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What are your opinions on cryptocurrency?
What about the technical aspects do you support and what are your reservations? Bitcoin vs. altcoins? Do you anticipate widespread adoption or fizzling out to occur in the next few decades?
I don't see the need for it when we already have actual currencies and ways to transfer money digitally. The only need it seems to serve is for criminals to transact illegally.
And, in the past few months, I've been reading about the environmental and social impacts of Bitcoin - specifically the amount of electricity required to "mine" new Bitcoin and to record each transaction. I read somewhere that, if everyone used Bitcoin, it would require the electricity output of a mid-sized country to maintain it (I believe that Ireland was the comparison used). I've also read about towns in the USA being taken over by Bitcoin miners, diverting ever-increasing proportions of electricity to their server farms, and distorting the local economy.
I don't see an upside to this. It has no benefits, only drawbacks.
No, that's how much it's already using, even with such low usage: https://www.theguardian.com/technology/2017/nov/27/bitcoin-mining-consumes-electricity-ireland
Oh! Well, then.
The thing is that it if the demand increases, there won't be an increase in electricity cost*, as the usage is a factor of the proof of work computation - its a competition to see who mines the current block. Naturally that is an equilibrium of cost of computational power and the reward from mining a current block. If demand goes up, the PoW is independent of that as its independent of the content of that block.
You don't think it has any benefits at all? Out of curiosity, have you ever done an international bank transfer?
I haven't observed any benefits based on my readings.
I've never done an international bank transfer, but I have made quite a few international payments when I've bought merchandise online. Is that the only benefit that cryptocurrencies have? Surely we don't need to use enough electricity to power Ireland just to make it easier to transfer money from one bank account to another.
Bitcoin is a on another level with power consumption but not all crypto's are like that.
There are other "mining" possibilities like proof of stake (rather than proof of work) which would drastically reduce electricity consumption. Does that make a significant difference in your mind?
That's only really addressing one half of the cost-benefit analysis, right? You're talking about the potential (not yet realized) for reducing the amount of electricity consumption that cryptocurrencies generally require, but the starting point Algernon had was more of "I don't see any real benefit, and what's worse (and more), the cost is so ridiculously high anyway." You're saying the cost could be reduced, but not that the benefit would be increased.
So yeah, it would potentially make a difference, but not a huge one given the lacking benefits you gain from this sort of decentralized monetary system.
Exactly!
It might reduce the cost, but it doesn't really demonstrate any benefit.
If the cost is reduced enough, then it becomes quirky and pointless but not damaging.
Not OP, but I live on a different continent to my girlfriend and we've never had any problems with transfers. Also, the bank I'm with does free international transfers and withdrawals.
The only legal benefit I can see from cryptocurrency is privacy purchases (e.g. VPNs) but I don't trust the coin exchanges.
I've. The fees are quite steep but, at least with the bank I was using at the time (UniCredit Bank) fixed on 30 something euros per transaction, and only for money leaving my account, not entering movements. Also, 3-5 days for clearance.
Honestly, not bad. If you had worst experience, change bank.
That's the only way I do international transfers. Really convenient and easy, the fees are very low. I can't really complain about anything.
They also offer a debit card tied to prepaid account. Much cheaper than credit card to use abroad.
Yes, for a few months. Used it already when I was abroad and for some online payments. The cost of card is 0, they earn money on the conversion ratios which are exactly the same as for transfers.
I may have only done a couple international transfers, but one was free, and the other was less than 1% of the transfer. Both cleared in three days.
Relatively painless, and without enormous environmental impact.
Of course you do! :)
Yes, I understand that some of the motivation for some people to support cryptocurrencies is to be free of fiat currencies and the governments behind them. But, I believe in government, so this isn't a big thing for me.
if we're talking straight cryptocurrencies and not other alts. Then much of what you said I agree with to a degree. However, there's a huge benefit in some of the other coins that operate as platforms for smart contracts as smart contracts have a huge use case, if and I do mean "if", they can maintain a healthy balance of decentralization, efficiency as well as staying fee-less. Additionally, much of your above points relate directly to cryptos using Pow(Proof of Work). There's a whole slew of consensus mechanisms that are running that are far more efficient and carry literally NO energy consumption/use beyond what normal web browsing would incur. For instance, PoS(Proof of Stake) is one, which Ethereum is moving too in the future with Casper and other changes. There's a huge market out there and Bitcoin, while still the strongest network by way of hash power, is hardly the leader I see for the future of crypto. But, still you make some valid points and concerns.
