Bitcoin Forum

Everybody is speaking about how BTC is deflationary... Well, didn't you see how its value just got from $266 to $100 in hours? What was that, the USD deflating?

We mustn't fool ourselves. Bitcoin is not going to be truly deflationary nor a safe store of value if we don't break the loop. While the "value" of Bitcoin is established with its exchange rate for FIAT... We are just fucked, and it will just be a TOY for speculation, while being very vulnerable to attacks from its enemies.

Think about the most likely attack to BTC from its natural enemy, the FED: they own fiat money, and if they feel BTC is a danger for them, they can just pump it to the fucking sky to crash it to almost $0. Explain then about how it is a "store of value" to those who lose everything. How do we avoid that? Breaking the fucking loop FIAT->BTC->FIAT.

We need business that set their prices in BTC, and pay all their costs (including salaries) in BTC. We need to break the laces with fiat money. When we do that, then we will have a really deflationary currency that will truly serve as a store of value. Until BTC's value is related with the exchange rate with fiat... We are fucked, and it will be useless as soon as the FED decides it has to go.

It is a fools errand.  It would limit the entire Bitcoin economy to just those products which can be produced completely with a Bitcoin supply chain, all raw materials, production, labor, etc solely in Bitcoins.  We are likely decades (as in plural) if ever from that happening.

Also goods even if priced in BTC have to be competitive to alternate currencies.  Here is an example.  I will sell you 1 oz gold coin right now for 20 BTC.  See nice round number 20 BTC.  You won't take it.  Why? Because you could sell BTC for USD and buy the same gold coins for cheaper.  Why would you pay more just to buy it in BTC?  Maybe you would pay a slight premium to avoid the cost and hassle of conversion but to know what a "slight premium" is you need an exchange rate.  Of course by the same logic you would gladly buy a 1 oz gold coin for 10 BTC right?  Even if you are bearish on gold you could buy the coin for BTC.  Sell it and use those USD to buy more BTC.  Still nobody (outside of scammer who doesn't intend to deliver) would sell you 1 oz of gold for 10 BTC because they could do the same thing (GLD -> USD -> BTC) and get more than 10 BTC.

Exchange rates will always exist.  
Merchants will always have at least some costs in dollars.  
Goods will always need to be competitive to other currencies because people have the choice to spend USD/EUR/JPY etc.
Even if you never exchange BTC for fiat or fiat for BTC you need to know an exchange rate to make your services competitive to those offered in other currencies.

We are all participating in a global experiment to move value into Bitcoin. This isn't going to happen all at once, in fact, it will probably never end. But before we have "stable" prices in BTC, we would have to reach some kind of saturation point.

Even as fast as things are growing, we are incredibly far away from that right now. The good news is that so many new businesses are accepting BTC every single day that I don't bother to announce them all any more.

Some things I consider huge as far as "closing the loop" for BTC in the last few weeks:
4 property management companies (Memphis, Vegas, NYC, Houston) are now accepting BTC for rent. This is not one or two people renting their personal houses, there are now thousands of properties you can rent for BTC.
Last year we had a handful of restaurants that accepted BTC. Thanks to Foodler.com, now over 17,000 restaurants, in 48 states, accept BTC.

We are definitely moving forward at a rapid pace.

We have to make people want to list their prices in BTC. That means it has to have some semblance of stability. Otherwise it can be nothing more than a proxy for actually stable currencies. Deflation itself isn't the solution or the problem, it's stability. If BTC gained 5% of its value every day, it still wouldn't work as a currency because the value isn't stable. It's gotta do something like only gain 5-10% of its value every year so that people can know the value of a Bitcoin. We need to be able to go to the store and have an expectation for how many BTC a loaf of bread costs without it changing every week.

Without stability, BTC can never stand on its own.

Bitcoin could use an anchor business. No big business accepts Bitcoins. If you could buy iTunes tracks with Bitcoins (from Apple, not someone selling their gift card), or phone minutes (from an actual phone service), and people actually did that, it would tend to provide some price stability. If Amazon or Alibaba accepted Bitcoins, it would become a real currency overnight.

Well that will only happen when Bitcoins much much larger.  Of course how do you get much much larger with exchange rate only rising even say 2% per month?  You don't.  The value of Bitcoin's money supply is ~$1B, the value of all Silver Bullion is ~$30B, the value of all Gold Bullion is ~$7,000B.  Now bring up a daily candle stick chart of BTC, SLV, and GLD.  Ignore the long term trend (rotate the chart in your mind so the starting and ending points are at the same horizontal level) and just focus on the day to day directionless volatility. 

