They quote a "Maximum fair market value" of $1300 based on a couple of different methodologies.
In my (limited) experience, when banks forecast prices (for stocks, indices, FX rates etc) they always quote a number within a reasonable-sounding percentage of the current price, because not to do so risks being wrong and looking stupid.
This means that most of the time they are not far out, and when it really matters (eg 2008) they are miles out (and so is everyone else).
So even if BofAML actually thought that the "maximum fair market value" was significantly higher than $1300, I doubt they'd have said so, simply to avoid the reputational risk.
Totally agree. This figure is ridiculous. I actually laughed out loud when I read it. Like anything the price is based on supply and demand. The supply is fairly predictable. The demand is a complete guess at the moment. A maximum market capitalization of $15Bn? Why? The 100 fold increase risks getting ahead of its fundamentals. What fundamentals? The nature of Bitcoin since its inception has been expotential growth. I'm not saying that will continue forever - it can't - but there's nothing to suggest that this rate of growth will stop when that value of a bitcoin reaches $1300.
Anyone can predict a change of a few percent in the short term and be correct to within 10%. But where does that get you? Which one of these financial analysis publications told their readers something useful, like in 2007 there's a financial crash coming or 2009 invest heavily in bitcoin? None.
The ecosystem and brand awareness of Bitcoin is novel though. It will take a full transition from people becoming marginally aware of Bitcoin to comfortably trading in cryptos before a "replacement" even one with a better design - and IMO there hasn't been one yet - threatens or supplants BTC.
It seems like since they're just quoting a maximum, higher should be safer. There can always be reasons it didn't hit the maximum, there shouldn't be reasons it exceeded it.
The main difference between BofA's analysis and mine is that I see Bitcoin as a far superior alternative for many financial and other types of applications. For one, Bitcoin as a platform provides a global, decentralized, irreversible log of programmable transactions. For another, bitcoins as "money" are easier to secure, transport, hide, and backup than all prior forms of money ever used by civilization. (Actually, no prior form of money ever used – whether made of bank credits, paper, metal, or other substances[1] – could be backed up like a Bitcoin wallet.)
Therefore, if Bitcoin continues to work as intended (i.e., proves immune to attacks) and gets easier and safer to use (for non-technical people), it will slowly gain credibility in the public’s mind, not just as medium of exchange and store of value, but also as application platform. Over a period of many years or even decades, as the world gradually learns via trial-and-error how to use it, becomes familiar with its properties, and ultimately comes to trust it, nothing can prevent Bitcoin from gaining as much credibility as other alternatives, including gold.
In my view, public acceptance requires stability. There's nothing that I can think of in the theory or history of Bitcoin to suggest that it should, can, or will ever, overcome its volatility.
"Store of value" acceptable to laypeople will never happen, so long as Btc is volatile.
"Medium of exchange" will be hampered by volatility because the use of Bitcoin by laypeople will require them to exchange Btc for a stable currency such as government money. This exchange is unnecessary when using a mechanism such as PayPal, thus Btc inherently suffers a higher load of transaction fees.
It's a vicious circle. Liquidity of the exchange between currency and Btc would help to address both of these problems, but is beyond the scope of the Btc concept itself. It will require further innovation. A possible scenario for success is that competition drives Btc transaction costs below credit card swipe fees, thus breaking the oligopoly of the credit card processing business.
Disclaimer: I use a PayPal merchant account for my side business.
> In my view, public acceptance requires stability. There's nothing that I can think of in the theory or history of Bitcoin to suggest that it should, can, or will ever, overcome its volatility.
I think we're missing the data, but I feel fairly certain that bitcoin has, on average, become less and less volatile since it started being traded.
What would be helpful is a chart that plots a price average across exchanges, where the price on each exchange is weighted by the daily volume of the exchange in question. This would show a more accurate picture of volatility, and I bet that this is slowly decreasing, ever since bitcoins became tradable for USD.
We've already seen the market depth increase dramatically over the past few years. One can purchase or sell $1M worth of bitcoins with a slippage of 4.35% and 1.47%, respectively - if you spread it out over exchanges. That's unprecedented, I believe, although I don't have a consolidated historical BTCUSD order book to back it up.
The argument would be that going from $1 to $100 is more volatile than going from $100 to $1000 and it is therefore getting more stable. But I don't think the general public will view it that way. Normal people think on an linear and not a logarithmic scale.
It's certainly possible the general public won't view it that way, but it's clearly the right way to view it.
By calculating volatility using nominal values, we can conclude that the Google stock is 200 times more volatile than the AMD stock (because the Google stock has risen by $10 today ($1057 to $1067) and AMD only $0.05 ($3.64 to $3.69). And that a share of Berkshire Hathaway is 130 times more volatile than Google (and 26,000 times as volatile as AMD). We can also conclude that a company can reduce the volatility of its stock by performing a stock split.
Clearly this doesn't make sense, and it doesn't serve its purpose: to assess the how much money you gain/lose when buying $x worth of something and the price changes. Whether you buy $1000 worth of bitcoins at $1 and they drop to 50 cents, or you buy $1000 worth of bitcoins at $1000 and they drop to $500, you've lost the same: $500. That's the relevant metric.
Ask the general public whether they would rather hold $1000 worth of bitcoins going from $1 to $15 or $1000 worth of bitcoins going from $500 to $1000 and I'm fairly sure you'll get the right answer.
When BTC prices do not deflate in any way and only experiences inflation of 2-3% on an annual basis, call me.
While I'm on the topic, you realize that because the money supply can't be increased in any meaningful way once mining is no longer viable, prices will experience constant deflation? This alone makes BTC worthless as money.
I think there is a difference between an inflationary/deflationary currency and inflation/deflation of value.
The USD currency experiences inflation by adding dollars to circulation which causes the value of individual dollars to drop.
Bitcoin is deflationary. Bitcoin, as a currency, experiences deflation (bitcoins can only be lost, never added, over time after all bitcoins are 'found'), therefore the value of bitcoin value can only be increased as supply diminishes.
> While I'm on the topic, you realize that because the money supply can't be increased in any meaningful way once mining is no longer viable, prices will experience constant deflation?
Yes. I consider an annual deflation rate of 2-3% just as stable as an annual inflation rate of 2-3%.
> Yes. I consider an annual deflation rate of 2-3% just as stable as an annual inflation rate of 2-3%.
Please provide a single example of a viable currency that has deflated over a long period of time. Because bitcoin, by design, will force deflationary pricing forever.
Deflation is horrible. It is much much worse than inflation and any sustained deflation destroys the economy.
> Please provide a single example of a viable currency that has deflated over a long period of time.
Please provide a single example of a decentralized digital peer-to-peer payment network based on virtually fraud-immune proof of work. My point is that Bitcoin is fundamentally different than anything before it.
but the data show rates of change at <orders of magnitude> in variation. that simply is the problem. its not that its accelerateing or not, simply absolute level is not consistent with any concept of a (stable) store of value. Its a false argument to think that because the asset itself is inflating it's "storing value"; the variance of returns to the asset in increasing and the volatility as a risk factor is agnostic to direction. If it were not, it would be a fault in any event because its value as an investment would (essentially) preclude its use as a currency (because the forecasting/bookeeping overhead).
