Opinions on cryptocurrencies

Cryptocurrencies, like most currencies, have no intrinsic value. They only have value because people are willing to exchange them at a given rate. Much of the volatility in cryptocurrency is not because if issues with the math or the verification or the costs of mining, the volatility comes from the lack of established value and the lack of a link to physical goods except for the link of the cost of mining the coins. Apart from that, currencies are nothing more than a token. The token has value because people are willing to trade goods and services at a rate they deem fair. Tokens like dollars and euros have a constant dynamic on their value, and because so many people use them for a wide range of items the value is easily maintained. Digital currencies like bitcoin have had far fewer users, and even though they are used for many things online their adoption rate is minuscule relative to the transaction rates of other currencies.

No matter the currency, their value will always remain whatever value people are willing to trade for them.

As for making one unified currency, that sort of thing never works out the way people plan. As long as people desire to trade good and services using a token as value, the token will have value.

Ok for the value. And as for the "one unified" that won't work, that is a very sad observation. But I could tolerate the next best thing: The minimum number of different currencies.

Let's take the Euro crisis as an example of why a unified currency can't work, and let's establish the fact that we need some amount of elasticity in the value and the inflation rates of currencies based on local specificities, we still can attempt to minimize how many fragments are needed no ?

Your third point was usage in relation to goods. Yes, adoption is the main issue cryptocurrencies are facing. But, will really buy/sell transactions for material goods, create a "peg" on the value of those objects ? didn't we see hyper inflation in period of war make the price of bread skyrocket to billions of Deutshmark in Germany ? It seems the value can still be volatile even when massively adopted. But inflation should be something controlled by the central banks, so in a system where the monetary base is fixed, there can be only deflation. And the speed at which it happens cannot spin out of control since the deflation is bound to the production volume of the whole economy, and not arbitrary loans, compensatory easing, or interest rates which are not controllable parameters in current cryptos. So the volatility diminution would have to come from an increase in liquidity only no ?

Crypto, while the idea is neat, the application tends to have few problems:

• Taking too much for doing transactions (which is imho killing off Bitcoin now, on the other hand this gives opportunity for other crypto to take lead ~ although ETH increases in there)
• Global problem - supply & demand of hardware - ETH currently caused increased price for graphics cards, and supply failures for both major vendors - NVidia and AMD ... price went 30% - 100% up, and it will be going up in short term ~ will be solved by either new competitors in the same area, or just increased output of those two
• Global problem - power - mining now consume huge amount of energy, this adds to global ecology problems ... and as a matter of fact drives power price up ~ we can go extinct sooner than we think

As a currency they have extreme flaws:

• Volatility - compare crypto with something stable, like gold ... or even USD ... hell even Russian Ruble is a lot more stable than any crypto currently on the market
• Bitcoin, is not easily Transferable (sigh... the average percentage for transfer went way too high) and Durable (it is tied to network) ... yet as bitcoin fell down from December, Transferability increased (e.g. transfer cost decreased ... it's still way too high though - meaning that there are better alternatives)
• Anonymity - blockchain transaction leave traces, which may be a problem in future (especially for people avoiding taxes, selling or buying on black market, etc.)

In the end, cryptos are something new, and as being said - as long as people will be willing to exchange it for anything else in value - it's going to be there. It is going to stick around for long time.

Crypto is a neat idea, but not one that IMHO is sustainable.

As others have pointed out, it's extremely volatile, which already is a major reason not to use crypto.

But something more I'd like to point out that I haven't pointed out (and I agree with all criticisms so far), but who is ultimately responsible for the currency? USD, for example, is backed by the US government. There is no onus of responsibility on anyone with crypto. This can be fixed, but it's an issue imho that hasn't been fixed yet.

Another thing to remember with something like USD is that we have institutions in place that can control the supply of money and manage it. The Federal Reserve, in case of the USD, dictates monetary supply policy to combat inflation, etc. Whose doing that with crypto? Without some sort of regulating authority, it's far too dangerous to use.

A unified currency can work, but we'd need to go quite far to get it to work. We'd really need to break down borders, and just look at how difficult that would be.

42 minutes ago, deltaKshatriya said:

The Federal Reserve, in case of the USD, dictates monetary supply policy to combat inflation, etc. Whose doing that with crypto?

Well, that's kind of the whole point of a cryptocurrency. The supply is explicitly constrained by the mining algorithm, i.e. the longer you mine, the harder it gets, till eventually it is infeasible to mine any more. In theory at least, the steadily dwindling supply is supposed to cause continual deflation...

That doesn't do anything for the volatility, of course

6 minutes ago, swiftcoder said:

Well, that's kind of the whole point of a cryptocurrency. The supply is explicitly constrained by the mining algorithm, i.e. the longer you mine, the harder it gets, till eventually it is infeasible to mine any more. In theory at least, the steadily dwindling supply is supposed to cause continual deflation...

