Intuitively, HN may be special. We're probably the most tech-savvy community of our size on the Internet; I would expect that HN would discuss happenings in the world of cryptocurrencies before, for instance, the NY Times.
I would also expect that the demand that drives market bubbles comes from a larger, less-technical audience. Therefore, I would expect that news hitting HN would be one of the first indications that a "hype cycle" is starting, which will likely result in a price increase due to speculation by the general public.
If NYT is the "mainstream" general media, then HN is the "mainstream" tech media.
Just as some stuff reaches the NYT late, most tech stuff tends to reach HN quite late, too. A perfect example of that is the "hype" for cryptocurrencies. The hype cycle is not starting when it reaches HN, but it's close to its peak at that point.
HN started being interested in Ethereum and Bitcoin again less than two months ago. That's pretty much when both of those reached their peak prices in this cycle. So when Ethereum, or Bitcoin, or some other hot cryptocurrency reaches HN in a year or two, know that then it's not the time to buy it, but to sell it (obviously if you already knew about it beforehand, which you wouldn't if you only got your crytocurrency news from HN, as mentioned above).
Considering Floyd Mayweather just announced he's going to make a "shitload of money" thanks to an upcoming ICO in August, I think we're definitely at, or very near, peak hype for crypto.
We are past bubble stage with Bitcoin IMO. It has failed to become much other than a bullshit investment vehicle. People only worried about how high it can go, instead of actually using it daily.
I use it to save 20% on Amazon orders(1). I bought my coins in the $200-400 range, so am getting at 20% discount orn top of my 1,000% discount of the price of coins purchased to today's price (minus ~13% capital gains tax of course). Your opinion may be valid for you but I am literally feeding my family everyday with Bitcoin.
Obligatory: "Dollars are still used far more often for buying drugs than Bitcoin"
That said, evasion of governmental restrictions is and always has been a core use case for Bitcoin. While that's not my primary concern I don't see that as a negative.
I see no evidence to support the statement "Bitcoin is mainly used in drug trading these days."
I do see some mild counter-evidence. There were two very large dark-net markets that were shut down recently, and the price of Bitcoin didn't seem to respond.
That's probably because most people see drug markets as a completely replaceable service. Silk Road down? Use AlphaBay. AlphaBay down? Use something else. It's so profitable to run these markets that the odds of someone developing a newer, better version are guaranteed.
> evasion of governmental restrictions ... core use case for Bitcoin
I think you're absolutely right, with the caveat that...
Yes, just because people are coming to Bitcoin with this in mind, does not mean that ultimately Bitcoin is successful at that use case.
Graphs like this coin flow graph[1] and the story[2] that goes with it, make claims that Bitcoin users can more successfully evade government restrictions, seem particularly dubious.
Coinbase, a licensed Money Service business, follows Know Your Customer and grows increasingly interested in their customers. I recently had to answer a follow-up survey about how I use Bitcoin and where my income is coming from, in order to withdraw less than $1000.
It would have been pretty easy to lie on this survey (and the questions were particularly non-invasive) but there's not really any doubt in my mind that Bitcoin is a platform where the users can be tracked.
We're running out of examples of major Bitcoin heists that went unsolved.
Bitcoin is absolutely more trackable than cash, and in a lot of cases (although maybe not so much for "tracking users" who are associated with governments, that already likely do have access to databases which the rest of us don't... but for the unprivileged anonymous internet users who are interested in tracking) Bitcoin is significantly more transparent and even more trackable than the banking system.
> "Obligatory: "Dollars are still used far more often for buying drugs than Bitcoin""
Sure, but let's compare apples to apples and compare the percentage of USD being used daily for buying illegal drugs (and other illegal) products with the percentage of Bitcoin being used daily for the same purpose.
This might be your perception, but it certainly isn't reality. If that were the case the amount of transactions and acceptance of bitcoin and other cryptocurrencies wouldn't be continuously trending upwards, which it is. There is a tremendous amount of adoption that's happened over the last couple of years. All you have to do it look at real data.
I can't believe people still think this about bitcoin here. I use bitcoin more than a credit card. Overstock, Steam, lots of VPS and VPN services, as well as many other online stores take bitcoin. There are billboards in non-tech cities advertising bitcoin ATMs. If it was all illegal transactions, why would the number of transactions go up so sharply when the prices rises and there is media hype? All the main stream exposure immediately translates to even more people buying drugs?
