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More Bitcoin analysis

By Heraclitusstudent following x   2017 Dec 14, 1:13pm 1,075 views   2 comments   watch   sfw   quote     share    

Learning a bit more about this:

The ideas behind bitcoin are in some ways similar to Uber: workaround any centralized controls imposed by states and banks, cut layers of established fat cats, and work bottom up. Promote individual liberties and truly free markets, in this case, to create a mean of exchange and potentially a store of value, that is decentralized, not controlled and not supervised by any authority.

Some of the reasons why people can need bitcoins (since obviously you can't buy anything with it):
- illegal activities...
- International transactions:
--- Western sanctions: The west in some case sought to use banking networks like Swift to impose sanctions against other countries like Iran or Russia. Bitcoin is a way of exchange that is truly international and free of controls. (http://www.pravdareport.com/news/russia/economics/15-08-2017/138412-russia_swift-0/)(https://www.economist.com/news/international/21633830-blocking-rogue-states-access-worlds-financial-messaging-network-potent-measure).
--- Capital controls: Some countries impose exchange restrictions. (the largest being China) Bitcoin offers a way around that. So rich Chinese need that.
--- slow international transactions. It often takes more than a day to clear an international transaction through banks. Banks generally have no incentives to reduce the delays, though there are plans to do so. (https://www.theclearinghouse.org/research/2015/2015-q3-banking-perspectives/global-real-time-payments).
--- Expensive remittances (2008: around 10% of amount sent): there are too many layers of fat cats between people and their money. Bitcoins cut that, though the limited size of blocks make the current system hard to scale and pushed transactions cost to around $10.
--- Potentially Tax evasion, though my guess is that is not a good idea: https://gcn.com/articles/2017/08/31/irs-bitcoin.aspx

- As a store of value: This is arguably a difficult point to make if this thing can lose 20% of its value overnight.
--- financial repression: there are literally trillions of money printed out by central banks slowly being eaten away by inflation, as any return they can earn is less than inflation. So there are huge incentives to escape fiat currencies.
--- a replacement for gold: The number of bitcoins in circulation is going to be eventually capped. Bitcoins obviously have huge advantages over gold in the way they can be split, (down to 7 digits precision), stored, transported and transmitted.

- resistance to external interference:
--- It is hard for one or even many governments to shut it down, since it is completely decentralized around the world, and anyone on the Internet can buy into it, mine it, etc...
--- It has survived well external shocks like the bankruptcy of Mt Gox in which about 10% of the BC wear stolen. https://en.wikipedia.org/wiki/Mt._Gox .

Against all these reasons, you have to weight its vulnerabilities:
- The price is totally arbitrary, obviously based on massive speculation, and it is completely based on the interest of other people. (network effect). Should people start getting interested in something else, the value is 0. But the current amount of money in bitcoins is around $200 billions. Gold is around $7trillions. Liquidities in the world are around $80 trillions.
- States may not be able to shut it down, but they can spy it, and spy participants.
- you can be robbed just like in RL.

1   Newbie123   ignore (0)   2017 Dec 14, 6:01pm   ↑ like (1)   ↓ dislike (1)   quote   flag        

I would like to add that you can buy products with Bitcoin. I expect that there will be more and more stores accepting it in the future too.

2   anonymous   ignore (null)   2017 Dec 15, 7:43am   ↑ like (0)   ↓ dislike (0)   quote   flag        

Bitcoin disgust ion

Waste of electrons

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