h2g2 The Hitchhiker's Guide to the Galaxy: Earth Edition

Cryptocurrencies seem like they've had a fair amount of attention lately. I've heard about bitcoin from time to time. At first, it sounded a bit liked the gold that we used to have on BBSs. Now it seems to be a thing.

Bitcoin had a bit of a run up last year. Other cryptocurrencies have been going up as well.

Any thoughts on whether it's a bubble or that something else is going on?

I hope it isn't a bubble. It only works whilst there are sufficient people to believe in the concept. A bit like religion perhaps.

I don't understand how it works really other than you set a computer off doing calculations (to no end other than to 'mine' virtual currency').

My son, who was in a reasonably paid job working for a musical instrument importer, with a bit of savings behind him, gave up work last year to get some further education and to explore virtual currencies. To that end, he did the arithmetic, made a mining machine set it going. He took into account the cost of electronics and the power used and reckons that he will break even some time this year.

The mining machine is a half dozen computer video cards - reasonably high end, and a controller of some sort. He is part of a co-operative who pool their efforts and share the proceeds. Video cards I understand, do calculations more quickly than a straightforward computer chip.

He has explained how this all works to me, but I still don't understand how it works without something of value having been exchanged for the numbers that the machines turn out.

It seems to be some sort of lottery.

PP.

After a couple of briefing, an interview with the author, and starting to listen to Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money, I was really intrigued.

I bought some bitcoin and some ethereum last month. The bitcoin hasn't done much, but the ethereal has doubled in price.

All currencies are arbitrary and illusory. They are mutually agreed upon delusions. The only value any currency has is the value we imagine and agree it has. In that sense, cryptocurrencies are just as valid as any nation's coins and bills. Gold is no less arbitrary. It doesn't have any intrinsic value beyond those of its elemental attributes, its high electrical conductance, its malleability and its resistance to corrosion. That we think it has a pretty, shiny color is of no tangible value.


So, I see no reason Bitcoin or any other virtual currency shouldn't be considered equal to pounds, dollars, & euros.



BTW, I highly recommend anyone interested to read _A Conspiracy of Paper_ by David Liss.

http://en.wikipedia.org/wiki/A_Conspiracy_of_Paper

It's an historical mystery novel set against the earliest market bubble and crash involving the South Sea trading company inflating their stock much like Enron did just as this novel was published.

'What has gold ever done for us except for conductance, malleability and resistance to corrosion?'

'Er, rarity!'

'Well, yes, obviously rarity. But apart from conductance, malleability, resistance to corrosion and rarity, what has gold ever done for us?'

PP.

Made pink glass?

"what has gold ever done for us?" [Pink Paisley]

Well, it has made trips to the dentist cost a lot. I used to have a gold filling or two.

Also, you can thank gold for enabling your visits to the Internet.
http://therefiningcompany.com/How-Much-Gold-Is-In-A-PC.aspx

Why get gold fillings? It seems like they're generally some grey medal.

My dentist thought they would be stronger than porcelain.

I see the media warnings about Bitcoin as a Luddite attempt by the forces of normal society to stop people from getting the idea that a currency NOT controlled by central banks and governments. All currencies are a bubble, potentially - would YOU buy Zimbabwean dollars? All currencies are, ultimately, an expression of faith in the issuing body and in the faith of everyone else who's using it. What's at issue is how secure these things really are. If I have two million dollars in bitcoin, I accept the risk that tomorrow it might be worth less... but how likely is it to be there at all? You have to trust the programmers that these things can't simply be spirited away. Equally, these currencies can be pumped and dumped by single messages on Twitter. For a good discussion, see here: https://www.theguardian.com/technology/2018/jan/07/bitcoin-crypto-currencies-mcafee

There are a number of different kinds of capital. We're not just talking about cash or stock certificates of real estate. Human capital is a worthy type. You invest in yourself, getting education (in whatever way you consider valid) and enhancing your skills. Ann Miller insured her legs for millions of dollars. Opera singers go to considerable lengths to protect their vocal cords. I know of a cartoonist who was contractually forbidden to play certain sports because of the risk of damaging the fine bones in his hands.

Many years ago I bought gold and silver. Thirty years later, they had a big run up in price, and I sold them. They didn't do especially well relative to inflation over the interim.

Maybe bitcoins possess value within certain contexts. Fine. But just because someone is collecting them, does that mean they need either my opinion or my permission? I don't think so.

One arguments against Btc being a bubble is that hardcoded into the system is a limit on the number of Bitcoins there will ever be. It's not like dollars, where you might have large holdings but the US treasury simply prints a trillion more making the ones you have worth less. Yes, people are "printing" bitcoins - "mining" is the term used - but every subsequent one "mined" makes the next one harder to get, until eventually there'll be something like 21 million of them, and then that's it - there can be no more. The maths of how they work just stops at that number, by design, and whatever value they have then can fluctuate but can never be affected by a potential devaluation or other shenanigan such as that pulled by the Indian government a few years ago.

That's what's got the financial industry worried - the rules for Btc are different, and the usual suspects are not in charge.

That does strengthen BtC from inflation, but it doesn't negate its "bubbletude". All it would take to burst is something that shakes investors trust. Many things could to that; malware, hackers, government intervention, &c. Or it could just burst the normal way where the price gets ridiculously overvalued and a drastic correction occurs.

I'm not invested in it so I'm just sitting back and watching. I personally hope it succeeds, at a more stable and reliable growth rate. Another issue that's arising is the proliferation of other cryptocurrencies. Literally anyone can log onto a website and create their own cryptocurrency. Kodak just created its own for the photography market. Some scandal could happen to another cryptocurrency that could erode confidence in all the others.

I am olde fashioned. If I have anything to save, I prefer to have it in a form that can readily be presented in a physical measure of recognized currency. Canadian dollars, high-value gold coins, ( Maple Leaf, Panda, Krugerrand ),something that can be physically traded for value of products or services.

In the 1950s and 1960s, we had something called trading stamps, which were handed out usually at supermarkets. The more money you spent on groceries, the more trading stamps you got. You pasted them into little booklets, and when you filled enough books you could trade them for stuff. That was a sort of surrogate currency, if you bothered with them.

Not that different from shop gift cards or vouchers - trouble is, when a shop goes bust the first thing the administrator does is declare them all void…
(See Woolworths, Borders, Zavvi etc)

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I remember those stamps, Paul, our village general store dealt with them for maybe 5 years or so. Around Easter, Thanksgiving and Christmas - they proved very nice to have when feasting a large family.

Oh! Green Shield Stamps!

I remember sticking those in books - my Dad used to be a rep and got stamps with petrol. They started off as 1 stamp per 6d spent but over the years escalated to double, treble and I think as much as 10X.

There's a Wiki entry. The Green Shield Stamp catalogue shops became Argos. I didn't know that.

http://en.wikipedia.org/wiki/Green_Shield_Stamps

And wasn't there another line of stamps too?

PP.

it probably depends on the country. In the U.S., we had S&H Green Stamps, but there were also Plaid Stamps at the A&P.

http://en.wikipedia.org/wiki/S%26H_Green_Stamps

Even as late as 1999, there were still 100 stores where you could get green stamps.

PP there were pink stamps as well in the UK,
http://www.lotus30.com/Library/What%20Are%20Pink%20Stamps.html

But I can't remember which shops issued them, Green stamps were definitely more prevalent.
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