Even silver is many times for volatility than Gold and Bitcoin is many times more volatile than Silver.  Why?  The size of the market.  Gold is relatively stable because it is so massive.  It takes pretty massive buys or sells to even move the price 1%.  Silver can be thrown around a lot easier and Bitcoin well it only takes a token amount of funds to make a large move.

You can't have a small stable currency (at least not without a central bank*). The road from $1B to $30B is going to be rough.  There is no way to make it slow and smooth.  Maybe the road is too rough and Bitcoin can't ever make it and some alternative (no not the copycat alt-coin junk but a real out of the box alternative) replaces it but I am not willing to write it off yet.  Still even this alternate will have high volatility until it can get "large enough".



* Small currencies (i.e. countries with a money supply of less than say $50B) often need to hold a large reserve of more stable currencies (EUR, USD, JPY, etc) and precious metals.  By controlling the "native" currency and buying their own currency back using foreign reserves they (at least in theory) can reduce volatility.  Essentially as the currency falls against competitors the bank prints more and when it rises against competitors they buy it using their foreign reserves.   The bank works against the actions of the market participants and creates a dampening effect.  Generally central banks can't prevent the long term trend but they can dampen the day to day swings.  Understand that a central bank loses money in this operation, and these losses show up in inflation.  It is the price of stability.

Solution for maintaining transaction value between bitcoin senders & receivers to create stability



Now, everyone may have noticed that people are using the Bitcoin system to speculate.

The purpose for Bitcoin: To securely move financial value from one point on the planet to another with no errors.  though what people are doing is quite amazing! very interesting.

now the sandbox elements of bitcoin currently being exploited by the financial sector is fine, the price of bitcoins should not affect our customers as long as an agreed upon price is set between sender and receiver.

Bitcoin was originally meant to work under traditional banks infrastructure as a sub-layer of security; the price would have been fixed and outside speculators ability to destabilize would be non-existent.

I.E. Bitcoins value would have followed a controlled growth pattern, exhibiting signs of both inflationary and deflationary characteristics depending on Global transaction volume; this would have set the value of each BTC

e.g.: if I wish to send money to my mom, I set the price to (Fair-market-value)(this is the set price for transmission so it does not affect the people using Bitcoin as a speculative commodity, it should be fair market value so you don't spend an eternity waiting for your order to go through) someone buys my currency and exchanges it into bitcoins, I then in turn tell my mom at what price I bought the bitcoins, she receives the  bitcoins goes to the exchange and demands a sell order at the same price. That way no value is lost during the transmission due to the speculators and the transaction fees should be paid to avoid being victim to speculators... otherwise your going to lose your shirt in the transmission if the transmission takes more than an hour.

the market cap of Bitcoin should reflect how much money is being transfered by the system and not as in traditional markets; the measure of value... its just the value of the volume of transactions.

hope you like my solution it is deceptively simple, it solves more than one problem if you realize it



I wrote that on another post, it solves the stability problem too,   though I must say it starts something... interesting, once the stability is created, how do we scale the bitcoin market for larger and larger transactions? Because at a cap of 2 billion... it does not scale to worldwide demand, to accommodate the entire world market the value of bitcoin would have to be $200,000 USD/BTC and 10 times that to handle all world wide transactions... if the market gained that consensus right now... it would be a disaster for bitcoin. someone would start hashing with a supercomputer, maybe several, destroying the p2p network, it would be brutal.

how does it relate to market prices for bitcoin adoption? the stability is caused because people are entering the same value twice at the exchanges within 1 hour, the more people start using it as it was intended as a medium of exchange to transfer money across the planet means the transactions in the millions would outnumber the speculators.  The people who just want to move their money around would stabilize the system, because they do not want instability, inherently they want to feel secure that their money is not going to fluctuate wildly in the space of 1 hour.

now to the scale problem... if the price of bitcoin is not at the right point at the right time it will hobble the system introducing lag between fiat to BTC conversions and vice-versa. So we have stabilized the Bitcoin market, now we have to grow the price of BTC in a controlled manner. The miners set the minimum price, their costs determine the price growth... so if the market reached that 200,000 USD/BTC point  the BTC4000 +/- coins produced each day would create a market liquidity of  $800,000,000 USD/ Day... now you see why the bitcoins have to be halved every few years?

so what determines the cost of operations to the miners? the difficulty;  If more miners get on the system the difficulty increases slashing their revenue, hence they must sell their bitcoins at a higher price or hold on to them until the market is able to afford the liquidity. so we have a problem, we need miners to verify the transactions, so we have to keep their number stable,

now here is the second effect of my solution people aware of the instability begin to add their transaction fees to accelerate their transaction to avoid falling victim to speculators. The revenue from these Fees creates incentive to continue mining when the bitcoins they are introducing into the market are not needed. but if people do not add the fees what motivation do they have to continue.

