Bitcoin Forum

Suppose a Bitcoin clone with little to no changes would startup tomorrow. Would miners switch?

I think they would, because early adoptors had (and still have) a big advantage with the current inflation model.
During the first year about half of all currently existing bitcoins were mined, while there were practically no transactions, and almost none of it has been spend.
Why would late comers simply accept this? If you newly learn about Bitcoin, you'll always have an incentive to start from zero.
Unlike gold, bitcoin is not unique and was never intended to be.
I'm not arguing on economic grounds, and do support the austrian school, so please don't restart the old inflation vs. deflation debate.
It's about sustainability of continuous network growth, which seems to need an equal playing ground in time.

There would be some incentive for miners to switch but miners only make up half of  price negotiation.

For it to be worthwhile for the miners to switch the difference in amount mined would have to be greater than the difference in value. For that to happen the people using bitcoin to conduct transactions would need to switch and I don't see the incentive for them to switch.

If bitcoin wealth became concentrated enough and the large hoarders began to behave in monopolistic ways in order to increase the value of their own bitcoins you might see people jump ship for a bitcoin clone.

It's really a fair question, and honnestly as far as I'm concerned I have no definitive answer to it.   How many other cryptocurrencies will there be?  I don't know.  Will miners start an other block chain when bitcoin reaches the 210,000nd block?  I don't know either.  If so, would that hurt bitcoin's monetary value?  I doubt so but I'm not sure.

Only time will tell.

new bitcoin-like currency can emerge only in some niche area. look at social websites as example - it's very easy and straightforward model, but there is only very few ones available and being used a lot. others - are either not used at all, or are niche social networks.

bitcoins - it's about people who uses it. bitcoin protocol is just a protocol.

so correct questions will be: will another group of enthusiast emerge in near feature. I would say - no. Probably, only some very-very niche group.

But surely the aim is to keep Bitcoin (or an alternative) attractive for a steadily growing percentage of the population? You don't have a disadvantage if you join facebook or twitter today, just the opposite: they get more attractive with more users.

Of course this is also true for money, so Bitcoins only advantage seems to be its momentum, e.g. the established economy and exchange volume, which is arguably not much.

Here's a starting point for an alternate reward/inflation scheme:

Solved blocks transfer a dynamic amount of money to the finder,
depending on current difficulty, which is adjusted every block, based on a moving average of:

• storage need, e.g. data per second
  → more blocks are generated during peak hours
  → transactions are cheaper during off hours
  
• threat level, e.g. number of blocks in concurrent chains
  → electricity is not wasted on security when not neccessary
  → defense is payed for in small bursts of inflation
  

→ inflation is infinite and follows adoption level, FLOPS/Watt, the acceptance of transaction fees and the ratio of commercial / free hosts
→ inflation is predictable and will eventually become constant = neglible

Is it really?  To me if the community is large enough to provide liquidity of exchange to most other currencies, then I think it good enough.

I'm pretty sure that if 1% of World population was made of bitcoin enthusiasts, then the currency would be much efficient enough for pretty much anything we might expect from it.

The more complicate you make the system the more chances an exploit could be found.

A competitor to bitcoin could win out but it would have to distinguish its self with more than a fresh block chain.

Bitcoin with no changes will eventually do this.


Off peak hours are when free/low fee tx will get in.

If there is some way to tell when it is necessary then I'm all ears.


I think it's pretty smooth, but this will end eventually anyway.

edit: Bitcoin is pretty freaking clever imo

@FreeMoney
The main point is that payout is proportional to difficulty, i.e. work done.
So, all else equal, it will rise exponentially as long as Moore's-Law holds, and there should be less (no?) incentive to get in early.

Because this would reduce the total hashing power, the point about the defense against attacks: I'm not expert enough, but there should be a way to detect an adversary based on "inconsistent" blocks in the chain? There are probably more ways to automate this.

It seems that you are missing one critical thing about Bitcoin. The value of bitcoin does not come directly  from protocol, or from technical details.
It comes from the people who use it.

So it doesn't matter how many clones of bitcoin you make, miners won't switch because the forked coins will have no value, because it won't be possible to convince a lot of people to switch to it. The more people use a currency and exchange it for real goods, the more value and more power it has.

Also, stop comparing Bitcoin to Ponzi scheme. If Bitcoin is ponzi scheme, then gold is ponzi scheme too. If gold is ponzi scheme, then every bullion (and any valuable and scarce thing than can be used as a currency) is ponzi scheme.

Comparing Bitcoin to Ponzi annoys me. That is absurd.

No-transaction-fee transactions will only get processed when a miner who accepts NTF transactions finds a block. I suspect that all miners will mine 24/7, so I don't think NTF transactions are any more likely to be processed in the middle of the night than they are during peak business hours.

(Plus 'off peak hours' may not mean anything as I suspect Bitcoin will be used all over the world.)

