Well it took awhile but I finally figured out the core architecture of Bitcoin. It’s a pyramid scheme but like no other, highly complex. It is designed to create exponential inflation of the coins value. The coin is created as a reward for the work of mathematical computation. These computations take high power computers to produce. So it is actually trading real energy for perceived value, (because of work and high energy that limits the ability to counterfeit it) held in cyberspace (by the way not a real space). As each block chain is created by design the next block chain becomes increasingly difficult to generate this guarantees that the currency will have to inflate in value because more energy is required to generate the continued production. ( this is a similar situation in a gold mine). Then to generate demand they capped the number at 21 million. This is an interesting move because it creates a gold rush effect. If you wait you’ll lose the best claims ( first production is cheapest last production most expensive hence pyramid scheme if your in early your rich if your in late your broke).
What BTC really is
Right now China is producing 70% of the Bitcoins being mined. But they’re not even covering their cost. So all the players have taken on massive debt speculating that the increase futures values (built on production limits )will bring them back into the Black. Bitcoin is also being used as a hedge against the falling yuan which is artificial demand. So it’s a productive tool only in converting yuan to Bitcoin. ( in effect Yuan is being used to buy energy to create Bitcoin ) Right now there are 15million Bitcoins in circulation maybe more like 16-17 I have old data. But at a 2.5 million annual growth rate the system is at its limit. The difficulty is the calculated iterations involved may make it impossible to generate the last coin. Not that they will stop trying. So in simple terms the value is being determined relative to cost of production ( electrical energy ) without debt included. What happens when the growth ends is a big question. It will depend on whether it maintains its perception of value.
Good thing I'm in on the ground floor
It’s quite likely that like other Ponzi schemes when the growth stops the system will collapse. The reason is as long as it can be produced it has productive value and a pricing mechanism (basically embedded energy, it is interesting to note that Bitcoin is around $2000.00 and the energy required to produce one with CAPEX is around $2000.00) When it can no longer be produced there is no longer a pricing mechanism. So the value becomes pure speculation. Without a floor there is no resistance so the price can drop to zero. This happened in Spain at the height of its power.
Now apply your same logic to stocks.
How are stocks, then, not also a pyramid scheme?
I don't think you even know what a pyramid scheme is, to be honest.
So how much energy is being consumed for nothing?
So if we add up the watts it costs to produce 1 bitcoin it looks like 3MWH ( Megawatt hours ) per coin. Presently bitcoins are being produced at 7200 per day. So that means 20-22 gigawatthours per day. That’s twice the power consumption of NYC. Produces absolutely nothing. At least a real mine brings gold to the surface so you retain the embedded energy. Must have been a psychopath who came up with this. No prizes wondering who is behind this one. Great way to ruin the planet.
>he thinks pyramid schemes and ponzi schemes are the same thing
Please finish your education before you continue to post here.
I don't think you understand what a stock is, to be honest.
wew
I knew Veeky Forums was dumb but
So what about proof of stake coins OP
how is it complex? it's just been in mainstream news often because it was used for drug deals.
the underlying programming of how bitcoin is moved and stored is complex and probably something we will use for a variety of applications. but how bitcoin exchanges work and everything people do to promote it isn't anything new. you have a vested interest in getting people to believe what you just bought is worth more, and because there is literally no way to evaluate what it should be worth, it depends on word of mouth/news. if you have been at art/trinket auctions, you know how bitcoin works in the public space. there are cycles of attention for it, the people who put the work in for that attention sell their bitcoins, and then somebody else who just bought in fills their shoes. it could go on forever but it could also struggle over time to excite people. it's not about the "gold rush" of having limited quantity specifically, because bitcoin can be effectively cloned overnight. it's just that you can make people believe it will be worth more because it has been growing, and then only offer it when they pay more. if they don't have the same influence they will eventually sell at a loss collectively. everyday volume is usually small amounts getting a few % here and there.
It's virtual currency, that's it.
>Great way to ruin the planet.
