Topic Wiki

Editor’s note: I know enough about this topic to be dangerous, but I’m not a true expert so please feel free to add to or edit anything in this wiki that will improve it. The FAQs contain many oversimplifications but that is intentional to make the information relatable to the audience. Thanks!

Frequently Asked Questions

What are blockchains and bitcoins and what is the difference?
A blockchain is the fundamental element in a crypto currency system. A blockchain is an accounting ledger. Each block contains a bunch of journal entries (i.e. a chronological record of transactions) that gets encrypted (by miners) but can be downloaded and read by anyone on the network. Why the blockchain ledger is secure and how we can vouch for its integrity is a slightly more advanced topic.

An accounting ledger typically keeps track of money, and a blockchain is no different. But the only type of money that it can accurately track is digital money that lives on the blockchain network. So dollars, euros, etc are out. The digital money that lives on the blockchain is called a crypto currency, and the most well-known one at this time is Bitcoin.

Currently there are a few major blockchain networks: the Bitcoin Network, the Ethereum Network, and the Litecoin Network. Each one has its own currency, which are Bitcoin, Ether, and Litecoin, respectively.

I’m just a simple DDFer and not an accountant + cryptographer + hacker all at the same time. Can you make this a little simpler to understand?
Let’s try an analogy. There is a certain website called Dansdeals.com and it has quite a following. Some of the followers are just users/readers but others are more active and produce value for the website. When they provide value, they earn currency for their work – called “EQP” and “HT”. So we have something we will call the Dansdeals Blockchain Network that is simply a record keeper of various ongoing deals and it issues a native currency that is fractionable (10,000 EQP = 1 HT). This is similar to the Blockchain network recording financial transactions and issuing bitcoins. The ones who work for the network (miners) earn bitcoins and everyone else needs to buy it to participate.

The analogy improves if you imagine that the Dansdeals website visitors have to pay a small amount, let’s say 5 EQP, in order to access a deal or a code that is recorded on the network. If the website has 30,000 followers who love deals, but only 1,000 active members who earn EQP, then you can see that there is a need for a marketplace to be created where you can buy EQP for later use.

Of course, websites are not networks, and this analogy is far from perfect. But useful.

How much is a Bitcoin worth
No one knows. A few people are speculating its worth based on the potential that Bitcoin will one day become a major world currency that people use in their daily lives. Most people though are speculating its worth based on what the next new investor will pay them for it (google “Greater Fool Investing”).

Even if a crypto currency becomes dominant, who says it will be Bitcoin? Maybe it will be Schmitcoin?
This is completely possible. Bitcoin and Ether are the most likely at this point, but their long term survival is not at all guaranteed.

So why all the fuss about Bitcoin? Shouldn’t we wait for Schmitcoin and its cousins to come out?
You could, but you don’t want to ignore how hard it is to start up a network from scratch. It may be that as little as one person can create rival code to compete with the existing digital currencies and blockchains, but one person is not a network. You need a lot of highly technical and motivated people to join you and also to invest their time, energy, and money in making that network run. It’s a highly specialized group of people, and most of the people who would fit that profile are already tied up with an existing network. So it’s not impossible, especially in the long-term, but even if it does happen it would be unlikely to pop up overnight and so Vegas odds for Bitcoin are way shorter.

Let’s go back to the Dansdeals analogy. Imagine that Dansdeals is not the only such website, and there are other websites in existence that provide similar services. For the sake of the analogy let’s call them MMS and OMAAT. They too have big enough followings to survive independently, and even though each one offers a slightly different flavor that differentiates them, anyone on one of the networks could also get their most important needs met on one of the other networks. In this analogy, do you think it’s worth collecting EQP/HT or not? After all, Schmansdeals.com could open up one day and all the business could move there.

The argument for the difficulty of starting up a rival blockchain network is much stronger than in the analogy (especially if we start to include “smart contracts” in the discussion), but the basic idea that you need a critical mass of follows to be successful and compete with existing rivals is the same.

« Last edited by yuneeq on December 25, 2017, 01:05:21 AM »

Author Topic: BitCoin Master Thread  (Read 347590 times)

Offline yuneeq

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Re: BitCoin Master Thread
« Reply #780 on: January 18, 2018, 01:24:27 PM »
You have been asked numerous times what you would consider to be a fair value and how you would reach such a metric. THere has been complete radio silence. Also, neither I nor anyone else has said they are valueless. I said it has the value of the resources required to find the encryption.