No, "inconsistent" blocks are rejected by all honest blocks no matter how much power an attacker has. What power allows you to do is right a new consistent chain that doesn't contain a payment that you previously made. People will know afterwards, but presumably the attacker will have already gotten his merchandise or whatever.


I don't understand. Do you think there is too much or too little incentive to get in early as Bitcoin is now?

Any difficulty rise that happens due to Moore's law won't affect miners generally, the will need to do more hashes/payday, but they will also have the advantage of being able to hash faster.

Yes, thats true. But don't they deserve it?

After all, these people are the ones that:

1. Came up with the idea.
2. Implemented it.
3. Maintained it.
4. Promoted it.

They are IMO, to be thanked, not criticized. It also should be remembered that despite the high value of BTC so far, there is still nothing practical they can be used for day-to-day, so while it appears these guys are hoarding, they are actually sustaining the value of bitcoin by not dumping their coins on the market, and waiting to spend coin on something useful, like helicopters.

Some miners will probably be programed to fill blocks with tx in order of fee size, and include free tx only if there is extra room. Maybe the backlog will be hours, days, years, infinity, but if it ever gets cleared it will probably be when fewer new tx with fees are coming as opposed to when the most are coming in.

Definitely not a ponzi even though the original miners accumulated a ton of BitCoins. Why? Because if they wanted to "cash in" they'd crash the price and their BTC would essentially be worthless.

It could put a damper on how fast the BitCoin economy grows though if we experience hoarding which I think we are. I doubt the current price is very realistic and is mainly supported by the unwillingness of the majority of the most wealthy BitCoin owners to sell. If the price stays this high new people will be more reluctant to enter so my hope is those hoarding right now will realize this and will start selling more and lower making the price more appealing and getting more people in.

I doubt miners would switch to an identical cryptocurrency since it's not the easiest thing to have those mined coins actually have some real world value but I could see this happen if perhaps a better much improved cryptocurrency emerged.

Has anyone thought the threat of everyone switching to another block chain makes the miners not act in bad ways ?

It is in their best interest to act reasonably.

The initial question is kinda moot, if we're talking about an identical clone, but the main point still stands:

Even though the technology is great and has lots of merits, adoption will suffer because rational people will not buy into the existing market.

I disagree, higher prices won't effect trade, in fact it would encourage it. People see what a bitcoin is worth they're more likely to like being paid it.

Not sure how higher prices would effect speculators.

That's not true.

Instead, you always have an incentive to buy-in at the most financially-gainful moment.

It's easy for you to assess buy-in behavior when you've seen 1 BTC grow from less than 0.01 to 1.00 USD in 3 years.

Late-comers must also accept that they didn't buy Apple stock a decade ago. Or last year. Or last week. But it certainly doesn't breed a remorse that makes them abstain from investing until a new Apple clone initializes out of the dust so they can invest their life savings. In fact, speculative certainty with a track record (like an ever increasing value) only incentivize newcomers.

There is no incentive to start from zero unless you know the progression of the value. Nothing about a new currency guarantees zero risk for Zero Day investment. In fact, now that Bitcoin is the first to market, a Bitcoin clone is even riskier.

And if you assert that a Bitcoin clone would be guaranteed to increase in value, then let's start about 10 more of them. You and me. I'll refinance my house and draw three more credit cards and invest everything I have because you must be a fucking wizard.  :D

You're missing the point. Higher prices will turn off all those who aren't trading them yet. It's like when you look at stocks, everyone wants to find and buy that one super cheap stock that will explode in price when it becomes really popular. Once it's popular and the price already exploded mostly day traders buy it...

With the amount of services and goods being offered and the volume at the exchanges anyone without any screws loose will quickly recognize that $0.90 is just too high of a price and will simply not buy. I know I wont even though I think this is the greatest invention I have ever discovered.

My prediction: the price average might hover at this mark for a while longer despite ever higher hashing difficulty and ever larger network. Then there will either be a shit ton of people entering the market based only on the logic behind bitcoins and them being the great invention that they are and not their actual market value and the price will rise or people will follow common sense, look at the volume, look at the services and goods available for BitCoins and decide against entering the market and the price will stagnate and eventually fall and the hoarders will soon hold worthless BitCoins at which point they'll start selling for cheaper and cheaper until the market will find the price for their actual value.

I think Satoshi made a huge mistake when he was designing the whole thing. If I could have changed one thing it would be the rate of issuing new BitCoins to a really slow start and then double the rate until we reached half of the 21mio limit and then I'd reverse the trend back to ever slower issuing until the limit is reached. This way the first people would still get a head start but not to the extent they did now and the supply of BitCoins would have been much more evenly spread between the economy which would encourage more trade and would keep the price low through competition until they would have actually gained value.

But it is what is now I guess. In the end hoarders will sell and price will drop, it'll just be a longer and more grueling process that's all.

A higher price may discourage people from investing in bitcoins. However if bitcoin is useful and it is easy to convert other currencies in to and out of bitcoins people will use bitcoin.

It seems to me that people using bitcoin is more important than people investing in bitcoins.

