Right now, I like anything that helps normalize the white-hot hype of cryptocurrencies. There's some real utility in this technology, and we won't get to see it until companies are forced to make sustainable business cases and serve real customers.
However,
> A website set up by the Chinese central bank warned that cryptocurrencies are "increasingly used as a tool in criminal activities such as money laundering, drug trafficking, smuggling, and illegal fundraising".
That sounds a bit like lip service...are they really just protecting investors and citizens, or is it because the assets are much harder to seize? Recently, there has been a large crackdown on foreign real estate purchases[0].
What other incentives does the party have for this policy?
I think all governments hate the crypto part of the currencies. You can't tax what you can't track. You can't manipulate what you don't have.
I personally fall a little to the left of currencies. I think these monetary systems are far right Libertarian's dream seeds. I do realize I am probably wrong but this is how they make me feel.
That's a good point about taxes. I wonder how the tax structures of the future will evolve if cryptocurrencies reach full swing. It could be reasonable to expect elaborate tariff systems that skim off the channels bridging wet and dry worlds[0]. With what we have today, there is already slightly less to tax[1], and with the ideas of today, there could be even less. You can't siphon tax if it's not in the contract code.
Most cryptocurrencies are actually quite trackable. Significantly more trackable than fiat currencies. There are notable exceptions like Monero and currencies specifically meant to protect privacy, but the vast majority are quite public.
I'd say they're only more easily tracked than cash. It doesn't get much easier to track than a bank or credit card account. And of course cash has its own problems (namely, it's difficult or even illegal to get and transport in large quantities while maintaining some anonymity).
At some point, you want to buy something with your money. The minute you do, tax authorities in your country can detect the discrepancy between your stated income and your lifestyle.
The sustainable business case is permissionless nature of Bitcoin. Everything else comes down to it. This talk of blockchain technology being somewhat of a new wonderful invention that's supposed to magically make companies more profitable...? Not so.
The reason why Bitcoin exists is because governments want control over money. Bitcoin gives people freedom. Period. Everything else is noise.
Of course. And for a good reason. People utter this line as if governments wanting control over money was somehow bad.
Money, within all human societies that exist or existed, is pretty much synonymous with power. It is the tool that allows an individual to incent, compel and coordinate other people to do what said individual wants. With $1 you can make someone cook you a hot dog. With $1K you can get someone to give you pretty advanced tech. With $1M you literally make other people build you a house.
State by its design is supposed to have monopoly on ultimate power. Since money is synonymous with power, the state needs to control money in order to fulfill its function (and to secure its ability to fulfill that function). So it's obvious that the state may not be happy about technologies that prevent them from controlling the money. It's threatening the state's ability to enforce rules. And despite the popular dystopian rhetoric, state being able to enforce rules is almost always a good thing for the society.
You think it's for good reason. Many people think it's for bad reason. Those people invented and developed Bitcoin. Now the people who think state has no business messing with money and private lives of people have an actual tool upon their hands.
I will say those people are wrong, and they're only able to think that because they live in stable societies under rule of law, and have time to criticize somewhat abstract issues like this.
Now don't get me wrong - I'm not saying the present balance of power between individual and the state is perfectly placed. But thinking about ditching states altogether is, presently, a pretty dumb idea, that only signals a lack of awareness of how the society works.
In fact, the opposite is true. Most of the people who are open to Bitcoin live in third-world countries (including myself) and have a natural distrust for government.
Also, saying some people "are wrong" is not an argument.
> Most of the people who are open to Bitcoin live in third-world countries (including myself) and have a natural distrust for government.
That's an interesting claim. Is there a good Bitcoin use by country breakdown? Because my impression was, that with the notable exception of Brazil, Bitcoin is still mostly the techie-westerners thing.
> Also, saying some people "are wrong" is not an argument.
That's not an argument, just my current belief. It might be wrong.
I would point out that I don't think anyone is saying that bitcoin and other altcoins should become the only, or even the main currencies in use.
> You think it's for good reason. Many people think it's for bad reason.
In reality, you are both right. There are both 'good' reasons and 'bad' reasons why the state wants control over monetary supply and flow. I feel that as electronic currency transactions has gained ground over cash, the 'bad' reasons have become stronger and more important.
The question really is to if degree that bitcoin undermines the good reasons for state monetary control balances with the degree that it undermines the bad reasons. I suspect that as electronic transfers become increasingly ubiquitous, we will see the importance of bitcoin in maintaining personal freedom increase.
The state by definition has monopoly on violence, not power in general.
You don't want a state with total centralized power over the economy because you end up with places like North Korea or the USSR with uncompetitive industry and shortages.
Violence is the most direct way to apply power, but not the only one. "Monopoly on violence" sounds cute, but it's not the precise and only thing the state is supposed to have. What good is a state so disconnected from money that it can't even fund its violence-applying apparatus?
Also: control over money doesn't imply control over markets. As evidenced by pretty much all western countries.
I didn't say the state doesn't have other forms of power, only that they don't (and shouldn't) have a monopoly on it.
Anyways, Bitcoin doesn't seem like much of a threat to the kind of power developed countries have over their currencies. The USD isn't going anywhere and nobody is using cryptos for day to day purchases or servicing debt so the fed will remain firmly in control of the money supply and interest rates.
It is much more of a threat as a method of capital flight to undeveloped countries (eg. China) who like robbing their citizens through inflation, currency manipulation, and capital controls.
Such a state as described in the pithy phrase has never actually existed. Even the very strongest states have violence that the state was powerless to stop. That objection can only be resolved by reducing the strength of the term "monopoly" to something more like plurality control, but then it does apply to power in general.
Simply put, if some other coalition has more general power than the state, then it has the option to become the de-facto state. There are lots of terms for this, depending on the party with the power: from revolt and coup to occupation to ineffective government.
There's a discussion to be had about how to best allocate that plurality control to minimize abuse, and physical force is likely a component of such an allocation. It's far from clear, however, that an allocation of only physical force is viable even if it is desirable.
This is so wrong that I don't know where to start.
First of all, people tend to forget that government is not made of angels. It is made of humans, who are susceptible to the same flaws as the rest of us: greed, hunger for power, etc. Therefore we should try to limit the power government has over us to only basic necessities.
Second of all, historically, human societies functioned quite well with multiple competing currencies on the same area, some of them private, some state-governed. It might have been pain in the ass if some customers wanted to pay in French coins and others in Belgian ones, but that pain was eased by the fact that they were made of gold or silver, so to compare their worth it was enough to compare weight.
Lastly, control of currency allows goverment to increase it's spending beyond reasonable levels with debt. Which of course happens at the expense of citizens. This is the sole reason government enforces it's monopoly on currency.
Cryptocurrencies are unique oportunity to take control over the currency from governments and put it back in people's hands, exactly how God intended it to be :) We shouldn't give up that control to easily.
In the end money is just a commodity, same as bread, so we should let the market decide which currency to use, without any monopolies, state-owned or other.
I agree with the points you made, and yet still I don't think this invalidates the notion that a state needs some level of control over money in order to function.
> In the end money is just a commodity, same as bread, so we should let the market decide which currency to use, without any monopolies, state-owned or other.
Is there some reason to believe that markets can exist without government intervention of some kind? At a minimum someone needs to ensure that the participants in the market are not killing each other. Even in prison economies there are de facto "governments" (inmates with power in the prison hierarchy) that keep the "market" orderly and decide the rules.
In the absence of government, trade tends to be limited to occasional encounters between groups of people and too infrequent for any kind of market to form as an emergent phenomenon. In the absence of government, an encounter between strangers can quickly turn into a deadly fight, and an offer to trade may just as easily be a pretext for killing someone to steal their possessions. Markets can only exist when the worst outcome of a bad deal is getting swindled.
With decentralized systems, the goal is to be in a state where participating outweighs the benefits of usurping. Where it makes more sense to play the game correctly.
The system creates trust.
Whether we can achieve this goal through cryptography and game theory remains to be seen.
Just wondering - when is it not a good thing for the state to be able to enforce their rules, then? You said "almost always." Specifically referring to money since the topic of conversation is Bitcoin.
I started with an assertion that money, in practice, is synonymous to power. I wasn't thinking about just economic rules.
But to pick something in big part economical, I'd say the war on drugs can be an example of a rule that's widely considered stupid, needlessly oppressive, and bad both economically and morally.
I'm not an anarchist, but I do think that the everyday person (especially in third-world countries) could use an escape hatch from the global economy, and it just so happens that Bitcoin fills that role perfectly.
Governments will always be able to tax people and they can tax them in whatever currency they want. This requires people to use their currency. So I don't think that Bitcoin poses any real threat to the powers that be except in harsh circumstances like Venezuela. In some situations, Bitcoin and other cryptos can actually help the government gain power, like in Palestine's situation.
Why conflate the fuzzy "ability to enforce [law]" with specific centralized economic levers? Your comment seems to be saying the former relies on the latter.
>State by its design is supposed to have monopoly on ultimate power. Since money is synonymous with power, the state needs to control money in order to fulfill its function (and to secure its ability to fulfill that function).
Good. It is about time citizens controlled the gov't.
Over the past couple of years, China has lost around a trillion dollars in foreign reserves (a 4 trillion dollar cash pile earned from exporting all those made in china goods) to capital flight. Whenever a Chinese citizen or business takes yuan and exchanges them for a foreign asset, China's fx cash pile is diminished. If china's "savings account" is bled dry, it would have to choice but to devalue and print its currency to handled some of it local fiscal issues.
To prevent "rocking the boat" with a currency devaluation before the Communist Party Meeting this fall, China has locked down it's capital account by blocking foreign company acquisitions, repatriation by multinational corporations (think blocking Apple's yuan accounts from withdrawals to USD), Toronto real estate purchases, etc.
Bitcoin was an unregulated and popular means of capital flight. It was just a matter of time before they cracked down on it as well.
That strikes me as an odd opinion. It sounds like you're saying that you appreciate an artificial decrease in cryptocurrencies' value or hype because you think there are other things artificially increasing it.
