Is Bitcoin the Next Big Thing?

[accelerator]

Hi Guys

Is Bitcoin the next big thing and how is it going to pan out in the UK?

The Xapo startup has just moved its headquarters from Palo Alto, California, to Zurich, Switzerland. Look at its recent post re its new advisory board, some very big players from the world of finance are now getting involved with Bitcoin companies:

https://blog.xapo.com/announcing-xapos-advisory-board/

Thoughts?

 

[Edwin]

No.

http://www.coindesk.com/price/

Bitcoin cratered after an initial burst of enthusiasm, and has never recovered. The price has been bumping along for the last 6 months.

It's extremely unlikely that any "event" will suddenly make the price spike upwards again and stay up, though there will of course be random fluctuations.

The whole premise of Bitcoin is built on nothing at all, and now that mining is impossible for "the little guy" because of the difficulty level, any newly mined coins are going to the huge mining pools armed with data centres packed with racks of ASICS and/or FPGA, and there's not even that latent undercurrent of "buzz" when somebody uses their high-end GPU to mine a "valuable" coin and tells their friends about it.

See for example http://www.economist.com/news/busin...ome-big-ruthlessly-competitive-business-magic (which tells the tale from the mining side, but of course was written before the extended period of price stagnation that we are still in)

 

[newguy]

I've never bought any but it's clear that it has a use and will remain for a good time yet. The price looks to have been stable this year at least.

 

[accelerator]

It's extremely unlikely that any "event" will suddenly make the price spike upwards again and stay up, though there will of course be random fluctuations.

Another banking crisis like the one in Cyprus could cause more demand, as Bitcoin can function in a similar way to Gold, being a value store when FIAT currencies are under threat.

There are some serious venture capital investments being made into Bitcoin at the moment.

I think the main problem for Bitcoin will be government reaction to it. It's already been banned by a number of countries, which is a great shame.

 

[mat]

Bitcoin is nothing like metals.

 

[newguy]

Bitcoin is undeniably useful for people, so value is attributed to it. I suppose that is the central fact no matter how similar or alike it is to anything else. I can't say that I would look to invest in it mind you as I don't really see any upside. The time to do that would've been early on.

 

[ian]

Whilst unregulated, it doesn't have a hope. Would rather remain in precious metals, art etc

 

[accelerator]

Whilst unregulated, it doesn't have a hope. Would rather remain in precious metals, art etc

Government regulatory response to Bitcoin is the elephant in the room at the moment.

The UK government is going to have to decide upon its response to Bitcoin. If it decides to ban it, as other countries have, it risks losing its London tech startups to other Bitcoin friendly states, e.g. The Isle of Man.

What is revolutionary is the Blockchain technology that enables Bitcoin and other cryptocurrencies. National states could use this technology to build there own national cryptocurrencies, and I think this is a strong possiblity. What is evident however, is Blockchain technology is likely to be a very big thing.

 

[newguy]

Government regulatory response to Bitcoin is the elephant in the room at the moment.

The UK government is going to have to decide upon its response to Bitcoin. If it decides to ban it, as other countries have, it risks losing its London tech startups to other Bitcoin friendly states, e.g. The Isle of Man.

What is revolutionary is the Blockchain technology that enables Bitcoin and other cryptocurrencies. National states could use this technology to build there own national cryptocurrencies, and I think this is a strong possiblity. What is evident however, is Blockchain technology is likely to be a very big thing.

Our government seems to want to attack online freedoms, so I wouldn't bank on them making decisions that are logical or helpful for business.

 

[accelerator]

This is my take. In terms of the internet and technology, blockchain technology is already a next big thing, and expect to see a lot of startups in this area. The reason for this is that the blockchain technology brings a way of trusting other people on the internet without needing an intermediary, so this is revolutionary. So, we have a country putting its land registry onto the internet via blockchain, plus we have:

https://www.ascribe.io/

Allowing copyright owners to manage their digital rights. This kind of stuff is game changing.

Re Bitcoin, well it's the pre-eminent digital currency. Personally I think it is already a "Next Big Thing". However, if you are looking at it purely as an investment, then there is a lot of risk involved. That said, there are some big names that are very bullish about Bitcoin, for example the Winklevoss twins, who are now heavily involved in it.

 

[Edwin]

If you really care enough about the subject, it's worth reading up on "blockchain bloat". There are some pretty wild ideas about how to "solve" the issue, including taking advantage of Moore's Law to throw vast amounts of storage/compute resources at it.
https://bitcoinmagazine.com/17824/how-to-ensure-network-scalibility-fighting-blockchain-bloat/

Bitcoin, at the time that article was written, was capable of handling 7 transactions per second. Visa, on the other hand (and unlike the Bitcoin Wiki page about scalability which woefully understates the numbers) handles 24,000 transactions per second. So that's a scaling factor of over 3,400 times. In other words, Bitcoin as it's currently implemented could at best process 0.03% as many transactions as Visa. That's probably enough to provide transaction processing services to a medium-sized town.

