[Tanmay K]

Originally Posted by smartcat

So future money supply will be decided by a bunch of techies who have access to fastest computers and cheapest electricity? And not the Government, whom we vote in?

It's a bit more nuanced than that. The guys mining (ones with access to fastest computers and cheapest electricity) are not the ones creating the "rules" of the cryptocurrency. These rules are generally based on consensus among the developers who are trying to solve the needs of the users instead. Miners themselves have tried making cryptocurrencies that were seemingly good for everyone but suited their own interests better. These have been rejected by the community time and again. You cannot force someone to use the crypto you created and a failed popular adoption just leads to an organic death of the currency. It's plain meritocracy.

Why would farmers toil to grow crops? Why would manufacturers bother to build cars and other machinery? Why would RELIANCE INDUSTRIES bother to refine crude oil, when it can use its resources to "create money" with the help of new low cost power plants & high end computer hardware?

The same could be said for mechanical engineers or lawyers or doctors adopting the fields they did. Money-making potential from mining will not be the only driving factor in people's lives. Some people prefer to work on things they like, some do not have the right skillset for a particular task, some people don't have access to the education needed for a particular job. Some people will make more money by running a, say, real estate brokerage company than being a techie. There could be a plethora of reasons.

If I am running Reliance Industries, I better be making more money from refining crude oil than I would if I was mining cryptocurrencies. If this is not true, it is time to evaluate my ability to do my job well or change the direction of the company. Hypothetically speaking, if too many oil refineries switch to mining, what happens to the price of refined oil? It shoots up. Simple supply and demand and all of a sudden, refining oil just became a lot more attractive than mining.

[SmartCat]

Originally Posted by Tanmay K

It's a bit more nuanced than that. The guys mining (ones with access to fastest computers and cheapest electricity) are not the ones creating the "rules" of the cryptocurrency. These rules are generally based on consensus among the developers who are trying to solve the needs of the users instead.

Yes yes, I get it. But I choose to read it like this.

There are -

1) Super Geeks (who make the rules)
2) Semi Geeks (who mine the coins)
3) End users (who actually use coins for making transactions, but quickly convert bitcoins to $)
4) Speculators (who hold a part of their wealth in bitcoins, because they believe its value will go up)

Perhaps crypto-currencies would be a bit more palatable to me, if its 'value' remained stable.

Perhaps the super Geeks should make rules that discourage 'investment' or 'hoarding'. Mission Impossible can offer some clues - cryptos that self-destruct after 5 days perhaps?

[Samurai]

Originally Posted by Tanmay K

But with mass adoption, hopefully easier solutions for managing cryptocurrencies will come up (and have already started coming in, check www.ledgerwallet.com).

This is still physical possession. That means it can be taken away from you by a thief. You lose the money, if you lose physical possession. This is the price you pay for avoiding the bank.

Originally Posted by Tanmay K

Cryptocurrencies like Monero are completely anonymous, if that is what one wants.

But no government likes anonymity in money transactions. They are cracking down on cash transactions for the same reason. So cryptocurrency will face the same problem.

Originally Posted by Tanmay K

The idea is to have a self-regulating currency.

Lack of regulation is not self-regulation. Most of us don’t like the highhandedness of police, but do we want to live in a society that has no police presence? Can you call it self-policing? Bitcoin doesn’t control inflation. In fact, it can cause deflation if everybody hordes bitcoins like they do now, and it is the only currency around. And central banks can't intervene to ease the problem.

Originally Posted by Tanmay K

It will not require a monetary policy from the government. Obviously this scares some countries like China like anything. I guess it becomes subjective at this point, but some people, including me, would rather trust a mathematical framework than some guys making decisions at the RBI or the Fed.

This is usually the stand taken by people/industry who are highly benefited by pure capitalism. People who have lots of money, don’t want regulations from the government. They would love plutocracies, over democracies which are mostly voted by poor people. More on this later.

Originally Posted by Tanmay K

The exact problem that it aims to solve is that of currency centralization. I won't go into the advantages or disadvantages of centralization/decentralization but cryptos aim to do to fiat currencies what internet did to traditional forms of information sharing.

But cryptocurrencies haven’t solved the centralization problem. Check this article.

Originally Posted by Tanmay K

This is a short video by Milton Friedman from the 1970s describing how central banks mess up economies by causing inflation (and have been messing up for decades on end) The answer to each and every concern raised in the video is answered by bitcoin due it it's deflationary nature, hence it's value. It's a capitalist's utopia.

