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Bitcoin's flaw

 
nick2020 2018-01-30 12:16:45 

This is what I do not get about Bitcoin.

The purpose of it is a direct contradiction of the reason to invest in it.

Bitcoin is supposed to be a better currency. Now look at it:

As a consumer why would I buy something using Bitcoin that is valued at $1 only to see the value of that go up tomorrow to $2? I in effect paid too much.

As a seller why would I accept Bitcoin only to see the value decrease?

Currencies work well when they are stable and predictable. Bitcoin is not. I don't get it.

 
Halliwell 2018-01-30 12:18:29 

In reply to nick2020

You ‘don’t get it’? Or you vex because you ‘didn’t get it’?
Copyright Snoopy

 
carl0002 2018-01-30 12:23:18 

In reply to nick2020
Maybe you can help with this strange story. Armed men held up a Bitcoin store here about a week ago. Another employee in the back of the store managed to call police and 3 of the guys escaped and they caught a 4th after a search with dogs etc. If Bitcoin is a digital currency what were these guys hoping to get by holding up a Bitcoin store. Algorithms?

 
pelon 2018-01-30 12:30:42 

In reply to nick2020

Read my post from Feb 2017.... the summary outlines the commodity aspect...



Let me simplify it (though I know I will fail!).

You set out to buy a Watch, value = $100.00 USD

The seller (merchant) listed the Watch at $100.00

Buyer 1 paid with $100.00 USD

Buyer 2 paid with .02* Ounces of gold

Buyer 3 paid with .000457* of Bitcoin

* just for example only

In the INSTANT of the transaction ALL 3 "currencies" was equal to $100 USD and the MERCHANT received $100.00 USD

Outcome: Merchant got $100.00 USD at point of transaction - no matter how (gold, crypto, cash) you paid.

PURCHASER:

THE ADVANTAGE in paying with a commodity (gold, salt, bitcoin, cryptocoin whatever) is that the PURCHASER could of paid less than $100 for the commodity 24 hrs ago, but walk away with the same $100.00 item - due to the fluctuation in the market price. (and could lose too, but then you would just use USD)

AS long as the merchant can exchange the commodity AND currency in REAL TIME (thus fx/crypto exchanges)... it works.

Complex, but not complex.

This is not new, nor unique to crypto... FX players have been doing just that for decades.

 
SnoopDog 2018-01-30 12:51:16 

In reply to nick2020

The 3 big problems with Bitcoin are: adoption, volatility, and use-ability.

When at least 2 of those problems are solved only then will it become a viable currency for the masses.

 
pelon 2018-01-30 12:57:17 

In reply to SnoopDog
co-sign
Exactly... my feb 2017 post said exactly that.

I would not advise investing in Bitcoin at this stage, it's at the "present apex" stage in my books.

 
SnoopDog 2018-01-30 13:02:46 

In reply to pelon

I would love to read your thoughts on quantum computing and A.I. (perhaps on another separate thread) and how it will impact and possibly revolutionize commerce and finance in the future.

 
pelon 2018-01-30 13:24:36 

In reply to SnoopDog

Exclude quantum computing, while it has a trajectory that *could* break Moore's Law... it is WAY outside of the scope of this forum and pelons reach.
The real disruptor is AI and Machine Learning (similar but separate)

AI is an object (non human) doing intelligent things (think smart devices - yet not highly adaptive)
Machine Learning is the above but also with an adaptive element. (think smart algorithms - highly adaptive)

Disclaimer: As stated before, my bread (and butter) comes from a single patent centered around an algorithm in GI research. I am not bold enough to label it as "intelligent" but it has given me wings. lol lol lol lol

RE: commerce and finance:
The tide is towards market intelligence. Buying predictors, cluster and neural node behavior. Big Data as predictors.....
Blockchain has already shaken the transaction ledger world... plebs like me are just late.

