BTC in the PP

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Re: BTC in the PP

Post by bitcoininthevp » Mon Aug 30, 2021 12:16 pm

Arthur Boe Nansa wrote:
Sat Aug 28, 2021 6:24 pm
From a superficial sense BTC has no counterparties, but in a philosophical sense miners are the ultimate counterparty. They control the network. I love the "well I can always spin up a node" argument. If you're not proving work, you're irrelevant. Most people making this argument aren't proving work and also probably wouldn't even when push comes to shove.
This isnt quite true in the sense I think you mean or imply it. Miners have some degree of control but only within following Bitcoin's protocol rules. For example, if a miner, or even most miners decide to reward themselves more bitcoins than the rules allow, the other nodes will reject that miners block, regardless of how much work was put into that block, and regardless of how many blocks other miners mine on top of it.

So within Bitcoin's rules what can miners do?

Miners can censor transactions, as "censorship" isnt really detectable/enforced at the protocol level.
Miners can mine empty blocks (no transactions in the block). This is similar to censorship mentioned above.

Miners can NOT add to bitcoins supply, steal funds, etc and still be complying with the Bitcoin protocol.

What would happen if miners started breaking with Bitcoin protocol rules? Well really it comes down to economic activity. Essentially there would be a fork, say 21M (original chain) Bitcoin and then 22M (22 million coin miner chain). Everyone who had coins at the time of the fork would have the equivalent coins on each chain.

So what could an individual person do? You could sell your 22M coins for 21M coins at the going exchange rate as your "vote" for 21M chain. Driving UP the price of 21M coin and DOWN 22M coin. Others might do the same.

This is basically what happened when the 2017 fork occurred, creating Bitcoin Cash. There were believers on each side of the fork that sold the opposing chain coins. The result? BTC/Bitcoin won out from a price perspective over BCH/Bitcoin-Cash. You could get 4 BCH for each BTC early in the fork. Now you can get nearly 80 BCH for each BTC.

I believe the BTC side won that battle as the economic majority wanted a monetary policy that changed LESS. BCH wanting to increase the block size was, IMHO for the majority, more risky option and thus gained less market traction. For more on the block size saga/war, this is a great book: https://www.amazon.com/Blocksize-War-co ... B08YQMC2WM

I think risks of forks will almost alway be won in the future by the more "conservative side" for this reason. Miners are aware of this risk of deviating from the protocol and I think risks of such miners going rogue are less, but of course not eliminated.
Arthur Boe Nansa wrote:
Sat Aug 28, 2021 6:24 pm
Also, despite how slim the chances are, a cataclysmic scenario makes the network useless. If computers aren't running then bits aren't moving. Gold is physical.
Given whats happening in the world, the future concern about atoms (humans, gold) moving seems greater than the concern about bits (bitcoin) moving. Lockdowns, physical restrictions, etc.
Arthur Boe Nansa wrote:
Sat Aug 28, 2021 6:24 pm
What more could be said about pretend scarcity? In general when something is made up, it's hard to prove it isn't made up...
The point is that for the same reason BTC maximalists believe BTC has value, every other crypto project has value- namely that scarcity exists and demand will drive its price up.
There is code that codifies the finite supply of Bitcoin, so in a "code" sense, the scarcity is clear. But at the end of the day, humans are the ones running that code (or not). People could decide to go run 22M bitcoin, its entirely possible, in theory. But the game theory and incentives here are against such changes as I outlined above. It would be like saying that silver could be better money than gold some day or some such argument. Sure it could happen but that doesn’t stop me from investing in gold.

But Gold and Silver have real differences and "bit coins" and other coins are all the same! See below:
Arthur Boe Nansa wrote:
Sat Aug 28, 2021 6:24 pm
In a funny money world this feels like it makes sense. But at the end of the day, value comes from the utility of something.
Ill keep repeating it. Value is subjective. Whatever "utility" means is just a subset of what humans value based on their preferences and environments. Controlling some # of digital tokens sitting in a ledger IS utility for some people. The ability to send such tokens is utility, etc.
Arthur Boe Nansa wrote:
Sat Aug 28, 2021 6:24 pm
BTC isn't special. It's network effect is special. As far as a 21M supply cap is concerned, why would that be better then a BTC ver. 2 with only 20M coins? Isn't that more scarce?
I think network effect is special too. But I think you are missing the bigger picture I mentioned before: the credibility of the monetary policy. Scarcity of the units is only part of monetary credibility. A HUGE super set of limited/unchanging supply is monetary policy.

A monetary policy that limits changes seems to be preferred over one that changes often. Not changing block sizes, not inflating (or DEFLATING!) units, adding in a bunch of features with potential security issues, has a large proof of work to secure it, etc.

In cases where Bitcoin does add features, it is done in a backward compatible way, a way that preserves and increases decentralization, and also it is done in a way that enhances Bitcoin's monetary properties (decentralization, fungibility, security, privacy, etc).
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Re: BTC in the PP

Post by bitcoininthevp » Mon Aug 30, 2021 12:35 pm

vincent_c wrote:
Sun Aug 29, 2021 5:07 pm
I know this post isn’t kbg’s answer and I don’t see a question here after this response so let me just say that I will not further engage with posts that are not serious in nature and without questions or challenges even if I am quoted. I hope this does not disuade those who are serious in engaging in this discussion for the sake of your financial future.
It’s a funny thing, us humans. It is really hard for us to state some assumptions that we have and then ask for feedback from other people.

Instead it comes out in "bit coins is beanie babies"-like snide remarks. But I do believe many people commenting here (and others not commenting!) are here to learn. Even the beanie babies.

In that spirit, Ill offer myself up. Ive stated my assumptions and opinions here, what is it that I am missing?

To try and put my thesis in a sentence: Bitcoin is the asset with the closest match to the monetary properties that humans value and is in process of monetizing.
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Re: BTC in the PP

Post by bitcoininthevp » Mon Aug 30, 2021 1:27 pm

vincent_c wrote:
Mon Aug 30, 2021 12:42 pm
bitcoininthevp wrote:
Mon Aug 30, 2021 12:16 pm

Miners can NOT add to bitcoins supply, steal funds, etc and still be complying with the Bitcoin protocol.
I think he may have meant that miners/mining pools can collude can perform a 51% attack and double spend on the network. In the past there were worries that ISPs could spoof mining traffic to do the same. Does anyone view this as a serious concern that we need to discuss it?
The ISP concern doesn’t seem feasible regarding double spends if you are running your own node. The ISP would need to essentially mine those blocks in order to feed you valid blocks that your node would accept.

