
Bitcoin Beat the Trough of Sorrow - stephensonsco
http://blog.deepgram.com/bitcoin-beat-the-trough-of-sorrow/
======
matt_wulfeck
Can someone help me understand how a network that can only do 3.2[1]
transactions-per-second stand up as anything other than a speculative
commodity? How can BTC possibly survive at such slow (and increasingly
expensive) transaction speeds?

1\. [http://hashingit.com/analysis/33-7-transactions-per-
second](http://hashingit.com/analysis/33-7-transactions-per-second)

~~~
CalChris
In addition to being slow transactions, they're also expensive transactions.

[https://blockchain.info/charts/cost-per-
transaction](https://blockchain.info/charts/cost-per-transaction)

Roughly, you're paying the miners. They (half of them) have to mine your
transaction into the blockchain and they could be using that time to mine. So
your transaction competes against mining time.

That's roughly why it's slow and expensive. I'd never use BTC unless the
kidnappers demanded it.

~~~
olegkikin
That "cost per transaction" chart is misleading. It includes the 25BTC per
(roughly) 10 minutes that gets created and is given to the miners.

The actual transaction costs are way under a dollar, and it is, by far, the
cheapest way to move the money, it's cheaper than the European SEPA, which is
normally 0.9 EUR.

~~~
joosters
If you don't include the 25BTC in the costs, you're pretending that the
electric costs of running all the bitcoin miners to 'secure' the chain don't
exist.

Bitcoin is a very expensive and inefficient way of transacting.

~~~
olegkikin
Yeah, but the miners pay for it, not the users of the network. Thus, it is not
a transaction cost, but yeah, it is the cost of running the network. You're
confusing the two.

------
cocktailpeanuts
I have some tens of thousands of dollars in bitcoin, and I keep track of all
the Bitcoin/Blockchain news because I do think the technology has potential.

However my impression after following all these "bitcoin influencer" people on
Twitter is: all they talk about is how Bitcoin will take over the world, again
and again, and again, and again.

They don't even try to come up with a new spin. It's always the same message,
they basically write blog posts and articles about how Bitcoin is a game
changer, yada yada.

I expected to gain some insights following these people, as in they would
actually come up with some fresh ideas, etc. But no, all they do is just the
rehash of the same stuff.

It reached the point where I feel like I'm going through the movie "groundhog
day", so I unfollowed all these people and only follow a couple of bitcoin
related blogs.

Seriously, the circle jerking in the bitcoin community is too excessive.

~~~
jamiepenney
That's because it's a pump and dump scheme. They're just trying to rustle up
some new bag holders.

~~~
imaginenore
It's not. I use bitcoin to pay for a few online services, including my
hosting. I love it. It would be absolutely awesome if bitcoin succeeded, even
if the price remained the same (I know it's mathematically impossible, but
still). A currency that no single government/entity can stop or freeze. A
currency that no government can dilute. It's kind of like digital gold, except
the amount of gold in the universe is practically unlimited.

------
ISL
Bitcoin (and most other things in finance) is best understood on a log plot.

[https://blockchain.info/charts/market-
price?scale=1&timespan...](https://blockchain.info/charts/market-
price?scale=1&timespan=all)

------
Mahn
There's this SMBC comic [1] that brought up the fact that no matter your
position or opinion on a subject, you can always find something to support it
on the internet. When people compare growth graphs to made up cycle/hype
graphs I feel it's a little bit like this; the comparison ends up uncanny
_because_ you, perhaps subconsciously, looked for graph that matched a certain
narrative in the first place.

There are many ways to interpret what data says, so it's easy to fall into
this trap, all you need is a certain preconceived idea and suddenly all you
are looking for is confirmation, which you'll always find if you look hard
enough.

[1] [http://www.smbc-comics.com/comic/citation-needed](http://www.smbc-
comics.com/comic/citation-needed)

------
aurelius12
You could have made the exact same case with the exact same chart in June/July
2014, after which the Bitcoin price crashed.

~~~
TylerE
But don't you understand? <Insert literally anything at all> is good for
bitcoin!

~~~
yongjik
> <Insert literally anything at all> is good for bitcoin!

> anything at all is good for bitcoin!

...instruction unclear, did I do it right?

~~~
TylerE
Pretty much!

Price goes up! Good for bitcoin! Price is up!

Price goes down? Good for bitcoin! Cheap coins!

Bitcoin used for ransomeware? Good for bitcoin! We're on CNN!

------
atlih
The bitcoin price up or down doesn't correlate with "bitcoin taking over the
world". It could crash down to 0.5$ and still takeover more of the worlds
transactions. What matters is this graph
[https://blockchain.info/charts/n-transactions?timespan=all](https://blockchain.info/charts/n-transactions?timespan=all)

------
panic
A quick citation for the cutting-edge methodology used in the article:
[https://www.youtube.com/watch?v=sIlNIVXpIns](https://www.youtube.com/watch?v=sIlNIVXpIns)

------
draw_down
"This graph looks like this other made-up graph." Congratulations.

~~~
smaddox
Indeed. It would be one thing if he had similar plots of non-crypto-currency
market cap. over time, but as far as I can tell this graph is completely
unique to bitcoin.

------
zekevermillion
Analogies are dangerous, but I don't think we have seen either the "peak of
inflated expectations" or the "trough of sorry" yet when it comes to bitcoin.

