Bitcoin is a test of Thier's Law, the opposite of Gresham's law, stating that in the absence of a legally-fixed exchange-rate between two currencies, the good currency will drive out the bad. So far, this has proved to be correct as bitcoin's price continues to rise indicating increasing demand
Bitcoin is a test of Thier's Law, the opposite of Gresham's law, stating that in the absence of a legally-fixed exchange-rate between two currencies, the good currency will drive out the bad. So far, this has proved to be correct as bitcoin's price continues to rise indicating increasing demand
Consider a Bitcoin that allows users to trace the transaction history of their coins vs one that has "fungibility and privacy improvements" that strip this information. Which Bitcoin would offer more utility to society? I will argue that a Bitcoin with individually identifiable coins is superior and that fears of government blacklisting undesirable coins are misplaced. First consider that the Bitcoin with identifiable coins offers the market more information than the one that does not. Simply put, a money that provides more information to market is better than one what provides less. Many people seem to argue this would allow government(s) to blacklist certain coins they deem illegal and then control Bitcoin. If government were to do this, argue this is simply a soft fork of Bitcoin that would be ignored. People often talk about forks in the Bitcoin code, but the code is merely the implementation of the social consensus. It is the social consensus that determines Bitcoin's monetary policy and that is the base layer at which any fork occurs, with the software fork just being incidental and along for the ride. Suppose government where to open up nodes and hard fork to a Bitcoin that gives them 1M extra coins raising the limit to 22M. Obviously this fork would be soundly rejected by the community and would flounder. Now consider that alternatively government owning 1M coins simply decrees that 1M coins owned by others are worthless and illegal to transact with. This would decrease the supply in this forked representation of Bitcoin and, if accepted increase the percentage of the Bitcoin they own. This may very well start off as government stripping 1M "tainted or illegal coins", but would no doubt continue once it is established that government has this power over Bitcoin's monetary supply. Soon after, government would create some nonsense reason to blacklist the coins they haven't moved in X years, claiming they are abandoned, of course doing so would be of benefit to the state--increasing the value of their Bitcoins. This would continue with the state taking more and more of they value of the money supply until it ends in the same disastrous state that always eventually results when governments have control of they money supply. Of course, I argue that such an attempt would backfire very badly for the state & those who sheepishly obey the command to fork Bitcoin to include only government-approved bitcoins. Let us look at an often occurring situation where there is some shitty country that has mismanaged it's monetary supply to the point people are starting to use another harder money, such as perhaps the US dollar. Imagine a situation where you live in such a country and you have half your money in USD and half your money in a rapidly devaluing Tropico Peso. You would expect to see transactions in the Peso to increase as it drives out the "good money" USD--consistent with Gresham's law. In such a situation, the USD's value would climb relative to the Tropico Peso. This should be obvious as people would rather hold the dollars and spend the pesos. Now imagine the Tropico government decreed that it is illegal to transact in dollars. This would only serve to hasten and magnify the collapse of the Peso, as now people can hold and spend Pesos, but they can ONLY hold dollars. It is simply the case that the value of a money does not depend very much at all on how much people are able to spend it or willing to accept it, but rather the desire of society as a whole to hold the money as a store of value over. One such evidence of this fact that was very shocking to me, was the price of Bitcoin immediately after the Silk Road was shut down. In late 2013, a large percentage of Bitcoin transactions were related to the Silk Road and after this avenue was closed off, the price quickly grew in value. Therefore when government attempts a GASF, to fork Bitcoin into only government approved bitcoins, they create a situation where people following this fork are going to end up paying a premium for "clean, government approved" coins that are allowed to be spent, and a situation where there are "unclean" coins that cannot be used to buy things (but can still be held). Paradoxically I would expect the illegal coins to gain in value as they are being held (and traded in black markets). Most probably GASF would fail with the market simply rejecting the government's fork attempt, but if it didn't it would inevitably fail later when government continued to meddle with the monetary policy to enrich itself, which would be to the benefit of anyone who ignored government and bought the "illegal coins" at a discount. In short, Bitcoin's monetary policy is determined by social consensus. Blacklisting coins would be an attempt to fork that consensus and would surely fail causing great economic harm to anyone who followed it.
Dash suitability as currency with expected price increase
So one thing that is an issue with cryptos with hard limits to the number of coins, is that they will increase in value in relation to demand, at a higher rate than an inflationary currency will. I.e, the unit cost of DASH will increase relatively more over time. This does not need to be denominated in USD or EUR, but can be bitcoins or litecoins as well. The point is, the purchasing power of a single unit of DASH will increase with increasing demand. Sounds great, if you are an early buyer and expect to make money of it (guilty). But that will not incentive me to actually spend the coins. Where that may start to backfire is when DASH wants to be THE crypto payment currency. This is illustrated in this article: https://cointelegraph.com/news/retailers-turn-their-backs-on-booming-bitcoin-trade-magazine To summarize: vendors are dropping or withholding bitcoin adoption, because people are holding rather and spending them. People will rather spend the currency that is expected to loose value (USD) and hold what is expected to rise in value (Bitcoin). Vendors then see no reason to accommodate bitcoin, as no one uses it for payment anyway (aside from the tx fees and slow confirmations). There are many things wrong with the current banking system, centralized power, integration of government and private banks, fiat money printing etc., and I'd rather not go into that in detail. But what it does do, it provide a means for creating a currency that can maintain its value in relative terms. Most governments aim for 1-2% inflation, and achieve this by printing extra money. A deflation of 1-2% is usually considered already as paralyzing to an economy, and is avoided at all costs. Personally I don't thing those values are paralyzing, but that's besides the point. Point is that DASH and other hard cap cryptos will have deflation values in the double digits once they start to take off. Only 18 million DASH available for the entire world? I believe DASH is much better suited to be a real crypto currency that can be accepted by vendors, and that's why I'm actually getting more of it. But at the same time I'm worried that DASH will run into the same problem as Bitcoin does. Hardly anyone will spend their coins because: 1. They need to be locked up in Masternodes 2. Anticipation of price rise Has this been addressed at any time in the past? PIVX, which is basically a copy of DASH, but uses a Quantative Easing type of system to steadily increase the amount of coins in existence, so that it can better maintain its relative value. To me this seems more desirable in a coin that wants to a day to day currency. I read about a proposal to move the decimal, but that does not create more coins or compensates for price increase. It simply moves the decimal (i.e., my wallet total value remains the same, as expressed in BTC or USD). What are your thoughts on this? -Edit- -Thanks everyone for the informative answers. It really helped make the concept clearer for me and realize it may not be problem after all. I still feel that to overcome larger public opposition, the deflationary nature and effect needs to be well explained in some way by DASH reps, as that will in some way always pop up In the future.
Ok so I'll start by saying that after years of Bitcoin floating around as a buzzword, and more years after that of being a curiosity to me, I'm sold. All in. To the moon. I have this community to thank for that. I keep reading that 0.28 BTC is that magic 1% number we should shoot for, with a stretch goal of 1BTC. But ever since I dove in I keep hearing about Gresham's Law and it puts the FOMO in me. As a 34-year-old I want to enjoy the rewards of this risky investment we're all making. More importantly, I want to enjoy it before I hit my golden years. Of course we can't say for sure what the price will be or how long it'll take to get there, but surely 0.28 BTC is conservative considering we will want to HODL for the higher number that could hit in our lifetimes. I also don't want to run into a situation where I experience needless stress accumulating, trying to get to an amount that would leave me with gains that I couldn't spend in a lifetime anyways. I know we'll have different opinions how how much is enough. I don't want to know how much you have, but I would love to hear what you are shooting for and why you think that's a good number. I feel like the perspective will help me find my sweet spot. Thanks again everybody for getting me here!
