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The bull run going on with Bitcoin right now is very concerning to me. There's been no recent improvements to the utility of Bitcoin, instead there's been scali

The bull run going on with Bitcoin right now is very concerning to me. There's been no recent improvements to the utility of Bitcoin, instead there's been scaling issues and an ugly, contentious civil war over how to solve it. It's utility if anything has dropped considerably, as mining fees have become far higher than traditional methods and more unpredictable, leaving smaller transactions to sometimes take 16+ hours to confirm, even with the default fees set by the wallet. Historically, a lot of this activity tends to be from unregulated exchanges in Asia, many of whom could be engaging in some form of price manipulation (it wouldn't be the first time - google for Willy Bot). My Bitcoin friends in town have started to joke that the reason it's going up is just the word "China", because it tends to be a repeated explanation of why the price is increasing, suggesting to me that nobody really knows what's going on or even where the demand is coming from. I'm not anti-bitcoin, but I'd vastly prefer to see a slow, stable increase in price based on the currency improving in utility, not these giant blasts of speculation that, IMHO, only work to discredit Bitcoin as a serious instrument for financial systems. An extreme example of how bad this is getting right now that I seriously hope is just a joke: https://np.reddit.com/r/Bitcoin/comments/6a3lvd/today_i_took_out_a_325239_equity_loan_on_my_house/ https://np.reddit.com/r/Bitcoin/comments/6a3lvd/today_i_took...

