Volatility, ain't seen nothing yet, 10K to 1M in 1 year???

[dinofelis]

I also think the demand will be higher for bitcoins in the future as more rich people might put some of their savings in btc.

The question is: why would they do that ?

(I'm not saying they won't ; I'm asking what do you think would drive them to do so).

[dinofelis]

It is arguably the only way to create an immutable, decentralized ledger. Not useful work? Very much useful since without the work the chain is not secure.
How useful is a currency that is easily attacked and vulnerable to corruption?

True, but the value of something is not given by the cost of production.  That has a long time been a problem in the value theory of money (and value theory in general), until von Mises pointed out exactly that error.

If it costs so much to keep bitcoins safe, that's more a disadvantage than an advantage.  The cost of production is a price bottom of the offer curve.  There's not necessarily a demand that corresponds to it (or it can be a very small demand).  If bitcoin needs to spend a billion $ of worth per year just to keep it up and running, then that is more a cost of usage (in competition with other stores of value) than anything else.

If I have a very expensive way to make absolutely disgusting food, not many people are going to buy my unique, expensive, and terrible tasting food.  It is not because there is only an expensive way to make it, that it will be valued so much by the costumer.

[cryptogeeknext]

...
I disagree.

Bitcoin is literally a proof-of-work in conjunction with a point on an adoption curve.

The proof-of-work part is what makes it tangible IRL, the point in the adoption curve is what makes it relevant to society. Yes, the same thing in a vacuum wouldn't be of much value, but value is a social construct and Bitcoin has that.

I set out to delineate the difference between Bitcoin and the stock market, not the value of Bitcoin.  But I'll follow your tangent.

"Proof of work" is not proof of useful work.  It's proof that an amazing amounts of electricity was wasted on what amounts to little more than digital thumb twiddling.  Useful to ASIC manufacturers?  Sure.  Useful to mining contract resellers?  Yeah.  But useful to society as a whole?  Not really.

How useful is a currency that consumes 10% of its market cap, each year, to secure?  Well, if Satoshi is right, and price of mining does approach the price of mined coins, then Bitcoin is costing just that:  ~10% of all the coins in existence were mined this year

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

[goldsun]

I also think the demand will be higher for bitcoins in the future as more rich people might put some of their savings in btc.

The question is: why would they do that ?

(I'm not saying they won't ; I'm asking what do you think would drive them to do so).

Diversity, but of course if they see a value in it, which I think some rich people do.

[dinofelis]

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

This is in fact a very intelligent point.  I have to say that I was first attracted in principle to such things as primecoin, because they solve at least some obscure mathematical problems during mining.  But you are right that what constitutes "useful work" is part of what the market has to decide, and will change over time, so it would be silly to cast it in stone in any successful cryptocurrency.

That said, there is indeed a fundamental difficulty with PoW.  In order for it to make the blockchain safe, a lot of work has to be done.  On the other hand, that is a cost for the use of the currency (a kind of tax on its usage if you want to).  During the early mining phase, that tax is essentially paid for by inflation (the phase we are in).  Later, the tax will be the fees that have to be paid.
If it is true that the cost of PoW is comparable to the inflation right now, that is, 10%, now that would be terribly huge.  As long as bitcoin adoption is growing, that's not so much of an issue, but imagine that the whole world economy is taken over by bitcoin.  It would mean that 10% of the world economic resources would go into PoW ?  It is what I touched upon in that other thread https://bitcointalk.org/index.php?topic=865870.0

I have no idea how much world resources are spent today to the fiat banking sector (I don't mean, how much money the banking sector is handling, but how much the banking sector's functioning is costing: salaries, real estate .... of banking and financial institutions).  The cost of the fiat banking sector is the fiat equivalent of the economic cost of PoW for cryptos.

[dinofelis]

Diversity, but of course if they see a value in it, which I think some rich people do.

The question was: what makes them "see value in it" ?

Because if the answer is "because they think it might significantly increase in price", then that's a Ponzi kind of motivation.  I already outlined that.  If the reason for people to buy bitcoin is essentially that they expect a significant increase in its price, then this cannot be the motivation for the "last ones".  As they will realize this, they will not buy, or they will sell after a while.  If they do, the second-last entries will realize that they will not find sellers at much higher prices than they bought.  So they will sell too.  Etc...
If the main or sole reason to buy something is the "greater fool" hypothesis (it will rise in price) then we are definitely in a Ponzi.

