Won't bitcoin fall in a deflationary spiral? – Bitkub.com

30+ Reasons Why Cryptocurrencies Are Worthless

1)It is possible to change the code through a miner vote or a fork and change the total supply or anything. DASH did it : they reduced the total supply from 84M to 18.9M a few years ago. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.

2)You can also fork bitcoin anytime , start over from 0 and claim it's the real bitcoin. (BCH , BSV , BTG , LTC , BCD etc)

3)Why would you pay $10,000 for a digital collectible unit called BTC when you can use BCH or TRX or LTC .. you name it. They work just as fine and cost less. There is no rarity like in gold.

4)Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You’d rather hold a wal mart gift card or even simply cash.

5)Private keys may be bruteforced as we speak. Quintillions entries a second. When they’ll have enough bitcoins under control , they could move them all at once instantly.(At least 45,000 ETH have been stolen this way for now through ethereum bandit)SHA 256 is too old , bitcoin is 10 years old , it is not secure enough , quantum computing could potentially break it.

6)And that’s if people don’t find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc..

proofs :

“Bitcoin , Coindesk : “The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret”an attacker could have actually used it to create new Bitcoin — above the 21 million hard-cap of coin creation — thereby inflating the supply and devaluing current bitcoins.”

Stellar : “Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed”

Monero : “A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post”

Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.

EOS : “Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX “

Zcash : “Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug” etc..

7)Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.

8)Then miners may be losing millions so they will stop mining , blocks may be so slow , almost no transaction will come though , and bitcoin may not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved may crash hard.

9)Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous “parity wallet”.

10)It is NOT trustless. you have to trust the wallet you’re using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..

11)Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly every 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.

12)Bitcoin price may artificially be inflated by Tether.

13)It’s an energy waste , an environmental catastrophy.

14)The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.

15)Governments will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies. Trump could kill bitcoin with one tweet , force fiat exchanges to cease activity.

16)Most cryptos are scams , the rest are just crazy speculative casino investments.

17)It is pyramidal : early adopters intend to profit massively while last comers get crushed. That's not how money works. The overwhelming majority of crypto holders are buying it because they think they will be able to sell it to a higher price later. Money is supposed to be rather stable. That's why the best cryptocurrencies are USDT USDC etc..

18)The very few stores accepting bitcoin always have the real price in the local currency , not in bitcoin. And prices like 0.00456329 BTC are ridiculous !

19)About famous brokers listing bitcoin : they have to meet the demand in order to make money , it doesn't mean they approve it , some even short it (see interactive broker's CEO opinion on bitcoin)

20)People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it , it's accepted everywhere , you can buy more things with it.

21)Everybody in crypto thinks that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it might not happen. The truth is past performance doesn’t indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun. The markets are unpredictable.

22)Also BTC went from about $0.003 to the price it is today , so don’t think it’s cheap now.

23)There is no recourse if you’re scammed/hacked/made a mistake in the address etc. No chargebacks. But it might be possible to do a rollback (blockchain reorganization) to reverse some transactions. BSV did it.

24)In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governments might ban it to prevent fiat inflation to worsen.

25) Having to write down the private key somewhere or memorize it is a security flaw ! It’s insane to think a system like this will gain mass adoption.

26) The argument saying governments can not ban it because it is decentralized (like they banned drugs) doesn’t work for cryptos. First , drugs are much harder to find and much more expensive and unsafe because of the ban , and people are willing to take the risk because they like it. But if crypto is banned , value will drop too much , and if you can’t sell it for fiat without risking jail , goodluck to find a buyer. Fiat exchanges could close. Banks could terminate every crypto related bank account. And maybe then the mining death spiral would happen and kill all cryptos.

27) Crypto doesn’t exist. It’s like buying air. It’s just virtual collectibles generated by a code. Faguzzi, fugazzi, it’s a whazzie, it’s a whoozie.. it’s a.. fairy dust. It doesn’t exist. It’s never landed. It’s no matter, it’s not on the elemental chart. It… it’s not fucking real!

28) Most brilliant guys have come out and said Bitcoin was a scam or worthless. Including Bill Gates , Warren Buffet , The Wolf Of Wall Street…

29) Inflation is necessary for POW , BTC code will have to be changed to bypass the 21M cap or mining will die ! If BTC code is not changed to allow for miners to be paid reasonably , they will cease mining when the bitcoin block reward gets too low.Even monero understood it ,the code will have to be changed to allow for an infinite bitcoin supply (devaluating all current bitcoins) or the hash will decrease and the security of bitcoin will decrease dramatically and be 51% attacked

30) Don’t mix up blockchain and cryptos. Even blockchain is overrated. But when you hear this or that company is going blockchain , it doesn’t mean they support cryptocurrencies.

31) Craig Wright had a bitcoin mining company with Dave Kleinman (he died) and on january 1 2020 he claims he will be able to access the 1.1M BTC/BCH/BTG from the mining trust. He may or may not dump them on the market , he also said BTC had a fatal flaw and that by 2019 there will be no more BTC.

32) Hacks in cryptos are very common and usually massive. Billions of dollars in crypto have been stolen in the last 6 years. In may 2019 Binance was hacked and lost 7,000 BTC (and it’s far from being the biggest crypto hack).

33) Bitcoin was first. It's an ancient technology. Newer blockchains have privacy, smart contracts, distributed apps and more.Bitcoin is our future? Was the Model T the future of the automobile? (John Mc Afee)

34) IOTA investiguating stolen funds on mainnet. IOTA shuts down the whole network to deal with trinity wallet attack.

35) Compared to bitcoin other cryptos work just as fine and don't waste so much energy.

36 ) Everytime miners disagree on the updates it will create another version of bitcoin : problem of governance and legitimacy.

37) Cryptos are only legitimate if they act as a credit for a redeemable asset like USDT or gold backed coins.


While the native language of the writter is not english , I think you get the point and it doesn't make it any less relevant.
submitted by OverTheRedHills to u/OverTheRedHills [link] [comments]

TOP 20 Reasons Why Cryptocurrencies Are Worthless

https://medium.com/@quizas_869/20-reasons-why-cryptocurrencies-are-worthless-b38f34e4d6b3

1)Private keys are being bruteforced as we speak. Quintillions entries a second. When they’ll have enough bitcoins under control , they can move them all at once instantly.(At least 45,000 ETH are known to have been stolen this way for now through ethereum bandit)SHA 256 is too old , bitcoin is 10 years old , it is not secure enough , quantum computing can break it.
2)It is possible to change the code anytime and change the total supply or anything. DASH did it : they reduced the total supply from 84M to 18.9M a few years ago. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.
3)You can also fork bitcoin anytime and start over the pyramid scheme from 0. (BCH , BSV , BTG , LTC , BCD ETC etc)
4)And that’s if people don’t find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc..
proofs :
“Bitcoin , Coindesk : “The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret”an attacker could have actually used it to create new Bitcoin — above the 21 million hard-cap of coin creation — thereby inflating the supply and devaluing current bitcoins.”
Stellar : “Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed”
Monero : “A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post”
Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.
EOS : “Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX “
Zcash : “Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug” etc..
5)Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.
6)Then miners will be losing millions everyday so they will stop mining , blocks will be so slow , almost no transaction will come though , and bitcoin will probably not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved will crash hard.
7)Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous “parity wallet”
8)It is NOT trustless. you have to trust the wallet you’re using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..
9)Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly every 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.
10)Bitcoin price is artificially inflated by Tether
Other major non-technical problems :
11)It’s an energy waste , an environmental catastrophy
12)The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.
13)Governements will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies. Trump could kill bitcoin with one tweet , force fiat exchanges to cease activity.
14)Most cryptos are scams , the rest are just crazy speculative casino investments
15)Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You’d rather hold a wal mart gift card or even better simply cash.
16)It is pyramidal : early adopters intend to profit massively while last comers get crushed.
17)The very few stores accepting bitcoin always have the real price in the local currency , not in bitcoin. And prices like 0.004563298 BTC are ridiculous !
18)About famous brokers listing bitcoin : they only want to give people an opportunity to short it , and make money on it as brokers do.
19)People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it. The governement the police the taxes etc. Cryptos are so much worse it’s printed out of thin air we could change the algorythm of bitcoin to instantly mint an infinite amount of bitcoin , it is technically possible..
20)Everybody in crypto think they’re smart traders and that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it won’t. The truth is past performance doesn’t indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun.
21)Also BTC went from about $0.003 to the price it is today , so don’t think it’s cheap now.
22)There is no recourse if you’re scammed/hacked/made a mistake in the address etc. No chargebacks
23)In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governements might ban it to prevent fiat inflation to worsen. If prices would rise , whales stuck with cryptos would dump and cause an immediate huge drop.
24) Having to write down the private key somewhere or memorize it is a security flaw ! It’s insane to think a system like this will gain mass adoption.
25) The argument saying governements can not ban it because it is decentralized (like they banned drugs) doesn’t work for cryptos. First , drugs are much harder to find and much more expensive and unsafe because of the ban , and people are willing to take the risk because drugs are probably the best feeling in the world , but cryptos are nothing it’s all virtual. If crypto is banned , value will drop too much , you can’t sell it for fiat without risking jail , and goodluck to find a buyer. Fiat exchanges could close. Banks could terminate every crypto related bank account. And maybe then the mining death spiral would happen and kill all cryptos.
26) Crypto doesn’t exist. It’s all virtual. It’s like buying air. It’s just virtual collectibles generated by a code.
27)The overwhelming majority of crypto holders are buying it because they think they will be able to sell it to a higher price later. This is clearly the greater fool theory.
updating..
submitted by OverTheRedHills to zec [link] [comments]

