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What if the Bitcoin bubble bursts?
- sgspace 9y agoTLDR: "If there is such a thing as a healthy bubble, this is it. To be sure, regulators should watch out that cryptocurrencies do not become even more of a conduit for criminal activity, such as drug dealing. But they should think twice before coming down hard, particularly on ICOs. Being too spiky would not just prick a bubble, but also prevent a lot of the useful innovation that is likely to come about at the same time."
- deleted 9y ago[deleted]
- IanDrake 9y agoThe article states that bitcoin transactions take hours. Is that true?
- thinkMOAR 9y agoapparently yes, https://blockchain.info/charts/avg-confirmation-time https://blockchain.info/charts/avg-confirmation-time was a bit surprised myself
- sgspace 9y agoWhen a bitcoin transaction is created it sits in the transaction backlog until a bitcoin node validates it. Nodes have the economic incentive to pick transactions with the highest fees. If you do not set a high enough fee, you risk your transaction sitting in the backlog for hours or days.
- thatcat 9y agoIs there an easy way to see current queue status?
- sgspace 9y agoHere: https://blockchain.info/unconfirmed-transactions https://blockchain.info/unconfirmed-transactions Recently Ethereum has been taking a chunk out of Bitcoin's market share. One of the big reasons why is that it does not currently have this problem of a massive transaction backlog requiring large transaction fees.
- xorcist 9y agoThat's a rich statement to make, when we have just cleared the gigantic backlog of Ethereum transactions of the BAT token sale two days ago. And the transaction pressure then wasn't even what Bitcoin normally handles. (I'm not sure if that says more about the state of Bitcoin or Ethereum however.) Anyway, if you need transaction capacity, look elsewhere.
- saosebastiao 9y agoJust out of curiosity, where should you look? Is the transaction capacity problem inherent to Ethereum like it is for Bitcoin? I'm willing to overlook transaction capacity for the short term (while the currency is still immature and large speculative transactions overwhelm spot capacity), but I firmly believe that the market will eventually settle on the solution with the lowest transaction costs and the fastest transaction resolution.
- xorcist 9y agoI know it's a non-answer, but it depends very much on what your use case is. Any global system where every node stores every transaction for all eternity will be limited in capacity. If that is a problem depends on what your use case is. Most cryptocurrencies work like that, especially since they were all more or less inspired by Bitcoin. The capacity to which Ethereum and Bitcoin can scale can differ by a constant factor at most. (Where the latter is likely at an advantage, due to smaller transaction sizes and simpler scripts.) Scaling Bitcoin to a global payment network for everyone's daily transactions is probably not realistic. But it could very well act as the clearing backend for such a system. (See, for example, Lightning Network.)
- serhei 9y agoYou get to decide based on how much transaction fee you're willing to pay to the miners that confirm your transaction. The simplistic explanation is that the Bitcoin network effectively incorporates a hard upper limit on the number of transactions per unit time. (Every new transaction must be recorded in the blockchain, and the blockchain only grows so fast.) So as the currency becomes more popular and demand for transactions increases, either your waiting time to get the transaction confirmed on the blockchain increases, or your transaction fee has to increase.
- DiNovi 9y agoIt is the number one wedge issue in the community right now. It's also why alt coins are doing well - they present solutions
- statoshi 9y agoAltcoins present temporary solutions, but are fundamentally limited by the same scaling problems as Bitcoin. Just watch - as altcoins become popular the fees and wait times will similarly rise. Ethereum already had multi-hour backlogs recently as the network was trying to process all of the (rejected) transactions trying to get into the Basic Attention Token ICO.
- deleted 9y ago[deleted]
- CydeWeys 9y agoIt's ... very complicated. In most situations, as long as the transaction has a reasonable fee attached to it, you can proceed immediately (this is called a 0-conf transaction), as you can be pretty sure that it will be confirmed eventually. Of course, there are some transaction malleability edge cases that allow double-spends that are fixed with a new feature called segwit that hasn't rolled out yet, so if you are dealing with a potentially malicious party then 0-conf isn't good enough. In theory, you should wait for a transaction to have at least six confirmations on it before truly trusting it. That has always taken an average of an hour from the transaction first going into a block. It's the "first going into a block" part that takes longer now, unless you attach a higher fee to ensure that it goes in quickly.
- annabellish 9y ago>as long as the transaction has a reasonable fee attached to it, you can proceed immediately (this is called a 0-conf transaction) Not true. A 0-conf transaction is a transaction which has not been confirmed at all, which is orthogonal to its fee. A transaction with a reasonable fee may not even be confirmed at all, as it only takes a few days to fall out of every mempool and average fees are currently unreasonable, so it is not safe to trust 0-conf transactions currently as they may never make it on-chain.
- CydeWeys 9y agoIf a transaction fails to be confirmed for several days, then its fee was by definition not reasonable; it was too small. A fee significantly smaller than the average fee on transactions making it into blocks is unreasonably small.