So if the motivation is NOT "it will rise in price", but rather "it will keep its value long-term" what will make these people think that and prefer bitcoin over other stores of value ?

[Flashman]

And as to why anyone would buy at $100,000 plus a quote from an article today

In fact, the knowledge that valuations were hitting unsustainable highs seemed only to fuel the frenzy for venture firms, shareholders and banks to do deals at ever higher prices. That, in turn, kept those bubbles inflating well beyond the boundaries of rational pricing and investing.

As ex-Citigroup chief executive officer Chuck Prince said during the last go-round, offering all of us a permanent memento of a certain type of CEO, someone trapped by the forces of irrational exuberance, someone less a corporate steward and more a suitor at a cotillion: “When the music stops… things will be complicated. But as long as the music is playing, you’ve got to get up and dance.” Or as Daniel Cohen, a venture investor recently told me, “We know that the question is, 'When does the cycle turn?' But until then there’s lots of money to be made.”

http://www.bloombergview.com/articles/2014-11-25/tech-bubble-wont-burst-in-2015-2016

[NotLambchop]

<snip!>

Your account is relatively new, so I'll play Nostradamus and tell you a bit about the future.
You will continue to post well-reasoned, rational arguments.  For a while.  
Then you'll realize that no amount of logic will persuade those who are invested in believing the opposite.  A lunatic insisting that he is "a little teapot, short and stout" will not be persuade to think otherwise, no matter the force and elegance of your reasoning.

Then you'll start posting gifs.

Below, a quote describing the type of minds you're dealing with here much better than I could:

"...I have never seen a more sublime demonstration of the totalitarian mind, a mind which might be linked unto a system of gears where teeth have been filed off at random. Such snaggle-toothed thought machine, driven by a standard or even by a substandard libido, whirls with the jerky, noisy, gaudy pointlessness of a cuckoo clock in Hell.

The boss G-man concluded wrongly that there were no teeth on the gears in the mind of Jones. 'You're completely crazy,' he said.

Jones wasn't completely crazy. The dismaying thing about classic totalitarian mind is that any given gear, thought mutilated, will have at its circumference unbroken sequences of teeth that are immaculately maintained, that are exquisitely machined.
Hence the cuckoo clock in Hell - keeping perfect time for eight minutes and twenty-three seconds, jumping ahead fourteen minutes, keeping perfect time for six seconds, jumping ahead two seconds, keeping perfect time for two hours and one second, then jumping ahead a year.
The missing teeth, of course, are simple, obvious truths, truths available and comprehensible even to ten-year-olds, in most cases."

[dinofelis]

<snip!>

Your account is relatively new, so I'll play Nostradamus and tell you a bit about the future.
You will continue to post well-reasoned, rational arguments.  For a while.  
Then you'll realize that no amount of logic will persuade those who are invested in believing the opposite.  A lunatic insisting that he is "a little teapot, short and stout" will not be persuade to think otherwise, no matter the force and elegance of your reasoning.

Then you'll start posting gifs.

Below, a quote describing the type of minds you're dealing with here much better than I could:

"...I have never seen a more sublime demonstration of the totalitarian mind, a mind which might be linked unto a system of gears where teeth have been filed off at random. Such snaggle-toothed thought machine, driven by a standard or even by a substandard libido, whirls with the jerky, noisy, gaudy pointlessness of a cuckoo clock in Hell.

The boss G-man concluded wrongly that there were no teeth on the gears in the mind of Jones. 'You're completely crazy,' he said.

Jones wasn't completely crazy. The dismaying thing about classic totalitarian mind is that any given gear, thought mutilated, will have at its circumference unbroken sequences of teeth that are immaculately maintained, that are exquisitely machined.
Hence the cuckoo clock in Hell - keeping perfect time for eight minutes and twenty-three seconds, jumping ahead fourteen minutes, keeping perfect time for six seconds, jumping ahead two seconds, keeping perfect time for two hours and one second, then jumping ahead a year.
The missing teeth, of course, are simple, obvious truths, truths available and comprehensible even to ten-year-olds, in most cases."

