still skeptical of Bitcoin

[Gaku]

I see that there are a lot of upsides to crytocurrency, both in reality and conceptually.  On the other hand, bitcoin also seems to have a lot in common with penny stocks.  If a currency is only worth the value that people ascribe to it, then of course there is incentive to 1) get in early while the price is low (10,000 bitcoins for a pizza) and 2) get others to follow you in and prop up the price ($6,000,000 pizza).  The early miners created tons of coins with minimal energy; these coins don't cease to exist just because mining in the present is nigh-impossible for the Average Joe.  People who already have bitcoins (especially people with lots of them) have a financial incentive to get others to adopt the currency; the more people who decide bitcoin has value, the more value the early adopters receive from their trivial investments.

 

Despite all that, there are upsides to cryptocurrency.  I am not convinced that those upsides outweigh early adopters like Gavin Andresen and "Nakamoto" from quite literally becoming rich at the expense of others, as their coins had no value until others invested.  That's not to say that fiat currency is any better, but why should I prop up one group of speculators (early bitcoin adopters) vs another (fiat bankers)?  What incentive do I have to feed into this system?  In theory, why shouldn't I just create my own crytocurrency (since it's open source), quickly mine 10-20% of all possible coins, and then open it up to the public and make billions of dollars?  What is to keep the early adopters from dumping their shares, flooding the market, and laughing all the way to the fiat bank?

[SamuelS]

What's wrong with people making profit off a speculative endeavor that can change the world? They aren't forcing anybody to buy...main reason we use fiat is that's what we pay taxes with, since we're forced to use some it becomes convenient to use it all the time.

Same thing stops them from dumping btc that stops the Chinese from dumping dollars -- you devalue your holdings before they're even sold.

[Gaku]

Dumping bitcoins would probably not be an issue, then.

 

I still see a problem in that the early adopters don't add value; at best they do nothing and at worst they remove it.  If you have to pay into the system to join it, then you are essentially rewarding those who came before you, in inverse proportion to how much time/energy/resources they actually invested, for simply having beaten you to it.  I think this is where the Ponzi accusations come in, though it isn't technically a Ponzi scheme.

 

There are people now who collaborate to mine for every upstart cryptocurrency they can find.  The reward-to-risk is astronomical.  What value do they provide, other than standing to become rich if anyone should decide to invest actual resources into one of the many currencies they've mined?  It's not like I'm a consumer and I'm paying them for some good or service they've provided.

 

I agree with you about fiat, and I'm not saying that fiat is better.  I simply don't see why propping up these rich folks leeching off the system over here is preferable to propping up those rich folks leeching off the system over there.

[wdiaz03]

I'm not going to argue either way but wanted to give some perspective to your questions. I hope it helps

 

That's not to say that fiat currency is any better, but why should I prop up one group of speculators (early bitcoin adopters) vs another (fiat bankers)? 

 

You don't have to. People can go with what they think it's best.

 

What incentive do I have to feed into this system?  In theory, why shouldn't I just create my own crytocurrency (since it's open source), quickly mine 10-20% of all possible coins, and then open it up to the public and make billions of dollars? 

 

You can create one if you want, these early adopters had no idea it was going to get this big, plenty of early adopters get burned.

 

What is to keep the early adopters from dumping their shares, flooding the market, and laughing all the way to the fiat bank?

 

Nothing

 

I think you are making these observations after the fact. hindsight is 20/20. But in reality no one is certain of what is going to happen. Back in the days if you collected wampum shells because you liked them and then people around you decide to start trading them and use them as money you benefit. Should they then wonder why they are using the shells? should they look at your collection and claim it's unfair?

 

[Gaku]

I'm not going to argue either way but wanted to give some perspective to your questions. I hope it helps

 

 

You don't have to. People can go with what they think it's best.

 

 

You can create one if you want, these early adopters had no idea it was going to get this big, plenty of early adopters get burned.

 

 

Nothing

 

I think you are making these observations after the fact. hindsight is 20/20. But in reality no one is certain of what is going to happen. Back in the days if you collected wampum shells because you liked them and then people around you decide to start trading them and use them as money you benefit. Should they then wonder why they are using the shells? should they look at your collection and claim it's unfair?

 

That is one of the best things about cryptocurrency - that its use is voluntary.

 

I was thinking about similar scenarios in a sort of barter society.  In the case of wampum shells, I would know that someone took the effort to pick them up, and every wampum shell took approximately the same amount of effort to procure (industrial wampum farming notwithstanding).  So in trading wampum shells, you're trading an equivalent amount of time & energy as well as for scarcity.  Some people might have access to more shells, but they aren't able to magically create them; they still have to expend time/energy to get them.  I think a better analogy would be if someone came across a cache of wampum shells that someone else had collected over many years, convinced others that they had picked them up themselves, and then traded them as if they had put in the time/effort.    At least in the case of wampum shells, someone put in effort at some point, and collecting more wampum shells would require a similar amount of effort.  In the case of cryptocurrency, that's not really the case, where you need a massive amount of computing power to squeeze out a single bitcoin at present, where you could have mined with an old laptop when it first started.

