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So what's the deal? I've been hearing about Alt-Coin. Just another fad? Worth getting into? Worth the electricity bill? How do it get into it?

Alt-coin is a generic term: it refers to any crypto-currency that is not bitcoin.

Some prominent examples are LiteCoin, DogeCoin, Ethereum, Monero, Dash.

To answer your question, no, none of them are worth getting into.

A coworker made a ton on Ethereum when it jumped from $30 to over $200.

I can't say I get why it is a valid investment.

Hawkwing74 wrote:

A coworker made a ton on Ethereum when it jumped from $30 to over $200.

I can't say I get why it is a valid investment.

Well, that may be why. As long as enough people profit on a random cryptocurrency then many more will be incentivized to chase the next new alt-coin, rinse and repeat. We probably will continue to see more small, brief alt-coin bubbles constantly popping up like a roll of bubble-wrap going down a hill.

Hawkwing74 wrote:

A coworker made a ton on Ethereum when it jumped from $30 to over $200.

I can't say I get why it is a valid investment.

What's a "valid" investment anyway? If by "valid" you mean "possesses intrinsic value", then the only truly valid investments are physical commodities which are essential to our continued existence. Food, construction materials needed to provide shelter (depending on climate), and maybe fuel for cooking, if you really want to reduce it to basics. Where do you draw the line?

Once you get beyond basic subsistence, it's all speculation and/or arbitrage.

Hawkwing74 wrote:

A coworker made a ton on Ethereum when it jumped from $30 to over $200.

Did he cash out?

If just has a balance (or "re-invested") on poloniex or GDAX or Kraken, he arguably hasn't made anything yet.

I don't say that I made a "ton" on my 401k when a S&P 500 index fund doubled from ~2010 til now. Sure, the value went up, but I didn't make a dime and I can't until I start pulling funds out.

Oddly, crypto-currency enthusiasts speak like that all the time.

JBI wrote:

What's a "valid" investment anyway?

Bonds are promises by (hopefully!) reputable people to repay a loan.
Stocks are pieces of ownership in an ongoing business concern.

Crypto-currencies are tokens whose issuance is constrained by a protocol whose decision mechanism is completely dominated by a handful of private parties in China.

They do not represent a promise by anyone to repay. They do not represent qualified entitlement to a profit-making endeavor.

The value proposition is that the utility of bitcoin (et al) is so great and so unprecedented that they will be become desirable as a currency, and that due to the aforementioned issuance constraint, they are a deflationary currency that one can gain value simply by hoarding.

This idea is shockingly idiotic. To start, the issuance constraint is fatally flawed already and has been for several years. There is no technical reason why the centralized miners who publish virtually all the blocks and constitute well-over the 51% of hash-power necessary (considerably so, we're talking the extreme low end of estimates being mid 70s) can't do whatever they wish to issuance rate or virtually anything else for that matter.

Nor is it clear why bitcoin is in anyway special: should the properties of crypto-currency in general, or the current bitcoin protocol/technology specifically, become preferable for anything other than illicit commerce or outright crime, uh, dude? The whole thing is on github. Literally any idiot can clone it(and plenty already have), change a name/number in a configuration file, and viola: a new bitcoin that is identical in *EVERY RESPECT* save the pre-existence of a bunch of bagholders.

The sunk-cost fallacy is what makes coiners unable to handle that absurdity: They are so pre-occupied justifying the value to themselves that they can't even see that their arbitrary enrichment serves only them but not any late-stage surge in usage. Quite to the contrary, it's an obvious impediment: Why would newcomers want to make them rich? What does that add to their usage proposition? Oh, right, it's a huge detraction from it and it is 100% avoidable without any comcomitant penalty.

So, clearly, it's a reasonable assumption that they're just going to accept it.

Glorious wrote:

Hawkwing74 wrote:

A coworker made a ton on Ethereum when it jumped from $30 to over $200.

Did he cash out?

If just has a balance (or "re-invested") on poloniex or GDAX or Kraken, he arguably hasn't made anything yet.

