Bitcoin Forum

I know so much has been written on this subject, and the consensus is that the hoarders deserve their wealth.

However I think this hinders the growth of the bitcoin economy and here is why:

People currently possessing thousands to several thousands of bitcoins are holding them back in order to keep the prices up and with the goal of becoming wealthy from them in the next several years.
However, as in pointed out in another thread which drifted way off topic over half of all bitcoins currently in existence are held by such individuals.

To it comes the iterated Prisoners dilemma: The more people holding a significant amount of Bitcoins sell the more it crashes the price, we are seeing this right now and there seems to be a lot of pressure. However most of it is sold in bulk on the exchanges.
This is not good.

Yes with a few thousand bitcoins people can get enough fiat money to buy themselfes something nice in the fiat economy. That is not the problem.
The problem is it makes the bitcoin holdings even more centralized than they already are. People with deep pockets have no problem sucking those up and hoarding them. Possibly a lot of them have no real interest a future bitcoin economy or even with disruptive intentions. (mind you that is just a suspicion!)

My point is, people need to spend their Bitcoins into the economy with lots of little purchases. Even a percentage of the bitcoins currently hoarded as a ticket into the 'bitcoin billionaire club' could make a tremendous difference in the direction the economic development is headed.
And I personally believe it would increase the overall value of those holdings in real life value within a lifetime.

So if you are currently hoarding consider my suggestion if you aren't planning to sponsor your great grandkids with your stash.  ;D

My recommendation is for "hoarders" to do whatever they want. There is not necessarily any special gain made when a "hoarder" spends the money with a merchant. If the merchant saves the income, he becomes a "hoarder." If he cashes out, it drops the price and people get worried (though they shouldn't).

"Hoarders" do plenty of good to the economy - and it's made more clear when you realize they are no different than any merchant. A merchant sells a good for Bitcoins. Well - "hoarders" simply sold the good called "US Dollars" or another currency good for the Bitcoin. They then save the Bitcoins, raising market price and indicating to the market that Bitcoins have increased in demand.

Further, it's also important to realize that the more people "hoard" Bitcoin, the further the price increases, and this allows people who wish to spend their bitcoins to enjoy greater purchasing power. This increase in purchasing power is not only beneficial if you want to spend on consumption, but also on capital investment for Bitcoin projects.

Consider if Wealthy Investor A puts an order to purchase 5 million Bitcoins. He wants to "hoard" them. This will raise the price massively. Those holding Bitcoins now can spend each one to greater effect - the man with 1,000 coins is now sitting on substantial resources, and he can use that to invest in new startup businesses. If that Wealthy Investor A bought the coins then simply purchased tons of stuff with them, the 5 million coins would flow around and many would be sold off for other currencies. Good for the merchants in the short term, yes, but long term the effects are more complicated.

tl;dr - "hoarding" is neither good nor bad. It has positive and negative effects, based on who you care to look at and what your goals are. There is no need to either encourage it, nor discourage it.

Why do you assume that the amount of bitcoins that one spends is in any way affected by the amount of bitcoins that same person saves (as I prefer to call hoarding)?  You can use bitcoin earnings, spending, buying and selling to adjust your savings balance, but the decision to buy something or not doesn't have to be related to your desired level of savings.  Someone with 100,000 bitcoins can spend as many or few bitcoins as they like without dipping into their savings.  All you really need to encourage is for people to spend bitcoins instead of other currencies whenever possible (and go to the extra effort that might be required to do so...because going to that extra effort benefits the bitcoin economy).  There's no need to call upon people to reduce their savings.

5 million bitcoin is an extreme example, I don't consider that a realistic chance of happening.
I think that only real purchases can in effect make bitcoins more valueable in a long term trend.

Speculation does as well but has the downside of crashing the price, to a higher extent than a merchant liquidating their income. The merchant will use part of their profit to expand their operation which will result in economic growth.
Pure Speculation is a zero sum game and will only result in bubble behavior.

I even go as far as saying that only bitcoins used in secondary circulation will in effect increase their long term value.
As an example consider a web hosting service buying hardware with bitcoins. So if the hardware store hosts it's e-commerce platform on this provider we have a closed system.

And the more parties are involved the more permanent and stable will the value of bitcoin develop.

I know there are different theories about this and some might disagree with my assessment, but I can't see it any other way... If you believe otherwise please point out why...  :)

I bought 25$ worth of bitcoin when it was ~0.75$
and then 100$ worth when it was ~13$
I'm saving these coins. and buying more as price drops
In the end i'll have invested 200$

i don't like buying things online because of the shipping and handling fees.
if there was a place in Montreal that accepts bitcoin i would go there weekly!
i would keep my 200$ investment, and only buy more coins when i plan to spend them.

if buying in btc was somehow cheeper. like a Groupon for bitcoin. i would buy.