To anyone who thinks widespread adoption is just around the corner
One of the biggest online retailer for technical related stuff in Sweden is called webbhallen, and they started accepting bitcoin one year ago. They sell products such as laptops/desktops/games/sound systems, even things such as health products and refrigerators (although I doubt many people buy their refrigerators from that site...). They are very popular among the younger generation and especially tech-savvy people tend to buy stuff from webbhallen, although I guess they're getting more popular among the older generation as well now. Anyway, they stopped accepting bitcoin a few month ago. Reason? Only 3 people had bought things with bitcoin during the last year - 2 of which were flagged suspected of money laundering. They implemented it mostly for marketing reasons and closed it down when the buzz died down. The point is, if Sweden which is is arguably the most developed country in the world when it comes to fin-tech, can't get more than 3 transactions in an entire year (2 of which were cancelled) on the biggest online retailer of tech-related stuff, then adoption is not even remotely close. Any company implementing bitcoin payments are not doing it because they think anyone is going to pay with it, they're doing it for free marketing and the buzz. Webbhallen arguably has the best chance of any company in the world to actually get customers paying with bitcoin - since they only got 3 people in an entire year, I'm sure you can all imagine how many people are going to pay with bitcoin in other countries, and other less tech-savvy companies. Take this as a warning to anyone who thinks mass adoption is just around the corner as long as more companies start accepting bitcoin.
Greshams Law states (roughly) that bad (fiat inflatable) money drives out good (stable uninflatable). I don't know if this has been discussed before, but doesn't this imply that Bitcoin will tend to be hoarded and thus never replace fiat as a medium of exchange? So people will use fiat to pay for coffee, groceries and what not while hoarding Bitcoin for savings. Thus it will never actually get used.
Is nobody really worried about long term negative affects of current Bitcoin deflationary cycle?
In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it. Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising. The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed. https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy. The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play. And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit. I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them. Thoughts, comments? Feel free to tell me why I'm wrong.
I use Bitcoin every day and I no longer hold any fiat
I pay my rent with Bitcoin, I buy my groceries with Bitcoin and yes, I buy my coffee with Bitcoin. Listening to that-other-bitcoin-subreddit and the-fork-that-shall-not-be-named-subreddit, you would think that Bitcoin has entirely ceased to be a viable medium of exchange. I disagree. My transaction fees are less than a penny when buying coffee, and they are about to get a whole lot cheaper once Lightning Network and Rootstock get deployed. When I began exchanging my fiat into Bitcoin years ago my goal was to use it to buy things, not to hodl. This was at a time when Bitcoin was boring in price terms anyway. The problem was that no merchant accepted my currency. I knew this to be a temporary state of affairs and so it did not bother me and I kept holding onto my currency and pushing for adoption where I could. In the spring of 2017 I received my first crypto debit card from Cryptopay. It bridged the gap between my magic-internet-money and the real world. It was exhilarating to finally be able to use my Bitcoin daily. Unfortunately, the card held euro and so it did not really feel like I was spending Bitcoin, as I used the mobile app to manually refill the card by exchanging Bitcoin into euro. Fast forward to the summer of 2017 and TenX came along promising a card that automatically converted, at the time of the transaction, between Bitcoin and whatever currency the merchant accepted. I was one of the first to order their card, which was a real challenge at the time due to their extremely buggy software. Late in autumn my card arrived and I knew things would never be the same again. There was one more obstacle still remaining for full adoption. I kept falling victim to Gresham’s law, which states that bad money drives out good money. I wanted to hold onto my crypto which increased in value and preferred to spend my fiat which decreased in value due to inflation. The only way to escape this was to go full crypto. The value increase of Bitcoin already meant that 95% of my money was suddenly in crypto. And so I decided to go full crypto and to never look back. TenX works similar to an exchange in that transactions on the platform do not occur onchain. When I buy coffee I pay neither a transaction fee nor an exchange fee. The merchant pays the fee to Visa and the card issuer, same as with any debit or credit card. Transfering 0.1 BTC to my TenX account cost me $2 (100 sat/byte) and took 48 hours. Perhaps not ideal but good enough, and it allows me to purchase 1000 cups of coffee with an average transaction cost of 0.2 cents per cup. With TenX aiming to get 1 million of these cards into circulation in 2018, I feel that the world is about to get a whole lot more interesting, at least here in the EU. If Bitcoin were to crash 90% tomorrow, I would still buy the dip with my next paycheck. But unless Satoshi were to dump his stash at the same time as the US, EU and China all tried to ban Bitcoin, I doubt we will be fortunate enough to get such a steep discount.
The monetary system for a successful and sustainable future
Kinetically Charged Yield Bearing Asset Based Monetary System of Shared Economic Wealth In the same way our sun unconditionally delivers an indiscriminate share of energy to planet Earth that stimulates life, we present a comparative energy system to stimulate the movement of money, assets and hence overall commerce and economic activity in a fair, honest and rewarding process. It is an entirely new monetary system, which is based on movement, kinetics and velocity. We name the system Kinesis. The Kinesis system is an evolutionary step beyond any monetary system available in the world today. It enhances money as both a store of value and a medium of exchange, and has been developed for the benefit of all. Core to the mechanics of the system is the perpetual incentive and thus stimulus for money velocity. Outside capital is attracted into Kinesis via a highly attractive risk/return ratio and then put into highly stimulated movement, promoting commerce and economic activity. This is achieved through structuring money to represent 100% allocated title of an asset and then attaching a unique multifaceted yield system that fairly shares the wealth generated by the system according to participation and money velocity. Aside from offering the greatest store of value and striving to provide the most efficient medium of exchange, Kinesis is a monetary system focused on: minimising risk; maximising return; stimulating velocity and maximising the rate of adoption. Kinesis defeats Gresham’s Law of Money that asserts “bad money drives out good”, by highly incentivising “good money” to circulate and be utilised as an effective medium of exchange. Someone who values money over other money is inclined to hoard it and not use it as a payment currency, but rather use the less valued currency for payments. This model has been broken in the Kinesis system as the reward for using the valued currency is so tremendously strong. The primary currency chosen for the Kinesis monetary system is a kinetically charged physical gold based currency. Gold being the greatest store of value, indestructible in every sense, physically rare in quantity and has been appreciated by human civilisation as money for longer than anything else. It is the money created by our universe and not by people. It is created by a rare cosmic event of two neutron stars colliding, so rare that the first time this event was witnessed by humankind was 17 August 2017. Hold gold in your hands and you can feel its energy. It is the colour of stars, it is the money of the universe. Gold is the undisputed champion of fair, honest and sustainable money. Put allocated gold on a kinetically charged decentralised rail system and you have a very special monetary system. We believe this is what we have achieved, and a lot more. The Kinesis system can be overlaid on top of anything that can be standardised, traded and stored as value. Accordingly, we are developing a kinetically charged digital currency suite with allocated title of bullion, fiat bank notes, cryptocurrencies and other assets that are physically and digitally securely stored in our allocated Kinesis banking and asset management system. By attaching a yield to digital currencies, risk/return ratios can be forecasted and virtually all currency and investment asset markets can be targeted and infiltrated. As such, over time we plan for more currencies and assets to be added, ultimately infiltrating more markets spread across the world. Kinesis will attract capital from: Cryptocurrency markets – currently little to no yield The gold and silver markets – currently little to no yield Fiat currency markets – low to negative yield via debt based interest rates Investment asset markets – comparatively low yields for stock market and property investment Ultimately, if someone can get the same asset at the same price, but with significantly lower risk and higher return, it makes little sense for them to not choose the asset with the better risk/return ratio, particularly when significant returns are on offer. As the Kinesis monetary system is one that allocates title directly to the ultimate beneficial owner, where banks conversely hold legal title of their customer deposits and put those deposits at risk, the Kinesis system is in fact much less risky and with much