Why Bitcoin changed the world... and its price will crash

[marcus_of_augustus]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

This ... I think most people have been undervaluing bitcoin since day one mostly because they are innumerate, particularly when using large numbers and dimensional analysis for calculations assessing relative significance. The amount of uses already out there for bitcoin, in black, gray and white markets is quite staggering considering the relatively small amount of total users (even a latent bitcoin holder is a user).

Another property of the network effect is that the more users that use the network the more unit value it has to the users already connected .... 2 fax machines are better than 1, 3 is better than 2, 5 million is better than 1 million, etc, i.e. bitcoin becomes more valuable per user the more users that exist, the price will eventually reflect that when we go through the super-exponential valuation/growth phase (vertical) before approaching the saturation plateau.

No doubt we will hear anguished screams of "bubble!" and "Crash to zero!" warnings the whole way up by those who are outside looking in.

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[Aki4real]

Will it replace money? No, just as credit-cards and ATM cards have not replaced money. Because you can easily launder money, and hide it, and keep its transactions anonymous. BTC transactions are not anonymous, only the individuals identity of ownership is anonymous. It is not the same thing. You can actually send physical money anonymously, and no-one would ever know you sent it to anyone, or who sent it, other than you. Well, the person who gets it, would know they got it, and might record it, but they would not know who it came from. As opposed to sending a BTC, which records the send and the receive.

+1

[BigJohn]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

[pening]

How can an algorithmic artifact be a proxy for physical gold?
Someone has to update the network manually on the amount of gold in existence, since the digital network can't figure it itself.

This means: trust.

Trust & cryptocurrencies don't mix.

institution X assigns $1bn gold or other asset to BullionCoin. They premine 10million coins and sell those coins. you now have a cryptocurrency based on gold.  advantage?  you can trade those coins over the internet and have them redeemed the other end for the asset.  (yes, i'm aware this is exactly the same as the foundation of early banking)

Trust?  yep, but one needs to understand that 99% of the population will more likely trust this proposition tomorrow than Bitcoin.  I predict we will see this, and not even backed by gold but simply cash.  If there's a market to deliver this type of secured money transfer ability (which no one advocating Bitcoin is going to disagree with, shirley?), then we have to expect sooner or later an organisation will deliver it without all that messing about with a uncontrolled, decentralised network, in their view.

[marcus_of_augustus]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

[BlueNote]

Cryptocurrency is not designed to be backed by anything. I don't know how a bank would do that, or deal with a distributed network. This whole design is about cutting out the banks and trusted third parties. The software becomes the issuer and trust in the accounting is created through proof-of-work and cryptography.

The banks could issue their own cryto-cash, but they'd have to get regulatory approval. You would withdraw cash under their proprietary system from their centralized server, and it could then be traded anonymously just like cash. Anyone who wants to cash out of the token would take it back to the issuing bank for redemption.

This would actually be a great innovation. This is different from a Paypal-like arrangement where people all have accounts at one bank and the service just moves money between them. This would be actual electronic dollars which are allowed to trade outside the dollar system and then come back like cash would. Banks would not know the path it traveled, so it would be great for privacy like cash but more useful. That kind of product could compete with Bitcoin.

I do agree that the establishment may co-opt Bitcoin in some ways. Wall Street will probably want to trade the heck out of it, short it, etc. The fed has UNLIMITED funds with which to play in markets, and Bitcoin is a very small market with great potential for manipulation every which way. They may not co-opt it in such dark ways, however. They may just find a way to integrate it into their services and charge fees. That seems like the logical thing to do. They don't have to fight it. They can just tame it and make it work for them rather than against them. Bringing it into the fold would help the government to collect taxes on it as well. Many people would want to have Bitcoin seamlessly integrate with their bank accounts, so there's a lot of leverage the establishment has just from their economic power. They may not have to get nasty at all in order to keep Bitcoin under their wing.

[BigJohn]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

Can you be more specific? Cause otherwise it sounds like you're talking shit. Don't get me wrong, I'd love to be proven wrong.

