Bitcoin Fees Are Skyrocketing (arstechnica.com)

An anonymous reader quotes a report from Ars Technica: The cost to complete a Bitcoin transaction has skyrocketed in recent days. A week ago, it cost around $6 on average to get a transaction accepted by the Bitcoin network. The average fee soared to $26 on Friday and was still almost $20 on Sunday. The reason is simple: until recently, the Bitcoin network had a hard-coded 1 megabyte limit on the size of blocks on the blockchain, Bitcoin's shared transaction ledger. With a typical transaction size of around 500 bytes, the average block had fewer than 2,000 transactions. And with a block being generated once every 10 minutes, that works out to around 3.3 transactions per second. A September upgrade called segregated witness allowed the cryptographic signatures associated with each transaction to be stored separately from the rest of the transaction. Under this scheme, the signatures no longer counted against the 1 megabyte blocksize limit, which should have roughly doubled the network's capacity. But only a small minority of transactions have taken advantage of this option so far, so the network's average throughput has stayed below 2,500 transactions per block -- around four transactions per second.

Comments

As good an excuse ...

[CaptainDork]

... as any.

Re: As good an excuse ...

[segin]

I refuse to see it as a scam; scams involve deception. Bitcoin is fully transparent, there is no deception.

Re: As good an excuse ...

[jandrese]

It's only about self deception.

Everybody knows there is a bubble, but nobody wants to believe that it will ever pop.

Re: As good an excuse ...

[Fancy Feast Cat Food]

Shoe shine boys?

Bitcoin is too complicated to use as an actual currency. The whole concept of it was that it would be easier and cheaper to send money around to people. I can send an international transfer these days for $12 with a 3 day wait period and that sucks. Bitcoin on the other hand is frelling ridiculous, you have to pay $26 or more, understand the concepts of how many megabytes of currency you want to transfer (frelling dren!) and then even after all that it might take a week just to get your money anyway..

The worst part about it is it isn't any better than having money in the bank because you're money is held hostage to the whims of the developers that write the bitcoin code. So unlike banks that have to abide by government regulations, the developers of all the different bitcoin programs can get together and legally yotz you over in all sorts of ways.

Re: As good an excuse ...

[ladislavb]

On the contrary. Everybody keeps shouting bubble, bubble, tulips, tulips. Ponzi, pyramid, ponzi, pyramid. Fraud, fraud, fraud!!! You've been doing it for years!

Re: As good an excuse ...

[Antique Geekmeister]

Except when there is fraud.

https://en.wikipedia.org/wiki/...

Re: As good an excuse ...

[JcMorin]

Credit cards can add 2-3% of the transaction, for you that may be small, but for most retailers, it's mostly their end profit margin. Bitcoin [core] is charging a ridiculously high fee because those stupid dev refuses to increase the block size. It's 1 MB per 10 minutes, you probably use more your cell phone than that. Thank god, it's open source and there is a fork call Bitcoin Cash that reset the fee to 1 or less. They are preparing for 1 GB block, tests are already made. https://www.youtube.com/watch?...

Re: As good an excuse ...

[wed128]

You're so money and you don't even know it.

Re: As good an excuse ...

[Ol Olsoc]

On the contrary. Everybody keeps shouting bubble, bubble, tulips, tulips. Ponzi, pyramid, ponzi, pyramid. Fraud, fraud, fraud!!! You've been doing it for years!

So it's pretty awesome that we have built the financial version of perpetual motion, where Bitcoin will just continue to rise, This train is bound for glory, and it ain't stopping - the brakeman has resigned! Onward to infinity, Bitcoin.....

Re: As good an excuse ...

[segin]

So it's pretty awesome that we have built the financial version of perpetual motion...

The stock market?

Re: As good an excuse ...

[Ol Olsoc]

So it's pretty awesome that we have built the financial version of perpetual motion...

The stock market?

Which is built on only the inside traders making money. The rest of us? It's designed for us to lose it.

Re: As good an excuse ...

[jandrese]

Yep. There have never been stock market bubbles, it's the perfect system.

Unclear Story

[rtb61]

The story makes no sense, payment in dollars for bitcoin exchanges. It doesn't seem accurate, I mean, how can an exchage demand real currency when dealing with the fake currency they are promoting. I assume the payment demand is in bitcoin and hence the need to load up the price because of hugely fluctuating prices of bitcoin. Likely the rate is really high because the exchanges are expecting a major crash in bitcoin but don't want to admit it and instead charging for bitcoin exchanges at a rate that reflects a much lower bitcoin for real money exchange. If they are charging in real currency, then who the fuck is fooling who, I mean seriously what the fuck?

Re:Unclear Story

[Jonathan C. Patschke]

It doesn't seem accurate, I mean, how can an exchage demand real currency when dealing with the fake currency they are promoting.

Bitcoin fees are expressed as an average amount in BTC per kilobyte. A given transaction takes a particular amount of space in the block (owing to how many previous transactions are needed to express the exact amount to send plus the address to send the "change" to), and that transaction has a fee attached. The fee is a "bid" to place the transaction on the network.

Likely the rate is really high because the exchanges are expecting a major crash in bitcoin but don't want to admit it and instead charging for bitcoin exchanges at a rate that reflects a much lower bitcoin for real money exchange.

A given node will take the transactions it knows about, and pack the ones with the highest fees into the current block until that block is full. Then the block is mined. If that node wins the mining operation, those transactions become part of the chain. If some other node wins, the transactions it knows about become part of the chain (which will likely have a lot of commonality with the transactions in the first node's block). A higher fee attached to the transaction increases the chances that it'll be processed quickly. Below the average amount, you've got queueing working against you, and your transaction will likely expire before it becomes part of the chain.

If a transaction is totally within one exchange, the fee may be nominal or zero because it's done entirely off the blockchain, but that's not the rising fees the article discusses. This is purely a congestion effect.

Re:Unclear Story

[Harlequin80]

No the reason is you need to bid to get your transaction processed. There are a max of 3.3 transactions per second. How do you get to be the transaction that gets processed? You bid to get your transaction included in the block-chain window. The ~$26 amount was the amount required to get your transaction into the processing window.

Re:Unclear Story

[GuB-42]

This isn't about exchange, it is only about bitcoin transactions, and the fees are in bitcoin. Converted into dollars with the current rate for "clarity".

The way transaction work is by telling the world "hey, I want to transfer 0.1 BTC to X, I give 0.001 BTC to the one (a miner) who makes if official (by committing it to the blockchain). You can chose how much you want to give, including zero, but those who give the most get priority. And because the system is overloaded, you need to give a lot just to be accepted.

Re:Unclear Story

[LynnwoodRooster]

So, basically, you "bid" on making your transaction faster? And the base fee of the transaction is somewhat variable anyway, depending upon the complexity of the transaction?

Re:Unclear Story

[omnichad]

This works the same with everything being in BTC. The currency is undergoing massive deflation (purchasing power increases per BTC). That means that the transaction fees are way too high on a relative scale for smaller transactions. At the time Bitcoin was conceived, if anyone realized it would deflate to that level (to become a global currency it would HAVE to), they did not think about the transaction fees.

Re:Unclear Story

[Lobachevsky]

The transaction fees are variable and optional in the bitcoin protocol (the sender chooses the fee to use). The only issue is that most exchanges use a fixed transaction fee when sending to your private wallet or whatever address you request they send it to. These exchanges usually set it as 0.0005 BTC ($8.50 when BTC is $17,000). If they have to create a multi-transaction transfer to aggregate smaller sizes across multiple wallets, the fee can be 4x or 6x larger, so $34 - $51 per transaction, but that's usually only if the exchange has to send large sizes.

The exchange doesn't really care what the fee is set to, because they're spending your money, not theirs, and as a result they haven't updated their fees since when BTC was $700. This causes a game-theoretical problem because a lot of the transactions in the block are coming from exchanges, using large fees that they don't have to pay for, but now that means any smaller fee transaction queues up behind them since miners always process the biggest fee transactions first.

Re:Unclear Story

[aaarrrgggh]

How can a transaction be wholly within one exchange? Doesn't (at a minimum) the source and destination wallet need to be debited and credited within the blockchain?

I get converting cash to bitcoin to cash off-block-- the wallets never really get involved within the float period of the exchange. I don't understand how you could move bitcoins between wallets though...

Re:Unclear Story

[Jonathan C. Patschke]

That's it.

