Bitcoin / Litecoin / Ethereum / alts discussion

[Alkali Ike]

This video seems to answer my question.

The video is fascinating. Kind of like a mashup of a Tony Robbins motivational seminar and the sales pitch Bernie Madoff would have given to his "investors".

But I still don't get it at all. Massive computing power solving complex mathematical "puzzles". Toward what end?

I just don't get it and I probably never will.

 

[Alkali Ike]

Here's some light reading.

Beginner’s Guide to Bitcoin & Cryptocurrencies

On the upside I guess I now know that "alts" apparently refers to any crypto currency that isn't bitcoin.

 

[-Asdfgh-]

I do not understand crypto currency at all. The explanations I find online are complete utter gibberish to me. Never heard of alts, lite, or eth until this thread.*

Man am I out of it. I feel really dumb.

*Neither has iOS apparently. I had to "correct" its autocorrections several times.

The concern is it they are electronic tulips (see J.K. Galbraith's book). But then some people did very well from tulips. In 2009 I nearly bought £100 of bitcoin, and if I'd sold those last week I could have retired. Bitcoin seems to get used by some unsavoury times, but I suppose £ do too.

 

[mattsk42]

Yeah this last reply is really what it's about to me. It may be the whole tulips problem again, but there are people who made a TON of money off of that before it popped/crashed. I really really don't care at all if it's trying to "replace banks". I really really don't care that it's unstable. I would never put my life savings into it or have any expectation of getting the money back.

If I have $1000 just sitting in the bank (I wish, this is hypothetical) or in regular investments making 1 to 10%, it doesn't change anything for me. If I put that same $1000 into the CORRECT guess, it could be literally millions in a year or two. Ethereum was 10 bucks in January of this year, and is stable at $280 or so now with an all time high of $400 last month. (so a potential $40,000 win) Bitcoin was $200 in 2013 and got over $5000 at one point last month.

I obviously didn't buy in when they were low, otherwise I would be on a boat somewhere and not GASing over any 5 string Cirrus like I am now. But do the math and it can be fun. If I'm out $x-amount after it all, oh well. If I happen to guess right (with research), it could change my year/many years.

 

[fdeck]

Regarding investment, I once read that if you can predict the market just 51% of the time, and act on your predictions, you will become unspeakably wealthy very quickly.

The problem is, even professional investors can't predict the market 51% of the time.

 

[Aberdumbie]

That's a fact. That's why most of us are doomed to a lifetime of toil......... I have read the posts and the links. I cannot get straight in my mind. Is Bitcoin something physical?

 

[powmetalbassist]

Bitcoin is a digital currency. treat it as you would your money in a bank (it is just digital), but the money is extremley volatile in regards to value and until you sell your money it will never become real money.

 

[Alkali Ike]

That's a fact. That's why most of us are doomed to a lifetime of toil......... I have read the posts and the links. I cannot get straight in my mind. Is Bitcoin something physical?

Nope. The “coins” often used to illustrate articles about bitcoin are for show only.

Think of it like your employment income being direct-deposited into your bank account. You set up auto-billpay for your regular bills like say utilities. So you may never physically see or hold a lot of your money — it’s just numbers in your bank account. Debits and credits.

You can go to an ATM and convert some of those bank credits to physical dollars.

What those dollars are worth (whether they’re physical or just numbers in your bank account), ie their purchasing power, is well established and generally pretty stable.

Bitcoin is another “currency” except it has no physical manifestation. It’s numbers in a digital wallet, supposedly very tightly controlled, but not by traditional currency-issuers & regulators like governments or banks. Bitcoin believers determine its purchasing power.

Someone professing to understand cryptocurrency: How’m I doing so far?

 

[Aberdumbie]

Nope. The “coins” often used to illustrate articles about bitcoin are for show only.

Think of it like your employment income being direct-deposited into your bank account. You set up auto-billpay for your regular bills like say utilities. So you may never physically see or hold a lot of your money — it’s just numbers in your bank account. Debits and credits.

You can go to an ATM and convert some of those bank credits to physical dollars.

What those dollars are worth (whether they’re physical or just numbers in your bank account), ie their purchasing power, is well established and generally pretty stable.

Bitcoin is another “currency” except it has no physical manifestation. It’s numbers in a digital wallet, supposedly very tightly controlled, but not by traditional currency-issuers & regulators like governments or banks. Bitcoin believers determine its purchasing power.

Someone professing to understand cryptocurrency: How’m I doing so far?

I am fully impressed. I read the same posts. Watched the videos and the links. All I comprehended from all that was that it were an imaginary holding. Wholly dependent upon the stability of the web. You just closed the circle for me.... It makes sense.... However I still plan to hoard gold and silver.

