What Bitcoin and the crypto currencies will do is to prove how to finesse the technology for central banks to de-materialised currency. It will remove the role of clearing banks which are the entities that by controlling access to credit actually have control of how much money is in circulation and cause the boom and bust cycles. Central banks will be able to better control money supply and continue to use interest rates to control demand and supply for money.
Without crypto currency the technology would never be developed. That is the value of crypto currency, not the currency but the test beds being operated to prove which is the best system for eventual adoption of digitalised national currency.
Read up on ripple.
This is genuinely interesting stuff. I can see enormous benefits if financial institutions adopt the technology.
However, I see that the banks which have signed up to test it do not actually need to use XRP tokens. It is just an advance on online banking that places trust in the ledger rather than intermediary banks when sending payments to arrive in a different currency. It underscores the fact that it is the technology not the token, which has value. If you could, buy shares in Ripple and it showed how it was monetising the technology, great. But that is not what is available. No one knows what the banks are paying to acquire a store of XRPs from Ripple, it's a secret, but given you don't need XRP tokens to use the technology, I would guess not very much. No different to paying software support fees. So why would you pay more for XRP on the private market than the banks pay for existing stock.
The banks are interested because Ripple allows them to save costs yet still charge a fee to customers.
It seems the speculation in XRP is based on the idea that banks will need more XRPs when the supply of XRP runs out and its price will surge based on demand once Ripple becomes the accepted means of value transfers. Firstly, there's no magic in XRP tokens, any token can be used, and secondly, shouldn't we be acknowledging that if there is a price barrier to acquiring crypto currency then all the benefits fall away and we stay where we are if it's cheaper.
Ripple is very different to Bitcoin and the nearer it gets to being a practical solution for global frictionless transfers the nearer it gets to being a token of currency with no intrinsic value and no reason to hold as a store of value.
Just wanted to say thank you for all who have contributed to this thread, I must admit, I walked through the whole thread again over the weekend, and am now just a teeny bit wiser.
I bought 500 quid of etherium when they were about 150 each. Now selling at 800 plus. All well and good these crypto currencies but apparently there about 1500 different choices and they reckon only about 10% will ever do anything. Bitcoin is getting bad press at the moment. Who knows. I know jack about these things, but I’m not investing any more. Will see where etherium takes me.
I've just bought "The End of Money" in an attempt to discover what I am failing to understand that crypto currency experts understand.
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
I've just bought "The End of Money" in an attempt to discover what I am failing to understand that crypto currency experts understand.
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
I've just bought "The End of Money" in an attempt to discover what I am failing to understand that crypto currency experts understand.
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
Let us know your conclusion, eh
I detect some sarcasm there. If so, that's a pity. I think the divergent views of @kentaddick and @Dippenhall on this topic have been one of Charlton Life's best ever discussions, and with potentially significant consequences for those who are convinced by one or another viewpoint. If you are persuaded by KentAddick's view, you may still show a tidy return on investment. If you are persuaded by Dippenhall, you may avoid losing money. Both deserve to be bought a pint or two by those of us who hadn't a clue until we opened this thread. And where else can you find such a discussion? I had a look at the Reddit thread which KA recommended but I couldn't understand wtf they were all on about, and more importantly they are all enthusiasts. Big media tend to reflect the viewpoint of one author, which is rarely challenged immediately by another author of equivalent overall authority. I know @Dippenhall personally and both he and @cafcfan are people who understand financial matters far better than I do, and whose viewpoint I'd consider very carefully before doing something with my hard-earned.
I also think that kentaddick and dippenhall are not as far apart from each other as people (including the two protagonists themselves) might assume, and that reflects the truth of the matter discussed. It's not black and white, it's fast moving and in a year's time the entire discussion may have a completely different framework.
I've just bought "The End of Money" in an attempt to discover what I am failing to understand that crypto currency experts understand.
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
I've just bought "The End of Money" in an attempt to discover what I am failing to understand that crypto currency experts understand.
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
Let us know your conclusion, eh
I detect some sarcasm there.
How?
Could be very wrong and happy to apologies to Siv if so. I think It was the "eh".
Just finished reading the book which was published by New Scientist as an academic piece which explains the development and technology of crypto currency with a history of its twists and turns.
The book makes no judgement on whether crypto currency is a good, bad or indifferent investment, it merely accepts that people buy and trade the currency and it is volatile in value. It precluded New Scientist publishing its price in Bitcoins because it did not know what a Bitcoin was worth on the day of publication, none of its stockists accepted Bitcoin in payment, and how would you process then transactions. That in effect is all you need to say about crypto currency not yet being in a position to replace cash and credit cards as a means of making financial transactions. As it stands, crypto currency is too volatile, its use is marginal and the technology is embryonic. You can't use it to buy much in the real world without workarounds and special service providers.
