They are still unable to control it. They may have a bunch of it, but they can’t adjust the supply. They can’t print more, though I suppose they could reduce the supply, at great cost to themselves.
I’ve heard this, but I also recently got a new computer that had a 3080 in it for its listed retail price.
Maybe OEMs have a better supply than individual consumers, though.
What worries me is how bitcoins are being used, and by whom. We’re in a situation in which interest rates are at all-time lows with probably no end in sight, so financial institutions are naturally going to look for new schemes to make money. Ditto certain unnamed companies that try to pump up the price of crypto as a way to improve their company’s financial position. We’re in a wildly speculative environment. And going back to the Tulip mania of the 1600s, the history is pretty clear how this will eventually end.
AIUI, transactions have to be authorised by a majority of the bitcoin miners, and these are now heavily concentrated in China and therefore subject to influence from the Chinese government.
I just googled and found an article saying that one of the only ways to get hold of an Nvidia RTX 3080 at the moment is to buy a pre-built PC with one installed. So, yeah.
At the moment, I would say yes, but mainly because they are a vehicle for speculation. A Bitcoin has no real value until it gets exchanged for “real” money, which in the last resort is something you can physically put in your pocket, even though an increasing proportion of financial transactions are electronic.
Since this exchange rate fluctuates wildly, this makes Bitcoins a dubious prospect. You sold something and got paid in Bitcoin? How much will that be worth when it is converted to the currency of your choice? Whether o not you want it, paying and being paid with Bitcoins is a gamble. And also one with considerable financial overhead at the moment, as other posters have explained.
One of these years the world will have one or more cryptocurrencies, but a number of things have to apply:
Bitcoins have too much overhead in the mining, and the transactions are expensive and slow. There is sure to be something better out there, Bitcoin may have been one of the first, but not necessarily the best. But I leave that aspect to the experts.
In the last resort, a viable cryptocurrency has to be backed either by a government or a very big financial institution. This of course means that one of the current attractions of Bitcoin will not apply, as there will almost certainly be a certain amount of control and surveillance. But if not, somebody will break into the system and manipulate it. I saw a report that this has already happened with Bitcoin.
One aspect of Bitcoin is that the supply of money is limited, there can only ever be (AFAIK) 21 million Bitcoins. Some have already got lost, so the supply of money will decline. Against that, sooner o later somebody will figure out how to break the barrier and then create some more Bitcoins for themselves. This is the problem with what is in effect a private currency that relies on electronic security rather than human intervention.
But one day one or more cryptocurrencies will be in wide use.
It seems like the major non-asset use of Bitcoin is for illicit purposes, such as money laundering, human trafficking, assassinations, tax avoidance, drug transactions, etc. Even if Bitcoin processing used a trivial amount of energy, it seems like the actual use of Bitcoin as a currency is a net negative for society.
That’s not quite how Bitcoins work.
There’s no technical reason you can’t just make up more Bitcoins for yourself. The problem is that the way the algorithm works, everybody else would have to agree you have them. That’s the main barrier. Unless a majority of bitcoin miners agree, any new Bitcoins don’t count.
There’s also some technical things that would need to be worked out but those are very minor compared to the necessity of having all the other miners agree. These proposed changes do sometimes lead to some interesting effects. Bitcoin itself has been “forked” a couple times (XT and Classic being the major ones) as different groups wanted to implement fundamental changes. Extending the number of coins in such a fork would be absolutely possible (forks have generally ‘grandfathered’ existing coins into the new). But then it’s basically a separate cryptocurrency and a majority (sometimes a supermajority) of miners still have to agree on the blockchain.
But that’s doesn’t address the real issue, which is there doesn’t seem to be a widespread and currently neglected use case that couldn’t be fulfilled one way or another with digital transactions denominated in dollars (or euros or whatever). Even most illicit transactions fall into this bucket. Sure, there’s the “shiny new object” aspect but it boils down to the fact that for most people buying their daily Starbucks, it doesn’t much matter if their card swipe works in dollars or bitcoins. And dollars have the benefit of the backing of a major nation.