I answered above but you ignored it as usual.
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Offline aygart

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Re: BitCoin Master Thread
« Reply #781 on: January 18, 2018, 01:25:33 PM »
I answered above but you ignored it as usual.

Where? Please quote it.
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #782 on: January 18, 2018, 01:27:36 PM »
Where? Please quote it.

I was just asked this question and already answered it.
But if you want more depth, consider the market cap of gold ($7 trillion) as a store of value and the possibility of crypto replacing part of it.
Or research the market cap of currencies around the world, and the user base of each currency. If crypto is transacted by a 10 million people every day, would it be fair to value it similar to a currency that has a user base of 10 million people? You do the math, and tell me what it's worth.

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Offline aygart

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Re: BitCoin Master Thread
« Reply #783 on: January 18, 2018, 01:36:12 PM »

If market cap is your basis of valuation then it is not over valued at all. Is the proper basis how many people use it for one transaction in a day or how many use it as their primary currency? If I am only using it as a transaction medium then does that give it the same value as what I use as my primary store of value? If it is a transaction medium it does not give it any value at all. a check is also a transaction medium and many more people use checks than use crypto.
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #784 on: January 18, 2018, 01:46:00 PM »
If market cap is your basis of valuation then it is not over valued at all. Is the proper basis how many people use it for one transaction in a day or how many use it as their primary currency? If I am only using it as a transaction medium then does that give it the same value as what I use as my primary store of value? If it is a transaction medium it does not give it any value at all. a check is also a transaction medium and many more people use checks than use crypto.

My basis for overvalued is relative to other crypto which I believe do a better job and have lower market cap.

I think your mistakenly comparing checks to crypto. Checks are a form of sending USD. IP packets are the checks of digital currency. IP packets are worthless. Crypto is the actual currency and is a store of value as well.
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Offline aygart

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Re: BitCoin Master Thread
« Reply #785 on: January 18, 2018, 01:57:51 PM »
I think your mistakenly comparing checks to crypto. Checks are a form of sending USD. IP packets are the checks of digital currency. IP packets are worthless. Crypto is the actual currency and is a store of value as well.
What makes it so?
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Offline ExGingi

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Re: BitCoin Master Thread
« Reply #786 on: January 18, 2018, 02:09:48 PM »
My basis for overvalued is relative to other crypto which I believe do a better job and have lower market cap.
OK. And what's to say they aren't both overvalued compared to the USD?

I think your mistakenly comparing checks to crypto. Checks are a form of sending USD. IP packets are the checks of digital currency. IP packets are worthless. Crypto is the actual currency and is a store of value as well.
What is a USD?

The greenbacks which you might have in your pocket read "Federal Reserve Note", they are a bearers note. A שטר which is pre-printed to the benefit of the benefit of the bearer. The only difference between that and a cheque which is payable to the bearer is that the greenback is guaranteed by the issuer, whereas a cheque is up to the faith and credit of whoever wrote it (and technically also dependent on the bank against which it is drawn).
I've been waiting over 5 years with bated breath for someone to say that!
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #787 on: January 18, 2018, 02:17:09 PM »
What makes it so?

What makes it a currency or what makes it a store of value?
The fact that it is used a medium of exchange for services and goods makes it into a currency.
The fact that it weighs nothing, is trustless, decentralized, used by millions, deflationary, highly divisible, can easily transfer around the world, and is transact-able as a currency makes it practical as a store of value. That does not mean it will not be volatile. Gold also has periods of high volitility.  It just means it’s practically a good place for storing value.

“A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved”
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Offline ExGingi

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Re: BitCoin Master Thread
« Reply #788 on: January 18, 2018, 02:18:44 PM »
“A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved”
That's a key word there.

I'm willing to make you the same offer I made to @Emkay. If you agree in principle we will hammer out the details.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline aygart

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Re: BitCoin Master Thread
« Reply #789 on: January 18, 2018, 02:20:01 PM »
“A store of value is the function of an asset that can be saved, retrieved and exchanged at a later time, and be predictably useful when retrieved”
How is it predictably useful when retrieved? According to this
My basis for overvalued is relative to other crypto which I believe do a better job and have lower market cap.
All it takes for it to be overvalued is a better mathematician
Feelings don't care about your facts

Offline Emkay

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Re: BitCoin Master Thread
« Reply #790 on: January 18, 2018, 02:20:45 PM »
That's a key word there.

