As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

https://techcrunch.com/2018/12/26/as-bitcoin-sinks-industry-startups-are-forced-to-cut-back/

219 297 8 years ago

aphextron2• 8 years ago

BTC/USD is doing just fine. Nobody who knows anything about anything made any kinds of plans involving $20,000 Bitcoin. At ~$4k, it's still 10x where it was 2 years ago. Anybody remotely involved in BTC from it's actual inception (not the bandwagon shirt-losers of 2017) is filthy stinking rich now.

smacktoward• 8 years ago

Nobody who knows anything about anything made any kinds of plans involving $20,000 Bitcoin.

Except for Goldman, Morgan Stanley, Citigroup and Barclays (see https://www.bloomberg.com/news/articles/2018-12-23/wall-stre...)...

pesmhey3• 8 years ago

What stops GS from replacing their fee-based offerings with a blockchain solution? Could this really be as obvious in hindsight as looking at Sears in the 90s not developing an online catalog?

nck4222• 8 years ago

That article really does not support your point at all...

Squeamish from the start about pursuing profits in one of the darker corners of finance, established firms this year slowed their already halting efforts to make a business out of Bitcoin mania.

So they were slow from the start, and are slowing their already slow efforts.

“The market had unrealistic expectations that Goldman or any of its peers could suddenly start a Bitcoin trading business,” said Daniel H. Gallancy, chief executive officer of New York-based SolidX Partners, which hopes to launch a Bitcoin ETF in the U.S. "That was top-of-the-market-hype thinking."

So the market (not banks or other insiders) had unrealistic expectations of traditional institutions.

With regulators offering little clear guidance on how they will classify the broad universe of tokens—as commodities, securities or something else—banks and investment firms are treading cautiously.

Banks continue to wait for regulations and guidance before committing fully.

Cobord• 8 years ago

I think OP is saying they don't know anything about anything. Which has a point, they claim to know what they are doing, but just have such large capital that there is no way for them to fail even if they did everything wrong. So you can't use success as a barometer for knowing anything.

wolco2• 8 years ago

They are part of the getting in late group and the lower valuations are most probably signs they are leaving the market.

I remember when the price started to increase I didn't think 4,000 would hold. 2500 seemed like the correct price. The fact that it hasn't fallen below that amount means there are more investors.

Personally I was using it to purchase goods before the runup and the slowness and increased fees made me move to another form of payment. I'm considering going back now that the price[is dropping

aphextron2• 8 years ago

Except for Goldman, Morgan Stanley, Citigroup and Barclays (see https://www.bloomberg.com/news/articles/2018-12-23/wall-stre...)...

See: bandwagon shirt-losers of 2017

Bitcoin was the largest, fastest, most successful transfer of institutional wealth into private hands we've ever seen.

harryh2• 8 years ago

Of course if you are filthy stinking rich, it's because you participated in a distributed scam in order to defraud money from those "bandwagon shirt-losers."

sneak• 8 years ago

What precisely was the scam? Who and how was I scamming by mining coins with my GPU and some open source software I saw on slashdot that are now worth several thousand dollars each?

wolco2• 8 years ago

It's not a scam just a bad investment.

Those using bitcoin for payments saw a utility not provided by other solutions.

Those investing are a different class of users. Most purchased after hearing get rich stories.

213• 8 years ago

You mean, like pension funds trading the stock market?

minimaxir4• 8 years ago

At what price will the Bitcoin death spiral occur? (i.e. when it costs more to produce/handle Bitcoin than the revenue generated, so best move is to just exit the crypto industry).

marcell• 8 years ago

Bitcoin was doing perfectly fine at $100, so I think these predictions are a bit premature and have some recency bias.

The price drop does lower the amount of security in the network, so it becomes cheaper to attack it. However, it also means the payoff to attack is lower.

minimaxir4• 8 years ago

The cost of production (as a function of the hash rate) was much lower than $100/coin at that time.

duxup2• 8 years ago

Correct me if I'm wrong, but I thought mining coins took power as time went on. Thus what it took to do the job in the past isn't what it would take today and thus past mining really wouldn't be comparable.

asfgjonuinio3• 8 years ago

However, it also means the payoff to attack is lower.

"Your money is safe because it's not worth anything anyway."

marcosdumay2• 8 years ago

Don't bitcoin costs adjust to a shrinking miner population as well as it adjusts for a growing one?

If so, the answer is never. As people give-up, the costs for the remaining ones reduce so that at some point it's lucrative again.

The interesting question is at what price people will stop speculating on its price and run to an exit? I don't think anybody can answer this one.

hudon7• 8 years ago

The difference is that even if the difficulty adjusts, there will be dormant ASICs waiting to be used. If the price lowers enough and enough ASICs are out on the bench, it’ll at one point becoming economically beneficial to turn them all on and attack the network rather than having them collect dust and depreciate.

