Cryptocurrency - where's the actual value?

[NickCQ]

TooMany2cvs said:

NickCQ said:

Can you educate me on the division of BTC? I've seen people talk about holding fractions of BTC but how is this done? Is there a middleman that holds the actual BTC and sells fractions syntehticaly, or can the actual item be divided? Forgive my ignorance...

Angle grinder.

very good

[Behemoth]

NickCQ said:

Can you educate me on the division of BTC? I've seen people talk about holding fractions of BTC but how is this done? Is there a middleman that holds the actual BTC and sells fractions syntehticaly, or can the actual item be divided? Forgive my ignorance...

It's pretty simple if conceptually difficult. The currency is digital. I can choose to send you 1BTC or I can choose to send you 0.1 or 0.01 or 0.00000001 or anything in between or any amount more (up to the limit of the coins in existence, theoretically).

There is never a need for any middle man. You hold the cash.

[Behemoth]

NickCQ said:

Yep, it's all about national income and government power to levy taxes on that income denominated in GBP. As discussed upthread. Doesn't exist yet for BTC.

If I earn some €, would I declare those to HMRC? Yep. Do I pay HMRC in €? Nope. HMRC publish a handy table for monthly exchange rates. BTC isn't there yet, but just wait. Just because earnings are in a non-local currency doesn't means that tax events can't happen.

[NickCQ]

Behemoth said:

NickCQ said:

Yep, it's all about national income and government power to levy taxes on that income denominated in GBP. As discussed upthread. Doesn't exist yet for BTC.

If I earn some €, would I declare those to HMRC? Yep. Do I pay HMRC in €? Nope. HMRC publish a handy table for monthly exchange rates. BTC isn't there yet, but just wait. Just because earnings are in a non-local currency doesn't means that tax events can't happen.

I think we are talking at cross-purposes. In your example, you can sell the € to any of the millions of people that pay billions in taxes in €. What gives any currency 'intrinsic' value is that there will be people somewhere with liabilities denominated in that currency, so the currency functions as a store of value.

With tulips, the wind can change and suddenly no-one will buy your tulips. You can't do anything with them as no-one has to accept tulips. Which is where they differ from a currency.

[NickCQ]

Behemoth said:

NickCQ said:

Can you educate me on the division of BTC? I've seen people talk about holding fractions of BTC but how is this done? Is there a middleman that holds the actual BTC and sells fractions syntehticaly, or can the actual item be divided? Forgive my ignorance...

It's pretty simple if conceptually difficult. The currency is digital. I can choose to send you 1BTC or I can choose to send you 0.1 or 0.01 or 0.00000001 or anything in between or any amount more (up to the limit of the coins in existence, theoretically).

EDIT: I just looked it up
https://bitcoin.stackexchange.com/questions/13157/...

Seems like each BTC is actually a collection of 10^8 saitoshis, so that's the actual currency unit, (i.e. pence), whereas bitcoin is a pound (but 10^8 not 10^2).

[Maxf]

NickCQ said:

OK, but I thought that each BTC represented (in layman's terms) a unique solution to an increasingly difficult maths problem. How can this be subdivided without losing the security benefits afforded by the complexity of the problem?

Each new transaction, so giving someone 0.1 of you 1 BTC requires a new problem solved.

The reward for solving the problem is BTC, keeping the miners (problem solvers) interested.

[Behemoth]

NickCQ said:

I think we are talking at cross-purposes. In your example, you can sell the € to any of the millions of people that pay billions in taxes in €. What gives any currency 'intrinsic' value is that there will be people somewhere with liabilities denominated in that currency, so the currency functions as a store of value.

With tulips, the wind can change and suddenly no-one will buy your tulips. You can't do anything with them as no-one has to accept tulips. Which is where they differ from a currency.

