Bitcoin and other cryptocurrencies

[crashtech66]

Bitcoin changed from a cryptocurrency into a hustle when they started trading futures. Now the manipulators can contract more bitcoin than actually exists with settlement in fiat.

The manipulation method is the same as the fraudulent unallocated precious metals funds. There is a lot of virtual bitcoin in the exchanges.

All the coins are just script for sovereign fiat anyway.

An example of how fraudulent precious metals funds harmed the value of the physical metal might help make your point. Otherwise, what you are saying is that fraudsters penetrate every niche in society, which seems a given. So far, the Bitcoin algorithm has been proof against any real attack that would dilute its value. It's supply is finite, so its value will grow.

[Nonc Hilaire]

Bitcoin changed from a cryptocurrency into a hustle when they started trading futures. Now the manipulators can contract more bitcoin than actually exists with settlement in fiat.

The manipulation method is the same as the fraudulent unallocated precious metals funds. There is a lot of virtual bitcoin in the exchanges.

All the coins are just script for sovereign fiat anyway.

An example of how fraudulent precious metals funds harmed the value of the physical metal might help make your point. Otherwise, what you are saying is that fraudsters penetrate every niche in society, which seems a given. So far, the Bitcoin algorithm has been proof against any real attack that would dilute its value. It's supply is finite, so its value will grow.

Value as defined in fiat is not real value. Ask a Chinese.

And the only finite supply is individually held with keys. The exchanges are all virtual counterfeiters. When they fold all will be revealed to have used their controlling ownership of investors’ btc to buy futures. Beneficial owners will be left with worthless IOUs.

[crashtech66]

Bitcoin defined in gold:
https://www.buybitcoinworldwide.com/bit ... e-in-gold/

I just don't think I am getting what you're trying to say. Real examples would be helpful.

[noddy]

I dont think anyone is disputing the fact that bitcoin is unhackable and clever, without quibbling over details, it can be seen as virtual gold in the perfect safe.

the hangup is that on a practical level, the only way I can get money in this safe is via government controlled fiat systems, the only way I can get usable money out of the safe is government controlled fiat systems and the roads this safe travels down are also government controlled, with border checks on what goods are being passed.

I believe the last 2 pages of back and forth are now covered.

we understand blockchain is distributed and largely unhackable, we dont understand exactly why this changes the status quo, their is no seperation from the fiat system.

its just another forex, if we wanted volatile day trading in the forex market.

on any given day, if i desperately needed my bitcoin funds, would my $1000 be $500 or $2000 ?

gold, I can bury in my backyard, it can survive the heath death of the universe (reasonably) and on any given day its value will be on par with what i put into it.

which isnt a very good investment but is the kind of property required to make something "fiat proof"

[crashtech66]

Time will tell if there will be any escape from 100% authoritarian control or not. Seems as if a lot of folks have made their peace with being under the thumb of a central authority. I on the other hand love to see power taken away from those who would exercise it "for our own good."

[Nonc Hilaire]

Apmex will still trade PMs for btc. Realizing profits is never a mistake in my book.

[Miss_Faucie_Fishtits]

Quantum hackers can bring down Bitcoin: expert
Top Chinese cryptographer tells Asia Times’ webinar how over $3 trillion in cryptocurrency assets are at unseen risk

Crypto analysts have worried about the quantum invasion for some time. Motley Fool’s Zhiyuan Sun wrote in September, “The rise of quantum computing may soon give governments a means to crack down on Bitcoin and other types of cryptocurrencies… Governments could potentially decrypt digital currencies or launch hash attacks to take over their network for a regulatory shutdown with these machines.”

https://asiatimes.com/2021/12/quantum-h ... in-expert/

[crashtech66]

The CCP is eager to destroy anything it can't control.

[Doc]

The CCP is eager to destroy anything it can't control.

"Who that has the power to destroy a thing owns it."

“Our modern information system relies completely on public key cryptography, including Bitcoin,” Ding told the “Data Wars” webinar, co-sponsored by the American Affairs journal and Asia Times. “If we have a quantum computer, our Zoom would be finished, and everything actually—the whole information system, because our fundamental security solution relies on it.”