TOP 20+ Reasons Why Cryptocurrencies Are Worthless

-Private keys are being bruteforced as we speak. Thousands of quadrillions entries a second. When they'll have enough bitcoins under control , they can move them all at once instantly. (At least 45,000 ETH are known to have been stolen this way for now through ethereum bandit) Quantum computing is coming. bitcoin is using SHA 256. It's pretty old , it was already old in 2009 , it will be broken.
-It is possible to change the code of a crypto anytime to change the total supply or anything really. DASH did it : they reduced the total supply to 18.9M from 84M when it wasn't called DASH yet. They could also increase it to 999 Trillions if they wanted to so that millions of DASH are mined every week.
-You can also fork bitcoin anytime and start over the scheme from 0. (BCH , BSV , BTG , LTC , BCD ETC etc)
-And that's if people don't find a way to create an infinite amount of coins to sell on exchanges.. it happened with monero , stellar , bitcoin , zcash , zcoin , eos , etc proofs :
"Coindesk : "The Latest Bitcoin Bug Was So Bad, Developers Kept Its Full Details a Secret"an attacker could have actually used it to create new Bitcoin – above the 21 million hard-cap of coin creation – thereby inflating the supply and devaluing current bitcoins."
Stellar : "Stellar Inflation: Glitch Leads to 2.25 Billion Extra XLM Printed"
Monero : "A bug in the Monero (XMR) wallet software that could enable fake deposits to exchanges has been recently brought to public attention through a Medium post"
Zcoin : Forged coins were created, but not exceeding 1% of the circulating supply. We will release further details on exact numbers when Sigma is released.
EOS : "Hackers Forge Billion EOS Coins to Steal Real Crypto From DEX "
Zcash : "Zcash Team Reveals It Fixed a Catastrophic Coin Counterfeiting Bug" etc..
-Segwit , and especially Lightning network is a very complex technology and it will inevitably have flaws , bugs , it will be exploited and people will lose money. That alone can cause bitcoin to drop very low levels.
Then miners will be losing millions everyday so they will stop mining , blocks will be so slow , almost no transaction will come though , and bitcoin will probably not have enough time to reach the next difficulty adjustement. This is reffered to as a death spiral. Then every crypto even those with no mining involved will crash hard.
-Many crypto wallets are unsafe and have already caused people to lose all their investment , including the infamous "parity wallet"
-It is NOT trustless. you have to trust the wallet you're using is not just generating an address controlled by the developper , you have to trust the node the wallet connects to is an honest node , you have to trust a Rogue state or organization with enough computing power will not 51% attack the network. etc..
-Bitcoin is NOT deflationary. Bitcoins are created every blocks (roughly 10 minutes) and you wil be dead by the time we reach the 21 million current hard cap.
Other major non-technical problems :
-Bitcoin price is artificially inflated by Tether
-It's an energy waste , an environmental catastrophy
-The only usecases are money laundering , tax evasion , gambling , buying on the dark net , evading sanctions and speculation.
-Governements will ban it if it gets too big , and they have a big incentive to do so , not only for the obscure usecases but also because it threatens the stability of sovereign currencies.
-Most cryptos are scams , the rest are just crazy speculative casino investments
-Think of any amount you hold in ethereum as a gift card to use smart contracts on the ETH blockchain. Ridiculous. You'd rather hold a wal mart gift card or even better simply cash.
-It is pyramidal : early adopters intend to profit massively while last comers get crushed.
-The very few stores accepting bitcoin always have the real price in $ , not in bitcoin.
-About famous brokers listing bitcoin : they only want to give people an opportunity to short it , and make money on it as brokers do.
People say cash is backed by nothing and losing value slowly , and yes it is very flawed , but there is a whole nation behind it. The governement the police the taxes etc. Cryptos are so much worse it's printed out of thin air we could change the algorythm of bitcoin to instantly mint an infinite amount of bitcoin , it is technically possible..
-Everybody in crypto think they're smart traders and that there will be a new bullrun and that then , they will sell. But because everybody thinks it will happen , it won't. The truth is past performance doesn't indicate future performance and it is absolutely not guaranteed that there will ever be another bullrun.
-There is no recourse if you're scammed/hacked/made a mistake in the address etc. No chargebacks
-In case of a financial crisis , the speculative assets would crash the most and bitcoin is far from being a non speculative safe heaven ; and governements might ban it to prevent fiat inflation to worsen. If prices would rise , whales stuck with cryptos would dump and cause an immediate huge drop.
submitted by OverTheRedHills to eos [link] [comments]

What's Holding Bitcoin Back

I've previously posted some of my writings here and garnered a positive response. Since then I've abandoned steemit and created a dedicated website dubbed graspbitcoin.tech that ventures to explain how bitcoin will change the world. Included below is the full text of the 3rd article in this series, but there are already a number of other post on my site that go further. This information is geared towards the general public and may seem largely like review to this community.

What’s Holding Bitcoin Back

Money should be a good store of value, medium of exchange, and unit of account. There are a lot of barriers preventing bitcoin’s widespread use by the aforementioned criteria, let’s take a look and see how they might be solved.

Lack of Understanding

Bitcoin is complicated and unfamiliar. This is a huge barrier to entry because people distrust what they don’t understand, and ease-of-use and simplicity is what usually sells a new technology. If you have read this series from the beginning though, you may now see some potential upsides to such a drastically different system than what we are used to. Many resisted smartphones for a time (and a few still do). The benefits have to outweigh the costs of adoption, so we may see niche cases being the early adopters (like citizens of Venezuela or remittances payments). Also, when a new complicated technology rolls around, it sometimes takes a generation before it becomes widespread; young people are particularly adept at adopting new tech.

Volatility

The tendency of bitcoin’s price to change rapidly or unpredictably is what comprises volatility.
When you search for bitcoin you may find that most of the results you get (and the discussions happening on forums) are about it’s price. This is understandable, it has seen some crazy moves both up and down over the years facilitating the potential for huge gains (and huge losses). Still, over time the price certainly is increasing. Unless you bought in a single 2 month period in 2013, holding bitcoin for longer than 2 years at any point in its history would land you in a better position than when you started. And, when viewed on a logarithmic scale (used in long-term stock charts), the trend is quite clear:
(Bitcoin Price 2012-2018, Logarithmic Scale (bitcoincharts.com))
There is a risk/reward to adopting new tech, and this is no exception. But, my goal is absolutely not to “sell” it to you as an investment by any means.

This is not financial advice. We’re simply looking at the pros and cons of this space, and I encourage everyone to do their own research and come to their own conclusions. Never invest anything you aren’t prepared to lose.

This meteoric rising (and crashing) of the “price” (which, I’ll point out, might just as well be considered an exchange rate) understandably makes it pretty difficult to use bitcoin as a currency. If it moves a few percent in a day, and can move a few hundred percent in a month, purchasing a car or a house could cost you significantly more by the time your finished closing. That’s just not viable, and certainly not a good unit of account.
However, I see the volatility in price simply as growing pains. It is the market that dictates the price of bitcoin, quite literally, it’s traded like a stock. This is referred to as speculation (“the purchase of an asset with the hope that it will become more valuable at a future date”). Speculation happens between national currencies already, but they are generally stable in comparison so it’s not lucrative. People are unsure of how this whole bitcoin thing is going to play out. It’s not like anything we’ve ever seen, it’s difficult to understand (and use), and it’s not accepted at every corner store or online business. Many in the space are just here for a quick buck, and they sell it when the price rises to get back “real” money we are used to, that is “stable” in price against other currencies, and can predictably buy goods and services.
The way I see it, all of these will concerns diminish in time.
Though Amazon or Target don’t yet accept bitcoin, Microsoft and Overstock.com do. Some cities and towns across the world are embracing it a lot more than others. It’s not surprising to see San Francisco accommodating the new technology. But, other cities like Portsmouth in New Hampshire with numerous cafes and shops accepting bitcoin (and “Dash coin”) might surprise you. There are maps available to see where crypto-currencies are accepted at locations near you, and the amount of them are increasing, albeit slowly. It’s a bit of a chicken-and-egg situation, but that hasn’t stopped revolutions from happening before.
Consider when cars first came about, roads were dirt and mud which cars didn’t do well with. It took building massive infrastructure before cars could ever become mass-adopted, but we spent the time, money, and effort because we saw the potential advantages. It will be trivial for businesses to accept bitcoin compared with pouring hundreds of millions of dollars in asphalt to connect our world. Other parallels include train tracks, phone lines, electricity lines, communication satellites, etc. Each of these replaced or iterated on previous functional technologies, and required massive upfront costs before the benefits were available. It’s clear now that we made some good choices there but there were doubts at the time.
Despite some pretty major setbacks, bitcoin’s trend is up. Interest is growing and more businesses and individuals are actually using it. But due to the trading mentality, the uncertainty with regulations, uncertainty in the technology itself, uncertainty that the price will not drop, and other factors, emotion and greed encourages people to sell in flocks if the price climbs high enough.
Furthermore, right now with a large enough stack of money one can influence this market in drastic ways, and cries of manipulation of the price are not unfounded. So-called “whales” can buy and sell huge amounts of coins and the price can jump a bit each time. Coupled with uncertainty in the space, and so many “investors” trying to time the markets, we end up with a pretty volatile landscape where the price is not stable. My argument is that this is diminishing as it gains in popularity, and it is gaining value because its utility is growing (see the network effect”) and the utility itself is slowly becoming more apparent.

Volatility is actually decreasing.

Bitcoin Volatility Over Time(bitvol.info)
In the period from 2011 to 2014 bitcoin’s volatility often spikes into the 15% range. But from 2014 to the present, volatility has only just spiked above 7% twice, spending most of it’s time below 5%. Even the large boom and bust in price at the end of 2018 seems tame compared to the early years.
The trends show the price going up over time, and volatility going down. The more actual use the coin has (people saving and buying with bitcoin), the percentage of people entering the space to use it the way it was intended increases, the percentage of “stock traders” declines. And as more capital enters the space, the less influence whales have (because the current against which they swim is getting stronger). And as the price stabilizes, traders will become less interested.
There is a critical point where this becomes a negative feedback loop. I could be wrong, but the idea is at least founded in reality, and it would solve the unit of account issue if the price could stabilize to within a few percent per year.
Similarly, as a store of value, bitcoin becomes more viable in this scenario. This is coupled with the fact that although bitcoin is somewhat inflationary now as the supply is increasing (bitcoins are “discovered” as rewards for mined blocks), the amount of discovered coins are cut in half every few years. This “halving” is logarithmic, meaning eventually the amount of coins discovered is infinitesimally small, and total supply will asymptotically approach 21 million coins (the maximum supply that we will ever see).
This model of supply is actually meant to mimic gold because it’s a well-known store of value and monetary device throughout history (though it is not easily divisible, and not as portable as bitcoin). In both bitcoin and gold, mining is more fruitful in the beginning, and as we extract the low-hanging-fruit, mining requires greater effort and yields less return.
World population is increasing which leads to bitcoin becoming deflationary in the future if demand continues (the supply won’t increase beyond 21 million). And, I argue that it will become more valuable in time due to the network effect as bitcoin use becomes more widespread (the value of being able to exchange with more people anywhere, any time, and without permission from anyone).
This is a positive feedback loop, and shows how bitcoin is deflationary long-term. While deflation is generally considered negative by economists, the main reason is based around debt which isn’t possible in the same way with bitcoin because bitcoins cannot be created out of thin air like fiat currency.
The discussion of deflation vs inflation is an important one, and bitcoin’s monetary policy is an outlier compared with national currencies which are typically inflationary. The US dollar for example averaged 3% inflation since the year 1900. That means that over the last 100 years, a dollar has lost over 95% of its purchasing power. You could buy 95% more stuff with $1,000 last century, or, saving $1,000 from 100 years ago would buy you 95% less stuff at present. Put another way, purchasing power is cut in half after about 25 years, a concern for anyone retiring for over 20 years with a fixed retirement sum.
Some other national currencies have higher inflation rates, and there are numerous cases of inflationary spirals over the years. A few examples include Germany 1923, Hungary 1945, China 1947, Vietnam 1988, Peru 1990, Yugoslavia 1992, Zimbabwe 2008, and right now in Venezuela 2018. Entire countries of people have lost essentially all of their money, and it keeps happening over and over. A wise man would tell you it’s dangerous to say “it could never happen here”.
*UPDATE: Turkey is also now in financial crisis. This is our money with which we hold and exchange value, our earnings, our savings, our livelihoods. Maybe it’s time we had, at least, another option outside of government control. An option that governments can’t destroy through mismanagement. A neutral option that ignores all borders, is open to everyone, and can be accessed anytime from anywhere.

