Centralization is a double-edged sword. submitted by
So far, centralization (and intertia, and laziness, and caution) has been favoring Blockstream.
But if and when a congestion crisis comes, then the tide is gonna turn pretty quickly - and Blockstream's monopoly in terms of "code running on the network" is gonna evaporate quicker than anyone expected. How will this happen?
Bitcoin is going to go into a crisis - not just the current agonizing slow-motion swamp of centralized fascist governance, but a real-time honking red alert involving a clogged-up network, with people freaking out screaming from the rooftops that millions of dollars in transactions are in limbo due to some pointless fucked-up 1 MB "blocksize limit".
And at that point, people are going to get rid of the damn piece of broken cripple-code, immediately.
End of story. Slow to crumble, fast to collapse
Up till now, the Bitcoin governance crisis
has been like slowly sinking into a swamp of quicksand.
But once a real-time congestion crisis
actually hits (and online forums become dominated by posts screaming "my transaction is stuck in limbo!!!"), then all the previous bullshit and bloviating from economic idiots about "fee markets" and "soft hard forks" or whatever other nonsense will be instantly forgotten.
And at that point, there will be only 2 things that can happen:
You don't need Blockstream - they need you
- Either Bitcoin dies, and $7 billion dollars in investor wealth evaporates into thin air; or
- The simplest and safest "good enough" on-chain scaling upgrade gets rolled out ASAP - ie, we will get bigger blocks so fast it will make your head spin.
When push comes to shove, people are going to remember pretty damn quick that open-source code is easy to patch
People are going to remember that you don't have to fly to meetings in Hong Kong or on some secret Caribbean island ... or post on Reddit for hours ... or spend hundreds of thousands of dollars on devs ... in order to simply change a constant in your code from 1000000 to 2000000. Eventually, we are going to remember what vote-with-your-CPU consensus looks like
Remember all those hours you wasted on reddit?
Remember all that time you wasted in some hidden downvoted sub-thread debating with some snarky little toxic troll who'd wandered over from a censored
forum full of brainwashed circlejerkers and foot-stomping fascists whose only adrenaline rush and power trip in life had evidently been when they would run around bloviating gibberish like "fee markets!" or "Austrian!"
to the self-selected bunch of ignorant submissive sycophants who hadn't been banned from r\bitcoin yet?
Well, when the real crisis hits, all that trivial online drama isn't going to matter any more.
When the inevitable congestion crisis finally comes, it's only going to take a couple of mining pools plus a couple of exchanges to make a simple life-or-death business decision to un-install Blockstream's artificially crippled code
and instead install code that has actually been upgraded to deal with the reality of mining and the marketplace
- and then we're all going to see what actual vote-with-your-CPU consensus
really looks like (instead of vote-with-your-sockpuppet pseudo-consensus on Reddit).
This upgraded code could be Classic, or Unlimited, or even a modded version Core - it doesn't really matter.
Code is code and money is money
, and when push comes to shove, investors and miners aren't going to give a damn what some overpaid economic idiot from Blockstream said at some meeting in Hong Kong once, or what some fascist poisonous astroturfing shill-bot posted a million times on Reddit
. Things usually move slow in Bitcoin-land - except when they move fast
For an example of how fast the tide can turn, just look at a couple of major events from the past two days:
(1) Coinbase is suddenly saying
- Bitcoin looks a lot like hard-to-use antiquated assembly code - and Ethereum looks like an easy-to-use modern programming language;
- Blockstream with its toxic, opaque and oppressive culture is scaring away all the new devs - who are flocking to alt-coins like Ethereum which has a healthy, transparent and welcoming culture.
the good devs are flocking to Ethereum now.
Any smart dev can see from a mile away that it would be suicide to try to contribute to Core/Blockstream - Blockstream don't want
any new coders or new ideas, they are insular and insecure and they feel downright threatened
by new coders with fresh ideas.
They've shown this over and over again, eg:
- when they repeatedly freaked out and went nuclear and refused to compromise whenever any dev made a simple safe scaling proposal, like 20 MB blocks, or 8 MB blocks, or 4 MB blocks, or 2 MB blocks, or Adaptive Blocks, etc etc.
