Cryptocurrency!

[heartily24]

Hello! I was looking around the internet for topics and articles about cryptocurrencies like Bitcoins, Etherium, etc.
I stumbled upon some websites showing off games where you can invest/buy monsters and pet using cryptocurrencies and you can engage in combat, buying, selling, trading, etc. with other players online.
Some examples of these types of games are Bitpet, Cryptopet, World of Ether.
It's like the same concept with mining coins but gives people (mostly gamers who invest, I guess) a certain game factor in mining.
What do you guys think about this overall? May I have your opinions? I personally like the unique concept in it but I have yet to try it out.
Thanks for your inputs.

 

[Silentpony_v1legacy]

I still don't get how anyone thinks cryptocurrency has any real world value. It reminds me of that south park where the kids are trying to get internet money, and all those old memes like star wars kid and laughing baby are bragging how they're worth theoretical millions.

Like, has anyone actually bought something with a bitcoin? Does Walmart take bitcoins? Who bought groceries, or filled up their car with bitcoins? Who paid a doctor's bill in bitcoins? How many bitcoins does it take to buy an airplane ticket for thanksgiving? Why aren't people paying off student loans with bitcoins?

Whole thing has felt like a very intricate scam from the very beginning.

 

[aegix drakan_v1legacy]

Considering how hard it is to cash Crypto out...It's always been a bit shaky to me.

And considering how mining is now dominated by larger Mining Groups, getting into Crypto to earn some and make money is looking almost as unlikely as being able to start your own bank in your own home town and succeed.

It's a lovely idea and I'd like to see it take hold...But given the major weaknesses that I see...I'm not exactly convinced.

 

[Nomad]

I still don't get how anyone thinks cryptocurrency has any real world value. It reminds me of that south park where the kids are trying to get internet money, and all those old memes like star wars kid and laughing baby are bragging how they're worth theoretical millions.

Like, has anyone actually bought something with a bitcoin? Does Walmart take bitcoins? Who bought groceries, or filled up their car with bitcoins? Who paid a doctor's bill in bitcoins? How many bitcoins does it take to buy an airplane ticket for thanksgiving? Why aren't people paying off student loans with bitcoins?

Whole thing has felt like a very intricate scam from the very beginning.

Yes, people buy things with bitcoin - and other cryptocurrencies - all the time. Steam allowed you to buy software with bitcoin at one point, but stopped when bitcoin adoption raised to a level where the transaction fees started going through the roof (the transaction fees and times are directly relative to the level of blockchain congestion). A few big electronics stores in my country also allow you to buy things with bitcoin, and I've seen coffee shops and the like that accept it as well. Overall, though, it isn't the least bit strange that most places don't - just like most places in Argentina don't allow you to pay with Russian rubles. Merchants in a certain country generally only accept the currency of that country, and so far no country has adopted a cryptocurrency in that capacity.

Cryptocurrency is a concept that is still in its infancy - bitcoin, which is the oldest one, hasn't even gone a decade since the initial release yet. We've had computer games with longer development times than that. Pretty much all cryptocurrencies are still in an initial development stage, providing more promise of future features than actual utility today. That's why people are mostly using it as an investment vehicle at this point - buying cryptocurrencies now, before they're mainstream, so the worth of your assets will have grown by the time they reach general adoption. Like other high-risk investments, there's no guarantee we'll reach that point, but that's not fundamentally different from investing in any other startup business.

The possibility of cryptocurrency being a scam concept is basically none, for two reasons. The first is that many of them, including bitcoin itself, lack a centralized controlling interest. No one can control or own the bitcoin blockchain. That's part of why it was created in the first place - to oppose the current centralized monetary system. The bitcoin genesis block contained the message "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks", referencing the dangers of the banking system. The other reason why cryptocurrency in general can't be an intricate scam is that even bitcoin itself represents a minority of the entire cryptocurrency sphere - in terms of value, in terms of usage and definitely in terms of the number of currencies floating around. Individual cryptocurrencies can definitely be, and in some cases are very clearly, more or less elaborate scams - but the entire sphere doesn't have the kind of centralized influence that could maintain a controlling interest across the board. You yourself can make a cryptocurrency of your own in 10 minutes through coinlaunch or something, and I assume you're not part of a global cryptocurrency conspiracy. You simply can't say cryptocurrency is a scam any more than you can say traditional currency is a scam, because the number of unrelated parties involved is far too great.

Considering how hard it is to cash Crypto out...It's always been a bit shaky to me.

And considering how mining is now dominated by larger Mining Groups, getting into Crypto to earn some and make money is looking almost as unlikely as being able to start your own bank in your own home town and succeed.

It's a lovely idea and I'd like to see it take hold...But given the major weaknesses that I see...I'm not exactly convinced.

