Major fall in BTC price (16th Jan)

[jman0war]

Because all the wealthy countries were doing it, so they had to follow suit.

 

[jman0war]

I think you may be confused about something Duke.
It's the Fractional Reserve system that has enabled banks to loan money it doesn't have.

Whether that currency is commodity based or FIAT.

 

[tecate]

tecate why has the whole World adopted Fiat?

I acknowledge that FIAT has attributes & qualities but that doesn't make it perfect. It's the nature of things that we devise better systems. I'm not suggesting that crypto's are a panacea. However, I do believe that they bring something to the party and have several use cases.
Additionally, I'm also not approaching this subject as if it has to be one or the other. Crypto's have their use cases and potentially can coexist alongside FIAT.

 

[TheBigShort]

THEY? A wickeid elite who encashed all their currency for gold and then conned the rest of us by issuing Fiat?

Are you talking about when the US government banned the use of gold in 1933? Confiscating it for $20 an ounce only to devalue that $20 three years later by 75%?
Or are talking about when Nixon abandoned the Gold Standard in 1971 in order to avoid bankruptcy?

This is what they teach in the universities.

They? THEY?

Who are THEY that you speak of? Which universities are you talking about?

It was recognised that part of the problem of the Great Depression was the deflationary influence of the gold standard

The causes of the Great Depresson are numerous but primarily led by a stock market bubble and crash, subsequent bank closures and lack of investment in the economy - where have we heard that before?
Arguably, the gold standard hampered recovery.
The crash of 2007/8 is considered the biggest crash since the Great Depression, and occured without a gold standard, giving weight to factors other than gold being primarily responsible for booms and busts.

The gold standard was abandoned and one of the greatest leaps in modern economic management was launched - Fiat currency, freely manageable in supply to support the economy's real needs.

Eh, fiat currency has been around through the ages.

The result has been the most remarkable transformation of human economic activity which has resulted in growth beyond anybody's wildest dreams

Yep, even last year, who could imagine our 26% economic growth? Even the leprechauns were wetting themselves.
For sure, some remarkable achievements have been obtained through science and medicine in particular.
But it also comes with a cost. Climate change, plastic pollution of oceans, obesity, income inequality, perpetual debt and bankruptcies, perpetual war. Closer to home, we have record numbers of homeless and posters on this site calling for fast-track repossession orders for banks that couldnt pay their own debts when it came to it.
You have to wonder, what is all this economic 'growth' for if its primary measure is how much GDP has grown.

Nobody uses a gold standard any more.

Makes you wonder why governments hold onto all that gold though doesnt it?
I wonder if it has anything to do with the invariable return of paper fiat currencies to zero value?

But hey, the whole World is dominated by elites engaged in this gigantic fraud.

What delusional planet are you on now? Perhaps you should read up on what French President De Gaulle had to say about the US Dollar in 1965, see if it resonates in any way with events of today. Or what Sarkozy said about it in 2009?

There is endless information from financial analysts and economists home and abroad about the fundamental problems of the Euro and we know too well all about that - dont they teach this in the universities?

Nevermind the emergence of China as the second biggest economy in the world, and with it, their efforts to place the Yuan as global reserve currency to compete with the US Dollar.

Nevermind the US military and its proxy wars in Libya, Yemen, Syria in order to preserve the Dollar as the reserve currency through energy control.

We are fortunate that we are on the 'right' side of these affairs, insofar and as long as our wealth is protected and preserved - even that was touch and go in 2010/11.
But as much as i am open to the possibilty of bitcoin returning to zero, I am open to the possibilty that the euro could collapse, that another deep recession may not be far away, that international tensions may escalate into something more sinister.

History informs that these are real possibilities.

This is distinct from saying they will happen, which is unfortunately how your delusional disorder tends to read things.

 

[Duke of Marmalade]

I think you may be confused about something Duke.
It's the Fractional Reserve system that has enabled banks to loan money it doesn't have.

Whether that currency is commodity based or FIAT.

No I am not confused in this regard. Now FR would take us way off topic but as you may have guessed I am a fan of FR.

What I am referring to is the more than 100 fold growth in the US economy since 1929. No commodity based currency could possibly have been adequate to the task of matching the economy’s needs for transactional money. The gold standard would have been hugely deflationary and giving people a big incentive to hoard would have seriously held back growth. It is a major advance for civilization that its money can be managed to meet the needs of the economy and is not artificially tied to the supply of some commodity.