[wdiaz03]

That is one of the best things about cryptocurrency - that its use is voluntary.

 

I was thinking about similar scenarios in a sort of barter society.  In the case of wampum shells, I would know that someone took the effort to pick them up, and every wampum shell took approximately the same amount of effort to procure (industrial wampum farming notwithstanding).  So in trading wampum shells, you're trading an equivalent amount of time & energy as well as for scarcity.  Some people might have access to more shells, but they aren't able to magically create them; they still have to expend time/energy to get them.  I think a better analogy would be if someone came across a cache of wampum shells that someone else had collected over many years, convinced others that they had picked them up themselves, and then traded them as if they had put in the time/effort.    At least in the case of wampum shells, someone put in effort at some point, and collecting more wampum shells would require a similar amount of effort.  In the case of cryptocurrency, that's not really the case, where you need a massive amount of computing power to squeeze out a single bitcoin at present, where you could have mined with an old laptop when it first started.

 

Actually I disagree, not all shells take the same effort to find. Initially the shells would be common and easily found, just like the initial bitcoins, eventually as more and more people take the easily accessible shells from the ground they will become harder to find. 

Initially someone did put a lot of effort coding the protocol and mining the initial bitcoins. I agree they were easier, but just like the shells would have been. The last wampum left to collect would be as hard to find as the last bitcoin.

[WorBlux]

Dumping bitcoins would probably not be an issue, then.

 

I still see a problem in that the early adopters don't add value; at best they do nothing and at worst they remove it.  If you have to pay into the system to join it, then you are essentially rewarding those who came before you, in inverse proportion to how much time/energy/resources they actually invested, for simply having beaten you to it.  I think this is where the Ponzi accusations come in, though it isn't technically a Ponzi scheme.

 

There are people now who collaborate to mine for every upstart cryptocurrency they can find.  The reward-to-risk is astronomical.  What value do they provide, other than standing to become rich if anyone should decide to invest actual resources into one of the many currencies they've mined?  It's not like I'm a consumer and I'm paying them for some good or service they've provided.

 

I agree with you about fiat, and I'm not saying that fiat is better.  I simply don't see why propping up these rich folks leeching off the system over here is preferable to propping up those rich folks leeching off the system over there.

 

Beyond Bitcoin and Lightcoin I don't think there's much of a market except maybe one more that incorporates proof of stake.

 

Just getting the ball rolling was a pretty big deal, and they did something nobody thought was even possible for a long time.

[Gaku]

Actually I disagree, not all shells take the same effort to find. Initially the shells would be common and easily found, just like the initial bitcoins, eventually as more and more people take the easily accessible shells from the ground they will become harder to find. 

Initially someone did put a lot of effort coding the protocol and mining the initial bitcoins. I agree they were easier, but just like the shells would have been. The last wampum left to collect would be as hard to find as the last bitcoin.

That's true; I was thinking more in terms of amount of effort to bend down and pick up a shell.  That plus the assumption that new shells are still being generated.  Good point, though.

 

Beyond Bitcoin and Lightcoin I don't think there's much of a market except maybe one more that incorporates proof of stake.

 

Just getting the ball rolling was a pretty big deal, and they did something nobody thought was even possible for a long time.

It is pretty incredible that it caught on.

 

just randomly thinking if there would be an incentive for each nation or region to have its own cryptocurrency, since the real value will vary between regions.

[Brentb]

I don't think it makes any sense to make personal decisions based on whether it benefits speculators or not.

 

I assume that you've eaten in the past week. If so you've benefited to a very small degree some speculator on commodities such as orange juice, wheat, pork bellies, etc.

 

Speculators perform the function of absorbing risk. In the case of food, neither the farmers, food producers, or grocery stores want to take on all the risks involved in food production and the fluctuating supplies of food that result from weather and food expiration. These parties deal in contracts to make deliveries of specific commodities by a certain date at a specific price. If the speculators weren't bidding up or selling off these contracts there would be massive surpluses in some items and shortages in others. 

 

Some early adopters of bitcoin took risks by investing in something unproven, but every new adopter adds value since it widens the network of bitcoin users and expands its usefulness. Some early adopters were just lucky - they were playing around with the idea of cryptocurrency and it paid off. It's not fair but so what? Would you avoid buying gold because at some point someone may have found it in their backyard? Do you avoid money in general because some people just inherit it? Do you avoid physically beautiful women because they were just born that way? 