Yeah, I am saying someone will come along with something so similar to Bitcoin, and it will be banks and governments, and it will make Bitcoin obsolete. I said in my example that "Even though the fundamental technology hasn't changed all that much since the 80s", which it seems you've missed, the internet of today isn't the internet of the yesteryears. The tech is very similar, or even the same, but the final product isn't.

In the cryptocurrency world, things like Litecoin and Peercoin prove this point. It's easy enough to take the basic tech and build something extra on top of it. And the final product is Bitcoin-based, but it is not Bitcoin itself. Much like how the server that runs this forum is running the same technology as the first linked-up computers back in the day, but it is not those exact computers.

The leap from an Altcoin to a government/bank-backed coin really doesn't take that much imagination.

[marcus_of_augustus]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

Can you be more specific? Cause otherwise it sounds like you're talking shit. Don't get me wrong, I'd love to be proven wrong.

Yeah, I am saying someone will come along with something so similar to Bitcoin, and it will be banks and governments, and it will make Bitcoin obsolete. I said in my example that "Even though the fundamental technology hasn't changed all that much since the 80s", which it seems you've missed, the internet of today isn't the internet of the yesteryears. The tech is very similar, or even the same, but the final product isn't.

In the cryptocurrency world, things like Litecoin and Peercoin prove this point. It's easy enough to take the basic tech and build something extra on top of it. And the final product is Bitcoin-based, but it is not Bitcoin itself. Much like how the server that runs this forum is running the same technology as the first linked-up computers back in the day, but it is not those exact computers.

The leap from an Altcoin to a government/bank-backed coin really doesn't take that much imagination.

No, it is you who is talking shit.

Learn something, just a little would be a start, about technical networking protocols. Nuff said.

[BigJohn]

Ok so I'm wrong because... I just am?

Good argument old chap.

[marcus_of_augustus]

Ok so I'm wrong because... I just am?

Good argument old chap.

No, you are wrong because you don't have a clue 

That much is obvious, chap.

[BittBurger]

It's funny how *everyone* talking trash, is a new registrant here.  Fewer than 100 posts.

My estimation:  They "discovered" bitcoin a few months ago, googled for "Bitcoin Forums".  

Found this one, signed up, and felt motivated to share their pearls of wisdom with this community.

So here they are, all with 11 posts, 38 posts, 85 posts ... telling us why Bitcoin will fail.

My guess is its a bunch of self proclaimed economic experts, stock guys, and others in the old school obsolete finance world.

Just something I've noticed.  Obviously there are exceptions.

-Burger-

[frito]

All of us are tired of hearing the same weak arguments made against Bitcoin by reporters and mainstream economists who don't understand the fundamentals of cryptocurrency. Two weeks ago, I beg.......
.....yadaya...
These are realities that people on Wall Street know and believe. But they aren't being priced into BTC right now because there is no real way to short the currency's value, at least not with the scale and reliability that hedge funds demand. If there were, I guarantee there would be a significant amount of money willing to take the opposite side of bets against the BTC community's true believers.

Ultimately, the entire Bitcoin story will reinforce the truest aphorism of all: "Nothing is ever as good or as bad as it seems."

Mining fiat or gold based crypro currency?! really?!

[leeo]

If the argument against Bitcoin is that there is no physical backing to the rare numbers, consider the following:

I can envision a Distributed Autonomous Corporation [ ref www.letstalkbitcoin.com/bitcoin-and-the-three-laws-of-robotics ] that permits holders of slabbed gold or silver coins [ ref http://coins.about.com/od/coinsglossary/g/slabbeddefined.htm ] to sell covered calls on these assets, denominated in BTC.

One of the arguments against holding gold coins is that the money in this form, though it has no counterparty risk, has no associated income other than capital gains.  This would provide the holder of the gold or silver asset an interest income that is genuinely market set.

To the argument that there is no physical backing to BTC, simply purchase a few covered calls to guard against a BTC crash.  A critical mass of BTC to Au or Ag coins in the form of enforceable options would serve as a ballast, the way a genuine gold backing has to United States Dollars before the Federal Reserve Act.  --LeeO

[justusranvier]

Ok so I'm wrong because... I just am?