ForHackernews2• 8 years ago

The difficulty adjustment only occurs after a certain number of blocks are mined. If the price drops rapidly enough that most miners shut down, it might never get to the difficulty adjustment.

nikanj• 8 years ago

The costs for fiat exchanges, payment gateways, etc etc, do not scale like that. Only the mining difficulty does.

jayd162• 8 years ago

There are still fixed costs and opportunity costs. Even if the fixed costs are low enough that bitcoin will always be slightly profitable it still might not be profitable enough for big business to really bother.

arisAlexis4• 8 years ago

there can be no such a thing by design. Tulips didn't have it but Bitcoin does have a mechanism of self adjusting mining difficulty

CydeWeys2• 8 years ago

As others have pointed out, the difficulty adjusts both up and down depending on the total work being done by the network, so no death cycle is possible.

Additionally, even when there are rapid drops in value (and thus mining), people still want to transact Bitcoin, so transaction fees go up and become a significant percentage of the overall value of a new block, thus compensating miners for the reduced value of the block reward.

There is no death spiral; there's just regular increase/decrease in value over time.

asfgjonuinio3• 8 years ago

There are tons of interesting failure modes. The simplistic one won't happen, but that doesn't mean that it isn't teetering on the bring of a death spiral.

What happens when the market is flooded with cheap miners? A 51% attack is suddenly affordable.

What happens if the price drops off a cliff right after a difficulty adjustment? As hash rate falls, difficulty adjustments become farther apart than the two weeks they're supposed to be.

What happens when smaller miners close up shop? Bitcoin mining is already very centralized. Falling profitability would move it even more into the hands of the biggest players with the most efficient hardware and the cheapest electricity. Read: China.

A falling price is a huge problem for the security and stability of the network. Bitcoin is teetering on the brink of complete collapse.

people still want to transact Bitcoin

No one uses Bitcoin. The transaction fees would have to go up by a factor of over 100 to equal the current block rewards. And, if people don't use Bitcoin now, why would they when transactions are 100x the current price?

ivalm• 8 years ago

If transaction fees go up too much this discourages the use of bitcoin as a currency....

way2983• 8 years ago

As others have pointed out, the difficulty adjusts both up and down depending on the total work being done by the network, so no death cycle is possible.

It's true that the difficulty adjusts both up and down, however it does so over 2016 block intervals. If a sufficiently fast and large drop in value/hashrate occurs, the chain could well 'death spiral'. The drop simply has to occur within the adjustment interval (2016 blocks- or 14 days).

That said, recovering from a death spiral is as simple as a new Bitcoin Core release that hard-forks the difficulty to a new, workable level, so the fatalistic view of death spirals is still wrong.

InGodsName3• 8 years ago

Bitcoin will rise again.

Bitcoin removes the need to trust a bookie/agent to move money offshore.

Whenever flow of money is possible between a safe haven and a corrupt/socialist big country with high tax rate/more population burden.

Money flows to the safe heaven.

Bitcoin is one such way to move money from african nations/india/china to safe haven like Switzerland, Singapore, UK etc...

I am talking about illict gains/unreported assets which can't be moved through official channels.

Moving your unreported assets to a different country might not be illegal in that country if a deal is structured correctly. That's where lawyers/accounts/consultants come into play.

Bitcoin will rise again once a need to move money to save heaven rises again.

It's an efficient medium to move large sums of money without trusting a bookie.

I can buy coffee loaded in container from an african country where inflation has killed the local currency and banks do not have infra for international settlement or take much bigger cut or simply aren't trusted by local people. For this i make simple bitcoin transfer from Hong Kong and get my coffee contain undocked in Hong Kong.

Edit: it's haven not heaven.

carlob3• 8 years ago

First of all the word you're looking for is haven (as in a harbor), not heaven.

Secondly, are you saying that bitcoin exists solely for the purpose of money laundering and tax evasion?

mindfulplay6• 8 years ago

Basically a scam then?

213• 8 years ago

There was a time when the Bitcoin price was zero, yet people spent computer time mining it.

So the answer to your question is never, a Bitcoin death spiral can not occur.

onion2k• 8 years ago

You're right in the sense that there'll always be a few hundred interested people mining Bitcoin for fun, but that's not very useful information. "Actually dead" and "effectively dead" might as well be synonyms in this case.

asfgjonuinio3• 8 years ago

Already happened. The hash rate is falling and the market is flooded with cheap hardware.

You'll hear some handwaving about difficulty adjustments. That doesn't change the fact that it is becoming increasingly unprofitable and miners are already shutting down en masse.

gammateam• 8 years ago

This happened from 2014 to mid 2016, a good 18 months.

Nothing happened. There have been bigger threats to the network, the revenue of miners isn't currently one. A threat to the usability of the network would be if 90% of mining power disappeared at the same time, this means it would take 900% longer to confirm a block until the next difficulty adjustment drops the network confirmation time back to 10 minutes. Difficulty adjustments happen every 2016 blocks, each block is supposed to come every 10 minutes. The worst case scenario would be hashrate disappearing right after a difficulty adjustment meaning 2015 blocks will be found very slowly, there could be a max of 4 months of a slower bitcoin network.

Makes me wonder what you even mean by death spiral, like what user experience do you expect to happen?