It doesn't have to be that way. If you're running a node, you could run software that packs transactions into a block by any criteria you choose. However, since the aggregate fees for the block are part of the reward for winning the mining operation, it's in the miners' best interests to pack the largest fees first. Also, since the likelihood of any particular node winning the block is very low, we can talk about the most common strategy as if it were universal.

One of the parts of what makes me really nervous is that fees and trading price feed-back into each other in a damaging sort of way. The way that transactions are expressed is that their components must be spent in totality. So, if you're trying to pay 0.01 BTC, and your smallest previous inbound transaction was 0.1 BTC, you have to refund 0.09 BTC (less fees) back to yourself. Over time, this means your wallet gets fragmented with a bunch of spare change which may make some later transaction expensive because of the number of previous-spends needed to be referenced to get up to that amount. The smaller the pieces of change, the less they can contribute because of the fee overhead in referencing them.

Looking even a little in to the future, this is going to ramp up pressure to rely on off-chain transactions, using the blockchain itself more like inter-bank settling than like personal accounts. That's the exact opposite of the initial sales pitch.

Re:Unclear Story

[omnichad]

that means any smaller fee transaction queues up behind them since miners always process the biggest fee transactions first.

Which is sort of the whole point. At what point would cost-effective mining keep up with demand?

Re:Unclear Story

[fahrbot-bot]

You can chose how much you want to give, including zero, but those who give the most get priority. And because the system is overloaded, you need to give a lot just to be accepted.

Sounds like something you'd hear about the FCC plan to kill Net Neutrality.

Re:Unclear Story

[Orgasmatron]

Go browse the block explorer for a while. Pretty much none of the pools actually looks very closely at the fees or does any hard math on them. In most blocks, you'll find one or two transactions with dozens of inputs for roughly the same cost as the many one or two input transactions.

If you prefer to avoid small change in your wallet, it is trivial to gather up a few small inputs to redeem instead of just taking the smallest one larger than the desired output.

Also, there was no sales pitch - all of the cheerleaders you were listening to were freelance, and if they were selling bitcoin as a micropayment option, they were just as stupid to say that as anyone else must have been to have believed them. It doesn't need to take over all transactions to be successful - just handling inter-bank settlements would be a nearly-incalculable positive change for the world.

Bitcoin is decentralized. There is no "official" bitcoin anything. Even the blockchain itself is just an agreement between independent parties. Don't take anything that people say about it too seriously; their opinions don't mean shit.

Re:Unclear Story

[Anonymous Coward]

their locked down, offline systems

Classic comedy right here. You actually believe that?

Re:Unclear Story

[gweihir]

And that is just one thing to make things worse when the crash comes. The few transactions available per second will not be enough and transactions fees will go through the roof. At the same time Bitcoin will bleed value like crazy, making the transaction fees in BC even higher. This could mean that smaller transactions have no chance at all anymore, because the fee will exceed the transaction value. Larger transactions need somebody that is actually willing to buy. Remember that asking for a certain price does not mean that anybody is willing to pay it.

My take is that at this time it requires only a very small trigger to bring the whole house of cards down.

Re:Unclear Story

[smallfries]

Why would banks using bitcoin for interbank transfers be a good thing?

They have a much faster, more efficient, centralized network. It does not use matic internet money - instead the transfers they make have the same value when they arrive. Bitcoin takes 1-6 hours to make a transfer andbit is not unusual for its values to change by 10-20% in a day.

Re:Unclear Story

[Anonymous Coward]

1) BTC starts to crash
2) Everyone panic sells
3) Transactions are slow and the price continues to plummet, so sellers voluntarily offer higher transaction fees to speed up the transactions
4) Bidding war commences among transaction fees, causing the net gain from any successful sell order to go down commensurately. This accelerates the initial price decline.
5) By the end of it, some actually wind up selling their BTC for an effectively negative price.

Should be a fun ride.

Re:Unclear Story

[smallfries]

Ha ha ha. The “government free” libertarian dream? Sure kid, sure it will. Because this time it really is different. Shit, we don’t even have to talk about tulips - remember the last bitcoin bubble / crash? It was only four years ago...

Re:Unclear Story

[Cyberax]

SWIFT message exchange takes seconds. Bank processing might take days, lots of banks process messages _manually_.

Re:Unclear Story

[mwvdlee]

Assuming the transfer request was digital, there is no technical reason for transfers to take any longer than those few seconds (usually just a fraction of a second).
Banks still hold up transfers to gain temporary use of the floating funds involved. They can do this because historically it did take days and they just never bothered to improve service to their customers, who will happily believe it still takes that long.
If you pay a bank for it, they'll transfer in a few seconds (this is at near zero cost to them).
If there is some other benefit to the bank (i.e. correcting mistakes), they'll transfer in a few seconds.

Re:Unclear Story

[mwvdlee]

personally, I think my desktop PC is more likely to get a malware infection that steals currency than their locked down, offline systems.

How about their online systems that actually connect to the outside world?

Or do you redefine "offline" as "online, but somehow magically more secure because there are a lot of network connections inbetween"?

Re: Unclear Story

[gweihir]

And you lose that bet. Tying to pump? Likely.

Re:Unclear Story

[ctilsie242]

Bitcoin of blockchain ledgers? Two separate things. I can see banks using a blockchain network because it ensures a decentralized, verifiable record. I cannot see banks taking the risk of moving currency into and out of BTC.

Re:Unclear Story

[Cyberax]

If you transfer money in countries with more modern bank infrastructure it really takes seconds. Floating money during transfer is pretty much insignificant, it simply doesn't provide much value and is unreliable. I've seen computing infrastructure involved in SWIFT transfers for a couple of large banks in Europe, and I can definitely say that the slow speed is mostly caused by _really_ obsolete systems.

Re:Unclear Story

[AvitarX]

I'm sure plenty of people will hang in though.

It's suffered huge drops in the past.

I'm not saying it will recover if it crashes again, but if my choices are to bet on a recovery, or lose 75% I know which I'd take.

Note: if it goes up much higher, I'm going to sell half of my BTC, and have 0 exposure on what's left, and I only out 1 week's fun money in, so I'm not sweating either way

Re:Unclear Story

[Orgasmatron]

Good for who?

Obviously, it isn't good for the banks. They make their money by manipulating money.

It would, however, be good for us to stop them from doing that.

Re:Unclear Story

[smallfries]

Have you tried critical thought?

How would shifting inter-bank transfers onto the blockchain prevent banks from "manipulating money"?

Re:Unclear Story

[smallfries]

There is already a consortium of banks looking at blockchain technology for that purpose. It was a while ago so I can't remember the details, but JP Morgan might be involved? A custom blockchain would solve a lot of issues that they have, and it would still be a very closed system avoiding many of the issues that bitcoin must have. Interesting area. Doing it via BTC is indeed a totally separate issue.

Re: Unclear Story

[kyjellyfish]

Spot on. It's just speculation on a massive scale, like investing in some new technology with the potential to change life as we know it, except people are paying for "ether". With stocks, you are buying shares in something that produces tangible value, but with Bitcoin, nothing is created and nothing is destroyed. It makes more sense to save your money until Winter arrives, and then set fire to it...at least then you'd get some warmth by converting currency into BTU's.

Too complicated

[Anonymous Coward]

Bitcoin is so complicated to use as an actual currency. The whole concept of it was that it would be easier and cheaper to send money around to people. I can send an international transfer these days for 12 USD and a 3 day wait period and that sucks. Bitcoin on the other hand is fucking ridiculous, you have to pay 26 USD, understand the concepts of how many megabytes of currency you want to transfer (fucking wat?!) and then even after all that it might take a week just to get your money anyway..

The worse part about it is it isn't any better than having money in the bank because you're money is held hostage to the whims of the developers that write the bitcoin code. So unlike Banks that have to abide by government regulations the developers of all the different bitcoin programs can get together and legally fuck you over in all sorts of ways.

Re:Too complicated

[LynnwoodRooster]

So where was he wrong? Because just a few posts up, people are claiming you basically bid to get your transaction processed, and that the average cost is quite a bit more than the $12 claimed here. So what is wrong about it?

Re:Too complicated

[fahrbot-bot]

Bitcoin is so complicated to use as an actual currency. ... Bitcoin on the other hand is fucking ridiculous, you have to pay 26 USD, understand the concepts of how many megabytes of currency you want to transfer (fucking wat?!) and then even after all that it might take a week just to get your money anyway..