> While I'm on the topic, you realize that because the money supply can't be increased in any meaningful way once mining is no longer viable, prices will experience constant deflation? This alone makes BTC worthless as money.
On the contrary, I think its deflationary nature makes it worth a lot as money, and as long as a few other people agree, then we can use Bitcoin as a means of exchange.
The currency will be hoarded with only a tiny proportion of the stock being used for transactions. The price will increase rapidly so long as the transactional demand increases and the hoarders do not sell.
One day, of course, the currency will crash when hoarders finally try to cash out.
I'm aware of this, and I think it's the reason that BTC will never replace any of the national currencies, but I think it still has a tremendous value for smaller-scale things and has room to get a lot more popular and widespread.
Commodity prices are always unstable. There's a very good reason that only people with specialized needs write contracts in pork bellies, bbls of oil, or other highly volatile commodities.
BTC is a virtual commodity, and as such it's exceptionally unlikely that it will ever be more stable than other highly volatile commodities.
We're not talking about all commodities: we're talking about money.
There's no point in comparing pork bellies to gold: removing an entire year's supply of pork bellies from the market would send the price sky rocketing (in fact, it's probably not even possible since an entire year's supply of pork bellies isn't in stock), while the price of gold would hardly be affected.
The stock-to-flow ratio of gold is several orders of magnitude higher than that of non-monetary commodities (indeed that's one of the defining characteristics of money), so changes in supply don't affect them as much. This will also be the case of Bitcoin, in a couple of decades.
>We're not talking about all commodities: we're talking about money.
BTC isn't money. You make a great comparison of BTC to gold, a commodity. Gold isn't used anymore as money because there isn't enough of it for that role. BTC is in even worse situation. BTC is a great collectible commodity that will be growing in value, like Campbell soup paintings or Ferrari California. Great storage of value, yet not usable as money.
The next cryptocurrency which would contain infinite mining, balanced by infinitely increasing complexity, will very possibly make it as a money. It is understandable that BTC in order to crack the glass ceiling and gain trust and acceptance had deflation built-in. Now that POC succeeded the full-featured release is to come (though lets see about alpha/beta/etc... :)
However, if Bitcoin is expected to be completely mined by 2140, then for all intents and purposes it has no glass ceiling. Note that our current post Bretton-Woods system has 42 years, and that Bretton-Woods lasted ~40 years before collapsing (leading some to postulate, with the current crisis, that monetary systems blow up every 40 years).
Bitcoin can last 40 years of use without hitting the ceiling.
What is it about traditional commodities that make them inherently volatile, and does Bitcoin share these qualities? I'm not familiar with commodities markets, but the only thing I can think of that would cause inherent volatility is the inherent volatility of the physical commodities themselves, like crops reliance on weather patterns and oil's reliance on shaky international political relations.
-Bitcoin is not legal tender. Governments force banks to accept USD to pay debts, no matter what they perceive the dollar's value to be. Meanwhile banks have no obligation to accept bitcoin. This means that bitcoin volatility is more closely tied to perception than currency. This is a trait shared by other commodities.
-Bitcoin's finite supply. Once the supply of bitcoins is growing substantially slower than the size of the economy, there will be deflation until demand for bitcoins adjusts. With a fiat currency, money supply can be increased or decreased as the size of the economy changes. In a growing economy, a small level of inflation discourages hoarding and helps ensure that the currency accurately reflects the value of goods and services.
People say this means "bitcoins are deflationary" but that's not precisely true. It's true only if the size of the economy using bitcoins for currency is growing. In an economy that is stable and not growing, there should not be much deflation even if there is a finite amount of currency. If the economy grows, then a fiat currency can print money to cover the growth. Bitcoin cannot.
Thus, I would predict that unless bitcoin experiences a hoarding/deflationary spiral and crash into irrelevancy, it will wind up stabilizing in a particular niche of the economy, one that will likely become proportionally smaller over time as the world economy grows. This particular niche is likely to grow and contract more frequently than the larger economy meaning that demand for bitcoin will continue to fluctuate more than major fiat currencies. Given bitcoins fixed supply, this means price volatility.
Is this identical to other commodities? In some ways, I suppose, but I'm not sure that's a particularly interesting question one way or the other.
He's probably comparing it to central bank currencies that can be pegged to a stable interest rate. I don't think market depth alone will ever get BTC close to that, though imho it won't matter. People will just live with the instability, keeping some of their money in rate-backed currencies and some in cryptocurrencies.
> He's probably comparing it to central bank currencies that can be pegged to a stable interest rate.
What does that mean exactly? Interest rates haven't been stable for the past 100 years, and the USD isn't pegged to anything (nor is the Euro for that matter).
> There's nothing that I can think of in the theory or history of Bitcoin to suggest that it should, can, or will ever, overcome its volatility.
What is it about Bitcoin that you think leads to inherent volatility? The only explanations for its current volatility that I can think of are the fact that many new people are constantly learning about it, the financial services for it are still very young (like exchanges), and governments have yet to address it. But Bitcoin has only existed for 4 years, and has only been known in mainstream publications for 1 year.
(If you didn't read the article, cs702 thinks bitcoin could hit $90k.)
I still think you are off. The fractional reserve system warps incentives too much.
1. The world needs more than $600 of float. And most people think they have that. The difference is that its wrapped up in the fractional reserve banking system.
2. Due to inflation uninformed people are bullied into investing in mutual funds, stocks, housing, etc. with their savings. Just the existence of bitcoin as a major worldwide currency could transform the traditional saving model. If a 30 year old puts a days wages into an account and can expect a days wages out when he's 80 years old then he can drastically simplify his retirement. He can avoid speculative bubbles and bad mutual fund managers.
3. National currency reserves are currently done with sovereign debt - with the idea being that if a nation goes bankrupt they'll just inflate their currency anyway and the currency reserve may as well be in bonds. If Bitcoin were to become a major world currency, the reserves could be in actual Bitcoins.
All of this to say I still think that there is a 90+% chance that bitcoin will fail, but on that remaining percent, the limit higher than 100 times today. I've done the math a couple ways and I end up with $100k to $10m as my outliers given that bitcoin becomes a world currency.
"If a 30 year old puts a days wages into an account and can expect a days wages out when he's 80 years old then he can drastically simplify his retirement."
Your idea here seems to be that bitcoin could help you not only hedge against "inflation", but also against rising economic productivity. I.e., what a saver really wants is some kind of guarantee that at age 80 they will be able to consume the same fraction of economic output that they were able to at age 30. Could you spell out how bitcoin helps solve this problem?
(I take it for granted that hedging purely against inflation is actually a solved problem, because you can just invest in short term bonds, which provide excellent hedges against inflation. But of course they don't help at all with rising productivity).
Edit: Another - massive! - issue with retirement savings is longevity risk. How can you ensure that you won't run out of savings before you die? Bitcoin won't help you here.
Bitcoin solves that problem by being finite. Since scientific advances are cumulative and directly impact worker productivity, it is reasonable to assume that a stable currency that does not inflate will at least preserve purchasing power.
Investing in short term bonds is not only not riskless (lots of governments and corporations have either defaulted or written down their debt), but often times do not even match inflation.
