Several Thoughts about the Crypto Currency Phenomenon

[MissouriTiger]

I have several thoughts regarding the Currency Phenomenon. I am interested in hearing anyone's responses.

1. As the cost of processing bitcoin transactions (mining) continues to increase over time, once the cost becomes prohibitively expensive, who will process the transactions? Why would anyone be willing to spend their money on hardware & electricity with no return on their investment? And when nobody is willing to do it anymore, won't the currencies collapse? O

2. There is an interview on YouTube where a guy says that bitcoin has value, because people spend money to create it by mining it. This is a fallacy. Spending money to produce something does not automatically give it value. Many useless, worthless things are created every year that nobody wants. All of those things cost money to make.

3. Some people believe that cryptocurrencies will completely replace physical currency, that cash will be obsolete. I feel that would be a dangerous situation. Once all money becomes digital, the power grid will become the number 1 target for terrorists. Also, as fossil fuel reserves are depleted, the cost of electricity will rise significantly. There is still no way to generate the amount of electricity the world needs by alternative means. Nobody is sure if it can be done.

4. Many people seem to think that bitcoin is somehow inherently democratic, but I think the opposite is true. Clearly, those with the most money are able to mine bitcoins much more rapidly.

I am interested in your thoughts...

[cascano]

As an answer on your point 4 : Bitcoin is indeed not as decentralized as you think. there is something like a 51% attack that can occur. This is where one person, or several people control 51% of the network and fcan thereby manipulate where the mining block rewards go to. Other crypto currencies exist where this 51% attack is not possible. On coin that tackles this problem is Nexus (NXS)

[MissouriTiger]

Yes, I read about the 51% attack possibility. I did not know that the problem had been eliminated in other currencies.

[krishnapramod]

1. So basically what if mining becomes unprofitable to the point where cost of producing one Bitcoin exceeds mining costs, right? It depends on the price of mining hardware, power, and most importantly BTC/USD exchange rate (hard to predict). Even now mining isn't profitable for everyone. So in a scenario where mining becomes unprofitable for a good number of miners, they would leave, the rest of the miners would keep mining, assuming it would be unprofitable for everyone would be too hypothetical (geographical location, cheap electricity/renewable resources, technological advancements in mining hardware), difficulty would drop to the point where it again becomes barely profitable to mine.

2. According to cost-of-production theory of value, the price of an object or condition is determined by the sum of the cost of the resources that went into making it. I think in the early stages of Bitcoin or maybe even a couple of year ago it was the case, but now it is more of a value-based pricing. I don't think today, there is any direct correlation between cost of production and the current market price. It looks like the market price which is based on Bitcoin's scarcity and utility is dictating the cost of production.

3. Cryptos making cash obsolete is a far-fetched theory. A plausible scenario would be a parallel economy where both centralized and decentralized cryptos would co-exist. The electricity consumption is a real issue, don't know how it will get addressed in future, maybe renewable resources.

4. Bitcoin isn't a democracy.

Bitcoin is a system of super-majority consensus where it takes a very large percentage of the deciding groups (the five constituencies of consensus) in order to make change, which makes change very difficult. Bitcoin isn’t a democracy, not even in the mining.
- Andreas Antonopoulos

[mk4]

1. I think there will always be a sort of fine line between mining becoming profitable and non-profitable. Less miners = higher profit for miners, so there will always be people that will be mining.

2. "Many useless, worthless things are created every year that nobody wants. " Sure. But remember that no one has set a constant price of bitcoin. The price of bitcoin is only solely determined by the supply and demand of the people. So obviously, people definitely like bitcoin.

3. As much as I think that the chances that bitcoin will replace fiat money are quite low(as obviously the government wouldn't allow this), how would it end up though? I really don't know. Also, good luck getting the terrorists to destroy the power grid of the whole world. That's one of the beauties of bitcoin and most cryptocurrencies, they're decentralized. The miners are spread out on the whole world, not just one single country.

4. Same just with almost everything in real life. Those with huge amounts of money are able to make more money through investments and businesses; it's not just with bitcoin mining.

[cellard]

I have several thoughts regarding the Currency Phenomenon. I am interested in hearing anyone's responses.

1. As the cost of processing bitcoin transactions (mining) continues to increase over time, once the cost becomes prohibitively expensive, who will process the transactions? Why would anyone be willing to spend their money on hardware & electricity with no return on their investment? And when nobody is willing to do it anymore, won't the currencies collapse? O

2. There is an interview on YouTube where a guy says that bitcoin has value, because people spend money to create it by mining it. This is a fallacy. Spending money to produce something does not automatically give it value. Many useless, worthless things are created every year that nobody wants. All of those things cost money to make.