The worse part about it is it isn't any better than having money in the bank because you're money is held hostage to the whims of the developers that write the bitcoin code. So unlike Banks that have to abide by government regulations the developers of all the different bitcoin programs can get together and legally fuck you over in all sorts of ways.

Bitcoin. The SystemD of currency. :-)

Re:Too complicated

[Hal_Porter]

Yes you are money, AC! Yes your are!

Re:Too complicated

[comodoro]

Since no one does, I will try:

Bitcoin is so complicated to use as an actual currency.

It is not, there are such things as client software...

The whole concept of it was that it would be easier and cheaper to send money around to people.

I do not think so, AFAIK the main goal was to create decentralized digital means of exchange

I can send an international transfer these days for 12 USD and a 3 day wait period and that sucks. Bitcoin on the other hand is fucking ridiculous, you have to pay 26 USD, understand the concepts of how many megabytes of currency you want to transfer (fucking wat?!) and then even after all that it might take a week just to get your money anyway.

You can send international transfers to banks that accept them. Fees and time will vary across sending and receiving banks. In developed countries it will likely indeed be cheaper. You can send bitcoin anywhere and adjust the fee according to your preferred speed. I suspect the number 26 is a bit off, but do not know current situation enough to be able to argue about it. You are right that it make take a week, but if you attach a reasonable transaction fee, it is highly unlikely.

The worse part about it is it isn't any better than having money in the bank because you're money is held hostage to the whims of the developers that write the bitcoin code. So unlike Banks that have to abide by government regulations the developers of all the different bitcoin programs can get together and legally fuck you over in all sorts of ways.

That is not correct, the developers (hundreds or thousands of them, if you count everyone who contributed code to the bitcoin project) are able only to make relatively minor changes without making it incompatible with the current version. And if such big change ("fork") happens, a consensus of developers, miners and users is needed for it to be universally accepted. Bitcoin Cash and Bitcoin Gold are examples of such forks.

Re:Too complicated

[LynnwoodRooster]

Got it, so BTC has a pretty stable exchange rate (so it is as easy as currency when purchasing things like cars, or clothes, or trips) with a pretty defined transaction time (essentially zero time, like currency or credit cards). It works with all financial institutions, like wire transfers (I wonder which bank or credit union does not accept wire transfers?) with a fixed price and a guaranteed delivery time.

self collapse?

[kiviQr]

If I read it correctly, the longer we run bitcoin the larger the cost associated with transactions (network, computation). How is that sustainable? At that point MasterCard and Visa look great with their 2% processing fee.

Re:self collapse?

[dj245]

If I read it correctly, the longer we run bitcoin the larger the cost associated with transactions (network, computation). How is that sustainable? At that point MasterCard and Visa look great with their 2% processing fee.

Perhaps a more important question is regarding tumbling. If transaction fees are high, does this make tumbling uneconomical? If so, then all the people using bitcoin to launder and hide money will stop using it. And that is about the only valid purpose for bitcoin that I see at this point.

Re: self collapse?

[reanjr]

That's not accurate. Mining power accelerates to meet price demand (the more demand, the higher price, the more miners are willing to spend mining). But price demand is affected by the mining reward (currently 6.25 or 12.5 BTC). As the mining reward is scheduled to disappear sometime in the 23rd century, the only reward will be transaction fees. So unless BTC spenders are willing to pay considerably more transaction fees than they already do, the miners will spend commensurately little on power.

Re: self collapse?

[ElizabethGreene]

>> the only reward will be transaction fees.
Miners will make more in transaction fees, if they make the network faster and blocks larger. At today's tiny blocksize you are seeing as much ast 4 BTC/block in fees.

The 1MB/block size limit is illogical in 2017.

Re: self collapse?

[reanjr]

But the argument against Bitcoin being enery efficient is based on energy use per transaction. If blocks start getting more transactions, that drives the energy per transaction down assuming no price movements.

Right now there are 2500 transactions per block (and rising) and an average fee of around $5. On top of that is a 6.5 BTC reward. That puts the cost of the transactions at $12,500 and the cost of mining around $100,000. So, without anything else changing, we can expect the energy consumption to drop to 10% of what it is today.

Now, more transactions per block means more transaction reward to miners per block. But the fees people are willing to pay will go down because the more transactional volume the chain can handle, the less scarce is the resoure of confirmation, and so the less valuable, and so one would exect highter transaction volume to lead to lower fees. So, even that 10% consumption is at the high end.

Scaling to the real world?

[ColaMan]

I don't understand how Bitcoin and it's blockchain arrangement is ever going to be scaleable.

Currently we're running at a global rate of four transactions a second. Four. Just the everyday transactions at my local shopping centre would run above that rate.

How is this whole "ubiquitous Bitcoin economy" thing supposed to work again?

Re:Scaling to the real world?

[Baron_Yam]

It doesn't. Anyone who says otherwise is trying to sell you something or has Stockholm syndrome.

Re:Scaling to the real world?

[christophercole]

Agreed -- Bitcoin won't scale. It's already proving to be a very poor way to transfer small amounts of money. For example, last week, I sent $15 worth of BTC from one of my wallets to another. The default transaction fee was $7.50! Before sending, I overrode the suggested transaction fee and set it to the minimum amount, which was about about $1.50 -- that's effectively a 10% fee to move a small amount of money. I knew that opting for a lower transaction fee would result in a longer wait for my transfer to occur, but I was not in a hurry. I wanted to see what happened. Well, here I am 5 days later, and although the $15 is deducted from by source wallet, it has yet to show up in my destination wallet. And as long as there are thousands of other transactions around the globe paying higher fees, my money will forever be stuck in the ether. Bitcoin has proven to be: non-scalable, expensive, and unreliable.

Re:Scaling to the real world?

[Anonymous Coward]

you can double spend the coins with a higher transaction fee. the network will notice the double spend and remove the transaction not accepted into a block from the pool when the other is accepted into one

Re:Scaling to the real world?

[Anonymous Coward]

Rich people don't trade micrograms of gold or notional fractions of T-bonds to buy groceries. They trade dollars. Nobody with a clue believes Bitcoin will supplant fiat money -- no, fiat will simply submit. Just as it once did to gold.

Re:Scaling to the real world?

[gweihir]

Indeed, it does not. 4 transactions/second is completely ridiculous. For example, Swiss domestic interbank transfers are 2M per day. That is 23 per second and that is one small country with 8M population. The 4 per second for Bitcoin is global.

Re: Scaling to the real world?

[mapkinase]

This is the most insightful and informative comment I read so far about Bitcoin

Re:Scaling to the real world?

[tlhIngan]

Indeed, it does not. 4 transactions/second is completely ridiculous. For example, Swiss domestic interbank transfers are 2M per day. That is 23 per second and that is one small country with 8M population. The 4 per second for Bitcoin is global.

And something like Visa network (VisaNet) is handling about 10K transactions per second globally. Peak VisaNet speeds are around 56K transactions per second.

And I"m sure one of the reasons it can handle the speed is it separates the actual payment handling from the initial authorization. VisaNet handles the authorizations in real-time, making sure your credit limit isn't reached, blocking out the authorized amount, etc. That's real time. The actual money settlement happens in a batch process at night where all the amounts have been aggregated so instead of sending millions of little IOUs all the time, the banks really just send one big lump payment that covers all the obligations at once.

And I'm sure peak transaction volumes can probably reach a million or so for short periods of time during the busiest of the busy shopping periods.

If it was bitcoin, something like Black Friday could easily meant "We did buy it, but the bitcoin network hasn't confirmed the transaction yet by Christmas...".

Re:Scaling to the real world?

[paskie]

Lightning Network (http://lightning.network/) will allow Bitcoin to scale. Maybe not to VISA-level yet, but at least further several order of magnitudes.

The lightning network allows to keep most transactions off-chain - for example all your daily payments can go through a LN operator, and the only thing that needs to be stored in the blockchain are channel balance settlements - say once per month you settle the balance with a single transaction. It recently left beta, with the protocol finalized and three interoperable implementations. Now, UX and client support is needed, and adoption by major Bitcoin operators. But that'll happen.

Bitcoin adoption just went a bit ahead of the software ecosystem, but don't discard Bitcoin because of that just yet.

Re:Scaling to the real world?

