Bitcoins are absolutely worthless. If there is any sign of a tech bubble, it is these worthless hashes that people pay hundreds of dollars for.
One of the genius aspects of the Bitcoin scam is the limited output and increasing difficulty as it goes on. This keeps the scam going longer. If it were like tulip bulbs, or subprime real estate, or pets.com type stocks, the bubble would eventually burst. With the types of bubbles we've seen, and the big names in tech willing to associate their names with this scam, keeping a <$15 billion market cap going is feasible for a little while.
Also keep in mind that the float is not all that high. Many bitcoins have never been traded, especially early ones. That 30k of Bitcoins are going on the market can tank the price so much shows how weak demand is for this worthless "currency".
One aspect of the pied pipers of this scam is that their theories of its value are not falsifiable. My theory is falsifiable - Bitcoins are going to go from a current market cap of over $7 billion to well below $1 billion. There theory is not falsifiable "it's valuable because it's valuable". So if it goes up they're right, if it goes down they're right.
Why are Bitcoins valuable? Anyone thinking of buying an ASIC or a Bitcoin should read from the Bitcoin boosters the answer to this question. There is no answer. Which is why Bitcoin is bound to crash.
It's possible a real online currency might happen. The Bitcoin scam is certainly postponing that day. When Bitcoin crashes, possibly with much legal involvement afterward, VCs will be very hesitant to fund an online currency for years to come.
To me the real currency would have to be something in the realm of Folding@home. I'm not sure how it would work of if its computationally feasible, but I do know people would pay for the results of useful computations such as that.
I would short Bitcoins if I could find a reliable party to do it with, and it were easier to do. That doing that is so difficult is another sign how it's not a real currency.
That this post and any post not buying into the Bitcoin hype is bound to be downvoted is yet another sign of the scam. I rarely have posts downvoted on HN, but any time I am slightly skeptical of Bitcoin's value, the Bitcoin hucksters pile on and downvote anyone questioning the scam into oblivion. It reminds me of how MLM people act on the Internet.
People downvote you because if this post is similar to previous ones you wrote (I did not read your history), then it contains no argument whatsoever, no line of thoughts, nothing. You say "it is a scam, it is going to crash" without explaining why. For example you seem unaware that Bitcoin is decentralized and what fundamental advantages this gives it over any other currency. So, of course, if you seem uneducated about Bitcoin, people will see no value in your posts and downvote you. I suggest you read the original white paper http://bitcoin.org/bitcoin.pdf as a starting point. (No, this is not sarcasm, I am serious.)
For any remotely plausible definition of "worthless," bitcoins are just as worthless as any representative money, which inclues fiat money (like a USD) and commodity-backed money (like a gold certificate). The only reason money can be used in general transactions is that people choose to accept it, and they choose to accept it because they are reasonably confident they will be able to trade it again in the future for something of at least equal value.
This is the fundamental answer to "why is any representative money valuable?" If people don't have confidence that they can offer the money in the future, they won't accept the money today.
> To me the real currency would have to be something in the realm of Folding@home. I'm not sure how it would work of if its computationally feasible, but I do know people would pay for the results of useful computations such as that.
As far as I know, that can't happen, at least not in a proof of work system. The work in a proof of work system can't be severable from the specific information it is designed to secure (in Bitcoin, that would be transactions on the block chain). This isn't exactly a scholarly source, but it's from the "Chief Cryptographer for the Ripple protocol": http://bitcoin.stackexchange.com/questions/11649/intrinsical...
I'm not very familiar with other cryptocurrency systems, like proof of stake, but I know there are some attempts at cryptocurrencies that use computation with unrelated useful side effects.
For any remotely plausible definition of "worthless," bitcoins are just as worthless as any representative money, which inclues fiat money (like a USD) and commodity-backed money (like a gold certificate).
The US government is a powerful entity that levies taxes and accepts tax payments only in dollars. Gold has various uses in industry and fashion and therefore a certificate entitling one to ownership of gold would have some value independent of gold's use as a currency. None of these are true for bitcoin.
> The US government is a powerful entity that levies taxes and accepts tax payments only in dollars.
Right. That's just a more detailed explanation for why most people are willing to accept USD in exchange for their goods. There are similarly detailed explanations for why people are willing to accept bitcoins. The reasons are different, but they still (obviously) exist. If no reasons existed, then people would not be willing to accept bitcoins in trade.
I didn't downvote, but I have to wonder what you're threshhold for not being a scam is? What companies will have to accept it, and how long will it have to be around?