I'm willing to make you the same offer I made to @Emkay. If you agree in principle we will hammer out the details.
I wasn't sure what exactly you meant. What exactly the offer was.

Offline ExGingi

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Re: BitCoin Master Thread
« Reply #791 on: January 18, 2018, 02:33:29 PM »
I wasn't sure what exactly you meant. What exactly the offer was.

Let's name a date and a price. If Bitcoin is below that price at that date, I win, if it's above that price, you win. Simple. Winner names Yeshiva, loser gives $500 to that Yeshiva.

Subject to halachic approval.
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Offline Emkay

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Re: BitCoin Master Thread
« Reply #792 on: January 18, 2018, 02:38:20 PM »
Let's name a date and a price. If Bitcoin is below that price at that date, I win, if it's above that price, you win. Simple. Winner names Yeshiva, loser gives $500 to that Yeshiva.

Subject to halachic approval.
I don't think Bitcoin is the holy grail and I do think it needs to go but depending on the price and date I would tentatively be in. I would sooner bet on total crypto market cap than BTC price.

Offline yuneeq

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Re: BitCoin Master Thread
« Reply #793 on: January 18, 2018, 05:14:03 PM »
Let's name a date and a price. If Bitcoin is below that price at that date, I win, if it's above that price, you win. Simple. Winner names Yeshiva, loser gives $500 to that Yeshiva.

Subject to halachic approval.

Where in this thread do you see me confident about the current Bitcoin price?
So what's your point?
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Offline ChaimMoskowitz

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Re: BitCoin Master Thread
« Reply #794 on: January 18, 2018, 05:20:05 PM »
Where in this thread do you see me confident about the current Bitcoin price?
So what's your point?
Is there one you do feel confident in? If so which one?
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #795 on: January 18, 2018, 05:23:29 PM »
How is it predictably useful when retrieved? According to thisAll it takes for it to be overvalued is a better mathematician

Wrong. The statement I made was about currencies, Bitcoin for technical reasons is hardly if at all a currency nowadays. In order for the currency to become a store of value it first needs to be usable either as a commodity or a currency. My 2 comments were talking about 2 different things.

In addition - even if a cryptocurrency is overvalued does not mean it cannot be a store of value. Gold would still be a store of value even if the price spikes due to hype. "The point of any store of value is risk management due to a stable demand for the underlying asset."

As long as millions of people are interested in crypto and the interest keeps growing year over year, I'd say demand is pretty stable in that regard.
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #796 on: January 18, 2018, 05:26:51 PM »
Is there one you do feel confident in? If so which one?

Regarding currencies - I'm more confident in the utility of Bitcoin Cash and RaiBlocks.
I think both are more useful than BTC right now and will continue to be in the future unless something drastic happens.
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Offline ludmila

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Re: BitCoin Master Thread
« Reply #797 on: January 18, 2018, 06:52:53 PM »
Wrong. The statement I made was about currencies, Bitcoin for technical reasons is hardly if at all a currency nowadays. In order for the currency to become a store of value it first needs to be usable either as a commodity or a currency. My 2 comments were talking about 2 different things.

In addition - even if a cryptocurrency is overvalued does not mean it cannot be a store of value. Gold would still be a store of value even if the price spikes due to hype. "The point of any store of value is risk management due to a stable demand for the underlying asset."

As long as millions of people are interested in crypto and the interest keeps growing year over year, I'd say demand is pretty stable in that regard.
The difference is gold has been a proven currency or a flight to safety commodity for +1000 years. Owning gold coins or bars is a good protection for most people.
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Offline yuneeq

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Re: BitCoin Master Thread
« Reply #798 on: January 18, 2018, 06:59:23 PM »
The difference is gold has been a proven currency or a flight to safety commodity for +1000 years. Owning gold coins or bars is a good protection for most people.

Gold being around longer is an advantage of gold, but it doesn't change the definition of what a store of value is.
And if you're looking to compare, there are advantages and disadvantages to each of them (in regards to using it as a store of value)
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Re: BitCoin Master Thread
« Reply #799 on: January 18, 2018, 07:36:41 PM »
Gold being around longer is an advantage of gold, but it doesn't change the definition of what a store of value is.
And if you're looking to compare, there are advantages and disadvantages to each of them (in regards to using it as a store of value)
There is also a physical limit to the amount of gold as opposed to encrypted numbers which are infinite.
Feelings don't care about your facts