[ElizabethGreene]

>> Bitcoin has proven to be: non-scalable, expensive, and unreliable.

The bitcoin developers and miners have actively chosen to make it this way. It is literally a 5 minute code change to move to one block per minute and 8MB blocks. That'll take it from 4 transactions per second to 300.

The kicker to this is miners will make a lot more money if they do this. Spending BTC is a pain today because of these limitations. Remove the limitations and you get more transactions and fees.

Re:Scaling to the real world?

[h4x0t]

...and with 112 kg CO2 per transaction, (more than that by my math) the whole thing starts to look like a giant fucking mess.

Re:Scaling to the real world?

[luis_a_espinal]

Agreed -- Bitcoin won't scale. It's already proving to be a very poor way to transfer small amounts of money. For example, last week, I sent $15 worth of BTC from one of my wallets to another. The default transaction fee was $7.50! Before sending, I overrode the suggested transaction fee and set it to the minimum amount, which was about about $1.50 -- that's effectively a 10% fee to move a small amount of money. I knew that opting for a lower transaction fee would result in a longer wait for my transfer to occur, but I was not in a hurry. I wanted to see what happened. Well, here I am 5 days later, and although the $15 is deducted from by source wallet, it has yet to show up in my destination wallet. And as long as there are thousands of other transactions around the globe paying higher fees, my money will forever be stuck in the ether. Bitcoin has proven to be: non-scalable, expensive, and unreliable.

From that observation, I wouldn't call it "unreliable" (though it could be). From your description, it is an incredibly illiquid asset.

Being non-scalable is not a a fundamental problem depending on what you want the asset for (gold or art investments are not scalable, and are certainly not liquid.)

It is ok if an investment is expensive IIF if there is a reliable high ROI. Bitcoin could have been that.

However, being effectively illiquid, then it bits its main premise the most. People want to use bitcoin as currency, but for that, it needs to be effectively liquid for all amounts (and it isn't.)

And that's going to be its Achille's heel. People want Bitcoin to be a liquid asset, but it isn't. So the crazy prices we see right now can only be concluded to be a bubble. Worst of all, a bubble from where you might not be able to divest quickly.

Current prices are just a function of speculation, of psychology, the exact same conditions people like Warren Buffet would warn against. What trading is occurring with bitcoin? How much trade of assets is currently occurring using Bitcoin as currency?

What will the effects be?

[Bruce Perens]

What happens when Bitcoin crashes? What effects will it have on companies that accept, use, or hold it, market-makers on exchanges and futures, etc. ?

My theory is that it was created by a national actor with the intent of crashing national economies. Not sure it will actually do that, though. But real people will be hurt. Some of them will be people who took the risk themselves and deserve the consequences. But when stocks or currencies crash there are often lots of innocent victims who never made the choice to invest in them.

Re:What will the effects be?

[AHuxley]

Tulip mania https://en.wikipedia.org/wiki/...
Thats why the smart money is on been the gateway to the product not the product.

Re:What will the effects be?

[ShanghaiBill]

What happens when Bitcoin crashes?

If you look at the history of crashes, nearly all have one thing in common: Many people investing with borrowed money. This happened with tulips, the South Sea Bubble, the 1929 crash, and the sub-prime mortgage crash. I am unaware of any bubble that did not involve a lot of people borrowing or buying on margin.

So far that is not happening with bitcoin.

What effects will it have on companies that accept, use, or hold it, market-makers on exchanges and futures, etc. ?

I may be going way out on a limb here, but I think they will lose money.

My theory is that it was created by a national actor with the intent of crashing national economies.

All the bitcoins in the world total to $300B. For comparison, the recent financial crisis wiped out $20 trillion.

Also, the financial crisis hit people at the bottom the hardest, people that were struggling to pay their mortgages, and were then evicted from their homes when they lost their jobs.

Bitcoin is different. The people buying can mostly afford the loss, and much of the value is just paper profits. I bought my stash on a lark when the value crossed $1/BTC, mostly just out of curiosity of how the whole thing worked. They have turned out to be worth way more than I ever expected, but if the crash came tomorrow, it would not make one iota of difference to how I live my life.

But when stocks or currencies crash there are often lots of innocent victims who never made the choice to invest in them.

Stock crashes have way less effect on "normal" people than currency, bond, or real estate crashes, because no one expects equities to be stable. We shrugged off stock crashes in 1987, 1991, 2001. The financial crisis was far worse because no one expected housing prices to crash, and a huge part of our economy relied on their stability. Nobody is relying on bitcoin to be stable, or even as stable as equities.

Re:What will the effects be?

[LynnwoodRooster]

An awful lot of people are buying BTC with credit cards, and I would wager a large number of them are doing it with funds they don't have. Put $10,000 on your Visa, way 3 months, sell for 10X the amount and party! Right?

Re:What will the effects be?

[TheRealMindChild]

My theory is that it was created by a national actor with the intent of crashing national economies

That is simply ridiculous. It was an experiment. No one could have foreseen what it has become. Even with its original vector, the politics got in the way and totally changed the shape of the beast. To consider that it was created, KNOWING that it would hit this price point, that it would grow this large, that it would have these problems, that there would be this mania, is patently absurd.

Re: What will the effects be?

[Bruce Perens]

Nobody had to predict the specific way bitcoin progressed to this day. They simply had to create the ultimate fiat currency, and it was likely it would destabilize some capitalistic economies.

Re:What will the effects be?

[dslbrian]

What happens when Bitcoin crashes? What effects will it have on companies that accept, use, or hold it, market-makers on exchanges and futures, etc. ?

One thing I'm wondering is what is going to happen to AMD and Nvidia stock when Bitcoin crashes? I think a lot of their recent profit is driven off this craziness, and a crash might have a lot of people dumping gear to exit or cover losses. I imagine it might be a great day for buying surplus high-end video cards on eBay.

Re:What will the effects be?

[Bruce Perens]

Hadn't the serious miners gone to ASICs before now?

Re:What will the effects be?

[ShanghaiBill]

An awful lot of people are buying BTC with credit cards

It is not clear if many of these people are actually buying. But even if they are, it is not the same as buying on margin, since they are not using the purchased asset as collateral, so there is no margin-call that can force them to sell and accelerate a crash.

Put $10,000 on your Visa

CC companies don't give people more credit than they can be expected to service. If their credit limit is $10k, then they have income, and other assets. Financially irresponsible people more often have a credit limit of between $0 and $500.

1% of the population running up a $10k debt is not going to crash the economy.

Re:What will the effects be?

[ShanghaiBill]

3) You're forgetting the stock market crash of 2007.

That was not a "stock market crash". It was a housing crash. The stock market decline was the consequence, not the cause ... and I didn't forget about it. I specifically mentioned it three times in the post you replied to.

Re: What will the effects be?

[Orgasmatron]

What did you do before that made people think you were worth listening to? Its been so long, I honestly can't remember.

But let me help you out here. From a dictionary:

fiat (noun):
1. a command or act of will that creates something without or as if without further effort
2. an authoritative determination - dictate
3. an authoritative or arbitrary order - decree

And from Wikipedia:

Fiat money is a currency without intrinsic value established as money by government regulation

Now pray tell us all exactly which government established bitcoin as money by dictate or decree...

If you can remember whatever it was that established your credibility, you might want to consider sticking to that topic, whatever it is. Because you don't even know the stuff that your teacher would expect you to know walking into an Econ 101 course on the first day, and talking about things that don't know even the most basic definitions of is going to tank your brand.

Re:What will the effects be?

[ShanghaiBill]

No leveraging eh?

Ever heard of USDT/Tethers?

Yes, I have heard of USDT and Tether. What do they have to do with leveraging or debt?

Re:What will the effects be?

[fahrbot-bot]

Tulip mania https://en.wikipedia.org/wiki/...

Oddly, not what I was expecting when I read "Tulip mania". I thought of the Japanese band Tulip. I have their album Tulip Best (vinyl LP) given to me by a CISV (Children's International Summer Villages) exchange student from Japan in 1979 - when I was 16. (I was suppose to visit Japan the next summer, but was unable as my parents were divorced and I moved from living with my father to with my mother and my father wouldn't pay and my mother couldn't afford it.)

Re:What will the effects be?

[gweihir]

While doing this is utterly demented, I think you are right and that this is what drives prices. Nobody sane would get in on it at the current price and volatility. Hence it must be people that do not know what they are doing and that also means people that do not actually have the money in the majority.

