[HN Gopher] When You Know
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When You Know
Author : hypomnemata
Score : 59 points
Date : 2021-01-21 21:16 UTC (1 hours ago)
(HTM) web link (www.tbray.org)
(TXT) w3m dump (www.tbray.org)
| mmcclure wrote:
| I'd put myself in the "very intrigued by the idea of crypto but
| extremely skeptical in practice" camp. I do agree with him that
| it's largely a Ponzi scheme that will absolutely continue its
| cycle of boom and bust, but his "money" argument feels
| exceedingly weak.
|
| I very rarely hear the bitcoin crowd claiming anything around
| bitcoin as money, but more like gold; a store of value that is
| admittedly difficult to move around. You can't pay your taxes in
| _any_ asset that isn 't money. The government isn't going to take
| a bar of gold (or if they will, I certainly don't know how to
| give it to them), and they definitely won't take your Micky
| Mantle baseball card or Rembrandt painting unless you've gotten
| so far down the hole that they've got people liquidating those
| things to wring the money out of them to pay your debt. There are
| a lot of things that represent monetary value that definitively
| aren't money and can't be used as such, but that doesn't negate
| their value.
| dgellow wrote:
| Doesn't any Ponzi scheme a "store of value"? Until it isn't.
| rednerrus wrote:
| The underlying asset has to have some intrinsic value for it to
| be a store of value. Gold is a value store because people can
| use it to make things, and historically it's been one of the
| assets that women could own.
| thrawa567 wrote:
| Well, that's an easy one. I "knew" that in 2013 after a bit of
| research.
|
| I'd be more curious about something less obvious, e.g. in 2030
| 50% of software running was not written by humans or the like.
| [deleted]
| LinuxBender wrote:
| Something I rarely see discussed is the risk around power
| regulation as it pertains to bitcoin. As virtual currencies
| become more popular and easier for people to utilize, the demand
| to create coins will increase. I've seen some articles discussing
| how mining coins has put a strain on some power grids that are
| already stressed beyond capacity. Could this reach a point where
| governments require something to the effect of additional carbon
| credits or such?
| davidw wrote:
| I recall when I first got internet access in the early 90ies, via
| a text terminal. I had access to both Gopher, and the WWW, via
| Lynx or some other text-based browser. I thought the WWW stuff
| looked very disorganized and ugly compared to the more nicely-
| organized and hierarchical Gopher, and wasn't really sure the
| 'web' thing would catch on.
|
| I try and keep that in mind when I feel too tempted to get into
| the predictions game.
|
| I wouldn't get into Bitcoin either, though.
| throw0101a wrote:
| When it comes to Bitcoin, I kind of see it as being similar to
| gold in the modern world. See Buffett's 2011 letter:
|
| > _The major asset in this category is gold, currently a huge
| favorite of investors who fear almost all other assets,
| especially paper money (of whose value, as noted, they are right
| to be fearful). Gold, however, has two significant shortcomings,
| being neither of much use nor procreative. True, gold has some
| industrial and decorative utility, but the demand for these
| purposes is both limited and incapable of soaking up new
| production. Meanwhile, if you own one ounce of gold for an
| eternity, you will still own one ounce at its end._
|
| > _What motivates most gold purchasers is their belief that the
| ranks of the fearful will grow. During the past decade that
| belief has proved correct. Beyond that, the rising price has on
| its own generated additional buying enthusiasm, attracting
| purchasers who see the rise as validating an investment thesis.
| As "bandwagon" investors join any party, they create their own
| truth -_ for a while.
|
| [...]
|
| > _Today the world's gold stock is about 170,000 metric tons. If
| all of this gold were melded together, it would form a cube of
| about 68 feet per side. (Picture it fitting comfortably within a
| baseball infield.) At $1,750 per ounce - gold's price as I write
| this - its value would be $9.6 trillion. Call this cube pile A._
|
| > _Let's now create a pile B costing an equal amount. For that,
| we could buy all U.S. cropland (400 million acres with output of
| about $200 billion annually), plus 16 Exxon Mobils (the world's
| most profitable company, one earning more than $40 billion
| annually). After these purchases, we would have about $1 trillion
| left over for walking-around money (no sense feeling strapped
| after this buying binge). Can you imagine an investor with $9.6
| trillion selecting pile A over pile B?_
|
| [...]