- rtb 9y agoBy that definition, your first comment was a meaningless tautology. If a "reasonable" fee is one that causes a transaction to be accepted, then your first comment can be rewritten as: "as long as the transaction [will be confirmed within several days], you can be pretty sure that it will be confirmed eventually".
- xorcist 9y agoThe recommendation with Bitcoin is to wait for six confirmations before considering a transaction secure. That's about an hour, best case. It might be overly secure for most applications, but that's generally what people use. Other PoW-based systems have similar recommendations. You can have more frequent blocks, but the economic security offered by each confirmation will be lower. There are other nifty networks called payment networks which promises instantly secure transactions, the most well known being Lightning. They offer that by identifying cheating and offering both parties to get their money out in case the other party does. They are still pretty experimental but the results are promising.
- vesak 9y agoSure, but how long do credit card transactions take?
- 0x4f3759df 9y agoWon't Bitcoin go to zero when quantum computers can break elliptic curve cryptography?
- zitterbewegung 9y agoNo, they would probably move to a postquantum cryptography system.
- palunon 9y agoIf there is no viable alternative to EC for public key cryptography by then, a lot of things will break down, and Bitcoin wouldn't be my main worry. If there is, I hope Bitcoin will have transitioned.
- Cshelton 9y agoThere are a few ideas about how to circumvent that, most are pretty early. I think the general consensus is we still have at least 30 years to figure it out as that kind of quantum computer is more than likely, that far off. But of course it can all change pretty quick. And if we don't have quantum cryptography by then, not just Bitcoin, everything we use today pretty much will be at risk.
- canpan 9y agoActually no. Long answer: Yes, the outgoing transaction from a ledger to another one is done using crypto that can be broken by quantum computers. But a ledger that has never been used to send money is only visible by it's hash value. So it's security is based on sha256 which is quantum secure (There is Grover's algorithm, but it should be OK for a while). BC would just need to change the signing algorithm. So unless quantum computers pop up just over night everything should be fine. There are many threats to Bitcoin, IMO QC is one of the smallest.
- fooker 9y agoWhat is the largest threat in your opinion? Someone capturing >= 50% of the mining computation power?
- 9y ago
- pg_is_a_butt 9y agothen the price of bitcoin would be less than it was yesterday. you're all idiots.
- smitherfield 9y agoBut hasn't it at least 3 times already?
- jephir 9y agoBTC trades like an accelerated stock market. Instead of crashing every few decades, it "crashes" every few months.
- DiNovi 9y agoI can only think of a few the past 4 years. Granted, 2 were in the past 8 months
- jephir 9y agoA 5-10% drop in a single day on the SPX would probably cause a panic. This happens on a regular basis with BTC.
- steevenwee 9y agoI don't think it's correct to compare index to what basically is a stock.
- midnitewarrior 9y agoA stock share is partial ownership of a for-profit venture for gain. Bitcoin is more akin to a precious metal or commodity, except that btc doesn't have any utility value like gold, silver or copper do. Stocks pay dividends and entitle the owner to certain rights. Btc gives you some crypto that others trust. Not very similar.
- cyphar 9y agoArguably precious metals don't have much more utility value either.
- jlebrech 9y agoinvest when it does. it's gonna keep going up and down.
- monochromatic 9y agoHas the bubble burst when it hits $100? Or has the bubble burst when it hits $1?
- jlebrech 9y agoalways keep money in reserve for when the bubble further crashes.
- gr3yh47 9y agobitcoin has been rising to 400% and then falling to 50% in a pretty solid rhythm for a long time, and i'm kicking myself hard for not buying back when it was at 100 and then crashed to 50
- hackcasual 9y agoMight have lost it all due to an exchange going belly up.
- koolba 9y agoI was thinking the same thing. Short of DIY cold storage, there's quite a bit of holding risk. Even cold storage has the risk of being held at gunpoint to transfer it over. It's akin to having a bunch of cash/gold buried under your basement. If anybody knows it's there, you better be ready!
- hackcasual 9y agoOr you just have a HD die on you. Or it gets lost in a move.
- deleted 9y ago[deleted]
- jlebrech 9y agowhen credible finance media start warning of a bubble, causes a bubble to burst. buy afterwards.
- deleted 9y ago[deleted]
- frgtpsswrdlame 9y agoA bunch of people will learn a very good lesson on gambling. One thing I do enjoy about bitcoin is that it's complicated/technological enough that traditional media doesn't have good language to speak about it. With stocks, there's this huge vocabulary which is used to obscur the fact that most people have no clue why it's moving, they just throw out some jargon. Seeing that stripped bare for altcoins is really refreshing.
- problems 9y agoSeriously, some of the altcoins I've seen are launched on such terrible ideas... The Brave browser devs launched one that promises to pay people out for viewing ads. On their open source web browser that anyone can bot. It sold for something like $33M. I swear I should launch one that's backed by my dog's ability to produce shit, at this point I figure it has a minimum $2M value at launch.