This is gambling. The rule on gambling is only do it if a) you do not need the money and b) you do it for the entertainment you get from the act. Disregard these rules and you are screwed. Many people will get screwed on Bitcoin, but one has to be realistic and see that the 278B market capitalization of Bitcoin is tiny and does not matter in the greater scheme of things. Also because it is backed by exactly no real value, i.e. most of that volume comes from nothing and will go to nothing. It really is just hot air.

Re:What will the effects be?

[LynnwoodRooster]

Credit card delinquency is above 2%. And a lot of people will take the "get rich quick" schemes that are being pushed as BTC. It's going to be an ugly bubble pop for a lot of people... Yeah, they're stupid for buying on credit (which they probably cannot afford; I know if I maxed out all my credit cards I would have a hard time paying the minimums), but it's going to happen. And over-leveraged with credit cards is like margin at your broker - you're borrowing money you don't have, to make a bet you think will win.

Re:What will the effects be?

[gweihir]

I do not think it will matter much. They have wisely not extended their manufacturing capabilities and in the end, prices will drop a little, but that is it. The manufacturing capabilities are scaled for the regular market (which currently gets screwed), but as soon as Bitcoin crashes, it is back to business as usual and as planned. It may be possible to get used cards for cheap from bankrupt miners for a while though, although I do not think that many people will be interested in buying a card that potentially has a much reduced remaining lifetime.

Re:What will the effects be?

[gweihir]

They have not or only partially. Insufficient manufacturing capabilities and nobody is going to build hugely expensive fabs for a bubble. Also designing and actually making ASICs takes a lot of time and you need to order a long time in advance.

Re: What will the effects be?

[Bruce Perens]

Be civil or don't play.

Yes, bitcoin was not established by a government, because when that definition was written nobody could have imagined that you could create a currency that people would be crazy enough to buy that wasn't backed by a government.

It does have the major functional, rather than historical, characteristic of a fiat currency, which is the part you got from Wikipedia: no intrinsic value.

So, wake up to the present, where we got two new technologies: cryptocurrency and the internet, so that rather than a government some anonymous and possibly fictional person could create a fiat currency.

Re:What will the effects be?

[crimson tsunami]

It's nothing like margin, you are not forced to sell. If the wild gyrations continue you are fine. With margin and forced selling one trip on the roller-coaster that is too low and you are done. Even if the price quickly recovered after. Too many people in that situation makes the dip deeper and it's self reinforcing from there as the new low triggers more margins. No margin, no forced selling, no feedback loop.
It can still crash (and probably will) for other reasons, but not this one.

Re:What will the effects be?

[Bruce Perens]

Well, then that's actionable information: AMD and NVIDIA, to the extent that their value is from sales of compute-oriented "graphics" cards to large-scale miners, might fall when bitcoin fails, and could be shorted. Possibly there's even a hedge play there.

What about Intel and Xeon Phi?

Re:What will the effects be?

[Bruce Perens]

The main components with limited lifetimes are the electrolytic capacitors. And I'm not sure they get highly stressed. I am not one of the people who believes that ICs wear out. I do own a lot of 1980's test equipment from Rohde & Schwarz, Agilent, etc., and thus have developed some expertise in this.

Re:What will the effects be?

[Bruce Perens]

If any of the futures exchanges are already started, there will be people who get option calls as the price changes. They're forced to sell or put in funds to cover their options.

Re:What will the effects be?

[Bruce Perens]

You forgot the proliferation of unregulated derivatives.

Re:What will the effects be?

[ShanghaiBill]

You forgot the proliferation of unregulated derivatives.

Since housing prices never go down, the sub-prime mortgage derivatives were a sure-thing, and there was no point in regulating something when there was no risk.

Re:What will the effects be?

[ShanghaiBill]

If any of the futures exchanges are already started, there will be people who get option calls as the price changes. They're forced to sell or put in funds to cover their options.

Options don't work that way. They give the buyer the option, to buy (for call options) or sell (for put options) at a particular price, but without an obligation to do so. Their value can go to zero, but cannot go below. So there is no "call".

It is also possible to directly short sell, or buy long, but "normal" investors are generally restricted from doing so.

Re:What will the effects be?

[thegarbz]

The GP's point is that this is massively small fry in compared to what has happened in crashes that have had a serious impact on the world.

$10000 credit card? That's cute. The housing crisis took down $50000000 housing complex investments and hit the average person who wasn't investing far more than $10000. To create a bubble and crash it in a way that affects the economy in a significant way you need more than a handful of low rollers making poor financial decisions with credit cards.

Re: What will the effects be?

[Orgasmatron]

Originally, people used the money they wanted to because they wanted to use it. Later on, rulers used the power of the state to force them to use worthless money, by fiat - that's where the expression came from. Now people are choosing once again to defy the government fiat and use money that suits their needs instead of the needs of their rulers.

But yes, if you ignore the one fundamental and unalterable characteristic of "fiat money", bitcoin does indeed possess some of the same secondary and accidental characteristics.

In the interests of being civil, I will precisely diagnose the root cause of your error. You've allowed yourself to be hoodwinked by the theory of "intrinsic value". There is no such thing. You can melt down a gold bar, or grind it to powder or examine it in a microscope or a particle collider and never will you find a particle of value in it. You can shred a paper dollar or examine the spectra when you burn one, and you'll find no evidence of value there either. You can chisel a yap stone to dust in a futile search for "value", or you can read the software that manages checking accounts at your bank or processes credit card transactions at a merchant bank and you'll never find "value".

All things have value only because, and only to the extent that, people expect that they can use them or trade them for other things they want. That is the only value, and it isn't intrinsic to the thing, it is instead in our brains.

And when you phrase it the way I did just now, you'll see that "trade them for other things" is just a special case of the more general "use them". Not only does bitcoin have no "intrinsic value", bitcoins don't even exist. They don't even exist in the abstract intangible sense. And yet, they still have so much utility that people use them voluntarily - no fiat needed.

Re:What will the effects be?

[gweihir]

Good luck with that. Matter of fact is that quite a few people that want graphics cards for other reasons are currently waiting for them to become affordable again. And it seems most of the price-inflation is not done by the chip manufacturers. So AMD and NVIDIA may actually be minimally affected or not affected at all.

Incidentally, my comment was on ASICs, not graphics cards.

Re:What will the effects be?

[goose-incarnated]

The main components with limited lifetimes are the electrolytic capacitors. And I'm not sure they get highly stressed. I am not one of the people who believes that ICs wear out. I do own a lot of 1980's test equipment from Rohde & Schwarz, Agilent, etc., and thus have developed some expertise in this.

Depends - running at full steam (mining bitcoin) means running at high temps. Gamers don't run their system flat out 24x7 and hence less heat over the lifetime of the pcb. With bitcoin they're essentially heating the card 24x7. I doubt many cards have a MTBF that remains constant even when running at the max temps rated.

Maximum temperatures are usually rated as a function of time - $FOO degrees for not more than $BAR seconds. Buying a 2nd-hand card that was heated constantly may not be such a good idea.

Re:What will the effects be?

[dcollins]

LOL, one day later:

https://news.slashdot.org/story/17/12/12/1631246/sec-warns-extreme-caution-over-cryptocurrency-investments-as-many-people-take-out-mortgages-to-buy-bitcoin

Re: What will the effects be?

[Bruce Perens]

I understand that gold won't feed me directly, and that technology could change its value, but it always has a value in connection with its utility for practical things. In contrast, a bitcoin is a large number created to satisfy a set of arbitrary rules. It represents a potentially large amount of work which has been made useless and can never be made useful again. So, there is a fundamental difference in that bitcoin can never have any intrinsic value, while hard currency bases always have some.

Indeed, bitcoin is a sort of potlatch, in that it represents wasted computing effort and the power and materials that went into that effort, to the detriment of society. Nothing but a cryptocurrency so efficiently wastes work to no purpose. Currencies should in general cause something that arguably benefits society, like the creation or extraction of a usable commodity.

Re: What will the effects be?

[Orgasmatron]

Sigh.

I try to be civil to engage you, and this is what I get? A steaming pile of your own subjective opinions passed off as objective facts. Read your post from the point of view of someone who doesn't think the sun shines out your ass if you wonder why I hold you in such contempt. Anything that Bruce doesn't understand is useless. Nay! Worse than useless - actually a "detriment to society".

