If you are using it, you are not holding it long-term.  You obtain them (by selling stuff/providing services), and somewhat later, you are spending them (obtaining stuff/getting services).  You should only worry about a short-term fluctuation in between the obtaining them, and spending them.  That shouldn't be a long period.   If XMR is $1 a piece, or $100 a piece, doesn't really matter, if it doesn't change too much during the time between you selling stuff, and you buying stuff, which shouldn't be very long.  If you want to buy stuff on the dark market, you get your monero in the morning (eventually by having bought bitcoin for it, and having exchanged them for monero), and you've spend them in the afternoon.  What do you care about the price level, as long as it didn't change much between the morning and the afternoon ?

And if you're "holding" them, you're simply betting on their rise, but you're not using them.  In that case, of course, there are going to be as many winners as there are losers.

You shouldn't care about the price of monero if you are USING it (to buy stuff).  And if you're not using it, then you can only be gambling on it.  It is in the nature of gambling that one can sometimes lose.  (in fact, exactly as many losses have to incur, as there are benefits).

If the price of monero comes from its usage (via Fisher's formula), then that price is a healthy fundamental.  If the price rises because people are betting on it, then this is a price built on hot air.

A market cap of $100 million, driven by Fisher's formula, would imply a VAST usage (billions of $ worth per year).  This could clearly not occur in a few weeks' time.    I'm pretty happy that the bubble deflates, because hot air doesn't do any good to a crypto currency.  The market cap should be sufficient for it to be usable and not more.

That's probably exactly the reason why the platform that didn't have anything to do with it, forked over the poorly coded DAO I guess 

Again, you're thinking in terms of absolutes.  "true" anon.  I'm talking about "good enough" anon.
There's no way to do something even "off chain" without leaving any records.  If you use communication infrastructure, you always use third-party stuff that can make records.  And if not, you have to make physical contact in some or other way, and you leave physical traces (ADN, video surveillance, ...).  So your "true anon" is an illusion, but that's not what one is after.  That's what I said: the (impossible) perfect is the enemy of the good (enough).



Didn't know that quote, but it is exactly what I wanted to say.

I expect many.  Hundreds, thousands.  Maybe none of those that exist today.  Maybe not even bitcoin.  In the same way that Roman money doesn't exist today, but that there are hundreds of fiat currencies.

I just want to stress again that I DON'T say that "bitcoin is a ponzi game", and I DON'T say that bitcoin doesn't have any real usage.  Bitcoin is a real monetary asset, that can have (and has, up to a certain point) real, genuine usage as such, and can bring real value as a new form of monetary asset, improving competitive advantage for those that use it.

I'm only saying that, unfortunately, today, most (95% say) of bitcoin activity, and hence most (95%) of its market cap is DOMINATED by "greater fool theory" usage at the *expense* of this real, genuine usage, and at the expense of its genuine value proposition, and that if this stays that way, it will end up killing bitcoin all together in the long run.

There.  I managed to give a short reply.  

It's not.  You are falling in the trap of the perfect being the enemy of the good.  Of course with enough effort, SOME anonymity can be lifted.  Of course with enough effort, all of your privacy can be undone and told to the world.  But it is nevertheless a good idea to lock the door.

The idea of freedom regained is not so much that you can be the perfectly hidden, lone enemy of the almighty state, totally secure behind your keyboard.  It is rather that *if enough people give something about freedom and hence use privacy/anonymity stuff like they close their door*, for small stuff you can more easily stay under the radar ; and it can hopefully gain adoption sufficiently that large parts of the population start enjoying their regained freedoms.  (I have to say that when I see people, I don't have much hope).  The "almighty state" cannot do much against MANY PEOPLE using anonymity tools to enjoy their regained freedoms, if they are numerous enough.  The almighty state cannot easily use dragnet techniques to do so.   If the almighty state would like to regain confidence of people so that they don't use anonymity tools to hide from it in general, then maybe the almighty state shouldn't steal as much freedoms from people in the first place.  (but that would make the raison d'existence of that same state futile).

"suppose that every crime would be solved, then there cannot be a perfect crime QED".  If you start from your conclusion with your assumption, then of course it is not difficult to reach your conclusion.  Yeah, of course, if you KNEW about the contract between an unknown and a contract killer, then of course both would be taken to jail. 