SIDE NOTE:
I bought a Roomba a few years back... just to mess with it... the AI is great at cleaning around a basic layout - but it is dumb as fcuk ultimately. This is the pragmatic assessment i offer u: algorithms that investigate, adapt, learn = INVEST NOW.

To quote Snoop himself: It aint no fun if my homies can't have none.

 
nick2020 2018-01-30 13:37:19 

In reply to pelon

The difference is not at the time of purchase in your example. The difference is volatility in using this currency.

That Gold and Currency today will be about the same value it was when bartered yesterday. Bitcoin will not.

So when I paid 0.00457 Bitcoin on Tuesday for a watch only to see the value of bitcoin go up to 0.009 on Wednesday I really overpaid for that watch. Or the reverse side as the recipient of bitcoin.

If 1 banana = 1 apple = 1 bitcoin on Wednesday

What good is the currency if I sell 1 banana for 1 bitcoin on Wednesday only to hear on Thursday I need 2 bitcoin now to buy an apple?

 
pelon 2018-01-30 13:48:00 

In reply to nick2020

I see you completely ignored he concept of (instant) commodity exchanges. That's ok. It takes time.

What good is the currency if I sell 1 banana for 1 bitcoin on Wednesday only to hear on Thursday I need 2 bitcoin now to buy an apple?


Except that the real world does not wait a day to exchange the bitcoin. It is done instantly - this is not 1923 or 1986 - in 2018 - crypto exchanges can do things in real-time.

As a buyer, you don't just have bitcoin in your portfolio, you have 3, 4 options (including FX and Cash)... you use the one that works best in that INSTANT. This is the foundation of globalization and currency markets. When solar panels are 1500Yen today, and $256366Yuan you use the country that allows you the most for your buck....

Where you are 100% correct is the VOLATILITY of bitcoin... it is still in the wild wild west stage. (go back to my feb 2017 post)

 
SnoopDog 2018-01-30 15:07:27 

In reply to pelon

This is the pragmatic assessment i offer u: algorithms that investigate, adapt, learn = INVEST NOW.


Duly noted Sir. big grin

I think my Nest thermostat is probably the most intelligent of my A.I. enabled gadgets at the moment. lol

 
nick2020 2018-01-30 15:39:02 

In reply to pelon


Except that the real world does not wait a day to exchange the bitcoin. It is done instantly - this is not 1923 or 1986 - in 2018 - crypto exchanges can do things in real-time.


I think we are not on the same page.

I accept your point as valid but it is a snapshot of life. There is today, tomorrow and the next day.

I grow a potato.
I sell a potato for 1 bitcoin because when I do all my analysis of what I need to sell it for to pay my bills and make some money that is what I should be selling it for. Then the price of my 1 bitcoin devalues the very next day.

To make another point an iPhone cost $699 USD today, tomorrow and next week.
Price that iPhone in bitcoin today, tomorrow and next week.

 
pelon 2018-01-30 15:43:01 

In reply to nick2020

My gad. Why would you the potato seller keep the currency in a coin you don't have confidence in.

At the point of transaction you are paid in USD not crypto. The buyer pays in crypto... but at the transaction level the merchant receives USD

How are you not understanding?

 
nick2020 2018-01-30 17:06:38 

In reply to pelon

Maybe because Bitcoin sells itself that way?

Pelon if Bitcoin is used for buying and selling then you the buyer and the seller will be sitting on Bitcoin for some period of time.

Surely you are not suggesting that I change USD into Bitcoin at 1:00 to purchase goods or sevices at 1:01 and the seller receiving said Bitcoin changes it back to USD at 1:02?

Also I still don't understand what is the price of an iPhone in Bitcoin? With the volatility of Bitcoin how does one price it?

 
pelon 2018-01-30 18:01:18 

In reply to nick2020

NO NO NO.

You are not thinking this out.

