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Author Topic: Gold collapsing. Bitcoin UP.  (Read 2010313 times)
smooth
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December 03, 2014, 02:30:21 AM
 #18321

If your point is that this has no direct harmful effect on bitcoin itself, I mostly agree (and disagree with cyperdoc) and consider side chains to be a bitcoin application that leads to more demand for bitcoin (to put in the "vault"), except for possible systemic and contagion effects, which are difficult or impossible to reason about in advance.

I never said there are no direct harmful effects, I only said that the allocation is known, and then pointed out how that itself is a large step better than today.

Good point. I've always said that side chains are a useful tool that likely make bitcoin more powerful and better.
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December 03, 2014, 02:44:35 AM
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i'm also going to claim that it's being driven by the commoditization of hardware as indicated by the leveling off of the hashrate.  prices have plunged 10-fold allowing more and more smaller pools into the game.  this was predicted here long ago:

The leveling off of the hash rate is almost certainly due to the 70% drop in price. You had huge investment pouring into mining, now you don't. What new gear is going into service is being balanced out by older unprofitable gear coming out of service.

That may in turn have some effect on pool concentration, but the effect is not clear to me, other than the obvious of say ghash not spending a lot on expanding the in house cloud mining right now.

I agree with Greg Maxwell as quoted in that tweet. The issues of mining decentralization have not been solved, as far as I can tell. I don't understand what you are talking about in terms of nash equilibrium so maybe you could expand on that so I can learn something.

Lots of VC money in mining, just scroll through this list.http://www.coindesk.com/bitcoin-venture-capital/ over $90m invested and yet to materialize in hardware.
Not to mention existing mining operations reinvesting.

That 70% price drop has taken place over almost a year, during that time we've seen an exponential increase in mining starting in April 2013, at one stage it was almost like every 2 weeks we were adding more hashing power to the network than existed 2 weeks prior.

The feed stock energy is still below 50% the market price. what I think we're seeing is the infrastructure committed too during the April 2013 growth spurt is now implemented. planing new infrastructure If you are setting up a big farm is a big undertaking with lots of risk given the "relatively small" profit margin at the moment, just the basic you have to get a warehouse and have the appropriate energy and cooling infrastructure installed, these logistics take manpower, capital and time, so it is likely it is being planed but to launch with next gen hardware.  

I feel comfortable projecting that any hardware investment made prior to the last 2 months has had a ROI.  

Just a few hours ago we had our first negative difficulty adjustment, since Feb 2013* (its the equivalent of losing all the hashing power that existed up until about October 2013) just a small 0.73% adjustment.

It is now probably less risky to sell ASIC hardware than it is to invest in new infrastructure, given the uncertainty in price, so long as the price stays in this range.

Asic Manufactures are probably focused on design and development stages given the flat difficulty. I think we will see mining hardware drop in price now, at least until Bitcoin starts its next growth stage, at which point it won't be sold but deployed by the developers themselves, or sold at a premium.    

Also i expect about 50% of mined coins to make it into the market as most miners can cover all costs and comfortably save 50% of there BTC income. (the proponents will be saving anyway)  

If you are worried about mining distribution and bullish on Bitcoin price long term, now could be a good time to think about diversifying into mining hardware, and if some of that VC investment comes through we could start to see growth in difficulty again, hardware should become cheaper.

So I dont think mining hardware is centralizing, nor is a problem yet, it is still a function of the economic incentives driven by Bitcoin adoption.

* my last reported observation was an error, I misread the charts)

    

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smooth
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December 03, 2014, 03:09:31 AM
 #18323

That 70% price drop has taken place over almost a year, during that time we've seen an exponential increase in mining starting in April 2013, at one stage it was almost like every 2 weeks we were adding more hashing power to the network than existed 2 weeks prior.

Yes because the 10x price rise over a relatively short period last year (2013) sent profitability through the roof and and manufacturers and farm builders into overdrive. Mining was being increased as fast as possible, and while difficulty was rising, it was gated by manufacturing and farm build out.

