The wild price swings, slow transactions, high fees, and loq merchant acceptance make it complete garbage as a currency. But as a store of value, none of those arguments apply. It only has to compete with gold bars, which are crappy in their own ways.
To be a good store of value its not enough that it exists and people value it, you have to be able to call upon it when you need it. That's where its back to approximating currency, and where Bitcoin's weakest link seems to be. This is probably just the beginning of the bad news.
King George used to lay claim to every pine in North America, to be called upon when he needed them for ship masts. For some reason or another he couldn't do that anymore. Historical examples abound, if you look for them, and they're not tulips: https://hackernoon.com/the-guns-of-bitcoin-1f779309a718 (disclaimer: I wrote that, which dances around a few historical reasons why bitcoin's value might not be so peachy)
> Volatility is a feature of Bitcoin, not a bug, and that is in part for reasons that have nothing to do with speculation or bubbliness, but rather follow from the contours of the utility function. It’s that latter point that hardly anyone understands.
I'd argue this is might be correct, but also irrelevant, as many people involved in bitcoin either wanted to use it as a payment method, or are only in it for speculation, or money laundering/covert transferring of wealth.
How useful is a value store where it's very difficult to actually get the value out remains to be seen, or what effect such a realisation will have on the price.
There really is no asset "there" when talking about Bitcoin. Bitcoin acts purely technically and can be traded that way. Unless Bitcoin's structure changes the price will either continue to rise as a trend, or it will crash forever. Long positions and scalpers do great with Bitcoin.
To diversify, as modern portfolio theory prescribes, investors seek assets whose prices don't change in relation to other prices, are uncorrelated. In today's world, most markets are highly correlated with each other, they are almost like separate instruments playing in a huge symphony.
But not Bitcoin. Not for now. Bitcoin moves according to bitcoin.
If bitcoin becomes more and more like "digital gold" and loses some of the volatility, however, it will also start to act more and more like physical gold on the world markets. Gold moves as a safe haven asset, and so will Bitcoin, and thereby lose its status as an investment uncorrelated to the broader markets.
If you're involved in trading, you can pretty much be given a single market quote like the S&P or gold, and generally guess the direction and possibly the amount of price changes in many or most other world markets, unless there were events specific to one or another market. Usually if gold went up, for example, the Japanese yen also gained. These relationships change over time, but they are very pronounced. You can ask maybe three questions and generally extrapolate what happened over the entire world except for cases where a local event in India caused its bourse to move independently, or for example a weather event moved an agricultural commodity. Even real estate does not escape the bonds of market correlation.
But... Bitcoin. Without a very large move in other assets, I doubt a well-versed market participant could tell you what happened to Bitcoin without hearing about Bitcoin itself (or maybe Ethereum...). To repeat myself, I believe this will change if BTC becomes established as a "store of value", it will join the symphony, but for that reason it will also lose its great appeal to institutional investors -- its uncorrelated quality, "pure alpha" as one well-known asset manager recently termed it (where alpha is independent returns and beta is benchmarked correlated returns).
So, with its volatility, Bitcoin is maybe being thought of by institutional investors as a kind of extreme spice that can add a bit of diversified risk into their larger stew. Just dab will do ya. But as more dabs are added, the "alpha" quality will wear off and it will begin to move more and more like plain old gold. Maybe less lustrous...
So maybe in investment terms as well, Bitcoin might have a scaling problem.
If you send 1 million dollars in Bitcoin, a $20 fee is negligible - The reliability of the Bitcoin network makes it worth it.
For smaller transactions you should just use a different coin.
You may feel a $20 fee is negligible, how about a 1% price move? 10%?
It's funny how often one sees these sort of high-dollar scenarios described for this "decentralized"! "currency of the people"!
Like, sending million dollar wires is a fairly niche market, and to my knowledge people regularly engaging in such things seem to be getting along just fine, there not crying out desperately for a better solution. And how exactly is bitcoin better for doing this if your million dollar transactions don't consist of the spoils from an exchange hack, exit scam or the like?
