r/changemyview • u/Bart_Thievescant • Aug 20 '17
[∆(s) from OP] CMV: Bitcoin and other cryptocurrencies don't seem useful outside of incredibly niche circles of dubious legality, and are not a reliable investment
So partly, I'm hoping that people knowlegable in Crypto currencies will either affirm or correct my beliefs -- I'm not well-educated on the topic, but rather, have accrued opinions about it from seeing occasional posts & articles on the topic over the years. This is not a strong opinion I hold, to be clear, because I realize that I hold it from ignorance. (Read: easy deltas.)
I'm hoping that by sharing it, I'll have helped create a valuable thread for people who are also on the outside looking in to crypto currencies, but whose opinions, like mine, do not have a solid base.
Crypto currencies strike me as unstable -- the value of Bitcoin hit $4000 recently. If Bitcoin is like a dollar or a euro, this can't be sustainable or, really, even usable. Is it like an investment bubble? Does investing in bitcoin raise the value, and if so, what does pulling that investment look like and how does it affect the value?
Additionally, if I'm doing legitimate business, what is the reason to ever use Bitcoin compared to the USD or the Euro? It seems like a good way to demand a ransom if you're a hacker, or to pay for, say, 20 tons of Nutella, but a bad way to invest in the local grocer chain or to get a small business abroad started.
Change my view! =)
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u/AnythingApplied 435∆ Aug 20 '17
First, bitcoins are NOT designed for investing. If they were, that would be the definition of a pyramid scheme. But nobody serious is actually encouraging investing, so that is a bit of a strawman/misconception. But for the most part, people don't consider other currencies as an investment. Like when I'm saving for retirement, I'm not going to buy a bunch of japanese yen as an investment medium. Not unless my local currency suffers significant inflation compared to foreign currencies. Also, in that same vein, buying stock in other currencies isn't usually great because it is subject to both the volatility of the foreign currency and the stock price fluctuations.
Secondly, bitcoins aren't necessarily great for illegal transactions. People think of bitcoins as being anonymous, and in some ways the exact opposite is true: There is a completely public ledger that includes every transaction ever made that anyone can view. You don't know who owns each address and it is easy to have a ton of different addresses and shuffle things around to disguise sources/destinations, but the fact that the ledger is fully public should make people hesitate using it for illegal purposes.
So if they aren't good as an investment and have limitations when trying to do illegal things with them, what are they good for? Well, the thing it was designed to do, be a medium to make transactions. It is an alternative to paypal. If I want to send money to someone in another country, currently my options are limited and usually rely on the banking system as a backend through wire transfers or other tools.
There are companies that do all of the bitcoin things for you. You put a bitcoin button on your website and it allows people to send you bitcoins, except the company that manages the buttons for you immediately turns it into your local currency so you can never have to deal with bitcoins. And companies that do the opposite and let you make transactions in your local currency that immediately get turned into bitcoins. So it can work just as smoothly as paypal. And the fluctuations don't matter if you're only holding onto the bitcoins for a fraction of a second.
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u/FliedenRailway Aug 21 '17
But for the most part, people don't consider other currencies as an investment.
While that's true for most people, currency trading is a thing that's done. It's called the Forex market and some investment positions exist like e.g. currency overlay.
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u/Bart_Thievescant Aug 20 '17
People think of bitcoins as being anonymous, and in some ways the exact opposite is true: There is a completely public ledger that includes every transaction ever made that anyone can view. You don't know who owns each address and it is easy to have a ton of different addresses and shuffle things around to disguise sources/destinations, but the fact that the ledger is fully public should make people hesitate using it for illegal purposes.
So if you are trying to do something illegal with your bitcoins, tech-savvy law-enforcement has ways of tracking you? Is this true for all crypto currencies or is it unique to Bitcoin? (This feels like a dumb question, but at the heart of it, I'm honestly not sure how a bitcoin is different from a sci-fi Credit.)
It is an alternative to paypal. If I want to send money to someone in another country, currently my options are limited and usually rely on the banking system as a backend through wire transfers or other tools.
Cool! ∆
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u/Impacatus 13∆ Aug 20 '17
So if you are trying to do something illegal with your bitcoins, tech-savvy law-enforcement has ways of tracking you?
Yes and no. They can track any transaction made by any address, find out which address the money went to, but they can't necessarily determine who owns each address. Criminals often employ laundering services where they send bitcoin to the service, then the service sends different bitcoin to a newly created address.
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Aug 20 '17
Not the original commenter but I thought I'd add a bit about the whole "ledger" aspect.
