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They are something between a pyramid scheme and a multi level marketing scheme. They have no inherent worth, are deeply flawed as currencies, and are highly vol

They are something between a pyramid scheme and a multi level marketing scheme. They have no inherent worth, are deeply flawed as currencies, and are highly volatile, so aren't useful stores of worth. There is a very low barrier to entry to creating one, so expect them to be created pretty much without limit.

adamnemecek 9y ago
This seems overly pessimistic. They do have inherent value (there's no better way of sending money, no strings attached). I guess the question is whether in the future the world will have one currency or multiple. I also wonder if this will ever be regulated (and if it even can, it seems like a cat-and-mouse game). > They have no inherent worth, They have inherent value as you need some foundation of the internet economy that's ideally not gov't controlled.
- kweinber 9y ago
  $100 bills also have very little inherent value or worth. They are only useful because people are willing to trade them for goods and services, there is a regulated source of them, and it is clearly defined how to transact with them. Cryptocurrencies have the latter 2 features sewn-up but there aren't a lot of hard-goods out there that are predominantly priced in crytocurrencies. . . until that happens their valuations will remain volatile.
  - deleted 9y ago
    [deleted]
  - overcast 9y ago
    The graph of the Dollar also doesn't look like this https://cdn-images-1.medium.com/max/1400/1*esoUPhcZiG3pEk1czC7ksw.png https://cdn-images-1.medium.com/max/1400/1*esoUPhcZiG3pEk1cz...
    - klodolph 9y ago
      And it's a damn good thing, too. High volatility and deflation would be an unmitigated disaster. The US, UK, and Japan are all currently fighting deflation with QE policies, which seem to be working fairly well.
      - Frogolocalypse 9y ago
        If by working you mean rapidly transferring wealth into fewer sets of hands, yes.
        klodolph 9y ago
        Are you saying that avoiding deflation and volatility is what consolidates wealth? How? Or are you saying that quantitative easing consolidates wealth? How? Or are you just inserting an unrelated complaint into the discussion?
        Frogolocalypse 9y ago
        I think I'm being clear enough. There has been an objectively massive shift in wealth between low and middle income earners to wealthy asset accumulators over the past 30 years, and that has accelerated over the past 10. This solution you're lauding has been engineered by exactly those asset accumulators as a response to problems caused by exactly those asset accumulators. It's like you're cheering on an arsonist because after the fire he lit that has burned down your house, he hands you a bucket of urine to help put the fire out.
        klodolph 9y ago
        So, I don't understand what you were trying to say, and when I ask for clarification, you just double down instead of actually answering my questions? Come on, I just want to understand what your viewpoint is, but if you don't want me to understand your viewpoint, I guess that's your prerogative.
  - michalu 9y ago
    Yes, but when my bank fails, the government backing that paper will pay up the deposit up to €50k... if the government is strong well there you go... Ask MtGox users what happened with their "currency"... and it's not even a big case in terms of amount of money gone. The thing is, yesterday I sent USD from US bank to UK and received it in less than 30 seconds paying less than 1% in total on fees (including FX), using Transferwise. Coinbase wants to charge me 4% and will take its time... A month ago I made a typo when making a transfer. The money bounced back in 3 days. Try sending BTC to your ETH wallet and see what happens. The problem that cryptocurrencies solve can and is being solved because the technology is at that level now so it's possible. Yeah banks suck, we need new, better banks. Transfers suck, we need more like Transferwise. Blockchain is a different story though...
    - DennisP 9y ago
      Ask the central bank of Bangladesh what happened with theirs. http://thehackernews.com/2016/03/bank-hacking-malware.html http://thehackernews.com/2016/03/bank-hacking-malware.html
      - zanny 9y ago
        The point isn't that having the central bank backing makes fiat infallible, it is that people will trust a private bank with the backing of a government controlling an economy on the scale of the US more than something without any guarantees at all. Of course, with bitcoin, ether, and fiat, you don't need a bank. You can always keep your money yourself. Except with bitcoin and ether the ability to secure your own money is much more attainable for average people. On the flip side, a lot of people conflate trust in web exchanges or bitcoin banks with the stability of the currency itself. Isolated, you have a reason to trust bitcoin way more than any state actor - its math, codified, and nobody can erase it now. On the other hand, state actors have force of violence if anyone breaks the money. If someone breaks bitcoin with an exploit in the blockchain, you are screwed without recourse. At this point, with the amount of participation it has, the bitcoin protocol should be considered robust - but that also is what translates into its valuation. It is only worth so much because it is proven through its long years of use.
  - AlexCoventry 9y ago
    The difference between a $100 bill and 0.04 BTC is that the IRS accepts the $100 bill as payment for taxes. Taxation is what creates the fundamental demand for national currency.
- flunhat 9y ago
  Are Bitcoin or Ethereum really good as a currency, though? They're quite volatile. Fred Wilson makes a good point here - it's quite gut-wrenching to send someone a token that might have doubled in value if you had waited a week. And I would imagine the seller might not feel great either if they received a token that took a sharp drop in value upon receiving it. Buying things is one of the main uses of currency, IMO, and you can't buy much with any cryptocurrency. I don't think that's likely to change - businesses take fiat currency instead of bitcoins or whatever because they have to pay taxes on their business, and those taxes must be paid in US dollars (or GBP or whatever). And if they don't, men with guns will come and arrest them. That's one of the great drivers of demand for dollars that bitcoin can't really compete with. So where do cryptocurrencies provide value? Well, the main one is in areas where traditional, government-backed fiat currencies can't be used. In other words, mostly illicit cases - drugs, money laundering, etc. Otherwise, especially for those in nations with more developed financial infrastructure, there's no compelling reason to use bitcoin other than purely ideological motivations. So you're right that cryptocurrencies do have value, it's just that the value is far more limited and based on illegal activity than most of its proponents will claim.
