AsianGuy333 Offline

45 Single Male from Westbury       222
         

If you love Bitcoin, at least understand what it is and what it is not (not for folks with short attention spans)

Over the last few months a lot of people here have been talking about Bitcoin – with a significant uptick in the last few weeks. Sometimes people ask my opinion, because of my previous line of work. Rather than repeat myself over and over, I decided to add a blog so I can just direct people here. Love it or Hate it, you need to at least be able to talk about a subject matter with some sort of coherent logic. “I believe” and “I feel” a position will go a certain direction doesn’t work for me. The same way you wouldn’t just be ok if a doctor tells you “I feel you have cancer”, they better have some way to back that claim up before they start irradiating or chopping things off you.

Bitcoin is not BlockChain Technology:

Bitcoin is to BlockChain as a car is to an internal combustion engine. A car is built around the technology of an internal combustion engine the same way Bitcoin is built around the technology of BlockChain. The same way you can have sh*tty cars, you can have sh*tty BlockChain products. By sh*tty BlockChain products, I mean cryptocurrency in its current inception.

Bitcoin is not currency (it is a misnomer):

Currency exists as a vehicle for exchange. Its core function is to facilitate the exchange of goods. Secondary to this is to make a transaction more efficient. Bitcoin does neither of this, at the time of this writing (Feb 2021), you cannot purchase a ‘basket of goods’ with Bitcoin. ‘Basket of goods’ is economically defined as goods that a typical family requires for day to day living. Sure you can buy a Tesla or drugs from the darkweb, but at the end of the day, society at large doesn’t recognize it as a legitimate currency and therefore doesn’t provide an efficient vehicle for exchange. Consider the purchasing routes for a moment. I see goods I want, I have money, I pay money for goods, I own goods. Now consider Bitcoin, I see goods I want, I have money, I buy Bitcoin, I pay for goods in Bitcoin, I have goods. How is the latter situation more “efficient”?

Bitcoin is at best a commodity (even then it’s not really):

Commodity is a good or service that’s produced for the sole purpose of it being consumed. Economically, consumption is defined as any good or service that will increase one’s utility – sometimes referred to as happiness. The problem is Bitcoin cannot be “consumed” – no one wants to have Bitcoin just to own it – they only want it as a means of exchange for something else they want. Take for example oil – an established accepted commodity. People want oil, so they can heat their homes (energy), go to work (fuel), and various goods (petroleum based products). People want oil because it adds ‘value’ (increase utility) and can be consumed. Now you might be saying, hold up Steve, people also want diamonds, and they aren’t “consumed”. Now I will highlight that “consumed” doesn’t have to mean used and/or destroyed, it just needs to increase one’s utility, therefore the simple act of owning a diamond IS consumption – because you feel joy from owning it – and the owner parting with it would decrease their joy. Diamonds therefore still has an end consumer. There is no end consumer for Bitcoin – no one wants to own a Bitcoin just to own a Bitcoin – As indicated before, they only want it because of some perceived value for trade. Therefore it act neither like oil nor diamonds – it is not consumed and therefore not a real commodity.

Value and Exchange in terms of economics:

Value is measured based on the benefit a good or service can provide – as we stated earlier, this typically increases utility/happiness. There is virtually no way to figure out something’s absolute value, it can only be measured based on the comparative value in a trade (one cow is worth 2 pigs, 2 pigs is worth 50 chickens, 50 chickens is worth 5 microwaves…you get the idea). The shifting of exchange rates is related on how much someone is willing to part with a good or service for another good or service. Related to this is the idea of inflation, it is the erosion of value over time (not due to an imbalance of trade) – also viewed as the reduction of purchasing power over time. In the simplest example, if you worked today and earned $100 dollars, you should be able to buy a ‘basket of goods’ that’s worth $100 today, next week, next month…and all the way to retirement without loss of purchasing power. Unfortunately, inflation erodes at your purchasing power and over time you can only purchase $95…then $90… and so on. This erosion should take years to decades – that is how a healthy economy should behave. The problem with Bitcoin is it’s in the order of weeks to months – and that is hyperinflation, and not how any healthy economy behaves. Societies that suffers prolong hyperinflation often leads to increase civil unrest and in extreme cases – the fall of governments. An example of this is during and post World War II Germany.

What Bitcoin champions, and why it is also its Achilles Heel:

Advocate of Bitcoin would often tell you how Bitcoin decentralizes the financial system so that it empowers the people. I need people to realize that centralization isn’t the villain, corruption is the villain. Centralization allows for fiscal and monetary policies to be implemented such that economic turmoil can be adverted (hyperinflation being an example from before – and numerous other issues I don’t have the time to explain here). Without a centralized system, positive and/or negative feedback loops are allowed to run rampant, it offers no safety net, therefore it’s not a matter of if but when Bitcoin will collapse on itself.

What is Bitcoin then?

