Crypto currency: What are your thoughts?

[Bicurico]

Hi,

I am a 51 years old engineer.

I worked with computers since I was 10 years old and still today I spend most of my time with technology: CAD/CAM/CAE, CNC, CMM, but also spectrum analysis, TV, CATV and SAT reception and distribution, emulators, electronics, etc.

Yet, I have to confess that I suddenly feel like being part of the "old generation": my younger coleagues at work (former students of mine), in their late 20ies, early 30ies, all use some form of crypto currency. They have credit cards linked to their crypto wallet, they invest some of their money in Bitcoin, Dodgecoin, Ethereal, etc. They talk about their portfolios and basically consider all of that normal.

I, on the other hand, have my money sitting on a bank account without any application (the time to read the contract is more valuable that the interest rate offered). I don't invest in the stock market, either.

The only thing I have done is to invest in real estate.

The reasons for being so avid against investing in crypt currency or stocks is that I cannot afford to lose the little money I have.

But, I could, like my colleagues, take up to 1000 Euro play money and do investments. Yet, somehow I never done it.

But now I am reading more seriously into this new financial world and my conclusions are:

1) Bitcoin does seem like a pretty good Ponzi scheme.
2) I wonder were the different wallet providers get the money to pay 10% to 16% interest rates from?
3) It sounds all so easy, yet so complicated and obfuscated: it is hard to really understand what is behind it, even if the currency is based on "open source".
4) I roughly understand what a blockchain is, but then, do I really? Does the broad public investing in crypto currencies really know what a blockchain is?

Take a look at www.helium.com. They have their own crypto currency HNT and you can mine it by providing a gateway for LoRaWAN. The point is that instead of solving math problems to earn crypto coins, you provide a "useful" contribution to LoRaWAN coverage. But: where does the money come from - up to 500 Euro/month per gateway? Why are the gateways so expensive (100 Euro hardware sold for 600 Euro with huge waiting lists, or buy it from scalpers for 1.500 Euro right away)?

I really would like to know what you guys think and do regarding crypto currency.

Thanks,
Vitor

[ataradov]

Here are my thoughts - crypto currencies are a scam. Take helium. What does use of crypto achieve here? Can they not call it "loyalty points" and add them to the users account just like we did for decades? And this is the case for 99% of crypto currencies. Helium are actually on the right track here, the money comes from the fact that company itself does not have to put up those gateways (the first version of the gateway they were actually giving away for free to seed the market, since their business is the modules for end devices). And you are not getting $500/mo, unless you are in a heavily trafficked area. And once they know what areas are heavily trafficked, they will install their own gateways there, those minimizing your earning potential.

They obviously did it as a way to attract idiots that are now buying up all those gateways and setting them up without having any understanding of what is going on. As usual, some will make some money. Majority will lose. In this case scalpers will benefit the most, cashing in on the hype.

I really don't see what problem do they solve. Ok, you can't mess with transactions. Did we have a problem with the real banks with relational databases mess with transactions? I don't think so.

And if crypto currency were to be adopted as a national  currency, it would have to be under the complete government control, so it just turns into more expensive to run database. I'm excluding pathological cases like Bolivia, where it really does not matter what you do, it is all bad.

My real hope is that this forum is not full of cryptobros and this will not turn into a traditional crypto circle jerk.

[Johnny10]

The OP made his own best point... I can't afford to lose the money.

Enough said.

Play Red on the roulette wheel if you want to take a chance.
You will either win or lose and you will know right away.

[eti]

Fairytale "Money" 

[nali]

Fairytale "Money" 

OK then, so what is "real" money? Mine just says the bank promises to pay me on demand... good luck going down to your local bank (if you can find one now) and getting your £1 worth of <whatever> 

I agree with Johnny10 though. If you want to play, only invest what you're prepared to lose. Sure, crypto has its place and will ultimately be the enabler for other stuff but an investment in current times? nah.

[ataradov]

OK then, so what is "real" money?

That is debatable, but it is pretty clear that crypto currencies are not better in that respect than any other real-world money. And anyone who claims otherwise is either an idiot or tries to take advantage of other idiots.