In most economics discussions, people often throw Milton Friedman videos at me. His ideas are from the cold war era, before globalization and before USA diluted the glass-steagall act.

Let me throw a Milton Friedman video back at you, but from 2005. In here, he gives major credit to Fed for the economy stability since the 90s. Which goes against the stand he took most of his life. And two years later, the world economy got flushed down the toilet. So he was wrong again about the stability created by the Fed.

Not only that, he tells that the holy doctrine of monetary economists have been proven wrong. Guess who is considered the most influential monetary economist? Milton Friedman.

https://www.youtube.com/watch?v=ImjOwmEMgfQ

Originally Posted by Tanmay K

It's a bit more nuanced than that. The guys mining (ones with access to fastest computers and cheapest electricity) are not the ones creating the "rules" of the cryptocurrency. These rules are generally based on consensus among the developers who are trying to solve the needs of the users instead.

This is what scares me. The monetary policies are now decided by developers, whose primary skills are mathematics and cryptography. They are the economists of cryptocurrency.

What did Keynes say about who should be an economist?

Originally Posted by Keynes

The master-economist must possess a rare combination of gifts. He must be mathematician, historian, statesman, philosopher—in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near to earth as a politician.” (Keynes 1924: 321-322)

There is a reason why economists must study sociology, otherwise they will act like investment bankers who caused 2007 crash. These days most people study economics/finance via MBA route, which completely blinds them towards the humanities part of economics. Even I am guilty of that, but I have been trying to fix that in the last few years by reading about the history of economics.

I have previously addressed these here and here.

[V.Narayan]

Thank you for educating all of us on this new avenue for investment. Nice for folks like me to read. As far as investment goes I prefer the real thing that you can see, hold and control - gold, a real business that sells a product or service etc. I think it will take many years and several heart breaks and ponzi scheme like events before electronic coins get credibility and value. A prosaic item suddenly acquiring price because of an impending believed shortage and a perception of value is as old as the Tulip scheme of the 1636-37 where the price of a tulip flower climbed 20 times and a single tulip bulb was being exchanged for two fat oxen. I better stop here before I get branded as old fashioned and out of date.

[Tanmay K]

Originally Posted by smartcat

Perhaps crypto-currencies would be a bit more palatable to me, if its 'value' remained stable.

Yeah, the crypto markets are very shallow at present, so price movements can be pretty big. I think more maturity should come with time. The sooner the better.

Originally Posted by Samurai

This is still physical possession. That means it can be taken away from you by a thief. You lose the money, if you lose physical possession. This is the price you pay for avoiding the bank.

One can keep the crypto in multi-sig addresses. No physical possessions needed. If used properly, it can more secure than keeping money locked up in a Swiss bank. Having said that, the possibility of money being stolen from someone is not something that can ever brought down to zero, whether that is crypto or traditional currencies. If it is accessible to you, it can be accessible to a thief. It just depends to what lengths the thief is willing to go to. As they say, nothing can make a car unstealable, it just takes a enough determination.

But no government likes anonymity in money transactions.

If tax is a concern, the problem of people not paying tax on crypto possessions can be solved by smart contracts very easily. Regarding nefarious uses, like I said, the bad guys usually will find one way or another. Crypto can actually make life harder for them, its just a matter of time before it is implemented.

Lack of regulation is not self-regulation.

When I say regulation, I mean the economic rules which determine a crypto (not the regulation or hand-holding that governments require. including but not limited to AML-KYC stuff). Cryptos in that sense, are nothing but a set of rules (regulation) that are followed by everyone in the system. If they don't follow the rules, they can't be a participant. About hoarding, as I said earlier, is a natural phenomenon associated with things which are perceived to have value. Just like gold. It causes bubble-like situations, just something to be aware of while deciding to hoard. It's painful for some when bubbles burst (and they do), but ultimately no one is responsible for that other than the hoarder himself.

But cryptocurrencies haven’t solved the centralization problem

The article's arguments hold some validity. The cost of convenience and ease of use is that there has been a formation of pseudo-centralization. But the positive thing is, as a crypto user, there is always an option for you to circumvent those pseudo-nodes that the article talks about. It's probably just limited to the geeks right now though, yes. Hopefully those issues get ironed out soon.

The monetary policies are now decided by developers, whose primary skills are mathematics and cryptography. They are the economists of cryptocurrency.

