Bitcoin is too volatile to be taken seriously

[Pekelo]

Fun fact: The FBI is one of the biggest investors/owners of bitcoin, sitting on a wallet worths 100 million bucks.

It is quite possible that in the future someone will be able to hack into that wallet or the password somehow leaks because it goes through so many employees' hands.

Bitcoiners keep sending small amounts with messages to that account.

https://blockchain.info/address/1FfmbHfnpaZjKFvyi1okTjJJusN455paPH

At the Senate hearings one official mentioned that these coins will be most likely sold eventually... Would be fun to drop it on the market all at once...

 

[Baron]

Quote from StarDust9182:

While I think Bitcoin will fail ultimately - the cat (control of money printing) is out of the bag IMO.

For what reason(s) do you think it will fail?

 

[StarDust9182]

Because the FBI seized some of it and the senate is publicly discussing it. Therefore most likely there are other investigations going on that are not so public. So the government has seen the threat and will resist it strongly I think. Remember strong encryption was at one time considered munitions. (I am not sure if that is still the case.) A law could be passed to forbid it.

And because it is not a big enough float yet IMO to have a significant effect on one of the three major currencies.

Also, there is a distant threat of quantum computing making its encryption type potentially obsolete. However, quantum computing is supposedly theoretically able to make tamper-proof new forms of encryption.

The public would need to get comfortable with the concept. Most prefer fiat to virtual today.

I think it's just a test before the real thing appears improving on lessons learned by releasing Bitcoin.

 

[Pekelo]

SD, you made some points that are only currently present, but most likely not in the future. So I would correct a few things...

Quote from StarDust9182:

Bitcoin.

1. Actually, the outcome of the 2 Senate hearings were quite positive. BTC reached its all time high right after the first hearing.
2. There is no need to pass new laws against it, there are at least 2 existing ones that could be used against bitcoin in the US. But yes, they could....
3. Not enough float, you said yet. Doesn't mean in the future it can't happen.By the way float is irrelevant compared to other currencies, as long as enough people use it or think it has value, it won't fail.
4. Public comfortability. It is an issue, now, but not necessary in the future. Hey, even grandma learnt how to use email. But security has to be simpler for the average joe...

 

[Pekelo]

Quote from Baron:

For what reason(s) do you think it will fail?

Well, first we have to agree what we mean by failing and second if we talking about just bitcoin, or generally virtual currencies.

Bitcoin failing could mean 2 things:

1. Price will fall huge, to single digits or even below.
2. It will never act as intended, as a currency, but stays an asset commodity or speculation device. Price can stay high for a long time but as long as people hoard it instead of spending it, it has failed its role as a currency.

If we are talking about virtual currencies general, I think they are here to stay. Maybe bitcoin isn't going to be the clear winner for various reasons, but the cat is out of the bag, and in some kind of form virtual currencies will exist for a long time. It is possible there are going to be more than one used (like credit card types,Visa, MC, DinersClub,Amex) and bitcoin will be just one of them, but not the most popular.

Now let's go back to bitcoin failing and/or price falling, since the 2 are not the same but related.

Reasons for those happening

-competition increasing from other alt coins
-mass disappointment from owners who lost too much too often because of volatility and trying to time them
-government actions, bans
-usability decreases (in a non-electronic world, it is useless)
-major retailers never embrace it, it stays a fringe payment method
-whales keep manipulating the market
-security breaches never cease
-the coin black list gets enacted
-something even newer but better payment method gets invented
-if price doesn't keep going up, there isn't just enough coins, and divisibility doesn't solve this problem
-coins keep getting lost and eventually there is a shortage
-miners stop mining, because there is no more coin to be mined, this stops confirmation
-etc.etc.

 

[Hoi]

Quote from Pekelo:

-competition increasing from other alt coins

Alt-coins will fill-in other niches.

-government actions, bans
They will TAX virtual-currencies, so have incentives to keep them

-usability decreases (in a non-electronic world, it is useless)
There is a large non-Banked world (2 billion people don't have a bank-account, but are using Mobile-phones). They will embrace virtual-currencies to Bank themselves.

-major retailers never embrace it, it stays a fringe payment method
Even for a major retailer a 3% revenue increase is attractive (using Bitcoin will give them this).

-whales keep manipulating the market
That's indeed a problem.

-security breaches never cease
Secure Hardware wallets will flood the market next year.

-the coin black list gets enacted
I don't see this happen as the Mining-community will not accept it and/or will implement address-mixers.

-something even newer but better payment method gets invented
Possible indeed.