 So a two prong approach was created to control the market value through the miners, if both of the above criteria are not met, then the network can safely get rid of excess hashing power because the miners have no motivation to remain.

the fees increase as urgency increases, i'm sure people want their transaction done now... not tomorrow, so they pay.

Increases in lag time to include each transaction in the next block motivates higher transaction fees, higher transaction fees equal more miners to lower the lag.

now, something I have noticed; since the price is not set by the banks it is set by supply and demand, this means that the price of BTC can increase slowly because some people may try to buy at $100 then the recipient buys at $101 if the market accepts it they just payed their transaction fee back and they can repeat it too, ... this will undoubtedly have an incremental effect on the price of BTC. What will happen because of this? I do not know and can only speculate, sorry.

Bitcoin is a whole different animal; It only likes to be treated in a certain way.

But then again I could be wrong, you may want to poke holes in my logic, we have to figure this thing out somehow.

Is there anything that could be done about this? I know what I'm about to say is impossible, but... if we could make a currency in which one denomination was worth some set amount of value, and no matter what the currency's market cap was, that denomination always had the exact same value or slightly more over time, it would imho be the ideal currency. I know that can't happen exaclty but is there any way an approximation of this could be possible during a rapidly changing market cap? Could Bitcoin's mining difficulty be used somehow to intelligently control the supply to reduce volatility?

Also, jdbtracker, I don't really understand what you're saying. Could you please re-explain your last post, because I can't understand what you're trying to say.

Bitcoin is about freedom, forcing your idea will fail. If people want to sell bitcoins for fiat, it is their right to do so.

Bitcoins price was supposed to be set to scale according to transaction volume, the banks would have set a specific price to accomodate all denominations of currencies world wide.   It would have been stable.

but now... to stabilize it people need to begin using it as a service to move funds from point A to B on the earth or from one Currency to another and get that money into a stable bank account ASAP! this has to be done on the short term, until someone figures the problem out with a less work intensive solution or the market cap gets large enough to be stable.

that stability will create the conditions necessary to have Bitcoin as a stable currency, but we are a long way away, ... it will be a rough road, there is no going around that, just not enough miners to carry out the volume of transactions, not enough interest to allow it to become what it was intended to be by the people.  

What the Bitcoin community has built is light years ahead of what it originally was meant to be, now we just wait to see if all the improvements that allow it to function in the free markets are solid, the speculator problem was quite a doozy, it seriously hurt the Bitcoin community.

Who are you and what are you talking about?

I've been looking at the structure of Bitcoin and I can tell how it should have functioned it seems quite obvious to me, The fluctuations in the market are telling me it's being destabilized by speculators.

I read Satoshi's paper and I know how they intended it to work, it doesn't describe it as an economic system, it was described as a Cryptography Engine and no mention of economic effects is anywhere to be found on the paper. so I figured it would be more stable if it works closer to what was described in the paper.

The rest is me just trying to figure out how to stabilize bitcoin so that it can be used as described, It obviously was supposed to spread the wealth among the population, with greater and greater automation occuring the wealth of the world is being concentrated into the hands of the few causing massive inflation and instability in the economic system., the p2p Bitcoin system was supposed to counter that.

Plus it does not help that so many people outsourced their jobs to China, India, and other countries, stripping the wealth from the developed nations. if people can't make a living how the hell are they going to buy all those chinese made goods? It's obvious Satoshi knew this and started solving the problem with this protocol.

now how did Satoshi plan to reverse the loss of wealth of the people while still encouraging automation? Satoshi realized that the online payment industry was going to grow to match the real economy, so that the transaction fees would scale to 2.7 trillion dollars/ year in fees alone. It's obvious, Satoshi may have just saved us all from ending up as serfs to the 1%.

Bitcoin is a distributed wealth,p2p open source Corporation model.

watch this one it's a summary.

https://www.youtube.com/watch?v=DxxL0EcpvdQ

and here are all the examples to automate all jobs in every single industry. from transportation, avionics, construction, sales, warehousing etc.

