Crypto Conversation

[Wheat/"/"/"]

I am very skeptical of bitcoin but have found this discussion interesting, so thank you to all parties involved. I tend to be extremely risk averse.

Not to take the conversation back to the nursery school level, but what no one has ever explained to me is who set the max number of bitcoins? And what prevents them from changing that max number? And who is the counterparty that says "aha, you got it" when a miner finds a match and gets a bitcoin?

I recently had a crypto training session for work (there were a few hundred of us on the zoom presentation) by one of the large outside companies but they quickly got really deep in the weeds without really covering the fundamentals so it was of limited value.

Here Is a fairly clear article explaining it all….

“Bitcoin mining is the process of discovering new blocks, verifying transactions and adding them to the Bitcoin blockchain.
Each time a new block is discovered, the successful miner is granted the right to fill that block with new transaction data.
In return for dedicating time and resources to performing this task, winning miners receive a free amount of newly minted bitcoin known as a “block reward” as well as any fees attached to transactions they store in the new blocks.
The process of giving successful miners newly minted bitcoin is exclusively how new coins enter circulation.”

“Satoshi Nakamoto” is credited with developing Bitcoin.

[CrazyNotCrazie]

The hard cap is built into the original Bitcoin code by its creator - Satoshi Nakamoto (a pseudonym). The code is freely available for anyone to examine, play with and use. Dogecoin is arguably the most famous derivative (a second derivative actually) based on the original code. It was created as a joke and has the hard cap removed so the supply is infinite.

There have been bugs in the Bitcoin code that broke the hard cap but they have been patched. The blocks in Bitcoin are verified by a network of nodes, spread across the globe, that run the Bitcoin Core software and enforce its rules. They are run on a consensus mechanism so it's not easy to manipulate it. They do not necessarily have to run the most up-to-date Bitcoin Core so there are dozens of version of the software in use. Anyone can run a node. The hardware requirements are minimal. The nodes independently and simultaneously verify the blocks. They work in conjunction with miners to valid, transmit and record transactions on the ledger. Blocks that do not pass are rejected because they are stale (late), duplicate or just wrong.

Technically these node operators could change the hard cap. It would require a coordinated effort between developers, node operators and miners. A developer could update the Bitcoin Core software to increase or remove the limit. If a majority of node operators adopt the new software and enough miners move their computing power to those nodes they could hard ford the blockchain. It's been done before. The old fork (and rules) would still exist and people could use it but would be a secondary chain and compete for resources with the new consensus fork.

So, it's theoretically possible to change the hard cap. The scenario is probably academic but if someone tells you otherwise, they are liars. However unlikely, improbably, impractical it is possible. The main reason why is because current players don't have an incentive to increase supply and reduce scarcity.

Thank you. That is helpful. Doesn't make me any more enthusiastic about it, but I understand it a little bit more so that is good.

[OldPhiKap]

This kind of hits it for me:

https://www.wsj.com/articles/crypto-...se-11652875201

Snippet:

Crypto was [supposed to be] different: It sought to replace the financial system altogether with one that was faster, cheaper, less under the thumb of government and more accessible to the poor. It has had 13 years to make that case, and failed. Bitcoin comprises just 0.2% of international remittances, according to Manuel Orozco of the Inter-American Dialogue, a U.S.-based think tank. El Salvador made bitcoin legal tender last September and heavily subsidized its adoption. Usage has since plunged; only 20% of companies in El Salvador accept it and less than 5% of sales are conducted in bitcoin, according to an April study. The poor, it turns out, don’t need a new currency: They need cheaper ways to use the old one. Crypto makes day-to-day transactions more expensive, not less. Bitcoin ATM fees can range from 7% to 20%, and transaction charges from $1.78 to $62. The only businesses to truly embrace crypto are those allergic to oversight, such as ransomware and sanctions busting.

[Wheat/"/"/"]

This kind of hits it for me:

https://www.wsj.com/articles/crypto-...se-11652875201

Snippet:

“Bitcoin don’t care”.

Despite the negativity those being disrupted want to put out there, Bitcoin is not political. It’s just not. All it aspires to be, is just better money for you and me.

