Posted on 02/14/2018 7:44:46 AM PST by SeekAndFind
The miners are free to move to any other mining pool if they want. But, the centralization pressure is real due to economies of scale. The thing to worry about is centralized mining farms where a lot of hash power is under one roof.
But miners, even the big mining farms, are acutely aware that their hardware and electricity investment depends on the value of the system. One of the things that could impact that value negatively is aggregation of anything approaching 50% of the network hash power (really much less than that now).
And secondly, everyone’s implicitly trusting that the distribution of BTC (or eth, or whatever) is correctly done according to the actual work contributed.
Remember, the system is completely transparent. Miners can see a pool's block production and calculate the pool's hash rate (pools post the rate as well). If a miner isn't getting the correct share, they're not just gonna take it. Such a pool operator will quickly find its hash rate migrating to other pools.
Okay then, explain it to me. What can I do with bitcoin that I can't do with credit cards, US currency, checks, etc.? What can I do with bitcoin that I can't do without it? What exactly makes it "useful"? What gives it "value"? I'd honestly like to understand what makes so many people buy in to the siren call of "Bitcoin".
Saying "it's an algorithm" makes it seem like you think that somehow gives it value, but I don't understand how. It sounds more like a word that people parrot to make it sound like they're more educated than the people they're talking to, when in reality they are just as clueless as the rest of us. It sounds like a meaningless word used to explain the inexplicable. It's based on the assumption that the other person will not be willing to admit that they are too dense to understand the simple explanation that "it's an algorithm" is all that is needed, and if they can't understand that, there is no hope for them anyway. Meanwhile, the person who used the term doesn't understand it either, but they think they can bluff their way through by acting like the buzzword explains it all.
It’s a ways to securely conduct economies without governments or parasitic middlemen interfering or exploiting.
Yup. Gold, silver, oil, in fact pretty much every commodity is selling for ten times what it did a year ago, just like bitcoin is. /s
I didn’t know that little kernel of history.
It is a frictionless, trustless method of exchanging value. For example, if you want to buy a cargo container full of sneakers. Now you would agree on a price in yuan. Then you convert it to dollars. Then you wire the money from your bank through a settlement system which charges you a fee to convert your dollars into yuan. They wire that money to China.
That process probably takes two days minimum and probably upwards to 5-8% in addition to your fee for the sneakers.
With a blockchain tech you agree on a price in bitcoin. You convert your dollars to bitcoin. You then transfer the funds to the other party. The blockchain verifies the balance on each account and makes the transfer. The verification goes through six or seven confirmations. The bitcoin arrives in the vendor’s account and is immediately converted to the local fiat.
That transaction takes about ten minutes and costs about 1/10th of the bank fee.
Bitcoin is NOT for buying a cup of coffee. It’s is for moving significant amounts of value quickly and securely. It is a public ledger—meaning it is open for audit. The security on these transactions are, by the nature of the cryptology, more secure with anything you would have with a bank or credit card transaction.
As you can see, the immediacy of the transaction makes the value fluctuations almost moot because it doesn’t change that much if you are converting on either end—certainly not enough to make it more expensive.
That is just one example.
Another example would be tying contracts or records to the blockchain. One example is real estate titles. Once the records are uploaded to the blockchain your property would be assigned an “address.” Every time the property is bought, sold, or otherwise affected it would be recorded to the blockchain.
In a few years you would go online, get the address for the property and you would be able to perform a complete title search in seconds. It would be secure and could not be counterfeited. Tax records could be assigned.
Imagine no title insurance, no search fees, and a full accounting of any liens or encumbrances. What would THAT do for closing costs?
Medical records could be used the same way. And it would be much more secure than a social security number. You swipe a card upon entering any hospital and they would have instant access to every medical record. And since it’s a 256 key number, no one is going to guess it.
Finally, the value come with its utility. People don’t see it today. But the example I gave are just two very broad things that could be done. Any type of contract could be sent as a “smart contract” that secured the payment and would only release them to the counter party when the conditions are met. Think about it as an escrow account that cannot be robbed and can only be executed when both parties agree.
That is the value. You need something to be the toll that allows these transactions to take place.
It’s not pie in the sky. It’s not make believe. This stuff is happening today. You will hear more about the blockchain and these “coins.”
Personally I think the name makes it sound stupid. Use of a term like a toll, or token, or whatever better describes what it is.
You've got it all backwards. The dollar should not be manipulated in the ways you are suggesting. In particular the manipulation of rates distorts the credit market. Low rates were the direct cause of the 2000's bubble that led to the 2008 crash. The dollar value is supposed to change in response to the market supply and demand for those dollars. Manipulating it is political. Also there's no decent way to measure the value of a dollar,
Yes, it is concentrated, and that is a concern for the transaction handling. As I just pointed out it's very hard to cheat on the pooling and impossible to cheat on the work since checking the successful hash takes a zillionth of the time it took to create it. But a concentration of miners could, with successful hashes, cheat on transactions in various ways. It's the 51% attack and has been written about extensively.
