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Title: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 02:15:30 PM http://news.ycombinator.com/item?id=2359239
I think this is an excellent criticism of Bitcoin. Title: Re: Confidence Crisis and Collapse Post by: sirius on March 23, 2011, 03:13:40 PM That "nothing backs it up" crap again. Bitcoin is backed by a good number of various services and products (https://en.bitcoin.it/wiki/Trade).
Title: Re: Confidence Crisis and Collapse Post by: Nefario on March 23, 2011, 03:18:50 PM That "nothing backs it up" crap again. Bitcoin is backed by a good number of various services and products (https://en.bitcoin.it/wiki/Trade). As are all forms of money, government "backed" or not. Title: Re: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 03:20:05 PM As are all forms of money, government "backed" or not. Supposedly, government money are backed by the force of gun. Though, gold have useful properties so people would alway use it as industrial application. Bitcoin is practically nothing without being used as a medium of exchange. Title: Re: Confidence Crisis and Collapse Post by: xc on March 23, 2011, 03:44:36 PM Here's what I posted there:
This obsession with 'backing' demonstrates a gross failure to understand the subjective theory of value. What backs gold??? Nothing other than the subjective valuations of individuals. The same is true of fiat currencies, except here individual subjective valuations concern matters such as 'not getting arrested' or 'not getting shot.' Bitcoin is a technologic, cryptographically-rooted, informational commodity. It has unique, desirable properties inherent to its design and structure. Individuals subjectively value these properties. Their reasons and value scales differ, but the simple fact that people are already trading Bitcoins proves that it is subjectively valued. You talk about 'confidence crises.' This is unique historically only to fiat currencies (and paper currencies built fractionally on commodities like gold). The subjective valuation of fiat currencies is derived from political considerations. As such, confidence in them is built on the ever-shifting sands of political perceptions. When was the last confidence crisis in gold? There hasn't been one. People value gold for its physical properties defined by the laws of nature. Those properties do not change and individuals have continued to subjectively value them. The same is true of Bitcoin. Its properties are rooted in our present understanding of cryptographic principles. As long as individuals continue to value properties such as anonymity, decentralization, finite supply, low transaction fees, ease of digital manipulation, ability to integrate smart contracts, etc... we have no reason to expect a 'confidence crisis.' This will be true as long as the cryptographic logic buttressing the system remains sound – just like the laws of physics underlie the desired properties of gold. Breaking this cryptographic logic (akin to cheap transmutation of lead into gold) would require breakthrough advancements of our knowledge of cryptography and discoveries on hitherto unsolved mathematical problems. But even in this case, the open-source nature of Bitcoin allows it to evolve new cryptographic implementations that would avoid such problems. Title: Re: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 04:01:26 PM Here's what I posted there: This obsession with 'backing' demonstrates a gross failure to understand the subjective theory of value. What backs gold??? Nothing other than the subjective valuations of individuals. The same is true of fiat currencies, except here individual subjective valuations concern matters such as 'not getting arrested' or 'not getting shot.' Bitcoin is a great form of money. That why people value it. While gold is great form of money in addition of having useful properties outside of money, that we called intrinsic value.(Not to be confused with the idea of objects having inherent value.) The worry is that one of those confidence crisis could spark people to abandon bitcoin as money forever. Without intrinsic value, there is no reason why people should continue to use bitcoin. Title: Re: Confidence Crisis and Collapse Post by: barbarousrelic on March 23, 2011, 04:04:17 PM Nothing has intrinsic value except for perhaps basic necessities like food and shelter. These things do not act well as forms of money because the former rots and the latter is immobile and indivisible.
Title: Re: Confidence Crisis and Collapse Post by: ffe on March 23, 2011, 04:05:06 PM The original article talks about the dollar being backed by force (specifically since people are coerced into paying obligations to the US government using dollars.)