The world's economy is based on modern information systems being secure. Without that security it will be set back to 1900. Call it the "Great Setback"

[Typhoon]

FT - Lex | The Crypto Revolution [paywalled]

Video transcript.

Lex Megatrends. The Crypto Revolution.

Anarchy has not conquered the UK despite the predictions of the Sex Pistols. But a version of it is gaining traction in finance worldwide. Cryptocurrencies such as Bitcoin have bedazzled investors and are entering the financial mainstream. Cryptos embody a core tenet of anarchism, co-operation in the absence of centralised authority.

The financial establishment is worried. In this video we predict where it may all end. The invention of Bitcoin in the noughties is credited to the pseudonymous Satoshi Nakamoto. He, or perhaps they, had the revolutionary idea of creating a decentralised currency. Bitcoin deals are recorded in a public distributed ledger, a database accessed and managed by multiple participants.

They verify transactions by solving cryptographic puzzles and are paid in Bitcoin. But Bitcoin is a flagship with flaws. Criminals favour the currency, which sometimes resembles a Ponzi scheme. It is polluting. It is volatile. And Bitcoin is too clumsy to be handy for everyday transactions.

Despite this, Bitcoin has done something truly remarkable. It has shown that a decentralised digital currency can suck in billions, thanks to healthy dissent, base greed, lofty idealism, and sheer fear of missing out. It was valued at over $1tn in late October, 2021. The crypto universe was valued at some $2.4tn. That compares with the UK GDP of $2.7tn.

Lex is still sceptical about Bitcoin's value. We don't like European bank stocks, or Brussels sprouts, either. But we believe digital assets will disrupt finance. Central banks fret that cryptos could destabilise financial systems. Bitcoin is 12 times more volatile than the S&P 500 index. A prolonged bear market could bring it down to earth with a bump. That would hurt leveraged investors most. Stablecoins pegged to official currencies would increase, rather than dampen risks, if assets and liabilities were mismatched.

Official currencies help governments stay in charge, alongside police and armies. Establishments fear cryptos will undermine their power, as well as financial stability. That is why China has launched a digital yuan for retail transactions. The European Union plans to introduce a digital euro. Europeans could end up depositing some of their cash with the ECB, or national central banks, such as the German Bundesbank.

Central bankers are too high and mighty to service retail customers. Commercial banks would do that for them, somehow. Digital euros or dollars or pounds wouldn't generate easy profits for banks, though. Funding costs would go up if their own deposits fell. In a crisis customers might leave them in droves.

Digital assets create opportunities for banks, too. Many are hiring teams of crypto experts to advise clients and their own senior management. Official regulation of digital assets will make their jobs easier. Eventually low-friction dealing in stocks and bonds, using public ledger technology, will hit profits for some but raise it for others.

Lex believes the financial establishment will struggle to assimilate digital assets. But assimilate them it will. Some cryptos will stay forever on the margins. But anarchism in finance, as in politics and music, is very vulnerable to sell-outs. As crypto bros take jobs in the City and on Wall Street the idealists may ask one another the question posed by Johnny Rotten of the Sex Pistols: "Ever get the feeling you've been cheated?"

[Typhoon]

FT Alphaville | Why bitcoin is worse than a Madoff-style Ponzi scheme [paywalled]

Among other issues, this article places the energy used to mind bitcoin in context.

. . . and has at least some claim to being tied to something of value, the energy and hardware that verifies the transactions along the blockchain.

Full article.

A Ponzi scheme is a zero-sum enterprise. But bitcoin is a negative-sum phenomenon that you can’t even pursue a claim against, argues Robert McCauley.

Bitcoin is off its all-time high of $69,000 set on November 9, 2021. It suffered a wrenching $12,000 flash crash over the first weekend in December, amid accounts of leveraged positions being closed out. And yet, even at the current price of $49,000, guests on financial TV news continue to tout it as the best-performing asset of the last N years, where N can be just about any number from one to ten. They also increasingly judge it as a credible investment in its own right.