There is no evidence of these kinds of biases and lots of evidence to the contrary. Coinbase said that they added a million new customers on this last price rise and is now valued at well over a billion dollars. They shutdown people's accounts when they trace their transactions to dark net market activity. And yet people still keep going on about bitcoin only being adopted by criminals.
Are you really going to tell me that the thousands of bitcoin ATMs around the world are all being used for people getting on the TOR network, using encrypted messaging, and buying drugs from darknet markets over TOR hidden services?
I would argue yes. No one legitimately uses Bitcoin as a form of currency. The two types of people buying it are (1) those currently using it as a volatile investment vehicle and (2) those currently using it as a means of illicit transactions.
Any other play is a losing one as your risk of huge devaluations in trying to use Bitcoin like cash make it incompatible to the average person. The usage of Bitcoin as it was originally envisioned is far from the truth.
You can't be serious... you are literally responding to someone who told you they use bitcoin more than credit card, and yet you still maintain that "No one legitimately uses Bitcoin as a form of currency."
You think all of us who use bitcoin to buy things are just lying?
I apologize. Perhaps I should have been less colloquial with my writing. My meaning was meant to generally imply a lack of usage by the main stream population. Niche users who are generally early believers / proponents of a decentralized currency like Bitcoin, which I should point out I very much am and hold definitive stake within, don't count.
Until Bitcoin as a whole stabilizes, the original vision that Bitcoin and other cryptocurrencies that soon arised were meant to advocate for, will never be realized.
> Overstock, Steam, lots of VPS and VPN services, as well as many other online stores take bitcoin.
Under current US tax laws, every time you purchase something with BTC, you need to calculate the cost basis in that individual lot of BTC and then determine if capital gains taxes are owed, and if so, then remember to include them on your tax return for the year. Do you have the discipline to do this? I don't. Hopefully the laws change to become more pragmatic in the future, but until then, it's pretty much DOA if you want to remain totally tax compliant.
How so? It keeps track of them in the same place as the private keys - a local encrypted wallet file. Have you ever used bitcoin or any cryptocurency? Are you sure you actually understand them?
I guess that might be the majority of the situation, but for me personally it's been a lifesaver. Capital controls don't matter, I don't need a bank account, I pay whatever I can with bitcoin and if not possible I use my debit card which I load with bitcoins.
That's been my daily life for a couple years now and it's been liberating. Certainly there's a challenge so you don't loss net-worth with volatility when it drops, but I see it as a cost of freedom.
It sounds like you're describing normal banking + massive volatility. How is that a lifesaver or particularly liberating? And what do you actually buy with Bitcoin?
Also curious: is there a debit card that you can back with Bitcoins?
I can spend any amount I want without being restricting by anyone, that's pretty basic, but in some countries you just can't do that.
I personally have found ways and can manage Bitcoin's volatility just fine (relatively predictable income/expenses + fiat reserve + futures) (of course you could just sell for a fiat currency/USD), so I really don't have a single issue with Bitcoin, apart from not being accepted yet to more places.
I'm sorry what? Why would I trust my live saving account (which is already pretty volatile), into something much much more volatile? And I can spend whatever money I have on my bank account without anyone limiting or controlling it, and also without any hassles. I don't see the point for real.
The only downside I can see for me is that I can't make 'quick' profit by playing with the trend/market.
I don't see how actively having to manage the volatility of your currency is "liberating" or a "lifesaver". I'm also not sure who or what would normally be restricting your spending, I live in the US and have only tripped up on fraud alerts (where my bank gives me a call before someone cashes my check, which I appreciate). Again, what are you buying regularly with Bitcoin? And what percentage of those massive expenditures are purely Bitcoin anyway?
I also looked into these Bitcoin-backed debit cards and they have all the same issues as normal debit cards but worse:
- 1% fee to load the card (this is nuts)
- ATM fees like usual
- Other misc fees, monthly or otherwise
Every time someone talks about how great using Bitcoin is it sound like they just liked the idea of it and very deliberately modeled parts of their lives around it, rather than it offering any actual benefit.
Managing volatility is interesting.
Some eliminate it by going fiat and keeping funds on exchanges. Even if it's the easiest way of handling it, I go a different way because I also see it as an long-term investment, so I'm happy to hold real bitcoins on my own wallet, plus I like to optimize my positions in general.