 

Point is, I'm pretty new at *this* forum, but I'm an old whale in forums on the internet, and you tell me nothing new.

My main aim is not to come here and "educate people" or something.  I use the method of pretending to educate people to look at the reactions, and to find out if there are arguments that show me wrong (that convince ME that I might be wrong). 
In fact, I already changed my mind on some aspects of bitcoin (to which I'm pretty new).  I used to think that history would repeat and that a run-up would come soon.  I'm now pretty convinced I have all my time watching how price will evolve.

I'm less pessimistic about bitcoin than you are.  But it is, in my opinion, a bet on a VERY long term (measured in decades).  There's a high chance of it failing, but there's a small chance of it succeeding.  I'm trying to argue one way, and see if there are strong arguments the other way, in which case I learn.

The best way to learn, is to pretend to teach.  I'm here to learn.  Not to teach.  But I pretend to teach in order to learn.

[brg444]

Diversity, but of course if they see a value in it, which I think some rich people do.

The question was: what makes them "see value in it" ?

Because if the answer is "because they think it might significantly increase in price", then that's a Ponzi kind of motivation.  I already outlined that.  If the reason for people to buy bitcoin is essentially that they expect a significant increase in its price, then this cannot be the motivation for the "last ones".  As they will realize this, they will not buy, or they will sell after a while.  If they do, the second-last entries will realize that they will not find sellers at much higher prices than they bought.  So they will sell too.  Etc...
If the main or sole reason to buy something is the "greater fool" hypothesis (it will rise in price) then we are definitely in a Ponzi.

So if the motivation is NOT "it will rise in price", but rather "it will keep its value long-term" what will make these people think that and prefer bitcoin over other stores of value ?

Speculative attacks aka "Your dirty fiat is no good here". The currency war is coming and Bitcoin is David amongst Fiat Goliaths.

http://nakamotoinstitute.org/mempool/speculative-attack/

A few of the criticisms mentioned earlier are correct, yet they are complete non sequiturs. Bitcoin will not be eagerly adopted by the mainstream, it will be forced upon them. Forced, as in "compelled by economic reality". People will be forced to pay with bitcoins, not because of 'the technology', but because no one will accept their worthless fiat for payments. Contrary to popular belief, good money drives out bad. This "driving out" has started as a small fiat bleed. It will rapidly escalate into Class IV hemorrhaging due to speculative attacks on weak fiat currencies. The end result will be hyperbitcoinization, i.e. "your money is no good here".

[goldsun]

Diversity, but of course if they see a value in it, which I think some rich people do.

The question was: what makes them "see value in it" ?

Because if the answer is "because they think it might significantly increase in price", then that's a Ponzi kind of motivation.  I already outlined that.  If the reason for people to buy bitcoin is essentially that they expect a significant increase in its price, then this cannot be the motivation for the "last ones".  As they will realize this, they will not buy, or they will sell after a while.  If they do, the second-last entries will realize that they will not find sellers at much higher prices than they bought.  So they will sell too.  Etc...
If the main or sole reason to buy something is the "greater fool" hypothesis (it will rise in price) then we are definitely in a Ponzi.

So if the motivation is NOT "it will rise in price", but rather "it will keep its value long-term" what will make these people think that and prefer bitcoin over other stores of value ?

I was about to write that they will see value in it as they see the value in gold or fiat money, but I didn't, because I thought it would be obvious.

If rich people buy BTC, they will probably buy to diversify their money from fiat or gold. If they are rich, they don't need to see it as a investment. But if the price increase over time, I don't think it would be negative for them.

But the main question remains, why would someone buy bitcoins? Because it's an anonymous method of payment? Because less decentralization? Because less banking control? Because lower fees? You can pretty much meet like half of these requests in regular money, fiat.

[dinofelis]

Diversity, but of course if they see a value in it, which I think some rich people do.

The question was: what makes them "see value in it" ?

Because if the answer is "because they think it might significantly increase in price", then that's a Ponzi kind of motivation.  I already outlined that.  If the reason for people to buy bitcoin is essentially that they expect a significant increase in its price, then this cannot be the motivation for the "last ones".  As they will realize this, they will not buy, or they will sell after a while.  If they do, the second-last entries will realize that they will not find sellers at much higher prices than they bought.  So they will sell too.  Etc...
If the main or sole reason to buy something is the "greater fool" hypothesis (it will rise in price) then we are definitely in a Ponzi.

