6 ms·

I don't see anything 'safe' about bitcoin ownership, it's quite volatile and risky, and not backed by any asset. So, not really safe in any classical sense.

kinghajj 10y ago
Bitcoin is its own asset, just as gold, or any other commodity, are assets.
mdpopescu 10y ago
You mean unlike rupees? :)
kobeya 10y ago
What asset backs dollars?
- edblarney 10y ago
  "What asset backs dollars?" USD are mostly backed by T-Bills, i.e. government bonds, i.e. the faith you have in the US government (i.e. people of the US) to pay you back. Oddly - they are priced in dollars creating a really odd circular dependency. If the US government paid off all of it's debt today, most currency would be sucked out of the market! :) Since 2008 - some of USD is backed by crappy real-estate. Euros are backed by 'strong assets' for the most part: real estate, high grade bonds (I think) etc.. The reason the Euro is a very strong currency is because none of the European countries trust each other to not print money willy nilly. So if a bank wants Euros, they have to put up good collateral. This is how Germans know their Euros are not going to devalued by Italians at the printing press. RMB is backed by nothing really, just faith in the Chinese government, which is why people don't want to hold them. If China wants to become a real player they have to have transparency, which means they cant print money willy nilly, which means they lose some crazy monetary control they have today. But they think they need that super money power to 'centrally manage' the economy. You can't have both. They either need to have a currency with more integrity - which other nations will 'buy into' - or - they can keep their currency kind of a fiction, but which allows them to turn their economy on a dime if they need to. (Question is, will they turn it in the right direction?). If Bitcoin were used broadly in some areas - say across a bunch of S. American countries that don't trust their governments, and it was widely used by the citizens, then it might actually have more integrity than say the RMB. Bitcoins cannot be arbitrarily devalued, whereas RMBs are quite often. The big risk with Bitcoin is that people stop needing/wanting them and they become worthless. Remember that humans are susceptible to up and down 'manias'. All it takes is one rumour and selloff to wipe out Bitcoin for good. If there is a really bad report about US economy, the dollar might go down - but there is 'underlying support' for the USD - people still need them to do commerce, pay taxes. With bitcoins ... a single downturn would wipe them all out for good. They'd have no reason to come back.
  - lhl 10y ago
    The bigger problem with Bitcoin today is that it can't be used for regular transactions. Due to the 1MB blocksize cap (that people having being trying and failing to fix for 2 years), Bitcoin has been limited to ~3tps, has permanent backlogs in the mempool in the thousands (and climbing to tens of thousands during busy times) and tx fees have risen to 10-20 cents (or more) for regular transactions, making it useless for day-to-day payments. ETH has pushed up to 100tps in prod, but realistically, higher transaction rates will need to wait for Casper (sharded PoS). Monero has a flexcap blocksize, although I don't know if it's ever been stress-tested in practice. I think that whatever alt gets a good light wallet that supports seamless transactions (contactless/touchid) for mobile devices might get some serious traction...
    - runeks 10y ago
      If by "regular" transactions you mean consumer-to-merchant transactions, then this is solved by off-chain clearing, much like VISA solves it for our current monetary system whose lowest level transfer protocol (SWIFT) is also too slow/expensive for consumer transactions. With Bitcoin, consumers can connect to clearing intermediaries via payment channels, allowing them to be in full control of their funds while having them ready for instant transfer. If merchants are willing to accept a week of credit risk -- which, I would argue, VISA proves that they are -- then thousands of off-chain transactions can be cleared into a single Bitcoin transaction, making the performance of the underlying blockchain less important.
      - lhl 10y ago
        Payment channels, besides being alpha/never used in production, are also dependent on a transaction malleability fix. Since SegWit was rolled into this soft-fork disaster, I'm pretty confident in saying it will never reach 95% and activate (there are almost as much BU/BCl support as BCo/SW support at this point), so a non-starter honestly. I'm not against PCs in principle, I just don't understand why the block size wasn't increased and then a fully tested version of LN being rolled out afterwards - instead we've 2 years where the blocksize cap has been looming, a year where Bitcoin functionality has actually been crippled (Bitcoin is the only "successful" technology I know of where it's getting more expensive and performing worse as time has been going on), and of course there's been a combination community and developer civil war/purge (and subsequent deadlock) that could have easily been avoided. This whole mess has been extremely counterproductive. Note, even in Poon and Dryja's original paper, they outline that LN still requires bigger blocks: "If we presume that a decentralized payment network exists and one person will make 3 blockchain transactions per year on average, Bitcoin will be able to support over 35 million users with 1MB blocks in ideal circumstances (assuming 2000 transactions per MB). This is quite limited, and an increase of the block size may be necessary to support everyone in the world using Bitcoin." It's worth pointing out that Bitcoin currently has just under 52K unconfirmed transactions in the backlog (this will take hours if not days to clear) and that PCs still have risks/failure modes from that as well (failure of breach remedy transactions can actually break down the counterparty trust system from my understanding, making rollbacks and even double spends possible).
- MagnumOpus 10y ago
  The tax-collecting power of the US federal government, backed by the world's largest military.
  - monort 10y ago
    Russian ruble was backed by a tax-collecting power and a large military too, but they still had a hyperinflation period during 90s. It's easy to mismanage a currency for the precise reason, that it is not backed by anything.
  - kobeya 10y ago
    That's not an asset.