---

On the double spend topic for context for the thread. The idea here is that someone sends you $1,000,000 in BTC in a transaction and you see that transaction in the blockchain after a block comes in a few minutes. Then another block comes in on top of it. And another. So now you have 3 "confirmations" (blocks) for your transaction. You give the guy the plutonium he ordered for his bombs (since bitcoins for criminals ofc) and he leaves on his helicopter. Then he calls his Bitcoin miner buddies, and they stop their normal operations and work to essentially "redo" mining the last 3 blocks such that everything is basically the same except that his $1m transaction to you is no longer in the block chain. Poof, your payment is gone. This can be done all the back to the bitcoin first block in theory. In practice most people feel safe with large amounts after 6 confirmations, but you can read more on that here: https://en.bitcoin.it/wiki/Confirmation

This is in some sense another form of censorship per my previous post. Miners are not stealing money persay but censoring a recent transaction. It is a risk but this sort of thing basically never happens on Bitcoin and is mitigated by waiting more confirmations (blocks).
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Re: BTC in the PP

Post by bitcoininthevp » Mon Aug 30, 2021 1:34 pm

vincent_c wrote:
Mon Aug 30, 2021 12:57 pm
1) Gut feelings about an asset that looks overvalued
Im not necessarily trying to convince anyone to buy bitcoin so this isnt really a concern of mine. I think the big money will come from companies buying which has started, and then larger orgs and then governments.
vincent_c wrote:
Mon Aug 30, 2021 12:57 pm
2) Disagreement with the idea that bitcoin is money

This is where I differ from bitcoininthevp because I think it doesn't help to frame bitcoin as being in the process of monetizing. The reason is because opponents to this thinking will just focus on the fact that they don't think bitcoin will ever become money since they don't see it.

By doing so they miss things that they might actually agree on, like there is a growing blockchain industry, that there will be public blockchains, that there will be a digital collateral asset, that bitcoin currently fulfills that role and we need to discuss the reasons why it may or may not ultimately be the gold equivalent in that blockchain industry. Only once there is agreement on the future landscape where we can begin to discuss whether bitcoin can be anything more than digital property that has monetary-like properties.
I guess theres two things here:

1. Do I believe Bitcoin is becoming money
2. Is "framing" Bitcoin as becoming money the best way to achieve something else (convincing opponents, newcomers, etc)

I believe 1 and dont really have a strong opinion on 2.
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Re: BTC in the PP

Post by Arthur Boe Nansa » Tue Aug 31, 2021 12:48 pm

I'll clarify that i've been in the crypto space for a few years and i've already said that personally, I prefer BCH as the proper Bitcoin chain. However that's not the discussion here so i'll limit myself to discussing BTC's properties without making direct comparisons to other projects. You're very level headed about the discussion and hopefully we can continue it for others who may not be as well versed on the technical side of things (and how it may relate to the economic side of things).
bitcoininthevp wrote:
Mon Aug 30, 2021 12:16 pm
This isnt quite true in the sense I think you mean or imply it. Miners have some degree of control but only within following Bitcoin's protocol rules. For example, if a miner, or even most miners decide to reward themselves more bitcoins than the rules allow, the other nodes will reject that miners block, regardless of how much work was put into that block, and regardless of how many blocks other miners mine on top of it.
What do you mean "even if most miners decide"? If by most miners you mean most hashrate, then they are the Bitcoin chain. Other chains rejecting their block puts those that have rejected on the minority chain, not the other way around. That is enough to create serious rifts in the essential question of "which chain should be followed".
So within Bitcoin's rules what can miners do?

Miners can censor transactions, as "censorship" isnt really detectable/enforced at the protocol level.
Miners can mine empty blocks (no transactions in the block). This is similar to censorship mentioned above.

Miners can NOT add to bitcoins supply, steal funds, etc and still be complying with the Bitcoin protocol.
Again, in a 51% attack or majority shift in miner sentiment, it's not that they're not complying, it's that you're not complying. Code is law. ;)
What would happen if miners started breaking with Bitcoin protocol rules? Well really it comes down to economic activity. Essentially there would be a fork, say 21M (original chain) Bitcoin and then 22M (22 million coin miner chain). Everyone who had coins at the time of the fork would have the equivalent coins on each chain.

So what could an individual person do? You could sell your 22M coins for 21M coins at the going exchange rate as your "vote" for 21M chain. Driving UP the price of 21M coin and DOWN 22M coin. Others might do the same.

This is basically what happened when the 2017 fork occurred, creating Bitcoin Cash. There were believers on each side of the fork that sold the opposing chain coins. The result? BTC/Bitcoin won out from a price perspective over BCH/Bitcoin-Cash. You could get 4 BCH for each BTC early in the fork. Now you can get nearly 80 BCH for each BTC.

I believe the BTC side won that battle as the economic majority wanted a monetary policy that changed LESS. BCH wanting to increase the block size was, IMHO for the majority, more risky option and thus gained less market traction. For more on the block size saga/war, this is a great book: https://www.amazon.com/Blocksize-War-co ... B08YQMC2WM
I know. My point was less about the technical aspect of a chain split and more about the weak argument of "BTC has value because it has a capped supply." Anyone can make a carbon copy of the chain with less Bitcoins and have every quality Bitcoin has down to a T, but with less supply, thereby being objectively "scarcer" with the same qualities (well, except network effect, which i'll address at the end).