  - immune2tvtropes 9y ago
    Agreed, illicit transactions is a core use case for Bitcoin & friends. The other big use case is speculation - because their real-world value is so uncertain, they're easy to create, very hyped, and basically unregulated, the current crop of cryptocurrency tech is basically a bubble factory.
  - problems 9y ago
    > So where do cryptocurrencies provide value? Well, the main one is in areas where traditional, government-backed fiat currencies can't be used. In other words, mostly illicit cases - drugs, money laundering, etc. Otherwise, especially for those in nations with more developed financial infrastructure, there's no compelling reason to use bitcoin other than purely ideological motivations. Definitely. Tack ransomware onto that list too. There's legitimate use cases too though which do present at least a few compelling cases - for example I've had large purchases outright refused because the seller thought there was a chance I was a credit card fraudster. Nothing says "the money is yours now" like a cryptographic proof of that. They straight up told me, even after I gave them proof of ID - "sorry, too risky, pay with bitcoin". I've also been flagged by maxmind and similar anti-fraud tools before when I made VPS purchases over Tor. But because I paid in Bitcoin support was able to approve the transaction without a second thought - no more fraud risk could occur. Of course - these types of purchases aren't that frequent - but they do occur.
- jackweirdy 9y ago
  > there's no better way of sending money, no strings attached Is this true? I've never been able to figure out how to turn my BTC back into GBP without submitting documentation for KYC laws. I never had to show Paypal my passport, and paypal sucks.
  - askmike 9y ago
    You are not talking about sending money, but converting money from one type into another, namely fiat money (which is exactly why all the KYC regulation is required). Try converting one crypto currency into another using shapeshift and see how extensive that KYC process is.
  - zanny 9y ago
    Except the same applies to translating almost any currency into any other. The Eurozone is fairly unique in the world in terms of lax currency exchange within itself - go try converting Yen or Rubles into GBP and see if you don't have to file anything. Bitcoin absolutely is valuable. Some people even take it as payment, making it a currency. And moving around that currency is way more transparent and unencumbered than moving any form of fiat. Currency exchange is wholly up to what you want to convert it into and what exchange you are working with. And if that ends up involving your government... people in other parts of the world don't have that limitation. You can't blame the tech if your society chooses to inhibit it (as your PM is trying to do right now...).
- richardwhiuk 9y ago
  Bitcoin's total potential transaction volume is about 3 orders of magnitude less than the Visa network. It's a massively centralized currency (everyone has a list of every transaction in the currency) compare to any real currency which can perform transactions solely between two parties. There is absolutely no inherent value and no transaction is denominated in bitcoins (you can pay in the number of bitcoins equivalent to a number of dollars, but nobody operating a real business wants a number of bitcoins for a good or service).
  - deleted 9y ago
    [deleted]
  - Frogolocalypse 9y ago
    > Bitcoin's total potential transaction volume is about 3 orders of magnitude less than the Visa network. Why are you comparing it to visa? I have no intention of getting rid of my cc. My bank account on the other hand... > There is absolutely no inherent value Clearly the people who have assigned value by acquiring it would disagree with this, yes? > and no transaction is denominated in bitcoins That's just false. Almost all other cryptos are priced in bitcoin, which i think is the subject matter of this thread. > nobody operating a real business wants a number of bitcoins for a good or service Oh dear. No. If you think that service providers that are paid in bitcoin aren't keeping their bitcoin holdings you're kidding yourself. That may have been the case a few years ago, but today? There are services today that do exactly the opposite : take a wage and immediately convert into bitcoin and place it in your wallet.
linsomniac 9y ago
There is low barriers to entry, but Diamond referenced above at least has 3M in transactions, so it doesn't seem quite like a copy-and-paste cryptocurrency. There are 800 or more cryptocurrencies, most of them are probably junk. The top 10 by market cap are probably interesting. There are many that fit a particular niche (gaming, banking for legal pot, medical records in blockchain, privacy, smart contracts).
- chinathrow 9y ago
  Heck a transaction count could easily be part of a pump and dump scheme.
  - linsomniac 9y ago
    That's $3M in transactions, sorry I forgot the $. Yes, it could be part of the scheme, but most exchanges charge a percent or more. So it's more than just a copy-and-paste (the term for new currencies that come out without any substance behind them), if they're also spending $40K/day in exchange fees. Now, speculation is that C-CEX is involved or behind some of these bogus coins, so you gotta look at what exchanges it's on. Diamond is on Bittrex, which seems to be on the up-and-up.
badloginagain 9y ago
I wonder how long before someone leverages celebrity to launch a new coin. The barrier to entry is so low, and everyone wants to get in on the ground floor of "The Next BitCoin". A decent marketing campaign and an easy-to-use purchase flow could blow up a new cryptocoin pretty quickly.
mtgx 9y ago
Since your comment seems to be one of the most negative in here, it's a good place to post this article, and I recommend you also read it. Perhaps it can change your opinion a little bit from the "cryptocurrencies are just like tulips" mentality: https://hackernoon.com/why-everyone-missed-the-most-important-invention-in-the-last-500-years-c90b0151c169 https://hackernoon.com/why-everyone-missed-the-most-importan...
just_one_time_ 9y ago
What is your definition of "low barrier to entry"? I guess it includes a 4 year CS degree or lots of C experience and $10-100,000 in startup funds for mining and marketing.