Saving as a logevity risk: Yes. You don't know how long you will live, we could very well develop medicine that would keep me as a functioning senior until I'm 100 years old. But against all other alternative forms of saving, if bitcoin was a world-currency it would be the safest way to assure purchasing power.
One way money becomes less valuable is because demand for goods and services increases. So there can be Bitcoin inflation without an increase in the BTC supply.
Obviously if a comet is hitting the earth a month from now the relative demand shifts from dollars to Viagra, but we're speaking in term relative to dollars. Since the supply of Bitcoins is not increasing after it hits 21 million, there is no reason to suspect inflation.
how the f is it reasonable to assume that it will preserve purchasing power, based on the assumption that it will be stable?
I can set up a chain of assumptions about the dollar based on actual historical precedence & Bitcoiners will whine & whine but because Bitcoin is "so pure" or something you think it's safe to chain a set of dependent assumptions together & say "This is how its goin down"?
Basic supply and demand theory. When supply goes up, price falls. Since Bitcoin's supply does not go up after a certain point, all other things being equal it will preserve purchasing power vs the USD.
but why would demand remain constant? In Bitcoin, a buyer & seller are needed in order to exchange. The idea of demand remaining constant only really holds true in a scenario where Bitcoin is the 1 world currency, and even then there are fluctuations in population and productivity.
I get that you're saying all other things being equal but that doesn't really float in a real-world simulator.
How big a problem is it that bitcoins are finite ? The minimum unit of a bitcoin today is a satoshi, there can ever be max about 2200000000000000 satoshi. Is 2200000000000000 units of currency going to be enough to run a global economy ?
I've wonder about #2 though. We see the downsides of saving in an inflationary system, but a finite currency system... do we really expect that to be stable for 50 years, and if so, based on what precedent?
I was surprised to see BOA list "It's finite" as an advantage. It seems like this mentality is all anti-inflation (which seems justifiable) yet the alternative is taking a wildly experimental approach to savings. BTC hasn't proven stability within a month really yet, why trust it for 50 years? And then if you put in that 1 day's wage of Bitcoins, what happens when the market cap for BTC fluctuates? It won't always be in a steady demand, it will depend a bit on how many people are using it, no?
I am a doomsdayer also I think that it can only succeed if it always remains the same price or keeps going up, but the belief that this is possible is obviously intellectually malformed.
>but a finite currency system... do we really expect that to be stable for 50 years
No, it's deflationary. And while deflation isn't "evil" in and of itself, it causes the same problems as inflation (in reverse, obviously).
For example, if Bitcoin are restricted to 21MM units, as the population of the planet increases, an individual's wages must decrease in Bitcoin terms to maintain their real value.
That means that prices for goods will have to drop as well, which leads to terrible menu costs, and hoarding (why buy my car now when it will be cheaper in bitcoin terms next year?) In a predictably deflationary environment, it's always better to spend your money "later".
> In a predictably deflationary environment, it's always better to spend your money "later".
So if I'm saving up in a deflationary currency, it's better for me to wait upgrading my computer until the day before I die, instead of doing it now?
The thing with saying something is "always better later" is that it logically means that it never gets done, because there's always a "later" (until there isn't (ie. you die)).
>"So if I'm saving up in a deflationary currency, it's better for me to wait upgrading my computer until the day before I die, instead of doing it now?"
Then the best possible job is to sell food. You're basically forcing people to give up currency that will insanely increase in value if they don't want to die..
hah yeah this is what i was thinking about too. if you follow deflationary logic through to the end it makes you think of a Mad Max kinda world. But they expect it to stabilize when it hits the cap, no? I don't know.... experiments that take hundreds of years to run. Why not just dollar-back it? lol, i know i knowwww, they hate that. But the Canadian gov has a cryptocoin, right?
Imagine I need a car and I hear there is a 30% off sale in January. Yes, I'll wait. Im considering the lost marginal value to me (keeping my shitty car in December) vs marginal gain (saving 30%). That's what deflation feels like.
But as far as I can see, you wouldn't have bought the car without deflation (or a sale, as it were), because you couldn't afford it. So in this case it causes you to spend money that you wouldn't have spent otherwise.
Deflation doesn't eliminate the demand curve, it just shifts it a bit to the left. It reduces consumption. It reduces investment. It increases savings. It does not cause a 100% reallocation from consumption and investment to savings.
1) Savings erodes investment. Savings is the non-productive hoarding of cash. Investment is when one takes cash and deploys it in a way that creates value. In a slightly inflationary economy, a wealthy person can only remain wealthy if they deploy their capital in a way that creates more value for the entire economy. In a deflationary economy, they can get wealthier by doing literally nothing.
The net effect of this is a reduced pace of innovation for the whole economy.
2) My consumption is your income. Thus, if I spend less money, you make less money.
The net effect of this is a huge pile of pernicious effects (reduced economic mobility, reduced productivity gains, reduced innovation, reduced opportunity, reduced incomes for all, etc...).
yea i hear ya... i've always been wondering what fraction of current market volatility is due to speculation & how much is just the flaw of the deflationary nature exposing itself too soon
>"Due to inflation uninformed people are bullied into investing in mutual funds, stocks, housing, etc. with their savings."
It's not bullying, it's the foundation of capitalism; that is putting capital to work, not putting it under your mattress.
I'm satisfied that Bitcoin (or whatever succeeds it) exists, merely as a check against corrupt government. It's good that the money printers know there's an alternative. But I'm not ready to ditch the current economic paradigm, which has created more wealth for more people in the past 200 years than any point in human history.
People are disillusioned if they believe there were significantly more economically stable periods in history. Believe it or not, smart people are actually concerned about, working on, and resolving current issues. It doesn't happen overnight.
No, the foundation of capitalism is private property. Coercing individuals to accept a currency for debt payments and then inflating that currency thereby manipulating individuals to invest in markets that they don't understand is not capitalism.
I think the introduction of bitcoin into the current paradigm would only serve to deepen and strengthen it. A universal currency with no barrier of entry and a slew of other features and benefits can and should be leveraged.
Your #2 would be monumentally awful for the economy. The individual might like it if they can let their money just sit there and hold value, but if everybody can save like this, then there is very little incentive for anybody to ever lend out their money. If nobody wants to lend, then nobody can borrow either.
(Technically, the price of lending/borrowing, i.e. interest rates, would skyrocket until lenders were willing to lend, but then almost nobody would be able to afford to borrow anything unless they had something with the potential for monumental returns)
If nobody can borrow, then how does anybody start or expand a company? If starting and expanding companies gets massively more difficult, then who will employ that 30 year old in the first place? How would any new product or technology ever get created and distributed?
The Austrian theory is that this problem solves itself: 30 yr olds try to hide their money in "inflation-proof" non-fiat currencies for 50 years, and then when they cash out they get a crash course in Supply and Demand -- all these BTC flooding the market and no one producing anything for sale drives the (nominal, BTC) price of everything up, so those BTC don't actually buy much anymore, and people have to go back work to make things for each other.
A big part of the issue with Bitcoin is that our global economic system is, and for the foreseeable future will continue to be based on fiat currencies issued and controlled by central banks.
