Merged Bitcoin - Part 3

[The Don]

As with any exchange rate, there is always a buy/sell spread. But that would apply to converting fiat currency to and from Bitcoin as well.

Yes, but the buy/sell spread can be considerably wider depending on which financial institution you're using.

For example my Nationwide Building Society Visa card doesn't charge a transaction fee for foreign currency transactions and the exchange rate is very close to the spot rate.

My Barclaycard Visa card charges a 1% fee and the exchange rate is typically 1%-2% worse than the spot rate.

 

[Samson]

Yes, but the buy/sell spread can be considerably wider depending on which financial institution you're using.

For example my Nationwide Building Society Visa card doesn't charge a transaction fee for foreign currency transactions and the exchange rate is very close to the spot rate.

My Barclaycard Visa card charges a 1% fee and the exchange rate is typically 1%-2% worse than the spot rate.

The virtue in these fees is the certainty your capital is preserved.
Crypto is impossible without entities resembling banks to transfer wealth. From time to time that wealth disappears as in FTX etc.
Richi Sunak is the latest celebrity to extoll crypto, watch this space.

 

[Samson]

I suspect the present few hours down draft in crypto "assets" is related to Binance and Mazars suspension of auditing work.

https://www.tradingview.com/news/re...or-mazars-pauses-all-work-for-crypto-clients/

 

[The Don]

Media sentiment regarding cryptocurrencies seems to have changed:

If Bitcoin was a boxer it would be a scrappy brawler that refuses to give up.

But the last few weeks it has taken a pummelling, with the collapse of industry giant FTX and the arrest of its founder Sam Bankman-Fried in the Caribbean.

Bitcoin is used to taking knocks, but this anti-establishment fighter was already on the ropes after its most bruising year yet.

If Bitcoin was a boxer it would be lying on its back on the canvas seeing stars.

It is down, but is it out?

https://www.bbc.co.uk/news/technology-63990215

Whether this is an accurate summary of the situation is a question I would leave to the reader to assess. I've never understood cryptocurrencies so I wouldn't know when or if they've jumped the shark.

Given how wrong the media usually is (or how far behind the curve) then I wouldn't be shocked if there was a sustained surge in the price of Bitcoin over the next few months.

 

[The Don]

I cannot comment on the accuracy of this Youtube video claiming that using Bitcoin has allowed money to be funnelled to Russia.

 

[Suddenly]

That was originally part of the design spec. The hope was that the price of bitcoin would get so high that you had to break it up into smaller units.

We have mBTC (1/1000th of a BTC), uBTC (1/1000,000th of a BTC) and the "Satoshi" (1/100,000,000th of a BTC).

At current prices, $1 USD = 57 uBTC.

Designing a currency around the assumption of hyper-deflation is... interesting.

 

[Suddenly]

I cannot comment on the accuracy of this Youtube video claiming that using Bitcoin has allowed money to be funnelled to Russia.

It strikes me as a "water is wet" sort of revelation. It's the nature of the beast that bitcoin could be used in ways to avoid government regulation. I mean, that's a large part of the case for it's existence.

It's just one person's noble civil disobedience is another person's criminal behavior.

 

[psionl0]

Media sentiment regarding cryptocurrencies seems to have changed:

https://www.bbc.co.uk/news/technology-63990215

Whether this is an accurate summary of the situation is a question I would leave to the reader to assess. I've never understood cryptocurrencies so I wouldn't know when or if they've jumped the shark.

Given how wrong the media usually is (or how far behind the curve) then I wouldn't be shocked if there was a sustained surge in the price of Bitcoin over the next few months.

There is a myth that bitcoin can't exist without exchanges and that if an exchange disappears then so does bitcoin.

This has just never been the case in the past. Exchanges have come and gone (most notably MtGox) yet bitcoin keeps bouncing along. As long as there is a demand for exchanges, new exchanges will crop up as others fail.

 

[Chanakya]

That was originally part of the design spec. The hope was that the price of bitcoin would get so high that you had to break it up into smaller units.

We have mBTC (1/1000th of a BTC), uBTC (1/1000,000th of a BTC) and the "Satoshi" (1/100,000,000th of a BTC).

At current prices, $1 USD = 57 uBTC.

That's interesting. I hadn't known that.

Looked it up, admittedly very cursorily, and apparently the tiny Satoshi unit can get recorded in the blockchain. That's very cool, in that that specific issue I spoke of had clearly been pre-empted, and a workaround already built in. So I can, already, and ignoring all other issues for the moment, actually order a pizza today using BTC.

Heh, but that also means Satoshi had intended, or at least pre-empted (maybe hoped and prayed for?!), this frenzy of speculation interest. ............But I guess that's kind of unfair, that criticism, because if you don't do it it's a design glitch, and if you do then it's greedy hope-to-get-rich-quick cunning!


So, the sense I get from a cursory read of some stuff, is that as we get closer to the limit, it isn't that mining will stop, but that smaller and smaller units will be produced, in lesser and lesser amounts. Of course, whether that will be cost-effective will be a function of the price levels prevailing, as always.

 

[marting]

Miner's don't make money only on minting bitcoins but also on fees to include pending transfers. People that want their transfers recorded quickly offer higher amounts. Miners can and do give priority to those that offer more. As the bitcoin limit is reached, miners will depend more on the fees and less on the bitcoins they mine.

 

[Samson]

Someone might answer this.
Bitcoin at 1 million dollars will consume all world energy?

 

[marting]

Someone might answer this.
Bitcoin at 1 million dollars will consume all world energy?

