
Bitcoin Sees Wall Street Warm to Trading Virtual Currency - vthallam
https://www.nytimes.com/2018/05/07/technology/bitcoin-new-york-stock-exchange.html
======
hudon
This seems like good news for speculators (disclosure: I still hold Bitcoin
and worked at a Bitcoin exchange).

Having said that, "Wall Street" should be wary of enabling the use of a system
that is using more electricity than the country of Switzerland [0] without any
productive output. The energy consumption is rapidly rising too. Furthermore,
Bitcoin's transaction throughput is dismally low compared to existing payment
systems (Visa, PayPal, etc.) and "smart contract" systems like Ethereum seems
to still not show any productive output aside from scams and severe bugs in
wallets and contracts that lose millions of dollars.

I'm all for "wait and see", but have we ever done that with a technology that
is literally using more electricity than a medium sized nation? When are we
going to ask crypto-fans to be accountable for the burned energy? We're asking
Google and Facebook to treat our data fairly, can we ask proof-of-work miners
to treat our planet fairly? At least wait until the blockchain can solve a
real world problem before burning through the mines?

[0] [https://digiconomist.net/bitcoin-energy-
consumption](https://digiconomist.net/bitcoin-energy-consumption)

~~~
DINKDINK
>I [...] worked as an engineer at a well-known Bitcoin company). >Having said
that, "Wall Street" should be wary of enabling the use of a system that is
using more electricity than the country of Switzerland [0] without any
productive output

You worked at a Bitcoin company and don't understand the value of proof of
work? Being able to trustlessly settle shared stated across the entire globe
is unproductive output? The globe spend billions of dollars each year blowing
up mountains to sift for gold that then sit in central bank vaults to collect
dust. At least bitcoin mining can absorb some of the curtailed renewable
energy and make the payback on renewables faster.

~~~
jonny_eh
Has the growth in popularity of BTC affected the perceived value of gold? You
seem to be asserting that crypto-coin popularity will save the planet by
reducing gold mining, I'm very skeptical.

~~~
DINKDINK
Advantages of gold over bitcoin:

If there's a total internet && computer && electricity apocalypse, a physical
barter exchange with gold is more trustless than bitcoin. You can still
transact bitcoin but there's trust involved.

Advantages of Bitcoin over gold:

No trusted third party (If you're moving sizable sums of gold, you're doing it
with a trusted third party[TTP))

99.99226%[1] transaction uptime (Your TTP keep business hours)

No countries win the gold-geography lottery (Your country that has no gold
reserves can still accumulate)

Instantly assay the value (gold takes time)

You can use latent renewable energy to mine bitcoin (the way that miners
remain profitable is by using cheap hydro power that would be wasted if not
consumed) No need to blow up mountains to sift for gold.

Bitcoin is programmable value (People in places without functioning
judicial/commercial systems can create contracts with each other)

You cannot practically bring more bitcoin to market if the price increases
(The price of gold dictates which gold fields are profitable to produce)

Most importantly, it separates money that citizens use and the onus of
financial obligations that the oligopoly (Banker's bailout 2008) and political
class (Endless war) place on citizens.

[1][http://bitcoinuptime.com/](http://bitcoinuptime.com/)

~~~
mvindahl
Further advantages of gold over bitcoin:

1) Has been used for millennia. Bitcoin was invented ten years ago.

2) Accepted as valuable by most of human population. Bitcoin mostly as
valuable within internet echo bubbles.

3) Although price fluctuates, it's more stable than that of bitcoin, thus
better suited as store of value.

4) Has applications for industrial uses or for jewelry, guaranteeing that your
gold retains at least a base value. Same cannot be said of prime number data
structures.

5) Doesn't corrode and doesn't depend upon hardware or storage media to be
working.

I'm not saying that people should hoard gold, just that bitcoin is a pretty
poor substitute.