[Cerebus]

OK then, so what is "real" money? Mine just says the bank promises to pay me on demand... good luck going down to your local bank (if you can find one now) and getting your £1 worth of gold 

What gold? Britain has had a purely fiat currency since coming off the gold standard in 1931. If you went to the Bank of England and demanded they made good on the promise printed on the note they would give you ... another note or perhaps some £1 or £2 coins.

[Bud]

It is a highly speculative instrument at this point in time. Many coins and tokens do have utility value (designed to solve specific problems) and many do not.   If you have fear to lose your investments and have short-time expectations, do not get into crypto.
In case you still have some money that you would like to grow long term and trust Warren Buffet's advice, consider investing in so called index funds.

[daqq]

There are real world applications for cryptocurrencies, though many of them are kinda on the naughty list. Possibly most - I do not know of anyone who actually traded anything other than other crypto or money for crypto.

1) Bitcoin does seem like a pretty good Ponzi scheme.

Fairytale "Money" 

At the end of the day, all money (whether fiat or representative) has value only because people agree that it (or what it represents) has value and therefore are willing to offer goods and services in exchange for said money. Whether the amount of money you have is represented by a number printed onto papers and coins in your wallet, a few kB of database logs in your bank or a few lines in a distributed blockchain database, the concept remains. And anything only has the value that a buyer is willing to trade for it, whether in goods, services or money. Given the "money printer go brrrrr" attitudes, I can see why people want a digital financial service that is not prone to state control and transparent-ish.
While I abhor the absolutely tremendously insane amount of power being consumed by bruteforcing cryptographic algorithms, I can see the value of the concept. Sadly, BTC came first rather than more energy efficient algorithms. And the whole thing devolved into speculative purchases rather than using it as an alternative currency.

[nali]

OK then, so what is "real" money? Mine just says the bank promises to pay me on demand... good luck going down to your local bank (if you can find one now) and getting your £1 worth of gold 

What gold? Britain has had a purely fiat currency since coming off the gold standard in 1931. If you went to the Bank of England and demanded they made good on the promise printed on the note they would give you ... another note or perhaps some £1 or £2 coins.

OK, strike the word "gold" [above post edited] which really only serves to reinforce my tongue in cheek question.

[Johnny10]

"real money" is a store of value.

Our members living in countries with high inflation may move there fiat currencies into gold, diamonds, emeralds to hedge against wild fluctuations.
Converting your inflationary susceptible currency into Crypto doesn't alleviate this problem, I suggest it often makes it worse.

Moving US dollars into Crypto doesn't make sense unless it is for speculation.

But let some of the Latin American members or others from high inflation problem countries tell us what they do when their local currency has 80% or more inflation.

[Whales]

Yet, I have to confess that I suddenly feel like being part of the "old generation": my younger coleagues at work (former students of mine), in their late 20ies, early 30ies, all use some form of crypto currency. They have credit cards linked to their crypto wallet, they invest some of their money in Bitcoin, Dodgecoin, Ethereal, etc. They talk about their portfolios and basically consider all of that normal.

Don't be sucked in by the psychology.  The world is a big place, there are lots of people that treat things as "normal" that you probably want to avoid. 

Pyramid schemes AKA multi-level marketing
Investing and controlling money of other family members
Lots of credit card debt across multiple cards
etc

Be wary of "fear of missing out" and "everyone else is doing it, I want to jump on the bandwagon".  These are strong motivators used by many companies to get people to do what they want and spend money where they want them to spend money.

To be brutally honest: if I wanted to get money quick, I'd target someone who identifies themselves "as part of the old generation" with an investment scam.  I'd show them growth rates, talk about how many other people my age are investing; if I tried enough targets it would probably eventually work (and would pay better than my current jobs).

3) It sounds all so easy, yet so complicated and obfuscated: it is hard to really understand what is behind it, even if the currency is based on "open source".
4) I roughly understand what a blockchain is, but then, do I really? Does the broad public investing in crypto currencies really know what a blockchain is?

Yes all the details matter.

In a perfect world markets don't have any hidden gotchas.  Things go up, things go down, you can put money in and take it out whenever.