|
| > _A century from now the 400 million acres of farmland will have
| produced staggering amounts of corn, wheat, cotton, and other
| crops - and will continue to produce that valuable bounty,
| whatever the currency may be. Exxon Mobil will probably have
| delivered trillions of dollars in dividends to its owners and
| will also hold assets worth many more trillions (and, remember,
| you get 16 Exxons). The 170,000 tons of gold will be unchanged in
| size and still incapable of producing anything. You can fondle
| the cube, but it will not respond._
|
| * https://www.berkshirehathaway.com/letters/2011ltr.pdf
|
| In some ways this is a form of Greater Fool Theory: you'll only
| make a profit if someone comes along later and is willing to pay
| more for it, as it otherwise doesn't not have any productive use.
|
| * https://en.wikipedia.org/wiki/Greater_fool_theory
|
| And given it was designed to have a finite amount, that means it
| is deflationary over the long-term which incentivizes hoarding.
|
| An observation from a paper I ran across:
|
| > _An ECB publication states that bitcoin's theoretical roots are
| in Austrian economics[11]. Bitcoin corresponds with Austrian
| economic ideas in that bitcoin was intended to provide a monetary
| alternative that is beyond the reach of governments to regulate.
| Bitcoin has correspondence with libertarian ideas, which have
| some relationship with Austrian ideas. In the USA, my experience
| is that bitcoin proponents appear to have obtained their theory
| from science-fiction, radical libertarian popular literature,
| anti- government /anti-tax activism, and often from nothing that
| is apparent except their own thoughts._
|
| * https://arxiv.org/pdf/1312.2048.pdf
|
| * https://arxiv.org/abs/1312.2048
|
| I remain skeptical about any mainstream use. Though having a bit
| (<5%) in one's portfolio isn't crazy as some 'play money'.
|
| Similarly I don't bother holding gold (bullion or ETFs), but if
| someone has a portfolio with a few percentage points' worth it
| isn't unreasonable. Generally gold isn't as useful as many people
| think it is:
|
| * https://www.pwlcapital.com/will-gold-save-the-day/
| elwell wrote:
| Slowness of transactions and low throughput is a weak argument
| against Bitcoin. With innovation, or workarounds, I just don't
| see that as a real hangup here. Anyways, would be interested in
| author's opinion of other cryptocurrencies such as Ethereum.
| rednerrus wrote:
| What is the problem crypto is trying to solve? We have wire
| transfers to move money around. If we wanted to create a public
| ledger of all money transactions, we could do it using a lot
| less energy than we are using on crypto right now.
| throw-08408204 wrote:
| This is an interesting instance of cherry-picking and
| retrospective determinism in an attempt to convince the reader
| that the author's personal bias is valid and deserved.
|
| After reading this we should be careful not to make an argument
| from fallacy. This may be a fallacious argument but that does not
| mean the conclusion is wrong.
| 1996 wrote:
| The author seems to keep making the same mistakes - the latest
| being on iPhones and BTC.
|
| Do I care that Android devices have larger market share? Not at
| all. Apple is on the high end, profitable part.
|
| Should you care that the crypto ecosystem has a few bad actors,
| and may not be for 90% of the population? Not at all, and for the
| same reason.
|
| Some customers are said to be the "harbinger of failure" [1].
| Considering the author employment history, I might say the same:
| some employees may be harbingers of doom for the company that
| hires them.
|
| If he had been working at Apple (=>iPhone) instead of Sun then
| Google, he might have had more of a point... but still, past
| performance not being indicative of future performance, I'm
| extremely cautious about old hackers who think they know it all
| and extrapolate WAY outside their area of competence.
