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Goldman Sachs Report Explores Use of Bitcoin as Currency

157 points by justboxing 9y ago

aaron-lebo 9y ago
More than a little disturbing. They talk about helping developing economies, but what you can bet this means is that they'll be screwing over those people some way or another. https://en.wikipedia.org/wiki/Goldman_Sachs#2007%E2%80%932008_Subprime_mortgage_crisis https://en.wikipedia.org/wiki/Goldman_Sachs#2007%E2%80%93200... http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/ http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/ This is the end game of cryptocurrencies; not worldwide financial liberation but the same massive financial institutions further cementing their power. Kind of funny that they are looking at Bitcoin at a point where it's more valuable but is more poorly suited to be a currency than ever before. Says a lot.
- keyle 9y ago
  Wherever there is blood, there are sharks, vultures...
- paulmd 9y ago
  The problem in hyperinflationary situations isn't lack of access to hard currency, it is usually readily available on the black market. The problem is the lack of affordability of hard currency. How many US dollars do I get for this piece of hyperinflating funny money? Probably not many. Bitcoin is really no different from transacting in US dollars or any other hard currency, in fact it's arguably worse in pretty much every way. And you won't be able to get Bitcoins at affordable funny-money prices any more than you can get dollars. So when you hear things like "Zimbabwe should switch to Bitcoin", just mentally replace that advice with "Zimbabwe should switch to USD" and imagine how that would play out. Harsh austerity measures, deregulation, and privatization to get a few measly millions of World Bank loans that will be gone in no time. Any country that finds themselves in a position where they can't issue their own currency is going to have a real hard time of it. So just think "shock doctrine, but with Bitcoin".
  - lazerpants 9y ago
    Umm... You do know that Zimbabwe has used the USD and South African Rand as its currencies since 2009, right? They abandoned the Zimbabwean dollar due to hyperinflation. All I've ever seen there is USD.
gimmeayrwlt 9y ago
Why I would be interesting what globalist corporations are thinking ?? Our governments lies so much to us it's a joke. "Trust" is lost for both!!
wmf 9y ago
Has the Bitcoin crash of 2013 already been forgotten? It's totally irresponsible to use such a volatile asset as currency.
- deleted 9y ago
  [deleted]
- adamnemecek 9y ago
  Bitcoin in 2018 is not the same bitcoin in 2013.
  - deleted 9y ago
    [deleted]
  - 0wing 9y ago
    Correct, it's actually measurably worse. As time passes, Bitcoin becomes more exploitative to new users. [1] Not to mention, the bandwidth is severely crippled and the network is basically unusable for normal transacting. Take the case study of Steam discontinuing Bitcoin payments. [2] [1] https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ [2] https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613 https://steamcommunity.com/games/593110/announcements/detail...
    - adamnemecek 9y ago
      Bitcoin is a portal, not a coin you'd use for actual exchanging.
      - mulmen 9y ago
        Then why isn't it called Bitportal?
      - jklein11 9y ago
        Can you elaborate on this? In what way is it any more of a portal than government issued fiat? Is it because the infrastructure is more robust because it has been around the block longer? Is there some other technical detail that makes it exceptionally good at being a portal?
libpcap 9y ago
As an investment vehicle? Probably. As a currency? With that kind of volatility, it would be difficult. If I were to sell my used car today in, say, BTC, it would be tough to determine at what price I want to let it go. This is not to mention what how the buyer would haggle (e.g. "I think BTC will go up next week, so how about BTC XXX for your 2013 Hinda Civic?").
nerfhammer 9y ago
If you think bitcoin would make a good currency, ask yourself what happens if you have any debts, lease or mortgage denominated in bitcoin. At least hyperinflation wipes out debts, in hyperdeflation some people become millionaires and others owe millions based on whether you had positive or negative money at the start.
- grey-area 9y ago
  What I find most interesting about Bitcoin are its inherent contradictions - the tragedy hidden amongst the tensions in the inventor's world-view. Some of the aspirations are really interesting - a currency which no-one controls, a currency without built in inflation, which is stable in value, a financial system with low fees and without government control, untaxable and ungovernable. A currency where the people own the means of production. The implementation however expresses the contradictions hiding beneath the surface of these seemingly benign ambitions: A stable currency cannot simultaneously be a valuable asset. A money supply which cannot be manipulated means an economy completely at the mercy of economic cycles. A system not amenable to government also means one not amenable to regulation. A fully distributed eventually consistent ledger cannot form the basis of a fast global payment system. A partially anonymous yet public ledger is open to abuse and but not redress. An immutable ledger doesn't match how we think of social transactions (which are usually reversible or revokable). A fixed money supply in practice means deflation, with all the problems even a little deflation causes. If nothing else I hope the bitcoin and cryptocurrency experiment brings us all to question just how much inflation is good, just how well politicians manage our economy, and how much good a fractional reserve banking and arbitrary money supply manipulation really does. Are the fictions and confidence tricks we live by at present much better than the cryptocurrency systems proposed? Perhaps marginally, but they too will be replaced in time with something better, hopefully something which no one government controls. This development though hints at a darker future, where corporations issue or control their own money supply, and force others to use it.
