Did you use a deterministic wallet ?  If you have the pass phrase, you can reconstruct it.  If you don't, and you don't have a back up of your wallet, then that is utterly profoundly dangerous in any case.  What if your hard disk was dead ?  What if your computer didn't boot any more ?

So in any case, you should have, or a back up of your wallet file, or the pass phrase of the deterministic wallet, written down somewhere. 

That said, once the transaction is broadcast, your wallet doesn't matter any more in reality.  Once your transaction is in the mem pool of other nodes, indeed, you don't need your original wallet any more ; unless the transaction gets eliminated because of too low fee.

In as much as we're repeating the 2014 scenario, there will be enough dips to come in the coming years.  But then, maybe we won't repeat the 2014 scenario.

To me, Segwit is another layer of cryptographic data abstraction.  In bitcoin's original block chain, you have essentially 3 levels of cryptographic data abstraction: the header list, the Merkle tree, and finally, the real stuff, the transaction.  Segwit adds another layer of abstraction: the node in the Merkle tree is an abstraction for whatever the transaction is, of which the details are now in the witness.

These different layers of abstraction allow for different levels of cryptographic verification of authenticity, and use different cryptographic mechanisms.  The top layer, the headers list, is a linked list of hashes, containing the proof of work (which is bitcoin's conventional signature of authenticity at the highest level).  The second layer, the block, has a Merkle tree, which is a linked binary tree of hashes, of which the head is in the block header.  You only need to descend into that tree if there is specific information you want to verify within a block: ideally, you'd only need the Merkle tree "path" down to the location where the node information resides.  With a legacy node, that node is the transaction information you're looking for.   As all this stuff are linked hashes, from the single node, through the Merkle tree, up to the block header, to the header chain, the authenticity of all these elements is secured, because they are linked together with hashes.  Within the node information itself, however, the authentication is done by digital signature.  All the signed information used to be in the node in the legacy protocol ; with segwit, this can refer also to "witness data", which is outside.  This is somewhat similar to locking up the hash of a big book in a bitcoin transaction: you can transmit the book data outside of the chain, and verify that it is the book that has the right hash that was in the chain.  So what Segwit essentially does, is to allow the node (the former transaction) to be itself an abstracted form of cryptographic data link to the rest of the system.

So in a way, bitcoin is built to be a growing "data base" of stuff of which each element can be verified to be indeed included, without, that's the whole point, having to download the entire database.  I can prove to you that a certain node Y is part of the block chain at block X, by providing you only with:

- the full header list
- the part of the Merkle tree of block X that goes to node Y
- the full data of node Y

You can verify all that, and you can verify that there's no way that I'm faking you if you can find out whether the current block header "on the net" is the block header at the end of what I gave you.  You don't need to download the full block chain for that.

This is exactly what a light wallet does, where the only nodes Y it is interested in, are the transactions to and from the addresses of the wallet.

With Segwit, there's now, "next to the block chain", also data that is related to node Y, which is called its witness.  With legacy transactions, the witness is empty, with segwit transactions, that witness contains the actual transaction data.

So now we have that in order to be sure that I have all I need to know concerning Y:

- the full header list
- the part of the Merkle tree of block X that goes to node Y
- the full data of node Y
- the witness of node Y

If there is a single, accepted, block chain out there, then these elements are all I need to be cryptographically certain that this information is authentic in that chain.  So as a user, I don't need anything else, apart from the "actual head of the chain that is accepted".  I don't need the full block chain.  I can do with the minimum, but I can use somewhat more if I like:
I could download the full block Merkle tree, instead of just the path to the node I'm interested in.
I could also download the full transaction data of the block containing my node data Y.
I could also download ALL blocks.
And I could, or not, download all the witness data.

But all this doesn't change a thing for me, namely, to know whether my data Y are authentically accepted in the sole agreed-upon block chain out there. This is why, for a normal user, there's no "data burden", and that's what Satoshi explained in his mail of November 2008.

So who could want to download all of the block chain information ?  (non-mining full node)
Who is, by doing so, exposed to the full burden of data ?

