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I had a bit of Bitcoin back then-- maybe 10 BTC. Some I mined back when you could CPU mine. I set up a process to mine in a pool whenever my 2011-2012 era MacBo

by api 9y ago

I had a bit of Bitcoin back then-- maybe 10 BTC. Some I mined back when you could CPU mine. I set up a process to mine in a pool whenever my 2011-2012 era MacBook was plugged in and had Internet, keeping it alive even when the lid was closed with another hack. I spent it on various things between then and the big Bitcoin pumps: coffee (there was a spot that would take BTC in SoCal), open source contributions, etc., and cashed a little out just to see Coinbase work. I never thought it would go anywhere near this high for the rational reason that Satoshi's Bitcoin is really not a very good currency. It's a significant innovation in distributed systems and the Bitcoin code base is a good proof of concept, but I expected it to stay semi-niche or to eventually crash if/when major technical limits were found. I saw three killer problems with it: (1) Proof of work inherently promotes centralization due to industrial economies of scale. I expected some miner to eventually have 51% and behave badly, or a government that felt threatened by it to invest in >=51% hash power (or nationalize a few miners) and wreck it. The latter would be cheaper both politically and monetarily than a full frontal assault, especially if done semi-secretly. (2) It doesn't scale and won't scale. It's far too heavy. Some of the issues are merely Bitcoin's choice of parameters and some are deeper problems with the implementation. (3) Hyper-deflationary behavior is not a desirable characteristic for a currency. (Hyper-inflationary isn't either, but Bitcoin will never have that problem.) A currency needs to have at least a somewhat stable price and the ability to grow in quantitative base if needed to act as a good medium of exchange. Bitcoin is far more deflationary than gold. Not only does it have a strict known global limit, but it's subject to breakage (loss of coins) to a much greater degree than gold. So I didn't "hodl" because I thought it would probably top out at around $100/coin. I underestimated the irrationality of the rest of the market. Moral of the story? Markets are not rational and are therefore pretty tough to predict using purely rational models that don't delve into emotionally driven human behavior, herd dynamics, and game theory. Second moral of the story: I agree with point #3 here that sometimes extreme upside arguments do work. I should have held because I didn't need to cash out and there was the remote chance that... this... would happen. The latter works with startup investing too. I've talked to some angels and several said they made their biggest exits on companies they'd mentally written off. In one case when it came time to cash out he forgot where he put his certificate info or how many shares he had.

dmichulke 9y ago
> or a government that felt threatened by it to invest in >=51% hash power (or nationalize a few miners) and wreck it Well, AFAIU they will wreck their fork, fine by me. > Hyper-deflationary behavior is not a desirable characteristic for a currency. It is a desirable characteristic for a store of value though. And eventually, every hyper-deflation stops and it might become a currency.
- api 9y ago
  Bitcoin is a poor store of value too. It requires a lot of power simply to maintain it. It's a dissipative structure. Gold on the other hand can be buried in the ground and can just sit there for free. There are costs associated with moving and guarding or hiding it, but they're less than the cost of maintaining a vast network infrastructure and lot of energy-consuming hash computers. To me the whole "store of value" thing is goal post moving. It was originally intended to be a currency but it's not very good for that, so people have decided to punt on that goal and redefine its objectives. I also forgot to add that Bitcoin in its current incarnation is not quantum hard and will die when practical QC arrives. It could be rev'd to support post-quantum crypto, but the way it's dealt with scaling issues so far does not inspire confidence that it will get ahead of the curve.
  - dmichulke 9y ago
    > To me the whole "store of value" thing is goal post moving. I agree and the bet is currently on LN to get that currency aspect back. But it troubles me and many others. On the mitigating side, many people think that it it's not a currency, even with low transaction fees, because it's so volatile. Therefore, those people have never bought it in the first place and cannot exert downward price pressure right now either.
- lmm 9y ago
  > eventually, every hyper-deflation stops and it might become a currency. That's not what tends to happen though. If you look at collectibles (which I maintain are the closest analogue for Bitcoin), they get rarer and the price climbs, and then people lose interest but the price doesn't drop; rather transactions become rarer and rarer, but those transactions that do happen still happen at the "old" price. And eventually no-one cares about the thing, but the value is still nominally high, and the market never gets more active.

by api 9y ago

dmichulke 9y ago

> or a government that felt threatened by it to invest in >=51% hash power (or nationalize a few miners) and wreck it Well, AFAIU they will wreck their fork, fine by me. > Hyper-deflationary behavior is not a desirable characteristic for a currency. It is a desirable characteristic for a store of value though. And eventually, every hyper-deflation stops and it might become a currency.

api 9y ago
Bitcoin is a poor store of value too. It requires a lot of power simply to maintain it. It's a dissipative structure. Gold on the other hand can be buried in the ground and can just sit there for free. There are costs associated with moving and guarding or hiding it, but they're less than the cost of maintaining a vast network infrastructure and lot of energy-consuming hash computers. To me the whole "store of value" thing is goal post moving. It was originally intended to be a currency but it's not very good for that, so people have decided to punt on that goal and redefine its objectives. I also forgot to add that Bitcoin in its current incarnation is not quantum hard and will die when practical QC arrives. It could be rev'd to support post-quantum crypto, but the way it's dealt with scaling issues so far does not inspire confidence that it will get ahead of the curve.
- dmichulke 9y ago
  > To me the whole "store of value" thing is goal post moving. I agree and the bet is currently on LN to get that currency aspect back. But it troubles me and many others. On the mitigating side, many people think that it it's not a currency, even with low transaction fees, because it's so volatile. Therefore, those people have never bought it in the first place and cannot exert downward price pressure right now either.
lmm 9y ago
> eventually, every hyper-deflation stops and it might become a currency. That's not what tends to happen though. If you look at collectibles (which I maintain are the closest analogue for Bitcoin), they get rarer and the price climbs, and then people lose interest but the price doesn't drop; rather transactions become rarer and rarer, but those transactions that do happen still happen at the "old" price. And eventually no-one cares about the thing, but the value is still nominally high, and the market never gets more active.