If Bitcoin isn’t currency, isn’t a commodity, and can’t be regulated by an administrator entity, what does the product/model most parallel? - A pyramid scheme

Let’s take a look at the hallmarks:

-Funnels earnings from those of lower tiers to those of higher tiers (in this case, time of entry) – Yup, check

-Relies on recruitment of low tier individuals (“You need to get in on this!”)– Yup, double check

-Promotes the false belief that free money is to be had (“Bitcoin is the wave of the future!” “Buy Buy Buy!” “It can never go down in value!”) – uh huh…triple check

As long as people who are buying Bitcoin understand what it is - have at it. However understand that only the person on top makes a profit. The people who cash out last will be the biggest losers – the market is a zero sum game. Thinking this is a viable long term investment is naïve at best, idiotic at worst (consider Sears, it’s taking them more than two decades to die, and they are still not dead – There was a time when Sears was considered superior to Walmart – Yes…they were viewed as BETTER than Walmart as an investment). If you want to “invest” in Bitcoin on the short term because of its volatility, that’s gambling, not investing – know the difference.

Closing thoughts:

Its fine to claim you’ve been lucky and making money off Bitcoin, but everyone makes money in a bull market run, so don’t claim you’re financially savvy. Blockchain technology might have a place in our financial systems – there is merit in reducing the overhead cost of exchange. However the various popular crypto currencies that exist in its current incarnation are poison.

The only way cryptocurrency can work in my opinion is that a couple of major issues need to be first addressed. You’re free to disagree, but your feelings mean nothing to me if you can’t back it up with a solid argument based on reality, a firm understanding of economics or some other accepted discipline. As an aside, a well-polished pyramid scheme video or article isn’t evidences – it’s sales material.

Suggested fixes:

-The creation of a clearing house/admin, so that you reduce the volatility that we are witnessing currently. However this goes against the very dogma by which Blockchain was built on, I can’t see this hurdle being surmounted any time soon or ever.

-You don’t have anonymous wallets. This would allow government to tax businesses. This in affect helps legitimize its use. I can give you historical perspective from the credit card industry, but this blog is getting too long as is…

-Lay people, sophisticated people, the very rich to the very poor can buy a ‘basket of goods’ using cryptocurrency with ease. Currently cryptocurrency as I understand it requires a 10 minute transaction confirmation time. No one is waiting at Starbucks for their coffee payment to clear for 10 minutes. And God forbid they “give you the wrong change”, and you need to wait another 10 minutes for the return transaction? No…just no

-Cryptocurrency can be mined dynamically, not based on preset algorithms. The very fact that this is static means the system can be hijacked and gamed. However as full disclosure, I will admit gold is introduced into our market in a static means, so it COULD work… however gold isn’t currency either (who do you know is carrying gold flakes around to pay for groceries?). Having said that I accept that as one possible argument that Bitcoin is immature digital gold – that is a weak argument, but a possible argument. However, if you buy into that thought, you’re opening a can of worms.



P.S. – I already know what this blog is welcoming…Trolls, Insecure people, Bitcoin Koolaid drinkers, simmer down your rants. If you want to discuss this topic, I welcome it – in fact I would love for you to change my mind, but come prepared with facts, evidences, and supporting arguments base on reality. Angry retorts because someone challenged your views is what five year olds do, not adults.
FlyJaeBirdFly
FlyJaeBirdFly: Bruh bruh u don't even get it like you're just one of them

(more constructive comment to come at a later date)
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AsianGuy333
(Post deleted by AsianGuy333 3 years ago)
AsianGuy333
AsianGuy333 in reply to FlyJaeBirdFly: I’m confused…huh?
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seashellcrown
seashellcrown: Good read😁
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AsianGuy333
AsianGuy333 in reply to seashellcrown: Thank you! How have you been?
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seashellcrown
seashellcrown: im great, how are you?
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tina_time7
(Post deleted by tina_time7 2 months ago)
tina_time7
tina_time7: To me this part isn’t clear. “Consider the purchasing routes for a moment. I see goods I want, I have money, I pay money for goods, I own goods. Now consider Bitcoin, I see goods I want, I have money, I buy Bitcoin, I pay for goods in Bitcoin, I have goods. How is the latter situation more “efficient”?” - because what is the difference between having and owning ? Plus previously you said we can not buy with bitcoin so I am confused.
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tina_time7
tina_time7: I also do not understand what you meant about sears still dying off- where?
And this paragraph also leaves me puzzled as to the point: “-Lay people, sophisticated people, the very rich to the very poor can buy a ‘basket of goods’ using cryptocurrency with ease. Currently cryptocurrency as I understand it requires a 10 minute transaction confirmation time. No one is waiting at Starbucks for their coffee payment to clear for 10 minutes. And God forbid they “give you the wrong change”, and you need to wait another 10 minutes for the return transaction? No…just no”
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AsianGuy333
AsianGuy333: I should have used the same adjective; I see where the confusion was. I was indicating that purchasing goods via Bitcoin require an additional unnecessary step.

Sears at one point was considered a VERY good investment, whereas Walmart was considered third rate. Clearly with hindsight we can see that Walmart won out. I was using it as an analogy that Bitcoin might seem attractive now, but you have to actually evaluate it appropriately.

Related to above, Bitcoin doesn’t allow for easy exchange of goods, which weakens the argument of it being digital “currency”

As of the date of writing, bitcoin transaction are not “instant” - you can’t just hand someone bitcoin and walk out the door, you have to wait for ledgers to confirm the transaction. I don’t know if that’s still the case now…but I imagine it is?
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