This was a nice unbiased recap of the chain-split. Unfortunately the book, while presented well, is not very unbiased and is good at "nudging the reader". People can read it for the main overview, but I recommend people interested in the subject to look at other sources as well.
I'll only say that while most people ultimately didn't want a block increase, it was less about their actual preference and more about "trusting the experts to make the best decision." Satoshi had clearly stated increasing block size would make sense when it was needed and Adam Back was originally in favor of steadily increasing the block size as well. Why it was slowly ignored as the preferred scaling solution is a different discussion...
I think risks of forks will almost alway be won in the future by the more "conservative side" for this reason. Miners are aware of this risk of deviating from the protocol and I think risks of such miners going rogue are less, but of course not eliminated.
Definitely agree here. That being said, miners ultimately do whats in their financial interest (even if users won't be happy about it) and can also be influenced by larger forces (that may or may not materialize, but the CCP telling some of their biggest businesses to "help out" with fiscal duties and their compliance with those demands isn't reassuring).
Given whats happening in the world, the future concern about atoms (humans, gold) moving seems greater than the concern about bits (bitcoin) moving. Lockdowns, physical restrictions, etc.
Disagree here. If things ever get real bad I think running away with smuggled gold makes a lot more sense then relying on lightning network hubs to broadcast transactions. Even if you did, who would provide you the physical things? We take it for granted, but we're still very, very reliant on the physical world. Your paradise in VR means nothing if you don't have a roof over your head IRL.
There is code that codifies the finite supply of Bitcoin, so in a "code" sense, the scarcity is clear. But at the end of the day, humans are the ones running that code (or not). People could decide to go run 22M bitcoin, its entirely possible, in theory. But the game theory and incentives here are against such changes as I outlined above. It would be like saying that silver could be better money than gold some day or some such argument. Sure it could happen but that doesn’t stop me from investing in gold.
The difference is silver and gold have physical properties you can use. Whether their values go up, down, flip or whatever is less relevant... the point is that they can do things people eventually need.
But Gold and Silver have real differences and "bit coins" and other coins are all the same! See below:

Ill keep repeating it. Value is subjective. Whatever "utility" means is just a subset of what humans value based on their preferences and environments. Controlling some # of digital tokens sitting in a ledger IS utility for some people. The ability to send such tokens is utility, etc.
Value is subjective. But it doesn't mean the term is totally meaningless when trying to justify/not justify the merit of things. Controlling some # of digital tokens isn't utility to people, the transfer of their perceived value is. The ability to send such tokens isn't utility, the transfer of their perceived value is. The great irony is that most people enthusiastic about crypto don't even hold their own coins. They like to say they can if they want to, but they don't. But that's the point of the decentralized, permissionless ledger in the first place! So what value are they really interested in? The properties of Bitcoin or the "perceived value and reflected dollar price" of the properties of Bitcoin?
I'm not belittling the strides crypto is making- to the contrary, i'm very excited about it, but there's a present reality people like to ignore. Instead of addressing the issues head on, they use vacuous statements like "we're still so early" and "few understand this" to keep the momentum of the narrative alive and well, which leads me to my next point...
I think network effect is special too. But I think you are missing the bigger picture I mentioned before: the credibility of the monetary policy. Scarcity of the units is only part of monetary credibility. A HUGE super set of limited/unchanging supply is monetary policy.

A monetary policy that limits changes seems to be preferred over one that changes often. Not changing block sizes, not inflating (or DEFLATING!) units, adding in a bunch of features with potential security issues, has a large proof of work to secure it, etc.
Don't get me wrong, I also think the network effect is special. In fact, it's almost unbelievable.
But the network effect being special is not an inherent property of BTC, it's a startling outcome of the amalgamation of factors that have helped push BTC to the moon. Whether that push continues or not is anyone's guess, but such a strong network effect (when the underlying fundamentals are competitively weak) are both a blessing and a curse.
In cases where Bitcoin does add features, it is done in a backward compatible way, a way that preserves and increases decentralization, and also it is done in a way that enhances Bitcoin's monetary properties (decentralization, fungibility, security, privacy, etc).
Predictability in project direction is certainly comforting, but I don't think it's enough to make BTC the "clear winner" as far as a future money or future store of value amongst the competition. Time will tell.


Parting words: I'm not trying to tell people what to do, i'm playing devils advocate and so long as people stay diversified for changing macro conditions they should be fine.
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Re: BTC in the PP

Post by bitcoininthevp » Tue Aug 31, 2021 8:11 pm

Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
bitcoininthevp wrote:
Mon Aug 30, 2021 12:16 pm
This isnt quite true in the sense I think you mean or imply it. Miners have some degree of control but only within following Bitcoin's protocol rules. For example, if a miner, or even most miners decide to reward themselves more bitcoins than the rules allow, the other nodes will reject that miners block, regardless of how much work was put into that block, and regardless of how many blocks other miners mine on top of it.
What do you mean "even if most miners decide"? If by most miners you mean most hashrate, then they are the Bitcoin chain. Other chains rejecting their block puts those that have rejected on the minority chain, not the other way around. That is enough to create serious rifts in the essential question of "which chain should be followed".
There is a disconnect here. Bitcoin isnt the chain with the most proof of work, it’s the chain with the most proof of work that is valid. Miners that follow the existing Bitcoin protocol, which all current Bitcoin Core nodes run and enforce, can "misbehave" (for lack of a better word) in limited ways. Censorship of transactions, mining empty blocks, or 51% attacks are examples of this. These are all valid-in-the-existing-protocol ways to misbehave as a miner. These are valid behaviors because the existing Bitcoin protocol allows them.

There are other, invalid-in-the-existing-protocol ways for miners to misbehave as well. For example, rewarding themselves 1,000,000 BTC in a single block. This is invalid regarding the existing Bitcoin Core software/Bitcoin protocol that the network runs. If all miners, right now, started rewarding themselves 1,000,000 BTC, there would immediately be a fork in the network.

This is basically what I already outlined in my "22M Bitcoin" fork example previously. All mining power is on the 22M chain, but the credible monetary policy, which economic actors value, is on the 21M chain. So everyone sells 22M coins and buys the 21M coins, driving up 21M price and down 22M price. That leaves 22M chain with all the miners fighting over less and less revenue, and eventually losing money. And leaves 21M chain with its easy mining, a huge financial incentive for miners to defect from 22M chain, or huge incentive for new miners to join the 21M chain.