Here’s what hits home for me….and this is just recently.

Emirates, one of the worlds elite airlines, announces plan to accept Bitcoin.

Brazilian banks, including one backed by Warren Buffet with 50 million customers, continue to expand on Bitcoin services. (Watch what they do, not what they say).

40+ countries meet to learn more about Bitcoin at a conference in El Salvador.

Grayscale Bitcoin Trust has “productive” meeting with the SEC as we get closer to approval of the first US Bitcoin spot market ETF.

Global restaurant software provider Lavu announced on May 19, that they’re now in cooperation with Verifone a global FinTech payment solution provider.

Global Bitcoin adoption is growing, and the fear of the unknown of just how this disruption will affect the entrenched financial system will promote more of these sorts of articles.

Tune them out, and focus on what the big money is doing.

[Wheat/"/"/"]

[Jeffrey]

“
Brazilian banks, including one backed by Warren Buffet with 50 million customers, continue to expand on Bitcoin services. (Watch what they do, not what they say).

NU’s desire to make substantial Bitcoin fee income is not a prudent reason to buy Bitcoin. It tells me, Bitcoin will be a net loser for the poor. A knife in the back and more of the same.

[Wheat/"/"/"]

NU’s desire to make substantial Bitcoin fee income is not a prudent reason to buy Bitcoin. It tells me, Bitcoin will be a net loser for the poor. A knife in the back and more of the same.

Hard to imagine the poor working man losing any worse by putting their value earned in Bitcoin than what they currently lose every day in the fiat money system run by elite bankers.

The annual inflation rate in Brazil jumped to 12.13% in April of 2022 from 11.30% in March, and slightly above market expectations of 12.07%. It marks the eighth consecutive month of double-digit inflation rates and the highest since October 2003. Prices advanced faster for transport (19.70% vs 17.37%), namely fuels (33.24%); food & drinks (13.47% vs 11.62%), and healthcare (5.12% vs 4.52%). On the other hand, housing prices rose at a softer pace (13.44% vs 15.00%). On a monthly basis, consumer prices were up 1.06%, easing from a 1.62% rise in March, but marking the biggest change for an April month since 1996.

[Jeffrey]

Hard to imagine the poor working man losing any worse by putting their value earned in Bitcoin than what they currently lose every day in the fiat money system run by elite bankers.

Who do you think runs NU?

On a percentage basis, NU can make substantially more fee income from Bitcoin than fiat currency.

[Kdogg]

“Bitcoin don’t care”.

Despite the negativity those being disrupted want to put out there, Bitcoin is not political. It’s just not. All it aspires to be, is just better money for you and me.

It’s not Skynet. It does not aspire to be anything. People, on the other hand…mainly the people that have a vested interest…want to use it to make money…myself included. Whether as a speculative asset, a store of wealth, or as a means for commerce it’s just another potential financial tool. It’s not some utopia paragon because in the end it’s controlled by people.

[Kdogg]

Hard to imagine the poor working man losing any worse by putting their value earned in Bitcoin than what they currently lose every day in the fiat money system run by elite bankers.

The annual inflation rate in Brazil jumped to 12.13% in April of 2022 from 11.30% in March, and slightly above market expectations of 12.07%. It marks the eighth consecutive month of double-digit inflation rates and the highest since October 2003. Prices advanced faster for transport (19.70% vs 17.37%), namely fuels (33.24%); food & drinks (13.47% vs 11.62%), and healthcare (5.12% vs 4.52%). On the other hand, housing prices rose at a softer pace (13.44% vs 15.00%). On a monthly basis, consumer prices were up 1.06%, easing from a 1.62% rise in March, but marking the biggest change for an April month since 1996.

The Brazilian Selic rate (their Fed Funds Rate) shadows their CPI so no one is losing anything in savings. What they are losing is current purchasing power something Bitcoin would not solve.

[Wheat/"/"/"]

The Brazilian Selic rate (their Fed Funds Rate) shadows their CPI so no one is losing anything in savings. What they are losing is current purchasing power something Bitcoin would not solve.

So nobody is losing anything in fiat savings? But they are losing purchasing power….Hmmmm

Their savings buy less stuff each year, but they’re not losing anything? Seems like twisted logic to me.

