Topic Wiki

Editorís note: I know enough about this topic to be dangerous, but Iím 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.

Iím just a simple DDFer and not an accountant + cryptographer + hacker all at the same time. Can you make this a little simpler to understand?
Letís 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 Ė called ďEQPĒ and ďHTĒ. 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, letís 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 ďGreater Fool InvestingĒ).

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? Shouldnít we wait for Schmitcoin and its cousins to come out?
You could, but you donít 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. Itís 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 itís 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.

Letís 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 letís 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 itís 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 ďsmart contractsĒ 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 145812 times)

Offline yos9694

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Re: BitCoin Master Thread
« Reply #1575 on: March 02, 2021, 05:38:14 PM »
Interesting counter-analysis: https://cryptobriefing.com/will-coinbase-introduce-its-own-exchange-token/

I don't think it's much of a counter argument though. It's true that Coinbase helped make USDC but that's not a profit vehicle and doesn't really offer any advantages to people with access to USD. A Coinbase exchange token, on the other hand, would be a means to generate capital through selling/generating coins when adoption/price is high, and would create a loyalty program to help hold onto customers. As @Yitzshpitz mentioned, their fees are higher (at least 5x higher in fact) than Binance and other leading Asian exchanges, and while Coinbase is a great gateway exchange I'm sure as their users become more sophisticated they start to migrate away.

I'm envisioning that they would straight up copy Binance, KuCoin, et al and offer 50% discount of trading fees for using their native coin. Customer loyalty is a great way to keep profits steady and shareholders happy

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Re: BitCoin Master Thread
« Reply #1576 on: March 02, 2021, 05:50:23 PM »
...
I'm envisioning that they would straight up copy Binance, KuCoin, et al and offer 50% discount of trading fees for using their native coin. Customer loyalty is a great way to keep profits steady and shareholders happy

Have you read their S1? I tried glancing through it to see where they discuss a potential native coin, but my eyes started swimming.
When you find yourself agreeing with me more often than not, it's time for a cheshbon hanefesh.

Offline yos9694

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Re: BitCoin Master Thread
« Reply #1577 on: March 02, 2021, 06:17:20 PM »
Have you read their S1? I tried glancing through it to see where they discuss a potential native coin, but my eyes started swimming.

I haven't.  The whole idea is pure speculation with no supporting evidence. But I've wondered why cardano was never listed by Coinbase despite its popularity. Its runup over the past month (in excess of the general hysteria) is likely connected with the fork but we're still missing an explanation as to why the fork makes the coin so much more valuable. At the same time, Coinbase announces it will be going public even though their exchange has an inferior business model which results in churning through customers and investors will hate that

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Re: BitCoin Master Thread
« Reply #1578 on: March 02, 2021, 06:23:22 PM »
I haven't.  The whole idea is pure speculation with no supporting evidence. But I've wondered why cardano was never listed by Coinbase despite its popularity. Its runup over the past month (in excess of the general hysteria) is likely connected with the fork but we're still missing an explanation as to why the fork makes the coin so much more valuable.

IIRC, the run-up to every fork of every coin has created a spike in price.
When you find yourself agreeing with me more often than not, it's time for a cheshbon hanefesh.

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Re: BitCoin Master Thread
« Reply #1579 on: March 02, 2021, 06:49:53 PM »
IIRC, the run-up to every fork of every coin has created a spike in price.

Wish I could respond with specific examples but can't do it off the top of my head and dont have time to pull up charts. But its definitely untrue that anticipating a fork alway leads to a runup. Not all forks are good, especially not hard ones where the community can be split into 2.

I think best example in your favor was btc/bch because both coins had ample communities and your tokens were doubled. But the opposite was true with eth/eclassic because the latter branch was literally to preserve stolen assets for the thieves. Also, not every fork results in multiple coins, many are just software protocol changes and have nothing to do with value

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Re: BitCoin Master Thread
« Reply #1580 on: March 02, 2021, 06:54:41 PM »
Wish I could respond with specific examples but can't do it off the top of my head and dont have time to pull up charts. But its definitely untrue that anticipating a fork alway leads to a runup. Not all forks are good, especially not hard ones where the community can be split into 2.