Users wouldn't immediately stop using bitcoin because it was slower, they wouldn't even know it would suck, so more likely the unconfirmed transactions would add up, and to ensure getting mined into a block, the users would increase their transaction fees to coax miners to include them first (instead of dropping their transaction completely when they run out of memory). With a higher fee market, this is an even greater incentive for miners to come back on the network, because now the block reward doesn't even matter, since the fees can potentially eclipse it totally. The price of bitcoin would even cease to matter, if there is a dollar figure of fees just there. Miners come back on the network would make the hashrate higher again, before the difficulty adjustment, making blocks confirm faster, instead of slower.

This equilibrium is already in the minds of miners, which contributes to them staying on the network so that they don't miss out.

This isn't theory, its all happened before.

sbenitoj• 8 years ago

When it costs miners (who lack the economies of scale and access to cheap electricity that major miners have) more to produce Bitcoin than the block rewards and transactions fees they receive from doing so, they simply shut off their miners until the price gets high enough to operate profitably again (of course they could also just continue to operate at a loss in the short-term, but financial resources are always limited so they would have to stop operating at some point if the price doesn’t increase).

There will always be SOME miners who have access to cheap enough electricity and economies of scale for whom it continues to be profitable to mine.

cageface8• 8 years ago

I think the problem is that BTC has been through a very public boom and bust cycle so the public at large is now very wary and a lot of new regulations are coming in. Blockchain needs to start solving some actual man in the street kind of problems soon if it's going to retain any mindshare.

ramontayag3• 8 years ago

I think it is solving some man-in-the-street problems for people who aren't in countries with good financial systems.

walrus01• 8 years ago

I've seen so many local startups that are essentially scams:

March 2018: https://www.politico.com/magazine/story/2018/03/09/bitcoin-m...

November 2018: https://www.seattletimes.com/business/washington-bitcoin-pio...

JohnJamesRambo• 8 years ago

Ah, the Bloomberg and TechCrunch bottom signals I’m looking for.

KasianFranks2• 8 years ago

Precisely

verdverm• 8 years ago

A year ago, I was explaining to family why crypto was a thing. This year I'm explaining why it crashed and why it's to be avoided. Also, why blockchain and crypto are not the same thing.

There are many who participated in the 2017 speculation that will actively avoid and advise against participation this go around. The bubble popped and it will be many years before we see worthy investments take shape.

wpietri6• 8 years ago

I think another factor is that we've passed peak uncritical press coverage. Never again will there be as large an influx of media-driven naive optimists who think that the price will only go up.

ryanSrich• 8 years ago

To think anyone can predict the market (good or bad) is foolish. You could easily flip your statement in support of crypto and it would be equally meaningless. Having participated in crypto since 2013, the only thing that I (or anyone else for that matter) knows is that _no one_ has a clue what they're talking about it.

It's pure speculation in both directions.

We could see BTC go sub $1k in Q1, or we could see it hit another ATH as those that got left out in 2017 FOMO in.

No one, not a single person, has any idea.

inersha3• 8 years ago

I never understand why people try to separate blockchain and bitcoin.

dole• 8 years ago

Bloomberg's always Chicken Littling cryptocurrency and backslapping the large investment firms.

MentallyRetired• 8 years ago

Reminds me of the time they called my website dead, but it's still alive and generating revenue 10 years after the article...

xiphias2• 8 years ago

They started already a few weeks ago. But right now the calm days are starting. The next half year or more will be about people forgetting about Bitcoin.

Steko• 8 years ago

It's always good news for Bitcoin!

arisAlexis4• 8 years ago

long time since the last Bitcoin is dead article

minimaxir4• 8 years ago

The lack of attention to crypto as a serious financial instrument is more damning to crypto than an indicator of its success.

KasianFranks2• 8 years ago

We'll just file this under "comments that won't age well"

ziont2• 8 years ago

is anybody really surprised other than people still involved with this blockchain/cryptocurrency nonsense?

The entire bitcoin pump and dump was orchestrated.

wpietri6• 8 years ago

I think this is a fine case to apply Hanlon's Razor: https://en.wikipedia.org/wiki/Hanlon%27s_razor

Conspiracy was unnecessary.

ziont2• 8 years ago

ITS NOT A CONSPIRACY

https://www.bloomberg.com/news/articles/2018-06-13/professor...

DOJ is investigating. If you ran an ICO, and you still haven't lawyered up, you are at risk.

jron• 8 years ago

When you flip the chart upside down, it sunk 300% over 2 years!

roguecoder• 8 years ago

At least this might provide pressure to reduce the environmental impact of mining, if only to reduce costs.

baby• 8 years ago

I see this arguments being thrown all the time, but I also like the argument that current infrastructures needed to run "previous-gen" currencies are actually burning way more[1]. While I wait for concrete research to estimate how much energy was wasted in the creation and maintenance process of these, I will abstain from spreading the FUD.

