Good article by Rory Gillen on Bitcoin

Brendan Burgess

Brendan Burgess

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Bitcoin - Currency, Asset or Mirage


Extract:
So, have bitcoins any value? When you own them can you earn a return on them? Our current understanding is no. Do you have counterparty risk? Yes. Can the amount of bitcoins be increased at will? Not at present, but new cryptocurrencies are cropping up regularly so does it really matter if each separate one is limited if there's no control of the supply in general? It would not appear so. Unless you know the answers to these 'Sound Money' questions, you should avoid bitcoin as an investment proposition. Fans of bitcoin seem to be placing all their faith in the fact that bitcoins are strictly limited in supply. So what? A limited supply means very little if an item has no intrinsic value. The Dutch learnt the lesson of intrinsic value in the late 1600s when Tulip-mania took over. The only intrinsic value tulips had then (and now) was the cost of production, but the Dutch forgot that for a few years, and lives were ruined in the too often human pursuit of riches without effort.
 
The article isn't good..
How is there counterpart risk on Bitcoin ?

Other cryptocurrencies dont mean increased supply simply because no one is forced to use them, unlike increasing supply on government backed fiat currencies.

The faith in bitcoin is not based on tulip - style limited supply. It's things like decentralisation, permission-less innovation, transparency , privacy that make it attractive.

And the list could go on and on , there are nice articles and presentations about these things from people that are smarter and have better communication skills than me.

Like we say that we can't afford to not own a house and can't afford to stay out of the stock market , with the same logic we can't afford to stay unexposed to cryptocurrencies.
 
I first heard of Bitcoin when it was about €80 a coin and I dismissed it as I hadn't a clue. Kept on hearing about it, kept on dismissing it.
Finally tried to learn about it. The jury is still out for me but I have heard enough to consider buying some. My purchases of bitcoin to date are very modest and I haven't actually used it to buy anything or trade with someone else.
But what convinced me to get involved is the reporting around the blockchain technology. I don't fully understand it nor could I explain it but I think I understand the concept. It is that understanding that makes bitcoin very interesting.
I would be of the mind that global government backed fiat currencies are devaluing at a faster and faster rate. Cash will certainly become, if not a thing of the past, a nostalgic item like vinyl.
All transactions are going digital, so what is the point of having multiple international currencies? These are useful within the borders of countries, but in a globalised digital world, a binary code is the same in Alaska as it is in Zambia.
So who will control a globalised digital currency? Well, if it's decentralized, then no-one but the users themselves. Sovereignty will rest with the individual, not the State.

There are still more questions than answers, but ones relating to multiple crypto currencies can be answered by pointing to multiple national currencies.
What about claims that it is being used for money laundering? Perhaps so, but so what? Cash and the banking system is also used for money laundering, still we use it today.
It has no intrinsic value? Neither has anything really, unless there is a demand for it. That demand being generated by a confidence. Certainly, the confidence in blockchain technology is growing.

Anyway, that's my tuppence worth (or 0.0000012 of bitcoin). Gradually becoming a believer, just wished I did so at €80!
 
ant dee said:
The faith in bitcoin is not based on tulip - style limited supply. It's things like decentralisation, permission-less innovation, transparency , privacy that make it attractive.
Click to expand...

It is exactly the same, in both cases their worth depends on confidence, nothing else.
 
I think its worthwhile to separate Bitcoin and the underlying blockchain technology. I have no idea where any of the cryptocurrencies will end up but I am reasonably sure that blockchain technology will be successful - take a look at the marketing spend IBM are putting behind their own Hyperledger blockchain initiative.

BTW there's a server up in the Digital Hub somewhere with several Bitcoin, I started mining in 2009 and gave it up as a lost cause.... :-(
 
seamless said:
I think its worthwhile to separate Bitcoin and the underlying blockchain technology. I have no idea where any of the cryptocurrencies will end up but I am reasonably sure that blockchain technology will be successful
Click to expand...

I agree, that is why I bought some. Mostly out of curiosity in trying to understand it.
But as I have begun to understand it more, at least to my understanding, I have also bought some other crypto's. It is becoming more of a collection of fine crypto currencies, which in itself is bizarre.
It will all go bust when it is realised that these things are not backed with any intrinsic value.
But as you have pointed out, the blockchain technology appears to have real value. Therefore, increasing the value of bitcoin and others.
It reminds me somewhat of when Facebook emerged. Most people initially dismissed it as a fad. Now it's huge and part of everyday living. By no means the first social media, it is however joined by a plethora of other social media platforms.
Crypto currencies are to fiat cash currencies what social media is to print media.
 
TheBigShort said:
I agree, that is why I bought some. Mostly out of curiosity in trying to understand it.
But as I have begun to understand it more, at least to my understanding, I have also bought some other crypto's. It is becoming more of a collection of fine crypto currencies, which in itself is bizarre.
Click to expand...

Not to derail the topic but was just wondering what exchange and wallet you used to buy other cryptos ? I currently hold positions in Bitcoin, Etherium and Lite coins (roughly a 50% gain in all three at this point in time). I used Coinbase on IOS to buy all three and also hold them on the Coinbase wallet. I would like to purchase some lesser known Cryptos such as Dash or OMG but finding exchanges to do so is proving difficult. I am also considering moving to an offline type wallet for increased security.
 