Well, there's of course more to bitcoin than just having a correct set of nodes: the essence of bitcoin is that these nodes correspond to "correct transactions".  In order to be able to verify whether a transaction is correct, one needs two things: one needs information about the previous transactions referred in the to-be-verified transaction ; but one also needs to verify that some information is NOT PRESENT in the WHOLE of previous data blocks, to avoid double spending.  So, in order to verify the correctness of a transaction, one needs the whole chain.

So if you want to be able to say whether a transaction IS ALLOWED TO BE included in a block or not, you do need the full chain (and with segwit, ALSO the witness data).  However, who is to decide ?  The answer to this question is: the mining nodes, and ONLY the mining nodes.  Indeed, bitcoin's solution to the Byzantine General's problem is based upon a vote by proof of work.  Nothing stops a mining node, technically, from including erroneous node data (or even erroneous Merkle trees, or erroneous headers).  But his block will be voted away by the other mining nodes, that will not build upon it.  As mining is economically costly (proof of work), for a mining node, there's no reason to make blocks his peer mining nodes will not vote for.  He will be wasting resources for nothing.  So the sole, consensual, block chain that is going to be built is a consensus of mining nodes.  As long as more than 50% or so of the hash power of mining nodes plays by the rules, the block chain will  be constructed by the rules.  But in order to do so, in order to be able to make correct blocks, mining nodes need the full data burden of the full block chain.  There's no way they could verify the correctness of a new block if they didn't have the full data set.  On the other hand, if ever mining nodes came to the agreement to include non-conform blocks, and continue building on it, as a user, there's nothing that you can do about it.  There is no alternative chain.  If node Y within block X contains a transaction that is not correct, but it is deeply buried inside the chain and the mining nodes continue to build upon that chain, there's nothing you, as a user, can do about it.  Even if you download all that data.  Even if you see that it is wrong.  Because there's no other chain out there.

If you have big stakes in bitcoin, however, it might be a good idea, to be aware of it, even if you cannot do anything about it.  So if you have big stakes in bitcoin, it might be a good idea to download all of the data, with all of the burden it represents, just to know whether the miners did include funny things or not.   But by far most users don't need the full data burden.  


The fundamental error is to think that every user needs the full data burden.  That's not feasible.  But not all users of Wikepedia download all of the Wikipedia data.  They only look at those pages they want to read.  As a normal bitcoin user, you don't need the full data burden.  You only need to do the cryptographic verification that the information you download, is corresponding to what's in the sole block chain out there.  

The big mistake in this whole debate is to confuse two aspects of bitcoin's cryptography:

1) verify that the transaction data you have, is the correct data that is in the consensual, single block chain out there

2) verify that the mining nodes that have the consensus power in bitcoin, followed the rules they are supposed to follow in building the sole consensual chain out there.

The normal user only needs to be concerned with 1).  Even if he found out in 2) that the sole chain out there is not built according to the rules he thought were in effect, there's nothing he can do about.

However, big players may want to look at 2).  Big exchanges for instance.   But it is sufficient that some look.  There will be a whistle-blower.  If you think it is fun, you can do it.  It comes with a data burden.

The "hard" consensus is the one of the mining nodes, with their vote by proof of work.  If mining nodes decided collectively to come to consensus A, then that's what's out there, and nothing else.  If mining nodes don't come to a consensus, we have a fork, but a fork without bidirectional incompatibility is very dangerous (can be overtaken).  So usually, a fork with the same protocol will not last, which means, that for the normal user, there is only one chain out there.

But there is also "soft power" in this game.  Suppose the mining pools come to the consensus that they increase the block reward.  They can, of course.  If they come to that consensus, and the sole block chain out there has now bigger block rewards, there's *technically* nothing a non-mining node can do about it, apart from seeing that that is what is happening.  So why don't mining nodes decide to do so ?  Of course, for them to do so, they would have to collude.  There's the "tragedy of the commons" effect (Nash equilibrium) that stops an individual mining node to take the initiative to give himself more rewards: his block would not find consensus by his peers.  But suppose that the Nash equilibrium of honest mining node breaks down and that all of them collude over larger mining rewards.  The chain out there now prints more bitcoin per block.  
As mining nodes are rewarded in coins, they are also sensitive to the market.  They can print themselves as many bitcoin as they want, if bitcoins aren't worth zilch in the market, they have been spending a lot of economic cost for nothing.  Printing more bitcoins is something the market would be highly negative about.  So if there is one set of entities that are kept by soft power, it are the mining nodes.  Even if they are not decentralized enough for the Nash equilibrium to be secure, they are simply kept by the "soft power" of the market. This is why the total centralization of mining nodes didn't bring a disaster: they need the market to like bitcoin. If they do crazy things, the market will blow their investment to oblivion.  Even if there was only one single mining node out there, it most probably would still play by the rules, because if it didn't, the market would crash and his entire investment would be dead.

