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

[johnyj]

The alt-coins will never become big, because they don't have the corresponding infrastructure. You can copy the source code, but you can never copy the hardware infrastructure and the operating cost

If not because of the large scale ASIC mining equipment roll out and raised level of investment in infrastructure, the bitcoin's value would still stay at $10 range, because the cost of each coin was roughly that level

Now, if you want to mine 1 bitcoin, at least you should invest $1000 in latest generation mining rigs, that's the reason the price will never go much below that level

Of course J.P. Morgan can start a special cryptocurrency with large amount of infrastructure investment, but currently most of the IT talents were attracted by bitcoin and without them not so many people left will support a new coin

[Valerian77]

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.

That is the single point which @CryptoPhilanthropist has not catched - there is no intrinsic value. And the senseless try to back a currency by gold or anything else is just a naive imagination of gold having an intrinsic value which is even not true - it is the coherent believe of the owners into yellow metal. As we see in Bitcoin no bounding to gold is needed to create a coherent believe in the value of Bitcoin. The creation of BTC is genius in an emergent way which is without precedence but comparable to gold, internet, email etc

The speculation that some bank will create its own cryptocurrency may become true but will not affect Bitcoin. That will just be another altcoin like all the other 60 or so ones. If the bank keeps the control over this currency it will be no more than any other fiat just as electronic currency.

[HeliKopterBen]

A gold-backed money will not work without centralization and a money sponsored by a bank or other large business will not work unless it is completely decentralized and open-source.  Sure a business or government could create a completely decentralized, open-source money but then you are left with just another alt-coin. 

[BigJohn]

But why would it have to be decentralized? The USD is very much centralized, and it's also the most widely adopted currency in the world.

I don't think that The Powers That Be really care if their currency "works" in the long run. As long as it gets adopted, it works well enough for them. If Bitcoin proves to be something the public wants, so much so that it endangers other currencies, then what's stopping them from making a centralized (and backed) crypto-coin of their own?

The point is that if they make such a coin, it will likely get adopted much easier than Bitcoin has.

[theecoinomist]

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.

The question is whether they'd name it Debtcoin or Derivativecoin?

[Valerian77]

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.[/b]

The question is whether they'd name it Debtcoin or Derivativecoin?

lol     

[pening]

...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 ...

The resistance to counterfeiting as you put it well is a property of all cryptocurrencies.  If one is "backed" by something else, that is an additional property, it does not by definition reduce the value.

[marcus_of_augustus]

But why would it have to be decentralized?

Now we know you are just trolling.

[BigJohn]

But why would it have to be decentralized?

Now we know you are just trolling.

Oh okay, I was saying that for wide adoption a coin doesn't have to be decentralized. Obviously I'm wrong, so for a coin to have wide adoption it must be decentralized. Explains why the USD is so widely in use. [/sarcasm]

[d'aniel]

But why would it have to be decentralized?

Now we know you are just trolling.

Oh okay, I was saying that for wide adoption a coin doesn't have to be decentralized. Obviously I'm wrong, so for a coin to have wide adoption it must be decentralized. Explains why the USD is so widely in use. [/sarcasm]

Gold has a comparable market share to USD's M1, but people hold it for very different reasons than they hold USD.  If USG suddenly figured out a way to cheaply create new gold, but could keep the technique secret, and promised not to create "too much", would gold remain valuable?

[Peter R]

Reading the OP and the thoughtful comments greatly reduced my concern that a bank, government, or tech company could create a crypto-currency that is a credible threat to bitcoin.  If JPMorgan, China, or Google tried, they must either build a (1) centralized coin, or a (2) decentralized coin.  Here are the outcomes as I see them:

CENTRALIZED COIN:
=============

- The coin supply *will* be inflated beyond what was originally promised.  History has shown that *all* humans with the ability to inflate the money supply eventually take advantage of this power.  If there is a "backing," it will eventually become meaningless, as history has also shown.  

- Transactions will be reversible and balances will be confiscatable.  Even if the protocol starts out as "digital cash" the political pressure to "do something" when something "bad" happens will be unstoppable.  This will set a precedent and eventually we'll end up with the same rules for reversible transactions as the present banking system has (and the expensive AML/KYC regulations to go along with it).  

- It will *not* be possible to send coins to certain countries and regions.  Again, even if this is not the case initially, after the first false-flag terrorist funding escapade, we'll soon return to the same capital controls / international sanctions we presently have.  


What I realized is that even if a company *genuinely wants* to create a centralized-version of Bitcoin's electronic cash, they won't be able to.  The reason is simply that any centralized organization would eventually succumb to the pressure to "do something."

My conclusion is that the end game for any centralized coin is something very similar to the banking system we already have.  


DECENTRALIZED COIN:
===============

- Then it's just another bitcoin-wannabee alt-coin and it has to compete on its own merit and lack of a head start.  They may as well co-opt bitcoin.  

 

[Rez]

Look, here's new ChaseCoin!

It's just like Bitcoin ... only it can be confiscated from you.

[justusranvier]

What I realized is that even if a company *genuinely wants* to create a centralized-version of Bitcoin's electronic cash, they won't be able to.  The reason is simply that any centralized organization would eventually succumb to the pressure to "do something."