The book covers the potential use of the technology rather than the value of the currencies. The well publicised failures have produced winners, mainly the exchanges and the originators of the crypto currencies able to sell their currency for real money after pumping up demand and the price of the currency. [My view - As with many investments, it is the intermediary services collecting transaction charges who make money risk free. The punters are simply being milked and a whole industry grows up promoting crypto currency as a conventional form of commodity trading. The whole system looks to me designed to create demand to increase trade and benefit the exchanges. The people who crunch the computer code to validate transactions (the "miners") and paid in crypto currency also have a conflict off interest in creating a market for their currency, otherwise they will never receive tangible reward.]
Every crypto currency technology is based on sending encrypted data which simply compares two values to confirm they are equal. Blockchain is a means of ensuring one computer cannot send fraudulent encrypted data to extract money from someone else's account. The difference between different crypto currencies is the underlying encryption algorithms, nothing more. The more secure the algorithm the more computing power you need to dis-encrypt the data and the slower is the rate at which trades are validated. Ripple is the latest technology attracting interest from financial institutions. It is able to speed up the validation of transactions using algorithms developed by Microsoft in the 1980s, it has simply been incorporated into a blockchain network. It uses tokens, XRPs, as intermediary values but is able to transact in any currency and fix the exchange rate to ensure certainty of value.
Ripple's attraction exposes the flaw in crypto currency logic. The technology must eventually be able to transact any type of asset/commodity/intellectual property/real property etc. This also raises objections from the ideologist who believe that democratisation of currency is being usurped - they are right but that's the problem with an ideology that doesn't work in practice.
Only being able to transact in Bitcoins means Bitcoin or any other unitary crypto currency has no future as a universal blockchain system. It will not disappear but retain an informal existence on the dark side of the internet.
The message is that it's the technology which is being developed on the back of attempts to create a democratised digital currency will actually be co-opted by Silicon Valley and Wall Street or a nation state whose currency has collapsed. The cost is being borne by the current developers and investors but the rewards will be snatched by big business when all the lessons have been learned by the failures along the way, and the blockchain technology perfected.
So no insight into crypto currency as an investment, simply people have made money and lost money. The impression is given that Bitcoin is unlikely to disappear, but due to its limited scalability it is unable to serve more than a small fraction of the value of global transactions and the prospect of Bitcoin or any other currency developing into a new universal form of digital currency is dismissed as simply an ideology. It is the technology which will be harnessed outside of any existing crypto currency network.
Interestingly, it was the engagement of the Chinese with an obsessive betting culture which fired up the crypto currency trading frenzy. Their attitude to currency is different to the West where we have not had the same restrictions on currency movement and State controlled exchange rates.
So if enough people believe they can make money trading crypto currency as a commodity it will continue to be a market place where money can be made and lost, a bit like betting blind on dog racing by choosing numbers. If you like betting you will love the thrill of crypto currency trading. So will not try and knock the idea of trading in crypto currency, money has and will be made, but I will knock the idea that there is any scientific basis for deriving fair price or that its value is related to the value of the particular technology supporting the currency.
I think that last post is pretty fair, @Dippenhall.
Adoption of BTC as a currency is prevented by volatility and transaction timing: can you imagine nipping in to Nero and buying a coffee for £3 on the way to the office, and it rising £3.5 when you want one at lunch? Consider larger purchases, like your weekly shop, where you may be spending £50 - and suddenly you may be looking at a rather larger surprise.
Similarly, dealing with transaction confirmations - and the delay - poses an even bigger barrier. What if you went to Nero and could wait a few hours for your payment to be confirmed, or alternatively spend an extra £10 to ensure it's confirmed before you finish your coffee?
Transaction timing and completion is a purely technical issue at it's core, and although it has a layer of ideology above it - with concerns about maintaining decentralisation - it can be solved with relative ease. In fact there are coins hoping to do just this.
The issue of volatility and speculation is a more painful issue though - and one that the Bitcoin core team seem to be quite frustrated with themselves. See, it's completely obvious that speculative trading is not only accounting for most of the current transactions - and therefore responsible for the transaction costs that will prevent adoption - but it's also against the objective of the project; clearly it was intended to be a currency, as opposed to the commodity it's become.
However, this situation leads me to see one potential outcome - and despite a lack of economic understanding on my behalf - I genuinely think this could be something we begin to see in 2018:
1. Bitcoin will continue to command a high price - maybe not the $20,000 mark it hit in December briefly, but still in the low/mid 5 digit range - but will not be used for consumer based transactions.