Of course, I'm not saying that such kind of crime cannot be solved.  It can, if one puts in enough of an effort.  Traces of the crime scene might trace back to the actual killer if he made enough errors.  Research of who might have motives would trace back to me.  But establishing the link between the killer and me would be way more difficult than if *I* were the killer myself.  If I committed "anonymity errors" AND the killer committed anonymity errors, and if law enforcement were smart enough to do so, they could prove the link, and we would be convicted.  But the difficulty for law enforcement is to find the link in the first place.  If the killer is sufficiently smart, there's no trace on his computers of this contract.  I may have a motive, but 100s of other people may have a motive too.  As there has never been any direct contact between me and the killer, and as we don't know each other at all, most usual techniques to establish a link will fail.

It is not waterproof.  And that's good: we're talking murder !  This is an extreme example.  For much less severe "crimes", it would be too involved for law enforcement to spend all the needed resources to trace back, with little hope of succeeding.


What "guys" are "running the smart contract block chain" ?  The nodes ?  The miners ?  Some chinese guys with free electricity ?

This is btw also why serious anon devs should remain anon too... and disappear once the system is up and running.

I suggest BigBrotherCoin.

If I sell, say, personal courses in mathematics for bitcoin, and then I buy VPN access with those bitcoin, at no point I need an exchange.  My student may need to go to an exchange to obtain bitcoin to pay for my courses, but that is perfectly "KYC" and "AML" - unless the student is the son of the owner of the VPN provider, in which case, the circle is closed.  That's the real usage of crypto.  I can sell courses (without having to give half of it to taxes).  I can obtain stuff in exchange for the service I produced and provided.  I don't have to give up taxes over it.  The trade "I produce the service of a course" and "I want to obtain VPN access against it", would, in my current situation, if I were fully law abiding, cost me more than 60% of the initial value provided.  Indeed, on the "income" of the service provided (the course I sell), I have to pay 30% of income taxes, and 20% of "social security contributions".  In other words, I can keep half of the value of my course.  Now when I BUY with that half, another product, like a VPN service, I pay AGAIN 20% of VAT.  So in total, of my initial market value of the sold course, I can obtain something like 40% of it in VPN service.

Of the value I produced (a course), I could only obtain 40% in the market of another good or service ; in my example, a VPN service.

That's why I think crypto is liberating.  If now, it is totally "law abiding" and "traceable", I should also give up 60% of my bitcoins I received when I provided the course.  Then, I don't see why I would go through the hassle of using bitcoin.

I haven't dealt with drugs.  I haven't sold fire arms.  I haven't financed terrorists.  I only wanted to trade freely: provide some value (a course), and obtain some equivalent value (a VPN service).  State and law don't allow me so, if they cannot run away with 60% of that value.

 

Sure, you can play with the toy.  So what ?  Apart from having the potential to give liberty back to its users, it only brings hassle.  Everything in crypto is more difficult to do than in fiat.  It is the price of liberty.  I'm willing to pay that price, on the condition that I get what I pay for: liberty.  If the idea is that liberty is taken away from crypto as much as it is from other means of payment (fiat), then there's no reason to use it, at all.

Cars bring liberty over trains.  Trains, you have to take them at a specific moment, at a specific place (the railway station).  But trains are easy to use: you pay your ticket, you go to the railway station, and you sit down in the train.  Cars are much more of a pain: you have to take care of them yourself, buy petrol, repair them, and they are often more expensive to use.  You have to drive them yourself.  You can get lost, you can have an accident.  But cars bring liberty: you can go where you want, when you want.  That's why you pay that price.
Suppose now that one obliges car owners to park their car at the railway station, and only drive at specific times, following given tracks, to given destinations.  In order to use your own car, you have to order a voyage with it in a given catalogue, you have to go at the specified time at the railway station, and drive it exactly as they tell you, to another railway station as they specify it to you.  Owning a car would be totally ridiculous.  You better take the train: less hassle.  You've lost the extra liberty the car brought to you, it has to suit exactly the same rules and limitations as the train, and it only brings in extra costs and hassle.

