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[nynt9]

https://www.wsj.com/articles/china-widens-bitcoin-crackdown-beyond-commercial-trading-1505733976

Chinese authorities are moving toward a broad clampdown on bitcoin trading, testing the resilience of the virtual currency as well as the idea its decentralized nature protects it from government interference.

Regulators have decided on a comprehensive ban on channels for the buying or selling of the virtual currency in China that goes beyond plans to shut commercial bitcoin exchanges, according to people familiar with the matter.

Officials communicated the message to several industry executives at a closed-door meeting in Beijing on Friday, according to people who were at the meeting. Until last week, many entrepreneurs in China's bitcoin circles had thought authorities might shut down only commercial trading activity while tolerating peer-to-peer, or over-the-counter, bitcoin platforms, which enable buyers and sellers to find each other and trade directly.

The Chinese plan represents some of the most draconian measures any government has taken to control bitcoin, created by an anonymous programmer nearly a decade ago as an alternative to official currencies, and word of it sent another wave of anxiety through the Chinese bitcoin community.

They show that 64.7% of bitcoin mining in the world happens in China, previously to this change.

Last weekend, the largest domestic bitcoin exchanges—BTCC, Huobi and OKCoin—all said they would halt trading services in the coming weeks, sending prices of bitcoin on the global market tumbling. Bitcoin traded at $3,947 apiece on Monday evening in Beijing, roughly 26% off its high of $4,960.72 on Sept. 1.

Industry advocates hail bitcoin for allowing users to transact with each other without the involvement of a central authority. In reality, users access the market for virtual currencies via services and businesses that are centralized in real locations and therefore are susceptible to third parties. Any attempt by China to interfere broadly in the bitcoin network would test that notion further.

They also have this piece: Bitcoin's Wild Ride Shows The Truth: It Is Probably Worth Zero

https://www.wsj.com/articles/bitcoins-wild-ride-shows-the-truth-it-is-probably-worth-zero-1505760623

So is a single Bitcoin worth $500,000, $5,000, $500 or $0? I'm inclined to say $0, especially if Bitcoin's value depends on it being adopted as a global digital currency to replace dollars. There is no chance whatsoever that Bitcoin can displace the dollar, for the simple reason that it is badly designed. Bitcoin can handle a pathetically small number of transactions, and uses an inordinate amount of electricity to do so, making it entirely unsuitable to replace ordinary money.

Even if Bitcoin worked better, it is in a Catch-22 because of Gresham's law, the nostrum that bad money drives out good. Given the choice of spending inflationary government-issued money or something which holds its value, everyone would spend the bad paper stuff and hoard the Bitcoin. You wouldn't want to be the person who spent 10,000 Bitcoins on two pizzas in 2010, when a Bitcoin was worth a fraction of a cent. Those Bitcoins are now worth $40 million. But if no one spends Bitcoin, it will never get established as a currency.

I'm not sure what to make of this information. A couple years ago bitcoin was a joke, last year/early this year it was in danger of a fork and a Chinese takeover, and now this. On one hand, the value is very high (but dropping), on the other hand it seems extremely unstable.

The second article posits that the two potential main use cases for Bitcoin are either illegal transactions, or a replacement for gold as a stable, "insurance" currency. However, they say:

But studies cited by the United Nations Office on Drugs and Crime suggest that cryptocurrency-based online drug dealing remains relatively small, and focused on retail, meaning fewer and smaller transactions

So the illegal use case is overrated, and:

If we assume that Bitcoin will either succeed completely in displacing gold or fail and be worth zero, it helps explain why the digital token has been so incredibly volatile, with a 40% loss in two weeks, and a 33% rebound since Friday's low. Based on the simple choice between total success and failure, we can very roughly say that Bitcoin at 70% of the gold ETF-derived price suggests a 70% chance of displacing so-called paper gold as society's chosen emergency store of value, and a 6% chance of displacing physical gold. Even digital dreamers should accept that is far too high.

So what is the future of Bitcoin then? What do we make of this? I think cryptocurrency as a concept has a future, but Bitcoin is a flawed implementation and heavily favors early adopters and China (well, until now) and there are many concerns regarding it. Thoughts?

 

[ponpo]

So what is the future of Bitcoin then? What do we make of this? I think cryptocurrency as a concept has a future, but Bitcoin is a flawed implementation and heavily favors early adopters and China (well, until now) and there are many concerns regarding it. Thoughts?

I'm curious to see what that future is. I keep seeing interesting ideas posted in white papers but every new coin seems to exists just to get money for another ICO and then repeat the cycle.

 

[nynt9]

I'm curious to see what that future is. I keep seeing interesting ideas posted in white papers but every new coin seems to exists just to get money for another ICO and then repeat the cycle.

Yeah, exactly. The market seems super idiosyncratic right now. Ironically, some regulation would help set it straight. I remember someone saying "bitcoin is a fascinating microcosm of libertarians discovering why regulations exist"