So if the motivation is NOT "it will rise in price", but rather "it will keep its value long-term" what will make these people think that and prefer bitcoin over other stores of value ?

I was about to write that they will see value in it as they see the value in gold or fiat money, but I didn't, because I thought it would be obvious.

The point is that fiat and gold have two (different) fundamentals.  Gold is a historical store of value (and used for centuries to be a currency, until it was replaced by fiat).  So gold has historical trust, most people value gold and I would think that rich people looking for a store of value would think that even 30 years from now, people will still value gold (somewhat more, or somewhat less than today).

Fiat is currency which can actually buy stuff.  Even if you don't trust the value of fiat in the long run, it is a relatively safe store of value in the short or medium term, simply because you can buy directly a lot of stuff with it.  The nice thing with fiat is that, as it is a currency, you will be able to buy any other store of value with it when you want.  It has the highest possible liquidity.

So these two things have established fundamentals which make you consider rationally that they are stores of value.

Bitcoin, on the other hand, is something totally new, has very high volatility and an uncertain future (very bright, or not at all).  As a high risk, high return investment, of course it would be a good idea to invest a tiny fraction of your holdings into bitcoin, like it is to invest a tiny fraction in start-up shares.   But it is only a high-risk, high return asset if its price is low when buying!  Otherwise, it is just a high-risk, no high return asset.

This would be totally different if bitcoin were a currency, and if there were massive merchant adoption.

So this is where my question came from: what rational motivation would "rich people" have to buy bitcoin at a high price ?
And if they don't, price will fall of course, until it is again low enough so that there's a good chance for a high return.

I think this is what we are witnessing right now: price remains low (might even get lower ?) because at this price, there's still the potential for high return.  From the moment the price rises, the potential for high return diminishes, but the risk remains the same.  So at that point, other high-risk, high-return investments are more interesting.

[brg444]

Is it wrong that I hoard BTC? I collect and receive tips for 25 cents and hoard it as if it will be worth $500+ in 5 years. Everytime I see someone say 10 bits, I am thinking $10 dollars in the future

Hoarding is the way to go my friend.

how will hoarding add value?

if everyone sat on their coins the pump and dumpers will dictate the price

spending adds value

Wrong, the hoarders are the hero.

http://nakamotoinstitute.org/mempool/im-hoarding-bitcoins-and-no-you-cant-have-any/

Haha! don't believe everything you read on the internet

Maybe you'd like to believe this guy then :

Economists err if they believe something is wrong when money is not in constant, active “circulation.” Money is only useful for exchange value, true, but it is not only useful at the actual moment of exchange. This truth has been often overlooked. Money is just as useful when lying “idle” in somebody’s cash balance, even in a miser’s “hoard.” (At what point does a man’s cash balance become a faintly disreputable “hoard,” or the prudent man a miser? It is impossible to fix any definite criterion: generally, the charge of “hoarding” means that A is keeping more cash than B thinks is appropriate for A.) For that money is being held now in wait for possible future exchange—it supplies to its owner, right now, the usefulness of permitting exchanges at any time—present or future—the owner might desire.

It should be remembered that all gold must be owned by someone, and therefore that all gold must be held in people’s cash balances. If there are 3,000 tons of gold in the society, all 3,000 tons must be owned and held, at any one time, in the cash balances of individual people. The total sum of cash balances is always identical with the total supply of money in the society. Thus, ironically, if it were not for the uncertainty of the real world, there could be no monetary system at all! In a certain world, no one would be willing to hold cash, so the demand for money in society would fall infinitely, prices would skyrocket without end, and any monetary system would break down. Instead of the existence of cash balances being an annoying and troublesome factor, interfering with monetary exchange, it is absolutely necessary to any monetary economy.

It is misleading, furthermore, to say that money “circulates.” Like all metaphors taken from the physical sciences, it connotes some sort of mechanical process, independent of human will, which moves at a certain speed of flow, or “velocity.” Actually, money does not “circulate”; it is, from time, to time, transferred from one person’s cash balance to another’s. The existence of money, once again, depends upon people’s willingness to hold cash balances.