adamnemecek 9y ago

This seems overly pessimistic. They do have inherent value (there's no better way of sending money, no strings attached). I guess the question is whether in the future the world will have one currency or multiple. I also wonder if this will ever be regulated (and if it even can, it seems like a cat-and-mouse game). > They have no inherent worth, They have inherent value as you need some foundation of the internet economy that's ideally not gov't controlled.

kweinber 9y ago
$100 bills also have very little inherent value or worth. They are only useful because people are willing to trade them for goods and services, there is a regulated source of them, and it is clearly defined how to transact with them. Cryptocurrencies have the latter 2 features sewn-up but there aren't a lot of hard-goods out there that are predominantly priced in crytocurrencies. . . until that happens their valuations will remain volatile.
- deleted 9y ago
  [deleted]
- overcast 9y ago
  The graph of the Dollar also doesn't look like this https://cdn-images-1.medium.com/max/1400/1*esoUPhcZiG3pEk1czC7ksw.png https://cdn-images-1.medium.com/max/1400/1*esoUPhcZiG3pEk1cz...
  - klodolph 9y ago
    And it's a damn good thing, too. High volatility and deflation would be an unmitigated disaster. The US, UK, and Japan are all currently fighting deflation with QE policies, which seem to be working fairly well.
    - Frogolocalypse 9y ago
      If by working you mean rapidly transferring wealth into fewer sets of hands, yes.
      - klodolph 9y ago
        Are you saying that avoiding deflation and volatility is what consolidates wealth? How? Or are you saying that quantitative easing consolidates wealth? How? Or are you just inserting an unrelated complaint into the discussion?
        Frogolocalypse 9y ago
        I think I'm being clear enough. There has been an objectively massive shift in wealth between low and middle income earners to wealthy asset accumulators over the past 30 years, and that has accelerated over the past 10. This solution you're lauding has been engineered by exactly those asset accumulators as a response to problems caused by exactly those asset accumulators. It's like you're cheering on an arsonist because after the fire he lit that has burned down your house, he hands you a bucket of urine to help put the fire out.
        klodolph 9y ago
        So, I don't understand what you were trying to say, and when I ask for clarification, you just double down instead of actually answering my questions? Come on, I just want to understand what your viewpoint is, but if you don't want me to understand your viewpoint, I guess that's your prerogative.
- michalu 9y ago
  Yes, but when my bank fails, the government backing that paper will pay up the deposit up to €50k... if the government is strong well there you go... Ask MtGox users what happened with their "currency"... and it's not even a big case in terms of amount of money gone. The thing is, yesterday I sent USD from US bank to UK and received it in less than 30 seconds paying less than 1% in total on fees (including FX), using Transferwise. Coinbase wants to charge me 4% and will take its time... A month ago I made a typo when making a transfer. The money bounced back in 3 days. Try sending BTC to your ETH wallet and see what happens. The problem that cryptocurrencies solve can and is being solved because the technology is at that level now so it's possible. Yeah banks suck, we need new, better banks. Transfers suck, we need more like Transferwise. Blockchain is a different story though...
  - DennisP 9y ago
    Ask the central bank of Bangladesh what happened with theirs. http://thehackernews.com/2016/03/bank-hacking-malware.html http://thehackernews.com/2016/03/bank-hacking-malware.html
    - zanny 9y ago
      The point isn't that having the central bank backing makes fiat infallible, it is that people will trust a private bank with the backing of a government controlling an economy on the scale of the US more than something without any guarantees at all. Of course, with bitcoin, ether, and fiat, you don't need a bank. You can always keep your money yourself. Except with bitcoin and ether the ability to secure your own money is much more attainable for average people. On the flip side, a lot of people conflate trust in web exchanges or bitcoin banks with the stability of the currency itself. Isolated, you have a reason to trust bitcoin way more than any state actor - its math, codified, and nobody can erase it now. On the other hand, state actors have force of violence if anyone breaks the money. If someone breaks bitcoin with an exploit in the blockchain, you are screwed without recourse. At this point, with the amount of participation it has, the bitcoin protocol should be considered robust - but that also is what translates into its valuation. It is only worth so much because it is proven through its long years of use.
- AlexCoventry 9y ago
  The difference between a $100 bill and 0.04 BTC is that the IRS accepts the $100 bill as payment for taxes. Taxation is what creates the fundamental demand for national currency.
flunhat 9y ago