And, BTW:

> No countries win the gold-geography lottery (Your country that has no gold
> reserves can still accumulate)

Pop quiz: the population of Germany is roughly on par with the population of
The Democratic Republic of Congo. Do the citizens of the two countries
currently hold the same amount of bitcoin? If not, how come?

~~~
DINKDINK
>Although price fluctuates, it's more stable than that of bitcoin, thus better
suited as store of value.

Price fluctuations are not what you care about with a store of value. What you
care about is the elasticity of supply with respect to price. If the market
price of gold increases, the production of it will increase (though to a
lesser degree of other commodities). Bitcoin's supply curve is programmed with
time as the only input. This means that no matter the change in price, supply
cannot increase. This is a coup de grâce against every other existing store of
value.

>4) Has applications for industrial uses or for jewelry, guaranteeing that
your gold retains at least a base value. Same cannot be said of prime number
data structures.

You don't want a store of value to have a myriad of other uses because those
uses influence the price of the store of value. Say that 'Beautanium' becomes
a more popular substance use for jewelry. Now Gold loses value. The only
metric you care about in a store of value is the change in supply vs the
available supply. This is Bitcoin's killer app, This is why it has value.

~~~
mvindahl
> If the market price of gold increases, the production of it will increase
> (though to a lesser degree of other commodities).

Yet the total amount of gold on this planet is finite, and as the millennia
have passed, it has become increasingly expensive to dig it out of the ground.
These are the same properties that people laud in bitcoin.

> Bitcoin's supply curve is programmed with time as the only input

As far as I am informed, bitcoin mining farms also tend to be connected to the
power grid. May be just to keep the soft drink vending machine running. Dunno.

> This is a coup de grâce against every other existing store of value.

Limited supply is by no means unique to bitcoin. Gold and real estate share
the same properties.

~~~
DINKDINK
>the total amount of gold on this planet is finite You confuse yourself with
two qualities: Scarcity and _Controlled_ Supply. The two are not the same.

>> Bitcoin's supply curve is programmed with time as the only input

>As far as I am informed, bitcoin mining farms also tend to be connected to
the power grid.

The electric grid has no influence on the supply curve of Bitcoin. Do you
accept the fact that time is the only input for the supply function? It does
not matter if there is one miner producing bitcoin or if bitcoin's price is $1
or $1MM dollars the same amount of bitcoins are produced.

>Limited supply is by no means unique to bitcoin.

Again seems like you completely misunderstand the difference between scarcity
(limited supply) and controlled supply. There's a finite amount of water on
the planet (because there's a finite amount of hydrogen and oxygen on Earth)
too, does that mean water would make for good money? No because water is
easily synthesized from other elements. It has a very multivariable supply
function.

~~~
dragonwriter
> The electric grid has no influence on the supply curve of Bitcoin.

Difficulty readjustment mitigates long term influence of electriciry market on
Bitcoin supply curve, but doesn't prevent the current prices from short-term
influences

> Do you accept the fact that time is the only input for the supply function?

No.

> It does not matter if there is one miner producing bitcoin or if bitcoin's
> price is $1 or $1MM dollars the same amount of bitcoins are produced.

First, this isn't true over short terms, though difficulty adjustment means it
should be approximately true with a steady state allocation of mining
resources over the long term.

Second, though, supply isn't production caapcity, it's the mapping of price to
number of units _sold_.

~~~
DINKDINK
>> Do you accept the fact that time is the only input for the supply function?

>No.

Do you accept that the following line is nominally linear?
[https://blockchain.info/charts/total-
bitcoins?timespan=1year](https://blockchain.info/charts/total-
bitcoins?timespan=1year)

If you do, then you must accept that time is the only input to the supply
function.

If you don't, supply a source to show what variable you think is correlated to
the change in bitcoin. The data indicates, time alone.

~~~
dragonwriter
> Do you accept that the following line is nominally linear?

> If you do, then you must accept that time is the only input to the supply
> function.

Er, no, even assuming the omitted x-axis is linear, I don't. The other inputs
being relatively constant or having variation which mostly cancelled out each
other's effects over a one year period is indistinguishable, on such a chart,
from time being the only input. (Plus, the implicit function to which time
would hypothetically be the only input isn't a supply function, which is a
mapping from price to quantity people are willing to sell.)

------
tobiaswk
In all fairness the Bitcoin, BTC, is currently close to unusable and scales
very bad. It quickly gets oversaturated with transaction and transaction fees
rise quick. I think the conspiracy has come full circle. Those who slowly
"threw sand in its engine" has done a great job. Why are transaction fees low
today? Because no one, or a lot less, is using BTC. I know some will label me
as a conspiracist. I've been following this project since early 2011 and it
has derailed badly. The community is a toxic mess. On both sides to some
extent. I'm interested in how they will do this trading. Off-chain or on-
chain.