2. Like Gold, Bitcoin will be the underlying store of value that other cryptocurrencies are measured again; consider the amount of trading on the exchanges of */BTC pairs.
3. There will be fatigue from the number of alternative coins - there's coins which began largely as a joke/meme (i.e Dogecoin) which have now hold market caps of $1,600,000,000+, this clearly can't sustain. As fatigue sets in, holdings will be consolidated in to larger coins, volatility will reduce, leading to a reduction in speculative trading.
4. With a stabler set of altcoins, and an underlying value (BTC) which isn't quite so rigid, coins with faster transaction speeds will begin to see higher adoption in commerce.
Ultimately though, this does mean we're back to a situation where there are multiple currencies (similar to fiat currencies) which are backed by a unifying commodity (in this case BTC, but similar to the Gold Standard..), and openly traded in the markets (like the FX markets..). All that will be different from the current system is that there will be increased transparency, but a loss of regulatory safety.
Now in the interest of full disclosure, by trading different currencies I know I'm actively part of the problem - it's the kind of speculation that I've been making that has introduced a lot of the problems I've underlined: high transaction costs, and unsustainable volatility. Alas, I'm but a human - and to have tripled my investment in only a few weeks shows that there is indeed money to be made.
With that in mind, and a small pot of money to gamble, there's an obvious strategy to be had whilst this evolution occurs:
1. Consider Bitcoin as the commodity that backs the currencies, and worry not about how much you've made in fiat - but concern yourself with trading to increase the value of your account in Bitcoin. (i.e I do a trade not to make $$$, but to additional BTC 0.0001..)
2. Keep a percentage holdings in some of the more stable (established?) cryptocurrencies - i.e Ethereum and Bitcoin itself.
3. Trade the smaller coins when they're introduced to exchanges, due to make announcements, or purely on the charts; a chart with a combination of a stop loss and sell order is quite a powerful toolkit.
4. When BTC appears to be going through a reduction/correction, transfer a percentage to one of the other stable holdings - although the monetary (fiat) value is reducing, you'll be left with an increase in how much BTC you'll be able be able to buy in with when it stabilises.
There's an obvious problem though: it soon becomes Catch-22, and as the more people use a strategy like that, the less chance of the altcoins consolidating and stability being achieved. Alas, the with press coverage peaking, the speculation is obviously here to stay for a bit longer..
Alternatively, my long essay of bollocks goes out the windows, and transaction problems are solved directly on BTC (via SegWit, or Lightning Network) and, for all intents and purposes, we re-imagine where the decimal place in BTC occurs.
Suddenly it's easier as a user to both imagine the value of BTC (i.e it's easier for me, as a human, to imagine how much my coffee is as "BTC 1.5", rather than "BTC 0.0000001.5"), and to use it in a real commerce transaction.
This still demands an answer to the issue of volatility though, and that doesn't look particularly fun to try and solve; least of all because it's human nature to speculate when there is a gain to be made.
I think that last post is pretty fair, @Dippenhall.
Adoption of BTC as a currency is prevented by volatility and transaction timing: can you imagine nipping in to Nero and buying a coffee for £3 on the way to the office, and it rising £3.5 when you want one at lunch? Consider larger purchases, like your weekly shop, where you may be spending £50 - and suddenly you may be looking at a rather larger surprise.
Similarly, dealing with transaction confirmations - and the delay - poses an even bigger barrier. What if you went to Nero and could wait a few hours for your payment to be confirmed, or alternatively spend an extra £10 to ensure it's confirmed before you finish your coffee?
Transaction timing and completion is a purely technical issue at it's core, and although it has a layer of ideology above it - with concerns about maintaining decentralisation - it can be solved with relative ease. In fact there are coins hoping to do just this.
The issue of volatility and speculation is a more painful issue though - and one that the Bitcoin core team seem to be quite frustrated with themselves. See, it's completely obvious that speculative trading is not only accounting for most of the current transactions - and therefore responsible for the transaction costs that will prevent adoption - but it's also against the objective of the project; clearly it was intended to be a currency, as opposed to the commodity it's become.
However, this situation leads me to see one potential outcome - and despite a lack of economic understanding on my behalf - I genuinely think this could be something we begin to see in 2018:
1. Bitcoin will continue to command a high price - maybe not the $20,000 mark it hit in December briefly, but still in the low/mid 5 digit range - but will not be used for consumer based transactions.
2. Like Gold, Bitcoin will be the underlying store of value that other cryptocurrencies are measured again; consider the amount of trading on the exchanges of */BTC pairs.