Agreed, and he is trying to figure out if he should cash out. If it tanks before he sells, yes, he won't be able to make anything.

I think he is in Bitcoin for the "long haul."

Hawkwing74 wrote:

I think he is in Bitcoin for the "long haul."

You might want to let him know that, despite what proponents believe, tracing Bitcoin transactions to individuals is trivially easy these days.

[/day job]

Captain Ned wrote:

You might want to let him know that, despite what proponents believe, tracing Bitcoin transactions to individuals is trivially easy these days.

[/day job]

He's not doing it for black market...he thinks it's an investment.

Captain Ned wrote:

You might want to let him know that, despite what proponents believe, tracing Bitcoin transactions to individuals is trivially easy these days.

[/day job]

Nice! So, let's talk about Ransom-ware payable in Bitcoin, and how it's still a thing...

Hawkwing74 wrote:

Agreed, and he is trying to figure out if he should cash out.

At the very least he should sell a meaningful portion of it. That way, regardless of your faith in "TO THE MOON!" euphoria, you've at least captured some value even if it craters.

Like, he should definitely sell enough to recoup his initial investment.

Vhalidictes wrote:

Captain Ned wrote:

You might want to let him know that, despite what proponents believe, tracing Bitcoin transactions to individuals is trivially easy these days.

[/day job]

Nice! So, let's talk about Ransom-ware payable in Bitcoin, and how it's still a thing...

It's one thing to trace, and another thing altogether to get certain countries to do anything with the trace results.

Vhalidictes wrote:

Nice! So, let's talk about Ransom-ware payable in Bitcoin, and how it's still a thing...

On the one side, you have random victims distributed across immense geography for individually trivial amounts of money. Many of whom are just happy they got their pictures back and not tremendously interested in pursuing justice against the ineffable.

On the other side, you have some guy in Bulgaria. Or maybe you don't, because they stashed the coins in a new address and are just sitting on them completely anonymously until the heat cools off.

Traceable doesn't mean realistically prosecutable, especially not when you have to explain transaction mixing. Sure, your spread-sheet "proves" it, but come on, that's not the kind of thing a prosecutor wants to go in front of a jury with.

Glorious wrote:

Bonds are promises by (hopefully!) reputable people to repay a loan.
Stocks are pieces of ownership in an ongoing business concern.

Crypto-currencies are tokens whose issuance is constrained by a protocol whose decision mechanism is completely dominated by a handful of private parties in China.

But at the end of the day, all rely fundamentally on the interested parties agreeing that they have value. Just to be clear, I'm not claiming that crypto-currencies are as "real" as stocks, bonds, or fiat currency (provided it is issued by a stable government); but at the end of the day, they're all just tokens.

Glorious wrote:

They do not represent a promise by anyone to repay.

The fact that you're not implicitly relying on a promise from anyone is in fact touted as an advantage by crypto-currency proponents!

Glorious wrote:

They do not represent qualified entitlement to a profit-making endeavor.

Profit-making endeavors can quickly turn into unprofitable ones, or can turn out to be vaporware/shams/scams (see: Theranos).

IMO, in terms of investment risk/reward crypto-currency lies somewhere on the line between the traditional investment vehicles already mentioned, and playing the lottery.

Glorious wrote:

Vhalidictes wrote:

Nice! So, let's talk about Ransom-ware payable in Bitcoin, and how it's still a thing...

On the one side, you have random victims distributed across immense geography for individually trivial amounts of money. Many of whom are just happy they got their pictures back and not tremendously interested in pursuing justice against the ineffable.

On the other side, you have some guy in Bulgaria. Or maybe you don't, because they stashed the coins in a new address and are just sitting on them completely anonymously until the heat cools off.

Traceable doesn't mean realistically prosecutable, especially not when you have to explain transaction mixing. Sure, your spread-sheet "proves" it, but come on, that's not the kind of thing a prosecutor wants to go in front of a jury with.