So essentially, those suffering from the data burden, are the mining nodes themselves: they need it technically.  It is also very probable that those with big stakes in bitcoin, have an incentive to be "nice to the bitcoin users" and allow them to use their datacenter as a proxy for the block chain (to allow users to connect their light wallets).  

Normal users only need to verify the cryptographic soundness of that the data they have, is the real data of the real block chain, and a light wallet is enough for that.  They rarely *need* to verify the work of the mining node consensus.  They might be the whistleblower of a problem, but they cannot do anything about it.  As mining nodes are kept by the market sentiment to finance their huge economic spendings in proof of work, the very last ones to want to crash the market are the mining nodes.  So even if they are highly centralized, they most probably will continue to play by the rules.

So the "data problem" is not real.  And that's what Satoshi already explained in November 2008.  Satoshi made many mistakes, but on this one, he was right.

There is still one potential issue: who is going to provide normal users with enough network infrastructure so that they can download the data for their light wallet verification ?  The answer to this one is actually very simple: the bitcoin industry, of course !  The bitcoin industry are all those people making profit over the existence of bitcoin: the mining nodes in the first place, and also, the big exchanges, and if it ever happens, other entities in the ecosystem that have benefit from users using bitcoin.   These are the entities that have an incentive to put at the disposal of their bitcoin users/customers, a "full node data centre" that can connect to the light wallets.  Mining nodes may be incentivised to build a geographically distributed net of data centers "serving the block chain and capturing transactions".  These are the entities that are exposed to the "data burden", but for such entities, this databurden is ridiculously small as compared to the data burden of other data centres. Compared to say, TV over internet, bitcoin's data burden is ridiculously SMALL.

Bitcoin is remarkable, the sole asset I know off that can bubble successively.  Usually a massive bubble kills the underlying asset when it pops.  But this is already the third massive bubble in bitcoin, after the one in 2011, and the one in December 2013.  Each time we got an order of magnitude difference between the starting point, the ATH (peak of the bubble) and the slower agonizing decay, but which, surprisingly, lives up again, towards the next bubble.  Bitcoin looks like champaign: when  one bubble burst, another is preparing itself. 

I remember reading threads between 2014 and 2016 "will we ever see 1000+ again ?".

Segwit has advantages, but the trick of only counting half of the real data and claiming it makes a difference is very cheap.  A transaction, whether segwit or legacy, takes about the same amount of data, except that you don't count everything in the main block with Segwit. But for storage and transmission, that's the same burden.

In reality, Segwit didn't do zilch to the actual amount of bitcoin transactions per block:

https://blockchain.info/charts/n-transactions-per-block?daysAverageString=7

No big increase has been seen when segwit got activated end of August 2017.

People don't really use it, even given the high fees:

http://segwit.party/charts/

Segwit is good, but for a totally different reason: atomic swaps.  


I think that hard forks are good things :they are THE way to have decentralized "governance".  Instead of voting and killing of the "smart minority", it acts like biological evolution.  The mutant is maybe in minority, but it can fill its ecological niche, and maybe even exterminate the parent species if it is superior.  Most mutants die immediately.  But some survive, and some may even exterminate the parent.  Hard forks are nature's way to improve biology, and they are the free market equivalent as compared to state-planned economies based upon a parliament voting.

In any case, the whole block size debate was full of deception and disinformation, and the hard block limit in bitcoin was/is a bad thing for the strain of bitcoin that contains it.  Hence the good OP question.  Satoshi made a mistake, or wanted to put a bomb in bitcoin by doing so, or thought it would be no issue to change it.  There's absolutely no sense in hard-limiting block size without limiting the system's utility at the same time.  If bitcoin is at 1/3 market cap right now, it is because of this block limit (and the very bad way of handling it by Satoshi's heirs).