Neat concept, but first mover advantage means that the leading cryptocurrency, bitcoin, is a first gen product with some dubious design decisions, not suited for use as a currency on this scale, meaning that it's an absolutely colossal waste of electricity for the service it provides. And I mean colossal; the numbers I've heard are 200KWh per transaction, and most of that is generated by cheap Chinese coal plants. That's quite an environmental disaster right there for a service that can process a whopping three to seven transactions per second, globally.
Are there any stats on how much power the current systems use. Our current systems uses a lot of power banks and verifying transactions. Also we are printing money that takes energy too.
Not remotely comparable. The highest numbers I've seen puts the power consumption of the entire traditional banking system at around 100TWh annually, about triple bitcoin. But instead of handling, again, three to seven transactions per second, that power handles all of them, which at an unrealistic, conservative, absolute minimum would amount to at least 50,000 transactions per second, making traditional banking at least 2,381 times more energy efficient than bitcoin.
But because bitcoin is software it has the opportunity to evolve. As the lightning network gradually rolls out the landscape is going to change significantly.
Though transaction speeds and energy inefficiency are major problems, bitcoin has issues that are rather more fundamental. The key thing standing in the way of its adoption as a currency is the fact that it's designed to be deflationary, which doesn't work at all for a medium of exchange, since it disincentives spending over holding.
Agree, but changing the block reward schedule is a BIP away.
I suppose it can act well as a reserve currency, so that crypto-pairs use it as a point of common trade. Of which, those other cryptocurrencies would hopefully have their success in their efficiency and transaction speed.
Where is all this energy being used in making a transition on bitcoin? Might seem like a naïve point - but doesn't it cost lots of power to mine the coin, how does processing transactions cost so much power?
Mining is what processes transactions.
So when we run out of bitcoins to mine the transactions stop and it all dies?
There are also transaction fees that go to the miners, so even when all the coins are mined there'll be some incentive to process transactions.
So just the transitions don't cost that insane amount of energy? Why are the global transitions so low? something like 7 per second?
The transactions do cost that insane amount of energy, since the entire power usage of the miners goes to processing transactions. You can't separate mining and making transactions, block rewards on top of transaction fees don't take any extra computational power, they're just an incentive to start mining in the beginning. The maximum of 7 transactions per second is a design limitation that stems from capping transaction blocks at 1MB in size.
So a block is mined then a transaction (or is it a group) is assigned to that block?
What happens when we runout of block to mine? This seems like a crazy system.
I also really appreciate the info you're giving never been able to figure out this whole block chain thing.
We'll never run out of blocks, it's just that the generation of new bitcoins as a reward for completing the blocks will stop and miners will only be getting transaction fees. It is still an insane system though, since if non transaction fee rewards end, either transaction fees have to become prohibitive to finance mining, or enough people quit mining that one group suddenly has over 50% of the hashing power on the network, which gives them the power to basically dictate all transactions on the network, monopolize mining, and make counterfeit bitcoin. There's also the fact that the ending of new bitcoin generation makes bitcoin an inherently deflationary "currency", meaning it will never make sense to spend it, because you're always losing money versus just sitting on it. And yeah no problem. Relevant smbc.
Damn, well again thanks for all the info. It's been super helpful either way.
For the record I still consider myself a fan of the spirit of the thing. I've been following the topic since 2009.
Bitcoin's market cap is currently over 130 billion USD.
Total cryptocurrency market cap is currently over 273 billion USD.
At the peak of the previous bubble the latter's market cap was over 500 billion USD.
For reference Tesla is worth 90B (Edit: 50B. ouch.), McDonald's is worth 125B and both Apple and Google each have a market cap of around 900B USD. Think of human capital those companies have under their belts. Think of the intellectual property, of the products and brand recognition. Think of the RND they've invested and market share they hold. There's a case to be made that the entire cryptocurrency market is still obscenely overvalued.
Speaking of obscenity, Bitcoin processes an abysmal maximum of around 7 transactions per second and uses just under 1000kWh of electricity for each of those. The energy consumption of a single transaction could power 30 average US homes for an entire day (or of course one home for an entire month). The average transaction fee during the previous bubble reached over 30USD, though it's subsided since to "only" a dollar or two.