So what is important in such a split is where the economic majority will go, not where the miners choose to go.
Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
My point was less about the technical aspect of a chain split and more about the weak argument of "BTC has value because it has a capped supply." Anyone can make a carbon copy of the chain with less Bitcoins and have every quality Bitcoin has down to a T, but with less supply, thereby being objectively "scarcer" with the same qualities (well, except network effect, which i'll address at the end).
You and I can spin up NansaCoin tonight with the same code, but what would be missing is the credible part of the credible monetary policy as I refer to it. NansaCoin has no developers, a weak hashrate, no lindy effect, no supporting application ecosystem, etc. Its not scarcity, as you point out, its credible monetary policy.

Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
I'll only say that while most people ultimately didn't want a block increase, it was less about their actual preference and more about "trusting the experts to make the best decision."
Their preference was to trust the (perceived) experts.
Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
...miners ultimately do whats in their financial interest (even if users won't be happy about it) and can also be influenced by larger forces (that may or may not materialize, but the CCP telling some of their biggest businesses to "help out" with fiscal duties and their compliance with those demands isn't reassuring).
In an extreme example you have the 22M CCP-backed chain forked off from 21M chain. Basically what happened in 2017.
Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
The difference is silver and gold have physical properties you can use. Whether their values go up, down, flip or whatever is less relevant... the point is that they can do things people eventually need.
I dont really understand where this is going, you’re arguing that golds non-monetary uses (1% of golds value? 2%?) means its somehow significantly better than Bitcoin in some way? Because if gold is de-monetized your rock is worth a few bucks and if Bitcoin is demonetized you end up with zero instead? This doesn’t seem like an important point but maybe Im missing it.
Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
Value is subjective. But it doesn't mean the term is totally meaningless when trying to justify/not justify the merit of things. Controlling some # of digital tokens isn't utility to people, the transfer of their perceived value is. The ability to send such tokens isn't utility, the transfer of their perceived value is.
I think it’s a bit of a spectrum. From a price perspective, people seem to prefer stronger store of value-ish tokens with a weaker transaction mechanism. After all we have 100s of different ~free transaction apps (venmo, zelle, paypal, etc) and tons of credit/debit card choices for easy transactions.
Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
The great irony is that most people enthusiastic about crypto don't even hold their own coins. They like to say they can if they want to, but they don't. But that's the point of the decentralized, permissionless ledger in the first place! So what value are they really interested in? The properties of Bitcoin or the "perceived value and reflected dollar price" of the properties of Bitcoin?
I cant comment on behalf of others, but self custody is opt in and that seems ok. I think this will be solved as the space matures with better apps, usability, and services for multisig.
Arthur Boe Nansa wrote:
Tue Aug 31, 2021 12:48 pm
Don't get me wrong, I also think the network effect is special. In fact, it's almost unbelievable.
But the network effect being special is not an inherent property of BTC, it's a startling outcome of the amalgamation of factors that have helped push BTC to the moon. Whether that push continues or not is anyone's guess, but such a strong network effect (when the underlying fundamentals are competitively weak) are both a blessing and a curse.
I agree regarding network effect/first mover advantage. But as I said I think its sub part to the credible monetary policy.
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Re: BTC in the PP

Post by Arthur Boe Nansa » Wed Sep 01, 2021 6:00 am

bitcoininthevp wrote:
Tue Aug 31, 2021 8:11 pm
There is a disconnect here. Bitcoin isnt the chain with the most proof of work, it’s the chain with the most proof of work that is valid. Miners that follow the existing Bitcoin protocol, which all current Bitcoin Core nodes run and enforce, can "misbehave" (for lack of a better word) in limited ways. Censorship of transactions, mining empty blocks, or 51% attacks are examples of this. These are all valid-in-the-existing-protocol ways to misbehave as a miner. These are valid behaviors because the existing Bitcoin protocol allows them.

There are other, invalid-in-the-existing-protocol ways for miners to misbehave as well. For example, rewarding themselves 1,000,000 BTC in a single block. This is invalid regarding the existing Bitcoin Core software/Bitcoin protocol that the network runs. If all miners, right now, started rewarding themselves 1,000,000 BTC, there would immediately be a fork in the network.

This is basically what I already outlined in my "22M Bitcoin" fork example previously. All mining power is on the 22M chain, but the credible monetary policy, which economic actors value, is on the 21M chain. So everyone sells 22M coins and buys the 21M coins, driving up 21M price and down 22M price. That leaves 22M chain with all the miners fighting over less and less revenue, and eventually losing money. And leaves 21M chain with its easy mining, a huge financial incentive for miners to defect from 22M chain, or huge incentive for new miners to join the 21M chain.

So what is important in such a split is where the economic majority will go, not where the miners choose to go.
Yes and no. You've again dipped into this idea of "credible monetary policy", but you keep blurring the lines between code and "efficient market participation that seems so obvious and that everyone would follow it." Is segwit a credible monetary policy?
For more on hard/soft forks and the notion of credible monetary policy in upgraded software, I recommend people also read this: https://medium.com/@octskyward/on-conse ... a050c792e7

The point i'm trying to make is that (user activated) soft forks don't really mean what people think they mean as far as the code is concerned and the philosophical fundamentals that are supposed to make Bitcoin superior. In almost prophetic words, the end of his article is this:

Can hard forks destroy bitcoin?
No. If it were the case then literally anyone could kill Bitcoin by just mining a block or two with different rules. The entire purpose of the block chain algorithm is to ensure that this cannot do any damage!
The idea that “contentious” hard forks could cause bitcoins to “permanently lose their value” appears in the bitcoin.org policy, but it’s actually the other way around. To demand that any change must have 100% agreement (or 99%), as at least one Bitcoin Core developer wants, just means anyone can hold the entire community to ransom by refusing to agree unless they get what they want. No actual piece of infrastructure works this way. If Bitcoin did, it could never evolve and eventually would become worthless.