If bitcoins are in use for a while and legal contracts are written requiring the paying of obligations in bitcoin then bitcoins will have a little bit of the same kind of backing as the dollar. Someone could be coerced (by the courts) into seeking out bitcoins to pay off obligations. In that sense bitcoins will have intrinsic "value". We could grow into this kind of world because bitcoin has advantages paper dollars don't. Contracts may start to be written denominated in bitcoin. Title: Re: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 04:06:03 PM The original article talks about the dollar being backed by force (specifically since people are coerced into paying obligations to the US government using dollars.) If bitcoins are in use for a while and legal contract are written requiring the paying of obligations in bitcoin then bitcoins will have a little bit of the same kind of backing as the dollar. Someone could be coerced (by the courts) into seeking out bitcoins to pay off obligations. In that sense bitcoins will have intrinsic "value". We could grow into this kind of world because bitcoin has advantages paper dollars don't. Contracts may start to be written denominated in bitcoin. The problem with bitcoin is that it is not legal tender. If a country recognize it as legal tender, than bitcoin would indeed...have "backing". Of course, it's a bad kind of backing. Title: Re: Confidence Crisis and Collapse Post by: ffe on March 23, 2011, 04:09:31 PM The original article talks about the dollar being backed by force (specifically since people are coerced into paying obligations to the US government using dollars.) If bitcoins are in use for a while and legal contract are written requiring the paying of obligations in bitcoin then bitcoins will have a little bit of the same kind of backing as the dollar. Someone could be coerced (by the courts) into seeking out bitcoins to pay off obligations. In that sense bitcoins will have intrinsic "value". We could grow into this kind of world because bitcoin has advantages paper dollars don't. Contracts may start to be written denominated in bitcoin. The problem with bitcoin is that it is not legal tender. If a country recognize it as legal tender, than bitcoin would indeed...have "backing". Of course, it's a bad kind of backing. I agree it's not legal tender, but bitcoin civil agreements can still be written and enforced by courts (such as wage agreements denominated in bitcoin). If this becomes common who cares if the US government insists on dollars. Title: Re: Confidence Crisis and Collapse Post by: barbarousrelic on March 23, 2011, 04:12:47 PM The original article talks about the dollar being backed by force (specifically since people are coerced into paying obligations to the US government using dollars.) If bitcoins are in use for a while and legal contract are written requiring the paying of obligations in bitcoin then bitcoins will have a little bit of the same kind of backing as the dollar. Someone could be coerced (by the courts) into seeking out bitcoins to pay off obligations. In that sense bitcoins will have intrinsic "value". We could grow into this kind of world because bitcoin has advantages paper dollars don't. Contracts may start to be written denominated in bitcoin. The problem with bitcoin is that it is not legal tender. If a country recognize it as legal tender, than bitcoin would indeed...have "backing". Of course, it's a bad kind of backing. I agree it's not legal tender, but bitcoin civil agreements can still be written and enforced by courts (such as wage agreements denominated in bitcoin). If this becomes common who cares if the US government insists on dollars. Title: Re: Confidence Crisis and Collapse Post by: caveden on March 23, 2011, 04:17:44 PM This obsession with 'backing' demonstrates a gross failure to understand the subjective theory of value. Very well said. Good post! Title: Re: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 05:40:38 PM Nothing has intrinsic value except for perhaps basic necessities like food and shelter. These things do not act well as forms of money because the former rots and the latter is immobile and indivisible. That's a narrow definition of intrinsic value. Title: Re: Confidence Crisis and Collapse Post by: rebuilder on March 23, 2011, 05:56:45 PM I would argue Bitcoin, too, is backed by Men with Guns. It is backed by Men with Guns because they can not destroy it, unlike they can with fiat.
Title: Re: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 06:00:47 PM I would argue Bitcoin, too, is backed by Men with Guns. It is backed by Men with Guns because they can not destroy it, unlike they can with fiat. Not really. Bitcoin is just virtually indestructible. Title: Re: Confidence Crisis and Collapse Post by: kiba on March 23, 2011, 06:05:14 PM Perhaps bitcoin would gain intrinsic value by games using it as key part of their mechanic. Say, you need energy, and you need to put some bitcoin in..
Of course, it would be very weak version of intrinsic value because you can just change the code not to use bitcoin. Title: Re: Confidence Crisis and Collapse Post by: barbarousrelic on March 23, 2011, 06:23:14 PM Nothing has intrinsic value except for perhaps basic necessities like food and shelter. These things do not act well as forms of money because the former rots and the latter is immobile and indivisible. That's a narrow definition of intrinsic value. Title: Re: Confidence Crisis and Collapse Post by: marcus_of_augustus on March 24, 2011, 01:45:49 AM The original article talks about the dollar being backed by force (specifically since people are coerced into paying obligations to the US government using dollars.) If bitcoins are in use for a while and legal contracts are written requiring the paying of obligations in bitcoin then bitcoins will have a little bit of the same kind of backing as the dollar. Someone could be coerced (by the courts) into seeking out bitcoins to pay off obligations. In that sense bitcoins will have intrinsic "value". We could grow into this kind of world because bitcoin has advantages paper dollars don't. Contracts may start to be written denominated in bitcoin. Very intriguing idea. Maybe we start a bounty for the first person to have a legal contract written with bitcoin denominated as the settlement currency? It would make for a great precedent and be the seminal contract for a new branch of common law based on crypto-currencies. Title: Re: Confidence Crisis and Collapse Post by: no to the gold cult on March 25, 2011, 07:59:05 PM Quote The currency can still hyperinflate even if it is physically impossible to produce more by virtue of people raising all BitCoin prices as their confidence in the currency collapses. But instead of hyperinflation producing lots more BitCoins, then collapsing the economy, hyperinflation will simply directly collapse the economy as it takes ever increasing amounts of the BitCoins in the world to buy a service, until eventually even every BitCoin in the world isn't adequate. Hyperinflation is a symptom of lack of confidence in a currency, not a cause. (Of course observing hyperinflation can further decrease confidence, but the hyperinflation started in the first place because of lack of confidence.) Argument fails. People can charge what they want for products, inflate the price to the moon if they want and sell nothing, it just means someone with confidence in btc will undercut them. People lose confidence in the value of money all the time it's true. Sometimes they decide that all the money in the world can't buy them love or happiness. Sometimes they move to a retreat somewhere and meditate. Meanwhile the rest of us will keep selling things at prices others are willing to pay, and keep paying for things at prices we are willing to buy at. Title: Re: Confidence Crisis and Collapse Post by: gigabytecoin on March 26, 2011, 09:04:27 PM My thoughts exactly, xc.