This contradicts the longstanding sceptical view by many economists and others that what bitcoin really is, in effect, is a Ponzi scheme. Brazilian computer scientist Jorge Stolfi is one voice who has contended this. His view is based on the following observations:

1. Investors buy in the expectation of profits.

2. That expectation is sustained by the profits of those that cash out.

3. But there is no external source for those profits; they come entirely from new investments.

4. And the operators take away a large portion of the money.

All of this rings true true. But in calling bitcoin a Ponzi scheme, critics are arguably being too kind on two counts. First, bitcoin doesn’t have the same endgame as a Ponzi scheme. Second, it constitutes a deeply negative sum game from a broad social perspective.

On the first count, it’s worth assessing how it compares to the original scheme devised by Charles Ponzi. In 1920, Ponzi promised 50 per cent on a 45-day investment and managed to pay this to a number of investors. He suffered and managed to survive investor runs, until eventually the scheme collapsed less than a year into it.

In the largest and probably the longest running Ponzi scheme in history, Bernie Madoff paid returns of around one per cent a month. He offered to cash out his scheme’s participants, both the original sum “invested” and the “return” thereon. As a result, the scheme could and did suffer a run; the Great Financial Crisis of 2008 led to a cascade of redemptions by participants and the scheme’s collapse.

But the resolution of Madoff’s scheme has extended beyond its collapse on account of the remarkable and ongoing legal proceedings. These have outlived Madoff himself, who died in early 2021.

Many are unaware that a bankruptcy trustee, Irving H. Picard, has doggedly and successfully pursued those who took more money out of the scheme than they put in. He even managed to follow the money into offshore dollar accounts, litigating a controversial extraterritorial reach of US law all the way to the US Supreme Court. Of the $20bn in recognised original investments in the scheme (which the victims had been told had reached a value more than three times that sum), some $14bn, a striking 70 per cent, has been recovered and distributed. Claims of up to $1.6m are being fully repaid.

By contrast to investments with Madoff, Bitcoin is bought not as an income-earning asset but rather as a zero-coupon perpetual. In other words, it promises nothing as a running yield and never matures with a required terminal payment. It follows that it cannot suffer a run. The only way a holder of bitcoin can cash out is by a sale to someone else.

Bitcoin’s collapse would look very different to that of Ponzi’s or Madoff’s scheme. One possible trigger could be the collapse of a big so-called stablecoin, that is, ersatz US dollars that have sprung up to provide a cash leg for cryptocurrency transactions. These “unregulated money market funds” have been sold as dollar stand-ins with safe assets that match their outstanding liabilities. Given the lack of regulation and disclosure, it is not hard to imagine a big stablecoin “breaking the buck”, as occurred with a regulated money market fund that held Lehman paper in 2008. This could so disrupt the whole ecology of crypto that there could be no bids for bitcoin. The market might close indefinitely. 

In this event, there would be no long-running legal effort to chase down those who cashed in their bitcoin early in order to redistribute their profits to those left holding bitcoins. Holders of bitcoin would have no claim on those who bought early and sold.

In its cashflow, bitcoin resembles a penny-stock pump-and-dump scheme more than a Ponzi scheme. In a pump-and-dump scheme, traders acquire basically worthless stock, talk it up and perhaps trade it among themselves at rising prices before unloading it on to those drawn in by the chatter and the price action. Like the pump-and-dump scheme, bitcoin taps into the pure desire for capital gains. Buyers cannot stand the sight of friends getting rich overnight: they suffer an acute fear of missing out (FOMO). In any case, bitcoin makes no promises and cannot end as a Ponzi scheme ends. 

On the second count, another big difference between bitcoin and a Ponzi scheme is that the former is, from an aggregate or social standpoint, a negative sum game. To the extent that real resources are used up to make bitcoin run, it is costly in a way that Madoff’s two- or three-man operation was not. From the social standpoint, what Madoff took out of his scheme and finally consumed is a redistribution in a zero-sum game (the trustee sold his penthouse). Stolfi’s fourth observation above that “the operators take away a large portion of the money” lumps together Madoff’s take and bitcoin miners’ revenues, but these are very different in economic terms. 

With bitcoin and other cryptocurrencies, the game is to name the country whose electricity consumption equals that of all the puzzle-solvers (miners) who get to effect transactions and receive bitcoin in reward. Even if the electricity were priced to include its contribution to global warming (its “environmental externality”)—which presumably it mostly is not—this represents a real cost. 