The reason it feels like Bitcoin is far from becoming worthless is less about his analysis being wrong and more that "the game has changed" e.g. Funny money and the ever shifting ideology of what Bitcoin is and does.
You and I can spin up NansaCoin tonight with the same code, but what would be missing is the credible part of the credible monetary policy as I refer to it. NansaCoin has no developers, a weak hashrate, no lindy effect, no supporting application ecosystem, etc. Its not scarcity, as you point out, its credible monetary policy.
Is this a proposition? Let's do it! :)
And I'm glad we agree scarcity isn't really a fundamental of Bitcoin, rather credible monetary policy (which i've briefly expressed my doubts about above and below)
Their preference was to trust the (perceived) experts.
Amen.
In an extreme example you have the 22M CCP-backed chain forked off from 21M chain. Basically what happened in 2017.
Eh, i'd say both sides had enough China backing to make their ulterior motives questionable. But we'll keep the discussion economical.
I dont really understand where this is going, you’re arguing that golds non-monetary uses (1% of golds value? 2%?) means its somehow significantly better than Bitcoin in some way? Because if gold is de-monetized your rock is worth a few bucks and if Bitcoin is demonetized you end up with zero instead? This doesn’t seem like an important point but maybe Im missing it.
Correct. I think the "floor" of base metals is an extremely important part of their store of value thesis. I'm not against a digital store of value (with theoretical zero intrinsic value) I just think we need to be humble enough to realize that we're not technological advanced to do it well yet. If it doesn't arise organically, it's speculation as far as i'm concerned.
If you don't see it as an important point we'll just agree to disagree on this one.
I think it’s a bit of a spectrum. From a price perspective, people seem to prefer stronger store of value-ish tokens with a weaker transaction mechanism. After all we have 100s of different ~free transaction apps (venmo, zelle, paypal, etc) and tons of credit/debit card choices for easy transactions.
They do seem to prefer that, but I think its more of a play to the narrative than an actually rational position. I feel comfortable making this claim as it simply reflects user behavior: most people keep their coins on custodial exchanges, from a code perspective UASF doesn't make much sense, and the fact that the Whitepaper was literally titled "Bitcoin: A Peer-to-Peer Electronic Cash System" and that fairly fundamental aspect of the network has gone by the wayside for some kind of SoV. The shift in narrative feels less like a calculated decision and more like an inevitable conclusion to a system that has trouble innovating. If you have an oven (=Bitcoin) that's supposed to be multipurpose for lots of different dishes (=handle many transactions, at scale, for a low fee with adequate decentralization and permissionlessness), but the oven doesn't rise to a high enough temperature (=scaling issues), sunk cost fallacy makes the idea of relabeling the use case of the oven (=narrative shift) much more attractive than deeming it a bad oven (=admitting its failure) or spending the time, energy, effort, and money to make big changes to it that can also make certain people upset (=finding "compromises" that "change" parameters of the code).
I cant comment on behalf of others, but self custody is opt in and that seems ok. I think this will be solved as the space matures with better apps, usability, and services for multisig.
Sure it's okay, i'm not gonna tell people what to do with their money haha. I was just highlighting the discrpency between that action and the touted benefits of a decentralized and permissionless network that's "always available".
I certainly hope for everyone's sake that the space matures.
I agree regarding network effect/first mover advantage. But as I said I think its sub part to the credible monetary policy.
We'll leave it to people to decide what constitutes a credible monetary policy for them, the best advice I can give is to just keep the mind open and read as much as possible.

I think we covered enough ground, if there's anything else you want to say feel free.
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Re: BTC in the PP

Post by Arthur Boe Nansa » Wed Sep 01, 2021 6:37 am

vincent_c wrote:
Tue Aug 31, 2021 9:41 pm
To make things simple, people should know that the type of blockchain bitcoin is is considered more secure than most of the newer blockchains that are mostly some version of proof of stake. At the end of the day, encryption is probabilistic and it is secure enough for most people, I think that is a fair statement.

If you are concerned about bitcoin’s security then the conversation is over.
It's kind of hard to say "considered more secure" as a blanket statement. There are definitely important trade-offs though and anyone who wants to see crypto as more than a novelty (store of value, medium of exchange, etc.) Should understand the fundamental consensus mechanism of the project they're interested in.
If you are concerned about hardfork, I’ll say this isn’t 2017 and I’m very sorry for you if you supported BCH all this time. The thing is, people should understand the one key thing about forks which is that when a blockchain forks the token holders get both coins in the fork and you don’t lose anything. The market will sort out which is the blockchain that retains the most value and it doesn’t affect you at all.
You may find the article I linked to about hard and soft forks in my above post compelling. Thank you for being sorry for me, we're sorry for ourselves (and everyone else) as well haha. But it's okay, we have our heads up and I understand crypto is an experimental industry that will continue to have many changes. I support quite a few other projects, though you should know that BCH is far from "dead", but i'll leave it at that. The point is optionality in technology and while we'd all like to see the dollar value of our coins rise exponentially i'm also very excited about the possibilities that are being offered in the industry.
Why does BTC have value? It’s because everyone knows BTC and trust is difficult to accquire. Not a lot of people even know ethereum and if someone can name a project that is looking to be a store of value blockchain then let’s hear it because if I can’t think of one and I’m in the space both as an investor and in business then how well known can it be?
Why does Tesla have value? Is it because they're selling more cars than Ford or Toyota? Because they've rolled out a million robotaxis?
You could say it's because everyone knows Tesla and trust is a difficult thing to acquire...but people said the same of Theranos and WeWork. The passage of time does funny things to our memory.

I'll offer you an alternative perspective- what if a blockchain isn't looking to be a store of value, but naturally becomes one by way of its utility being too attractive to ignore and permeating everyday life? That is what Ethereum proponents imagine is going to happen. Whether it does I don't know, but that seems like a smarter strategy then "accept BTC as a store of value because everyone covets it (why they covet it, no one really knows).

