
As Bitcoin Sinks, Industry Startups Are Forced to Cut Back - toufiqbarhamov
https://techcrunch.com/2018/12/26/as-bitcoin-sinks-industry-startups-are-forced-to-cut-back/
======
DenisM
The most remarkable thing about BTC is diffusion of responsibility. If it was
issued and marketed by a single entity the participants would be in hot water
by now for violating the Securities and Exchange laws. However here we had one
non-affiliated group of bigger miners issuing the coins and another group of
volunteer enthusiasts hyping them up. Since the second group was not hired by
the first, the first group cannot be held accountable, while the second group
has agents too numerous and too small to go after.

This is similar to the housing bubble, where the industry collectively hyped
up the "investment" promising huge returns, yet no one was to blame when the
music stopped.

Watch out for mo ways to diffuse responsibility, that's where "action" will
be. Maybe we can nip it in the bud sooner if all keep an eye out.

~~~
krrrh
Preston Byrne pointed out since there is no pyramid, this can’t be called a
Ponzi scheme. It deserves a new name, the “Nakamoto scheme”:

[https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/](https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/)

~~~
GavinMcG
"Scheme" implies a unified/central schemer, though. We can already call it a
fad, or a mania (a la tulip mania).

~~~
hndamien
It certainly does seem to be a "scheme" but I wonder how it compares to other
fiat or gold currency when looked at through a "scheme" lens.

~~~
xapata
Fiat currency generally has some military, militia, or at least a police force
and a tax payable in that currency. Gold is somewhat similar historically,
though has been abandoned for that purpose in recent decades.

------
cageface
2018 is the year that we learned that complex social problems can not be
solved by technology. From the political weaponization of social media to the
collapse of the ICO market we've seen that the techno-utopian dream is largely
just that, a dream. Social change takes hard work and the slow building of
consensus, not just clever code. We have seen, however, that we can do a lot
of damage to the social fabric with poorly thought out technology so I think
the era of the unregulated internet is sadly coming to a close. We really have
nobody to blame but ourselves.

The next generation of internet startups is going to have to be a lot more
savvy about how technology interacts with society.

~~~
Nasrudith
I think that the biggest issue is frankly bullshit. Bullshit in the sense of
complete lack of sensitivity to the truth so long as it leads to the outcome
they want. Technology isn't at fault here but bullshit is on so many levels it
isn't funny.

The stupid internet rumors and social media manipulation? Bullshit because
they want to influence people - they don't care if it is true or not. Company
valuations? They don't care if it is productive or useful - they just want it
to make money which leads to the new Tulip craze. Security theater and claims
that they need to spy on everything? Bullshit to justify their positions and
cover their asses. It isn't a technology - it is the social black art old as
dirt that keeps being used. It causes problems everywhere because it exists on
a nearly fractal level.

We see plenty of people blaming tech companies for their problems and calling
for regulations? Do they care if it is true or have any idea for specific
regulations in mind? And the few that are trotted out turn out to be trivially
unworkable or contrary to the given purpose on so many levels like encryption
bans. Because it is all bullshit - what they want is to protect their own
vested interests and they don't want the truth in the same building of a
skyscrapper, much less the same room because they will lose in a discussion of
facts.

I would be very skeptical of anyone who claims that we need regulation on the
internet - because so far all of the pushers are shoveling more bullshit.

~~~
Joe-Z
Indeed. I found GP's comment quite insightful until it suddenly called for
regulation on the internet.

Why would that change anything when we just established that not the
technology but learned behaviours are the problem?

Maybe 2018 was the year that showed us that we finally need to come to terms
with the fact that - yes - there are enough resources for everybody and the
people who control the bulk of them still want to treat you as a dumb cog in a
machine and we need to cut through all the layers of bullshit they are
throwing at us.

~~~
cageface
To be clear - I'd prefer _not_ to see a new wave of regulation online. I'd
much rather see the tech industry clean up its own house and fix its own
problems. But since the big companies still seem to be dragging their feet on
this after all that's happened I'm pretty sure we're about to get dragged
kicking and screaming into the sausage factory that is government regulation.