- when they ignored other important new stuff, like Xtreme Thinblocks
- when they ostracized important devs like Gavin Andresen and Mike Hearn, and censored the mathematician Peter__R
- when they let their dev mailing list be controlled by guys like btcdrak and kanzure
- plus who knows what kinds of other possible innovations they're ignoring that we never hear about
(2) AntPool is suddenly throwing down the gauntlet, saying they won't do SegWit unless and until they get a hard fork first
AntPool represents a pretty big chunk of hashrate - so all it's gonna take is another big chunk of hashrate to make the same practical business decision as AntPool (to serve Bitcoin users
, instead of serving Blockstream) - and boom! - Blockstream loses their stranglehold on the miners. Devs don't like dicatorships Blockstream is too
jack-booted lock-step to ever attract any more new dev talent.
This is because good devs are very
independent-minded: they can smell a dicatorial organization from a mile away, and so no good dev in their right mind (who might actually have some interesting new ideas that could help
Bitcoin) would ever go near Blockstream and its toxic group-think culture.
And so Blockstream will just continue to stagnate under Gregory Maxwell's oppressive "leadership": Blockstream has backed themselves into a corner
At this point, people are starting to realize that Blockstream is a led by desperate and incompetent dead-enders.
some great coders over there such as Pieter Wuille - and Greg Maxwell is also a great Bitcoin coder, but he is toxic as a "leader"
Blockstream can't do capacity planning, they can't do threat assessment, they can't innovate, they can't prioritize, and they can't communicate
In the end, they're only destroying themselves - by censoring debate, and ostracizing existing innovators (eg, Mike Hearn and Gavin Andresen) - and scaring away potential new innovators. Remember, Blockstream != Bitcoin
It's important to remember that Blockstream cannot destroy Bitcoin - any more than Mt Gox could.
Once Blockstream is thoroughly discredited in the eyes of the Bitcoin community and the media, as "the company that almost strangled the Bitcoin network by trying to force blocks to be smaller than the average web page
" - it's gonna be time for honey-badger jokes all over again. Blockstream's gargantuan conflicts-of-interest will be their downfall
Blockstream is funded by insurance giant AXA
- a company whose CEO is the head of the friggin' Bilderberg Group. (He's scheduled to move from CEO of AXA to CEO of HSBC soon. Out of the frying pan and into the fire.)
AXA doesn't even want
cryptocurrency to succeed anyways, because half of the 1 trillion dollars of so-called "assets" on their fraudulent balance sheet is actually nothing more than toxic debt-backed worthless derivatives garbage. (AXA has more derivatives than any other insurance company.
In other words, AXA's balance sheet will be exposed as worthless
and the company will become insolvent (just like Lehman Brothers and AIG did in 2008) once real money
like Bitcoin actually becomes dominant in the world economy - which will "uber" and knock down the whole teetering $1.2 quadrillion
Hmm... AIG... a giant insurance group whose alleged "assets" turned out to be just a worthless pile of toxic debt-backed derivatives on the legacy ledger of fantasy fiat, AIG who triggered the 2008 financial near-meltdown... Who does AIG remind me of... Oh yeah AXA... So let's put AXA in charge of paying for Bitcoin development!
What could possibly go wrong?!? Blockstream's owners HATE Bitcoin
This is the probably the most gigantic CONFLICT OF INTEREST in the history of economics. And it's something to think about, as we sit here wondering for years why Blockstream is not only failing
to scale Bitcoin - but it's also actively trying to SABOTAGE anyone ELSE who tries to scale Bitcoin as well. So, be patient - and optimistic
Viewed from one perspective, the fact that this blocksize battle has dragged on for years can be very
But, viewed from another perspective, the fact that it's still going on is positive - because, for example, nobody really dares to say anymore that "blocks should be 1 MB"
- since repeated studies have shown that the current hardware and infrastructure could easily handle 3-4 MB blocks, and Core/Blockstream's own precious SegWit soft-fork is going to need 3-4 MB blocks anyways.
Plus, the only "strengths" that Blockstream had on its side actually turn out to be pretty weak upon closer scrutiny (money from investors like AXA who hate cryptocurrency, censorship from domain squatters who only know how to destroy communities, snark from sockpuppets who can't argue their way out of a wet paper bag on uncensored forums).
In fact, if you were part of Blockstream, you'd be pretty demoralized that a rag-tag bunch of big-blocks supporters has been chipping away at you for the past few years, creating new forums, creating new coins, creating new products and services, exposing the economic ignorance of small-block dead-enders - and all the while, Blockstream hasn't been able to deliver on any of its so-called scaling roadmap.