The fiscal management of the economy as expounded by Keynes was also a major breakthrough.

But yes of course both monetary policy and fiscal management are open to abuse. I was a tad nervous during the crisis but I could never ever see salvation in bitcoin. I genuinely just can’t figure that one out at all.

 

[TheBigShort]

The gold standard would have been hugely deflationary and giving people a big incentive to hoard would have seriously held back growth.

There is reasonable arguement, considering the environmental dangers facing the planet that growth restraint, or preferably growth measurements based on sustainable practices and not solely on shallow mathematical equations such as GDP are the way forward for bringing greater prosperity to all corners of the planet.

It is a major advance for civilization that its money can be managed to meet the needs of the economy and is not artificially tied to the supply of some commodity.

You mean backed by nothing other that government decree. Governments - always to be trusted and never fail in Dukes LaLa Land.

I could never ever see salvation in bitcoin.

Does anybody?

 

[Firefly]

There is reasonable arguement, considering the environmental dangers facing the planet that growth restraint, or preferably growth measurements based on sustainable practices and not solely on shallow mathematical equations such as GDP are the way forward for bringing greater prosperity to all corners of the planet.

And Bitcoin is really helping here isn't it?

 

[tecate]

And Bitcoin is really helping here isn't it?

Sure, it's an issue. However, are we going to look at that in isolation and not bear in mind that it's still a developing situation? As and when Layer 2 solutions come on stream, whilst current energy consumption won't go down, the number of transactions completed has the potential to increase exponentially without the need for more energy usage.
Furthermore, this problem is driving innovation. There's plenty of energy that simply gets wasted - because it's not of any use at the time of production or it's not of use in the location it's produced. Miners are now co-locating with energy producers at point of source.

You're right to make the point. However, clearly this area is evolving. Additionally, some would contend that the total energy requirement of the complete banking system is just as energy hungry if not moreso.

Lastly, the use of Proof of Stake rather than a Proof of Work validation system (the latter being the energy hungry one) is being mulled over. May not happen in the case of Bitcoin as there are other considerations. However, it's worth bearing in mind that some crypto's use Proof of Stake.

 

[Duke of Marmalade]

Lastly, the use of Proof of Stake rather than a Proof of Work validation system (the latter being the energy hungry one) is being mulled over. May not happen in the case of Bitcoin as there are other considerations.

I think you know it won't happen in the case of bitcoin. The protocol is set up to control the timing of the release of bitcoin. The timing is dictated by the amount of CPU power devoted to the puzzles. The amount of CPU power is dictated by the rewards in being allocated new bitcoins for solving the puzzles. No amount of layers or changing the nature of the puzzle (from POW to POS) can alter these bitcoin economic realities.

 

[tecate]

I think you know it won't happen in the case of bitcoin.

Yes, I agree that it's unlikely that they would make such a fundamental change in the case of bitcoin (although a leading Bitcoin Developer recently called for the change). However, there are other crypto's using Proof of Stake.

No amount of layers or changing the nature of the puzzle (from POW to POS) can alter these bitcoin economic realities.

If you are suggesting that in a scenario where the use of Layer 2 applications was to be exponential, you're absolutely wrong in saying that it won't have an effect in terms of overall energy usage / energy usage proportional to the number of transactions.

Secondly, you blindly ignore innovative solutions to actual usage that I outlined simply because you can't approach this topic with an open mind.

 

[tecate]

But yes of course both monetary policy and fiscal management are open to abuse. I was a tad nervous during the crisis but I could never ever see salvation in bitcoin. I genuinely just can’t figure that one out at all.

You've been told countless times before but you won't take it on board. It's not an all or nothing deal. Crypto and FIAT will co-exist. You are entrenched in a position where you maintain FIAT good, CRYPTO bad. Nothing is ever black and white.

However, we do FINALLY have one glimmer of objectivity from you i.e. the long overdue admission that centralised systems are open to abuse. As regards bitcoin being a panacea, who here has ever suggested that??

 

[Duke of Marmalade]

If you are suggesting that in a scenario where the use of Layer 2 applications was to be exponential, you're absolutely wrong in saying that it won't have an effect in terms of overall energy usage / energy usage proportional to the number of transactions.