No. Mining complexity has little to do with bitcoin price. It''s adjusted by algorithm to maintain a mined block rate regardless of price.

 

[jeremyp]

There is a myth that bitcoin can't exist without exchanges and that if an exchange disappears then so does bitcoin.

Probably it does - if all the exchanges disappear. How do ordinary people buy and sell Bitcoin without an exchange? If you want to buy BTC, you have to find somebody who has got it and agree a price with them. Theoretically, you can do it without an exchange but it's much more difficult.

Furthermore, exchanges can actually make BTC more efficient because, as long as you leave your cryptocurrency in the exchange's wallet, nothing has to go on the blockchain. BTC already has a scaling problem, I wonder how much worse it would be without exchanges.

This has just never been the case in the past. Exchanges have come and gone (most notably MtGox) yet bitcoin keeps bouncing along. As long as there is a demand for exchanges, new exchanges will crop up as others fail.

You're conflating the demise of individual exchanges with the demise of the whole system. MtGox was a famous failure but it was far from the only place you could trade BTC. If it had been, BTC would have crashed almost to zero.

That leads me to realise that your opening sentence is a straw man. Nobody says any single exchange is a requirement for Bitcoin to work, but there must be some exchanges.

 

[jeremyp]

No. Mining complexity has little to do with bitcoin price. It''s adjusted by algorithm to maintain a mined block rate regardless of price.

Actually, it has a lot to do with the price. If a BTC = $1 million, I can spend $990,000 electricity mining it and still make a profit. If a BTC is only worth $1,000 and it costs me $990,000 to mine, I lose money.

Conversely, if it only costs $1k to mine a Bitcoin and it is worth $1 million, there's a huge profit, which means lots more mining will be done, which means the complexity and hence the cost will go up. The equilibrium point is probably around the point where it stops being profitable to mine BTC i.e. near the price of BTC.

It's slightly complicated by the fact that there are fees as well, but if the profit is BTC value + fee, then the cost is likely to be near that, because, if it was much less, you'd have more people joining the pool of miners.

 

[marting]

Actually, it has a lot to do with the price. If a BTC = $1 million, I can spend $990,000 electricity mining it and still make a profit. If a BTC is only worth $1,000 and it costs me $990,000 to mine, I lose money.

If BTC was $1,000, or even $100, many mining companies would be out of business. In particular the leveraged ones that borrowed money over their capital investment. But the hashes needed to mine a block would just decrease such that the burn rate (electricity mostly) of miners is less than or equal to the required income. Minting of new blocks would continue.

 

[The_Animus]

Probably it does - if all the exchanges disappear. How do ordinary people buy and sell Bitcoin without an exchange? If you want to buy BTC, you have to find somebody who has got it and agree a price with them. Theoretically, you can do it without an exchange but it's much more difficult.

Crypto ATMs exist pretty much everywhere at this point. Even some small towns with a population of less than 5k have them. Some you can only buy crypto, some you can buy or sell. You don't need an account and you use your own wallet. Scan your wallet address, put in your money, wait 15 minutes for the blockchain confirmations, and you're done. Anyone with sufficient funds can buy one of the various models of crypto ATM and make an arrangement with a local gas station or whatever to house it just like any other ATM.

 

[Dr.Sid]

Crypto ATMs exist pretty much everywhere at this point. Even some small towns with a population of less than 5k have them. Some you can only buy crypto, some you can buy or sell. You don't need an account and you use your own wallet. Scan your wallet address, put in your money, wait 15 minutes for the blockchain confirmations, and you're done. Anyone with sufficient funds can buy one of the various models of crypto ATM and make an arrangement with a local gas station or whatever to house it just like any other ATM.

Doesn't that make it an exchange ?

 

[jeremyp]

If BTC was $1,000, or even $100, many mining companies would be out of business. In particular the leveraged ones that borrowed money over their capital investment. But the hashes needed to mine a block would just decrease such that the burn rate (electricity mostly) of miners is less than or equal to the required income. Minting of new blocks would continue.

You now seem to be agreeing with Samson. The more expensive BTC is, the more electricity will be consumed by miners.

 

[jeremyp]

Crypto ATMs exist pretty much everywhere at this point. Even some small towns with a population of less than 5k have them.

I've never seen one in my life.

Some you can only buy crypto, some you can buy or sell. You don't need an account and you use your own wallet. Scan your wallet address, put in your money, wait 15 minutes for the blockchain confirmations, and you're done. Anyone with sufficient funds can buy one of the various models of crypto ATM and make an arrangement with a local gas station or whatever to house it just like any other ATM.

Let's suppose that you own one of these ATMs. Where do you get the BTC to "stock" it? How do you price the BTC?

If you had a BTC ecosystem without exchanges, they will inevitably arise because they make certain functions very much easier.

By the way, these ATM's sound like an excellent way to scam people, particularly the ones where you can sell BTC.

 

[marting]

You now seem to be agreeing with Samson. The more expensive BTC is, the more electricity will be consumed by miners.

That's generally true except I don't see BTC's value going through the roof. However, i suspect investors in mining put a large portion of that capital into BTC marketing. To the extent more buyers than sellers drive up the price, current miners benefit. Works until it doesn't then you have underwater miners. But mining will go on. Trick for the VCs is when to jump in and out of the miners. My perspective on bitcoin and crypto/web3 in general, is similar to Molly White's. It's a solution in search of a problem. Blockchain is a clever idea but actual use cases are somewhat elusive.