Same with crypto.  If crypto has to comply to everything fiat complies automatically to, then crypto is just more hassle.  There's no need for it, it doesn't solve any issue (any more) that wasn't already solved in an easier way with fiat.

There's one exception: greater fool betting.  That's the principal use of crypto right now, and that is something that will probably remain.  It is an extra toy for gamblers.  I already explained that there's no need to have a block chain for that: tokens as IOU on exchanges is good enough.  With some extra law enforcement on exchanges, they can even be connected to bank accounts in fiat.  You'd have X virtual coins A, Y virtual coins B, and people would trade them on the exchange.  You can always return to your coupled bank account.  No need to have a block chain for those coins.  You hold them on an exchange, or you convert them back to fiat.  You can couple the same bank account to different exchanges, and hence use your fiat to transfer "coins" (IOU) from one exchange to another.  No need for block chain.   And all taxes paid, all laws respected (the bank and the exchange check that).  Everything known to the powers that be, as the law prescribes.

Why crypto then ?


Because "dealing with crypto on exchanges" is NOT using crypto ; it is just gambling on crypto.  You don't need block chains for that, as I told you.

You may be right that what I propose is not going to work, but then, crypto doesn't work, period.  It is like cars in railway stations.  Yes, you can gamble on it.  That's about it.

Amen.

The "sound money doctrine" is a naive doctrine, that only makes sense if the two following hypotheses are satisfied:

1) the monetary asset has 100% of the "store of value/currency" market (that is, it is the ONLY currency in use)
2) the monetary asset exists since a very, very long time, and the unfairness of its seigniorage and early adopters is long forgotten and diluted.

Only on the basis of these starting points, the sound money doctrine makes sense.

If the monetary asset is one amongst many, eating a small, variable part of the market of "store of value" and if the asset has to be created and the seigniorage problem addressed, then almost the whole theory falls on its face, because "inflation" will be related to the totally variable market share in the "store of value" market it will take, and in any case, if there is a mechanism to undo the unfairness of seigniorage, then monetary creation is not a problem, and if seigniorage is a problem, then it will be a problem for a long time in the usage of the coin.

In fact, "sound money doctrine" only makes sense if all monetary assets, including fiat, derive 1-1 from gold and nothing else.  Gold has then, directly or indirectly, the whole market of store of value ; and gold is a monetary asset since so very long, that "early adopters" and "early miners" are long since forgotten.

This is kind of silly, no ?  If you want to do it the legal way, use fiat.  It exists already, it is already totally open to scrutiny if you go by "normal" banks.

The whole idea of crypto is to be able to do without banks and without sticky fiscal fingers, and to do without interference of state and law.  Now, if you want to trade without abiding to the law, and HENCE cannot use fiat, then and essentially only then, crypto has something for you.  Otherwise, crypto is meaningless.  Stick with fiat.  Much easier, no hassle.  But if you want to trade without abiding by the law, you better hide and use something that is difficult to trace.  Hence if you have crypto, it must be anon.  If not, you don't need crypto, and you can do it with fiat, banks and lawyers too.

We don't need any adoption that is legal, do we.  If it's legal, there's no need for crypto.

Multiple oracles can, up to a point.  If smart contracts are to be connected to the real world, one has to accept oracles, in the sense of "reliable data base queries" of officially known data.  This is not very well done in ethereum, but one could think of having cryptographically signed (certificate stuff) data from reliable web sites, such as public obituaries or the like.  What is considered reliable is coded in the contract.  For instance, the beneficiary has to download a web page, signed by a CA saying that the web page content is coming from one or other entity, in which a certain phrase appears, like "Joe Smith, date XX/XX/XXXX" date of death or the like.

No of course you don't want that.  If I am an unknown, anonymous entity that makes a smart contract with you, another unknown, anonymous entity, on terms that only you and I know, without knowing one another, then no law can interfere, and nobody can be sued or forced to follow the contract, or not.  If code running our contract is such that transactions happen according to our agreements, then that's all there is to it.

For instance, if I agree upon a contract with you, that if Joe Smith is dead between the 20th and the 27th next month, you get 100 000 XMR, and we set up a smart contract that can read obituaries, and if Joe Smith is marked as dead in the indicated period, the transfer is acted, and you don't know who I am (apart from the fact that I must be someone who doesn't like Joe Smith) and I don't know who you are, then this smart contract is perfectly binding.  If Joe isn't dead, then you won't get the coins, and if he is (whether you are lucky, or whether you killed him), you get the coins.