loceng 9y ago
It's due gambling. The first blockchain currency that corrects the unreasonable value gained simply because of demand (via redistribution?), will be the blockchain that wins the whole market.
goodside 9y ago
One way to read this is that every year that goes by without the discovery of a major, world-ending flaw in the Bitcoin protocol should increase your confidence that there won't be one soon, so you should expect growth even if all else is equal. It's not just time either, as the "bounty" on such a discovery is proportional to the market cap of Bitcoin.
- codexon 9y ago
  All crypto will eventually be broken. SHA-1 seemed bulletproof a few years ago, and now people are trying to phase it out. If it becomes worth it to break bitcoin, these vulnerabilities will be used, discovered faster, and likely won't be published before someone uses it to profit off Bitcoin and crashing the price. Bitcoin is priced this high because uneducated people expect it to replace paypal and credit cards but it will never be able to because 1 transaction take 30+ minutes and that is by design. The faster they make transactions take, the higher chance of forgery. Other crypto-currencies that attempt to have faster transactions are simply trading safety for speed.
  - foota 9y ago
    A few? https://www.schneier.com/blog/archives/2005/02/sha1_broken.html https://www.schneier.com/blog/archives/2005/02/sha1_broken.h...
  - placeybordeaux 9y ago
    For a merchant a CC transaction can take up to 30 days. A customer can initiate a charge back any time between when they txed and when they pay their bill. With bitcoin the ~10m+ tx time is a cost, but is in material if you are dealing with either a trusted party or a small amount of $
    - codexon 9y ago
      > For a merchant a CC transaction can take up to 30 days. A customer can initiate a charge back any time between when they txed and when they pay their bill. Customers don't care how long a transaction takes for the merchant. Have you ever tried selling anything for bitcoin? Nearly no one will use it even when being told of all the "benefits". They don't want to wait 30+ minutes. When they see they need to give some exchange a scan of their passport and wait 3-5 days to link their bank account, and losing the ability to do a chargeback, they never think about using Bitcoin again.
      - icebraining 9y ago
ismail 9y ago
Curious to understand why there has been a sudden jump in the last few weeks.
modeless 9y ago
I really doubt that reddit post is anything but attention seeking. It would take weeks to conduct such a transaction from start to finish. You couldn't do it on a whim "today".
21 9y ago
The market always prices in future utility (as best predicted), not present. The same with future non-utility - oil price is dropping because everybody knows that Saudi (and the rest) sit atop a sea of oil which is not as needed anymore (solar, electric cars, ...)
- tom_mellior 9y ago
  > oil price is dropping Except that it isn't, really. Looking at the data at http://www.wolframalpha.com/input/?i=oil+price http://www.wolframalpha.com/input/?i=oil+price , it has been fairly constant over the last two years. It did go down by 50% over the second half of 2014 but hasn't made dramatic moves since. If Tesla hype had anything to do with the oil price, it should have moved.
RachelF 9y ago
The Chinese government has been cracking down on ways its citizens can get their money out of the country. Bitcoin is an easy, hard to trace way for them to convert RMB to USD.
clarkmoody 9y ago
Well the price has been bound in a wide channel since the start of 2016, showing stable growth within that channel for 18 months. The second half of 2016 was very benign growth, especially compared with bitcoin's past. It was only the surge to 1500 that finally broke out of the channel, and we're seeing typical channel breakout price action. We will test the previous upper bound to see whether the price will stay outside the channel or not. This would be a crash back below $1500 at this point. Think about utility from this angle: 300k transactions per day are willing to pay the fees to get into the blockchain. Higher fees necessarily crowd out lower-value use cases for bitcoin. This means that bitcoin remains useful for ever-higher value transactions, which continue to find utility in the coin. The Reddit post about the home equity loan is a sure sign of the top. Of course this sort of investment folly is not unique to the crypto world.
- mcv 9y ago
  If Bitcoin is not useable for low value transactions, then what is it good for? Normal people don't do high-value transactions with cash. High value transactions are done with loans, bank guarantees and signatures. Nobody has big piles of cash ready for big transactions, except for criminals. So is crime really going to be the only valid use case for Bitcoin?
  - clarkmoody 9y ago
    Interesting how you jumped to that conclusion, just like many other bitcoin skeptics since 2009. Think about this: with bitcoin, you have a highly-secure, trustless, immutable distributed ledger that anyone can pay a fee to get in to, with no restrictions. Let's say we take a hash of a huge Wall Street swap contract worth $100M and embed that hash in the blockchain. Now both parties can verify the integrity of the contract without involving lawyers or governments, and nobody else knows any better than "there is 32 bytes in the blockchain." How much is it worth to those parties to verify that contract? How about this one: I'm a wealthy businessman in China, and I don't like how the economy feels. My government imposes strict limits on how much foreign investment I can do, since the state and the banks are in partnership. I can use bitcoin to move money across the imaginary borders imposed by governments, even if I trade it back for dollars as soon as it moves out of China. Or maybe you're a gold bug, but you want something that's actually useful ;-) It's very hard to spend gold or move it around. What about the global foreign exchange markets? Companies are moving trillions of dollars daily through the interbank network. There are fees and counterparty risks associated with those moves, especially if you're doing business in a developing country. Bitcoin may eliminate some of those risks. And the fees are agnostic to the transaction value, which is why high-value use cases crowd out low-value ones. I pay the same fee whether I'm transferring $1 or $1M.
Taek 9y ago
I think the biggest change recently is that the civil war inside the bitcoin community has calmed down, a lot. There's still a deadlock, but at least people aren't at eachothers throats 24/7. It's a reassuring change of pace. I think it's a combination of some people realizing that you can do a LOT with 3 tps (the global gold market is far less than that), and also of many people realizing that Bitcoin's incentive structures protect it even in the face of a miner with >50% hashrate. (Mining costs hundreds of millions in electricity, and hardware costs hundreds of millions as well. If the miners become malicious, either users will hardfork or leave, and those hundreds of millions suddenly can't be recovered by mining a now devalued asset). And, externally, I think more people are starting to understand the whole decentralization thing. Bitcoin is extremely powerful in that: It's very difficult to censor transactions It's very difficult to seize money There is full immunity to hyperinflation Nobody controls it. Not the devs (segwit wouldn't be struggling if they did), not the miners (we'd have 2MB or 8MB blocks if they did), not the regulators (drug markets wouldn't be so pervasive if they did). That's powerful, and Bitcoin is basically the only option if you want a money where some central authority (be it the Etherum foundation or the federal reserve) can't decide to enforce some new rule that you aren't expecting and aren't okay with. No other money can make these claims.
- clarkmoody 9y ago
  I would assume @kyledrake knows the benefits of bitcoin. He wrote a bitcoin wallet back in the day ;-)
  - kyledrake 9y ago
    The fee calculation is the weirdest thing about modern Bitcoin to me. It was a lot simpler when we used to do it - basically a constant with a simple multiplication of the transaction size. Don't even get me started on segwit. PS: Hi Clark! Been a while.
    - clarkmoody 9y ago
      Dynamic fee computation has some interesting game theory aspects to it. Fee rate (bitcoin / byte) dropped significantly after dynamic fees caught on. They have been rising with full blocks as users bid to have transactions included in the limited block space. We'll see what Litecoin does when SegWit activates tomorrow!
awqrre 9y ago
The value appears to move like the value of stocks... not very predictable.
dwaltrip 9y ago
This is actually fairly slow growth for a Bitcoin bull run.
lokistar 9y ago
Maybe people value the current state of Bitcoin with its 'flaws' and all. The Bitcoin-as-gold vision is the current de facto situation (vs Bitcoin as coffee payment system). The scaling issues are really a simplistic way to explain the conflict between this two visions (worth mentioning that the block size increase, another simplification, won't solve either in mid/long term) Also, improving utility is subjective in this case. Bitcoin is a not a product or service in the traditional way: it does not have to serve all the users, there's no clients as such, there's no companies to sell the 'product' to. Its roots are real financial disruption, not another payment network.
- tom_mellior 9y ago
  If Bitcoin doesn't have to serve "users", then it will not be able to "disrupt" anything. You'll only "disrupt" banks and credit card companies if you manage to offer "services" to their "users".