I would even say that a massive LN on top of a hard-limited block chain is suicide, because of the danger of massive settlement.  With flexible blocks, settlements will always be possible.  On a block-limited chain, settlements are also restricted, making the "settlement run" instead of a "bank run" a genuine possibility.  A well-targetted spamming campaign combined with a settlement panic could be fun to watch.

In summary, no argument holds for hard block limits, and the final argument "my goodness, it is a hard fork" is now done too, because, hey, hard forks happened already.

Actually, forks are the natural way of upgrading decentralized immutable systems, exactly like in biological evolution.  So all this is very positive.   Forks are like genetic mutations: out of the mother species come two or several daughter species.  They compete, and some survive, some find different eco systems.  Much better than centralized collectivist decision techniques like voting.

I said: bitcoin will not undergo a fork until it has lost its total market dominance, because bitcoin only has its brand name to go for.  Once the brand monopoly will be gone, they will finally maybe move their asses and do something that works.  Right now, bitcoin doesn't work well.  Pseudo-4MB or not.
Well, that's more or less what happened: bitcoin is now at 1/3 of the market cap, the forking fear is gone, bitcoin now has two viable clones in the top 20 and as far as I know, bitcoin is still at its 1 MB block limit after the segwitx2 failure, no ?  Given the competition of bitcoin cash, and the fact that bitcoin, finally, did fork, rendered the power monopoly of Core moot.  When it will have become a moot point, I guess suddenly for core, the holy 1 MB block limit will not be a problem any more, they will invent another narrative.... and it won't matter any more, because they overplayed their hand, split bitcoin over their pet story, and removed bitcoin as the market monopolist.  Which is a very good thing.  Brand monopoly is a bad thing, and competition improves everyone.

On the contrary.  Satoshi knew very well how to do it, and explained it here:

http://satoshi.nakamotoinstitute.org/emails/cryptography/2/

His idea was that there would be a few (100 - 1000 ?) full nodes/miners "with specialized hardware", who are the "Facebook servers" of the block chain, and all users simply connect with light SPV wallets.  He considered 100 GB/day block chain growth not a problem, because only these "nodes with specialized hardware" had to keep them.  So, grossly, he was considering 100MB blocks.

The narrative that every Joe needed a copy of the full block chain in his basement is Core narrative, not Satoshi narrative.

Satoshi never seemed to have publicly seen the difficulty of "hard forks".  In as much as he understood immutability of the past ledger, he didn't seem to have bothered about the same immutability mechanism for the rules (the protocol).  So changing a parameter didn't seem like a lot of troubles, even though people pointed out the danger of it "locking in".

You're a factor 20 off.  That is because bitcoin has nothing to do with money.  So the broad money supply M2, we don't care.  Bitcoin is a highly speculative asset, that has its place in the financial circus of the derivatives, where big players bet against one another in a zero-sum game.  It doesn't play in the money market, but the derivatives market.  Well, that game is about $1.6 quadrillion.  If bitcoin eats it all (it won't, because it wouldn't make sense: you need a market, so the whole crypto market), that would bring a single bitcoin to $80 million.  Not $4 million.

This is the essential reason why bitcoin will never be a generalized currency.  The technical difficulties add to it, but the volatility is essentially making it useless as a currency.

The *whole idea* of a currency is to be an intermediate fluidifier of economic interaction, that is:

when I want to offer good or service A and I want to obtain good or service B, deemed of equal value in the market, the direct bartering is a difficulty.  So the use of a currency is that I can exchange good or service A against X currency, and I can pay for good or service B with X currency, because A and B are equal value in the market, so they should have equal price X in currency.

This requires the currency to be stable between my acquiring X when I sell A, and my paying X when buying B.   X should be neutral.   So X should have stable value.

Anything that is volatile, cannot be used as a currency in this respect.  

A currency is also a unit of account, which is related to its value stability.

Suppose that in beginning 2017, I wrote a contract for 2 years with the maid: she cleans the house twice a week, and I'll pay her $500 a month for that.  Suppose that I wrote the contract in bitcoin.  At that time, 0.5 BTC per month seemed a reasonable pay, right ?

If I would have written that contract, I would pay the cleaning woman now about $5000, and in December, I paid even $9000.  Very expensive cleaning !

