If Bitcoin was worth $1 each in 2011, why are they worth $12,000 each now?

Brendan Burgess

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If those who are championing Bitcoin were so confident in it, I presume getting next year's salary based on today's Bitcoin price would be very attractive

Hi Firefly

Again, I am not sure that is fair. I am a great believer in shares. But if I were dependent on my salary, I would not want it paid in shares.

Brendan
 

Firefly

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Hi Firefly

Again, I am not sure that is fair. I am a great believer in shares. But if I were dependent on my salary, I would not want it paid in shares.

Brendan

Updated to "some" - it's a currency rather than a share, so you would think it should broadly hold its value.
 

Brendan Burgess

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Technically, it's a currency. But it's not acting as a currency.

If it falls to $1 per Bitcoin and remains stable at that level, people probably would be happy to be paid in it.

The high price and volatility wrecks any chances it has of being widely accepted as a currency - but its potential as a currency is what makes it valuable, but its value destroys its use as a currency ...

Brendan
 

fpalb

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Thanks for the post (genuinely) and I agree this does seem like a legitimate use of Bitcoin. I have to ask you however, did you not find it a bit strange to have to "dig into" the question of the uses for Bitcoin?
Thanks for reading it and replying. Well I had heard of purse.io previously but had not used it as I was suspicious, what I had to dig into was the reason people were willing to pay a premium for bitcoin using it. The reason I didn't know that is as I said, I'm part of the 1% in a first world country, so I had no idea about the need for people in Indonesia to earn income working remotely for amazon or the difficulties they have liquidating their payment into local currency. When something is completely global like bitcoin you have to consider all the possible use-cases globally and you can't do that without some digging.

And if so, how on earth does the price explosion seem justified? The use you have outlined may be legitimate (as opposed to most other Bitcoin transactions I would guess), but it's still kinda niche isn't it?
The price explosion is largely unrelated to purse.io or any other 'medium of exchange' uses of bitcoin, it's to do with the speculative 'store of value' use. In fact the 'medium of exchange' uses CAN'T grow right now as bitcoin is already constantly bumping off the daily transaction limit. It was like this before most of the recent price run up, so I don't expect any significant part of the recent rally to be due to an increase in demand for bitcoin as a medium of exchange, and the uses for that will remain niche until there is a drastic improvement to the transaction capacity of bitcoin.

Many people speculating on the price will leave when it's no longer going up (i.e. when the current bubble bursts), but those niche uses as a medium of exchange will continue, and be more attractive as fees reduce, until something else better serves as a medium of exchange.

I guess the other reason why the price has gone so high, is the "store of value" argument. But again, what's behind this? Why has gold not risen too, or are wise & conservative holders in gold dumping their assets for Bitcoin?

There are probably a mix of reasons:
- While gold is scarce, it's nothing like bitcoin, especially if you are comparing ounces to bitcoins. There are apparently 2500 tons mined per year, which is 80million ounces (Someone correct me if I'm wrong on that, it's more than I expected!)
- Gold (in it's use as money) already reached market saturation a long time ago, and the demographic is probably older. Every day some old timer goldbugs die, and some teenagers get their first crypto.
- Gold has been getting relatively less practical in terms of it's 'medium of exchange' use as technology progresses - not just crypto. If someone in Kenya is using m-pesa on their phone to pay for things, it makes gold seem all the more impractical than it did beforehand.
- Some people are definitely either diversifying some of their precious metals to crypto, or moving to crypto entirely. Many early bitcoiners were goldbugs first.
- This one may or may not be a valid point - I haven't researched it thoroughly yet, but I'm skeptical of how the gold price is determined. Gold is so impractical as a medium of exchange that it can't even find a price in real time on the free market like bitcoin can. This has two consequences - many people buy paper gold instead of gold and the price is calculated and published as a spot price.
 