loceng 9y ago

It's due gambling. The first blockchain currency that corrects the unreasonable value gained simply because of demand (via redistribution?), will be the blockchain that wins the whole market.

goodside 9y ago

One way to read this is that every year that goes by without the discovery of a major, world-ending flaw in the Bitcoin protocol should increase your confidence that there won't be one soon, so you should expect growth even if all else is equal. It's not just time either, as the "bounty" on such a discovery is proportional to the market cap of Bitcoin.

codexon 9y ago
All crypto will eventually be broken. SHA-1 seemed bulletproof a few years ago, and now people are trying to phase it out. If it becomes worth it to break bitcoin, these vulnerabilities will be used, discovered faster, and likely won't be published before someone uses it to profit off Bitcoin and crashing the price. Bitcoin is priced this high because uneducated people expect it to replace paypal and credit cards but it will never be able to because 1 transaction take 30+ minutes and that is by design. The faster they make transactions take, the higher chance of forgery. Other crypto-currencies that attempt to have faster transactions are simply trading safety for speed.
- foota 9y ago
  A few? https://www.schneier.com/blog/archives/2005/02/sha1_broken.html https://www.schneier.com/blog/archives/2005/02/sha1_broken.h...
- placeybordeaux 9y ago
  For a merchant a CC transaction can take up to 30 days. A customer can initiate a charge back any time between when they txed and when they pay their bill. With bitcoin the ~10m+ tx time is a cost, but is in material if you are dealing with either a trusted party or a small amount of $
  - codexon 9y ago
    > For a merchant a CC transaction can take up to 30 days. A customer can initiate a charge back any time between when they txed and when they pay their bill. Customers don't care how long a transaction takes for the merchant. Have you ever tried selling anything for bitcoin? Nearly no one will use it even when being told of all the "benefits". They don't want to wait 30+ minutes. When they see they need to give some exchange a scan of their passport and wait 3-5 days to link their bank account, and losing the ability to do a chargeback, they never think about using Bitcoin again.
    - icebraining 9y ago

ismail 9y ago

Curious to understand why there has been a sudden jump in the last few weeks.

modeless 9y ago

I really doubt that reddit post is anything but attention seeking. It would take weeks to conduct such a transaction from start to finish. You couldn't do it on a whim "today".

21 9y ago

The market always prices in future utility (as best predicted), not present. The same with future non-utility - oil price is dropping because everybody knows that Saudi (and the rest) sit atop a sea of oil which is not as needed anymore (solar, electric cars, ...)

tom_mellior 9y ago
> oil price is dropping Except that it isn't, really. Looking at the data at http://www.wolframalpha.com/input/?i=oil+price http://www.wolframalpha.com/input/?i=oil+price , it has been fairly constant over the last two years. It did go down by 50% over the second half of 2014 but hasn't made dramatic moves since. If Tesla hype had anything to do with the oil price, it should have moved.

RachelF 9y ago

The Chinese government has been cracking down on ways its citizens can get their money out of the country. Bitcoin is an easy, hard to trace way for them to convert RMB to USD.

clarkmoody 9y ago

Well the price has been bound in a wide channel since the start of 2016, showing stable growth within that channel for 18 months. The second half of 2016 was very benign growth, especially compared with bitcoin's past. It was only the surge to 1500 that finally broke out of the channel, and we're seeing typical channel breakout price action. We will test the previous upper bound to see whether the price will stay outside the channel or not. This would be a crash back below $1500 at this point. Think about utility from this angle: 300k transactions per day are willing to pay the fees to get into the blockchain. Higher fees necessarily crowd out lower-value use cases for bitcoin. This means that bitcoin remains useful for ever-higher value transactions, which continue to find utility in the coin. The Reddit post about the home equity loan is a sure sign of the top. Of course this sort of investment folly is not unique to the crypto world.