What "legally binding" is needed here ?  I would expect that such a contract can never be legally binding if I'm not a member of a powerful state agency.  But it is a contract that will run to terms nevertheless.  I see this as the core of "smart contract".

If you want things that are legally binding, then there's no need for smart contracts.  Smart contracts are *especially* useful if they cannot be made legally binding, and you want to set them up nevertheless. 

The funny thing is that you are giving the arguments that indicate exactly what you are trying to deny.

My thesis now is: "most people are into bitcoin, mainly because they expect a price rise"

From that proposition, I think we can agree that "greater fool theory" follows. 

We can formulate my thesis differently, but logically equivalent: "if many people that have a demand/are holding bitcoin, were to expect a price stagnation, they wouldn't hold onto their coins, or they wouldn't express a demand for it."

You deny this.  Hence, your statement is: "most people in bitcoin use it as a currency/store of value and are NOT into it mainly because they expect a price rise".  Or equivalently: "if most people who are now, or in the future, in bitcoin would know for sure that the price wouldn't rise, they would still express their demand for bitcoin / hold on their coins".

BTW, when you write this:


that is not in contradiction: the point is that people EXPECT a price rise, even if they give it a probability of a price decrease.  It is all about expectation values, and risk aversion, we agree.  But this doesn't change the main statement, that people are mainly IN bitcoin because of their expectation to make a benefit.

Let us now look at how you are REALLY appreciating the importance of bitcoin's price in the demand for it:


--> probabilistic expectation of value increase


--> "cashing out to make a benefit on price rise"


--> "large majority is speculation" (on price rise, what else...)


--> It does.  It is exactly that.  If 95% is "to the moon speculation" then my "assertion that almost all of bitcoin is speculation" is for sure correct ! 


--> Why would that be the case ?  Is the percentage (5%) rising or decreasing over time ?  If most people in bitcoin now are speculating on greater price, why on earth would newcomers be different, and "true users" ?  My impression is rather that the bitcoin market cap rose much more than the actual currency usage (for instance, on dark markets), which would rather indicate that the "bitcoin user population" is evolving more towards speculation than to usage.   

I don't see any reason to expect the future adoption of bitcoin by new users to be radically different than the current one, and if anything, it goes more and more in the direction of speculation, while "currency adoption", say, on stores and so on, is not following.

When the price rose during spring this year, this was clearly NOT related to a higher amount of demand for usage as a currency.  It was not because all of a sudden, Amazon allowed people to pay in bitcoin or something and people rushed out to obtain bitcoins to do their shopping on Amazon. 



Well, if it is 95% - 5%, clearly we have an almost totally (95% !) speculation dominated asset, and that is *by definition* an asset one demands to be able to get rid of it at a higher price: greater fool.  I don't see how one can escape this iron logic.

An asset is not "greater fool" if its demand for speculative purposes is very small (say, <10% <20%) as compared to its demand for usage (here, store of value in the long run, or currency usage to buy stuff with).  If an asset's demand is totally dominated (95%!) by speculation, then we have the schoolbook example of a greater fool driven system.  It would indeed mean that the day that all speculators realize that they are "the last in the row" and that there are no greater fools, the demand would plummet by a factor 20 (from 95% to 0%, which leaves 5% of real usage: 1/20) and hence the market cap too.
If an asset suffers from 10% speculation, the day the speculators realize they are the "last fools", then that asset's demand (and hence its market cap) would only drop 10%, as 90% of its demand is unrelated to expectations of price rise.

That's all.

After bitcoin there will be botcoin ? 

This is indeed the main point of contend.  I thought it was more or less acknowledged that people "investing" in bitcoin do it mainly because MOON.  The other reasons to buy bitcoin would be "store of value" and "currency" (both are the same concept, only the time scale of holding is different), and hence actual USAGE, which, I thought we agreed upon, is only a tiny fraction of bitcoin's actual demand.  The "buying because of selling higher", I thought (which I call "speculation") was the main drive of the volume, of the demand, and hence of the market cap and *hence of the price* of bitcoin.