I see Bitcoin's role in all this as a way to exploit arbitrage in currency exchange rates for restricted currencies. This is exactly why it's popular in China. It is a currency whose supply is algorithmically limited and theoretically should track global inflation. The world has always had nominal exchange rates and de-facto exchange rates for restricted currencies; but until something like Bitcoin emerged there was no legal way to perform exchanges at the de-facto rates at scale.
My big worry with Bitcoin is that the supply is too limited. Currency is subject to manipulation by many forces; much of the job of a central bank in control of money supply is to counteract any intentional manipulation. With unstable prices and a limited circulation value (the total value of all BTC in circulation is only ~$12 billion) it is very open to manipulation by investment banks and hedge funds. Until BTC reaches economic scale, it's going to be subject to all sorts of shenanigans; and with no central authority to counteract the manipulative influences, I don't know that there will ever be enough trust in it for it to reach that scale.
Most of such rhetoric is just a word acrobatics. The confusion comes from using inappropriate words, because this phenomena needs some new words for a correct description.
We cannot call this a currency because having few exchanges does not make it as such. There are option exchanges and futures exchanges and other specialized institutions.
It the first place, a currency cannot be this volatile, or, if so, it is a worthless currency.
The current observable behavior is alike of futures and options - the price (not a value) is determined by expectations that people are holding about further movements of the price, so, basically it is a commodity futures speculation.
The particular properties of the underlying technologies, such as decentralization and publicly available log of all transactions are just nice (and unique) properties, but they does not magically create any value for a bitcoin, which is just a set of unique numbers.
Therefore, it is not a currency, it is a internet powered and hence globally available digital (virtual) commodity, (as worthless and dangerous as means of legal tender as derivatives) which now is in a stage of a truly global ponzi scheme, where prices are based on the pure speculation about it further movements.
The usage of familiar words in a new context is what makes the ponzi scheme rolling - people make their snap-judgments based on old "rules" about "currencies" which are not appropriate for bitcoins along with peer and bandwagon effects. Very clever.
Very interesting article, it looks very prescient right now, kudos. I agree with you that the bitcoin protocol as a p2p irreversible log of transactions is a real and still misunderstood great invention.
It's akin to the gunpowder: the Chinese were the first to toy with the volatile stuff in the 8th century B.C. But the killer app (!!) took a long time to emerge.
The current state of affair with bitcoin looks a lot like a bubble, there's no question in my mind. As long as it's a speculative device, it's actually dangerous/endangered. It needs to find a use and stability, which might take a while.
One of the strong cases you laid out is hyperinflation: I can see local bourgeois looking for a safer place to park reserve purchasing power before escaping abroad. That's a limit case, however. The rest of the people are by definition struggling if there is such a crisis.
Thanks. I really don't understand the purpose of these annoying poorly implemented document sharing sites when the original format is widely supported.
I believe the purpose is to "drive traffic", "build user base", "engage users", and later "monetize". Without supplying much value in the process, which is why we are annoyed.
There is a purpose. Several sites that depend on document submissions of different formats (like pdfs, ppts, word docs, etc.) might need an efficient way to render these document previews on a page. Those sites can use an api from scribd, documentcloud, etc. to display these files inline.
There is a certain very valid and extremely useful use case to sites like this, of course, linking random internet users to pdfs through them shouldn't be one of them ;)
I am in no way affiliated with any of these services, just came across this use case while building something for someone in the past.
I think that's not doing DocumentCloud justice. While I realize this is a precarious argument, I find it hard to believe that Jeremy Ashkenas, an active HN member, creator of Backbone and CoffeeScript, and someone I've come to respect, would work for a company that offers no value.
Maybe you're right, but in this case I do think it is somewhat transitive. Based on what I know about Jeremy, I'm inclined to think he is successful enough work somewhere that he considers 'worthy'. But I'm not certain enough to strongly argue this point :-).
DocumentCloud was created to help journalists, researchers and archivists, by allowing them to embedded, annotate, and search PDF documents in news stories. Take this CBC new story for example [0]. This allows media outlets to publish the documents "inline" with their own content, rather than asking the reading to download something. DocumentCloud works with many major news outlets (NY Times, PBS, Associated Press, etc), and they are a major playing in this space, if not the biggest [1]. Their code is open-source too, so if you think something could be improved, send a pull request [2].
Even if their code could be improved, it's still obnoxious. Downloading something sucks if it's a weird format that requires users to hunt for an application to view it with, but these are PDFs.
Chalk it up to personal preference I guess. DocumentCloud shows the document "inline", but you always have the option of downloading the original document too [1]. So, if anything, they are attempting to serve both categories.
Why should anyone create PDFs that are 100's of MBs in size?
At some point "convenience" becomes annoyance. Because instead of encouraging people to do the sensible thing like breaking documents into smaller, digestible pieces (e.g. small PDFs, page images, etc.), they are encouraged to be lazy (e.g. throw a 500 page document in a scanner that outputs PDF, and upload the oversized result to one of these annoying sites). Then the average user tries to access it and she has to wait patiently while the browser tries to load this ridiculously large file, or her browser just chokes. So, "time saved" on the front end - easy scanning of docs to PDF - can often lead to "time spent" dealing with the mess on the receiving end. The uploader gets convenience, the user gets annoyance.
Why the hell would a PDF for public use be more than a hundred megabytes? You'd think the solution to people being too retarded to properly use a PDF conversion tool is teaching them how to use it, not building a website that thrashes PDFs and hogs your computer to make sure they don't annoy anyone.
Thanks, I can see some value to it now, and it does have lower bandwidth requirements than the PDF. I think Scribd has completely switched me off to document hosting sites.
That being said (1) the link you posted is not posted within an embedded context, so there's no benefit as you described, as far as I can tell; and (2) I can't zoom in properly since it's using GIFs, which is really annoying because now I have to click a link, visit it and wait for it to load just so that I can click the .PDF link -- I'd rather click a PDF link to begin with.
You know this is HN when the top thread veers off on a tangent about the particular site used to display the article without a single comment about the actual content of said article
I am surprised to learn there are only 2,100 trillion Satoshi (smallest unit of bitcoin, equal to 1e-8 coin). For comparison, the Gross World Product [0] is roughly $85 trillion, or 8,500 trillion pennies, and growing (almost) every year.
I'm no economist, but wouldn't it be a long-term problem for bitcoin to not have enough units to represent the world's wealth? Or does the inherent deflationary nature of BC remedy this somehow?
GWP is probably the wrong measure. Instead, take a look at the money supply (m0) [2]. It's the sum of currency in circulation plus money available in demand deposits. For Bitcoin, that's essentially the market cap =~ $15 billion. Total m0 for USD is about $3.1 trillion. [1]
M0 would work as a comparison only if nobody saved in BTC. If people did save in BTC, you'd need a much broader definition of money supply as comparison, and cshimmin's comparison makes sense.
And since that's a common objection: a reserve banking system on top of BTC would at best last two generations due to a lack of a central bank.
If we use M2, which is like $11t, then Bitcoin seems to be in the same situation as the dollar.