Bitcoin Cash, BCH, though is very interesting. It conforms to the original
idea (whitepaper) much better in my opnion. No second layer nonsense
"solutions". A simple block size limit increase (again) and enablement of Op-
Codes (again). All coming 15th of May. The very reason to why Ethereum was
created by Vitalik was because Op-Codes usage was too limited on BTC. This
changes with BCH; Op-Codes will be back and open for smart contracts. Lots of
merchants and people are beginning to use BCH. Because it is fast (0-conf
works again) and has close to zero transaction fees. It's the project I began
following early 2011.

~~~
lrvick
Bitcoin fees were cut in half on a technical level by those that chose to
adopt segwit which made transactions roughly half as big. Schnoor signatures
can further compress transactions to get even more in a block.

If in spite of these innovations blocks end up full, a block size increase is
still a tool kept in reserve.

In reality BCH did not make any hard won technical innovations and simply
reached for the bigger blocks knob. If BCH did become the globally adopted
winner its blocks would fill and create a fee market eventually too driving it
to seek the same sorts of transaction size optimizations bitcoin has made.
These roads might well converge in a similar place eventually.

I strongly suspect Layer 2 solutions are going to be needed regardless of the
knobs fiddled on an expensive but immutable Layer 1 so we might as well all
buckle up for that. Plus, atomic swaps in Lightning pave the way for
decentralized exchanges which means even better anonymization and censorship
resistance. Everyone wins with a stable Layer 2 most major coins are
compatible with.

~~~
tobiaswk
That's my point. BCH did not include some technical innovations like you
stated. It simply increased hardcoded block size limit. Simple as that. Even
Satoshi himself mentions this in his whitepaper. Other stuff has also changed.
The difficulty adjustment (DAA) algorithm has changed to allow are more stable
difficulty for miners. Segwit just changed what parts of a transaction counted
as size in a block. In reality we're talking about 200KB or thereabouts extra
space in blocks. Lightning network is based on a mesh-network. Furthermore it
completely changes the bitcoins fundamental clockwork. Suddenly you can't
receive payments if you don't hold any coins yourself. Even more detrimental;
you can't receive payments if you are not online on the lightning network. It
has several other flaws that are very hard to fix;
[https://medium.com/@jonaldfyookball/mathematical-proof-
that-...](https://medium.com/@jonaldfyookball/mathematical-proof-that-the-
lightning-network-cannot-be-a-decentralized-bitcoin-scaling-
solution-1b8147650800).

I suggest you see this presentation on 1GB blocks (tested on test-net) by
Peter Rizun;
[https://www.youtube.com/watch?v=5SJm2ep3X_M](https://www.youtube.com/watch?v=5SJm2ep3X_M)
And his talk at "Satoshi's Vision" (here he talks about what is called "weak
blocks" and how it can improve scaling and wasted PoW;
[https://www.youtube.com/watch?v=yXFuNkaYcPQ](https://www.youtube.com/watch?v=yXFuNkaYcPQ)

It's totally feasible and does not require super computers albeit a Raspberry
Pi won't do no more. Scaling to VISA level of transactions is possible. I
don't think it's really going to change too much in computing power with
bigger blocks. The size of the merkle root won't change just because blocks
are larger which means the block header size won't change.

Why do you suspect a second-layer is needed?

~~~
brandonsometig
You need a second layer(and possibly more on-top of that) for several reasons.

How do you expect to propagate and store 1GB blocks (hell, even 100MB blocks)
every 10 minutes for the foreseeable future. I understand that the cost of
storage and bandwidth has been falling for some time however if you want this
system to gain 'mainstream' adaption it cannot everyone's coffee purchases for
the rest of time. How do you keep a system like that decentralised if you
aren't even paying people to run these nodes? There certainly wouldn't be as
many as there are currently.

In a world of 1GB blocks and ultra cheap transactions it means people can
simply use it as online storage. You could upload your movie collection and
have it propagated to all of the nodes on the network.

The internet would not have scaled if we still broadcasted every single packet
to all of the nodes on the network, it had to be split up and routed and the
very same will happen to Bitcoin.