But.. but.. an 'analyst' for CoinDesk said this was normal and the exchanges will just need to get a license and China welcome them back with open arms.
The bullshit artists that already 'invested' in this scheme will now tell you that China did not matter and the people under them will parrot it.
Anybody that disagrees simply doesn't understand Bitcoin or just mad that they could not get on the choo-choo train at the right time.
I don't agree with OP necessarily but just because one may think it's BS doesn't mean they think the public and traders think that. So shorting it wouldn't work out for a while in that hypothetical.
I don't have too much knowledge about cryptos. And the ICOs occurring certainly seem mostly like BS, but I'm still "investing" (more like trading quickly and selling) to make a profit while this gold rush lasts. Doesn't matter how I feel about it.
1) Shorting into a bubble is usually a terrible idea.
2) The only realistic way to short BTC is to do so via a very small list of exchanges. Even if you trust them (which, given the history of cryptocurrency exchanges is hardly a given) the borrow cost is huge: there's no way you could reasonably make this kind of macro BTC bet.
The combination of these two realities makes the "If you don't believe the price, you ought to be shorting it" assertion completely baseless.
Once a security has entered bubble territory, by definition its price has become disassociated from any underlying fundamentals - bubbles form when rising prices drive positive sentiment which pulls in fresh buyers who buy into the rising price story, driving the price higher which in turn draws in more buyers in a self feeding cycle that only ends when the supply of fresh buyers dries up.
Because this is a self feeding cycle, the price can double & redouble from almost any point if the "story" is good enough. So you can be dead right about a given asset being in a bubble, but if you short it the odds are that you're going to get painfully stopped out long before the bubble collapse finally happens. As Keynes said, prices can remain irrational longer than you can remain solvent: The history of investing is littered with individuals who were right, but lost their capital because they were simply too early.
Obviously BTC can be in a bubble & whilst still having real value - the two things are not necessarily connected. (Although having a good future value story is helpful for a bubble to form in the first place I would argue.)
Then at the bare minimum make some falsifiable prediction, like "a bitcoin will be worth less than 1,000 USD 24 months from today." If someone insists that shorting is infeasible, and refuses to make a clear prediction, then their claim is unfalsifiable and thus fairly meaningless.
There's not a great reason to make such a claim, unless you are interested in proving a point afterwards. Instead, it's valid to believe "Bitcoin's price today is higher than its intrinsic value" and take action on that claim by not buying Bitcoin. You may not be forwarding the rational discourse on Bitcoin's price and value, but you are still "putting your money where your mouth is."
My "buy in" was a $300 AMD graphics card which I then kept using for games after the mining difficulty was too high. As far as I'm concerned my BTC is an added value. If it crashes to worthlessness I would not care.
PS: I have no intention of cashing out.
Since BTC is deflationary I'd rather hold till each BTC is worth 100k. Check this thread in 2030 :)
Deflationary does not imply an ever-increasing value. At some point, deflationary commodities will be so rare as to be useless. Lack of supply leads to a lack of velocity, which leads to a lack of liquidity. Once that happens, people will move to a competing product.
Imagine if soy beans gradually went extinct. In the short-term, the prices would spike as companies reliant on soy beans compete for the shrinking supply. But as prices go up, these companies either go bankrupt, or find alternative inputs to replace soy beans. Either way, the prices eventually hit zero before extinction occurs.
The once plentiful and valuable becomes rare and worthless.
Technically supply does diminish. People like to calculate the market cap of Bitcoin based on the theoretical amount of them in existence however people lose their wallet.dat files all the time which contains the password allowing someone to send those bitcoins elsewhere. This causes deflation to occur on top of the regular limit on the amount of bitcoins.
Well, it's totally possible to lose a btc irrecoverably.
Secondly, at some point, calculations become onerous. Like, if btc is $100k/coin, then normal, every day transactions will need to be in 0.000001 coins. Which is an incredibly annoying unit to work with, it's trivially easy to miss an order of magnitude, i.e., 0.0000001 at a glance, is that a dime, a dollar, or a ten?
Accidentally give a $100 instead of $10 once, and you'll be annoyed, do it twice and you're done using btc.
I mined up a fair amount in 2009/2010, then lost them all my after computer got fried in a power surge.
If lightning had struck a few houses over, would I have cashed out or held? I suspect I would have cashed out most of them around $1k. Why did you hold?
I don't trust exchanges. I prefer to sell in cash at a Bitcoin meet up. This means I'm less susceptible to market whims. I could also simply use the bitcoins to buy things. I did at one point get a butterfly labs miner but I simply broke even on that. The only thing I wish I did was buy in more massively in the early days. I know a guy who put 5k into mining rigs. Made himself 70 btc. And then promptly sold them at $2 during the first crash. He's still kicking himself over that one.
Oh and for those of you reading this: back up your wallet.dat in an encrypted truecrypt volume with multiple cloud backups!
I think this is a really good sign that it's a good idea to get out of crypto currencies. China is actually pretty good at making decisions to defend it's country from negative outside influence. Anywhere that hosts a bitcoin exchange is also hosting criminal activity. Consequently, Bitcoin exchanges are going to make areas more dangerous to live. It's just a bad business decision to allow it to exist in your country.
Many of us analysts who are deep in the game recognize that China is simply shutting them all down to start its own cryptocurrency that (probably) has ID/government name linked to it.
It is! unless you are China and you still want to make money while making sure the company line is toted by all.
China is able to track their populous really well, or at least have their population believing so, and thus anything that adds pseudo-anonymity kinda ruins their mission.
In the future it is probable that all countries will have their own cryptocurrency, backed by some sort of tangible asset like Au (gold) or Ag (silver). What strikes me as very important for the US is establishment of a national cryptocurrency. It can be anonymous (everyday cash is essentially anonymous), but the consensus on how to regulate one is very much a process of education (elder generation finance people don't really get bitcoin yet). So once regulatory measures can be taken to ensure there's no theft etc, then it'll be easy. China's thinking on the matter is that if it cannot be regulated, shut it down and make a version that can be.
There are various forms of decentralization. Bitcoin tries to be as extremely decentralized as possible but you can greatly increase energy efficiency by centralizing a few aspects. Here is a thought experiment:
Imagine a system where the money is issued by a central authority. The users would register their identities with the authority, and receive a certificate. When the bank issues money, it assigns a random serial number R, and it signs it with the bank's key and specifies whose money it is by the user's public key U: S[U, R]. Now suppose Alice has S_Bank[Alice, R] and wants to pay Bob. She can sign the money over to Bob: S_Alice[Bob, S_Bank[Alice, R]]. Bob could do the same to give Charles some money.
Eventually, someone will deposit the money they received with the bank. The bank will check if money with the same serial was ever deposited previously. It can then catch the cheater who double-spent the money by looking for the "fork" in the signature chain. So if the bank tied identities to some offline ID, the police can go arrest the fraudster (or you can imagine other punishments, like blacklisting them from the entire system, etc.).
Notice that even though money creation, identification, and double-spending defense are all centralized, payments remain decentralized: unlike credit cards etc., in this system, one need not contact the bank in order to spend money. True, there may be more of a delay in catching double spending; on the other hand, we have gotten rid of the very expensive mining process. We have also avoided one of the more subtle and annoying issues with Bitcoin: bootstrapping the P2P connection (you only need to connect to whomever you are trying to pay when you are trying to pay them).
[This is just a simplified version of "ecash," which cryptographers have been studying since the 1980s. What I left out is the mechanism for ensuring payment privacy, which is pretty interesting in the offline payments case.]
It doesn't have to be, it can also become a heavily centralized, carefully monitored system thanks to the intrinsic immutability of the underlying technology.
This is a really good point. I live Downtown near a BitCoin ATM. The neighborhood was really posh when I moved in.
Since the the BitCoin ATM was installed, home prices are down 25%, crime is WAY UP, and the transient population has exploded. People are talking about moving to Detroit to get away from the general rot and decay of the BitCoin defiled inner city. /s
It is in China now. Russia too IIRC. Probably several other countries that impose capital controls.
In the west this is legal, but the bank may still ask you where the money came from under their enforcement of laws like knowing your customer and money laundering controls.
Tax agencies may also get involved if there is automatic reporting.
Not yet anyway, laws take time. I hope it doesn't become law (and I suspect it's too extreme for that, even for Russia.) But it gives you an idea of the way things are trending there.
That's exactly what capital flight is (one of its forms), and what most thrid-world countries try to avoid by these banning practices. They (we) have shitty unstable currencies and broken banking systems that the people have no trust in, so they use their savings to buy USD (hard to do in these countries) or Bitcoin to maintain value. Note that money doesn't even need to leave the country for it to be a form of capital flight; just the fact alone that you're buying foreign currency or Bitcoin in a black market.
Unfortunately, many companies still insist upon remitting in paper checks, especially for cross-border transactions. If I could route a paper check remittance to a BTC/ETH exchange like Kraken, buy into BTC/ETH in that paper check's denomination, then immediately sell and withdraw as USD, then I and many other vendors could solve that use case. If anyone knows of a BTC/ETH exchange with turnarounds even faster than forex brokers, and can process paper checks, then please post who you use. For a world economy that is supposed to be a global integrated entity, the amount of rentier hurdles sitting on the borders never ceases to amaze me.
For the few customers that agree to a wire transfer, I'm trying out a cryptocurrency exchange in 2018 to convert them to USD.
Where are you getting below 1%, and how much are you exchanging? I'm working with 5-figure USD amounts, drafted on paper checks, and I'm averaging right around 1-1.2% after all costs are accounted for, but not below that.
How do I get in touch with a "Stock broker with FX"? That's not a term I'm familiar with unfortunately, and searching that string turns up either FX brokers, or FX trading platforms.
I've spoken with my US equities/funds brokerage firm, and they have an FX desk, but they're still more expensive than the dedicated FX broker I found and currently work with. Before that, I was regularly raked by my US bank for 4-6% off the mid-market. I haven't seen mid-market spread + 0.01% anywhere, and only seen + 0.1% thrown around for 6-figure and up USD transaction sizes, wire transfer (ACH or SWIFT), at least several of those per month volume. TransferWise works at mid-market + 1%; but they don't work with paper checks. What you're getting is even better than cryptocurrency exchange-facilitated conversions, so I'm very interested in finding out more if you can post a pointer in the right direction. Thanks.
