Crypto Dabble.

vart400

I get that some people don't believe in fiat currency, as it's no longer backed by gold. What is crypto currency backed by? How does and who decides what the price of 1 Bitcoin or 1 Dogecoin etc?  

Aegis

vart400 said:

I get that some people don't believe in fiat currency, as it's no longer backed by gold. What is crypto currency backed by? How does and who decides what the price of 1 Bitcoin or 1 Dogecoin etc?  

Exactly what I've asked for repeatedly, but apparently that makes me too stupid to invest in crypto, or something to that effect. Apparently wanting to know how to price an asset is now a negative trait.

tebbins

vart400 said:

I get that some people don't believe in fiat currency, as it's no longer backed by gold. What is crypto currency backed by? How does and who decides what the price of 1 Bitcoin or 1 Dogecoin etc?  

"Backed by gold"  a meaningless phrase, Bretton Woods ended 50 years ago and the world still hasn't ended yet.

Aegis said:

darren232002 said:

Aegis said:

I'm particularly interested in hearing how you determine fair value for each token, especially when you compare something like bitcoin with dogecoin

You might be the absolute worst poster so far on these threads. You claim you've done a load of research in to crypto (in another thread) but cant identify the difference between Doge and BTC. This alone tells everyone that isn't an idiot that you have no idea what you're talking about.

Aegis said:

My honest opinion is that it's because a lot of investors in bitcoin have never ridden through a serious market crash before, so they don't believe that their investment can fail.  

Are you on crack?

Bitcoin lost 60% of its value.. err.. 4 months ago. Bitcoin hit 85% value loss from its ATH... err.. 18 months ago.

But yes, please tell me more about how 'a lot' of current Bitcoin holders have no idea or experience of market crashes.

What an erudite and cogent response. You must be so proud that, when given the opportunity to provide information you instead decide to attack the questioner for daring to come to a different conclusion to you. Again, in case the question was somehow overlooked, how do you calculate fair value for one bitcoin, and how does that pricing formula differ when looking at one dogecoin? I assume that, once again, this question will be ignored, but of course I'M the worst poster in this thread.

And no, I'm not on crack, I'm not talking about corrections or blips, I'm talking about the very real possibility of holdings dropping to negligible value and never recovering. It's happened before even to long standing investments where the underlying value seemed good, but as asked above, there doesn't seem to be a good way to value crypto tokens.

I put him and a few other soon-to-be-banneds on ignore weeks ago, the only thing that will make them shut up is when the crypto craze passes. I am not opposed to moving say, £1k of my money into BTC with a reputable broker for a core + satellite + tail risk approach but for that amount, given BTCs return potential is probably capped at the market cap of gold (10x or so) I just don't see it being worth the bother and risk.

Zola.

vart400 said:

I get that some people don't believe in fiat currency, as it's no longer backed by gold. What is crypto currency backed by? How does and who decides what the price of 1 Bitcoin or 1 Dogecoin etc?  

I cant speak for all the !!!!!! coins / "alt coins", like Doge, which are almost all entirely poor copycats of Bitcoin, and are not actually decentralised, or have any meaningful long-term future. I will only reference bitcoin from here as i don't believe in anything else.

Like all money, it's a belief system. Bitcoin does not have the backing of government authorities, nor does it have a system of intermediary banks to propagate its use - that is entirely its point. 

Bitcoin is a digital alternative to scarce, hard assets like gold. It is built on an incorruptible network, the strongest computer network ever created, backed by millions of computers working together and it grows in size every day. It is the only truly decentralised crypto asset and will remain the largest one, the open-source decentralised nature of it can only be achieved successfully once. There is no second best, no alternative, and never will be now that the cat is out of the bag. 

There is a wealth of information out there if you look...


https://www.investopedia.com/ask/answers/100314/why-do-bitcoins-have-value.asp

https://casebitcoin.com/critiques/no-intrinsic-value

https://casebitcoin.com/what-is-bitcoin

https://github.com/libbitcoin/libbitcoin-system/wiki/Value-Proposition

https://nakamotoinstitute.org/mempool/how-we-know-bitcoin-is-not-a-bubble/

vart400

Zola. said:

Thanks for that, I'll have a read of the links and see if I can understand more about it.

