Bitcoins Death By 21 Million Cuts ... 5 Or 6 Times - Part 1

in #bitcoin7 years ago (edited)

How Did We End Up With Bitcoin Anyway? The financial crisis of 08

bills-2557264_1920.jpg
source

When the Federal Reserve began printing trillions of dollars in 2008 through to 2014, it was an extraordinary measure taken to prevent global economic collapse as there was a credit liquidity issue - which means there wasn't enough money inside the system to service debt, which had a snowball effect across financial institutions

Bank A, owed Bank B, who owed Bank C, who owed, Bank A - and somewhere in this long chain of debt to debt to debt, someone couldn't pay. This is how the solvency issue started and ultimately led to the collapse of several major financial institutions in the United States. It exposed a network of unserviceable debt, questionable practices and downright abuse of the worlds most renowned capitalist economy.

It was most certainly due to a lack of oversight and regulation. It was the result of greed, shills, and plain stupidity. One could argue the Federal Reserve abused the fractional reserve system, our current monetary system during the 2008 crisis (which actually began in 2007). However, had these extraordinary measures not been taken, a depression the likes of the 1920s through the 30's would have taken hold of the global economy. That means wheelbarrows of cash to buy bread, wealth disparity would have hit a new extreme.

If we break it down further, total annual GDP in the United States is approximately $18 trillion dollars. In 2014, when asset purchases had stopped, the federal reserve had accumulated a mere $4.5 trillion over 6 years. Small potatoes if we view things in percentage terms. The monetary cycle continues and the federal reserve has begun unwinding these assets as they increase interest rates to match inflation. They are doing so in a slow and controlled manner so as not to shock the financial system. It should be recognized that the Fed could even turn a profit as they liquidate the original $4.5 trillion in asset purchases. This money could be used for several things, including kept in reserve, servicing the national debt or economically stimulative initiatives.

As a function of GDP

4.5 trillion over 6 years = 750 billion.
4.5trill / 18trill / 6 years = 4% annually.

Is it possible the FED only increased the total money supply by 4% annually to stave off a financial calamity? Good on them.

Lets talk about bitcoin

Blockchain and Satoshi's Bitcoin were actually conceptualized in the 80s and 90s, however, the technology simply didn't exist to host a distributed ledger - and perhaps society hadn't reached the point of total disenfranchisement with the current monetary system. Around the same time as the 08 financial crisis, the world had gotten over the dot-com boom and bust, suddenly the technology existed to make blockchain and bitcoin work.

In the years following the financial crisis, a movement known as, "The 99%", paralleled the Federal Reserves Quantitative easing program. Suddenly there was a demand for an alternative to the current system. Satoshi made bitcoin, distributed ledger technology was implemented and when bitcoin started, it was viewed as a joke, used for online gambling and generally not wildly known or understood. It just percolated in chat rooms and forums on the internet.

Suddenly, overnight millionaires were born as the adoption spread like a wildfire. The craze began and here we are today with a cryptocurrency market inspired by Satoshi's bitcoin with over 1000 tokens to choose from. Interestingly, the original allure of Bitcoin was limited supply and suddenly supply is unlimited in the broadest sense. A guy in his garage, a girl in her basement, or some 'dude' in some far off place can make a coin, make a blockchain - or at least they could run token sales for it (Ponzi coins are a discussion for another day).

Blockchain technology has grown rapidly and has been adopted into the real world, by the likes of mega-corporations, specifically IBM and some major financial institutions with Bank of America now having over 30 patents on the technology. It is important to recognize, first came blockchain, then came bitcoin. Going forward one should expect this reality to become more and more present. Cryptocurrency fundamentals will depend heavily on the strength of their networks and the underlying technology they are to power.

Bitcoin, for example, is purely transactional, Ethereum introduced the smart contract - the evolution of technology is natural and should be embraced which presents an interesting issue as technology tends to become obsolete. In the internet age, this age of science, we don't 'Macgyver" we build new, we make better, continuously improve and the rate this occurs is seemingly exponential.

"Fork it!" They say...

Blockchain forks are opportunities to update the codebase to accommodate the evolution of a distributed ledger and/or coin -- or they are abused and coin after coin gets made.