http://www.theatlantic.com/magazine/archive/2012/12/the-insourcing-boom/309166/

http://singularityhub.com/2013/02/28/high-tech-clothing-store-hointer-employs-robots-and-mobile-technology-instead-of-salespeople/

http://singularityhub.com/2013/01/22/robot-serves-up-340-hamburgers-per-hour/

http://singularityhub.com/2012/11/12/1-million-robots-to-replace-1-million-human-jobs-at-foxconn-first-robots-have-arrived/

http://www.ted.com/talks/mick_mountz_the_hidden_world_of_box_packing.html

https://www.youtube.com/watch?v=eoAJdvFOaQs   automated slaughterhouse

https://www.youtube.com/watch?v=unS_WdnyDQY  google automated vehicle

http://www.youtube.com/watch?v=BoPpod1tsDM automated aircraft

http://www.youtube.com/watch?v=JdbJP8Gxqog  automated protrution construction

http://www.youtube.com/watch?v=M-QUkgk3HyE  Artifical intelligence helicopter

http://www.youtube.com/watch?v=cDn8biQny9M  automated Accounting software

http://www.youtube.com/watch?v=b79pwb6Wlsc automated restaurant

https://www.youtube.com/watch?v=2qk5vxWY46A  Circuit board assembly

http://www.youtube.com/watch?v=WFR3lOm_xhE    IBM's Watson Supercomputer Destroys Humans in Jeopardy

http://www.youtube.com/watch?v=YXldB7KbP1c Progress Report IBM Watson Utilization Management Pilot at WellPoint, Inc.

http://www.youtube.com/watch?v=9dW3FUZdYx4  

Brothers and Sisters are you picking up what i'm putting down?

https://www.youtube.com/watch?v=32INUJdxbRk&list=FLrYYkONYExBwGM5haeG7B7w

Inflation is caused by central banks printing money.  This does cause instability, but it isn't caused by automation.

A possible interesting outcome: Automation reduced the amount of people who need to work, those who don't need to work will mine bitcoin, and mine bitcoin is not a very difficult work, just need some basic computer knowledge, so mining will absorb all the jobless people. Now everyone will have a job

If too many people join the mining, then there will be less and less people working with production of other goods/services, this will increase the price of those goods/services and reduce the bitcoin relative exchange value, reach a balance

Did you check out the first link with the talk by Marshall Brain? that is really good for describing whats going to happen, did you see the graph with the market job rates? it looked pretty grim, I figure if someone could find the graph he was showing we could extrapolate a trend line.

but yeah, the difficulty would scale to those people too eventually, but I think while it is being adopted the price should increase to increase the system capability of handling all transactions globally, so the system has a built in incentive to add as many miners as possible until it scales to unprofitability... of course counting on the fact that there are enough transaction to pay for all those miners cause the Bitcoin lottery is not going to cut it if there's too many miners.

The production of goods could be further automated, Have you seen the FPGA chips? They are Programmable Field Gate Arrays, these chips could be programmed to virtualize any instituions work load, Bitcoin could be a model for sustainable automation. I mean we have to have a measure of scarcity in the system, it has to be, otherwise jeez someones going to start using their new 3d printers to print a bazzilion trinkets just like a hoarder. they'd probably just do it to spite everyone else too.

jeez it could get crazy because I know you can build neural chips for neural networks with a FPGA... this could be interesting, those chips cost millions of dollars for each one, one of those FPGA could make a Semantic Web Machine for 1/10000 of the price.

jeez all I can think of are all the industries that could be Virtualized and distributed just like Bitcoin thanks to these FPGA chips.

Hmmm. the loss of the work force would occur slowly, cause I don't think all those unemployed people have the money to buy a GPU. cause I know people are greedy they would still try to work while their rigs were happily virtualizing all human institution for a fee or they could be incentivised to start another open source corporation like bitcoin to generate more revenue...

but wow, I mean wow Satoshi designed and created the first client and then got input from thousands of people, this is a viable method of building a company...

lets see what industries could be automated: everything pretty much, just thinking of something to virtualize.

Accounting companies done online, instead of inhouse they could send their work loads to the network to start managing their AR/AP work.

maybe distributed research farms for the pharmaceutical companies, I mean if they got paid in bitcoins they can take some of the miners away to do some useful tasks like finding new cures for cancer. etc.  the network would have more processing power than anything the pharmaceutical industry could come up with cost effectively.

massive p2p simulators for governments and other virtualized companies.   my head is full of ideas. :)

I am an idiot, I started reading Satoshi's old posts, he does describe some economic effects. wow, the paper is so sanitized, but I guess it would be if it was intended as a academic paper.

I think the biggest selling point of BTC it's anonimity.
And that is the biggest drawback too.

Us people, Loooove to have a currency where the government can f**k off, and don't know how much we have or not have.

who's your roof? 

Ireland

Yo I had a stroke of inspiration!