Work can never be stored - it is always consumed. If you paint your house, you can't decide to unpaint it and get those hours of your life back. But you still do it, either to make your life more enjoyable by having an aesthetically pleasing home, or to protect the other work you've put into your house from weather, or because you think you'll be able to exchange the house for more money later.

Bitcoin does not "represent" the work done on it, or the electricity consumed by the network, or silicon in the chips it runs on. Bitcoin is a decentralized ledger, nothing more. The computing effort is not wasted, it has been voluntarily spent to do work that people find useful.

I guess I shouldn't be surprised that a Bernie-bro like you thinks that people should be spending their work on things that you want instead of things that they want.

Re:What will the effects be?

[Bruce Perens]

That statement should be kept with this ship is unsinkable.

Re: What will the effects be?

[Bruce Perens]

It doesn't do you credit if you have to pile on the insults because you've failed to make your point.

Work going into mining bitcoins doesn't create any value whatsoever. Bitcoin value is a fiction for the fatuous, and its holders will realize that soon enough. And the work has not gone to create any benefit to society whatsoever, where a silver-based currency, for example, would at least have resulted in the extraction of a useful material.

Re:What will the effects be?

[LynnwoodRooster]

It's nothing like margin, you are not forced to sell.

No, but you are forced to pay up. Buying speculative things like BTC on credit card means you WILL have to pay, and if you only have enough money to last for a few months of minimum payments on your CC, and BTC drops - the result is the same as buying on margin.

Re: What will the effects be?

[Orgasmatron]

I pile on insults because it makes the tedious enterprise of talking to you more enjoyable for me. But I never make the mistake of merely insulting - I've made many points, which you've ignored. You are still ignoring them.

Here's one:

The computing effort is not wasted, it has been voluntarily spent to do work that people find useful.

Now, I don't come right out and say what that work is for two reasons. For one thing, we are discussing bitcoin and if you don't understand how the network places transactions into order, you are even less qualified to be discussing bitcoin than I thought at first, which would be incredible considering how low my initial estimate was. The second reason is that it doesn't really matter. You are not emperor and you don't get to decide what is a "benefit to society".

What is your response to that? Nothing. You just repeat your claims. You don't make any arguments, you provide no logic, you cite no reasons or authorities. You merely repeat yourself.

How did you respond to my citation of definitions for a term that you used incorrectly? You burn your dictionary and declare yourself the victor. Bravo. Golf clap.

In your own mind, you may be the pinnacle of eloquence, but everyone else reading this can see that you are just repeating the same baseless claims over and over again.

Re: What will the effects be?

[Bruce Perens]

It doesn't actually matter who I am. I can show benefit from work when that work has concrete results such as feeding someone, transportation, etc. That work actually produces value. Money is not value, it is an unreliable medium for exchange of value. Creating money does not create value, doing useful work does. People investing in bitcoin have lost sight of this. The world will not be able to feed one person more because 300 Billion (or whatever) in fictional value was created. Nor would one more person be fed because dollars are printed.

The problem with bitcoin, now, is that it costs so much more than printing a dollar to calculate a new bitcoin. You are confusing this with creating value, while losing the benefit of all of that electricity is a net cost to society greater than the cost of printing a dollar.

I don't need to cite authorities, this isn't a court. And the only authority I saw you cite was a dictionary and Wikipedia, on the use of a word, and obviously words and their meanings change over time.

Bitcoin embodies the bad characteristics of fiat currency without being the product of a government. So, fiat currency need not be the product of a government any longer. Not so difficult to understand.

Re: What will the effects be?

[Orgasmatron]

In your world, does management create value? They don't feed anyone or transport anything, but they make the workers more efficient.

How about insurance? Risk management doesn't actually feed anyone either. Is that wasted?

How about banking? Lending doesn't feed anyone. Is it a waste for producers to have access to capital?

What do you think about art? No one eats art, at least not that I know of. Do you denounce art?

Your theory of value is straight up Marxian, and you still think that you should be entitled to dictate what work should be done.

Creating money does not create value

Serious question - what do you mean by "creating money" here? Do you mean like physically printing dollar bills? Or inflation in general? Or a new money system? Or do you mean that the invention of money as a concept added no value to the world?

The problem with bitcoin, now, is that it costs so much more than printing a dollar to calculate a new bitcoin. You are confusing this with creating value, while losing the benefit of all of that electricity is a net cost to society greater than the cost of printing a dollar.

If the bitcoin was just another inflationary fiat system managed by the powerful at the expense of everyone else, you might be onto something. But bitcoin isn't that - it is a money system that cannot be manipulated by anyone. No government and no bank gets to skim 5% of the world's savings away each year in inflation. Can you really see no value in that?

Re: What will the effects be?

[Bruce Perens]

Some things belong in a cost center, and some in a profit center. This is hardly a Marxian principle! It's simple business economics. Management, insurance, banking, are things that a business other than one that offers those things commonly spends money upon, thus they are cost centers. The companies that farm, manufacture, and in other ways produce desirable goods. are the ones that actually create new value. The others are necessary, but they don't either add to or subtract from the overall economy.

Entertainment is value creation, it's a new desirable good where none existed before.

The invention of money increased economic efficiency and, along with transportation and communications, money made large economic networks possible. But the value was still in the things made rather than the transfer medium. Bitcoin has not been a socially beneficial addition for two reasons: 1) There wasn't a money shortage, and 2) Due to the various shady customers of anonymous funds transfer acting as a net detriment to society.

Also, you're being optimistic that bitcoin is manipulation-proof. The algorithms might be (and that's hard to prove), but the whales can tank bitcoin, etc.

Re: What will the effects be?

[Orgasmatron]

Do you have any idea how incoherent your philosophy of economics is?

The others are necessary, but they don't either add to or subtract from the overall economy.

I can only conclude that you are making this up on the spot. For something to be both necessary, and to have no effect is self-contradictory. You can't possibly have thought about this in advance or you'd have seen it yourself, and presumably not written it out.

Entertainment is value creation, it's a new desirable good where none existed before.

Hang on a second... Is business management a desirable good (or service) or not? Business owners desire it, pay for it, and consume it (as much as anyone consumes entertainment). Do you have a rule for deciding which things are desirable goods, or are you just winging it?

There wasn't a money shortage

Zimbabwe had a "money shortage". I've got one of their ten trillion dollar bills in my collection. It is worth far more on ebay as a curio in the US than it is as money in Zimbabwe.

Do you know what that ten trillion dollar bill really is? It is the theft by the powerful of nearly 100% of the savings of all of the powerless people in that country. Ask someone from that part of the world who had their life savings wiped out by hyperinflation how they feel about money that their government can inflate at will.

Due to the various shady customers of anonymous funds transfer acting as a net detriment to society.

Yeah, yeah, we get it. You are a totalitarian control freak.

The algorithms might be (and that's hard to prove)

Actually, trivial to prove. In the bitcoin-core client source, it is in the file validation.cpp. You can add it up with pencil and paper if you want, or, if you have access to some sort of machine that can perform additions and rightshifts, you can ask it to add the numbers up for you.

CAmount GetBlockSubsidy(int nHeight, const Consensus::Params& consensusParams)
{
        int halvings = nHeight / consensusParams.nSubsidyHalvingInterval; // Force block reward to zero when right shift is undefined.
        if (halvings >= 64)
                return 0;

        CAmount nSubsidy = 50 * COIN; // Subsidy is cut in half every 210,000 blocks which will occur approximately every 4 years.
        nSubsidy >>= halvings;
        return nSubsidy;
}

the whales can tank bitcoin, etc.

No, they can't. They could toss around the exchange rate, but bitcoin is not the exchange rate. Oh, and people can (and have!) messed with exchange rates since exchange rates have existed.

Re: What will the effects be?

[Bruce Perens]

No, of course business management is not a desirable good.

I have published on economics in a refereed journal. And on law, computer science, and telecommunications for that matter. Show me just one example that you've done the same.

One small function that determines the reward for computation does not in any way assure that bitcoin can not be manipulated!

You believe in the bitcoin. I don't. I understand that annoys you tremendously. Sorry, but not changing my opinion. Check back with me in a year when bitcoin is all over. By then, things will be a lot more clear.

Re: What will the effects be?