And I have a pretty good idea of what a dollar will buy me tomorrow, next week, next month, even next year.
Bitcoin, not so much.
Agreed - report out of Mexico says banks launder more money than crypto. https://www.doubleurbitcoin.com/2020/new-report-says-banks-launder-much-more-money-than-crypto/
Bitcoin is OG cryptocurrency that uses the energy-intensive proof of work model; there are literally thousands of newer cryptocurrencies that do not use proof-of-work - they use proof of stake instead, which is much less energy intensive. I don’t know if Bitcoin can or will move to a proof of stake method, but the crypto community is very aware of the problems with Bitcoin’s energy footprint.
… Or gets exchanged for goods or services, and that’s the exact same for any currency. You could say that the Euro has no real value until it gets exchanged for goods or services, or some “real” money (such as the US dollar I suppose). With every comment here about Bitcoins not having real value, those same comments apply exactly as well for every other currency.
And what does it mean to say that the US dollar is backed by the US government or economy? The dollar no longer represents a fixed amount of gold, so its value is only what people say it is. It’s the same for Bitcoin.
The problem with Bitcoin is as GreenWyvern pointed out above, that its transaction cost is crazy high, and that the energy use to keep the system going is unacceptable.
It’s been explained upthread.
The US dollar is what the US government accepts. And this matters when the US government accepts dollars - and not euros or crypto - for taxes and other business. And US creditors that take cash are required to accept US dollars to satisfy that cash transaction. And those businesses will have banks and exist in cities and states that are themselves going to be heavily incentivized to denominate their own transactions in dollars.
They are the figurative 800 pound gorilla in the room. The ‘value’ of the dollar is not an inherent property of the currency itself but the fact that there’s this rather large, powerful organization that insists upon its use. And that kind of matters. A lot.
That is NOT the same for Bitcoin at all.
Except I can pay my taxes in dollars. I can pay my debts in dollars.
The US govt doesn’t have to take bitcoin for my taxes, my creditors don’t have to take bitcoin for my debts.
Another problem is unregulated bitcoin exchanges.
If you want to convert bitcoins into hard currencies you need to use an exchange. Also, most users are not tech-savvy enough to handle their own transactions, so they trust their bitcoins to exchanges to do it for them.
In 2016, Bitfinex was hacked and $73 million of bitcoin was stolen. It was never recovered.
in 2018, 76,000 investors lost a combined $169 million when Quadriga went under.
But there’s no shortage of stories of bitcoin scams, thefts, and losses. Here’s a long list from last year:
And that they’re a solution to a problem that doesn’t exist. I have no problem using actual money for things I want to buy. Has anyone articulated a reason (other than currency speculation) for the use of a complicated new currency?
As far as “net negative” to society, we’d have to be able to weigh the positives against the negatives.
As far as the positives to society, I’m not sure there’s even a good way to quantify that. It’s a store of value and a means of exchange, and there seems to be demand for it, so it does seem to have some value.
I’ve seen some big numbers tossed around for Bitcoin’s electricity usage. I’m not sure how accurate they are, but it seems like the doomsayers are focusing on carbon footprint per transaction. This seems misleading to me as Bitcoin transactions are on average in the neighborhood of US $15,000, whereas a traditional credit card processor has much lower transaction efficiency (smaller amounts). So it seems like this may not be a big deal, other than the same big deal that affects all financial cryptography (it’s computationally expensive, as it has to be).
Backing up a little, what value does Bitcoin really need to give to be socially valuable? Would we tell a video gamer that they can’t enjoy their hobby because it wastes electricity for no social benefit? Because a BTC farm runs substantially the same hardware (high end GPU cards), for hours a day similar to someone playing a video game. If we say video games are socially valuable as entertainment, then why couldn’t Bitcoin be seen as valuable as a source of entertainment? It could be framed as a game that might eventually turn a profit.