Yes, of course. Winds also change with traditional fiat currencies. No-one has to accept Reichmarks, Zimbabwe dollars, Venezuelan Bolivars to name just three. People move to a proxy when currencies fail. And believe me they do fail, in wheelbarrow loads, every decade. Of course the intrinsic value is adoption dependent & adoption is obviously in the early stage with BTC. There's no denying the risk, but the utility for BTC is very clear.

Edited by Behemoth on Thursday 7th September 13:46

Edited by Behemoth on Thursday 7th September 13:47

[NickCQ]

Behemoth said:

NickCQ said:

I think we are talking at cross-purposes. In your example, you can sell the € to any of the millions of people that pay billions in taxes in €. What gives any currency 'intrinsic' value is that there will be people somewhere with liabilities denominated in that currency, so the currency functions as a store of value.

With tulips, the wind can change and suddenly no-one will buy your tulips. You can't do anything with them as no-one has to accept tulips. Which is where they differ from a currency.

Yes, of course. Winds also change with traditional fiat currencies. No-one has to accept Reichmarks, Zimbabwe dollars, Venezuelan Bolivars to name just three. People move to a proxy when currencies fail. And believe me they do fail, in wheelbarrow loads, every decade. Of course the intrinsic value is adoption dependent & adoption is obviously in the early stage with BTC. There's no denying the risk, but the utility for BTC is very clear.

Edited by Behemoth on Thursday 7th September 13:46

Edited by Behemoth on Thursday 7th September 13:47

[bqf]

Things only have value if people need them, or if people want them.

Nobody needs Bitcoin, either as a store of value or medium of exchange. Why wouldn't we simply continue to use actual currency, which is used everywhere to buy or sell goods and services? It has the added advantage of being backed by the issuing state. If the state collapses, then your devaluing currency is going to be the least of your worries.

People want Bitcoin, as it has increased in value very sharply, and is limited in issuance. Currently. What if the supply increases, which is technically possible? Values will fall. What if the Blockchain becomes corrupted? If you say "that's impossible", then you're just wrong.

Lots of people are going to lose their shirt with cryptocurrency.

[anonymous-user]

bqf said:

Lots of people are going to lose their shirt with cryptocurrency.

But lots have people have lost pensions, savings through failed investments. No one is doubting it is risky and there is potential for a big failure but potential for a big success equally. There have been people who have said btc would fail time and time again and been proven wrong. Only time will prove if your assertion is correct.

i may come off as a btc fanboy but i don't actually hold any, i use it as medium to buy other coins but its success is intrinsically linked to all other coins,

Edited by The Spruce goose on Thursday 7th September 14:15

[Behemoth]

WitnessProtection said:

Wikipedia article is worth a read.

My understanding...

Individual transactions are broadcast to the network, where miners compete to compile them into the next agreed block of transactions to be added to the ledger. A miner who "wins" the race to solve the next block and have it added to the chain is rewarded with new Bitcoin, so the mathematical puzzle exists at block rather than transaction level. If you wish to send 0.000001 BTC to another wallet, you generate the transaction, which your wallet then broadcasts to the network, where it's swept up with other transactions to form the next block to be "discovered". The security isn't in the individual transaction, rather the work required to recreate or falsify that transaction once the block it's in has been validated. To do so would involve reprocessing the entire history of the chain to that point, which would require ferocious computing power and energy consumption.

That's my general understanding, but always worth reading the original white paper!

Spot on. It's worth adding that when Bitcoins run out (there is a finite supply), then transaction fees will take over as the reward for keeping the system running. By that time, small devices (eg smartphones) might well be powerful enough to do the job. So every user will help support the infrastructure in the background.

[Behemoth]

bqf said:

Things only have value if people need them, or if people want them.

Nobody needs Bitcoin, either as a store of value or medium of exchange. Why wouldn't we simply continue to use actual currency, which is used everywhere to buy or sell goods and services?

Few needed the internet or the web in 1994. Do you need it now? Things get adopted because they are better, more efficient, quicker.

[Benjaminpalma]

Behemoth said:

Few needed the internet or the web in 1994. Do you need it now? Things get adopted because they are better, more efficient, quicker.