How big a cost? At the beginning of 2021, Stolfi put the cumulative payments to bitcoin’s miners since 2009 at $15bn. At the then price of bitcoin, he put the increase in this sum at about $30m per day, which mostly pays for electricity.

At today’s higher bitcoin prices, the hole is growing faster. About 900 new bitcoin a day require most of $45m a day in electricity. Thus, the negative sum in the bitcoin game is in tens of billions of dollars and rising at over a billion dollars per month. If the price of bitcoin collapses to zero, the gains of those who sold would fall short of the losses of holders by this growing sum. To liken bitcoin to a Ponzi scheme or a pump-and-dump scheme, both basically redistributive, is to flatter the cryptocurrency system.

To conclude, an economic analysis of bitcoin must recognise its uniqueness in the history of manias. As an object of speculation, bitcoin is unprecedented in the degree to which there is no there there. This post-modern mania features big prices for entries on nobody’s spreadsheet. A zero-coupon perpetual has arrived not as a joke but as a trillion dollar asset. Unlike a Ponzi scheme, bitcoin cannot end in a run. 

In a crash, the holders of bitcoin will collectively have lost what they have paid the miners for their bitcoin. This sum may be not far from the sum originally invested with Madoff, after accounting for inflation. But bitcoin holders will have no one to pursue to recover this sum: it will simply have gone up in smoke, a social loss. The holders of bitcoin would then only wish it had been a Ponzi scheme.

[Nonc Hilaire]

Bitcoin fans like the idea of a verifiable public transaction blockchain, but is it really?

Is there an app I can dl to check? And if there is an error or fraud, where do btc holders turn for recourse?

[crashtech66]

Bitcoin fans like the idea of a verifiable public transaction blockchain, but is it really?

Is there an app I can dl to check? And if there is an error or fraud, where do btc holders turn for recourse?

What is it that you think Bitcoin miners are doing with publicly available software? They are verifying each others answers on a massive scale, and outliers (honest mistakes or attempts to defraud) are discarded.

As to the wall of bullshit quoted by Typhoon above, even as a novice I could probably refute at least a third of it, but I don't consider myself enough of an authority to do the rest. I guess if you compare something to a Ponzi scheme or a bad investment, it must necessarily be one. The author makes many statements of opinion as if they are facts, and presents worst-case imaginary conclusions as if they are foregone.

Notably, searching for "currency" or "fiat" in his piece conspicuously produces no hits, because comparing Bitcoin to fiat currencies inevitably reveals the glaring flaws with gov-issued currency, something a statist like Robert N McCauley would naturally want to avoid. Bitcoin wasn't conceived as an investment vehicle, it was supposed to be a means to cut the state of the currency game. Yet in a free society people can do what they wish, therefore there's nothing keeping people from investing in it, but no promises of performances are ever made. Caveat emptor! If Bitcoin remains successful and settles down, it will eventually be like gold, a store of value, and part of a portfolio, but certainly not a get rich quick scheme.

[Typhoon]

Counterview

Stephen Diehl | The Token Disconnect

Stephen Diehl | The Case Against Crypto

[Typhoon]

Cryptos, the new inflation hedge, failed to hedge against anything.

by Wolf Richter | Wolf Street Report

At first, years ago, cryptos were supposed to be this new currency that would leave the hated “fiat” currencies in the dust. And then, when that didn’t pan out, they were supposed to be assets whose prices would endlessly boom. And when that didn’t work out in 2021, they were supposed to be a hedge against inflation.

Well, OK, it started out with Bitcoin, and now there are nearly 9,000 of these cryptos, and it turns out they’re just gambling tokens. For example, the largest hedge against inflation, Bitcoin, has plunged by 36% in the two months since November 7, to hedge again 7% inflation over a 12-month period or whatever. So that didn’t work out either. Well, OK, the jury is still out, I can already hear it, it’s going to a gazillion by March.