greater return than legacy alternatives. With global low to negative interest rates, bail-in provisions, depositors’ insurance being removed, and with banks holding legal title to their customer deposits, it makes no logical investment sense to choose risk and nil-to-negative return over the alternative Kinesis system with negligible risk and high return. In comparison to legacy fiat money and fractional banking systems, Kinesis seems too good to be true, but it isn’t. Once clearly understood, Kinesis will lead a highly disruptive paradigm shift in money. Kinesis has taken the very best properties of both old-world money and new-world innovation and combined them together to power banking and commerce in a new fair, inclusive and incentivised way. The result is something extraordinarily powerful that will change the way we all view money forever. The primary elements of Kinesis are: Gold & Silver - The primary currencies offering allocated 1:1 title to physical gold & silver – the greatest stable and definable stores of value for use in commercial and private transactions and investment. Yield - A perpetually recurring yield generated from economic activity, not from debt based interest like fiat currency – providing definable value via Net Present Value (NPV) calculations for use in commercial, institutional and retail investment. Cryptocurrency technology – can only be enhanced. Blockchain peer-to-peer decentralised distributed ledger technology – blockchain may become obsolete, but distributed ledger technology can only be enhanced. Kinesis can never be destroyed as these elements will never go away, never be valueless and can only be enhanced. Nothing can take away intrinsic asset value and the value of future cash flows, and technology will only ever be enhanced. Gold and silver have survived the greatest test of all, time, and so too will Kinesis. Other cryptocurrencies with value determined by the anonymous decentralised blockchain payment capabilities and their controlled supply scarcity are all at risk of losing value as their initial founding value proposition is diluted by others coming into the market with enhanced solutions. This is evidenced by Bitcoins’ dominance continuing to fall and has been witnessed in many other industries and markets throughout history as competitors rise. A major contributing factor to the volatility in cryptocurrencies is that they are impossible to value. By intrinsically backing a currency, hence back-stopping the value and defining the risk, and then placing a yield on it, hence defining the return and providing superior value, then a currency which is safe, stable and rewarding is created with a highly attractive investment risk/return ratio attached. This form of currency has necessary real-world application in both commerce and private transactions, along with attracting capital from institutional and retail investors and savers. This is not just a currency, this is a new parallel monetary system to sit alongside but integrated into the legacy problematic centrally controlled fiat and fractional monetary and banking systems. Kinesis is the undeniable superior alternative. This model is highly revolutionary alone, however to take it the next step further, already in place is a highly disruptive retail and institutional commercialisation strategy with unique distribution and committed adoption from day one of launch. Pre-existing investment commitments are in place for the Kinesis currency suite which will surpass the largest ICO to date by a significant multitude. Kinesis is being developed and being brought to launch by a consortium of industry leading organisations in the precious metal trading, mining, refining, exchange, technology, blockchain, mobile banking, vaulting, postal system and marketing spheres. From launch the system will have extensive institutional and retail distribution, integration, liquidity and adoption. Our liquidity, which will be provided by professional bullion market participants and others, will enable billions of dollars of value to efficiently enter and exit the market. Direct and indirect integrations will provide for immediate adoption into hundreds of millions of users. With the evolution of blockchain, cryptocurrencies and mobile devices, the people of the world have been presented with a profound opportunity. It’s an opportunity to apply empowering creativity to money and be part of a person-centric revolution. We have now been enabled to adopt and support a system that individually and collectively benefits us all based upon nothing more than participation. This system combines new world decentralised technology with the oldest, fairest and most sustainable form of money, to empower and serve the interests of us all equally and capitalistically.
I sell stuff online and many people have ethereum, litecoin and other types of bric-a-brac that they want to pay me in. I don't particularly want those and just want Monero. So what I've been doing is happily sending them a shapeshift.io link where the value is transfered from whatever their coin is into sweet sweet Monero. I've decided that services like shapeshift.io should be called a Theirs Machine or Reverse Gresham Machines. See. When legal tender laws apply, the better money leaves the system. For example people are now hoarding the copper pennies as opposed to the zinc pennies. This is because the copper pennies melt value is higher than their legal tender value. So, the less valuable zinc penny is what is used for trading. However, in cryptocurrencies these legal tender laws do not apply and Gresham a law works in reverse. No one is forced to be paid in the equivalent of zinc pennies in the cryptocurrency world. So they instead request to be paid in the currency that they believe to have the best long term storage of value. Quote from Wikipedia: "These examples show that, in the absence of effective legal tender laws, Gresham's Law works in reverse. If given the choice of what money to accept, people will transact with money they believe to be of highest long-term value. However, if not given the choice, and required to accept all money, good and bad, they will tend to keep the money of greater perceived value in their possession, and pass on the bad money to someone else. In short, in the absence of legal tender laws, the seller will not accept anything but money of certain value (good money), while the existence of legal tender laws will cause the buyer to offer only money with the lowest commodity value (bad money) as the creditor must accept such money at face value" Generally the seller would request to be paid in the better money, but thanks to these reverse Gresham Machines everyone is happy and the value of cryptocurrencies adjust quicker & more accurately to represent their supply and demand. Normally it would be difficult to convert currencies into another, and this would result in a less liquid market and less ideal market for everyone. Luckily this isn't the case with cryptocurrencies when services like shapeshift.io exist. The buyer gets go pay with their inferior currency which they're happy about, and the seller gets to be paid with the superior currency, which they are also happy about. That very transaction also lowers the price of the inferior coin and raises the price of the superior one since in order for it to happen they have to be exchanged on the market. I just thought that was pretty cool and it has some interesting implications. As it shows that there is very little friction between all cryptocurrencies, especially when you consider services like Lens and shifty button. The little friction it has means that the network effect is very weak and that there really isn't any lock in. If you think that bitcoin might be so far ahead of Monero that it's network effect will overcome the superior Monero technology, I would say that you're wrong because of these reverse Gresham Machines which will pump value into better coins without any friction to the buyer or seller. The seller of course is able to still transaction with the superior coin for their expenses without any issue, and since it will be better their transactions may not go through a Reverse Gresham machine. Additionally buyers may premetipvly convert their inferior coins using these reverse Gresham Machines. Ultimately what you'd expect to see is the inferior coins trading more frequently than the superior ones. So number of transactions per minute is not a sign of health but a sign that the currency is no good because no one wants to hold it. This will really work to our advantage as Bitcoin deflate in value it will have to discover and design good second layer scaling solutions whicj will ultimately benefit Monero, as they can be incorporated when needed. Does anyone have additional thoughts on this idea?
WSJ Article "Bitcoin is Worth Zero" is scaring my investor friends. Can someone with more knowledgeable expertise please assess the claims in this article and their merit?
It would be helpful for us all to understand possible issues and arguments against bitcoin, even if the majority of us are fans and HODLers. Here is the mirror I found: https://i.imgur.com/UFn64Gp.png Claims in the article:
I'm inclined to say Bitcoin is worth $0, especially if Bitcoin's value depends on it being adopted as a global digital currency to replace dollars
No chance Bitcoin can replace dollar because it's badly designed. It can handle a pathetically small number of transactions, and used an inordinate amount of electricity to do so, making it entirely unsuitable to replace ordinary money
Even if Bitcoin worked better, it is in a Catch-22 because of Gresham’s law, the nostrum that bad money drives out good. Given the choice of spending inflationary government-issued money or something which holds its value, everyone would spend the bad paper stuff and hoard the Bitcoin. You wouldn’t want to be the person who spent 10,000 Bitcoins on two pizzas in 2010, when a Bitcoin was worth a fraction of a cent. Those Bitcoins are now worth $40 million. But if no one spends Bitcoin, it will never get established as a currency.