Like I said, restrictions apply to countries that have Capital controls, for starters you are only allowed to withdraw $300 per week and of course no purchases outside the country. Obviously I'm not in the US and I'm merely describing my case.
My card's fee is a flat 0.5% on any amount loaded and ~$2 per withdrawal from an ATM, imo it's not that much plus the exchange rates are better than if I tried myself on my exchange. Also, I skip the fees from international remittances.
I don't know the reality of daily life in the US, but even there it's not the same for everyone, I've read the stories of the unbanked. Just because it doesn't seem useful to your case, it doesn't prevent it from being for others.
> It has failed to become much other than a bullshit investment vehicle.
I disagree, and think there is some observation bias going on here. I've been using a Bitcoin-linked debit card for a couple of years now, and take payment in Bitcoin for odd jobs I do for people online. I also always list that I accept Bitcoin when I post things for sale on Craigslist and other "classifieds" sites, and probably 10% of people use it for payment now. I've had several people buy things from me on Craigslist from across the country and the world that I wouldn't have accepted otherwise due to payments fraud. I'm happy to ship a $400 fountain pen to a buyer in Lagos (which I've done!) if they pay in Bitcoin, but I'd never consider doing so if they used any other payment method for fear of fraud.
I don't see anyone posting about everyday uses, but they do seem to be happening.
> People only worried about how high it can go
The only time I really think about the current price of Bitcoin is when it's in a period of volatility. Otherwise it seems to be consistently slightly deflationary, which is exactly what I expect it will be long-term.
Many finance publications use USD regardless of their country of origin. Financial Times, a UK-based company, regularly lists valuations with USD equivalent. Does that invalidate the GBP or EUR as real currencies?
The market cap of USD is over 1.5 trillion. The market cap of bitcoin is $45b USD. It's more than sensical to display equivalent conversions.
You shouldn't need to be told that, as a HackerNews reader, you aren't representative of the population. Consider how many people still don't even understand how to use credit cards properly, and then ask yourself how many of them will be willing to jump through the mental hoops necessary to understand Bitcoin at even the most basic levels when alternatives like Apple Pay, Paypal, Google Wallet, and Venmo make exchanging money simple and easy. Bitcoin solves a problem that 99% of people don't have.
Remember that you have been using it for the last couple years only, which were a bull market for bitcoin.
If you hold during the bear market, you might have had a different opinion about the slightly deflationary nature of the beast. x10 return in a couple years is not slightly deflationary by any measure.
I've been involved with Bitcoin, and holding it, since mid-2011. I'm quite familiar with both sides of the boom/bust cycle. It's only been in the past couple of years where Bitcoin-backed debit cards were available.
> x10 return in a couple years is not slightly deflationary by any measure.
At no point was I holding significant value for daily transactions over a long period - I mostly use it like I would use PayPal, to take payments online and easily spend the proceeds.
I raise this every once in a while on BTC discussions and nobody's ever been able to tell me anything about the investment fundamentals of BTC. Why should it even be worth anything, and why should it go up? Owning (some part of) a BTC just means that you can use the blockchain to prove that a while ago, someone raised the total entropy of the universe by solving a relatively unimportant crypto problem. I fail to see why that (solving an insignificant crypto instance) should be worth money in the first place.
BTC is literally just some bits in a few computers out there. It is not backed by the full faith and credit of a stable entity like the US government, and, because the blockchain is literally a distributed, public transaction ledger, it's more trackable than cash (as another commenter noted. I can't reasonably expect to make significant amounts of transactions with them in day to day life (Bay Area coffee shops that accept BTC notwithstanding). I can't explain it to my mom, which tells me I don't understand it, and nobody else can explain it to me, which tells me they don't understand it.
Even assuming you can answer why they should be worth something, why should these bits be worth more than the output of /dev/random, or some bits that make up a MP3 file?
Why is anything worth anything? Gold and silver have value because they're more rare than other metals, there's only so much of it that exists, and it takes time, money, and work to go out and mine them. The reason Bitcoins are worth something (unlike /dev/random output) is because there is a fixed output and total amount that will exist. It takes time, work, and money to mine them.
All information trends towards fast, cheap, and global. We saw this first with mp3s. You used to have to pay $20 for a CD with 10 songs that you could only play in your own stereos. Then Napster came along. Music is just information. It was made digital and became fast to access, cheap to acquire, and you could bring it anywhere.