I figured it out, The deflationary nature of Bitcoin... and all these failing economies. They kept printing money, more and more just trying to stave off economic collapse. the only way to avoid the Fiat/BTC/Fiat cycle is to convince these countries that to save their economies they have to convert to Bitcoin(Gold Standard) and Litecoin(Silver Standard)! We may need a bronze standard for quick store front purchases.

the only way they could avoid collapse would be to start buying Bitcoins and Litecoins!!!

the mere fact that this would allow their currencies to safely collapse would further increase the value of bitcoin to USD, this would effectively introduce another scaling mechanism for Bitcoin.

We need to break the cycle of JPY/USD/JPY these companies are only buying USD to purchase things that are made in Japan and priced in Yen.  It would be better if they just used Yen in the first place.

See it works.

BTC is one medium of exchange among many, many others.  It's price is in fluctuation right now due to currency manipulation made possible by the fact that a single exchange controls over 80% of the market because it has become the defacto standard.  Want to stabilize the price of bit coin?  Use multiple exchanges.  We shouldn't all be sitting on one exchange, it's putting all our eggs in one (admittedly very honest and very well run and secure) basket.

This is an interesting point to bring up, I have a number of web projects under development and although I have limited coding skills in PHP etc I would like to provide users with ability to see BTC prices in real time. As of yet I have not found a system that does this, are there any systems that can change prices in real time relative to average Bitcoin value? At the moment I cannot list a product for BTC2 when a week later those BTC2 decrease in value by 30%. Merchants do need stability but entrepreneus also need adequate addons to upgrade existing sites, at the moment it is a bit to Wild West.

This guy ( http://armstrongeconomics.files.wordpress.com/2012/05/manual-models.pdf ) hasn't said anything specific about bitcoins but here's something he said I find applies:


The market phase transition bitcoin just passed through is from in the shadows to in the limelight. So price has just gradually exited stage left @ around 100 bucks a coin thank you very much bitcoin. We await act 2.

Man, that crazy talk.  But I'll play.

Please support the claim with direct quotes from the source.

The proof-of-work(facts) also solves the problem of determining representation in majority decision
making. If the majority were based on one-IP-address-one-vote(representative), it could be subverted by anyone
able to allocate(control) many IPs(representatives). Proof-of-work(facts) is essentially one-CPU-one-vote(information). The majority
decision is represented by the longest chain(group concensus), which has the greatest proof-of-work(facts) effort invested
in it.

If a majority of CPU(information) power is controlled by honest nodes(people), the honest chain(group) will grow the
fastest and outpace any competing chains(groups). To modify a past block(historical event), an attacker would have to
redo the proof-of-work(facts) of the block(historical event) and all blocks(historical events) after it and then catch up with and surpass the
work of the honest nodes(people). We will show later that the probability of a slower attacker catching up
diminishes exponentially as subsequent blocks(historical events) are added.

5. Network

The steps to run the network are as follows:

1) New transactions(information) are broadcast to all nodes(people).
2) Each node(person) collects new transactions(information) into a block(historical event).
3) Each node(person) works on finding a difficult proof-of-work(fact) for its block(historical event).
4) When a node(person) finds a proof-of-work(fact), it broadcasts the block(historical events) to all nodes(people).
5) Nodes(people) accept the block(historical event) only if all transactions(information) in it are valid and not already spent(known).
6) Nodes(people) express their acceptance of the block(historical event) by working on creating the next block(historical event) in the
chain(group), using the hash(logic) of the accepted block(historical event) as the previous hash(logic).

6. Incentive
By convention, the first transaction(information) in a block(historical event) is a special transaction(information) that starts a new coin(trust) owned
by the creator of the block(historical event). This adds an incentive for nodes(people) to support the network, and provides
a way to initially distribute coins(trust) into circulation, since there is no central authority to issue them.
The steady addition of a constant of amount of new coins(trust) is analogous to gold(value) miners expending
resources to add gold(value) to circulation. In our case, it is CPU(information) time and electricity(effort) that is expended.
The incentive can also be funded with transaction(information) fees(value). If the output(meaning) value of a transaction(information) is
less than its input(utility) value, the difference is a transaction(information) fee(value) that is added to the incentive value of
the block(historical event) containing the transaction(information). Once a predetermined number of coins(trust) have entered
circulation, the incentive can transition entirely to transaction(information) fees(value) and be completely inflation(manipulation)
free.The incentive may help encourage nodes(people) to stay honest. If a greedy attacker is able to
assemble more CPU(information) power than all the honest nodes(people), he would have to choose between using it
to defraud people by stealing back his payments(values), or using it to generate new coins(trust). He ought to
find it more profitable to play by the rules, such rules that favour him with more new coins(trust) than
everyone else combined, than to undermine the system and the validity of his own wealth.