In any currency, the money supply multiplied by how often it circulates equals the price level times the number of transactions. For Bitcoin we can estimate three of the four variables, Mr. Davies says. He observed that even hardened criminals don’t set prices in Bitcoin, but rather in dollars, and then immediately convert. Assume that all drug dealing moves online, that Bitcoins circulate as fast as ordinary currencies, and estimate a $120 billion-a-year market for illegal drugs, and the formula spits out an ultimate value of $571 for a single Bitcoin. The more drugs traded, the higher the value, and the more Bitcoin hoarded rather than spent, the higher the value. Drug dealers might be willing to put up with the limitations of Bitcoin, notably the uncertain time taken to complete a purchase and the high transaction costs. Laundering dollars is more expensive. But studies cited by the United Nations Office on Drugs and Crime suggest that cryptocurrency-based online drug dealing remains relatively small, and focused on retail, meaning fewer and smaller transactions than Mr. Davies’ limiting assumption, so justifying a much lower Bitcoin price.
On this basis the current price of $3,950 is mostly speculation, and J.P. Morgan Chase & Co. Chief Executive James Dimon’s comparison to the 17th-century Dutch tulip mania is apt.
Digital gold might be more appealing for Bitcoin’s true believers, who would surely prefer to avoid basing a currency on illegal activity. Gold is hopeless if you want to pay the mortgage or buy bread, but is useful insurance because we can be confident that if a government currency collapses the shiny metal will roughly hold its value. It helps that history holds plenty of examples of currencies losing all their value to hyperinflation while gold could still be bartered for food and shelter.
Gold has a value far above what is justified by its uses in electronics and jewelry only because (almost) everyone agrees that it has value. That “network effect” is what Bitcoin needs to establish itself, and the more attention it garners, the more likely it is to become established. Yet, gold has had thousands of years and a history of being used to back money to support its position. Technological disruption may be overturning many societal norms, but securing society-wide recognition as a safe asset takes more than the backing of tech evangelists and a bunch of get-rich-quick stock promoters.
Still, the potential to replace gold gives us some figures to work with. Thomson Reuters GFMS estimates there were 2,155 metric tons of gold held in exchange-traded funds. Switch all of that into Bitcoin and it would justify a price of about $5,500 for the 17 million Bitcoins currently outstanding.
We could be more optimistic and think Bitcoin might replace gold coins and bars. Leave aside that the gold is better than Bitcoin because gold doesn’t depend on having an electricity supply, and the 24,000 metric tons GFMS estimates have been bought for investment in the past half-century would justify a price of $61,000 for every Bitcoin.
If we assume that Bitcoin will either succeed completely in displacing gold or fail and be worth zero, it helps explain why the digital token has been so incredibly volatile, with a 40% loss in two weeks, and a 33% rebound since Friday’s low. Based on the simple choice between total success and failure, we can very roughly say that Bitcoin at 70% of the gold ETF-derived price suggests a 70% chance of displacing so-called paper gold as society’s chosen emergency store of value, and a 6% chance of displacing physical gold. Even digital dreamers should accept that is far too high.
In economics, Gresham's law is a monetary principle stating that "bad money drives out good". For example, if there are two forms of commodity money in circulation, which are accepted by law as having similar face value, the more valuable commodity will disappear from circulation. The law was named after Sir Thomas Gresham, a sixteenth-century financial agent of the English Crown in the city of Antwerp, to explain to Queen Elizabeth I what was happening to the English shilling. Her father, Henry VIII, had replaced 40 percent of the silver in the coin with base metals, to increase the government's income without raising taxes. Astute English merchants and even ordinary subjects would save the good shillings from pure silver and circulate the bad ones; hence, the bad money would be used whenever possible, and the good coinage would be saved and disappear from circulation.
When people have a choice of which to spend and which to hoard, they will tend to hoard the money that is a better money. The problem for all forms of fiat is that they are inferior for holding. No one wants to hold a currency that is inflating. Fiat has become a hot-potato that everyone wants to get rid of and no one wants to be left holding. This is manifesting in the form of rapid gains across the entire cryptosphere, in practically all of the leading coins. The vast majority of people buying crypto today do not actually understand why this is happening, they have only identified it as a phenomenon that has now trended in the same direction long enough, for so many years, that they have significant confidence it will continue to rise. However this trend is not good news for the people that control fiat and derive a large part of their wealth and power from their ability to shift the cost of printing more money onto the population at large and thus to enrich themselves dishonestly. Note today that South Korea is undertaking an emergency meeting to figure out what to do about cryptocurrency investing after South Koreans "discovered" bitcoin recently and began going in deep. Cryptocurrency, in all its leading forms, being inherently a better money than any form of government fiat simply because it is not subject to the whims of human management and corruption, is becoming a prime way for the masses to save. This is on the doorstep to creating a viable competitor to the stock market as a way to save. A large amount of the money now tied up in cryptocurrency undoubtedly would've found its way into Wall St. and similar traditional investment vehicles like property, had cryptocurrencies not existed. So all fiat is inferior for holding, and this was good for the stock markets of the world and the property markets of the world. This is a problem because someone has to hold fiat. And if all the world begins trying to get out of fiat and into cryptocurrencies, that has potential to creates the nightmare scenario that the state dreads above all: hyperinflation as people rush to escape a failing currency and those left holding the bag last lose most. This is why the US government is concerned about bitcoin, why places like Russia and China keep announcing bans or controls and then walking back on those ideas when they realize that bitcoin transactions cannot be regulated by the state in any reasonable way (well, they could turn off the internet, but that would result in open revolt of the populace, rock and hard place), and why South Korea is concerned now. The worst-case scenario for government is total repudiation of their currencies, ala Ecuador. But at the same time, the US government, and many other governments, have become afraid to take a hard line against new technologies because they all want to ride the wave of technological innovation and earn taxes from new industries that pop up, and they would rather not chase those industries into other countries and find themselves left out of the new technological bonanza. This also helps explain why multiple cryptocurrencies are doing well instead of just one, because the leading cryptocurrencies all have the properties of a good currency, better than fiat, and cryptocurrencies won't actually have to compete strongly with each other until fiat is replaced or deprecated worldwide. So why has BTC done better than all other cryptocurrencies in terms of unit price to this date apart from inflation-arbitrage. It's primarily because of mindshare and exposure and good-press. Think of BTC as being to cryptocurrency what AOL was to the internet in the 90's. At that time, AOL had created its own walled-garden and was on-boarding large numbers of people into using the internet in a safe and idiot-friendly way, while offering none of the power-features of the real internet. For the purposes of this analogy, Bitcoincash is the real internet of the 90's. And while massive numbers of people got into the internet for the first time through using AOL, it wasn't long before they realized they lived in a walled garden and the real thing was on the other side of that wall, and the whole world ultimately made the jump to the real internet. That is why so many of us think BTC will do well in the short-term as people are on-boarding into cryptocurrency through BTC, but that in the long-term, people will begin to realize that BCH is the real thing and why are we bothering to put up with the AOL of cryptocurrencies when this other thing, BCH, works so much damn better? And value will begin leaking out of BTC and into BCH, especially as use cases for BCH begin to multiply and an ecosystem of use-cases are built on top of BCH as a platform. That will begin to multiply the network-effect. And BCH devs are wisely keeping the use-cases as wide open as possible, that allows path-dependence effects to stay wide-open as well, allowing that ecosystem to grow. An ecosystem that the BTC-Core devs have already destroyed, strangling the baby in its crib, btw. So, in the same way that we had to educate the masses about cryptocurrency in general, it is now our task to explain to them why Bitcoincash is where focus needs to be going forward. Honestly, the hard work of validating the cryptocurrency concept is already done, now the job is to compete within the class, and we have every advantage.