Aegis

Zola. said:

Bitcoin is a digital alternative to scarce, hard assets like gold. It is built on an incorruptible network, the strongest computer network ever created, backed by millions of computers working together and it grows in size every day. It is the only truly decentralised crypto asset and will remain the largest one, the open-source decentralised nature of it can only be achieved successfully once. There is no second best, no alternative, and never will be now that the cat is out of the bag.

By this logic Apple could never have started producing phones and Google could never have become a successful search engine.  This is like saying that Ask Jeeves would always be superior to Google because it was around first, or that Nokia would always outsell Apple when it comes to phones.  As I said elsewhere, reality doesn't care about what an investment has done in the past, only the future.  And to work out whether you are buying at a good price or not you need to have a method of valuing the asset in question, and you need to be able to explain why that doesn't apply to ethereum or dogecoin, both of which look just as viable to me when looking at cryptos in general.

Again, if I have one bitcoin and one aitcoin (name made up, no idea if it's a real coin) which has been cloned from the bitcoin network and does exactly the same thing, how do I determine which is worth $100,000 and which is worth nothing.  It can't be utility, because they have the same utility, it can't be scarcity, because the clone has the exact same limitations as bitcoin, so how is one network worth $1tn and the other is worthless?

Zola.

vart400 said:

Zola. said:

Thanks for that, I'll have a read of the links and see if I can understand more about it.

Very welcome. It takes time to properly understand it.. 

Some books I would also recommend 

- the bitcoin standard
- layered money
- the Internet of money
- the bullish case for bitcoin
- the book of satoshi
- the price of tomorrow (not exactly a bitcoin book, but relevant) 

Zola.

Aegis said:

Zola. said:

Bitcoin is a digital alternative to scarce, hard assets like gold. It is built on an incorruptible network, the strongest computer network ever created, backed by millions of computers working together and it grows in size every day. It is the only truly decentralised crypto asset and will remain the largest one, the open-source decentralised nature of it can only be achieved successfully once. There is no second best, no alternative, and never will be now that the cat is out of the bag.

By this logic Apple could never have started producing phones and Google could never have become a successful search engine.  This is like saying that Ask Jeeves would always be superior to Google because it was around first, or that Nokia would always outsell Apple when it comes to phones.  As I said elsewhere, reality doesn't care about what an investment has done in the past, only the future.  And to work out whether you are buying at a good price or not you need to have a method of valuing the asset in question, and you need to be able to explain why that doesn't apply to ethereum or dogecoin, both of which look just as viable to me when looking at cryptos in general.

Again, if I have one bitcoin and one aitcoin (name made up, no idea if it's a real coin) which has been cloned from the bitcoin network and does exactly the same thing, how do I determine which is worth $100,000 and which is worth nothing.  It can't be utility, because they have the same utility, it can't be scarcity, because the clone has the exact same limitations as bitcoin, so how is one network worth $1tn and the other is worthless?

I don't have the energy to get into another big debate with you. But I will make an effort.

You need to stop comparing Bitcoin to businesses and products. Not relevant. Compare it to something more relevant and similar, like gold. 

As for the last paragraph. It's largely about the network effect. Litecoin, for example, is another old clone of bitcoin and it has tried so hard to position itself as 'bitcoin's silver', its USP being a code tweak where it can handle more transactions per block. No one really cares, and its price history shows that. 

There is a book called "the blocksize war" which documents the earlier years of bitcoin, where various people tried to change bitcoin's rules and instead went on to create hard forks / new alternative coins. All pretty irrelevant today and worth less than 1% of bitcoin. 

If you have millions of people playing chess every day and you copy the board and change a few pieces, don't expect the millions of people who like real chess to want to play with you, or care. 