[luxfelix]

Do you avoid physically beautiful women because they were just born that way? 

 

Maybe they're born with it... maybe it's Maybelline... 

 

There's a similar controversy over "carrion" companies benefiting from the real estate crash. However, we don't blame the vulture for the dead animal it consumes; likewise, the company provides a kind of cleaning service, occupying a value vacuum that would otherwise fester.

 

Why would we view these companies or speculators in a less positive light? (Have they aggressed? Who benefits from our showing disdain toward entrepreneurs?)

 

It's good to know that early adopters benefit from taking risks. It's only by taking such risks that we progress. 

[RuralRon]

Beyond Bitcoin and Lightcoin I don't think there's much of a market except maybe one more that incorporates proof of stake.

 

Just getting the ball rolling was a pretty big deal, and they did something nobody thought was even possible for a long time.

(emphasis mine)

 

I have very limited financial resources (i.e. next to none) but I was excited by the promise of what bitcoin could do for freedom, so back in March I started to investigate it. At the time I needed to register a new Internet domain name for a group I was helping to form in my local community. In this process I discovered namecoin and .bit domains. One fellow I met online was willing to trade 6 namecoins he had for $10 of paypal fiat money. I was excited to put a fraction of that to use for as yet undecided domain name for the group.

 

So I waited for the group to make it's decision. When they did about a month later I went back to the forum where I discovered namecoin and the guy I bought some from to review the registration process. Much to my surprise, Micheal Dean, who was the main spokesman who was such a proponent and who provided much explanation in favor of namecoin (he's also a major advocate for freedom) had become disillusioned with the direction namecoin was moving and joined forces with Daniel Larimer of bitshares where he is today.

 

So my investigation took a twist, and I found a whole new well of information and perspective on the cryptocurrency world. If I had money to invest based on what I know now I would be putting some of it into bitsharesX (or whatever it is called today; that's one problem with bishares it's rapidly evolving and isn't stable in all it's aspects). But Larimer's an excellent spokesperson and teacher, and point's out how the financial model of bitcoin isn't profitable and argues based on that it isn't sustainable in the long run.

 

He invented bitshares to address this. Using the metaphor of shares in a company instead of coins makes a great deal more sense as a foundational model. He calls it a Distributed Autonomous Company or DAC for short. One example is a cryptocurrency lottery that's profitable from day 1. I won't go into the details of that here but it's a good case study and comparison between the bitshares vs. bitcoin's model of operation. Proof of stake is a key differentiating factor in the two models.

 

I also agree with WorBlux about the tremendous value bitcoin has provided in terms of providing the blockchain innovation. But even that has it's roots in the concept of distributed file sharing and bit torrents.

 

I would encourage anyone serious about getting involved with cryptocurrency to look into Invictus Innovations, Daniel Larimer and bitshares.org. You might also be well advised to read this post from on the bitshares forum from a disillusioned participant and decide for yourself if this team is worthy of your support. I have no financial stake in this yet and am only posting my opinion here based on the technical merits of the bitshares model and the research I've done so far.

 

When I move forward and make an real investment in cryptocurrency you bet I'll be looking into this guy's claims more carefully.

[Kason]

From what I understand of BTC- It is another product that can act as a medium of exchange. (similar to fiat currency)

 

Some of the benefits of a cryptocurrency would be 

• Scarcity - A limited number can be produced, so your currency will gain value, rather than lose value, over time.
• Security - It's more profitable to do business honestly with bitcoins than to try to "Hack" the network to spoof a transaction. 
• Security(b) - Your assets cannot be stolen by any people. Governments. Criminals. Anyone.
• Security© - You can do business anonymously
• Barriers to business - You can send 100% of the value of your currency across the globe. for free. almost instantly. 
• Barriers to business(b) - there is no "custodial" (labor based) upkeep to manage your account. Via the blockchain
• Barriers to business© - You don't need to buy any currency to start doing business in it. Creating a wallet is free!
• Barriers to business(d) - Offering to accept bitcoin opens you up to an international marketplace that may not do business in your country of origin.
• Holding Value - All of those early adopters, assuming they want to maximize their profit, have a huge incentive to maximize the value of their current holdings in BTC. And would do anything to add to the feature set of BTC.

     In comparison to current currencies...

     I believe that I heard a podcast on the internet somewhere referring to something along these lines:

• Fungibility (the ability to substitute one unit of currency for another without a loss in value)
       every 1 BTC is worth 1 BTC. Very different than if we were using a barter system. 1 horse ≠ 1 horse. 
• Portability
      you could carry all 21,000,000 BTC on your phone, laptop, or even just memorize the keys.
      Try carrying all of the dollars in circulation.
• Divisibility
  BTC can be divided to .00000001 BTC -- it loses it's value at a linear rate rather than a quasi exponential rate like a diamond.
   