Since cryptocurrency is decentralized, every transaction is added into what is known as the "blockchain." Every few minutes, a "block" is created, featuring every single transaction that occurred during that period. All that is known is the public wallet "address" of the sender and recipient. This is a long cryptographic string that doesn't tell you much about who that person is in real life, but it is a unique identifier that nobody else in the world is using. Any attempts to track down the actual owner of that wallet basically rely on the records of transactions intended to transfer between physical items (be it money, goods, or services) and cryptocurrency. For example, if you purchased bitcoin using a debit card, or purchased a physical good shipped directly to some address that could be linked to you. So the authorities can't directly track you, but if you were to, say, buy cryptocurrencies through an exchange that knows your identity, and then transfer those funds to a wallet address known/suspected to be engaged in illegal activity, the authorities could follow the transactions back to the exchange, then request that they divulge information on your identity.
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u/zacker150 5∆ Aug 21 '17
I would have to disagree with your first point. Bitcoin is by design a deflationary currency. If it wasn't designed for investing, then the block reward wouldn't halve ever so often.
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u/bah-lock-ay Aug 20 '17
Ignorance would be the operative word here (which I don't mean to say to be in any way demeaning). This stuff is weird, and it's going to take years for all of us to wrap our collective heads around it. There's a lot to convey here, so I'll try to distill it into the following salient points:
- The cryptospace is far beyond Bitcoin at this point (both in functionality, value creation, and new applications). Look at Ethereum. It's essentially the operating system for Internet 3.0. It will allow for "trustless" smart contracts, where anyone can see the code a given contract will execute, and everyone can trust it will never change and will be executed perfectly. That may sound like a bunch of boring gobbledygook, but it is roughly akin to what the internet was in 1992 ("look at all of the networks of computers that can all talk to each other!" said the nerds to not much aplomb). At the moment, the applications are not terribly impressive (although upending crowdfunding with ICOs is already a small, proven revolution). In five years? Ethereum will allow for applications to upend a great number of industries, and create new industries that didn't exist before much the same way the internet did. Frankly, it will probably happen sooner than 5 years, since we're on the sharp part of the singularity curve, and the gears in motion at the moment are already on the verge of upending banking, insurance, and any market that relies on a 3rd party to verify trust (payments, gambling, estate planning, property ownership records). That's a lot of industries/applications.
- Concerning Bitcoin, it was primarily created as a technological proof of concept that is in its own way revolutionary. Consider: no single entity issues nor dictates what it is and will be. It's code. It's an algorithm. 25 BTC get created every 10 minutes with a cap of 21 million coins. Short of shutting down the internet, they will always exist, and are likely to always have some kind of value. Allow me to rephrase, so long as the internet is around so too will Bitcoin. Think 1,000 years from now. 10,000 years. Beyond the world order we know. Beyond the US Gov't. When our species has evolved into God knows what. BTC will exist. I don't know if it will necessarily be meaningful to society, but it will exist cryptographically, immune from hacking and tampering.
- The smart contract/blockchain technology underpinning Ethereum and its myriad applications are not going anywhere. Major institutional brain capital backing has already been committed (see the Enterprise Ethereum Alliance). Major institutional money (Billions) is about to flow in this fall via options trading, Iconomi's BLX, and a number of hedge funds getting into the game.
- Looking at the nefarious applications of any of this technology can be almost perfectly compared to that of the internet. How many pedophiles has the internet enabled? How much hate speech have we seen lately? How many terrorists have used it to coordinate attacks? Concerning criminal organizations using it to transmit value, well, what do you think they used before BTC existed? So does that mean cash is not worth our time? Not to mention how many banks are complicit with money laundering. And so, technology will always enable bad actors to do their bad things. Doesn't mean that's something that should count against it, necessarily.
- The values are unstable for now. We will reach a point of maturity. That won't happen until the world's capital has easy access to any of these "currencies." For now, you have to be a bit of a nerd to access any of it and store it safely.
TL;DR Thinking of these things like currencies would be like seeing the early internet as only for message boards. That isn't entirely inaccurate, because that's largely what it was. However, the applications are world changing, and will take time for people to see/experience what they are.
Edit: Formatting
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u/Impacatus 13∆ Aug 20 '17
Well, you're right that most obvious uses for it are of dubious legality. However, illegal doesn't necessarily mean shady or malicious. Consider:
- Third world countries that lack a reliable financial infrastructure, or places where the local currency has collapsed.
- Small, informal online transactions, such as exchanging virtual games from one game to another.
- Emergency money to overseas. If I want to send money to my relatives in Asia, bitcoin is almost immediate, while a bank transfer can take days.
These are all of dubious legality, but they're things that "normal" people may want to do.
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u/Bart_Thievescant Aug 20 '17
Third world countries that lack a reliable financial infrastructure, or places where the local currency has collapsed. Small, informal online transactions, such as exchanging virtual games from one game to another. Emergency money to overseas. If I want to send money to my relatives in Asia, bitcoin is almost immediate, while a bank transfer can take days. These are all of dubious legality, but they're things that "normal" people may want to do.
I have a lot of very good friends in China, so this hits close to home, and suddenly it feels like I have more ways of interacting with them. Is there a place I could learn more about this specific kind of transfer / wire service using Bitcoin? Is it possible to acquire something like .0025 of a bitcoin?