|
| [1] https://news.mit.edu/2015/harbinger-failure-consumers-
| unpopu...
| oh_sigh wrote:
| Saying what you got right in the past isn't enough - Tim should
| also post about the things that he had a hunch about and then
| turned out completely wrong.
| daze42 wrote:
| Is he talking about Bitcoin specifically or cryptocurrency as a
| whole? If just Bitcoin, yes, I agree that the transactions per
| second (TPS) is too low for global adoption. But as far as I
| know, there's no technical reason it has to be that slow for all
| cryptocurrencies. Ethereum 2.0 is supposed to support 100,000+
| TPS according to Vitalik.
| https://twitter.com/VitalikButerin/status/127796159495847116...
| sxp wrote:
| Is there a trusted broker that can be used to short Bitcoin? It's
| unclear to me if BTC will work in the long run, but it would be
| nice if all the people claiming it's going to crash would put
| their money where their mouth is. It's possible that the BTC
| market "can remain irrational longer than you can remain
| solvent", but people have been saying this for the past decade
| and it's boring to see people make claims without updating their
| beliefs based on new evidence. At least the TSLA bears are
| investing money into short positions as a demonstration of their
| beliefs.
| hpkuarg wrote:
| The most regulated way to short it is via CME Bitcoin
| futures[0]. However, it's quite heavily leveraged at 5 bitcoins
| per contract -- meaning each contract is ~$157k of notional
| value at today's close. This, combined with the volatility of
| the thing, is easily above my personal risk tolerance, but
| obviously YMMV.
|
| Given the history of how financial bubbles play out, I
| personally would not recommend shorting it outright.
|
| [0]: https://www.cmegroup.com/trading/equity-index/us-
| index/bitco...
| microtherion wrote:
| Just because it might be a bad idea to go long Bitcoin doesn't
| necessarily mean that it's a good idea to short Bitcoin.
|
| As you mention, market timing is always a problem in such
| trades. A problem more specific to Bitcoin is that the market
| is not all that liquid, and that it is subject to the whims of
| some whales. Last of all, I suspect that Bitcoin bets might
| carry a significantly higher counterparty risk that e.g.
| shorting TSLA.
| reidjs wrote:
| Spoiler: the post boils down to an anti-Bitcoin warning using the
| old motto "it's not real money" because you can't pay your taxes
| with it. I can't pay my taxes in Yen but that doesn't mean Yen
| isn't real money.
|
| This is an example of a tech person extrapolating their expertise
| outside tech. Bitcoin is an experiment in economics as much as
| it's an experiment in technology. Just because the network is
| slow to process transactions doesn't mean the entire system is
| worthless.
|
| The first 90% of the article isn't bad, but IMO author didn't
| really backup his claims.
| seabass wrote:
| The author also assumes there will be no changes or innovation
| to speed up the network. I think that's a bad assumption to
| make. Beyond that, I know in my own experience I don't use btc
| for any transactions that I need settled instantly--that
| doesn't make it valueless, it just gives it a different purpose
| than, for example, usd credit card payments.
| burade wrote:
| No, that's not the argument. That argument is that the global
| bitcoin network is slow as shit, and it would take 5 entire
| months just to process 140 million US citizens' taxes. Meaning
| that it's not really viable, unless some technological
| breakthrough happens.
| googlryas wrote:
| It needs a social/political breakthrough, not technological.
| You could just make block sizes 1000x larger and be done with
| it. Literally just a configuration variable if everyone would
| get on board.
| mr_woozy wrote:
| https://www.youtube.com/watch?v=CqNEQS80-h4 - Luke Dashjr
| "Briefly, Why Block Sizes Shouldn't Be Too Big"
|
| https://www.youtube.com/watch?v=92AYj_9W7x0 - Why is Block
| Size 1MB Andreas Antonopoulos
|
| There's simple trade-off between decentralized and
| bandwidth requirements. If you raise the limit you reduce
| the pool of those that run full nodes thereby centralizing
| the network at which point you're undermining the point of
| a decentralized ledger.
