trillion Shiba Inu coins worth thousandths of a cent. They'll never hit a penny because to do so they'd be worth more than 5x the entire crypto market cap (including real players like Bitcoin.) Meanwhile BTC with its hard cap has a chance to appreciate.

    (All the usual caveats around appreciating only as much as someone will pay apply of course.)
     
    Johann likes this.
  19. Johann

    Johann Well-Known Member

    Thanks for correcting me, Steve. I couldn't resist a cheap wisecrack - and deserved to have it go sideways, as it did, And yes - I'm with you all the way on your decentralization remarks.
     
    SteveFoerster likes this.
  20. nosborne48

    nosborne48 Well-Known Member

    Now where did I see this? Some money-ologist said that USD might not be a fiat currency in the usual sense. Instead, it's a commodity backed currency and the commodity that backs it is petroleum. All or almost all oil delivery contracts are written in USD. You can buy petroleum with USD and you can't buy it without USD.

    Absolutely no idea if there's anything to this idea but I thought it was interesting.
     

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