The never-ending debate of whether economics is a science or an art, eh?

otherwise they will act like investment bankers who caused 2007 crash.

This would be a bit like blaming the technology for the crimes of humanity. Criminals use smartphones and cars for doing their jobs. Should we blame mobiles and the automotive industry for that? The bankers abused the financial derivatives markets that caused the 2008 crash. The financial system was broken enough to give them absolutely no incentive to not abuse derivatives. It would be wrong to blame to the tools, when the real culprits are the men using those tools.

[Samurai]

Originally Posted by Tanmay K

The bankers abused the financial derivatives markets that caused the 2008 crash....It would be wrong to blame to the tools, when the real culprits are the men using those tools.

They could abuse because regulations were systematically diluted over 25 years. Tools make them much more efficient at it. But I was not referring to tools. I was saying that these developers shouldn't be making economic policy. It must be done by economists who have also studied history and sociology. Otherwise they will think like wall street bankers and not like government policy makers, who must think about all sections of the society and not just investors. Government policy making is not about profit, but about welfare of all citizens.

Originally Posted by Tanmay K

The financial system was broken enough to give them absolutely no incentive to not abuse derivatives.

That's like a thief saying he had absolutely no incentive to not to rob his victims. Basically, you are saying lack of regulation allowed them to abuse it. That means we need stricter financial regulations and not lack of it.

[Tanmay K]

Originally Posted by Samurai

That's like a thief saying he had absolutely no incentive to not to rob his victims. Basically, you are saying lack of regulation allowed them to abuse it. That means we need stricter financial regulations and not lack of it.

When you look at it, it might seemingly require "more" regulations. While surely you can go ahead and do that, the way some countries in the world do (looking at you, China and Kim-Jong), but a more effective way is to change the incentivization process which prevents the thief from acting irresponsibly or illegally. This was/is completely doable. In a way, this is a "regulation" too. So I welcome those kind of regulations.

Edit: I mean incentives other than just "not breaking the law and going to jail".

Edit 2:

I was saying that these developers shouldn't be making economic policy. It must be done by economists who have also studied history and sociology. Otherwise they will think like wall street bankers and not like government policy makers, who must think about all sections of the society and not just investors. Government policy making is not about profit, but about welfare of all citizens.

Yes, I see your point and it is fair enough. People may differ on this and that's ok, but I feel that with enough sophistication, the needs of all the sections of society can be incorporated in a mathematical framework. Bitcoin is too simple a model, IMO, I'll agree with that. The worst case scenario is that bitcoin fails to gain popular adoption because it fails to attract the common man, the price crashes and the bubble of perceived value pops. Some people who got overly involved lose a chunk of their money and crypto development faces a decade long setback.

The upside? Bitcoin itself or some other present crypto succeeds in what it aims to do and everyone is happy. Or it sets up framework for some better future crypto.

[tsk1979]

Originally Posted by Samurai

Otherwise they will think like wall street bankers and not like government policy makers, who must think about all sections of the society and not just investors. Government policy making is not about profit, but about welfare of all citizens.

This is not true. Govt policy making is about interests of lobbying groups. So from that point of standpoint it does not matter who thinks like what. As long as the decision maker is not aligned with you, you will suffer.
And secondly to regulate cash it is easier because cash can be de-legitimized. However crypto cannot. If crypto again moves underground, you will have realisitic prices.
It also is directly proportional to the freedom in the world. The more countries start cracking down, the more valuable crypto becomes. In a very free and open world with proponents of life liberty and happiness ruling over us, crypto is needed only for evil. However, in the absence of that, crypto gets legitimacy.

So yes, crypto is currently a bubble, but its not going to vanish, eventually it will settle to a value which will gradually change.

[ashokrajagopal]

Originally Posted by Samurai

This is usually the stand taken by people/industry who are highly benefited by pure capitalism. People who have lots of money, don’t want regulations from the government. They would love plutocracies, over democracies which are mostly voted by poor people. More on this later.

This statement sort of summarises the key to a lot of discussions that happen around "taxing" and "evil government" and "free market controlling everything".
A severe lack of understanding of economic history is what prompts such stands taken by pure capitalists who hate the governments.

Coming back to the point, the idea of asking for "Intrinsic value" for the money is another similar thought process. Bitcoin or anything that you can measure in intrinsic value without a Govt intervention sooner or later just breaks the economics of the country. I will try to explain, I am not sure if it will be clear.