 

Hopefully that answers some of your questions as to "Why Bitcoin"

for more information check out these great videos:

 

These are what got me interested in bitcoin as an intrigue -- which led me to FDRpodcasts -- Which is why I am here now!

 

 

All the best,

Kason

[jacbot]

but why should I prop up one group of speculators (early bitcoin adopters) vs another (fiat bankers)?

 

yeahh, i see this on Al-jazeera alot, discussions about forced marriages "rape" and volentary partner choice....on a biological mechanical level its all sex, this it fact.

 

The one is based on free cooperation (volentary partner choice, choosing bitcoin) the other is based on coorcion.

[cynicist]

I still see a problem in that the early adopters don't add value; at best they do nothing and at worst they remove it.  If you have to pay into the system to join it, then you are essentially rewarding those who came before you, in inverse proportion to how much time/energy/resources they actually invested, for simply having beaten you to it.  I think this is where the Ponzi accusations come in, though it isn't technically a Ponzi scheme.

 

That's not accurate. They took the currency seriously when other people didn't, and helped the project in the early days. Why shouldn't they be rewarded for that? Buying bitcoin isn't 'paying into the system to join it', it's buying bitcoin. There is no 'system' to speak of.

[RuralRon]

I'm curious about why nobody has commented on the info I posted concerning bitshares. Hasn't anyone else looked into it? If not I believe you're not being very thorough in your cryptocurrency analysis.

 

Larimer has been interviewed by numerous heavy hitters like Andreas Antonopoulos and Mark Levine to name only 2. I find his perspective economically sound. Where I believe bitshares is weak is in the unproven technological approach they've taken around proof of stake (their implementation of it). He raises some excellent points about the long term viability of the bitcoin financial model that the "shares in a company" metaphor resolves. Their "prime directive" is decentralization all the way.

 

I read the "disillusioned participant" thread I referred to above and my take is the guy makes some good points but he made a speculative decision and is now crying about his losses. He fails to see the tradeoffs, if made more in his favor, would have resulted in adjustments down the road when more participants might stand to loose rather than the limited number of early adopters now. The decisions weren't easy to make and they were carried out rather hastily without a thorough peer review process, and on that score the guy makes some good points.

 

The thread is worth reading from start to finish to see how difficult it is to innovate in this highly technical and speculative arena where the stakes and the risks are as high as Mt. Everest. I'm highly impressed with the whole project and the innovation and dedication to the principles of decentralization and freedom Larimer is guided by.

 

I would love to see Stefan dig into bitshares and interview Larimer, and perhaps help more people see it's merits.

 

One thing I dislike about bitcoins and many alt coins is how mining is no longer possible except for major players and in my view that's a vulnerability waiting to be exploited. I wouldn't give you one shatoshi for the number of alt coins that have exploded onto the scene with little value to add to the world other than a new field to mine coins easily.

[Jer]

Despite all that, there are upsides to cryptocurrency.  I am not convinced that those upsides outweigh early adopters like Gavin Andresen and "Nakamoto" from quite literally becoming rich at the expense of others, as their coins had no value until others invested.  That's not to say that fiat currency is any better, but why should I prop up one group of speculators (early bitcoin adopters) vs another (fiat bankers)?  What incentive do I have to feed into this system?  In theory, why shouldn't I just create my own crytocurrency (since it's open source), quickly mine 10-20% of all possible coins, and then open it up to the public and make billions of dollars?  What is to keep the early adopters from dumping their shares, flooding the market, and laughing all the way to the fiat bank?

Given its open source nature, anybody can start their own cryptocurrency. The hard part is getting somebody to accept it for goods or services. If you can convince people to use your currency you can do even better than the early Bitcoin adopters.

 

A fun exercise I like to do is replace bitcoin with USD when reading skepticism of crypto. Oftentimes people have never thought to apply that critique to the currency they use regularly. What incentive do I have to feed into the USD system? What is to keep the Federal Reserve from dumping their digitized dollars and flooding the market the market and laughing all the way to the war hawk bank?

 

With bitcoin there is a strict limit to the inflation (which goes to people doing work) and we know the total market cap precisely at any moment in time. Can your fiat currency do that?

 

Edit: Potcoin is an example of one that was started by a community presumably with your concern about not wanting to enrich Bitcoin early adopters. It is basically a copy of litecoin as far as I know. I haven't found any reason that it's preferable over bitcoin or litecoin except that the entire community it's marketed to was given the opportunity to mine from day 1. Several businesses are accepting it in exchange for goods now.

[J-William]

still skeptical

Why should anyone care that you are skeptical of bitcoin?