- intrasight 9y ago
  Exactly. Ask people in Italy or Greece whose banks made them take out mortgages in Euro.
twblalock 9y ago
The article makes the point that Bitcoin could be viable in many countries where people already use foreign currencies because they don't trust their domestic currency. That's one of the few arguments for cryptocurrency that I find convincing, but I think it's a stronger argument for cryptocurrencies other than Bitcoin. The Bitcoin transaction fees are so high right now that it doesn't make sense to use it for small purchases, which really limits its usefulness for people in poor countries. For example, right now the average Bitcoin transaction fee is more than $20, and the average annual income in the Democratic Republic of Congo, one of the countries mentioned in the article, is about $400 per year.
- toomanybeersies 9y ago
  I am struggling to see how cryptocurrencies would have any tangible advantage over US Dollars in developing nations. Remember that in many of these countries, most people don't have smart phones, and there's a lot of people who don't even have phones. Electricity and internet connections are intermittent at best. Good luck convincing Cambodian street hawkers that your magic internet money is better than a good old fashioned Greenback. And another reason that cryptocurrencies will struggle to catch on: it's hard to bribe people with magic internet money. There's no paper trail or proof if you bribe someone with cash.
  - root_axis 9y ago
    Indeed. It also requires considerable levels of technical literacy to use, maintain, and properly secure blockchain tokens, and even with all that people regularly have their bitcoins stolen or irreparably lost.
    - hanselot 9y ago
      I love how Fiat Money was designed to be impossible to use for illegal purposes, and there is no way to steal it. I mean really, if there were a way for it to be used in that way, surely your argument would be pointless, but luckily we know that the more middlemen we introduce between us and another party, the more affordable the transaction will become.
drngdds 9y ago
Where can I read the actual report?
- justboxing 9y ago
  I tried looking for it. Haven't found it yet. It was supposedly distributed by Goldman Sachs to it's Clients, so hoping some client will post the actual report / PDF.
0wing 9y ago
Bitcoin and blockchain systems are nearly all designed to exploit new users and extract capital from greater fools who are too late to the game and didn't read or understand the rules and fine print. Satoshi's Bitcoin and many of the crypto-currencies that have followed create and distribute the supply that effectively creates a decentralized pyramid-ponzi scheme. Semantically, a more accurate term is needed; Bitcoin is a Satoshi scheme, .. or a "Nakamoto Scheme" https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ Imagine an economic policy that uses a "limited" amount of pie as "currency". Bitcoin gave half of this pie away to the first few users who arrived in exchange for the least amount of work/effort possible. Any user arriving later will need to waste more hashing power (computational work) in exchange for a smaller sum of newly generation coins for a successfully mined block reward. or the user might be convinced to purchase a previously produced coin from one of the early adopters. Buying a Bitcoin is worse than zero-sum, as money from buyers is exchanged for previously generated coins, the network must increasingly waste computations and energy. Satoshi's economic model creates a system where participation is only beneficial if you can exploit the ignorance of another new user who enters the network after you. Bitcoin effectively relies on psychological manipulation though deceptive marketing claims like "Bitcoin is deflationary" "Bitcoin is rare" "Bitcoin is a store of value" When what actually happens is you either need to enrich someone who generated the coin for far less than you're paying, or waste more electricity and computational work than other early users for significantly less share of the pie. If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is. 1. The claim of "rare" doesn't exactly hold true. Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price). The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people. Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent (http://www.businessinsider.com/927-people-own-half- of-the-bitcoins-2013-12). The concentration of Litecoin ownership is similar (http://litecoin-rich-list.blogspot.com). Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes the China’s and even the US’ wealth distribution look like that of a workers’ paradise 2. Easy migration to more advanced e-cash services See: https://coinmarketcap.com/currencies/views/all/ https://coinmarketcap.com/currencies/views/all/ 3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners. 4. Electricty usage is unsustainable, GOTO 3 5. [4] Bitcoin value is make-believe just like money. But even though there is bitcoin-sphere governance, there are no bitcoin-sphere assets. Taxes are not paid in bitcoin. There is no FDIC, only hackers that lift a million here and there. And when nation-states decide its a nuisance, what are the guns of bitcoin? It’s anonymity? From the same government that created PRISM and then used mind-magic* to make everyone forget about PRISM? Please. You may think crypto-currencies that require more power than a small country to run can fly under the radar, but somehow I think not indefinitely. After all, becoming the next big thing would mean its a threat to the