(Not an endorsement in any way and I'm sure there are others).
Fees are min($2, 0.002%), typical spread is a few pip or much less (eg. EURUSD at the moment: 1.20015 (sell) 1.20020 (buy)).
But you'll also need a bank account in both currency most likely.
edit: maybe a downside, but there's a min $10/month activity fee at IB if you have less than 100k holdings (but your transaction fees count against that). But as I said, I'm sure IB isn't the only place with those offerings.
Thanks, I'll keep them in mind if a wire transfer comes up in the future, that looks useful. Unfortunately, many of my non-US customers still request remitting in their native currency via paper check. And IB doesn't seem to accept paper checks from commercial entities other than banks.
Part of my forex broker's value add is they have banking points of presence in many nations, and can accept the check there, then convert to any currency I designate (typically USD). That would probably explain much of the spread between IB's and my FX broker's margins.
I had in mind transactions in Europe within the SEPA area, eg EUR/GBP/CHF. Banks charge nothing for the transfer, 0.5% fee, and the spread which often is 0.1% or less. FX brokers have even better conditions for high volume customers.
I can exchange FX at 0.5% market rate, and that's through an online stock broker. I can probably do better through a forex broker, e.g. 0.25%. I don't see how Bitcoin can be more competitive.
This is a great example of something that just boggles my mind. With all the regulation out there (on financial stuff in this case), how do people naturally come to the conclusion that such a scheme bypassing them is not illegal? (genuine question; not disparaging you)
Well that is sort of a common law view of things. But most countries practice case law, which means if somethings not explicitly illegal then it must be legal. So I don't think circumventing the law is seen the same way as it would over in the anglosphere, where we'd condemn someone for intentionally not following the 'spirit of the law' and a judge/jury might convict them anyways.
Disclaimer: IANAL and perhaps a bad judge of how people around the world view the law.
> Well that is sort of a common law view of things. But most countries practice case law
Aren't these the same thing? [1] Do you mean something else (civil law)?
But that's a great point; maybe the problem is my lack of living in a purely civil law country. The thing is though, it seems more like common sense to me than a legal issue. Like for example, if (say) murder with a knife and a gun had been illegal, but there was no law against using baseball bats, then suddenly everyone in a civil law system would naturally assume using baseball bats to kill would be okay? It just doesn't make sense to me that "whatever is not expressly illegal must be legal", whatever the legal system... but maybe you're saying that would actually stand up in a civil-law court, and people would actually be okay with it?
It's also quite counter-intuitive to me since the US (with its common law) seems to be quite prominent in its tendency to let its people and companies stick to the letter of the law but not its intent. e.g. so many corporations find legal loopholes to take advantage of all sorts of people (from consumers to politicians) by means which are not technically expressly illegal but which almost surely are out of line with the spirits of many existing laws.
Murder is kind of hard to use as an example because there's typically really strong moral and cultural understandings that you shouldn't be doing that. But lets think of a more nuanced example. Lets say there's a lake that's being overfished. The government doesn't want to outlaw all fishing, but they want to rein in the more massive fishing operations. So they outlaw using trawler nets in the lake, but people using conventional poles or spears can keep fishing as much as they want.
Now say someone comes along and figures out another method to massively overfish the lake without using nets. In civil law countries if the law is written to specifically outlaw the use of nets I think the people would look at the law as faulty instead of the person who exploits the loophole. After all, whatever method they figured out isn't actually illegal. And the way to solve the issue is to update the law, not to punish the clever loophole seeker.
But in common law countries the law would more likely be written in a way that can't be as strictly interpreted. There might be wiggle room that would allow a judge/jury to basically say "Look we didn't explicitly forbid what you are doing, but it's clearly something this law was meant to prevent. Therefore you're guilty, and case law will be updated to include this verdict."
Interesting, thanks for the example. It doesn't fully seem to be consistent with my experience (I feel the US allows much more freedom than many civil law countries, which seems unintuitive give this line of reasoning) but you're probably right, I'll have to read more about this haha. Thanks!
it was legal in so many ways in the past (slavery) and a few today (death penalty, wars)
the thing with all laws, and the state, is that they exist not to make the world fair, but ti maintain status quo.
in the death example, if the law explicitly left baseball bats deaths out, that means that someone with influence over the state wanted it to be exempt.
this is the same on china now probably. china has tons of tech and hydropower. heck they may have invented satoshi! and maybe now too many small players are disrupting their game? or it maybe be that btc is but an annoyance to them and when their economy crumbles because of the upcomingreal state buble they dont want to also have to deal with people loosing money to bogus ICOs. who knows?
> The saver can then exchange bitcoin for dollars at any of the global bitcoin exchanges without anyone ever knowing his identity.
This is where the "Chinese people use Bitcoin to exfil capital" story falls apart. It's near impossible to open a foreign bank account and pass KYC from within China as a Chinese citizen.
You have to travel to Macau or Hong Kong - and if you're doing that you may as well use the cheaper and more efficient underground laundering and exchange networks.
The most well known ways of exfiltrating capital out of China - foreign real estate[0], casino junkets[1] and foreign acquisitions[2] - have been cracked down on in the past 12 months.
I think Bitcoin pales in comparison to these sources and is a minor irritant, and it was more likely Bitcoin is now being more heavily regulated because of the ICO boom and associated scams in China.
As sboselli points out below (https://news.ycombinator.com/item?id=15285900), money doesn't even need to leave the country. Just the fact alone that a Chinese citizen is buying foreign currency or Bitcoin in a black market constitutes a form of capital flight.
When I worked in Shanghai this year, I noticed that a business openly advertising "large sum transfers" was located literally one door away from city's procurator office.
This matches what I see on the ground in Shenzhen and in HK banks. Even the latter are getting squeezed about mainland capital inflow now. There are still mechanisms through international corporate relationships and licensed investment channels to exfiltrate large sums. The regulator in question is the 外汇管理局 or "foreign exchange management bureau". Smiles from Zurich.
Part of me believes that an economic crisis on china regarding capital flight could be the next global crisis. If chinese cpaital alone stopped buying property, and caused some plummet in property demand, it alone could cause plenty of waves.
I really don't understand the capital flight argument. The Chinese economy has seen overwhelming growth in the past 10 years. If you are searching for yield, it's in China.
It's a legitimate concern rooted in past precedent. I also think this is partly why you are seeing large expenditures aimed at green-tech, etc. If you can turn around some of the social ills (namely pollution), you can stem the flow a bit.
It's not just quality of life. A lot of wealthy people have at least some exposure to criminal behaviour, and are not keen on being swept up in white collar prosecutions.
The government control in China is a driving force to spread your capital outside. Remember, average citizen can only transfer out $60k per annum. Not much.
um, where have you been the past 2 years? China's stock market crashed, its forex reserve down 1 trillion, its millionnaires fleeing the country, it has imposed massive (but ineffective) capital control to prevent any money from leaving, its gdp/debt ratio way above 300%, its economy propped up by shadow debts.
Much of the money getting made in China is ending up in the hands of government employees who should not have very lucrative jobs, and the combination of lavish personal consumption by them and obvious advantages afforded to their children ("princelings") is causing audible social discontent about corruption.
The Chinese Communist Party considers audible social discontent to be an existential threat and responds to it with overwhelming force. Part of the response is banning public expressions of discontent. Part of it is shooting corrupt officials after show-trials. Part of it is rejiggering incentives, to make it clear that you'll have to keep your money under the watchful eye of the CCP rather than discretely investing it in a country which probably won't execute you.
Some people making money in China are doing so through corrupt practices, or for other reasons fear that the government will seize their assets. These individuals probably continue to invest in China. They just want some of their wealth in a place safe from forfeiture.
There is no argument, it's a fact. There is capital flight out of China. Their FX reserves have plummeted because they are trying to support the Yuan from dropping off the side of a cliff.
Note that the Chinese government also demanded DVDs of all transaction records at the exchanges. This means that the Chinese citizens who moved their Bitcoin off of the exchange will have to answer to the bean counters.
How could a clever Chinese citizen avoid government scrutiny of their cryptocurrency finances under these conditions? They could trade Yuan (cash) for BTC through an underground mechanism of some sort. The vast majority will already be on the record at the soon to be defunct exchanges.
They could buy the hardware and power needed to mine new coins. This seems to be the simplest solution for someone who wants to get a couple thousand bitcoins without leaving a paper trail.
there is a theory that this is the reason the majority of miners are in China. Combine cheap power from bribed officials and the mining ASICs and you have money laundering generators.
If you use an exchange, you are one step removed from the cryptocurrency.
Complaining about the lack of privacy of BitCoin when using an exchange is like complaining that you did an illicit transaction in front of a police station to ensure you didn't get mugged, but are surprised when the police use security camera footage as evidence against you.
I am pointing out that it was "sold" as "anonymous", by the establishment. And it clearly could not be that, per spec.
In fact, I also remember that this feature of cryptocurrencies was subtly communicated to a larger audiance in conjunction with stories about "a group of hackers called Anonymous" -- you know, those guys with their suited headless figure in front of a globe with imperial laurels logo. (Someone must have gotten a good lolly laugh coming up with that zinger of a logo. Or possibly merely sniffed in contempt.)
> growing number of Chinese nationals has been using Bitcoin to siphon money out of China over the past several years
Growing but irrelevant. The largest sums I've heard of being moved by Bitcoin are, at most, a few hundred thousand dollars. This pales in comparison to the invoice factories in Hong Kong, Taiwan, et cetera through whom hundreds of millions of dollars flow.
The CCP is worried about fraud in a way American regulators aren't because Chinese victims of ICOs are more likely to look to Beijing when they lose their money.
(Keep in mind that Bitcoin was fine until ICO promoters started pilfering from the masses. Also, China is loosening its capital controls in a bid to keep the renmimbi from overheating [1].)
Bitcoin and for that matter all crypto currency is a libertarian ideal.