 

[fdeck]

Bitcoin is a digital currency. treat it as you would your money in a bank (it is just digital), but the money is extremley volatile in regards to value and until you sell your money it will never become real money.

It's real money. But money is a technology, and a money system can be designed for a specific purpose. Government money systems of the most prosperous countries are designed with one set of objectives in mind, Bitcoin with another.

In addition to the volatility, there are also issues of security and exchange fees. On the other hand people who live in countries with no functioning money system might be better off using bitcoins for things like overseas purchases.

 

[Alkali Ike]

Just to complete the thought

Since bitcoin transactions do not pass through traditional banks or financial institutions, they should be anonymous and untraceable. Hence the attraction for their use in possibly illegal financial exchanges.

China isn't about to say "We no longer recognize or accept transactions in dollars". Virtually every country in the world accepts dollars, either directly or via conversion to another regulated currency, like euros. These conversions are fairly stable and predictable.

Now suppose China suddenly says "Nope, no dollars". It would be financial chaos and suicice for the economies of many countries. Notably China itself.

But China can nip bitcoin in the bud, as they're apparently doing. Suddenly you've cut off a sizable chunk of the bitcoin believers, and the value of bitcoin predictably falls.

Also, nobody thinks in terms of "A movie ticket costs 0.0000121 bitcoin".* They're going to mentally or via calculator translate that into dollars or whatever the official local currency is in order to decide if the price is ok. That's if the theater accepts bitcoin at all (highly unlikely).

An investment in bitcoin is pure speculation, or it's for money laundering, or just for hiding the transaction.

Am I still more or less correct?

*I have no idea what the current conversion rate is. But whatever it is today, it could be substantially different next week.

 

[guy n. cognito]

Just to complete the thought

Since bitcoin transactions do not pass through traditional banks or financial institutions, they should be anonymous and untraceable. Hence the attraction for their use in possibly illegal financial uses.

China isn't about to say "We no longer recognize or accept transactions in dollars". Virtually every country in the world accepts dollars, either directly or via conversion to another regulated currency, like euros. These conversions are fairly stable and predictable.

Now suppose China suddenly says "Nope, no dollars". It would be financial chaos and suicice for the economies of many countries.

But China can nip bitcoin in the bud, as they're apparently doing. Suddenly you've cut off a sizable chunk of the bitcoin believers, and the value of bitcoin predictably falls.

Also, nobody thinks in terms of "A movie ticket costs 0.0000121 bitcoin".* They're going to mentally or via calculator translate that into dollars or whatever the official local currency is in order to decide if the price is ok. That's if the theater accepts bitcoin at all (highly unlikely).

An investment in bitcoin is pure speculation, or it's for money laundering, or just for hiding the transaction.

Am I still more or less correct?

*I have no idea what the current conversion rate is. But whatever it is today, it could be substantially different next week.

That's about right. Bitcoin could disappear tomorrow with zero widespread financial implications. Treat it as money, and you'll get burned. Treat it as blind speculation (which it is) and you'll still get burned, but you won't be surprised.

 

[Selta]

That's about right. Bitcoin could disappear tomorrow with zero widespread financial implications. Treat it as money, and you'll get burned. Treat it as blind speculation (which it is) and you'll still get burned, but you won't be surprised.

Haven't been burned in either case myself. Made a few hundred bucks just in the last month, and overall, made quite a chunk of change off of it. Also have used it to buy quite a few things - contrary to beliefs here, legitimate things as well, nothing illegal or shady. I don't understand the crusade here against cryptocurrency. Is it simply fear of something that is grossly misunderstood?

Just to complete the thought

Since bitcoin transactions do not pass through traditional banks or financial institutions, they should be anonymous and untraceable. Hence the attraction for their use in possibly illegal financial exchanges.

China isn't about to say "We no longer recognize or accept transactions in dollars". Virtually every country in the world accepts dollars, either directly or via conversion to another regulated currency, like euros. These conversions are fairly stable and predictable.

Now suppose China suddenly says "Nope, no dollars". It would be financial chaos and suicice for the economies of many countries.

But China can nip bitcoin in the bud, as they're apparently doing. Suddenly you've cut off a sizable chunk of the bitcoin believers, and the value of bitcoin predictably falls.

Also, nobody thinks in terms of "A movie ticket costs 0.0000121 bitcoin".* They're going to mentally or via calculator translate that into dollars or whatever the official local currency is in order to decide if the price is ok. That's if the theater accepts bitcoin at all (highly unlikely).