[1] https://en.bitcoin.it/wiki/Myths#Bitcoin_mining_is_a_waste_o...

duskwuff• 8 years ago

That argument looks like it was written 5 or 6 years ago, long before the modern cryptocurrency boom (and the associated rise in large-scale mining, e.g. in China). It hasn't aged well.

arisAlexis4• 8 years ago

by the way, Techcrunch CEO was all in crypto last year

minimaxir4• 8 years ago

Michael Arrington left TechCrunch a long, long time ago.

arisAlexis4• 8 years ago

not sooo long ago and why is it relevant? he is still the founder and his actions bear some significance.

jMyles16• 8 years ago

The discussion of blockchain tech on HN is puzzling to me.

On the matter of value: I suspect that if we find ourselves able to send a message back in time two years (when BTC was less than $1,000 USD) and report that the price is now over $3,700, that we'll find this message to be met with an understanding that this is, at least, a validation of the use of blockchain tech as a store of value.

I suspect that if we describe the details of the lightning network in this message and report that transactions are radically faster and cheaper for retail-scale use, that we'll hear cheers about blockchain utility as a currency.

If we describe LivePeer and Fluence and the Origin protocol, if we stream talks from this year's DevCon about the incredible Python tooling that is coming of age and the progress on sharding, proof-of-stake, ring signatures, and zero-knowledge proofs, I'm certain that we'll hear nothing but confidence about the ecosystem and the extensibility of blockchain tech.

If I am permitted to send one of my recent talks[0] back with this message about our progress at NuCypher on developing new cryptographic primitives and cryptological narratives to accompany them, I have no doubt whatsoever that we'll receive back both excitement and gratitude, not on account of our work but because everybody in December of 2017 will be so grateful to know that they're about to be alive during a time when organizations like ours actually have the funding and mission to dust off tech that has sat largely stagnant for the preceding 10-15 years and move it substantially forward.

Yet, look at us HN. Instead of these reactions we're sitting here filled with cynicism and darkness. Why? Where have we misplaced our joy at these developments?

I'll tell you what: let's just pretend that somebody from December of 2021 has posted a message here with similar signs of encouragement. Let's imagine that they've told us about Ethereum 2.0 and Monero coming online. That new turnkey technologies include decentralized access management via NuCypher, buttery transcoding via LivePeer, and fast and flexible decentralized queries via Fluence.

Let's hear in our mind's voice about the next cohort of decentralized tech following these, including fully-homomorphic encryption (perhaps via NuFHE), solutions to several of the open oracle problems, and blockchain use in all sorts of gaming scenarios to ensure fairness of loot boxes and other intra-game economics.

Let's celebrate all the adoption they report to us: medical devices that work without the need for trust in insurance companies, communications infrastructure with far greater robustness and in widespread use to thwart spy apparatuses of despotic governments, sharing frameworks to ensure that media is able to spread throughout the world despite attempts at censorship or outdated notions of "intellectual property."

Please, let's let 2019 be a year when optimism and childlike curiosity are not only permitted in these parts but celebrated like they (largely) were just two years ago when the BTC price was less than 30% what it is today.

[0] https://www.youtube.com/watch?v=OuY9WXK61gY

sp527• 8 years ago

You're reading way too hard into this.

It skyrocketed to ~$20K and then plummeted to here because, plainly, it was a vehicle to manipulate morons out of their money. That's worth at least some "cynicism and darkness", and should be prompting our community to contemplate how, going forward, we can avoid hurting the tech illiterate masses when our own irrational exuberance, in concert with the more classically opportunistic and morally deficient business types, leads to damaging outcomes.

This is in fact my gripe with the tech community more generally: we have demonstrated ourselves to be chronically incapable of tempering the innovative instinct with an even baseline understanding of the realities of human nature. And this is why we're becoming increasingly more responsible for breaking the world.

twblalock5• 8 years ago

There will always be people who say a breakthrough is just around the corner. How many years should the rest of us wait wait before we decide that blockchain tech was a dead end? It's already been around for a while and I can't think of any successful use cases outside of cryptocurrency.

jMyles16• 8 years ago

Are you insinuating that there have been no breakthroughs in the past 2 years? How do you respond to the ones I have listed in the comment to which you're replying?

pjc50• 8 years ago

You can ask for childlike curiosity, or you can ask people to invest money.

jMyles16• 8 years ago

...to be clear: I have not and do not ask the latter. I think blockchain-based assets are super risky and I simply don't know enough about investing to advise people either way.

I do, however, know enough about the tech to conclude that this is a time of great excitement and progress; I'm sad that these feelings aren't more widely shared here in our lively discussions every day.

dgellow• 8 years ago

outdated notions of "intellectual property."

Could you elaborate? What is wrong with current notion of intellectual property? What is outdated about it?

In general I see this point targeting patents, not the whole concept of IP.

jMyles16• 8 years ago

Not sure why you're being downvoted; this is a very reasonable question.

...and truth be told, I'm not exactly sure what I mean. But I do think that it's plain to notice that the internet tends to facilitate a style of sharing that is inconsistent with the "copyright" model of intellectual property (in addition to precluding a functioning patent system, as you point out).