The Fear of “Hacks”

It’s a very real threat to have all your money stolen, if your bank was robbed you are protected by FDIC (in most cases only up to $100,000). The vast majority of coins that have been stolen have come from hackers attacking “exchanges” and getting away with millions. These exchanges are websites where you can trade bitcoin for other crypto-currencies (or “alt-coins”). You can also buy and sell bitcoin on them, and subsequently people end up storing a lot of coins on these exchanges, and the exchanges hold the “private keys” so they can execute trades.
Cryptographic private keys are analogous to a key that opens a door, or, a key that locks a message in a box before it is sent to the recipient. In our case the door opened allows you to sign your message and spend coins, and the message is your transaction on the bitcoin network. Anyone with your private keys can spend your coins. Exchanges are a honey pot of thousands of private keys that represent a lot of money. If a hacker can break into the exchange and steal the keys all at once, their work will pay off.
This is why any crypto guru will advise you not to store large amounts of coins on exchanges, and rather transfer them in your own wallets where you hold the private keys. The mantra is “your keys, your money; not your keys, NOT YOUR MONEY!” Of course your own computer can be hacked, but you are not as big a target as an exchange which may hold vast sums of money. There are also some pretty safe ways to store your coins if done right.
Centralized exchanges are a necessary evil for many people because they facilitate acquiring and trading coins easily. But decentralized exchanges are becoming more common because they allow you to trade while keeping your coins in your control at all times. They need some work and more users, but it’s a promising solution to this problem. Summarizing the above, the big hacks you read about are virtually eliminated if your keys are in your control and you keep them safe.

Fees

Transaction fees are generally negligible in a bitcoin transaction, but in many ways “fees” are holding us back. Interestingly, this is a symptom of being in the very early days.
Firstly, there is a lot of work on “scaling” crypto-currencies (making fees even lower than they already are and increasing transaction speeds). This is just an engineering problem, and many people are working on solving it in many different ways. Other currencies like NANO or IOTA have different underlying tech and have zero fees and instantaneous transactions.
In fact, most fees people encounter aren’t fees from bitcoin transactions; instead, they get hit with fees when exchanging between national currencies and bitcoins. In order to electronically trade USD($), EUR(€), or YEN(¥) with bitcoin, we need to hook into the closed-off for-profit banking network and we need third-parties to do so (and they take their cut).
But even these fees could be avoided in time. For example, you can buy bitcoins with cash directly from a person (localbitoins.com). And, it might seem distant, but in the future you may end up receiving bitcoins as your salary, from a friend, or from accepting them in your place of business. Likewise you can spend your bitcoins directly to other bitcoin users. Getting coins directly eliminates all the exchanging and associated fees because once your money is on the bitcoin network, fees will be negligible (especially as these networks evolve).

Usability

Right now it’s easier than ever to acquire some bitcoin. People can download “Coinbase” or “Square App” on their smartphone and purchase some using a credit card in a few minutes. Depending on which service you use and how much you want to buy, you may need to send a picture of your license for KYC regulations. However, as I mentioned above, there are risks to storing all your coins on exchanges, especially with large amounts. I always recommend transferring them to a wallet where you control the private keys.
But using wallets and storing private keys (and “seeds”) securely, is not as straightforward as we would like. This is a major factor holding back adoption, because if it’s not easy to use, people will consider it too much effort.
The next post in this series digs into wallets and storing your coins.
submitted by mrcoolbp to CryptoTechnology [link] [comments]

Litecoin needs a fundamental differentiator. Why don't you address the deflationary spiral?

submitted by rwitoff to litecoin [link] [comments]

19 myths about Bitcoin

19 myths about Bitcoin
Let me clarify common misconceptions about Bitcoin.

Myth # 1. It's just something similar to other virtual currencies, nothing new

All other virtual currencies are controlled by their regulatory center.
This means that:

they can be printed on the subjective whims of the currency regulator;
they could be destroyed by an attack on this regulatory center.;
arbitrary rules can be imposed by the currency regulator.
Bitcoins, being initially a decentralized currency, solve all these problems.

Myth # 2. Bitcoins do not solve any problems that gold and/or Fiat money cannot solve

Unlike gold bitcoins:

easy to carry and store;
easy to authenticate.
Unlike Fiat money, bitcoins:

have predictable and decreasing emissions;
not controlled by any regulatory center.
Unlike Fiat electronic money, bitcoins:

can be anonymous (like cash);
there's no way the accounts can be frozen.

Myth # 3. Bitcoins are secured by CPU time

It is incorrect to say that bitcoins are secured by CPU time. When it is said that a currency is "secured" by something, it is meant to be centrally tied to something at the exchange rate. You can not exchange bitcoins for the computing power spent on their generation (it is too high). In this sense, bitcoins are not secured by anything. This is a self-valuable product. Think, unless gold is provided with something? No, it's just gold. It's the same with bitcoins.

Bitcoin currency is created with the use of processor power: the integrity of the block chain is protected from all sorts of attacks by the existence of a large computer network. That's it.

Myth # 4. Bitcoins are worthless because they are not secured by anything

Gold is not secured by anything, but is used and valued everywhere. See the previous myth.

Myth # 5. The value of bitcoins is based on how much electricity and processing power is required to generate them

This myth is an attempt to apply labor value theory to bitcoins, which is not applicable to them and is probably false. Just because something requires X resources to create doesn't mean that the final product will cost X. it can cost more or less X, depending on the usefulness to users.

In fact, there is a broken causal relationship (this applies to the above theory as a whole). The value of bitcoins is based on how valuable they are. If bitcoins rise in price, more people will try to generate them (because bitcoin generation becomes more profitable), this will increase the difficulty of generating, which in turn only leads to the difficulty of mining them. If bitcoins fall in price, then the reverse process occurs. These processes maintain a balance between the cost of generation and the cost of bitcoins generated.

Myth # 6. Bitcoins have no value of their own (unlike some other things)

Many things have their own value, but it is usually well below the market value of the thing. Consider gold: if it were not used as an inflation-resistant value, and used only for industrial purposes, it would not have today's value, since the industrial need for gold is much lower than it is available.

Historical value has helped establish some things as a means of exchange, but it is certainly not a necessary condition. Perhaps bitcoins will not be used as a raw material for industrial purposes, but they have many other useful qualities that are necessary for the means of exchange.

The value of bitcoins is determined solely by people's desire to trade them - supply and demand.

Myth # 7. Bitcoins are illegal because they are not a legal tender

Short answer: chickens are not a legal tender, but bartering with chickens is not illegal.

There are many currencies that are not legal tender. Currency, after all, is just a convenient unit of account. Although national laws may vary from country to country (you should definitely check the laws of your state), in General - trading with any commodity exchange, including digital goods (e.g.: bitcoins, virtual worlds second Life or WoW game currencies), is not illegal.

Myth # 8. Bitcoins are a form of domestic terrorism because they only harm the economic stability of the state and the state currency

Read the relevant Wikipedia article. Action will not be considered terrorism if it is not violent. Bitcoins are not imposed on anyone with violence, so they are not terrorism.

Also, bitcoins are not "internal". It's a worldwide product. Look at the auto-generated node map.

Myth # 9. Bitcoins will only facilitate tax evasion, which will lead to a possible fall of civilization

It's up to you whether you follow the laws of the country or face the consequences of breaking the laws.

Myth # 10. Bitcoins can print/mint everyone, therefore they're useless

To generate coins requires significant computing power, in addition, over time, all the coins will be generated.

Myth # 11. Bitcoins are useless because they are based on unverified / unproven cryptography

The Sha-256 and ECDSA algorithms that are used in the #Bitcoin program are well-known industrial encryption standards.

Myth # 12. First bitcoin users are unfairly rewarded

The first users were rewarded for taking on a higher risk of losing their time and money.

From a more pragmatic point of view, the term "equity" is a conditional concept, making it unlikely to be agreed upon by a large number of people. Establishing "fairness" is not the goal of the Bitcoin project, as it would be simply impossible.

The vast majority of the 21 million bitcoins still haven't been distributed among people. If you start generating or purchasing bitcoins today, you can become one of the "first users"yourself.

Myth # 13. 21 million coins is not enough, it is not commensurate with the needs of mankind

In fact, the Bitcoin project will exist 2099999997690000 (just over two quadrillions) of the maximum possible indivisible units.

One bitcoin is 100 million (one hundred million) of them. In other words, each bitcoin can be divided into 10^8 parts.

If the value of bitcoins rises too much, then people for convenience can start working with smaller pieces such as Milli-bitcoins (mBTC) and micro-bitcoins (µbtc). However, it is possible and denomination with coefficients 1:10, 1: 100 and so on.

Myth # 14. Bitcoins are stored in wallet files, just copy the wallet and get more coins!

No, Your wallet file contains secret private keys that give you the right to dispose of your bitcoins. Imagine that you have a key issued by your Bank to manage your account. If you give it to someone else, it will not increase the funds in your Bank account. The funds will be spent either by You or by this third party.

Myth # 15. Lost coins cannot be replaced, which is bad

The minimum bitcoin unit is 0.00000001, so this is not a problem. If you lose coins, all other coins will rise in price a little. Consider this a donation to all other bitcoin users.

There is a related question (and the answer to it).

Why is there no mechanism to replace lost coins?
It is impossible to distinguish between the lost coin and the one that is simply not used at the moment and waiting in someone's purse of his time to be useful.

Myth # 16. It's a giant pyramid scheme.

In financial pyramids (see Ponzi scheme and MMM), the founders convince investors that they will be in profit. Bitcoins do not give such guarantees. There is no regulatory center, there is just a group of people who are building a new economy.

However, one should not confuse bitcoins by themselves with various projects on the Internet, which can accept bitcoins as a contribution and be financial pyramids.

Myth # 17. Limited emissions and lost coins generate a deflationary spiral

Both deflationary forces can manifest themselves, and economic factors such as hoarding counteract the human factor, which can reduce the chances of a deflationary spiral.

Myth # 18. The idea of bitcoin may not work because there is no way to control inflation

Inflation is simply an increase in prices over time, which is usually a consequence of currency depreciation. It is a function of supply and demand. Given the fact that the supply of bitcoins is fixed (due to the peculiarities of their issue), unlike Fiat money, the only way out of control of inflation is the disappearance of demand for bitcoins.

It should also be taken into account that bitcoins are a currency with a predictable decentralized issue. If demand falls to almost zero, then bitcoins will be doomed in any case. However, it is unlikely that this can actually happen.