Image
The blockchain industry needs capital in order for blockchain projects to be funded. That capital has to get into the crypto industry somehow and whether you like it or not, the tool that is being used is the BTC blockchain. Is that even controversial?
No that's what Tether and stablecoins do, but that's a completely different can of worms.
That BTC is objectively the "gold standard" (pun unintended, but now intended) of crypto projects right now is not controversial. Even people who don't like it will admit that, but that's because the space is FAR from mature. I do not expect it to last, but that's what makes a market.
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Re: BTC in the PP

Post by bitcoininthevp » Wed Sep 01, 2021 10:31 am

We seem to agree or at least agree to disagree on many of the points so keeping only a couple for discussion.
Arthur Boe Nansa wrote:
Wed Sep 01, 2021 6:00 am
Yes and no. You've again dipped into this idea of "credible monetary policy", but you keep blurring the lines between code and "efficient market participation that seems so obvious and that everyone would follow it."
Im not trying to blur any lines, but there is some relation there. The code that people run is directly tied to market participation, especially regarding fork-ish stuff.

Im also not trying to be prescriptive here but descriptive. There are properties that it seems humans value/prefer in "money". The closer Bitcoin's properties (or other cryptos or even non-cryptos) seem to align with these preferences the higher price those monetary-type assets seem to have. These properties include the usual divisibility, fungibility, durability, verifiability, scarcity, etc. But for something digital, there seems to be another property: credibility. And that means the "faith" that people have that those other properties will not change in a way that would decrease those properties.

This unique property, credibility, of digital money-type assets can be increased by things like:
  • Supply limit (scarcity) is not changed
  • Decentralization is preserved or enhanced so that Bitcoin can better resist attacks on its money-ness
  • Lindy effect - "hey this things been around a while, I have more faith in it"
  • Lack of changes - "those Bitcoin dudes fought for 3 years just about a small increase to the block size?, woah, they probably arent going to change <other Bitcoin money-ness properties> easily
  • PoW mining doesn’t change
The common theme here is that (faith in->credibility) not changing properties is prioritized in Bitcoin.
Arthur Boe Nansa wrote:
Wed Sep 01, 2021 6:00 am
Is segwit a credible monetary policy?
It doesn’t seem to negatively affect any of Bitcoin's money properties above, so I think its ok. It also adds to transaction capacity which is good for Bitcoin's money properties. It adds "features" to Bitcoin which I think are net positive. Biggest downside might be it shows that Bitcoin does change "some" which might give people who want nothing to change about Bitcoin a negative feeling.
Arthur Boe Nansa wrote:
Wed Sep 01, 2021 6:00 am
And I'm glad we agree scarcity isn't really a fundamental of Bitcoin, rather credible monetary policy (which i've briefly expressed my doubts about above and below)
I think scarcity (limited supply) is important in a money-type asset. And I believe in general other humans do. But scarcity without credibility-of-said-scarcity means the scarcity is untrustworthy and thus might as well not exist.
Arthur Boe Nansa wrote:
Wed Sep 01, 2021 6:00 am
They do seem to prefer that, but I think its more of a play to the narrative than an actually rational position. I feel comfortable making this claim as it simply reflects user behavior: most people keep their coins on custodial exchanges, from a code perspective UASF doesn't make much sense, and the fact that the Whitepaper was literally titled "Bitcoin: A Peer-to-Peer Electronic Cash System" and that fairly fundamental aspect of the network has gone by the wayside for some kind of SoV. The shift in narrative feels less like a calculated decision and more like an inevitable conclusion to a system that has trouble innovating. If you have an oven (=Bitcoin) that's supposed to be multipurpose for lots of different dishes (=handle many transactions, at scale, for a low fee with adequate decentralization and permissionlessness), but the oven doesn't rise to a high enough temperature (=scaling issues), sunk cost fallacy makes the idea of relabeling the use case of the oven (=narrative shift) much more attractive than deeming it a bad oven (=admitting its failure) or spending the time, energy, effort, and money to make big changes to it that can also make certain people upset (=finding "compromises" that "change" parameters of the code).
Im a bit more sympathetic to this narrative change than most Bitcoin maximalists. I think narratives (the way humans think or talk about Bitcoin) have changed over time. But I see it less of some sort of conspiracy and more of an evolution of our understanding of Bitcoin.
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Re: BTC in the PP

Post by Arthur Boe Nansa » Wed Sep 01, 2021 11:37 am

Regarding limited supply as money, KBG has provided relevant insights before, but fair points BintheVP. We disagree on a few things, but I think we presented our cases openly and amicably. Hopefully it'll be good food for thought for others.
I'll wait until the next route of discussion to chime in. ;)
vincent_c wrote:
Wed Sep 01, 2021 8:21 am
Everyone following this thread should watch this https://youtu.be/QBjzEya1WRc, and then I think that it might be a good idea to focus on the reasons why BTC should be part of the PP or not because that is what this thread is about but also I think in the context of this forum it doesn’t make sense to discuss opinions like whether BTC or stablecoins are used to move money into the blockchain industry (which both could be).
Breedlove is smart and articulates himself well, but he's not always right.
I only brought up stablecoins because you said "That capital has to get into the crypto industry somehow and whether you like it or not, the tool that is being used is the BTC blockchain. Is that even controversial?"
It was a direct response to something you said and I didn't mean to start a whole other discussion about it.
vincent_c wrote:
Wed Sep 01, 2021 8:21 am
If you guys are only interested in blockchain technology and not how it ties into how PP investors should act based on the state of that technology and adoption then I don’t think that discussion belongs in this thread.
I think clarifying the aspects of blockchain technology is a prerequisite to the discussion of considering crypto as any part of a financial portfolio, especially if before considering it as part of the PP.
That being said, we're in the Variable Portfolio section, defined as "A place to talk about speculative investing ideas for the optional Variable Portfolio". Yes the topic is "BTC in the PP", but I don't think we've really deviated much from the point of this section of the forum. If people don't find the technical discussion interesting or relevant, that's fine as we were wrapping up.
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Re: BTC in the PP

Post by bitcoininthevp » Wed Sep 01, 2021 12:38 pm

vincent_c wrote:
Wed Sep 01, 2021 12:10 pm
I know neither you nor bitcoininthevp are interested in convincing others, but then what is the point? Any bitcoin investor ought to be interested in persuading others to join the network because that is how you make sure the network remains valuable. I think it's more like this is the forum where we should be able to decide as a community what is the proper way to allocate to the PP. In particular to those who have considered diversifying their gold with BTC but have come to the conclusion that it is either not the right time or it is not necessary I would like to hear those points of view and the reasons behind it, but so far the people who haven't taken action seem to either be ignorant or to not have a good understanding of how bitcoin functions as a monetary-like property.
Im not here for production value, like getting PPers to buy BTC. Likely we as a small forum cant move BTC price (speak for yourself bitcoininthevp!). Plus pumping my bags feels... wrong.