The consensus?  This doesn't even make sense to me.  How can hoarding be equated to wealth.  I figure those who are spending are the only ones seeing the value in whatever it is that would be hoarded, so they would be the true wealthy, right? 

For example, the only people who are wealthy off of Bitcoin, are the people who have sold or mined or got something from their coin, not from just holding it, right?   If Bill Gates was homeless, but had the same amount of money he has, unless he uses on that money to take his ass off the streets, is his cash not worthless unless he spends it?   Well that doesn't make sense either, but then again cash does not fluctuate the way Bitcoin does.

well said.

heh

Well said, but that is just word play.


Real wealth has to develop itself and the only scenario for a wealthy bitcoin community is a flourishing economy. As for why I think it is up to the massive bitcoin holders to initiate economc growth:
Because they can, it makes a tremendous difference in the amount of bitcoins involved in a closed system loop.

If we consider these 3 choices what to do with a bitcoin stash:
-Selling them on the exchange for fiat and possible crashing the price.
-Don't spend them yet.
-Using them for purchases

My opinion is that only the latter increases their value and even withholding them does not since speculators assess the real economic growth in order to determine the price they are willing to pay. (ultimately)

Currently over half of all bitcoins is in the hand of a few people, a fraction of them has decided to sell them for fiat money. Another has decided to not spend them yet.
The other half is currently in the hand of the masses which are dependent on the other half.

In order to have a healthy economy a currency should have about 50% hoarding and 50% circulation. Wealthy speculators (in terms of bitcoin holdings) are hoping that the masses use 100% of their bitcoins for circulation.
This will not happen, obviously the half in possession of the masses will be in wider circulation but some of it will be hoarded even there. That amount has to be compensated for by the bit-rich.

That is a responsibility those people need to recognize and until this happens I don't see the booming economy we are all hoping for.  

You do have a point that people sitting on 100,000 bitcoins have a lot of spending power that isn't being utilized.  They might not be in a position to buy more bitcoins and purchase, but they could dip into their savings and make purchases to help get the economy going.  Note however, that this too would cause the price of bitcoin to fall further (but that's okay too).

Exactly and that's where secondary circulation comes in and once the figure is above
50%^(1/N... numbers of times in circulation before exit into fiat)
spending will actually increase the the price.

One thing hindering economic development is the price.  People do not want to spend BTC when they are valued this low.  My sales go away when bitcoin is dropping. 

This is unfortunate...and the wrong way to look at.  If you're concerned about draining your bitcoin balance by buying something, just buy additional bitcoins to cover the purchase.  It may be a bit more of a hassle, but it supports the bitcoin economy.  And look at the flip side, if you're allocating a portion of your income to bitcoin savings, then with each paycheck, you're able to buy more bitcoins as the price falls.

This thread again? I thought I unsubscribed from your newsletter.

You said "hoarding." Virtually every use of this word I've ever seen has been from someone horribly misusing it. Your use of the word is no exception.

So then why are you bumping the thread?


Again my core point is: Big btc holders who are hoping that the masses will use all of their half only for circulation are livin in illusion.

You know the great part about bitcoin?  We can see just by looking at the blockchain if your idea that the big btc holders are just waiting (or already) dumping BTC.   Guess what.  They are not.  The coins that move and that are bought and sold are mostly newer coins.  Not early adopters.  Most of those coins just sit, and a huge chunk of them may not even be spendable anymore. 

Did I say anything about early adopters? No I said large bitcoin holders that includes early adopters and everybody else who belongs to the group holding the upper 50% of currently issued coins.

And the fact that the early coins aren't moving confirms exactly my point.
If people would care they would order their groceries with BTC, host their projects on one of the many companies accepting it, I'm sure lots of these people don't even have the keychain... you know what I mean.  ::)

And that a two figure percentage of issued coins are already lost?

NFW, how naive would you be to believe that?

Hoarders spending money into the economy doesn't grow it. That's just consumption: taking real wealth out and putting currency in, bidding up prices.

To grow the economy, hoarders would need to invest their coins. investment creates or grows new businesses, which is precisely economic growth. The thing is, you can't really loan out bitcoins at the moment, but this is a problem of a lack of infrastructure, which will come with time.

Just holding coins forever doesn't impact the economy, except by lowering prices due to reduced supply of coins in the active economy.

Right, lending...

LOL
That is fiat economy talk where that actually means something. What would a merchant do with a BTC loan? Sell the coins and buy more product stock/resources? Then he'd sit on it.
The only way the economy will grow at a healthy rate is by an increase in business volume.