Plus it meant that older gear remained profitable long past its prime. I ran some ASICMINER blades for a while at horrific hash/watt, but they were still profitable anyway. I sold them for a reasonable price and they were still profitable for the buyer to continue running them for some time longer.

None of that is true any more, given the price drop. Yes, brand new ASICs are still profitable vs. power, but the investment is much riskier now, and old gear isn't worth running at all.

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December 03, 2014, 04:11:41 AM
 #18324

That 70% price drop has taken place over almost a year, during that time we've seen an exponential increase in mining starting in April 2013, at one stage it was almost like every 2 weeks we were adding more hashing power to the network than existed 2 weeks prior.

Yes because the 10x price rise over a relatively short period last year (2013) sent profitability through the roof and and sent manufacturers and farm builders into overdrive. Mining was being increased as fast as possible, and while difficulty was rising, it was gated by manufacturing and farm build out.

Plus it meant that older gear remained profitable long past its prime. I ran some ASICMINER blades for a while at horrific hash/watt, but they were still profitable anyway. I sold them for a reasonable price and they were still profitable for the buyer to continue running them for some time longer.

None of that is true any more, given the price drop. Yes, brand new ASICs are still profitable vs. power, but the investment is much riskier now, and old gear isn't worth running at all.

Yes I agree hash rate would have increased if the price of Bitcoin were 70% higher today, and I would expect mining hardware manufacturers to employ there own equipment rather than sell it, but an equilibrium has now been achieved. I don't think of Bitcoin mining gear as having a "prime", but rather they have an efficiency rating in the law of comparative advantage.

The Bitcoin Price will tend to be marginally higher than the total energy consumed to mine one, we are still at about 50% capacity this gives a nice buffer for volatility this also creates opportunity for new competition. the fact that old gear isn't profitable dose not imply centralization, if you bought new mining hardware 9 weeks ago (available to anyone who wants to take a business risk) you have had a RIO on your new hardware. If you have fairly cheep electricity it costs about $130 to find a Bitcoin.  If the price goes up too quickly one could see GPU's become profitable again, but we have a healthy balance now, and those who have taken the risk are now in profit taking mode until the next wave of disruption, guaranteed to occur after 87341 new block have been mined, or if the network grows, or if some of those VC funded mining investments come on line.  

Sure mining is nothing like it was in 2011, but it's decentralized enough, and the incentives to keep it so are still in play.
looking at the difficulty it seems mass deployment has stalled, and new mining hardware is now readily available. There will always be risks, and those that circumvent them most successfully will prosper. The market may respond differently but I see the readily available hardware and the upside price potential in Bitcoin as a reversal in the centralized incentives that got us here. The same incentives that encouraged the exponential growth in the security in the networks hashing power are now changing it could be starting to decentralize again.  

The risk of profitable mining is increasing so I agree not everyone can mine Bitcoin profitably, and some centralization needs to take place for efficiency of scale, but there is a limit and i think we just hit the optimum scale limit with the decrease in difficulty in this price zone.  

    

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cypherdoc
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December 03, 2014, 06:58:41 AM
 #18325

that was a pain in the ass.  but well worth the time:

Peter R
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December 03, 2014, 07:40:57 AM
 #18326

that was a pain in the ass.  but well worth the time:



Yep.  You'll always remember the first time you did raw multisig. 

Run Bitcoin Unlimited (www.bitcoinunlimited.info)
molecular
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December 03, 2014, 07:45:40 AM
 #18327

can someone direct me to a source where i can practice constructing a multi-sig tx with the equivalent of a "createrawtransaction" using bitcoind and JSON-RPC?

you could try sx: https://sx.dyne.org/

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December 03, 2014, 12:30:55 PM
 #18328

can someone direct me to a source where i can practice constructing a multi-sig tx with the equivalent of a "createrawtransaction" using bitcoind and JSON-RPC?

you could try sx: https://sx.dyne.org/

I used bitcoind  and json  simply for reasons of consistency. Why use sx or pybtctools?   Easier, no need for blockchain, diversity, curiosity?  