This is one of a few fundamental issues facing cryptocurrency markets. If total supply of bitcoin was only ever intended to be 21 million, but with a hard fork a bitcoin derivative is created, total supply increases in a roundabout manner and effectively increasing by 100% each time - let's ignore market cap for now as bitcoins appeared overnight and could just as easily disappear overnight.

BTC = 21 million
BCH = 21million
BTG = 21 million
etc etc.

So the real questions ... ?



How are hard forks better than the fractional reserve system?
Is supply truly limited?
What constitutes decentralized? Is true decentralization even possible?
Is Bitcoin decentralized if the top miners get to decide what happens and not the community of holders?
What happens when the regulators truly take action?
Is it possible that the true purpose and value was lost in the capitalist growth of the crypto market?
How do we determine intrinsic value? Silver has intrinsic value... does bitcoin?


board-2853022_1280.jpg
source

Crypto community members need to start asking these question. Greed is blinding and that is why we now have over 1000 coins to choose from. Some have great technology, some are simply ponzi schemes. Others might have a fantastic use case or technology, does that mean they should be a cryptocurrency?

Let us know what you think in the comments, and let's explore these questions in Part 2.


disclaimer.png

Authored by: @satchmo

discord.gif

Sort:  

The questions you mentioned here may offend a few. But to me, you are absolutely spot on. I really didn't understand why there are hard forks occurring at all. The last thing we want is unlimited "printing" of Bitcoins.

Great post @adsactly. Kudos

Hei! Thank you for the comment you just gave. It is interesting to read others opinions and comment and interact.

We want to say thank you from UseTheBitcoin. We are a team that works to provide good information about cryptocurrencies and its environment.

You also know that a diversified news feed can be a good ally of investors. Even when you do not invest, being informed is a good way of starting the day, or spending the Saturday!

We invite you to read what we write about, and if you like it, just support us as you believe would be the best way: https://steemit.com/segwit2x/@usethebitcoin/segwit2x-what-is-it-and-what-should-you-know-about-it

We say hanks again for commenting and sharing your experiences. It is great what you do and we hope to see you again in another post or comment. Thank you!

I agree with you a hardfork is no better than the government printing as much as they want.

Really nice overview of the existing fractal system.
The forks in a coin disappointed me somewhat. Without scarcity, it could just be coins, stacking on coins, with just a different kind of unknown face, holding most of the cookies!

Hello! It is really interesting and nice that you comment here. First because you help to build a community. Second because you share your point of view and experience.

We are UseTheBitcoin, a cryptocurrency site that promotes news and analysis.

We believe, that is important to have a diversified news feed and follow different news sources, not only the most important ones.

If you would like, you can support us, or read what we write about: https://steemit.com/segwit2x/@usethebitcoin/segwit2x-what-is-it-and-what-should-you-know-about-it

If you don't want to, just let me say thank you. This is freedom. We decide what to do. And all the decisions we take are because of our own desires.

Thank you in advance, and the best day for you. Keep sharing your ideas and commenting!

Great article @adsactly - Right now people still have faith in the dollar which is why most still don't know what cryptocurrency is as of yet. Crypto enthusiasts have faith in bitcoin which is why they are all in. They are both currencies. Money is gold and silver, and platinum. These coins are physical, require a lot of work to mine, refine, and stamp. Hence currency is not money.

Awesome read, followed you. I don't know how it happened it's first post of yours which I read. In my opinion forks are not good. But community is aware of that and it just keeps adding to their saving so - who cares? I hope BTC will be the one and only for the "digital gold" asset. I can't see it being used as it is know as a form of payment due to costs.

Hei! It is amazing that you support people and articles in this way. It is really amazing and we want to say thanks from UseTheBitcoin.

We believe that the best for making a community grow is to share, comment, and interact with other users. And because of this, we want to say thank you.

It is important to follow a diversified newsfeed, that will allow us to take the best decisions and be informed about every single situation in the cryptocurrency sphere.

Not all the important news are in the same place.

We invite you, to take a look at what we do. Maybe you like it. Maybe not. But dont worry, this is part of the challenge and the game. Try to do something that others will like or not and give us support if they believe it is nice.

https://steemit.com/segwit2x/@usethebitcoin/segwit2x-what-is-it-and-what-should-you-know-about-it

If you wanna take a look at it, you are welcomed.