It seems to me that we need to make peace with the innate tendencies of information, including the tendency of data to be copied and shared. The myth of Prometheus teaches us that this is a message deep in the species, and yet somehow governments have gotten the idea that they have the power to reverse it.

If the internet and governments clash head-to-head, of course the internet will win. The forward march of time does not yield, and especially not for something so fragile and childish as a claim to own an idea.

So I don't exactly know which notions of IP will become outdated and when, but I can visualize easily enough that some of them will at some future point.

mdpopescu4• 8 years ago

Imaginary Property has a number of drawbacks [0]. Among them, the fact that it trumps real property - IP will prevent you from using your own real property as you see fit. (For example, playing music in your garage without a broadcasting license [1].)

[0] https://mises.org/library/against-intellectual-property-0

[1] https://www.telegraph.co.uk/news/newstopics/howaboutthat/424...

zanny• 8 years ago

The practical real world beneficiaries of IP law in modern time are nigh exclusively international business conglomerates using it for rent seeking. The number of individual creatives who use the courts to enforce their copyrights as a revenue stream are drops from a spigot next to a torrential river of institutionalized copyright trolling, cross-lawsuits between dozens of lawyers from fortune 500s, and the systemic privatization of culture as a means for profit.

Whole generations have had their heritages locked up in corporate coffers for going on a century now with no end in sight, and that kind of abuse will leave lasting scars on humanity as a whole. I would anticipate historians a millennia from now might reflect on this time as having sufficient creative and intellectual death by copyright aside other calamities like global warming, exploitation of third world labor, or nuclear proliferation as the principal sins of the 20th and 21st century.

Nursie6• 8 years ago

On the matter of value: I suspect that if we find ourselves able to send a message back in time two years (when BTC was less than $1,000 USD) and report that the price is now over $3,700, that we'll find this message to be met with an understanding that this is, at least, a validation of the use of blockchain tech as a store of value

So just ignore everything in between? Yah, sounds great...

I suspect that if we describe the details of the lightning network in this message and report that transactions are radically faster and cheaper for retail-scale use, that we'll hear cheers about blockchain utility as a currency.

The lightning network is an overcomplicated joke, which requires on-chain transactions to seed, massive amounts of capital tied up into it, always-on participants etc. It also suffers from fundamental problems around routing, payment contention etc. A year on from its launch, it still has negligible uptake, and fails to really take any load off BTC.

Further, its very existence points to a massive failure in the underlying cryptocurrency as a payment network. I look at lightning and see two failures, not one success.

Let's hear in our mind's voice about the next cohort of decentralized tech...

Very, very few people care about decentralised money, or decentralised tech as a whole. For most, the very nature of it represents a huge step backwards in usability and reliability compared to fast, lightweight, insured and reversible centralised systems.

Let's celebrate all the adoption they report to us

There are virtually zero positive outcomes for blockchain tech, a decade on. Time to let it rot on the pile of might-have-been's

ramontayag3• 8 years ago

It's actually useful in places that don't have great financial access. I'm guessing your estimate of "very few people" is from a place that has good access?

mindfulplay6• 8 years ago

You are conflating greed with innovation.

We did not rally optimism and childlike curiosoty from the general public for HTTP or TCP/IP.

You are shilling based on the popular Bitcoin playbook of Quotes and Comments.

If it's really about the technology then people shouldn't care about the USD value of this crapshitcoins era... But no you folks not only took on the technologically inclined people but dragged the unaware general public into the mud took their money and fueled your drug-induced, darkweb fantasies of lambos and Porsches.

Just stop with this bs already .. I really hope SEC comes after everyone of you greedy technobabble mumbo jumbo Signal pump-dump idiots.

jMyles16• 8 years ago

We did not rally optimism and childlike curiosoty from the general public for HTTP or TCP/IP.

Yes we did! It took a lot to get people excited about the internet, and a lot of naysayers made it a dramatic feat. The difference is that I'm hoping not to find this kind of negativity and name-calling here on HN.

you folks not only took on the technologically inclined people but dragged the unaware general public into the mud took their money and fueled your drug-induced, darkweb fantasies of lambos and Porsches.

Please show me where I did anything even vaguely resembling this. I assert that I've been a reliable, honest contributor and spoken with my code. I've never been part of a public sale, nor ever made any promises of any kind to anybody who was participating in a public sale. NuCypher will not hold a public sale until our network is ready for use by real application developers. Full stop. That is the opposite of shilling.

Why are you attacking me personally here?

amvalo• 8 years ago

Hey now... don't drag Signal into this.

zik• 8 years ago

Not everyone's who's interested in decentralized trustless payment technology is a "shill".

You're dismissing innovation and tarring it with greed.

root_axis2• 8 years ago

The cynicism has been well earned by all the hype with nothing to show for it. The best thing the cryptocurrency community can do is accept the lumps on the head, taste some humble pie, and shut down the hype machines until there is actually something useful to show. Cryptocurrency is the only technology that requires so much vociferous defense.

