Predictions are basically hopes. When you look at them rationally, they are rarely based on facts but intuition. On this list:
1. More than $100M of venture capital will flow into Bitcoin start-ups.
No it won't because if you ask VCs they will mostly tell you that the value can not be extracted easily into fiat currency and that's what they need to still work in.
To that argument, some will say "BTC-only VCs" will emerge which is a regulatory nightmare, so would be restricted to angels only, or that the money will flow into making BTC<->Fiat exchange easier, but that needs buy-in from the banks, and the moment they decide it's safe to do, they'll just do it themselves so there is no market for it.
Investing in BTC startups is a risky business as it is. Putting $100mm into them would be seen by the VC industry as positively insane.
2. Mining ‘will not’ be dead
If you run the numbers, it's of marginal profitability at best right now (and in most legal use cases is a negative - you need to steal power from somewhere, basically), and the miners aren't doing their maths very well. The poster's opinion that smaller enterprises will move their mining out to the cloud means they haven't done the maths either.
3. There will be less than 5 alt-coins (out of the 50+ in existence) that will survive 2014
This made me laugh. The fact alt-coins exist at all shows how the value of BTC is being misunderstood by both sides of the "is this tulipmania or a revolution?" debate.
The advantage of BTC is that it's a decentralised "currency" based on open source algorithms and a network of workers validating itself, which can be easily replicated.
The disadvantage of BTC is it's a decentralised "currency" based on open source algorithms and a network of workers validating itself, which can be easily replicated.
It's biggest strength is also it's biggest weakness.
If you can't see that strength as a massive weakness, ask yourselves what value BTC intrinsically has over other alt-coins.
If you follow that argument down the inevitable rabbit hole you will eventually rationalise that the value is based on perception, much like fiat currencies of the modern era, and you will start hankering for the gold standard.
Except the perception of fiat currencies is so strong it is unlikely to be undermined by the majority. Is that true of BTC?
In essence, BTC will remain strong as long as people believe it will remain strong. But the moment the majority flip, or switch to an alt-coin like Litecoin, etc. then what value will it retain?
4. Bitcoin community will solve problems including that of ‘anonymity’
Anonymity is not the problem banks and governments are truly concerned about. If it were, cash would be phased out by governments just as much as BTC would be blocked. In general they are undecided but wary of BTC because it has all the hallmarks of a Ponzi scheme with mysterious founders who do not make their intentions known.
It is accountability of the system that is of concern, not accountability of the transactions within it.
5. US, China and other global forces will not be at the forefront of Bitcoin adoption
If you think that the US, China and other countries are "global forces" you need to look at corporate entities more and ask who has the money and who has the debt.
Either way, the fact that BTC could be a private currency that lets corporations run free from government control and "tyrannical" central banks is just going to force more legislation outlawing BTC transactions.
6. Indian ecosystem will be slow to evolve; limited to speculators and mining pools
As indeed will the rest of the World. There are no pure consumers in the BTC space - everybody in the BTC ecosystem right now is a miner or a speculator or both, and the transactions are a side effect of suddenly having a lot of "money" that can't be easily turned into fiat currency.
There are few people - if any at all - who are using BTC because they perceive it as better for day to day transactions than fiat currency, because for the most part it is not.
7. The use of Bitcoin will evolve beyond ‘store of value’ or ‘transactions’
Adding metadata to the BTC blockchain is mildly interesting. Using the protocol for other purposes outside of the BTC transaction block chain (messaging, etc.) is much more interesting.
I have no doubt that the true value of BTC is the protocol that might inspire all sorts of wonderful P2P applications to emerge, but I don't think it's clear right now that any of them still lasting in 10-20 years will be currency.
8. The ‘browser’ of Bitcoin will come this year
By definition if you make a system easier to use, you have to make it less secure. If this happens, we can expect many more "somebody stole my BTC because I left my web browser open" stories.
Banks serve a useful purpose with BTC: they keep money safe. BTC needs something like banks to emerge, and that defeats part of the point of BTC.
And of course, it's virtually impossible for BTC banks to operate because they can't provide interest (BTC is designed to be anti-inflationary, and therefore by definition the concept of interest is hard to fit into the scheme of things), so people will either need to continue to struggle or we'll see value being stolen regularly.
9. The price of Bitcoin is likely to range between $4000-5000 by the end of 2014
You could literally use a RNG to come up with predictions for 2014 highs this year on BTC. Here are 10 I just came up with, and all of them are equally valid: $0, $12, $87, $479, $2065, $3535, $5566, $9233, $65136, $72612. Pick one, it's your prediction for the year. Well done.