Libertarian ideals do not fit in communist societies. Regulation was always coming, as even liberal societies regulate.
But regulation is only there to keep the established order. The established order is very afraid of crypto right now in the same way the music industry freaked out over MP3.
I can't help it, but I get annoyed when crypto is branded with illegal activities like terrorism, fraud etc. No one talks about USD being used in the same way!
The US takes active efforts to prevent USD being used in illegal activities. That's not to say that it isn't, but there are legal red flags if you try to haul a big pile of bills through customs. Cryptocurrency's entire use case so far has focused around illegal activity. Whether said activity is immoral is up for debate (you can certainly deem breaking the laws of some countries to be moral), but illegal? Absolutely.
If you want to know why people associate bitcoin with crime, look no further than the people celebrating that it will be easier to commit tax fraud now in this very thread.
That kind of petty criminality and fraud seems to run through the heart of the bitcoin community, and is part of why I think people are reasonable to associate it with questionable activity -- that's what it's advocated as supporting even here on HN!
Come on though, it's not that unreasonable to point it out, and it doesn't mean anyone who points it out is a menace to society like you seem to imply.
It's not that different than when people (used to) talk about not paying sales tax on online purchases, but hopefully you wouldn't conclude that "petty criminality and fraud seems to run through the heart of ecommerce."
I'm actually confused by your example, because it looks like an example of precisely that happening (and then they were forced not to allow that). Lots of people flocked to e-commerce because of changing the ability to tax transactions.
Lots of "technology disruptions" seem organized around allowing people to break the law on the broad scale by making enforcement complicated and infractions easy. Not to say all of them, but enough that it's certainly a trend.
We can view that as a good thing or a bad thing (and there are reasons it might be a good thing), but it seems strange to ignore it happening.
No, I really do think that's a pretty unreasonable take on ecommerce. The sales tax loophole might have been nice, but I highly doubt that it was a significant cause of ecommerce success, and its elimination (in most US states, AFAIK) doesn't seem to be hurting ecommerce much.
It's really a perfect analogy. Apparently some people think that cryptocurrencies and ecommerce were both founded or significantly based on criminality, but I think there are some great advantages and opportunities with both that have nothing to do with crime. With cryptocurrencies, that's still largely a prediction, but with ecommerce I think it's ludicrous to claim that its success is owed to crime to any meaningful extent.
> its elimination (in most US states, AFAIK) doesn't seem to be hurting ecommerce muc
This seems to be the crux of your argument, and doesn't necessarily follow. Just because it was instrumental for the rise doesn't mean it will cause a fall if its removed at a significantly later point in time.
A support can be essential for building a bridge, even though the bridge stands without it when completed. I think tax evasion was precisely that bridge support for online commerce.
> Apparently some people think that cryptocurrencies and ecommerce were both founded or significantly based on criminality, but I think there are some great advantages and opportunities with both that have nothing to do with crime.
These two positions aren't contrary, and I'm curious why you're presenting them as if they were -- criminality is incentive to switch services, which are then sticky because they do provide features. However, pretending that those features is what caused the initial switch is revisionist.
> ecommerce I think it's ludicrous to claim that its success is owed to crime to any meaningful extent
I think claiming its success (and certainly that of current players) doesn't have anything to do with early criminality is absurd.
That being said, no one is talking about its present generator of value, we're talking about what created the incentives that led to this outcome two decades ago.
Cash is the original anonymous "crypto"-currency. Still the preferred tool of money launderers, drug dealers, pimps, black marketeers, and other neerdowells everywhere. Also, offers real anonymity with no blockchain records.
I completely agree with this. For years, I was a crypto-currency advocate, telling any and all that it's better than their credit and debit cards. When I took a look at why, though, I realized that tool (in physical form) already exists: cash. As long as you trade a few with a few friends, or buy something from a Mom & Pop, no one can really know what bills you have, and there's no record, ever.
You make it sound easier and more powerful than it really is though. For all intents and purposes, cash is mostly anonymous. Bitcoin, on the other hand, is traceable if you can map accounts to real people.
> No one talks about USD being used in the same way!
They do, literally all the time, to talk about money laundering and justifying absurdity like seizing cash from motorists.
The only money that isn't Supporting Terrorism!(tm) is Fed Fun Bucks(tm), which are stored as a number you may request be told to you from a participating national bank.
>Libertarian ideals do not fit in communist societies. Regulation was always coming, as even liberal societies regulate.
I'm not really sure what point you're trying to make here; that regulation is a Communist idea? Either way, China is not a Communist society, it's a very capitalist society, with private property, wage labour etc. Also, libertarian (used in the original way libertarian was used) is Communist society. The modern "libertarian" (propertytarian) ideals do not fit in Communist society. Great lovers of freedom from democratic socialists Oscar Wilde to George Orwell to the social anarchists knew this.
The essence of Chinese politics is communist control. The actual iteration is very different as you say. But this does not alter the fact that freedom of the individual as provided by bitcoin runs counter to the Chinese communist manifesto. I am talking about the clash of ideals really, not actualities.
Monetary regulation protects, supposedly. It may protect individuals against losing money in stupid schemes. But it didn't save us from the recent massive and costly market crashes which hurt far more people than a few loan sharks ever could.
The rich use regulation to control markets, that's why the gaps are growing between rich and poor people.
Regulation protects from both sides. It can protect you from getting rich too, by loading barriers to your opportunities.
Look at climate change - if you want to use another regulatory framework as an example of governmental regulatory failure.
Did environmental regulation stop climate change? No it became a tool for lobbyists to use to delay changes to the market that would harm profits. A protectionist racket, full of do good fools who think they know best.
Regulation is a tool used by governments to control stuff. Look at what is broken in the world - regulation is a huge factor in that.
That's because buying coffee with USD is the cheapest available option. There are very few things you can buy where BTC would be the least costly option, outside of the darknet markets.
China will nationalize the domestic miners and treat Bitcoin as a commodity asset that the state controls.
I believe this will immediately cause a constriction in supply as those coins will not be sold at least initially on the open market.
Look for this messaging to coincide with the pronouncements around the new five-year plan(FYP)[1]. As the first major section of the 13th FYP, innovation is emphasized as a cornerstone of China’s development strategy.[2] Bitcoin is a technology and has already come along way from the Satoshi whitepaper. State-Owned Enterprises will be emphasized as they strengthen SOEs as national champions at home and abroad and protect their interests in this emerging blockchain space. The goal of the One Belt, One Road (OBOR) initiative is to facilitate access to natural resources and encourage economic development in China’s poorer western provinces.
While such an initiative can continue without bitcoin, it is interesting to think of how OBOR would be strengthened on the world stage with an instantly settled mechanism such as bitcoin behind its infrastructure.
I agree that centralization is antithetical to Bitcoin, game theory says that it is to China's advantage to mine for profit. I believe they will want to mine and hodl, vs sell immediately to cover costs. Think of it as their strategic crypto reserve... how much is enough to float an e-yuan?
Bitcoin could hard-fork to a memory-hard algorithm (like Lyra2RE), or even change to any hashing algorithm for which ASICs don't exist yet.
Even if they switched to Scrypt (from SHA256) for which dedicated hardware exist, it would cost them millions of dollars and require months of manufacturing re-organization to get to their share of hashrate.
Of course, the miners would still be able to mine the old fork and at that point it is more likely that an altcoin (like Ethereum, Litecoin or Vertcoin) would eat up Bitcoin's marketshare.
The majority of the hash power is in China. If China can seize the miners all at once, they'll have control over the blockchain. At that point, other countries would be foolish to compete, and may focus on alternate alt currencies.
If you control 50 + epsilon percent of the hash power you can censor blocks at will. You can ignore every block that anyone else makes and still have the longest chain.
You're forgetting that every miner chooses how they mine. Someone with 51% hash power can decide to always mine on top of their previous block, ignoring what everyone else does. And because the 51% chain is longer, the 49% chain get discarded by any miner following default bitcoin rules. So the effective block rate gets slowed down, and the person with 51% of the power has control of 100% of the canonical blocks.
This would make the 51% miners' chain grow at half the speed as the 49% miners' chain, because the 49% are building on both their blocks and the other miners' blocks, whereas the 51% are only building on their blocks.
This, of course, is assuming that the 51% doesn't create blocks considered invalid on the other chain. This would cause a hard fork and it's exactly what is happening now with Bitcoin Cash, except with a much smaller fraction than 51%.
So no, what you are describing cannot happen with the default rules.
> the 49% are building on both their blocks and the other miners' blocks, whereas the 51% are only building on their blocks.
They are building on some of their blocks and some of the other miner's blocks. This doesn't make them faster.
Whenever a 49%er mines a block, there is a temporary fork. The 49% and the 51% start mining on two completely separate branches, both of which progress at half speed. Eventually the 51% branch is longer, and the 49% discard their previous work and switch to it. So the 49% were using their blocks, and now they are using the 51% blocks, but never both at the same time.
The canonical blockchain does not progress at full speed. Half the blocks that get mined eventually become orphans.
It would be impossible for the 49% to build on everyone's blocks, because the 51%-created blocks are always mutually incompatible preexisting 49%-created blocks.
> This, of course, is assuming that the 51% doesn't create blocks considered invalid on the other chain.
If this were so then Bitcoin Cash would have been dead from the start. They hard forked with much less than 49% of hashpower.
There are really two separate scenarios we're talking about here. Miner activated hard forks, which are a real thing that have happened (though not exactly like you describe), and a hypothetical situation where a group of miners agree to create an exclusive chain that is also backwards compatible. I'm no expert but I don't think that would have the intended result.
Nothing "stopping" it, except the tens (hundreds?) of millions of dollars worth of hardware investment it would take before your new hashrate becomes at all competitive. It's a bit like saying there's nothing stopping you from launching your own soft drink and beating out Coca Cola (you could try, but you probably won't win).
China has a huge and possibly insurmountable lead in not just existing built hardware, but a head start in the know-how of rolling out new ASIC designs to production, (relatively) cheap factories to mass-produce hardware, access to cheap/state-subsidized electricity, and (in this hypothetical scenario of nationalization) the support of the central government of one of the largest/most-powerful nations on Earth.