I guess it's like learning another language. Literally,  I suppose.

Its always insightful and fascinating for me to find out what drives all you smart people.
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December 03, 2014, 12:41:02 PM
 #18329

Why use sx or pybtctools?   Easier, no need for blockchain, diversity, curiosity?
Why do we have Firefox, IE, Chrome, and Opera?
Zangelbert Bingledack
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December 03, 2014, 02:33:46 PM
 #18330

On monoculture and diversity...

There absolutely should be one coin/ledger but is it imperative that there be one protocol/chain to update it?

Maybe multiple chains could allow us to manage the risk of one failed blockchain bringing its coin down with it?

And what if the coin itself fails, perhaps for economic rather than technical reasons?

The term "coin" is introducing confusion. The question is, what if the ledger fails?

This makes it clear that we must be careful to distinguish between the ledger (a conceptual spreadsheet keeping track of who owns what percentage of the economic community known as "the Bitcoin ecosystem" and later perhaps just "the global economy") and the protocol for updating that ledger.

Now here I wondered how you could possibly mean that a ledger - a mere spreadsheet - could "fail" for economic reasons. Then I noticed later you posted this, which is a common economic misconception that I recommend rooting out of your thinking completely:

Quote
Also your example of physical gold is not really an argument in favor of bitcoin because gold does not have a fixed supply and also has a supply that is responsive to technological advancement (correlated with economic growth).

The problem is in imagining that the money supply needs to expand to accommodate an expanding economy (or contract in an contracting economy). As a ledger, all that matters is what percentage of total supply you own. Disregarding the physical difficulty of working with very tiny pieces of gold, even a single ounce of gold would be enough to power the world economy, no matter how it may grow or shrink. Any amount of money works the same, because again it just comes down to what percentage of the total supply you hold. The term "1 BTC" just means 1/21M of the total ledger (or 1/13M of the current ledger). 130,000 BTC is just another way of saying "1% of the current ledger." An ounce of gold is just another way of saying X% of the total gold supply.

Laboring under that misconception, and thinking in terms of "coins" instead of a ledger (and these two confusions go hand in hand), I can see how you might think the Bitcoin ledger could fail due to there "not being enough money."

With that possibility out of the way, you are still quite correct that Bitcoin the protocol could fail for technical reasons, so arguably a monoculture in protocols is bad. However, monoculture in the sense of everyone using the same ledger is not a bad thing at all, and it's kind of the point of money in the first place; the only way it could be bad is if the system for updating that ledger were faulty, which again points to the protocol as a possible weak point, not the ledger itself.

TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.
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December 03, 2014, 02:35:05 PM
 #18331


I used bitcoind  and json  simply for reasons of consistency. Why use sx or pybtctools?   Easier, no need for blockchain, diversity, curiosity?  


I do not define myself as a smart person, but I dare say that diversity is fundamental. As smooth already said a few posts ago diversity brings you anti-fragility.
(if you didn't read Nassim N. Taleb's work yet, look at:  http://www.fooledbyrandomness.com. it's worthy imo.)

Bitcoin is a participatory system which ought to respect the right of self determinism of all of its users - Gregory Maxwell.
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December 03, 2014, 03:16:48 PM
 #18332

If you're still having trouble focusing on the problem that Bitcoin was invented to solve and after everything I've said, watch Chris Whalen (one of the smartest guys on Wall Street) here disassemble the Fed. Please keep your eyes on the ball :

http://mobile.bloomberg.com/video/is-the-fed-in-need-of-a-fix-Zh1ER_XYQBmT8bMzNn_9mQ.html
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December 03, 2014, 03:32:25 PM
 #18333

On monoculture and diversity...

TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.

on bitcoin monoculture, an external to bitcoin point of view:

http://cointelegraph.com/news/113036/vitalik-buterin-challenges-the-idea-of-bitcoin-dominance-maximalism-op-ed


Bitcoin is a participatory system which ought to respect the right of self determinism of all of its users - Gregory Maxwell.
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December 03, 2014, 03:36:39 PM
 #18334

If you're still having trouble focusing on the problem that Bitcoin was invented to solve and after everything I've said, watch Chris Whalen (one of the smartest guys on Wall Street) here disassemble the Fed. Please keep your eyes on the ball :

http://mobile.bloomberg.com/video/is-the-fed-in-need-of-a-fix-Zh1ER_XYQBmT8bMzNn_9mQ.html

FTFY, doesn't load on desktop

http://www.bloomberg.com/video/is-the-fed-in-need-of-a-fix-Zh1ER_XYQBmT8bMzNn_9mQ.html
brg444
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December 03, 2014, 05:16:43 PM
 #18335

On monoculture and diversity...

There absolutely should be one coin/ledger but is it imperative that there be one protocol/chain to update it?

Maybe multiple chains could allow us to manage the risk of one failed blockchain bringing its coin down with it?

And what if the coin itself fails, perhaps for economic rather than technical reasons?

The term "coin" is introducing confusion. The question is, what if the ledger fails?

This makes it clear that we must be careful to distinguish between the ledger (a conceptual spreadsheet keeping track of who owns what percentage of the economic community known as "the Bitcoin ecosystem" and later perhaps just "the global economy") and the protocol for updating that ledger.

Now here I wondered how you could possibly mean that a ledger - a mere spreadsheet - could "fail" for economic reasons. Then I noticed later you posted this, which is a common economic misconception that I recommend rooting out of your thinking completely:

Quote
Also your example of physical gold is not really an argument in favor of bitcoin because gold does not have a fixed supply and also has a supply that is responsive to technological advancement (correlated with economic growth).

The problem is in imagining that the money supply needs to expand to accommodate an expanding economy (or contract in an contracting economy). As a ledger, all that matters is what percentage of total supply you own. Disregarding the physical difficulty of working with very tiny pieces of gold, even a single ounce of gold would be enough to power the world economy, no matter how it may grow or shrink. Any amount of money works the same, because again it just comes down to what percentage of the total supply you hold. The term "1 BTC" just means 1/21M of the total ledger (or 1/13M of the current ledger). 130,000 BTC is just another way of saying "1% of the current ledger." An ounce of gold is just another way of saying X% of the total gold supply.

Laboring under that misconception, and thinking in terms of "coins" instead of a ledger (and these two confusions go hand in hand), I can see how you might think the Bitcoin ledger could fail due to there "not being enough money."

With that possibility out of the way, you are still quite correct that Bitcoin the protocol could fail for technical reasons, so arguably a monoculture in protocols is bad. However, monoculture in the sense of everyone using the same ledger is not a bad thing at all, and it's kind of the point of money in the first place; the only way it could be bad is if the system for updating that ledger were faulty, which again points to the protocol as a possible weak point, not the ledger itself.

TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.

+1

"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010
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December 03, 2014, 05:40:49 PM
 #18336

With that possibility out of the way, you are still quite correct that Bitcoin the protocol could fail for technical reasons, so arguably a monoculture in protocols is bad. However, monoculture in the sense of everyone using the same ledger is not a bad thing at all, and it's kind of the point of money in the first place; the only way it could be bad is if the system for updating that ledger were faulty, which again points to the protocol as a possible weak point, not the ledger itself.

TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.

This is a great way to look at it. Thank you.
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December 03, 2014, 06:00:36 PM
 #18337

I don't understand the fear of alts. I'm into Bitcoin because it's better money, in our history it's the best yet.
Competition is what will make it better. Alts can out innovate Bitcoin on every metric except one, the Network Effect, and this is what makes it useful as a SoV.

I think this significantly underestimates the threat of alt coins and why Bitcoin is not a given (I'm saying this as someone who believes/hopes in the project)

For example what if the US government created a USDollarCoin that:
1) has all of the benefits of programmable money, you can have your own wallet and spend it through computing devices
2) has the _perceived_ benefits of centralized control including the ability to "recover" lost coins and "reverse fraudulent" transactions (possibility a majority of people prefer this based on Bitcoin's detractors' views). This could be accomplished with forced use of multisig where the FED has co-control.
3) has significantly easier tax implications to deal with (meaning no tax implications) compared to bitcoin where EVERY transaction is a taxable event
4) launches with mass adoption through automatic bank account conversion
5) was legislated as the only legal currency

Maybe that doesn't scare you, but it scares me.