I've heard (perhaps Ned can confirm/refute) that even credit card companies tend not to pursue prosecution of fraudsters until the amount gets above $1000. It's just too much trouble.

just brew it! wrote:

I've heard (perhaps Ned can confirm/refute) that even credit card companies tend not to pursue prosecution of fraudsters until the amount gets above $1000. It's just too much trouble.

There's a number, but they don't tell us what it is. My guess is that it's higher than that simply because of the cost/benefit ratio, and it probably starts at the deductible on their fraud insurance policies. The card companies don't care about jail terms, they want their $$ back. Indicted fraudsters tend not to have much in the way of recoverable assets. Also, getting a prosecutor interested in a $1,000 fraud is a whole lot harder than it is when there's another three zeros at the end.

Not even local prosecutors will take bad-check cases these days, which is why you see all of those bad checks taped to the overhead cigarette rack at your local convenience store.

JBI wrote:

But at the end of the day, all rely fundamentally on the interested parties agreeing that they have value. Just to be clear, I'm not claiming that crypto-currencies are as "real" as stocks, bonds, or fiat currency (provided it is issued by a stable government); but at the end of the day, they're all just tokens.

Oh, absolutely. We're totally on the same page about ultimate meaning of "intrinsic value" and so forth.

I was just pointing out that the common belief that bonds + equities have value additionally has a very different sort of underpinning: they have value extrinsic to their commodity.

For instance, if I bought a bond and a stock today and then tomorrow the government decided that people like glorious are far, far too abrasive, annoying and anti-bitcoin, and so henceforth I can no longer trade my bond or my stock as a penalty, well, they still have value to me, don't they?

The bond gives me coupon payments. The stock gives me dividends. Even though I can no longer trade them to anyone else, a commodity value of zero, they still have a separate value that is not zero.

If I can't trade a bitcoin, though, I have nothing. It's just zero.

What I am saying is that this kind of thing influences the common perception of value, because there is a value to it independent to what anyone on the market for it, in and of itself, is willing to give me. That this situation imbues a sort of relative stability to its commodity value. And so forth.

JBI wrote:

The fact that you're not implicitly relying on a promise from anyone is in fact touted as an advantage by crypto-currency proponents!

But of course!

JBI wrote:

Profit-making endeavors can quickly turn into unprofitable ones, or can turn out to be vaporware/shams/scams (see: Theranos).

Oh they certainly can, all is fallible, but the distinction remains.

JBI wrote:

IMO, in terms of investment risk/reward crypto-currency lies somewhere on the line between the traditional investment vehicles already mentioned, and playing the lottery.

Much more towards the lottery side, in my opinion.

Bad place to ask about cryptocurrencies, pretty much anyone here will offer a 'anti-monopoly money' point of view with almost no idea of what they're talking about. Altcoins is a generic umbrella term that applies to every coin not Bitcoin. There are TONS of altcoins. As far as altcoins being a good investment, there are a lot of possible 'good' investments, but that can sometimes be extremely random as even very promising coins can crash and burn. Cryptocurrencies are like the stock market on crack, they sway very heavily, the smaller the coin, the bigger the sway.

Yes, Ethereum is one of the biggest altcoins, there are a few other major ones. And yes they have very high impact markets. Ethereum had 482m in volume yesterday for instance. Here is the best place to locate rising and or big coins. Sort by volume: http://coinmarketcap.com/

Also if you want to learn about cryptos visit Bitcointalk, that is where the majority of any sort of meaningful discussion happens. You'll have to read up on each coin to figure out whether or not they're worth your money. They'll eat your money if you aren't careful.

Bensam123 wrote:

Bad place to ask about cryptocurrencies, pretty much anyone here will offer a 'anti-monopoly money' point of view with almost no idea of what they're talking about.

I absolutely know what I'm talking about.

Bensam123 wrote:

As far as altcoins being a good investment, there are a lot of possible 'good' investments, but that can sometimes be extremely random as even very promising coins can crash and burn.

Go gamble, because then, if you win against slight improbability, they're legally obligated to pay you.