So BTC is not useful in contracts either.

It is not a currency, because it is very volatile.  And it is very volatile because it is a collectible.

Great question !


There are three possible answers:

1) Satoshi didn't completely understand the implications of his random choice, which seemed reasonable at the time to him.  

2) Satoshi knew very well what he was doing, was an evil mind, and he was lying through his teeth all the time, to trick us into his nonsense.

3) Satoshi was a true god and genius, and even though we think he might have made a mistake, he was absolutely right in everything he ever did and we are simply too dumb to see it.

There have been a lot of discussions over that issue, and people warned Satoshi that his random decision was recipe to disaster.

The truth is maybe in the 3 things at once.  It is obvious that the spam limit is a joke.  In fact, it makes spam worse.  The excuse was that if a fool mined a single block of 10 GB full of nonsense, the blockchain would be spammed to an incredible size in no time.  That was clearly wrong, because in order for that block to be incorporated into the chain, other miners would have to agree with it.  There's no reason why honest miners would mine on top of a crazy block.  In other words, implicitly, there would be a gross maximum size set by miners and that would grow dynamically.

By putting a hard limit on block size, you actually increase drastically the effect of spam, as we saw.  Once the block is full of spam, transactions are hindered.  This is an efficient DDOS of bitcoin.  If the blocks are elastic, you can spam a lot, that will increase the size to some point, but transactions can go through unhampered, and you'd have to spam like crazy in order to have an efficient DDOS.  Hard limits make DDOSsing of bitcoin in fact much easier.

Satoshi was clearly in favour of very large blocks if useful, and he explains that in the beginning, where he tells us that most normal users shouldn't run a full node, "left to specialists with farms of specialized hardware".  That was in November 2008.

People explained him that putting a hard limit in the protocol would require a hard fork at a point, which might be problematic.  He wavered that away: just changing a constant in the code.

Maybe Satoshi did put a "time bomb" in his bitcoin system because he considered it an experiment from which we have to learn, and it should self-destroy at a certain point in order for us to make a new system with better properties.  Maybe Satoshi wanted to put in a trap, so that only if his heirs were smart enough to have good governance, and if they cannot even change a simple parameter, then it is better that this system dies.  Maybe Satoshi wanted to develop a whole crypto market, and needed to put something nasty in bitcoin, in order to make it lose its first mover advantage and open up the market.

Maybe Satoshi was designing a reserve currency for big, dark, deep state players, and only needed Joe Sixpack to ramp it up, but needed him to be pushed out of bitcoin once the system was up and running, to leave it to the big boys.  Claiming it to be a currency of the people, but at the same time, making its use too expensive for the people, and only allow the big boys on it, was maybe his hidden plan.

But I think that Satoshi simply made a mistake.  He made many.  Bitcoin is quite ill designed.  That doesn't take away the fact that he was a bright mind.  We have hindsight he didn't have.  But he was wrong on this one, as he was wrong on many choices.

Bitcoin is a purely speculative asset, that started out with a deceptive narrative of being a currency.  It isn't a currency at all, even though it can be used somewhat to do payments with through bartering.   The reason is that bitcoin is a collectible, which makes its price highly volatile.  A currency (see Nash ideal money) should have a value-stability mechanism to it which a collectible lacks entirely.  A value-stability mechanism adapts currency offer to aggregate demand, which is shear horror in the ears of bitcoin believers ("the FED printing money out of thin air").

On top of that, the devs have made the potential use of bitcoin as a transferable asset difficult with their "we chase Joe Sixpack off the blockchain, only reserved for whales" policy of small blocks.   The narrative is that Joe Sixpack cannot afford a 2 TB disk of $70, but that same Joe Sixpack will have to pay the same amount in fees when he buys 3 coffees.  (yes, yes, the lightning network, sure...).

Bitcoin is a ticket in a large greater-fool game, and the ride may be just beginning.  Enjoy.  There will be winners, and there will be an equal amount of losers.  Pick your side.

Hello Vladimir,


You are right of course.