Most people just don't know how to play the prisoners dilemma that's the only reason for the current situation but don't you worry silkroad will be around and the next selloff is coming.  ::)

Why are you talking about merchants? Businesses take loans to improve their infrastructure/efficiency/capacity with the intention of paying if of using the increased productivity that follows. If successful, the economy is more productive than it was before; there is more output for the same input. This is growth.


Selling more goods doesn't make the economy any more productive. The input output ratio is still the same. Unless that business saves the extra profit due to increased volume to later invest in equipment upgrades to make their process more efficient. ie. they hoard money then invest it; their input output ratio improves.

Just consuming resources doesn't create economic growth.

Strawman  >:(

Are you made of straw?

If there is a flaw in my logic, please do me the honor of deconstructing it. I think I made a reasonable case for hoarders not hindering development.

No you made a strawman argument, there is no point in deconstructing it since it doesn't apply to my statement.

You contradict yourself.

Why would hoarders invest their coins and create businesses? It is far more profitable to just sit on their coins and let the economy suffer deflation while sitting pretty on that pile of money. If the price of goods is reduced, I can buy more stuff with my hoard.

You are right though, hoarding is bad for society in general. Tax the rich.

Your forgetting that investment, if done right, will bring nominal returns. Why sit on money when it can earn interest.

If you "buy more stuff with your hoard" then you're no longer hoarding.

No. the economy grows from savings and loans, not by consumption. Growth means the economy produces more goods and services than it did before. It can't do that unless it increases it's efficiency, that is: more output for the same input (labor). To increase efficiency a business must invest in new equipment, RND, etc.

If a bunch of hoarders suddenly start spending their money, business will experience a temporary spike in sales and the value of money will drop. Afterwards, the economy is no bigger than it was before and businesses will have low stock.

To sustain an increased volume a business must improve it's infrastructure. This requires capital.

This is a direct argument against your core assumption.

You are repeating yourself.  :D

Absolute bullshit btw.

This is the noise made by people without arguments.

If growth does not require savings of capital, why don't you go spend yourself into prosperity?

Well I could repeat my own argument but that won't do any good. As I said asdf made a strawman argument and there is nothing to refute.

But to give you something of why I am not attempting to refute his claims:
Stating that increase in business volume and economic growth are not correlated is just and simple false.

Correlation != causation

An increase in business volume can only come after the necessary capital is in place. Individuals must forego consumption now (save/hoard) in order for those resources to be devoted to creating that necessary capital. It's an iterative process.

Yes it is but real growth can only occur when profits are made and reinvested. That's the way it always worked. While short-term loans might be desirable for a startup or during a period of unexpected rapid development they are not the main engine for growth. 

Speaking of straw...

I said nothing about loans, only saving/hoarding which is reducing consumption in order to divert scarce resources toward building capital

So the upper 0.1% which own 50% of issued coins are about to come up with their own businesses? But hey we never know, wake me up when they do.  ::)
(I think they don't they want to retire, big time which will not happen imo)

The statement about loans was dedicated to asdf who said growth is dependent upon loans.

Why do you assume that they have not?


Are you a liar, or can you not read?


Individuals must save/hoard and then loan/invest their savings to businesses which use those loans to build capital, which is economic growth.

Old coins barely move. You can see that if you dig though the block chain a little.
I mean, fuck not everybody is retarded and some of those startups might have been partially funded by early adopter coins but a majority of the 0.1% still thinks they gonna live their golden years in a castle by doing nothing.

Kinda like all those lazy hoarders with stocks and bonds in their 401k's and pension funds. F those guys, right?

So? What if those keys are lost? What if they want to keep their older coins for their savings?


What?


Yeah, project those beliefs, project them!

Guys! Compounded interest is magic, they taught me that in elementary school!

Bitcoin is differnt. With current price development the only people who can fund a startup with their coins are those 0.1%. Of course that is not for everybody that's why the alternative is partial consumption from people who startup from the fiat side.

The main thought process seems to be 'they never know I have 100k coins, I'll use those when I can buy myself an island'. Problem is the economy needs a small percentage of those coins to get started because the public now involved to with bitcoins plans to buy a new car by then. (Real world examplified but see the rest of the argumentation above)

I think I've gone over that in enough detail to make it clear.

I can totally follow the thought process but that's not the point.

Who has more incentive to see bitcoin succeed than the 0.1% holding 50% of the coins?

From what evidence do you draw this conclusion?

All I see is you projecting your thought process onto others.

People who genuinely plan an exit strategy from the current economic model.



