
Why Bitcoin will fail - mihvoi
http://meaningofstuff.blogspot.com/2017/12/why-bitcoin-will-fail.html
======
djsumdog
The thing about loans, that is borrowed capital that you use to try and create
more capital, is that there isn't enough capital to go around. Capitalism does
depend on a certain percentages of businesses failing, and that debt being
written off.

You also can't make loans with BTC because debt needs to be enforceable. There
must be violence behind debt. In the past that meant someone turns you into a
slave or breaks your legs. Today the violence has been reduced (you get bad
credit score and debt collectors keep calling), but it's still there. States
have to have a monopoly on violence to enforce debt.

I don't really agree with where this guy is going, because the entire way
loans are used to generate fiat currency isn't really sustainable. David
Graeber has talked a lot about every great civilization has needed some form
of debt relief at some point, either when a new leader comes in or when the
civilization collapses.

People in the ancient world knew the empires they lived under would eventually
end. Today in many high income countries, most people cannot see the end.

~~~
0x445442
Yeah one has to buy into the premise that debt based money is a good thing but
I reject that premise.

At least each BTC represents a certain amount of work (in the form of
electricity expended) that's already been performed.

Debt is great as long as there is enough work to be performed to square the
accounts.

~~~
candiodari
Not really. You only have to buy in the premise that given 2 options:

1) a system with a lot of (risky) debt

2) a system in which debt is impossible

Then have competition between these 2 options. There is no doubt about the
outcome. System 1 will devastate system 2 (in that the total economy size of
system 1 will be a LOT larger than system 2).

Therefore the Nash equilibrium is a debt based system.

Nobody's claiming there aren't any advantages to a system where debt is not a
possibility. I guess people are just claiming that not having debt is too
expensive, in terms of missed opportunities.

The strength of bitcoin is the inflexibility and general incompetence of
government based money systems. It wouldn't be too hard, I think, for a
government to make a money system that would trounce bitcoin. Of course,
they'd have to be prepared to trounce banks and most of the financial sector
to do this.

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overcast
It's already failed. It's gone from the currency of the future, to a store of
a value, to just a pure speculative commodity. Nothing more or less. Use it to
make money, and get out.

~~~
nske
No, you see that's not Bitcoin. That's how different numbers of people
perceive or use Bitcoin at different times. Bitcoin is ever adjusting and
changing, often making short-term sacrifices and failing to meet certain
expectations that people have at the time. It would really fail if a
fundamental technical flaw was discovered or if it hit a brick wall where
realistic solutions to current problems stopped being actively worked on. So
far that hasn't been the case.

So what matters is the technical side, things that are actively being
developed, such as the Lightning network, and that at least some entrepreneurs
understand this technical side sufficiently enough to build services that
translate its fundamental value into things that people can more easily
understand and appreciate. Much like the internet in early days.

Someone could go back 20 years and say "where are all these revolutionary
things we keep reading about that would be possible? Wild speculations,
Internet has failed."

Of course Bitcoin might fail, but I believe something like Bitcoin will
succeed -and Bitcoin itself seems like the best candidate at the moment.

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neals
I've been putting up over 200 of my btc in various loans for over 15 months
now. I do this on Bitfinex. It's a double blind loan and can only be used by
the receiving party for margin trading. That party has to have maintain a
certain reserve to be able to allow an automated stop-loss.

This system is fully automated and I've gotten some interesting rates on btc
that would otherwise just have been idle.

~~~
MuffinFlavored
200 BTC * $15k/BTC = $3,000,000

You have $3m of BTC?

~~~
loblollyboy
200 of

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julvo
You are talking about a short time horizon. Yes, bitcoin will possibly crash,
but that is when a large part of the speculative play money will leave the eco
system. Bitcoin could still gain value afterwards if there will be an
increasing utility.

~~~
vinchuco
you mean like dogecoin ?

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chamza
Good read.

There are more mature cryptocurrencies emerging that are based on 'loans' as
the author describes. The Maker Project's stable coin 'Dai' is an example,
which is only created by collateralized debt positions. However, the debt
position is currently based on ETH, which is 'backed' by speculation.

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sanbor
In Poloniex you can lend money. Would that count as loans? There are pre-mined
cryptocurrencies like Ripple and Stellar that doesn't need proof of work to
solve the double spending problem, and thus doesn't need lots of electricity
to work.