Phone cost $700
You offer to buy it at $700.00
YOU PAY in Bitcoin (say .004 of a coin)
at the transaction level the barter can be converted INSTANTLY to cash for the merchant, in that way they are not exposed to a rise or fall in say 3 hours. The CONVERSION happens at the moment of the transaction

If the merchant decided they wanted to keep in Bitcoin it means they ELECTED to hedge a bet on bitcoin... but it is their prerogative at the transaction level... very few merchants accept bitcoin now, because very few have conversion/exchanges accounts

Bitcoin Example
YOU--->> .004 Bitcoin -->> in to coinbase/virtual exchange --->> into [merchant] iPhone Apple account as 700.00USD or .004 Bitcoin (gave or take minor conversion fees, but conversion rates are INSTANT)
At no time above did Apple handle bitcoin - if they only wanted USD currency. (not a problem)

Visa Example
YOU -->> $1400 BDS -->> into date/time fixed fx exchange -->> (your amount owed at CIBC is now 14000bds --> into [merchant] iPhone Apple account as USD700.00 (give or take)
At no time did Apple handle $BDS

When you buy an iPhone from Bim, do you think apple holds $BDS ?????? hedging the market????
please....

 
nick2020 2018-01-30 18:20:15 

In reply to pelon

If the merchant decided they wanted to keep in Bitcoin it means they ELECTED to hedge a bet on bitcoin... but it is their prerogative at the transaction level... very few merchants accept bitcoin now, because very few have conversion/exchanges accounts


Pause pelon.

So bitcoin supposed to be a form of currency. Currency used to buy and sell.

Yet

1. It is risky to keep.
2. Few merchants accept it.

All you are telling me is it is really poor as a currency but great to speculate on. So let me rewind.

Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet.


That is taken from bitcoin.org. Cash that is extremely volatile that you really do not want to keep and few people accept it?

And yes when a store buys an iPhone in Bim for $500 USD from a wholesaler they take $1000 BDS * Rate which bank sells you USD at + wire fees + bank charges (which at the bank I use is free for $500 USD). All that is relatively stable from January to July with subtle market fluctuations from the wholesaler until the next iPhone comes out.

Unlike bitcoin.

So I can sell that iPhone for $1800 BDS bank the profits, rinse repeat.

Pelon, I fully understand when you take a snapshot of a bitcoin transaction that it works. But the whole process of buying and selling persists beyond just a snapshot of converting printed currency to electronic currency. How on earth does bitcoin work as currency yet it is something that you do not want to hold onto?

 
pelon 2018-01-30 18:34:21 

In reply to nick2020

so, your view, your preview... your entire perspective is at the consumer level.
what would happen if I told you about derivatives?????
Gold ETFs, the FIX Protocol etc... you would wonder if cash is obsolete since 1987. Shit, Swaps have been around since mid 70s

It is ironic that the very thing you are complaining about is why nations trade in commodities, in order to diversify into an asset class with less exposure to currency depreciation.

THAT IS the irony of your preview.


And yes when a store buys an iPhone in Bim for $500 USD from a wholesaler they take $1000 BDS * Rate which bank sells you USD at + wire fees + bank charges (which at the bank I use is free for $500 USD). All that is relatively stable from January to July with subtle market fluctuations from the wholesaler until the next iPhone comes out.

Unlike bitcoin.


You still don't get it.

 
nick2020 2018-01-30 18:59:04 

In reply to pelon

What you said went over my head.

You are right; I do not get it.

In all fairness to my inability to comprehend you have not really (in my opinion) given me a compelling reason why people should use bitcoin to buy and sell things.

To use hyperbole 99% of the people in the world are employed, paid in a currency and use that currency to buy things. How does bitcoin work in this cycle?

Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet.


Why should I use bitcoin instead of VISA or Paypal or Western Union or Telex or any other method of transaction?

I guess because of this

It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen.