Whereas you can make a "killing" in the crypto-space and still lose everything because the exchange you orchestrated your complicated trading scenario upon got "hacked", steals your money, disappears, announces bankruptcy, or no longer allows you to withdraw any USD from.

All the above happens multiple times a year, and that's independent of any number of user errors that can send you into penury: your hard-drive crashes, you lose your paper wallet, you fat finger the wrong address, download a wallet within a window in which it relied upon a bogus RNG, forget your password, get hacked yourself, etc...

People suffer major loses because of situations like that on a weekly basis.

Bensam123 wrote:

Yes, Ethereum is one of the biggest altcoins, there are a few other major ones. And yes they have very high impact markets. Ethereum had 482m in volume yesterday for instance. Here is the best place to locate rising and or big coins. Sort by volume: http://coinmarketcap.com/

Those volume numbers are highly dubious.

Bensam123 wrote:

Also if you want to learn about cryptos visit Bitcointalk, that is where the majority of any sort of meaningful discussion happens.

I read it all the time, and you must be joking.

Bensam123 wrote:

You'll have to read up on each coin to figure out whether or not they're worth your money. They'll eat your money if you aren't careful.

If anyone here thinks anything I say carries any weight then heed this above all else: Do not invest in crypto-currencies.

The thing I've never understood about crpyto-currency is how it's any different than distributing computing projects like Folding@Home or BOINC. If the people behind those promised payment per completed work unit, then wouldn't we have the same system?

Redocbew wrote:

The thing I've never understood about crpyto-currency is how it's any different than distributing computing projects like Folding@Home or BOINC. If the people behind those promised payment per completed work unit, then wouldn't we have the same system?

It's very different.

Each of those work units, save perhaps some redundancy where the same work unit is independently computed by a few others to ensure computational accuracy (e.g. bit flips or other corruption invalidating the result), are unique.

In bitcoin, you are trying to produce a block containing transactions from the mempool that has a hash value that matches the current difficulty parameter. That is, it has a sha256(sha256(block)) hash with a certain number of leading masked digits. In other words, you have hash a valid block that looks like 00000000000000000000000a82e09fd115b3fac9214 or some such.

Now, each block could potentially include a different variety/ordering of pending transactions, but if we ignore that non-essential difference, everyone is trying to solve same essential problem simultaneously. The only thing that varies is the nonce field that everyone is cycling through trying to generate a different hash that matches the appropriate difficulty.

If you win the hash lottery for your block, then the first transaction on that block gets to be a special transaction in which you move the block reward (currently 12.5 BTC) to an address of your choosing. You also get the fees of all the transactions you included in that block, which is another ~2 BTC or so at the moment but can wildly vary.

The thing is, your block contains the hash of the previous block, which also contains the hash of its previous block, ad infinitum. Thus anyone trying to change the blockchain, the merkle-tree of blocks, needs to generate an ungodly amount of hashes of severe difficulty.

Thus all the work is interrelated, in that it continually builds upon itself to provide transactional security that increases the further you go back in history.

----

Also(and perhaps more directly relevant to what you asked specifically), no external payment is promised. You are awarded BTC which only exists as part of very system you are working to perpetuate: it requires no outside funding from any party other than its direct participants, much less any sort of entity "behind" it.

Redocbew wrote:

The thing I've never understood about crpyto-currency is how it's any different than distributing computing projects like Folding@Home or BOINC. If the people behind those promised payment per completed work unit, then wouldn't we have the same system?

No, it is not at all the same thing. "Normal" distributed computing projects don't provide mechanisms to authenticate and track transactions, or detect "double spending". Also, the inventors of any given crypto-currency don't pay anyone anything. If/when you "cash out" crypto-coin, you're either using it to pay for goods or services, or trading it on a crypto-currency exchange (in which case the payment comes from the exchange).