-if price doesn't keep going up, there isn't just enough coins, and divisibility doesn't solve this problem
It's too rare. Price has to go up if more people wants to use them.


-coins keep getting lost and eventually there is a shortage
Just more digits after the dot.

-miners stop mining, because there is no more coin to be mined, this stops confirmation
That will never happen, as the transaction fees will generate their income. But of-course this needs mainstream adaption for a huge number of transactions per second. If that doesn't happen, then indeed: miners will stop

But still a lot of known and unknown problems ahead which can "fail" (not die) this Virtual-currency experiment.

 

[Pekelo]

I didn't necessary wanted to debate the possible reasons why bitcoin could fail, I just listed a bunch, because Baron asked. They were all valid reasons by the way...

Quote from Hoi:There is still a lot of known and unknown problems ahead which can "fail" (not die) this Virtual-currency experiment.

1. We don't know how alt coins will act, or how popular they will become. Just remember Myspace, the first one isn't always the winner. Now there are some venture capital companies that work on new coin systems, when they realized, "hey, you can just create your own money, and get rich by doing so"?
2. We don't know how or when the government will act. The hearings were rather (and surprisingly) positive, but the future doesn't need to be so. The US government has the means and can have the will to kill virtual currencies if they want so. If nothing else, they could just use the 140K coins and make the market extremely instabile by throwing it all at once then buying it back and keep repeating it.
3. Mass sentiment can change very quickly. The best crime usage isn't selling drugs but payment for kidnapping. Once a famous person gets kidnapped and the criminals ask for payments in bitcoins, that will be a game changer. The same if a terrorist cell gets discovered living in America, and getting paid via bitcoin.
The point is, average people can turn their back on it very fast, if certain events happen.
4. The TAX thing. Prostitution/marihuana are taxable but still mostly illegal, so that is not a good argument.
5. There can be plenty of reasons why a retailer doesn't want to deal with it, security, fearing government action,etc.
6. The coin white list is being discussed, and the government could say, they allow bitcoin usage, but only if this feature is implemented.
7. The more digits after the dot only works if price increases and that is not a given, for the already described reasons...So lost coins do cause a problem.
There can be an altcoin where lost/unused coins gets replaced repeatedly.

8. I haven't mentioned in the earlier post, but bitcoin is essentially a ponzi/pyramid scheme, and once new users stop coming in, growth stops, and once users leave, the system fails.

The bottomline is what I quoted from you, there are plenty of unknowns that can cause this experience not to work out as intended...

So we actually agree....

P.S.: One of the biggest problem of bitcoin is the fixed amount of coins. That's not how money systems operate. In a perfect world the money supply is flexible, and when there are more products and services, more money is created, when the economy contracts, the supply is withdrawn. This problem isn't addressed by bitcoin. It is a deflanionary system by design. And please don't mention the more dots behind the zero...

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It is very easy to send money to the wrong person/address, and you are at the mercy of the receiving person's goodwill:

http://www.reddit.com/r/Bitcoin/comments/1r6a1t/a_huge_mistake_i_made_protip/

This dude has just sent 15K to the wrong address, but got lucky and they returned the coins. There is simply no law or any kind of enforcement system what could reverse the accidental action. Huge fail if you ask me....

 

[stevegee58]

Quote from Pekelo:
P.S.: One of the biggest problem of bitcoin is the fixed amount of coins. That's not how money systems operate. In a perfect world the money supply is flexible, and when there are more products and services, more money is created, when the economy contracts, the supply is withdrawn. This problem isn't addressed by bitcoin. It is a deflanionary system by design. And please don't mention the more dots behind the zero...
[/B]

There's not an infinite amount of gold in the world either and yet many are clamoring for a return to the gold standard.

You're right it's not the way the banking system operates but maybe that's a good thing. The only real "backing" in any modern currency today is debt - promises to repay loans with interest.

 

[Hoi]

Quote from Pekelo:

The bottomline is what I quoted from you, there are plenty of unknowns that can cause this experience not to work out as intended...

So we actually agree....

Ohh..yes sir...we agree !

 

[Pekelo]

Quote from stevegee58:

There's not an infinite amount of gold in the world either and yet many are clamoring for a return to the gold standard.

Well, I don't. The gold standard has the exact same problem, the gold supply isn't flexible.

With virtual currencies though, there could be a system made that is somehow more flexible, but that would require some kind of authority to issue/withdraw the coins. Also I don't like the way how Bitcoin was originally distributed (first come first rich scenario).
I guess the bottomline is that it is a pretty decent first try, but there are plenty of things to tweak and maybe the next one is going to be a much better version...