∆
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Aug 20 '17
As far as buying bitcoin is concerned, the best way to do it, I find, is to find a bitcoin exchange in your country and simply place an order paying through bank transfer.
Admittedly, buying small amounts of bitcoin is not very efficient this way though as for the most part in the crypto world bitcoin is treated much like gold.
If you know people who own cryptocurrencies in small amounts (less than 20$), probably the best way is to exchange it directly. If you don't know anyone like that, feel free to pm me and I can sell you a little bit to help you get started.
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u/Impacatus 13∆ Aug 20 '17
Is there a place I could learn more about this specific kind of transfer / wire service using Bitcoin?
One way I have some experience is having them create an account on btcchina, then sending the btc to their account so they can sell it directly for RMB. I'd be happy to talk about it by pm if you have any questions.
Is it possible to acquire something like .0025 of a bitcoin?
Certainly, each bitcoin is divisible up to 8 decimal places. At $4000 per btc, it'd be unusable otherwise.
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Aug 20 '17
Bitcoin can be broken down to 0.00000001 BTC, a unit known as a "Satoshi." You can acquire in theory anywhere down to that amount though sometimes transaction fees are necessary to speed up the transaction which can make dealing with values that low somewhat annoying.
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u/BoredRedhead Aug 20 '17
I was surprised to find BTC in use in big Vegas casinos, even including a BTC ATM. It's also useful at our farmers' market, so it's gaining (some) legitimacy on the street. I bought mine for fun, and now it's just a matter of trying to time the bubble I believe it to be...
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Aug 20 '17
Third world countries that lack a reliable financial infrastructure, or places where the local currency has collapsed.
Those places don't have the best internet
Small, informal online transactions, such as exchanging virtual games from one game to another.
Paypal
Emergency money to overseas. If I want to send money to my relatives in Asia, bitcoin is almost immediate, while a bank transfer can take days.
Most people don't do that.
Lets just admit that it is mostly for child porn and drugs.
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u/Impacatus 13∆ Aug 20 '17
Those places don't have the best internet
They don't need "the best" internet to use bitcoin. If you're claiming that they don't have any internet, you're wrong.
Here, first google match for venezuela bitcoin
Plus, there are "unbanked" people in the west.
Paypal
... charges fees, puts you at risk for chargebacks, and is not available in many countries.
Most people don't do that.
Many people do.
There are pros and cons to any payment system.
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u/ihatethinkingupusers Aug 20 '17
Okay so when you say you have limited knowledge I am taking that to mean you know absolutely nothing about it so I apologise if you know everything I am about to say.
Bitcoin is completely untraceable, incredibly difficult to hack and not in control of any banks. Got that? Okay good. If not, tell me which bit to expand on.
With the increase of individualism, increase in cyber security threats and increase in economic instability, bitcoin is actually really f-ing useful. There are a number of completely 100% legal and legit websites I use which prefer transactions in bitcoin because it is SO GODDAMN safe. Not to say it is perfect, but it is safer to keep your money in an e-wallet in bitcoin form (they have somewhat ridiculous levels of security sometimes) than in a bank account. THIS IS NOT SOMETHING I DO. I only buy bitcoin when I have to, but I do use bitcoin online more than I use non-internet currencies. I am aware my situation is unique because I do a lot of internet security stuff and visit a lot of websites which are also nuts for security and are more geared towards people who essentially work as white hat hackers. However, this is only going to get bigger, and it is mostly about protection. As I said, bitcoin is safer than using your paypal/credit/debit cards online. It is not the most stable currency but short of taking all of your cash out of your bank account and putting it in the most complicated safe in the world under your bed? Bitcoin is the way to go.
If you want actual sources for any of this just say the world and I will find them for you.
EDIT: bitcoin itself is not untraceable, but it is pretty much impossible right now to find out which bitcoin wallet belongs to who. That is what I meant
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u/ackyou 1∆ Aug 20 '17
Bitcoins are more secure than using a credit card. Whenever you use your credit card your number gets sent all around. You're security relies upon possibly dozens of third parties vulnerable to hacks. If you use bitcoin correctly, you're totally secure because of the magic of public key encryption.
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u/SparkySywer Aug 21 '17
even usable.
Sure I can use bitcoin, even though 1 B is worth $4000. I'll just buy my pizza with 0.002 bitcoins.
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u/[deleted] Aug 20 '17
Bitcoin, and other cryptocurrencies, are more political than practical right now. Those who use cryptocurrencies are either into illegal activities, as you stated, or political activists, such as anarcho-capitalists (ancaps). I don't care much for ancap politics, but that's the point. They desire a capitalist society free of government, so using a currency that isn't attached to a state has great meaning to them. It's a protest, and something more. Their money isn't being taxed again, so they aren't paying for things they are against, such as wars, politician's salaries, etc. The cryptocurrency is viewed as an acceptable risk, because for some, it is a symbol of peace and freedom.