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jman0war

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Technically, it's a currency. But it's not acting as a currency.
If it falls to $1 per Bitcoin and remains stable at that level, people probably would be happy to be paid in it.
The high price and volatility wrecks any chances it has of being widely accepted as a currency - but its potential as a currency is what makes it valuable, but its value destroys its use as a currency ...
Brendan
Medium of Exchange vs Store of Value.
I believe it's a sort of pendulum that swings between these two.
In the early days it was a medium of exchange, today we are in the next economic era of bitcoin.

https://medium.com/@rusty_lightning/the-three-economic-eras-of-bitcoin-d43bf0cf058a
 

fpalb

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Medium of Exchange vs Store of Value.
I believe it's a sort of pendulum that swings between these two.
In the early days it was a medium of exchange, today we are in the next economic era of bitcoin.

https://medium.com/@rusty_lightning/the-three-economic-eras-of-bitcoin-d43bf0cf058a
Damn, I hadn't read that and was looking forward to it after seeing it was authored by Rusty but I don't like a lot of the conclusions he's jumping to without considering other possibilities.
 

jman0war

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Like what?

In my view, the primary utility for Bitcoin is not that one can spend it to buy things.

It's that no one can stop you.
 

fpalb

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The idea that bitcoin 'requires' the current hashrate and working backwards from that to assume a required cost - "in 10 years they would be paying $700M per year to secure the network at current levels"

Presuming that bitcoin exists in a vacuum, that is that participants will not just leave (this is really common among people making arguments about the 'power' various bitcoin stakeholders have). Saying that miners or businesses will find the 3rd era difficult instead of considering if they'll move to an alternative.
 

Duke of Marmalade

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Interesting video which does nothing to change my views. Some comments/extracts.

Invest no more than 1% of your liquid net worth in BTC. There is a non trivial chance it will go to zero but there is also a non trivial chance it will go to €1M. In other words hold it as a diversified punt. Absolutely no attempt to assess its true value.

His hedge fund has 50% in BTC because of its spectacular recent rise. He acknowledges that is a problem and he is going to address it without selling. Any clues?

The interviewer reads out a list of luminaries who rubbish BTC confirming my overall impression from my researches that the overwhelming consensus of mainstream thinking is that BTC is worthless. Bill ripostes by saying it's because they don't understand the technology. Warren Buffet is simply typical of old white men who rubbished technology break throughs in the past.

So Bill sees that the value of BTC is in its wonderful technology. Yet he is very skeptical of Initial Coin Offerings which uses similar technology. He states that there is nothing behind these ICOs, you might as well give your money to the Salvation Army. OMG so after all there has to be something behind these crypto currencies rather than mere technology.

Amazon fell 95% in the dot com bubble but people who bought at its height are okay now. But Amazon is making money. BTC will never ever make money.
 
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jman0war

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So Bill sees that the value of BTC is in its wonderful technology. Yet he is very skeptical of Initial Coin Offerings which uses similar technology. He states that there is nothing behind these ICOs, you might as well give your money to the Salvation Army. OMG so after all there has to be something behind these crypto currencies rather than mere technology.
Nothing behind it, i take to mean that there is no actual functioning network.

Like, there's no testnet
 

fpalb

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Invest no more than 1% of your liquid net worth in BTC. There is a non trivial chance it will go to zero but there is also a non trivial chance it will go to €1M. In other words hold it as a diversified punt. Absolutely no attempt to assess its true value.
He did talk about it eating into golds market as thatdeversification.

His hedge fund has 50% in BTC because of its spectacular recent rise. He acknowledges that is a problem and he is going to address it without selling. Any clues?
I don't know, maybe he'll hedge it with the new futures?

The interviewer reads out a list of luminaries who rubbish BTC confirming my overall impression from my researches that the overwhelming consensus of mainstream thinking is that BTC is worthless. Bill ripostes by saying it's because they don't understand the technology. Warren Buffet is simply typical of old white men who rubbished technology break throughs in the past.
I agree with him. If there's a 20 minute interview with Buffett detailing his issues with bitcoin showing that he undestands what it is and what it's capable of I'd love to hear. I love Buffett, but this isn't specialty, he's pretty much missed every winner during the computer revolution so far by choosing not to get involved.

So Bill sees that the value of BTC is in its wonderful technology. Yet he is very skeptical of Initial Coin Offerings which uses similar technology. He states that there is nothing behind these ICOs, you might as well give your money to the Salvation Army. OMG so after all there has to be something behind these crypto currencies rather than mere technology.
The ICOs are where the real bubble is/was. It's completely crazy. Here's what's been happening using Tezos as an example. A whitepaper detailing some vague system which will provide a product/service via a blockchain is released. https://www.tezos.com/static/papers/Tezos_Overview.pdf The systems typically depend on some limited token to work, with the idea being that if the product or service becomes useful the value of the tokens will increase. The tokens are created in advance by the creator and auctioned off as a crowd sale. Whether any actual code or product/service ever follows this is not certain. Tezos raised 1/4 billion dollars by the way.