It isn't hard to cash out, though. Most places where you can buy cryptocurrency for real-world money also let you sell cryptocurrency for real-world money. It's a two-way street. If you can buy it, you can sell it - that's what makes it possible for other people to buy it as well. The cryptocurrency you buy isn't created from thin air when you click "buy", it's sold by another party from a fixed supply. Incidentally, this is also what causes the price fluctuations - supply and demand. If more people want to buy bitcoin (or something else) than there are people who want to sell it, they're going to have to pay more to increase the supply of willing sellers. If the situation is reversed, the price lowers instead.

What is difficult is jumping through the hoops to let you buy cryptocurrency to begin with, though. The gateways between real-world currencies and cryptocurrencies are too few, too cumbersome and too overloaded to handle the demand as it is. During the last few months, pretty much all of the major ones have had to disable new registrations at some point to be able to keep up with demand, and even now - during one of the greatest market slumps for years - many have backlogs that measure months in support time.

 

[Silentpony_v1legacy]

SNIP

Here's the thing though, I can take my Russian rubles, go into any bank in Argentina, and exchange it for pesos at the current rate. That's part of what makes it a currency - value compared to other currency, backed up by Governments and the international banking system.

Bitcoins only have the value people who own bitcoins think they do. They're not guaranteed by any Government or banking system. You can't go into a Bank of America, show them a bitcoin on your phone, and then walk out with 8 grand in cash.
And seeing how what, 100 people own the majority of all bitcoins, I'm going with scam.

Also whats the tax form for bitcoins? If people are actually turning a profit on these investments, how much do they pay in income tax?

 

[heartily24]

Thanks for the inputs, guys. I might try Bitpet, though. Seems worth to try at least.
Yes, I have had experiences where I purchased items using Bitcoins, such as laptops, online store purchases, and a Nintendo Switch. Nomad is correct in a way - "If you can buy it, you can sell it."
The people who mine cryptocurrencies want to be viewed as anonymous so they can avoid getting taxed.
I used to think like you before I really got into all the kinks of mining and cryptocurrencies, I was totally confused and wondered how it even works since it is like an "online theoretical currency".

 

[heartily24]

@Nomad:
|Wow, I learned more from what you just said. Thanks! May I ask if you have any personal experience with cryptocurrencies?

 

[Nomad]

SNIP

Here's the thing though, I can take my Russian rubles, go into any bank in Argentina, and exchange it for pesos at the current rate. That's part of what makes it a currency - value compared to other currency, backed up by Governments and the international banking system.

Bitcoins only have the value people who own bitcoins think they do. They're not guaranteed by any Government or banking system. You can't go into a Bank of America, show them a bitcoin on your phone, and then walk out with 8 grand in cash.
And seeing how what, 100 people own the majority of all bitcoins, I'm going with scam.

Also whats the tax form for bitcoins? If people are actually turning a profit on these investments, how much do they pay in income tax?

On exchanges: I can take my bitcoin to Coinbase, Kraken, Bitstamp, Gemini or one of the plethora of more minor actors and exchange it for USD or EUR at the current rate, though. The market value of bitcoin isn't fictional - you can absolutely exchange 1 bitcoin for $ 8 881 at the time of writing, with no issues at all so long as you're a registered and verified user at one of the so-called fiat gateways. The number of such gateways is steadily increasing as well, both large-scale and small-scale - Binance being an example of the former, and COSS or Hawala being examples of the latter.

All money only has value because we think it does. If everyone stopped accepting USD, then USD would become worthless. Since the US abandonment of the gold standard, almost every conventional currency takes the form of so-called "fiat money [https://en.wikipedia.org/wiki/Fiat_money]". The only difference between USD and Bitcoin is that, as you say, USD is "backed" by the government. In practice this only means backed by fairly toothless regulation - it works as long as people agree it should keep working. Heck, even before the abandonment of the gold standard, money only had value because we universally agreed that gold had value - and that value isn't exactly stable either.

I don't think your numbers are accurate with regards to the distribution of bitcoin, but seeing as we don't know who owns which wallets, I can't provide you with a number that is accurate. I'm not convinced that skewed distribution of capital turns a currency into a scam, though. Wealth tends to collect at the top of the pyramid [https://www.theguardian.com/inequality/2017/nov/14/worlds-richest-wealth-credit-suisse].

How bitcoin is taxed varies from country to country, as the concept is still new. The IRS, I think, still goes by a guideline issued in 2014 [https://www.irs.gov/pub/irs-drop/n-14-21.pdf], defining "virtual currencies" as property. My own country defines it as a capital asset [https://www.skatteverket.se/privat/skatter/vardepapper/andratillgangar/virtuellavalutor.4.15532c7b1442f256bae11b60.html]. In most places, you are indeed supposed to pay taxes for your cryptocurrency gains. Exactly how much naturally varies not only with the country you're in, but also with your specific financial position - like other forms of income or gains.

