I think it’s time to move into crypto

[SomeDude]

I think the definition of fiat money is of an item or record that has no intrinsic value, and is commonly accepted as a means of payment.
Crypto has no intrinsic value. Whether it is accepted as a means of payment is definitely debatable. So at this point, it's not even good enough to be called fiat money!

Fiat = 1 : a command or act of will that creates something without or as if without further effort According to the Bible, the world was created by fiat. 2 : an authoritative determination : dictate a fiat of conscience. 3 : an authoritative or arbitrary order : decree government by fiat.

Bitcoin is not fiat because it has not been declared money by a government. I don't know if the recent move by el Salvador makes bitcoin a fiat currency. They've declared it legal tender but i don't know if el Salvadorians are required to accept it as remittance of debts or to pay taxes in it like in the US.

They have declared something that was already performing some.....some functions of money to be legal tender so i suppose el Salvadorians no longer have to pay captial gains if bitcoin increases in value. I don't think this makes bitcoin fiat money anymore than the constitution made gold and silver fiat money. In that instance they were already money without the government decree.

[SomeDude]

I can see that say a Bitcoin has intrinsic value because it takes a lot of energy to produce it. Just as it takes work to produce gold.

Cost to produce does not confer value, intrinsic or otherwise.

Plenty of things cost more to produce than their value. Business and people that produce them end up losing money and stop producing them. The cost to produce acts as a restraint on supply, not a conveyance of value.

Value is either intrinsic or extrinsic.

Obviously bitcoin has no extrinsic value. A bitcoin cannot be used to do anything. Unless someone else is willing to trade you something that has value there is nothing you can do with your bitcoin. It can be argued that even in the process of being transferred around the bitcoin is still doing nothing.

Intrinsic value is harder to comprehend. It is the desire for something for that thing's own sake, and not for it's useful properties.

Gold is the easiest example. Gold has tons of uses, it's a very useful metal. There are people who hold it though who will never put it to use, whether in electrical components, dental work, jewelry, or anything. Some are holding it as a store of value and a speculation on future price, but some will never part with it, no matter what the price ever does. They want gold for its own sake. It has intrinsic value.

Contrast this with an apple. An apple is useful, you can consume it. That's pretty much it. No one hoards apples for the sake of having them. It only has extrinsic value.

Bitcoin and crypto are neither. They have no properties that make them useful and no one wants them just to have them. 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.

In the meantime They might be a great trade, but only to those who cash out.

[SomeDude]

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.

[SomeDude]

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.

[SomeDude]

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?

[SomeDude]

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?

[I Shrugged]

Suppose I link my car to some satoshis. Then what?

[SomeDude]

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?

[I Shrugged]

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?

[SomeDude]

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.

[SomeDude]

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?

[SomeDude]

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

[Mark Leavy]

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 (94.89 KiB) Viewed 12124 times

[Mark Leavy]

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.

[Mark Leavy]

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

[I Shrugged]

It’s certainly causing people to view fiat currency with suspicion.

[Jack Jones]

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?

[Jack Jones]

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.

I don’t think transaction fees are related to price or number of miners. Fees increase as people vie for their transaction to make it into the next 2MB block. A higher price or more miners won’t change that.

I agree that the price going up is good for the network because it will bring more miners. More miners means the network is more secure.

Also, the price going up reduces volatility. The activities of a wealthy individual like Elon Musk are less likely to impact the gold market because the market cap is much larger.

[Mark Leavy]

Anyone have some context for stablecoin going to zero today?

[Kbg]

Anyone have some context for stablecoin going to zero today?

If you steal something and your theft causes its value to go to zero, was the theft successful? Now there's a good philosophical question for pondering on a Monday evening.

[SomeDude]

Anyone have some context for stablecoin going to zero today?

If you steal something and your theft causes its value to go to zero, was the theft successful? Now there's a good philosophical question for pondering on a Monday evening.

If the theft causes its "value" to go to zero, then did it ever have any value?

It had a price, but never any value in my opinion. The real theft was the scam of selling it in the first place.

[I Shrugged]

A couple of newbie crypto people in my life tell me that in the US, everything is being reported. They mean by the exchanges and brokers and businesses. I tried the what about? questions but their reply was that if you want to do anything useful with it, it is reported.

My specific question to the forum is, please give me the rundown on this. How can US persons own and use crypto without reporting? I’m not looking to do so. Rather, it will affect my thinking that the gov doesn’t like it, wants to see it gone, etc.

[Kbg]

A couple of newbie crypto people in my life tell me that in the US, everything is being reported. They mean by the exchanges and brokers and businesses. I tried the what about? questions but their reply was that if you want to do anything useful with it, it is reported.

My specific question to the forum is, please give me the rundown on this. How can US persons own and use crypto without reporting? I’m not looking to do so. Rather, it will affect my thinking that the gov doesn’t like it, wants to see it gone, etc.

Short answer: Legally, you can't starting last year.

[I Shrugged]

Part of the bull case for crypto is that it is being regulated and the future of crypto will include things like digital identities and therefore make it easier for users, investors and businesses alike, to be regulatory compliant. There is already paper cash for those looking to use without reporting.

Isn’t this at odds with the initial idea of Bitcoin?

[I Shrugged]

A couple of newbie crypto people in my life tell me that in the US, everything is being reported. They mean by the exchanges and brokers and businesses. I tried the what about? questions but their reply was that if you want to do anything useful with it, it is reported.

My specific question to the forum is, please give me the rundown on this. How can US persons own and use crypto without reporting? I’m not looking to do so. Rather, it will affect my thinking that the gov doesn’t like it, wants to see it gone, etc.

Short answer: Legally, you can't starting last year.

Understood. But how can they if they want to?