My conclusion is that the end game for any centralized coin is something very similar to the banking system we already have.  

Exactly.

Bitcoin is successful not because it uses cryptography nor because it's more convenient than a bank wire.

Bitcoin is successful because it lacks prior restraint, remote confiscation, and arbitrary inflation.

It doesn't matter what banks or governments try to do to compete with Bitcoin. Those are three features they will always in their currencies no matter what technology they build upon.

[marcus_of_augustus]

But why would it have to be decentralized?

Now we know you are just trolling.

Oh okay, I was saying that for wide adoption a coin doesn't have to be decentralized. Obviously I'm wrong, so for a coin to have wide adoption it must be decentralized. Explains why the USD is so widely in use. [/sarcasm]

You have much to learn, I just hope it does not come at the expense of your financial well-being ... on the other hand, hmmmm?, maybe?, nah, I wouldn't wish that on anybody.

[Cryddit]

For those who are saying "no newer and different cryptocoin could replace Bitcoin, cos Bitcoin was first!!!11"  

I'm noticing that a lot of Rock & Roll artists sold a hell of a lot more records than Chuck Berry.  

Inventing Rock & Roll (arguable, but he was definitely the "firstest with the mostest") did not get him to the all-time record for most number-one Rock & Roll albums and greatest number of Rock & Roll fans.  Those honors went to Elvis Presley and the Beatles (at least so far... ).  Largely because they had slicker promotion and weren't working against long-established racism.  

We need to remember that slicker promotion is *OWNED* by major commercial enterprises like banks and search giants, and that commercially speaking prejudices against the anarchic, decentralized, and anonymous are just as strong as prejudices in the US in the late 50s against racism.

[marcus_of_augustus]

For those who are saying "no newer and different cryptocoin could replace Bitcoin, cos Bitcoin was first!!!11"  

I'm noticing that a lot of Rock & Roll artists sold a hell of a lot more records than Chuck Berry.  

You have just argued that Chuck Berry is analogous to TCP/IP in that it was the first to market .... therefore TCP/IP should have been superseded by now by infinitely better protocols? wtf?

Did you already read the prior posts about needing to have a technical understanding about networking protocols before making informed commentary? (I'm supposing not)

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

[pening]

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

Funny, because that's exactly what i thought when you started comparing Bitcoin to TCP/IP, and the OP didn't compare Chuck Berry to TCP/IP, you have.  Your analogy to TCP/IP is flawed as its too technically specific a protocol, Bitcoin is a broader concept built upon components.  A better comparison would be with the Ethernet standard which too builds upon a range of protocols and other standards.  That once had competitors and alternatives, it won through.   There analogies should end, because you cannot use the adoption (or otherwise) of technology 30-40 years ago to predict what will happen with a technology today.  What i see here is some trying to attack a perfectly sensible point with distractions and sniping.  The premise that cryptocurrencies might be picked up by institutions would signal mainstream acceptance and adoption of the technology, i dont see why it creates this fear.

[johnyj]

The essential of bitcoin is a consensus that never inflate the money supply of a unique type of money, thus that money can be used to register value long term wise. Anything that inflate the money supply (alt-coins for example) will directly against this promise and will be discarded when people eventually reach this consensus

[marcus_of_augustus]

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

Funny, because that's exactly what i thought when you started comparing Bitcoin to TCP/IP, and the OP didn't compare Chuck Berry to TCP/IP, you have.  Your analogy to TCP/IP is flawed as its too technically specific a protocol, Bitcoin is a broader concept built upon components.  A better comparison would be with the Ethernet standard which too builds upon a range of protocols and other standards.  That once had competitors and alternatives, it won through.   There analogies should end, because you cannot use the adoption (or otherwise) of technology 30-40 years ago to predict what will happen with a technology today.  What i see here is some trying to attack a perfectly sensible point with distractions and sniping.  The premise that cryptocurrencies might be picked up by institutions would signal mainstream acceptance and adoption of the technology, i dont see why it creates this fear.

all analogies are flawed, they are analogies ... but bitcoin is closer to Chuck Berry than it is to TCP/IP? lol, good try, but you get another post to your tally for your efforts i spose ... at least you understand somewhat about the network effect and adoption curves, it isn't necessarily who's tech is best but who's is first to market ...

[AnonyMint]

A backed coin will never gain the global economies-of-scale for at least two reasons:

1. Why would I pay a price higher than the value of the backing? Thus it can't scale globally as an asset.

2. Backing requires a centralized authority, and there is no such global authority at this time which can subjugate all authorities in all jurisdictions.


The OP is correct that there is a reverse networking effect, because as I pointed in the Problem With Altcoin thread, to pay using an altcoin is simple as having a Bitpay which does real-time market price conversion. There is no great barrier to entry, as there is with TCP/IP where one would have to change every server on the internet. This hasn't been done yet, because the market cap of Litecoin was too small. But as the market caps of all grow, someone will create this.

And the OP is correct that there will be a CPU-only (botnet resistant) altcoin with stronger anonymity that will challenge Bitcoin effectively.