Murray Rothbard

[cryptogeeknext]

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

This is in fact a very intelligent point.  I have to say that I was first attracted in principle to such things as primecoin, because they solve at least some obscure mathematical problems during mining.  But you are right that what constitutes "useful work" is part of what the market has to decide, and will change over time, so it would be silly to cast it in stone in any successful cryptocurrency.

That said, there is indeed a fundamental difficulty with PoW.  In order for it to make the blockchain safe, a lot of work has to be done.  On the other hand, that is a cost for the use of the currency (a kind of tax on its usage if you want to).  During the early mining phase, that tax is essentially paid for by inflation (the phase we are in).  Later, the tax will be the fees that have to be paid.
If it is true that the cost of PoW is comparable to the inflation right now, that is, 10%, now that would be terribly huge.  As long as bitcoin adoption is growing, that's not so much of an issue, but imagine that the whole world economy is taken over by bitcoin.  It would mean that 10% of the world economic resources would go into PoW ?  It is what I touched upon in that other thread https://bitcointalk.org/index.php?topic=865870.0

I have no idea how much world resources are spent today to the fiat banking sector (I don't mean, how much money the banking sector is handling, but how much the banking sector's functioning is costing: salaries, real estate .... of banking and financial institutions).  The cost of the fiat banking sector is the fiat equivalent of the economic cost of PoW for cryptos.

Thanks for understanding!

I would like to compare mining to gaming. Imagine the number of graphics cards sold annualy (tens of millions) and the amount of energy humanity "wastes" on shooting aliens in video games. Nobody seems to complain about that, as there is a lot of fun there. Plus there is an added benefit - gaming led to the development of highly efficient parallel processors that now contribute to research in other areas of human life.

The same way, mining has a lot of fun for nerds building custom rigs and playing with various settings, while manufacturers and vendors push state of the art silicon technology to produce the most efficient machines. Mining might become an incentive for humanity to push research in energy-efficient compuattion, development of new types of energy sources as well as deeper understanding of cryptographic hash functions. So it's not all that useless as it seems on the surface.

Competition requires energy, you can't change that. The good thing, is that energy is not actually "wasted", just transformed.

[NotLambchop]

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

This is in fact a very intelligent point.  I have to say that I was first attracted in principle to such things as primecoin, because they solve at least some obscure mathematical problems during mining.  But you are right that what constitutes "useful work" is part of what the market has to decide, and will change over time, so it would be silly to cast it in stone in any successful cryptocurrency.

That said, there is indeed a fundamental difficulty with PoW.  In order for it to make the blockchain safe, a lot of work has to be done.  On the other hand, that is a cost for the use of the currency (a kind of tax on its usage if you want to).  During the early mining phase, that tax is essentially paid for by inflation (the phase we are in).  Later, the tax will be the fees that have to be paid.
If it is true that the cost of PoW is comparable to the inflation right now, that is, 10%, now that would be terribly huge.  As long as bitcoin adoption is growing, that's not so much of an issue, but imagine that the whole world economy is taken over by bitcoin.  It would mean that 10% of the world economic resources would go into PoW ?  It is what I touched upon in that other thread https://bitcointalk.org/index.php?topic=865870.0

I have no idea how much world resources are spent today to the fiat banking sector (I don't mean, how much money the banking sector is handling, but how much the banking sector's functioning is costing: salaries, real estate .... of banking and financial institutions).  The cost of the fiat banking sector is the fiat equivalent of the economic cost of PoW for cryptos.

Thanks for understanding!

I would like to compare mining to gaming. Imagine the number of graphics cards sold annualy (tens of millions) and the amount of energy humanity "wastes" on shooting aliens in video games. Nobody seems to complain about that, as there is a lot of fun there. Plus there is an added benefit - gaming led to the development of highly efficient parallel processors that now contribute to research in other areas of human life.

The same way, mining has a lot of fun for nerds building custom rigs and playing with various settings, while manufacturers and vendors push state of the art silicon technology to produce the most efficient machines. Mining might become an incentive for humanity to push research in energy-efficient compuattion, development of new types of energy sources as well as deeper understanding of cryptographic hash functions. So it's not all that useless as it seems on the surface.