~~~
raverbashing
The market hates regulation but will happily sell you HIV infected blood,
then, when they get regulated they cry bloody murder.

And of course regulatory capture is an issue as well.

It is a hard problem because we're dealing with psychopaths.

------
jklepatch
What puzzled me is how comes blockchain startups did not sell their crypto for
fiat just after their ICOs.

I recommended this to several of my blockchain customers but none of them
listened. I dont know if that was motivated by greed or something else.

According to Game theory there is no benefit in not selling the crypto for
fiat: if you raise lets say 10million during an ico (typical amount raised 6m
ago), there isnt much you can do with 20M (i.e you keep the crypto and it
doubles) that you cant do with “just” 10M.

However, if the crypto crashes, and become 5M, you are going to have a hard
time explaining to stake holders that 5M just disappeared...

At worst you keep 10pct in crypto if really you want to keep some upside to
crypto but thats it

~~~
dustingetz
What is even involved in finding a buyer for $10mm btc in usd and then getting
that usd into a legal/compliant bank account? Sounds non-trivial. It's my
understanding from some work I did for a crypto startup that there is
approximately zero usd/btc liquidity, the apparent "usd liquidity" and "usd
price" last year was actually dominated by tether-btc and tether-eth
liquidity. There was not actually a functional usd/btc market at any point, at
least not with liquidity necessary to justify a statement like "startup X
holds $10m btc" and this whole thing is a bunch of twenty-five year old
entrepreneurs learning about macroeconomics the hard way.

~~~
seibelj
Circle Trade and Cumberland do OTC trades of large amounts. Nothing is magical
about this. [https://www.circle.com/en/trade](https://www.circle.com/en/trade)

~~~
dustingetz
Sure OTC services exist (I believe Coinbase has one) but I think the whales
spending $10m on BTC might have an inkling about buy low and sell high – aka
they are decidedly _not_ buying during the period between August 2017 and
today, which is exactly the period they would need to be buying _at scale_ for
all these startups to unload their disintegrating assets.

~~~
askmike
You are very wrong, OTC markets are very liquid right now.

Also $10 million in BTC isn't very much, you can trade this on the public
markets without slipping very much if you really want to.

~~~
dustingetz
yes of course they are liquid _now_ , and of course you can trade it in
crypto-crypto markets, the question is if you can trade it for USD cash money
in a real bank account, _eight months ago_

~~~
leppr
There may have been more slippage than your startup was comfortable with, but
the OTC market has always been liquid enough for startups to liquidate ETH/BTC
from ICOs, even in the middle of the bear market.

~~~
dustingetz
show us some evidence!

~~~
eaurouge
What sort of evidence are you looking for? If indeed people were having
problems cashing out as you seem to think, this would have been big news. In
which case _you_ should be able to find and provide evidence of this
occurring. And, if I understand you correctly, you might as well ask for
evidence that investors can sell their TSLA stock for cash.

~~~
dustingetz
hardly anybody was even trying to cash out! As demonstrated by this headline.

------
minimaxir
At what price will the Bitcoin death spiral occur? (i.e. when it costs more to
produce/handle Bitcoin than the revenue generated, so best move is to just
exit the crypto industry).

~~~
marcosdumay
Don't bitcoin costs adjust to a shrinking miner population as well as it
adjusts for a growing one?

If so, the answer is never. As people give-up, the costs for the remaining
ones reduce so that at some point it's lucrative again.

The interesting question is at what price people will stop speculating on its
price and run to an exit? I don't think anybody can answer this one.

~~~
hudon
The difference is that even if the difficulty adjusts, there will be dormant
ASICs waiting to be used. If the price lowers enough and enough ASICs are out
on the bench, it’ll at one point becoming economically beneficial to turn them
all on and attack the network rather than having them collect dust and
depreciate.

~~~
stale2002
People vastly overestimate the profitability of attacking a crypto network.

There are tons and tons of much smaller coins, that can be attacked for very
cheap, and yet attacks are still very rare.

IMO, this is because double spends just aren't a very good idea. If you tried
to steal money from an exchange, everyone would know it was you doing the
attack, and then they wouldn't accept your money in the future, or maybe you'd
just go to jail instead.

