The economics of BitCoin

GreatApe

economic wrote: »

Non-zero sum game basically.

Well they could gain if there are some real buyers out there maybe say state museums with deep pockets.

Say you want to sell your art in the next ten years. If the last time that artists work was sold was 20 years ago for $1m you might have a hard time convincing the buyer its worth $50m. But if you and your pals do a few fake sales over the next few years for $35m $40m then maybe when you come to do your real sale a buyer will be more willing to accept a price of $50m

Pure speculation on my part

economic

You can not compare a painting to BTC. With BTC you can buy a tenth or even a hundredth of a BTC. With a painting, its all or nothing.

westernpromise

GreatApe wrote: »

Some of these art sales must be fake just to drive up the price of the stock of art

So I own a painting and you own a sculpture.
I convince you to pay me double what I paid for the painting and I will pay you double what you paid for the sculpture. So long as there are no capital gains taxes in the locations we live we have not lost anything but the world just saw our assets supposedly double in value.

Correct, although you need throughput - in the shape of new money coming in - to encash those gains.

Here's a good example.
http://www.telegraph.co.uk/culture/art/artsales/8127919/Chinese-vase-sells-for-world-record-breaking-53.1-million-at-auction.html

Vase sells at auction for £53 million. Except it doesn't
http://www.telegraph.co.uk/lifestyle/interiors/antiques/9075120/Mystery-over-51m-sale-of-Chinese-vase.html
the buyer...has not paid up because, it is understood, he is reluctant to pay the flat rate 20 per cent fee of £8.6 million levied on the sale by Bainbridges auctioneers...

Oh yeah? Not like it wasn't in the T&Cs or anything. In the end:
http://www.dailymail.co.uk/news/article-2263411/20m-Chinese-vase-finally-paid-solicitor-half-50m-went-auction.html
New bidder has now purchased the antique - but for just £25million

So between 2010 when the £43 million price was set, and 2013 when the real price was determined (what someone would actually hand over), how many other similar vases were sold privately for prices around £43 million, based on this reported sale? And how many of those sales were made by the bloke who "bought" this one for £43 million and then never paid? I smell a rat.

But of course, as the art market is unregulated, bidding up the price of stuff you're long of, selling your own stuff at similar prices, then flaking on your own buy would be unscrupulous but not illegal. It wouldn't be shill bidding because that is being a bidder in an auction in which you are the seller.

GreatApe

This is funny a huge flaw of magic beans that I have not seen debated anywhere really is that the network can and probably is and probably always will be clogged with fake transfers

The bitcoin tech is limited in the number of transactions that can be done.
Each block is 1MB in size and one block is created every 10 minutes.
This basically works out to about 4,200 transaction per block max.
If there are more transactions they go into some memory pool and hope it is recorded on the next block or the block after that or the one after that...etc

The way the miners determine which transaction to process first is that the bigger a cut you give to the miners the more likely it is that they will do your transfer in this block.

The proposed solution to this is to just increase the block size. Increase it to say 10MB a block and you can process 10 x as many transfers and so long as transfers are lower than the block limit no one needs to pay any fees. Only problem with this idea is that the miners can just set up accounts that transfer bitcoins from themselves to themselves and saturate the network with transfers so anyone who really wants to transfer bitcoins is going to have to pay the miners a fee

Maybe there is a solution but right now the miners are killing it charging roughly 6 bitcoins in fees per block. That works out to ~$30 a transfer even if you want to just transfer 50 cents if you want it to go though you need to pay $30 fee

That is roughly $100,000 per 10 minutes to process the transfers! CRAZY. They also get 'paid' 12.5 bitcoins per block as a reward for the mining = about $200,000 per 10 minutes. So the miners are making ~$300,000 per 10 minutes or $1.3 billion per month just on bitcoin probably roughly the same again on all the other coins combined.

The miners must be holding most of their mined coins in the same hope that prices go up
Can there really be >>$1.3 billion net in monthly speculative flows into bitcoin just to cover the miners?