kinghajj 10y ago

Bitcoin is its own asset, just as gold, or any other commodity, are assets.

mdpopescu 10y ago

You mean unlike rupees? :)

kobeya 10y ago

What asset backs dollars?

edblarney 10y ago
"What asset backs dollars?" USD are mostly backed by T-Bills, i.e. government bonds, i.e. the faith you have in the US government (i.e. people of the US) to pay you back. Oddly - they are priced in dollars creating a really odd circular dependency. If the US government paid off all of it's debt today, most currency would be sucked out of the market! :) Since 2008 - some of USD is backed by crappy real-estate. Euros are backed by 'strong assets' for the most part: real estate, high grade bonds (I think) etc.. The reason the Euro is a very strong currency is because none of the European countries trust each other to not print money willy nilly. So if a bank wants Euros, they have to put up good collateral. This is how Germans know their Euros are not going to devalued by Italians at the printing press. RMB is backed by nothing really, just faith in the Chinese government, which is why people don't want to hold them. If China wants to become a real player they have to have transparency, which means they cant print money willy nilly, which means they lose some crazy monetary control they have today. But they think they need that super money power to 'centrally manage' the economy. You can't have both. They either need to have a currency with more integrity - which other nations will 'buy into' - or - they can keep their currency kind of a fiction, but which allows them to turn their economy on a dime if they need to. (Question is, will they turn it in the right direction?). If Bitcoin were used broadly in some areas - say across a bunch of S. American countries that don't trust their governments, and it was widely used by the citizens, then it might actually have more integrity than say the RMB. Bitcoins cannot be arbitrarily devalued, whereas RMBs are quite often. The big risk with Bitcoin is that people stop needing/wanting them and they become worthless. Remember that humans are susceptible to up and down 'manias'. All it takes is one rumour and selloff to wipe out Bitcoin for good. If there is a really bad report about US economy, the dollar might go down - but there is 'underlying support' for the USD - people still need them to do commerce, pay taxes. With bitcoins ... a single downturn would wipe them all out for good. They'd have no reason to come back.
- lhl 10y ago
  The bigger problem with Bitcoin today is that it can't be used for regular transactions. Due to the 1MB blocksize cap (that people having being trying and failing to fix for 2 years), Bitcoin has been limited to ~3tps, has permanent backlogs in the mempool in the thousands (and climbing to tens of thousands during busy times) and tx fees have risen to 10-20 cents (or more) for regular transactions, making it useless for day-to-day payments. ETH has pushed up to 100tps in prod, but realistically, higher transaction rates will need to wait for Casper (sharded PoS). Monero has a flexcap blocksize, although I don't know if it's ever been stress-tested in practice. I think that whatever alt gets a good light wallet that supports seamless transactions (contactless/touchid) for mobile devices might get some serious traction...
  - runeks 10y ago
    If by "regular" transactions you mean consumer-to-merchant transactions, then this is solved by off-chain clearing, much like VISA solves it for our current monetary system whose lowest level transfer protocol (SWIFT) is also too slow/expensive for consumer transactions. With Bitcoin, consumers can connect to clearing intermediaries via payment channels, allowing them to be in full control of their funds while having them ready for instant transfer. If merchants are willing to accept a week of credit risk -- which, I would argue, VISA proves that they are -- then thousands of off-chain transactions can be cleared into a single Bitcoin transaction, making the performance of the underlying blockchain less important.
    - lhl 10y ago
      Payment channels, besides being alpha/never used in production, are also dependent on a transaction malleability fix. Since SegWit was rolled into this soft-fork disaster, I'm pretty confident in saying it will never reach 95% and activate (there are almost as much BU/BCl support as BCo/SW support at this point), so a non-starter honestly. I'm not against PCs in principle, I just don't understand why the block size wasn't increased and then a fully tested version of LN being rolled out afterwards - instead we've 2 years where the blocksize cap has been looming, a year where Bitcoin functionality has actually been crippled (Bitcoin is the only "successful" technology I know of where it's getting more expensive and performing worse as time has been going on), and of course there's been a combination community and developer civil war/purge (and subsequent deadlock) that could have easily been avoided. This whole mess has been extremely counterproductive. Note, even in Poon and Dryja's original paper, they outline that LN still requires bigger blocks: "If we presume that a decentralized payment network exists and one person will make 3 blockchain transactions per year on average, Bitcoin will be able to support over 35 million users with 1MB blocks in ideal circumstances (assuming 2000 transactions per MB). This is quite limited, and an increase of the block size may be necessary to support everyone in the world using Bitcoin." It's worth pointing out that Bitcoin currently has just under 52K unconfirmed transactions in the backlog (this will take hours if not days to clear) and that PCs still have risks/failure modes from that as well (failure of breach remedy transactions can actually break down the counterparty trust system from my understanding, making rollbacks and even double spends possible).
MagnumOpus 10y ago
The tax-collecting power of the US federal government, backed by the world's largest military.
- monort 10y ago
  Russian ruble was backed by a tax-collecting power and a large military too, but they still had a hyperinflation period during 90s. It's easy to mismanage a currency for the precise reason, that it is not backed by anything.
- kobeya 10y ago
  That's not an asset.