3. There will be fatigue from the number of alternative coins - there's coins which began largely as a joke/meme (i.e Dogecoin) which have now hold market caps of $1,600,000,000+, this clearly can't sustain. As fatigue sets in, holdings will be consolidated in to larger coins, volatility will reduce, leading to a reduction in speculative trading.
4. With a stabler set of altcoins, and an underlying value (BTC) which isn't quite so rigid, coins with faster transaction speeds will begin to see higher adoption in commerce.
Ultimately though, this does mean we're back to a situation where there are multiple currencies (similar to fiat currencies) which are backed by a unifying commodity (in this case BTC, but similar to the Gold Standard..), and openly traded in the markets (like the FX markets..). All that will be different from the current system is that there will be increased transparency, but a loss of regulatory safety.
Now in the interest of full disclosure, by trading different currencies I know I'm actively part of the problem - it's the kind of speculation that I've been making that has introduced a lot of the problems I've underlined: high transaction costs, and unsustainable volatility. Alas, I'm but a human - and to have tripled my investment in only a few weeks shows that there is indeed money to be made.
With that in mind, and a small pot of money to gamble, there's an obvious strategy to be had whilst this evolution occurs:
1. Consider Bitcoin as the commodity that backs the currencies, and worry not about how much you've made in fiat - but concern yourself with trading to increase the value of your account in Bitcoin. (i.e I do a trade not to make $$$, but to additional BTC 0.0001..)
2. Keep a percentage holdings in some of the more stable (established?) cryptocurrencies - i.e Ethereum and Bitcoin itself.
3. Trade the smaller coins when they're introduced to exchanges, due to make announcements, or purely on the charts; a chart with a combination of a stop loss and sell order is quite a powerful toolkit.
4. When BTC appears to be going through a reduction/correction, transfer a percentage to one of the other stable holdings - although the monetary (fiat) value is reducing, you'll be left with an increase in how much BTC you'll be able be able to buy in with when it stabilises.
There's an obvious problem though: it soon becomes Catch-22, and as the more people use a strategy like that, the less chance of the altcoins consolidating and stability being achieved. Alas, the with press coverage peaking, the speculation is obviously here to stay for a bit longer..
That’s why you go for altcoins that have real world usage.. something like Vechain or neo who’s wallet is the node that produces another crypto which powers the network. You can buy the power coin to use the blockchain or by Vechain or neo to produce the power coin and use that to access the blockchain.
I’m fairly certain ethereum will one day become the gold standard, since most cryptos are based off of it these days, and it’s price is pretty consistent
I think that last post is pretty fair, @Dippenhall.
Adoption of BTC as a currency is prevented by volatility and transaction timing: can you imagine nipping in to Nero and buying a coffee for £3 on the way to the office, and it rising £3.5 when you want one at lunch? Consider larger purchases, like your weekly shop, where you may be spending £50 - and suddenly you may be looking at a rather larger surprise.
Similarly, dealing with transaction confirmations - and the delay - poses an even bigger barrier. What if you went to Nero and could wait a few hours for your payment to be confirmed, or alternatively spend an extra £10 to ensure it's confirmed before you finish your coffee?
Transaction timing and completion is a purely technical issue at it's core, and although it has a layer of ideology above it - with concerns about maintaining decentralisation - it can be solved with relative ease. In fact there are coins hoping to do just this.
The issue of volatility and speculation is a more painful issue though - and one that the Bitcoin core team seem to be quite frustrated with themselves. See, it's completely obvious that speculative trading is not only accounting for most of the current transactions - and therefore responsible for the transaction costs that will prevent adoption - but it's also against the objective of the project; clearly it was intended to be a currency, as opposed to the commodity it's become.
However, this situation leads me to see one potential outcome - and despite a lack of economic understanding on my behalf - I genuinely think this could be something we begin to see in 2018:
1. Bitcoin will continue to command a high price - maybe not the $20,000 mark it hit in December briefly, but still in the low/mid 5 digit range - but will not be used for consumer based transactions.
2. Like Gold, Bitcoin will be the underlying store of value that other cryptocurrencies are measured again; consider the amount of trading on the exchanges of */BTC pairs.
3. There will be fatigue from the number of alternative coins - there's coins which began largely as a joke/meme (i.e Dogecoin) which have now hold market caps of $1,600,000,000+, this clearly can't sustain. As fatigue sets in, holdings will be consolidated in to larger coins, volatility will reduce, leading to a reduction in speculative trading.
4. With a stabler set of altcoins, and an underlying value (BTC) which isn't quite so rigid, coins with faster transaction speeds will begin to see higher adoption in commerce.