But you're looking at Bitcoin from only a speculative point of view.  As a currency, it doesn't matter what the absolute price is vis-a-vis the dollar or whatever.  People will be attracted to Bitcoin for a variety of reasons, including its low transaction cost and decentralized and pseudonymous nature.  My enthusiasm for it wouldn't be any less in the absence of mining.

It can easily be thought of as a kind of ponzi scheme.

The claim that the crash in price if the long time miners sold their hoards indicates it is not a ponzi does not make sense to me, because ponzis too tend to crash very similarly. (The originators cash out instead of continuing to give back incoming money to other people.)

We need not speculate about new startups, we can experiment to obtain empirical results.

A number of currencies have been commissioned, and I have implemented IRC bot interfaces to them.

So far none of them have seen value in exposing their blockchain building operations to the public. They see the distribution nature of the protocol as useful for communicating among trusted partners, and prefer to keep difficulty at 1 (one), which they can well afford as long as they don't start attacking each other.

It looks like they plan to address value primarily by not "issuing" coins that are not in some way or other "backed". For example they are all committed to buying huge number of each others' coins, so each will be backed by a basket of all the others. Even that though they do not consider sufficient, they are also trying to work out policies to try to "ensure" that there is more "behind" them than just other such virtual/digital coins.

The way the IRC bots do their accounting is dictated by that requirement, for example. Each type of coin has an account at each type of coin. If you have let's say some CDN, and you tell the bot to exchange it for GMC, it sends the CDN to the gmcbank's CDN account and sends GMC from the cdnbank GMC account to your GMC account.

It can only do that if cdnbank has enough in its GMC account. There can be any amount of GMC in the other coin-type's GMC accounts, those are not relevant, only the GMC that is in cdnbank's GMC account can be used to "back" (aka buy) CDN.

Thus basically what the bots are doing is holding the stuff used to back the various coins. Each coin has it's own distinct collection of stuff to back itself with aka to buy back the coins it issues.

So basically the plan seems to be not to "cash out" by buying fiat currencies but, rather, to "back" themselves by buying fiat currencies to hold as "reserves" with which to back their own value; standing ready to buy themselves back.

Thus the lack of desire to open up "mining opportunities": they have no desire to bleed out their reserves by cashing in coins created by random miners. In essence they can have digital tokens manufactured at less cost by keeping difficulty low until many, maybe even all, coins have been manufactured.

-MarkM-

The difference between Bitcoin and a Ponzi scheme is that all possible outcomes of a Ponzi scheme are win-lose, while Bitcoin also has possible win-win outcomes.

Could some one explain what markm's trying to say here?

It's kind of silly to say that miners who sell bitcoins aren't giving anything back. When they sell coins they are giving the best version of money I've ever heard of and getting crappy old dollars in return.

Is Bitcoin only a ponzi if it fails? Is every currency system a ponzi or become one after it falls?

The thing with a ponzi scheme is that it eventually will have to collapse, and when it does, everybody still in will lose everything. However with bitcoin you might see massive price increase, a bubble. But once it pops the price will only fall to a certain point because people will eventually start buying again once they feel the price is right. And also, if bitcoin is a ponzi scheme, so is all other currencies.

Some people posting on this thread seem to believe bitcoins have no intrinsic value.  That is simply not the case.  Bitcoins can be readily transferred electronically, mathematics and a widely distributed system of trust ensure their limited supply, transactions are pseudo-anonymous, they are impossible (practically speaking) to double spend.  It's incredulous to me that people could even imagine that bitcoins have no intrinsic value in the face of these facts.  It's true that if hoarders dumped their hoards on the market, the prices would fall, but certainly not to zero...and the hoarders would have little rational economic incentive to do that (I mean, it's not like a run on a bank...due to intrinsic value, it is more like a stock and as prices fall, they would find a natural level of support).

In fact, given these properties, one could argue that bitcoins have far greater intrinsic value than gold (which has similar intrinsic value, but is stuck in the physical world).

I strongly believe you are wrong in regards with the bold part because if the hoarders wont sell and the prices stays too high no one is going to buy and the BitCoin economy wont grow. The sooner these hoarders realize that and give in and start selling the better it is for the growth of the BitCoin economy thus they have a strong incentive to sell and lower the price to a more reasonable one.

And IMO and I'm pretty sure I'm not alone thinking like this, $0.90/BTC although looking great to someone new just finding out about BitCoins IS to high for the current volume and interest and especially the bid vs ask ratio.

Gold have intrinsic value based on industrial and decorative application. Bitcoin, on the other hand, have no such use outside of money.

There IS obviously a strong incentive for hoarders to sell at some point:  profit.

I mean, say someone owns 100,000 bitcoins, as many very early adopters probably do.  Didn't such a person have a huge incentive to sell while bitcoin reached parity?

Personnaly I own a few thousand bitcoins.  If bitcoin was to worth 10 euros per bitcoin, let me tell you that I'd sell some of them!