DenisM3• 8 years ago

The most remarkable thing about BTC is diffusion of responsibility. If it was issued and marketed by a single entity the participants would be in hot water by now for violating the Securities and Exchange laws. However here we had one non-affiliated group of bigger miners issuing the coins and another group of volunteer enthusiasts hyping them up. Since the second group was not hired by the first, the first group cannot be held accountable, while the second group has agents too numerous and too small to go after.

This is similar to the housing bubble, where the industry collectively hyped up the "investment" promising huge returns, yet no one was to blame when the music stopped.

Watch out for mo ways to diffuse responsibility, that's where "action" will be. Maybe we can nip it in the bud sooner if all keep an eye out.

jMyles16• 8 years ago

I assert that the diffusion of responsibility is a key feature of decentralized technology precisely because it renders us unable to "nip it in the bud".

wpietri6• 8 years ago

Unfortunately, it does so for everybody. Including people who have a strong interest in the world not seeing Bitcoin as scam central. It all strikes me as a classic tragedy of the commons.

hudon7• 8 years ago

Not really. When the MPAA wanted action taken on torrented movies, they didn’t just throw their hands up in the air and go “whelp, it’s decentralized!“, they went after the authors of the protocol, the ISPs, hell even domain name registrars (that listed torrent websites). You can still torrent films, but you could get prosecuted or fined. Furthermore, some content is completely censored from torrent sites.

All that to say, it’s not clear to me that “decentralized technology” can prevent the very human process of holding others accountable. It does slow down that process for now, since the software obfuscates what’s going on (who’s doing what), but regulators will understand how the tech works eventually...

sgt1013• 8 years ago

And yet, should it become illegal for people to exchange fiat for crypto and for domiciled entities to own crypto all the decentralisation in the world wouldn't help.

krrrh2• 8 years ago

Preston Byrne pointed out since there is no pyramid, this can’t be called a Ponzi scheme. It deserves a new name, the “Nakamoto scheme”:

https://prestonbyrne.com/2017/12/08/bitcoin_ponzi/

jayd162• 8 years ago

Isn't most of the scheme the classic pump and dump?

GavinMcG• 8 years ago

"Scheme" implies a unified/central schemer, though. We can already call it a fad, or a mania (a la tulip mania).

elvinyung• 8 years ago

I guess you can say it's less like a scheme and more like a meme.

chii• 8 years ago

why not call it a bubble, just like everything else like it that has come before in history?

https://en.wikipedia.org/wiki/Tulip_mania

pera• 8 years ago

If it was issued and marketed by a single entity the participants would be in hot water by now for violating the Securities and Exchange laws.

What laws are being violated by Bitcoin's participants?

carleverett• 8 years ago

Certainly not any SEC laws. Jay Clayton, SEC Chairman, has explicitly said that Bitcoin is not a security: https://www.investopedia.com/news/sec-chair-says-bitcoin-not...

If they were in violation of SEC laws, the parent comment is still be inaccurate since Bitcoin's immutable ledger would mean the SEC would absolutely be pursuing violations, like they are with other ICOs.

dnautics• 8 years ago

This is similar to the housing bubble, where the industry collectively hyped up the "investment" promising huge returns, yet no one was to blame when the music stopped.

Except with the housing bubble the hype was generated by the government, with Republicans touting an ownership culture party line and Democrats applauding expert control of the economy by genius planners.

Secondly, in the housing bubble asset prices were pumped by leveraged (debt-based) transactions. The Hallmark of this is a collapse that happens twice as fast as the run-up. While certainly some people made leveraged plays on crypto I doubt it was very many, which means that the damage is contained to the sector (less domino effect of defaulting entities causing their lenders to default), evidenced by how the crypto collapse is twice as slow than the run-up.

rblion• 8 years ago

This articulates the situation perfectly. A clear lack of checks and balances.

tim3334• 8 years ago

The entity behind BTC was smart to remain kind of anonymous.

jklepatch• 8 years ago

What puzzled me is how comes blockchain startups did not sell their crypto for fiat just after their ICOs.

I recommended this to several of my blockchain customers but none of them listened. I dont know if that was motivated by greed or something else.

According to Game theory there is no benefit in not selling the crypto for fiat: if you raise lets say 10million during an ico (typical amount raised 6m ago), there isnt much you can do with 20M (i.e you keep the crypto and it doubles) that you cant do with “just” 10M.

However, if the crypto crashes, and become 5M, you are going to have a hard time explaining to stake holders that 5M just disappeared...

At worst you keep 10pct in crypto if really you want to keep some upside to crypto but thats it

plantain• 8 years ago

It took me a long time to realise, but these people really do believe in bitcoin/blockchains.

tonyedgecombe• 8 years ago

The easiest person to fool is yourself.

untangle• 8 years ago

It took me a long time to realise, but these people really do believe in bitcoin/blockchains.

Best. Comment. Of. 2018.

Especially since "these people" include some ostensibly smart cookies.

I conjecture that these people were/are trying to elevate BC to the level of adtech (Google).