Does anybody know or understand that the market is a consensus based system. It allows buyers and sellers to set prices. We can rely on that because there is no one to control those prices. So we think. Markets work best to price the supply of goods and services to be sold. Goods and services are practically unlimited. But here is the issue. Bitcoin is money. It can’t be printed out of thin air unlimitedly. It has rules they We all agree to follow. We have been following these rules for almost 10 years. The network has grown and now we are at a point where we accept it as digital gold. That is the problem. Yet we are making a payment layer to use it as cash. How ironic? How does this relate to Nixon. Well Nixon with the stroke of a pen ended the Bretton Woods act. He didn’t wait for the market to say it was ok. He just did it. And after that the financial system has moved from a petro dollar to a debt based dollar. None of this was decided by the market. Now what is my point. Today we use markets to allocate capital for its best use. Until we got bitcoin. What started off as a simple concept has now become a war. This war involves no bombs. It involves your mind. They have been using money as a way to control for so long they are really good at it. And the best way to control bitcoin is to use the exchanges to control the price. It’s no different than what they do with gold. This is what you are seeing. They know the best way to keep bitcoin from being circulated is to keep the price low enough where it is appealing enough to own. But not appealing enough to spend. But why? Because banks will do anything to keep you on their system. That’s why we have Blockchain not bitcoin. That’s why we have a thousand shitcoins too. This is all made to keep bitcoin less desirable. Gresham law states bad money chases out good money. But extend this to a digital vs physical money. Digital money will chase out physical money. It cost less and is easier to use. But banks don’t want you using digital bitcoin. They want you to use their digital money. It’s always about control to them. Money is in unlimited supply. How do we overcome this. It’s pretty radical of a concept. Bitcoin is widely known and has global infrastructure behind it. It is growing. That what you want to see. But the exchanges have and are being used to slow this growth through the pricing mechanism. So we just reject the pricing mechanism and use something new. I can buy an unlimited amount of Coca Cola for $1. But why can’t I buy 100 satoshi’s for $1. I can. And if enough people decide to do this it becomes the consensus. Just like in a market. But why? Because global debt exceed GDP by 300%. Who owns this debt? The banks and central banks of course. So they can do whatever they want. And they are. Politicians are catering to them to keep from blowing up their economies. This is why we have bitcoin. It’s our protection from this screwd up banking system. Pierre calls it hyperbitcoinization. But the reality is within this construct of money and faith based system we have something that truly changes everything. Yet we are still playing by their rules. All it took was the signature of Nixon. With bitcoin all it takes is our will to pay $1 for 100 satoshi’s. And if the market feels this price is too high and floods it with coins it doesn’t matter. Because you don’t need a weaponized market that will do their bidding. Some ppl will get super rich. My hope is we will have more good actors with btc than we have malicious ones. And we can move into a future where the power of the few can no longer control the fate of the many. And if nation states want to keep their central banks it’s ok. But we don’t have to use their money system.
This is my first contribution to the CryptoCurrency, and as already been commented it's too long, you can scroll down to the MAIN PART, so, please comment about changes you would make to it or just your opinion in general. Thanks Remember Nash equilibrium, Gresham's law, the rules of the Stasi? So the banking system is similar to the Stasi. But that's not the topic. Why did crypto currency become currency in general? The Nobel laureate in economics would have answered something like this: "At some point in time, the market fell into Nash's equilibrium, where everyone suddenly agreed that counting bitcoin as a currency is normal." Why do men wear trousers, and women wear skirts? Historically, in Scotland it wasn't done that way. It's just that at some point everyone agreed that this should be so. Nash equilibrium. Generally ... What is the currency? A currency is a means of indirect exchange. Once the means of exchange were the feathers of a pheasant, which before that did not cost anything. But then the demand arose and people said: "The feather will be a currency, a means of indirect exchange." Gradually, the general requirements for currency were formed: it should be simply divided into parts, and its value does not change; It is easy to carry around; And it should have a long shelf life. Well and the main thing - people should be ready to use currency as a means of exchange. With the crypto currency the same thing happened: people were READY to use it. Now I'm ready to exchange my phone for bitcoin. It is clear that all other criteria for crypto currency is, perhaps, even better than any other currency (it is much easier to store, transfer, divide, and it is eternal). And why there was a crypto currency? One of the main reasons, in my opinion - is the huge embitterment of people on the banking system with all of its rules, which are being promoted under the auspices of a mythical struggle against scammers and other scoundrels. So, the current banking system is similar to the Stasi, to which I must explain why I have such a gait, and not another, and why I go to work such a route, and not another. And then, unless two-meter fences stop real criminals? When criminals need to break into the banking system, they just buy a bank. All these safety rules are, in fact, useless. Therefore, there is a global irritation of people by the banking system. This can be seen everywhere - and in business of any size, too, from small to large. The annoyance created a request for some kind of analogue to the current system. There was a crypto currency. And the process can not be stopped - the crypto currency will take its place in the world economy. What a question for now. The problem is that in fact, the crypto currency is not used today precisely as a means of exchange. The phenomenon is called the Gresham's law: no one wants to pay with the currency, which constantly and strongly becomes more expensive. Everyone has heard a story with two pizzas that were bought for 10 thousand BTC in 2010 (just curious if pizza shop kept those bitcoins until today). Who wants a pizza for $ 15 million? Or do you want to drive in a Toyota car, bought today for 30 BTC, after learning in a year that they paid $3 million for it? Therefore, the crypto currency is used as a means of accumulation and speculation. At the same time, the process of continuous growth leads to the fact that basic crypto-currencies lose their properties as a means of settlement - stability. They turn into the semblance of shares of a rapidly growing company. And who wants to sell or change the goods and services of treasuring shares today, if tomorrow they will cost more. This is problem. Stablecoin The volatility of the crypto currency is the subject of long-standing discussions, in which the words "bubble" and "speculative instrument" can often be heard. The problem is solved including the launch of special settlement crypto-currencies, the so-called "stablecoins". This is a crypto currency, the value of which is determined not only by the demand for it, but also by more established methods. In the world there were several attempts to create such stablecoins. As a rule, they were tied to either the value of the fiat currencies - the dollar, the euro - or raw materials (commododis) - oil, gold, and so on. But due to various reasons, they were not widely used. First of all, because the creators of such currencies violated the principle of blockchain - distribution and independence. They issued crypto currency, they sold it, and they bought security on the proceeds. And the fact that the security was stored and controlled by the release organizers did not inspire confidence in the community. Now there are more advanced projects. In general, there is a hypothesis that the future is behind the "stable", tied to commododes. It is based on the fact that in the society in general and in the economy in particular, the so-called fatigue of the material of the classical unsecured money. At the same time, we see that the same dollar, euro, yuan, Brazilian real and all other classical currencies are also subject to volatility. And all this against the backdrop of a global rise in the cost of money. The economy is looking for alternatives. But will the social request for a block of commodities be critically higher than for classical money? I am not sure. But the fact that it will be more than now - most likely. Right now, there are several interesting stablecoin projects in the world: There is a project Tether, which stably enters the TOP-50 on capitalization (just over $300 million). Tether is the dollar's coin, 1 to 1. In Israel, they launched a start-up, which tries to make a crypto currency, tied to oil. In fact, they are not yet very successful, because they can not solve the problem of oil storage - it is difficult to store. There are projects that try to link the crypto currency to computing power, to electricity, such as SONM. You can easily explain to your mother about the crypto currency, tied to gold. I have not talked about the main (yet) and most obvious commodity - gold. Gold is a commodity that everyone understands. Gold accounts for about 5-10% of the global investment market. Gold is a natural limited natural resource. According to open data, the gold reserves of governments are about 30 thousand tons, and about the same in the hands of citizens. Total about 60 thousand tons. About 3 thousand tons of gold is extracted every year. This is a stable figure that can not change dramatically in any direction due to distributed production in different countries and established technologies. Therefore, the value of gold, expressed in goods and services, practically does