| throw0101a wrote:
| > _Literally just a configuration variable if everyone
| would get on board._
|
| If.
| googlryas wrote:
| Right. Almost an impossible task based on precedent. But
| my point was that it isn't like the system as designed
| can't handle way more transactions than it currently
| does.
|
| If you have a sports car that is limited to do 15mph, but
| can actually do 215mph if you remove the artificial
| limiter, then you don't need a technological breakthrough
| to get the car to go to 215mph.
| bhupy wrote:
| But that's sort of a straw-man representation of what (most)
| Bitcoin adherents see as the future of Bitcoin / crypto. I
| don't think anyone serious expects the raw blockchain to
| power every single transaction, rather it's seen as a
| mechanism to supplant _clearing houses_. Consider that every
| night, banks submit batch files to a network of clearing
| houses in order to electronically transact US dollars (credit
| cards, Venmo, etc are all just abstractions on top of this
| ultimate step). The slow, asynchronous blockchain transaction
| is meant to be a replacement for _that_ step.
|
| The steel-man version of the Bitcoin/crypto future is that
| most people would use trust-based institutions to perform
| instant transactions (like credit cards and Venmo), just that
| the ultimate step involves an hour long blockchain
| transaction rather than a days-long ACH batch file. The fact
| that the Blockchain also enables individual point-to-point
| payments (albeit slowly) in a trust-less way is more of a
| replacement to having to mail somebody an envelope/briefcase
| full of cash, which is currently the only way one can
| transact if one is blacklisted by the centralized
| institutions. And depending on your political leanings, you
| might still prefer to use centralized payments on top of
| Bitcoin/crypto instead of on top of USD because with the
| former, there's little room for funny business by central
| bank reserve messing with the supply of money.
| elliekelly wrote:
| > rather than a days-long ACH batch file
|
| Same-day ACH exists today. Even for international
| transactions. Most ACH batch files can be processed in as
| little as an hour. To the extent there's anything
| preventing "instant transactions" its (1) AML regulations
| and (2) internal/contractual (Visa, etc.) fraud prevention,
| not the ACH process.
| bhupy wrote:
| That's not the point though, the point is that Bitcoin is
| not comparable to the entire financial system, rather
| it's comparable to raw cash. Just like it's pretty
| infeasible for everyone to always use cash all the time,
| it would be pretty infeasible for everyone to always use
| Bitcoin-on-the-blockchain to buy a cup of coffee.
|
| What Bitcoin allows you to do is build a financial system
| comprised of products that look like Venmo, credit cards,
| banks, etc on top of a currency system that's 1)
| censorship resistant (unlike ACH), and 2) independent of
| central bank monetary policy (unlike most fiat
| currencies).
|
| The degree to which you care about (2) is obviously based
| on your political leanings, but (1) basically turns
| paper-money in-person transactions into something that
| can happen between strangers over the Internet
| unencumbered. Most crypto bulls hope that the vast
| majority of people use instant bank-driven payments, just
| based on the blockchain at the lowest layer, rather than
| USD-over-ACH.
|
| And to be clear, I'm not really a crypto bull and I don't
| really have a horse in the race. But this is the steel-
| man argument for crypto.
| erehweb wrote:
| I think I'm missing something. If the system doesn't have
| that much capacity for transactions, wouldn't that still be
| a problem, even if you do the Venmo-like stuff instantly
| and batch the reconciliation overnight?
| bhupy wrote:
| The system has just about as much capacity for
| transactions as batch-driven ACH clearing houses today.
| Until very recently, the expectation for ACH was that a
| transaction would clear after days (sometimes weeks). The
| end user of that product (at scale) is banks, not
| individuals. Bitcoin/crypto solves the problem of being
| able to essentially do a "briefcase full of cash"
| transaction over the internet, a use case that obviously
| only matters to a tiny sliver of people. The remaining
| majority would simply use more trust-based institutions
| (like the Lightning network) to facilitate
| convenient/instant transactions. The fact that you can
| run an hour long transaction in a trust-less way on the
| blockchain is just an option, but realistically not the
| use-case for most people.