Miners have very little power over Bitcoin as a whole. They are constrained both by Bitcoin's rules and economics. If they mine invalid blocks or optimize for something other than fees, the operation will turn unprofitable. If they just stop mining, the mining difficulty will adjust and suddenly ASICs will not be needed to turn a profit. There is a delicate balance in Bitcoin, currently tipped slightly in their favor, that they probably don't want to disrupt.
> Miners have very little power over Bitcoin as a whole.
Chinese miners currently control significantly more than 50% of Bitcoin mining.
If the government takes control of the the miners, they take control of the bitcoin network. There's plenty of mischief they could make with that if they were so inclined.
Your reply does not refute the point you quoted in any way, nor does it address the other points I made. You are merely restating what the other person said in an equally hand-wavy manner.
China will nationalize the domestic creation of Bitcoin. This is their sphere of influence. Thus they will control the domestic production of bitcoins. This nationalization will kick off the next leg up of the exponential growth for bitcoin. Just as the US Marshals auctioning off the Silk Road coins established legality in the American market. China will want to control capital flight and will use bitcoin as the release valve for their outrageously overhigh investment in US Treasuries.
Bitcoins are not like some manufactured physical item where a group of people can collectively seize the means of production with force to control supply of said item. It would be kind of funny if the CCP views it that way but I doubt they do. They probably have more knowledge about how Bitcoin works than everybody on HN combined.
The miner's mining Rig's are plugged into the state controlled power grid. If China wants to control the means of production, they simply follow the power hogs, remember we're talking about operations that are industrial scale. The small players have 500+ mining rigs alone. The means of production will be seized. Existing coins are a toss-up. Although since the penalty could be a death sentence, I'm sure the business's that have these will comply with what ever orders follow.
You are still thinking about this in terms of a physical object. Miners don't "produce" anything except in the same sense that I "produce" the answer to a crossword puzzle. You can take away my pencil but it doesn't make the puzzle unsolvable.
Dude. The mining rigs are physical. All I said was that China will seize the 'means of production' so they control the manufacture domestically. It's a phrase that was used a lot to describe the basic tenets of different types of economy and harkens to a time when industrialization was a major focus of the first world and people trying to find their place in an industrial society. The "means of production" phrase has been distilled and entered the zeitgeist as a way to talk about communism.
Yep, thanks, I'm aware of the history of the term.
Think back to what I said about crossword puzzles. If China had a world-class crossword puzzle team, winning every competition, why on earth would they seize their own team's pencils? It wouldn't stop the competitions from happening, and it wouldn't stop other teams from winning them.
I'm not trying to be a pedantic prick on the internet, so please excuse me if I'm coming off that way, but I enjoy this topic a lot, probably too much.
Because it is the most efficient way to build a reserve of a limited commodity (bitcoin) that has a much longer exponential curve to expand along.
Currently, the Chinese miners are operating as a business to squeeze a margin out of the discounted electricity available in China. It is in China's interests to treat this as a national resource wherein it is produced domestically. My thesis is NOT that they want to control Bitcoin, only the domestic production for their long term national interests. Remember mining will continue until approximately 2140, that is a significant horizon to look at.
Miners can only double spend transactions if they have > 50 % of the hash rate.
The only purpose of miners is to add proof of work to in exchange for new coins that users value. If the proof of work is on a chain that contains valid transactions and conforms to consensus rules, it'll be valuable.
Your link doesn't address the question. It's about an invalid transaction within the block, not the refusal to place a particular transaction into one. With over 50% of mining power you can definitely do this.
> Clients will ignore invalid blocks when determining which chain is difficultywise-longest. Mining clients will not build on top of invalid blocks. Clients will not propagate invalid blocks (or invalid transactions).
Proof of work does not mean full nodes trust miners blindly. It only means they prefer the longest chain that follows the rules.
Like I said, yes, with 50% mining power you can double-spend all you want. But other nodes know what you are doing, expel you from the network, and discard your work, just as if you had 25% of hash power or 0.1%. The Bitcoin blockchain is not a democratic system where the majority always wins.
Same story if you control 1% of hash power. Anyone can ignore any block, but you can't completely block a transaction unless you prevent it from being included in ANY block. Even if 90% of the hash power is blocking your transactions it just means it takes 10x longer for your transaction to go through.
This is not ignoring transactions, this is ignoring any block that contains those transactions. You make your own pure chain that's longer, and everyone else uses it too because it's longer. If someone else mines a block then such a transaction can temporarily get a confirmation or two, but the 90% steamroller will come by and quickly reduce it back to 0 confirmations on the longest chain.
If someone with 1% hash power ignores certain blocks, they make a chain that's totally irrelevant in their own corner. If someone with 60% hash power does it, they win.
China can exert a lot of control on it's business regarding bitcoin but they wouldnt be able to control or censor the network so this wouldnt kill bitcoin.
Interesting theory. I don't like the idea of 2/3rds of the hashpower to be owned by one player. 50% hash power means not only the ability to double spend, but also to censor txs. If someone else mines a block they don't like they can just ignore that block and eventually get the longer chain.
> 50% hash power means not only the ability to double spend, but also to censor txs. If someone else mines a block they don't like they can just ignore that block and eventually get the longer chain.
This is not true if you just have 50%. You'd have to consistently win the next block for double spending to be reliable, and users would just be wary to wait for more confirmations before accepting payment.
Besides, if China takes over all bitcoin exchanges and mining in China, that changes the "bad news" to huge positive news and basically a Bitcoin endorsement by a major world power. Once that happens the value of bitcoin would likely increase at a rate such that maintaining even a 50% hold on hash power would be difficult for a single player.
You gotta wonder if they will go after the miners. I suppose other cryptos have dealt with this issue, and one with the right properties will emerge, but BTC requires huge warehouses full of computers to mine, so the decentralisation part of the argument is a bit flawed.
And the big miners happen to be in China, which is pretty convenient for the government. Not sure exactly how much of capacity is in the country, but if a lot of it gets shut down I think there's a 2 week reset window before the difficulty can come back down. If it's a large proportion it will significantly lengthen the time between blocks.
Also in the bigger picture, if illicit movements bother the Chinese, will they pressure other countries to stop allowing BTC?
the core dev team for BTC already said they are prepared to either emergency
adjust difficulty or change the hashing algo if a disaster happens with the miners .. yes this is technically a hard fork of the block chain but it has happened before in an emergency
Well the core dev team already classifies the miners as attacking the network when they don't vote for them and chooses another fork. I would take what they say with a huge grain of salt.
For those of you who know a bit more about the topic. Is this ban going to stop the large-scale cryptocurrency mining that occurs in China? Isn't it actually something interesting for the rest of the world, as mining could become a bit easier?
I don't know, but that's one of the two "real" questions:
1. How will China treat miners?
2. Will they go forward with blocking node communication at the port/GFW level?
Re: 1, if they shut down / limit mining it's nbd. If they co-opt it to try & launch 51% attacks it's a big problem, but not, I think, insurmountable and would be a tactical error.
I have a different technological perspective on this. Having traveled and lived in Asian, Chinese-majority cities/countries, this is a typical Chinese govt. move. In China, WeChat is a dominant player (by Tencent), a LOT of the transactions in China happen through WeChat, which offers seamless payments integration. The penetration is so strong that even poor, road-side sellers accept money through WeChat. Almost everyone has a WeChat account.
This in my personal opinion - is to prevent BitCoin from posing a threat to their homegrown technology industry, which is honestly no match for what we have in the Americas.
List of banned companies:
Google - Because they want to protect their clone Baidu.
Twitter/Facebook - Because they want to protect their clone Weibo.
YouTube - Because they want to protect their clone YouKu.
.
.
.
(it's a long list)
BitCoin banned - Because they want to protect their homegrown WeChat.
I highly doubt that. First, bitcoin can be used through "wechat". Second, bitcoin can't handle what wechat is doing: It is volatile, expensive to transact with and slow.
My guess is the simplest thing: China only wants things that can yield its' control over.
But speaking of this, it's really interesting to witness many Chinese bitcoin users/traders start to abandon WeChat and switch to Telegram. Many of them are totally new to telegram, but fear of Gov-monitoring drive them there.
So they're only mentioning bitcoin because every exchange offers bitcoin trading pairs, right? This is effectively suppression of every cryptocurrency, not just bitcoin?
232 comments
[ 0.20 ms ] story [ 237 ms ] threadHowever,
> A website set up by the Chinese central bank warned that cryptocurrencies are "increasingly used as a tool in criminal activities such as money laundering, drug trafficking, smuggling, and illegal fundraising".
That sounds a bit like lip service...are they really just protecting investors and citizens, or is it because the assets are much harder to seize? Recently, there has been a large crackdown on foreign real estate purchases[0].
What other incentives does the party have for this policy?
[0] https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-o...
I personally fall a little to the left of currencies. I think these monetary systems are far right Libertarian's dream seeds. I do realize I am probably wrong but this is how they make me feel.
[0] https://unenumerated.blogspot.com/2006/11/wet-code-and-dry.h...
[1] http://fortune.com/2017/03/19/irs-bitcoin-lawsuit/
Most cryptocurrencies are actually quite trackable. Significantly more trackable than fiat currencies. There are notable exceptions like Monero and currencies specifically meant to protect privacy, but the vast majority are quite public.
The reason why Bitcoin exists is because governments want control over money. Bitcoin gives people freedom. Period. Everything else is noise.
Of course. And for a good reason. People utter this line as if governments wanting control over money was somehow bad.
Money, within all human societies that exist or existed, is pretty much synonymous with power. It is the tool that allows an individual to incent, compel and coordinate other people to do what said individual wants. With $1 you can make someone cook you a hot dog. With $1K you can get someone to give you pretty advanced tech. With $1M you literally make other people build you a house.
State by its design is supposed to have monopoly on ultimate power. Since money is synonymous with power, the state needs to control money in order to fulfill its function (and to secure its ability to fulfill that function). So it's obvious that the state may not be happy about technologies that prevent them from controlling the money. It's threatening the state's ability to enforce rules. And despite the popular dystopian rhetoric, state being able to enforce rules is almost always a good thing for the society.