$11t is 1100 trillion cents. Bitcoin currently has exactly the same amount of indivisible currency units: 1100 trillion (11,000,000 BTC which are divisible into 100,000,000 units).
Interesting point. But as bitcoin adoption (hypothetically) increases, its market cap should approach some significant fraction of m0. And m0 is presumably increasing with time, while the total supply of BC does not.
As others pointed out, this can supposedly be relieved by updating the protocol to allow greater divisibility.
- Allow unspendable dust to evaporate and return to the miners.
But surely by the time we get to the point where adoption means each satoshi is worth say $1 or 1 cent then this dust will no longer be dust so why shoud it be unspendable?
Of course the bigger issue will be the 1000's of coins that were mined and have subsequently been lost, e.g. 7500 coins in a landfill site in Wales (perhaps that will become the equivalent of a gold mine with only one tiny bit of resource at the bottom).
You can send money to accounts which are provably unspendable. It's a public key that provably has no private key. Some people send satoshis to these addresses to store data in the block chain
> I'm no economist, but wouldn't it be a long-term problem for bitcoin to not have enough units to represent the world's wealth? Or does the inherent deflationary nature of BC remedy this somehow?
my guess is bitcoin would just eventually be treated like gold or just used for larger transactions, and some other currency (litecoin?) would be used for smaller/day to day transactions
But if no more coins are generated, what happens when Bitcoins are lost? Won't that be a problem?
…The Bitcoin protocol uses a base unit of one hundred-millionth of a Bitcoin ("a Satoshi"), but unused bits are available in the protocol fields that could be used to denote even smaller subdivisions. [1]
Won't loss of wallets and the finite amount of Bitcoins create excessive deflation, destroying Bitcoin?
…Bitcoin, however, offers a simple and stylish solution: infinite divisibility. Bitcoins can be divided up and trade into as small of pieces as one wants, so no matter how valuable Bitcoins become, one can trade them in practical quantities.
In fact, infinite divisibility should allow Bitcoins to function in cases of extreme wallet loss. Even if, in the far future, so many people have lost their wallets that only a single Bitcoin, or a fraction of one, remains, Bitcoin should continue to function just fine. No one can claim to be sure what is going to happen, but deflation may prove to present a smaller threat than many expect. [2]
Or bitcoin backed currencies, given bitcoin will someday be somewhat stable. But this is still far away, worrying about this is like a startup worrying about scaling their infrastructure to twitter-sized userbases when they don't have a product yet.
You're putting the cart before the horse. It's because the value of the dollar deflates that prices for things increase. The worth of a single unit is not constant. That's why there are more millionaires than ever before - not because we all have increased purchase power but because the value of the individual denotation is less than before. You don't need an infinitely scalable system of measurement; it's an illusion that such a thing is even possible.
It's just decimal numbers and not written in stone. I guess you could divide it further down to smaller units if needed, probably with some upgrades to the current protocol.
In the reference client it's represented as a whole number and infact the denomination Bitcoin is an abstraction on top. They may have changed this recently but I was under the impression the units are not represented as a decimal number.
That's correct, Bitcoins are represented by 64-bit integers, since it's usually a very, very bad idea to use floats in the financial realm.
I suspect that Bitcoin's lack of divisibility past the satoshi won't ever be an issue, since there will probably be other digital currencies in use for small, everyday purchases (perhaps one of the altcoins, but more likely one that hasn't yet been created).
It seems to me like this isn't likely to be a problem. If it were an order of magnitude different from the number of pennies, we might need to worry, but it seems likely that one cent is far more granularity than is really necessary.
I've read many comments saying the protocol can be modified to add n more decimal places without too much trouble in the future if required. Would be a nice problem to have anyway!
But this is just a question of granularity. When Zimbabwe hit hyperinflation they printed trillion-dollar notes because the 1-dollar note was too fine-grained to be feasible. Conversely, Britain used to circulate half-pennies, because there was a time when a penny was too large a unit to represent realistic transactions.
In other words, as the world's wealth grows, won't we need a currency with greater range than "on a scale from 0-2,100 trillion, how valuable is X"?
"As Bitcoin becomes more popular, competitors will face higher barriers to entry, making it less likely they will be successful in supplanting Bitcoin’s market share. Several other digital currencies with similar features to Bitcoin have been introduced with limited success."
They think it's a “Winner Takes All” system. I completely disagree. If one cryptocurrency gets accepted, others will be right behind it. It's all automated, it's all decentralised. There's zero reason bitcoin should be the only one.
Yeah, except, you know, the infrastructure behind it which is getting harder to replicate by each passing day, the amount of money being invested in Bitcoin companies, the first-mover advantage, the fact that no other alt currency is being accepted by merchants and the fact that most of these alt coins offer 0 advantage over Bitcoin, with the exception of namecoin, for example, which is unique in it's own way.
A big misconception I've noticed is that people think ASICs are just for Bitcoin, while the reality is that ASICs are Application Specific Integrated Circuits. While the current ASIC systems being used for Bitcoin mining serve no other purpose, the general concept of an ASIC miner existing for Litecoin mining, or anything really isn't a farfetched idea - you just need new hardware that handles the Litecoin mining and will be single purpose just like the Bitcoin ASICs are.
What company is doing the advertising? Are they subject to FCC regulation? Seriously though, there being no ASIC hardware for ltc mining yet means it's "ASIC-proof" in the same way that it not raining in New York today means that New York is "rain-proof". There's been no drive to build and (more importantly) sell ltc mining ASIC hardware.
No, Litecoin chose scrypt specifically because they thought it would not run any faster on GPUs or ASICs and thus it would be pointless to ever develop those ASICs. It looks like they may have been wrong twice.
Maybe, maybe not. I'd like to compare it to social media. Facebook has a massive user base and is very hard to defeat, because there's no way in for competitors. But Bitcoin has no central servers, no one company calling the shots. Someone, somewhere could decide to exchange Bitcoins for Xcoins. Then Xcoins could exist next to Bitcoin, no problemo.
I agree, they could exist. But why would anyone want Xcoins, Ycoins or Zcoins instead of Bitcoins? It's not a choice between meaningless desktop wallpapers or your favourite cheeses - this is a currency. And for that you need faith that other people will accept it.
Why would people want Bitcoins in the first place? Whatever the source of demand for Bitcoin was in 2009 (when it was monopoly money) should be equally applicable to competing systems today.
People started playing around with Bitcoin because it was something new and exciting, it was truly the first of it's kind! Ideas were being thrown around, more and more people started joining the ecosystem, mining was getting really competitive, Bitcoins found their place on Silk Road, etc.
The point I'm trying to make is that Bitcoin was first! And all that excitement and experimentation over time translated into monetary investments and architecture, something the alt coins will have to work really hard to obtain! Not saying it's impossible, just highly unlikely.
You have not actually answered the question. Experimentation and competitive mining do not translate to demand. Why did people ever start exchanging valuable things for Bitcoin?
I did answer your question, read it again. Do you think that the guy who sold a pizza for 10'000 put some sort of actual value on Bitcoins? No, it was all good fun. You can also include in the mix the idea that this technology seemed like it might go somewhere at the time (still does!) so it might not have been the value at the time that people were putting on Bitcoins, but the value in the future.