Even if you will not take a look at it, just let us say Thank you. Thank you for being part of this community, being interested in cryptocurrencies and sharing your experience.

Quote:Is it possible that the true purpose and value was lost in the capitalist growth of the crypto market?
This question continually hurts me. Today we can see how the crypto have become another good with which to speculate, trade, etc. as if the stock market was.
And I personally do not like it.
But having said that and although I do not like the current philosophy in the crypto space every dollar / euro coming out of the corrupt, manipulated and unsustainable financial system for me is a small victory.

Seems like the market will speak for itself, as we are seeing with the current gold fork bullshit which seems stillborn.
There is is room for other coins for sure, but these forks are clearly a forking scam which are exclusionary by thier very nature and not compatible with free market.
For me to collect bitcoin cash or bitcoin gold I have to entrust my bitcoin with a third party is absolute bullshit.
Seems to me the market has spoken, and the self healing growth characterstics of the bitcoin are shinning through.

Bitcoin has the same intrensic value as the US dollar—nothing. The only value in either of them is the faith of those who are willing to trade for it. Ease and safety of trading also add value. They are both interesting speculations.

Comparisons of bitcoin with the USD is kinda missing the point of what bitcoin really is.
Bitcoin is the internet of money; the very first decentralized trans-national currency.
it is quite fascinating to watch the Andreas Antonopoulos talks on bitcoin to gain a deeper perspective of the value of bitcoin and what it means and holds for the future.

Its not a comparison of Bitcoin to USD -- its a comparison of the fractional reserve system to forking coins.

Actually bitcoin does have intrinsic value...it costs money to mine a bitcoin...hence giving it value. It costs nothing to create fiat.

Talk to miners and ask them when it costs to create a bitcoin in their wallet....

Costing money to mine it, doesn't actually give it an intrinsic value, it just is USD or BTC cycled back into the economy via the purchase of computer equipment (jobs) and electricity (jobs). If once electricity is spent on mining coin is coin electricity LOL joke!

In reality tho, electricty is non permanent, so it can't be argued that is the intrinsic value. If we mine steel, that doesnt make its value - the fact that it is used in all infrastructure vs total supply is where value is derived and then market forces are layered in.

BTC intrinsic value is a function of its network only this case.

There are only 3 ways to obtain Bitcoin..Buy Bitcoin with cash, Mine Bitcoin which is now very expensive for electricity and buying mining equipment, and last but not least....someone gives you bitcoin. Hope this helps~! all donations accepted here;18sbJiLrAA5ogJoktQxpe8RJ5LaSDmcqbK
Tibets should be worth a cup of coffee...WeLoveBitcoin~!!!

It's interesting, isn't it? bitcoin was supposed to be capped at 21 million and now with bcash and bgold - they push the overall total cap to over 63 million. if not more.

Still there is only one bitcoin, although Rodger Vers argument that segwit removes digital signatures is one to take in.

Is Bitcoin decentralized if the top miners get to decide what happens and not the community of holders?

That's really important question. if someone or group is controlling the fate, then what's its differences with centralized system?

Hope you have the answer too. Waiting for part 2.
Really effective post to understand the background!

That's such a good article @adsactly that's the big question really, can blockchain be decentralized and achieve mass adoption. I am too new to answer that but I will say to achieve bigger adoption that 5% you need the general public to be using it which means you need stability and as so many people are out for a quick buck can that happen just yet?

Fortunately, the market will decide how many of those other 42 million coins are actually viable. BCH didnt exactly knock BTC off its block and it seems BTG is having even less of an impact. Forks are now getting to the point of crying wolf...nobody pays attention. BTC appears to be the true Bitcoin still with the others languishing.

A fine point to talk about the blockchain currencies are on when evaluating them. This is something that few seem to want to do. Bringing it back to your bitcoin split point, how much development is going on with the BCH network compared to BTC? It isnt even close. Over time, BTC will evolve as developers start to add things common on other blockchains.

Critical knowledge is key

Agree what you said there must be a knowledge source