- jacquesm 9y agoOffer fractional ownership in the dog, I'm sure you'll get at least 10 times as much. Suggested currency name: the micropup.
- 9y ago
- midnitewarrior 9y agoI've heard rumblings of this from some big players who are trying to sell some of their bitcoin, but network transactions are so backlogged that it's an illiquid market for them at the volumes they are looking to trade. They are worried that they won't be able to move in time if the market drops because they are sitting on such huge sums. Any market panic is only going to compound the transaction volume problem, leading to greater panic like people experience when there's a bank run. It's kind of a self-fulfilling prophecy until the block size / transaction volume issue is resolved, but the community's inability to address this problem could be the death of it.
- xorcist 9y agoThat doesn't make sense. Transactions aren't slower if you move more Bitcoins. In fact, if you move a big stash then the transaction fees probably doesn't matter much and your transaction can be first in line. Most exchanges still need those six confirmations however, so any bank run would be limited by that. If you need instant sells you have to keep that stash with an exchange at all times. That requires a fair bit of trust in them, which I wouldn't recommend for regular users, but for an institutional investor that's probably how they would do it anyway. Those guys don't exactly walk around with an USB stick carrying their private keys.
- KingMob 9y agoYou're technically correct, but people trying to sell off millions of dollars worth of bitcoins can almost never do that in a single sale. What happens in a market is, if a large enough bid order hits the market, people freak that a large player is selling off the asset (Do they know something we don't? Maybe we should sell now, too, just in case!). Bitcoin, with its small size (relative to fiat currencies) and slow confirmation rate, exacerbates that. So to actually sell off a million in BTC, you have to do it in regular, steady small sales that won't spook anyone. This takes time, which is not your friend if you expect the value to go down.
- xorcist 9y agoWhat you're saying is that Bitcoin markets is illiquid. That's something I can understand and perhaps even try to give a reasonable answer to. That "network transactions are so backlogged that it's an illiquid market" is not. (Backlogs doesn't make for illuquid markets, and even if it did it doesn't affect the "big players" at all.) Trading on exchanges is off-chain in the sense that no transactions takes place on the public blockchain. Bitcoin markets used to be rather thin, but volumes haven't dropped in proportion to rising value. Which is to be expected with a more mature market. Your specific example of a million (US dollars, I presume) would hardly be noticable on any of the big exchanges today. That's just 500 bitcoins. I wouldn't worry about it. Keep in mind that Bitcoin is still inflationary and four times that amount is mined every day, most of which is sold. That's just what's visible, and who knows what's going on off the order books.
- TYPE_FASTER 9y agoIs it possible to short BTC?
- SimbaOnSteroids 9y agoIf you can find someone to take the opposite bet sure, why not?
- danmaz74 9y agoYes, but the counterparty risk - in case of a real crash - is pretty high IMHO. Anyway, a couple of ways to do so: You can short BTC using "USDT" on poloniex: https://poloniex.com https://poloniex.com (USDT is a cryptocurrency theoretically pegged to the USD, but their peg hasn't be very stable lately) Another way, which could in theory be better (or not) is using options: https://www.deribit.com/ https://www.deribit.com/
- icpmacdo 9y agoHow does one currency peg its self to another?
- grandalf 9y agoOf course there will be corrections. There are a small number of people who own a large enough percentage of BTC that when they cash out the market will correct significantly. There are some forces acting against this: - The general usefulness of BTC, which reduces the incentive to move wealth out of BTC - The incentive for these large holders to transact slowly, preventing an abrupt correction.
- pdog 9y agoThe much more interesting question: what if it doesn't?
- deleted 9y ago[deleted]
- bitmapbrother 9y agoI'm hoping it does so that I can buy in.
- Entangled 9y agoNot if, but when, and I'd say real soon. It will burst back to $500 and then slowly up to current levels. Rinse, repeat.
- awkwarddaturtle 9y agoIf it bursts, it bursts. A few get wealthy, a lot get poor. But everyone gets educated for a time. Then another bitcoin bubble or another bubble in another crptocurrency or another asset get blown up. Rinse repeat.
- Twisell 9y agoJust hope than no real retirements funds have invested in this shit gambling with other people saving...
- mark_l_watson 9y agoEven at the current high price, I tried to buy more BC a few days ago but my vendor wasn't selling. I agree with the notion that BC is similar to gold because it is an alternative to fiat currencies. The author James Richards has the good idea of putting the dollar about 10% on the gold standard to loosely tie the dollar to gold so when money is "printed" at least part would need to be backed by a physical gold purchase.
- RealityVoid 9y agoGold is inflated in of itself. The industrial value is way smaller than the trading value. Just because you can touch something and it's not a bunch of numbers on a PC, it doesn't mean it has value.