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Author Topic: Why I'm Wary to Invest (Change my mind and I'll give you 1 BTC)  (Read 4279 times)
Jack of Diamonds
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June 26, 2011, 01:18:58 AM
 #41

Deflation due to limited supply.

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June 26, 2011, 01:35:18 AM
 #42

I personally don't think this is an issue, because the success of the existing Bitcoin network creates a very strong barrier-to-entry for competitors.  Who is going to participate or invest in a competing cryptocurrency when Bitcoin already has such a long head start?  Why would anyone switch over when Bitcoin is already so well established?  It would take significant, compelling new features in any competing cryptocurrency to convince people to switch over to it.  Maybe it will happen someday, but I personally don't think it will be soon...

I'm just going to use your quote because it's hard to address everyone individually (although thank you everyone for your input).  I have to disagree with your assertion and it's what concerns me the most.  There are very low barriers to entry.  Bitcoin is open source, it's out there for everyone to see and replicate.  There are many barriers to entry but the primary ones are cost of capital, geography, and regulation.  I'm sure there are more but I'm just going off the top of my head.  Bitcoin has none of those barriers.  

My example of Pfizer would be a better example of a high-barrier-to-entry.  They are protected by patents, have to spend millions on R&D and have to deal with the FDA scrutiny/approval process.  THOSE are high barriers to entry.  Bitcoin can be recreated relatively easily by a saavy computer developer(s).

I'm also a bit surprised about the first to market and Facebook examples.  Facebook was most definitely NOT first to market.  Asian Avenue, MySpace, there were tons of predecessor social networking sites.  Facebook just improved on those concepts.  If anything, Facebook strengthens my point.  It's the latest and most successful incarnation of social networking.  But first?  Not even close.

Speaking of market cap (whether you feel it relevant or not) you simply cannot have an unprotected multi-million dollar concept, or whatever you want to call it, and not expect to see immense competition.  If a guy was selling hotdogs for $50 each, that costs him $2 to make, AND posts his recipe for everyone to see, wouldn't you or someone else come in and start selling hotdogs too?  Of course!  Because there's profit to be made.  That's why I say it's simple economics, to think BTC can go to $100 or whatever arbitrary number you want to use without factoring in competition is coming to a conclusion missing a very important variable.

I just want to finish by saying I'm not trying to sway people one way or the other.  I think it's been a great discussion.  But for me, this is the way I do my investing/speculating.  I play devil's advocate and see what type of responses I get.  

What your argument is missing is the fact that Bitcoin is fully decentralized, so no company can just create a Bitcoin 2.0 and profit. Anyone trying to create a for-profit version of the technology will need to centralize the function mining provides in Bitcoin: transaction validation and currency issuance. If Google created gCoin and intended to profit from it the design would make the product a new Beanz instead of a new Bitcoin. Would you use a new Beanz? Would anyone else? The key distinction is between centralized and decentralized digital currencies.

The only threat from competition is from a superior technology. Even in this case if enough users want to keep the existing blockchain they may find consensus to use it to bootstrap the new technology. If that happened your existing bitcoins would still be valuable.
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June 26, 2011, 01:36:25 AM
 #43

go with your gut, if your weary, then sail along to something else that floats your boat, why belabour it?

good luck and good bye

ElectricMonk
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June 26, 2011, 08:09:31 AM
 #44

Your first question is a misunderstanding of market cap. There's no room for subjective debate here. It's a question based upon a false premise regarding in-flow of USD.

I'm also a bit surprised about the first to market and Facebook examples.  Facebook was most definitely NOT first to market.  

That was my point. Facebook came after a plethora of social networking sites but it was based upon technologies that had existed for years... HTML, HTTP, PHP, Javascript.

Nobody in their right mind would design PHP these days. Trust me, it's f&*(ing horrible and ASP ain't any better but they're used because there's a huge intellectual and infrastructural investment in them. So people take these crap technologies and they invent! They create PHP frameworks and Javascript libraries. That's how the world moves on.

The 'profit' comes from finding new ways to utilize the technology e.g. building Amazon.com. That's where the future money is but right now the money can be made by simply recognizing it as a unique and ground breaking concept and buying some BTC.

People will take the path of least resistance because high utility from a small amount of effort is how we make profit/money. Bitcoin2.0 would be hard to create, even with a significant amount of investment.

