Gold outflows, bitcoin inflows

[Cortopassi]

However, I never really understood the pooh poohing by so many of "fiat" government money, especially the US, making it sound like the money is worth nothing. The US has gold, property, buildings, infrastructure, land, armies, etc. There's absolutely value that could be sold off to prop up the price of the dollar if needed.

Dollars have value because people believe they do. Just like anything else. If people start valuing dollars less (right or wrong I suppose), what would the mechanism be for the US to increase the value of the USD? Would the USG sell some BLM land to a private entity, and the act of taking those dollars off of the market would push up the dollar ever so slightly. Curious more than criticizing here.

I'm not saying the value of the dollar can't go down or up, it obviously has gone down because of inflation since the start.

I'm just kind of going down the line that drastic value changes in either direction are way more unlikely with the dollar (which is the main reason I don't have anything in Bitcoin). The US could certainly sell things off as crazy as that may be. Didn't we get land that way from France and such?

On the other hand, if, say, somebody really had a hard on against Bitcoin, it cold easily likely be declared illegal to own and/or mine. Didn't that happen recently in China in some fashion?

[Cortopassi]

On the other hand, if, say, somebody really had a hard on against Bitcoin, it cold easily likely be declared illegal to own and/or mine. Didn't that happen recently in China in some fashion?

I think it was critical that the West has won the bitcoin war.

Do you think it is a coincidence that China finally banned bitcoin, then the hash rate left China and now the US is developing the semiconductor production facilities that will secure bitcoin mining in the future and the hash rate has gone to the US. Then the SEC allows a Bitcoin futures ETF so that financial advisors can allocate BTC for the mass market. FDIC is saying Banks would like to add BTC to their balance sheets.

If after all of this, the US declares bitcoin illegal, does this make sense to you? Not only that, but the crypto industry is probably the fastest growing sector and lots of young kids are developing the skills to work in that industry. I don't see how it can be made illegal, can you?

I am talking out of my ass here, not knowing enough. What are the chances, like wifi encryption, and lots and lots of other historical precedents of unbreakable security being broken, that someone or something or some group in the near future can hack or break or otherwise get into the system and cause widespread problems?

Is it not possible? If yes, then what?

What bugs me most, and I know you can say the same thing about gold or diamonds, etc, is the energy consumption (and the resulting perpetual shortage of good graphics cards!)

https://digiconomist.net/bitcoin-energy-consumption/

Interesting:

[I Shrugged]

I read that 0.1% of Bitcoin miners control half of all mining capacity. This gives rise to the 51% problem. Meaning the network could be abused by a small cohort of miners. I’m not claiming knowledge of how. But you can search 51% Attack and read up.

Id be curious as to the source on this, sounds wildly wrong.

Also there is some nuance here, a couple points:

There is no way to know for sure which miner is mining which blocks as mining in bitcoin is anonymous. Anonymous mining (transaction processing) is critical for the decentralization of the network.

Also, there is a difference between Bitcoin MINERS and Bitcoin MINING POOLS. Bitcoin miners join Bitcoin mining pools of other miners to smooth out their BTC mining rewards (otherwise small miners might get no revenue for a year+ and then find one block reward after 18 months of mining, for example). Here is a chart of mining pools: https://btc.com/stats/pool

Pools voluntarily choose to identify themselves when they mine a block as a way of advertising how big their network of miners is to other potential miners.

Miners can join and leave pools with ease, instantly. So if there is misbehaving pool, or if a pool gets too big, things rapidly resolve.

I suppose in theory a miner could own 99% of the hashrate and just join many different pools to "pretend" they are not the owner of 99% of the bitcoin hashrate. So it is possible, but there is no evidence of this.

Clear as mud?

https://fortune.com/2021/10/26/bitcoin- ... ber-study/

[I Shrugged]

Today I read that the simplest purchase of something with Bitcoin generates the consumption of $100 in electricity, assuming low rates being used by most miners. It is 1173 kWH.

https://fortune.com/2021/10/26/bitcoin- ... -footprin/

[yankees60]

Eugene Fama says bitcoin should not exist. He thinks its value will drop to zero since it doesn’t have enough stability to serve as a unit of account.

This is pretty hilarious given Fama is the efficient market hypothesis guy.