Money is just information, like music. There is no reason it needs to be slow, expensive, or restricted - which all other money currently is.
Bitcoin is better at organizing the information of money than all other existing methods. This (+ scarcity) is what enables it to be valuable.
Specific bits in the bitcoin blockchain are not valuable, as you're stating. There are no individual bits in memory or on disk that have value. They're simply clones of the same distributed information, which is that you have some slice of the pie. It's your ownership of the slice of the pie that is valuable, because it is scarce, and because it is value-information that is fast, cheap, and global.
What does "backed by the full faith and credit of a stable entity" even mean? Why does it matter? Does it have anything to do with the organization of information? It seems like it doesn't.
> What does "backed by the full faith and credit of a stable entity" even mean? Why does it matter?
I understand it to meant that the country in question will be a currency-recipient of last resort: the country will always accept taxes paid in this currency, and will use this currency to charge for government services and pay its employees. This ensures that there's always a market for the currency -- something that you don't have a guarantee of otherwise, unless the mode of payment has non-financial uses (like rice, cloth, nails, or cows).
> why should these bits be worth more than the output of /dev/random, or some bits that make up a MP3 file?
Well why don't you generate some bits from /dev/random and see how much people will offer you for them?
The reason Bitcoin is worth more than arbitrary bits is because it can't be faked (you can't just create more bits for free and spend them again) and because everybody else agrees that they're worth something. The same properties that any system of money requires.
EDIT: And what do you think it means to be "backed by full faith and credit"? It sounds grandiose but is meaningless.
The fact that USD is "backed by the full faith and credit of the US government" is not the reason for its value. There is nothing the US government can do if everyone decides GBP or milk is worth 10,000 more relative to 1 USD. Things like USD and Bitcoin both have no intrinsic value and their market value comes from the collective fictions of society.
The collective belief in the value of intrinsically useless mediums with certain properties is one of the major technological breakthroughs of humanity. Currency is the bubble that seemingly never pops. Bitcoin and its future incarnations aim to improve it.
Proof of work has nothing to do with giving Bitcoin value. PoW is the cost the distributed network pays for trustless consensus, nothing more.
To understand your fundamental misconceptions, I would start by reading the seemingly unrelated but actually very relevant book Sapiens by Noah Yuval Harari.
Finally, Monero solves the privacy problem of Bitcoin if that's the kind of transaction you want to make, but this is another topic.
Bitcoin's intrinsic value is the right/ability to write a new row into a global immutable append-only decentralised censorship-proof spreadsheet table. It is valuable not only in economic context to create a border-less cash-like virtual commodity. It could be used for proof of publication or proof of existence and in many other ways (smart contracts).
In other words, owning a non-dust amount of Satoshis gives you some useful property. Anything scarce and useful will have value and market will price it. Anything with price and good properties to become means of exchange, unit of account or store of value can under some circumstances become some form of money.
People like you have been saying that since bitcoin was like 4 dollars. It is almost 3k. At which point will you be putting some a1 sauce on that foot?
I'm waiting for scaling to be fixed. Only then will daily use cases become relevant again. It's hard to sell a merchant on a payment method that can take hours to confirm.
I wouldn't expect bitcoin to be used as a currency for transactions. Bitcoin is deflationary, and is the "best" currency (other currencies lose value due to inflation). You don't pay for things with your "best" currency--you hoard it.
This is just when there's tech news on Bitcoin. If you want to get ready for bubbles just keep an eye on google trends "how to buy bitcoin". Worked for me, admittedly only once though.
When I overhear random people on the train, my coworkers during coffee break etc. discuss bitcoin, I know that the bubble is about to burst. This predictor has never failed.
Funny. Beside looking at Google Trends, this trigger was the same for me,
The 16 year old brother of a friend of mine suddenly wanted to buy Ethereum but didn't know what it was. A month before that he wanted to get rich with binary option websites.
I sold him the amount he wanted (30 eur worth at around 380USD/ETH) and then sold all of my ETH.
By what possible metric is BTC a trainwreck? This thread sounds like it's from 2012. I understood the skepticism then, but how do people still deny the utility of the blockchain?
the post could have had a lot more value if it compared against other news outlets to see if HN has its own independent trends or it just plain and simple follows media trends.