Cryptocurencies have been around for about a decade now and none have made any significant penetration as an accepted payment method. In fact Bitcoin has essentially lost the miniscule ground it managed to gain since most significant online stores such as Newegg and Steam, which previously accepted Bitcoin, have since removed it as a payment option.
I'd also posit the conjecture that mining centralization through consolidation and subsequent existential risks of 51% control attacks are going to become a real problem. Cheap electricity is a geographically local phenomenon, and proximity increases the likelihood of concentration of control by fewer and fewer individuals and groups. That's before even getting into the topic of mining pools in which the many pool their resources together and hand over control of their hashing power to the few in exchange for more frequent (though nominally equivalent on average) revenue.
All that being said an interesting, novel, and recent trend is the growing diversification of cryptocurrencies we're seeing now where a multitude of so-called altcoins represent a significant percentage of the total market.
I think in 10 or 20 years we'll probably see the beginning of a legitimate adoption of a handful of these or future cryptocurrencies that rise through this pile of hot garbage and hysteria, each with their own niche usecases be that transactional or otherwise, but it probably won't be Bitcoin, and will be long after we stop seeing such vacuous and asinine posts online as "How do I start a business based on blockchain?", tatamount to asking about starting a company "based on encryption".
In the meantime there's probably good money to be made being patient, buying low, and selling high. Until there isn't. People made good money buying at 20$ and selling at 2000$ or buying at 2000$ and selling at 20,000$. That's great, but do we have room for much more? Going up just one order of magnitude instead of two leaves us with 200,000$, a market cap of 4.2 Trillion USD. That's over 4 Googles. That's the entire GDP of Germany. There's a fascinatingly fractal symmetry to Bitcoin's exponentially increasing boom and bust cycles but the bigger those get the more they start rubbing up against the real world, and there's only so much friction a system can take.
Tread carefully.
As a pure technological innovation, the blockchain and proof-of-work schemes in general are interesting.
As far as mainstream practical applications go...I consider them a technolibertarian fantasy. The same type of people who used to hoard gold in case the government collapses, now hoard Bitcoin. Have fun lugging around a pile of GTX 1080s if a Mad Max dystopia happens.
For niche practical applications (buying drugs through Tor), Bitcoin seems quite useful. Certainly not foolproof, in that if the cops really want to track you down they will, but better than nothing.
The fact they're unregulated and have been used to fund malicious regimes and organisations makes me wary. The fact I also associate them with capitalistic tech-bros also makes me wary. I'll admit I don't know a lot about cryptocurrency though, so if anyone knows of cases where they've been used for good, I'd be happy to hear about it.
One big use case is logistics and product tracking. For instance, there's a few different projects that are focusing on tracking fruits and veggies and meats etc that are meant to be truly organic. They do so using RFID chips that are scanned and automatically written to the blockchain using smart contracts. These same products use their ERC-20 token running on the Ethereum blockchain to afford the transaction that's written and validated which allows the end user to see exactly where their cut of rib eye came from from farm to fresh. Also, the auto-industry is doing the same just not customer facing to my understanding. For instance BMW and others have signed on with a couple different projects and are using the blockchain and automated smart contracts to track and record their parts and logistics. That's just a single use case for a couple different industries. There's so much more than just bitcoin used for malicious intent. Frankly, TBH I kinda reject that argument as cash is the ultimate currency for criminals and the like. But, ultimately I think having a currency which is private has it's benefits beyond just the dark net. Especially, as privacy concerns grow and span to trickle into every last element of our daily lives.
You can obviously tell that I'm quite biased in my opinion as I've been a user and investor in crypto since 2011. But, I do believe that removing a trusted third-party has it's uses. While at this point the tech is so new and misunderstood it's still an uphill battle to win over the general public, especially since the media has done a great job of misinforming people. But there's so much out there beyond just currency like bitcoin or monero that they really should not be wholly representative of the industry/market in any way other that being the first-to-market. Thats just my two satoshis, anyways. I appreciate your input! I hope my comment didn't come off in the wrong way and sound confrontational. If it did I'm very sorry.
I'm optimistic something will come of it. It's a neat add-on to a lot of stuff (most notably peer-to-peer/distributed applications, in my view) to add incentives to good behaviour. In a simple file-sharing application, for example, you can use it as a way to give a gentle push for people to upload more than they download, without a central authority.