Where would you start? If you're the Google CEO and you want to start gCoin (a theoretical decentralised, P2P currency publicised by Google) - leaving aside all the political/social/legal entanglements that a blue chip would want to avoid - your best bet would be to take Bitcoin 1.0, make some minor improvements (hard to think what they'd be to be honest but let's assume you can make some) then repackage as gCoin (still decentralised BTW but with Google brand) and offer out 6.5 million gCoin with a $30 guarantee each. Essentially offer free money to the world! The money would likely be snapped up by those with no understanding of the currency who would be eager to cash out. But say it wasn't, let's assume the 6.5 million gCoins were bought by a group of techies/nerds who could see the potential, then the curreny might take off and a gCoin might be worth 1000 USD in future. Great! What's Google got out of this? Nothing. They were willing to act as guarantor to a fledgling currency that creates no profit for them.

RE: Mining - I personally don't touch mining. It's a hugely competitive and near perfect market so economics tell us that the profits will be low (not for an individual but for the market as a whole). In short, adjusting for the BTC price increase, bitcoin mining is low profit unless you have something that separates you from the crowd and for those few the profits are huge. So personally, I earn money in my business and buy a small BTC investment rather than mine.

I'm always a little bit surprised that people can't see how unique and interesting Bitcoin is. It's like watching the first email to be sent and then shrugging your shoulders and walking away. Very odd.

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June 26, 2011, 09:04:44 AM
 #45

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Where does this money come from? 

30 Million a year is nothing. That's the revenue of a small company. Remember that Bitcoin is a global project. There are now Bitcoin early adopters in the most remote corners of the world, and most people in the world haven't heard about Bitcoin yet.

There are 1 Billion internet users in the world. If just 0.3% (3 Million) of them join Bitcoin in the next 12 months and spend $10 to give it a try, the price will stay where it is.

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Bitcoin in unpatented intellectual property. 

So is Wikipedia. It is very easy to copy Wikipedia and make a for-profit fork. Even Wikipedia's content can be used commercially as long as it's published under the same license.  Yet, nobody seems to have succeeded with this. Well, there are a few examples but their user numbers are negligible compared to the original Wikipedia.


Why is that? Mainly because of network effects and "community spirit".

Network effects are even stronger for Bitcoin than for Wikipedia.

A closed-source version of Bitcoin would lose the emotional appeal of decentralization. It would be no better than the dozens of centralized virtual currencies already out there: liberty reserve, linden dollars, pecunix, ...

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June 26, 2011, 04:40:23 PM
 #46

Quote
Where does this money come from? 

30 Million a year is nothing. That's the revenue of a small company. Remember that Bitcoin is a global project. There are now Bitcoin early adopters in the most remote corners of the world, and most people in the world haven't heard about Bitcoin yet.

There are 1 Billion internet users in the world. If just 0.3% (3 Million) of them join Bitcoin in the next 12 months and spend $10 to give it a try, the price will stay where it is.

Quote
Bitcoin in unpatented intellectual property. 

So is Wikipedia. It is very easy to copy Wikipedia and make a for-profit fork. Even Wikipedia's content can be used commercially as long as it's published under the same license.  Yet, nobody seems to have succeeded with this. Well, there are a few examples but their user numbers are negligible compared to the original Wikipedia.
.

Why is that? Mainly because of network effects and "community spirit".

Network effects are even stronger for Bitcoin than for Wikipedia.

A closed-source version of Bitcoin would lose the emotional appeal of decentralization. It would be no better than the dozens of centralized virtual currencies already out there: liberty reserve, linden dollars, pecunix, ...


I agree with people here that because of the network effects there will probably not be a successful competitor to bitcoin unless it's radically different, or at least have some kick-ass features that Bitcoin lack. That's why we have near-monopoly on services like Facebook, E-bay, Paypal, Wikipedia etc. Why do we use these services? Because everybody else does. All of them might not have been first of its kind, but they were first to reach the "critical mass" were the network effects get so important that they can't be out-competed by a similar product. I would say Bitcoin have just reached the critical mass. Not that I can back this with numbers or anything, but that's the feeling I get.

Talking about numbers, can you explain yours? Why would the exchange-rate stay the same? 3 million spending 10 each tells you something about demand but nothing about supply, i.e. how many will sell at the same time and to what price

Looking for an easy way to charge bitcoins at: houseofreplicas.net, high quality replica watches. Using WP with the E-shop plug-in at the moment for charging credit-cards.
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June 26, 2011, 09:07:26 PM
 #47

Never invest money that you can't afford to burn.  If you lose it, you're still ok, if you make it big, more power to you.

darkwon
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June 26, 2011, 09:08:42 PM
 #48

Prices trend upwards, even after a massive security disaster -> BTC is bulletproof.

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