The key point here is that bitcoins cannot be impaired by a sharp increase in inflation by any person, organization or government, since there is no way to increase the supply too much due to the peculiarities of the issue.

In fact, a more likely scenario is an increase in demand for bitcoins due to the growing popularity, which should lead to a constant increase in the exchange rate and deflation.

Myth # 19. Bitcoin community is anarchists, conspiracy theorists, supporters of the gold standard and geeks

Confirm. However, it is necessary to consider that it is only a part of all color of community.
https://preview.redd.it/qkk7hybryqg21.jpg?width=1980&format=pjpg&auto=webp&s=a373d5483cc87c1e2c651ff864fc324273fa3f08
submitted by trip2crypto to u/trip2crypto [link] [comments]

Dan Hedl Breaks Down Bitcoin.

1/ The Bitcoin (double) Standard
A deep dive into the cognitive dissonance of nocoiners, and the ridiculous double standard they have for Bitcoin. Thread 👇
2/ Manipulation
Over the last decade, banks globally have been fined with more than $200 billion in penalties, following investigations into manipulation of various markets/instruments: FX, metals, LIBOR, etc. Those cumulative fines are 2x the current total crypto market cap.
3/ Intrinsic Value
Complaining it has no intrinsic value when their primary currency has absolutely no intrinsic value.
“Bitcoin units have no intrinsic value… the U.S. dollar, the euro, and the Swiss franc, have no intrinsic value either.”
https://t.co/bssEa3U3S5
4/ Money Laundering
Approximately $2T a year globally is laundered, Americans spend $100B on drugs annually, Crypto market cap is $109B as of this tweet storm.
“Cryptocurrency [represent a] “low risk” for money laundering and terrorist financing activities... according to FATF
5/ Complexity
Consumers don’t understand how their existing financial system works, nor their cell phone, microwave, etc. There is minimal new training needed for them to be literate/enjoy basic interactions, just like any new technology in their life.
6/ Volatility
The only constant in markets is volatility. No one says “Gold isn’t a good SoV because the price fluctuates” but we hear that all the time with #bitcoin. What did you expect with a new emerging sound money? It certainly wasn’t going to be a linear price path.
7/ Energy Consumption
🚨 Electricity police! 🚨
Complaining about energy consumption, without first comparing it to the energy consumption of gold mining, the financial system, government, courts, military, selfies, or watching the Kardashians.
https://t.co/4ONTBlKRrA
8/ Monetary Policy
Worried about deflationary spirals when they most they’ve spent studying deflation is the 15 second dismissal argument from their econ 101 professor
9/ Control
Worries that it was created by an anonymous “hacker” vs highly flawed founding individuals of their government/financial system. Worries that no one “controls” the monetary policy vs a group of old white men they can’t even name
10/ FUD
What all of this FUD represents is the magnitude change Bitcoin brings. Any new technology evokes FUD, which is proportional to the impact it will have on the world. Humans don’t like change, FUD is a representation of the change that a new technology rings.
11/ History rhymes
When the bicycle debuted in 1800s, it was blamed for all sorts of problems—from turning people insane to destroying women’s morals
In the future, we’ll look at these double standards as we do now with bicycle objections: with laughter https://t.co/hTrn2xpnqx
submitted by Kashpantz to Bitcoin [link] [comments]

Of Wolves and Weasels - Day 187 - Guest Post: Confessions of a Bitcoiner

Hey all! GoodShibe... on Summer Vacation!
Please enjoy this post by Guest Writer Justlite and tip them well ;D)
Note: To tip them directly:
+dogetipbot @Justlite xxx doge verify
I've been part of this Dogecoin community since early January and I have to say the people here constantly amaze me. For me Dogecoin and this community is the future of cryptocurrency and I'm speaking as a long time Bitcoiner. Over a month ago I explained in a previous post why I believe Dogecoin price will rise again and correctly predicted Bitcoin to rise substantially shortly after my post against in the face of several counter arguments late last year. My thoughts have not changed on Dogecoin but I feel it's worth giving my experience on cryptocurrencies as a Bitcoiner in the early days of 2010-13 and how that compares with Dogecoin.
I bought Bitcoin and Litecoin in the early days and I can tell you the Bitcoin community back then was hopeful, cheerful and very welcoming...forgive us right now we are at the fighting stage with the established status quo wants to knock Bitcoin down.
In the early days we were only known for CPU/GPU mining discussions and tipping one another after each comment. In fact Bitcoin was only ever used to tip and trade but not to buy anything since we didn't have anything available for Bitcoin. We were very brave I mean wiring money to a company in Japan and getting these online things called Bitcoin which doesn't buy anything?!
Back then Bitcoin fans were seen as weird and Bitcoin as a complete joke we were idealist and we still are. Many of the people that fought us then were actually the libertarian precious metals community and because gold and silver were tangible and has been money for 5000 years Bitcoin wasn't and was barely a year old. It's hard to argue with them, after all some guy that called himself Satoshi Nakamoto, the Japanese equivalent of Jack Smith, created it but left after a year and no one saw how he looks like.
We could understand their concerns, a lot of early Bitcoiners like me also have gold and silver in the belief it will protect our wealth from the next financial collapse. But Bitcoin was created for this purpose too, no more will the 1% have economic power over the 99%, "1 CPU - 1 vote" said Satoshi in his white paper. We are also in the digital era and with all the success the internet is nowadays there still was no internet currency without the excessive charges of credit card companies.
Bitcoin changed all that it wasn't just an internet currency it was hoping to be money on every platform in every country, person to person, in at least 10 minutes between any country in any amount for free! Fast forward to present day and we are starting to see that.
Of course we have had many setbacks on the way, such as exchanges being hacked, wallets stolen. We weren't so security conscious back then and we learned the hard way.
Then we grew in price and popularity and quite recently the government fought us when our dark market Silk Road was shut down by the Feds. We have had 4 price bubbles a lot of sleepless nights I've personally ploughed in tens of thousands of dollars lost a lot of Bitcoins on the way (and also lost 15000 Litecoins) and forced to read articles with declarations of "Bitcoin is dead" after each major price drop.
Sound familiar?
"History doesn't repeat it self but it does rhyme" Mark Twain
That's all part of the growing pains of a disruptive idea.
Dogecoin, by comparison, has a whole economy after just 7 months of inception! It's remarkable as I am also a big Litecoin fan and even that community isn't as productive as this. People talk about Dogecoin's PR as it being behind its popularity but I honestly believe there is no intentional PR, I mean where is the PR team?
I believe it was a combination of a friendly meme encouraging positive kind people, a internet currency that's easily explainable to anyone, a very mineable coin using your PC/laptop so everyone can get involved in and great online platform such as Reddit to connect like minded users together and everything just snowballed from there.
Now Dogecoin is one of the most productive coins out there with several client and core devs, hundreds of retailers, apps, doge specific websites, blogs and charity fundraisers. That's why I believe Dogecoin is undervalued right now.
This doesn't mean you should put your life savings into Dogecoin or other cryptocurrencies as they are still a risk and early stage technology. Just buy with what you can afford to lose!
So where is Dogecoin heading? - The analysis
As long as we still use doge for goods and services and keep the positivity going then I can only see the price of doge going higher and reaching all time highs without the need for manipulation. Over what time frame?
Like Bitcoin it won't be overnight and granted there's no supply limit so it will never reach tens or hundreds of dollars but we don't need it to. I honestly want Dogecoin to be a currency and I personally like having whole doges. Ideally I would hope that 1 or even 10 doge will buy 1 loaf of bread or 1 litre of milk at my local grocery store some day.
Supply vs Demand
As I mentioned before the supply coming to the exchanges from multipools has been immense - it is thought about 160 million doge a day is being mined and sold on exchanges just from miners. This not only exerts a lot of selling pressure but it also encourages weak hands to sell forcing the price down further it's a downward spiral which we have been seeing.
Any other coin would have collapsed long ago but doge is no ordinary coin. After the next two halvings in October time it will be down to 40 million a day and low enough to allow for natural demand to outpace the supply causing the price to increase steadily which will give momentum and may then lead to a new all time high and the second bubble.
Network Hashrate
I'm of the belief that ASICs are a necessary evolution in cryptocurrencies by making a coin secure which will attract investment/adoption and environmentally friendly. With scrypt ASICs large and small coming online the network hashrate has more than doubled in the last 2 months from 40 GH/s to 90 GH/s and while we tend to see a jump in hashrate just before a halvening I attribute this rise to small miners also buying ASICs and a lack of more profitable altcoins. Again that's great for the stability of our coin and this will provide further confidence that Dogecoin is a good crypto to buy/adopt/invest.
Deflationary Inflation
Sounds confusing so let me explain unlike Bitcoin where there will only be 21 million coins mined, Dogecoin will reach 100 billion coins mined after block 600k and then see 5.25 billion coins mined each year forever which works out as 5.25% inflation in the first year and then 4.99% in the second year and so on.
While this may seem a lot I have come to the conclusion that it may be a blessing for Dogecoin as it is thought that 5 billion coins per year would be lost permanently anyway so this will 5.25billion coins would replace the lost coins. The extra 5.25 billion coins per year would be enough to incentivise miners to continue mining doge (which would hopefully be at a high enough price after the 600k block reward) and securing our network.
Because Bitcoin has a cap it is seen as a store of value like gold whereas Dogecoin has a infinite supply but at a predictably low yearly increase in fact from 2015 to 2020 Dogecoin will have less yearly inflation than Bitcoin. This can actually encourage people to treat Dogecoin as a true currency to buy everyday items with than as a store of value. I believe that is what Satoshi envisioned Bitcoin to be.
What are the whales doing?
The top 20 dogecoin addresses which account for 40% of all mined Dogecoin out there haven't sold any of their DOGEs.
The whales with large wallets have not sold their DOGE over the course of the last 4 months but the smaller wallets have! Why? The whales are happy to see their DOGE go to zero if they thought it was dying or they have been there and done that and know that perhaps Dogecoin is heading up? I can tell you I have no intention of selling my DOGEs as I believe interesting times are ahead.
The Bitcoin Effect
Bitcoin has paved the way for a crypto to go from $0.0001 to $1000+ and brought technological development, liberty and a sense of community all in a 5 year timespan.
While only $0.00023 Dogecoin has got an ecosystem, a following, funded several charity efforts and a burgeoning economy after only 7 months thanks in part to the network effect of Bitcoin and the rest down to you.
All I can say to you all is well done to all of you for being such a positive and productive community. Keep using Dogecoin and check the links at the side bar such as dogedoor.net and suchlist.com so that you can spend, buy, tip and mine doge and spread the word.
Now let's go to the moon!
TL;DR - Bitcoin had it's ups and downs and not short of haters over the years. Dogecoin is following the same path but in a shorter time frame. After the next 2 halvings Dogecoin price should be rising and adoption will speed up again which will make it a true currency so keep buying using and tipping doge wherever you can.
It's 8:09AM EST and we've found 87.24% of our initial 100 Billion DOGEs -- only 12.76% remains until our period of Hyper-inflation ends! Our Global Hashrate is up from ~76 to ~92 Gigahashes per second and our Difficulty is up from ~1196 to ~1351.
I Hope you enjoyed today's Guest Post by Justlite!
Note: To tip them directly:
+dogetipbot @Justlite xxx doge verify
GoodShibe
submitted by GoodShibe to dogecoin [link] [comments]

Inflation Vs. Deflation in relation to currencies and their history!