It's just a very reliable network for sending very big transactions.
Do you think the traditional channels for sending million dollar wires are unreliable? This seems like an area where the market is likely to converge on the very most reliable options and any service provider in this area with even a hint of unreliability would rapidly fade away.
The bitcoin blockchain is a great way to transfer a fixed amount of bitcoin. It is an awful, awful way to transfer a fixed amount of wealth.
Beginning with a knock on the door and two gentlemen with badges asking why you transfer so much money over - well - unconventional channels.
As for it being a store of value akin to gold? I don't think so. For various reason, even disregarding the historicity, and the physical nature of gold, the primarily reason I think it won't be comparable to gold will be because of the nature of technology. That being the lack of long term, and I'm talking centuries, hell even a few decades out, type of stability, and I just don't see Bitcoin being stable for such a long period of time. Technologies improve, and fundamentally demand constant change,and so superior competitors will emerge. Hell if anything even a state sanctioned E-Coin system would obliterate Bitcoin.
Fundamentally at this point Bitcoin is reliant on the network effect. As of even today the technology behind it is in constant flux, experimentation, and competition, what keeps bitcoin afloat is that it's a first mover, and a lot of people use it. The network effect is really a short term moat for most technologies, including Bitcoin, and as such it will not last long enough to be a Long Term store of value. So any sort of comparable "Long term store" of value in any comparable to gold is out of the question.
We have these, they're called debit cards, credit cards, paypal, etc.
For anything "state-sanctioned," centralized and "trustful" systems are always going to be more efficient, and chosen over less efficient and inferior options.
This is why it's hard to see where something like bitcoin would ever find widespread use, it's only good for non-"state-sanctioned" things.
If large numbers of people were to start doing non-"state-sanctioned" things, they wouldn't start using bitcoin, they would change the laws of the state.
There are lots of stores of value besides gold bars and Bitcoin; real estate, business equity, business and government debt instruments,...
Lightning Network is moving quickly. It is live on mainnet, tho still considered unstable.
Schnorr signatures are in development. This will further compress transactions.
Seems like progress is happening to me...
Although I suppose digging them up also has serious environmental consequences.
> It used to be "this is the currency of the future, down with cash/Visa!"
> but now you hear "Bitcoin is not a currency, it's a store of value".
Bitcoin is working exactly the same as it has always, however now because of the backlog, transaction fees are very high.
In the order of Western Union + Visa Fees + Bank Wire fees all at the same time!
I made a very small transaction for a friend a week ago (~$50) and paid $2 USD in fees. That is not enough and the transaction will sit waiting until the backlog decreases, it may never clear.
Bitcoin is kind of broken right now.
What you do is raise the insufficient fee after the fact by issuing a new transaction that is dependent on the first one, and adding a large enough fee to the second one. This is known as "child pays for parent" in BTC lingo.
That being said, the fee for a good transaction now is around $22 so it might not be worth doing for your $50 send.
There is an implementation of essentially the same concept that you are describing called "replace by fee". I haven't seen it implemented in any wallet software, but apparently it's in Bitcoin Core.
I think the tricky part is getting nodes to relay transactions that can look like double spending.
You'll probably find it's not worth it...
It would seem that getting your transactions confirmed is an auction of sorts at this point. While this is certainly not optimal for a currency, it seems like a problem with a solution somewhere.
Anyone who accepts Bitcoin runs into the problem where others can know their balance by looking up the address (and thus could be at risk for theft/mugging).
If people want to keep their balances private and not share their transaction history (or later transactions), they should use a coin that's private by default such as Monero.
Additionally, Monero has a dynamic blocksize, so as usage increases it won't experience the transaction backlog that Bitcoin faces.
You didnt say it is not yet in a tagged release, just mentioned no it isnt subadress but multisig, ehich tells me you had no idea
Either way, it doesnt matter.