not change. All this makes gold the ideal equivalent of calculation. Actually, it was so throughout the history of human development. Even the first money was tied to gold until governments decided to replace the gold mining process with a simpler process of printing paper money. Well, the main thing: you easily explain to your mother about the crypto-currency, tied to gold. And she will understand you. Now there are several "golden" crypto projects. There are not so many, but everyone has a different concept: Impressive is the OneGram project from Dubai, which plans to raise $ 500 million for the ICO, which began on May 27 and which should end on September 24. For today, 22% of 12,400,786 tokens sold at $ 43.18 apiece are sold. "Dubai" and "gold" sounds somehow impressive, you must agree. OneGram is tied to the stored physical gold. They have a content, strange, in my opinion, a counter: they position themselves as a project for Muslims. In the world of blockade, any artificial limitation causes questions, because it contradicts the very concept of technology. True, according to the founders themselves, now most of the investors of the project are not Muslims. Still there is a project of the British Royal Mint - Royal Mint Gold, in which one token is tied to one gram of gold. The project raises questions from the point of view of decentralization. Another ambitious project is the American-Australian OZCoin. It is provided with 100 thousand ounces (slightly more than 2.8 tons) of gold at 24 carats. Also, there is a "Russian" Goldmint. I took the "Russian" in quotes, because it has international team. The project plans to hold ICO in September, and in May held pre ICO and collected for a couple of days $600 thousand. Imagine that there is an ingot of gold that is able to be transported quickly and cost-free to anywhere in the world without a chance of being stolen. Usually verification of the team removes 9/10 of the risk - the probability of "scam" or some illegal actions is equated to zero. I always say that Whitepaper, the business plan in the ICO world is secondary to the team. It does not matter what you do, but who you are. If tomorrow Elon Musk will grow cows, then investors will believe in his project. Overview of TOP-15 crypto-currency Now about the crypto currency in general. On the Internet, you can easily find sites where you can see the capitalization of each crypto currency, which is drawn at the crypto-exchange, its current price in dollars, the schedule of price changes, the amount of currency that is traded on the market. Such statistics will help a little to understand the beginning investors, but give at least a general idea of what is happening. I will briefly talk about several crypto-currencies in the TOP-50 on capitalization: what are their essence, advantages and disadvantages. And despite the fact that in many of them I invested money, I will not give any specific advice on investment here. MAIN PART
The analogy from the real world is gold. This currency appeared first on the market, and therefore occupies (so far) the first place in terms of popularity, capitalization and exchange rate relative to the dollar. All other currencies, which appeared later, began to be called altcoins, and bitcoin is still a benchmark, from which all are repelled. Bitcoin is a crypto currency that can only be sent, received and stored. In doing so, it has many disadvantages inherent in the architecture itself: it is slow, difficult to scale, requires a lot of power for mining, a lot of storage space, transactions are expensive, and cryptography can be hacked if desired. Here are the cons: Bitcoin is slow, means that transactions in bitcoin occur every 10 minutes. To confirm the transaction, you need to mine, and this is a very energy-intensive process. To increase the number of users (scalability), you need to increase the computing power of computers. Bitcoin was not such a decentralized system, as it was announced at the very beginning. Theoretically, the miners can unite into huge pools and manage the network. The maximum number of bitcoins that can be released is 21 million. To date, they have already produced 16.75 million. What will happen when the total volume reaches the limit? Obviously, there will be a so-called hardfork, when it will be decided to create a new version of the bitcoin-network. This means a big vote, if you want - holding a referendum among the holders of the bitcoins. The Chinese holders of the Crypto-currency were in favor of holding such a referendum already in September. After him, perhaps, the "constitution" of bitcoin will change. And we know how constitutions change easily and quickly in different countries ...
An analogy from the real world is the new Microsoft. "Ether" begins to press bitcoin in terms of popularity. Probably, this currency has more prospects. If bitcoin can act only as a means of exchange and storage, then Ethereum has a number of advantages. The main thing is the ability to create smart contracts. Now, this platform is the most popular in the world in the construction of the block economy, and is used with numerous ICO. Ethereum inherited almost all the diseases of bitcoin. Yes, it's faster - it updates every 10 seconds (that is 60 times faster), but it has the same scaling problems (the recent case with SONM is an example), power consumption and storage. It may well challenge the leadership of bitcoin in the near future.
An analogy from the real world is the new VISA. The project team is trying to make a new payment system so that it can make payments in all currencies. The advantage of this currency is that it is used by banks. However, it is not decentralized. Coins can not be mined, therefore, their number does not increase. Ripple has a huge speed advantage over BTC and ETH, but the operations are not so transparent. For the classical banking system, this is normal - there anonymity has never been welcomed.
An analogy from the real world is platinum, which is cheaper than gold. Absolute analog of the bitcoin. Faster, better in all respects - but just turned out to be the second. But it is worth it in terms of diversifying investment in the same bitcoin. However, there is nothing from the point of view of innovation.
The analogy from the real world is Alibaba (not Amazon). Alibaba - the largest online store with a multi-billion dollar turnover. But still understand that it is still not as steep as Amazon. Classic may even be more expensive than regular Ethereum, but there are some nuances. ETC appeared after the Ethereum hardfork, which occurred last fall, and still does not cause trust in the crypto community. The main attention is still paid to ETH, and all the iconic projects are being conducted on this platform.
Dash and NEM
The analogy from the real world is "not clear who." Honestly, I do not often see these currencies. NEM is mainly drawn in Japan, where it is officially allowed to buy and sell goods for crypto currency. The number of coins is always one less than 9 billion, additional emission is not provided, so there is no mining, but there is a so-called harvesting. A major jump in the NEM course occurred in May, when a closed Mijin platform was created on the basis of NEM, through which Japanese banks can conduct secure transactions. NEM is built on the example of bitcoin, but there are no fundamental differences in architecture. Dash - crypto currency, whose transactions are completely anonymous. Many people talk about this as an advantage, but think: why does an ordinary person have complete anonymity in transactions? Still, all decisions about changes in the "constitution" take place with the help of a general vote, that is, the Dash-network is completely decentralized. Naturally, both currencies work faster than a bitcoin and have a number of software advantages.
An analogy from the real world is the new Google. A real innovation in the world of crypto currency. It offers a fundamentally new paradigm that can change everything at all. IOTA is also called the "crypto currency of things". It appeared five years ago, but it has become popular just now. As soon as it entered the stock exchange, it immediately burst into the Top 10 crypto-currency. How does bitcoin work? In order to perform a bitcoin transaction, the miner must do some work to confirm the transaction. Spend time, huge amounts of energy and allocate space for storage. In the case of IOTA, you can independently confirm the transaction with your device - for example, a regular phone. Your smartphone confirms two other transactions. Those transactions are confirmed by other two. And so on. The more users, the faster and better the network. Now IOTA users have accumulated a critical mass and the currency has become very popular. There is no limit to scalability, no miners are needed, so transactions are free. You do not need to pay a commission to the miners, you do not spend computing power. In general, this is a real bomb that threatens to make a revolution. IOTA solves all problems inherent in bitcoin (limited, high demands on computing power, pseudo-decentralization, data growth and storage problem, slow speed).
The analogy from the real world is JFC Sistema. Briefly, unlike bitcoin, Monero emission is not limited, but transactions take up several times more space than bitcoin. But this is not the most interesting. In general, low-cost transactions, good translation speed, good mining.
An analogy from the real world is the Empire State Building. EOS - the evolution of the currency BitShares and Steemit (which, by the way, seriously criticized that does not prevent BitShares from getting close to the top 10 on capitalization). It is based on a breakthrough technology, which can be compared with the appearance of a blockade. In theory, they can replace Ethereum or enter into synergy with it. In terms of technology, the project is better than Ethereum. Developers have created a new language, and now the EOS platform creates an operating system on which it will be possible to build separate applications. The logic is this: all databases, all web programming will be transferred to the block system. New technologies will allow asynchronous launch of different applications, which will seriously increase the speed of the OS based on EOS. The team expects that the whole world will work on EOS. In general, to be honest, this is the world of "Crypt 3.0".
