Logo Background RSS

Advertisement

Reggie Middleton: Bitcoin Q&A

  • Written by Syndicated Publisher No Comments Comments
    January 1, 2014


    The article and accompanying video “Bitcoin for Big Dummies: Why The Digital Currency Is Spiking & Why It’s Not A Bubble” proved to be rather controversial, and has spawned many different viewpoints and comments. I’d like to take this time to address a few of them in detail.

    +Gary Tooze “Hi Reggie – I know you fancy yourself as a realist, but in all the videos and articles I have followed from you – you have never mentioned ‘Gold’. Why do you suppose the Central Banks hold Gold? REALISTICALLY they OWN the government – which could crush BTC in a flash. The CBs know exactly what is going on and won’t be the losers in these shifting sands….

    Reggie Middleton

    +Gary Tooze Who would accept Bitcoin with all of its volatility? Possibly everyone who accepts the USD, who’s predecessor had even more violent swings which ended up in a redemption value of less than 1% – http://boombustblog.com/blog/item/9178-the-anti-economist-calls-bitcoin-the-anti-social-network. You see, new currencies with thin markets are prone to risk and volatility. Many act as if Bitcoin invented the term volatility.

    Reggie Middleton +Gary Tooze No, you have not got it right in referece to your gold comparisons. BTC does have Intrinsic value, more so than gold in my opinion. BTC is programmable, gold is not. BTC can easily be stored, transfered and tracked – gold can not. BTC can circumvent banks, as can gold – but by your estimation the banks hold most of the gold already 🙂 The programmability of BTC (especially in a digital age) should end the argument of intrinsic value before it gets started. Programmability is more valuable than fringe industrial uses in the age of the Internet and an interconnected world. Dinan5iver2A few observations Mr. Middleton. First, the problem with your automobile analogy. Who builds and maintains the exclusive road that only your car may use? The roads that the rest of us use can be built with the monetary unit of account (fiat) for public purpose. Could the same ever be said of a bitcoin alternative? I don’t see this as a remote possibility. 

    This leads to what I consider the primary weakness of the bitcoin alternative model. It’s essentially a return to the gold standard by electronic means and would severely limit policy space for a democratic republic in a massively monetized economy. Can bitcoin as presently constructed fuel a federal job guarantee to provide a true living wage floor for those willing to work? How would a true single-payer universal health service be provided with bitcoin? What about publicly provisioned education through graduate school at no charge for citizens? I think you can see what I’m driving at here. All of these policies require the services of a true central bank (under democratic control) utilizing fiat over which it maintains absolute sovereignty. 

     

    Reggie Middleton

    Actually, the hundreds of millions of denizens of the World Wide Web builds “builds and maintains the exclusive road that only your car may use?” The Web, and its denizens are not, in large part, governmental agencies, nor are they direct agents of the government either.

    “The roads that the rest of us use can be built with the monetary unit of account (fiat) for public purpose. Could the same ever be said of a bitcoin alternative? I don’t see this as a remote possibility.”

    Of course, those digital roads can be built. There are some ISPs and hosting services that you can go to know to pay in bitcoin to set up a site infrastructure and be part of the roads of the Web.

    Can bitcoin as presently constructed fuel a federal job guarantee to provide a true living wage floor for those willing to work? How would a true single-payer universal health service be provided with bitcoin? What about publicly provisioned education through graduate school at no charge for citizens? I think you can see what I’m driving at here. All of these policies require the services of a true central bank (under democratic control) utilizing fiat over which it maintains absolute sovereignty.”

    You’ve lost me here. It’s not as if the USD can “fuel a federal job guarantee to provide a true living wage floor for those willing to work” so I don’t see how you would ask the same of Bitcoin. It is the value percieved behind the dollar that fuels these items you refer to, not the dollar itself. It is this very same discussion that outlines the utility of bitcoin as a currency (as opposed to Bitcoin, the transmission network). The Fed can, and has, and currently is, mulitplying the amount of dollars in the system to fund these activities without a commensurate increase in the value backing these dollars nor a commensurate increase in the economic value in the system at all. This can’t be done very easily with bitcoin, which is one of the popularly stated benefits of the currency. It is essentially printer-proof!

    What your country’s central bank is doing is debasing the value of the monetary units to make more of them to nominally purchase goods and services in the present, but not paying for them in the present. Economically, this is simply a loan that needs to be repaid by true value creation in a future time period (likely that of your children). You see, those debased dollars are essentially IOUs, while you are referring to them as actual units of value and not promises to deliver said value.

    chocomalk

    False correlation.
    Bitcoin is not the internet, it’s not a road either and we had an internet bubble anyway lol. You assume it’s present unregulated state will continue.
    And obviously you have not looked into the “fuel cost” of Bitcoin, it is actually quite high. Your analogy of a road can be used with the present regulated transfer system.

