I think it’s time to move into crypto

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SomeDude
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Re: I think it’s time to move into crypto

Post by SomeDude » Sun Jun 13, 2021 7:25 pm

vincent_c wrote:
Tue Jun 08, 2021 7:34 pm
Bitcoin is also a network so you can code metadata to bitcoin transactions that can have real practical uses.
Can you name a few? I have never heard of a single practical use for a bitcoin so I'm interested.
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Re: I think it’s time to move into crypto

Post by vincent_c » Mon Jun 14, 2021 9:06 am

SomeDude wrote:
Sun Jun 13, 2021 7:25 pm
Can you name a few? I have never heard of a single practical use for a bitcoin so I'm interested.
I think some parallels can be drawn with gold.

If gold has a practical use, it's financial value gives incentives to find alternatives. There is also quite a bit of friction when you move/trade it which limits its uses. So just because a technology has practical uses doesn't mean that it is economically feasible to use it which limits its practicality.

With that in mind, some of the non-store of value use cases for bitcoin's network are:

1) A payment network like Strike (https://strike.me/)
2) Creating a stable coin like Tether (USDT) using Omni Layer (https://www.omnilayer.org/)
- using this method you can secure any real world transaction with bitcoin and have an immutable ledger that you can use to audit any supply chain.
3) NFTs, you can issue unique marked satoshis that represent ownership of real world assets

In the end, a blockchain is just an append only log and to ask whether it has any real practical uses would be the same as asking whether any ledger had any use. The advantage of bitcoin is that it is the most secure/trusted (trustless) ledger and if you had large assets or transactions that need a ledger to keep track of then you would want to use the most secure ledger available.
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Re: I think it’s time to move into crypto

Post by SomeDude » Mon Jun 14, 2021 1:23 pm

vincent_c wrote:
Mon Jun 14, 2021 9:06 am
SomeDude wrote:
Sun Jun 13, 2021 7:25 pm
Can you name a few? I have never heard of a single practical use for a bitcoin so I'm interested.
I think some parallels can be drawn with gold.

If gold has a practical use, it's financial value gives incentives to find alternatives.
Thank you Vincent and please don't take this as a personal attack or even a comment on bitcoins future price moves. Some people will make a lot of money from it, and some people will lose a lot of money on it. I hope you are in category 1.

The main difference between gold and bitcoin is a bitcoin has no practical use. It doesn't have physical properties and it doesn't "do" anything. All you can do with a bitcoin to my knowledge is pass it back and forth.

That's what separates it from gold. There is no end user because it can't be used (bitcoin that is).

It absolutely has a price right now and people will trade for it, but ONLY because they think they will eventually trade it to someone else for more than they gave up. Otherwise they would find another one of the 10,000 cryptos to hold and transfer, or just hold dollars or gold or a different fiat currency.

99% of the bitcoin holders don't care about anonymity. They think they're going to get rich and most will hold to zero (i think).

This is in contrast to gold which has actual users of it in a practical or just have it around because it's pretty.

Unless there's a way to make bitcoin jewelry....... If ladies start wanting bitcoin jewelry then men will buy since we love ladies.
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Re: I think it’s time to move into crypto

Post by vincent_c » Mon Jun 14, 2021 2:54 pm

SomeDude wrote:
Mon Jun 14, 2021 1:23 pm
The main difference between gold and bitcoin is a bitcoin has no practical use. It doesn't have physical properties and it doesn't "do" anything. All you can do with a bitcoin to my knowledge is pass it back and forth.

I'm happy to engage in this type of discussion.

I actually think it is important for PP investors to understand bitcoin fully because there is a lot of inertia when it comes to trying to learn about it and the entire blockchain industry and I think a lot of people are looking for ways that they can avoid spending that time figuring it out.

I'm not sure if I explained it well but I can keep trying.

So the point you're trying to make is that gold is a physical material so it can "do" stuff. This implies that things that are intangible can't "do" stuff which is wrong.

What is a bitcoin?

A bitcoin is actually a unit that represents 100 million satoshis, a satoshi being the smallest unit that can be transacted on the bitcoin blockchain. So can a satoshi do anything?