If it hadn't been for a few historical accidents (cheap energy behind the Great Firewall of China, plus the other
"linguistic" firewall that has prevented many people in the Chinese-speaking community from seeing how much of the community actually rejects Blockstream, plus the other accidental fact that bigger blocks involve generalizing Bitcoin, which mathematically happens to require a hard fork
), then Blockstream would not have been able to control Bitcoin development as long as it has.
Yeah, they have
done routine maintenance stuff and efficiency upgrades, like rewriting libsecp256k, which is great, and much appreciated - and Pieter Wuille's SegWit would be a great refactoring and clean-up of the code (if we don't let Luke-Jr poison it by packaging it as a soft-fork) - but the network also needs some simple, safe scaling.
And the network is going to get simple, safe scaling
- whenever it decides that it really, really
And there's nothing that Blockstream can do to block that.
Disclaimer: This post is not an endorsement to either buy or sell Bitcoins. I am simply attempting to outline the reasons why there is inherent value in Bitcoins, as well as the risks that come with investing in a crypto-currency. In full disclosure, I personally own and use them, but only a very small portion of my overall portfolio which I would be ok if BTC went to 0 tomorrow. Purpose: submitted by
I’ve been seeing a lot of doom and gloom (as well as irrational exuberance) in a lot of posts lately, and a lot of people saying this or that with no evidence or fundamentals to back up their claims. So I wanted to put my thoughts and experiences [more about me below] out there in the hopes that people actually serious about utilizing Bitcoins (BTC from here on) might find this information helpful, as well as to connect with and solicit thoughts from anybody else that’s done research on the future of BTC. Also mods:
I searched through old posts and the FAQ but couldn’t really find anything like this, so let me know if there is a more appropriate place to post this. I can also add hyperlinked sources to this to make it a reference document if there is interest. Summary/tl;dr:
The fundamentals underlying the intrinsic value of Bitcoins haven’t changed. In fact, they continue to improve day-by-day, as merchant and user adoption increases. As long as this trend continues, and certain risk factors - see below - are minimized, BTC will eventually become widely accepted as a currency. That being said
, you should never “invest” more money than you are willing to completely lose, or money that you would otherwise need for living expenses. Otherwise, you are gambling. (I put “invest” in quotes because I believe BTC are currently far too speculative to be considered an “investment.” This may change in the future, but the technology is still so new, and there are so many unknowns, that it should not be considered anything more than a speculative investment at this point.) This has happened before and it will happen again:
This week hasn’t been good for those holding Bitcoins. In fact, if you invested in BTC anytime in the past year, I’d say it’s been a pretty shitty year, period. But the thing is, we’ve seen this type of thing in financial markets before, almost exactly to a t, and how they tend to play out. There have been various bubbles of all shapes and sizes throughout history, and the run-up in prices earlier this year, was no exception. However, unlike the critics, I believe BTCs are different, as there is significant intrinsic value in the BTC network and BTC as a value store - which I outline below.
I also think it’s useless to speculate about the direction of BTC in the short to medium-term (I would argue the price adjustment has been a good thing for the long-term), so to me the only meaningful way to analyze what’s going on is to examine the fundamentals (apologies if a lot of this is basic, but I wanted to cover all the key points as I saw them):
- Currency As a Store of Value: A currency has value because the holders of it believe it has value. This might seem like a paradox, but it is how fiat currencies (namely, the USD and every other major currency in the world) function, and BTC is no different. As the number of people owning and using BTC increases, the relative value of BTC will have to grow as the supply is limited to 21million BTC (to use an economics analogy: In this case, we can’t find more seashells, we can only break the ones we have into smaller pieces).
What if user adoption were to plateau or decrease? Even if growth were to stop today, and not a single more person in the world were to use BTC than already are, there would still be value assigned to them by those who currently hold, which is reflected in the BTC/USD rate. There is already value there by virtue of the number of people that own it and merchants that accept it.
As of me writing this, there are an estimated 1.2million BTC holders on ledgers worldwide. This number is greater than the population of many countries that have their own currency. I believe BTC are past the point where people should question the viability of BTC as a store of value, and instead look at BTC for the value it provides for the following reasons.
- Worldwide Transaction Network: In my analysis, this represents the true potential value of BTC. Think of the major credit card companies (Visa, MasterCard, AMEX) - they’re accepted pretty much anywhere right? You can walk into almost any shop throughout the world, and as long as you hold one of these cards, the merchant will trade you his/her goods and services for a portion of what you’ve got in your account. And this is hugely valuable. To the tune of $Billions per year these companies make in profit, all because of the network of merchants that accept them worldwide. But one thing that people might forget is these companies had to grow their merchant network, just like BTC, one at a time.