Of course I won't hoard the euros I bought, but I'd buy a few stuffs with them.

It is not you but the market that will decide what a "reasonable" price is, and the market currently thinks 0.88 is  reasonable.  The exchange rate is irrelevant to the desirability of BTC as a currency.  Just because it costs 83 JPY to buy one USD doesn't mean USD are too expensive.  If you have JPY but need or want USD, then you will trade at the market rate, then trade back out at a later date if you so desire.

Please tell me where you've learned all this "wise" logic of yours. What research are you basing on your beliefs? Because you make no sense.


I base my logic on the Austrian school of economics and a lot of research on monetary policies and world wide current affairs.

People absolutely don't just buy USD with their JPY if there's a cheaper option. Why do you think the world is waging currency wars right now where they are each trying to win the race to the bottom of their currencies. Every major economic power with their own central bank right now is trying to devalue their own currency so that their exports are more attractive and they can raise more revenues through exports to cover their budget shortfalls.

BTC will have to get attractively cheap enough for more people to buy some more. I'm not saying people aren't buying them at the current price but what I'm saying is that there would probably be way more buyers if they were cheaper. I mean FFS look at the MtGox bid vs ask ratio, does it really not tell you anything???

I'm not saying I want the price cheaper, the market is! And the market currently thinks 0.88 is reasonable only because you have hoarders who have no serious competition and can afford to prop up their desirable price. I mean I don't blame them, they shouldn't be forced to sell lower if they don't want but all I'm saying is that this situation doesn't make the price reasonable and that it will have to come down if BTC wants to grow significantly before it can go up again. I mean FFS it's basic supply vs demand: Right now there's huge supply and low demand, what does that tell you? Prices have to come down, that's what. Any they will!


And please for the future if you're just having some thoughts in your head which you haven't actually done any research on keep them to yourself. Because making statements is not the same as presenting facts.

Hazek,

Austrian economists have no problem with "hoarding", which they actually call "saving".

See: http://mises.org/money/2s9.asp

Economists say always a bunch of garbage, Austrian included.

Well, the "garbage" of austrian economists is many orders of magnitude closer to reality than the garbage of "standard" economists and/or keynesists.

Look like we got ourselves into an unsubstantiated debate.

I commend you for actually doing some research but unfortunately you're applying the learned knowledge incorrectly. The article speaks about money and not local currencies which is what BitCoins are the most similar to atm.

If BitCoins were the reserve currency and all prices were expressed in BTC I agree with you, hoarding wouldn't have been a problem. But they're not. Prices are in USD and EUR and so forth and you need to first exchange your BTC for one of those fiat currencies before you can buy almost anything. Sure we already have a few services and goods that have it's prices expressed in BTC and those prices may very well fall if the price of BTC doesn't which btw is a function of supply and demand. But then what's the appeal of charging BTC for those services and goods if they could charge USD or EUR or other fiat currencies at a higher price? There isn't one.

So BTC economy will either keep it's exchange price and lower prices for goods and services offered for BTC which will eventually shrink the size of BTC economy or the exchange price will fall and which will raise prices and make the BTC economy more attractive inviting more goods and services in which will then slowly lower prices and this process will repeat until every good and service is priced in BTC after which moment hoarding wont be a problem anymore.

But if at any point along that path hoarders tighten too hard they'll drive goods and services out of this economy and put this process in reverse.

Btw it's very hard to prove any of what I'm saying because there's a time component involved. But that's why the theory behind of it all is so important since it allows us to fairly accurately predict these future outcomes.

They're not hoarding, they're saving. If there is "too much" saving, prices will get too high, and some people will sell. If they are unable to sell due to high exchange rates, their asks will come down. I guess I just don't see any problem here that won't be solved by market forces. I plan on hoarding some BTC, but I am also investing some into BTC companies and acquiring some more to sell to friends and spend on the BTC economy.

As a "hoarder", it's in my best interest for the economy to become as big as possible, not just for me to hold as much BTC as possible.

Yes, there is.
When I charge all my goods and services with BTC, I have no limits on sending and receiving money worldwide, at no fees at all.
And I can be sure I will not be screwed by any financial institution or Paypal-like, with freezings and chargebacks shit.

http://en.wikipedia.org/wiki/Ponzi_scheme


http://www.sec.gov/answers/ponzi.htm

Bitcoin does not pay returns, therefore, it cannot be a Ponzi scheme.

The value of Bitcoin may increase and it may later drop in value. Under this scenario, it can be rightly described as a bubble that popped, but it is not a Ponzi scheme.

I had to actually read back and see what exactly my initial point of this argument was because I agree with your statement in bold. But my initial argument was that we are already at that stage where the exchange rate is too high and that it will have to come down first before the economy can grow at a faster potentially exponential rate and and that the sooner the hoarders realize this the sooner the influx of new goods and services will happen..

My point is that the current exchange rate is not realistic and already too high and all my posts was basically theory supporting why that might be true.

I think you are stuck on the intrinsic value of money and are neglecting its suitability for exchange.