Are Bitcoin or Ethereum really good as a currency, though? They're quite volatile. Fred Wilson makes a good point here - it's quite gut-wrenching to send someone a token that might have doubled in value if you had waited a week. And I would imagine the seller might not feel great either if they received a token that took a sharp drop in value upon receiving it. Buying things is one of the main uses of currency, IMO, and you can't buy much with any cryptocurrency. I don't think that's likely to change - businesses take fiat currency instead of bitcoins or whatever because they have to pay taxes on their business, and those taxes must be paid in US dollars (or GBP or whatever). And if they don't, men with guns will come and arrest them. That's one of the great drivers of demand for dollars that bitcoin can't really compete with. So where do cryptocurrencies provide value? Well, the main one is in areas where traditional, government-backed fiat currencies can't be used. In other words, mostly illicit cases - drugs, money laundering, etc. Otherwise, especially for those in nations with more developed financial infrastructure, there's no compelling reason to use bitcoin other than purely ideological motivations. So you're right that cryptocurrencies do have value, it's just that the value is far more limited and based on illegal activity than most of its proponents will claim.
- immune2tvtropes 9y ago
  Agreed, illicit transactions is a core use case for Bitcoin & friends. The other big use case is speculation - because their real-world value is so uncertain, they're easy to create, very hyped, and basically unregulated, the current crop of cryptocurrency tech is basically a bubble factory.
- problems 9y ago
  > So where do cryptocurrencies provide value? Well, the main one is in areas where traditional, government-backed fiat currencies can't be used. In other words, mostly illicit cases - drugs, money laundering, etc. Otherwise, especially for those in nations with more developed financial infrastructure, there's no compelling reason to use bitcoin other than purely ideological motivations. Definitely. Tack ransomware onto that list too. There's legitimate use cases too though which do present at least a few compelling cases - for example I've had large purchases outright refused because the seller thought there was a chance I was a credit card fraudster. Nothing says "the money is yours now" like a cryptographic proof of that. They straight up told me, even after I gave them proof of ID - "sorry, too risky, pay with bitcoin". I've also been flagged by maxmind and similar anti-fraud tools before when I made VPS purchases over Tor. But because I paid in Bitcoin support was able to approve the transaction without a second thought - no more fraud risk could occur. Of course - these types of purchases aren't that frequent - but they do occur.
jackweirdy 9y ago
> there's no better way of sending money, no strings attached Is this true? I've never been able to figure out how to turn my BTC back into GBP without submitting documentation for KYC laws. I never had to show Paypal my passport, and paypal sucks.
- askmike 9y ago
  You are not talking about sending money, but converting money from one type into another, namely fiat money (which is exactly why all the KYC regulation is required). Try converting one crypto currency into another using shapeshift and see how extensive that KYC process is.
- zanny 9y ago
  Except the same applies to translating almost any currency into any other. The Eurozone is fairly unique in the world in terms of lax currency exchange within itself - go try converting Yen or Rubles into GBP and see if you don't have to file anything. Bitcoin absolutely is valuable. Some people even take it as payment, making it a currency. And moving around that currency is way more transparent and unencumbered than moving any form of fiat. Currency exchange is wholly up to what you want to convert it into and what exchange you are working with. And if that ends up involving your government... people in other parts of the world don't have that limitation. You can't blame the tech if your society chooses to inhibit it (as your PM is trying to do right now...).
richardwhiuk 9y ago
Bitcoin's total potential transaction volume is about 3 orders of magnitude less than the Visa network. It's a massively centralized currency (everyone has a list of every transaction in the currency) compare to any real currency which can perform transactions solely between two parties. There is absolutely no inherent value and no transaction is denominated in bitcoins (you can pay in the number of bitcoins equivalent to a number of dollars, but nobody operating a real business wants a number of bitcoins for a good or service).
- deleted 9y ago
  [deleted]
- Frogolocalypse 9y ago
  > Bitcoin's total potential transaction volume is about 3 orders of magnitude less than the Visa network. Why are you comparing it to visa? I have no intention of getting rid of my cc. My bank account on the other hand... > There is absolutely no inherent value Clearly the people who have assigned value by acquiring it would disagree with this, yes? > and no transaction is denominated in bitcoins That's just false. Almost all other cryptos are priced in bitcoin, which i think is the subject matter of this thread. > nobody operating a real business wants a number of bitcoins for a good or service Oh dear. No. If you think that service providers that are paid in bitcoin aren't keeping their bitcoin holdings you're kidding yourself. That may have been the case a few years ago, but today? There are services today that do exactly the opposite : take a wage and immediately convert into bitcoin and place it in your wallet.