I'm pretty amazed that people still think it's a scam when huge companies with massive legal departments are accepting it. That's some pretty extreme skepticism.
BTW, there are plenty of easy, legitimate ways to short Bitcoin, but given your extraordinarily high threshold for "non-scam", I won't bother mentioning them.
PS: Bitcoins are valuable because people are willing to buy them. Despite what most people think, money is not magic, it's just an agreement.
> people still think it's a scam when huge companies with massive legal departments are accepting it.
Sub-prime real estate was a scam. Huge companies with massive legal departments protected themselves from the illegal part of the scam - all those loan officers telling people to lie on their loan applications. In fact these banks got their lobbyists to get them TARP bailouts after the scam had run its course.
Banks are willing to trade subprime "liar loans" once legally insulated, so big companies willing to deal with Bitcoin doesn't really mean much.
I didn't say it was impossible to short Bitcoins. They are not FX traded alongside the dollar, euro, yen etc. though.
The central question is, why do Bitcoins have value? Why did subprime real estate loans, pets.com stock and Dutch tulip blubs have value? Actually, both these things were hypothetically more valuable than Bitcoins. Bitcoins are worthless.
When the price of a Bitcoin drops below $100, are people here going to learn a lesson about how value works? I don't think they will. That's the thing - Bitcoin will crash, and those talking it up here won't have learned a thing. If they did, these scams (subprime, pets.com stock, dutch Tulip Bulbs) couldn't keep popping up over time suckering people in. People have no concept of the relation of price to value, and thus are easily fooled.
At what point would you accept that Bitcoin is not a scam? What percentage of the Fortune 500 accepting it? How many years? 10 years? 20 years? Can you give a number?
I mean, at least Prof. Bitcorn gave us a date. An open ended "it's a scam and you people are going to learn...someday" is not very useful.
And speaking of value, after years of paying $30 a pop to receive a few thousand dollars from Europe in 3-5 business days, being able to effortlessly send a few digits, pay a few cents, and receive that money in less than an hour is...highly valuable.
This is tangential to your point, but I recently did a international money transfer to a friend. The fee was $40AUD for <$1000USD sent. They received it in a day and a half.
For Bitcoin I need to:
* Get the requisite amount of bitcoins, plus a percentage extra to protect against fluctuations (BTC crashed is not a valid excuse for non-payment of rent)
* Help said friend set up a BTC wallet, plus security
* Find a trustworthy person willing to exchange USD for BTC at some agreed value
* Send friend to person and hope the exchange goes as planned.
I'd love to use BTC in place of IMT but it's just not easy enough yet.
Yeah, my grandma has also run into some troubles when trying to send an email. She had to:
- Investigate which PC she should buy
- Find someone willing to sell a PC at a fair price. This is a problem because PCs get old really quick, and some vendors will try to sell you old PCs at their original prices. I don't know how they expect PCs to be useful if they go down in value so fast. Why buy a PC today, when you can buy it at half its price in a year?
- Ask someone for help to connect all the wires
- Fail to send an email. Learn that she also needs an internet connection
- Investigate which ISP she should hire
- Etc...
With traditional mail, she just writes the letter and drops it in the post office.
When someone tries to use email and fails, they can lose some time.
When someone tries to use bitcoin and fails, they can lose their home. When silk road 2 lost their users' bitcoins to theft, there was a comment on Reddit about a silk road user who became homeless because they had converted their savings into bitcoin and stored the coins in silk road's webwallet. When the coins were lost, so was their home, since they could no longer afford rent.
Bitcoin needs to become pro-consumer with strong protections and convenience. There are dozens of ways to lose your money, so no one wants to convert a sizable portion of their wealth into bitcoin, which means no one has bitcoin on hand to spend at a whim. Eventually merchants are going to start wondering why they're bothering to let people buy their products via bitcoin since very few people buy anything via bitcoin.
If bitcoin becomes safe and convenient, bitcoin adoption will follow.
a lot of these people don't have that good of arguments, so they instead use crappy metaphors to make their points. they take something that is totally different than bitcoin and try to use that to make their point. but they need examine f it is a valid analogy. I don't think a PC, a consumer good, can be compared to something that's supposed to function as a currency. one is a store of a value and one has a functional use. if your grandma wants to save her money she should by stocks or bonds or something with low volatility. if she wants to send an email she should get a computer, not for storing value, but for it's functional
use. and if she wants to get around town she should by a car, even though they depreciate. I don know how op ever thought it made sense to compare bitcoin and computers.