I might be too harsh with what I've just said, and I've not even looked into Tezos itself to any degree (though I did listen to an interview with one of its guys that did not full me with confidence) maybe there are some ICOs of merit, but there's no doubt most are a way of doing a tiny bit of work producing a whitepaper to scam speculators out of money.

Amazon fell 95% in the dot com bubble but people who bought at its height are okay now. But Amazon is making money. BTC will never ever make money.
BTC isn't a company with the purpose of making money... it IS money.
 
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Firefly

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The price of Bitcoin has risen above 15,000 Euro in the past 2 weeks, representing a 25% increase.

Can the OP please update the title of this tread to make it more meaningful? :D:D:D:D
 

Duke of Marmalade

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Nothing behind it, i take to mean that there is no actual functioning network.

Like, there's no testnet
My understanding (I could be wrong) is that ICOs use the same Blockchain technology. They have all the attributes of BTC but they purport to actually represent something. BTC doesn’t purport to represent anything. It’s a bit contradictory for Bill to dismiss ICOs because you don’t know what they are really representing whilst accepting that BTC represents nothing at all.
 

fpalb

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The proof is in the pudding. Bitcoin functions as a monetary system which now exceeds the Australian Dollar in value. The only other blockchain-based system I know of that raised crowd-sourced funds in advance of release and delivered anything of use is Ethereum... and that is mostly used so far for other ICOs.

I don't know about anyone else, but as much as I like bitcoin, I sure wouldn't have been giving Satoshi money up-front for bitcoins based only on the whitepaper before the code was written and we could see it working.
 

jman0war

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My understanding (I could be wrong) is that ICOs use the same Blockchain technology. They have all the attributes of BTC but they purport to actually represent something. BTC doesn’t purport to represent anything. It’s a bit contradictory for Bill to dismiss ICOs because you don’t know what they are really representing whilst accepting that BTC represents nothing at all.
I don't know what you mean that BTC doesn't represent anything.
Bitcoin the protocol is just recording a transaction on an immutable blockchain and bitcoin is the currency.
The generation of new coins is hard coded into the protocol.

ICO's on the other hand can be absolutely anything.
Generally speaking ICO's are a fund-raising campaign.
Instead of bootstrapping their project by raising funds from VC's the old fashioned way, they are issuing a 'token' and basically pitching to an existing niche market of possible investors.
 

fpalb

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Yeah, and unlike a share issued in an IPO, a token issued in an ICO is not any legal ownership of the 'company'. The value of the token will purely be based on what the demand of those tokens is.
 

Duke of Marmalade

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The proof is in the pudding. Bitcoin functions as a monetary system which now exceeds the Australian Dollar in value. The only other blockchain-based system I know of that raised crowd-sourced funds in advance of release and delivered anything of use is Ethereum... and that is mostly used so far for other ICOs.

I don't know about anyone else, but as much as I like bitcoin, I sure wouldn't have been giving Satoshi money up-front for bitcoins based only on the whitepaper before the code was written and we could see it working.
I can see that difference, yeah. But is it not true that the honest ones have all the technological attributes of BTC? Yes I understand that without the critical mass alt coins and ICOs are not a rival of BTC. But Bill was extolling the virtues of BTC purely on the basis of its technology and then dismissing that same technology in ICOs because there was nothing behind them. Hope this does not become another semantic debate ala Water and Black Tea:rolleyes:
 

jman0war

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I can see that difference, yeah. But is it not true that the honest ones have all the technological attributes of BTC? Yes I understand that without the critical mass alt coins and ICOs are not a rival of BTC. But Bill was extolling the virtues of BTC purely on the basis of its technology and then dismissing that same technology in ICOs because there was nothing behind them. Hope this does not become another semantic debate ala Water and Black Tea:rolleyes:
It's hard to say since he didn't cite any particular ones.
It's difficult to paint them all with the same brush since some are creating their own blockchains but many are not.
In my opinion "nothing behind them" means there is no testnet, no network and potentially no development team.
 
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