Let me start of by stating that I am a big believer that BTC will stand the test of time,however,the issue I am having is the ability to envision how that future will play out.Allow me to share my conundrum and I would appreciate any feedback or opinions on this matter.
When one looks at the history of money one can notice that every single one of them withoit exception is inflationary.From seashells to gold.The more valuable they become the more incemtives there are for people to either mine(in the case of gold) or simply provide resources to find them(in the case of seashells).Eventually,you will get to one of 2 points.Either an equilibrium between supply and demand is reached causing price stability or the currency proves itself to be unreliable due to high inflation(the supply of seashells is too unpredictable to be able to properly value it).Now comes Bitcoin where the laws of supply and demand is turned upside down.It doesnt matter how much demand there is,the supply will continuously decline as time goes by.The block rewards are set and it is expected to continue to decline.The Hashrate climbing only indicates the competition to mine and the rewards are set no matter what.So how can BTC ever reach a point of equilibrium in order for it to be a stable mean of transacting?I have seen articles with estimates of 1 to 100 million $,however,even at those levels,what can provide the counter weight to the deflationary character of BTC to prevent it from becoming so high that its use case becomes limited to people HODLING it forever.This argument can also apply to many other cryptocurrencies and I have yet to see a rational reasoning as to why BTC will not remain in a deflationary spiral forever.
submitted by Housam_jarrar to Bitcoin [link] [comments]

Great interview questions for bitcoin engineers

From here...
https://bitcointalk.org/index.php?topic=5006583.0
Questions. Chapter 1: Introduction 1. What are the main Bitcoin terms? 2. What is a Bitcoin address? 3. What is a Bitcoin transaction? 4. What is a Bitcoin block? 5. What is a Bitcoin blockchain? 6. What is a Bitcoin transaction ledger? 7. What is a Bitcoin system? What is a bitcoin (cryptocurrency)? How are they different? 8. What is a full Bitcoin stack? 9. What are two types of issues that digital money have to address? 10. What is a “double-spend” problem? 11. What is a distributed computing problem? What is the other name of this problem? 12. What is an election? 13. What is a consensus? 14. What is the name of the main algorithm that brings the bitcoin network to the consensus? 15. What are the different types of bitcoin clients? What is the difference between these clients? Which client offers the most flexibility? Which client offers the least flexibility? Which client is the most and least secure? 16. What is a bitcoin wallet? 17. What is a confirmed transaction and what is an unconfirmed transaction? Chapter 2: How Bitcoin works. 1. What is the best way to understand transactions in the Bitcoin network? 2. What is a transaction? What does it contain? What is the similarity of a transaction to a double entry ledger? What does input correspond to? What does output correspond to? 3. What are the typical transactions in the bitcoin network? Could you please name three of such transactions and give examples of each type of the transaction? 4. What is a QR and how it is used in the Bitcoin network? Are there different types of QRs? If so, what are the different types? Which type is more informational? What kind of information does it provide? 5. What is SPV? What does this procedure check and what type of clients of the Bitcoin network usually use this procedure? Chapter 3: The Bitcoin client. 1. How to download and install the Core Bitcoin client? 2. What is the best way to test the API available for the Core Bitcoin client without actually programming? What is the interface called? 3. What are the major areas of operations in the Bitcoin client? What can we do with the client? 4. What are the available operations for the Bitcoin addresses? 5. What are the available read operations for the Bitcoin transactions? How is a transaction encoded in the Bitcoin network? What is a raw transaction and what is a decoded transaction? 6. If I want to get information about a transaction that is not related to any address in my own wallet, do I need to change anything in the Bitcoin client configuration? If yes, which option do I need to modify? 7. What are the available read operation for the Bitcoin blocks? 8. What are the available operations for the creation of the transactions in the Bitcoin network? 9. How do you normally need to address the unspent output from the previous transaction in order to use it as an input for a new transaction? 10. What is the mandatory operation after creating a new transaction and before sending this new transaction to the network? What state does the wallet have to be in order to perform this operation? 11. Is the transaction ID immutable (TXID)? If not why, if yes, why and when? 12. What does signing a transaction mean? 13. What are the other options for Bitcoin clients? Are there any libraries that are written for some specific languages? What types of clients do these libraries implement? Chapter 4: Keys, Addresses and Wallets. 1. What is a PKC? When it was developed? What are the main mathematical foundations or functions that PKC is using? 2. What is ECC? Could you please provide the formula of the EC? What is the p and what is the Fp? What are the defined operations in ECC? What is a “point to infinity”? 3. What is a Bitcoin wallet? Does this wallet contain coins? If not, what does it contain then? 4. What is a BIP? What it is used for? 5. What is an encrypted private key? Why would we want to encrypt private keys? 6. What is a paper wallet? What kind of storage it is an example of? 7. What is a nondeterministic wallet? Is it a good wallet or a bad wallet? Could you justify? 8. What is a deterministic wallet? 9. What is an HD wallet? 10. How many keys are needed for one in and out transaction? What is a key pair? Which keys are in the key pair? 11. How many keys are stored in a wallet? 12. How does a public key gets created in Bitcoin? What is a “generator point”? 13. Could you please show on a picture how ECC multiplication is done? 14. How does a private key gets created in Bitcoin? What we should be aware of when creating a new private key? What is CSPRNG? What kind of input should this function be getting? 15. What is a WIF? What is WIF-Compressed? 16. What is Base58 encoding and what is Base58Check encoding? How it is different from Base64 encoding? Which characters are used in Base58? Why Base58Check was invented? What kind of problems does it solve? How is Base58Check encoding is created from Base58 encoding? 17. How can Bitcoin addresses be encoded? Which different encodings are used? Which key is used for the address creation? How is the address created? How this key is used and what is the used formula? 18. Can we visually distinguish between different keys in Base58Check format? If yes, how are they different from each other? What kind of prefixes are used? Could you please provide information about used prefixes for each type of the key? 19. What is an index in HD wallets? How many siblings can exist for a parent in an HD wallet? 20. What is the depth limitation for an HD wallet key hierarchy? 21. What are the main two advantages of an HD wallet comparing to the nondeterministic wallets? 22. What are the risks of non-hardened keys creation in an HD wallet? Could you please describe each of them? 23. What is a chain code in HD wallets? How many different chain code types there are? 24. What is the mnemonic code words? What are they used for? 25. What is a seed in an HD wallet? Is there any other name for it? 26. What is an extended key? How long is it and which parts does it consist of? 27. What is P2SH address? What function are P2SH addresses normally used for? Is that correct to call P2SH address a multi-sig address? Which BIP suggested using P2SH addresses? 28. What is a WIF-compressed private key? Is there such a thing as a compressed private key? Is there such a thing as a compressed public key? 29. What is a vanity address? 30. What is a vanity pool? 31. What is a P2PKH address? What is the prefix for the P2PKH address? 32. How does the owner prove that he is the real owner of some address? What does he have to represent to the network to prove the ownership? Why a perpetrator cannot copy this information and reuse it in the next transactions? 33. What is the rule for using funds that are secured by a cold storage wallet? How many times you can send to the address that is protected by the private key stored in a cold storage? How many times can you send funds from the address that is protected by the private key stored in a cold storage? Chapter 5: Transactions. 1. What is a transaction in Bitcoin? Why is it the most important operation in the Bitcoin ecosystem? 2. What is UTXO? What is one of the important rules of the UTXO? 3. Which language is used to write scripts in Bitcoin ecosystem? What are the features of this language? Which language does it look like? What are the limitations of this language? 4. What is the structure of a transaction? What does transaction consists of? 5. What are the standard transactions in Bitcoin? How many standard transactions there are (as of 2014)? 6. What is a “locking script” and what is an “unlocking script”? What is inside these scripts for a usual operation of P2PKH? What is a signature? Could you please describe in details how locking and unlocking scripts work and draw the necessary diagrams? 7. What is a transaction fee? What does the transaction fee depend on? 8. If you are manually creating transactions, what should you be very careful about? 9. Could you please provide a real life scenario when you might need a P2SH payment and operation? 10. What is the Script operation that is used to store in the blockchain some important data? Is it a good practice? Explain your answer. Chapter 6: The Bitcoin Network. 1. What is the network used in Bitcoin? What is it called? What is the abbreviation? What is the difference between this network architecture and the other network architectures? Could you please describe another network architecture and compare the Bitcoin network and the other network architectures? 2. What is a Bitcoin network? What is an extended Bitcoin network? What is the difference between those two networks? What are the other protocols used in the extended Bitcoin network? Why are these new protocols used? Can you give an example of one such protocol? What is it called? 3. What are the main functions of a bitcoin node? How many of them there are? Could you please name and describe each of them? Which functions are mandatory? 4. What is a full node in the Bitcoin network? What does it do and how does it differ from the other nodes? 5. What is a lightweight node in the Bitcoin network? What is another name of the lightweight node? How lightweight node checks transactions? 6. What are the main problems in the SPV process? What does SPV stand for? How does SPV work and what does it rely on? 7. What is a Sybil attack? 8. What is a transaction pool? Where are transaction pools stored in a Bitcoin network client? What are the two different transaction pools usually available in implementations? 9. What is the main Bitcoin client used in the network? What is the official name of the client and what is an unofficial name of this client? 10. What is UTXO pool? Do all clients keep this pool? Where is it stored? How does it differ from the transaction pools? 11. What is a Bloom filter? Why are Bloom filters used in the Bitcoin network? Were they originally used in the initial SW or were they introduced with a specific BIP? Chapter 7: The Blockchain. 1. What is a blockchain? 2. What is a block hash? Is it really a block hash or is it a hash of something else? 3. What is included in the block? What kind of information? 4. How many parents can one block have? 5. How many children can one block have? Is it a temporary or permanent state of the blockchain? What is the name of this state of the blockchain? 6. What is a Merkle tree? Why does Bitcoin network use Merkle trees? What is the advantage of using Merkle trees? What is the other name of the Merkle tree? What kind of form must this tree have? 7. How are blocks identified in the blockchain? What are the two commonly used identities? Are these identities stored in the blockchain? 8. What is the average size of one transaction? How many transactions are normally in one block? What is the size of a block header? 9. What kind of information do SPV nodes download? How much space do they save by that comparing to what they would need if they had to download the whole blockchain? 10. What is a usual representation of a blockchain? 11. What is a genesis block? Do clients download this block and if yes – where from? What is the number of the genesis block? 12. What is a Merkle root? What is a Merkle path? Chapter 8: Mining and Consensus. 1. What is the main purpose of mining? Is it to get the new coins for the miners? Alternatively, it is something else? Is mining the right or good term to describe the process? 2. What is PoW algorithm? 3. What are the two main incentives for miners to participate in the Bitcoin network? What is the current main incentive and will it be changed in the future? 4. Is the money supply in the Bitcoin network diminishing? If so, what is the diminishing rate? What was the original Bitcoin supply rate and how is it changed over time? Is the diminishing rate time related or rather block related? 5. What is the maximum number of Bitcoins available in the network after all the Bitcoins have been mined? When will all the Bitcoins be mined? 6. What is a decentralized consensus? What is a usual setup to clear transactions? What does a clearinghouse do? 7. What is deflationary money? Are they good or bad usually? What is the bad example of deflationary spiral? 8. What is an emergent consensus? What is the feature of emergent consensus? How does it differ from a usual consensus? What are the main processes out of which this emergent decentralized consensus becomes true? 9. Could you please describe the process of Independent Transaction Verification? What is the list of criteria that are checked against a newly received transaction? Where can these rules be checked? Can they be changed over time? If yes, why would they be changed? 10. Does mining node have to be a full node? If not, what are the other options for a node that is not full to be a mining node? 11. What is a candidate block? What types of nodes in the Bitcoin network create candidate blocks? What is a memory pool? Is there any other name of the memory pool? What are the transactions kept in this memory pool? 12. How are transactions added to the candidate block? How does a candidate block become a valid block? 13. What is the minimum value in the Bitcoin network? What is it called and what is the value? Are there any alternative names? 14. What is the age of the UTXO? 15. How is the priority of a transaction is calculated? What is the exact formula? What are the units of each contributing member? When is a transaction considered to be old? Can low priority transactions carry a zero fee? Will they be processed in this case? 16. How much size in each block is reserved for high priority transactions? How are transactions prioritized for the remaining space? 17. Do transactions expire in Bitcoin? Can transactions disappear in the Bitcoin network? If yes, could you please describe such scenario? 18. What is a generation transaction? Does it have another name? If it does, what is the other name of the transaction? What is the position of the generation transaction in the block? Does it have an input? Is the input usual UTXO? If not – what is the input called? How many outputs there are for the generation transaction? 19. What is the Coinbase data? What is it currently used for? 20. What is little-endian and big-endian formats? Could you please give an example of both? 21. How is the block header constructed? Which fields are calculated and added to the block header? Could you please describe the steps for calculation of the block header fields? 22. What is a mantissa-exponent encoding? How is this encoding used in the Bitcoin network? What is the difficulty target? What is the actual process of mining? What kind of mathematical calculation is executed to conduct mining? 23. Which hash function is used in the Bitcoin mining process? 24. Could you describe the PoW algorithm? What features of the hash function does it depend on? What is the other name of the hash function? What is a nonce? How can we increase the difficulty of the PoW calculation? What do we need to change and how do we need to change this parameter? 25. What is difficulty bits notation? Could you please describe in details how it works? What is the formula for the difficulty notation? 26. Why is difficulty adjustable? Who adjusts it and how exactly? Where is the adjustment made? On which node? How many blocks are taken into consideration to predict the next block issuance rate? What is the change limitation? Does the target difficulty depend on the number of transactions? 27. How is a new block propagated in the network? What kind of verification does each node do? What is the list of criteria for the new block? What kind of process ensures that the miners do not cheat? 28. How does a process of block assembly work? What are the sets of blocks each full node have? Could you please describe these sets of blocks? 29. What is a secondary chain? What does each node do to check this chain and perhaps to promote it to the primary chain? Could you please describe an example when a fork occurs and what happens? 30. How quickly forks are resolved most of the time? Within how many new block periods? 31. Why the next block is generated within 10 minutes from the previous? What is this compromise about? What do designers of the Bitcoin network thought about when implementing this rule? 32. What is a hashing race? How did Bitcoin hashing capacity has changed within years from inception? What kind of hardware devices were initially used and how did the HW utilization evolved? What kind of hardware is used now to do mining? How has the network difficulty improved? 33. What is the size of the field that stores nonce in the block header? What is the limitation and problem of the nonce? Why was an extra nonce created? Was there any intermediate solution? If yes, what was the solution? What are the limitations of the solution? 34. What is the exact solution for the extra nonce? Where does the new space come from? How much space is currently used and what is the range of the extra nonce now? 35. What is a mining pool? Why was it created? How are normally such pools operated? Do they pay regularly to the pool participants? Where are newly created Bitcoins distributed? To which address? How do mining pools make money? How do the mining pools calculate the participation? How are shares earned calculated? 36. What is a managed pool? How is the owner of the pool called? Do pool members need to run full nodes? Explain why or why not? 37. What are the most famous protocols used to coordinate pool activities? What is a block template? How is it used? 38. What is the limitation of a centralized pool? Is there any alternative? If yes, what is it? How is it called? How does it work? 39. What is a consensus attack? What is the main assumption of the Bitcoin network? What can be the targets of the consensus attacks? What can these attacks do and what they cannot do? How much overall capacity of the network do you have to control to exercise a consensus attack? Chapter 9: Alternative Chains, Currencies and Applications. 1. What is the name of alternative coins? Are they built on top of the Bitcoin network? What are examples of them? Is there any alternative approach? Could you please describe some alternatives? 2. Are there any alternatives to the PoW algorithm? If yes – what are the alternatives? Could you please name two or three? 3. What is the operation of the Script language that is used to store a metadata in Bitcoin blockchain? 4. What is a coloured coin? Could you please explain how it is created and how it works? Do you need any special SW to manage coloured coins? 5. What is the difference between alt coins and alt chains? What is a Litecoin? What are the major differences between the Bitcoin and Litecoin? Why so many alt coins have been created? What are they usually based on? 6. What is Scrypt? Where is it used and how is it different from the original algorithm from which it has been created? 7. What is a demurrage currency? Could you please give an example of one blockchain and crypto currency that is demurrage? 8. What is a good example of an alternative algorithm to PoW? What is it called and how is it different from the PoW? Why the alternatives to Bitcoin PoW have been created? What is the main reason for this? What is dual-purpose PoW algorithms? Why have they been created? 9. Is Bitcoin “anonymous” currency? Is it difficult to trace transactions and understand someone’s spending habits? 10. What is Ethereum? What kind of currency does it use? What is the difference from Bitcoin? Chapter 10: Bitcoin security. 1. What is the main approach of Bitcoin security? 2. What are two common mistakes made by newcomers to the world of Bitcoin? 3. What is a root of trust in traditional security settings? What is a root of trust in Bitcoin network? How should you assess security of your system? 4. What is a cold storage and paper wallet? 5. What is a hardware wallet? How is it better than storing private keys on your computer or your smart phone?
submitted by 5tu to BitcoinTechnology [link] [comments]

