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Book author here. Ask me anything. I have a blog of the same name: https://davidgerard.co.uk/blockchain/ https://davidgerard.co.uk/blockchain/ And a second bo

Book author here. Ask me anything. I have a blog of the same name: https://davidgerard.co.uk/blockchain/ https://davidgerard.co.uk/blockchain/ And a second book, about Facebook's Libra.

counternotions 5y ago
In the future, with the lessons of history behind us, how can the Bitcoin community avoid another stablecoin debacle that we are seeing unfold in front of us in real time (namely Tether, and the faux liquidity it has been injection into the valuation of BTC).
- davidgerard 5y ago
  So firstly, they'd have to take account of the lessons of history. In my experience, the bitcoin subculture is really bad at doing the reading, and accepting any version of history that doesn't reinforce their assumptions that they're going to get rich for free. There's a history of extremist libertarian ideology in bitcoin, and that's still how the subculture talks about their common beliefs. But the subculture's behaviour is more accurately predicted if you assume their only interest is "number go up." So printing billions of "dollars" of questionably-backed digital wildcat banknotes is good news for bitcoin, if it keeps number going up. The noisy online cultist sort of bitcoiners will swear everything is fine with Tether, but the traders know damn well it's going to explode some time. The only bright side is that crypto is not systemic to the real economy, even the paper economy. So if Tether and/or a major exchange blew up - Binance is looking like a hot prospect, with the amount of regulatory heat it's been getting in just the past few weeks, and with multiple reports of people unable to get their money or even their cryptos out - and bitcoin crashes, then the rest of the financial world will barely be affected.
- AndrewStephens 5y ago
  Not the author but I think in general the ethos and technical design of Bitcoin is doomed to end up attracting scammers (bad exchanges, tether-like debacles, etc) no matter what. You just cannot have anonymous, irreversible value flowing in large amounts anywhere near humans. Bitcoin has exactly one real use - transferring money without pesky government oversight, effectively money laundering, which it doesn't even do that well. Everything else is either speculating on the value going up (it's not actually a Ponzi scheme as such but it could be called I-can't-belive-it's-not-a-Ponzi due to the way the exchanges pump the price) or some kind of idiotic banking-the-unbanked scheme that is doomed to failure. The price remains high due to Tether and the abundance of real money flowing around at the moment. But as soon as that money dries up Bitcoin will be the first investment class to be wiped out. Bitcoin will always be worth something - in 50 years there will still be some oddballs running nodes in their garden sheds. But the investors and scammers will have moved on to something else.
FabHK 5y ago
1. Bitcoin's "coinbase" mining reward halves every 210,000 blocks. Is it conceivable that miners band together and quietly remove that part of the code? (I guess that you'd then have a "good miners" and "bad miners" hard fork, and it all depends on who's in the majority, so it boils down to a good old 51% attack. But what are the game theoretic elements there?) 2. Those that have gotten rich - where did the money come from? It seems like a negative sum game to me (as you have to pay the ASICs and power, ie mining rewards). How is that different from a "normal" stock?
- davidgerard 5y ago
  1. So remember that bitcoin has had its 51% event - in 2014, when GHash went over 51%, and promptly split into smaller pools, so as not to spook the suckers. Nobody talks about that now. But from 2014 on, bitcoin mining was indisputably centralised - it's only ever been decentralised in the sense of "can't sue me bro", not in operational practice. In 2015, the men controlling 80% of bitcoin mining stood on stage together at a conference. Three or four entities have run bitcoin mining since then - assuming they don't share ownership behind the scenes. The only thing preventing miner misbehaviour is wanting to avoid spooking the suckers. That's the game theory here. The miners would love to increase the reward. The trouble will be selling it to the subculture. They'd need to make a convincing case that it was necessary to number going up. 2. You're correct: no money comes out of bitcoin that didn't go in. So for everyone who got rich, there's a pile of suckers who got poor. Everyone who talks about bitcoin as an great investment does so with massive survivorship bias. A securities issuance is supposed to (this is the brochure version) fund investment in a productive enterprise. You get a pile of capital together, you invest it in an enterprise, it generates wealth. A pile of bitcoins can't do that. It's just a pile of a commodity, that doesn't do anything else. All you can do is buy, hold or sell it. Early bitcoin buyers are only ever paid with actual dollars from later bitcoin buyers. This is technically not a Ponzi, because nobody is running it, but it works very like one. Holders are incentivised to promote the scheme so as to help grow the supply of later bitcoin buyers to offload their bags onto, so they can cash out at all.
- simonw 5y ago
  "Those that have gotten rich - where did the money come from?" People who bought in later than they did. The reason I find Bitcoin speculation so distasteful is that the only way to make money from it is to wait for more people to be convinced to buy in, so you can sell your Bitcoin at a higher price then you bought it. The reason this differs from the stock market is that stocks are attached to companies which have an inherent value and, through dividends, share that value with the holders of the stock. Sure, there's a lot of speculation, but there's also genuinely useful economic activity happening, generating real value.

