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[Reelya]

www.news.com.au/finance/money/investing/cryptocurrency-market-crashes-20-per-cent-as-website-ditches-south-korean-exchange-data/news-story/ecc5f4dcab56b5f3da31b803b1db4446?from=rss-basic

This is an interesting story because it's one of those misleading headline ones:

Cryptocurrency market crashes 20 per cent as website ditches South Korean exchange data

Actually what happened was there's a service that estimates the global price, and South Korean exchanges are typically 30% higher than the rest of the world, then the service decided to not count those exchanges in their price metric, causing the estimated "price" to fall, even though it didn't actually fall on any existing exchange.

It's like calculating the "average hair color" around the world, then excluding China from your metric, and concluding that "the world is turning blonde".

[JoshuaFH]

God do cryptocurrencies weird me out, it's just one of those things that makes me think "What the hell is the rest of the world thinking?". Way back when, when I first heard about bitcoin, I thought it was a joke, and it was a joke, but now people arbitrarily decide to take it seriously and it gains arbitrary value? The entire thing, top-to-bottom, feels like a scam. How can anyone take a deregulated currency seriously?

That's my opinion, but I'm clearly ignorant on the matter with how consistently wrong I am.

[Reelya]

Well, they said the same when the gold standard was abandoned. Paper money isn't "backed" by anything, in the sense that there's no official place you can take banknotes and exchange them for a set amount of "goods". They are in fact only worth something because people will accept them, and people only accept them because they know someone else will accept them later.

Sure, the government can regulate the rate at which they're "printed" and stuff, but that doesn't really mean anything. They are still really just worthless bits of paper, only worth stuff because we agree on it.

And of course, you can follow the rabbit hole. When the "gold standard" existed what gave gold value? Why could you eat like a king if you own yellow shiny rocks? It's nonsensical. You can't eat gold, and the industrial uses don't account for it's value. It's only worth "stuff" because we agree that gold is worth "stuff". In the end, gold is just a lumpier, heavier version of worthless paper money.

And, fundamentally, we cannot say that they are in fact any better as "stores of value" than a well-designed cryptocurrency: a cryptocurrency can be designed with different features, e.g. the creator can specify the exact amount that's created, timeframes, and whether the amount created goes up or down according to some schedule. That is in fact much more predictable and controllable than a fiat currency or gold production.

