4 ms·

This is a big deal. With leverage and shorting, the only people who will have use for BitCoins (as opposed to a long position in a margin account) will be the s

This is a big deal. With leverage and shorting, the only people who will have use for BitCoins (as opposed to a long position in a margin account) will be the small set who need the specific type of liquidity that BitCoin offers... and that will prove to be a small set. (People who need regular anonymous liquidity have other means.) I will also remark that, even when a bubble is underway, shorting is dangerous. If you don't know what margin calls are (and how much it sucks to get hit by one) then stay out.

waterlesscloud 14y ago
The real value in bitcoin is that it provides settlement from anywhere in the world to anywhere in the world in at most a couple of hours. Very few other options exist for such rapid settlement. Whatever happens with bitcoin, that pace of commerce exists in the world now. To me, the interesting thing to be doing at this point is figuring out how to take advantage of that speed with new business models.
- jacoblyles 14y ago
  No, the real value in bitcoin is the blockchain. It shows us a method to use to create and mutate an agreed-upon public state history using a p2p network. Namecoin shows that this can be used for other purposes than merely currency. Blockchain based coordination and provision of public goods is the future.
  - tocomment 14y ago
    Hmm, that's an interesting point. I wonder if it could be adapted for secure online voting somehow? Perhaps we could finally have a system that's anonymous but prevents double voting?
    - mcherm 14y ago
      Voting is an incredibly hard problem. For instance, your description "anonymous but prevents double voting" is ripe for fraud: I go around paying people to vote for me (or intimidating them into doing so). The secret ballot, cast in public, is resistant to that attack. More generally, one requirement of a voting system is that people trust it. Any elaborate system, no matter what it's theoretical advantages, can have a hard time meeting this hurdle because there are many people in the population who are NOT experts on cryptography and won't be comfortable with any elaborate system.
txttran 14y ago
If you need further evidence on how dangerous shorting is, even for something that everyone thinks will go down, consider the "Widowmaker" bond trade. Essentially, most traders agree that the Japanese Government (JG) will have to soon increase the yield of their new bonds (which have historically been very low) because of Japan's huge and growing national debt (200% of GDP) and the slowly increasing risk of defaulting. Once this happens, the value of the current bonds in the market will drop because who wants to buy bonds with a lower yield at the same price? After the Fukushima disaster, investors thought for sure that the JG would increase yield to get more money to repair infrastructure, deal with a weakened economy, etc. Many, many hedge fund managers have shorted Japanese bonds and all of them have lost money. Yet, the idea persists and every day, traders are shorting JG bonds, convinced that it can't stay low forever. No doubt, one day it will pay off, but will you be the lucky one to cash in? Unlikely.
- jessriedel 14y ago
  Haven't the bond yields, and hence prices, been flat? If so, why did anyone loose money?
andrewljohnson 14y ago
You miss the big picture. Digital currencies will exist as an instrument to hedge against currency fluctuations, commodity manipulation, and to let you deploy liquid money into assets with calculable appreciation/depreciation rates. It won't take much more than a large industry coalition to settle the price fluctuation around bitcoins, which will follow the basic organic market coalition... i.e. vendors accepting bitcoins. In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. I don't know if my bitcoins will be worth anything eventually, but they will be an artifact of great change at least.
- dragonwriter 14y ago
  > In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. Well, in that most sovereign currency denominated accounts in the modern world exist as digital records, sure, we have been for many years.
  - andrewljohnson 14y ago
    I mean that it will be useful to have currencies allocated by computer programs in predictable fashions, and to be able to track the history of each "dollar." Today, we only have politically controlled currencies, and we can only track transaction history, not dollar history.
- michaelochurch 14y ago
  Digital currencies will exist as an instrument to hedge against currency fluctuations, commodity manipulation, and to let you deploy liquid money into assets with calculable appreciation/depreciation rates. National currencies are much less volatile than Bitcoins have shown themselves to be. In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. I think we can agree there. "Bits" have nothing to do with it. It's this: Money pre-1800: metal (usually gold or silver) that can be used to pay taxes and hire killers to defend land. Money 1800-2075[?]: debt of large institutions, with equity a small player. Money post-2075: access to talent (the new limiting factor on getting ideas into implementation). We're starting to see that. I put that at 2075 because people are very conservative when it comes to money, so even though that will be the definition of wealth decades before that, I think it will take a long time before we can come up with a reasonable talent-based currency. What would the proof-of-work model be? It's hard to say.
kokey 14y ago
It's not risky if you know when and by how much it's going to go down. However, you need to have a time machine for that.