I could be wrong though, this is just what I read into it... I've read the damn thing 10-20 times and the wording Satoshi uses was bothering me throughout the paper. I don't think this thing is describing just a digital financial system, it seems to describe how to maintain information integrity over a digital communication channel for the purpose of collective concensus.


A purely peer-to-peer version of electronic cash would allow online
payments to be sent directly from one party to another without going through a
financial institution. Digital signatures provide part of the solution, but the main
benefits are lost if a trusted third party is still required to prevent double-spending.
We propose a solution to the double-spending problem using a peer-to-peer network.
The network timestamps transactions by hashing them into an ongoing chain of
hash-based proof-of-work, forming a record that cannot be changed without redoing
the proof-of-work. The longest chain not only serves as proof of the sequence of
events witnessed, but proof that it came from the largest pool of CPU power. As
long as a majority of CPU power is controlled by nodes that are not cooperating to
attack the network, they'll generate the longest chain and outpace attackers. The
network itself requires minimal structure. Messages are broadcast on a best effort
basis, and nodes can leave and rejoin the network at will, accepting the longest
proof-of-work chain as proof of what happened while they were gone.

These costs and payment uncertainties
can be avoided in person by using physical currency, but no mechanism exists to make payments
over a communications channel without a trusted party.

The system is secure as long as honest nodes collectively control more CPU power than any
cooperating group of attacker nodes.

The problem of course is the payee can't verify that one of the owners did not double-spend
the coin. A common solution is to introduce a trusted central authority, or mint, that checks every
transaction for double spending. After each transaction, the coin must be returned to the mint to
issue a new coin, and only coins issued directly from the mint are trusted not to be double-spent.
The problem with this solution is that the fate of the entire money system depends on the
company running the mint, with every transaction having to go through them, just like a bank.

The only way to confirm the absence of a transaction is to be aware of all transactions.
In the mint based model, the mint was aware of all transactions and
decided which arrived first. To accomplish this without a trusted party, transactions must be
publicly announced

A timestamp server works by taking a
hash of a block of items to be time-stamped and widely publishing the hash, such as in a
newspaper or Usenet post The timestamp proves that the data must have existed at the
time,

The traditional banking model achieves a level of privacy by limiting access to information to the
parties involved and the trusted third party. The necessity to announce all transactions publicly
precludes this method, but privacy can still be maintained by breaking the flow of information in
another place: by keeping public keys anonymous. The public can see that someone is sending
an amount to someone else, but without information linking the transaction to anyone.

This is similar to the level of information released by stock exchanges, where the time and size of
individual trades, the "tape", is made public, but without telling who the parties were.

We consider the scenario of an attacker trying to generate an alternate chain faster than the honest
chain. Even if this is accomplished, it does not throw the system open to arbitrary changes, such
as creating value out of thin air or taking money that never belonged to the attacker. Nodes are
not going to accept an invalid transaction as payment, and honest nodes will never accept a block
containing them. An attacker can only try to change one of his own transactions to take back
money he recently spent.

12. Conclusion

We have proposed a system for electronic transactions without relying on trust. We started with
the usual framework of coins made from digital signatures, which provides strong control of
ownership, but is incomplete without a way to prevent double-spending. To solve this, we
proposed a peer-to-peer network using proof-of-work to record a public history of transactions
that quickly becomes computationally impractical for an attacker to change if honest nodes
control a majority of CPU power. The network is robust in its unstructured simplicity. Nodes
work all at once with little coordination. They do not need to be identified, since messages are
not routed to any particular place and only need to be delivered on a best effort basis. Nodes can
leave and rejoin the network at will, accepting the proof-of-work chain as proof of what
happened while they were gone. They vote with their CPU power, expressing their acceptance of
valid blocks by working on extending them and rejecting invalid blocks by refusing to work on
them. Any needed rules and incentives can be enforced with this consensus mechanism.

What your lengthy reply was was an iteration of the general theory of and use of bitcoin.   What it was not was support for your person opinions which I commented on and which I repeat in part.

It obviously was supposed to spread the wealth among the population, with greater and greater automation occuring the wealth of the world is being concentrated into the hands of the few causing massive inflation and instability in the economic system., the p2p Bitcoin system was supposed to counter that. ....

By the way, I'm NOT criticizing your opinions.  I'm just saying they don't follow logically from the bitcoin model.  Neither do we have direct evidence to support your views.  Such as "Nakamoto SAID..."

No, he didn't say.

No, it does not follow.

Sorry... I got carried away with something else I noticed in it, I encourage people to question me, I learn better that way.