The OP on HN got the idea of bitcoin wrong. It is first and foremost a "store of value", not a currency. Nothing backs gold, and nobody says boo. Here's what I posted there: This obsession with 'backing' demonstrates a gross failure to understand the subjective theory of value. What backs gold??? Nothing other than the subjective valuations of individuals. The same is true of fiat currencies, except here individual subjective valuations concern matters such as 'not getting arrested' or 'not getting shot.' Bitcoin is a technologic, cryptographically-rooted, informational commodity. It has unique, desirable properties inherent to its design and structure. Individuals subjectively value these properties. Their reasons and value scales differ, but the simple fact that people are already trading Bitcoins proves that it is subjectively valued. You talk about 'confidence crises.' This is unique historically only to fiat currencies (and paper currencies built fractionally on commodities like gold). The subjective valuation of fiat currencies is derived from political considerations. As such, confidence in them is built on the ever-shifting sands of political perceptions. When was the last confidence crisis in gold? There hasn't been one. People value gold for its physical properties defined by the laws of nature. Those properties do not change and individuals have continued to subjectively value them. The same is true of Bitcoin. Its properties are rooted in our present understanding of cryptographic principles. As long as individuals continue to value properties such as anonymity, decentralization, finite supply, low transaction fees, ease of digital manipulation, ability to integrate smart contracts, etc... we have no reason to expect a 'confidence crisis.' This will be true as long as the cryptographic logic buttressing the system remains sound – just like the laws of physics underlie the desired properties of gold. Breaking this cryptographic logic (akin to cheap transmutation of lead into gold) would require breakthrough advancements of our knowledge of cryptography and discoveries on hitherto unsolved mathematical problems. But even in this case, the open-source nature of Bitcoin allows it to evolve new cryptographic implementations that would avoid such problems. Title: Re: Confidence Crisis and Collapse Post by: hugolp on March 27, 2011, 10:06:17 AM The original article talks about the dollar being backed by force (specifically since people are coerced into paying obligations to the US government using dollars.) If bitcoins are in use for a while and legal contracts are written requiring the paying of obligations in bitcoin then bitcoins will have a little bit of the same kind of backing as the dollar. Someone could be coerced (by the courts) into seeking out bitcoins to pay off obligations. In that sense bitcoins will have intrinsic "value". We could grow into this kind of world because bitcoin has advantages paper dollars don't. Contracts may start to be written denominated in bitcoin. No. Most countries have legal tender laws which means you dont have freedom of contract. If you write a contract and demand to be payed in bitcoins, gold, blue shoes, whatever... you can not enforce it. If you go to court to demand payment the court will allow the counter part to pay you bank in the legal tender currency (dollar, euros, ...) because by law legal tender means its valid to reapy any debt. Btw, when you voluntarely sign a contract, it is not initiation of violence if I demand that you fulfill your contract. Title: Re: Confidence Crisis and Collapse Post by: hugolp on March 27, 2011, 10:07:04 AM Here's what I posted there: This obsession with 'backing' demonstrates a gross failure to understand the subjective theory of value. What backs gold??? Nothing other than the subjective valuations of individuals. The same is true of fiat currencies, except here individual subjective valuations concern matters such as 'not getting arrested' or 'not getting shot.' Bitcoin is a technologic, cryptographically-rooted, informational commodity. It has unique, desirable properties inherent to its design and structure. Individuals subjectively value these properties. Their reasons and value scales differ, but the simple fact that people are already trading Bitcoins proves that it is subjectively valued. You talk about 'confidence crises.' This is unique historically only to fiat currencies (and paper currencies built fractionally on commodities like gold). The subjective valuation of fiat currencies is derived from political considerations. As such, confidence in them is built on the ever-shifting sands of political perceptions. When was the last confidence crisis in gold? There hasn't been one. People value gold for its physical properties defined by the laws of nature. Those properties do not change and individuals have continued to subjectively value them. The same is true of Bitcoin. Its properties are rooted in our present understanding of cryptographic principles. As long as individuals continue to value properties such as anonymity, decentralization, finite supply, low transaction fees, ease of digital manipulation, ability to integrate smart contracts, etc... we have no reason to expect a 'confidence crisis.' This will be true as long as the cryptographic logic buttressing the system remains sound – just like the laws of physics underlie the desired properties of gold. Breaking this cryptographic logic (akin to cheap transmutation of lead into gold) would require breakthrough advancements of our knowledge of cryptography and discoveries on hitherto unsolved mathematical problems. But even in this case, the open-source nature of Bitcoin allows it to evolve new cryptographic implementations that would avoid such problems. +1 People dont understand value and money. Title: Re: Confidence Crisis and Collapse Post by: grondilu on March 27, 2011, 12:39:20 PM I whish a confidence crisis in bitcoin happens soon, so I can buy them all for say, 10 euros a million of bitcoins.
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