Did you see something in the article that implied causality? You can make predictions without a direct causal link, though having one typically helps you make more robust predictions.
Looking at the actual charts presented in the article, I can't help but draw a very different conclusion: the spikes in Bitcoin-related HN posts do not precede BTC price increases, but instead they more or less mirror the price swings (as do most other relevant news sources).
It's deceiving, especially at the scales used, because it's easy to compare the peak of a price swing with the uptick in news stories (implying some kind of predictive power) when in reality, the upticks in stories are fairly proportional to the price changes leading up to the price peaks - it's just not as noticeable due to the difference in scales.
As with other markets, a trading strategy based on public news is - for any normal trader - a losing strategy. The people who are able to make gains based on news in other markets often have to pay a premium to colocate servers at or near the exchange's servers, and a trade delayed by more than a few milliseconds will have lost any potential upside in the market's reaction to the news. You can bet on the same thing happening with Bitcoin (and the decentralized nature of Bitcoin doesn't change the requirement to be located near the exchanges' servers since these trades all happen outside the blockchain - i.e., on traditional servers).
I read somewhere that bitcoin was deemed a pyramid scheme. Not sure about that, but doesn't it get more and more expensive to do transactions as more and more people use it? Is there a limit to unique sigs people could use?
This 'researcher' has no control group. There's more interest in a financial asset when the price of that asset (or asset class) is increasing sharply. That's all there is to it.
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[ 3.2 ms ] story [ 139 ms ] threadI would also expect that the demand that drives market bubbles comes from a larger, less-technical audience. Therefore, I would expect that news hitting HN would be one of the first indications that a "hype cycle" is starting, which will likely result in a price increase due to speculation by the general public.
Just as some stuff reaches the NYT late, most tech stuff tends to reach HN quite late, too. A perfect example of that is the "hype" for cryptocurrencies. The hype cycle is not starting when it reaches HN, but it's close to its peak at that point.
HN started being interested in Ethereum and Bitcoin again less than two months ago. That's pretty much when both of those reached their peak prices in this cycle. So when Ethereum, or Bitcoin, or some other hot cryptocurrency reaches HN in a year or two, know that then it's not the time to buy it, but to sell it (obviously if you already knew about it beforehand, which you wouldn't if you only got your crytocurrency news from HN, as mentioned above).
1. purse.io
That said, evasion of governmental restrictions is and always has been a core use case for Bitcoin. While that's not my primary concern I don't see that as a negative.
I do see some mild counter-evidence. There were two very large dark-net markets that were shut down recently, and the price of Bitcoin didn't seem to respond.
I think you're absolutely right, with the caveat that...
Yes, just because people are coming to Bitcoin with this in mind, does not mean that ultimately Bitcoin is successful at that use case.
Graphs like this coin flow graph[1] and the story[2] that goes with it, make claims that Bitcoin users can more successfully evade government restrictions, seem particularly dubious.
Coinbase, a licensed Money Service business, follows Know Your Customer and grows increasingly interested in their customers. I recently had to answer a follow-up survey about how I use Bitcoin and where my income is coming from, in order to withdraw less than $1000.
It would have been pretty easy to lie on this survey (and the questions were particularly non-invasive) but there's not really any doubt in my mind that Bitcoin is a platform where the users can be tracked.
We're running out of examples of major Bitcoin heists that went unsolved.
Bitcoin is absolutely more trackable than cash, and in a lot of cases (although maybe not so much for "tracking users" who are associated with governments, that already likely do have access to databases which the rest of us don't... but for the unprivileged anonymous internet users who are interested in tracking) Bitcoin is significantly more transparent and even more trackable than the banking system.
[1]: http://wizsec.jp/images/theft_flow.svg
[2]: http://blog.wizsec.jp/2017/07/breaking-open-mtgox-1.html
Sure, but let's compare apples to apples and compare the percentage of USD being used daily for buying illegal drugs (and other illegal) products with the percentage of Bitcoin being used daily for the same purpose.
Sure, it's being adopted by criminals. Great. Not many startups opportunities there, unless you want to risk a lifetime in jail.
There is no evidence of these kinds of biases and lots of evidence to the contrary. Coinbase said that they added a million new customers on this last price rise and is now valued at well over a billion dollars. They shutdown people's accounts when they trace their transactions to dark net market activity. And yet people still keep going on about bitcoin only being adopted by criminals.