Sorry Eugene the market knows something you dont!

My first reaction was...you are correct!

However, when it comes to securities....there can be some form of efficient market since so much is known about the securities by so many people.

But when it comes to bitcoin is it not certain that nowhere as much is known about it and then only by a relatively small handful of people?

[yankees60]

Today I read that the simplest purchase of something with Bitcoin generates the consumption of $100 in electricity, assuming low rates being used by most miners. It is 1173 kWH.

https://fortune.com/2021/10/26/bitcoin- ... -footprin/

Where I live in Western Massachusetts....that level of electricity consumption would result in a bill of about $250...

[yankees60]

But when it comes to bitcoin is it not certain that nowhere as much is known about it and then only by a relatively small handful of people?

No, this is just you extrapolating your personal knowledge to what's going on in the world.

The fact is a lot of people know about bitcoin.

You have to define what is "a lot of people". In things like this it is always best to think in both absolute numbers and percentages. One or the other does not reveal the full story.

In the entire worldwide investing universe what percentage of them have good to excellent knowledge regarding investing in stocks as opposed to those who have good to excellent knowledge regarding investing in bitcoins?

I'd be surprised if the ratio was even as low as 100 to 1. Would not be surprised if it is is 1,000 to 1.

That is what the efficient market hypothesis is all about. That all information is known about a specific security so that there is no way for you to exploit inefficiencies to gain an advantage. One of the tenets of what you'll do better than most by just investing in index funds or EFTs.

Seems like the opposite is currently true with bitcoin....there are currently great disparities in the knowledge among those investing in bitcoins.

[bitcoininthevp]

I'm just kind of going down the line that drastic value changes in either direction are way more unlikely with the dollar (which is the main reason I don't have anything in Bitcoin).

Bitcoin seems to be short term volatile and long term value up.

USD seems to be short term stable and long term value down.

The US could certainly sell things off as crazy as that may be. Didn't we get land that way from France and such?

Part of Harry's presidential campaign was to sell the national parks/forests/etc if I recall correctly.

On the other hand, if, say, somebody really had a hard on against Bitcoin, it cold easily likely be declared illegal to own and/or mine. Didn't that happen recently in China in some fashion?

Yes, and how did bitcoin react from a pricing and network perspective?

Short term the network slowed due to Chinese miners going offline. Only for the miners to move (markets find a way) to other jurisdictions and now hashrate is basically back to where it was.

Short term, for less than an hour, BTC price went down, only to nearly double since.

I dont expect all bitcoin bannings will react in this sort of positive way, especially when the US bans it, but its interesting to note the "banning" objection fall on its face in this scenario.

[bitcoininthevp]

I am talking out of my ass here, not knowing enough. What are the chances, like wifi encryption, and lots and lots of other historical precedents of unbreakable security being broken, that someone or something or some group in the near future can hack or break or otherwise get into the system and cause widespread problems?

Is it not possible? If yes, then what?

A bug in the code or breaking of the cryptographic assumptions that Bitcoin relies on is definitely a risk to Bitcoin.

What bugs me most, and I know you can say the same thing about gold or diamonds, etc, is the energy consumption (and the resulting perpetual shortage of good graphics cards!)

https://digiconomist.net/bitcoin-energy-consumption/

You dont need to read all of these articles, but one or two might help on the energy debate topic:
https://niccarter.info/topics/#energy

Some tldr of that: bitcoin does use energy but it uses a lot of green energy, it incentivizes investment in green energy, and uses otherwise stranded energy.

[bitcoininthevp]

Eugene Fama says bitcoin should not exist. He thinks its value will drop to zero since it doesn’t have enough stability to serve as a unit of account.

This is pretty hilarious given Fama is the efficient market hypothesis guy.

Sorry Eugene the market knows something you dont!

My first reaction was...you are correct!

However, when it comes to securities....there can be some form of efficient market since so much is known about the securities by so many people.

But when it comes to bitcoin is it not certain that nowhere as much is known about it and then only by a relatively small handful of people?

I agree with this since it means I am the one with the asymmetric inside information on the greatest investment in history. But I dont see a difference between thinking that and drinking too much coolaid.