There are some problems with it. One is anonymity. Another is the environmental cost (I know some coins have gone to things like proof-of-stake instead of proof-of-work, which helps a lot). The big problem that I think needs to be addressed is scalability. Ideally we want to be able to do billions of transactions a second, but obviously that's tough when you have a global register, effectively globally shared state. I don't know what the solution to that is.
Overall, cool and promising, but I'm not convinced any of the current crop of coins has quite got it yet.
I think widespread cryptocurrency usage would be a huge step in the right direction for a fairer, more open future for our society. Maybe it’s not Bitcoin (or any other existing cryptocurrencies), but an open-source, decentralized, anonymous, secure currency that no one directly controls would be great.
In terms of cryptocurrency today, there is some great potential for the technology. One service that I’m following, Choon, could be pretty big (they already have some big artists), due to how big of an issue profits from streaming services is for musicians. I think it’s a good example of how smart contracts can help solve some complicated problems.
Some crypto currencies have the potential to serve a useful purpose.
Most are simply attempts to scam.
It certainly has some idealistic appeal, as a currency supposedly for the people by the people, i.e. with no potentially corrupt central regulating authority. It could, in theory, revolutionize a lot of technologies we use everyday already. For instance, I have seen design attempts for internet-like mesh networks that are maintained by paying/mining cryptocurrency for each connection.
However, ignoring that it is unlikely the internet could be supplanted or replaced by such a system without a significant problem damaging the Internet itself (however that would be possible), the numerous technical downsides to cryptocurrency, (such as the high electricity costs, growing computing power potentially making old coins obsolete because their hashing algorithms collide, the potential for malicious groups taking over a currency by simply offering the most mining power, etc.) make me sceptical that this technology (meaning Blockchains) will be used for currency much longer.
Data encryption and verification perhaps, because there you can easily migrate the data to another system when your current one becomes obsolete, but not currency (outside maybe certain subcultures and criminal elements working with their own tokens to avoid paper trails).
We have seen bitcoin crash and recover half a dozen times in the last year alone, this is not what a currency is supposed to do. If this had happened to any analog currency, you'd be damn sure its supervising organisation would change their monetary policy (Unless you're in Venezuela, in that case you just remove five zeros from the end of your numbers and call it a day).
Bitcoin and the many alt-coins that followed in its footsteps are an interesting technological achievement, but ultimately very flawed. The Proof of Work concept that they are based on is inherently wasteful because it encourages an arms race of processing power (and thus electricity usage) with virtually no benefit to anyone outside the speculative markets.
However the idea of cryptocurrency as a whole is a great concept, and while I don't follow the crypto news too closely, I do like the ideas behind Filecoin, which intends to base the value of the currency on storing a unit of useful data for a period of time. I think this lends itself well to being used as an actual currency instead of a purely speculative device.
The fact that so many scams happen and that so many people with zero technical know-how or interest in decentralized currencies are talking about it purely in terms of "how to make money" has soured me quite a bit on the idea of cryptocurrency. Currently most of it is basically cryptostocks more then anything else.
I've got growing apathy.
Bitcoin itself needs to die. Seriously. We are killing the environment trying to scrape those last few coins out of the ether. What I would rather see is no need to do random hashes, and instead tie the distribution towards distributed computing projects like folding@home that help further research that makes the world a better place? That way we aren't completely wasting our electricity. There are probably millions of other distribution schemes that would be better than using pointless hashes. Another reason to kill off bitcoin is that there are many other problems that other cryptocurrencies have already solved or improved, such as transaction times and transaction fees.
The biggest thing to realize is that the current concept of cryptocurrency is flawed in a number of ways. Cryptocurrencies are open, which means that virtually anyone can make their own cryptocurrency. Adding more currencies has the effect of making the other ones fall in value. There is a huge market of cryptocurrency trading; it's basically a stock market for money. People mine the popular crypto of the day and immediately flip their earnings, causing their values to sink. Garlicoin is not even a year old, and it has already suck to about one penny in value largely due to this effect. Crypto is more of a betting chip than a currency.
Note that my understanding of cryptocurrencies is limited. Feel free to correct any errors in this comment.