Now don't get me wrong - I'm not saying the present balance of power between individual and the state is perfectly placed. But thinking about ditching states altogether is, presently, a pretty dumb idea, that only signals a lack of awareness of how the society works.
Also, saying some people "are wrong" is not an argument.
That's an interesting claim. Is there a good Bitcoin use by country breakdown? Because my impression was, that with the notable exception of Brazil, Bitcoin is still mostly the techie-westerners thing.
> Also, saying some people "are wrong" is not an argument.
That's not an argument, just my current belief. It might be wrong.
No, because you can't effectively track wallets/usage. However, you can, for example, look at Google Trends: https://trends.google.com/trends/explore?date=today%205-y&q=...
> You think it's for good reason. Many people think it's for bad reason.
In reality, you are both right. There are both 'good' reasons and 'bad' reasons why the state wants control over monetary supply and flow. I feel that as electronic currency transactions has gained ground over cash, the 'bad' reasons have become stronger and more important.
The question really is to if degree that bitcoin undermines the good reasons for state monetary control balances with the degree that it undermines the bad reasons. I suspect that as electronic transfers become increasingly ubiquitous, we will see the importance of bitcoin in maintaining personal freedom increase.
You don't want a state with total centralized power over the economy because you end up with places like North Korea or the USSR with uncompetitive industry and shortages.
Also: control over money doesn't imply control over markets. As evidenced by pretty much all western countries.
Anyways, Bitcoin doesn't seem like much of a threat to the kind of power developed countries have over their currencies. The USD isn't going anywhere and nobody is using cryptos for day to day purchases or servicing debt so the fed will remain firmly in control of the money supply and interest rates.
It is much more of a threat as a method of capital flight to undeveloped countries (eg. China) who like robbing their citizens through inflation, currency manipulation, and capital controls.
I think that's a great thing.
Such a state as described in the pithy phrase has never actually existed. Even the very strongest states have violence that the state was powerless to stop. That objection can only be resolved by reducing the strength of the term "monopoly" to something more like plurality control, but then it does apply to power in general.
Simply put, if some other coalition has more general power than the state, then it has the option to become the de-facto state. There are lots of terms for this, depending on the party with the power: from revolt and coup to occupation to ineffective government.
There's a discussion to be had about how to best allocate that plurality control to minimize abuse, and physical force is likely a component of such an allocation. It's far from clear, however, that an allocation of only physical force is viable even if it is desirable.
First of all, people tend to forget that government is not made of angels. It is made of humans, who are susceptible to the same flaws as the rest of us: greed, hunger for power, etc. Therefore we should try to limit the power government has over us to only basic necessities.
Second of all, historically, human societies functioned quite well with multiple competing currencies on the same area, some of them private, some state-governed. It might have been pain in the ass if some customers wanted to pay in French coins and others in Belgian ones, but that pain was eased by the fact that they were made of gold or silver, so to compare their worth it was enough to compare weight.
Lastly, control of currency allows goverment to increase it's spending beyond reasonable levels with debt. Which of course happens at the expense of citizens. This is the sole reason government enforces it's monopoly on currency.
Cryptocurrencies are unique oportunity to take control over the currency from governments and put it back in people's hands, exactly how God intended it to be :) We shouldn't give up that control to easily.
In the end money is just a commodity, same as bread, so we should let the market decide which currency to use, without any monopolies, state-owned or other.
A stable monetary climate is one of those that I am very happy to delegate.
>> In the end money is just a commodity, same as bread,
No, it's not, it's a method of exchange and follows different rules.
Is there some reason to believe that markets can exist without government intervention of some kind? At a minimum someone needs to ensure that the participants in the market are not killing each other. Even in prison economies there are de facto "governments" (inmates with power in the prison hierarchy) that keep the "market" orderly and decide the rules.
In the absence of government, trade tends to be limited to occasional encounters between groups of people and too infrequent for any kind of market to form as an emergent phenomenon. In the absence of government, an encounter between strangers can quickly turn into a deadly fight, and an offer to trade may just as easily be a pretext for killing someone to steal their possessions. Markets can only exist when the worst outcome of a bad deal is getting swindled.
The system creates trust.
Whether we can achieve this goal through cryptography and game theory remains to be seen.
But to pick something in big part economical, I'd say the war on drugs can be an example of a rule that's widely considered stupid, needlessly oppressive, and bad both economically and morally.
Governments will always be able to tax people and they can tax them in whatever currency they want. This requires people to use their currency. So I don't think that Bitcoin poses any real threat to the powers that be except in harsh circumstances like Venezuela. In some situations, Bitcoin and other cryptos can actually help the government gain power, like in Palestine's situation.
Good. It is about time citizens controlled the gov't.
To prevent "rocking the boat" with a currency devaluation before the Communist Party Meeting this fall, China has locked down it's capital account by blocking foreign company acquisitions, repatriation by multinational corporations (think blocking Apple's yuan accounts from withdrawals to USD), Toronto real estate purchases, etc.
Bitcoin was an unregulated and popular means of capital flight. It was just a matter of time before they cracked down on it as well.
The bullshit artists that already 'invested' in this scheme will now tell you that China did not matter and the people under them will parrot it.
Anybody that disagrees simply doesn't understand Bitcoin or just mad that they could not get on the choo-choo train at the right time.
If you're so sure that it's bullshit you're free to put your money where your mouth is and short it.
Let me know when you are back to peddling Amway.
https://news.ycombinator.com/newsguidelines.html
I don't have too much knowledge about cryptos. And the ICOs occurring certainly seem mostly like BS, but I'm still "investing" (more like trading quickly and selling) to make a profit while this gold rush lasts. Doesn't matter how I feel about it.
2) The only realistic way to short BTC is to do so via a very small list of exchanges. Even if you trust them (which, given the history of cryptocurrency exchanges is hardly a given) the borrow cost is huge: there's no way you could reasonably make this kind of macro BTC bet.
The combination of these two realities makes the "If you don't believe the price, you ought to be shorting it" assertion completely baseless.
Because this is a self feeding cycle, the price can double & redouble from almost any point if the "story" is good enough. So you can be dead right about a given asset being in a bubble, but if you short it the odds are that you're going to get painfully stopped out long before the bubble collapse finally happens. As Keynes said, prices can remain irrational longer than you can remain solvent: The history of investing is littered with individuals who were right, but lost their capital because they were simply too early.
“The price of BitCoin has a 91% correlation with Google searches for BitCoin” http://uk.businessinsider.com/bitcoin-price-correlation-goog...
Obviously BTC can be in a bubble & whilst still having real value - the two things are not necessarily connected. (Although having a good future value story is helpful for a bubble to form in the first place I would argue.)
(In my personal opinion: It's like asking when the next collapse in a sandpile will happen & how big it will be. Not possible.)
PS: I have no intention of cashing out.
Since BTC is deflationary I'd rather hold till each BTC is worth 100k. Check this thread in 2030 :)
Imagine if soy beans gradually went extinct. In the short-term, the prices would spike as companies reliant on soy beans compete for the shrinking supply. But as prices go up, these companies either go bankrupt, or find alternative inputs to replace soy beans. Either way, the prices eventually hit zero before extinction occurs.
The once plentiful and valuable becomes rare and worthless.
How does one define supply with a divisible unit like bitcoin? Arguably, supply does not diminish, rather people use smaller units of bitcoins.
Tldr; Bitcoin is deflationary because math.
Secondly, at some point, calculations become onerous. Like, if btc is $100k/coin, then normal, every day transactions will need to be in 0.000001 coins. Which is an incredibly annoying unit to work with, it's trivially easy to miss an order of magnitude, i.e., 0.0000001 at a glance, is that a dime, a dollar, or a ten?
Accidentally give a $100 instead of $10 once, and you'll be annoyed, do it twice and you're done using btc.
Further details: http://bitcoinchaser.com/bitcoin-units-and-denominations
You are unquestionably better than ignorant humans with liquid assets.
If lightning had struck a few houses over, would I have cashed out or held? I suspect I would have cashed out most of them around $1k. Why did you hold?
Oh and for those of you reading this: back up your wallet.dat in an encrypted truecrypt volume with multiple cloud backups!
https://finance.yahoo.com/quote/BTCUSD=X/
Not really. Timezones are a thing and I'm pretty sure the majority of those exchanges halted trading.
https://data.bitcoinity.org/markets/volume/3d?c=e&t=b
We'll know when something meaningful happens by the price impact
China is able to track their populous really well, or at least have their population believing so, and thus anything that adds pseudo-anonymity kinda ruins their mission. In the future it is probable that all countries will have their own cryptocurrency, backed by some sort of tangible asset like Au (gold) or Ag (silver). What strikes me as very important for the US is establishment of a national cryptocurrency. It can be anonymous (everyday cash is essentially anonymous), but the consensus on how to regulate one is very much a process of education (elder generation finance people don't really get bitcoin yet). So once regulatory measures can be taken to ensure there's no theft etc, then it'll be easy. China's thinking on the matter is that if it cannot be regulated, shut it down and make a version that can be.
Imagine a system where the money is issued by a central authority. The users would register their identities with the authority, and receive a certificate. When the bank issues money, it assigns a random serial number R, and it signs it with the bank's key and specifies whose money it is by the user's public key U: S[U, R]. Now suppose Alice has S_Bank[Alice, R] and wants to pay Bob. She can sign the money over to Bob: S_Alice[Bob, S_Bank[Alice, R]]. Bob could do the same to give Charles some money.
Eventually, someone will deposit the money they received with the bank. The bank will check if money with the same serial was ever deposited previously. It can then catch the cheater who double-spent the money by looking for the "fork" in the signature chain. So if the bank tied identities to some offline ID, the police can go arrest the fraudster (or you can imagine other punishments, like blacklisting them from the entire system, etc.).