American dollar, do you really think the US Gov will shrug and say “shucks bitcoin went from a ponzi-novelty to something that will totally usurp this hegemony we worked so hard to make. Guess we’ll have to call it a day.” (If you think this, sell your Bitcoin and buy an imagination.) The day you can pay tax bills to a government in Bitcoin is probably the day you can rest easy. Until then dear Bitcoin holders, you do have something of value, just like the Louisiana territory has value. But in this 1800’s metaphor, what makes you so sure you’re America? Monopoly money is good to have, while the game is still running. [1] https://bitcoin.stackexchange.com/questions/86/is-it-possible-to-estimate-the-gini-coefficient-for-bitcoins-and-if-the-trend-is https://bitcoin.stackexchange.com/questions/86/is-it-possibl... http://www.businessinsider.com/bitcoin-inequality-2014-1 http://www.businessinsider.com/bitcoin-inequality-2014-1 [2] https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE [3] https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/ https://qz.com/1055126/photos-china-has-one-of-worlds-larges... [4] https://hackernoon.com/the-guns-of-bitcoin-1f779309a718 https://hackernoon.com/the-guns-of-bitcoin-1f779309a718
JohnJamesRambo 9y ago
Bitcoin is not remotely usable as a currency now. The fees are incredible, the confirmation times ridiculous. We need to move on to something more modern like Ethereum, Stellar Lumens, etc. immediately. Asking the current 1 mb blocksize version of Bitcoin to be a currency is like Goldman Sachs writing a report saying they want to run their website on Intel 486 processors. They mention Zimbabwe moving to it as an alternative. The average Bitcoin fee is now $40 and the average weekly salary there is around $60. It is ludicrous to even think about asking someone to spend almost a week's wage for something as simple as a transaction fee. Bitcoin has failed completely at accomplishing the "banking the unbanked" goal that drew many of us to it in the first place. That story and that loss is a long, convoluted, and sad story for another time. But other cryptos with teams willing to adapt and listen to reason are moving forward with this torch.
- e19293001 9y ago
  Now is the era where companies are racing to replace Bitcoin. We'll see what happens at the end of this year.
  - deleted 9y ago
    [deleted]
- StateChannelBro 9y ago
  you seem to be underestimating the value of lightning networks, TEEchains, quorums, etc.
  - mulmen 9y ago
    Honest question: how does any of that help with transaction fees?
    - tananaev 9y ago
      With Lightning Network you pay fees once to create a channel and then you can use that channel to make smaller payments for very low or even no fees. Channel can stay open for a very long time (e.g. a year). So, you end up paying single Bitcoin transaction fee instead of hundreds, and it also reduces load on the Bitcoin network freeing the block space lowering fees even more.
keyle 9y ago
They would 'explore' anything they could trade, by any mean 'legal', to maximize their profits. They'd be mad not to 'explore'.
intrasight 9y ago
There are these universal truths - things created by all sentient beings throughout the universe. The wheel, nuclear power, markup with angle-brackets, and bitcoin.
bluetwo 9y ago
I feel like every bitcoin post becomes Groundhog Day.
halamadrid 9y ago
And this article is published on iconow.net I am guessing it’s not biased?
- justboxing 9y ago
  Well, Forbes also wrote about the same story / GS Report, if that's any consolation. [Clutter, Adware free version] Forbes : Goldman Sachs Caves: Bitcoin Is Money https://outline.com/5R8akm https://outline.com/5R8akm
justboxing 9y ago
EDIT / UPDATE: Here's the same story covered on Forbes.com Forbes : Goldman Sachs Caves: Bitcoin Is Money https://outline.com/5R8akm https://outline.com/5R8akm [Clutter, Adware free version] I still haven't been able to locate the actual bitcoin report that GS sent it's client.
danifeld 9y ago
More and bigger sharks are coming into this space. Which is perfect.
tasssko 9y ago
The first few bitcoin transactions happened when the government rolled out bond notes correlating well with a reduction in US$ money supply. The black market was paying 90% on a bond note a few weeks later it was 55% on a bond note. Bitcoin is making it easy for these parties in this market to repatriate money. The important consideration is this is usually principle+profits and so the risk vs reward of using bitcoin is at a minimum over ‘getting the money out’. I don’t think there is any problem with this. Will this reduce the need to use the US$ on the black market ? Yes if more people owned bitcoin then they could swap it for goods on this market rather than deal with any fiat transactions. Most of these transactions would be US$10k+-US$150k. Compare buying a bitcoin to the cost of offshoring US$ which is usually about 10% on principle. If you look at the math bitcoin is a good proposition assuming you can sell it on the other side. Bitcoin is useable in Zimbabwe or any other country which has a black/grey market for repatriating money. Edited for brevity.
mrarjen 9y ago
Don't think they will ever even consider using this as a currency themselves, it's but a routine paper on how people have attempted to use it as a currency in my opinion. The title is simply to drive more readers to the site. Any Cryptocurrency used by banks or finance companies will be behind locked doors without public trading and no media will be involved if they are smart.
gchokov 9y ago
If GS says so, they are pumping it up for their own profit. Don't ever trust the biggest balloons making machine ever. It also means Bitcoin is BS.
mathattack 9y ago
This article seems like enough to say, "Let's call a top right here and now"
disputatious 9y ago
Bitcoin is the best, the exchange of its value is the problem, exchanges will need to do better.