Ultimately though, this does mean we're back to a situation where there are multiple currencies (similar to fiat currencies) which are backed by a unifying commodity (in this case BTC, but similar to the Gold Standard..), and openly traded in the markets (like the FX markets..). All that will be different from the current system is that there will be increased transparency, but a loss of regulatory safety.
Now in the interest of full disclosure, by trading different currencies I know I'm actively part of the problem - it's the kind of speculation that I've been making that has introduced a lot of the problems I've underlined: high transaction costs, and unsustainable volatility. Alas, I'm but a human - and to have tripled my investment in only a few weeks shows that there is indeed money to be made.
With that in mind, and a small pot of money to gamble, there's an obvious strategy to be had whilst this evolution occurs:
1. Consider Bitcoin as the commodity that backs the currencies, and worry not about how much you've made in fiat - but concern yourself with trading to increase the value of your account in Bitcoin. (i.e I do a trade not to make $$$, but to additional BTC 0.0001..)
2. Keep a percentage holdings in some of the more stable (established?) cryptocurrencies - i.e Ethereum and Bitcoin itself.
3. Trade the smaller coins when they're introduced to exchanges, due to make announcements, or purely on the charts; a chart with a combination of a stop loss and sell order is quite a powerful toolkit.
4. When BTC appears to be going through a reduction/correction, transfer a percentage to one of the other stable holdings - although the monetary (fiat) value is reducing, you'll be left with an increase in how much BTC you'll be able be able to buy in with when it stabilises.
There's an obvious problem though: it soon becomes Catch-22, and as the more people use a strategy like that, the less chance of the altcoins consolidating and stability being achieved. Alas, the with press coverage peaking, the speculation is obviously here to stay for a bit longer..
That’s why you go for altcoins that have real world usage.. something like Vechain or neo who’s wallet is the node that produces another crypto which powers the network. You can buy the power coin to use the blockchain or by Vechain or neo to produce the power coin and use that to access the blockchain.
Bingo.
And that is how I'd choose the longer term holdings; I mention Ethereum as it's established, but there are those that help satisfy a niche - and I can see them becoming stable and established in time.
Alternatively, my long essay of bollocks goes out the windows, and transaction problems are solved directly on BTC (via SegWit, or Lightning Network) and, for all intents and purposes, we re-imagine where the decimal place in BTC occurs.
Suddenly it's easier as a user to both imagine the value of BTC (i.e it's easier for me, as a human, to imagine how much my coffee is as "BTC 1.5", rather than "BTC 0.0000001.5"), and to use it in a real commerce transaction.
This still demands an answer to the issue of volatility though, and that doesn't look particularly fun to try and solve; least of all because it's human nature to speculate when there is a gain to be made.
When the gold standard was used to support major world currencies, the price of gold was fixed by the US, the dominant holder of gold reserves. It's the only way a currency backed by a commodity can in practice operate as a trusted means of exchange otherwise you would be looking to purchase goods and services not when you needed them but when you could optimise value in line with the prevailing exchange rate. It also means that whoever builds up a store of the commodity controls the market, which compromises the concept of a democratic digital world currency, the cornerstone of the Bitcoin ideology. It's a Catch 22, if it's a commodity that's traded it can't function as a stable currency and if it's a stable currency it has zero value beyond its face value so it has little value as an investment.
The blockchain technology is simply an accounting system that holds multiple duplicate records of IOUs in the form of encrypted numbers. Trading a crypto currency is trading the IOUs for more than the face value assigned when they were originally created. Those IOUs will be accepted currency if there is trust in the IOUs being honoured for goods and services. SegWit was created to fix a bug which would allow a single IOU to be paid out more than once. It seems trust is a long way off and all the new crypto currencies seem to be competing to be the safest and quickest but surely only one technology will win through leaving all the other crypto currencies worthless. This is the game the big corporations are sitting back and monitoring to see how the technical problems are eventually solved, putting as little of their own money at risk as possible.
I guess if you continually move to different crypto currencies and don't end up holding the baby as the bath water goes down the plug hole you could end up owning a store of value in the winning technology. My fear would be that you would be frozen out of participation in the winning technology as it could be duplicated and a new currency created that was not traded on an exchange the private individual had access to. You cannot buy XRPs from Ripple, and the banks using Ripple will not buy your XRPs, that should start alarm bells ringing.
Speaking of Ripple , FT Alphaville has some not very positive things to say about it here.
in particular it takes the axe to the idea that in buying XRP tokens you are buying a stake in the Ripple business - which is supposed to be all about replacing SWIFT and other exchange protocols. Basically what I take out of it is that the XRP tokens are irrelevant to that relatively modest business goal, but they do make the founders ore rich than Zuckerberg.
I've just bought "The End of Money" in an attempt to discover what I am failing to understand that crypto currency experts understand.