An investment in bitcoin is pure speculation, or it's for money laundering, or just for hiding the transaction.

Am I still more or less correct?

*I have no idea what the current conversion rate is. But whatever it is today, it could be substantially different next week.

I'm not sure what a "bitcoin beliver" is. Unless someone's started up a religiion about it that I've missed entirely.
The value fell, a bit, but is still trending up and regaining ground. The China news was "big", but anticipated for about 3 months from those of us who keep our eye on things. If you have been keeping track, you'll notice every 6 to 9 months there something that triggers either a pull back, or massive growth. So far, every growth has been larger than every pull back.

You are "more or less correct", but you're leaning towards more incorrect than correct, IMO. You can treat it as a speculative investment, you can mine it youself and create the currency directly (which requires more knowledge on crypto, algorithms, and computer hardware than has been demonstrated here, by far -- yes, I mine, and no, I don't feel like writing up much on mining, plenty of easy to find info on it out there already), you can view and dissect the blockchain yourself, you can buy a lot of products from retailers with it, and sure, you can launder money and "hide transactions" with it if you'd like.

 

[fdeck]

An investment in bitcoin is pure speculation, or it's for money laundering, or just for hiding the transaction.

Am I still more or less correct?

*I have no idea what the current conversion rate is. But whatever it is today, it could be substantially different next week.

Almost. Straightforward bitcoin transactions are traceable because they are recorded in the blockchain, but there are methods for making them untraceable. In practical terms, regular people who use bitcoins probably have no guarantee of privacy.

But yes, it's volatile because it's designed to operate without government control. The reason why the dollar is stable, is because the government stabilizes it to a certain extent.

 

[Alkali Ike]

It's real money. But money is a technology, and a money system can be designed for a specific purpose. Government money systems of the most prosperous countries are designed with one set of objectives in mind, Bitcoin with another.

In addition to the volatility, there are also issues of security and exchange fees. On the other hand people who live in countries with no functioning money system might be better off using bitcoins for things like overseas purchases.

The value "Real Money" is defined by consumers, corporations, and governments. It's based largely on faith. In the US we have a pretty good idea what a $20 bill can be exchanged for. Everyone agrees on that, at least implicitly.

If you're exchanging $10M via bitcoin and can save 0.3% in transaction fees by using bitcoin instead of dollars, that's significant to you. But risky unless you can complete the transaction very quickly while you know what the value of bitcoin is today.

EDIT: If you engage in exchanges for goods or services in dollars, you're a "dollar believer". Likewise bitcoin. Anything can be currency, if both parties to the transaction accept it.

I don't want your bitcoin offer for my bass, or an offer in pounds of carrots, unless I can pinpoint the exact dollar value of your offer right now and exchange it to dollars right now.

I'm out because I'm in way over my head.

 

[fdeck]

The value "Real Money" is defined by consumers, corporations, and governments. It's based largely on faith. In the US we have a pretty good idea what a $20 bill can be exchanged for. Everyone agrees on that, at least implicitly.

Indeed, that's a perfectly good definition. And like you say, it's based on faith, but in this case the faith is in the continuity of US government policy in the short term. And to some extent, it's faith in people who are much bigger and more powerful than me, who would be... disappointed... if the dollar were to suddenly take a wild swing.

 

[fdeck]

Since the Holland tulip bubble came up...

Invalid Link Removed

 

[Tom Bomb]

Invalid Link Removed

"We have tetchy Christian moralists to blame for that." Quite a line there.

I enjoyed that article. Good lesson. It's rewarding to have some greater detail on this history. Even history can sometimes be speculation. Many thanks.

 

[tshapiro]

A layman's explanation of bitcoin, challenges, opportunities:

Bitcoin/block chain - a software/concept/technology where money is represented by a freestanding unit (i.e file or record) that can you can do business with. For example you can trade it or by things with it by sending it to someone else. The key to this is the software security is supposed to be so tight the self contained unit 'file' is unbreakable and has an audit trail to verify history.

Problem - there is no governing body that will uphold the integrity when someone finally does break the code. Other problem - a long transaction list or audit trail can cause issues as the size of the data grows.

Valid uses - tracking food and such where the compelling allure for hacking is lower and the transaction life cycle is shorter. With this, you could quickly track a piece of fruit and see if it came from an area that had a heath issue.

Sorry for the high level generalities, but, wanted to give explanations that people who aren't eyes-deep into the technology could understand.

 

[Alkali Ike]

Just passing this along.

Special Report: Chaos and hackers stalk investors on cryptocurrency exchanges

Special Report: Chaos and hackers stalk investors on cryptocurrency exchanges