157 points by justboxing 9y ago

More than a little disturbing. They talk about helping developing economies, but what you can bet this means is that they'll be screwing over those people some way or another. https://en.wikipedia.org/wiki/Goldman_Sachs#2007%E2%80%932008_Subprime_mortgage_crisis https://en.wikipedia.org/wiki/Goldman_Sachs#2007%E2%80%93200... http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/ http://fortune.com/2016/04/11/goldman-sachs-doj-settlement/ This is the end game of cryptocurrencies; not worldwide financial liberation but the same massive financial institutions further cementing their power. Kind of funny that they are looking at Bitcoin at a point where it's more valuable but is more poorly suited to be a currency than ever before. Says a lot.

keyle 9y ago
Wherever there is blood, there are sharks, vultures...
paulmd 9y ago
The problem in hyperinflationary situations isn't lack of access to hard currency, it is usually readily available on the black market. The problem is the lack of affordability of hard currency. How many US dollars do I get for this piece of hyperinflating funny money? Probably not many. Bitcoin is really no different from transacting in US dollars or any other hard currency, in fact it's arguably worse in pretty much every way. And you won't be able to get Bitcoins at affordable funny-money prices any more than you can get dollars. So when you hear things like "Zimbabwe should switch to Bitcoin", just mentally replace that advice with "Zimbabwe should switch to USD" and imagine how that would play out. Harsh austerity measures, deregulation, and privatization to get a few measly millions of World Bank loans that will be gone in no time. Any country that finds themselves in a position where they can't issue their own currency is going to have a real hard time of it. So just think "shock doctrine, but with Bitcoin".
- lazerpants 9y ago
  Umm... You do know that Zimbabwe has used the USD and South African Rand as its currencies since 2009, right? They abandoned the Zimbabwean dollar due to hyperinflation. All I've ever seen there is USD.

gimmeayrwlt 9y ago

Why I would be interesting what globalist corporations are thinking ?? Our governments lies so much to us it's a joke. "Trust" is lost for both!!

wmf 9y ago

Has the Bitcoin crash of 2013 already been forgotten? It's totally irresponsible to use such a volatile asset as currency.