Aegis

Zola. said:

Aegis said:

Zola. said:

Bitcoin is a digital alternative to scarce, hard assets like gold. It is built on an incorruptible network, the strongest computer network ever created, backed by millions of computers working together and it grows in size every day. It is the only truly decentralised crypto asset and will remain the largest one, the open-source decentralised nature of it can only be achieved successfully once. There is no second best, no alternative, and never will be now that the cat is out of the bag.

By this logic Apple could never have started producing phones and Google could never have become a successful search engine.  This is like saying that Ask Jeeves would always be superior to Google because it was around first, or that Nokia would always outsell Apple when it comes to phones.  As I said elsewhere, reality doesn't care about what an investment has done in the past, only the future.  And to work out whether you are buying at a good price or not you need to have a method of valuing the asset in question, and you need to be able to explain why that doesn't apply to ethereum or dogecoin, both of which look just as viable to me when looking at cryptos in general.

Again, if I have one bitcoin and one aitcoin (name made up, no idea if it's a real coin) which has been cloned from the bitcoin network and does exactly the same thing, how do I determine which is worth $100,000 and which is worth nothing.  It can't be utility, because they have the same utility, it can't be scarcity, because the clone has the exact same limitations as bitcoin, so how is one network worth $1tn and the other is worthless?

I don't have the energy to get into another big debate with you. But I will make an effort.

Thanks, I guess.

You need to stop comparing Bitcoin to businesses and products. Not relevant. Compare it to something more relevant and similar, like gold. 

I don't like gold as an investment either. Ity doesn't produce any underlying income and is only worth what someone is willing to pay for it. The thing about gold is that in the long run, the price is incredibly stable, generally performing in line with inflation. Sometimes it has periods of outperforming inflation, other times it's under, but the long term position is that what you could buy with an ounce of gold two thousand years ago is broadly similar to what you could buy with an ounce of gold today. With bitcoin, what you could buy with 1 coin a decade ago isn't even remotely comparable to what you could buy with the same coin today. The price stability just isn't there, and there's no mechanism, to control the volatility. So again, the issue is trying to work out what represents a fair price for each token. With gold, you have ultra-long term financial stability underpinned by the fact that gold is useful for both jewellery and industry. With bitcoin, you have what...?

As for the last paragraph. It's largely about the network effect. Litecoin, for example, is another old clone of bitcoin and it has tried so hard to position itself as 'bitcoin's silver', its USP being a code tweak where it can handle more transactions per block. No one really cares, and its price history shows that. 

I agree, it seems few people think Litecoin has any real value. My question is why they are correct when it comes to Liecoin, but incorrect if applying the exact same objections to Bitcoin having value.

There is a book called "the blocksize war" which documents the earlier years of bitcoin, where various people tried to change bitcoin's rules and instead went on to create hard forks / new alternative coins. All pretty irrelevant today and worth less than 1% of bitcoin. 

Again, no disagreement here. The question is not so much "do these other systems have value" as "are the tokens you get as part of this system any different to those you get with bitcoin". If you come back to commodities, the difference between a gold coin and a copper coin is that the two coins are made of different metals, and those metals have different applications in either industry or jewllery, so having different prices is expected. If I have 1 bitcoin and 1 dogecoin, what ultimately is the difference?

If you have millions of people playing chess every day and you copy the board and change a few pieces, don't expect the millions of people who like real chess to want to play with you, or care. 

This feels like the best exampole you've given so far in answer to this question, but I hope that you realise it amounts to no more than "it has value because a lot of people agree that it has value".  It might work, like with diamonds, or it might ultimately crash like Beanie Babies.

Zola.

Aegis said:

Zola. said:

Aegis said:

Zola. said:

Bitcoin is a digital alternative to scarce, hard assets like gold. It is built on an incorruptible network, the strongest computer network ever created, backed by millions of computers working together and it grows in size every day. It is the only truly decentralised crypto asset and will remain the largest one, the open-source decentralised nature of it can only be achieved successfully once. There is no second best, no alternative, and never will be now that the cat is out of the bag.