Are you really going to tell me that the thousands of bitcoin ATMs around the world are all being used for people getting on the TOR network, using encrypted messaging, and buying drugs from darknet markets over TOR hidden services?
https://coinatmradar.com/
Any other play is a losing one as your risk of huge devaluations in trying to use Bitcoin like cash make it incompatible to the average person. The usage of Bitcoin as it was originally envisioned is far from the truth.
You think all of us who use bitcoin to buy things are just lying?
Until Bitcoin as a whole stabilizes, the original vision that Bitcoin and other cryptocurrencies that soon arised were meant to advocate for, will never be realized.
Under current US tax laws, every time you purchase something with BTC, you need to calculate the cost basis in that individual lot of BTC and then determine if capital gains taxes are owed, and if so, then remember to include them on your tax return for the year. Do you have the discipline to do this? I don't. Hopefully the laws change to become more pragmatic in the future, but until then, it's pretty much DOA if you want to remain totally tax compliant.
That's been my daily life for a couple years now and it's been liberating. Certainly there's a challenge so you don't loss net-worth with volatility when it drops, but I see it as a cost of freedom.
Also curious: is there a debit card that you can back with Bitcoins?
I personally have found ways and can manage Bitcoin's volatility just fine (relatively predictable income/expenses + fiat reserve + futures) (of course you could just sell for a fiat currency/USD), so I really don't have a single issue with Bitcoin, apart from not being accepted yet to more places.
I also looked into these Bitcoin-backed debit cards and they have all the same issues as normal debit cards but worse:
- 1% fee to load the card (this is nuts) - ATM fees like usual - Other misc fees, monthly or otherwise
Every time someone talks about how great using Bitcoin is it sound like they just liked the idea of it and very deliberately modeled parts of their lives around it, rather than it offering any actual benefit.
Like I said, restrictions apply to countries that have Capital controls, for starters you are only allowed to withdraw $300 per week and of course no purchases outside the country. Obviously I'm not in the US and I'm merely describing my case.
My card's fee is a flat 0.5% on any amount loaded and ~$2 per withdrawal from an ATM, imo it's not that much plus the exchange rates are better than if I tried myself on my exchange. Also, I skip the fees from international remittances.
I don't know the reality of daily life in the US, but even there it's not the same for everyone, I've read the stories of the unbanked. Just because it doesn't seem useful to your case, it doesn't prevent it from being for others.
I disagree, and think there is some observation bias going on here. I've been using a Bitcoin-linked debit card for a couple of years now, and take payment in Bitcoin for odd jobs I do for people online. I also always list that I accept Bitcoin when I post things for sale on Craigslist and other "classifieds" sites, and probably 10% of people use it for payment now. I've had several people buy things from me on Craigslist from across the country and the world that I wouldn't have accepted otherwise due to payments fraud. I'm happy to ship a $400 fountain pen to a buyer in Lagos (which I've done!) if they pay in Bitcoin, but I'd never consider doing so if they used any other payment method for fear of fraud.
I don't see anyone posting about everyday uses, but they do seem to be happening.
> People only worried about how high it can go
The only time I really think about the current price of Bitcoin is when it's in a period of volatility. Otherwise it seems to be consistently slightly deflationary, which is exactly what I expect it will be long-term.
I'm assuming you're placing your ad in USD and converting to BTC for the transaction, instead of listing a BTC price.
There are however some people that price their "services" in BTC, most notably ransomware criminals. I think also bets are quite often valued in BTC.
Please, tell us about the debit card. Who is the issuer?
Shift: https://www.shiftpayments.com/card
If you hold during the bear market, you might have had a different opinion about the slightly deflationary nature of the beast. x10 return in a couple years is not slightly deflationary by any measure.
> x10 return in a couple years is not slightly deflationary by any measure.
At no point was I holding significant value for daily transactions over a long period - I mostly use it like I would use PayPal, to take payments online and easily spend the proceeds.
I raise this every once in a while on BTC discussions and nobody's ever been able to tell me anything about the investment fundamentals of BTC. Why should it even be worth anything, and why should it go up? Owning (some part of) a BTC just means that you can use the blockchain to prove that a while ago, someone raised the total entropy of the universe by solving a relatively unimportant crypto problem. I fail to see why that (solving an insignificant crypto instance) should be worth money in the first place.