The internet delivers real value. Bitcoin, it seems from our discussion above, has no value other than as a speculation medium.

[Behemoth]

Benjaminpalma said:

The internet delivers real value. Bitcoin, it seems from our discussion above, has no value other than as a speculation medium.

You almost certainly would not have said this about the web in 1995. In 1995, people just like you were saying the web had no purpose, no utility, no future. I know, I was there & I knew its potential. Very few others did. It's normal for new technology early in its adoption curve.

[Benjaminpalma]

Behemoth said:

You almost certainly would not have said this about the web in 1995. In 1995, people just like you were saying the web had no purpose, no utility, no future. I know, I was there & I knew its potential. Very few others did. It's normal for new technology early in its adoption curve.

I was using it - with patience - in 1995. The possibilities were obvious to most then, and it's still surprising how slowly it's all crept forward.

The reverse is true with Bitcoin as it seems it's only now that people are starting to point at the Emperor's nakedness.

At least we will have been left with blockchain technology which will automate so many administrative tasks in future.

[Maxf]

bqf said:

Things only have value if people need them, or if people want them.

Nobody needs Bitcoin, either as a store of value or medium of exchange. Why wouldn't we simply continue to use actual currency, which is used everywhere to buy or sell goods and services? It has the added advantage of being backed by the issuing state. If the state collapses, then your devaluing currency is going to be the least of your worries.

People want Bitcoin, as it has increased in value very sharply, and is limited in issuance. Currently. What if the supply increases, which is technically possible? Values will fall. What if the Blockchain becomes corrupted? If you say "that's impossible", then you're just wrong.

Lots of people are going to lose their shirt with cryptocurrency.

Thats true for the UK, with a stable government and decent banking sector - but what about countries which arent so lucky? Do they not need somewhere to securely hold wealth? It's a global currency, not just reflective of our little part of the world.

Who is going to lose their shirt, really? I cant see anybody putting all of their wealth into crypto currencies, and if they do more fool them. A couple of % of your net worth could be worth 0 in the future or you could be part of something massive with real value.

[Behemoth]

Benjaminpalma said:

I was using it - with patience - in 1995. The possibilities were obvious to most then, and it's still surprising how slowly it's all crept forward.

The reverse is true with Bitcoin as it seems it's only now that people are starting to point at the Emperor's nakedness.

At least we will have been left with blockchain technology which will automate so many administrative tasks in future.

The true power of the blockchain requires very wide distribution and full decentralisation. You don't get that with any private blockchain and you never will. Just as the internet through TCP/IP is resilient because of its decentralised and widely distributed nature. No private network can ever match it.

The only thing naked about Bitcoin is its transparency. The codebase and infrastructure construct are open for all to see. This reinforces its security and resilience, just like TCP/IP and the web.

[NickCQ]

Behemoth said:

The true power of the blockchain requires very wide distribution and full decentralisation. You don't get that with any private blockchain and you never will. Just as the internet through TCP/IP is resilient because of its decentralised and widely distributed nature. No private network can ever match it.

The only thing naked about Bitcoin is its transparency. The codebase and infrastructure construct are open for all to see. This reinforces its security and resilience, just like TCP/IP and the web.

As ever, the network is only as strong as its weakest link. I suspect this will be how users store their wallet details.

[Behemoth]

NickCQ said:

As ever, the network is only as strong as its weakest link. I suspect this will be how users store their wallet details.

If I lose £5 from my jeans pocket because I've been too lazy to secure it properly, that doesn't lead to the collapse of sterling. Storing passwords is certainly a weakness, but it doesn't have any effect on the strength of a distributed decentralised cryptocurrency network.

If the chap running a private blockchain had his pwd compromised, that might be another matter entirely

[x5x3]

Another benefit of Bitcoin is the degree of anonymity it provides. It is not entirely anonymous as the blockchain is there for anyone to analyse but a lot of people are fed up with the amount of data amazon/visa etc carry about us and our spending habits.