[Bruce Perens]

If you want to understand the economics I am citing, (it's not my philosophy, it's conventional economics) read up on why only final goods are counted in the GDP. The service of business consulting is a cost in the production of some final good. If you could somehow eliminate it and do the same job, the production of the final good would be more efficient.

Re: What will the effects be?

[Orgasmatron]

Reminder set. See you next year.

Well, it's a matter of context.

[Tjp($)pjT]

In terms of Bitcoin, transaction fees aren't skyrocketing. Only in the fiat currency you can exchange for bitcoin.

Re:Well, it's a matter of context.

[AHuxley]

Petrodollar recycling https://en.wikipedia.org/wiki/... for the USA did so well for so long.
Now the buying power is been exposed for the first time.

Re:Well, it's a matter of context.

[omnichad]

Not at all true.

Bitcoin is undergoing massive deflation. Which means you're spending fewer Bitcoin because it has a larger buying power. Transaction fees are actually going up (not just in absolute BTC terms, but relative to BTC spending power), because it's computationally expensive to process those transactions.

Re:Well, it's a matter of context.

[Luthair]

Oh and since everything else on and around the plant has its value determined in "fiat currency" not fixed to bitcoin...

Re:Well, it's a matter of context.

[Actually, I do RTFA]

Only in the fiat currency you can exchange for bitcoin.

Would you mind explaining how bitcoin isn't also fiat currency.

UNPOSSIBLE!

[LynnwoodRooster]

Why in a recent thread I was promised - PROMISED! - that BTC fees were the cheapest way to send money, and were nearly instantaneous! Who would have figured it would be otherwise???

Re:Please be vegan

[LynnwoodRooster]

I am vegan! I just like my vegetables to first be processed into meat...

We need a Bitcoin category...

[leonbev]

So we have the ability to filter the category from our Slashdot news feed! Seriously, I've never seen this much focus on a single subject since Apple product release days (back when Steve Jobs was still alive), except these stories have been showing up EVERY DAMN DAY for the past two weeks.

Can you PLEASE fix this, so Slashdot stops looking like "News about Bitcoin, and stuff I don't care about"?

Re:We need a Bitcoin category...

[Anonymous Coward]

Yeah, I'm laughing at the people who bought or mined Bitcoin when it was $1, and sold them for $10000. Those idiots.

No, it can scale!

[bussdriver]

Gold can not scale. Limited amount, it has to be verified and processed; that takes time and money to do. Ever look into gold? You pay overhead costs in actually trading in gold plus you have to pay to securely store and transport any sizable amount of it.

How did gold become the foundation of everything until the banksters finally took over?

Abstract trading; not actual gold exchanges done on top of the real thing. Also, money was created ON TOP of gold and that is where all the action happened.

When you see other kinds of money float on top of bitcoin then you will see it scale. I see no reason why it can not become a kind of digital gold as long as the encryption holds up.

Gold is and hasn't been worth as much as we've made it for centuries. We based a system around it and that made it valuable. It has a silly jewelry value but that isn't what made it so expensive.

With futures trading and bigger banks involved... interesting times are coming. (not exactly a good thing; it's more of a curse but it is not dull)

Re:No, it can scale!

[Xylantiel]

Right, the banksters "took over" by figuring out that using a deflationary currency is a Really Bad Idea(TM). You have just successfully argued that Bitcoin is no better than any finite resource. We could just declare all first-run pokemon cards the new gold standard (haha, get it) and it would all be good right? As I say, we figured out a long time ago that using something like that for currency is unstable. If you want to store value long-term it should NOT be in currency because currency has NO INTRINSIC VALUE, as compared to, for example, part-ownership of an actual functioning business. Trying to "get off" fiat currency is chasing a madman's dream where the world owes you something for nothing. The blockchain is a great innovation for decentralized ownership tracking. But why not use that for ownership of worthwhile stuff rather than just "virtual coin" number x out of y.

Re:No, it can scale!

[ColaMan]

One of the central tenets around Bitcoin is that every transaction is logged in the blockchain and thus verifiable and unchangeable forever more.

I'm not sure how abstracting that away with a currency "on top" is going to make it any better than gold, or oil, or whatever.

Re: No, it can scale!

[mapkinase]

What's the point of storing i you can't find it?

Log N might seem small but what happens when N is googol?

Re:No, it can scale!

[DerekLyons]

Abstract trading; not actual gold exchanges done on top of the real thing. Also, money was created ON TOP of gold and that is where all the action happened.

When you see other kinds of money float on top of bitcoin then you will see it scale. I see no reason why it can not become a kind of digital gold as long as the encryption holds up.

Every civilized country has ended up abandoning gold because gold does not scale. The amount of gold in a vault used to support a given currency serves as a hard limit on the size of the economy that currency can support. Even with Bitcoin's divisibility, there's still a hard limit.
 
Nor were the currencies built on gold in vaults truly abstract - ultimately they were trusted because the issuing authorities were trusted. (Those pesky governments that Bitcoin zealots hope to deprecate.) There's no such trusted authority for Bitcoin.

Re:No, it can scale!

[luis_a_espinal]

Gold can not scale. Limited amount, it has to be verified and processed; that takes time and money to do. Ever look into gold? You pay overhead costs in actually trading in gold plus you have to pay to securely store and transport any sizable amount of it.

How did gold become the foundation of everything until the banksters finally took over?

Abstract trading; not actual gold exchanges done on top of the real thing. Also, money was created ON TOP of gold and that is where all the action happened.

When you see other kinds of money float on top of bitcoin then you will see it scale.

Uh, what? The whole point of bitcoin is that it is a fiat currency (with some desirable attributes), not an illiquid asset to back another one.

I see no reason why it can not become a kind of digital gold as long as the encryption holds up.

Gold is and hasn't been worth as much as we've made it for centuries. We based a system around it and that made it valuable. It has a silly jewelry value but that isn't what made it so expensive.

With futures trading and bigger banks involved... interesting times are coming. (not exactly a good thing; it's more of a curse but it is not dull)

And I see no reasons why it could (or should or would). Ergo, this shit is a 50/50 game, and considering that people are already reporting how illiquid bitcoin is (days just to transfer small amounts from one wallet to another), coupled with effectively high fees, then what exactly does it has in its favor.

Don't get me wrong, it could still be the next big time (who can predict what markets can do), but just look at the current illiquidity of it!

The current high prices truly look like an speculative bubble. Riches will be made for sure... after a correction or two (if not a crash.)

Re:No, it can scale!

[dj245]

How did gold become the foundation of everything until the banksters finally took over?

Gold is and hasn't been worth as much as we've made it for centuries. We based a system around it and that made it valuable. It has a silly jewelry value but that isn't what made it so expensive.

In a perfect world, the cost or value of anything represents all the costs needed to produce, process, and transport that item. Gold isn't that bad of a commodity to measure wealth- it does not rust or otherwise deteriorate (in typical conditions) over time, reasonable quantities can represent significant value, and the industrial demand (demand which is not jewelry related) is reasonably non-volatile. And you can actually use it as a low-resistance, non-corrodible coating. I am not a gold nut, but I would say that gold is on average better than a piece of paper which has intrinsic value far less than the actual valuation.

If the valuation of gold was significantly higher than the cost of mining it, mining companies would be making great profits. This does not appear to be the case- from 2003 to 2013, 3 of the largest gold mining companies had several years of losses, even when considering various different accounting methods. The stock price and dividends of these companies also are not particularly spectacular. I can't think of a great reason that such companies would cook the books or spend money unnecessarily so as to be less profitable than they could be. Therefore I would conclude that gold may be overvalued at times, but it is generally not unreasonably overvalued considering the cost of production.

Re:No, it can scale!

[iMadeGhostzilla]

Gold has thousands of years of history and a consensus for being used as currency. Billions of people in human history have been using it or appreciating it in one way or another. If gold didn't exist and you introduced it today as currency, it wouldn't work.

A big part of why gold can be used as a currency is that its exchange value has historically been stable. Bitcoin has been too volatile to be used as a currency. And as commodity bitcoin has no intrinsic value -- there's nothing you can do with a bitcoin on its own. (Even gold has some small use value as commodity, such as in jewelry.)

Re:No, it can scale!

[bussdriver]

Authority is given by public support (even the oppressed support the oppressor; unless they are actively fighting.)

Gold was backed by a massive consensus. I used the term bankster for a reason, I suggest you look into that history further and see why gold can scale just fine and it did so for 100s of years as the backbone behind layers of other systems. Furthermore, you must be claiming the Swiss are not civilized? (until 2000. They keep having moves to restore the old ways.)