@Nomad:
|Wow, I learned more from what you just said. Thanks! May I ask if you have any personal experience with cryptocurrencies?

I started dabbling last year, but I've been absentmindedly following the development of the sphere since 2011. At first it seemed like a neat little idea, and then I expected the whole currency thing to mostly represent the stage of infancy for the blockchain technology in itself, which would make the value plateau as the infrastructure matured beyond the cryptocurrency sphere, so it took a good while before I threw actual money at it. I still think it will, but I also think that the currency-as-fuel concept has become institutionalized to a point where I think the currency development will keep moving in tandem with the various forms of underlying infrastructure. Things like ethereum and its smart contracts have a pretty wide array of potential uses.

I have also made a few minor purchases with cryptocurrencies, but like most others I'm just hoarding my assets like a digital dragon at this point.

 

[heartily24]

SNIP

Here's the thing though, I can take my Russian rubles, go into any bank in Argentina, and exchange it for pesos at the current rate. That's part of what makes it a currency - value compared to other currency, backed up by Governments and the international banking system.

Bitcoins only have the value people who own bitcoins think they do. They're not guaranteed by any Government or banking system. You can't go into a Bank of America, show them a bitcoin on your phone, and then walk out with 8 grand in cash.
And seeing how what, 100 people own the majority of all bitcoins, I'm going with scam.

Also whats the tax form for bitcoins? If people are actually turning a profit on these investments, how much do they pay in income tax?

On exchanges: I can take my bitcoin to Coinbase, Kraken, Bitstamp, Gemini or one of the plethora of more minor actors and exchange it for USD or EUR at the current rate, though. The market value of bitcoin isn't fictional - you can absolutely exchange 1 bitcoin for $ 8 881 at the time of writing, with no issues at all so long as you're a registered and verified user at one of the so-called fiat gateways. The number of such gateways is steadily increasing as well, both large-scale and small-scale - Binance being an example of the former, and COSS or Hawala being examples of the latter.

All money only has value because we think it does. If everyone stopped accepting USD, then USD would become worthless. Since the US abandonment of the gold standard, almost every conventional currency takes the form of so-called "fiat money [https://en.wikipedia.org/wiki/Fiat_money]". The only difference between USD and Bitcoin is that, as you say, USD is "backed" by the government. In practice this only means backed by fairly toothless regulation - it works as long as people agree it should keep working. Heck, even before the abandonment of the gold standard, money only had value because we universally agreed that gold had value - and that value isn't exactly stable either.

I don't think your numbers are accurate with regards to the distribution of bitcoin, but seeing as we don't know who owns which wallets, I can't provide you with a number that is accurate. I'm not convinced that skewed distribution of capital turns a currency into a scam, though. Wealth tends to collect at the top of the pyramid [https://www.theguardian.com/inequality/2017/nov/14/worlds-richest-wealth-credit-suisse].

How bitcoin is taxed varies from country to country, as the concept is still new. The IRS, I think, still goes by a guideline issued in 2014 [https://www.irs.gov/pub/irs-drop/n-14-21.pdf], defining "virtual currencies" as property. My own country defines it as a capital asset [https://www.skatteverket.se/privat/skatter/vardepapper/andratillgangar/virtuellavalutor.4.15532c7b1442f256bae11b60.html]. In most places, you are indeed supposed to pay taxes for your cryptocurrency gains. Exactly how much naturally varies not only with the country you're in, but also with your specific financial position - like other forms of income or gains.

@Nomad:
|Wow, I learned more from what you just said. Thanks! May I ask if you have any personal experience with cryptocurrencies?

I started dabbling last year, but I've been absentmindedly following the development of the sphere since 2011. At first it seemed like a neat little idea, and then I expected the whole currency thing to mostly represent the stage of infancy for the blockchain technology in itself, which would make the value plateau as the infrastructure matured beyond the cryptocurrency sphere, so it took a good while before I threw actual money at it. I still think it will, but I also think that the currency-as-fuel concept has become institutionalized to a point where I think the currency development will keep moving in tandem with the various forms of underlying infrastructure. Things like ethereum and its smart contracts have a pretty wide array of potential uses.

I have also made a few minor purchases with cryptocurrencies, but like most others I'm just hoarding my assets like a digital dragon at this point.

Thanks for all your inputs so far. It greatly helped me view these topics at a different perspective and I gained knowledge in the process. In my opinion, there may be some crashes every now and then, but I personally think that cryptocurrencies will eventually be a norm and, not even surprisingly, be something that is a standard in the future.
Back to my initial topic about game developers now making games catering specifically to cryptocurrency miners/gamers, I think these are signs that because of cryptocurrencies becoming more mainstream, it should mean that many people have now considered it as a stable asset.