Example 1: You want to buy oil and you need dollars to do so but you only have yen.  Solution: buy some dollars at the current exchange rate and then buy the oil.  

Example 2: You want to have pseudo-anonymity and a low transaction cost for a series of exchanges.  Solution: buy some BTC at the current exchange rate and then engage in your transactions.

In each example, another currency was better suited to the task at hand than the one you currently possessed, so you did an exchange first.  

Most merchants who price goods and services in BTC adjust their prices regularly to reflect the current exchange rate.  I sell wireless phone minutes for BTC, but my cost basis is in dollars.  So the BTC price of these minutes varies over the course of time.  If you want to refill your wireless phone anonymously, you can buy BTC at the current rate and then buy minutes from me with BTC.  Since my prices are tied to the BTC/USD exchange rate, you won't pay any more or less than if you bought the minutes directly in USD.

I don't think anyone here is suggesting that Bitcoins are superior to gold or silver as a long-term store of value.

I'm not stuck I just feel that the current price of BTCs does not validate the gained value of advantages through it's use for most new to this economy.

Btw in your example you're assuming no one has to pay any fees in exchanging between USD and BTC? And are you also assuming there's no other perhaps cheaper option to purchase the same service with another currency?

Please enlighten us as to what you believe the current value of Bitcoins are, and don't forget to show your math.  I am also interested in hearing about other peer-to-peer, pseudo-anonymous, digital cryptocurrencies.

Don't be childish, it's impossible to know. But I do see a 1 to 4 bid to ask ratio and I do know it's too high. Only the market knows how much though.

What I meant was that the hoarders would have little (or less) incentive to sell as the price fell and that would create a floor under the value of bitcoins (rather than falling to a value of zero as an ealier post implied (based on what I considered a flawed argument that bitcoins have no intrinsic value)).

What I don't get is why the exchange rate of BTC would have any affect at all on the adoption and growth of bitcoins.  They could be worth $0.10, $1, $10 or $1000 and I don't think it would make a difference.  But, I can see argument that exchange rate volatility is a hinderance to adoption and use.  If the price moves in large swings over short periods of time, people will be less confident in holding and using bitcoins in commerce.  And that is why we need lots of active BTC traders...people willing to buy as the price falls and unload as it rises in an effort to profit from the volatility (reducing volatility in the process).

The exchange rate should have no effect on peoples' willingness to adopt Bitcoin. Extreme volatility in exchange rate, however, may have a negative effect.

Really? It's hard to understand for you how the rate of exchange could play a role in whether or not someone decides to give BitCoins a chance?

Tell me something, if I show you a brand new invention that you might not even fully understand how it works would you be more willing to buy one for a cheap price or buy one if it were really expensive? I mean geesh use some common sense will ya..

And what do you think does an unequal bid vs ask ratio spell? Stability of the rate?

Rate exchange is absolutely neutral for anyone using BTC to buy or sell things, the higher the rate, the few BTC you will need to buy or sell the same goods. Think of the convenience instead.

I'd think there's probably a technical reason why the number of bids fell dramatically in the past few days (http://bitcointalk.org/index.php?topic=4067.msg61397#msg61397) ;-)

I agree. But what if the rate is too high and I buy BTCs and then a month later before I spend them the rate falls and prices readjust and I just lost all the value? Hmmmm?

How is this so tough to get, I really don't understand.

bid vs ask ratio from MtGox website is 38 vs 126 right now. So unless you're suggesting that because of the move people who'd normally put in bids didn't have access to the site I don't see how that event could have had any effect.

Bid/ask ratio is not a reliable figure for two reasons:

1) Dark pools
2) Bids and asks that are far from the current trading price would not really affect trading. There are currently well over $10,000 worth of asks above BTC 1.05 .  If I wanted to, I could put in a ton of bids or asks at prices nobody is ever going to trade at, but I seriously doubt these are going to affect near-future prices.


I think if you wanted to predict future prices you'd have to look at the number of bids and asks within, say, 5% of the last traded price. That number, as are all numbers when predicting the future, is entirely subjective.

I'm suggesting that we're likely only seeing a fraction of the bids. Prior to the server move there were bids at, for example, the 1c mark. It makes very little sense to me for all these bids to have been pulled by users at exactly the same time that MtGox moved servers. It makes more sense that tcatm's experience at Bitcoincharts is true also for MtGox's market depth reporting.

I have thought on this, I think the answer is yes and no. Yes because the early adopters have an advantage over later adopters. However, it has a built in stop mechanism that will eliminate the necessity to gain supporters. After the fulfillment of the 21 Million BTC, there is no advantage whatsoever. The supply and demand will be purely market driven. It does make sense to provide an incentive to early adopters, but one that equalizes. As with all currencies, the flow of the currency is more important than the holding of currency.