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
Let us know your conclusion, eh
I detect some sarcasm there. If so, that's a pity.
No sarcasm at all. Apology accepted. Not sure how the “eh” came across as sarcastic. Will note it for future reference.
For me, 90% of these cryptos are a quasi-equity in the underlying technology that underpins the coin rather than being an actual usable currency. It gives these firms a lot more freedom to raise funds with less regulation, meaning if you pick a loser you're going to zero, but a winner at an early stage and you're potentially onto something huge. If you're in on the right Telegram groups, so far anyway, you can also feed off the hype in getting into decent icos at an early stage.
For the mainstream coins be greedy when others are fearful and fearful when others are greedy couldn't ring any truer
Speaking of Ripple , FT Alphaville has some not very positive things to say about it here.
in particular it takes the axe to the idea that in buying XRP tokens you are buying a stake in the Ripple business - which is supposed to be all about replacing SWIFT and other exchange protocols. Basically what I take out of it is that the XRP tokens are irrelevant to that relatively modest business goal, but they do make the founders ore rich than Zuckerberg.
Think I will avoid that one.
Ripple is indeed a tricky one for reasons you and Dippenhall have said. However, if this happens...
For me, 90% of these cryptos are a quasi-equity in the underlying technology that underpins the coin rather than being an actual usable currency. It gives these firms a lot more freedom to raise funds with less regulation, meaning if you pick a loser you're going to zero, but a winner at an early stage and you're potentially onto something huge. If you're in on the right Telegram groups, so far anyway, you can also feed off the hype in getting into decent icos at an early stage.
For the mainstream coins be greedy when others are fearful and fearful when others are greedy couldn't ring any truer
Exactly what I said before, investing and holding in a tech that works and has a lot of partnerships could make you a lot of money in a few years.
Comments
However, I see that the banks which have signed up to test it do not actually need to use XRP tokens. It is just an advance on online banking that places trust in the ledger rather than intermediary banks when sending payments to arrive in a different currency. It underscores the fact that it is the technology not the token, which has value. If you could, buy shares in Ripple and it showed how it was monetising the technology, great. But that is not what is available. No one knows what the banks are paying to acquire a store of XRPs from Ripple, it's a secret, but given you don't need XRP tokens to use the technology, I would guess not very much. No different to paying software support fees. So why would you pay more for XRP on the private market than the banks pay for existing stock.
The banks are interested because Ripple allows them to save costs yet still charge a fee to customers.
It seems the speculation in XRP is based on the idea that banks will need more XRPs when the supply of XRP runs out and its price will surge based on demand once Ripple becomes the accepted means of value transfers. Firstly, there's no magic in XRP tokens, any token can be used, and secondly, shouldn't we be acknowledging that if there is a price barrier to acquiring crypto currency then all the benefits fall away and we stay where we are if it's cheaper.
Ripple is very different to Bitcoin and the nearer it gets to being a practical solution for global frictionless transfers the nearer it gets to being a token of currency with no intrinsic value and no reason to hold as a store of value.
Is their a trusted alternative?
Do you use it, @shine166 ? You pay cash in and then trade there? Are you satisfied that it is trustworthy, if so?
All well and good these crypto currencies but apparently there about 1500 different choices and they reckon only about 10% will ever do anything.
Bitcoin is getting bad press at the moment.
Who knows.
I know jack about these things, but I’m not investing any more.
Will see where etherium takes me.
Great article
This article just backs up my own posts, which is not surprising given it is simply reflecting the evidence of economic history, but will retain an open mind until I've finished the book, I'm always open to my cynicism being trumped by new knowledge.
And where else can you find such a discussion? I had a look at the Reddit thread which KA recommended but I couldn't understand wtf they were all on about, and more importantly they are all enthusiasts. Big media tend to reflect the viewpoint of one author, which is rarely challenged immediately by another author of equivalent overall authority. I know @Dippenhall personally and both he and @cafcfan are people who understand financial matters far better than I do, and whose viewpoint I'd consider very carefully before doing something with my hard-earned.
I also think that kentaddick and dippenhall are not as far apart from each other as people (including the two protagonists themselves) might assume, and that reflects the truth of the matter discussed. It's not black and white, it's fast moving and in a year's time the entire discussion may have a completely different framework.
Dipps, when you've read it, can you let us know your conclusion ?
The book makes no judgement on whether crypto currency is a good, bad or indifferent investment, it merely accepts that people buy and trade the currency and it is volatile in value. It precluded New Scientist publishing its price in Bitcoins because it did not know what a Bitcoin was worth on the day of publication, none of its stockists accepted Bitcoin in payment, and how would you process then transactions. That in effect is all you need to say about crypto currency not yet being in a position to replace cash and credit cards as a means of making financial transactions. As it stands, crypto currency is too volatile, its use is marginal and the technology is embryonic. You can't use it to buy much in the real world without workarounds and special service providers.