I will also tell you my story.  As I'm libertarian-inclined, free/liberty money is something that always interested me, and I was quite close to the developments of David Schaum's e-cash in the 1990-ies.  That was a total failure, and when I heard about bitcoin in something like 2011 or 2012 for the first time, my idea was "been there, done that, silly stuff that doesn't work", and I didn't give it any further attention.
However, for totally unexpected reasons, I looked deeper into it in 2014, and I found the cryptographic scheme quite brilliant.  I believed the "currency on the internet" stuff, I was acquainted with the Austrian school, and most importantly, in 2014, bitcoin had its bubble just before, which I didn't take part in.

My idea was that an asset that had known a speculative bubble and burst, would be "cured" of all speculative temptation in the future, and as I believed in the "money of the future", I bought some (around, on average, $300 per coin).  But it continued to decline slowly.  So I tried to estimate the "fundamentals" of bitcoin, which, if it is a currency for real, can be estimated by Fisher's formula (total amount of money, velocity, and total amount of stuff bought with it).  There was Silk Road of course, and some other stuff.... and my estimation came out to something like $10 or $20, as the fundamental, Fisher-formula induced price of bitcoin.   I thought to myself, I'm an idiot, I sell everything, and buy back when it is a few tens of $.  So I sold... in January 2015, the lowest point, around $200.  I lost $100 per coin.  I expected the down trend to continue until bitcoin hit its fundamentals.  But no, it started rising again !  So I thought that my estimation was wrong, there was more bitcoin usage than I realized.  I bought back in around, yes, $300.  The very slow rise seemed to go on par with its currency usage adoption... until the slope became too steep.  That was not on par with reality.  In the mean time, I learned about Nash ideal money theory, and I realized that bitcoin, being a collectible, can never be a good currency.  In fact, it is not a currency at all.  It is a speculative asset.  It is one of the purest forms of speculative asset.  

I also had another problem with bitcoin.  When there was the bitstamp hacking, and people were chasing the thieves, I realized that bitcoin's transparency was extremely dangerous.  I looked into more privacy-oriented coins, Darkcoin (now DASH) and Monero, and bought  some at ridiculously low prices, because my idea was that bitcoin was now a dangerous form of money, where all your actions are graved into stone forever and visible to anyone.

But if bitcoin is not a currency, and if its price is not made by the tension of offer and demand for its usage as a currency (that's what Fisher's formula expresses), then where does the value of bitcoin come from ?  The answer is: "from a greater fool's belief".  Bitcoin is the purest form of recursive belief.  I don't believe that bitcoin has any fundamental value, but that doesn't matter, as long as YOU believe it has value, I can rationally accept bitcoin against value, because I can sell it to you.  And you maybe don't believe honestly in the value of bitcoin, but as long as Joe believes in it, you can do so too, because you can sell your coins to Joe.  And so on.

Now, there are two solutions to this game: a bubble, and a "store of value" version.  The bubble version is that you think that you will find people that will pay much more for the asset than you have to pay for now.  In other words, you're a fool buying the stuff, but you hope to find an even greater one.  That's like a pyramid game: in the end you run out of greater fools, but it is the last layer of fools (the greatest fools) that pay for the benefit of all their predecessors.  
But there's also a steady-state solution to it: you're not expecting MORE than you put in it, but you consider that it is a safe heaven for the value.  You're not looking for a "greater fool" but for a "same fool".  Gold is like that.  Nobody expects to make benefit by holding gold.  But you are convinced that if you buy gold now, it will still hold that same value 60 years from now (give or take a small factor).  Gold that will buy 10 houses now, will most probably also buy about 10 houses 60 years from now (maybe 3, maybe 30 houses).  You do not expect that gold to buy you a whole town 60 years from now, nor do you expect to being able to buy simply a bicycle with it.  That's a sustainable form of "equal fool".

Now, bitcoin seems to play in the "get rich quickly" scheme, that is, the greater fool stuff.  Almost the only reason why people buy bitcoin, is to sell it later at a higher price, not, like me, to try to use it on Openbazaar or buy their VPN/VPS services with for privacy.  That's pure "greater fool".  That has to end one day, because, as you say, it is a pyramid game that stops when one runs out of greater fools.