TheBigShort said:
I first heard of Bitcoin when it was about €80 a coin and I dismissed it as I hadn't a clue. Kept on hearing about it, kept on dismissing it.
Finally tried to learn about it. The jury is still out for me but I have heard enough to consider buying some. My purchases of bitcoin to date are very modest and I haven't actually used it to buy anything or trade with someone else.
But what convinced me to get involved is the reporting around the blockchain technology. I don't fully understand it nor could I explain it but I think I understand the concept. It is that understanding that makes bitcoin very interesting.
I would be of the mind that global government backed fiat currencies are devaluing at a faster and faster rate. Cash will certainly become, if not a thing of the past, a nostalgic item like vinyl.
All transactions are going digital, so what is the point of having multiple international currencies? These are useful within the borders of countries, but in a globalised digital world, a binary code is the same in Alaska as it is in Zambia.
So who will control a globalised digital currency? Well, if it's decentralized, then no-one but the users themselves. Sovereignty will rest with the individual, not the State.

There are still more questions than answers, but ones relating to multiple crypto currencies can be answered by pointing to multiple national currencies.
What about claims that it is being used for money laundering? Perhaps so, but so what? Cash and the banking system is also used for money laundering, still we use it today.
It has no intrinsic value? Neither has anything really, unless there is a demand for it. That demand being generated by a confidence. Certainly, the confidence in blockchain technology is growing.

Anyway, that's my tuppence worth (or 0.0000012 of bitcoin). Gradually becoming a believer, just wished I did so at €80!
Click to expand...

Excellent post and I fully agree. Like you I wish I had jumped in at €80. Current levels look bubbly to me but I've never looked at it in enough detail so I could be wrong.
 
Still a Rory Gillen fan I see Brendan, even though he has turned his back on AAM.

https://www.askaboutmoney.com/threa...ccounts-or-a-general-15-yr-plan.202538/page-4

Brendan Burgess said:
A limited supply means very little if an item has no intrinsic value. The Dutch learnt the lesson of intrinsic value in the late 1600s when Tulip-mania took over. The only intrinsic value tulips had then (and now) was the cost of production, but the Dutch forgot that for a few years, and lives were ruined in the too often human pursuit of riches without effort.
Click to expand...

Tulips illustrate the problem which can arise where an item with no intrinsic value is used as a store of value.

Certain other items with no intrinsic value, which have been used as a store of value, could be called upon to illustrate the durability of such things. Gold, US Dollar bills, the €10 note I have in my pocket.
 
cremeegg said:
Still a Rory Gillen fan I see Brendan, even though he has turned his back on AAM.
Click to expand...

???? If I think an article might be of interest to users of Askaboutmoney, I link to it. It is completely irrelevant whether they are a poster on Askaboutmoney or not. Anyone has a right to stop posting if they get fed up with it. Lots of active users stop posting. Some come back, some don't.

Brendan
 
Firefly said:
Current levels look bubbly to me but I've never looked at it in enough detail so I could be wrong.
Click to expand...

The more I understand about it the more I consider it's potential to rise in value. As stated above, digital transactions will be the norm. The need for multiple national currencies will be redundant. The euro (notwithstanding it's flaws) is a typical example of not needing multiple currencies. The US dollar operates in fifty states across the US and in various countries around the world. It acts as the global reserve currency. That is it's value is recognized everywhere (if not accepted).
In a digitized world, all digital transactions are effectively computer code. Those codes will need to be valued against something. The US dollar? I don't think so, to do so would cede global sovereignty to the federal reserve.
Perhaps it can be valued against gold? But gold cannot be transferred digitally. So what's left?
A blockchain technology of limited supply, that has confidence of users (getting bigger all the time), that is - bitcoin.
 
TheBigShort said:
But what inspires confidence in bitcoin?
Click to expand...

The exact same thing as with the tulips - believe! And just like the tulips, if that belief is shattered it will rapidly loose value. You cannot invest in anything who's value is based on fear and greed. You can speculate, but then you should recognize it, for what it is.
 
Jim2007 said:
The exact same thing as with the tulips - believe! And just like the tulips, if that belief is shattered it will rapidly loose value. You cannot invest in anything who's value is based on fear and greed. You can speculate, but then you should recognize it, for what it is.
Click to expand...

I disagree. I don't think you can compare the blockchain technology that is driving bitcoin to a pretty flower. But I accept the point. It is speculative. But just as tulips were speculative so was, at one point, Facebook, Apple, Microsoft etc.
I don't fully understand bitcoin or blockchain technology, but I do find it intriguing.
The internet opened the door to all sorts of technological advances and innovations. Tulips didn't.
 
Bitcoin has actual uses , it's not a flower , we are missing the point here!

It's hard for us privileged people to see that with our fancy cards , online banking and brokerage accounts. We have all the financial freedom one would need , easy and fast. For the short term future at least... Who knows what's gonna happen after a few elections and a severe market crash or something.

But go ahead to India , Venezuela , Argentina, Cyprus etc and tell them Bitcoin and cryptocurrencies are like tulips.
Sure, us folks will choose to jump in and invest to speculate.
Billions of un banked people are seeing little choice but turn to cryptos to prosper, some even to survive.
 
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ant dee said:
But go ahead to India , Venezuela , Argentina, Cyprus etc and tell them Bitcoin and cryptocurrencies are like tulips.
Click to expand...

Venezuela, Argentina and Cyprus !!, hardly countries with the most stellar financial histories, it might be more to do having a history of defaulting on US dollar loans so wanting to start with a clean slate using cryptos.
 
If you had all the bitcoin in the world but weren't allowed to sell it, would you make a return?

If you invest in equities, bonds, cash or property you would. Even with deposit interest rates as low as they are, you would still make your money back, it would just take a longer period of time. With bitcoin, gold and other commodities, it is only worth what someone is willing to pay for it and there's no regular return from it.


Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)
 
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