This is why calling bitcoin a "deregulated" currency is a little off the mark. The exact amount of bitcoin that exists and the rate at which it's created is a strictly controlled phenomena. It's no more "deregulated" than paper money or gold or any other commodity that's produced at a finite rate. In fact, it's more regulated than most commodities, who's rate of production can change.

~~~

Another interesting point is the confusion about why "transaction fees" have gone up, and people mistake this as having something to do with the hashrate or mining difficulty. This is a completely contrary understanding of what's going on. The network supports a finite amount of transactions per block, so there's a supply and demand market around buying transactions. e.g. when the number of transaction demand exceeds supply, then the price rises until supply and demand stabilize. Basically, transaction fees are an auction, and recently, demand has outstripped supply.

Then because of this demand, the profits per block increase, and miners compete to get that money, which drives up the hashrate. The hashrate in fact rises because of the higher demand for transactions, it's not the cause of it. Miners make more money when there's high volatility in the bitcoin market (since this causes more transactions to happen), rather than when the price goes up or down.

[Tack]

I think 'Regulated' refers to governments.

[Sheb]

Nah, what make Bitcoin not really a currency isn't it's arbitrariness, it's that it sucks at every single role of a currency. It's a crap store of value because it's so volatile. It's a crap medium of exchange because transaction rate are so limited (and again because it is so volatile.), and you can't really buy anything with it. People are mostly just buying it hoping to make money of the volatility. It's closer to a dutch tulip bulb than anything like a currency.

[Antioch]

God do cryptocurrencies weird me out, it's just one of those things that makes me think "What the hell is the rest of the world thinking?". Way back when, when I first heard about bitcoin, I thought it was a joke, and it was a joke, but now people arbitrarily decide to take it seriously and it gains arbitrary value? The entire thing, top-to-bottom, feels like a scam. How can anyone take a deregulated currency seriously?

That's my opinion, but I'm clearly ignorant on the matter with how consistently wrong I am.

It has value because it facilitates illegal unmonitored transactions.

It's not a coincidence at all that things like ransomware demand payment in bitcoins.

[JoshuaFH]

God do cryptocurrencies weird me out, it's just one of those things that makes me think "What the hell is the rest of the world thinking?". Way back when, when I first heard about bitcoin, I thought it was a joke, and it was a joke, but now people arbitrarily decide to take it seriously and it gains arbitrary value? The entire thing, top-to-bottom, feels like a scam. How can anyone take a deregulated currency seriously?

That's my opinion, but I'm clearly ignorant on the matter with how consistently wrong I am.

It has value because it facilitates illegal unmonitored transactions.

It's not a coincidence at all that things like ransomware demand payment in bitcoins.

That's what I'm curious about, why would people that care about illegal transactions place their faith in bitcoins of all things? It's circular logic: People place value in it > because other place place value in it > because the other people place value in it, so on and so forth. It seems it gained value apropos nothing, because what even started that circular chain? How can people have faith in it, when all it takes it one solid hit to that faith to shatter that chain completely?

[Egan_BW]

If people think it works, it works. It's convenient for it to work, so people think it works in order for it to work so that they can have the convenience of it working.

[JoshuaFH]

It's the Freddy Krueger of currencies, if people believe in it, then it's real.

[Maximum Spin]

It's the Freddy Krueger of currencies, if people believe in it, then it's real.

That is literally how all currencies work.

[Reelya]

There's a polynesian island, Yap, where they uses these very large rocks as money, they're too large to move so people just remember who owns which one. At one point, a ship was transporting a rock to the island, and it sunk, but the people on the boat survived and told the other islanders about it. The islanders talked, and decided that they believed the story, and the lost rock was accepted as legal currency, so after that, they also tracked ownership of the rock that is at the bottom of the ocean, somewhere.

https://www.npr.org/sections/money/2011/02/15/131934618/the-island-of-stone-money

[JoshuaFH]

It's the Freddy Krueger of currencies, if people believe in it, then it's real.

That is literally how all currencies work.

I think there's a bit of a difference, with something like a government-backed currency, someone is forcing the currency to have value, and so it does. Whereas with bitcoin, people believe it of their own volition, as if the digital bits on the internet have self-evident value, which they don't. That's what trips me up.

[Maximum Spin]

I think there's a bit of a difference, with something like a government-backed currency, someone is forcing the currency to have value, and so it does.

In practice, though, that doesn't really happen either. When was the last time you had to redeem the government's promise that "this note is legal tender for all debts, public and private" in a court? If the government stopped making that promise tomorrow, do you think anyone would stop using the money?

[wierd]

Yes. The US Dollar is the WMF reserve currency. If it removed its promisary notice, then the WMF would SERIOUSLY degrade the currency, causing a massive panic of selling holdings of the currency.

[Reelya]

Gold is the prime example that there's nothing "forcing" money to have value. We just have a bias that money must have value in and of itself, because that's our worldview. Just like we have this massive cognitive bias that gold is more "real" than paper money, despite there being even less ways that institutions that can intervene in the price of gold than they can with money they print.

No institution is, in fact, forcing gold or really any other currency to have value in the sense that people are willing to trade concrete resources for it. It does really come down to confidence.

The main things a goverment can do are to contract or expand the rate at which pieces of paper enter or leave the economy. That in no way "forces" the pieces of paper to have real value, any more than expanding or contracting the amount of bitcoin in circulation "forces" bitcoin to have real value.