mcv 9y ago
If Bitcoin is not useable for low value transactions, then what is it good for? Normal people don't do high-value transactions with cash. High value transactions are done with loans, bank guarantees and signatures. Nobody has big piles of cash ready for big transactions, except for criminals. So is crime really going to be the only valid use case for Bitcoin?
- clarkmoody 9y ago
  Interesting how you jumped to that conclusion, just like many other bitcoin skeptics since 2009. Think about this: with bitcoin, you have a highly-secure, trustless, immutable distributed ledger that anyone can pay a fee to get in to, with no restrictions. Let's say we take a hash of a huge Wall Street swap contract worth $100M and embed that hash in the blockchain. Now both parties can verify the integrity of the contract without involving lawyers or governments, and nobody else knows any better than "there is 32 bytes in the blockchain." How much is it worth to those parties to verify that contract? How about this one: I'm a wealthy businessman in China, and I don't like how the economy feels. My government imposes strict limits on how much foreign investment I can do, since the state and the banks are in partnership. I can use bitcoin to move money across the imaginary borders imposed by governments, even if I trade it back for dollars as soon as it moves out of China. Or maybe you're a gold bug, but you want something that's actually useful ;-) It's very hard to spend gold or move it around. What about the global foreign exchange markets? Companies are moving trillions of dollars daily through the interbank network. There are fees and counterparty risks associated with those moves, especially if you're doing business in a developing country. Bitcoin may eliminate some of those risks. And the fees are agnostic to the transaction value, which is why high-value use cases crowd out low-value ones. I pay the same fee whether I'm transferring $1 or $1M.

Taek 9y ago

I think the biggest change recently is that the civil war inside the bitcoin community has calmed down, a lot. There's still a deadlock, but at least people aren't at eachothers throats 24/7. It's a reassuring change of pace. I think it's a combination of some people realizing that you can do a LOT with 3 tps (the global gold market is far less than that), and also of many people realizing that Bitcoin's incentive structures protect it even in the face of a miner with >50% hashrate. (Mining costs hundreds of millions in electricity, and hardware costs hundreds of millions as well. If the miners become malicious, either users will hardfork or leave, and those hundreds of millions suddenly can't be recovered by mining a now devalued asset). And, externally, I think more people are starting to understand the whole decentralization thing. Bitcoin is extremely powerful in that: It's very difficult to censor transactions It's very difficult to seize money There is full immunity to hyperinflation Nobody controls it. Not the devs (segwit wouldn't be struggling if they did), not the miners (we'd have 2MB or 8MB blocks if they did), not the regulators (drug markets wouldn't be so pervasive if they did). That's powerful, and Bitcoin is basically the only option if you want a money where some central authority (be it the Etherum foundation or the federal reserve) can't decide to enforce some new rule that you aren't expecting and aren't okay with. No other money can make these claims.

clarkmoody 9y ago
I would assume @kyledrake knows the benefits of bitcoin. He wrote a bitcoin wallet back in the day ;-)
- kyledrake 9y ago
  The fee calculation is the weirdest thing about modern Bitcoin to me. It was a lot simpler when we used to do it - basically a constant with a simple multiplication of the transaction size. Don't even get me started on segwit. PS: Hi Clark! Been a while.
  - clarkmoody 9y ago
    Dynamic fee computation has some interesting game theory aspects to it. Fee rate (bitcoin / byte) dropped significantly after dynamic fees caught on. They have been rising with full blocks as users bid to have transactions included in the limited block space. We'll see what Litecoin does when SegWit activates tomorrow!

awqrre 9y ago

The value appears to move like the value of stocks... not very predictable.

dwaltrip 9y ago

This is actually fairly slow growth for a Bitcoin bull run.

lokistar 9y ago

Maybe people value the current state of Bitcoin with its 'flaws' and all. The Bitcoin-as-gold vision is the current de facto situation (vs Bitcoin as coffee payment system). The scaling issues are really a simplistic way to explain the conflict between this two visions (worth mentioning that the block size increase, another simplification, won't solve either in mid/long term) Also, improving utility is subjective in this case. Bitcoin is a not a product or service in the traditional way: it does not have to serve all the users, there's no clients as such, there's no companies to sell the 'product' to. Its roots are real financial disruption, not another payment network.

tom_mellior 9y ago
If Bitcoin doesn't have to serve "users", then it will not be able to "disrupt" anything. You'll only "disrupt" banks and credit card companies if you manage to offer "services" to their "users".