Where's the money going to come from to scale the entirety of the Bitcoin network 3,400-fold? I've never seen an article that begins to even hint at a realistic answer.

http://usa.visa.com/merchants/industry-solutions/retail-visa-acceptance.jsp

Bitcoin's biggest problem is its name. If it had been called "magic beans", people would have taken the concept exactly as seriously as it deserves to be.

 

[websaway]

It appears to me that the problem with this is not over complicated.
The situation that's accrued is nobody any longer wants to now go in because there are too many people waiting to get out.

 

[Edwin]

It's fascinating to see that the total of the publicly-disclosed amounts invested in Bitcoin-related ventures by VC firms to date (as tracked by Coindesk) is almost 25% of the value of all Bitcoin in existence.

VC firms have invested US$790.52 million http://www.coindesk.com/bitcoin-venture-capital/
Bitcoin capitalisation: US$3,212 million http://www.coindesk.com/price/

 

[bonusmedia]

That doesn't necessarily mean that VC firms have high confidence in Bitcoin - just that the potential rewards if it does well are very high.

If you think the chance of something happening is 9-1 then 10-1 odds are worth taking

 

[accelerator]

It's fascinating to see that the total of the publicly-disclosed amounts invested in Bitcoin-related ventures by VC firms to date (as tracked by Coindesk) is almost 25% of the value of all Bitcoin in existence.

So what are saying is the significance of this?

I've certainly been watching the moves the venture capitalists are making here. The internet has disrupted shopping, music, cinema, communication ... it looks like banking is next.

 

[Edwin]

So what are saying is the significance of this?

I'm saying that it's amazing how much they've collectively invested in something that's "worth" so little.

(You only have to look at the various stories of mining companies that have stopped mining because it's unprofitable now that the price of Bitcoin has dropped so low to see that many of these VC investments are already literally worthless)

Bitcoin had a fantastic story at the beginning: "People who bought Bitcoin for a few cents or a dollar or so are sitting on Bitcoin worth hundreds/thousands. People in their bedrooms could mine valuable coins on their gaming rigs."

Then it became the less exciting "People bought Bitcoin for a couple of hundred dollars and saw the paper value of their investment rise five-fold. People willing to invest in FPGA/ASIC rigs could mine even more valuable coins."

Then it became the bland "People bought Bitcoin for a couple of hundred dollars and six months later the market price was still a couple of hundred dollars. The only people still mining Bitcoin in quantity were huge, expensive data centres set up next to near-free sources of electricity (hydro, geothermal etc.)"

 

[Admin]

There was also the release of many new variants of Bitcoins, (litecoins etc.) a bit like all the new domain extensions, this only sought to confuse people what to mine or invest in.

There is also still a massive security risk that the average person would not understand enough to protect themselves - I wrote a small article about it that was published in Webuser magazine last year. Basically if someone can get their hands on a copy (not even the original) of your wallet.dat file that is un-encoded, they can simply transfer your coins away to another account.

I am sitting on a few Bitcoins just for the hell of it but I don't see any future in something so unsafe and unregulated.

Admin

 

[accelerator]

There is also still a massive security risk that the average person would not understand enough to protect themselves - I wrote a small article about it that was published in Webuser magazine last year. Basically if someone can get their hands on a copy (not even the original) of your wallet.dat file that is un-encoded, they can simply transfer your coins away to another account.

This is the first time I've heard of this. Is there a link to the article?

If you are holding your Bitcoin with a Bitcoin company like Coinbase, Circle or Xapo, then surely this wouldn't be an issue?

 

[Admin]

If your coins are with a 3rd party your risk is that their server gets hacked and your coins stolen, check their T&Cs on what you get if this happens.

The only truly safe way is to keep your wallet.dat file on multiple USB sticks completely offline, so people put them in a bank vault.

I don't know if the article is still there but there must be loads of references online about it.

Try it yourself, copy your wallet.dat from one machine to another and open it with your Windows client, if you can open it then you can transfer the coins away.

Admin

 

[Edwin]

This is the first time I've heard of this. Is there a link to the article?

If you are holding your Bitcoin with a Bitcoin company like Coinbase, Circle or Xapo, then surely this wouldn't be an issue?

Here's an article that may shed some light on the issue: "How to steal Bitcoin in three easy steps"
http://www.theverge.com/2013/12/19/5183356/how-to-steal-bitcoin-in-three-easy-steps

From the article:

All methods can be protected with various levels of security, but all methods are vulnerable to theft since the robbery simply depends on gaining access to the string.

There are thousands of references out there to what happens if a wallet.dat file falls into the wrong hands (basically it's digital data, so the copy is EXACTLY the same as the original - there's nothing to distinguish "your" copy)

As to your second question, that just makes the target even more attractive for thieves. From the article I linked to above:

The most lucrative attacks are carried out on online services that store the private keys for a large number of users, as Sheep Marketplace did. It seems these attacks are often carried out by insiders who don’t have to do much hacking at all. Just copy the database of private keys and you can gain control of the bitcoins at all those addresses. You, the thief, can now spend those bitcoins whenever you want, as long as the owner doesn’t move them first.