deleted 9y ago
[deleted]
adamnemecek 9y ago
Bitcoin in 2018 is not the same bitcoin in 2013.
- deleted 9y ago
  [deleted]
- 0wing 9y ago
  Correct, it's actually measurably worse. As time passes, Bitcoin becomes more exploitative to new users. [1] Not to mention, the bandwidth is severely crippled and the network is basically unusable for normal transacting. Take the case study of Steam discontinuing Bitcoin payments. [2] [1] https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ [2] https://steamcommunity.com/games/593110/announcements/detail/1464096684955433613 https://steamcommunity.com/games/593110/announcements/detail...
  - adamnemecek 9y ago
    Bitcoin is a portal, not a coin you'd use for actual exchanging.
    - mulmen 9y ago
      Then why isn't it called Bitportal?
    - jklein11 9y ago
      Can you elaborate on this? In what way is it any more of a portal than government issued fiat? Is it because the infrastructure is more robust because it has been around the block longer? Is there some other technical detail that makes it exceptionally good at being a portal?

libpcap 9y ago

As an investment vehicle? Probably. As a currency? With that kind of volatility, it would be difficult. If I were to sell my used car today in, say, BTC, it would be tough to determine at what price I want to let it go. This is not to mention what how the buyer would haggle (e.g. "I think BTC will go up next week, so how about BTC XXX for your 2013 Hinda Civic?").

nerfhammer 9y ago

If you think bitcoin would make a good currency, ask yourself what happens if you have any debts, lease or mortgage denominated in bitcoin. At least hyperinflation wipes out debts, in hyperdeflation some people become millionaires and others owe millions based on whether you had positive or negative money at the start.

grey-area 9y ago
What I find most interesting about Bitcoin are its inherent contradictions - the tragedy hidden amongst the tensions in the inventor's world-view. Some of the aspirations are really interesting - a currency which no-one controls, a currency without built in inflation, which is stable in value, a financial system with low fees and without government control, untaxable and ungovernable. A currency where the people own the means of production. The implementation however expresses the contradictions hiding beneath the surface of these seemingly benign ambitions: A stable currency cannot simultaneously be a valuable asset. A money supply which cannot be manipulated means an economy completely at the mercy of economic cycles. A system not amenable to government also means one not amenable to regulation. A fully distributed eventually consistent ledger cannot form the basis of a fast global payment system. A partially anonymous yet public ledger is open to abuse and but not redress. An immutable ledger doesn't match how we think of social transactions (which are usually reversible or revokable). A fixed money supply in practice means deflation, with all the problems even a little deflation causes. If nothing else I hope the bitcoin and cryptocurrency experiment brings us all to question just how much inflation is good, just how well politicians manage our economy, and how much good a fractional reserve banking and arbitrary money supply manipulation really does. Are the fictions and confidence tricks we live by at present much better than the cryptocurrency systems proposed? Perhaps marginally, but they too will be replaced in time with something better, hopefully something which no one government controls. This development though hints at a darker future, where corporations issue or control their own money supply, and force others to use it.
intrasight 9y ago
Exactly. Ask people in Italy or Greece whose banks made them take out mortgages in Euro.

twblalock 9y ago

The article makes the point that Bitcoin could be viable in many countries where people already use foreign currencies because they don't trust their domestic currency. That's one of the few arguments for cryptocurrency that I find convincing, but I think it's a stronger argument for cryptocurrencies other than Bitcoin. The Bitcoin transaction fees are so high right now that it doesn't make sense to use it for small purchases, which really limits its usefulness for people in poor countries. For example, right now the average Bitcoin transaction fee is more than $20, and the average annual income in the Democratic Republic of Congo, one of the countries mentioned in the article, is about $400 per year.

toomanybeersies 9y ago
I am struggling to see how cryptocurrencies would have any tangible advantage over US Dollars in developing nations. Remember that in many of these countries, most people don't have smart phones, and there's a lot of people who don't even have phones. Electricity and internet connections are intermittent at best. Good luck convincing Cambodian street hawkers that your magic internet money is better than a good old fashioned Greenback. And another reason that cryptocurrencies will struggle to catch on: it's hard to bribe people with magic internet money. There's no paper trail or proof if you bribe someone with cash.
- root_axis 9y ago
  Indeed. It also requires considerable levels of technical literacy to use, maintain, and properly secure blockchain tokens, and even with all that people regularly have their bitcoins stolen or irreparably lost.
  - hanselot 9y ago
    I love how Fiat Money was designed to be impossible to use for illegal purposes, and there is no way to steal it. I mean really, if there were a way for it to be used in that way, surely your argument would be pointless, but luckily we know that the more middlemen we introduce between us and another party, the more affordable the transaction will become.

drngdds 9y ago

Where can I read the actual report?

justboxing 9y ago
I tried looking for it. Haven't found it yet. It was supposedly distributed by Goldman Sachs to it's Clients, so hoping some client will post the actual report / PDF.