Bitcoin is a non inflationary asset. Limited supply, can’t be expanded. Current BTC inflation rate is 1.77% and declining towards zero on a defined schedule.
As more adoption takes place, the main issue with Bitcoin, volatility, should decrease. Purchasing power stored in Bitcoin should remain constant, or grow.

“How can third-world countries counter inflation using Bitcoin”?

[Kdogg]

So nobody is losing anything in fiat savings? But they are losing purchasing power….Hmmmm

Their savings buy less stuff each year, but they’re not losing anything? Seems like twisted logic to me.

Bitcoin is a non inflationary asset. Limited supply, can’t be expanded. Current BTC inflation rate is 1.77% and declining towards zero on a defined schedule.
As more adoption takes place, the main issue with Bitcoin, volatility, should decrease. Purchasing power stored in Bitcoin should remain constant, or grow.

“How can third-world countries counter inflation using Bitcoin”?

There is a difference between prices going up because of supply/demand and because of monetary policy. In Brazil, their savings buy the exact same amount as last year because their interest rates shadow (historically exceed) inflation. The lose is from wages paid today that have not changed. But the money earned today (if saved) will buy the same amount next month. Bitcoin would not solve that.

[snowdenscold]

So I did finally read the entire Molly White piece linked earlier, which was definitely worthwhile, as was the lengthy Current Affairs piece w/ Nicholas Weaver. Both articulated a lot of inchoate thoughts I had about the entire space.

Anyway, in one of the footnotes of the former, it linked to a site Attack of the 50 Foot Blockchain, which I guess is also a book of the same name by the guy who runs it.

Two article of note:
Bitcoin myths: immutability, decentralisation, and the cult of “21 million”
https://davidgerard.co.uk/blockchain...of-21-million/

The conspiracy theory economics of Bitcoin
https://davidgerard.co.uk/blockchain...cs-of-bitcoin/

I am not an economist, and am not well-versed on the debates around monetary policy, but both pieces definitely got my attention. A couple quotes from the latter that seem relevant to our discussion here:

Pure commodities – gold and silver – haven’t done the job of money well for a few hundred years, and Bitcoin wants to be money but was set up to work like a commodity. Nakamoto put a strict limit on the supply of bitcoins: there will only ever be 21 million BTC. So advocates claim Bitcoin is thus, somehow, sufficiently similar to gold to serve as a “store of value” in the desired manner, even “an Internet of true value” (whatever “true” means there). This is despite its extreme volatility making it almost useless as a store of value, and despite it being way harder to use as money than any currency should be, even for its few use cases.

Bitcoin ideology bought into the entire Federal Reserve conspiracy package. The Fed is a plot to use inflation to steal value from the people and hand it to a shadowy cabal of elites who also control the government; the worldwide economy is in danger of collapse at any moment due to central banking and fractional reserve banking; gold – sorry, Bitcoin – has intrinsic value that will protect you from this collapse. Advocates repackage and propagate these ideas almost verbatim, even when they almost certainly don’t know who or where they trace back to.

...

Conventional economics views inflation – a decline in money’s purchasing power – as a phenomenon of consumer prices, consumer confidence, productivity, commodity and asset prices, etc., which a central bank then responds to with monetary policy. Printing more money can cause inflation, but it’s not the usual cause. The conspiracy theorist view is that it’s the central bank intervention causing the inflation. Bitcoin ideology assumes that inflation is a purely monetary phenomenon that can only be caused by printing more money, and that Bitcoin is immune due to its strictly limited supply. This was demonstrated trivially false when the price of a bitcoin dropped from $1000 in late 2013 to $200 in early 2015 – 400% inflation – while supply only went up 10%.

Nakamoto’s 2008 white paper alluded to these ideas, but the 2009 release announcement for Bitcoin 0.1 states them outright:

The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted 
not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money 
and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them 
with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.

Bitcoin failed at every one of Nakamoto’s aspirations here...

[Wheat/"/"/"]

I am not an economist, and am not well-versed on the debates around monetary policy, but both pieces definitely got my attention. A couple quotes from the latter that seem relevant to our discussion here:

Here are the quotes you posted with my thoughts…..