You have to do the gedanken experiment: suppose that all people holding bitcoin now would, by some element of magic, KNOW that they are going to sell their coins at $600 in the future (because a genie has come and told them for instance).

Suppose that a genie tells all potential bitcoin buyers that they will sell their coins, if they buy them, at about the same value.  Do you think still many people would be holding/buying bitcoin ?

Those like me that buy bitcoin to buy some services on the net would be happy, and not change their habits.  But do you really think that *most* of the market cap, most of the holders, most of the buyers, would continue their activity of holding, buying if somehow they KNEW that they would sell their coins (or use their coins) at exactly the same market value as they bought them ?   Or would the whole thing crumble down ?  Be honest.


That would be true usage as "store of value" (like gold is: nobody is expecting "exponential growth" of the price of gold - you can think that there are good and bad moments to enter gold, but in general, people buy gold as a STORE of value for the long term, exactly as you describe).  Do you really think so that most bitcoin holders are in for that ? 


Imagine that bitcoin remains in the $100 - $1200 range for decades.  Would most current bitcoin holders be happy you think ?


Well, if most bitcoin holders do what you suggest, then you are right, that is not greater fool theory, but that is just USAGE as a (long term) store of value.  But my impression about everything I read about people's motivations for going into bitcoin is MOON!  And without that hope for MOON! they wouldn't simply be there. 

If what you write is correct, then the actual market cap of bitcoin is mainly given by bitcoin USAGE, and not by speculation.  That would be great. Honestly, I don't believe that.



My idea of the demand of bitcoin is that it is 95% driven by "hope for MOON!", and that if in one way or another, there wouldn't be that hope, they wouldn't bother holding any coin.



No.  The motivations are essential.  They distinguish between greater fool theory, and "fundamental growth".  In the first case, the growth charts are the main or sole motivation ; in the second case, they are the consequence.  In the first case, there cannot be anything else but a crash when "full adoption" is reached, in the second case, when full adoption is reached, charts stabilize.

But the charts themselves can not distinguish whether they are "cause and effect" or "only effect".


I'm sorry.  I thought it was clear for you as well as for me that the main bitcoin activity is speculative, and I wanted to bring you to the inevitable conclusion that follows logically from it.
Now I see that you are in fact not convinced that most bitcoin activity (amongst which "holding" is also a kind of activity) is driven by speculation.  In that case, I can understand that you come to a different conclusion.

I simply have not the impression that this is what motivates people mainly to buy or hold bitcoin.   I can be wrong, but I thought we agreed on that, and now it seems that we aren't in agreement there.


That's the case of every tradeable asset.  The only question is if that behaviour is only "sugar on top of the usage demand", or is motivating the bulk of the demand.


Indeed.  The only thing that can really give one an idea are the individual motivations of people of why they have a demand for bitcoin.  If their main motivation is to "buy low and sell high", then we know we are in "greater fool".  If their main motivation is to use it as a currency to buy stuff on the internet (it isn't, this we know), or if their main motivation is to "hold value for later" (like gold), then we are in a "fundamentals" paradigm.

I thought it was clear that the first motivation outnumbers significantly the second, but you seem to doubt that.  Fair enough.


Ok, the argument doesn't change, read then: "when 3/4 of the ultimate number of people use bitcoin".  Point was simply that "increasing adoption" will stop SOMEWHERE and I gave you the ultimate upper bound.  So at a certain point, more than half of the people that ever will use bitcoin, will have bought bitcoin and hold it.  These people will not be able to hope that they will find other people buying their stash for much more.  These people cannot reasonably hope for "more adoption".  At a certain point, growth stops.  If GROWTH was the motivation to be in the game, the game will crash.  That was my point, because I thought that you and I agreed that most people were in bitcoin to "invest" (that is to say, to sell higher, a LOT higher).  Given that you now take the position that this is not the case, my logical deduction doesn't hold any more.


This is again some kind of "hope for MOON!", no ?

"one day we will reach saturation, but that's still far in the future and the price will still grow, grow grow !!"

But that was exactly my argument.  One day it stops if that's the motivation.  As long as it doesn't stop, one can get in and out and get rich.