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An article on Ars Technica notes the continuing slide downward of Bitcoin prices (down below $9,000 per coin from a December peak of $19,500). It also notes some recent news about Facebook ads and crypto, SEC Action against a different cryptocurrency project, and rumors about a still different coin's possibility of insolvency.
Meanwhile, rumors are swirling about Tether, a cryptocurrency whose value is pegged to the United States dollar. Tethers are supposed to be redeemable for dollars at any time, but in recent months Tether has struggled to gain access to the conventional banking system and has failed to produce a financial audit demonstrating its solvency.
I'm not sure if the article is connecting unconnected stories of problems or if the theme of trouble in crypto-land generally is valid. But this quote got me to thinking how much the state of cryptocurrency may be like the Free Banking Era in the United States in the 1800s and the Wildcat Banking that signaled its demise. We discuss cryptocurrency a lot on Soylent, but are the troubles of various operators all linked or is it unrelated coincidence?
[Ed. Note: The linked story at Ars Technica was updated to report that the price of one BitCoin dropped below $7000. As of this writing, coinbase reports the price dropped to about $6400 (Javascript required). Note this price is still $5500 ahead of where it was this time last year when it had just inched above $1000.]
(Score: 5, Insightful) by Thexalon on Tuesday February 06 2018, @03:57AM (6 children)
That's just it: There has almost never been a currency based on intrinsic value. It's almost always based on social value, because the whole concept of currency is a social concept.
Yes, even when it's been based on precious metals. Gold and silver have substitutes that aren't as good as gold and silver for what they do, but are about 1000 times cheaper. For practical applications like tools, they're actually worse than most other metals because they're too soft and hard to come by. And governments could and did debase the currency even when the coins in question were gold and silver. Basically, they're valuable because they're pretty and stay pretty over time.
BitCoins, like all other currencies, have value because people believe they have value. Unlike currencies with government backing, that's all they have going for them. By contrast, currencies with government backing have guys with guns who will come explain that you do in fact need to come up with a certain amount of that currency for the tax man if you know what's good for you.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Tuesday February 06 2018, @05:23AM
Bitcoin, like other currencies, had value because people believed it provided a functional means of exchange that got around issues presented by conventional currencies.
At this point, just about all of those issues are worse with Bitcoin than they are with other currencies (it's slow, it's expensive to transact, at this point everyone realizes it's anything but private, etc).
Cryptocurrency has a future. Bitcoin MIGHT...but it really depends on how the rollout to the Lightning network fares. Even if it goes well, there are projects like Monero that do mostly what it does, but with added functionality (with monero, that functionality being fungibility, or as some like to think of it, a "built in laundry service"). I will not be surprised if we turn out to have seen Bitcoin's highest peak.
That said, I won't be shocked if it breaks its record again. After all, Dogecoin spiked despite having been abandoned for over a year in the clamor to a market cap of $2 billion. People are crazy, and markets are people. Hail Eris, All Hail Discordia.
(Score: 0) by Anonymous Coward on Tuesday February 06 2018, @05:37AM (3 children)
gold and silver have value because they don't degrade.
"noble" metals they are called, because they generally don't do chemical reactions.
this makes them ideal for coins because the coin won't change much over a hundred years or so.
(Score: 2) by maxwell demon on Tuesday February 06 2018, @07:44AM
Of course numbers don't degrade either. The medium they are stored on can, of course, but you can back it up. If you desire so, you can even engrave your offline wallet in stone.
However, unlike gold, you'll need a working infrastructure (electricity, internet) to spend your bitcoins.
The Tao of math: The numbers you can count are not the real numbers.
(Score: 2) by Thexalon on Tuesday February 06 2018, @01:04PM (1 child)
Except of course for nobody hanging onto actual coins for over a century. The Romans, for instance, had fairly sophisticated banking systems, which meant the rich folks didn't have to actually lug around hard cash when they, for instance, went to Egypt to conduct business.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 0) by Anonymous Coward on Tuesday February 06 2018, @02:30PM
the point is that it's a reasonably small thing that can be easily exchanged between people, and it will stay more or less the same for generations.
and you can make a crown from gold and then it will be the same crown "forever". as well as various religious stuff.
(Score: 2) by crafoo on Tuesday February 06 2018, @05:29PM
Not quite right. Currency has value because people believe that they can exchange them for real goods and services at some later date. It's not some blind belief in a social idea. They work how much faith they have that the currency will be worth goods and services into their valuation of the currency.