That doesn't do anything for the volatility, of course

Well, that's what I mean is that there still needs to be a central authority like the Fed. There are other scenarios that can cause inflation or other issues.

The main problem is that cryptocurrency isn't effective and that the best parts of it is already in used by existing government banks.

People say it's great because of no tax and fees. Yea that is what the miner fee is; it is tax and the worst kind. The more users use a cryptocurrency the more they would have to pay so that miners deal with there transaction first.

If the whole world used cryptocurrency and here is only power for 20% of the transactions, you could end up with a situation where you have to pay the miners $10 000 - $1 000 000 to deal with your transaction of a $1 000.

So sooner or later a fixed tax system would have to be implemented, say 4% of the transaction value goes to the miner. Except that wouldn't work because your miners will want to deal with the largest transactions to get the most money.

The simple fact is cryptocurrency is a self destructive system with no place for linear growth.

To fix the linear growth problem you need to give it some one authority over it and they would have to police it. Then you just end up with a system less effective than the banking we already have.

Honestly I think Bitcoin was made to see how long it takes to break the system.

55 minutes ago, Scouting Ninja said:

If the whole world used cryptocurrency and here is only power for 20% of the transactions, you could end up with a situation where you have to pay the miners $10 000 - $1 000 000 to deal with your transaction of a $1 000.

That's a problem specific to cryptocurrencies based on proof-of-work consensus.

Efforts are already underway to detach existing coins from said algorithms, and several existing coins never used proof-of-work in the first place.

12 minutes ago, swiftcoder said:

That's a problem specific to cryptocurrencies based on proof-of-work consensus.

True the bloating example is mostly to bit coin but peer coin has it's own list of flaws.

In the end the problem is that keeping the money secure requires work and work = money. The people using the system has to pay for it and often taking a cut from what they put in is the easiest and most fair way.

Cryptocurrencies will keep loosing value as they grow because there growth is what rises there costs. The system isn't even new it's just digitized.

All the reasons cited above are valid concerns to me. That's why my prefered cryptocurrency and the only one I can endorse with mind honesty, is nano (ex RaiBlock). They use multiple blockchains and no mining. So no waste of energy, instant transactions, and no fees. The host of the network nodes are idealists like hosts of tor nodes. There is less corruption in nano space thanks to no gold rush. It doesn't solve the economics though. (supply/inflation/volatility..)

I've head the opinion though that economics could be a part of the system, since lots of those things work with votes already, we can imagine a crypto with director interests and all central bank prerogatives included in the system and the people would have control by votes. so a replica of the current system but with full democracy.

4 hours ago, Scouting Ninja said:

Cryptocurrencies will keep loosing value as they grow because there growth is what rises there costs

That may be [citation needed], because so far the major Cryptocurrencies have mostly gained value as they grow, despite rising costs.

2 minutes ago, Lightness1024 said:

with director interests and all central bank prerogatives included in the system and the people would have control by votes. so a replica of the current system but with full democracy.

I'm not sure I trust the general populace to know how to run an economy... Not that the central banks have always shown great reliability on that score, but in theory they are subject matter experts.

15 hours ago, swiftcoder said:

That may be [citation needed], because so far the major Cryptocurrencies have mostly gained value as they grow, despite rising costs.

Cryptocurrencies have the problem that it's hard to separate there value from there coin value.

What I meant was that as it gains more user the cryptocurrencies become less stable and slows down and becomes less usable and so the cost of maintenance rises.

Proof-of-stake does improve on this and so does some of thee Hybrid systems but in the end still suffer from the same problems.

Don't get me wrong, I am not against cryptocurrencies. I am against a single unified cryptocurrency.

The reason cryptocurrencies work right now and have such low tax rates is because of how they loose value as they grow. There is a tipping point for them and as long as there is many competing systems there tax rates will stay low.

Rant:

People seam to think that things like the private sector and government sector was build out of greed, when in fact it was build out of necessity to fight against greed. Tax wasn't someones great scheme to make money, it was decided as a fair way to pay for things.

People look at cryptocurrencies and think, "Hey look no tax!" without thinking about what it means if every miner gets 1%.

"The 1% is made up value, there not taking it from my share." Yes they are, by adding in more coins they reduce the value of the coins you have.

We as developers use these tricks in our games, MMO design is the same thing. When you think of it cryptocurrencies is just a MMO.

1 hour ago, Scouting Ninja said:

We as developers use these tricks in our games, MMO design is the same thing. When you think of it cryptocurrencies is just a MMO.

I absolutely agree with this sentiment.