Thus, this to me represents the primary growth potential of BTC. I’ve seen estimates that 10,000 retailers are currently accepting them, and there are some pretty big names in the list (Overstock, Target, eBay via PayPal, CVS). As the number of places that accept BTC increase, so does the intrinsic value. This also has a compounding, even self-fulfilling, effect: as the number of places that accept BTC increases, the value increases, thus more merchants are willing to accept BTC as a currency because it has value…chew on that for a second.
- Growing BTC Eco-system: This is represented by the growing number of Bitcoin-related venture startups and websites/wallets/apps that support BTC transactions. There is a network effect here, and as long as people are invested into it, will continue to grow.
- Security/Anonymity/Ease of Transaction: I think most of us are familiar with BTC security measures (how important the password to your wallet/account is), how the hashes are generated by an algorithm that cannot be faked (essentially counterfeit-proof), and low transaction costs. These are all pluses that make the currency attractive as a value store, with some caveats listed in the “Risks” section below.
- Hedge Against Fiat Currencies: This is a two-edged sword. I think there’s a lot of investment in BTC because of the fear of overactive Central Banks inflating other currencies (again, namely the USD), but as we saw this week, this can work against BTC. I explain more later below.
So I’ve briefly outlined above some pretty clear reasons why there is inherent value in BTC, and the reasons why I personally am optimistic about the long-term future and will continue to use them. That being said, I’ve also identified several primary risk factors
me as a long-term investor, ones that all holders of BTC should be aware of. Please, if you know or can think of any others, reply or PM me so I can add them to this list:
- Continued market volatility: Price volatility might be good for day-traders, but for a currency, it’s killer. As described above, one of the core elements a currency must have is as a store of value, and if the price fluctuates wildly from day-to-day, merchants (and currency owners) will be less willing to accept it. Who would want to hold currency that’s worth 1/2 of what it was last week?
This is also a reason why it’s essential for the currency to have a limited supply (or perception thereof), or else rampant inflation would occur - look at Zimbabwe. The bottom-line is, if the USD (US Dollar) were to drop 25% in one week, like we saw with BTC this week, it would indicate a complete economic collapse was occurring. Faith in the currency would be destroyed, and it would take extreme measures to preserve it. It’s actually kind of a small miracle BTC hasn’t completely collapsed, but I think it’s because (1) there is real value in it, and (2) BTC are not widely used yet.
The remedy for this is there has to be either (1) a large holder of the currency that is able to inject or take out some currency to keep the price stable -- if you look at the US Federal Reserve this is one of its two primary mandates, or (2) the number of BTC owners has to reach a saturation “tipping point” where enough people are utilizing the currency for day-to-day transactions, and not for speculative reasons. I don’t believe we’re quite at this point yet, but getting there.
- Governmental regulation: This is a big unknown for me, and with recent news that Russia and China have prohibited use of BTCs, presumably in the effort to curb illegal transactions, could become a trend. However, to address people who are concerned about this, I would make the following points:
- What is the reason for government regulation? Is it to curb illegal activity transacted in BTC? If this is the case, there is plenty of illegal activity being transacted in US Dollars, Russian Rubles, gold coins, jewelry, etc… What makes BTC special? If the reason is to prohibit a competing national currency, then that is a separate legal issue which will have to be resolved, but probably not until far in the future. In the US, a case like this would almost definitely go to the Supreme Court for clarification.
- Which government agency should have regulatory authority? In more democratic societies (than Russia and China) that have a strong rule of law (most of the rest of the western world), government agencies can’t simply do something because they want to (unfortunately the trend is changing even in the US). There has to be a legal jurisdiction or precedence that would allow this, and because crypto-currencies are so new, none has been set. For example, just look at how long it took most state governments to start taxing Amazon purchases. I used to live in Virginia, and they just started in Dec 2013, almost 20 years after Amazon was founded…
- How would governments enforce restrictions? Would it be by imposing fines on merchants that accept the crypto-currencies? Legally, how is this different than restricting payment in gold or silver then, or Craigslist transactions?
- Ease of use: BTC are not quite easy enough to use where the average person will find it appealing. I think a lot of companies are working to address this (e.g. the hardest part of signing up on Coinbase was remembering my password), so to me this risk is what we can do the most about, but still a concern.