Also, the network is not static. If there is lots of hashpower sitting unused,
maybe that hashpower would turn in to _defend_ against an attack.

More people have something to lose from a successful attack, and thus could be
motivated to defend when an attack happens.

~~~
hudon
Haha, then “PoW is for security” is a myth. If you are correct (which is
arguable), then you don’t need PoW, you just need an elected federation of
validators. And validators won’t attack because of the counter-incentives you
describe.

So either PoW has a security hole related to dormant ASICs or it’s useless.
Either way it’s not a good look.

~~~
stale2002
Dormant POW could be as much of a benefit as it is a drawback.

If someone owns 10s of millions of dollars worth of miners that are
temporarily turned off, do you think this entity would want an attack to
succeed?

No. They'd want to protect their future investment in mining equipment. They
might just turn that hashpower back in, if an attack was in progress, and take
a temporary loss to fight off a temporary attack.

Even the threat of a big player coming in to prevent an attack would make the
risk of attacking way to high.

We saw this happen recently when someone tried to attack the Bitcoin Cash
network. Defending miners temporarily turned on their hashpower to stop any
attacks. And it worked.

~~~
Nursie
> If someone owns 10s of millions of dollars worth of miners that are
> temporarily turned off, do you think this entity would want an attack to
> succeed?

Well that depends on how much they're holding and how deep they are in the
hole at the given time.

> No. They'd want to protect their future investment in mining equipment.

Unless they were in financial trouble and an attack would get them some cash,
fast. The sort of financial trouble that can happen when a company invests,
say, millions and millions of dollars into now-unprofitable hardware.

~~~
stale2002
What I am saying is, that it one "desperate" miner attacks, then 5 other
miners, who don't want to lose their investment, will defend.

The network is not static. It doesn't matter if one miner wants to make a
quick buck, because the defenders have more to lose, and would spin up
defending POW if needed.

~~~
Nursie
Until/unless a large player takes this sort of approach, like, say, Bitmain,
who have just hit massive financial difficulties.

It absolutely can be in the rational self interest of such players. Relying on
other dormant capacity to come up in defence seems fanciful at best.

------
JohnJamesRambo
Ah, the Bloomberg and TechCrunch bottom signals I’m looking for.

~~~
verdverm
A year ago, I was explaining to family why crypto was a thing. This year I'm
explaining why it crashed and why it's to be avoided. Also, why blockchain and
crypto are not the same thing.

There are many who participated in the 2017 speculation that will actively
avoid and advise against participation this go around. The bubble popped and
it will be many years before we see worthy investments take shape.

~~~
wpietri
I think another factor is that we've passed peak uncritical press coverage.
Never again will there be as large an influx of media-driven naive optimists
who think that the price will only go up.