Well the use of a satoshi is to pay for the right to add data to the bitcoin blockchain so that is one practical use. This means that to say that it doesn't "do" anything is factually wrong. But what I was trying to explain in my previous posts is that anyone can attach data to a satoshi or any number of satoshis and this allows them to come up with creative uses for these satoshis.

My question is, do you still insist that a bitcoin, being just a name for a certain number of satoshis, has no use and doesn't "do" anything? Or can we have some common ground to build our discussion?
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Re: I think it’s time to move into crypto

Post by SomeDude » Mon Jun 14, 2021 6:37 pm

vincent_c wrote:
Mon Jun 14, 2021 2:54 pm

My question is, do you still insist that a bitcoin, being just a name for a certain number of satoshis, has no use and doesn't "do" anything? Or can we have some common ground to build our discussion?
I am totally up for it V, although it might be at a snails pace. My life is pretty busy and any time on the forum has to be spread around topics.

I did know that a bitcoin is a collection of satoshis, so i think for simplicity we can use either term.

What i am curious about is, what does a satoshi actually do that has value? You said that data can be "attached to it". How is this useful? Is it like a secret messaging system?
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Re: I think it’s time to move into crypto

Post by vincent_c » Mon Jun 14, 2021 7:57 pm

SomeDude wrote:
Mon Jun 14, 2021 6:37 pm
What i am curious about is, what does a satoshi actually do that has value? You said that data can be "attached to it". How is this useful? Is it like a secret messaging system?
What a satoshi can "do" is to keep a record of who owns what on the bitcoin blockchain. This could be used for anything that might want to have a ledger to keep track of any data whether it be ownership or credentials.

Because you can attach a unique identifier to a satoshi it means that you can link real world items to that identifier.

I think it may be useful for people to think about it as just a form of technology. For example, anything that can form 1's and 0's can in theory be used to build a computer. You have to think of it that way instead of just ruling out any usefulness to a technology just because one isn't familiar with it.

The issue with bitcoin is that the underlying blockchain technology can be copied, improved upon, and it has. If you want to invest you should have exposure to the blockchain industry and not only bitcoin. What bitcoin has going for it is that it is the blockchain that anyone should trust the most. So if you did have extremely important data you wanted to keep track of, then you would use bitcoin blockchain. It certainly isn't the cheapest blockchain, so just like gold there are alternatives that have been developed that are used instead.

I suppose to strongman your argument, it is that with gold at $2000/oz someone is still willing to buy jewelry at that price + a profit margin because being expensive is sometimes a feature of jewelry.

On the other hand, if bitcoin is very expensive then what? How do we gauge whether it is worth it's price? Just because there is a fixed supply doesn't mean that everyone who owns it doesn't value it at an extremely low price so that alone might not set a floor on pricing.

I'll concede those points for now because as bitcoin gets more expensive it actually is better for the network since there will be more miners and transaction fees will be lower. Instead I will ask us to consider whether the demand for gold jewelry is price inelastic so that if the price of gold fell a lot would there suddenly be more demand for gold jewelry or is the financial value of gold so dominant that if we magically take away gold's financial value and history what the price of gold would be if its price was purely driven by the demand of gold jewelry.

Going back to bitcoin, there is a non-zero chance that because bitcoin is so much better a form of recording ownership of value than previous systems that it will continue to take market share from all preceding systems. It will do this until there is something else that is significantly better at doing what bitcoin does before it will be replaced. In some ways, because it is such a great way to record ownership of things it is also a really good way to keep track of value itself. I think we have a term for that.
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Re: I think it’s time to move into crypto

Post by SomeDude » Mon Jun 14, 2021 10:16 pm

Thanks Vincent. Are people then using satoshis to keep a record of ownership of something else? Are you keeping a record of ownership of anything with your satoshis? How many satoshis could a single person use? If there are 100M satoshis in a bitcoin, and 21M bitcoin, my calculations put that at 300,000 satoshis for every man, woman, child, non-binary, transgender, gender fluid, fill-in-the blank person on Earth.

Is there even one person on earth that could use 300,000 satoshis? This does not sound like something that is scare to me so i must be missing something.

Can satoshis do something different when you have more of them?