I am kind of confused with the block size thing. Sure, increasing the size means more transactions can be added into the problem. Bu, as far as I know bigger block size has it's own share of problems - block propagation is slower which can cause double spending and frequent orphans means the blockchain has to keep re-organising frequently too.
Blockchain-based coins are hard to scale. The most scalable ones at the moment use a Directed Acyclic Graph (DAG) instead of a blockchain.
I think that IOTA and Byteball (both DAGs) are the most advanced at the moment in terms of scalability.
In the long term, Ethereum may have potential if they manage to implement sharding.
Another good long term bet is Lisk which aims to scale using sidechains.
This isn't terribly surprising because from the discussions I saw, the entire justification for why it could scale infinitely seemed to boil down to the creator accusing anyone who questioned this of spreading FUD. Byteball may be doing better, but on the other hand it hasn't had the same kind of speculative bubble that's done Bitcoin and IOTA in yet.
I'm sure that IOTA still has issues but I think that the core DAG/tangle concept is sound. Unlike with most other tokens, these problems should be relatively easy to fix... My bet is that it's much easier to scale a DAG than a Blockchain. But I'm sure that some blockchain-based tokens will also scale eventually.
I agree. I researched Ripple a lot and am sold on it, since it's not just a crytocurrency (XRP Ticker) but is also a protocol that Gates Foundation, AMEX and other banks are using to perform cross-border payments almost instantly and with a lot lower fees and overheads.
Are any of the others you mentioned, ex : stellar, dash, monero etc similar to Ripple? If not, what are their use cases? Any links you can point me to would be helpful thank you. (I know I can google this, but google is full of SEO-ed promotional and pump-and-dump posts, so can't really rely on that info).
I recommend reading forum posts about these different currencies to get an idea of what people think are the most competitive features/pitfalls. You could google something like "most scalable alt-coins" and then read stuff from reddit and bitcointalk.org. When a few of them have gotten your attention, do a "x vs. y vs. z" search and read more forums. You kinda have to feel it out!
In short, most altcoins are neither useful for investment nor payment. Which is a shame, because there are some coins that have substantial technical improvements over bitcoin, and nearly all of them can handle more transactions/second than bitcoin
The really big multipliers have been in so called alt-coins for years. This statement is flat out wrong.
Here's the reference website for BTC blockchain backlog. It allows you to understand what a good fee is at a given time.
It's possible for a transaction to get stuck and never be confirmed if it's fee is low enough. If that happens, then you'd need to send a new transaction, which cancels out the stuck one.
The current situation makes arbitrage less effective and slows down trade because it's more expensive to move bitcoins to an exchange though
ShapeShift.io is charging an unprecedented 0.003 per transaction. The Coinomi Android wallet is listing their minimum transaction fee (the "LOW" fee) at 0.002 as of last week. The Mycelium Android wallet is trying to scavenge about 0.0025 per transaction at the high end.
And the reason for the high fees IS NOT because of the network congestion: It's because so far the greedy bastard miners are finding where they can get away with it. Probably in fact they purposely slowing down the network to cause the congestion as a ruse in claiming it for an excuse to charge exorbitant fees. This is also an age-old trick that union workers use to get more money for doing nothing on the job by just purposely slowing down the work pace.
Right now anyway, I've seen where the average Bitcoin ATM machines are quite busy with greenhorns who are shoving their cash bills into the machines for a little dab of Bitcoin here and there. Most of those people are buying it to hold it for awhile with the idea in mind of selling it back to the same ATM machine they bought it from and turn a profit. So about the time more and more and more people begin to understand that they are being fleeced for exorbitant transaction fees that dramatically cut into any gains they would have made off of typically small investments, then they will STOP buying Bitcoin from the ATM machines.