Perhaps we have averted another black hole for the greatest minds of a generation.

seanwilson• 8 years ago

What puzzled me is how comes blockchain startups did not sell their crypto for fiat just after their ICOs.

I'm not sure what's puzzling: The startups who base their business around crypto believe crypto will rise in price. A crypto startup selling all their crypto because they think there's a high risk crypto will crash in value is also sending out a very bad signal to potential investors.

yodsanklai• 8 years ago

The startups who base their business around crypto believe crypto will rise in price

A startup may very well work on some blockchain technology while not believing that a particular cryptocurrency will rise in price.

dustingetz5• 8 years ago

What is even involved in finding a buyer for $10mm btc in usd and then getting that usd into a legal/compliant bank account? Sounds non-trivial. It's my understanding from some work I did for a crypto startup that there is approximately zero usd/btc liquidity, the apparent "usd liquidity" and "usd price" last year was actually dominated by tether-btc and tether-eth liquidity. There was not actually a functional usd/btc market at any point, at least not with liquidity necessary to justify a statement like "startup X holds $10m btc" and this whole thing is a bunch of twenty-five year old entrepreneurs learning about macroeconomics the hard way.

cobookman• 8 years ago

There's off exchange buyers and sellers of crypto who deal in orders of > 1M usd.

It's fairly trivial to go from 10M BTC to 10M of a stable coin. Can't speak on how difficult it is to do 10M stable coin/btc to us bank

tim3334• 8 years ago

The BTC/USD market on Kraken is pretty liquid. I think trading $10m wouldn't have been a problem if you spread it over a few days. They are trading $34m/day now and it would have been far more 6 months ago.

Not sure what paperwork you need - as long as you could document the source was legit it would probably be ok.

Also changing BTC/USDT would at least protected against the decline in value.

seibelj• 8 years ago

Circle Trade and Cumberland do OTC trades of large amounts. Nothing is magical about this. https://www.circle.com/en/trade

merkaloid• 8 years ago

If you do that people will think you're exiting and your company will tank massively.

village-idiot• 8 years ago

True believers make terrible investment decisions.

a13n• 8 years ago

if you raise lets say 10million during an ico (typical amount raised 6m ago), there isnt much you can do with 20M (i.e you keep the crypto and it doubles) that you cant do with “just” 10M.

By that logic, why invest in anything ever?

b_tterc_p• 8 years ago

There’s an unstated assumption that investing 10M in crypto offers high risk of losing it all. The utility of losing 10M is worse than the utility of gaining an additional 10M- and much moreso when weighted with common sense probabilities.

Nasrudith5• 8 years ago

Cynically the time to sell it is after the IPO for even larger gains with less responsibility. Since if you are behind a ICO and then start to sell yourself it is a clear pump and dump. After a company becomes big enough for an Initial Public Offering however it allows for a clean getaway without liability. You often notice start ups selling out after the growth starts to decline whether they are right or wrong about it - which at least lends some honesty to the transaction.

If it goes bigger after the IPO they either missed out or gave it to more capable hands. If it goes kaput they either got out just in time or it got ran into the ground by the new guys.

tCfD• 8 years ago

In most if not all cases the answer is: they can't. The price of crypto, especially that of the ICO era, is propped up by the same individuals that would most want to sell it. It's their HODLing of the coin that keeps it illiquid enough to allow them to drive the price up to the ico target and beyond. By casing out they'd be selling largely to themselves + the thin wisp of actual rubes they've duped into believing there's any substantial buy support under the listed market price.

tanilama• 8 years ago

Funny that crypto is being called industry.

jchannon• 8 years ago

Wonder how this effects Lykke.com

dikaio• 8 years ago

Long

spir• 8 years ago

From a fundamentals perspective, blockchain has a bright future:

lending - https://dharma.io

derivatives - https://dydx.exchange

forecasting/gambling - https://www.augur.net

on-chain "US dollars" - https://mkr.tools

atiffany• 8 years ago

When I first invested in Bitcoin several years back, I tried to imagine ways that it could one day be deterred from becoming increasingly adopted and valuable. Government regulation and hacking were obvious possibilities, but I never considered “death by fragmentation” at the time. I think Bitcoin would be a lot more valuable today if it had not been for the explosion of largely greed-motivated shitcoins (and later ICOs) entering the market.

black-tea• 8 years ago

It was the scalability problem that killed Bitcoin and it probably would have happened a lot sooner without the fragmentation.

cageface8• 8 years ago

2018 is the year that we learned that complex social problems can not be solved by technology. From the political weaponization of social media to the collapse of the ICO market we've seen that the techno-utopian dream is largely just that, a dream. Social change takes hard work and the slow building of consensus, not just clever code. We have seen, however, that we can do a lot of damage to the social fabric with poorly thought out technology so I think the era of the unregulated internet is sadly coming to a close. We really have nobody to blame but ourselves.

The next generation of internet startups is going to have to be a lot more savvy about how technology interacts with society.

Nasrudith5• 8 years ago

I think that the biggest issue is frankly bullshit. Bullshit in the sense of complete lack of sensitivity to the truth so long as it leads to the outcome they want. Technology isn't at fault here but bullshit is on so many levels it isn't funny.