Forget about the market price and selling your satoshis to someone else for a second. What can i do with 100 satoshi that i can't do with 1? It's obvious if you have more Gold you can do twice as much with it if you wanted to use it, twice as many fillings, pieces of jewelry, electronic parts etc.

What can a person like you or me for example use a satoshi for and why would you want 100 million of them (a bitcoin), if not to just hope someone else will pay more for them than you paid?
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Re: I think it’s time to move into crypto

Post by vincent_c » Mon Jun 14, 2021 10:58 pm

I don't think people are using it the way you want to think about it. But I think there are other services that do and I won't pretend to be a bitcoin blockchain developer and understand the intricacies but what I do know is that bitcoin is what is called a layer 1 blockchain and then there are layer 2 protocols that interact with bitcoin and it's likely that these protocols utilize to some degree what we are talking about.

So let's say Strike eventually replaces VISA and Mastercard and has that volume of transactions then you can imagine that they would need that many satoshis to keep track of all these transactions. We are talking about tens to hundreds of thousands of transactions per second that is what a lot of the scaling solutions are aiming for.

In the end, all these use cases utilize the bitcoin network as a final settlement layer and satoshis are also used to pay for those transactions. If you have double the amount then you can pay for double the number of transactions.
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Re: I think it’s time to move into crypto

Post by I Shrugged » Tue Jun 15, 2021 10:49 am

Suppose I link my car to some satoshis. Then what?
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Re: I think it’s time to move into crypto

Post by SomeDude » Tue Jun 15, 2021 2:37 pm

I Shrugged wrote:
Tue Jun 15, 2021 10:49 am
Suppose I link my car to some satoshis. Then what?
Can you link it to just one? What can i do if I have 1 satoshi?

If i find a use for satoshis, can i just buy them and use them on the spot? What is the benefit to having them?
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Re: I think it’s time to move into crypto

Post by I Shrugged » Tue Jun 15, 2021 7:29 pm

SomeDude wrote:
Tue Jun 15, 2021 2:37 pm
I Shrugged wrote:
Tue Jun 15, 2021 10:49 am
Suppose I link my car to some satoshis. Then what?
Can you link it to just one? What can i do if I have 1 satoshi?

If i find a use for satoshis, can i just buy them and use them on the spot? What is the benefit to having them?
Well they aren’t consumables. I think Vincent is saying they can be used to represent an actual thing. I’m trying to get a better handle on that. Between my question and yours, yes we need to find out if you just use a satoshi as a blockchain reference to said real object (car), or do we have to have satoshis of value equivalent to the car?
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Re: I think it’s time to move into crypto

Post by vincent_c » Tue Jun 15, 2021 9:00 pm

Yes you can have a unique satoshi that can represent a real item. Whether anyone is doing that right now using the bitcoin blockchain I don’t know. A company who wanted to secure their supply chain might use a private blockchain and companies that wanted to prevent imitation products might not find bitcoin economically feasible.

But anyway, if all this is new to you then you are way behind the game when it comes to the blockchain industry as this is just scratching the surface. We’re pre-2017 right now in terms of discussion.
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Re: I think it’s time to move into crypto

Post by vincent_c » Tue Jun 15, 2021 9:06 pm

I Shrugged wrote:
Tue Jun 15, 2021 10:49 am
Suppose I link my car to some satoshis. Then what?
If a car’s ownership was linked to a satoshi and you transfer ownership of that satoshi then you could transfer ownership of the car.
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Re: I think it’s time to move into crypto

Post by SomeDude » Wed Jun 16, 2021 11:49 am

vincent_c wrote:
Tue Jun 15, 2021 9:06 pm
I Shrugged wrote:
Tue Jun 15, 2021 10:49 am
Suppose I link my car to some satoshis. Then what?
If a car’s ownership was linked to a satoshi and you transfer ownership of that satoshi then you could transfer ownership of the car.
I'm starting to see a real use case for satoshis. Obviously there's needs to be a vast amount of other uses to support the huge amount of them. Unless I've done the math wrong there will be 21,000,000,000,000 satoshis when this is all done. In order to sustain a market price there will have to be a practical use for them AND they will be competing with 10's of thousands of other cryptos.