The problem is there will be no Quantitative Easing possible. The Savers have the advantage in the long run, but then again they always did have the advantage no matter what the currency.  Deflationary pressure will strip the advantage of saving if allowed to occur. All modern currencies try everything possible in order to avoid deflationary pressures because it hurts. The irony, is that it suppose to hurt. It means people have been to greedy and not sharing in growth. You can delay it, but not avoid it.

A key characteristic of money is that it's divisible without loss of value.  Bitcoin is divisible (to 8 decimal places anyway).  It wouldn't matter to me if one bitcoin was $1 or $10,000.  The exchange rate is nothing more than a momentary point of reference.  What does matter to me is what the price of bitcoin was yesterday and what it will be tomorrow relative to what it is today.

So, to answer your question, if you showed me some new invention and it was really cheap, sure, I would buy it.  If it was really expensive, I would still buy 1/10000 of it.

When I first started looking into bitcoin, the only thing that I really cared about was the price history chart...but the values on the y-axis were irrelevant from my perspective.

In most markets early adopters do not have an advantage, but additional risks.
Could you explain what's meant with "equalizes"?

One must at least accept, that the inflation scheme is not totally irrelevant, by reductio ad absurdum:
If the total block limit had been set to 1000, would we now have this discussion?

Here's the math for the approximate current energy costs, solely for the hashing power:

   (600 Ghash/s / 2 Mhash/Ws) * (0.2 $/kWh)
= (300 kW) * (0.2 $/kWh)
= 60 $/h
= 1440 $/day

Does the Bitcoin economy really warrant that kind of expense, to protect against double spending?

I've refined my preferred inflation scheme, to get rid of the problem with Moore's Law, which would have led to too strong inflation:

• #currency units awarded ~ energy spend on the proof of work
  when a host solves a new block, it gets coins proportional to the current difficulty = amount of work spend
  
• long term adjustment through a conversion factor:
  - the factor will be set to always approximate the real Watt*seconds spend during solving the hash
  - with more efficient or specialized hardware, the factor will fall
  - in case the hash is broken, the factor can be adjusted downwards or a new hash can be chosen
  - in case energy production gets a lot more efficient, the factor could also be adjusted
  

Everybody will understand that electricity can always be turned directly into bitcoins (even anonymously).
The result is that early adopters have the same conditions as late comers.

'Early adopters having an advantage over later adopters' is not a sufficient characteristic to classify something as a Ponzi scheme.

I've read your posts in this thread and you seem to be stuck in a rut.

Your problem is that you're attaching an arbitrary value to Bitcoin.

Conversion rate from Bitcoin to USD is arbitrary and irrelevant. It tells you nothing. Sure, you can look at the historical price of Bitcoin and see that it's enjoyed a steady rise to USD parity, but that's only because speculators traditionally stabilize speculation around the arbitrary value of USD parity because we're human and USD parity "seems like a good place to stop buying".

Even if one Bitcoin cost $1000, how can you pass a judgment on it beyond referring to historical price activity? Something that costs 1000 USD also costs 1 BTC. It doesn't matter what the conversion rate is in itself because it's market nominal.

By asserting that Bitcoin is overvalued right now, you're playing clairvoyant and suggesting that there's going to be a substantial price drop, but there's no predictable circumstance for that. Currency isn't overvalued just because "it seems high".

Furthermore, Bitcoin has no commercial market to entrench price or give meaningful value to price. Currency markets play much different once they start pushing volume in markets other than currency trades because the currency value becomes objectified with the acquisition and investment in goods/services.

Really? What exactly is the incentive for taking those extra risks if not some advantage?

I believe in order to properly quantify the BitCoin currency, it must be done as others are.

How many people (including businesses) use or accept it?  What is the availability(volume)?  What is the flow(# of transactions) of it?

Its value will be directly proportional to the other currencies using the same criteria as above. The BitCoin doesn't have to be pegged to any one currency but to all simultaneously. The ratio to the USD, YEN, EUD, etc... to the BitCoin can be determined on a global scale.

Just because a few pay 2:1 for the BitCoin doesn't mean the BitCoin is worth 2:1, it means there are people willing to take risks.

Is the trend line increasing or decreasing from the above calculations?, should determine whether those risks are justified or wishful.

It is believed that volatility will always exist in a "Xchange Market" for there will be Market Makers (enough influence to change the rate).

For Example:

There are about 5 Million BitCoins (the rate of increase is easily determined because it is programmed). If I own 1 Million of the BitCoins and sell them, the Xchange rate will fall drastically. But only a few nodes at time will register the transaction.  Now that I sold, the 1 Million, I know the market rate will go down (and I can predict the time to bottom based on the # of confirmations of the transaction). Then when the it bottoms, I can buy up at a rock bottom price. After a few of these, I will own the market. Now obviously, I would not buy up all BitCoins because I want a market in them. I just want to own enough of them to remain a Market Maker and control the system.

I will become the next Wall Street. Now there will be other Market Makers. But as many point out the elusive Game Theory, the Market Makers will work together to maintain their dominance of the Market.

Unlike current methods though, I can be a Market Maker being completely anonymously with my "partners."

