Today I realized that Proof-of-Work #cryptocurrency is yet another way to pin a currency's value on a corresponding physical resource, just like the Gold Standard was. As a result the sky-rocketing dollar price of Bitcoins isn't entirely speculative, the Bitcoin algorithm demands more work to mine any subsequent unit of currency, making it more valuable in dollars because of the invested resources. To me it seems like the limit to this system is when the resource supply won't be able to meet the algorithmically ever-increasing demand, just like why the Gold Standard was eventually dropped. I expect the Bitcoin value to plummet in such an event.
I'm no expert, though, feel free to prove me wrong!
I'm no expert, though, feel free to prove me wrong!
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Brian Ó
•Brad Koehn ☑️
•**joe
•Hypolite Petovan
•ermanno
•Anubis2814 likes this.
Hypolite Petovan
•ermanno
•The most interesting part is where he stresses that people working in the bitcoin industry must be well paid ti guarantee their loyalty.
Hypolite Petovan
•ermanno
•Hypolite Petovan
•I still wouldn't touch Bitcoin with a ten-foot pole, but Proof-of-Work can explain part of the unrelenting growth the dollar value of Bitcoin has seen since its inception.
ermanno
•ermanno
•Hypolite Petovan
•Brad Koehn ☑️
•silverwizard
•Proof of Work currencies basically means that the people mining it have an incentive to buy and sell it, because mining is very computationally expensive, and therefore those people need to convince greater fools. And so, NFTs took off when Jack Dorsey sold an NFT to a bitcoin investor. Because it was a 2.9 million marketing buy, to convince greater fools.
But proof of work is actually a backed asset, but the mining thing is apt. Buying GPUs or specialized hardware, and then burning them out to get free bitcoins. If you do that, you lose money unless you can sell those bitcoins. But those GPUs are the actual commodity that is obeying market forces.
The problem is that PoW isn't backing bitcoins by being inherently valuable, but instead by making bitcoins *slow to make*.
I think I might be too early in the morning to make sense.
Hypolite Petovan likes this.
silverwizard
•Bitcoin is backed by making a valuable commodity worthless.
Hypolite Petovan likes this.
Hypolite Petovan
•silverwizard
•**joe
•Hypolite Petovan
•**joe
•I guess my point is that any analysis of money must start with the understanding that it is based entirely on the faith of the user. If enough people believe it is valuable, it is.
silverwizard
•Hypolite Petovan
•**joe
•Some commodities, like wheat or salt, have an intrinsic use value. But other commodities, such as gold, are, like fiat money, only valuable because people believe it has value.
But bitcoin isn't commodity money, is it?
Hypolite Petovan
•In this context, I believe Bitcoin is commodity money. It requires work to be created, which enforces a relative scarcity. This doesn't mean its dollar value cannot fluctuate, but I believe it means it can fluctuate less than non-Proof-of-Work cryptocurrencies.
**joe
•(PS, at this point, the discussion is pretty much over my head, so I hope my comments are not just annoying you.)
Hypolite Petovan
•On the contrary, not everyone can issue Bitcoin, you need to solve hard mathematical problems, which boils down to try as many potential solutions as possible with fast computers. These computers are a tangible asset that anyone who wants to mine Bitcoin needs to rent or purchase, house, maintain and feed power. So anyone who has successfully been mining Bitcoin has had expenses and as such has had an incentive to use these Bitcoins to cover their investment and then some, spurring Bitcoin trade which is what you want for any currency to thrive.
So far, I've not been aware about Bitcoi... show more
On the contrary, not everyone can issue Bitcoin, you need to solve hard mathematical problems, which boils down to try as many potential solutions as possible with fast computers. These computers are a tangible asset that anyone who wants to mine Bitcoin needs to rent or purchase, house, maintain and feed power. So anyone who has successfully been mining Bitcoin has had expenses and as such has had an incentive to use these Bitcoins to cover their investment and then some, spurring Bitcoin trade which is what you want for any currency to thrive.
So far, I've not been aware about Bitcoin loans, but this is a bank's privilege, and they started dabbling with cryptocurrencies, so it isn't entirely out of the question.