Gold is physically FIXED and tamper proof, unlike bankster run money systems and their puppet governments. Bitcoin's encryption is about as equally FIXED and tamper proof as gold but it's mathematical rather than based in physics.

To say gold can not scale when the many arbitrary systems build upon it are easily altered and comparatively unstable (hence the use of land/gold as a hedge) is ignorant. Such systems can change and adapt (and be corrupt) as they always have been for over a millennium, certainly they can scale.

Re:No, it can scale!

[bussdriver]

Gold mining gets more difficult as you run out of gold to mine. Like everything else... oil for example. We never run out because there is always a little bit left over but it becomes prohibitively expensive or too technically difficult to bother. We can MAKE gold atoms but that is purely academic; someday it might be realistic to do in quantity but it'll still cost too much...(until replicators)....but it might get cheaper than mining what is left the stuff in the ground.

Keep in mind that we inflate our money and even when gold backed inflation happens which makes the value seem to go up $ wise. We also no longer get official inflation numbers for US dollars since Bush stopped reporting of it... not that it wasn't likely a cooked number at many points in history of money. Also, when you add more gold into the equation you impact the relative worth of the money, slightly.

Re:No, it can scale!

[bussdriver]

Thank you for letting me know I made my point.

I am not a fan of bitcoin even though I have some. I am not a fan of any monetary systems either. I make the arguments because I don't see others making them.

Blockchain doesn't work for a shared commerce system and I never thought it would from the start; I have a CS degree. Why others with CS degrees jumped on it so quickly puzzles me.

In our present economic systems, I think government controlled inflation in necessary but I object strongly with banks taking over as they have. Economics is too powerful a weapon to allow to be controlled by private parties; unless you dislike democracy...

Fiat currencies are collective agreements; they change as the vast majority of the populace changes (which means very rarely.) Blockchain works by collective agreement upon the chain to be used-- the method is set in mathematical stone. Getting rid of bankster middle men is the appeal of such systems.

I thought somebody would take bitcoin as a great application of chained encryption and invent a workable variation but I've yet to read about a real solution. I don't think there is one which handles everybody's commerce... not with blockchain. I'm not convinced it needs to handle the whole planet at once... although the strength of a decentralized system is how many people support it... (trusted proxies seem necessary... or proxies we give authority not completely trust... which is what government and banks do already.)

ownership is an interesting application. transaction levels are lower but government enforces and decides ownership how government records it does not really matter a great deal. it is far more important they use digital signing to verify their fancy paper documents and make copies. a constantly changing private key to prevent a hack or corrupt official from altering or creating conflicting documents... sounds like a better place to explore.

poor investment mindset

[gravewax]

The mentality I don't understand around some of this are people that gambled and won big time (kudos to you), but they still remain invested up to the teeth in bitcoin (fucking moron). I see the same thing in stock market or real estate etc. for fucks sake you made a fortune, get the fuck out, diversify. What sort of mentality is it where someone is rich enough that they are set for life yet continue to risk it all in order to make more. I had friends that went from having 10+ million net worth in 99 to having nothing in 2001 except for a large pile of debt. Same in real estate crash.

bitcoin is due for a major correction, wonder how many are leveraged to the hilt to turn their 10 million into 100 million.

Re:poor investment mindset

[Actually, I do RTFA]

From time to time I look at the news and just say, "Man, if I had only invested when I first heard about bitcoin, I'd be rich." Except, I know I wouldn't. Cause I would have sold out long ago (unless I forgot I had bought any).

Re:poor investment mindset

[gweihir]

It is called "greed" and it almost universally comes with that other quality humans tend to excel at, namely "stupidity".

Sane people only gamble with money they do not need. Stupid people driven insane by greed will gamble with everything they can lay their hands on. And they will usually destroy themselves that way. Bitcoin will serve as an excellent example for this in the future. Fortunately, the overall actual value in there is small (the "market capitalization" number is nonsense) and this will hopefully not affect many innocent bystanders.

Re:poor investment mindset

[gweihir]

Interesting. Makes perfect sense.

Incidentally, you _are_ working. You just found something you enjoy and are good at.

Re:poor investment mindset

[gweihir]

Indeed. This seems to be some systematic mental defect in these people where greed blots out all sanity. I mean you can explain to a child why it cannot go up indefinitely and yet these people still believe that. They are, in fact, blind to reality and life in a fantasy of their own making. "Get rich quick" schemes always attract people and this one is no different.

Re:Please be vegan

[I'm New Around Here]

We also share this planet with plants.

What is your point?

Litecoin!

[TheNarrator]

Use Litecoin people! The transaction fees are negligible.

Just like the 1849 Gold Rush

[fozzy1015]

The people who made money were the ones who sold the equipment, not the ones looking for gold.

Lightning

[fulldecent]

Why aren't we talking about Lightning here?

Also altcoins are skyrocketing

[slashdotiscorrupt]

The hysteria is spreading to Ethereum and Litecoin especially.
The very odd thing I can't figure out is that Litecoin is up 100% on the day but the only currency trading more Bitcoin than the dollar is Litecoin....seems like Litecoin shouldn't be able to sustain that price against the dollar for any amount of time....I have no idea what's going on with that.

My guess this is because of the rumblings of the Fed severely jacking up interest rates and everyone wants to get rich before 2Q 2018.
After this bubble pops there is going to be huge sustained growth with altcoins as the market decides the roles of the various crytocurrency technologies in the decentralized banking economy that is coming in the next decade.

Re:Please be vegan

[I'm New Around Here]

What does bio-diversity have to do with being vegan? You want vegetables, you don't want meat. As a vegan, are you going to advocate raising animals? Are you going to advocate allowing animals to eat the vegetables being grown for you to eat?

Why crash?

[AnotherBlackHat]

Bitcoin has no intrinsic value, it's only value comes from what you can trade it for.
Given that, what is the "right" price for a bitcoin?
I ask, because I don't see any reason to think that $10,000 a coin is "too high".
Don't get me wrong, I don't see any reason to think $10,000 a coin is "right' or "too low" either.

Re:Why crash?

[Tony Isaac]

It's not the specific dollar amount that makes it due for a crash. It's the "irrational exuberance" of the droves of people who are buying Bitcoin right now. Like a Ponzi scheme, people are buying Bitcoin at high prices, paying off earlier investors, who are very happy with their take. But also like a Ponzi scheme, the rise will end, causing the last people in line to take heavy losses. The entire scheme WILL collapse. It's not a question of whether, but when.

Impervium remains free

[Drunkulus]

Impervium is the only cryptocurrency that has built-in free transactions. It is the best method for purchasing those rare Magic the Gathering cards, drugs, or Beanie Babies.

Margin is different to credit cards

[crimson tsunami]

Read your own comment. You are not forced to sell it the second(/day) it reaches a certain price, you can last months (indefinitely) making minimum payments on your Visa. Margin at a broker is not like that, you pay up now or they sell (some of) it for you.

Margin you need collateral, say 50%, and the bitcoin will be collateral too. As the price falls the broker will keep selling your bitcoins for you until they are all gone and all your collateral is gone.
In this scenario you lose all your collateral, ie money you already had and invested. Kick yourself for being gullible and move on.

Visa will not give 2 fucks if bitcoins drop in price on any given day.They are not going to send around the repo-men to repossess your bitcoins if you don't pay your interest. Eventually if you don't pay your bills long enough you will have to sell your other assets, will go bankrupt etc. In this scenario you lost money you never had and were forced to sell other things to pay for your stupidity. But you could also still have the bitcoin if they ever recover, assuming you didn't tell your creditors about them.

(Yes you could have pulled out the Visa to cover the margin, but then you are 'investing' money you don't have again and changing it to scenario 2)
Margin is different to credit cards.

Virtual trading does not count

[bussdriver]

You are not trading actual gold at those transaction rates. You are trading virtual gold, or promises of gold... a note... or marker... a debt of gold. Actual real gold transactions involve serious fees to make sure somebody isn't gold plating lead or something like that. It is not simple or easy or cheap process, just look into actual real gold investing. a gold coin can be faked, a bar even easier. You are better off with a proxy like a number in a computer... and the more heavy the trading more obvious the tedium of exchange becomes as we physically swap and test each other's gold bars.