Oh. Ok. Good luck with that.

 
nick2020 2018-01-30 19:03:16 

Wait I have a reset two part question to help me understand:

Who should use bitcoin and what should they use it for?

 
pelon 2018-01-30 19:07:18 

In reply to nick2020

go read my post from last year. the reason why YOU* should have some diversified coin is explained.... [AGAIN, let the concept settle before you invest... it is the wrong time now]

Oh. Ok. Good luck with that.
Bro, that is exactly what your grandfather said when the bank told him to get a Visa card in 1978.

It was pie in the sky to us in the region this "credit card nonsense...."
... that was 1978 (and believe me he called it madness)

Then, debit cards.... what no cash in my wallet???? how will I pay????

Then... blockchain transactions.... boom... your mind blown... ending with: "Good luck with that"

You are too young to be that regressive.

 
nick2020 2018-01-30 19:21:05 

In reply to pelon


As a Caribbean nationals, each of our countries are subject to fluctuation in the dollar (USD). Many are tied to the USD, some float - but all currency markets in the Caribbean are regulated. Individuals and corporate entities all have strict regulations around foreign currency transactions - which inherently (attempts to) stabilize our national currencies - but unfortunately exposes individuals to the "whims" of or fiscal/political economic management policies.

Cryptocurrency (like Bitcoin), a de-centralized currency, bypasses those regulations and limitations.


Seems like cryptocurrency has to deal with "whims" as well.

I read the whole thread and look at your summary

Summary: Cryptocurrencies is still in the wild wild west stage, even though it already has a robust, if not mature ecosystem and it is becoming more accepted globally - even at merchant level. The trust factor, that which is critical to any currency (digital or hard), is the last hurdle before it cements itself. My personal belife is that it will morph more into a commodity, moreso than "currency"

The early prospect of making money from Bitcoin will fade, as the currency stablizes against market demand. The rocket trajectory will flatten much closer to a 1-1 ration than the 1-900 current boom... but the other benefits of a de-centralized currency hold well in the future, for members of small island states like ours as an alternative to hedging against devaluation without conversion to USD. While I own slightly less than 7 BTC units that cost me aprx. $1400.00 I used little to no hard currency (as stated above) to acquire them - perhaps this model will appeal to you also.


If bitcoin morphs into a commodity then its entire existence would have to change from what it was intended to be:

Bitcoin is a consensus network that enables a new payment system and a completely digital money. It is the first decentralized peer-to-peer payment network that is powered by its users with no central authority or middlemen. From a user perspective, Bitcoin is pretty much like cash for the Internet.


And I think that is exactly what bitcoin is being treated as right now - a commodity. Something that people are investing in and making (and losing) lots of money on.

The early prospect of making money from Bitcoin will fade, as the currency stablizes against market demand. The rocket trajectory will flatten much closer to a 1-1 ration than the 1-900 current boom


If and when that happens then it will be a currency and not the day trader's dream it is now.

Question though. With a 21 million bitcoin limit how will bitcoin be widely available to the 6 billion people on earth? Especially if it goes to this 1-1 ratio?

 
nick2020 2018-01-30 19:25:49 

In reply to pelon

You are too young to be that regressive.


I understood Paypal from the first time I heard about it and signed up for an account.

Sure Paypal is not as game changing as bitcoin. But I could understand it.

I do not understand bitcoin as internet cash. I do understand it from a day trader perspective.

 
pelon 2018-01-30 20:05:31 

I do not understand bitcoin as internet cash.


No problem.

Later in the week I will compare mining gold to mining crypto. by time we get to the blockchain ledger, even you will say: "let me buy pelon a liver cutter"

BTW: do you think Pink Star* has gone 40 years not taking debt cards because debit cards are _____ [fill in with negative adjective]
Same fing thing with the new tech.... you've thrown your hands to the sky, while the white Russian is mining....

*one of my fav. liming spots back in the day.... with a REAL backroom for regulars.

 
nick2020 2018-01-30 20:58:23 

In reply to pelon

I probably have a very basic understanding of the mining aspect.

Mainly from the computer building world where people were buying up expensive graphics cards and sli and crossfiring then to better mine.

I look forward to your presentation.