The first wave of alts were simple clones, it was almost a given that network effects would hold them back here. However the next wave of alts are going to
a) come with real innovations and then
b) come with government sanctioned force

Network effects & Bitcoin's programmable nature will probably keep a) at bay, however network effect might actually work against Bitcoin if b) ever came to pass.

I'm not saying this will happend, and it may seem far fetched today, but it is in the realm of possibilities. The US government lives off of the inflation tax and if Bitcoin ever becomes a real threat, the state will definitely try more and more attempts to maintain control of the money supply. It's possible the proposal above would be a last ditch attempt to save itself.
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December 03, 2014, 06:01:40 PM
 #18338

On monoculture and diversity...

TL;DR: Monoculture in protocols may introduce weaknesses; monoculture in a having a single ledger doesn't, and is pretty much the point of having money at all.

on bitcoin monoculture, an external to bitcoin point of view:

http://cointelegraph.com/news/113036/vitalik-buterin-challenges-the-idea-of-bitcoin-dominance-maximalism-op-ed




Vitalik is brilliant and understands code. Unfortunately, he doesn't fully understand money or human nature. I think that comes more with age/experience.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
Cryptoasset rankings and metrics for investors: http://onchainfx.com
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December 03, 2014, 06:11:53 PM
 #18339

I don't understand the fear of alts. I'm into Bitcoin because it's better money, in our history it's the best yet.
Competition is what will make it better. Alts can out innovate Bitcoin on every metric except one, the Network Effect, and this is what makes it useful as a SoV.

I think this significantly underestimates the threat of alt coins and why Bitcoin is not a given (I'm saying this as someone who believes/hopes in the project)

For example what if the US government created a USDollarCoin that:
1) has all of the benefits of programmable money, you can have your own wallet and spend it through computing devices
2) has the _perceived_ benefits of centralized control including the ability to "recover" lost coins and "reverse fraudulent" transactions (possibility a majority of people prefer this based on Bitcoin's detractors' views). This could be accomplished with forced use of multisig where the FED has co-control.
3) has significantly easier tax implications to deal with (meaning no tax implications) compared to bitcoin where EVERY transaction is a taxable event
4) launches with mass adoption through automatic bank account conversion
5) was legislated as the only legal currency

Maybe that doesn't scare you, but it scares me.

The first wave of alts were simple clones, it was almost a given that network effects would hold them back here. However the next wave of alts are going to
a) come with real innovations and then
b) come with government sanctioned force

Network effects & Bitcoin's programmable nature will probably keep a) at bay, however network effect might actually work against Bitcoin if b) ever came to pass.

I'm not saying this will happend, and it may seem far fetched today, but it is in the realm of possibilities. The US government lives off of the inflation tax and if Bitcoin ever becomes a real threat, the state will definitely try more and more attempts to maintain control of the money supply. It's possible the proposal above would be a last ditch attempt to save itself.

As I have said previously, the beauty of cryptocurrency is that it democratizes the creation of money. Competition is now possible and Bitcoin has obvious competitive advantages solely because of its monetary policy.

The USDcoin might have the benefits of digital money but carries with it the devaluation problems and the reliance on a failed, soon to be bankrupt state.

Of course we both know that to the general population this is not a real concern as they do not realize that money is stolen from their pocket through inflation but now that a deflationary alternative is available it won't take long until they realize they're on the wrong side of the fence.


"I believe this will be the ultimate fate of Bitcoin, to be the "high-powered money" that serves as a reserve currency for banks that issue their own digital cash." Hal Finney, Dec. 2010
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December 03, 2014, 06:14:44 PM
 #18340

hold on.  this should mean that fiat will be diverted to the price:

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