From what I understand Bitcoin is designed to create one new block every 10 minutes, and the creation of a new block is rewarded with a new coin. The reason behind this is to limit the creation of new coins to one every 10 minutes, to ensure a slow and steady supply, and a fair reward to those contributing their computing power to the network. This is achieved by increasing the difficulty of the hashing algorithm ("mining") the more computing power is contributed.
But to me this seems like the completely wrong way to achieve this. By intentionally increasing the difficulty, the Bitcoin network becomes ever more resource hungry and inefficient. A better solution might be to decrease the reward for new blocks, or to increase the size of blocks, both of which would increase the number of possible transactions per second (or per 10 minutes I suppose) as more computing power is added to the network.
There are other cryptocurrencies that use different systems. Bitcoin's model is often referred to as Proof of Work (PoW), and the most common alternative is called Proof of Stake (PoS), which I must admit I understand even less of. From what I understand PoS offers more transactions with lower energy use, so I assume it must have some major downsides as well.
It might be too easy to create new cryptocurrencies. Currently there are thousands in existence, with more added every day. Some of these have advantages over the established ones, some are simply attempts to make a quick buck, while some are outright scams. Most of these probably have no future, but who knows, maybe one of them will one day dethrone Bitcoin as the king of cryptocurrencies.
That's going to be hard though. Bitcoin is the one everyone's heard of. Even if other coins might be better suited as actual currencies, I expect Bitcoin to remain relevant as a store of value, much like gold has been since the advent of fiat currencies.
If you're an idealist hoping to see banks and government-backed currencies disappear, look into altcoins. If you're an investor hoping to make money, look into Bitcoin.
I'm excited to see how cryptocurrencies will handle the next big financial crisis, which I expect we'll see within the next few years. Most likely the value of most of them will crash harder than the stock markets, but they may come out stronger on the other side. If people lose faith in their local fiat currencies, they may turn to cryprocurrency as an alternative, and that would be the first big test of the viability of the concept.
I can see blockchain being used in certain fields. For example to make the review process in academia fairer and more transparent. Similar for other author-based products like arts, content creation, etc.
But I'm not sold on cryptocurrencies to be honest. It seems plausible to me that bad agents will appear and learn how to dominate the market if they are left fully unregulated (I may be wrong because I'm not an expert, only know about the technology behind it), and if they become regulated... well, what's the point then?
Currently crytpocurrency isn't a very good currency. Its price fluctuates wildly and can be easily manipulated. There is some value in decentralized currency in places where regular currency has difficulty, such as international transfers of money. The underlying technology of cryptocurrencies has some good uses in niche areas, but has been over hyped as a solution to a wide variety of problems.
I have no opinion over the coins or their use cases as I haven't spent too much time looking at them. What I have seen is the fanaticism over buying and selling the coin like it's a know and respected commodity. My friends have invested thousands into different alt coins hoping to strike it rich one day. I get links sent to me to sign up at coin exchanges because they get referral bonuses. I see people in the alt coins subreddit acting similarly to the addicted guy at the gas station with a stack of used lottery scratchers.
In that sense I think they are unhealthy and an avenue for wealthy people to siphon off money from poor people by manipulating an unregulated market with the promise of "get rich, quick!". The only advice I give them is they can for sure do that, but if I were looking at it from an investment standpoint, I would save as much money as possible and wait for the stock market to crash after the stock buyback bubble has popped.
I don't like it. I think that the nodes waste electricity and it could indirectly contribute to pollution.
I like the idea in theory, but I don't think it'll become mainstream until many years into the future. Its hard for people to adapt to other forms of currency, especially with it being stored online. It'll also be difficult for stores and restaurants to accept the currency especially if its new.
Good way to buy drugs.
It will never be much more than that and a speciation tool.
I really like the idea of a means of value exchange that is founded directly in its users, as opposed to government and/or corporate institutions. Cryptocurrency makes a good run at that. The real problem is making mining fair, limiting speculation, and using an appropriate amount of electricity.
As I understand the problem, the obscene electrical usage stems from an effort to make mining more fair. There's probably a mathematical/technological solution to that, which makes it a very solvable problem.
Of course, even once that's solved, there becomes an issue of network access to make it truly universal. But maybe that limitation outweighs the costs associated with government/bank backed currencies.
Cryptocurrencies are just one use case of blockchain technology. My feeling is that crypto will truly start to shine once a a couple of decentralized applications (smart contract based) gain popularity.