| alfonsodev wrote:
| yeah, while I enjoyed those stories it feel wrong at the end,
| because it is an appeal of authority fallacy. "I was was right
| about unrelated fact A, B, C I am an authority so trust me on
| this."
| mr_woozy wrote:
| >it is an appeal of authority fallacy
|
| Couldn't say it better myself.
|
| Smart enough to understand tech trends, but not smart enough
| to introspect using logical fallacy.
|
| SMORT
| throw0101a wrote:
| IMHO, the primary argument is:
|
| > _It is completely unambiguously obvious to me that Bitcoin, a
| brilliant achievement technically, is functioning as a Ponzi
| scheme, siphoning money from the pockets of rubes and into
| those of exchange insiders and China-based miners._
|
| Can anyone confirm/debunk this claim:
|
| > _A few large holders commonly referred to as whales continue
| to own most Bitcoin. About 2% of the anonymous ownership
| accounts that can be tracked on the cryptocurrency's blockchain
| control 95% of the digital asset, according to researcher
| Flipside Crypto._
|
| *
| https://www.bloomberg.com/news/articles/2020-11-18/bitcoin-w...
| roland35 wrote:
| There is no technical limitations on everyone paying their
| taxes in Yen (or Euros), but there is a rate limit on bitcoin.
| breck wrote:
| The best argument I've heard for the long term success of
| bitcoin:
|
| if you think Bitcoin is complex and expensive to maintain, what
| do you think it costs to run the U.S. Dollar system?
|
| For that reason and that reason alone I would never ever bet
| against BitCoin.
|
| I also wouldn't bet my house on it, but digital currencies
| really could turn out to a be much more efficient currency
| system than our current state issued currencies.
| mediaman wrote:
| Bitcoin in particular would have really benefited from some
| basic understanding of monetary economics.
|
| If you want it to be a currency, it needs to be able to
| expand its supply to meet demand as a medium of exchange.
| Otherwise you get huge deflation.
|
| Instead, Bitcoin was designed to have a very finite amount of
| supply. And - shockingly - anyone trying to use it as a
| medium of currency would find that viewing the world through
| the lens of Bitcoin has been massively, hugely deflationary
| (meaning: the cost of a Bag Mac has fallen dramatically in
| terms of Bitcoin, as has your paycheck).
|
| That same 'feature' is what made it the darling of
| speculators. It's like the feature that makes it a
| dysfunctional currency is also what made it successful as a
| tool of speculation.
|
| That's not an indictment of crypto generally - hopefully
| other coins that were designed to more intelligently expand
| supply as the demand for them increased as a medium of
| exchange, and these other coins would exhibit more price
| stability, a core requirement of a functional currency.
|
| Crypto brings some great decentralized features, and its
| creators deserve credit for it. But combining that innovation
| with some understanding of monetary economics would truly
| unleash its potential as an alternative to state-sponsored
| currency.
| throw0101a wrote:
| An observation from a paper I ran across:
|
| > _An ECB publication states that bitcoin's theoretical
| roots are in Austrian economics[11]. Bitcoin corresponds
| with Austrian economic ideas in that bitcoin was intended
| to provide a monetary alternative that is beyond the reach
| of governments to regulate. Bitcoin has correspondence with
| libertarian ideas, which have some relationship with
| Austrian ideas. In the USA, my experience is that bitcoin
| proponents appear to have obtained their theory from
| science-fiction, radical libertarian popular literature,
| anti- government /anti-tax activism, and often from nothing
| that is apparent except their own thoughts._
|
| * https://arxiv.org/pdf/1312.2048.pdf
|
| * https://arxiv.org/abs/1312.2048
| andrewguenther wrote:
| > This is an example of a tech person extrapolating their
| expertise outside tech.
|
| Isn't this exactly what Bitcoin is?
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