Should be interesting.
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Re: I think it’s time to move into crypto

Post by SomeDude » Wed Jun 16, 2021 11:54 am

I Shrugged wrote:
Tue Jun 15, 2021 7:29 pm
SomeDude wrote:
Tue Jun 15, 2021 2:37 pm
I Shrugged wrote:
Tue Jun 15, 2021 10:49 am
Suppose I link my car to some satoshis. Then what?
Can you link it to just one? What can i do if I have 1 satoshi?

If i find a use for satoshis, can i just buy them and use them on the spot? What is the benefit to having them?
Well they aren’t consumables. I think Vincent is saying they can be used to represent an actual thing. I’m trying to get a better handle on that. Between my question and yours, yes we need to find out if you just use a satoshi as a blockchain reference to said real object (car), or do we have to have satoshis of value equivalent to the car?
What i meat by "use" I shrugged was....if i want to buy or sell something using bitcoin instead of dollars or Euros for some reason, can't i just buy and sell the bitcoin practically at the same time? If the only use for bitcoins or satoshis is transferring ownership of them, what is the point of ever buying and holding them, other than as a bet that someone else will give me more dollars for them in the future. But why would someone do that unless they have am actual use?
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Re: I think it’s time to move into crypto

Post by vincent_c » Thu Jun 17, 2021 10:51 am

SomeDude wrote:
Wed Jun 16, 2021 11:49 am
vincent_c wrote:
Tue Jun 15, 2021 9:06 pm
I Shrugged wrote:
Tue Jun 15, 2021 10:49 am
Suppose I link my car to some satoshis. Then what?
If a car’s ownership was linked to a satoshi and you transfer ownership of that satoshi then you could transfer ownership of the car.
I'm starting to see a real use case for satoshis. Obviously there's needs to be a vast amount of other uses to support the huge amount of them. Unless I've done the math wrong there will be 21,000,000,000,000 satoshis when this is all done. In order to sustain a market price there will have to be a practical use for them AND they will be competing with 10's of thousands of other cryptos.

Should be interesting.
I think the only thing that matters is whether there is an active use for the satoshi that are in circulation.

So if there are 21 million bitcoin and if it is able to attract and lock up a certain % of total global value, then how many satoshi are in circulation?

There are various ways to value bitcoin. Miners will always want to profit and if they can't profit then the transaction costs of the network go up. If the network is used to secure transactions that are network fee insensitive but is purely focused on security, then the market will restore profitability for miners.

Bitcoin can also currently be lent out and have a yield and one day that that could be a risk free yield (currently there are a bunch of risks like protocol risk). This is yet another use for bitcoin/satoshi holders. But the yield on the bitcoin allows some kind of DCF valuation over traditional risk free investments.

Going back to whether there are too many satoshi, I really don't think so because market participants are only looking at bitcoin's value in taking market share away from gold and it already justifies current pricing. You also need a relatively unlimited supply of satoshi in order to perform some of the practical stuff we've discussed.

Now what about gold?

Is there a real practical demand for all the physical gold that we have that is non-financial in nature? Certainly gold can be broken down into 1 atom thin items and then how much supply of that gold is there? We would have to find out what the demand of gold is from a weight average weight of gold perspective and see how that compares with available supply. My guess is that there is plenty of gold to meet that supply once we eliminate the supply that is locked up as a store of value.

In fact, one of the reasons I invest in gold and think it makes sense in the PP is that its value isn't tainted by practical uses like the other industrial metals. Otherwise its price would behave differently as it would have a credit component mixed in. So it is beneficial to me that gold and bitcoin do as little as possible other than being a store of value that enough people buy into.
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Re: I think it’s time to move into crypto

Post by SomeDude » Thu Jun 17, 2021 6:28 pm

Thanks for the thoughtful reply vincent. I have a lot of thoughts on the matter i will try to condense into bullets this weekend when i have a little time.

Cheers and good luck
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Re: I think it’s time to move into crypto

Post by Mark Leavy » Thu Jun 24, 2021 12:34 pm

Taleb has posted a draft of his analysis of bitcoin on his quant blog. Needless to say, it is drawing fire.

It's a fun read for the mix of math and dry humor - for those that are into that sort of thing...