The book covers the potential use of the technology rather than the value of the currencies. The well publicised failures have produced winners, mainly the exchanges and the originators of the crypto currencies able to sell their currency for real money after pumping up demand and the price of the currency. [My view - As with many investments, it is the intermediary services collecting transaction charges who make money risk free. The punters are simply being milked and a whole industry grows up promoting crypto currency as a conventional form of commodity trading. The whole system looks to me designed to create demand to increase trade and benefit the exchanges. The people who crunch the computer code to validate transactions (the "miners") and paid in crypto currency also have a conflict off interest in creating a market for their currency, otherwise they will never receive tangible reward.]
Every crypto currency technology is based on sending encrypted data which simply compares two values to confirm they are equal. Blockchain is a means of ensuring one computer cannot send fraudulent encrypted data to extract money from someone else's account. The difference between different crypto currencies is the underlying encryption algorithms, nothing more. The more secure the algorithm the more computing power you need to dis-encrypt the data and the slower is the rate at which trades are validated. Ripple is the latest technology attracting interest from financial institutions. It is able to speed up the validation of transactions using algorithms developed by Microsoft in the 1980s, it has simply been incorporated into a blockchain network. It uses tokens, XRPs, as intermediary values but is able to transact in any currency and fix the exchange rate to ensure certainty of value.
Ripple's attraction exposes the flaw in crypto currency logic. The technology must eventually be able to transact any type of asset/commodity/intellectual property/real property etc. This also raises objections from the ideologist who believe that democratisation of currency is being usurped - they are right but that's the problem with an ideology that doesn't work in practice.
Only being able to transact in Bitcoins means Bitcoin or any other unitary crypto currency has no future as a universal blockchain system. It will not disappear but retain an informal existence on the dark side of the internet.
The message is that it's the technology which is being developed on the back of attempts to create a democratised digital currency will actually be co-opted by Silicon Valley and Wall Street or a nation state whose currency has collapsed. The cost is being borne by the current developers and investors but the rewards will be snatched by big business when all the lessons have been learned by the failures along the way, and the blockchain technology perfected.
So no insight into crypto currency as an investment, simply people have made money and lost money. The impression is given that Bitcoin is unlikely to disappear, but due to its limited scalability it is unable to serve more than a small fraction of the value of global transactions and the prospect of Bitcoin or any other currency developing into a new universal form of digital currency is dismissed as simply an ideology. It is the technology which will be harnessed outside of any existing crypto currency network.
Interestingly, it was the engagement of the Chinese with an obsessive betting culture which fired up the crypto currency trading frenzy. Their attitude to currency is different to the West where we have not had the same restrictions on currency movement and State controlled exchange rates.
So if enough people believe they can make money trading crypto currency as a commodity it will continue to be a market place where money can be made and lost, a bit like betting blind on dog racing by choosing numbers. If you like betting you will love the thrill of crypto currency trading. So will not try and knock the idea of trading in crypto currency, money has and will be made, but I will knock the idea that there is any scientific basis for deriving fair price or that its value is related to the value of the particular technology supporting the currency.
Adoption of BTC as a currency is prevented by volatility and transaction timing: can you imagine nipping in to Nero and buying a coffee for £3 on the way to the office, and it rising £3.5 when you want one at lunch? Consider larger purchases, like your weekly shop, where you may be spending £50 - and suddenly you may be looking at a rather larger surprise.
Similarly, dealing with transaction confirmations - and the delay - poses an even bigger barrier. What if you went to Nero and could wait a few hours for your payment to be confirmed, or alternatively spend an extra £10 to ensure it's confirmed before you finish your coffee?
Transaction timing and completion is a purely technical issue at it's core, and although it has a layer of ideology above it - with concerns about maintaining decentralisation - it can be solved with relative ease. In fact there are coins hoping to do just this.
The issue of volatility and speculation is a more painful issue though - and one that the Bitcoin core team seem to be quite frustrated with themselves. See, it's completely obvious that speculative trading is not only accounting for most of the current transactions - and therefore responsible for the transaction costs that will prevent adoption - but it's also against the objective of the project; clearly it was intended to be a currency, as opposed to the commodity it's become.
However, this situation leads me to see one potential outcome - and despite a lack of economic understanding on my behalf - I genuinely think this could be something we begin to see in 2018:
1. Bitcoin will continue to command a high price - maybe not the $20,000 mark it hit in December briefly, but still in the low/mid 5 digit range - but will not be used for consumer based transactions.