That's a bit harsh. The metaphor made a lot of sense, because their point was that bitcoin is currently hard to use, and will get easier with time, which is true.
4% and a day and a half is outrageous. You can get < $1000 in BTC on Coinbase instantly if you have a high enough verification level and your friend can sell on an exchange in his country as soon as he gets them (10 minutes) to avoid the volatility risk.
Huge companies with massive legal departments don't accept bitcoin. They contract with smaller VC-funded startups to accept it and assume the risk and pay the large retailer in cash at sale time. The large retailers neither accept nor hold bitcoin directly, nor should they (as a merchant, you don't want to be holding something that loses 10% of its value during your business hours as bitcoin did today). The large retailers merely get to enjoy capitalizing on bitcoin as a purchase method.
That seems like a non-standard usage of "accept". Does everyone who accepts a payment method while hedging it also not count as another vendor who accepts it?
If someone accepts PayPal while insuring against the possibility of not being paid "not accept PayPal"?
If a non-US vendor uses forward/option contracts to maintain cash flow in the local currency, do they "not accept" USD?
This doesn't count as insurance, though, because no risk is ever actually held, it's farmed out. The most anti-bitcoin person in the world will accept USD that has been converted from bitcoin by an entity that is actually taking the risk, because by necessity it needs to hold lots of bitcoin reserves just to do business.
I chuckled a little bit when he said hashes people are willing to pay hundreds of dollars for... annd those dollars are printed on paper with old dead guys on it. Ahh the world this guy lives in must be an interesting one.
it's intriguing to me that no one has pointed out the inherent value of BitCoin:
You can commit nearly anonymous transactions over long distances with it. It's value over international currencies is in proportion to the size of the black market transacted via BtC.
There are many people out there who don't try to get rich, they simply mine a handful to buy small amounts of drugs on the internet. The "convenience" of that service raises the utility and value of BtC over e.g. dollars.
Of course, I say nearly b/c a dedicated sleuth could investigate a transaction, but ask yourself as a practical matter, will federales go after an 18-year buying a gram of weed via BtC? of course not. The complexity of the BtC transacation obscures such small transactions well into the realm of "safety."
> You can commit nearly anonymous transactions over long distances with it. It's value over international currencies is in proportion to the size of the black market transacted via BtC.
Eh, I think in the long run that will be more of a hindrance than a help, as it will give governments in many places a plausible reason to attempt to ban or limit its use (which would tend to lead to a vicious cycle of only criminals--however you define that--using it).
On a more practical level, I can't remember a time my credit card has been refused for local or international transactions (and any additional fees are largely invisible to me, the consumer). Paying with a credit card also carries certain advantages: If the goods aren't delivered, I spend 2 minutes on the phone and get my money back.
For the vast majority of consumers, the headache of converting local currency to BtC, learning how to use it, and finding a reliable escrow service will greatly outweigh the benefits of being able to buy drugs (especially as states decriminalize drugs). That keeps BtC firmly in the grasp of speculators.
> On a more practical level, I can't remember a time my credit card has been refused for local or international transactions (and any additional fees are largely invisible to me, the consumer). Paying with a credit card also carries certain advantages: If the goods aren't delivered, I spend 2 minutes on the phone and get my money back.
I donated to wikileaks. Except I didn't, because the US put pressure on VISA+MC, and reversed my transaction. That whole business convinced me of the need for decentralised currency.
Fast international money transfer is something that is already handled very well for those that truly need it. I know for a fact that the european central bank handles large volume transactions in a matter of seconds if not less. There is really no reason why traditional banks could not offer significantly shorter processing times for the majority of their services, it is just not in their interest to do so.
Interest is the keyword here. Banks collect it on their customers' money while they declare it to be 'in-flight'. This is the main reason why transactions that should take seconds are still deliberately delayed for days.
you honestly don't think the Feds won't develop a program that automatically tracks bitcoin wallets and finds their owners? I think it's obvious they will.
A century ago to the year, the second biggest economy in the world, Germany, had people saying the exact same thing about the Papiermark as you're saying. Anyone curious can go to the Wikipedia entry on Papiermark to see how that all eventually ended.
I didn't downvote you because it's important that people realize why you are wrong.
The value of any fiat, piece of gold, diamond etc isn't falsifiable either. You are assuming that other types of currency has inherent value. They don't.
With my theory of value, Bitcoin has to collapse. Keynes talked about how markets could remain irrational longer than he was able to remain solvent, but that said, with my theory of value it has to collapse. So my theory of value is falsifiable.