Competition requires energy, you can't change that. The good thing, is that energy is not actually "wasted", just transformed.

Interesting point re. all the graphic cards sold.
It would be a great point if those graphic cards were running at maximum energy consumption 24/7 during their lifetime, and if that energy consumption was anywhere close to today's ASICSs.

And if those graphic cards were used to fill giant aircraft hangers, like so:



And yes, energy is never wasted, only transformed.  Because first law of thermodynamics.  Good one

[brg444]

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

This is in fact a very intelligent point.  I have to say that I was first attracted in principle to such things as primecoin, because they solve at least some obscure mathematical problems during mining.  But you are right that what constitutes "useful work" is part of what the market has to decide, and will change over time, so it would be silly to cast it in stone in any successful cryptocurrency.

That said, there is indeed a fundamental difficulty with PoW.  In order for it to make the blockchain safe, a lot of work has to be done.  On the other hand, that is a cost for the use of the currency (a kind of tax on its usage if you want to).  During the early mining phase, that tax is essentially paid for by inflation (the phase we are in).  Later, the tax will be the fees that have to be paid.
If it is true that the cost of PoW is comparable to the inflation right now, that is, 10%, now that would be terribly huge.  As long as bitcoin adoption is growing, that's not so much of an issue, but imagine that the whole world economy is taken over by bitcoin.  It would mean that 10% of the world economic resources would go into PoW ?  It is what I touched upon in that other thread https://bitcointalk.org/index.php?topic=865870.0

I have no idea how much world resources are spent today to the fiat banking sector (I don't mean, how much money the banking sector is handling, but how much the banking sector's functioning is costing: salaries, real estate .... of banking and financial institutions).  The cost of the fiat banking sector is the fiat equivalent of the economic cost of PoW for cryptos.

Thanks for understanding!

I would like to compare mining to gaming. Imagine the number of graphics cards sold annualy (tens of millions) and the amount of energy humanity "wastes" on shooting aliens in video games. Nobody seems to complain about that, as there is a lot of fun there. Plus there is an added benefit - gaming led to the development of highly efficient parallel processors that now contribute to research in other areas of human life.

The same way, mining has a lot of fun for nerds building custom rigs and playing with various settings, while manufacturers and vendors push state of the art silicon technology to produce the most efficient machines. Mining might become an incentive for humanity to push research in energy-efficient compuattion, development of new types of energy sources as well as deeper understanding of cryptographic hash functions. So it's not all that useless as it seems on the surface.

Competition requires energy, you can't change that. The good thing, is that energy is not actually "wasted", just transformed.

Interesting point re. all the graphic cards sold.
It would be a great point if those graphic cards were running at maximum energy consumption 24/7 during their lifetime, and if that energy consumption was anywhere close to today's ASICSs.

And if those graphic cards were used to fill giant aircraft hangers, like so:

And yes, energy is never wasted, only transformed.  Because first law of thermodynamics.  Good one

We're waiting for you to propose a better alternative, troll.

[NotLambchop]

Not until you lrn some tact

[cryptogeeknext]

The uselessness of PoW outside of the context of the blockchain is actually not accidental:
https://bitcointalk.org/index.php?topic=855520
This is what makes money system neutral towards any type of useful work.

I don't think comparison of money system to a stock market is appropriate. Money system is a playing field, which needs to be simple, neutral and robust. Stock market is a competition of various players within the money system.

Mining allows competition of control to stay an open game for as long as innovation can occur (indefinitely).
Other schemes would tend towards concentration of control with long lasting network effects.

This is in fact a very intelligent point.  I have to say that I was first attracted in principle to such things as primecoin, because they solve at least some obscure mathematical problems during mining.  But you are right that what constitutes "useful work" is part of what the market has to decide, and will change over time, so it would be silly to cast it in stone in any successful cryptocurrency.

