Bitcoin....who's gotten into it?

**neckdeep** · 04-11-2018, 11:09 AM

Why Bitcoin is bullshit, explained by an expert

https://www.vox.com/conversations/20...urrency-weaver

Cryptocurrencies like Bitcoin are constantly in the news, as is the blockchain technology behind them.

If, like me, you don’t really understand these things, it’s hard to know what to make of all this. Is Bitcoin, and other cryptocurrencies, the future or will this experiment gradually fade away like a historical footnote? Are cryptocurrencies actually decentralized or are they controlled by small groups of people? Are they fraud-proof or can they be manipulated by insiders?

To get some answers, I reached out to Nicholas Weaver, a researcher at the International Computer Science Institute at UC Berkeley. Weaver teaches a course on blockchains and seems to think the technology is, at best, misguided and, at worst, a fraud. So I asked him to lay out his case in the simplest possible terms.

A lightly edited transcript of our conversation follows.

Sean Illing
I don’t really understand Bitcoin or blockchains, and my sense is that I’m not alone. So let’s start with a basic question: What is a blockchain?

Nicholas Weaver
It depends on what you mean. There are private blockchains, which is a 20-year-old technology that somehow causes idiots to throw money at it, and then you have public blockchains, which is supposed to be a decentralized record-keeping structure but, in reality, is both centralized and horribly inefficient. The use of private blockchains is pretty varied because there’s nothing new and it’s an old idea. The use of public blockchains is basically limited to cryptocurrencies.

Sean Illing
You say that cryptocurrencies like Bitcoin aren’t decentralized, and yet people are enamored with these currencies precisely because they believe they’re decentralized. What are they missing?

Nicholas Weaver
None of the cryptocurrencies are truly decentralized. They’re actually centrally controlled by the miners, who can basically rewrite history at will.

Sean Illing
I’m not sure we can understand who the miners are unless we understand how Bitcoin works. Can you walk me through this?

Nicholas Weaver
Imagine we have a public square that has written down everyone’s bank balance, and if I want to send you some money, I basically write a check to you and post it in the town square. The miners gather up all these unconfirmed checks and carve them into stone tablets that then go into the public square.

So if I sent you a check and you want to see that it’s good, you just look on the stone tablets and confirm that it’s good. Think of the miners as the record-keepers who manage all of this. They validate the checks, create them into a bundle (called a block), and then they get paid for their role in the process. These miners are the de facto central authority in cryptocurrency exchanges.

Sean Illing
There are plenty of people who see cryptocurrencies, however flawed, as a step in the right direction because they at least take power away from governing authorities and give individuals more freedom. But you seem to think this is bullshit. Why?

Nicholas Weaver
Well, there are multiple arguments. These systems require an obscene amount of energy to function. And the blockchains are not decentralized and they’re not efficient, so that undercuts the two main points in their favor. But the cryptocurrencies don’t work either, because they don’t actually work as currencies.

Sean Illing
What do you mean they don’t work as currencies?

Nicholas Weaver
The rationale for these things is that there’s no central authority, which means no one can block or undo a transaction. And so far at least, it’s true that transactions aren’t blocked. But why do you need such a system? Because you’re doing a transaction that a central authority would otherwise block, like paying off a hitman or buying drugs.

If that’s what you need money for, the cryptocurrencies are the only game in town. But if you don’t need to buy drugs or hitmen, the cryptocurrencies are vastly less efficient. I mean, look at the volatility of Bitcoin and other digital currencies — they’re all over the place. So if you go to one of the few legitimate merchants that take Bitcoins, they aren’t actually taking Bitcoins. They’re using a service that allows them to price in dollars, and that service immediately sells the Bitcoins and deposits the dollars with the merchants. So there’s a mandatory conversion step.

If I want to buy something with Bitcoin, I don’t like that the price is bouncing up and down either. So I have to turn my dollars into Bitcoins and then do the transaction, and that is a remarkably costly process. That, in my opinion, is not a system that works.

Sean Illing
It appears that Bitcoin’s main accomplishment is that it allows people to buy things clandestinely, only in an absurdly inefficient way.

Nicholas Weaver
Correct. But if you want to buy something you don’t want people to know about, you can just use a pre-paid credit card. There’s still no need for Bitcoin.

Sean Illing
You also say that all cryptocurrencies are plagued by frauds that were banned in the 1930s. Can you explain?

Nicholas Weaver
Cryptocurrency exchanges are not like regular stock exchanges. In a stock market exchange, stocks are all tied to together so the prices are very close. These Bitcoin exchanges are unregulated entities that allow all sorts of things that are outright frauds. For example, in a regular stock exchange, you’re not allowed to trade with yourself because that’s price manipulation. But that’s a regular occurrence on these cryptocurrency exchanges.