It's not that easy answering those kind of questions to be honest, without polling everyone who was involved in the community from the beginning and asking them what was their reasoning. So I can only speak for myself.
Not necessarily true. Just look at gold - you can say the same thing about competing metals, but gold was the original and is seen by people as the true de facto metal currency. This has been the case for hundreds of years.
because of all of Bitcoin's black market/early-adopter emotional baggage (the BOA report addresses this as Seigniorage). I'm not saying Litecoin is any better but my best guess is that eventually a solution will emerge with a model that negates the need to mine in order to maintain the integrity of the blockchain. (Maybe something that incorporates such costs into the exchanges, which then form a network that does this processing? Not actually saying that would work, just an example).
Basically a system that is "more professional" will come out, think of it as Bitcoin 2.0. All the vendors will adopt since they can co-opt a lot of the same POS systems they're already using (how hard would it be, really, to accept 2 forms of cryptocurrency instead of 1?)
Other exception: litecoin (or, well, just scrypt in general). Things may change eventually, but for now the scrypt hashing algo has staved off ingress of ASIC miners. This matters because ASICs are not commodity hardware- you need deep pockets to play that game. That takes us right back to more centralized control of the network.
Because it gives a chance for end-users to be miners themselves, which in theory keeps the whole network democratised.
In the Bitcoin network today, two mining pools ( GHash and BTC Guild ) between them have over 60% of the mining capacity. There is no way for end-users to meaningfully nudge the behaviour of those pools, which in turn grants them great power over the future of the protocol and network.
Each of those pools alone has twice the capacity of the next largest ( Elgius at 700 Thash/sec ) which in turn is twice as large as Slush, and so on...
An end-user in the Bitcoin network, not owning sufficient ASIC hardware to grant 'access' to such pools, is dependent upon them.
I've also been quite curious - is it even possible to make modifications the protocol with so much of the current hashing power implemented in application specific hardware?
Yes. Hand waving because I'm not real familiar with the specifics, the hardware implements a very small piece of the protocol and needs a supervising controller to tell it what to do.
As long as they are easily interchangable (I can swap my LTC for BTC in liquid markets) it's not so much of an issue. Services could make these transactions seamless.
I'm not a LTC or alt coin fan, but I don't think BTC infrastructure is really an issue.
What I find interesting is the chart where they estimate daily mining revenue to be on the order of $10 million/day, assuming current prices. Probably, that computation should be easy to verify using the various Bitcoin websites.
Fundamentally, Bitcoin is a transaction ledger. I suspect a ledger supporting the same volume of monetary transactions could be implemented using a single moderately sized server. Even if you calculate with decent margins and fail-overs, the true cost of providing most of the functionality of Bitcoin is more like $1000 per year. (I'm not calculating software development, since the Bitcoin software development also doesn't figure into those $10 million / day).
How valuable is the fact that Bitcoin is decentralized and therefore very difficult to control for governments? Is that worth $3000 million per year or more? And is there truly no alternative way to get there that is cheaper in terms of computing power?
If you're long BTC, it seems to me that that's what you're betting on.
If the answer were No to either of these questions, there would eventually be a correction.
> What I find interesting is the chart where they estimate daily mining revenue to be on the order of $10 million/day, assuming current prices. Probably, that computation should be easy to verify using the various Bitcoin websites.
One thing I like to point out is that right now mining is over-subsidized by the basic protocol: why is the block reward 25btc (or whatever it is now)? It's completely arbitrary and is paying the miners more than their services are worth (hence the arms race to earn as much of the reward as possible).
The point of mining is to secure the blockchain and render it infeasible to perform double-spends, right? But double-spends are not that disastrous: a few double-spends are an inconvenience and not a disaster for Bitcoin. There is no need to allocate 25btc a block to achieve the current record of close to zero successful double-spends. It is wasteful.
So as the block reward declines, we'll see more reasonable amounts of revenue flowing to miners and hence also a decline in how much computing power (electricity) is spent, eventually converging on what is optimal for securing the blockchain.
So... you'll have miners who have sunk huge investments into powerful computers who are unhappy to see their investments become worthless, and who have the computer power to force high transaction fees onto Bitcoin users. That'll certainly be interesting to watch.
Somebody is going to lose big time. The question is whether Bitcoin as a currency will survive in the fallout.
double-spends are not that disastrous?
You've go to be out of your mind. If your bank or credit card allowed you to double spend your account they would be out of business very very quickly. Same thing applies to cryptocurrencies.
Are you sure you understand how double-spends in Bitcoin work? If you did, the right response would not be to double-down and engage in false dichotomies where a single double-spend of any transaction ever is a 100% disaster, and instead, adopt the more nuanced perspective that a few double-spends will not kill the currency, will save vast amounts of computational resources, and users can opt into however much security they require by waiting an appropriate number of confirmations.
$3000 million is certainly a lot less than the cost of a military powerful enough to defend such a centralized system from government takeover. Also, I think the right comparison is not a hypothetical single server handling transactions, but the current bloated global financial industry. I'll bet $3000 million doesn't even cover the air conditioning bills for the offices of the financial institutions whose jobs would be better handled by Bitcoin.
As for the military: That may well be true, but who is willing to spend that kind of money in a sustained fashion just to have a system that is safe from government takeover? Libertarian ideology only gets you so far. Will libertarians put their money where their mouth is?
As for the bloated global financial industry, there are two points. First, it does more than just a simple ledger (think the overhead of dealing with fraud in a way that people are willing to accept). Second, it's plausible that Bitcoin will help de-bloat the financial industry, at least the payment services part, and that would certainly be welcome. That doesn't mean that Bitcoin will survive in the long run, though.
> And is there truly no alternative way to get there that is cheaper in terms of computing power?
If you discover one then please let us know. Right there there is no known alternative to proof-of-work when trying to reach consensus in a distributed system.
> There is at least some chance that a big awful corporation is more trustworthy than a plurality of miners.
Definitely. But it's about central points of failure, not trustworthiness. The trustworthiness of a company is irrelevant if the government decides to confiscate all its assets.
For people doing transactions, I'm pretty sure trustworthiness is what it is about. Very few people in the US or EU have concerns about the government seizing assets held on their behalf (you can reply that they should have such concerns, but as a practical matter they do not).
> In PoW when you attempt to mine you must expend energy and so you should only mine on a consensus which is likely to be the surviving one if you want your work to not be wasted. In PoS the same is not true, and an optimally rational PoS miner will attempt to concurrently mine all forks which he does not hate.
> Originally the signed blocks in PPC were supposed to be a bootstrap mechanism until most of the mining was PoS based, but then some clever miner started mining many possible histories and finding ones where he magically got lucky and his coins were the selected stake for all the blocks.
The bitcoin mining analogy on p. 2 is actually pretty good IMHO -- I've tried to explain Bitcoin to others before but it always gets a little abstract when explaining proof-of-work.
It is more than common for banks to invest and hype markets (ie. chase artificially pumping the Facebook IPO). They can because of their sheer size, so why not?
Their sheer size also represents two reasons against their investing significantly in bitcoin: one, any buying or selling on their part will significantly move the price of BTC because the markets are so thin, and two, there are regulations that force them to control risks, and I'm not sure what, if anything, such regulations have to say about buying cryptocurrencies.