“ Pure commodities – gold and silver – haven’t done the job of money well for a few hundred years, and Bitcoin wants to be money but was set up to work like a commodity. Nakamoto put a strict limit on the supply of bitcoins: there will only ever be 21 million BTC. So advocates claim Bitcoin is thus, somehow, sufficiently similar to gold to serve as a “store of value” in the desired manner, even “an Internet of true value” (whatever “true” means there). This is despite its extreme volatility making it almost useless as a store of value, and despite it being way harder to use as money than any currency should be, even for its few use cases.”

True value means an instrument/unit of something where value can be placed that cannot be counterfeited, like Bitcoin.

The volatility of Bitcoin makes the “short term” (two years <) store of value use a challenge for now in its early adoption phase. As a long term store of value (two years>), BTC has been an excellent store of value asset in its short 13 year history.

Not sure where the author gets their info, but Bitcoin is very easy to use as a currency. Phone wallet to phone wallet transactions between two entities happen almost immediately, without a need for a trusted third party, like a bank. Tiny fees. There is an adoption curve happening, we are in the early phase.


Bitcoin ideology bought into the entire Federal Reserve conspiracy package. The Fed is a plot to use inflation to steal value from the people and hand it to a shadowy cabal of elites who also control the government; the worldwide economy is in danger of collapse at any moment due to central banking and fractional reserve banking; gold – sorry, Bitcoin – has intrinsic value that will protect you from this collapse. Advocates repackage and propagate these ideas almost verbatim, even when they almost certainly don’t know who or where they trace back to”.
...

It’s no conspiracy regarding what the Federal Reserve is doing. Just take an honest look.
The FED continues to counterfeit the dollar,
printing more of them out of thin air, which amounts to stealing the purchasing power of the previous held and earned dollars, through inflation…. of everyone holding dollars. That’s just a fact.

They do this to cover for their poor monetary decisions and to protect the value of assets held by those that actually have assets.
In the eyes of a working class earner, that asset holder is an “elite”. The people who have not accumulated assets are left holding a currency that gets devalued at their expense, not the asset holders expense.

Bitcoin has the promise to fix this by separating money supply from government and bankers control. That would be a good thing for all.
Placing finite control of money supply in hard math/cryptography, not in people, puts control of the money earned in the hands of the individual who actually earned it. How can this be a bad thing?

BTW, the cabal is not shadowy, they are right out in the open. It’s a very small group of people at the federal reserve making monetary decisions that affect everyone.



“Conventional economics views inflation – a decline in money’s purchasing power – as a phenomenon of consumer prices, consumer confidence, productivity, commodity and asset prices, etc., which a central bank then responds to with monetary policy. Printing more money can cause inflation, but it’s not the usual cause. The conspiracy theorist view is that it’s the central bank intervention causing the inflation. Bitcoin ideology assumes that inflation is a purely monetary phenomenon that can only be caused by printing more money, and that Bitcoin is immune due to its strictly limited supply. This was demonstrated trivially false when the price of a bitcoin dropped from $1000 in late 2013 to $200 in early 2015 – 400% inflation – while supply only went up 10%.”

“Printing more money can cause inflation, but it’s not the usual cause”.

Really? I mean really? How dumb does the writer think people are? I guess you could add political spending and debt contribute to inflation too, which is just another small group of “elite” decision makers affecting the value of the currency the wage earners hold.

“The conspiracy theorist view is that it’s the central bank intervention causing the inflation”.

Is it a conspiracy theory when it’s simply a fact that when more money is counterfeited, inflation of that money is the result, and it is the central banks, through the Fed, doing the money counterfeiting?

The world needs incorruptible money.

If anyone has something with a better promise of delivering a place to put my value earned, in a secure, owner controlled unit, easily transferable, unable to be counterfeited, that’s better than Bitcoin, I’d like to look into it.

[PackMan97]

“Printing more money can cause inflation, but it’s not the usual cause”.

Really? I mean really? How dumb does the writer think people are? I guess you could add political spending and debt contribute to inflation too, which is just another small group of “elite” decision makers affecting the value of the currency the wage earners hold.