I don't know if we just witnessed that.  Are there still enough greater fools on earth, that will make the people that bought at $17 000 rich ?  That is to say, are willing to pay $170 000 for a coin ?  With what hope ?   To sell it for $1 700 000  a coin ?  Seriously ?  Who would buy it at $1 700 000 a coin ?  A fool thinking that he'll be able to sell it at $17 000 000 ?  Really ?   In fact, maybe.  I'll tell you why: alt coins.

If bitcoin were alone, the above phrase should make you think that nobody is going to buy bitcoin at $170 000.  But then, why did some idiots buy at $17 000 ?  What were they hoping for ?  But that was already the case at $1700:  who was expecting, one year ago, that you would find idiots buying at $17 000 ?  But without that, what's the point of buying at $1700 ?

But now, there are alt coins.  With alt coins, you can continue to play this greater fool game without ends, because one day, bitcoin rises, the next day, bitcoin falls, but ethereum rises, and the third day, ethereum falls but cardano rises, etc....

You don't have an *asset* any more, but you have a *market*.  With a market with several assets, rising and falling, newcomers jumping in, oldies dying, the "greater fool game" can continue forever, with limited market cap, because the capital that is in coinX today, can move to coinY tomorrow, and to coinZ the day after, without the need of NEW greater fools.

That's exactly what the financial world is.  The derivatives market is 10 times bigger than earth's economy.  So all that is hot air, but nevertheless, big finance plays in this since years.

It is, as you say, a big zero-sum game.  It doesn't create any value, but it is a casino.  There are losers, that pay for the winners.  But the losers continue playing, with the hope of being the winner one day.  And all economic value produced by people is eaten by that monster.

Well, the whole crypto market is evolving towards that finance market, but "on steroids".   Why would financial gamblers (big banks etc...) be satisfied with a volatility of half a percent per day, if they can have 20% in the crypto market ?  Crypto is way, way, way more interesting as a big finance casino than "real-world derivatives".  It is international, opaque, decentralized, you don't know who the participants are....

And that's why I think that this market will grow.  I think the crypto market will eat the derivatives market in the long run.  That useless, dangerous beast that fucks up all of sensible economic action, and dictates human and political action by its shear financial muscle will get doped by crypto.  Its booms and busts will make a crisis like 2007 pale in comparison.  And the control will be entirely opaque, international, and without any oversight.  This is going to go sky-high, and destroy everything on its way.


It is much more sophisticated than that.   The whole derivatives market of big finance doesn't make sense either.  But it is what dictates our society.  For the moment, there are still legal restrictions on those markets, but crypto will eat all that.

This is why I think that bitcoin at a million $ is thinkable - except if bitcoin dies earlier with its clunky devs.

Yes, the similarities with 2014 are strong: a crazy bubble with an ATH that was manifold the previous year's average, a crash, a bull trap, and then a long, agonizing, slow decline for a few years.  There was a previous crazy bubble in 2011.  

ATH on June 8, 2011: $29 coming from $1 a few months before. Crash down to about half of it, $6.5, on August 6, 2011.  Bull trap back to $11.15 a week later, and slow decline to around $2 - $3 for the rest of the year.  Next year, 2012, slow rising back to about less than half of the ATH, around $10 - $12.  2013: first crazy run-up to over $100 (even one day, over $200) in April 2013 with peaks over $1000 at the end of the year.  New ATH at $1124 on December 4. 2013.  Crashing down to less than half of it $522 on December 18. 2013, with bull trap back to $800-$900 in January 2014, followed by slow decline for the rest of the year (about $300 towards the end of 2014), with deep point $199 on January 17, 2015.
Stabilizing during 2015, steady value around $250 until October 2015.  Rise from there onward, until boom in December 2017.

I have the impression that the times between bubble bursting is becoming larger, but the pattern is repeating.  It has the typical pattern of a speculative bubble, except that usually, speculative bubbles are a one-time phenomenon, and bitcoin has already had 3 successive speculative bubbles.  So I guess the next one is for 4 or 5 years from now.

However, the lessons are two-fold.  On one hand, many people may realize they are in for a long bear period and may decide to sell now, even if it is to buy back in at the bottom (one year from now or so), some order of magnitude below the ATH ; as such, this becomes a self-fulfilling prophecy.  People may also realize that bitcoin may bubble again, and that it would be unsafe to sell because one might miss the train.  I guess this was already the case after the 2013 bubble, explaining the very slow decline.  