Lel, all BTC mining combined takes 10% of power that VISA's data centers use.
wow
You don't even know what inflation is numb nuts
Sage
That's not the definition of a pyramid scheme my dear OP
(OP)
Learn how to write without using parentheses. If your thought is important, incorporate it into the sentence, rather than just leaving a dangling thought. Sage
By the same definition every abstract financial derivative or market is a ponzi scheme also, including speculative metals like gold, which require other people to value the gold more than you bought it for or else you lose money.
The difference with Bitcoin is instead of trying to masquerade as something intrinsically valuable like gold, it's value is purely in the network and ability to transact with in, because Bitcoins themselves can't be removed from the network.
You got this right, user. 10/10 post.
But I got this figured out since the first time I read the whitepaper.
In order to maintain Bitcoin network, more and more electricity are pouring into BTC, inflating its value. No electricity = Network died.
On the hand, after you mined gold, its value is determined, there no need for additional labour pouring in. Bitcoin is not similar to gold.
It's no brainer to buy Bitcoin though, considering the nature of it. Just pull out before the next economic crisis (late 2017 or late 2018).
>On the hand, after you mined gold, its value is determined
The value of gold is 90% speculative. Imagine a huge vein found somewhere under a desert, which increases the gold supply by 50% over 6 months. What do you think happens then?
In long time, it just even out. Of course its price is found through the speculative process, but that is not the difference between bitcoin and gold.
The difference In essence:
Gold, Silver, etc. = Relatively fixed cost
Fiat = Very low cost, actually a form of IOU
Bitcoin, Alts = Exponentially increasing cost
There's no increasing cost with Bitcoin, you either mine when it's profitable, or you stop if it isn't. If you keep mining even when it isn't profitable that's not a design flaw in Bitcoin. Miners speculating on the future price of Bitcoin is no different than betting on commodity futures.
When the cost outweighs the profit and miners drop out, the cost decreases until an equilibrium is found again. If Bitcoin keeps going up "forever" of course the cost of mining will continue to climb, but the net cost will not.
There are economic limits that will eventually be reached, just like mining for gold. Huge deposits of gold just waiting to be mined, but the price of gold is too low to make it profitable. If mining for gold had no cost, gold would be sub-cents on the dollar.
How valuable would bitcoin be if one entity could in any given moment decide to make a trillion more of them?
You mean a trillion bitcoins or a trillion similar-to-but-not-the-same-as-bitcoins coins
We'll find out if ChinkCoin launches in a few weeks.
However, in the case of normal commodity, when there is a huge influx of producers -> oversupply.
With Bitcoin, more miners but the number of bitcoins generated is still the same. That's why instead of stopping their machine and getting bankrupt, the miners will push the price higher to break even, because they control the supply. Not to mention that transactions also need to be processed by miners too.
They can try, but miners will have continually less influence on the price as the number of Bitcoins generated per block decreases. It's like you haven't even read the whitepaper.
Bitcoin only uses as much electricity as needed to secure the network, over-mining is just another form of speculation on Bitcoin's price, and the less profit or loss you make is the same as the decreasing price of an asset that's supply is outpacing demand.
Miners could mine empty blocks, if I remember correctly, and they can charge higher transaction fees in the case of mining reward is not enough. Bitcoin miners are much more powerful than gold miners, and the entry cost for mining hardware is not cheap either.
Again, they can try to mine empty blocks, but doing so lowers the value of what they're mining. And they can try to only accept transactions with a certian fee or more, but all it takes is one miner who is happy to collect all that free money not being accepted by the other miners, it just means your transaction takes 2-3x longer.
The miners work for the users, they get rewards for mining blocks, and further rewards for adding transactions to blocks. If they stray too far from what the users want them to do, the Bitcoin's they're mining will increasingly become worth less, making mining less profitable for them.
If gold miners wanted to, they could simply hold back the gold they mine and release it on the market all at once or in some other way, its the same principle as what you're suggesting, as both require very high up-front costs with very high risks of losing a lot of money.
Youre right OP
The only way for you to possibly make money trading cryptos is taking money from others. Theres no inherent value behind any of these coins, it's pure speculation.
Despite that, it's a very profitable and widespread scheme...might as well jump in lol