Notice that even though money creation, identification, and double-spending defense are all centralized, payments remain decentralized: unlike credit cards etc., in this system, one need not contact the bank in order to spend money. True, there may be more of a delay in catching double spending; on the other hand, we have gotten rid of the very expensive mining process. We have also avoided one of the more subtle and annoying issues with Bitcoin: bootstrapping the P2P connection (you only need to connect to whomever you are trying to pay when you are trying to pay them).
[This is just a simplified version of "ecash," which cryptographers have been studying since the 1980s. What I left out is the mechanism for ensuring payment privacy, which is pretty interesting in the offline payments case.]
It's a dystopian government's dream.
Since the the BitCoin ATM was installed, home prices are down 25%, crime is WAY UP, and the transient population has exploded. People are talking about moving to Detroit to get away from the general rot and decay of the BitCoin defiled inner city. /s
Capital flight.
A growing number of Chinese nationals has been using Bitcoin to siphon money out of China over the past several years.[1][2]
Not surprisingly, the Chinese government is cracking down on this innovative form of capital flight.
[1] http://www.theepochtimes.com/n3/1891021-how-chinese-use-bitc...
[2] http://www.theaustralian.com.au/business/markets/chinese-inv...
In the west this is legal, but the bank may still ask you where the money came from under their enforcement of laws like knowing your customer and money laundering controls.
Tax agencies may also get involved if there is automatic reporting.
That's exactly what capital flight is (one of its forms), and what most thrid-world countries try to avoid by these banning practices. They (we) have shitty unstable currencies and broken banking systems that the people have no trust in, so they use their savings to buy USD (hard to do in these countries) or Bitcoin to maintain value. Note that money doesn't even need to leave the country for it to be a form of capital flight; just the fact alone that you're buying foreign currency or Bitcoin in a black market.
For the few customers that agree to a wire transfer, I'm trying out a cryptocurrency exchange in 2018 to convert them to USD.
I've spoken with my US equities/funds brokerage firm, and they have an FX desk, but they're still more expensive than the dedicated FX broker I found and currently work with. Before that, I was regularly raked by my US bank for 4-6% off the mid-market. I haven't seen mid-market spread + 0.01% anywhere, and only seen + 0.1% thrown around for 6-figure and up USD transaction sizes, wire transfer (ACH or SWIFT), at least several of those per month volume. TransferWise works at mid-market + 1%; but they don't work with paper checks. What you're getting is even better than cryptocurrency exchange-facilitated conversions, so I'm very interested in finding out more if you can post a pointer in the right direction. Thanks.
(Not an endorsement in any way and I'm sure there are others).
Fees are min($2, 0.002%), typical spread is a few pip or much less (eg. EURUSD at the moment: 1.20015 (sell) 1.20020 (buy)). But you'll also need a bank account in both currency most likely.
edit: maybe a downside, but there's a min $10/month activity fee at IB if you have less than 100k holdings (but your transaction fees count against that). But as I said, I'm sure IB isn't the only place with those offerings.
Part of my forex broker's value add is they have banking points of presence in many nations, and can accept the check there, then convert to any currency I designate (typically USD). That would probably explain much of the spread between IB's and my FX broker's margins.
Disclaimer: IANAL and perhaps a bad judge of how people around the world view the law.
Aren't these the same thing? [1] Do you mean something else (civil law)?
But that's a great point; maybe the problem is my lack of living in a purely civil law country. The thing is though, it seems more like common sense to me than a legal issue. Like for example, if (say) murder with a knife and a gun had been illegal, but there was no law against using baseball bats, then suddenly everyone in a civil law system would naturally assume using baseball bats to kill would be okay? It just doesn't make sense to me that "whatever is not expressly illegal must be legal", whatever the legal system... but maybe you're saying that would actually stand up in a civil-law court, and people would actually be okay with it?
It's also quite counter-intuitive to me since the US (with its common law) seems to be quite prominent in its tendency to let its people and companies stick to the letter of the law but not its intent. e.g. so many corporations find legal loopholes to take advantage of all sorts of people (from consumers to politicians) by means which are not technically expressly illegal but which almost surely are out of line with the spirits of many existing laws.
[1] https://en.wikipedia.org/wiki/Common_law
Murder is kind of hard to use as an example because there's typically really strong moral and cultural understandings that you shouldn't be doing that. But lets think of a more nuanced example. Lets say there's a lake that's being overfished. The government doesn't want to outlaw all fishing, but they want to rein in the more massive fishing operations. So they outlaw using trawler nets in the lake, but people using conventional poles or spears can keep fishing as much as they want.
Now say someone comes along and figures out another method to massively overfish the lake without using nets. In civil law countries if the law is written to specifically outlaw the use of nets I think the people would look at the law as faulty instead of the person who exploits the loophole. After all, whatever method they figured out isn't actually illegal. And the way to solve the issue is to update the law, not to punish the clever loophole seeker.
But in common law countries the law would more likely be written in a way that can't be as strictly interpreted. There might be wiggle room that would allow a judge/jury to basically say "Look we didn't explicitly forbid what you are doing, but it's clearly something this law was meant to prevent. Therefore you're guilty, and case law will be updated to include this verdict."
At least that's how I interpret it.
it was legal in so many ways in the past (slavery) and a few today (death penalty, wars)
the thing with all laws, and the state, is that they exist not to make the world fair, but ti maintain status quo.
in the death example, if the law explicitly left baseball bats deaths out, that means that someone with influence over the state wanted it to be exempt.
this is the same on china now probably. china has tons of tech and hydropower. heck they may have invented satoshi! and maybe now too many small players are disrupting their game? or it maybe be that btc is but an annoyance to them and when their economy crumbles because of the upcomingreal state buble they dont want to also have to deal with people loosing money to bogus ICOs. who knows?
This is where the "Chinese people use Bitcoin to exfil capital" story falls apart. It's near impossible to open a foreign bank account and pass KYC from within China as a Chinese citizen.
You have to travel to Macau or Hong Kong - and if you're doing that you may as well use the cheaper and more efficient underground laundering and exchange networks.
The most well known ways of exfiltrating capital out of China - foreign real estate[0], casino junkets[1] and foreign acquisitions[2] - have been cracked down on in the past 12 months.
I think Bitcoin pales in comparison to these sources and is a minor irritant, and it was more likely Bitcoin is now being more heavily regulated because of the ICO boom and associated scams in China.
[0] https://www.forbes.com/sites/ellensheng/2017/07/31/chinese-o...
[1] http://www.abc.net.au/news/2017-06-13/crown-employees-detain...
[2] http://www.afr.com/news/world/chinas-strict-capital-controls...
There's been something of a crackdown on this in the last few months too, AFAICT
http://www.telegraph.co.uk/business/2017/08/18/china-crack-f...
They can't make payment on their mortgage.
They can't find a buyer at high prices.
The Chinese Communist Party considers audible social discontent to be an existential threat and responds to it with overwhelming force. Part of the response is banning public expressions of discontent. Part of it is shooting corrupt officials after show-trials. Part of it is rejiggering incentives, to make it clear that you'll have to keep your money under the watchful eye of the CCP rather than discretely investing it in a country which probably won't execute you.
BS
On what timescale? WP says they have $3T, same as 2016.
https://en.wikipedia.org/wiki/Foreign-exchange_reserves_of_C...
https://www.reuters.com/article/us-china-economy-forex-reser...
How could a clever Chinese citizen avoid government scrutiny of their cryptocurrency finances under these conditions? They could trade Yuan (cash) for BTC through an underground mechanism of some sort. The vast majority will already be on the record at the soon to be defunct exchanges.
Manufacturing them in china let's you move money around, but you could also Manufacture anything else and just sell it in the west.
That's a lot of work.
http://www.newsweek.com/virtual-currency-bitcoin-anonymous-w...
https://www.newyorker.com/magazine/2011/10/10/the-crypto-cur...
https://arstechnica.com/tech-policy/2011/06/bitcoin-inside-t...
https://techcrunch.com/2011/05/20/bitcoin-ven-and-the-end-of...
https://gizmodo.com/5803124/what-is-bitcoin
Hah. So the usual suspects were pimping it, in 2011, as "anonymous". Surprise!?
It's like the utopia of Internet sold in the 90s that predictably mutated into the global panopticon.
Always read the specifications. Always.
Complaining about the lack of privacy of BitCoin when using an exchange is like complaining that you did an illicit transaction in front of a police station to ensure you didn't get mugged, but are surprised when the police use security camera footage as evidence against you.
I am pointing out that it was "sold" as "anonymous", by the establishment. And it clearly could not be that, per spec.
In fact, I also remember that this feature of cryptocurrencies was subtly communicated to a larger audiance in conjunction with stories about "a group of hackers called Anonymous" -- you know, those guys with their suited headless figure in front of a globe with imperial laurels logo. (Someone must have gotten a good lolly laugh coming up with that zinger of a logo. Or possibly merely sniffed in contempt.)
Growing but irrelevant. The largest sums I've heard of being moved by Bitcoin are, at most, a few hundred thousand dollars. This pales in comparison to the invoice factories in Hong Kong, Taiwan, et cetera through whom hundreds of millions of dollars flow.
The CCP is worried about fraud in a way American regulators aren't because Chinese victims of ICOs are more likely to look to Beijing when they lose their money.
(Keep in mind that Bitcoin was fine until ICO promoters started pilfering from the masses. Also, China is loosening its capital controls in a bid to keep the renmimbi from overheating [1].)
[1] http://www.reuters.com/article/us-china-economy-capital-cont...
Disclaimer: I am not a lawyer. This is not legal nor financial advice. Do not launder money.
Libertarian ideals do not fit in communist societies. Regulation was always coming, as even liberal societies regulate.
But regulation is only there to keep the established order. The established order is very afraid of crypto right now in the same way the music industry freaked out over MP3.
I can't help it, but I get annoyed when crypto is branded with illegal activities like terrorism, fraud etc. No one talks about USD being used in the same way!
That's a very narrow minded view of what regulation is good for.
That kind of petty criminality and fraud seems to run through the heart of the bitcoin community, and is part of why I think people are reasonable to associate it with questionable activity -- that's what it's advocated as supporting even here on HN!