Some of these cryptocurrency exchanges are accused of front-running as well, which means the people who run them are using their access to see what customers want to trade and then trading ahead of them to get an advantage. There are also plausible claims about insider trading in various cryptocurrency exchanges. I could go on, but you get the point.

Sean Illing
Do you see a cryptocurrency emerging in the future that is more viable than what we’ve seen so far?

Nicholas Weaver
Well, in order to make a cryptocurrency work, you need stability. The value has to hold. So what you need is an entity that will take, say, dollars, and give you cryptodollars one-for-one and vice versa. But we know what these institutions are; they’re called banks and they use banknotes. And if you build a cryptocurrency that way, you’ve got one of three choices.

One, you act like a regulated financial entity like PayPal or Venmo and don’t allow the criminality. So where’s the novelty there? Two, you become like a wildcat bank from the 1800s and issue banknotes that aren’t backed, but then you run the risk of a bank run and your value going to zero. So what’s the point? Or you have a cryptocurrency that actually is backed by money, and doesn’t allow criminal activity, but that’s been tried before; it was called Liberty Reserve, and it was shut down for money laundering in 2013 by the US government.

Sean Illing
Is yours a minority opinion in the world of cryptocurrency?

Nicholas Weaver
Yes, because there’s a self-selecting bias. Most people who think this is bogus simply walk away. Those who are believers are believers. Very few people have followed it like I have for five years and still find it ridiculous, but that’s because I’m an academic and I have the space to do it and I find parts of it, especially the criminality, interesting. But the arguments in defense of this stuff are getting loonier and loonier.

**Skidog** · 04-11-2018, 02:06 PM

Originally Posted by neckdeep

Why Bitcoin is bullshit, explained by an expert

https://www.vox.com/conversations/20...urrency-weaver

Cryptocurrencies like Bitcoin are constantly in the news, as is the blockchain technology behind them.

If, like me, you don’t really understand these things, it’s hard to know what to make of all this. Is Bitcoin, and other cryptocurrencies, the future or will this experiment gradually fade away like a historical footnote? Are cryptocurrencies actually decentralized or are they controlled by small groups of people? Are they fraud-proof or can they be manipulated by insiders?

To get some answers, I reached out to Nicholas Weaver, a researcher at the International Computer Science Institute at UC Berkeley. Weaver teaches a course on blockchains and seems to think the technology is, at best, misguided and, at worst, a fraud. So I asked him to lay out his case in the simplest possible terms.

A lightly edited transcript of our conversation follows.

Sean Illing
I don’t really understand Bitcoin or blockchains, and my sense is that I’m not alone. So let’s start with a basic question: What is a blockchain?

Nicholas Weaver
It depends on what you mean. There are private blockchains, which is a 20-year-old technology that somehow causes idiots to throw money at it, and then you have public blockchains, which is supposed to be a decentralized record-keeping structure but, in reality, is both centralized and horribly inefficient. The use of private blockchains is pretty varied because there’s nothing new and it’s an old idea. The use of public blockchains is basically limited to cryptocurrencies.

Sean Illing
You say that cryptocurrencies like Bitcoin aren’t decentralized, and yet people are enamored with these currencies precisely because they believe they’re decentralized. What are they missing?

Nicholas Weaver
None of the cryptocurrencies are truly decentralized. They’re actually centrally controlled by the miners, who can basically rewrite history at will.

Sean Illing
I’m not sure we can understand who the miners are unless we understand how Bitcoin works. Can you walk me through this?

Nicholas Weaver
Imagine we have a public square that has written down everyone’s bank balance, and if I want to send you some money, I basically write a check to you and post it in the town square. The miners gather up all these unconfirmed checks and carve them into stone tablets that then go into the public square.

So if I sent you a check and you want to see that it’s good, you just look on the stone tablets and confirm that it’s good. Think of the miners as the record-keepers who manage all of this. They validate the checks, create them into a bundle (called a block), and then they get paid for their role in the process. These miners are the de facto central authority in cryptocurrency exchanges.

Sean Illing
There are plenty of people who see cryptocurrencies, however flawed, as a step in the right direction because they at least take power away from governing authorities and give individuals more freedom. But you seem to think this is bullshit. Why?

Nicholas Weaver
Well, there are multiple arguments. These systems require an obscene amount of energy to function. And the blockchains are not decentralized and they’re not efficient, so that undercuts the two main points in their favor. But the cryptocurrencies don’t work either, because they don’t actually work as currencies.