In reality all "markets" have their own weird limitations that can trap you.

The bitcoin blockchain is very large, so most people trading it in don't directly run blockchain software on their own computer and instead get someone else to do it for them.  You give money to a company, they hold the coins for you, then they pay you back when you choose to sell the coins again.  Good luck suing/chasing them if they choose to misbehave. 

Bitcoin trading or holding companies do not even have to intentionally misbehave, bitcoins are a lot harder to "hold onto" than physical assets like gold because theft requires only a few small packets of data (micro-seconds of internet time) versus trucks, minis and explosives.  Some of the biggest bitcoin exchanges have collapsed because of hacks and others still lose large amounts of the coins they hold.  I'm not trying to spruik gold here; but it's worth understanding how "small" and "lightweight" bitcoin ownership information is.

If you want to invest/gamble then go right ahead; all markets have risk.  Alas I'm particularly uncomfortable with all "new" markets, including blockchain/crypto ones.  Best of luck.

[nctnico]

Hi,

I am a 51 years old engineer.

I worked with computers since I was 10 years old and still today I spend most of my time with technology: CAD/CAM/CAE, CNC, CMM, but also spectrum analysis, TV, CATV and SAT reception and distribution, emulators, electronics, etc.

I really would like to know what you guys think and do regarding crypto currency.

Stay away from it. Crypto currency is not suitable to replace money as we know it because it can not be printed at will (which is why all countries have left the gold standard).

Imagine a village where they have 1kg worth of gold coins. 1 loaf of bread feeds a family of 4 for 1 week and costs 1 coin in 1900. Fast forward a couple of decades and the number of people have doubled. This means that the amount of bread needed also has doubled. With the same amount of gold it means that 1 coin now buys two loafs of bread. This means that the intrinsic value of the gold has doubled. The people who where able to hold on to some gold have seen their savings double in value without doing anything for it. In the end a system where supply of money doesn't keep up with the size of the economy won't work.

If you want to invest money I strongly suggest to talk to a financial planner. Likely that person will advise you to invest in a fund where fund managers do all the hard work. Unless ofcourse you fancy getting into buying / selling shares but for most this is an expensive hobby. I used to work at a stock trading / fund management firm and being succesful takes a lot of experience and effort.

[NiHaoMike]

Helium is a great idea destroyed by greedy inventors. Perhaps someone could make a decentralized alternative?

There are real world applications for cryptocurrencies, though many of them are kinda on the naughty list. Possibly most - I do not know of anyone who actually traded anything other than other crypto or money for crypto.

Cryptocurrency can be traded for services or physical goods. One perfectly legitimate use is a decentralized alternative to Patreon and Paypal.

While I abhor the absolutely tremendously insane amount of power being consumed by bruteforcing cryptographic algorithms, I can see the value of the concept. Sadly, BTC came first rather than more energy efficient algorithms.

There are altcoins like Curecoin/Foldingcoin that do useful work (biomedical simulations) for mining. A side effect is that because GPUs are almost optimal for that simulation work, there's basically no advantage to developing an ASIC for that.

Some other altcoins like Swagbucks use cryptographic hash brute forcing just like Bitcoin does but with tricks to discourage large mining operations in order to keep the difficulty low and efficiency high, most of them involving the IP address the miner is operating from.

What I would like to see is a cryptocurrency that's "mined" by hosting content, basically Bittorrent that pays you to seed. The end goal is to make an alternative to Youtube.

[David Hess]

Fairytale "Money" 

More properly, fairytale currency, although less so than the dollar.  Neither bitcoin nor the US dollar are money; they are currency.  The dollar has not been money since 1934 and arguably 1913.  At least most cryptocurrencies cannot be wished into existence and arbitrarily devalued by the government to steal it.

[Cerebus]

Imagine a village where they have 1kg worth of gold coins. 1 loaf of bread feeds a family of 4 for 1 week and costs 1 coin in 1900. Fast forward a couple of decades and the number of people have doubled. This means that the amount of bread needed also has doubled. With the same amount of gold it means that 1 coin now buys two loafs of bread. This means that the intrinsic value of the gold has doubled. The people who where able to hold on to some gold have seen their savings double in value without doing anything for it. In the end a system where supply of money doesn't keep up with the size of the economy won't work.