------
overgard
In the same way correlation does not equate to causation, similar graphs
doesnt mean similar narratives.

~~~
zekevermillion
That is true. As a heuristic, I think the hype cycle is useful just to stand
for the idea that "important work gets done often times when the market has
given up". It is not useful to say "[insert your asset here] has recovered
from a slump, so it is all good now".

------
stephensonsco
I'm pretty pumped about this. Things are looking really good but still not
obviously in the clear. Cautiously optimistic :)

------
tadeegan
This feels like the hacker news I remember. :)

------
Ologn
Bitcoins have no value. Nothing is more an indication of quantitative easing
and bubbles and so forth than Bitcoin. A $12 billion market cap, as worthless
as the $12 billion valuation of some unicorns.

Warren Buffett and Charlie Munger have both been around 85 years and know when
something has value and when it doesn't. "Rat poison" is what Munger calls
Bitcoin and Buffett also notes their worthlessness.

Why does a Bitcoin have value? There is no answer to this question. They're as
worthless as Ponzi's postal reply coupons. One day, like Flooz and Beenz and
other worthless "electronic currencies" before it, Bitcoin will come crashing
down into worthlessness.

It's surrounded by scammers - Mt. Gox, Butterfly Labs was raided, on and on.
That should tell you something.

~~~
tomsthumb
> Bitcoins have no value

It's money (a currency). Money has value because someone says it has value and
someone else agrees. Congrats, bitcoin has value!

The nature of that value may be volatile and doomed to drop severely or go
away entirely in the future, but that doesn't make it non-existent now.

~~~
Ologn
> It's money (a currency). Money has value because someone says it has value
> and someone else agrees. Congrats, bitcoin has value!

Commodities have value. Until 1971 in the US, US currency had implied value
because it could be exchanged for a commodity - gold, which the US has
thousands of tons of in Fort Knox and other places. Then in 1971, Nixon
stopped the exchange of currency for that gold.

But the tons of gold are still in Fort Knox. Why? Why store thousands of tons
of gold? Obviously it is still backing the currency. Any currency panic can be
ended by starting the conversion back up. US currency went from an implied
conversion to an implication of an implication. It is still backed by those
thousands of tons of gold though, although not explicitly.

Bitcoin is backed neither explicitly nor implicitly by an useful commodity.

~~~
tomsthumb
Your second paragraph seems to be heading in the direction that bitcoin
doesn't have value because it lacks the robustness of being backed by a useful
commodity. This is only vaguely less than orthogonal though. The robustness of
a currencies value, while related, is not the same thing as the value of said
currency.

If the gold disappears tomorrow dollars would not become worthless. People
would still use them as value stores which can be exchanged for goods and
services (despite a lot of questions about where the gold went). Similarly,
Bitcoin is (now) exchanged for goods and services which have value.

Then comes the interesting question of "why is gold valuable?". If we assume
the apocalypse and you have gold and I have guns, bullets, and canteens you
could bet your boots I'm not interested in trading.

If you're certain bitcoin is valueless AND you're right I urge you to continue
convincing me. This could be one of the best short opportunities since the
housing crisis of 2006.

~~~
Ologn
Gold is a commodity has value because it can conduct electricity, fill teeth
and so forth. Historically it has been used as a currency because it is
portable, uniform, divisible and durable. It has had value for thousands of
years, through many of the calamities of history. Guns tend to have many laws
with regards to them, and lose value over time - the muskets of the late 18th
century are near worthless except as collector's items.

Commodities have value due to their utility. Dollars were useles in 1968, but
you could exchange them for a useful commodity. The value was implied. With
the exchange cut off, it is an implication of an implication.

It possibly could survive even more indirection. The US government could begin
emptying Fort Knox gold ton by ton, implying it would tax or somehow get
commodities from taxpayers or traders if necessary to back the currency. Then
it becomes even more abstract. Right now a currency panic could be stemmed by
simply turning gold convertibility back on. Gold has no magic properties, it
just has the qualities of a good currency (portable, divisible, durable...)

Germany used to keep the majority of its gold reserves outside Germany. In
2013 it began pulling this gold back to Germany. Why? Why bring it back now?
Why have gold reserves at all? In the industrial countries, paper currency was
exchangable for a useful commodity until around 1971 when the US closed the
window, which is around when all countries closed the window.

Also, currencies have what is probably a 10,000 year history, perhaps even
longer in some form. What is called fiat money has existed for at least 900
years. Other financial mechanisms of this type have been around longer. The
desire of governments to go into debt, to run printing presses and have the
paper which comes out have a price, is not new. Our current system has existed
for less than half a century, and in my view won't outlast panics, wars and
such. Which has a simple meaning - at some point in the future, the US or
Germany or some major industrial economy will be forced to open its gold
window again to stem some future panic.

~~~
tomsthumb
> Dollars were useless in 1968,

Hmmm. Go on....

> but you could exchange them for a useful commodity.

That sounds useful though. That sounds like dollars have (or represent or
store) utility.

Really, it sounds like you're making the point that Bitcoin isn't a commodity
and is therefore valueless, which I have a tough time agreeing with (the
marketplace also currently disagrees with the idea). Neither real-estate nor
services are a commodity and they both have economic value.

If that's not your point it seems that there is a misunderstanding of what
"useless" and "has no value" mean in the context of describing Bitcoin (and
dollars?), and that we've not come to terms on what those phrases exactly mean
so that we ensure we're examining the same set of thoughts built with the same
set of words.