2. Like Gold, Bitcoin will be the underlying store of value that other cryptocurrencies are measured again; consider the amount of trading on the exchanges of */BTC pairs.
3. There will be fatigue from the number of alternative coins - there's coins which began largely as a joke/meme (i.e Dogecoin) which have now hold market caps of $1,600,000,000+, this clearly can't sustain. As fatigue sets in, holdings will be consolidated in to larger coins, volatility will reduce, leading to a reduction in speculative trading.
4. With a stabler set of altcoins, and an underlying value (BTC) which isn't quite so rigid, coins with faster transaction speeds will begin to see higher adoption in commerce.
Ultimately though, this does mean we're back to a situation where there are multiple currencies (similar to fiat currencies) which are backed by a unifying commodity (in this case BTC, but similar to the Gold Standard..), and openly traded in the markets (like the FX markets..). All that will be different from the current system is that there will be increased transparency, but a loss of regulatory safety.
Now in the interest of full disclosure, by trading different currencies I know I'm actively part of the problem - it's the kind of speculation that I've been making that has introduced a lot of the problems I've underlined: high transaction costs, and unsustainable volatility. Alas, I'm but a human - and to have tripled my investment in only a few weeks shows that there is indeed money to be made.
With that in mind, and a small pot of money to gamble, there's an obvious strategy to be had whilst this evolution occurs:
1. Consider Bitcoin as the commodity that backs the currencies, and worry not about how much you've made in fiat - but concern yourself with trading to increase the value of your account in Bitcoin. (i.e I do a trade not to make $$$, but to additional BTC 0.0001..)
2. Keep a percentage holdings in some of the more stable (established?) cryptocurrencies - i.e Ethereum and Bitcoin itself.
3. Trade the smaller coins when they're introduced to exchanges, due to make announcements, or purely on the charts; a chart with a combination of a stop loss and sell order is quite a powerful toolkit.
4. When BTC appears to be going through a reduction/correction, transfer a percentage to one of the other stable holdings - although the monetary (fiat) value is reducing, you'll be left with an increase in how much BTC you'll be able be able to buy in with when it stabilises.
There's an obvious problem though: it soon becomes Catch-22, and as the more people use a strategy like that, the less chance of the altcoins consolidating and stability being achieved. Alas, the with press coverage peaking, the speculation is obviously here to stay for a bit longer..
Suddenly it's easier as a user to both imagine the value of BTC (i.e it's easier for me, as a human, to imagine how much my coffee is as "BTC 1.5", rather than "BTC 0.0000001.5"), and to use it in a real commerce transaction.
This still demands an answer to the issue of volatility though, and that doesn't look particularly fun to try and solve; least of all because it's human nature to speculate when there is a gain to be made.
And that is how I'd choose the longer term holdings; I mention Ethereum as it's established, but there are those that help satisfy a niche - and I can see them becoming stable and established in time.
The blockchain technology is simply an accounting system that holds multiple duplicate records of IOUs in the form of encrypted numbers. Trading a crypto currency is trading the IOUs for more than the face value assigned when they were originally created. Those IOUs will be accepted currency if there is trust in the IOUs being honoured for goods and services. SegWit was created to fix a bug which would allow a single IOU to be paid out more than once. It seems trust is a long way off and all the new crypto currencies seem to be competing to be the safest and quickest but surely only one technology will win through leaving all the other crypto currencies worthless. This is the game the big corporations are sitting back and monitoring to see how the technical problems are eventually solved, putting as little of their own money at risk as possible.
I guess if you continually move to different crypto currencies and don't end up holding the baby as the bath water goes down the plug hole you could end up owning a store of value in the winning technology. My fear would be that you would be frozen out of participation in the winning technology as it could be duplicated and a new currency created that was not traded on an exchange the private individual had access to. You cannot buy XRPs from Ripple, and the banks using Ripple will not buy your XRPs, that should start alarm bells ringing.
in particular it takes the axe to the idea that in buying XRP tokens you are buying a stake in the Ripple business - which is supposed to be all about replacing SWIFT and other exchange protocols. Basically what I take out of it is that the XRP tokens are irrelevant to that relatively modest business goal, but they do make the founders ore rich than Zuckerberg.
Think I will avoid that one.
Apology accepted.
Not sure how the “eh” came across as sarcastic. Will note it for future reference.
I agree that this is a very good discussion
For the mainstream coins be greedy when others are fearful and fearful when others are greedy couldn't ring any truer
https://www.coindesk.com/ripple-claims-3-money-transfer-firms-xrp-2018/
Expect it to fly on that news alone.