    There is nothing Bitcoin can do that another more efficient(cheaper) CURRENCY can do and that is the point, at these price levels, bitcoin is an investment vehicle not a currency.

    Is it a ponzi? I don’t know but it could be.

    It’s a great idea with horrible implementation. 

     

    Reggie Middleton  “Bitcoin is not the internet, it’s not a road either and we had an internet bubble anyway lol.
    No, we did not have an Internet bubble. We had a stock market bubble wherein underwriters preyed on the naive and greedy in convincing them to buy Internet stocks.

     You assume it’s present unregulated state will continue.

    How do you regulate a P2P network?

    And obviously you have not looked into the “fuel cost” of Bitcoin, it is actually quite high.

    The “fuel cost” of Bitcoin? You mean like the paper, ink, printing presses and metallurgical coin stamps made to produce fiat which has to cyclically be replaced every few years with the same expensive process save some additional R&D to attempt to outrun counterfeiters who always seem to win in the end anyway?

    ” Your analogy of a road can be used with the present regulated transfer system.

    So the present regulated transfer system can circumvent the Fed, ECB and all money center banks? Please….”There is nothing Bitcoin can do that another more efficient(cheaper) CURRENCY can do and that is the point, at these price levels, bitcoin is an investment vehicle not a currency.

    Nothing as in being programmable to act towards the wishes of the sender and/or reciever after being sent or recieved?


    Nothing as in being able to totally circumvent banks – all of them?


    Nothing as being able to settle a 9 digit international monetary transfer from Sri Lanka in 30 minutes on a Sunday afternoon in NYC?


    That’s a whole lot of nothing, my friend.

    chocomalk  +Reggie Middleton

    Yes it was an investment bubble, call it what you want the similarity is investment and inflated value. The net itself is not analogous to bitcoin nor were the businesses that sprung up around it outside the servers/IP providers themselves.

    You regulate with the law. You might be able to get away with underground transactions but they can limit a lot of commerce. They can also regulate the pay window, meaning you could not buy or sell into other currencies legally. Or accept payment as a business legally.

    I am not saying present currency doesn’t have a cost, just that the energy requirements for Bitcoin are quite large.

    Circumvent is what Bitcoin is doing at present, I already stated that it could end or be regulated the same way meaning there would be no effective difference.
    And I should have stated “crypto currency” that was my mistake. A cheaper, more secure crypto currency can and will be produced meaning any value that bitcoin has above its “manufacture” is based on investor and market opinion.

    Like I said, It’s a great idea with bad implementation and it is overpriced.

    The Internet is a interlocking network (hence the name, “internet”) of standalone servers that serve data to and from each other in such fashion as to make a seamless network of information available to all who access it. Bitcoin is a peer to peer network of computers who collectively transmit, recieve and maintain the bitcoin system as a whole. Think of bees working in a hive without a central queen bee, but a queen bee that exists a little at a time in each and every worker, drone, soldier and scout bee. In order to destroy the hive or to coopt it, you will have take down the entire hive or the vast majority (as in >95%) of the bees to do so. If you live in the hive as well, like the government and the rest of the world living on the WWW, then option one is out of the question. So, yes, Bitcoin is analagous to the Internet and WWW.

    Stephen Pettyjohn +chocomalk 

    Crypto currencies cost is irrelevant. At the end of the day it’s the amount of goods that can be bought. Since that measure is relatively the same and tracks with the dollar, the only thing that makes bitcoin feel expensive is the whole unit bias. After all it is infinitely divisible (in theory, currently a satoshi is only a ten-millionth)
    As for cheaper crytocurrencies, certain currencies have design advantages, but price is never one of them. A cheaper currency means that the network supporting it’s proof of work system is smaller.

    The 51% scale attack cost against bitcoin is close to 1.5 billion right now (and thats assuming that you can magically convert bitcoin into specialized ASICs) whereas, a single large bitcoin miner could easily perform a 51% attack on any of the SHA256 alt currencies. Bitcoin’s massive electricity and hardware costs are what give the currency it’s security against network attacks. In addition, the higher price and corresponding market cap encourages development in the area which makes bitcoin more fluid and props up companies like CoinBase, ItBit, Bitpay, and Circle.

    Images: Flickr (licence/attribution)

    About The Author

    Reggie Middleton is an entrepreneurial investor who guides a small team of independent analysts to uncover truths, seldom if, ever published in the mainstream media or Wall Street analysts reports. Since the inception of his BoomBustBlog, he has established an outstanding track record
    Share on FacebookTweet about this on TwitterShare on Google+Share on LinkedInPin on PinterestShare on StumbleUponShare on RedditShare on TumblrDigg thisBuffer this pageFlattr the authorEmail this to someonePrint this page

Advertisement

Closed Comments are currently closed.