But if the Fed – at the core of the hated fiat dollar – is tightening, and if cryptos are supposed to be the force that is independent and outside of the hated fiat, why did cryptos plunge today when QT [ Quantitative Tightening ] is showing up on the near horizon? People running for the exists suddenly? Another crypto narrative gone down the drain. In the end, they’re just gambling tokens with which people are trying to get rich quick. And it works for those that can get out in time.

[Typhoon]

WSJ | Cryptocurrency Doesn’t Amount to Much [paywalled]

Blockchain merely mirrors rudimentary parts of the regulated financial system.

By Steve H. Hanke and Matt Sekerke
Jan. 24, 2022 6:21 pm ET

The cryptocurrency lobby plans to spend tens of millions of dollars this year helping its largest holders convert their holdings into actual money. They are looking for a way to spin their crypto straw into gold. Lawmakers and regulators should ignore the hype.

Urging America to “lead in innovation,” crypto enthusiasts tout the innovation of the blockchain. And it’s true that blockchains achieve bookkeeping without a bookkeeper and allow individuals to make transactions anonymously and quickly. But the innovation pretty much ends there.

Compare the functioning of the crypto ecosystem with our current regulated financial system. Cryptocurrencies such as bitcoin are analogous to deposit money. Like regulated banks, crypto operations create digital money. Each cryptocurrency can be identified with its blockchain—a simple bank ledger with its own unit of account. Stablecoins function similarly to federal funds as the “inside money” that allows crypto deposits to move across crypto banks and provides an exchange rate into real U.S. dollars.

What has been hailed as “decentralized finance” rests on the ability of cryptocurrency holders to lend their balances to borrowers. Because such loans don’t involve the creation of new money, as in regulated bank lending, these transactions are actually more like debt finance with a bond, as the Securities and Exchange Commission rightly argued in an acrimonious exchange with Coinbase over its planned Lend product.

In other words, the crypto ecosystem merely mirrors, electronically and anonymously, the most rudimentary components of the regulated financial system. The putative gains are quickly dissipated by crypto’s many weaknesses. The convertibility of stablecoins like Tether to dollars at par is doubtful. People can’t judge credit risk the way banks can. As currently constructed, the crypto ecosystem lacks accountability and legal recourse, so there is little basis for trust. And bitcoin’s basic operations, for example, require enough electricity to power an industrialized nation.

The industry recognizes that these weaknesses are potentially fatal. But the crypto lobby is looking beyond mere regulation to a regime that assures the convertibility of stablecoins to U.S. dollars. While proposals are still emerging, measures such as giving crypto exchanges access to interbank clearings or extending Federal Deposit Insurance Corporation coverage to stablecoin balances would facilitate convertibility and effectively monetize crypto.

Crypto enthusiasts argue their vision of the financial future is needed to counter apocalyptic outcomes, such as hyperinflation and social collapse. Anything is possible, but if governments lose their ability to enforce property rights and ensure security, we’ll have bigger problems than money. As for the exceedingly rare phenomenon of hyperinflation, no major economy is foolish enough to gamble with it.

Unlike the fiat money created by bank loans, which is linked to the real economy, cryptocurrencies are untethered from economic value. To treat crypto as actual wealth on par with labor earnings and returns on actual investments would grant enormous purchasing power to people who have done nothing to expand the productive capacity of the economy. Monetizing crypto would be tantamount to legalizing counterfeit currency. Granting crypto operators access to the core of the regulated financial system would be catastrophic.

Perhaps it is time that we call Rumpelstiltskin by his name.

Mr. Hanke is a professor of applied economics at the Johns Hopkins University. Mr. Sekerke is a fellow at the Johns Hopkins Institute for Applied Economics, Global Health and the Study of Business Enterprise.

[Typhoon]

Doomberg | Dollars Ex Machina

"The majority of cryptocurrency mining is now conducted in commercial mining farms, essentially huge warehouses running thousands of high-powered computer processors day and night. The electricity expended mining Bitcoin and other cryptocurrencies is rapidly approaching 1 percent of global usage, which is famously greater than the total electricity consumption of many smaller developed nations.

Given that cryptocurrencies don’t produce anything of material value, this enormous waste of resources renders the whole enterprise a negative-sum game. Investors can only cash out by selling their coins to other investors — but only after the miners and various cryptocurrency service providers take the house’s rake. In other words, investors cannot — in the aggregate — cash out for even what they put in, as cryptocurrencies are inefficient by design."