The only way to avoid this (and it will happen if the BitCoin takes off) is to allow inflow to the currency but restrict outflow from the Currency.  Basically, You can check in; but not check out.  



BTW: this is why the Stock market is rigged. Watch the Market Makers, they control the prices by their purchases and sales of stocks. The "little guy" has no hope of competing with that, unless they know what the Market Makers are doing.

wb3, manipulating a market as you describe it is probably much more difficult than you think.   Moreover, there is nothing wrong with it, ethically speaking.  If someone has managed to own more than one million bitcoins, somehow he has done something to deserve them.  It is his property and he does whatever he wants with it.

You believe in private property or you don't.  Don't try to compromise.

I don't think there is anything "wrong" with it, but a system in which it is accepted; will divide not unite. If you can do it, more power to you. If you can not, oh well your not in the group.

It is not that difficult, as you might think. Especially if this is a goal from the start of a currency.  Assume right now the BitCoin becomes an accepted currency on the ForEX with a parity to the dollar.  With only 5 Million available, Market Makers would appear very quickly.

Wouldn't it be a fair system, if you could buy BitCoins from another currency but not sell them for another currency. The rich will be on the same playing ground as the poor. The rich could still remain rich but not by manipulating currency but by productivity and efficient use of resources.

All current xchange markets have a list of Market Makers. They exist. Wells Fargo is a Market Maker. Chase is a Market Maker. BoA is a Market Maker.  *The Federal Reserve is a Market Maker. --> and if the BitCoin becomes a concern the FED could destroy the BitCoin by buying the BitCoin to achieve a controlling interest and run it into the ground, but why. They would control it easily, buy exchanging with themselves at no cost to manipulate the markets. Call it their form of a TAX on the BitCoin.

Right Now, it would cost me $500,000 to have a 10% controlling interest in the market. I would be able to gain a 10% value by buying and selling the BitCoin to maintain that 10% control over the expansion of the BitCoin all the way up to 21 Million.  So a $500,000 dollar investment is all it would take. But that is now, if I did it as soon as the Xchange market came online it would be chump change.

Again, there is nothing "Wrong" with it. It is just not "Fair." This is why I question "socialists." I don't think they really want it to be fair. They just want it to be "fair" to them.  But if they really want the grandiose idea to a next level in society, the system must be fair and eliminate the greed from the system so the system is driven purely by market forces (supply and demand). One group should not be able to manipulate the price of corn, oil, grain, clothing, etc...

BTW: I don't think it will ever be a fair system until we eliminate greed, vanity, gluttony, etc... from human nature. So every one should be trying to control as much as they can control, it is survival of the fittest.  There are wolves, and there are sheep.

I very much doubt so.  It might cost you 500$ to own about 0.01% of the total amount of bitcoins, but not 1,000 times more to own 10%.  It is NOT proportionnal.

PS.  Anyway what you say can be said about money itself, or even the very concept of "wealth".  It's not just bitcoin.   Some people think money is unfair at best, evil at worst.  I don't, but we all understand your concerns.  Nothing new here, people think that about money since the beginning of time.

I don't get it. There are 5 Million BitCoins in existence as of now, I could buy 10% (500,000) and that is assuming parity (which it isn't even at). So in reality it would take less than $500,000.  10% of 5 Million is 500,000.  And then by simple manipulation, maintaining that 10% ration is not that hard just through buying and selling on the market. Especially with Dark Pools but even without them, transactions do not get confirmed to all nodes at once. It takes time, and as of now, a lot of time, for the transactions to reach all the nodes.

 

As soon as you start buying, unless you find a immediate sell order matching your 500,000$ bid, you will empty the ask part of the order book and then raise the price.

I have no idea about how much it would cost to buy 500,000 bitcoins.  I guess it depends on how you proceed, and which time frame you target, but it would certainly cost much more than 500,000$.

It doesn't matter when nodes see the Bitcoin transaction, it only matters when traders see the exchange activity. That is what will cause the prices to drop, not transaction confirmations.

Traders are but a "node" on the network.

If one Xchange sees it before another, there is even more money to be made. Heck, there are even xchanges that aren't exposing themselves to the "market".

The Key to any Xchange, is the proportional amount of BitCoins to Currency being xchanged. If only 1% of all BitCoins are being Xchanged as compared to the amount of BitCoin - BitCoin Transactions, the Rate means nothing. 

The nice thing is "anybody" can be an exchange, even off grid.

Your "Net" worth is nothing but the percentage of BitCoins you own compared to the # of BitCoins in existence.

No. Current exchanges operate "outside" of Bitcoin. I can see trades in real time on the exchange site, long before I'd be able to detect the trade in the block chain. This is because each exchanger basically has one wallet, with an internal accounting database (much like MyBitcoin). The only things that appear on the block chain from these exchanges are deposits and withdrawals in BTC.

You can't see xchanges in real time. Until they are added to the chain, they did not occur. Once added to the chain, the rate must change.