I am here for consumption value. I enjoy the perspectives and debate. Writing down thoughts forces an organization in the mind that is helpful. I personally enjoy trying to communicate knowledge I think I have to others so they can at least not-buy Bitcoin for the right reasons. I like to think my posts help people understand the space better, and if they buy some BTC, that’s cool too.
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Re: BTC in the PP

Post by bitcoininthevp » Wed Sep 01, 2021 3:15 pm

vincent_c wrote:
Wed Sep 01, 2021 1:54 pm
I'll play devil's advocate if you're willing to debate.

One of the things that I read recently was about the tokenization of NFTs themselves. So for example if we have a bunch of NFTs that people have used as a store of value (like meme NFTs, cypherpunks, veefriends, etc) then if you were able to buy a fraction of that store of value as your store of value driving up the price of a cypherpunk to a billion dollars then could something like that be a threat to bitcoin?
Id refer you to my recent posts in this thread for how Id think about that. Does a particular punk have monetary qualities? Does it have a credible monetary policy?

If so, Id like to store some value in punks. But I dont think, from what Ive seen, they are better money than bitcoins.

I dont think they are valueless, I just think it’s the latest fad.

That said, they could all good 10000x in value still for all I know.
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Re: BTC in the PP

Post by Jack Jones » Thu Sep 02, 2021 12:41 pm

bitcoininthevp wrote:
Wed Sep 01, 2021 10:31 am
Arthur Boe Nansa wrote:
Wed Sep 01, 2021 6:00 am
They do seem to prefer that, but I think its more of a play to the narrative than an actually rational position. I feel comfortable making this claim as it simply reflects user behavior: most people keep their coins on custodial exchanges, from a code perspective UASF doesn't make much sense, and the fact that the Whitepaper was literally titled "Bitcoin: A Peer-to-Peer Electronic Cash System" and that fairly fundamental aspect of the network has gone by the wayside for some kind of SoV. The shift in narrative feels less like a calculated decision and more like an inevitable conclusion to a system that has trouble innovating. If you have an oven (=Bitcoin) that's supposed to be multipurpose for lots of different dishes (=handle many transactions, at scale, for a low fee with adequate decentralization and permissionlessness), but the oven doesn't rise to a high enough temperature (=scaling issues), sunk cost fallacy makes the idea of relabeling the use case of the oven (=narrative shift) much more attractive than deeming it a bad oven (=admitting its failure) or spending the time, energy, effort, and money to make big changes to it that can also make certain people upset (=finding "compromises" that "change" parameters of the code).
Im a bit more sympathetic to this narrative change than most Bitcoin maximalists. I think narratives (the way humans think or talk about Bitcoin) have changed over time. But I see it less of some sort of conspiracy and more of an evolution of our understanding of Bitcoin.
Yes. Bitcoin is a phenomenon at this point. It's a fire that started in Satoshi's lab, but now it's out of control. The whitepaper was Satoshi's description of the phenomenon at that point in time. We should not anthropomorphize a phenomenon and expect it to behave consistently or feel betrayed when it doesn't live up to our expectations. Like with fire, what matters is how we can use the phenomenon to our advantage.

I am also sympathetic. I totally lost interest in the space from 2017-2021 because I felt the block size should have been increased. However, now that I'm back, it still feels like the wild west I remember it. The mempool is regularly clearing so fees aren't bad, and I think Bisq is the coolest thing since sliced bread.
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Re: BTC in the PP

Post by bitcoininthevp » Fri Sep 03, 2021 9:12 am

Jack Jones wrote:
Thu Sep 02, 2021 12:41 pm
I am also sympathetic. I totally lost interest in the space from 2017-2021 because I felt the block size should have been increased.
Without getting too technical here, there was an increase in the block size in 2017 / segwit. See the "size" column here for recent blocks:

https://mempool.space/blocks

It might not be an increase of what many wanted but there was an increase.
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Re: BTC in the PP

Post by bitcoininthevp » Fri Sep 03, 2021 9:19 am

vincent_c wrote:
Thu Sep 02, 2021 9:41 am
I'm still not sure I understand what makes a monetary policy credible or not credible.
See my other posts for credibility-building examples.

A rough response in this example:

- who "owns" or can affect the smart contract managing this NFT? (many people scam, even in groups)
- is the smart contract itself trustworthy? (many are hacked/bugs)
- what prevents changes to the smart contract? (people, the smart contract itself, etc)
- what chain is the smart contract on? (many chains have been attacked, reorg'd, hacked, or had a small group blacklist transactions they didn’t like)
- is the chain the smart contract is on resistant to the SEC or other organizations sending cease and desist letters?
- is the chain the contract is on becoming more or less decentralized over time?
- etc, etc
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Re: BTC in the PP

Post by Jack Jones » Thu Sep 30, 2021 9:07 am

Jack Jones wrote:
Fri Aug 27, 2021 10:29 am
Jack Jones wrote:
Tue Jul 27, 2021 3:11 pm
Stocks: 25%
Bonds: 20%
Gold: 20%
Cash: 20%
Bitcoin: 15%
I created a portfolio on Yahoo Finance to track this. +4.17% since thread inception. BTC-USD has risen 22% since then.
-0.04% since inception. Bitcoin has been the only positive asset at +9%.
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Re: BTC in the PP

Post by Jack Jones » Mon Nov 01, 2021 10:30 am

Jack Jones wrote:
Fri Aug 27, 2021 10:29 am
Jack Jones wrote:
Tue Jul 27, 2021 3:11 pm
Stocks: 25%
Bonds: 20%
Gold: 20%
Cash: 20%
Bitcoin: 15%
I created a portfolio on Yahoo Finance to track this. +4.17% since thread inception. BTC-USD has risen 22% since then.
+9.32% since inception. Bitcoin: +56%
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Re: BTC in the PP

Post by I Shrugged » Mon Nov 01, 2021 10:41 am

Jack Jones wrote:
Mon Nov 01, 2021 10:30 am
Jack Jones wrote:
Fri Aug 27, 2021 10:29 am
Jack Jones wrote:
Tue Jul 27, 2021 3:11 pm
Stocks: 25%
Bonds: 20%
Gold: 20%
Cash: 20%
Bitcoin: 15%
I created a portfolio on Yahoo Finance to track this. +4.17% since thread inception. BTC-USD has risen 22% since then.
+9.32% since inception. Bitcoin: +56%
The problem with the concept is that the PP is not designed around wildly speculative assets, but that's what BTC is for now. On the contrary, the PP is designed around time-tested assets that are reasonably predictable in their reactions to what goes on in the world. Bitcoin might be the best investment in the history of investing, but I don't see it as PP worthy anytime soon. VP worthy, that's different.