0wing 9y ago

Bitcoin and blockchain systems are nearly all designed to exploit new users and extract capital from greater fools who are too late to the game and didn't read or understand the rules and fine print. Satoshi's Bitcoin and many of the crypto-currencies that have followed create and distribute the supply that effectively creates a decentralized pyramid-ponzi scheme. Semantically, a more accurate term is needed; Bitcoin is a Satoshi scheme, .. or a "Nakamoto Scheme" https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/ Imagine an economic policy that uses a "limited" amount of pie as "currency". Bitcoin gave half of this pie away to the first few users who arrived in exchange for the least amount of work/effort possible. Any user arriving later will need to waste more hashing power (computational work) in exchange for a smaller sum of newly generation coins for a successfully mined block reward. or the user might be convinced to purchase a previously produced coin from one of the early adopters. Buying a Bitcoin is worse than zero-sum, as money from buyers is exchanged for previously generated coins, the network must increasingly waste computations and energy. Satoshi's economic model creates a system where participation is only beneficial if you can exploit the ignorance of another new user who enters the network after you. Bitcoin effectively relies on psychological manipulation though deceptive marketing claims like "Bitcoin is deflationary" "Bitcoin is rare" "Bitcoin is a store of value" When what actually happens is you either need to enrich someone who generated the coin for far less than you're paying, or waste more electricity and computational work than other early users for significantly less share of the pie. If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is. 1. The claim of "rare" doesn't exactly hold true. Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price). The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people. Best estimates are that there are about one million holders of Bitcoin; 47 individuals hold about 30 percent, another 900 hold a further 20 percent, the next 10,000 about 25% and another million about 20%, with 5% being lost. So 1/10th of one percent represent about half the holdings of Bitcoin and 1 percent close to 80 percent (http://www.businessinsider.com/927-people-own-half- of-the-bitcoins-2013-12). The concentration of Litecoin ownership is similar (http://litecoin-rich-list.blogspot.com). Most of the big wallets have been in place from early on, so sitting back and watching your capital grow has been a very successful strategy. The distribution of Bitcoin holdings looks much like the distribution of wealth in North Korea and makes the China’s and even the US’ wealth distribution look like that of a workers’ paradise 2. Easy migration to more advanced e-cash services See: https://coinmarketcap.com/currencies/views/all/ https://coinmarketcap.com/currencies/views/all/ 3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners. 4. Electricty usage is unsustainable, GOTO 3 5. [4] Bitcoin value is make-believe just like money. But even though there is bitcoin-sphere governance, there are no bitcoin-sphere assets. Taxes are not paid in bitcoin. There is no FDIC, only hackers that lift a million here and there. And when nation-states decide its a nuisance, what are the guns of bitcoin? It’s anonymity? From the same government that created PRISM and then used mind-magic* to make everyone forget about PRISM? Please. You may think crypto-currencies that require more power than a small country to run can fly under the radar, but somehow I think not indefinitely. After all, becoming the next big thing would mean its a threat to the American dollar, do you really think the US Gov will shrug and say “shucks bitcoin went from a ponzi-novelty to something that will totally usurp this hegemony we worked so hard to make. Guess we’ll have to call it a day.” (If you think this, sell your Bitcoin and buy an imagination.) The day you can pay tax bills to a government in Bitcoin is probably the day you can rest easy. Until then dear Bitcoin holders, you do have something of value, just like the Louisiana territory has value. But in this 1800’s metaphor, what makes you so sure you’re America? Monopoly money is good to have, while the game is still running. [1] https://bitcoin.stackexchange.com/questions/86/is-it-possible-to-estimate-the-gini-coefficient-for-bitcoins-and-if-the-trend-is https://bitcoin.stackexchange.com/questions/86/is-it-possibl... http://www.businessinsider.com/bitcoin-inequality-2014-1 http://www.businessinsider.com/bitcoin-inequality-2014-1 [2] https://www.youtube.com/watch?v=6r04gfWfRkE https://www.youtube.com/watch?v=6r04gfWfRkE [3] https://qz.com/1055126/photos-china-has-one-of-worlds-largest-bitcoin-mines/ https://qz.com/1055126/photos-china-has-one-of-worlds-larges... [4] https://hackernoon.com/the-guns-of-bitcoin-1f779309a718 https://hackernoon.com/the-guns-of-bitcoin-1f779309a718