Also I'd add, crypto isn't anything new in terms of pure tech. It's just a new combination of tech. Much of the tech has existed before and in some cases, is already being used.

I'm not touching crypto currencies with a ten foot pole. No way, no thank you.

1) It's not an investment. The "value" of crypto currency is driven purely by speculative hype. Hype is never a sound or stable investment strategy. Warren Buffet is wisely staying far away from it because he doesn't understand it. That should be a red flag.

2) Valve pulled their support for Bitcoin a month or two ago. They said that the reason was for the volatile price fluctuations. That makes sense. You can't build a stable business when your bottom line is so volatile and unpredictable. How many other businesses will stop accepting the currency as a valid form of payment for the same reasons? What does that mean for a "currency" when its not accepted as a form of payment in a transaction? That should be another red flag.

3) There is a small number of people who have put their fortunes into Bitcoin. A very small number. I believe they're operating a pump and dump scheme, and anyone who buys into the "currency" is going to be left holding the bag when the floor drops. That's the last red flag.

20 hours ago, Scouting Ninja said:

People seam to think that things like the private sector and government sector was build out of greed, when in fact it was build out of necessity to fight against greed. Tax wasn't someones great scheme to make money, it was decided as a fair way to pay for things.

Nice, I think that's a good perspective and a bit of fairness is overdue in the debate.

19 hours ago, deltaKshatriya said:

Also I'd add, crypto isn't anything new in terms of pure tech. It's just a new combination of tech. Much of the tech has existed before and in some cases, is already being used.

Absolutely, that's what I start with in my article (linked in OP).

11 hours ago, slayemin said:

The "value" of crypto currency is driven purely by speculative hype.

True. But there is indeed a small amount of bias for increase in value. Pure speculation would not leave you with more than 50/50 chance of loss vs profit. However, if we take BTC: that is a coin with a fixed supply, because of people who lose their keys (coin burning), and because of the entropy in the real economy "always rising" (added value theory), BTC is a deflationary currency by nature, which means it IS an investment.
Also there is a bandwagon effect which is why some people have accused it of being a Ponzi (more people coming is the reason for rise in value, which is not sustainable -> pyramid effect.) But I refute this accusation in my article.

12 hours ago, slayemin said:

Warren Buffet is wisely staying far away

So this comment has been a subject of extensive discussion in the field, and this doesn't have to be a red flag at all. Buffet said he will not invest in Apple either. You take it or leave it if your personality matches his, that's all, but it's not an absolute red flag. Authority is not an argument (one of the rhetoric fallacies).

12 hours ago, slayemin said:

I believe they're operating a pump and dump scheme

This is very much and sadly true, not so much in BTC because of the very large capitalization, but on other smaller coins it's the wild wild west and lots have been left holding the bag. I personally think this is not a problem at all, and it's a anarcho liberal point of view, the thing is just to be aware of this and hedge according to risks you can take, if you can't, just don't play, but there is no need to dismiss the game altogether because the players are rough.

2 hours ago, Lightness1024 said:

(more people coming is the reason for rise in value, which is not sustainable -> pyramid effect.) But I refute this accusation in my article.

But it isn't sustainable. That is why we need multiple Cryptocurrencies.

I don't believe it's a scam, it's just the nature of any money system, there have been a few currencies before that died of similar effect; a few even died because of the opposite effect.

It's the whole reason Cryptocurrencies need to fluctuate. As long as they keep rising and falling in value they can sustain them self. Because don't forget they don't have a government who can sustain them.

Cryptocurrencies are meant for small trades, but investing money into them is just gambling.

On 12-2-2018 at 3:52 PM, deltaKshatriya said:

The Federal Reserve, in case of the USD, dictates monetary supply policy to combat inflation,

Wrong, they PRINT more money to have more money, they do it with policy to not CAUSE too much inflation. Most if not all cryptocurrencies have a limited supply.

On 13-2-2018 at 5:45 PM, Scouting Ninja said:

Tax wasn't someones great scheme to make money, it was decided as a fair way to pay for things.

Tax was someone's scheme to produce military and thus tax more areas. People accepted taxation and have ever since been trying to make taxation work more for the common good.

Also, miners and transaction-fees are differnet things then taxation, miners mean inflation, though the max. amounts of coins for a given CC has already been pre-defined. (oh, and you HAVE to pay REAL taxes over CC's, anything that has value is taxable.)

@Lightness1024: there is no advantage to having only one currency, as a user you just gotta remember you don't have to use them all, you just use whatever currency suits your needs best(aka you can pay with it in a local store)

Crypto currencies are the future, not now and maybe not in next 50 years but a time will come where we will pay digital only. Take a look at Paypal for example, it is comfortable and today really convinient to pay with Paypal and even Skype now implements a payment service (I never sayd I trust Microsoft ). I agree to all the backdraws that come up here saying that all for primary Bitcoin as the dinosaur of CCs has massive problems but I wont see it as the future of payment rather than a toybox so one could experiment and extend the technology for a Bitcoin 2.0 however it will be named then.