I think best example in your favor was btc/bch because both coins had ample communities and your tokens were doubled. But the opposite was true with eth/eclassic because the latter branch was literally to preserve stolen assets for the thieves. Also, not every fork results in multiple coins, many are just software protocol changes and have nothing to do with value

I'm far from an expert on the tech. My comment was more that, to my memory, the word "fork" has always caused prices to go up, justified or not. A large percentage of the players in crypto have no idea what's flying.
When you find yourself agreeing with me more often than not, it's time for a cheshbon hanefesh.

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Re: BitCoin Master Thread
« Reply #1581 on: March 03, 2021, 09:52:03 AM »
I'm far from an expert on the tech. My comment was more that, to my memory, the word "fork" has always caused prices to go up, justified or not. A large percentage of the players in crypto have no idea what's flying.

Often it causes a short term spike but ends up retracing 80-90% and I dont think that is what they are going for.

 
... Customer loyalty is a great way to keep profits steady and shareholders happy

I agree. This is the main reason for them to make their own coin. In the coming years there will heavy competition in the crypto exchange market and having incentives and building loyalty among existing customers is a great way to keep their base happy.

IMO, the primary goal of Coinbase needs to be to invest into their trading platform infrastructure such as Coinbase pro app/site, charting options, and portfolio tools so customers can better evaluate their trading/investment performance and portfolio management. Other exchanges such as Binance, FTX and Bitmex are way ahead in this area. Coinbase was created for the elementary investor but provides few tools for even moderate traders. Additionally, the exchange always seems to go down when there is a lot of volume or extreme volatility.

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Re: BitCoin Master Thread
« Reply #1582 on: March 03, 2021, 09:56:02 AM »
Often it causes a short term spike but ends up retracing 80-90% and I dont think that is what they are going for.

No, but it would be a reason to hold off on an ADA investment until it corrects. It's currently up 700% since Jan 1.
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Re: BitCoin Master Thread
« Reply #1583 on: March 03, 2021, 12:39:37 PM »
No, but it would be a reason to hold off on an ADA investment until it corrects. It's currently up 700% since Jan 1.

My personal belief is that ADA is beating the same path as XRP did 3 years ago, right down to the same "use cases" for Africa. Went from relative obscurity to top 3 very rapidly and has a base that seriously believes it fills a need that no other coin does. Celebrity shills are joining up and it won't be long before one of them starts doing public promotion stunts and gimmicks. I'd predict that the coin will break its ATH a few more times with quick jumps and then take a nosedive.

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I've been waiting over 5 years with bated breath for someone to say that!
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Re: BitCoin Master Thread
« Reply #1585 on: March 08, 2021, 09:56:21 AM »
I've been waiting over 5 years with bated breath for someone to say that!
-- Dan

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Re: BitCoin Master Thread
« Reply #1586 on: March 08, 2021, 10:12:35 AM »
Quote
BTC is just another market to be traded, like Beans or T-Notes or Sugar

This x1000. Extends to all crypto.
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Re: BitCoin Master Thread
« Reply #1587 on: March 08, 2021, 10:13:32 AM »
This x1000. Extends to all crypto.

Are you forgetting @henches favorite market/store of value? Potato futures!
I've been waiting over 5 years with bated breath for someone to say that!
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Re: BitCoin Master Thread
« Reply #1588 on: March 08, 2021, 10:17:15 AM »
Are you forgetting @henches favorite market/store of value? Potato futures!

That one's less volatile. Always gets hot before Pesach and Chanukah, and any time Russia is in an economic downturn.
When you find yourself agreeing with me more often than not, it's time for a cheshbon hanefesh.

Offline AsherO

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Re: BitCoin Master Thread
« Reply #1589 on: March 08, 2021, 12:33:27 PM »
That one's less volatile.

IKR? Potatoes never bounce...

and any time Russia is in an economic downturn.

This part earned my like, I grinned IRL :D Kartoshka, the original Satoshi...