And it's that uncertainty that is driven by the fact the whole damned thing has so little liquidity and so much "value" is being sat on by speculators who could start a rush in under an hour, that makes it so hard for people to see BTC as viable long-term.
That then causes the effect that it is unlikely to ever become viable long-term.
10. Last but not the least – Satoshi nakamoto will be Time’s Person of the Year 2014.
Possibly, but I'm not sure if they give that award to ponzi scheme creators, so until they're certain it's not a ponzi scheme, aint going to happen.
> And of course, it's virtually impossible for BTC banks to operate because they can't provide interest (BTC is designed to be anti-inflationary, and therefore by definition the concept of interest is hard to fit into the scheme of things)
Here is how a bank operates: take deposits, promise withdrawals, send some fraction of the deposits to a third party to spend, charge him interest, give depositors a cut. Track him down if he won't pay, or absorb the losses, and if there are too many, fail (and all the depositors lose money). Likewise if there's a crisis of confidence and everyone rushes to withdraw all their money.
Here is how a Bitcoin bank would operate: take deposits, promise withdrawls, send some fraction of the actual cryptocurrency tokens to a third party to spend, charge him interest, give depositors a cut. Track him down if he won't pay, or absorb the losses, and if there are too many, fail (and all the depositors lose Bitcoin). Likewise if there's a crisis of confidence and everyone rushes to withdraw all their Bitcoin.
Either way, there's more money around than there used to be. Oh, there are the same number of crypto-tokens, but there's more money: money is money because people believe it is money, and you believe there's money in the bank. You could go so far as to say that all lending is, by its nature, a double-spend attack (with a promise to set things right in the future).
But since essentially no earns Bitcoin for a living, the foreign-exchange risk on a BTC-denominated loan is insane. A loan that'll cost $500 to pay back one day and $1000 a few weeks later? They'll sell like hotcakes!
1. Bitstamp is a YC company and many investors are looking to invest in the next Bank of America, unconcerned with short term liquidity.
2. Mining is currently barely profitable, but some people get economic value from heat and the mining futures market is going to stabalize the mining to bitcoin price relationship.
3. If you ever believe that a decentralized currency will be how we transact in the future (as I do) this will always be the case. The benefits of crypto currencies are vast, and the institutional support seems to be behind bitcoin at the moment, but this could change if a strong contender arises.
4. You misunderstood the author. He is saying that it will be easier to be anon with bitcoin in 2014 (think Tor backed bitcoin clients).
5. Global forces are complex. Corporations are some of the actors, politicians others, and the military and intelligence groups others. It is fair to talk of America's interests, as papers like the economist do.
6. Bitcoin is hard to use right now, it only competes well on irreversibility and on annonimity. People use it to buy drugs in western countries, but as it gets easier this may change.
8. Making something easier to use does not necessarily change its security. It is both easier and more secure to make a voice call over the internet than next to a land line.
9. Most people (including you it seems) don't have an intuitive understanding of inelastic supply. The price changes look more rational when you do.
>If you can't see that strength as a massive weakness, ask yourselves what value BTC intrinsically has over other alt-coins.
That's an easy one: the network effect (http://en.wikipedia.org/wiki/Network_effect). Same why you cannot simply start another successful social web and eat Facebook's lunch.
Most of your points are reasonable, but your last ruined it all for me.
> I'm not sure if they give that award to ponzi scheme creators
A Ponzi scheme requires new money all the time for it to continue. If new money stops going into Bitcoin, it's not doomed to collapse like an actual Ponzi scheme. Bitcoin is not a Ponzi scheme.
You need to read it in conjunction with the sentence that follows it - I'm saying the burden of proof that it isn't a Ponzi scheme in public perception is currently on BTC, not that it is a Ponzi scheme.
Pretty sure if all the miners stopped mining, bitcoin would be dead in the water, unless there is a secondary transaction mechanism that doesn't rely on miners.
1. More than $100M of venture capital will flow into Bitcoin start-ups.
No it won't because if you ask VCs they will mostly tell you that the value can not be extracted easily into fiat currency and that's what they need to still work in.
To that argument, some will say "BTC-only VCs" will emerge which is a regulatory nightmare, so would be restricted to angels only, or that the money will flow into making BTC<->Fiat exchange easier, but that needs buy-in from the banks, and the moment they decide it's safe to do, they'll just do it themselves so there is no market for it.