JohnJamesRambo 9y ago

Bitcoin is not remotely usable as a currency now. The fees are incredible, the confirmation times ridiculous. We need to move on to something more modern like Ethereum, Stellar Lumens, etc. immediately. Asking the current 1 mb blocksize version of Bitcoin to be a currency is like Goldman Sachs writing a report saying they want to run their website on Intel 486 processors. They mention Zimbabwe moving to it as an alternative. The average Bitcoin fee is now $40 and the average weekly salary there is around $60. It is ludicrous to even think about asking someone to spend almost a week's wage for something as simple as a transaction fee. Bitcoin has failed completely at accomplishing the "banking the unbanked" goal that drew many of us to it in the first place. That story and that loss is a long, convoluted, and sad story for another time. But other cryptos with teams willing to adapt and listen to reason are moving forward with this torch.

e19293001 9y ago
Now is the era where companies are racing to replace Bitcoin. We'll see what happens at the end of this year.
- deleted 9y ago
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StateChannelBro 9y ago
you seem to be underestimating the value of lightning networks, TEEchains, quorums, etc.
- mulmen 9y ago
  Honest question: how does any of that help with transaction fees?
  - tananaev 9y ago
    With Lightning Network you pay fees once to create a channel and then you can use that channel to make smaller payments for very low or even no fees. Channel can stay open for a very long time (e.g. a year). So, you end up paying single Bitcoin transaction fee instead of hundreds, and it also reduces load on the Bitcoin network freeing the block space lowering fees even more.

keyle 9y ago

They would 'explore' anything they could trade, by any mean 'legal', to maximize their profits. They'd be mad not to 'explore'.

intrasight 9y ago

There are these universal truths - things created by all sentient beings throughout the universe. The wheel, nuclear power, markup with angle-brackets, and bitcoin.

bluetwo 9y ago

I feel like every bitcoin post becomes Groundhog Day.

halamadrid 9y ago

And this article is published on iconow.net I am guessing it’s not biased?

justboxing 9y ago
Well, Forbes also wrote about the same story / GS Report, if that's any consolation. [Clutter, Adware free version] Forbes : Goldman Sachs Caves: Bitcoin Is Money https://outline.com/5R8akm https://outline.com/5R8akm

justboxing 9y ago

EDIT / UPDATE: Here's the same story covered on Forbes.com Forbes : Goldman Sachs Caves: Bitcoin Is Money https://outline.com/5R8akm https://outline.com/5R8akm [Clutter, Adware free version] I still haven't been able to locate the actual bitcoin report that GS sent it's client.

danifeld 9y ago

More and bigger sharks are coming into this space. Which is perfect.

tasssko 9y ago

The first few bitcoin transactions happened when the government rolled out bond notes correlating well with a reduction in US$ money supply. The black market was paying 90% on a bond note a few weeks later it was 55% on a bond note. Bitcoin is making it easy for these parties in this market to repatriate money. The important consideration is this is usually principle+profits and so the risk vs reward of using bitcoin is at a minimum over ‘getting the money out’. I don’t think there is any problem with this. Will this reduce the need to use the US$ on the black market ? Yes if more people owned bitcoin then they could swap it for goods on this market rather than deal with any fiat transactions. Most of these transactions would be US$10k+-US$150k. Compare buying a bitcoin to the cost of offshoring US$ which is usually about 10% on principle. If you look at the math bitcoin is a good proposition assuming you can sell it on the other side. Bitcoin is useable in Zimbabwe or any other country which has a black/grey market for repatriating money. Edited for brevity.

mrarjen 9y ago

Don't think they will ever even consider using this as a currency themselves, it's but a routine paper on how people have attempted to use it as a currency in my opinion. The title is simply to drive more readers to the site. Any Cryptocurrency used by banks or finance companies will be behind locked doors without public trading and no media will be involved if they are smart.

gchokov 9y ago

If GS says so, they are pumping it up for their own profit. Don't ever trust the biggest balloons making machine ever. It also means Bitcoin is BS.

mathattack 9y ago

This article seems like enough to say, "Let's call a top right here and now"

disputatious 9y ago

Bitcoin is the best, the exchange of its value is the problem, exchanges will need to do better.