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matthewbauer
Has anyone tried to “peg” a cryptocurrency to USD? That seems like an ideal
thing to have... Somehow change reward size based on exchange rate. That is
increase supply when above 1:1 and decrease when below.

~~~
rewtraw
MakerDAO just launched its stablecoin, DAI. It maintains stability by a
complex system of smart contracts and CDPs. The problem is much more difficult
than simply increasing/decreasing supply.

[https://makerdao.com/](https://makerdao.com/)

~~~
matthewbauer
Looks interesting! The trusted oracle part seems concerning as a single point
of failure but I suppose it’s necessary.

~~~
berberous
There's also BaseCoin, another attempt at a "stable coin" with prominent
investors:

[https://www.coindesk.com/basecoin-
revealed-a16z-metastable-s...](https://www.coindesk.com/basecoin-
revealed-a16z-metastable-seek-crypto-holy-grail-stable-token/)

------
noncoml
Bitcoin looks like a ponzi scheme to me as there is no value to a Bitcoin
other than that of itself.

Currencies used to represent the gold stored by each government. These days
currency represent the trust that the system that uses the currency, will
trade goods for it. However we had to go through the gold equivalent to get
here.

Bitcoin doesn’t represent anything and has nothing to back it up.

~~~
proofofanalysis
Bitcoin's value is connected to the costs to continuously mine it and
consequently keep the blockchain intact and secure.

These costs include electricity, mining equipment, personnel, and warehousing.

As with normal equity valuation, these costs would be transparent, allowing
for valuation to take place.

Since Bitcoin is decentralized and its "employees", or miners, are disparate;
costs are not known.

This information asymmetry is one cause of Bitcoin's unbounded price
discovery.

~~~
noncoml
What value do they create? Sure they burn electricity and energy but they
don’t create any value other than the bitcoin value itself.

~~~
proofofanalysis
The incorruptibility of the ledger is the value.

~~~
noncoml
> The incorruptibility of the ledger is the value.

It cannot feed me, it cannot protect me from the elements, I cannot grow food
on it and is not a tool to help me create something desirable by the others.
Hence it has no value.

~~~
proofofanalysis
Bitcoin, being a form of wealth, can give you all the things you just
described.

That it has no value during an apocalyptic scenario, does not mean it does not
have value in the non-apocalyptic times.

~~~
noncoml
You cannot call it wealth to describe its value. You are just saying that the
value of it is in itself. Which is what I am supporting as well.

In order for me to exchange it for goods, as you described, there must be
someone who has the goods and is willing to exchange them for bitcoin. There
is no real reason for someone to do so.

It is not an apocalyptic scenario. That’s what 90% if the population fight
for, day in day out. Food, protection from the elements, security.

~~~
proofofanalysis
You are throwing away the possibility that there is an intrinsic value in
Bitcoin, more related to socio-economic-political concerns, than survival.
There is not only one domain in life.

~~~
noncoml
Ok, cool. We are getting somewhere now. What does Bitcoin offer in that
perspective?

~~~
proofofanalysis
An incorruptible ledger resistant to the control of any individual,
corporation, or state. Bitcoin may fail in its implementation of this goal.
The future is still to be determined.

Bitcoin's underlying technology creates the possibility of decentralized
governance, starting with currency, which is the connecting link between
actors in societies based on economy.

Why such a future might be beneficial to mankind is that banking and finance
being controlled by a few has led to errors with systemic consequences.

See the 2008 financial crisis and hyperinflation in Venezuela and Zimbabwe.
See the seizure of funds by governments from individuals in Greek and Cyprus,
scenarios where many of the affected did not write their own doom (others
wrote it for them).

~~~
Lncn
I think you're conflating the value of a block chain with the value of
bitcoin.

Why is bitcoin more valuable in this regard than any other altcoin?

~~~
chrisco255
Because it being the first successful implementation...it has 9 years of
history at this point. It has proven itself resilient to hacks, ddos, Chinese
bans, threats of regulation, exchange scandals, and bad press, and yet the
protocol just keeps humming along. It being the first, all other cryptos are
traded in terms of BTC. The network effect, and the mind share of BTC are
substantial at this point. BTC has one largely fixable problem: it doesn't
scale. Lightning network tests prove that it can if a second layer is added.
Once this rolls out, the game will change.