[bitcoininthevp]

Today I read that the simplest purchase of something with Bitcoin generates the consumption of $100 in electricity, assuming low rates being used by most miners. It is 1173 kWH.

https://fortune.com/2021/10/26/bitcoin- ... -footprin/

Each transaction doesn’t add to bitcoin energy consumption. Bitcoin miners mine for blocks and those blocks can (and are often) empty. Also each bitcoin transaction can include 1 or many payments so its hard to quantity. But yeah, miners are mining to secure the network (which has the side effect of transaction processing) but the "cost" of a transaction isnt necessarily tied to that.

[I Shrugged]

Here is an article, originally in NY Mag I think, that gathers up bearish Bitcoin sentiments from a bunch of famous investors and economists. But the rebuttals to their views are interesting too. It is going to be fun to watch from the sidelines. I place my money on it being like the tulip bubble, because of the views of most buyers of it. (Not you people here.) It walks, looks, and quacks like a duck, to me. It might make all the sense in the world that it should become the next great thing, but my gut tells me the tulip buyer crowd will destroy it. I have always said that people who don't know why they want to buy gold should stay the hell out and not ruin gold for the rest of us. Well now we see bitcoin going ape-shit, and the speculation could crash and burn and ruin it. So let's see how it goes.

Since I don't get too much FOMO about anything any more, it's mostly academic to me.

https://www.cryptelicious.com/2021/10/1 ... -a-bubble/

[Cortopassi]

There are many good quotes in that article. My main takeaway is the second one below:

“We continue to press on for the day when we can say, ‘We told you so.’”

The winners of the Big Short came to define themselves as bears and proceeded to underperform everyone for 13 years. There’s never a need to define yourself. The market does not care who you are.”

“Bitcoin could disappear one day, but gold won’t.”

“People buy it thinking that the next guy will come along and subjectively value it higher,”

Meanwhile, flush with cash, the new crypto industry is busy lobbying Congress to thwart any new regulations, including efforts to tax crypto, and has drawn mostly Republicans to its side.

-----------------------------------

There are/were, for example, so many bloggers who are anti-Amazon since it's been in the low triple digits (or somewhere much lower). And they cannot let go or change their positions (at least last I checked which was a long time ago)

[boglerdude]

When will all the bitcoin be mined, and what will happen to the carbon footprint then

[dualstow]

When will all the bitcoin be mined, and what will happen to the carbon footprint then

They say 2140, although I don’t know how one predicts advancements in computing over such a long timespan.

[bitcoininthevp]

This is one of the coolest aspects of Bitcoin IMHO and it is called the difficulty adjustment. If more people are trying to mine bitcoin, the algorithm makes it harder, which helps keep Bitcoin's emission of new coins on schedule.

So if a ton of new miners join to mine, algorithm makes mining "harder" so there will still only be 1 block mined every ~10 minutes. So even if nation states fire up their nuclear power plants to mine bitcoin, nothing changes.

And if a ton a miners leave the network, algorithm makes mining "easier" so there will be 1 block mined every ~10 minutes. So if interest in Bitcoin goes to near zero and only a few individuals want to mine it on their laptop, nothing changes.

A visualization of the emission schedule vs total supply is here:



You can see the ~4 year periods along the bottom where block rewards were at first 50 BTC per block, then 25 BTC, 12.5 BTC, and now 6.25 BTC per block which is where we are today.

The difficulty adjusts every 2016 blocks, ~2 weeks.

The difficulty adjustment controls bitcoins "inflation rate" (rate at which the 21 million coins are distributed to miners), total supply cap of 21 million, and makes it so that no matter how high demand is for BTC ($1,000,000 price for example), no additional bitcoins can be mined above what the schedule dictates. This is different from gold, for example, where a higher exchange rate incentivizes MORE new gold to be mined and brought into the supply.

[dualstow]

I mean, what if some quantum computer comes along and just solves problems instantly?
Or are the problems themselves released more slowly, on a slower schedule?
Oh, I see the answer above.

), no additional bitcoins can be mined above what the schedule dictates.

Gotcha. Thanks.

[dualstow]

Thank you, Vincent. Very interesting.

[dualstow]

I for one would not bet against it for that specific reason, just as I’m not betting against gold simply because maybe someday we’ll be synthesizing it. No idea where technology’s going.