I don’t see the significance of the government requiring dollars for my tax bill. So some of my transactions must be in dollars. Does that have anything to do with the inherent value in a dollar?
Also, for the creditors that you now owe money to, those original agreements were that you would pay them in dollars, but that’s the only reason that they have to take dollars. If someone did work for me in exchange for me paying them in tulip bulbs, then they’d have to take tulip bulbs, right?
I must regretfully disagree with you. One of the biggest uses for Bitcoin is a store of value to hedge against the government devaluing currency with inflation. We’ve been living in devalued currency days for the last 50 years or so; that is going to go through the roof with governments trying to make up for their Covid spending sprees (in my opinion, of course). I don’t see any other way for the general population to access hedges against inflation.
We keep talking about anonymity in this thread, but to clarify, what the crypto community wants is PRIVACY. Some cryptocurrencies are working very hard to ensure their patrons can retain their privacy in their financial doings. Monero, for example, is a cryptocurrency that has been built for unassailable privacy. They’ve been so successful with this that the US government has basically put a bounty up for anyone who can crack their privacy codes.
I’m not up to ANY shenanigans in my life, but I still value my privacy, and I don’t want to give it up to any government or corporation.
As I mentioned up-thread, most newer cryptocurrencies are working with proof-of-stake rather than Bitcoin’s proof-of-work.
Again, completely disagree with you. First, the USD is being rapidly devalued and is on shaky footing because of your country’s political disasters and continuing civil war. Secondly, not everyone in the world has access to or wants USD. There are two million unbanked people in the world who would gladly use a cryptocurrency through their phone since their own country’s currency is not sound, and they don’t have access to it anyway.
https://hellosoda.com/blog/the-worlds-unbanked-population/
Cryptocurrencies/blockchain are more than stores of value, too – one of Ethereum’s strongest contender’s, Cardano, recently announced a partnership with the Ethiopian government for blockchain-based national IDs. Cardano Partners With Ethiopia Ministry of Education on Blockchain-Based ID System
True enough. And when they pay their taxes, they do it in dollars.
You could, should the other party accept it, simply barter for all the goods and services you needs. But it turns out people prefer a single, simple system. And the one that coincides with what a central bank/government prefers seems to be a winner.
Even in the US, one only has to go back a few centuries to when each state could print its own currency to see that they figured out a central currency was a better idea.
As I noted upthread, libertarian style goldbuggery.
People have been warning about the devaluation of the dollar for decades now and it keeps not happening.
Conspiracy theories about the “real” devaluation that’s occurring that we’re unaware of aren’t convincing at all.
This is true. It’s not the money that has value*, it’s the wealth that the money is backed by that has value. A $100 steak dinner, as I mentioned above, gets traded for a doctor having seen 3 or 4 patients. In aggregate, however, those dollars represent the entire economic output of the US (and the pounds the entire economic output of the UK, and so on). The bitcoins only represent some lines of code in a blockchain.
*. Paper cash will have some small value, coins made of nickel a little more, and the old copper pennies and silver dollars even more.
Where did that figure come from?
And what average are we talking about, mean or median?
If bitcoin is supposed to be used as a replacement for regular currency, and be in regular use, then it is going to have regular, everyday sized transactions. If it’s just being used by the wealthy and drug cartels, then it really isn’t meant for the little guy at all.
Not really. If I am playing a video game, I am using one GPU card for a few hours, at absolute most say 12. If I am a bitcoin miner, I am running dozens if not hundreds of GPUs 24/7.
But it’s not a game at all. It has no interaction, just plodding away at trying to make the next hash. It’s only about trying to make a profit.
Yes, it does. That is the fundamental basis for the value of a dollar, that the govt has to take it to cover taxes.
That’s not the only reason.
So, what happens if you don’t have those tulips when the contract comes due? They can then demand that you pay them for the value of those tulips in dollars, and you’d now owe them that many dollars. They cannot demand that you pay for the value in bitcoin.
That’s what it means on the dollar bill, where it says, “This note is legal tender for all debts, public and private.”