~~~
xenihn
That isn't true, it depends on the whims of the people who determine what
those optimists say and write.

~~~
wpietri
I am pretty clearly offering an opinion here, so I'm not asserting that it's
true. But the naive optimists I'm speaking of here were the greater fools [1]
who bought Bitcoin as it was rising. Journalists are generally cynics.

[1]
[https://en.wikipedia.org/wiki/Greater_fool_theory](https://en.wikipedia.org/wiki/Greater_fool_theory)

------
jMyles
The discussion of blockchain tech on HN is puzzling to me.

On the matter of value: I suspect that if we find ourselves able to send a
message back in time two years (when BTC was less than $1,000 USD) and report
that the price is now over $3,700, that we'll find this message to be met with
an understanding that this is, at least, a validation of the use of blockchain
tech as a store of value.

I suspect that if we describe the details of the lightning network in this
message and report that transactions are radically faster and cheaper for
retail-scale use, that we'll hear cheers about blockchain utility as a
currency.

If we describe LivePeer and Fluence and the Origin protocol, if we stream
talks from this year's DevCon about the incredible Python tooling that is
coming of age and the progress on sharding, proof-of-stake, ring signatures,
and zero-knowledge proofs, I'm certain that we'll hear nothing but confidence
about the ecosystem and the extensibility of blockchain tech.

If I am permitted to send one of my recent talks[0] back with this message
about our progress at NuCypher on developing new cryptographic primitives and
cryptological narratives to accompany them, I have no doubt whatsoever that
we'll receive back both excitement and gratitude, not on account of our work
but because everybody in December of 2017 will be so grateful to know that
they're about to be alive during a time when organizations like ours actually
have the funding and mission to dust off tech that has sat largely stagnant
for the preceding 10-15 years and move it substantially forward.

Yet, look at us HN. Instead of these reactions we're sitting here filled with
cynicism and darkness. Why? Where have we misplaced our joy at these
developments?

I'll tell you what: let's just pretend that somebody from December of 2021 has
posted a message here with similar signs of encouragement. Let's imagine that
they've told us about Ethereum 2.0 and Monero coming online. That new turnkey
technologies include decentralized access management via NuCypher, buttery
transcoding via LivePeer, and fast and flexible decentralized queries via
Fluence.

Let's hear in our mind's voice about the _next_ cohort of decentralized tech
following these, including fully-homomorphic encryption (perhaps via NuFHE),
solutions to several of the open oracle problems, and blockchain use in all
sorts of gaming scenarios to ensure fairness of loot boxes and other intra-
game economics.

Let's celebrate all the adoption they report to us: medical devices that work
without the need for trust in insurance companies, communications
infrastructure with far greater robustness and in widespread use to thwart spy
apparatuses of despotic governments, sharing frameworks to ensure that media
is able to spread throughout the world despite attempts at censorship or
outdated notions of "intellectual property."

Please, let's let 2019 be a year when optimism and childlike curiosity are not
only permitted in these parts but celebrated like they (largely) were just two
years ago when the BTC price was less than 30% what it is today.

[0]:
[https://www.youtube.com/watch?v=OuY9WXK61gY](https://www.youtube.com/watch?v=OuY9WXK61gY)

~~~
mindfulplay
You are conflating greed with innovation.

We did not rally optimism and childlike curiosoty from the general public for
HTTP or TCP/IP.

You are shilling based on the popular Bitcoin playbook of Quotes and Comments.

If it's really about the technology then people shouldn't care about the USD
value of this crapshitcoins era... But no you folks not only took on the
technologically inclined people but dragged the unaware general public into
the mud took their money and fueled your drug-induced, darkweb fantasies of
lambos and Porsches.

Just stop with this bs already .. I really hope SEC comes after everyone of
you greedy technobabble mumbo jumbo Signal pump-dump idiots.

~~~
zik
Not everyone's who's interested in decentralized trustless payment technology
is a "shill".

You're dismissing innovation and tarring it with greed.

~~~
mindfulplay
I did intentionally want this to be inflammatory.

ICOs,crapcoins have took money from the general public without any regulation
and funneled into shady, dodgy ventures. So yes of course my comments come out
to be inflammatory.

~~~
dang
Please don't do that here. It damages the container regardless of how right
you are.

[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

~~~
mindfulplay
Apologies. Won't do that again.

------
walrus01
I've seen so many local startups that are essentially scams:

March 2018:
[https://www.politico.com/magazine/story/2018/03/09/bitcoin-m...](https://www.politico.com/magazine/story/2018/03/09/bitcoin-
mining-energy-prices-smalltown-feature-217230)

November 2018: [https://www.seattletimes.com/business/washington-bitcoin-
pio...](https://www.seattletimes.com/business/washington-bitcoin-pioneer-
seeks-chapter-11-protection/)

------
atiffany
When I first invested in Bitcoin several years back, I tried to imagine ways
that it could one day be deterred from becoming increasingly adopted and
valuable. Government regulation and hacking were obvious possibilities, but I
never considered “death by fragmentation” at the time. I think Bitcoin would
be a lot more valuable today if it had not been for the explosion of largely
greed-motivated shitcoins (and later ICOs) entering the market.

~~~
black-tea
It was the scalability problem that killed Bitcoin and it probably would have
happened a lot sooner without the fragmentation.

------
jron
When you flip the chart upside down, it sunk 300% over 2 years!

------
arisAlexis
long time since the last Bitcoin is dead article

