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What is the point though?

I saw the programme. Iceland uses more power on bitcoin than it uses on anything else. An entire power station in NY is used for this useless pointless exercise. How does it help mankind? The computing power could be used for solving real problems like cancer, new viruses etc

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1 hour ago, 31Dec1966 said:

What is the point though?

The computing power could be used for solving real problems like cancer, new viruses etc

 

This is the dissapointing thing about the whole shebang. If the mathematics involved were producing a valued outcome then it wouldnt matter so much. But just "solving riddles" isnt much use to society.

 

 

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On 30/07/2021 at 13:17, OxonOwl said:

Is it really economically viable to run these mining farms?

It's viable as long as the amount of return goes up. 

 

This is the point/aim of bitcoin. There are a fixed supply of the things - so there will come a point where the last few will need to be mined. The expectation then is that the return to mining them will be in the hundredthousands/million dollar range,

 

 

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isn't there a guy in Wales who had Bitcoin stored on a hard drive that he accidentally threw out because despite it been a cyber currency its locally stored?. He knows its in a council tip but they wont let him look and its worth about £200m or something daft?

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On 17/08/2021 at 15:58, darklord said:

isn't there a guy in Wales who had Bitcoin stored on a hard drive that he accidentally threw out because despite it been a cyber currency its locally stored?. He knows its in a council tip but they wont let him look and its worth about £200m or something daft?

 

yes - theres a couple of cases of this..

 

https://www.theguardian.com/uk-news/2021/jan/14/man-newport-council-50m-helps-find-bitcoins-landfill-james-howells

 

 

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On 02/08/2021 at 07:55, 31Dec1966 said:

What is the point though?

I saw the programme. Iceland uses more power on bitcoin than it uses on anything else. An entire power station in NY is used for this useless pointless exercise. How does it help mankind? The computing power could be used for solving real problems like cancer, new viruses etc

 

There is no 'point' other than for investors to hopefully make money.


As mentioned, it started out as an attempt to disengage the concept of a 'currency' from needing to be backed by a state.  The 'solving equations' thing is just an automated way to control the number of bitcoins in existence so that a bitcoin doesn't become completely worthless, because obviously there is no central bank to actively control the money supply and manage inflation.

 

The problem is, it isn't actually all that much use as money.  For money to be useful, it needs to fulfill a number of functions:

 

1) A medium of exchange.  It needs to be freely and widely accepted as payment for goods and services. This is one area where having an actual state backing the currency is extremely useful. Cryptocurrency is still not widely understood or trusted, and not widely accepted for anywhere near as many kinds of financial transactions as actual currency.  In most cases you will have to sell it in exchange for sterling, dollars or whatever and use THAT as a medium of exchange.

 

2) A measure of, and a store of, value.  Money is necessary in order to facilitate the quoting of, and bargaining of, prices.  It also needs to be able to be securely stored, and retrieved and used later.  The blockchain technology behind cryptocurrencies makes it possible to use them as currency at all, because it is a way of assigning and confirming ownership of an entirely digital object.  It can't simply be copied ad infinitum like any other file, because the blockchain confirms exactly who 'owns' each individual 'coin' and how much they own.  Therefore they can be nominally 'worth' something, and store value just like any other real world currency.  The problem is that, without a creditworthy, credible state to act as the 'guarantor' of the value of any given crypto-currency, and without a central bank to take action to maintain the value over time (or actually try to very slowly reduce its value over time through inflation to ensure it stays in circulation and people don't hoard it too much), they tend to be extremely volatile - the market price can fluctuate wildly from day to day.  If you can't predict what your unit of currency is likely to be worth next week, it is no use as a store of value.  No one will want their salary to be paid in a currency that they can't be fairly sure of the future value of.  No one will want to use it to denominate future debts or the future price of goods and services, and they won't want to hold their long-term savings in that currency either.

 

What people have found that they ARE very useful for, is as a speculative investment.  You can use traditional currency as a speculative investment, but unlike crypto, there is a central bank specifically working to make sure a traditional currency isn't too volatile and roughly maintains its purchasing power over time  The Bank of England doesn't want Pound Sterling to suddenly massively increase in relative value, because that would cause deflation which would mean that people would stop actually spending money, expecting it to be worth more tomorrow, and it would lose its usefulness as a measure of value and a medium of exchange.  It doesn't entirely stop people like George Soros from doing things like massively shorting Sterling and crashing the UK out of the ERM in 1992, but in general it means that you are unlikely to get rich investing in a stable currency backed by a strong, creditworthy state.

 

Crypto, on the other hand, has none of these controls.  It is therefore, as mentioned, extremely volatile.  Jump onto a new crypto at the right time and you can make a huge return on your investment (or a huge loss if you don't know what you are doing).  On a related note, people like Elon Musk can manipulate the market in their favour by making pronunciations on social media in ways that would get them put in jail if they tried it with more traditional types of investment, because financial regulations are nowhere near caught up with cryptocurrency pretty much anywhere in the world.

 

So, what started off as a visionary, if slightly naive attempt to democratise currency has turned into a massive speculative investment free-for-all, where instead of creating a unit of currency with a relatively stable value that can be used as a medium of exchange, the aim is to increase the crypto supply as much as possible AND make it's value as volatile as possible because people want to use it to get rich quick.  The two aims are mutually incompatible.  Its quite hard not to see the whole thing as a lesson in why we actually still need the state after all by this point.

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