linsomniac 9y ago

There is low barriers to entry, but Diamond referenced above at least has 3M in transactions, so it doesn't seem quite like a copy-and-paste cryptocurrency. There are 800 or more cryptocurrencies, most of them are probably junk. The top 10 by market cap are probably interesting. There are many that fit a particular niche (gaming, banking for legal pot, medical records in blockchain, privacy, smart contracts).

chinathrow 9y ago
Heck a transaction count could easily be part of a pump and dump scheme.
- linsomniac 9y ago
  That's $3M in transactions, sorry I forgot the $. Yes, it could be part of the scheme, but most exchanges charge a percent or more. So it's more than just a copy-and-paste (the term for new currencies that come out without any substance behind them), if they're also spending $40K/day in exchange fees. Now, speculation is that C-CEX is involved or behind some of these bogus coins, so you gotta look at what exchanges it's on. Diamond is on Bittrex, which seems to be on the up-and-up.

badloginagain 9y ago

I wonder how long before someone leverages celebrity to launch a new coin. The barrier to entry is so low, and everyone wants to get in on the ground floor of "The Next BitCoin". A decent marketing campaign and an easy-to-use purchase flow could blow up a new cryptocoin pretty quickly.

mtgx 9y ago

Since your comment seems to be one of the most negative in here, it's a good place to post this article, and I recommend you also read it. Perhaps it can change your opinion a little bit from the "cryptocurrencies are just like tulips" mentality: https://hackernoon.com/why-everyone-missed-the-most-important-invention-in-the-last-500-years-c90b0151c169 https://hackernoon.com/why-everyone-missed-the-most-importan...

just_one_time_ 9y ago

What is your definition of "low barrier to entry"? I guess it includes a 4 year CS degree or lots of C experience and $10-100,000 in startup funds for mining and marketing.