By this logic Apple could never have started producing phones and Google could never have become a successful search engine.  This is like saying that Ask Jeeves would always be superior to Google because it was around first, or that Nokia would always outsell Apple when it comes to phones.  As I said elsewhere, reality doesn't care about what an investment has done in the past, only the future.  And to work out whether you are buying at a good price or not you need to have a method of valuing the asset in question, and you need to be able to explain why that doesn't apply to ethereum or dogecoin, both of which look just as viable to me when looking at cryptos in general.

Again, if I have one bitcoin and one aitcoin (name made up, no idea if it's a real coin) which has been cloned from the bitcoin network and does exactly the same thing, how do I determine which is worth $100,000 and which is worth nothing.  It can't be utility, because they have the same utility, it can't be scarcity, because the clone has the exact same limitations as bitcoin, so how is one network worth $1tn and the other is worthless?

I don't have the energy to get into another big debate with you. But I will make an effort.

Thanks, I guess.

You need to stop comparing Bitcoin to businesses and products. Not relevant. Compare it to something more relevant and similar, like gold. 

I don't like gold as an investment either. Ity doesn't produce any underlying income and is only worth what someone is willing to pay for it. The thing about gold is that in the long run, the price is incredibly stable, generally performing in line with inflation. Sometimes it has periods of outperforming inflation, other times it's under, but the long term position is that what you could buy with an ounce of gold two thousand years ago is broadly similar to what you could buy with an ounce of gold today. With bitcoin, what you could buy with 1 coin a decade ago isn't even remotely comparable to what you could buy with the same coin today. The price stability just isn't there, and there's no mechanism, to control the volatility. So again, the issue is trying to work out what represents a fair price for each token. With gold, you have ultra-long term financial stability underpinned by the fact that gold is useful for both jewellery and industry. With bitcoin, you have what...?

As for the last paragraph. It's largely about the network effect. Litecoin, for example, is another old clone of bitcoin and it has tried so hard to position itself as 'bitcoin's silver', its USP being a code tweak where it can handle more transactions per block. No one really cares, and its price history shows that. 

I agree, it seems few people think Litecoin has any real value. My question is why they are correct when it comes to Liecoin, but incorrect if applying the exact same objections to Bitcoin having value.

There is a book called "the blocksize war" which documents the earlier years of bitcoin, where various people tried to change bitcoin's rules and instead went on to create hard forks / new alternative coins. All pretty irrelevant today and worth less than 1% of bitcoin. 

Again, no disagreement here. The question is not so much "do these other systems have value" as "are the tokens you get as part of this system any different to those you get with bitcoin". If you come back to commodities, the difference between a gold coin and a copper coin is that the two coins are made of different metals, and those metals have different applications in either industry or jewllery, so having different prices is expected. If I have 1 bitcoin and 1 dogecoin, what ultimately is the difference?

If you have millions of people playing chess every day and you copy the board and change a few pieces, don't expect the millions of people who like real chess to want to play with you, or care. 

This feels like the best exampole you've given so far in answer to this question, but I hope that you realise it amounts to no more than "it has value because a lot of people agree that it has value".  It might work, like with diamonds, or it might ultimately crash like Beanie Babies.

1. You could say the demand, the absolute fixed scarcity and the proof of work algorithm which has incurred significant cost to the miner to produce the coin, so it has the backing of having required significant labour to create. 

2. Bitcoin has been perfectly designed in just about every way, changing the rules makes it worse. E.g. making the blocks larger, means it's much harder for you or I to run a node, as it will take up so much more space, so it hurts the decentralised nature of it. 

3. Alll historical money systems from rocks, seashells,  beads, to paper money, all were based on agreement and shared beliefs. The difference with paper money is it has been "backed" by the state, debased continuously, and controlled by violence. With the unpayable debt spiral that the world is in, there will be changes coming. 

The belief is no doubt the riskiest part of this asset, it's only 12 years old.  But millions around the world believe it to be a brilliant new form of digital money and it is onboarding new people at levels comparable to the internet in the late 90s.