I was reading Satoshi's paper to find all the peer to peer references, this is what I was thinking of... why didn't Satoshi just use a encryption for each coin in circulation with a Trimmetric Encryption, three keys.  one for the bank that owns it assigning them as the Institution in possession of it, a public key for transferring it between institutions and a third key that would be an extra key assigned to the possessor of the coin?
 
Since the system is running from the banks you would have to connect to your bank sooner or later. Since every single coin is encrypted and never leaves the bank and just hops from bank to bank with new encryption keys at every level no need for peer to peer communication. and each coin is encrypted so it becomes really insane to try to steal a large amount of them, you could only rob one person at a time and even then you have to break the bank branches encryption to get rid of which bank owns them not to mention re-assigning it to the attackers institution; plus if the banks Firewalls/Network has no record of that coin, it can effectively deduce that it is a fake; and it scales too, you can add as many keys as you need for multiple parties, making it extremely difficult to falsify.

I can show you how but I won't; I like Bitcoin.

there are a lot of ways to re-invent the wheel and keep it completely centralized.

 If he had done that it wouldn't of had to be Peer to peer, anyone trying to break the individual code of each coin would find it inpractical to do since it would take weeks just to falsify 1 coin.

i simply deduced it from all the mention of peer-to-peer that's all.

My thinking is; Why would Satoshi program the client to pay out a standard fee of .0005BTC for every transaction? I think he wanted to spread the wealth and figured the transaction would number in the quadrillions.

This is simply speculation on my part, guessing, trying to understand what this Person or Group did. I just can't imagine them doing this and thinking that people would expend resources for free...why would they code it in there?

I love this community! Bitcoin is so deep on so many levels! so many puzzles!

OKay, I understand this commentary quite well.  This follows a from b from c and so forth.

My thinking on the transaction fee would be just to place a small incentive on peer to peer database maintenance.  Why didn't he include banks?  We could conjecture that he found them to have been and be capable of being subjugated to the will of the powers of state (even in cases where the banks are not owned and operated by the state - many countries that is the case).

Let me continue this line of thought a moment.  If banks had been involved in the equation, would you or any one on this forum be here now?

NO!!!

So the rule set would then have had to be top down implemented by a government or the UN or some such corruption.  And they will try to do this - they will try to implement electronic money.  But the problem with that is that every single thing you do would be known by the government.  Lots of people would have a problem with that.

I rather think that he considered the possibility that a equation and system set might cause the light to go on in peoples' heads that they could take personal control of the problem of money.  But that's just my WAG.  Nakamoto feel free to private message me and provide input (LOL).

LOL!  I agree, I am happy with how things turned out, a Currency by the People, For the People.

I think Bitcoin has street cred since it's inception fully supported and evolved to the peoples tastes. :)  Long Live Bitcoin!!

Dude. Get Real. What you say is an Utopia. Like the Unicorns, Heaven and Communism.
The BTC fell from 266 to 55 for one reason - people made a lot of money from it, and decided to cash out. Of course they did not cash everything out at 266, as each sell order lowered the price. And it was natural and expected to see it fall.

Breaking the loop is most directly tied to adoption of the bitcoin Economy.

Loop:  FIAT->BTC->FIAT->Consumption

Broken loop: FIAT->BTC->Consumption

(That means paying for products directly with bitcoins, which leaves nationalized currencies out of the process entirely.)

With the Foodler news (http://bitcoinfinger.wordpress.com/2013/04/18/foodler-now-accepts-bitcoin), we've got more ability than ever to spend our bitcoins, but of course then we have a new problem as the price of bitcoin rises...

Human greed. It's harder to let go of any bitcoins that you bought at low prices when the price of bitcoin is now higher and climbing... Even just a few millibtc, our greed tells us that every millibtc is one day going to be worth thousands of dollars and what would it hurt if we kept it in our wallets and just hoarded every satoshi that came our way?

Sadly, a lot.

It hurts because if we're not spending our bitcoin for products, then the loop is complete again. Hoarding is like a pause button, but if everyone has their wallet 'on pause' then merchants aren't going to be making a profit by taking bitcoin and the infrastructure for bitcoin's growth never gets built.

What we need now is some kind of promise or pledge, where we raise awareness and get every bitcoin user to pledge to spend as much bitcoin he can inside the legitimate bitcoin economy.

If we all spend some from time to time, never sending it back to our nationalized currencies, then bitcoin's future is assured.

Anyone want to design the little pin? Perhaps something with digital code all over it?

We desperately need to raise awareness to this issue if we ever want the price of a bitcoin to stabilize.  

I'm going to order Pizza, I'm starving!

But if it became accepted by governments, would we need to find something else?

Hmm....