Is nobody really worried about long term negative affects of current Bitcoin deflationary cycle?

In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it.
Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising.
The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed.
https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a
https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l
It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy.
The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play.
And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit.
I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them.
Thoughts, comments? Feel free to tell me why I'm wrong.
submitted by AnythingForSuccess to Bitcoin [link] [comments]

Bitcoin is in a deflationary spiral and its bad for long term

In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it.
Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising.
The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed.
https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a
https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l
It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy.
The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play.
And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit.
I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them.
Thoughts, comments? Feel free to tell me why I'm wrong.
submitted by AnythingForSuccess to BitcoinMarkets [link] [comments]

Convince me that deflation in this scenario isnot the issue I think it is

Just read the "Common Myths" section before posting this and was impressed at how terrible the answer was: "As deflationary forces may apply, economic factors such as hoarding are offset by human factors that may lessen the chances that a Deflationary spiral will occur."
You have to do better than that at tackling probably the #1 issue with Bitcoins.
This is the most likely scenario that I see happening: Bitcoin becomes a widely used currency/commodity for online trade with a couple of million adopters. During the years to come there is an ever slowing pace of mining along with a constant drop-off in coins as accidents/server crashes/forgotten stashes takes its toll on the total availible ammount. This WILL lead to an ever increasing value as long as people use BTC. (No-one is arguing this and the solution touted is that BTC can be divided into ever smaller part, I.E deflation) Now the people that get into Bitcoins understand how the system works and you guys all know that it WILL increase in value. Why would you ever spend the BTC that you have accumulated? Why not use your USD´s that is doomed to always loose it´s value?
This leads to a clearing out of the user base I believe: The only people selling BTC are those who treat it as a commodity, an investment. They feel that it´s time to cash in the profits. Eventually the only people holding bitcoins are those who still believe in it´s value but at the same time less and less actual trade is taking place. You can allready see this happening; the ammount of people selling is slowing down (selling btw is the same as trading). Also, those who actually purchase goods and services with bitcoins are (I believe) those who have made a killing by now and feel good about the unrealized profits so they splurge on consumption.
In the end I think Bitcoin will be traded as a commodity with nothing to back up its value other than the belief in the system. Fewer and fewer will actually use their Bitcoins for trade thus further debasing it as an acceptable payment (at the moment more and more are accepting it as payment because of the increase in popularity. This will likely continue for a while but once the retailors realize that the number of BTC transactions is drying up this trend will reverse). The deflation spiral will keep prices going ever higher until that one day when you realize that everyone was in it for the long run but suddenly it no longer holds any use. When that day come you are not looking at a 50% drop, that day is the end of Bitcoin.
EDIT: Aaaand I fucked up the title
EDIT #2: This is going better than expected, I have actually gotten some good answers and I will think about them for a while tonight and answer in a few hours (also, I got a big finals two days from now that needs my immidiate attention.) Ferretinjapan gave the most thought through answer yet and It might be beyond me to analyse what he says to it´s full extent but I will do my absolute best. Either way, ferretinjapan´s should write the answer to the deflation question in the "Common myths" section as he has a way better grasp at this than whoever wrote "...are offset by human factors that may lessen the chances that a Deflationary spiral will occur.". That argument is just... unsubstansiated.
Final thought before I take a break here; Don´t downvote this thread as a whole. Downvote my answers if anything but you guys need to allow a serious discussion about this issue because it is a big one and this subreddit do hold some weight in the debate. Well thought out answers here can ripple out and convince more people to join in on BTC, just shunning me out as someone who doesn´t understand BTC and markets is not in your interest.
EDIT #3: Nooo! All my karma! My old stuff is getting downvoted to nothing... How sad :)
EDIT #4: Interesting read
submitted by oskarege to Bitcoin [link] [comments]

Is nobody really worried about long term negative affects of current Bitcoin deflationary cycle?