“The conspiracy theorist view is that it’s the central bank intervention causing the inflation”.

Is it a conspiracy theory when it’s simply a fact that when more money is counterfeited, inflation of that money is the result, and it is the central banks, through the Fed, doing the money counterfeiting?

Inflation is caused by increased demand, decreased supply, or by monetary policy (of which, printing is only one policy choice).

I think it's VERY VERY clear that decreased supply is driving a very significant amount of our current inflation. Whether it's from oil and gas shortages as the world tries to avoid Russian supplies, or from Chinese COVID shutdowns slamming supply chains and causing companies to seek limited alternatives, poor choices on what to do at the start of COVID (see lumber mills shutting down expecting housing to crash and still not really recovered), to an extremely tight labor market as many of left with COVID and not returned. Decreased supply of all the things is causing a lot of inflation.

As for printing money, the most important factor to look at when talking about printing money is the velocity of money. The velocity of money is basically how often a dollar gets spent in a given time. If the velocity of money is decreasing, printing money will have very little effect. The velocity of M1 money has been declining since 2007 and seriously tanked with COVID and has yet to recover. The velocity of M2 money has been declining since 1997 and also tanked at the start of COVID and has yet to recover. There is a lot more to it than this simple explanation from someone who only took one econ course at NC State, but to say, "printing money causes inflation" is just ignoring how economies work.

[mpj96]

You keep using the word counterfeit. This is intentional hyperbole, right? You don't actually equate the federal reserve printing money with the act of counterfeiting do you?

From the crypto bleacher seats it seems supply control should be an issue kept separate and apart from criminal fraud. Mint juleps should always be muddled, but they are an exception to the general rule.

Here are the quotes you posted with my thoughts…..

True value means an instrument/unit of something where value can be placed that cannot be counterfeited, like Bitcoin.

...

It’s no conspiracy regarding what the Federal Reserve is doing. Just take an honest look.
The FED continues to counterfeit the dollar,
printing more of them out of thin air, which amounts to stealing the purchasing power of the previous held and earned dollars, through inflation…. of everyone holding dollars. That’s just a fact.
...

“The conspiracy theorist view is that it’s the central bank intervention causing the inflation”.

Is it a conspiracy theory when it’s simply a fact that when more money is counterfeited, inflation of that money is the result, and it is the central banks, through the Fed, doing the money counterfeiting?

[Jeffrey]

You keep using the word counterfeit. This is intentional hyperbole, right? You don't actually equate the federal reserve printing money with the act of counterfeiting do you?

In Wheat’s defense, his school has been known to counterfeit degrees. If it’s happening at the state level, then it might also be happening at the federal.

[Kdogg]

It’s no conspiracy regarding what the Federal Reserve is doing. Just take an honest look.
The FED continues to counterfeit the dollar,
printing more of them out of thin air.[/B]

The Fed has never printed a single US dollar….ever. Its mandate is to maximum employment and control price stability. It does have tools to increase and decrease liquidity. When they decrease liquidity (and yes they do that) does it do the opposite of what you are claiming?

[Skydog]

AE0DEB0B-609C-42A8-91DF-940D96947CB7.png
Inflation between 0-5% for FORTY YEARS and declining steadily for last 35 years doesn’t look like the work of a Fed promoting inflation to ship worker $ to the elite. And if you want to insist that is their goal I wouldn’t worry about it since their interventions clearly have the opposite effect.

The recent blip is mainly due to covid caused supply chain disruptions and the effect of Russia’s war on energy (and soon food) prices. And the Fed just raised interest rates to slow inflation down. So it’s disingenuous to claim there is some pro-inflation conspiracy at the Fed.

Unfortunately for Biden and the Dems they will be blamed for inflation despite having little effect on it in either direction.

[PackMan97]

In Wheat’s defense, his school has been known to counterfeit degrees. If it’s happening at the state level, then it might also be happening at the federal.

You must spread some Comments around before commenting on Jeffrey again.

Jeffrey wins the internet today. I'm shocked I didn't think of it first, but I'm trying to do what the mods asked and not make every thread about the Tarheels and their cheating ways.