Never, ever, in the history of economics has the same amount of money consistently bought more as time has gone on. In fact, over the long term the opposite is true. According to your model when there was a gold standard there should have been permanent deflation. There wasn't.

[SiliconWizard]

That's gonna be a fun thread on a pretty sensitive topic. It's like this kind of discussion about politics, or sensitive sociological topics, or systemd.

[SiliconWizard]

Fairytale "Money" 

More properly, fairytale currency, although less so than the dollar.  Neither bitcoin nor the US dollar are money; they are currency.  The dollar has not been money since 1934 and arguably 1913.  At least most cryptocurrencies cannot be wished into existence and arbitrarily devalued by the government to steal it.

A currency is nothing more than the trust we collectively put into it, helped by the military when trust seems to be at stake.

The "problem" with "cryptocurrencies", as they are decentralized, is that not only can't it really be controlled by governments, but no country is going to use its army to defend it because of that. Large organizations ready to fight for something they can't control? Let's see...

Proponents and opponents essentially share the same understanding - at least when they understand what a currency is and how it works. They just don't share the same view of the world. Which is more right is basically a political debate.

[Halcyon]

The technology behind it is interesting and has actual legitimate uses, however the "currencies" themselves are nothing more than the modern-day equivalent of trading cards that you used to collect as a kid. Arguably very few are a decent investment. It's extremely high risk and very vulnerable to manipulation. I'd rather buy property personally. Unlike actually currency, crypto is not guaranteed or backed by the government. The savings in my bank account are.

That being said, I've made a decent net profit buying and selling crypto and my current holdings will only contribute to any future profits (if they all fell to a zero dollar value, I'd still be ahead).

Will they "exist" in the long-term in their current form? Who knows. Governments everywhere are turning the screws on tighter regulation and I fear that the vast majority will disappear into obscurity.

[VK3DRB]

"real money" is a store of value....

No it isn't. It is a store of PERCEIVED value, often by minority interests. Real value is something different altogether. Cryptocurrency is like the tulip bubble in Holland from in 1634 to 1637. Its foundation is greed, and it will ultimately fail. My guess is within a few years.

A persons worth is often based on a how much money or property they have. Bezos net "worth" is over $200 BILLION, with much of it made out of underpaying and exploiting vulnerable workers. A person's worth should be more akin to people like this judge and the priest. The $1000 gift will have a more value in it than the obscenely rich would realise....

[SiliconWizard]

Unlike actually currency, crypto is not guaranteed or backed by the government.

True. See above.

The savings in my bank account are.

I don't want to sound too pessimistic here, but I think you're a bit deluded with this one.
I don't know exactly how things work over there, but in most countries, savings are backed up to a certain amount only, and this maximum tends to get lower and lower as time goes by.
Oh, and even getting this minimum guaranteed is if everything else goes well... in case of a major bank failure. If the crisis is severe, I don't know what the government will back exactly. =)

Will they "exist" in the long-term in their current form? Who knows. Governments everywhere are turning the screws on tighter regulation and I fear that the vast majority will disappear into obscurity.

It's hard to tell, but being decentralized by nature, it will be very hard to shut off, unless the internet is modified *worldwide* in such a way that many decentralized services will also become near impossible. Which is not necessarily a great future.

[Rick Law]

What is money and what is currency:

I am going to regress to 1992 (pre-internet) meaning since meaning of words are always changing and some time become less well defined or even confusing.  So may be this old clearer definition can bring some clarity...

1992 The American Heritage Dictionary:

Money:
1.   A commodity, such as gold, or an officially issued coin or paper note that is legally established as an exchangeable equivalent of all other commodities, such as goods and services, and is used as a measure of their comparative values on the market.
2.   The official currency, coins, and negotiable paper notes issued by a government.

Currency:
1.   Money in any form when in actual use as a medium of exchange, especially circulating paper money.