The stupid internet rumors and social media manipulation? Bullshit because they want to influence people - they don't care if it is true or not. Company valuations? They don't care if it is productive or useful - they just want it to make money which leads to the new Tulip craze. Security theater and claims that they need to spy on everything? Bullshit to justify their positions and cover their asses. It isn't a technology - it is the social black art old as dirt that keeps being used. It causes problems everywhere because it exists on a nearly fractal level.

We see plenty of people blaming tech companies for their problems and calling for regulations? Do they care if it is true or have any idea for specific regulations in mind? And the few that are trotted out turn out to be trivially unworkable or contrary to the given purpose on so many levels like encryption bans. Because it is all bullshit - what they want is to protect their own vested interests and they don't want the truth in the same building of a skyscrapper, much less the same room because they will lose in a discussion of facts.

I would be very skeptical of anyone who claims that we need regulation on the internet - because so far all of the pushers are shoveling more bullshit.

cageface8• 8 years ago

We're going to see a lot of bullshit regulation on the internet and a lot of opportunists taking advantage of the current chaos to push their own agenda. Unfortunately we handed them the weapons they need to push these arguments by building toxic (or at least very naive) platforms like Facebook and Bitcoin. It's a shame really but the tech community has itself to blame for a lot of this.

The power struggles that have gone on in human societies for our entire existence are now starting to play out online. We should have seen this coming.

Joe-Z2• 8 years ago

Indeed. I found GP's comment quite insightful until it suddenly called for regulation on the internet.

Why would that change anything when we just established that not the technology but learned behaviours are the problem?

Maybe 2018 was the year that showed us that we finally need to come to terms with the fact that - yes - there are enough resources for everybody and the people who control the bulk of them still want to treat you as a dumb cog in a machine and we need to cut through all the layers of bullshit they are throwing at us.

arvinsim• 8 years ago

I would be very skeptical of anyone who claims that we need regulation on the internet - because so far all of the pushers are shoveling more bullshit.

I agree. Two wrongs won't make it right.

fooker• 8 years ago

One man's truth is another's opinion.

cat199• 8 years ago

2018 is the year that we learned that complex social problems can not be solved by technology.

speak for yourself. not a new realization for at least some.

r00fus2• 8 years ago

...so I think the era of the unregulated internet is sadly coming to a close. We really have nobody to blame but ourselves.

You had me until there. Who financed the utopian bullshit? We need to regress on this until we can find the culprit and watchlist those (types of) sources of funding.

As founders you can refuse (or be highly critical of) funding by e.g. Saudi Arabia or Russian billionaires. As an early engineer, you can choose not to work for shady outfits.

It all comes down to following the money.

cageface8• 8 years ago

By "ourselves" I mean the tech community as a whole, both engineers and entrepreneurs. The people who financed these problematic platforms bear a lot of the responsibility, of course. But I think we engineers must also accept some of the blame. Many of the best and brightest of my generation devoted their talents to building these things and without those efforts these platforms wouldn't exist.

You can always say that if you don't build it then someone else will but in my opinion that's a cop-out. You can't simultaneously claim that engineering talent is valuable and technology is powerful and that we have no responsibility for the things we build.

cc439• 8 years ago

Who financed the utopian bullshit?

That's not a question you can answer on the mainstream open internet these days.

afarrell2• 8 years ago

2018 is the year that we learned that complex social problems can not be solved by technology.

I’ve been hearing this notion, asserted with simplicity and exhaspiration, for the past 10 years. I don’t agree. “Technical solutions to social problems”, certainly do exist. Sewer systems that keep people from contracting cholera. Cold chain logistics systems that bring nutritious foods into the hearts of cities. Prosthetic limbs and wheelchairs that give people mobility. Locks which let people keep strangers from attacking them in their homes. Sms networks that let farmers understand the markets for their crops. Do these solutions have problems? Yes. We live in a world of tradeoffs and no matter how terrible the disease, we must balance benefits and harms for every treatment.

Failures reveal failure modes and a vocation kf building things in an increasingly complex world calls us to learn more broadly about the possible impact of our work and the history of systems made of humans. If we are to call engineering a profession, we can’t abandon our calling to solve the complex social ills of our societies.

cageface8• 8 years ago

Maybe it's more accurate to say that complex social problems can't be solved by technology alone. There's been a rarely questioned assumption that a bunch of hackers in a room together can single-handedly disrupt and reshape society in constructive ways. I think we're seeing now that this is a naive and even dangerous point of view.

To elaborate on your examples, things like sewers and wheelchairs benefit us but they depend on a social and legal framework to do so and require coordination, planning and consensus to be useful.

arithma• 8 years ago

Bitcoin seems to be getting real hurt from the lack of hype and bans from big adtech companies (along with all the cryptocurrency stuff as well.)

https://trends.google.com/trends/explore?q=bitcoin&geo=US

As Bitcoin Sinks, Industry Startups Are Forced to Cut Back

Related Stories