Max Kostikov
•**joe
•Hypolite Petovan
•hackbyte (pluspora DEFUNCT!) moved to friendica.utzer.de
•Mining is not the primary means to create new bitcoins. Mining is a artificial complex process to calculate hashes to create new valid blocks to the blockchain. The actual difficulty, which defines how much avg hashing power is needed to get a valid solution, is meant to regulate the amount of possibly found blocks per 10 minutes to average one block every 10 minutes.
So the difficulty adjusts itself, based on how much hashing power the overall network has and artificially makes it more or less complex/energy intensive to find valid new solutions.
The incentive to mine in the long run is, that you get paid from the transfer fees of the transactions you include into a new block with your solution.
And on top of that, it is used to distribute the coins "created" by the network. So for the very first blocks, every miner who created a new block got 50... show more
Mining is not the primary means to create new bitcoins. Mining is a artificial complex process to calculate hashes to create new valid blocks to the blockchain. The actual difficulty, which defines how much avg hashing power is needed to get a valid solution, is meant to regulate the amount of possibly found blocks per 10 minutes to average one block every 10 minutes.
So the difficulty adjusts itself, based on how much hashing power the overall network has and artificially makes it more or less complex/energy intensive to find valid new solutions.
The incentive to mine in the long run is, that you get paid from the transfer fees of the transactions you include into a new block with your solution.
And on top of that, it is used to distribute the coins "created" by the network. So for the very first blocks, every miner who created a new block got 50 btc ... after a halving, it was just 25btc. Right now it's "only" 12,5btc.
These halvings occur periodically until some day in around 2138 the very last new satoshi is created and miners will only earn what they can made of the transfer fees on the network...
Hypolite Petovan
•hackbyte (pluspora DEFUNCT!) moved to friendica.utzer.de
•To be honest, i'm a "bitcoin maximalist". Even if it is that much inperfect and suboptimal by design.
But besides the technology itself, it proved that it is possible to create a new 'social contract' on which people can act and trade world wide, but without nations/governments and banks in control.
So, for me, it's not "fiat vs bitcoin" but for me it's 'classical fiat' vs 'modern fiat'.
Classical fiats are like dollar, euro, yen and so on. Central controlled currencies which get manipulated by the needs of the people who are in control.
Bitcoin is different as it was designed once with all necessary basic parameters (maximum amount ever in existence, smallest denominator, security of transfers in trustless environment) and there is basically no (easy) way to alter these afterwards.
This presented a new contract to people who step by step started to adopt it. Up to a point where even nations and banks had to recognize it.
Btw, it is not that bitcoin basics could never be changed in any way. It's still a piece o... show more
To be honest, i'm a "bitcoin maximalist". Even if it is that much inperfect and suboptimal by design.
But besides the technology itself, it proved that it is possible to create a new 'social contract' on which people can act and trade world wide, but without nations/governments and banks in control.
So, for me, it's not "fiat vs bitcoin" but for me it's 'classical fiat' vs 'modern fiat'.
Classical fiats are like dollar, euro, yen and so on. Central controlled currencies which get manipulated by the needs of the people who are in control.
Bitcoin is different as it was designed once with all necessary basic parameters (maximum amount ever in existence, smallest denominator, security of transfers in trustless environment) and there is basically no (easy) way to alter these afterwards.
This presented a new contract to people who step by step started to adopt it. Up to a point where even nations and banks had to recognize it.
Btw, it is not that bitcoin basics could never be changed in any way. It's still a piece of software which can be altered and rewritten as one likes.
But the overall network and it's consensus mechanism implements a way, so that more than 51% of all miners have to agree on a new/different version....
And believe me, nobody who is really into bitcoin would like that or even support it. ;)
Hypolite Petovan
•I don't even understand the problem it's trying to solve. Having governments and banks on control of currency isn't a problem for 99.99% of the people, including myself. And what is this "social contract" that has nothing social about it?
And I disagree with you, Bitcoin currently can be manipulated because of its necessary relationship with the US dollar and the reliance on centralized exchanges.