So, non-currency money (definition #1) such as gold is a commodity with intrinsic value.  When you ask for 2 ounces of silver to fix my TV set, I know or I can find out how much 2 ounces of silver is worth, and I can decide if I want to give you 2 ounces of my silver in exchange you fix my TV.  That is 2 ounces of silver is 2 ounces of non-currency money.

There was a time currency was Gold Standard or Silver Standard.  The "Bank Note" is a promise that it is equivalent to a certain amount (in weight) of gold or silver.  You can exchange (with the issuer) that "bank note" face value to real physical metal commodity (gold or silver) at any time and at your discretion.  So rather than carrying a pound of sterling silver in metal form, you can carry a "1 Pound Sterling Note".  This is when the currency's value is "backed" by the government or "backed" by the issuing bank.

Now, currency are no longer directly tie to a commodity.  No Gold Standard, no Silver Standard.  Currency's value now is from "government decree" only.  So, the amount currency to actual commodity equivalence changes moment by moment, and the change is dependent on how the government is managing the currency's value at that moment. Gold price at the time I write this is USD $1805 per ounce.  I am sure it would have changed by the time you look.  That is not an once's of gold's value changed, but instead, it is the value of USD$1805 changed.  How much $1805's can buy will vary, by day, hour, or even milli-second.  It is not "backed" by anything.  It has value solely by government fiat, hence they are call fiat currency or fiat money.  Fiat currency is what is today's Euro, US $, CND $, AUS $...  I don't know of a bank/nation that is still on a commodity standard.

If US Government plans to do more "quantitative easing" between now and tomorrow,  quantitative easing means increasing the money supply, increasing money supply means each dollar will be worth less.  So if more "quantitative easing" occurs, it will take more than $1805 to get an ounce of gold merely knowing that supply-increased or an increase is coming soon.  That expanded supply of currency (in paper form, digital form, or any other form) is inflation.  As you can imagine, US dollar or Euro, the US/EU government can inflate (ie: increase) the supply by many means without limit.  So value of dollars/euro is entirely dependent on government actions (or inaction).

That supply of currency can increase in very unexpected ways.  Say for example if US Government pass a law that limits collateral to no more than 10% of the loan's value, that means I can borrow $1 million dollar on my $100K house, that is a lot more money floating around to be used.  So currency supply can increase in very unexpected ways other than merely government printing more money.

Crypto-Currency's promise (as I understand it, at least for Bit Coin) is that the build in mechanism sets an upper limit on how much can be issued, ever.  So once the upper limit is reached, inflation is no longer possible.  Where as, there is no limit to government printing more money.  So, it is not possible for crypto-currency to become worthless because of continuous inflation, but, crypto-currency has other means to loose value - such as, if no one trust that they can redeem the coin because no one will buy it, then that crypto-currency lost all it's value entirely without inflation.  Another way, and the mostly like way is: government regulating crypto currency making it harder to be used as a currency to exchange value.

EDIT:
Typo error, I had repeated a "not" unknowingly.  Corrected. "...So is not not possible..." replaced with "So it is not possible..."
Other typo correction without affecting meaning but merely to increase readability.

[alexanderbrevig]

Fun thread.

They waste A LOT of energy.

I discovered bitcoin early 2012 on Tor, being a curious IT nerd I did like the concept. Then I saw it could basically get you drugs, child pr0n or a targetted kill on an enemy. This made a lasting impression, so I will not touch it unless it is backed by my govurnment and bound to our actual currency.

I don't even regret not getting any.
I have a few friends that "did well" but to my surprise the common misconception is that they were smart, when in reality they got in the game because they are criminals. You could perhaps calling it smart not selling at the first bull, but I call it greed.

[Kim Christensen]

government regulating crypto currency making it harder to be used as a currency to exchange value.

This is why most cryptos cannot be used as "currency"... It is just too volatile. Using something like Bitcoin would be like living with 5-20% inflation one week and then 5-20% deflation the next. Markets would freeze up if our currency was that volatile.

[Bud]

. Then I saw it could basically get you drugs, child pr0n or a targetted kill on an enemy.

Should we compare how many drugs were sold and enemies killed that got paid for by fiat money vs crypto?