Bitcoin could be equated to Gold standard. Yes, Bitcoin is not naturally available like Gold, but mining gold could be equated to making new bitcoins (pls set aside the mining part in bitcoin for now). Making new bitcoins is limited by aspects like productivity of the technology at this stage or time period. Eg. the best achieved processing speed for computers at this period of time. Plus a hundred other factors not controllable by Govts. The minute your country's productivity reaches this stage, the country will spiral into stagflation.
Lets say, with the current technology and productivity levels, the number of bitcoins which can be produced (thus available in circulation) would be 100. If the economic activity in the country reaches that level, it hits a ceiling and there it stops. It goes into economic downturns to stagflation level from here. This is what had happened for any country that followed the Gold standard. This is also what had happened to countries that pegged its own currency to another currency ( an external factor, not controllable by its own government). A democratically elected government ( ie. people) should be able to set the value of the money ( a medium they use to transact). Anything not controllable by the govt means the government cant control the monetary policy.

Cryptos will never become currency. Of course it can run as a medium of hoarding, before and after Govts find a mean to tax transactions.

Originally Posted by tsk1979

This is not true. Govt policy making is about interests of lobbying groups. So from that point of standpoint it does not matter who thinks like what. As long as the decision maker is not aligned with you, you will suffer.
And secondly to regulate cash it is easier because cash can be de-legitimized. However crypto cannot. If crypto again moves underground, you will have realisitic prices.
It also is directly proportional to the freedom in the world. The more countries start cracking down, the more valuable crypto becomes. In a very free and open world with proponents of life liberty and happiness ruling over us, crypto is needed only for evil. However, in the absence of that, crypto gets legitimacy.

So yes, crypto is currently a bubble, but its not going to vanish, eventually it will settle to a value which will gradually change.

Sorry for back to back replies, couldnt edit the last post.
The whole idea of freedom equated to crypto is highly far fetched fiction.

In the past, through out history, there were people who controlled other people's lives. These were learned men, or powerful men, or skilled men or men born in the right families etc. And world over people joined together and decided that doesnt work out for them, and created collectives where they do a collective decision making as to what to do with their lives. Such entities are democratically elected governments.
People do not need freedom from themselves. They only need to realize and act on their freedom.

Of course its not perfect, but its the best system we have. And best system based on historical experiments manifested by people themselves. Government policy making is not about lobbying. Yes, it happens all the time, but that is not the definition.

[lambuhere1]

Guru's @ Cryptocurrency,

Need a few clarifications on crypto.

Understand we have a few exchanges in India like Zebpay, Unocoin which deal in Bitcoin. Are there any other trustworthy exchanges in India that deal with other coins ?

Looking for exchanges that are web based. Being a mech guy not comfortable with app exchanges.

Is it always necessary to buy the coins from exchanges in India ? Can we buy from exchanges throughout the world ? Any reference please?

Believe all these exchanges provide the user with Hot wallet. Assuming that there are some coins in hot wallets, can they be transferred to Cold wallets (like USB ones or Paper wallets ) ?

All above knowledge was through reading some books. Need bhpians guidance on how to approach about the purchase of cryptocurrency.

Thanks a ton

[anku94]

Originally Posted by lambuhere1

Understand we have a few exchanges in India like Zebpay, Unocoin which deal in Bitcoin. Are there any other trustworthy exchanges in India that deal with other coins ?

There is ethexindia for ETH, and Koinex, which is a very new multi-currency exchange but is doing well, it seems. ethexindia hasn't opened signups for new users for a couple of months now, though. btcxindia is also there for XRP, and is run by the same guys who run ethexindia.

Is it always necessary to buy the coins from exchanges in India ? Can we buy from exchanges throughout the world ? Any reference please?

Kind of. There's something called the FEMA (Foreign Exchange Management Act) which is easily violated if you try to buy cryptocurrency from exchanges abroad.

Most of them require you to deposit foreign currency in their wallets before being able to trade. There are some that allow you to use your credit card, but using CC for foreign currency transactions where foreign currency is meant to be used for trading is illegal as per FEMA or some other RBI act.

If you're a business, you might be able to find a legal way around this, but as an average individual, it is pretty difficult, unless you're a resident in another country and have a bank account there.

Indian exchanges (at least the good ones) also adhere to KYC norms voluntarily, which might help you in case of a run-in with a government/tax official until official norms/guidelines come in.