~~~
minimaxir
The lack of attention to crypto as a serious financial instrument is more
damning to crypto than an indicator of its success.

~~~
KasianFranks
We'll just file this under "comments that won't age well"

------
spir
From a fundamentals perspective, blockchain has a bright future:

lending - [https://dharma.io](https://dharma.io)

derivatives - [https://dydx.exchange](https://dydx.exchange)

forecasting/gambling - [https://www.augur.net](https://www.augur.net)

on-chain "US dollars" \- [https://mkr.tools](https://mkr.tools)

------
arithma
Bitcoin seems to be getting real hurt from the lack of hype and bans from big
adtech companies (along with all the cryptocurrency stuff as well.)

[https://trends.google.com/trends/explore?q=bitcoin&geo=US](https://trends.google.com/trends/explore?q=bitcoin&geo=US)

------
roguecoder
At least this might provide pressure to reduce the environmental impact of
mining, if only to reduce costs.

~~~
baby
I see this arguments being thrown all the time, but I also like the argument
that current infrastructures needed to run "previous-gen" currencies are
actually burning way more[1]. While I wait for concrete research to estimate
how much energy was wasted in the creation and maintenance process of these, I
will abstain from spreading the FUD.

[1]:
[https://en.bitcoin.it/wiki/Myths#Bitcoin_mining_is_a_waste_o...](https://en.bitcoin.it/wiki/Myths#Bitcoin_mining_is_a_waste_of_energy_and_harmful_for_ecology)

~~~
duskwuff
That argument looks like it was written 5 or 6 years ago, long before the
modern cryptocurrency boom (and the associated rise in large-scale mining,
e.g. in China). It hasn't aged well.

------
tanilama
Funny that crypto is being called industry.

------
dikaio
Long

------
ziont
is anybody really surprised other than people still involved with this
blockchain/cryptocurrency nonsense?

The entire bitcoin pump and dump was orchestrated.

~~~
wpietri
I think this is a fine case to apply Hanlon's Razor:
[https://en.wikipedia.org/wiki/Hanlon%27s_razor](https://en.wikipedia.org/wiki/Hanlon%27s_razor)

Conspiracy was unnecessary.

~~~
ziont
ITS NOT A CONSPIRACY

[https://www.bloomberg.com/news/articles/2018-06-13/professor...](https://www.bloomberg.com/news/articles/2018-06-13/professor-
who-rang-vix-alarm-says-tether-used-to-boost-bitcoin)

DOJ is investigating. If you ran an ICO, and you still haven't lawyered up,
you are at risk.

------
arisAlexis
by the way, Techcrunch CEO was all in crypto last year

~~~
minimaxir
Michael Arrington left TechCrunch a long, long time ago.

~~~
arisAlexis
not sooo long ago and why is it relevant? he is still the founder and his
actions bear some significance.

------
jchannon
Wonder how this effects Lykke.com

------
aphextron
BTC/USD is doing just fine. Nobody who knows anything about anything made any
kinds of plans involving $20,000 Bitcoin. At ~$4k, it's still 10x where it was
2 years ago. Anybody remotely involved in BTC from it's actual inception (not
the bandwagon shirt-losers of 2017) is filthy stinking rich now.

~~~
smacktoward
_> Nobody who knows anything about anything made any kinds of plans involving
$20,000 Bitcoin._

Except for Goldman, Morgan Stanley, Citigroup and Barclays (see
[https://www.bloomberg.com/news/articles/2018-12-23/wall-
stre...](https://www.bloomberg.com/news/articles/2018-12-23/wall-street-
quietly-shelves-its-bitcoin-dreams))...

~~~
pesmhey
What stops GS from replacing their fee-based offerings with a blockchain
solution? Could this really be as obvious in hindsight as looking at Sears in
the 90s not developing an online catalog?

~~~
hn_throwaway_99
> What stops GS from replacing their fee-based offerings with a blockchain
> solution?

What does that sentence even mean? To me this is right up there with "I'll
create a GUI interface with Visual Basic and see if I can track an IP
address."

~~~
pesmhey
It literally means what the words say. What stops Goldman Sachs from replacing
whatever mechanism they use to process payments with some coin. I would gladly
accept the answer ‘because it doesn’t make sense’. Didn’t realize I’d get so
much heat for this though.