Yes, you have characterized the mining game. Nobody does Bitcoin mining except Chinese with free large scale electricity and new hardware. Instead people speculate on the next new CC and appreciation in value. But even more importantly, when there are few miners in the early stages you get much more mining reward. That's before the CC can even be converted to anything else on any exchange. If it succeeds, at least temporarily, then you cash it in and find the next one.
You are too focussed on dirt world goods. In the virtual world, growing inexorably into the matrix, the purchase of goods will be crypto currency for crypto good. A crypto good could be a piece of artwork with an embedded public key. You buy the private key. The digital art can be copied of course, but nobody else can verify the good except you, with your private key.
My last sentence is confusing. You sign a challenge with your private key. Anyone else can verify the signature with the public key in the good. That’s how they know you own it.,
I'd be interested in finding out to what extent bitcoins are actually being used in the real world for transactions like the one you made in your first comment (the cargo container of sneakers, or similar large $ transactions between companies using different reserve currencies). What is the level of growth in bitcoins being used for actual large transactions? If there are real-world savings in time and costs, I'd suppose that it will prove itself by becoming the preferred method of making large transfers of funds. If that doesn't happen, it would mean that either there were unforeseen negative factors (high costs to convert to/from bitcoins from your usual currency, for example), or the benefits weren't as great as anticipated. For example, maybe the transfer costs of the 5-8% you suggest are not truly at that level. Without any experience to base the opinion on, 5-8% just strikes me as awfully high for transactions between two reserve currencies. Would that mean that somebody is making 5-8% on the entire $500 trillion of Chinese exports to the US last year, plus 5-8% of the $130 trillion we sold to them? The level of real-world usage would be a way of measuring the actual value added by bitcoin in comparison to what was used before bitcoin. If it produces real value for companies, they'll use it, and bitcoins will hold their market value based on utility. If tens of trillions of dollars were being raked off the top of the entire global trade by the banks making transfers in reserve currencies, the businesses affected would be the ones excited about bitcoins, instead of millennials excited about something for no better reason than that it is new.
Personally, I doubt that there really is much real-world value added. I think the majority of the current price is there because of speculation. Greed will drive up prices past where the intrinsic value says it should be, and fear can drive it back down below it's intrinsic value. And at this point, what the real intrinsic value properly should be seems to be nothing more than a wild guess. I've been wrong about a lot of stuff before in my lifetime though, so I could very well be wrong again.
Countries have an interest in maintaining a stable economy. Fairly stable unemployment rates. Fairly stable inflation rates. People aren't starving to death, or killing each other over food.
They manipulate the money supply and interest rates to achieve stability in order to avoid revolutions. IMO, its good to avoid revolutions. Lots of people die when there is a revolution, and republics are replaced by tyrannies.
Just because they screw up once in awhile in the rates/money supply in response to political pressure, doesn't mean the whole approach is flawed.
Or else they're using Bitcoin to get around taxes and regulations in their own country.
By the way, I'd suggest that the mortgage-backed securities were a lot bigger factor than the interest rates. Banks were lending money with no down payment and minimal credit approval because they could immediately sell those mortgages. The poor-risk mortgages were packaged together and sold as top-grade investments to pension funds, etc. The corrupt rating agencies rated those mortgage-backed securities as high quality investments even though they were full of bad risk loans.
By the way, I'd suggest that the mortgage-backed securities were a lot bigger factor than the interest rates. Banks were lending money with no down payment and minimal credit approval because they could immediately sell those mortgages. The poor-risk mortgages were packaged together and sold as top-grade investments to pension funds, etc. The corrupt rating agencies rated those mortgage-backed securities as high quality investments even though they were full of bad risk loans.
But this whole tangent is pointless because CC isn't fluid money yet. There are times and places it is useful liike transferring large amounts of capital without a need for a third party, store of value, aesthetics, etc. Not a dollar replacement.
A CC economy will eventually relpace the dollar economy.
I doubt it.
First of all, I don't think the supply of bitcoins and their ilk is sufficient to provide adequate liquidity in a $20 trillion GDP economy, let alone making purchases of trillions of dollars of imports. Or is the thought that the supply of bitcoins etc in circulation would be increased by having everybody and his brother be able to come up with their own additional competing CC?
In the second place, the Fed currently has the power to exercise some control of the economy by manipulating the money supply and interest rates, and I don't see them giving up that power without a fight.
I guess time will tell though. I don't plan to lose sleep over it.
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