The article quoted above

Jacobin Mag | Cryptocurrency Is a Giant Ponzi Scheme

Large Ponzi schemes typically target other financial firms, banks, elite institutions, and other wealthy investors.
Cryptocurrency, by comparison, is the people’s Ponzi.

[Doc]

Regardless of ponzi schemes or whatever there is a serious problem for Cryptocurrencies and digital property as a whole (Including the banking system. Quantum computing. BY 2030 quantum computing will most likely advance enough to break all crypto codes. Once that happens there will not be any secure means of means of making secure digital transaction until hardware for quantum computing is widely available for the masses. This is not speculation beyond what can easily happen. Computing power will drastically increase by magnitudes with Quantum systems. Leaving secure encryption far behind. Internet commerce will cease banking will go back to paper transaction. Weapons of war based on encryption will be useless. And it will happen literally over night.

[noddy]

Im not sure - I feel its obvious bitcoin is a fad, as are all the NFT things, its all sold on emotional hype about the future (tm), its even more fiat than fiat in the sense that the only value it has is the percieved value created by the people participating.

quantum making those calculations easy doesnt mean it makes every calculation easy, every tech has limitations.

crypto has a long history of scaling up the complexity to suit the tech of the day, we will just move to bigger , more complex keys as required.

banks will just physically isolated their private networks used for inter bank and ATM machines from the wider internet if it goes pearshaped , their will be no return to paper, its physically impossible now.

[Nonc Hilaire]

I predict dual (or polyamorous) currencies.

Definitely new government sponsored cryptos used as script, but also physical assets for generational wealth.

[noddy]

I largely agree, tho I will be surprised if government gets any more involved than it is currently, their is no need.

so it remains a FOREX into a virtual, unstable country with no assets - you can make money on the short term money market like any other FOREX, and you would be mad to have too much money tied up in it, like any unstable country.

I still dont grasp how the proponents think it its somehow robust against the hyper inflation and collapse of the local fiat - grid power and open internet require government stability.

Elon Musk and co bringing up low orbit wireless internet to solar powered phone chargers is all good in theory , but thats a fascist cyberpunk world and I doubt Elon will tolerate 3rd party cryptos on HIS network.

Facebook already tried this in India, a special facebook phone with free internet that only went to facebook profitable websites... thankfully it got shut down.

[Miss_Faucie_Fishtits]

I still don't grasp how the proponents think it its somehow robust against the hyper inflation and collapse of the local fiat - grid power and open internet require government stability.

That's making me think the strong suit for crypto is a protest against world governments treating fiat currency like a toy and not being worthy of the responsibility of the trust a global economy should have in them........

[noddy]

I still don't grasp how the proponents think it its somehow robust against the hyper inflation and collapse of the local fiat - grid power and open internet require government stability.

That's making me think the strong suit for crypto is a protest against world governments treating fiat currency like a toy and not being worthy of the responsibility of the trust a global economy should have in them........

yeh thats the claim.

i reckon if fiat collapses, ive got a decade of mad max to deal with before my virtual money experiment may or may not still be relevant.

3rd world countries which are stable in having nothing can probably use it with a bit more confidence than us westerners.

[Nonc Hilaire]

The crypto fans never account for greed, larceny and fraud.

Jack and the Beanstalk is a great story. Who wouldn’t sell the cow for a fist full of magic beans after reading that?

[Typhoon]

Hot Hardware | Cops On A Marijuana Drug Bust Discover An Illegal GPU And ASIC Mining Farm Instead

Altogether, authorities seized equipment worth an estimated 50,000 EUR. They believe the operation, even in its beginning phase, was already generating at least 1,000 EUR in profit each month. The operation was probably using 2,000 EUR a month of stolen electricity.

https://www.youtube.com/watch?v=a5ih_TQWqCA

a5ih_TQWqCA

Semi-log plot of relative bitcoin mining difficulty:

History_of_Bitcoin_difficulty.svg.png (57.65 KiB) Viewed 1639 times

[Source: Wikipedia]