Good argument old chap.

Try having a discussion with experienced neurosurgeons about the pros and cons of different techniques without even having gone through medical school and I bet you'd get the same response.

[BigJohn]

Are you seriously comparing neurosurgery to TCP/IP? Really?

And how do you know what I do and do not know?

It's amazing how humans are always certain that if the person they're talking to disagrees with them, then surely that person must be stupid. It's unimaginable that you may just be slightly wrong.

The funny thing is that the point of disagreement is actually a relatively minor one. I wasn't even saying someone is fundamentally wrong about some major thing. Just a minor point that I happen to disagree with. But it's so unimaginable to you that you could be wrong on even the slightest point, that surely you must be talking to a complete retard. So much so that I'm asking for him to just try and explain to my feeble mind why I'm wrong, but that's too much of a bother to such an intelligence that can grasp BOTH neurosurgery and TCP/IP. Two of the most complicated notions humanity has ever come up with.

[proton]

Any institution can create a form of cryptocurrency.  It does not have to be a large financial institution.  Amazoncoin is one example.  All of these new currencies would require trust in that institution.  These might work with their customers, but it is hard to see they would develop a universal appeal.  For example, why would you go and buy, say AliBaba's Alicoins, JP Morgan's JPcoins or Sumimoto's Sumicoins, which you can't use elsewhere? If they are backed by something like gold, it is still a claim, you would not know if they are actually backed or not.  You are still taking the counterparty risk in financial lingo.

The real threat to universal adoption of a decentralized cryptocurrency comes from the States.  Each State might develop its own currency, may rule it as fungible with their paper currency.  Such as ChinaCoin, Ruscoin, USAcoin....They have the power to enforce the use of these while ruling Bitcoin etc. illegal. 

[undeadbitcoiner]

Only read the first couple sentences but   1) I would agree that right now bitcoin is overvalued in comparssion to how much adoption and usage it currently  has .... however......  2) Bitcoin has a ton of potential in the future and it's still in such it's early stages that I don't think it's unreasonable to think in coming years bitcoin could be more properly   valued and still be quite a bit higher than it is currently.

So even if it is overvalued currently, a lot of people would argue they don't care because they are investing based on it's valued 5-20 years down the road.

+1

The More Demand in Current Future and the Less Supply Capacity will raise price much more.

[Peter R]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

+1

Thanks marcus_of_augustus for writing the post I was about to write.  I guess unless you are involved/interested in the technical details, it's hard to understand that the backbone protocol of the internet is the same as it was in the 80s and 90s.  A quick Wikipedia search reveals that "TCP is a complex protocol...its most basic operation has not changed significantly since its first specification RFC 675 in 1974."  This shows how low-level flexible protocols (like bitcoin) have much longer lifespans than things like software GUIs, iPhones, or website designs.  

But bitcoin is largely mathematical too.  Mathematical results have even longer lifespans.  The math still used to infer 3-D structures in X-ray computed tomography was actually invented in 1917 by an Austrian mathematician Johann Radon.  The physics (still used to this very day) that describe all electrical and magnetic phenomenon is unchanged since James Clerk Maxwell put the finishing touches on the four equations of electrodyanmics in 1862!

[BigJohn]

I'm starting to think you guys may just be trolling

[toknormal]

Good points, up til this paragraph which is way off in my opinion...

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies. Those will not be ideologically appealing to most people who post here, but the business model makes perfect sense. The fear that the public and media have about BTC is that it is an attempt to create wealth out of thin air. Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine. These bank-backed cryptocurrencies would look to many like the 'best of both worlds': the guaranteed value of a traditional bank note with the transparency and irreversibility of distributed block-chain logs.

Bitcoin has a value at the moment because it is "base money". That's to say, it is at the end of a chain of trust (i.e. not 'backed' by anything).

Money which has to be 'backed' by something, by definition, is not base money and so has no intrinsic value of its own. Bitcoin has intrinsic value because it works as a unique token of value with a high resistance to counterfeiting. Cryptocurrencies which have to be "backed" by something are by definition of far less value than ones that are not and so I think its unlikelt that banks will start to do this.