Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[JorgeStolfi]

Tim Swanson thinks transactions cost 25 BTC divided by the number of transactions in a block. That's a complete misunderstanding of not just what the block reward does but of what Bitcoin even is. He has gathered some interesting data, but his analysis is unlikely to be of much use as he has no fundamental understanding of Bitcoin in the first place.

Tim Swanson (who understands bitcoin's economy much better than most bitcoin gurus) is looking at the miners as an entity that performs a service to the "bitcoin system" (validating and securing transactions) in return for a payment (the block rewards and transaction fees).

Right now, that entity gets 25 BTC (~6000 USD) for each validated block, and the average block contains 750 transactions.  So the miners are being paid ~8 USD for each transaction that they process, on average.

In percentage terms, the transactions in a block move about 280'000 USD, on average (excluding presumed "return change" outputs); so the miners' revenue is about 2% of the money that they move.

There is not much room for misunderstanding there.  Right now,  the bitcoin network is way too expensive for the service that it renders.  If the price were to rise to 2'400 $/BTC before the next halving, and the volume numbers doubled until then (which is what they barely did over the last 2 years), the miners would be paid ~40 dollars per transaction , or 10% of the transaction amount, on the average.

As you all know, those 8 bucks (or 40 bucks) come entirely from the pockets of new investors -- the people who are buying bitcoins today to increase their holdings.  For the price to increase to 2'400 $/BTC over the next year, there would have to be a 10x increase in the money brought in by those investors.  I hope that everybody here is aware of that.

The money earned by the miners will never get back to the system; therefore, the only hope that those new investors have of recovering their money is that there will be enough new investors' money coming in tomorrow to pay for tomorrow's mining and to buy those bitcoins that they are buying today, hpefully with some premium. 

Thus, at current prices and rewards, the bitcoin protocol is creating every day another million dollars of naked debt: money which the bitcoin holders have put into the system, and expect to get back from it --- but which has been given to the miners, and will not be returned by them.

By pushing the cost of the network to those new investors, the protocol allows the users and entrepreneurs to entertain the illusion that transactions have almost zero cost, and therefore are cheaper than international bank payments and remittances.  This whacky "business model" cannot go on indefinitely.

[ChartBuddy]

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[becoin]

money which the bitcoin holders have put into the system, and expect to get back from it ---

I've put dollars into bitcoin but I don't expect to get back dollars. I expect to get back goods and services.

[cEI14b]

money which the bitcoin holders have put into the system, and expect to get back from it ---

I've put dollars into bitcoin but I don't expect to get back dollars. I expect to get back goods and services.

Bad excuses, goods and services providers will get dollars back immediately from shady exchangers or bitpay&coinbase, don't act like you don't know about it.

[becoin]

money which the bitcoin holders have put into the system, and expect to get back from it ---

I've put dollars into bitcoin but I don't expect to get back dollars. I expect to get back goods and services.

Bad excuses, goods and services providers will get dollars back immediately

Not all of them and not 100% of the bitcoins they get. You should read bitpay's report for 2014.

[Blazin8888]

Hey all. The Crave network is launching soon... (decentralized darkmarkets) and we are integrating BTC!

Take A peek:



http://coinmarketcap.com/currencies/crave/

https://bitcointalk.org/index.php?topic=997356.0

[cEI14b]

Let me get this straight, no one wants your over 80% dropped & dropping shitcoin, any Business or Merchants dare to keep it will go bankrupt and out of business.

Overstock decided not to keep any bitcoins any more, 100% fiat from bitpay, which is a smart thing to do after learned the hard lesson from their CEO's stupid mistake .

[TheButterZone]

As if businesses/merchants are running such razor thin margins that the <0.0001% of revenue they get from 100% BTC/fiat insta-conversion would bankrupt them if they instead held BTC for even the slightest bit of supply-choked upwards price movement.

[Cconvert2G36]

Something about needing $200+ dollars to coax a worthless internet token from a seller's hands seems to refute newb's wise words.

Have 2/10 troll points for trying tho   

Oh, and please short with leverage to reap those mad gains from the inevitable collapse.

[ChartBuddy]

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[derpinheimer]

As if businesses/merchants are running such razor thin margins that the <0.0001% of revenue they get from 100% BTC/fiat insta-conversion would bankrupt them if they instead held BTC for even the slightest bit of supply-choked upwards price movement.

I don't understand your statement here.. are you for or against overstock holding BTC? Because I don't see how instant conversion to fiat would have any negative consequences. Also, Overstock probably does have razor-thin margins.

[tabnloz]

I'm reading a bit of this Tim Swanson report Strider linked to and his analytical skills leaves a bit to be desired. I am not in any way suggesting that Brian Armstrongs assertion is unassailable, but Mr. Swansons attack on it is not worth much.

"Two months ago Brian Armstrong, the CEO of Coinbase, said:

Ripple, Stellar, and Altcoins are all a distraction. Bitcoin is way too far ahead. We should be focused on bitcoin and sidechains.

This is empirically untrue. If Bitcoin was “too far ahead,” then axiomatically no one would be working on all these other projects as they would clearly see this trend and focus on one platform. "


Edit: OK, I guess the answer to this:

1. It's not true that bitcoin (a token) and the underlying technology (a distributed ledger) are inseparable. As the Tim Swanson report showed (http://www.ofnumbers.com/wp-content/uploads/2015/04/Permissioned-distributed-ledgers.pdf).