~~~
sparkie
Extremely large blocks will require the big miners to all host their servers
in a ULLDMA-like facility, because low latency block propagation gives them
the advantage. Anyone not in the club will suffer high-latency block
propagation which will put them at a disadvantage to the other players who are
all hosted in the same physical location. The result is that a single-point of
failure in the system will come not from the concentration of mining power,
but the concentration of block-propagating servers accounting for the majority
of mining power.

There are obvious questions like who will run such facility, who will be able
to join, at what price, and under what jurisdiction will it be. If the club is
run collectively by the largest miners, they would not be incentivized to let
any new competition join the club as it would collectively harm the existing
members who have the advantage.

Also, in existing trading markets, we've seen that there's an "outside club"
that can pay to host servers in these facilities, but there's still an "inside
club", who get the data earlier than the outside club.
([https://www.cnbc.com/id/100809395](https://www.cnbc.com/id/100809395))

~~~
brandonsometig
At which point you may as well put the transactions in a SQL database and call
it Paypal.

------
selectodude
Wall Street will trade anything they can make money on. Better to make money
on transactions than trying to win the ponzi scheme.

~~~
ethbro
And if it's an unregulated market, then they'll trade even more money.

~~~
twblalock
It won't remain unregulated for long if the banks get in on it, or if a large
percentage of the public starts using it. After one or two bad examples on the
TV news of banks screwing people with crypto or a major exchange hack that
affects average Americans, you can be sure regulation will be coming soon.

------
jorblumesea
Translation: we see a sucker born every minute, and we have decided Bitcoin
has enough to justify our involvement.

------
blackrock
How do you guys buy your Bitcoin? What exchange do you use?

Do you use Coinbase? Or do you have an offline wallet?

~~~
sparkie
You should always have your own local wallet, and if you use an exchange, you
should immediately transfer your funds to your local wallet once you buy them.

In terms of exchanges, there are many alternatives to Coinbase which you
should look into. Coinbase has some sketchy history like insider trading,
blocking Wikileaks without giving reasonable explanation, several times
they've turned off their markets when conditions aren't favorable to them
(sudden price drops). They're also not able to keep up with the technology as
they've lagged way behind many of the other exchanges when it comes to
implementing technical updates like segwit, bech32 addresses, transaction
batching. God only knows how long it will take them (if ever) to be ready for
the Lightning Network.

~~~
blackrock
Any recommendations other than Coinbase?

~~~
sparkie
Depends where you are. I use Coinfloor (UK). I've heard good (and nothing bad)
about Gemini for US.

I also used Kraken in the past but now I actively avoid any exchange which
deals in Tether, as they've repeatedly failed to produce an audit to show that
the money actually exists.

------
thisisit
I wonder how does the cryptocurrency community react to such news? Because lot
of people holding cryptocurrencies tend to talk about how these coins are
going to destroy big banks and Wall Street.

~~~
kalms
I think the community is fine with it, if not outright wishing for it.

Institutional money can add a big boost to crypto, although it in turn
provides amble opportunity to control the market. Which they're probably
already doing to some extent.

We'll see how it plays out, but I'm pinning my hopes on tokens and networks
provided by Ethereum, EOS or similar.

------
AKifer
Funny to see that despite all the negative voices against bitcoin, these
people still advance theirs pawns and play the game. I seriously think that
there's a perverse move behind the walls to instill fear to the commoners
towards the cryptocurrencies though the media; until all the pie is eaten.
Then in a matter of days they will flip all these negative opinions and show
bitcoin as the new messiah on earth.

------
Havoc
They'd trade pet rocks if they thought there was enough of a market in it.

Market makers win in the same way as the house always win.

Call me again when they have actual direct exposure to BTC fluctuations.

------
r32a_
How are people surprised by this? If Cryptocurrencies become huge, these banks
will just buy up crypto companies and also point their resources at building
cryptocurrency applications.

They are in the business of making money. If they can make money in crypto
then they will do it.

~~~
hndamien
The problem is that HOLDers won't sell.

~~~
xor1
What makes you say that? I would be surprised if anyone who has sat on more
than $10 million USD of crypto at any point in the past few years didn't cash
out a substantial portion of it.

~~~
hndamien
This much is true. I agree.