Sean Illing
What do you mean they don’t work as currencies?

Nicholas Weaver
The rationale for these things is that there’s no central authority, which means no one can block or undo a transaction. And so far at least, it’s true that transactions aren’t blocked. But why do you need such a system? Because you’re doing a transaction that a central authority would otherwise block, like paying off a hitman or buying drugs.

If that’s what you need money for, the cryptocurrencies are the only game in town. But if you don’t need to buy drugs or hitmen, the cryptocurrencies are vastly less efficient. I mean, look at the volatility of Bitcoin and other digital currencies — they’re all over the place. So if you go to one of the few legitimate merchants that take Bitcoins, they aren’t actually taking Bitcoins. They’re using a service that allows them to price in dollars, and that service immediately sells the Bitcoins and deposits the dollars with the merchants. So there’s a mandatory conversion step.

If I want to buy something with Bitcoin, I don’t like that the price is bouncing up and down either. So I have to turn my dollars into Bitcoins and then do the transaction, and that is a remarkably costly process. That, in my opinion, is not a system that works.

Sean Illing
It appears that Bitcoin’s main accomplishment is that it allows people to buy things clandestinely, only in an absurdly inefficient way.

Nicholas Weaver
Correct. But if you want to buy something you don’t want people to know about, you can just use a pre-paid credit card. There’s still no need for Bitcoin.

Sean Illing
You also say that all cryptocurrencies are plagued by frauds that were banned in the 1930s. Can you explain?

Nicholas Weaver
Cryptocurrency exchanges are not like regular stock exchanges. In a stock market exchange, stocks are all tied to together so the prices are very close. These Bitcoin exchanges are unregulated entities that allow all sorts of things that are outright frauds. For example, in a regular stock exchange, you’re not allowed to trade with yourself because that’s price manipulation. But that’s a regular occurrence on these cryptocurrency exchanges.

Some of these cryptocurrency exchanges are accused of front-running as well, which means the people who run them are using their access to see what customers want to trade and then trading ahead of them to get an advantage. There are also plausible claims about insider trading in various cryptocurrency exchanges. I could go on, but you get the point.

Sean Illing
Do you see a cryptocurrency emerging in the future that is more viable than what we’ve seen so far?

Nicholas Weaver
Well, in order to make a cryptocurrency work, you need stability. The value has to hold. So what you need is an entity that will take, say, dollars, and give you cryptodollars one-for-one and vice versa. But we know what these institutions are; they’re called banks and they use banknotes. And if you build a cryptocurrency that way, you’ve got one of three choices.

One, you act like a regulated financial entity like PayPal or Venmo and don’t allow the criminality. So where’s the novelty there? Two, you become like a wildcat bank from the 1800s and issue banknotes that aren’t backed, but then you run the risk of a bank run and your value going to zero. So what’s the point? Or you have a cryptocurrency that actually is backed by money, and doesn’t allow criminal activity, but that’s been tried before; it was called Liberty Reserve, and it was shut down for money laundering in 2013 by the US government.

Sean Illing
Is yours a minority opinion in the world of cryptocurrency?

Nicholas Weaver
Yes, because there’s a self-selecting bias. Most people who think this is bogus simply walk away. Those who are believers are believers. Very few people have followed it like I have for five years and still find it ridiculous, but that’s because I’m an academic and I have the space to do it and I find parts of it, especially the criminality, interesting. But the arguments in defense of this stuff are getting loonier and loonier.

Cue stalefish to claim UC Berkeley dude must be a stupid hack.

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**neckdeep** · 04-11-2018, 02:08 PM

Originally Posted by Skidog

Cue stalefish to claim UC Berkeley dude must be a stupid hack.

More likely, he simply refused to read it. Why would he? Hodlers live inside a daisy-chain of confirmation bias. They huff each others farts like it was oxygen.

**skaredshtles** · 04-11-2018, 02:17 PM

Originally Posted by neckdeep

<snip>
If, like me, you don’t really understand these things, it’s hard to know what to make of all this.

Yeah... well, like, he doesn't understand it, so he can't even BEGIN to imagine the brilliance that is cryptocurrency and blockchain.

**stalefish3169** · 04-11-2018, 02:29 PM

If you bought Bitcoin in January 2016 when an earlier iteration of that article (rant) came out you'd be up about 16x today. Got any more awesome investment advice for us?

The future is coming whether you want it to or not. Whining about it isn't going to stop it.

Click image for larger version.