If for example, you are really interested in buy BitCoin, take a look at BitCoin Charts, buy foreign, sell local at MtGox, would be pretty profitable even though you would have to go from USD -> other foreign currency -> BitCoin -> USD at MtGox.  The xchanges are not in sync, neither will they ever be in sync. Because with BitCoin, anyone can be an Xchanger.

You must be reliant on the data from Confirmed Blocks, anything that is not confirmed, didn't happen.


The whole concept of the Dark Pool was to avoid the Volatility that must occur in this system. So by its own definition, the "Rate" doesn't reflect the real "Rate" of exchange, because of the Dark Pools.  People are getting Volume discounts based on amounts exchanged but that data is not fed into the system immediately.

Just take MtGox, can one buy in the Dark Pool for say 50¢ and sell in the open at 80¢ over an extended time. After a few of these transactions, you are well into the black and can afford to take bigger risks. Constantly being aware of a downward pressure due to the fact that more BitCoins are being "printed" but at a mathematical constant based on probability.

No, Market Makers are already here. And it doesn't take a degree in Economics to figure it out. But there is nothing "wrong" with it. It just isn't "Fair." 

IMO, the best way to judge the value is by the flow of BitCoin (the # of transactions occurring). But this can be misleading because people can exchange BitCoins between their own clients. So the true flow, will have to be the the ratio of transactions to product purchases which means businesses will have to report their transactions to get a view of the value. Businesses will do this voluntarily to get an idea of how to price their products. "Game Theory".  Illegal businesses won't report but rely on the ones that do, "The Prisoner's Dilemma."

You're still not getting exchanges like MtGox. All of those trades take place outside of the block chain, in a database operated by MtGox. When I sell you 100 BTC for $100, all that's taking place is an accounting record of that sale. Only when I withdraw or deposit BTC does the block chain become involved. I can't make this any clearer.

I get it, and understand.

Let me ask, with that system. Goto http://bitcoincharts.com/markets/ (http://bitcoincharts.com/markets/) and see how you could exchange to the positive (in the Black) by utilizing different Xchanges.  And those are just the ones most know of.

IRL, those transactions are immediately forecast for all other xchanges to prevent, pitting the xchanges against each other.


The differences in the xchanges are not set up to prevent, boarder crossing.

With a little research, I found that one can change USD -> Yen -> BitCoin -> USD  and come out ahead. That should not be possible.

I think you mean:
1. Exchange USD for JPY *now*,
2. Jump back in time to March 5th and exchange JPY for BTC,
3. Jack back to today and exchange BTC for USD.

Or is there a JPY figure that's more current than March 5th?

Arbitrage is certainly possible. It's possible, though harder, in far more liquid markets. But I doubt you'd find it to be as easy as you seem to suggest.

I have not done it. So as for experiment only, I will try it. I will use $20 as an example.

I will utilize the the exchange rates between IRL currencies with the Visa xchange rates.

And the Back to USD.

I will post the results.

I would think that if it can be shown to be done with $20, there is a problem because with volume discounts the problem is bigger.

After I am done, I will post the wheres and hows. I want to keep a certain JPY site secret for now.

If you're talking about arbitrage (making money from currencies mispriced in respect to one another), then you have discovered nothing new. In fact, arbitrage is one way that those pricing errors get fixed.

So, good luck to you, I guess?

The high price of bitcoins is due to an expectation of future value. Remember that if we know the price of something will double next week, then it will actually double today, then not change next week.

The value of any item-- gold, stocks, bonds, currencies-- is always equal to the limit (calculus) of the expected value at time X in the future, in today's dollars, as X goes to infinity. Example: Gold is worth 1000$/oz today. A worker at a gold mine leaks information to his friend that there is a HUGE gold deposit equal to all the gold previously thought to exist (so supply will double). But it will take 2 years to mine all of this gold. Result: gold price immediately drops to 500$. It does not take 2 years to slowly drop down to 500$.

Proof:
We know that gold is trading at 1000$/oz prior to the information leak. Therefore, lim x->inf (EV(x)) = 1000.
We expect that 5000 years from now (x = 5000 years) value will be 1/2 of what the market previously expected. (Note: 5000 years was picked as an arbitrarily long time, beyond which the market has no additional expectations, good or bad, about the value of gold)
With no information past 5000 years, the new graph of EV(x) is equal to half of the old graph, for all values > 5000 years, since the only new information we have is that supply will be double the old expectation once all gold is mined.
Therefore, lim EV(x) = half of the previous limit = 500, which is equal to the gold price.

The reason bitcoin is not a ponzi scheme is that the dollar value of your bitcoins is just an indicative valuation based on mtgox's recent transactions. There is no certainty that you will definitely be able to sell your bitcoins for any amount of dollars.

The difference with a ponzi scheme is that people receive statements quoting the amount of dollars that they're supposed to have, but don't exist.

Ah, considering recent events. I think I will put a hold on the experiment. Maybe, I will just send the $20 bucks to a charity over there.

Bingo!