And this is just at this stage. If the prices go up 10x roughly speaking the miners income goes up 10x

BananaRepublic

Bubbles arise because of some hyped concept. I'm sure many buyers know full well that it's a bubble, but they also know that as long as sentiment is positive, and more and more people buy into it, they will gain. The sensible ones know when to get out, or perhaps they know that they should cash in half their bitcoins now, then when the price doubles, cash in another half, and so on, that way they win. It's a tax on stupidity, the dumb lose out, the sensible win. It makes me wonder how many of those plugging it know full well that it is a case of the Emperor's new clothes.

As a concept though it seems flawed. It can only handle so many transactions per second, and nowhere near enough to be widely adopted for ordinary use, and the database ends up getting huge. It strikes me as barking, but I don't understand the implementation details.

BananaRepublic

Oh, and the fact that massive amounts of electricity are burnt mining these things is scandalous. When the East coast of England is inundated, blame Bitcoin ....

GreatApe

The top 20 coins have reached a market cap totalling $800 billion. This is so crazy

Peter Tiel a billionaire and very smart guy seems to think there is something workable about these coins. He reckons bitcoin could become a store of value the digital equivalent of gold. A type of bearer bond. I agree with him in that its all a confidence trick if enough people see bitcoin hold value for a long time they too could believe in it. I always thought gold was silly you spend money digging it out the ground and then spend money storing it in an underground vault yet people place a huge value on gold

So who knows maybe these coins will become the digital equivalent of gold and go up another 10x to $10 trillion. Or maybe its all part of the narrative and in five years time 99% of these coins won't exist and the handful that do will be worth-a-lot-less

economic

governments can easily make it illegal to use crypto to exchange for goods and services. its not 100% anonymous.

GreatApe

economic wrote: »

governments can easily make it illegal to use crypto to exchange for goods and services. its not 100% anonymous.

I think its fascinating I won't be putting a penny in but its interesting to watch from the sideline. $800 billion market cap is amazing

In theory you could use it in a 100% anonymous way. You just create a new wallet for each transaction and you can buy the coins for cash and sell them for cash. Problem with bitcoins is the transactions fees are too high sometimes $100+ so I don't think it will function as the original inventor intended that is to say as currency used to buy/sell goods and services. It may however become the digital gold. That is to say something which has value because it has value. Gold is like that 90% of golds value is its value.

If it does become a type of 'digital gold' it can be used to hide wealth and for large transfers.
It is interesting to think about the consequence if this succeeds. If bitcoin or one of the clones becomes the digital equivalent of gold with say a total market cap of $10 trillion which assets will suffer? Or is there a way a while new asset class can be created and have a value of $10 trillion without impacting the value if other asset classes?

To be clear I think its more likely that these pop and just become gambling coins (going up and down up and down for decades) but there is a small chance Peter Thiel is right (he is a very smart guy) and bitcoin (or one of its clones) could become a digital store of value a bearer bond of value.

economic

GreatApe wrote: »

I think its fascinating I won't be putting a penny in but its interesting to watch from the sideline. $800 billion market cap is amazing

In theory you could use it in a 100% anonymous way. You just create a new wallet for each transaction and you can buy the coins for cash and sell them for cash. Problem with bitcoins is the transactions fees are too high sometimes $100+ so I don't think it will function as the original inventor intended that is to say as currency used to buy/sell goods and services. It may however become the digital gold. That is to say something which has value because it has value. Gold is like that 90% of golds value is its value.

If it does become a type of 'digital gold' it can be used to hide wealth and for large transfers.
It is interesting to think about the consequence if this succeeds. If bitcoin or one of the clones becomes the digital equivalent of gold with say a total market cap of $10 trillion which assets will suffer? Or is there a way a while new asset class can be created and have a value of $10 trillion without impacting the value if other asset classes?

To be clear I think its more likely that these pop and just become gambling coins (going up and down up and down for decades) but there is a small chance Peter Thiel is right (he is a very smart guy) and bitcoin (or one of its clones) could become a digital store of value a bearer bond of value.

I agree I can definately see it as replacing gold as a safe haven to hide assets away from government/taxes etc. It’s a lot easier to hide large sums of money in crypto then in gold. Plus no need to worry about storage costs and theft.

However if government get desparate and see many people hiding vasts amount in crypto they can and they will go after them. Who knows they could already be thinking about legislation around crypto.

Peter thiel is a very smart guy but he also bought back in 2016 and 2017 and could also be talking his book. His fund which invests in startups hasn’t been doing too well so even though he is very smart does not make him a great investor.