Maybe run the same numbers with Tesla substituted for Bitcoin. Might not be too different.
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Re: BTC in the PP

Post by bitcoininthevp » Mon Nov 01, 2021 1:51 pm

vincent_c wrote:
Mon Nov 01, 2021 12:04 pm
I Shrugged wrote:
Mon Nov 01, 2021 10:41 am
The problem with the concept is that the PP is not designed around wildly speculative assets, but that's what BTC is for now.
The PP assets are designed to be volatile because we are choosing the asset that gives you the best capital efficiency for the type of risk exposure.

Each PP asset carries a speculative component to it which makes getting into/unwinding/rebalancing the PP at times quite risky. Bitcoin indeed is a higher volatility and more speculative asset but there are times where this can benefit you. Anytime you enter into a new position with any asset you need some kind of market timing or conviction, so the same is true for getting into bitcoin.

I actually think getting into bitcoin is safer to a degree because you know it is accruing value at a pace that gives you some margin of error when you're trying to subjectively estimate its fair value. You also size your exposure to bitcoin according to the volatility.
Yeah BTC is volatile but not enough data to see what its price movements really correlate with, if anything. At times it goes with stocks other times not, for example. The other PP components are chosen based on their outsized high receptivity to various market conditions.
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Re: BTC in the PP

Post by Hal » Tue Nov 02, 2021 2:44 am

Well, if you want a trial bitcoin VP you can now get Bitcoin ETF's
https://www.zerohedge.com/crypto/austra ... tcoin-etfs

and I had to include some funny ZeroHedge comments ;D
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Aussie GoldSmithPP - 25% PMGOLD, 75% VDCO
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Re: BTC in the PP

Post by Vil » Wed Nov 03, 2021 4:15 am

Not sure it was posted earlier here, a work from Nassim Taleb named "Bitcoin, Currencies, and Fragility"

Even though I can't clearly understand all of his statements, its a good food for thought.
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Re: BTC in the PP

Post by I Shrugged » Wed Nov 03, 2021 11:24 am

Vil wrote:
Wed Nov 03, 2021 4:15 am
Not sure it was posted earlier here, a work from Nassim Taleb named "Bitcoin, Currencies, and Fragility"

Even though I can't clearly understand all of his statements, its a good food for thought.
Well he's a lot smarter than I am. It's a very interesting read.
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Re: BTC in the PP

Post by Jack Jones » Wed Nov 03, 2021 12:55 pm

I Shrugged wrote:
Mon Nov 01, 2021 10:41 am
Jack Jones wrote:
Mon Nov 01, 2021 10:30 am
Jack Jones wrote:
Fri Aug 27, 2021 10:29 am
Jack Jones wrote:
Tue Jul 27, 2021 3:11 pm
Stocks: 25%
Bonds: 20%
Gold: 20%
Cash: 20%
Bitcoin: 15%
I created a portfolio on Yahoo Finance to track this. +4.17% since thread inception. BTC-USD has risen 22% since then.
+9.32% since inception. Bitcoin: +56%
The problem with the concept is that the PP is not designed around wildly speculative assets, but that's what BTC is for now. On the contrary, the PP is designed around time-tested assets that are reasonably predictable in their reactions to what goes on in the world. Bitcoin might be the best investment in the history of investing, but I don't see it as PP worthy anytime soon. VP worthy, that's different.

Maybe run the same numbers with Tesla substituted for Bitcoin. Might not be too different.
LTTs and Gold seem wildly speculative to some folks.
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Re: BTC in the PP

Post by I Shrugged » Wed Nov 03, 2021 1:05 pm

Jack Jones wrote:
Wed Nov 03, 2021 12:55 pm
I Shrugged wrote:
Mon Nov 01, 2021 10:41 am
Jack Jones wrote:
Mon Nov 01, 2021 10:30 am
Jack Jones wrote:
Fri Aug 27, 2021 10:29 am
Jack Jones wrote:
Tue Jul 27, 2021 3:11 pm
Stocks: 25%
Bonds: 20%
Gold: 20%
Cash: 20%
Bitcoin: 15%
I created a portfolio on Yahoo Finance to track this. +4.17% since thread inception. BTC-USD has risen 22% since then.
+9.32% since inception. Bitcoin: +56%
The problem with the concept is that the PP is not designed around wildly speculative assets, but that's what BTC is for now. On the contrary, the PP is designed around time-tested assets that are reasonably predictable in their reactions to what goes on in the world. Bitcoin might be the best investment in the history of investing, but I don't see it as PP worthy anytime soon. VP worthy, that's different.

Maybe run the same numbers with Tesla substituted for Bitcoin. Might not be too different.
LTTs and Gold seem wildly speculative to some folks.
But they have track records.
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Re: BTC in the PP

Post by bitcoininthevp » Tue Nov 16, 2021 11:33 am

I Shrugged wrote:
Wed Nov 03, 2021 1:05 pm
Jack Jones wrote:
Wed Nov 03, 2021 12:55 pm
LTTs and Gold seem wildly speculative to some folks.
But they have track records.
I largely agree with this, ofc. But keep in mind their track records could actually prove to be very dangerous. If long bonds begin to correlate with stocks (which I believe is happening more and more), and gold stops acting as the worlds second favorite money, these track records could burn people architecting portfolios around such assumptions.
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