I study CCs for a long time know since 2014 (and yes this is ages in technology) and I saw the evolution, anonymity, more anonymity, even more anonymity and mathematical improvments to make data blocks smaller and security higher. The core technology is very interesting to me.

The pros are uncontroversial there while the cons are there too. The most given argument is that CCs at the moment arent very stable in value but to solve this we should first take a look at the history of money. People found/harvested something (I may remeber it were shells as the first really trading value) that other people also liked to have and trade other goods and services for. It became convinient because you wont be in the need to carry a chicken anymore for trading that against something else over a long road and back home; letting other new business grown up like merchants or money changer (that later become banks)

Complete History of Money

I see this as the primary advantage of any CC regardless how it is implemented at the end, that people can carry there values without any major drawbacks. You wont need a bank account anymore (what I think is the main reson that CCs will not establish so far because companies earn money with your money) that disables the need for storing fees you have to pay. Without a bank account you also wont need an address that is why some homeless people cant get work in our countries (you need a home to get a bank account to get a job to get a home = fail!). Ever payed for bank card, print your own ones with CCs. It dosent take time to change your account like two weeks for the traditional way, it does just take a few seconds and you are done. Payment (could be) as fast as hell, while you have just to scan a QR code on checkout and your partner in contract gets nearly instant message about success or failure while you can also pay at weekend or holiday out of the usual business hours.

Transactions are as safe as the crypto problem is and unless someone invents the quantum computer, they will stay so (while even with our other currencies will get unsafe with a quantum computer) and anonymous if used correctly. This might be a point where people will discuss about but my opinion is that government should not know about what/who I pay nor has it the right to denie access or steal my money for whatever reason. Tax crime is a problem today but I dont think it will be a greater problem in a CC scenario. People will then just be forced to make a tax sheet what most companies and self-employed persons are need to do anyways so government can still check for tax crime while no-one other can investigate a persons payment history just from the blockchain.

Evaluating payments costs energy and so money this is fact but also fact is that any other of our digital payments today costs energy as well. But with a CC based payment system people offering computing power could earn money and so have the flow of currency units never stopped. I calculated with a fixed ammount of transaction fees that are measured not on value but on size of the transaction. It is not the transaction value that consumes the power but every block of bytes so why not pay per block where a block is big enougth to hold the information for one payment plus a bit extra. Larger payments or bigger payment bundles will then be at a higher cost because they take the space of smaller payments while transfering other values, for example contracts would also cost a bit more. I would give that money however to the evaluating network node to give an appeal to the human kind to take part at the system. However the crypto problem should be solved on evaluation, it should be fair and I also think we need multiple evaluations in parallel to get all the payment traffic done in the future.

I think the above can also help keeping the value stable because currency units are always in flow until the whole system stops working while I agree that the CC value should be something physical too. It is right that countries print there own money and print more money as some of them might have in gold and other values. Occasionally a reason for countries to make debts and get into insolvency. The backdraw on Bitcoin was that when the blockchain starts the first time, the inventors of Bitcoin should have taken a huge ammount of coins for themselfs before going into real public traffic. I thought about it and in my opinion there should be an initial fixed value of currency units equal to the financial value of a country spread to each country taking part at the system. So you will never ever have more units as are sealed by the value of a country. Countries give there currency units to citizens and may give or take currency units to keep the currency stable.

There are also a little more problems CCs have to solve in the future but I think this hits the core discussion

18 hours ago, Dramolion said:

Wrong, they PRINT more money to have more money, they do it with policy to not CAUSE too much inflation. Most if not all cryptocurrencies have a limited supply.

Incorrect. Printing money is one means of combatting inflation, amongst other policies. Another is setting the reserve requirements for banks. There is also buying back and selling bonds to control the money supply. They also set interest rates for lending out of the central reserve. It really isn't as simple as you're presenting it to be.

https://www.thebalance.com/the-federal-reserve-system-and-its-function-3306001

Cryptocurrencies have no means of controlling money supply. There might be a limited supply, but there's no means of stopping a party from dumping all of his/her cryptocurrency. Moreover, what happens if there's some sort of economic panic? Or if there's two few cryptocurrencies chasing too many products (deflation)? There's a wide variety of issues that requires some sort of central institution.

@Shaarigan: undeniably there are advantages to CC, but are these advantages exclusive to the system of CC? IMO they can (and at least some ideas already are) be implemented into more traditional currencies. Certainly while CC won't disappear, I'm not holding my breath for widespread adoption either.