Is the Bitcoin ecosystem sane?

[Lionel]

Hi i'm new to bitcoin and i have noticed that everyone here wants bitcoin only to speculate and to exchange BTC to real money at the end of the day, instead of using it to purchase actual goods & services.

This is nonsense for a number of reasons, tell me if i'm wrong.

First, the main purpose of Bitcoin is to safely hide your money from the eye of the governement who overwhelmes you with taxes and halves your income.
Actually you may legally run a business making lots of BTC without declaring it to the governement, because for them you are not getting actual money so you don't have to declare it.

But...if you miners exchange your 1,000 BTC to real dollars as soon as you have mined them, the trick does not work anymore!! Now you have lots of real money and you have to declare it.

I don't understand why is this if there are many online businesses out there accepting BC, you could purchase almost all kinds of stuff that you need, directly with your virtual currency.
It seems those shops have very few bitcoin-paying customers, see for example bitmit.net, almost all auctions have 0 offers.

If we continue like this, those businesses will stop to exist and you'll only get BTC to be traded with dollars....which you have to declare

Another issue : you miners can generate bitcoins only if there are transactions for which to find blocks..... but if people don't spend bitcoins .... there are no transaction for which to "solve blocks",  is that true?
So i think we have reached a point where there is no convenience in investing in a super-ASIC miner, because there are already too many out there and their computed GH/s will generate more blocks than the network actually needs, due to the lack of transactions to work with.

I was about to get an ASIC miner but i feel it would be a no-return investment for the reason above.
What do you think about it?

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[katutidi]

Hi i'm new to bitcoin and i have noticed that everyone here wants bitcoin only to speculate and to exchange BTC to real money at the end of the day, instead of using it to purchase actual goods & services.

This is nonsense for a number of reasons, tell me if i'm wrong.

First, the main purpose of Bitcoin is to safely hide your money from the eye of the governement who overwhelmes you with taxes and halves your income.
Actually you may legally run a business making lots of BTC without declaring it to the governement, because for them you are not getting actual money so you don't have to declare it.

But...if you miners exchange your 1,000 BTC to real dollars as soon as you have mined them, the trick does not work anymore!! Now you have lots of real money and you have to declare it.

I don't understand why is this if there are many online businesses out there accepting BC, you could purchase almost all kinds of stuff that you need, directly with your virtual currency.
It seems those shops have very few bitcoin-paying customers, see for example bitmit.net, almost all auctions have 0 offers.

If we continue like this, those businesses will stop to exist and you'll only get BTC to be traded with dollars....which you have to declare

Another issue : you miners can generate bitcoins only if there are transactions for which to find blocks..... but if people don't spend bitcoins .... there are no transaction for which to "solve blocks",  is that true?
So i think we have reached a point where there is no convenience in investing in a super-ASIC miner, because there are already too many out there and their computed GH/s will generate more blocks than the network actually needs, due to the lack of transactions to work with.

I was about to get an ASIC miner but i feel it would be a no-return investment for the reason above.
What do you think about it?

People exchange their BTC for fiat because fiat is actually backed by something, the US government (USD anyway) and bitcoin are not backed by anything; they rise and fall purely because of speculation, nothing else. People in general would much rather make a profit on fiat (USD or euro or something) then a profit on bitcoin because their profit in bitcoin tomorrow could be 5% of what it is today but in fiat it will remain basically constant.

[BartlebyTheScripter]

I think it depends upon what you mean by "sane".

If you mean "coherent and valid in its construction" it seems Bitcoin is the most coherent, reviewed and validated systems among the cryptocurrencies I've seen so far.  I'm finding Bitcoin unusual in that its protocol and major design features are fully documented and amenable to review and analysis, which is more than can be said about most of them out there.  A lot seem to be little more than a downloadable client with a website and/or whitepaper saying lots of heady stuff most of which can't be confirmed.  You have to wonder whether a lot of them are scams or attempts at some pump-and-dump strategy.

If you mean "populated with actors behaving rationally" it's pretty clear there are lots of reasonably intelligent people who see lots of potential in the system.  To what degree those individuals are committed to working toward a sustainable ecosystem with a long-term future is subject to debate.  Many people I've encountered seem interested in either currency speculation or doing some mining and cashing out to fiat currency.  Whether that's the long-term norm remains to be seen.