Governments don't have cooties, they have guns.

Bitcoins are impervious to guns. No reason to not want them to use bitcoin.
(They never, EVER, will do so, but I'm all for it if they change their mind.)

Well were going to have to find some sort of a use for it, because thus far as a "money", it's little more than a glorified "virtual toilet" who's sole "value" depends entirely upon how the last guy might leave the toilet seat, an hour from now.

The simple fact is that as long as the "Exchanges" continue to foolishly operate as "Penny-stock Markets" treating Our Labour Exchange Currency" as if it were some other poor dupe's "penny stock" to be bid up and down like a toilet seat Bitcoin can never ever become a "money".

with a toilet-seat valued "bitcoin futures derivative token" it is impossible to:

- get paid in Bitcoin for either past or future services in stable terms relative to the value of any other "Medium of Labour Exchange Currency"

- pay anyone for any good or service in Bitcoin in stable terms relative to the value of any other "Medium of Labour Exchange Currency"

- know the futures value of Bitcoin in stable terms relative to the value of any other "Medium of Labour Exchange Currency" an hour from now

- lend nor borrow Bitcoin in terms of Bitcoin

- agree to or form any sane contract for anything valued in Bitcoins

- even trade Bitcoin in exchange for anything with any certainty it will be worth the cost of it an hour from now

the only thing it works as is a fiat futures derivative contract for the future fiat value of Bitcoins.

(and of course if you have a "donation" to sell that costs nothing.)

Depending what hour your Bitcoin transaction passed through a "Bitcoin toilet" today, the current "fiat" toilet lid's position returned to you either $190 or $145 (likely mostly counterfeited) Federal Reserve Corporation "They-Owe-Us Notes" for it.

No, it would not. If a company can get some of supplies for fiat and some for bitcoins, then they need to sell part of their goods for fiat and part for bitcoins to cover supply costs.
 

You just don't get it do you? A "money" is a Medium of Labour exchange "*Currency*" (*meaning it can vary a tiny bit in value or quality from yester-day to current-day to tomorrow*) that is guaranteed to be of a reliable, more or less constantly repeatable value to everyone who uses it. Those needy for a constant, consistently valued utility of Labour-exchange include bushels-of-bonuses banksters, speculators, entrepreneurs, manufacturers, merchants, professionals, false-flag terrorists, street sweepers and even robbers. We all expect to be paid in something we can reliably use again to claim our rewards as we choose later.

Nobody can afford to get paid in something that they have no clue what it might only be worth an hour from now.

Even a slave has the freedom to decide to be fed, starve or just commit suicide, depending upon the certainty of what his reward for servitude will or will not be.

Without an assured value a "fiat bitcoin" can never ever become a "money".

Both of your loops are wrong. Correct loop would be

Production -> BTC -> Consumption

Well there are no laws against this... we could set the price, and tell everyone selling at the exchanges that this is the defacto bottom price of Bitcoin for this amount of volume of customers: Customers being people who just want to exchange their money to transfer it to someone else.

I mean is Bitcoin going to be a Currency of exchange... or a Commodity? How much fluctuation is good fluctuation that indicates the health of all the transactions on the system?

I am not sure you get it. Fiat and bitcoin transactions can run within same production cycle without converting BTC<->Fiat.    But, currently you can not completely avoid BTC<->Fiat exchange because miners need to pay their electric bills, and they can't pay those bills with bitcoins.

Heh.  I should report this to Language Log.  I doubt that they've seen this particular false etymology before.  Current is "that which circulates".  The exact same word also applies to rivers, circuits, etc.  It has nothing to do with time.

The truth is that nothing is fixed or reliable.  Not the dollar, not the euro, not gold, not silver, nothing.

I've seen this stability nonsense pop up a lot lately.  Surely there aren't that many people in the world that think that the dollar is a fundamental constant of the universe?

Although your loop is the outcome we all want here, I was addressing how to stop the current FIAT->BTC->FIAT loop mentioned in the OP.

That's easy.

Just add a second crypto and the loop wouldn't be such a problem. ATM every bigger transaction effects the exchange rate and every change triggers greed/fear. That greed/fear generates vola and vola is the reason merchants stay out of crypto.

A bigger transaktion on BTC pushes panikers into LTC and vice versa. If the big money is smart money they will already have a 2nd position in LTC to sell after LTC/BTC rises. Panikers are either idiots and loose their money or stop generating vola on Crypto/Fiat.
Less vola means more people in crypto ...
After a while vola will be reduced and value increased.

To stop idiots from panik moves to USD simply add a payout fee or delay and make LTC/BTC exchange for free.

Think about it.