The theory which says Bitcoin is valuable is "its valuable because its valuable". It's not really falsifiable. They say it's valuable because people find it valuable. If it loses value, they'll say it was because people stopped finding it valuable. How is that theory falsifiable? Whether it goes up or down, they can claim they were right. It's a tautological argument.
Gold is valuable because it is useful. It can be used to fill teeth, it can be used in electronics, for industrial purposes etc. Geologists spend time looking for where gold might be, then speculators spend time looking there, and if they're right, miners spend time mining it. As gold has a use, and has been useful for thousands of years, investors have a fairly certain (but not absolute) idea that they can exchange the gold they mine for other things.
Gold does have an inherent value. Compare an ounce of gold to a 1971 dollar. The 2014 dollar is worth a fifth of what the 1971 dollar was. An ounce of gold did not have it's value removed. Gold has an inherent useful value. The Papiermark, dollar etc. depend on the shifting winds of governments. The US government can fire up the printing presses and half the value of the dollar in a few days. You can't half the value of gold as easily, you'd have to make some kind of major scientific breakthrough.
> With my theory of value, Bitcoin has to collapse.
There's absolutely no risk to a vague claim like that. It's unfalsifiable. Either we witness Bitcoin collapse, in which case you made an amazing prediction, or we don't witness Bitcoin collapse, and on your deathbed you can be proud that you haven't been proven wrong yet.
To make a meaningful prediction, name a time (preferably within most of our expected lifetimes) and a market price. Of course, if you could do that with any confidence, you should also trade with that same confidence.
Gold and diamonds have inherent value - they're both used industrially. Bitcoin perhaps doesn't have less inherent value than a non-backed currency though; but even being decades passed gold standard, and such, currencies that have a "reliable" government as support are still pretty reliable.
Very little of gold and diamond's prices are their industrial value, just like very little of the value of a dollar bill is its industrial value in burning it to heat a factory.
What was gold's inherent value to industry prior to 1930 or so?
The fact that gold now has industrial uses makes it less suitable as money or a store of wealth than it had been for thousands of years, because saving/hoarding/speculating artificially reduces supply and increases its cost.
I can grant that people might be more trusting of bitcoin if it had some kind of intrinsic value to insure against collapsing 100%, but realistically it wouldn't be more than a tiny fraction of the market value, anyway. And as with gold, those other applications would be more expensive than they ought to be.
Wouldn't the value of gold and diamonds in that case be instrumental value, not inherent value? They are valuable by virtue of the aesthetic pleasure they cause in onlookers, or in their use as drils, and so on, where something with inherent value would be worth sustaining and creating even if it served no further end, like the life of a person for example.
I dare say you're right; never got far with Kant beyond the Imperatives - you appear to use his definition from within value ethics. My assessment was closer to the use in economics but still a bit aberrant - the context was the comparison of the value within the exchange articles themselves across paper money, gold, and cryptographic currency. The essence of my argument is that there is nothing else to be done with non-physical "articles" of exchange.
One might argue that the use of crypto hashes to certify documents or perform escrow-like services is comparable to the physical utility of gold and "paper" money. That seems a more apposite objection to my point, but hey ...
No value is inherent? The universe, say, has no value? I can certainly see possible frameworks in which this is true but they don't really appear to be useful in assessing relative worth. If we agree that things which can be utilised in order to provide gains in efficient production of fulfilment, happiness, [sense of] achievement, etc., then it seems that there are many things with inherent value, no?
For example, Gold is more readily worked than other metals and it's relative inertness makes it useful for carrying charge without causing a reaction (such as oxidation), additionally it has low resistance - these innate properties give it an inherent value by virtue of it's suitability for electrical connections.
If you're speaking on a the level of "value is a human construct"; well that's as may be but doesn't really aid in the discussion of human economics. I'm more than happy to discuss that but it seems we should stay within the locus of human experience here.
The point is that if gold has inherent value so has the bitcoin-protocol and it's a useless distinction to try and claim that one has and another hasn't.
For instance for remittance Bitcoin has immense value compared to for instance gold.
> Why are Bitcoins valuable? Anyone thinking of buying an ASIC or a Bitcoin should read from the Bitcoin boosters the answer to this question. There is no answer. Which is why Bitcoin is bound to crash.
Simple answer: Supply and demand. There is demand, you just have to research for more than 20 minutes to find the reasons for the demand aside from the artificial one created from people using it as a means for returns in investment.
Why do you jump to conclusions on topics in which you are clearly uninformed?