I haven't read too closely (not closely at all, which is why I asked for a quote) but the kinds of networks where the blockchain and the token is separable it seems that no value is transferred. It will function purely as a ledger and the value will have to be transferred otherwise. If true, that seems quite limiting.

re: Tim Swanson's paper. A permissioned ledger is a completely separate thing from the Bitcoin protocol. There really should not be a direct comparison because the critical aspects of Bitcoin aren't present in a permissioned ledger. They aren't decentralised and they are not 'trustless'.

In conversation with Tim I've been privy to, he has two main things to say: one, that big banks don't want bitcoin because they need to trust an unknown third party (miners) and two, that this is a business game to make money not be idealistic. He believes bitcoiners are all misguided anarchists and libertarians and that only profit focused people who play nice with the TBTF's see the potential.

[lyth0s]

As if businesses/merchants are running such razor thin margins that the <0.0001% of revenue they get from 100% BTC/fiat insta-conversion would bankrupt them if they instead held BTC for even the slightest bit of supply-choked upwards price movement.

I don't understand your statement here.. are you for or against overstock holding BTC? Because I don't see how instant conversion to fiat would have any negative consequences. Also, Overstock probably does have razor-thin margins.

Amazon's current net profit margin is negative -0.22%, overstocks is positive 0.50-0.60%, but that is okay when you're making over 2 billion a quarter and attemping to grow. Overstock also has good returns on assets and equity (8% range) that helps its revenue streams.

Also If I remember Overstock's most recent shareholders reports correctly, they are actually hold quite a decent amount of bitcoin.

Edit: Overstock.com holds $233,000 worth of bitcoin as of March 31, 2015 Link - Current report

[shmadz]

Tim Swanson thinks transactions cost 25 BTC divided by the number of transactions in a block. That's a complete misunderstanding of not just what the block reward does but of what Bitcoin even is. He has gathered some interesting data, but his analysis is unlikely to be of much use as he has no fundamental understanding of Bitcoin in the first place.

Tim Swanson (who understands bitcoin's economy much better than most bitcoin gurus) is looking at the miners as an entity that performs a service to the "bitcoin system" (validating and securing transactions) in return for a payment (the block rewards and transaction fees).

<snip>

That's where you and Tim are mistaken prof. You are completely ignoring the main function of the block reward, which is to distribute the tokens.

[ChartBuddy]

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[Sitarow]

[derpinheimer]

Guys we need to entice our whale leaders.


P.S. this rocket is on a one way flight to the moon.*

*Crash landing probable

[ChartBuddy]

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Explanation

[Fatman3001]

I'm reading a bit of this Tim Swanson report Strider linked to and his analytical skills leaves a bit to be desired. I am not in any way suggesting that Brian Armstrongs assertion is unassailable, but Mr. Swansons attack on it is not worth much.

"Two months ago Brian Armstrong, the CEO of Coinbase, said:

Ripple, Stellar, and Altcoins are all a distraction. Bitcoin is way too far ahead. We should be focused on bitcoin and sidechains.

This is empirically untrue. If Bitcoin was “too far ahead,” then axiomatically no one would be working on all these other projects as they would clearly see this trend and focus on one platform. "


Edit: OK, I guess the answer to this:

1. It's not true that bitcoin (a token) and the underlying technology (a distributed ledger) are inseparable. As the Tim Swanson report showed (http://www.ofnumbers.com/wp-content/uploads/2015/04/Permissioned-distributed-ledgers.pdf).

I haven't read too closely (not closely at all, which is why I asked for a quote) but the kinds of networks where the blockchain and the token is separable it seems that no value is transferred. It will function purely as a ledger and the value will have to be transferred otherwise. If true, that seems quite limiting.

re: Tim Swanson's paper. A permissioned ledger is a completely separate thing from the Bitcoin protocol. There really should not be a direct comparison because the critical aspects of Bitcoin aren't present in a permissioned ledger. They aren't decentralised and they are not 'trustless'.

In conversation with Tim I've been privy to, he has two main things to say: one, that big banks don't want bitcoin because they need to trust an unknown third party (miners) and two, that this is a business game to make money not be idealistic. He believes bitcoiners are all misguided anarchists and libertarians and that only profit focused people who play nice with the TBTF's see the potential.

I get the feeling he underestimates the value of what Bitcoin is though. Yes, technologies like hyperledger might lead to a more efficient digital layer within a states banking system, but when you want to move money between jurisdictions and currencies much of the same old system applies.

With Bitcoin, any individual anywhere in the world can secure value digitally and send it to wherever s/he wants instantly, because it has value just about anywhere. That takes time to build, and as we all know, it's a bumpy ride. And it's a quality I don't see in any of the permissioned tokenless ledgers. With those you have to have a separate clearing mechanism, so basically most of the costs are still in place.

You might get it to some extent with permissioned ledgers with tokens. But if it's going to be as cost-efficient as Bitcoin they will have to go through the bumpy ride of price discovery, and I just don't see how that's going to be done. Nor do I see why it should be done. It can't be closed loop, so it will run into much of the same problems as Bitcoin, except now you have someone to sue. And how is that going to help?

[ChartBuddy]

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