Believe all these exchanges provide the user with Hot wallet. Assuming that there are some coins in hot wallets, can they be transferred to Cold wallets (like USB ones or Paper wallets ) ?

I'm not familiar with the terms hot wallet/cold wallet, but you can transfer purchased crypto freely to wallets that are held solely by you.

[digitalnirvana]

@anku94 thanks for the clarification. After purchasing a certain amount can we move it off the exchange website to say a Google drive account with 2 factor authentication? What is the safest or standard way to store?

I've been reading about ETH with its recent fork and have been cursing myself for not investing (a little bit, in thousands not lakhs as per my limited capacity) earlier. Going by your profile picture, it seems you are well versed with ETH. What would you suggest an absolute newbie like me to the crypto world to do, with respect to investment in ETH, at this stage when it is near all time highs? Does it make sense to jump on the gravy train with small amounts or have I well and truly missed the bus?

[ragh_bhushan]

Originally Posted by ashokrajagopal

Lets say, with the current technology and productivity levels, the number of bitcoins which can be produced (thus available in circulation) would be 100. If the economic activity in the country reaches that level, it hits a ceiling and there it stops. It goes into economic downturns to stagflation level from here.

Isn't the number of bitcoins that can be mined limited to 21 million? Won't that make bitcoin deflationary?

In the past, through out history, there were people who controlled other people's lives. These were learned men, or powerful men, or skilled men or men born in the right families etc.

Who are these men in the current scenario considering bitcoin? I have not done much homework on other cryptocurrencies and I maybe wrong but bitcoin seems to be quite decentralised to me.

Originally Posted by digitalnirvana

After purchasing a certain amount can we move it off the exchange website to say a Google drive account with 2 factor authentication? What is the safest or standard way to store?

Yes you can move it off the exchange but keep in mind that there might be small network usage fee. Currently it is about Rs. 150 and varies depending on load on the bitcoin network. Safest option is print your private key on a piece of paper and keep it in a secure place.

What would you suggest an absolute newbie like me to the crypto world to do, with respect to investment in ETH, at this stage when it is near all time highs? Does it make sense to jump on the gravy train with small amounts or have I well and truly missed the bus?

Cryptocurrencies are really in their invention/nascent stage right now. So it is not really late to jump on the bandwagon.

Please do not treat this as an investment advice. I personally do not think that cryptos are tools for financial investment as it is too volatile right now. 10- 30% ups and downs within matter of days are a common thing here. I am not a finance guy. I just love the technology behind it and have put my skin in game just to get involved with the tech.

[digitalnirvana]

Originally Posted by ragh_bhushan

Please do not treat this as an investment advice. I personally do not think that cryptos are tools for financial investment as it is too volatile right now. 10- 30% ups and downs within matter of days are a common thing here. I am not a finance guy. I just love the technology behind it and have put my skin in game just to get involved with the tech.

That's where I am too currently, it's more of being really curious about where this goes. I oft stay up at night thinking I've missed the gold rush of our lives

Off topic, but what is the ballpark that you have invested please, if you are comfortable to share? Is it a case of only putting in so much of money that you can afford to write off?

Wanted a view from forum members about what is a good starting amount, and what drives them on when to buy crypto (say, a regular amount per month, or at dips, etc), before I put a few thousand in. Do they treat it as an ultra risky stock market that needs monitoring? Or is it just a buy-and-forget thing. I'll still have to read a fair bit and get a hang of this - the blockchain technology is fascinating.

[ragh_bhushan]

Originally Posted by digitalnirvana

I oft stay up at night thinking I've missed the gold rush of our lives

That's typical phenomena called "Fear of Missing Out" or FOMO which is driving the prices so wildly right now!

Here's a reference pic which I feel shows where we stand right now in terms of Blockchain as well as cryptocurrencies.

Off topic, but what is the ballpark that you have invested please, if you are comfortable to share? Is it a case of only putting in so much of money that you can afford to write off?

How much really depends on so many factors. Risk appetite, time horizon, liquidity requirement, targets, liabilities, assets, other investments, emotional quotient, understanding of the fundamentals and a ton of other things. Personally, I would categorise them into the category of maximum risk. So I have written off everything that I have put in.

Having said that, the upside that I see is huge. We are not even at 2% adoption level right now. If and when adoption increases, the rates are just gonna skyrocket.

Safest strategy for newbies would be to just buy and hold. I would also suggest to study as much about the tech behind it as possible. It truly is fascinating!