It's not that different than when people (used to) talk about not paying sales tax on online purchases, but hopefully you wouldn't conclude that "petty criminality and fraud seems to run through the heart of ecommerce."
I'm actually confused by your example, because it looks like an example of precisely that happening (and then they were forced not to allow that). Lots of people flocked to e-commerce because of changing the ability to tax transactions.
Lots of "technology disruptions" seem organized around allowing people to break the law on the broad scale by making enforcement complicated and infractions easy. Not to say all of them, but enough that it's certainly a trend.
We can view that as a good thing or a bad thing (and there are reasons it might be a good thing), but it seems strange to ignore it happening.
It's really a perfect analogy. Apparently some people think that cryptocurrencies and ecommerce were both founded or significantly based on criminality, but I think there are some great advantages and opportunities with both that have nothing to do with crime. With cryptocurrencies, that's still largely a prediction, but with ecommerce I think it's ludicrous to claim that its success is owed to crime to any meaningful extent.
This seems to be the crux of your argument, and doesn't necessarily follow. Just because it was instrumental for the rise doesn't mean it will cause a fall if its removed at a significantly later point in time.
A support can be essential for building a bridge, even though the bridge stands without it when completed. I think tax evasion was precisely that bridge support for online commerce.
> Apparently some people think that cryptocurrencies and ecommerce were both founded or significantly based on criminality, but I think there are some great advantages and opportunities with both that have nothing to do with crime.
These two positions aren't contrary, and I'm curious why you're presenting them as if they were -- criminality is incentive to switch services, which are then sticky because they do provide features. However, pretending that those features is what caused the initial switch is revisionist.
> ecommerce I think it's ludicrous to claim that its success is owed to crime to any meaningful extent
I think claiming its success (and certainly that of current players) doesn't have anything to do with early criminality is absurd.
That being said, no one is talking about its present generator of value, we're talking about what created the incentives that led to this outcome two decades ago.
If the same nodes repeatedly 'touch' the same serial numbers you can infer a relation.
The only downside to cash is a central authority controls it and can devalue if they so choose. Other than that, I agree, cash is great.
They do, literally all the time, to talk about money laundering and justifying absurdity like seizing cash from motorists.
The only money that isn't Supporting Terrorism!(tm) is Fed Fun Bucks(tm), which are stored as a number you may request be told to you from a participating national bank.
I'm not really sure what point you're trying to make here; that regulation is a Communist idea? Either way, China is not a Communist society, it's a very capitalist society, with private property, wage labour etc. Also, libertarian (used in the original way libertarian was used) is Communist society. The modern "libertarian" (propertytarian) ideals do not fit in Communist society. Great lovers of freedom from democratic socialists Oscar Wilde to George Orwell to the social anarchists knew this.
Monetary regulation protects, supposedly. It may protect individuals against losing money in stupid schemes. But it didn't save us from the recent massive and costly market crashes which hurt far more people than a few loan sharks ever could.
The rich use regulation to control markets, that's why the gaps are growing between rich and poor people.
Regulation protects from both sides. It can protect you from getting rich too, by loading barriers to your opportunities.
Look at climate change - if you want to use another regulatory framework as an example of governmental regulatory failure.
Did environmental regulation stop climate change? No it became a tool for lobbyists to use to delay changes to the market that would harm profits. A protectionist racket, full of do good fools who think they know best.
Regulation is a tool used by governments to control stuff. Look at what is broken in the world - regulation is a huge factor in that.
The answer to regulation is self education.
I believe this will immediately cause a constriction in supply as those coins will not be sold at least initially on the open market.
Look for this messaging to coincide with the pronouncements around the new five-year plan(FYP)[1]. As the first major section of the 13th FYP, innovation is emphasized as a cornerstone of China’s development strategy.[2] Bitcoin is a technology and has already come along way from the Satoshi whitepaper. State-Owned Enterprises will be emphasized as they strengthen SOEs as national champions at home and abroad and protect their interests in this emerging blockchain space. The goal of the One Belt, One Road (OBOR) initiative is to facilitate access to natural resources and encourage economic development in China’s poorer western provinces.
While such an initiative can continue without bitcoin, it is interesting to think of how OBOR would be strengthened on the world stage with an instantly settled mechanism such as bitcoin behind its infrastructure.
[1] https://en.wikipedia.org/wiki/19th_National_Congress_of_the_...
[2] https://www.uscc.gov/sites/default/files/Research/The%2013th...
Sounds like a good reason for a fork.
Even if they switched to Scrypt (from SHA256) for which dedicated hardware exist, it would cost them millions of dollars and require months of manufacturing re-organization to get to their share of hashrate.
Of course, the miners would still be able to mine the old fork and at that point it is more likely that an altcoin (like Ethereum, Litecoin or Vertcoin) would eat up Bitcoin's marketshare.
Having 51% of hash power doesn't mean you mine 100% of blocks. That's not how Bitcoin works. With 51% you will probably mine around 51%.
This, of course, is assuming that the 51% doesn't create blocks considered invalid on the other chain. This would cause a hard fork and it's exactly what is happening now with Bitcoin Cash, except with a much smaller fraction than 51%.
So no, what you are describing cannot happen with the default rules.
They are building on some of their blocks and some of the other miner's blocks. This doesn't make them faster.
Whenever a 49%er mines a block, there is a temporary fork. The 49% and the 51% start mining on two completely separate branches, both of which progress at half speed. Eventually the 51% branch is longer, and the 49% discard their previous work and switch to it. So the 49% were using their blocks, and now they are using the 51% blocks, but never both at the same time.
The canonical blockchain does not progress at full speed. Half the blocks that get mined eventually become orphans.
It would be impossible for the 49% to build on everyone's blocks, because the 51%-created blocks are always mutually incompatible preexisting 49%-created blocks.
> This, of course, is assuming that the 51% doesn't create blocks considered invalid on the other chain.
Yes, of course.
There are really two separate scenarios we're talking about here. Miner activated hard forks, which are a real thing that have happened (though not exactly like you describe), and a hypothetical situation where a group of miners agree to create an exclusive chain that is also backwards compatible. I'm no expert but I don't think that would have the intended result.
That's the difference between a hard fork and a 51% attack. In a 51% attack you keep making normal bitcoin blocks, just the ones you want.
China has a huge and possibly insurmountable lead in not just existing built hardware, but a head start in the know-how of rolling out new ASIC designs to production, (relatively) cheap factories to mass-produce hardware, access to cheap/state-subsidized electricity, and (in this hypothetical scenario of nationalization) the support of the central government of one of the largest/most-powerful nations on Earth.
Chinese miners currently control significantly more than 50% of Bitcoin mining.
If the government takes control of the the miners, they take control of the bitcoin network. There's plenty of mischief they could make with that if they were so inclined.
https://cash.coin.dance/blocks/profitability
Think back to what I said about crossword puzzles. If China had a world-class crossword puzzle team, winning every competition, why on earth would they seize their own team's pencils? It wouldn't stop the competitions from happening, and it wouldn't stop other teams from winning them.
I'm not trying to be a pedantic prick on the internet, so please excuse me if I'm coming off that way, but I enjoy this topic a lot, probably too much.
Miners can only double spend transactions if they have > 50 % of the hash rate.
The only purpose of miners is to add proof of work to in exchange for new coins that users value. If the proof of work is on a chain that contains valid transactions and conforms to consensus rules, it'll be valuable.
Bitcoin users can always choose a different PoW algorithm if a threat actor coerces too high of a percentage of SHA256 mining equipment
https://bitcoin.stackexchange.com/questions/55316/what-happe...
> Clients will ignore invalid blocks when determining which chain is difficultywise-longest. Mining clients will not build on top of invalid blocks. Clients will not propagate invalid blocks (or invalid transactions).
Proof of work does not mean full nodes trust miners blindly. It only means they prefer the longest chain that follows the rules.
Like I said, yes, with 50% mining power you can double-spend all you want. But other nodes know what you are doing, expel you from the network, and discard your work, just as if you had 25% of hash power or 0.1%. The Bitcoin blockchain is not a democratic system where the majority always wins.
https://en.bitcoin.it/wiki/Protocol_rules
If someone with 1% hash power ignores certain blocks, they make a chain that's totally irrelevant in their own corner. If someone with 60% hash power does it, they win.
This is not true if you just have 50%. You'd have to consistently win the next block for double spending to be reliable, and users would just be wary to wait for more confirmations before accepting payment.
Besides, if China takes over all bitcoin exchanges and mining in China, that changes the "bad news" to huge positive news and basically a Bitcoin endorsement by a major world power. Once that happens the value of bitcoin would likely increase at a rate such that maintaining even a 50% hold on hash power would be difficult for a single player.
And the big miners happen to be in China, which is pretty convenient for the government. Not sure exactly how much of capacity is in the country, but if a lot of it gets shut down I think there's a 2 week reset window before the difficulty can come back down. If it's a large proportion it will significantly lengthen the time between blocks.
Also in the bigger picture, if illicit movements bother the Chinese, will they pressure other countries to stop allowing BTC?
Currently. It wasn't always that way, and there are many other currencies (Monero) where that isn't the case.
1. How will China treat miners?
2. Will they go forward with blocking node communication at the port/GFW level?
Re: 1, if they shut down / limit mining it's nbd. If they co-opt it to try & launch 51% attacks it's a big problem, but not, I think, insurmountable and would be a tactical error.
This in my personal opinion - is to prevent BitCoin from posing a threat to their homegrown technology industry, which is honestly no match for what we have in the Americas.
List of banned companies:
Google - Because they want to protect their clone Baidu.
Twitter/Facebook - Because they want to protect their clone Weibo.
YouTube - Because they want to protect their clone YouKu.
.
.
.
(it's a long list)
BitCoin banned - Because they want to protect their homegrown WeChat.
Just my opinion.
My guess is the simplest thing: China only wants things that can yield its' control over.
But speaking of this, it's really interesting to witness many Chinese bitcoin users/traders start to abandon WeChat and switch to Telegram. Many of them are totally new to telegram, but fear of Gov-monitoring drive them there.
See also https://www.bloomberg.com/news/articles/2017-09-15/china-s-w...