Investing in BTC startups is a risky business as it is. Putting $100mm into them would be seen by the VC industry as positively insane.
2. Mining ‘will not’ be dead
If you run the numbers, it's of marginal profitability at best right now (and in most legal use cases is a negative - you need to steal power from somewhere, basically), and the miners aren't doing their maths very well. The poster's opinion that smaller enterprises will move their mining out to the cloud means they haven't done the maths either.
3. There will be less than 5 alt-coins (out of the 50+ in existence) that will survive 2014
This made me laugh. The fact alt-coins exist at all shows how the value of BTC is being misunderstood by both sides of the "is this tulipmania or a revolution?" debate.
The advantage of BTC is that it's a decentralised "currency" based on open source algorithms and a network of workers validating itself, which can be easily replicated.
The disadvantage of BTC is it's a decentralised "currency" based on open source algorithms and a network of workers validating itself, which can be easily replicated.
It's biggest strength is also it's biggest weakness.
If you can't see that strength as a massive weakness, ask yourselves what value BTC intrinsically has over other alt-coins.
If you follow that argument down the inevitable rabbit hole you will eventually rationalise that the value is based on perception, much like fiat currencies of the modern era, and you will start hankering for the gold standard.
Except the perception of fiat currencies is so strong it is unlikely to be undermined by the majority. Is that true of BTC?
In essence, BTC will remain strong as long as people believe it will remain strong. But the moment the majority flip, or switch to an alt-coin like Litecoin, etc. then what value will it retain?
4. Bitcoin community will solve problems including that of ‘anonymity’
Anonymity is not the problem banks and governments are truly concerned about. If it were, cash would be phased out by governments just as much as BTC would be blocked. In general they are undecided but wary of BTC because it has all the hallmarks of a Ponzi scheme with mysterious founders who do not make their intentions known.
It is accountability of the system that is of concern, not accountability of the transactions within it.
5. US, China and other global forces will not be at the forefront of Bitcoin adoption
If you think that the US, China and other countries are "global forces" you need to look at corporate entities more and ask who has the money and who has the debt.
Either way, the fact that BTC could be a private currency that lets corporations run free from government control and "tyrannical" central banks is just going to force more legislation outlawing BTC transactions.
6. Indian ecosystem will be slow to evolve; limited to speculators and mining pools
As indeed will the rest of the World. There are no pure consumers in the BTC space - everybody in the BTC ecosystem right now is a miner or a speculator or both, and the transactions are a side effect of suddenly having a lot of "money" that can't be easily turned into fiat currency.
There are few people - if any at all - who are using BTC because they perceive it as better for day to day transactions than fiat currency, because for the most part it is not.
7. The use of Bitcoin will evolve beyond ‘store of value’ or ‘transactions’
Adding metadata to the BTC blockchain is mildly interesting. Using the protocol for other purposes outside of the BTC transaction block chain (messaging, etc.) is much more interesting.
I have no doubt that the true value of BTC is the protocol that might inspire all sorts of wonderful P2P applications to emerge, but I don't think it's clear right now that any of them still lasting in 10-20 years will be currency.
8. The ‘browser’ of Bitcoin will come this year
By definition if you make a system easier to use, you have to make it less secure. If this happens, we can expect many more "somebody stole my BTC because I left my web browser open" stories.
Banks serve a useful purpose with BTC: they keep money safe. BTC needs something like banks to emerge, and that defeats part of the point of BTC.
And of course, it's virtually impossible for BTC banks to operate because they can't provide interest (BTC is designed to be anti-inflationary, and therefore by definition the concept of interest is hard to fit into the scheme of things), so people will either need to continue to struggle or we'll see value being stolen regularly.
9. The price of Bitcoin is likely to range between $4000-5000 by the end of 2014
You could literally use a RNG to come up with predictions for 2014 highs this year on BTC. Here are 10 I just came up with, and all of them are equally valid: $0, $12, $87, $479, $2065, $3535, $5566, $9233, $65136, $72612. Pick one, it's your prediction for the year. Well done.
And it's that uncertainty that is driven by the fact the whole damned thing has so little liquidity and so much "value" is being sat on by speculators who could start a rush in under an hour, that makes it so hard for people to see BTC as viable long-term.
That then causes the effect that it is unlikely to ever become viable long-term.
10. Last but not the least – Satoshi nakamoto will be Time’s Person of the Year 2014.
Possibly, but I'm not sure if they give that award to ponzi scheme creators, so until they're certain it's not a ponzi scheme, aint going to happen.