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**skaredshtles** · 04-11-2018, 02:34 PM

Originally Posted by stalefish3169

If you bought Bitcoin in January 2016 when an earlier iteration of that article (rant) came out you'd be up about 16x today. Got any more awesome investment advice for us?

The future is coming whether you want it to or not. Whining about it isn't going to stop it.

Sent from my Pixel 2 XL using TGR Forums mobile app

Wait. I thought it was a currency, not an investment?

I'm confused now...

**neckdeep** · 04-11-2018, 02:46 PM

Its an investment based on the possibility that it might become a viable currency. Despite all the evidence to the contrary. Its sort of like how one believes in God because there might really be a Heaven.

**skaredshtles** · 04-11-2018, 02:59 PM

Originally Posted by neckdeep

<snip> Its sort of like how one believes in God because there might really be a Heaven.

Makes perfect sense now! Thanks for the enlightenment...

**Skidog** · 04-11-2018, 03:25 PM

Originally Posted by skaredshtles

Wait. I thought it was a currency, not an investment?

I'm confused now...

It changes based on the article posted

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**Bromontana** · 04-11-2018, 07:02 PM

Eh

**reckless toboggan** · 04-11-2018, 07:57 PM

Originally Posted by skaredshtles

Wait. I thought it was a currency, not an investment?

I'm confused now...

It's not a currency or an investment...it's the Future!

And the Future is Looong Term!

Which is why he keeps showing short term trends and graphs. Because the Future is Now!

It's so obvious!

**skaredshtles** · 04-11-2018, 08:04 PM

Originally Posted by reckless toboggan

It's not a currency or an investment...it's the Future!

And the Future is Looong Term!

Which is why he keeps showing short term trends and graphs. Because the Future is Now!

It's so obvious!

**stalefish3169** · 04-12-2018, 08:32 AM

BTC shorts just got rekt.

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**swissiphic** · 04-12-2018, 08:33 AM

Originally Posted by stalefish3169

BTC shorts just got rekt.

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That's one helluva green candle.

**4matic** · 04-12-2018, 11:29 AM

Time ran out on that short. Sharp counter trend rallies are typical of bear markets.

**Danno** · 04-12-2018, 11:50 AM

Originally Posted by Danno

Anyone? I found some info, I still have my recovery key or whatever, and from what I saw maybe I could migrate the XRP over to GateHub??? But I am having trouble signing up for GateHub to even start the process, so maybe someone has other ideas?

Finally got this figured out and migrated my XRP to Gatehub. I have 1000 XRP. What's that worth?

**Bromontana** · 04-12-2018, 12:48 PM

Meh

**Danno** · 04-12-2018, 01:00 PM

I'm rich!

**stalefish3169** · 04-15-2018, 10:25 AM

Originally Posted by Bromontana

$570ish. Xrp range this year is $3.30-$0.43

Market is pumping...$680ish now.

**skaredshtles** · 04-16-2018, 11:28 AM

"Someone questioned him as to why someone would put money into a volatile bitcoin when they could lose 25% of their investment, to which Kelly replied that “it’s better than losing 100% if your assets are seized by a rogue government. So that is the use case today.”

https://www.ccn.com/bitcoin-at-25000-price-is-headed-to-the-moon-analyst/

This shit's GOLD, Jerry... pure GOLD.

**reckless toboggan** · 04-16-2018, 01:13 PM

Originally Posted by skaredshtles

"Someone questioned him as to why someone would put money into a volatile bitcoin when they could lose 25% of their investment, to which Kelly replied that “it’s better than losing 100% if your assets are seized by a rogue government. So that is the use case today.”

https://www.ccn.com/bitcoin-at-25000-price-is-headed-to-the-moon-analyst/

This shit's GOLD, Jerry... pure GOLD.

And that's the final handoff to the paranoid, prepper, tea party, trumpian bag hodlers.

**stalefish3169** · 04-16-2018, 02:05 PM

Originally Posted by reckless toboggan

And that's the final handoff to the paranoid, prepper, tea party, trumpian bag hodlers.

You might find that quote about governments seizing your money a lot more relevant if you lived in Africa.

I'm far-left (by US standards) and most hardcore Bitcoiners are pretty libertarian, more Ron Paul than Trump, but keep trying.

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**splat** · 04-16-2018, 09:30 PM

Originally Posted by skaredshtles

Well, now, there's something that people like to see in their currency... LOTS of horrific volatility over a long timeframe.

But each time it ramps then drops it still enjoys a significant price increase. If you can afford to hodl, all you have to do is figure out which ramp to cash out on. Or you could end up with a hodl lot of nothing.