Book author here. Ask me anything. I have a blog of the same name: https://davidgerard.co.uk/blockchain/ https://davidgerard.co.uk/blockchain/ And a second book, about Facebook's Libra.

counternotions 5y ago

In the future, with the lessons of history behind us, how can the Bitcoin community avoid another stablecoin debacle that we are seeing unfold in front of us in real time (namely Tether, and the faux liquidity it has been injection into the valuation of BTC).

davidgerard 5y ago
So firstly, they'd have to take account of the lessons of history. In my experience, the bitcoin subculture is really bad at doing the reading, and accepting any version of history that doesn't reinforce their assumptions that they're going to get rich for free. There's a history of extremist libertarian ideology in bitcoin, and that's still how the subculture talks about their common beliefs. But the subculture's behaviour is more accurately predicted if you assume their only interest is "number go up." So printing billions of "dollars" of questionably-backed digital wildcat banknotes is good news for bitcoin, if it keeps number going up. The noisy online cultist sort of bitcoiners will swear everything is fine with Tether, but the traders know damn well it's going to explode some time. The only bright side is that crypto is not systemic to the real economy, even the paper economy. So if Tether and/or a major exchange blew up - Binance is looking like a hot prospect, with the amount of regulatory heat it's been getting in just the past few weeks, and with multiple reports of people unable to get their money or even their cryptos out - and bitcoin crashes, then the rest of the financial world will barely be affected.
AndrewStephens 5y ago
Not the author but I think in general the ethos and technical design of Bitcoin is doomed to end up attracting scammers (bad exchanges, tether-like debacles, etc) no matter what. You just cannot have anonymous, irreversible value flowing in large amounts anywhere near humans. Bitcoin has exactly one real use - transferring money without pesky government oversight, effectively money laundering, which it doesn't even do that well. Everything else is either speculating on the value going up (it's not actually a Ponzi scheme as such but it could be called I-can't-belive-it's-not-a-Ponzi due to the way the exchanges pump the price) or some kind of idiotic banking-the-unbanked scheme that is doomed to failure. The price remains high due to Tether and the abundance of real money flowing around at the moment. But as soon as that money dries up Bitcoin will be the first investment class to be wiped out. Bitcoin will always be worth something - in 50 years there will still be some oddballs running nodes in their garden sheds. But the investors and scammers will have moved on to something else.

FabHK 5y ago

1. Bitcoin's "coinbase" mining reward halves every 210,000 blocks. Is it conceivable that miners band together and quietly remove that part of the code? (I guess that you'd then have a "good miners" and "bad miners" hard fork, and it all depends on who's in the majority, so it boils down to a good old 51% attack. But what are the game theoretic elements there?) 2. Those that have gotten rich - where did the money come from? It seems like a negative sum game to me (as you have to pay the ASICs and power, ie mining rewards). How is that different from a "normal" stock?

davidgerard 5y ago
1. So remember that bitcoin has had its 51% event - in 2014, when GHash went over 51%, and promptly split into smaller pools, so as not to spook the suckers. Nobody talks about that now. But from 2014 on, bitcoin mining was indisputably centralised - it's only ever been decentralised in the sense of "can't sue me bro", not in operational practice. In 2015, the men controlling 80% of bitcoin mining stood on stage together at a conference. Three or four entities have run bitcoin mining since then - assuming they don't share ownership behind the scenes. The only thing preventing miner misbehaviour is wanting to avoid spooking the suckers. That's the game theory here. The miners would love to increase the reward. The trouble will be selling it to the subculture. They'd need to make a convincing case that it was necessary to number going up. 2. You're correct: no money comes out of bitcoin that didn't go in. So for everyone who got rich, there's a pile of suckers who got poor. Everyone who talks about bitcoin as an great investment does so with massive survivorship bias. A securities issuance is supposed to (this is the brochure version) fund investment in a productive enterprise. You get a pile of capital together, you invest it in an enterprise, it generates wealth. A pile of bitcoins can't do that. It's just a pile of a commodity, that doesn't do anything else. All you can do is buy, hold or sell it. Early bitcoin buyers are only ever paid with actual dollars from later bitcoin buyers. This is technically not a Ponzi, because nobody is running it, but it works very like one. Holders are incentivised to promote the scheme so as to help grow the supply of later bitcoin buyers to offload their bags onto, so they can cash out at all.
simonw 5y ago
"Those that have gotten rich - where did the money come from?" People who bought in later than they did. The reason I find Bitcoin speculation so distasteful is that the only way to make money from it is to wait for more people to be convinced to buy in, so you can sell your Bitcoin at a higher price then you bought it. The reason this differs from the stock market is that stocks are attached to companies which have an inherent value and, through dividends, share that value with the holders of the stock. Sure, there's a lot of speculation, but there's also genuinely useful economic activity happening, generating real value.