Consider this comparison with the prisoners dilemma:
Lets say keeping the coins equals remaining silent (withholding them is the opposite another hoarder would want)
Lets say spending them equals confession (In that case the other one would have more coins which is what he wants)

We are currently in a situation where almost anybody remains silent. However there is not enough confession (spent coins overall) so that the prisoner gets free (bitcoin rich equals real world rich).
(In our case we would have to apply fuzzy logic since there is no need to totally cooperate or defect however the model would have the pinnacle point at 50%)

This is not the worst possible outcome (that would be a total sellof) but not ideal either. From current outlook holding a lot of coins could mean that you could retire on a stash but it could also take longer than ones lifespan.

So my claim is: People with enough coins could make sure they can retire on their stash if they spend or invest a little.

What about spending a portion of your wealth to improve the economy (on things like app, POS systems, exchanges, etc that actually grow the economy, not on just buying random junk which only transfers the coins from one hoarder to another)? How does that fit into the prisoners delema, and why do you think the 0.1% are NOT doing that?

That would be exactly what I am hoping them to do.
What makes me think that this is not yet happing to the necessary extent:
Almost no growth since summer and declining interest in Bitcoin. We are in better shape that in spring but nowhere better of than 3 months ago.

By what measure?

Of course there are web statistics, client downloads/connected clients, news reference volume and so on but they would say we are in a depression, we wouldn't want to say that are we?

But in the end that is subjective. Make up your own mind.

So your case isn't against the wealth pyramid, but actually with the lack of investment? Hoarders don't stop anyone from investing! Go and invest yourself if you think it's worthwhile or stop complaining that no-one else is investing.

Now, if the economy isn't growing due to lack of investment then the price will stagnate == no incentive to hoard. If the economy is growing (and the price of bitcoin with it) then clearly there is a sufficient amount of investment going on. So who cares if people are hoarding. What's the problem?

This is the same self-contradicting deflationary spiral argument in different clothes: the economy can't grow because it's growing too fast.

I suppose you'll just hide behind your faux "strawman" accusation to excuse yourself from making a counter argument.

You don't invest in a currency. You invest in products and corporations with currency. You can't invest in the infrastructure of a currency with the currency you hope to build that infrastructure around. That requires real value, something the early adopters do not have (but sure do hope to one day).


Investing in the currency does not equal a real investment. All it does is raise the price which provides the opportunity for early adopters to lower that price by selling. So anyone who "invests" does so by giving earlier adopters the opportunity to cash out. The only way the economy is likely to "grow" in this respect is that more people use it as a payment processor and nothing more. That isn't a currency, it's a payment processor. And while the fees might be lower, you have to play a game of hot potato and hope that someone doesn't sell a large chunk of coins between the spender buying coins and the receiver cashing out.

i get so tired reading your BS.

what the Bitcoin economy needs to get business investment going is more USD's.  i get asked to invest in Bitcoin businesses from time to time and its USD's they want and need to get going.  the more USD's or other fiat that flow into our economy the better.  this is what will cause success.

forget the hoarders; they're not the problem.

are you kidding?  the currency markets are the biggest of all markets on global exchanges.  hedge funds, banks, you name it, invest in currencies all the time.   one should look at a currency as just another investment class that has the potential to rise or fall just like any other.

i still argue that the best thing for the Bitcoin economy to get going would be a smooth rising price that would cause everyones Bitcoin holdings to go up along with investment optimism.

So your plan is:

1) Make a lot of trash tokens early on, hoard them, then make them really hard to get later on so they are scarce and a lot of value is demanded for the ones available
2) Encourage people to put real value (USDs, whatever that real value may be worth) into the currency so that...
3) The people who have a lot of trash tokens can cash them out for USD and hopefully...
4) Invest it (USD!!) into infrastructure for the currency so that...
5) The people who invested real value into the trash tokens can make more off of future people investing in trash tokens because of that infrastructure

Cool, I really see this plan of "I know how to use your money better than you do" working. I mean, there is nothing stopping step 4 from being "buy an island" but we need to have faith in these anonymous overloads, amirite??

first of all, the mere fact you're trying to start an alt chain makes your arguments biased.

second, there is no "plan" mainly b/c it doesn't matter what you or i say, things are what they are, and the economy is moving along according to market dynamics as i would expect it to.  why you guys argue so much against large holders of btc, "hoarders" according to you, is a waste of time and energy.  it is what it is and you can't change it.  clearly within this thread alone there are different ways to look at these holders and yours is just one opinion.

most of these "hoarders" or early adopters are miners who invested their USD's into hardware, software, electricity, time, effort, and intuition when Bitcoins were worthless.  others actually bought their coins from these guys.  either way, why do you begrudge them?  just b/c they have more than you?

shit is getting nowhere.