Glorious is nailing it. I'm generally a free market, libertarian dude, but seeing the mania around cryptocurrencies is enough to at least give me pause. When an Uber driver tells me he just bought some bitcoin, it's Bubble Time, just like flipping homes in 2006, and before that, tech stocks in '98. A guy in my office that barely knows how to operate his Android phone a couple months ago mentioned he'd bought some Bitcoin. Didn't know what a distributed ledger was, but he had some Bitcoin. His teenage daughter told him about it. People are going to get hurt and it's going to be sad seeing it.

Also, I find it hard to believe regulators will look the other way forever. They're generally older folks, so they lag behind on this sort of thing, but eventually a currency whose primary usage is black markets, ransom payments and aiding money laundering for wealthy Chinese to bypass their currency controls and funnel money in to places like Vancouvers real estate market will attract regulatory attention. And, owing to being 100% digital, there's easy ways to squash it if desired, like barring financial entities from transacting with cryptocurrency exchanges, requiring the money to be laundered at a foreign bank first. Tricky business.

Not to say people can't, and won't, make money speculating on these things, especially if they get out at the right time. It could also take another decade for regulators to catch on for all we know. It's too high risk for me, though. And perhaps the most important thing any of us here could convey; it's extremely risky.

Regulators are already looking at it, and the underlying concepts (blockchain) are already going mainstream. For evidence of the latter, you need look no further than this page: https://www.ibm.com/blockchain/

w76 wrote:

Also, I find it hard to believe regulators will look the other way forever. They're generally older folks, so they lag behind on this sort of thing, but eventually a currency whose primary usage is black markets, ransom payments and aiding money laundering for wealthy Chinese to bypass their currency controls and funnel money in to places like Vancouvers real estate market will attract regulatory attention. And, owing to being 100% digital, there's easy ways to squash it if desired, like barring financial entities from transacting with cryptocurrency exchanges, requiring the money to be laundered at a foreign bank first. Tricky business.

Once the presumed anonymity of Bitcoin (and I speak ONLY to Bitcoin) was shattered, regulators quickly learned how to love it, license it, and make regulatory fees off those licenses.

And yes, the underlying blockchain concepts are attracting major VC spending in the fintech world.

The underlying tech gives banks an impetus to finally upgrade from their 1960s and 70s back end processes, even central banks are looking at distributed ledgers. In economics circles it's created more excitement then anything I've seen since micro-finance became trendy.

I hadn't heard of any US regulators doing much with Bitcoin though, other than the SEC looking at allowing ETFs that attempt to track it.

w76 wrote:

I hadn't heard of any US regulators doing much with Bitcoin though, other than the SEC looking at allowing ETFs that attempt to track it.

Bitcoin exchanges that serve US customers (regardless of the exchange's legal domicile) must register with FinCEN (Financial Crimes Enforcement Network, part of the Treasury Dept.) as a "money transmitter" and must thus be licensed by the individual States as "money services businesses". Along with that comes Federal/State examination authority over the exchange's US operations, as well as a requirement to comply with Federal Bank Secrecy Act/Anti-Money Laundering laws.

A couple of years ago, a company set up an ATM in a local mall where you could directly deposit cash and get Bitcoin, or vice versa. Since they hadn't bothered to get the required license, my office shut it down. When they applied for a license, it was denied because they refused to identify the company's principals.

Regulators are only wary of new technologies/services until they've figured out how to regulate them, how to examine them, and how to collect fees for doing so.

So they're doing it through the banking angle, I figured that'd be easiest. That's also pretty mild stuff. I've met my share of contractors that have good off the books revenue by avoiding reporting thresholds. (Edit: To be fair, they're hiding money in currency that everyone accepts, you can't take a cash payment in bitcoin and then pay daily or operating expenses from it)

I've been waiting for the hammer to fall on the investment side. Assets this risky typically require accredited investors, ie., net worth over 1 million or joint income over 300k. Certain forms of P2P lending require that, for example. A lot of brokerages won't allow clients to trade penny stocks, which are comparable in risk, even though it's legal. I still don't think FINRA/SEC/CFPB understands the risk to investors, or haven't had the time to devote to a strategy to tackle it.