Here's the abstract:
INTRODUCTION/ABSTRACT
This discussion applies quantitative finance methods and economic arguments to cryptocurrencies in general and bitcoin in particular —as there are about 10,000 cryptocurrencies, we focus (unless otherwise specified) on the most discussed crypto of those that claim to hew to the original protocol [1] and the one with, by far, the largest market capitalization.
In its current version, in spite of the hype, bitcoin failed to satisfy the notion of "currency without govern- ment" (it proved to not even be a currency at all), can be neither a short or long term store of value (its expected value is no higher than 0), cannot operate as a reliable inflation hedge, and, worst of all, does not constitute, not even remotely, safe haven for one’s investments, shield against government tyranny, or tail protection vehicle for catastrophic episodes.
Furthermore, there appears to be an underlying con- flation between the success of a payment mechanism (as decentralized mode of exchange), which so far has failed, and the speculative variations in the price of a zero-sum asset with massive negative externalities.
Going through monetary history, we also show how a true numeraire must be one of minimum variance with respect to an arbitrary basket of goods and services, how gold and silver lost their inflation hedge status during the Hunt brothers squeeze in the late 1970s and what would be required from a true inflation hedged store of value.

And if you aren't into the math, you can just read the sidebar comments to get a flavor of where he is going.
Here's the first one:
Screen Shot 2021-06-24 at 7.31.08 AM.png
Screen Shot 2021-06-24 at 7.31.08 AM.png (94.89 KiB) Viewed 325 times
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Re: I think it’s time to move into crypto

Post by vincent_c » Thu Jun 24, 2021 12:38 pm

Regarding comment 1, the only reason this is true at the moment is because bitcoin is in price discovery.

There will be massive speculation on the upside and also large drawdowns. The volatility, in itself is proof that bitcoin's price is not where is should be. It could be much higher or it could go much lower before the "interest" in it stabilizes and then it performs more like gold.
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Re: I think it’s time to move into crypto

Post by Mark Leavy » Thu Jun 24, 2021 1:11 pm

vincent_c wrote:
Thu Jun 24, 2021 12:38 pm
Regarding comment 1, the only reason this is true at the moment is because bitcoin is in price discovery.

There will be massive speculation on the upside and also large drawdowns. The volatility, in itself is proof that bitcoin's price is not where is should be. It could be much higher or it could go much lower before the "interest" in it stabilizes and then it performs more like gold.
It's worth reading the text of the paper. It's not intractable and he lays out his thinking in the framework of an experienced forex trader.
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Re: I think it’s time to move into crypto

Post by vincent_c » Thu Jun 24, 2021 1:29 pm

I am reading it now.

Have to keep taking a break and calming down because I keep wanting to challenge so many things that is being asserted making it a difficult read.
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Re: I think it’s time to move into crypto

Post by Mark Leavy » Thu Jun 24, 2021 1:39 pm

vincent_c wrote:
Thu Jun 24, 2021 1:29 pm
I am reading it now.

Have to keep taking a break and calming down because I keep wanting to challenge so many things that is being asserted making it a difficult read.
Taleb :)
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Re: I think it’s time to move into crypto

Post by vincent_c » Thu Jun 24, 2021 2:12 pm

Finished reading it and all I could think was that Taleb was rebutting a bunch of points about bitcoin that at least I am not asserting.

I don't see anywhere in his article that refutes the fact that bitcoin is property and that it is limited in supply and that there is demand for property that has the attributes of being secure, fungible, transportable, divisible, durable, recognizable, counterfeit resistant, censorship resistant, permissionless.

Also, I think the problem that bitcoin could solve is gold adoption among future generations. I know lots of people who have no idea what the price of gold is but could tell you roughly how much a bitcoin costs.
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Re: I think it’s time to move into crypto

Post by I Shrugged » Thu Jun 24, 2021 9:15 pm

It’s certainly causing people to view fiat currency with suspicion.
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Re: I think it’s time to move into crypto

Post by Jack Jones » Sun Jun 27, 2021 11:34 am

It's 100% speculation that the future price will be higher. When no one believes that will happen the illusion will pop and i think the price will move quickly to match the intrinsic value.
Do you also think the gold price will someday crash to where it only reflects its intrinsic value? If not, what’s the difference?
Last edited by Jack Jones on Sun Jun 27, 2021 4:22 pm, edited 1 time in total.
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