But the situation has changed.  There's competition.  Bitcoin was alone essentially during the two previous bubbles.  Now, bitcoin is about 1/3 of crypto, and technically in a bad shape.  The driving belief of "money of the future" is also gone.  In 2014, you could still talk people in believing they could buy their groceries one day with bitcoin, that's over now... unless the lightning network proves to become a great success, which I personally doubt, but you never know.  Bitcoin as the new world currency was still a dream in 2014, it will be much harder to convince people right now.

So it is really an open question whether bitcoin will have had its last bubble, or whether it will bubble on like it did in the past.  However, normally, we should have a long bear market ahead.

You are obviously right.  But the "currency" narrative of bitcoin was only to get it going, to give it a sense of economic utility.  It is in fact a highly speculative asset, which is, as you say, in contradiction with the notion of currency.

By definition, a currency is to be gain-neutral, because it is supposed to be a space and time translation of economic value.  That's its whole utility: that you shouldn't worry about the value it carries, because it is the same, in and out.  This is what Nash defined as "ideal money".  Most fiat currencies, however, are not ideal money, because they have some inflation built into them.  Nevertheless, if this inflation is predictable and constant, that's a good substitute for ideal money ; it is what Nash called "asymptotic ideal money".  There are idiots who say that Nash is Satoshi, but Nash would never have built a stupid monetary system built on collectibles with high initial inflation - unless he was a bastard tricking people into his pyramid game, of course.

As some wrote, gold, a near-collectible, has had the function of money some times.   But most of the time in history, money has been a trust-based asset, with only a remote link to gold, simply because the monetary theory based upon collectibles doesn't work.  Yes, it has value !  But it is so volatile, that it cannot fluidify commercial relationships.  Exactly like bitcoin. 

Bitcoin COULD have had an almost ideal behaviour, simply by programming its difficulty along a technology slope, so that each coin mined did cost about the same amount of value.  That would have regulated the coin issuing so that it would behave something like Tether.  If the value rises, people mine more coins because it is profitable ; if the value falls, people stop mining them, and they become scarce.  If ever Nash would have been Satoshi, he would have done a thing like that.  The difficulty-adjustment to a finite amount of coins is what turns it into a speculative asset which prevents it from being a currency ever.

It's all in the title: I don't understand the almost perfect market correlation in crypto.  That doesn't make sense.  It did make sense when crypto was bitcoin, but now that bitcoin is one third of crypto, what's the cause of this strong correlation ?  Whales are not whales in all of crypto.  If they dump, they can only dump the coins they own ; other chains shouldn't be affected.  You might think that people keep portfolio ratios, but that's in contradiction with bitcoin's market share fluctuations of the last few months.  You might think that ethereum and crypto are the only crypto/fiat gateways, but 1) that is not true (Kraken has many fiat/crypto pairs) and 2) that doesn't matter, because you can trade any crypto X for any crypto Y, using only exchange IOU of eth/btc for a few seconds, without ever transacting real bitcoins or real ether, and hence, you're only depending on the volatility during these few seconds, and you don't care anything about their absolute market position.

Crypto market is moving as one single monolithic bloc, and that simply doesn't make sense.  Any idea ?

This is very weird.  I can perfectly understand that you do a major upgrade you tested, and before launching openly, but by testing it on production environment, you see that the upgraded system has problems you didn't see in testing environment.  But what do you do in such a case ?

Revert to backup of course !  You don't continue to twiddle on your production environment while you keep customers out.  You only realized that your testing environment failed to be a good test bed, so you put back the old system, and you try to improve your test environment so that you can faithfully reproduce the problems you inadvertently saw during upgrade !    If you saw stuff in the production environment that you didn't see in the test environment, then you can't trust the upgrade, and you have to go back to the previous, working environment.  You don't do testing on your production environment for days.
 

Indeed, 9 years already the 21st century version of Das Kapital was put in practice by Satoshi: "all speculators, big and small, unite !". 

It is more like CP/M of the crypto industry 

Point is, the volumes are on par with the market cap.  Bitcoin has 1/3 of the market cap of crypto, and *also 1/3 of the volume*.  These are two indicators giving its true significance.  XRP has half the bitcoin market cap, and also about half its volume.  So all this makes sense.