Bitcoin will be all washed up within a couple years if for no other reason than these greedy bastard miners who are going to find out that although they made more money in a shorter period of time with their greed, they WOULD have ended up making more money over the long term if they hadn't been the greedy bastards that they are.
Greedy bastards. All of them. Greedy bastards.
Looks a bit like a bank run, complete with the lines at the teller.
The older folks in the US (the same group who put the US in the situation it's in now) are still writing paper checks, putting them in envelopes, and sending them through the postal service. Sure, you can send a bank wire, but the sender will pay $15-30 for the privilege, and the receiver often has to pay $15 or more as well. Oh, and it can take 1-2 business days; and the receiving bank may decide, based on whatever reason, to hold the funds for 10 business days.
Things are slowly changing with US banking, becoming slightly more modern; but it's still the dark ages.
I'm amused when I visit family in the US and hear local people expressing superiority over the rest of the world, while Kenya has been doing mobile banking for 10 years.
Anyway, until you've lived in the US, you don't know how sucky banking is. Any extra-bank financial system in the US is better than what they have now!
Remember just a year or two ago when it was cool to buy your coffee at a shop that took bitcoin? You wouldn't do that now, since your coffee would cost the equivalent of $20 ($4 for the coffee, $16 for the transaction fee).
It's also painful to realize how much bitcoin some of us have spent on little things in the past. I've had some coffees that are now worth $300 a cup had I treated the btc as value store rather than currency ;).
I see bitcoin as a proof of concept that was much needed, so it grew legs and became a "real thing". Something better will replace it (and I wish I knew for sure which it would be so I could "bet" on it now! ;) ).
If people actually used litecoin it’d have the same exact problems.
I wonder if this set off a bunch of triggers to sell BTC.
The solutions for this 3 hour backlog of unconfirmed transactions include: implementing SegWit, increasing the blocksize, and Lightning Network.
Edit: after refreshing the page it still had about 220k pending transactions but was doing ~11.34 transactions per second. Equating to ~5hrs.
Edit 2: Again refreshing it went to 24.61 (2.5 hrs). Another refresh went to 11.56 (5hrs). So there are some clear stability issues. But your max of 7transactions/second comes into question, or this site.
Unfortunately, it gets even worse if you want any kind of anonymity - all the techniques for that lead to much bigger, much more computationally expensive transactions.
What makes bitcoin valuable is that it’s gold without any of the downsides of gold. Hop in an airplane with the equivalent of millions of dollars in your pocket without having to trust or ask permission from anyone.
Not really. Bitcoin is totally useless in most places especially outside of the developed world, you depend on the ability to find someone to trade you spendable money if you hope to make practical use of those "millions".
> What makes bitcoin valuable is that it’s gold without any of the downsides of gold.
Bitcoin has pretty much all the downsides that gold has, the main one being that despite its value its generally not accepted as a form of payment for goods and services, but even if you intend to barter, gold is much more practical because the transaction can be executed in real-time, offline, and isn't hindered by network congestion or limited access to computers/electricity/internet/technical-literacy etc etc. If are living in Puerto Rico the day before Irma hits, are you better off with 1kg of gold coins or 2 bitcoins?
Abstract: A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a
Granted, people in unstable countries may have difficulty investing in the US stock market.
People in unstable countries may have trouble safeguarding gold stockpiles, as well.
Hence Bitcoin. cf. Zimbabwe
Imagine that a large majority of miners bet the wrong way on Bitcoin at the CME and go in hoc up to their eyeballs short BTC. Let's say 80% of the BTC mining community is short big and they need BTC for delivery now. As a general proposition, that community could reach a consensus to modify the software they are running to inflate away their debt. The consensus is just like any other fiat currency, and it is very unlike the core nature of gold. The very scarcity is determined by consensus.
In addition, at the point that miners reached consensus for new BTC rules, arguably it would no longer be BTC.
Bitcoin’s qualities today make it more like gold than fiat, but in reality it’s neither. “Digital gold” is just an analogy.