waterlesscloud 14y ago

The real value in bitcoin is that it provides settlement from anywhere in the world to anywhere in the world in at most a couple of hours. Very few other options exist for such rapid settlement. Whatever happens with bitcoin, that pace of commerce exists in the world now. To me, the interesting thing to be doing at this point is figuring out how to take advantage of that speed with new business models.

jacoblyles 14y ago
No, the real value in bitcoin is the blockchain. It shows us a method to use to create and mutate an agreed-upon public state history using a p2p network. Namecoin shows that this can be used for other purposes than merely currency. Blockchain based coordination and provision of public goods is the future.
- tocomment 14y ago
  Hmm, that's an interesting point. I wonder if it could be adapted for secure online voting somehow? Perhaps we could finally have a system that's anonymous but prevents double voting?
  - mcherm 14y ago
    Voting is an incredibly hard problem. For instance, your description "anonymous but prevents double voting" is ripe for fraud: I go around paying people to vote for me (or intimidating them into doing so). The secret ballot, cast in public, is resistant to that attack. More generally, one requirement of a voting system is that people trust it. Any elaborate system, no matter what it's theoretical advantages, can have a hard time meeting this hurdle because there are many people in the population who are NOT experts on cryptography and won't be comfortable with any elaborate system.

txttran 14y ago

If you need further evidence on how dangerous shorting is, even for something that everyone thinks will go down, consider the "Widowmaker" bond trade. Essentially, most traders agree that the Japanese Government (JG) will have to soon increase the yield of their new bonds (which have historically been very low) because of Japan's huge and growing national debt (200% of GDP) and the slowly increasing risk of defaulting. Once this happens, the value of the current bonds in the market will drop because who wants to buy bonds with a lower yield at the same price? After the Fukushima disaster, investors thought for sure that the JG would increase yield to get more money to repair infrastructure, deal with a weakened economy, etc. Many, many hedge fund managers have shorted Japanese bonds and all of them have lost money. Yet, the idea persists and every day, traders are shorting JG bonds, convinced that it can't stay low forever. No doubt, one day it will pay off, but will you be the lucky one to cash in? Unlikely.

jessriedel 14y ago
Haven't the bond yields, and hence prices, been flat? If so, why did anyone loose money?

andrewljohnson 14y ago

You miss the big picture. Digital currencies will exist as an instrument to hedge against currency fluctuations, commodity manipulation, and to let you deploy liquid money into assets with calculable appreciation/depreciation rates. It won't take much more than a large industry coalition to settle the price fluctuation around bitcoins, which will follow the basic organic market coalition... i.e. vendors accepting bitcoins. In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. I don't know if my bitcoins will be worth anything eventually, but they will be an artifact of great change at least.

dragonwriter 14y ago
> In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. Well, in that most sovereign currency denominated accounts in the modern world exist as digital records, sure, we have been for many years.
- andrewljohnson 14y ago
  I mean that it will be useful to have currencies allocated by computer programs in predictable fashions, and to be able to track the history of each "dollar." Today, we only have politically controlled currencies, and we can only track transaction history, not dollar history.
michaelochurch 14y ago
Digital currencies will exist as an instrument to hedge against currency fluctuations, commodity manipulation, and to let you deploy liquid money into assets with calculable appreciation/depreciation rates. National currencies are much less volatile than Bitcoins have shown themselves to be. In the future, we may not be using bitcoins, but you can bet we're going to be using coins made of bits. I think we can agree there. "Bits" have nothing to do with it. It's this: Money pre-1800: metal (usually gold or silver) that can be used to pay taxes and hire killers to defend land. Money 1800-2075[?]: debt of large institutions, with equity a small player. Money post-2075: access to talent (the new limiting factor on getting ideas into implementation). We're starting to see that. I put that at 2075 because people are very conservative when it comes to money, so even though that will be the definition of wealth decades before that, I think it will take a long time before we can come up with a reasonable talent-based currency. What would the proof-of-work model be? It's hard to say.

kokey 14y ago

It's not risky if you know when and by how much it's going to go down. However, you need to have a time machine for that.