3. Some people believe that cryptocurrencies will completely replace physical currency, that cash will be obsolete. I feel that would be a dangerous situation. Once all money becomes digital, the power grid will become the number 1 target for terrorists. Also, as fossil fuel reserves are depleted, the cost of electricity will rise significantly. There is still no way to generate the amount of electricity the world needs by alternative means. Nobody is sure if it can be done.

4. Many people seem to think that bitcoin is somehow inherently democratic, but I think the opposite is true. Clearly, those with the most money are able to mine bitcoins much more rapidly.

I am interested in your thoughts...

My take on this...

1. It will always be profitable for some people to mine bitcoin, it's simple game theory. If it's not profitable for X, the difficulty lowers, and Y will be on the right spot to find a profit. It is a self adjusting system. With lightning network, miners will make revenue by mining all these blocks filled with transactions.

2. Bitcoin has value because it cannot be regulated. If you own 1 BTC, you own 1 BTC. There are no government that can cause a bail-in and steal it from your wallet. This has value within itself. The fact that you can send it around the planet across borders with no permisions is also another value of bitcoin. Some people can't get their heads around this fact and make retarded analogies about it this that just don't apply.

3. Physical money is going out like it or not, this is not on our reach, it's the government's agenda. Now thanks to bitcoin, we can have an alternative way to store and move wealth once physical cash is removed.

4. Bitcoin was never a democracy, I don't know where did you get that from. Bitcoin is all about skin in the game. You are either holding a lot of it, or you are mining a lot of it, those are ways to matter in bitcoin. If you make a technological breakthrough, you can add it as a BIP and you will get rich from doing so, it's open to anyone to contribute.

[dothebeats]

I have several thoughts regarding the Currency Phenomenon. I am interested in hearing anyone's responses.

1. As the cost of processing bitcoin transactions (mining) continues to increase over time, once the cost becomes prohibitively expensive, who will process the transactions? Why would anyone be willing to spend their money on hardware & electricity with no return on their investment? And when nobody is willing to do it anymore, won't the currencies collapse?

That is where the talks for a new algorithm comes to play. When the time comes that a single transaction costs $100, wouldn't it be feasible and most importantly economical to just remove the miners and look for better alternatives in processing transactions instead?

2. There is an interview on YouTube where a guy says that bitcoin has value, because people spend money to create it by mining it. This is a fallacy. Spending money to produce something does not automatically give it value. Many useless, worthless things are created every year that nobody wants. All of those things cost money to make.

Exactly, just like the government spends money on creating fiat doesn't necessarily mean that fiat has value because it costs to make them. The thing is, bitcoin has value because a lot of people agrees that it is priced X in their own currencies. It's a subconscious agreement from all the people which makes an item worth something.

3. Some people believe that cryptocurrencies will completely replace physical currency, that cash will be obsolete. I feel that would be a dangerous situation. Once all money becomes digital, the power grid will become the number 1 target for terrorists. Also, as fossil fuel reserves are depleted, the cost of electricity will rise significantly. There is still no way to generate the amount of electricity the world needs by alternative means. Nobody is sure if it can be done.

Replacing cash with bitcoin isn't going to happen. Bitcoin doesn't meet all of what fiat can do.

4. Many people seem to think that bitcoin is somehow inherently democratic, but I think the opposite is true. Clearly, those with the most money are able to mine bitcoins much more rapidly.

I am interested in your thoughts...

Mining has become centralized since the advent of ASIC miners. Only rich ass dudes with the fat bank account can buy these big boys and hash bitcoins for a living, which somehow makes the "decentralized" nature of bitcoin untrue.

[guybrushthreepwood]

3. Some people believe that cryptocurrencies will completely replace physical currency, that cash will be obsolete. I feel that would be a dangerous situation. Once all money becomes digital, the power grid will become the number 1 target for terrorists. Also, as fossil fuel reserves are depleted, the cost of electricity will rise significantly. There is still no way to generate the amount of electricity the world needs by alternative means. Nobody is sure if it can be done.

Cash is going to become obsolete and it will do so very likely within our lifetime. Maybe not crypto will over take it but almost all payments will become digital as we use our banking apps on our phones to pay for things. Cash is already on the decline with banking apps and most people already just use their debit cars over cash already. I think banks will have adopted the blockchain technology by then as well to process the payments though, so bitcoin will still have at least influenced the banking sector. I personally see bitcoin as something that will run alongside fiat cash (in whatever form) and just be a system to exist outside of the mainstream and I think there will always be a use for something outside the mainstream and centralized systems controlled by corrupt banking institutions. As for terrorists attacking, are you not worried they will attack our current banking system or even the internet? Also, will these same terrorists use different money to us? They need to get their funding from somewhere or are they going to be financing their terror operations in gold or something?