If by "sane" you mean "on track to a stable and sustainable long-term future" it's anybody's guess at this point.  There's lots of indication that Bitcoin is getting adopted, but so many of the actors seem mostly interested in speculating and cashing out such that promoting Bitcoin as a vehicle for actual day-to-day commerce seems to be something of an afterthought.  My personal belief is that Bitcoin's long-term future depends upon it reaching a point where most of the transaction volume is in commerce rather than speculation.  If most of the transaction volume is in huge transfers among dominant players and heavily financed actors from the fiat currency world looking to do a little hedging it will never achieve the stability needed to gain broad acceptance and thus last only as long as a handful of dominant players deem it interesting.

[Foxpup]

First, the main purpose of Bitcoin is to safely hide your money from the eye of the governement who overwhelmes you with taxes and halves your income.
Actually you may legally run a business making lots of BTC without declaring it to the governement, because for them you are not getting actual money so you don't have to declare it.

This is illegal. The government, for the most part, doesn't actually care whether your income is in legal tender, bitcoins, foreign currency, gold, stocks, pork belly futures, or whatever. All individuals and corporations are required to pay tax on the market value of whatever it is they receive as income. If you're attempting something like this and don't understand the tax implications, you should ask your accountant or tax advisor about taxation of barter transactions for information specific to your situation.

But...if you miners exchange your 1,000 BTC to real dollars as soon as you have mined them, the trick does not work anymore!! Now you have lots of real money and you have to declare it.

They had to declare it anyway, for the above reason. And if/when they do exchange their bitcoin for legal tender (or anything else for that matter), they also have to declare any increase in value of their coins between when they mined them and when they sold them (if, on the other hand, their coins decreased in value during that time, they can declare the loss and in some cases get a tax refund for it). Again, ask your accountant or tax advisor about capital gains and losses for more information.

Another issue : you miners can generate bitcoins only if there are transactions for which to find blocks..... but if people don't spend bitcoins .... there are no transaction for which to "solve blocks",  is that true?

Every block is guaranteed to have at least one transaction: the transaction that pays the miner his newly generated bitcoins! There is absolutely no problem with this transaction being the only transaction in the block. Note also that trading bitcoins for fiat money also involves transactions just as spending them does.

[mralbi]

Well, bitcoin means different things to many people.

As from my side:

1) I support the idea strongly from political level, so i just keep mining, no matter if is profitable or not, i also kept mining full speed when the price was 2 USD.

2) I use it to "hide" money, not really from the government, but mainly from banks. I like to have my assets at hand, for that also dont care much about the actual bitcoin price

3) Using it to purchase stuff is also a cool thing. When i do not buy food or pay the rent i for example when i buy stuff online I always use bitcoin so I can get my software codes immediately

4) In private life I use bitcoin to send money to relatives, use them as wedding or christmas present, donate it to cool websites/stuff and even go to a restaurant that accepts bitcoin

5) Of course it is also speculation. When I assume that the price drops I would sell some. When I assume the price goes up again I will buy more, thats all natural. But I always stick to my basic rule: Never sell all your bitcoins.



So bottom line, yes there is lots of speculation, but Bitcoin has far more to offer, it is a well-connected community and many people all over the world accept bitcoin for various things.

But if you wait till the supermarkt next door accepts bitcoin, this will never happen. But better ask yourself: Who accepts Gold? The supermarket? Can you pay your rent in gold?? No! But it still is an accepted asset that also fluctuates in price and lot of speculation is involved.

[jago25_98]

Acceptance is a very important indicator of how well Bitcoin is doing.

However, look at gold. I've tried a few times to see if a shop will accept a gold coin and they never do, or if they do they like to make a fat profit from it. Yet gold is still seen as a currency and countries in particular use it for payments.

The question then becomes,
how much is speculation and how much is real value? That's the hard one to answer. In particular it's difficult to unpick people who have a small store of emergency funds as BTC because it's harder to confiscate than gold for example.

[whault]

First, the main purpose of Bitcoin is to safely hide your money from the eye of the governement who overwhelmes you with taxes and halves your income.
Actually you may legally run a business making lots of BTC without declaring it to the governement, because for them you are not getting actual money so you don't have to declare it.

I wouldn't say that everybody has that goal. I have no particular qualm paying tax, and indeed happily paid tax on my mined coins. Worth it if only for the confusion on my tax accountants face when I tried to explain it all.