BTC is literally just some bits in a few computers out there. It is not backed by the full faith and credit of a stable entity like the US government, and, because the blockchain is literally a distributed, public transaction ledger, it's more trackable than cash (as another commenter noted. I can't reasonably expect to make significant amounts of transactions with them in day to day life (Bay Area coffee shops that accept BTC notwithstanding). I can't explain it to my mom, which tells me I don't understand it, and nobody else can explain it to me, which tells me they don't understand it.
Even assuming you can answer why they should be worth something, why should these bits be worth more than the output of /dev/random, or some bits that make up a MP3 file?
Money is just information, like music. There is no reason it needs to be slow, expensive, or restricted - which all other money currently is.
Bitcoin is better at organizing the information of money than all other existing methods. This (+ scarcity) is what enables it to be valuable.
Specific bits in the bitcoin blockchain are not valuable, as you're stating. There are no individual bits in memory or on disk that have value. They're simply clones of the same distributed information, which is that you have some slice of the pie. It's your ownership of the slice of the pie that is valuable, because it is scarce, and because it is value-information that is fast, cheap, and global.
What does "backed by the full faith and credit of a stable entity" even mean? Why does it matter? Does it have anything to do with the organization of information? It seems like it doesn't.
I understand it to meant that the country in question will be a currency-recipient of last resort: the country will always accept taxes paid in this currency, and will use this currency to charge for government services and pay its employees. This ensures that there's always a market for the currency -- something that you don't have a guarantee of otherwise, unless the mode of payment has non-financial uses (like rice, cloth, nails, or cows).
"Backed by faith" doesn't exactly inspire my confidence, and the US government is unhinged.
Well why don't you generate some bits from /dev/random and see how much people will offer you for them?
The reason Bitcoin is worth more than arbitrary bits is because it can't be faked (you can't just create more bits for free and spend them again) and because everybody else agrees that they're worth something. The same properties that any system of money requires.
EDIT: And what do you think it means to be "backed by full faith and credit"? It sounds grandiose but is meaningless.
The collective belief in the value of intrinsically useless mediums with certain properties is one of the major technological breakthroughs of humanity. Currency is the bubble that seemingly never pops. Bitcoin and its future incarnations aim to improve it.
Proof of work has nothing to do with giving Bitcoin value. PoW is the cost the distributed network pays for trustless consensus, nothing more.
To understand your fundamental misconceptions, I would start by reading the seemingly unrelated but actually very relevant book Sapiens by Noah Yuval Harari.
Finally, Monero solves the privacy problem of Bitcoin if that's the kind of transaction you want to make, but this is another topic.
In other words, owning a non-dust amount of Satoshis gives you some useful property. Anything scarce and useful will have value and market will price it. Anything with price and good properties to become means of exchange, unit of account or store of value can under some circumstances become some form of money.
Output of /dev/random is not scarce.
https://en.wikipedia.org/wiki/Gresham%27s_law
These things are not mutually exclusive. The fork will have an impact on price.
I used to work as an equities trader. One of the first things they told me was "if you know something, the market already knows it".
http://archive.fortune.com/magazines/fortune/fortune_archive...
The 16 year old brother of a friend of mine suddenly wanted to buy Ethereum but didn't know what it was. A month before that he wanted to get rich with binary option websites.
I sold him the amount he wanted (30 eur worth at around 380USD/ETH) and then sold all of my ETH.
The $2765 train wreck.
As it continues to plummet ever further upwards onlookers can only watch and exclaim.
It's deceiving, especially at the scales used, because it's easy to compare the peak of a price swing with the uptick in news stories (implying some kind of predictive power) when in reality, the upticks in stories are fairly proportional to the price changes leading up to the price peaks - it's just not as noticeable due to the difference in scales.
As with other markets, a trading strategy based on public news is - for any normal trader - a losing strategy. The people who are able to make gains based on news in other markets often have to pay a premium to colocate servers at or near the exchange's servers, and a trade delayed by more than a few milliseconds will have lost any potential upside in the market's reaction to the news. You can bet on the same thing happening with Bitcoin (and the decentralized nature of Bitcoin doesn't change the requirement to be located near the exchanges' servers since these trades all happen outside the blockchain - i.e., on traditional servers).
It doesn't look like it's in bubble territory.
A typo in the first sentence means to me that quality control on form, and possibly content, was neglected when writing this post.