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

Duke of Marmalade

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It was designed to be of a finite amount. Currently 16 million bitcoin in circulation (aside from those that have been lost) - although of those 16 million, many 'hodl' (they're keeping them and using them as a store of value). BTC has 8 places of decimal. There's still enough to go around - but with a finite amount (the maximum 21 million will only be realised by 2040), the price must go up.

Everything in bitcoin is done by consensus.

So why don't they agree to stop mining now. Indeed why not reduce everybody's BTC holding pro-rata. Imagine if there was only 1 BTC, wow what would its price be?

Far, far too much is made of this scarcity aspect.
 

IdesofMarch

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Since this thread has started you could have bought a bitcoin at 12,000 usd and sold to day for 16300 usd, not a bad return.
 

tecate

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So why don't they agree to stop mining now. Indeed why not reduce everybody's BTC holding pro-rata. Imagine if there was only 1 BTC, wow what would its price be?

Far, far too much is made of this scarcity aspect.
Mining is necessary in order to verify and confirm transactions. The white paper set out 21 million as the threshold figure. I'm not sure of the point that you are making?

Again, in my unqualified opinion, my understanding is that he wanted to create a currency that couldn't be interfered with - a la quantative easing, etc.
 

ant dee

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Since this thread has started you could have bought a bitcoin at 12,000 usd and sold to day for 16300 usd, not a bad return.
Now that would be a pure gamble, and only sounds good in hindsight.
Like watching a football match be 0-0 at Half Time and then say :
Since the start of the match you could bet 1000 for correct score 0-0 and cash it out now for 2000, not a bad return!
 

fpalb

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So why don't they agree to stop mining now. Indeed why not reduce everybody's BTC holding pro-rata. Imagine if there was only 1 BTC, wow what would its price be?

Far, far too much is made of this scarcity aspect.

The units are arbitrary, just like the number of shares issued for a company are arbitrary. Shares splits or share consolidations don't affect the value of anyone's holdings, all that matters is the market cap.

The scarcity doesn't come from the number of units, it comes from the fixed rate supply of new bitcoin which reduces over time, so if you own 1 bitcoin, you own 1/21 millionth of all of the bitcoin there will ever be. If the units are changed to milli-bitcoins you now have 1000 units instead of 1, but you still have the same 1/21 millionth of the total supply there will ever be. The fact that percentage remains constant is the scarcity. The fact that the scarcity is not enforced by an authority is the breakthrough. Everything digital and scarce up until bitcoin needed trust in a centralised authority to enforce that scarcity.
 

Brendan Burgess

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If the demand for Bitcoin was driven buy people trying to buy it, to in turn buy other stuff, I would get it. But as far as I can see people are just buying it to sell it on for more money.

This is the nub of the issue. No one needs Bitcoin to buy other legitimate stuff, they can do so with conventional currencies. So the demand is only for anonymous payment for black market stuff.
 

Duke of Marmalade

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Mining is necessary in order to verify and confirm transactions. The white paper set out 21 million as the threshold figure. I'm not sure of the point that you are making?

Again, in my unqualified opinion, my understanding is that he wanted to create a currency that couldn't be interfered with - a la quantative easing, etc.
Mining stops in c.2040 but presumably transactions will continue to be verified by the community. The point I am making is that if scarcity is so important why not stop now at 16M? Maybe that's because miners are in the majority. But then what's to stop the miners changing the rules to increase the supply to, say, 31M?

Actually, I think I know the answer to these questions. If there was such a major change in the rules it would blow the mantra that BTC is tamper proof, unlike fiat. But will that paradigm still hold in 2040?
 

ant dee

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Mining stops in c.2040 but presumably transactions will continue to be verified by the community. The point I am making is that if scarcity is so important why not stop now at 16M? Maybe that's because miners are in the majority. But then what's to stop the miners changing the rules to increase the supply to, say, 31M?

Actually, I think I know the answer to these questions. If there was such a major change in the rules it would blow the mantra that BTC is tamper proof, unlike fiat. But will that paradigm still hold in 2040?
The miners still collect the transaction fees.
There will be incentive to mine, even after the block reward dries out.
 

tecate

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The point I am making is that if scarcity is so important why not stop now at 16M? Maybe that's because miners are in the majority. But then what's to stop the miners changing the rules to increase the supply to, say, 31M?
The miners cannot dictate mining further coins. However, I do accept that the community/project has hit an issue in terms of the needs/wants of various stakeholders. That's what I was referring to with regard to the need for better governance. How that its resolved I personally don't know. However, you can be sure that there are smarter minds than me working on it.