These all Bitcoin PR actions are quite similar to situation on gold market few years ago. And we know what happened with gold prices.
US is exporting "green paper" and importing physical goods. Do you really believe that the US government and banksters will opt out of all fiat currency benefits?
It is interesting that China government is honest enough to tell the people what Bitcoin really is.
Still 3 times what they were 10 years ago. It seems unlikely at this point Bitcoin will collapse back to the $10 it was a year ago, even if there's a massive crash. For whatever reason, this year was a turning point.
>For whatever reason, this year was a turning point.
There's a few reasons for that.
The banking crisis in Cypress
The opening of BTCChina
The US Senate hearing on Bitcoin
The explosion of price caused by the above caused it to be in the press, which acted as a positive feedback loop and caused further explosion of the price.
Well, I have a feeling it will go higher. I've only been paying attention recently, but as I understand it, 30-40% of generated coins have been inactive since 2009-2010. If the market cap is 15bn, then we can assume 11538461.538 coins exist, but if say 8076923.076 coins (70%) then the value of a coin is 1857.14USD or the market cap is closer to 10b.
If most of merchants on the internet are willing to accept bitcoins, then a bitcoin can be worth 100x more than $1,300. It is a value of a finite resource like the value of a diamond.
Comparing the market for btc to the market for diamonds is not flattering for btc. The diamond market is thoroughly rigged. Try selling your second hand diamonds and see what you get for them.
Yeah, if Steam or even, let's dream a second, Amazon ever accepts Bitcoins, this will make the utility of Bitcoin explode, and its value should go up as a direct result.
That's like saying "You can Convert your Gold Bar in Dollars and shop on Amazon so that doesn't change the utility of Gold" . This is wrong. If tomorrow my convenience store accepts Gold coins, of course it increases its utility because it removes time, effort, and additional steps (i.e. barriers) to use it.
Yeah the utility would increase, but I think his point was that it wouldn't "explode".
I think it's more accurate to say that Amazon accepting BTC would place a minimum value on BTC, assuming Amazon didn't peg the price of items in BTC to the price some other currency, for example if they offered to sell the Nexus 7 for 0.5 BTC, then 1 BTC would be worth at least USD600.
The reason why I said it would explode is because right now Bitcoin has virtually no utility on the market, apart from niche usage (HB, Namecheap...).
As for the value of BTC, nothing would prevent Amazon to have a fixed price in USD and a floating/real-time adjusted price in BTC (that's what merchants using BTC do anyway currently).
If Amazon ever accepts bitcoin, you're effectively allowing Amazon to track all of your non-Amazon bitcoin spending too (via the public ledger) since they'll know your address and/or name. You'd have to go through a third party to obfuscate the bitcoin's source wallet, which I suspect most people won't do (if mass adoption of bitcoin occurs).
The moment a physical address / name are associated with a wallet, any spending from that wallet can be tracked back to you forever. If a substantial number of people are using bitcoin on Amazon, then effectively Amazon will be able to track what and where all of those people are spending their money.
Multiply this across all retailers, paycheck services, government institutions (e.g. the IRS), etc... and bitcoin effectively allows many corporations and governments to track any of your spending and (perhaps more importantly) wealth associated with bitcoin. This, I suspect, will ultimately limit bitcoin's adoption.
Who says you are limited to having a single wallet anyway ? As far as I know nothing prevents you from having 10 of them. It's not different from having separate credit cards, which is something people already do nowadays.
As for the tracking of your spending, it's already happening when you have a credit card. I don't know if Amazon know about your spending outside of their marketplace, but Mastercard, Visa and others certainly do, and I'm not sure whether they keep that data entirely private or not - Nothing would stop the government to ask them directly for your data, for example.
For sure, you could have multiple wallets. My point is, the second you spend from one wallet, that wallet may be forever "tainted".
Admittedly, governments can already request credit card data, under court supervision (ideally... unfortunately, it seems with an exception for the NSA), but with bitcoin you are voluntarily placing this information on public record.
If you ever want to buy something with bitcoin, the retailer can immediately look up how much money you're worth (or at least that particular wallet) when you give them your wallet address. They can also immediately check if you've spent any money (and how much) with their competitors' known public wallets.
There will likely be aggregation services that will associate multiple wallets that are connected with a common address (just like modern day data collection agencies) and sell this data to retailers. Advertisers will know exactly (or at least a lower bound) of how much you're worth and where you like to spend your money.
If bitcoin gets traction, it will effectively ruin any financial privacy we have remaining. It's one thing for a government to have access to this, it's a whole other world of problems when everyone from my neighbor to my cable company has access to it.
My point is, the second you spend from one wallet, that wallet may be forever "tainted".
A wallet usually had multiple addresses, and there's no reliable way to tell if two addresses are from the same person or not. So if you have funds on your public address A, and you transfer some to new address B, and later you pay with B, there's no reliable for Amazon to tell if A belongs to you or not.
They can also immediately check if you've spent any money (and how much) with their competitors' known public wallets.
That's not how it works. Companies can't just tell people to send money to their public addresses, because it'd be very hard to tell payments apart. They generate random addresses for each client, which they then transfer back to their main addresses.
But since most sites use payment processors like Coinbase, what really happens is that the processor generates their address, which the user send money to, and then they use internal accounting to send a single transfer to the retailer.
So all Amazon would know is that you spent your money with someone who uses Coinbase, but only Coinbase would know who.
My knowledge of the blockchain is quite limited but wouldn't seeing who sent the equivalent amount (plus/minus transaction fee by processor) to the processor that subsequently goes to amazon be quite trivial? That leaves you with the original wallet, and although it is not hard proof that all wallets are yours, wouldn't transferring between your wallets be visible too, tainting all wallets over time?
Let me try to unpack the problems. sgk284 described two situations:
- One is that Amazon can identify your wallet when you pay them for something.
My objection is that if you have multiple addresses, it's not easy at all for Amazon to know if they all belong to you or not. Of course, it doesn't work if you just create an address, transfer the payment amount to it, and then immediately transfer it to Amazon.
But if you keep a savings address and few payments wallets and maybe a web wallet (which is not really a "wallet", since it mixes your bitcoins with everyone else's), it becomes increasingly hard to tell apart.
- The second problem is that Amazon, having identified your wallet, can then see what other retailers have you bought from.
But this doesn't work, because other retailers will use payment processors, and that kind of tracking (correlating in → out) doesn't work, because payment processors don't do that. Instead, they pool all the payments and send you (the retailer) a single transfer at the end of the day/week/etc.
I don't see it. There's an added step (exchange) for anyone wishing to transact in Bitcoin compared to just putting their debit/credit card details in to such already respectable sites... and, if anything, you want more reversibility when dealing with sites you don't trust so much, not less.
For this reason I don't see Bitcoin exploding based on its utility as a payment platform, at least on-line. Fiat NFC mobile payments can be made just as convenient on the high street as well.
IMHO Bitcoins success with the everyman really hinges on being a super convenient but secure alternative for casual payments.