Bitcoin itself is a rubbish currency though. It has many of the negative aspects of coin, but without the simplicity and many of the negative aspects of credit cards, but without the insurance. Also, compared to other digital currencies, the inflation model seems doomed to hoarding and speculation, as while you can buy things with Bitcoin, people largely don't because they are betting on the price rising. And that is without getting into the issue of people embedding data in the blockchain. Some newspaper is going to notice that at some point and it will be very messy.
It's a great question - Marc Andreessen has addressed this question a couple times, and one of his analysis (if I've read it correctly) is that the only "inherent" value in Bitcoin is the value that comes from it serving as a transactional currency. I've probably bought bitcoin about a 15-20 times, and every time for the sole purpose of purchasing something. I didn't care (and the recipient didn't care) whether bitcoin was $0.00001, $1, or $1,000,000 a bitcoin - it was irrelevant to both of us. All we really cared about was whether it was non-volatile.
If that's the long term future for Bitcoin (as many people believe it is, and ignoring the value of the blockchain as a contract / consensus based negotiation mechanism for a moment), then the Bitcoin's value will eventually settle on a level that reflects its long term transactional use and "time in flight" - there is a non-zero period of time between when I purchase the bitcoin, and the recipient translates it back into local currency, in which the bitcoin will need to be purchased. Take your total daily transaction volume, and that time in flight - and you start to get a good sense of what the inherent value of bitcoin is.
That's the simple story as to why people are comfortable purchasing and holding it - it's going to be the global digital currency of choice, and as transaction volume increases, the value of the bitcoin will increase.
They are a unit of exchange that freely floats based on the demand for that unit of exchange.
There is an eventual fixed supply of coins (21 million), with currently ~13 million in circulation (http://blockexplorer.com/q/totalbc). Given that the 13 million isn't increasing at any meaningful rate as it relates to the money supply, we can almost consider the supply fixed (at least on any short term perspective).
With this fixed supply, if more people become interested in using bitcoin as a unit of exchange and buy it in order to use it, then they will increase the demand and thus the price. If they used it to transfer money back home (i.e. remittances), and their family their exited the position back into cash, then the demand would be neutral. In reality, their is some cost of carry where by holding it for a period, you still increase the demand.
That would an explanation for the price were it governed by an actual underlying value.
In reality, the price is mainly governed by speculators hoping that it will be used by people as a unit of exchange eventually and thus the speculators are buying and holding coins.
Human nature. Hoarding, speculation, pain-avoidance ("could have/should have" 10yrs from now)... emotion. It's wonderful! The price is a reflection on our thought processes.
The monetary supply is tailored to the needs of the economy to prevent volatility and create value. By being able to buy or sell anything and have the currency worth a predictable amount there are many transactions that can happen that would not be possible with a more volatile currency.
One of the genius aspects of the Bitcoin scam is the limited output and increasing difficulty as it goes on. This keeps the scam going longer. If it were like tulip bulbs, or subprime real estate, or pets.com type stocks, the bubble would eventually burst. With the types of bubbles we've seen, and the big names in tech willing to associate their names with this scam, keeping a <$15 billion market cap going is feasible for a little while.
Also keep in mind that the float is not all that high. Many bitcoins have never been traded, especially early ones. That 30k of Bitcoins are going on the market can tank the price so much shows how weak demand is for this worthless "currency".
One aspect of the pied pipers of this scam is that their theories of its value are not falsifiable. My theory is falsifiable - Bitcoins are going to go from a current market cap of over $7 billion to well below $1 billion. There theory is not falsifiable "it's valuable because it's valuable". So if it goes up they're right, if it goes down they're right.
Why are Bitcoins valuable? Anyone thinking of buying an ASIC or a Bitcoin should read from the Bitcoin boosters the answer to this question. There is no answer. Which is why Bitcoin is bound to crash.
It's possible a real online currency might happen. The Bitcoin scam is certainly postponing that day. When Bitcoin crashes, possibly with much legal involvement afterward, VCs will be very hesitant to fund an online currency for years to come.
To me the real currency would have to be something in the realm of Folding@home. I'm not sure how it would work of if its computationally feasible, but I do know people would pay for the results of useful computations such as that.
I would short Bitcoins if I could find a reliable party to do it with, and it were easier to do. That doing that is so difficult is another sign how it's not a real currency.
That this post and any post not buying into the Bitcoin hype is bound to be downvoted is yet another sign of the scam. I rarely have posts downvoted on HN, but any time I am slightly skeptical of Bitcoin's value, the Bitcoin hucksters pile on and downvote anyone questioning the scam into oblivion. It reminds me of how MLM people act on the Internet.