- Loss potential: If you forget or lose your password, you’re SOL at this point. But this isn’t really different from losing cash on the street.
- Market Cornering(added): There is the possibility a large percentage of the total available BTC are owned by a handful of individuals. For example, it is estimated that Satoshi alone owns ~1 million BTC. In the event that one or more of these owners were to attempt to corner the BTC market there could be extreme price volatility.
- Current overall valuation may be a bit high: Back of the napkin calculation follows- Total valuation of BTC = (# of BTC available) x (current price/BTC) Total valuation of BTC = ~13million x $330 = ~$4billion $4 billion of perceived value is probably high for as small as the BTC network currently is. But, this number is reflective of the high growth rate in the number of users/owners and merchants that have accepted BTC. In other words, this may be a fair price. And, by definition, it is technically the actual fair price since it is, after all, an actual currency.
I could go on, but those are the major value and risk factors I see. If you have anything to add, please feel free. So, in the context of everything I said above, I’d like to talk about what happened this week in particular:
I believe this week’s price movement (as of me writing this, has been a 25% drop) is a result of several factors:
- News that US Dollar is very strong
- Capitulation: I don’t have the ability to do Technical Analysis on BTC right now, but just eyeing the 1-year chart, it looks like $400 was a key support point for the price of BTC. Once it broke through that, psychological barriers were broken and selling cascaded.
- Russia and China potentially banning BTC
And that’s it. That’s all I can find about Bitcoins in the news. The value fundamentals I listed have not changed one bit, and if anything, the rate of user adoption has increased as more people are learning what it is
Which is why I’m excited about the future of BTC. It’s a product that I use and like, and see tremendous value for. This week’s sell-off just means I can buy more. About me:
In a past life, I was an equity research analyst responsible for due diligence, fundamental/technical analysis, and making recommendations to the PM on which stocks a certain mutual fund should buy or sell. This meant reading through a lot
of annual reports, financial statements, 10-K, 10-Q, shareholder calls, etc… My primary influences were Warren Buffett, Philip Fisher, and Ben Graham. If you recognize these names, you’ll probably guess that I was a value investor1
, and you’d be right. The fundamental premise behind value investing, for those that don’t know, is that you can find companies that are trading at a discount to their “true” intrinsic value, and thus can make money by buying the stock at a low price and selling when the market has realized the fair value of the company and the price has subsequently gone up. This is essentially how Warren Buffett built Berkshire Hathaway and became the world’s richest man (for a short period); his strategy has since greatly evolved, but this was the core philosophy he used for a long time. 1
Utilizing this strategy, our fund bought a significant stake in AAPL when the price per share was less than the amount of cash
per share the company currently held (split adjusted something like ~$2 per share when we bought). It hasn’t all been a bed of roses, we’ve made some not-so-great investments, but that’s a story for a different time :)
Edit: Paragraphs within bullets? How do you do them?
limit my search to r/Bitcoin. use the following search parameters to narrow your results: subreddit:subreddit find submissions in "subreddit" author:username find submissions by "username" site:example.com find submissions from "example.com" url:text search for "text" in url selftext:text search for "text" in self post contents self:yes (or self:no) include (or exclude) self posts nsfw:yes (or ... Fred Ehrsam, born Frederick Ernest Ehrsam III, is an American entrepreneur and businessman who co-founded the digital currency exchange company Coinbase.. In 2006, Ehrsam graduated from Concord-Carlisle High School in Concord, Massachusetts. In 2010, Ehrsam graduated with distinction from Duke University, earning a B.S. in computer science with a minor in economics. Fred Ehrsam; Service-Auflegung: Juni 2012: Firmenstandort: San Francisco, Vereinigte Staaten: Coinkite “Sicherste und leistungsfähigste Brieftasche.” Plattformen . Web. Beschreibung . Coinkite ist eine gehostete Brieftasche featuring Debitkarten und Händler POS-terminal-Geräte. Vorteile . Erweiterte Sicherheitsfunktionen und eine ansprechende Benutzeroberfläche. Mittel öffentlich ... Toggle navigation Coincrunch.com CryptoApps Submit News Blog Prices ICO Auctions Companies People Link Partners Wiki Signup Login Bitcoin · Blockchain · Ethereum · General · ICO · Kin · Ripple · Stellar · A community dedicated to Bitcoin, the currency of the Internet. Bitcoin is a distributed, worldwide, decentralized digital money. Bitcoins are...
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