An analogy from the real world - ? A useful tool not to lose on converting, not to depend on the legislation of different countries, taxes and so on. There is also a similar currency Tether, which is tied to the dollar 1 to 1. If you want to sell or buy dollars on the blockchain, you should come here. These are not speculative instruments. (Here you need to understand that BitShares itself as a unit of account is also "floating"). It is used as a currency for collecting commissions for a transaction of a fiat currency. It can be speculated. But if we want to operate with fiat money in the blockchain, we can do it inside the BitShares system). And 5 more crypto-currencies from the top 50 If you look further, in the top 50 crypto-currencies there are a few notable projects. I will list a few.
An analogy from the real world is the stock exchange. It is essentially a stock exchange: an Ethereum platform on which you can exchange different cryptocurrencies (but they all have to be the ERC20 standard - this is the most common Ethereum standard on which most projects are developed). Everything is regulated by smart contracts. This is a new economic tool in the world of blockchain. In fact, they brought the derivatives into the blockchain, which no one had done before. It seems to me that this is a niche product, which, however, can grow 5-10 times.
An analogy from the real world is McDonalds. A good, fashionable currency, I see future in them. Fast, cheap in a transaction, profitable in the mining. It is loved by miners - in other words, market providers like it. And it is like McDonald's - does not belong to anyone. 99.9% of McDonald's shares are traded on the stock exchange, but the largest shareholder owns only 2% of the shares. Decreded as McDonalds.
An analogy from the real world is Netflix. Fantastic project. And by "fantastic" I do not mean "cool", but the original meaning of the word. The business model is incomprehensible, but the team is good. They try to work in the market of events predictions. While the project is in the alpha stage and no real money goes in there, the team really knows how to correctly analyze the data. Aragon can become crypto-Netflix. How they do it - I have no idea. But just to remind you, 7 years ago Netflix was unprofitable.
Found this Bitcoin (Cash) thesis on the core blockchain!
401523. Oct 2017 09:20:15
Bitcoin (Cash): Investment Thesis Introduction Bitcoin has the potential to become the best and fairest form of money to ever exist. It essentially rolls gold, cash, and our credit card system into one. It takes the strengths of each and leaves the weaknesses behind. It has the limited supply quality of gold, but can be used to purchase everyday items. It has the speed of a credit card, but respects and protects your privacy. Transactions are settled instantly like cash, but are recorded on a public ledger. Here are further comparisons to our modern day financial system:
Unlike credit cards, there is little cost in sending money from one party to another
Unlike credit cards, there is no threat of fraud or charge-backs
Unlike government currencies, you will always know the exact quantity in existence
Unlike banks and credit cards, transactions are settled in seconds and minutes, rather than business days
Unlike banks and credit cards, funds are almost immediately available for use
Unlike banks and other money transfer systems, there is no added cost to send money outside the country
Unlike government currencies, the threat of a rapidly increasing money supply does not exist
Unlike government currencies, a country’s stability is not at risk due to currency mismanagement
Unlike gold, storage costs are minimal
Unlike cash, it leaves a trail
With Bitcoin, we have money that is issued in a predictable, automatic, and transparent way. With Bitcoin, we have securable money that allows us as individuals to be our own bank. With Bitcoin, we don’t need to worry about government debt loads or inflation. With Bitcoin, we have money that knows no borders, is perfectly divisible, quickly transferable, and transaction markable. With Bitcoin, there are no credit card fees for merchants upon sale, and once funds are sent to you, they’re yours. You no longer need to wait business days to receive or use your money. These revolutionary aspects are what some financial gurus are missing when they say that Bitcoin is a fraud or a bubble. They are not able to see a new form of money superior to all forms before it; and frankly, it does not matter. Bitcoin does not care what they think. Bitcoin does not care, because as long as it retains the properties that make it great in the first place, it will remain superior and expand at its “internet-like” pace. However, if those superiorities disappear, then it is possible that those financial gurus could be right, and that leads us to Bitcoin’s problem. Bitcoin’s problem The first and most important step in finding a solution to any problem is to pinpoint the source, or root cause, of the problem. Without an understanding as to what the problem actually is, a proper solution cannot be accurately and effectively developed. The main problem with Bitcoin was not that it has had too little usage. On the contrary, Bitcoin’s problem was one that many small businesses face as they begin to grow quicker than anticipated. It reached a point where its limited capacity could not keep up with increasing demand; and as a consequence, a bottleneck formed and quality suffered. Specifically, the network could not process transactions fast enough, and this created a transaction backlog. As a result, fees rose from cents to dollars, and transaction times went from seconds and minutes, to hours and days. The user experience during this time was of such low quality that alternative cryptocurrencies began to take market share; and Bitcoin’s superiority was in question. For a moment, it seemed like those financial gurus could be right. Then, on August 1st, 2017, a potential solution called Bitcoin Cash was born. Bitcoin Cash was created to eliminate this network congestion and scale Bitcoin by increasing the number of transactions it could process. Bitcoin, with a 1 megabyte (MB) blocksize limitation, was only able to process roughly 3 transactions per second. Bitcoin Cash chose to upgrade this limitation by increasing the blocksize to 8 MB; which allows it to process roughly 24 transactions per second. With an increase in transaction capacity, users no longer needed to pay inflated fee prices for quickly confirmed transactions. They would only have to pay pennies, and transactions would be confirmed within seconds and minutes. The network could once again give users the experience that made Bitcoin great in the first place. However, this seemingly logical solution to the problem has been met with resistance; and because of this, adoption in Bitcoin Cash is not as widespread as it is for legacy Bitcoin. The majority of industry participants have been convinced to increase Bitcoin’s transaction capacity using alternative methods, and they perceive Bitcoin Cash as an afterthought. Just as those financial gurus dismiss Bitcoin, many dismiss Bitcoin Cash the same. To the naked eye, these conditions may lead one to believe that the future of Bitcoin Cash is bleak, and investment into it would be unwise. To a contrarian investor that thinks these circumstances will disappear once emotions die down and Bitcoin Cash’s superiority as a scaling method becomes apparent; these current conditions, and investment in them, make potential outsized gains possible – and that, is the basis for this paper. Going forward, we will go into detail regarding Bitcoin Cash from an investment perspective and cover topics pertaining to it. The goal is to keep this paper non-technical, and to remain as objective as possible. Even if you do not agree with it, hopefully, at the very least, you can appreciate the perspectives within. Let’s begin with a brief introduction to the scaling proposals that led to a divide within the Bitcoin community. Bitcoin’s scaling options: Bigger Blocksize vs. Segwit + Sidechains Problem defined: 1MB Limit = Network congestion = Slow confirmation times = High fees = Decreased user experience Two proposals emerged for solving this problem. An increase in blocksize was one, and a technological modification called Segwit was the other. With a larger blocksize, the network would increase the number of transactions it could handle by adding more transactions into each block. This method of scaling utilizes the actual Bitcoin Blockchain, and thus, is referred to as “on- chain” scaling. With Segwit, part of the data normally included in each transaction is removed, and this decreases the size of the transaction. This decrease in size allows for more transactions to fit within each block, without actually changing the size of the block. You can think of this as an addition-by-substitution solution (For further explanation: Click here). Additionally, the Segwit proposal also plans to scale Bitcoin using a secondary method called the Lightning Network. The Lightning Network is billed as something that can take Bitcoin to VISA+ levels of capacity with instantly-settled transactions that cost nothing; except for an onboarding and offboarding transaction using the actual Bitcoin blockchain. Aside from those two transactions, all other transactions conducted within the network are of no expense, and take place outside of Bitcoin’s Blockchain. Hence, it is referred to as “off-chain” scaling. What is the superior solution? Before making this determination, we need to do the following:
Define Bitcoin’s goal and how it can be achieved
Understand the core problem in relation to the goal
Analyze the proposed solutions in relation to the problem and goal
Goal > Problem > Solution Bitcoin’s goal The goal, or potential of Bitcoin, is to become the internet of money. That is, to become the backbone of our financial system, to serve as a store of value, and to be the main form of money used for everyday commerce throughout the world. More specifically, the goal is to have everybody in the world using Bitcoin. Not just the technically-savvy, not just the wealthy, not just the young: everybody. Bitcoin’s long-term goal is worldwide adoption. That is the objective. Goal rationale The more that transact with this fair form of money, the better off we are as a society As Bitcoin’s history has proven, the more people that use Bitcoin, the greater its value will be. If 6 people use it, it’s not very valuable. If 6,000 people use it, it’s going to be more valuable than 6 people using it. If 6,000,000 people use it, it’s going to be far more valuable than 6,000 people using it. If 6,000,000,000 people use it, it will be exponentially more valuable than 6,000,000 people using it. Simply put, adoption equates to an increase in value. For this reason, it is essential that growth conditions are optimal so nobody is restricted, or priced-out, from using it. How does adoption continue to grow? “As a good rule of thumb, proprietary technology must be at least 10 times “better than its closest substitute in some important dimension to lead to a “real monopolistic advantage.” – Peter Thiel, Zero to One One of the main points made by Peter Thiel in his book, Zero to One, is in order to dominate a market, it is necessary to create something 10x better than what currently exists. If you create something only marginally superior in a crowded marketplace, the superiority may not be recognized, and dominance is far less likely to be achieved. Bitcoin, as evidenced by its uniqueness and rapid growth since inception, qualifies under the 10x criterion. Specifically, Bitcoin is 10x better as form of money and 10x better as a payment system. Combined together, the following characteristics make it superior to the legacy financial system and the form of money used within it (Dollars, Euros, etc):
Cheaper to transact with
Faster settlement times
Superior store of value
Prior to the ‘high fee and slow confirmation time’ bottleneck, these four characteristics were Bitcoin’s main competitive advantages. Once Bitcoin lost the first two advantages, the alternative cryptocurrencies began taking market share away from it - just as any competitive business does when an industry leader takes a misstep. It was a lot like going to Chipotle for lunch only to find a line out the door and around the block, or with prices that doubled from your last visit. Under these circumstances, you, as the customer, would take your business elsewhere. You would go down the road to Panera Bread, or another alternative, until those conditions subsided. If those conditions persisted, Chipotle would lose you and others as customers, since people only tolerate those unfavorable conditions for so long. That previously long line at Chipotle would shrink, and so would their customer base. To ensure this type of scenario doesn’t happen to Bitcoin, those four 10x advantages need to remain. ‘Needs Improvement’ Aspects' For Bitcoin to reach its full potential, it will need to retain those four competitive advantages and improve in three other major aspects as well:
Additional use cases
Ease-of-use Keep it Simple Stupid (KISS) For the average, everyday person, Bitcoin can be overwhelming and intimidating to use. To alleviate this issue, the user experience needs to improve to a point where the normal person feels comfortable using it, which means simple – but still secure – storage; an easy, inviting way to pay for things; and attractive, user-friendly interfaces. It should be so simple to use that your grandma could do it. Quite simply, the fewer the steps the better (click, click, boom). Merchant Adoption To attain global adoption, Bitcoin must be used in everyday commerce. Without use in commerce, Bitcoin lacks utility. It would not be very useful, nor would it be possible to unlock its full potential or value. This makes merchant adoption very important to Bitcoin’s long-term success. Fortunately, Bitcoin holds almost all key advantages over the predominantly-used, credit card system of today. To put this on full display, let’s glance over the advantages and disadvantages of the credit card system - in comparison to Bitcoin - from the eyes of a merchant or business. Credit card disadvantages:
Merchants are charged roughly 3% of the transaction total ($100 charge = $3 fee)
Payment received is not immediately available
Payments take multiple business days to settle
The risk of fraud or chargebacks is present
Merchant is responsible for safeguarding customer’s data
Credit card advantages:
Main payment method used by masses
People are comfortable transacting with it
Easier to use
The currency used for transactions promotes spending over savings (will be discussed further)
The current advantages the credit card system has over Bitcoin can change, but the disadvantages cannot. Bitcoin easily outcompetes the credit card system in terms of speed and cost, as well as privacy. In addition, it is also advantageous for merchants to accept Bitcoin because the currency itself is of limited quantity and makes a better store of value. For that reason, as Bitcoin’s adoption grows, it is likely that merchants will offer discounts for customers that pay with it. The ease-of-use and comfortability factors will likely remain advantages of the credit card system in the short-term, but over the long-term, they should lessen as Bitcoin becomes ingrained into society and easier to use. However, the last credit card system advantage may remain for some time due to the nature of Gresham’s Law, where: “Bad money drives out the good” Gresham’s Law asserts that people will save money thought to be a reliable store of value (gold) while spending the form of money thought to be an unreliable store of value (government currencies). The reliable store of value, or “good money,” will be hoarded; while the unreliable store of value, “bad money,” will be spent. Bitcoin, as a commodity/currency hybrid with limited supply, can be recognized as a good store of value. This is why, at this stage, we primarily see it held as an investment. This is likely to persist for some time because people are currently more interested in its price-appreciation potential rather than using it to pay for things. As Gresham’s Law emphasizes, why spend good money when you can spend the bad? Potentially, in the distant future, it is possible that Gresham’s Law reverses, and good money drives out the bad. In this scenario, adoption would be massive to the point where Bitcoin’s market capitalization would be comparable to gold or other major currencies. If such a point is reached, businesses and everyday people will likely prefer Bitcoin over traditional currencies. If everybody has the good, why would you want the bad? In the foreseeable future, however, Gresham’s Law will remain valid, and merchants will carry the task of extracting the good form of money from their customers. Since Bitcoin holds the main advantages merchants care about, it is in their interest to do so. That is, as long as those advantages remain.
When we look at bitcoin from the lens of Gresham’s Law it is rather impossible to determine if bitcoin is overvalued or undervalued; as by definition, whatever the market price is today is the real value. Due to bitcoin’s total elasticity, the value of bitcoin can theoretically fluctuate from millions of dollars in a matter of minutes, with little changing in the market other than ... Bitcoin & Gresham's Law - the economic inevitability of Collapse Philipp Güring & Ian Grigg October-December 2011 Abstract. The Bitcoin economy exhibits remarkable and predictable stability on the supply side based on the power costs of mining. However, that stability is challenged if cost-curve assumption is not solely expressed by the fair cost of power. As there is at least one major ... Not necessarily. It could also be a sign of Gresham’s law in action. People are funneling bad money (dollars) into good money (Bitcoin). Good money doesn’t circulate as much as bad money does. In the case of Bitcoin, people who see its true potential will not sell their Bitcoin at all except if their lives depended on it. 1: Discussions surrounding Bitcoin and Gresham’s law immediately devolve into a debate about historical formulation or wording of Gresham’s law. Gresham’s law includes the notion that one or several currencies must be accepted at a defined value under legal tender law. However, the wider economic phenomenon that “powers” Gresham’s law is a universal phenomenon that is independent ... How Gresham’s Law Drives the Bitcoin Price. By: Justice Clark Litle. Aug 14, 2020 Educational “Gresham’s Law” has been around a long time. It was coined in 1860 by Henry Dunning Macleod, a Scottish economist. But Macleod named Gresham’s Law after Sir Thomas Gresham, a 16th century English financier. Nicolaus Copernicus, the Renaissance-era astronomer who proposed that the Earth ...
IF BITCOIN BREAKS THIS LEVEL - PRICE WILL EXPLODE!! BTC PRICE RIGHT ON THE EDGE
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