In lights of the recent events of the high Bitcoin/USD exchange rates and the absurdly high numbers in case of of trading volumes, mainstream media is picking up on Bitcoin and the bag holders obviously love it.
Then earlier today a filthy statist wrote a blog post about price manipulations on Bitfinex and possibly GDAX. Which got me interested in the actual numbers of Bitcoin traded. It took me a bit longer than expected to get the raw number of Bitcoins traded per day because the main Bitcoin statistics websites only list the volume in US-Dollar. What I found was very surprising.
The actual number of traded Bitcoins seems to be drastically lower than in the end of 2016 – even a magnitude lower. While the last few weeks were pretty stable, 2016 was a trading fest in terms of raw Bitcoins moved. It seems to be correlated with the price, because just as Bitcoin broke through the $1,000 mark the volume collapsed.
https://data.bitcoinity.org/markets/volume/2y?c=e&r=week&t=a
https://data.bitcoinity.org/markets/price/2y/USD?c=e&r=week&t=l
It means we have a deflationary spiral. As the prices of goods and services decrease relative to bitcoin. IE 1 BTC =1 widget a year ago, .5 BTC =1 widget today, people tend to start hoarding. Why cash out for a Ford Focus today when I can get a Ferrari tomorrow? Once that happens it starts this self-fulfilling prophecy, and this is what you get. An economy whose "currency" is completely detached from the underlying economy.
The problem is in this ecosystem is that you have this inflationary period. New coins are constantly coming into creation, those coins have to be sold since mining is a zero sum endeavour, so that is acting against the price. However right now the demand is outpacing the supply, because like I said above, everyone is hoarding. As price increases the quantities demanded start to decrease, in this case the quantity decrease is more of a restriction on how much disposable income bitcoiners can throw at it. Eventually bitcoiners will be priced out from purchasing all but the smallest fractions of coins, but the supply will continue to increase consistently. Eventually this will push the price down and people will start selling to lock in gains. Now you have too much supply and not enough demand, so down we go. Money on the gold standard did this exact same boom/doom pattern. This is where the huge crash will come into play.
And all of this assumes the number is not just some bullshit made up number. I'm not confident that the price is not manipulated by exchanges et al. So we could have a price that is total fucking bullshit.
I do find it rather hilarious for bitcoiners to hand wave off deflation because "people don't do that, they have to eat", and yet can not see the bitter irony starring right back at them.
Thoughts, comments? Feel free to tell me why I'm wrong.
submitted by AnythingForSuccess to btc [link] [comments]

FAQ about Bitcoin(2)

FAQ about Bitcoin(2)
www.fmz.com
Legal
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions (such as Argentina and Russia) severely restrict or ban foreign currencies. Other jurisdictions (such as Thailand) may limit the licensing of certain entities such as Bitcoin exchanges.
Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system. For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Is Bitcoin useful for illegal activities?
Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.
Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures.
Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established. The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted. In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.
Can Bitcoin be regulated? FMZ
The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions. However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world.
It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country. Bitcoin use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban Bitcoin would prevent domestic businesses and markets from developing, shifting innovation to other countries. The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.
What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
What about Bitcoin and consumer protection?
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in a recourse against businesses with fraudulent practices.
It is also worth noting that while merchants usually depend on their public reputation to remain in business and pay their employees, they don't have access to the same level of information when dealing with new consumers. The way Bitcoin works allows both individuals and businesses to be protected against fraudulent chargebacks while giving the choice to the consumer to ask for more protection when they are not willing to trust a particular merchant.
Economy
How are bitcoins created? FMZ
New bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Why do bitcoins have value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
What determines bitcoin’s price?
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
Bitcoin price over time:

www.fmz.com
Can bitcoins become worthless?
Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing currencies, political issues and so on. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
Is Bitcoin a bubble? FMZ
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
Is Bitcoin a Ponzi scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.
Doesn't Bitcoin unfairly benefit early adopters?
Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they became valuable or bought only small amounts and didn't make huge gains. There is no guarantee that the price of a bitcoin will increase or drop. This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Bitcoin is still in its infancy, and it has been designed with a very long-term view; it is hard to imagine how it could be less biased towards early adopters, and today's users may or may not be the early adopters of tomorrow.
Won't the finite amount of bitcoins be a limitation?
Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases.
Won't Bitcoin fall in a deflationary spiral?FMZ
The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression.
Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same.
Isn't speculation and volatility a problem for Bitcoin?
This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability.
Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited.
What if someone bought up all the existing bitcoins? FMZ
Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
What if someone creates a better digital currency?
That can happen. For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
to be continued. FMZ
submitted by Ruby-Yao to u/Ruby-Yao [link] [comments]

FAQ about Bitcoin(2)

FAQ about Bitcoin(2)
www.fmz.com
Legal
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions (such as Argentina and Russia) severely restrict or ban foreign currencies. Other jurisdictions (such as Thailand) may limit the licensing of certain entities such as Bitcoin exchanges.
Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system. For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Is Bitcoin useful for illegal activities?
Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.
Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures.
Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established. The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted. In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.
Can Bitcoin be regulated? FMZ
The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions. However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world.
It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country. Bitcoin use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban Bitcoin would prevent domestic businesses and markets from developing, shifting innovation to other countries. The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.
What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
What about Bitcoin and consumer protection?
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in a recourse against businesses with fraudulent practices.
It is also worth noting that while merchants usually depend on their public reputation to remain in business and pay their employees, they don't have access to the same level of information when dealing with new consumers. The way Bitcoin works allows both individuals and businesses to be protected against fraudulent chargebacks while giving the choice to the consumer to ask for more protection when they are not willing to trust a particular merchant.
Economy
How are bitcoins created? FMZ
New bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Why do bitcoins have value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
What determines bitcoin’s price?
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
Bitcoin price over time:
www.fmz.com
Can bitcoins become worthless?
Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing currencies, political issues and so on. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
Is Bitcoin a bubble? FMZ
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
Is Bitcoin a Ponzi scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.
Doesn't Bitcoin unfairly benefit early adopters?
Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they became valuable or bought only small amounts and didn't make huge gains. There is no guarantee that the price of a bitcoin will increase or drop. This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Bitcoin is still in its infancy, and it has been designed with a very long-term view; it is hard to imagine how it could be less biased towards early adopters, and today's users may or may not be the early adopters of tomorrow.
Won't the finite amount of bitcoins be a limitation?
Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases.
Won't Bitcoin fall in a deflationary spiral?FMZ
The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression.
Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same.
Isn't speculation and volatility a problem for Bitcoin?
This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability.
Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited.
What if someone bought up all the existing bitcoins? FMZ
Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
What if someone creates a better digital currency?
That can happen. For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
to be continued. FMZ
submitted by FmzQuant to u/FmzQuant [link] [comments]

FAQ about Bitcoin(2)

FAQ about Bitcoin(2)
www.fmz.com
Legal
Is Bitcoin legal?
To the best of our knowledge, Bitcoin has not been made illegal by legislation in most jurisdictions. However, some jurisdictions (such as Argentina and Russia) severely restrict or ban foreign currencies. Other jurisdictions (such as Thailand) may limit the licensing of certain entities such as Bitcoin exchanges.
Regulators from various jurisdictions are taking steps to provide individuals and businesses with rules on how to integrate this new technology with the formal, regulated financial system. For example, the Financial Crimes Enforcement Network (FinCEN), a bureau in the United States Treasury Department, issued non-binding guidance on how it characterizes certain activities involving virtual currencies.
Is Bitcoin useful for illegal activities?
Bitcoin is money, and money has always been used both for legal and illegal purposes. Cash, credit cards and current banking systems widely surpass Bitcoin in terms of their use to finance crime. Bitcoin can bring significant innovation in payment systems and the benefits of such innovation are often considered to be far beyond their potential drawbacks.
Bitcoin is designed to be a huge step forward in making money more secure and could also act as a significant protection against many forms of financial crime. For instance, bitcoins are completely impossible to counterfeit. Users are in full control of their payments and cannot receive unapproved charges such as with credit card fraud. Bitcoin transactions are irreversible and immune to fraudulent chargebacks. Bitcoin allows money to be secured against theft and loss using very strong and useful mechanisms such as backups, encryption, and multiple signatures.
Some concerns have been raised that Bitcoin could be more attractive to criminals because it can be used to make private and irreversible payments. However, these features already exist with cash and wire transfer, which are widely used and well-established. The use of Bitcoin will undoubtedly be subjected to similar regulations that are already in place inside existing financial systems, and Bitcoin is not likely to prevent criminal investigations from being conducted. In general, it is common for important breakthroughs to be perceived as being controversial before their benefits are well understood. The Internet is a good example among many others to illustrate this.
Can Bitcoin be regulated? FMZ
The Bitcoin protocol itself cannot be modified without the cooperation of nearly all its users, who choose what software they use. Attempting to assign special rights to a local authority in the rules of the global Bitcoin network is not a practical possibility. Any rich organization could choose to invest in mining hardware to control half of the computing power of the network and become able to block or reverse recent transactions. However, there is no guarantee that they could retain this power since this requires to invest as much than all other miners in the world.
It is however possible to regulate the use of Bitcoin in a similar way to any other instrument. Just like the dollar, Bitcoin can be used for a wide variety of purposes, some of which can be considered legitimate or not as per each jurisdiction's laws. In this regard, Bitcoin is no different than any other tool or resource and can be subjected to different regulations in each country. Bitcoin use could also be made difficult by restrictive regulations, in which case it is hard to determine what percentage of users would keep using the technology. A government that chooses to ban Bitcoin would prevent domestic businesses and markets from developing, shifting innovation to other countries. The challenge for regulators, as always, is to develop efficient solutions while not impairing the growth of new emerging markets and businesses.
What about Bitcoin and taxes?
Bitcoin is not a fiat currency with legal tender status in any jurisdiction, but often tax liability accrues regardless of the medium used. There is a wide variety of legislation in many different jurisdictions which could cause income, sales, payroll, capital gains, or some other form of tax liability to arise with Bitcoin.
What about Bitcoin and consumer protection?
Bitcoin is freeing people to transact on their own terms. Each user can send and receive payments in a similar way to cash but they can also take part in more complex contracts. Multiple signatures allow a transaction to be accepted by the network only if a certain number of a defined group of persons agree to sign the transaction. This allows innovative dispute mediation services to be developed in the future. Such services could allow a third party to approve or reject a transaction in case of disagreement between the other parties without having control on their money. As opposed to cash and other payment methods, Bitcoin always leaves a public proof that a transaction did take place, which can potentially be used in a recourse against businesses with fraudulent practices.
It is also worth noting that while merchants usually depend on their public reputation to remain in business and pay their employees, they don't have access to the same level of information when dealing with new consumers. The way Bitcoin works allows both individuals and businesses to be protected against fraudulent chargebacks while giving the choice to the consumer to ask for more protection when they are not willing to trust a particular merchant.
Economy
How are bitcoins created? FMZ
New bitcoins are generated by a competitive and decentralized process called "mining". This process involves that individuals are rewarded by the network for their services. Bitcoin miners are processing transactions and securing the network using specialized hardware and are collecting new bitcoins in exchange.
The Bitcoin protocol is designed in such a way that new bitcoins are created at a fixed rate. This makes Bitcoin mining a very competitive business. When more miners join the network, it becomes increasingly difficult to make a profit and miners must seek efficiency to cut their operating costs. No central authority or developer has any power to control or manipulate the system to increase their profits. Every Bitcoin node in the world will reject anything that does not comply with the rules it expects the system to follow.
Bitcoins are created at a decreasing and predictable rate. The number of new bitcoins created each year is automatically halved over time until bitcoin issuance halts completely with a total of 21 million bitcoins in existence. At this point, Bitcoin miners will probably be supported exclusively by numerous small transaction fees.
Why do bitcoins have value?
Bitcoins have value because they are useful as a form of money. Bitcoin has the characteristics of money (durability, portability, fungibility, scarcity, divisibility, and recognizability) based on the properties of mathematics rather than relying on physical properties (like gold and silver) or trust in central authorities (like fiat currencies). In short, Bitcoin is backed by mathematics. With these attributes, all that is required for a form of money to hold value is trust and adoption. In the case of Bitcoin, this can be measured by its growing base of users, merchants, and startups. As with all currency, bitcoin's value comes only and directly from people willing to accept them as payment.
What determines bitcoin’s price?
The price of a bitcoin is determined by supply and demand. When demand for bitcoins increases, the price increases, and when demand falls, the price falls. There is only a limited number of bitcoins in circulation and new bitcoins are created at a predictable and decreasing rate, which means that demand must follow this level of inflation to keep the price stable. Because Bitcoin is still a relatively small market compared to what it could be, it doesn't take significant amounts of money to move the market price up or down, and thus the price of a bitcoin is still very volatile.
Bitcoin price over time:

Can bitcoins become worthless?
Yes. History is littered with currencies that failed and are no longer used, such as the German Mark during the Weimar Republic and, more recently, the Zimbabwean dollar. Although previous currency failures were typically due to hyperinflation of a kind that Bitcoin makes impossible, there is always potential for technical failures, competing currencies, political issues and so on. As a basic rule of thumb, no currency should be considered absolutely safe from failures or hard times. Bitcoin has proven reliable for years since its inception and there is a lot of potential for Bitcoin to continue to grow. However, no one is in a position to predict what the future will be for Bitcoin.
Is Bitcoin a bubble? FMZ
A fast rise in price does not constitute a bubble. An artificial over-valuation that will lead to a sudden downward correction constitutes a bubble. Choices based on individual human action by hundreds of thousands of market participants is the cause for bitcoin's price to fluctuate as the market seeks price discovery. Reasons for changes in sentiment may include a loss of confidence in Bitcoin, a large difference between value and price not based on the fundamentals of the Bitcoin economy, increased press coverage stimulating speculative demand, fear of uncertainty, and old-fashioned irrational exuberance and greed.
Is Bitcoin a Ponzi scheme?
A Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money, or the money paid by subsequent investors, instead of from profit earned by the individuals running the business. Ponzi schemes are designed to collapse at the expense of the last investors when there is not enough new participants.
Bitcoin is a free software project with no central authority. Consequently, no one is in a position to make fraudulent representations about investment returns. Like other major currencies such as gold, United States dollar, euro, yen, etc. there is no guaranteed purchasing power and the exchange rate floats freely. This leads to volatility where owners of bitcoins can unpredictably make or lose money. Beyond speculation, Bitcoin is also a payment system with useful and competitive attributes that are being used by thousands of users and businesses.
Doesn't Bitcoin unfairly benefit early adopters?
Some early adopters have large numbers of bitcoins because they took risks and invested time and resources in an unproven technology that was hardly used by anyone and that was much harder to secure properly. Many early adopters spent large numbers of bitcoins quite a few times before they became valuable or bought only small amounts and didn't make huge gains. There is no guarantee that the price of a bitcoin will increase or drop. This is very similar to investing in an early startup that can either gain value through its usefulness and popularity, or just never break through. Bitcoin is still in its infancy, and it has been designed with a very long-term view; it is hard to imagine how it could be less biased towards early adopters, and today's users may or may not be the early adopters of tomorrow.
Won't the finite amount of bitcoins be a limitation?
Bitcoin is unique in that only 21 million bitcoins will ever be created. However, this will never be a limitation because transactions can be denominated in smaller sub-units of a bitcoin, such as bits - there are 1,000,000 bits in 1 bitcoin. Bitcoins can be divided up to 8 decimal places (0.000 000 01) and potentially even smaller units if that is ever required in the future as the average transaction size decreases.
Won't Bitcoin fall in a deflationary spiral?FMZ
The deflationary spiral theory says that if prices are expected to fall, people will move purchases into the future in order to benefit from the lower prices. That fall in demand will in turn cause merchants to lower their prices to try and stimulate demand, making the problem worse and leading to an economic depression.
Although this theory is a popular way to justify inflation amongst central bankers, it does not appear to always hold true and is considered controversial amongst economists. Consumer electronics is one example of a market where prices constantly fall but which is not in depression. Similarly, the value of bitcoins has risen over time and yet the size of the Bitcoin economy has also grown dramatically along with it. Because both the value of the currency and the size of its economy started at zero in 2009, Bitcoin is a counterexample to the theory showing that it must sometimes be wrong.
Notwithstanding this, Bitcoin is not designed to be a deflationary currency. It is more accurate to say Bitcoin is intended to inflate in its early years, and become stable in its later years. The only time the quantity of bitcoins in circulation will drop is if people carelessly lose their wallets by failing to make backups. With a stable monetary base and a stable economy, the value of the currency should remain the same.
Isn't speculation and volatility a problem for Bitcoin?
This is a chicken and egg situation. For bitcoin's price to stabilize, a large scale economy needs to develop with more businesses and users. For a large scale economy to develop, businesses and users will seek for price stability.
Fortunately, volatility does not affect the main benefits of Bitcoin as a payment system to transfer money from point A to point B. It is possible for businesses to convert bitcoin payments to their local currency instantly, allowing them to profit from the advantages of Bitcoin without being subjected to price fluctuations. Since Bitcoin offers many useful and unique features and properties, many users choose to use Bitcoin. With such solutions and incentives, it is possible that Bitcoin will mature and develop to a degree where price volatility will become limited.
What if someone bought up all the existing bitcoins? FMZ
Only a fraction of bitcoins issued to date are found on the exchange markets for sale. Bitcoin markets are competitive, meaning the price of a bitcoin will rise or fall depending on supply and demand. Additionally, new bitcoins will continue to be issued for decades to come. Therefore even the most determined buyer could not buy all the bitcoins in existence. This situation isn't to suggest, however, that the markets aren't vulnerable to price manipulation; it still doesn't take significant amounts of money to move the market price up or down, and thus Bitcoin remains a volatile asset thus far.
What if someone creates a better digital currency?
That can happen. For now, Bitcoin remains by far the most popular decentralized virtual currency, but there can be no guarantee that it will retain that position. There is already a set of alternative currencies inspired by Bitcoin. It is however probably correct to assume that significant improvements would be required for a new currency to overtake Bitcoin in terms of established market, even though this remains unpredictable. Bitcoin could also conceivably adopt improvements of a competing currency so long as it doesn't change fundamental parts of the protocol.
to be continued. FMZ
submitted by FmzQuant to u/FmzQuant [link] [comments]

Why won't a deflationary spiral occur with Bitcoins?

I'm aware of this argument, but it's not very persuasive. They argue that because the supply of Bitcoins isn't fixed, that it can't occur. However the supply of gold isn't fixed either, people are constantly mining gold, and the more valuable it becomes, the more they'll mine it - just like Bitcoins. Bitcoins and gold are very similar, and I suspect equally vulnerable to hoarding.
Even if a deflationary spiral doesn't occur while Bitcoins can still be mined, surely it will occur once they can't be mined any more in 2140? Won't the value appreciate as more and more Bitcoins are lost, increasing the value of those that remain?
In short: Why is Bitcoin's specific mechanism of adding new Bitcoins to the available pool the right mechanism?
submitted by sanity to Bitcoin [link] [comments]

BITCOIN INDIKATOR SAGT 43% ANSTIEG VORAUS / BCH HALVING Bitcoin Q&A: The Switzerland of Currencies Bitcoin & Gold gegen die Krise - Das Halving, Hoffnung für IOTA, Ripple & die Sammelklagen CryptoHumor - YouTube Khan Academy - YouTube

Among the mainstream financial media and economic pundits there is a great deal of skepticism about Bitcoin. Critics have come up with all kinds of reasons why they believe Bitcoin fail. A particular argument you hear repeated ad nauseum is that Bitcoin's limited supply will produce a deflationary spiral. Now there are two forms of… As a result, Bitcoin mining becomes more expensive, and miners get less coins as Bitcoin mining progresses, so mining will only continue if the bitcoin rewards are worth more than the cost of the electricity that the Bitcoin mining process requires. So deflation is literally hard-wired into the Bitcoin protocol. Furthermore, contrary to mainstream economic arguments, deflation is actually a ... Theoretically, those who argue that bitcoin will go down the deflationary spiral, believe that with the number of bitcoins already fixed, its value over a period of time will be proportional to its demand within the same timeframe. With everyone believing it, they will end up hoarding bitcoin expecting the value to rise in the future. Mass hoarding will take bitcoin out of circulation leading ... After all, the new Bitcoins being minted are being distributed proportionally to the mining power these pools are able to contribute to the total network hashrate. Concentration of wealth in a deflationary system can lead to its collapse. For example, one risk in a deflationary currency system is an effect called the deflationary spiral. Isn't Bitcoin mining a waste of energy? How do you obtain Bitcoin? What is bitcoin mining and the role of the miners? How do I get my own bitcoin wallet and bitcoin address? See more Won't bitcoin fall in a deflationary spiral? Bitkub Support Updated August 09, 2019 11:23. Follow. Deflationary spiral occurs when the value of currency is relatively decreasing and people have an incentive to ...

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BITCOIN INDIKATOR SAGT 43% ANSTIEG VORAUS / BCH HALVING

Join Brett and CH as they discuss the third bitcoin halving that took place at block 630,000 on May 11th, 2020 which has now brought the block subsidy down to 6.25 per block from 12.5. This commerical is meant to rile up gold investors and for good reason as Bitcoin in most respects is better than gold as money and as an investment vehicle. If doesn't have the beautiful lustre ... Initially there wasn't enough demand in the economy, but as the reward diminishes over time, bitcoin will have a deflationary monetary policy and simulate a scarce resource like gold. But you can ... Bitcoin Power Hashing Solutions Introduction in English +91 9999897808 Power Hashing Solutions Pvt. Ltd. are a team of crypto currency experts, entrepreneurs... Ich habe nun damit angefangen, mich mit Bitcoin auseinander zu setzen und möchte meine Erfahrungen mit Dir teilen! Im heutigen Video sprechen wir über das Goldene Kreuz und warum diese Indikator ...

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