I like this approach of setting a ceiling on the potential value:
The world GDP is somewhere around 50 Trillion Dollars ($50 x 10^12). Bitcoin is designed so that there will never be more than 21 Million in existence. Let’s say that there is a possibility that Bitcoin could one day constitute 1% of world transactions. (I could envision the percentage being much higher, or 0%, but 1% is a good place to start). If this were the case, then
($50T x 1%) / 21M BTC = $23,809.52 / BTC
(Again, this isn’t a scientific treatment of the valuation of a currency, but a back-of-the-envelope approach.)
So we could see how the price of a single Bitcoin could increase from its current value of ~ $550.00 to $23,809.52. What is the likelihood of Bitcoin succeeding in being the currency used in 1% of world transactions? Let’s say it’s 10%. (Again, exact value not important.) You get a risk-adjusted value of $2,3809.52.
Diamonds can be synthesized by well-understood processes, but "easily" might be pushing things a little; synthetic diamonds aren't (just) expensive because of the artificially high price for natural ones.
It's not acceptance. If Amazon offers Bitcoin payment next to Paypal tomorrow, not much will change. The question is: When will prices of goods become stable in Bitcoin?
Imagine a web agency that decided earlier this year it will pay its designers 5k USD + 10 Bitcoins a month (as a nice perk). That agency would be bankrupt by now :)
You don't need to have prices of goods stable in Bitcoin - they can be adjusted in real time vs a fixed value in dollars. You are not paid in Bitcoins anyway. Bitcoin is just a way of exchanging your dollars/something else to them and make payments online without fees. With bitcoin you can, in theory, get rid of an expensive credit card, for example.
But isn't what really matters whether Amazon turns around and uses those bitcoins as bitcoins or converts them to USD? What benefit would the average consumer get from turning their USD into bitcoin to spend on amazon?
And what does that do for the average person? Marginally cheaper prices? Does that offset the steep learning curve and the fact that you're effectively on your own if something goes wrong? Other players(or perhaps even Amazon themselves) can step in to fill that gap, but then you're back at where we are today. Noone has yet made a convincing argument for why bitcoin-as-a-currency will take off in any meaningful way beyond niche markets serving niche customers without the addendum that re-centralization will have to occur.
But more importantly, what matters is whether the manufacturers and distributors accept and use bitcoin amongst themselves all the way along the resource chain. If Amazon immediately turns around and converts the btc revenue to usd in order to pay for inventory, then what point is there in using btc in the first place? Right now it's a niche group of people using bitcoin to actually buy things(at their own expense at that), and without a doubt the retailer is immediately converting that revenue to usd.
Well if you want to create a new currency you have to start somewhere, don't you ? The bet of Bitcoin is ultimately that it will be stronger than the fiat currencies out there, and that in case the USD, Euro or other key means of exchange should fall, the Bitcoin could be a value of refuge which is both convertible in other currencies and usable to pay for stuff on the net (and maybe in real shops, one day).
I don't think you fully grasp that there is a limit in the supply of Bitcoin in the long term, and that is exactly the key differentiator vs fiat currencies printed when governments need to pay their debts, ad vitam eternam. Some people say it's because of this structure that Bitcoin will fail, but in the end that's the only reason that Bitcoin will actually thrive if it is successful.
None of that addresses any of my points. Yes of course there is a finite supply of bitcoin and thus it is inherently deflationary. That's a good thing for hoarders, and the current volatility is great for speculators. I'm not seeing any key advantages for the average consumer, not until they're paid in bitcoin and there are similar financial services as today. But then what has really changed?
You can use just one. Some like to play it safe, though, and keep an "active wallet", where they have a small portion of their money (especially if they have a lot of Bitcoins), and they keep the rest backed-up (and encrypted) and somewhere safe, locally, to protect themselves against hacks.
No, you end up with a single wallet with multiple addresses. FWIW, by default, every time you make a transaction you send the change to a new address, too.
These recent analyses, even if correct, attempt only to compare bitcoin to currencies or commodities. They are not addressing the potential of new functionality enabled by features of bitcoin such as multisignature transactions and the nascent payment protocol. They don't address the network affects either. Bitcoin only has to get a toehold on a class of transactions and will then start to become more valuable.
The two are not mutually exclusive but in fact highly correlated. I would argue adoption is a function of market cap, volume and price. Stability will come, but BTC has a lot of appreciation to get through which will not be easy.
When I can get a government-recognized financial product - 401k, ISA, current account, whatever - that is linked to BTC, in most major developed countries, insured against theft, the market-distorting factors should be gone.
BTC will become the global CONSUMER method of exchanging value. Up and only up (of course volatility will persist during the initial stages of breakout). Exciting times are ahead.
Interesting reading, coming from BoA, but nothing really new there, except from a rough estimation that BTC's intrinsic value is/will-be ~ 1300 USD, which could be way off the mark.
Miaow! The analysis is absurd because it treats Bitcoin as the only representative of an asset class (crypto currency), rather than one of possibly hundreds.
There are dozens of altcoins now but LTC is the only one with any real cap - and its purely a speculatve vehicle, whereas while BTC is mostly speculative, you _can_ actually exchange BTC directly for goods and or services in a rapidly increasing number of ways.
The ecosystem and brand awareness is novel for BTC, so in that respect I don't disagree with the analysis having focused solely on it - however, I do find their number (remarkably close to current price) a bit leading.
Pretend it is 1 year go. Assume at that time that BTC was trading for 50 USD. (I pulled this out of thin air, somebody can look up the real historical rates at that time, if curious. But I know it was much much lower than present.) Pretend that BoA came out back then with a fancy serious official "expert judgment" report saying that the maximum fair market value of BTC would be 70 USD/BTC. Now let this digest in your mind.
And that this type of thing is happening all the time in the "serious" financial/business/entrepreneurial world. Nobody's an expert about the future. (Nor on the present.) It's an unknown country. It doesn't exist yet. I won't say that literally anything could happen in the future. But there are so many things that can, and so many variables and moving parts, and so many unknowns, that it's often effectively equivalent to that.
If a man steps out of a Time Machine from the Future, and tells me the maximum value is 1300 USD, then, maybe I'll believe him. But I'd still want some independent verification that his box can truly travel in time. And these BoA folks aren't even claiming they have that.
When is the bubble going to burst? I'm just asking because I've been told it's been coming for years, yet BitCoin is now many thousands of percent more valuable than it was when I was first told that it was another tulip bulb.
In fairness to you it is very difficult to distinguish an Internet-style network effect, where there is exponential growth, and a bubble. But it's not impossible. This is exponential growth due to a network effect because BitCoin represents real value and is not a bubble.
Wrong. The only thing worse than losing money in a bubble from a banks point of view is missing out on a rare explosive paradigm shift. It makes perfect strategic sense for banks to invest in Bitcoin.
In my (limited) experience, when banks forecast prices (for stocks, indices, FX rates etc) they always quote a number within a reasonable-sounding percentage of the current price, because not to do so risks being wrong and looking stupid.
This means that most of the time they are not far out, and when it really matters (eg 2008) they are miles out (and so is everyone else).
So even if BofAML actually thought that the "maximum fair market value" was significantly higher than $1300, I doubt they'd have said so, simply to avoid the reputational risk.