That said, there is indeed a fundamental difficulty with PoW.  In order for it to make the blockchain safe, a lot of work has to be done.  On the other hand, that is a cost for the use of the currency (a kind of tax on its usage if you want to).  During the early mining phase, that tax is essentially paid for by inflation (the phase we are in).  Later, the tax will be the fees that have to be paid.
If it is true that the cost of PoW is comparable to the inflation right now, that is, 10%, now that would be terribly huge.  As long as bitcoin adoption is growing, that's not so much of an issue, but imagine that the whole world economy is taken over by bitcoin.  It would mean that 10% of the world economic resources would go into PoW ?  It is what I touched upon in that other thread https://bitcointalk.org/index.php?topic=865870.0

I have no idea how much world resources are spent today to the fiat banking sector (I don't mean, how much money the banking sector is handling, but how much the banking sector's functioning is costing: salaries, real estate .... of banking and financial institutions).  The cost of the fiat banking sector is the fiat equivalent of the economic cost of PoW for cryptos.

Thanks for understanding!

I would like to compare mining to gaming. Imagine the number of graphics cards sold annualy (tens of millions) and the amount of energy humanity "wastes" on shooting aliens in video games. Nobody seems to complain about that, as there is a lot of fun there. Plus there is an added benefit - gaming led to the development of highly efficient parallel processors that now contribute to research in other areas of human life.

The same way, mining has a lot of fun for nerds building custom rigs and playing with various settings, while manufacturers and vendors push state of the art silicon technology to produce the most efficient machines. Mining might become an incentive for humanity to push research in energy-efficient compuattion, development of new types of energy sources as well as deeper understanding of cryptographic hash functions. So it's not all that useless as it seems on the surface.

Competition requires energy, you can't change that. The good thing, is that energy is not actually "wasted", just transformed.

Interesting point re. all the graphic cards sold.
It would be a great point if those graphic cards were running at maximum energy consumption 24/7 during their lifetime, and if that energy consumption was anywhere close to today's ASICSs.

And if those graphic cards were used to fill giant aircraft hangers, like so:



And yes, energy is never wasted, only transformed.  Because first law of thermodynamics.  Good one

Beautiful pics

Actually, I would be interested to know the estimates of energy consumption in gaming versus mining.
I don't have the data, but something tells me that the former is orders of magnitude greater than the latter.

Bitcoiners' community is just a few millions in total and only a small part of it crowd-funded mining operations, including those of Asicminer, Avalon, KnC, BFL and others. Gamers, on the other hand, are in hunderds of millions worldwide if not more.

Anyways, competition is fun, it's worth the energy.

[dinofelis]

Wrong, the hoarders are the hero.

http://nakamotoinstitute.org/mempool/im-hoarding-bitcoins-and-no-you-cant-have-any/

If you make your own altcoin, and you mine it exclusively yourself, and you hoard it 100%, and you replace bitcoin by the name of your altcoin in the above argument, what changes ?

[DieJohnny]

I also think the demand will be higher for bitcoins in the future as more rich people might put some of their savings in btc. But I am not sure about if we will go away from fiat totally. Maybe this will just become a good first or second alternativt payment system or what ever one wants to call it.

What is your statment based on when you say that even 1 btc will be so epxensive that one can't buy it with all their lifesavings in fiat? It's interesting but some has 4 digits in lifesavings and some up to 6 digits, just to use some logic numbers.

Do you think that the next halving will effect the price in a huge way? Since by then more people have adopted bitcoins than before. And if we know that bitcoins would go up a lot in value it would not be so useful to spend it yet.

And the question still kind of remains, if the price goes up to a new all time high, will it stay there if some people want to cash out to fiat? Or will the price drop.

Going away from fiat is not really the point, people still use fiat in Argentina and their currency goes down in value constantly. The question is if you have savings where will you keep it.

When i say life savings I mean the majority of humanity. Certainly, some people will be able to buy a Bitcoin no matter the price, but not anyone I know.

I think there is little doubt that the halving will be a catalyst, probably the next speculative bubble. Six months before the halving the pressure will start to build and price will grow until it pops.

We have one more speculative bump and drop. After that we will enter a new phase of Bitcoin where market adoption exceeds any ability to provide enough coins.

We will spike late 2015 and drop to 1200 mid-late 2016. After that, the next run up will be to the top of what Bitcoin will ever be worth in our lifetimes--The last truly great bubble. I think it will be an x100+ run up and won't stop until the price is so high that even stone cold holders like me will sell coins to diversify, my feeling is before 2020. Then it will be the mature phase of Bitcoin where price fluctuates based much less than on non-speculative factors.