Let's leave the handbags at the door just for a moment. It is possible that I don't fully understand this aspect, and I do want to improve my understanding.

Layer 2 aspires to address scalability issues, and I presume it will achieve that. But what is driving the energy usage in bitcoin's case is the hunger of the miners to get more bitcoin at these prices. Even if main blockchain activity were to fall to a trickle the protocol says the reward for the puzzles can only be allocated every 10 minutes on average. The number of transaction per block may fall off dramatically with Layer 2 but that doesn't change the economics of the puzzle. It is a race by the CPU power to solve the puzzle and get the rewards. The more CPU power is dedicated to the race the harder the puzzles are made thus underpinning the energy usage. Validating the transactions and the number of transactions are completely irrelevant to this game. The economics would stay the same even if there was only one transaction per new block.

But I may have that all wrong. In any event I was never really hung up on this eco criticism of bitcoin.

 

[tecate]

Let's leave the handbags at the door just for a moment.

I never brought mine - I suggest you decommission yours permanently.

Layer 2 aspires to address scalability issues, and I presume it will achieve that.

Well, if it doesn't, you'll get your wish as I think Bitcoin would be toast and until actual implementation, it remains to be seen if it does so.

But what is driving the energy usage in bitcoin's case is the hunger of the miners to get more bitcoin at these prices. Even if main blockchain activity were to fall to a trickle the protocol says the reward for the puzzles can only be allocated every 10 minutes on average. The number of transaction per block may fall off dramatically with Layer 2 but that doesn't change the economics of the puzzle. It is a race by the CPU power to solve the puzzle and get the rewards. The more CPU power is dedicated to the race the harder the puzzles are made thus underpinning the energy usage. Validating the transactions and the number of transactions are completely irrelevant to this game. The economics would stay the same even if there was only one transaction per new block.

If most of the transactions end up being carried out off-chain, then there's less puzzles to be solved. The backbone will still have the same existing overhead (the chain itself as it exists right now). However, the energy requirement of that chain won't grow in proportion to an escalation in the number of actual transactions - if those transactions occur via Layer 2 - off-chain.

 

[Duke of Marmalade]

If most of the transactions end up being carried out off-chain, then there's less puzzles to be solved.

I don't think that's right.

Rules of the bitcoin game:

We are aiming to take 10 minutes to solve the puzzle
If you do so first you will get 12.5 bitcoin, that's c. $125k
I see there are 100 zigawatts about to play the game
I therefore set the difficulty to X so as to target our 10 mins objective
Ready, set, go!

No mention of transactions there. The scalability problem is that because of the 10 mins rule the blocks are not being added fast enough for current transactional demand - people have to wait or pay extra transaction fees. Layer 2 addresses that by going off chain, but it does not change the rules and economics of the primary blockchain puzzle. I am making no big deal of this, just want to be sure I am not fundamentally misunderstanding the whole thing.

 

[tecate]

A volume of transactions off-chain without the need for additional hash power means less overall energy requirement whilst increasing the number of transactions exponentially.

 

[Duke of Marmalade]

A volume of transactions off-chain without the need for additional hash power means less energy requirement proportional to the overall volume of transactions achieved.

Well, sure, can't argue with that.

 

[tecate]

Well, sure, can't argue with that.

Statement edited . Ergo, it can scale without expanding energy requirement.

 

[TheBigShort]

And Bitcoin is really helping here isn't it?

It is no different to any other industry, product, service or thing that uses energy now, or in the future.
Its the source of that energy that is at issue and the effects of carbon emuissions (if any) that is the issue.
The planet has an abundance of clean renewable energy sources that if harnassed could alleviate the need for dirty fossil fuel energy.

(...wait a second, I know you quoted my comment, but are you sure you meant to? You do get mixed up, a lot!)

I would suggest bitcoin is better placed to adapt than most industries.

Im sure this has been explained to you before, but is there any point I wonder?

 

[Gus1970]

I would like to add that a layer2 solution is only one of the possible options for scaling bitcoin without extra hashing power. Hashing power and amount of transactions are not related if we ignore the competition to get transaction fees

 

[tecate]

I would like to add that a layer2 solution is only one of the possible options for scaling bitcoin without extra hashing power. Hashing power and amount of transactions are not related if we ignore the competition to get transaction fees

Schnorr signatures being another one ....and of course, Segwit impementation is still only at 30%.