Bitcoin has hit crisis after crisis in it's 8 years of existance. It has overcome them. They've been replaced with new challenges - I've every confidence it will overcome those too. Such is the nature of a developing and emerging disruptive technology.
 

tecate

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Oh...and in terms of the issue with cost of transactions and speed of transactions, 'lightening network' is in the works.
 

Duke of Marmalade

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Oh...and in terms of the issue with cost of transactions and speed of transactions, 'lightening network' is in the works.
Maybe I am misunderstanding your point, in fact maybe I am misunderstanding everything:oops:

The problem with the speed of transaction verifying is that it is far too fast. As a result the difficulty of the hash puzzle has had to be increased from 1 at the beginning to around 4 billion :eek: so as to target the 10 minutes settlement time. And while I'm here I do not buy that all this puzzle solving is to ensure the integrity of the blockchain - why were single figure difficulties okay in the early days but have to be 4 billion today?
 

Duke of Marmalade

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The miners still collect the transaction fees.
There will be incentive to mine, even after the block reward dries out.
Exactly, so why not pull up the ladder now at 16M to maximise the scarcity effect? (that's what this line of the thread is about). If its because the miners call the shots (majority consensus) then what's to stop them increasing the 21M when the party looks like ending?
 

fpalb

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The miners can't change the rules unilateraly, because the rules are also enforced by user wallets, the nodes that exchanges run etc. The block they mined that had the incorrect reward included as a transaction would be rejected by the rest of the network, and they would have wasted money on mining it.
 

Duke of Marmalade

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The miners can't change the rules unilateraly, because the rules are also enforced by user wallets, the nodes that exchanges run etc. The block they mined that had the incorrect reward included as a transaction would be rejected by the rest of the network, and they would have wasted money on mining it.
Okay, this has been a bit of a cul de sac, apologies:oops:
 

fpalb

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I wonder about the depth of liquidity for bitcoin. Would someone with $200m of bitcoins be able to sell them in a short space of time and realise their current potential, or would they quickly exceed the liquidity available in one or more brokers?

Are there any easy ways to look at the depth of liquidity of bitcoin?

You can view the order books of most exchanges on their own sites. You can also view the books of various exchanges here http://bitcoinity.org/markets/coinbase/USD (click links at the top to change between them). Exchanges which support it may also have hidden orders on the books, we can't know how many of these there are. Based on the non-hidden orders alone market selling $200m (over 10,000 coins) on any exchange would suffer massive slippage, and even spreading it over a few exchanges would still suffer significant slippage.
 

TheBigShort

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This is the nub of the issue. No one needs Bitcoin to buy other legitimate stuff, they can do so with conventional currencies. So the demand is only for anonymous payment for black market stuff.

Im not buying into the criminality element of it. Its another headline grabbing tatic to deter people from considering crytocurrency as an alternative means. Its up there with 'NK Korea hackers' (as if only the big, bad NK hackers would be engaged in this activity), or 'Bitcoin uses the same electricity as Ireland'.

Taking a simple example of a drug-dealer. Im assuming that drug dealers get into the business to obtain wealth for themselves in order to bring themselves out of relative poverty and enjoy a far more luxurious lifestyle than they currently enjoy. But if there isnt anything you can buy with bitcoin, then criminals are forced to sell their bitcoin to avail of their ill-gotten gains.
So just as criminals are buying bitcoin to cover their transactions, driving up the price, they would also be selling in order to realise their gains, thus driving down the price.
 

brianb

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So just as criminals are buying bitcoin to cover their transactions, driving up the price, they would also be selling in order to realise their gains, thus driving down the price.

I think it goes a bit further than that. Bitcoin has enabled some crimes that just were not possible beforehand. I'm thinking of large scale desktop/laptop ransomware in particular. We've seen this kind of malware now routinely asks endusers for bitcoin to unlock their desktop once they've been caught by it. Police forces are unable to follow the money, a key route to catching malware authors up until now.
 
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