Bitcoin Forum

I think this should answer any questions that you might have regarding the issues bitcoins are having.

http://www.flexcoin.com/calc/

I'll put it in the standard flexcoin template later today.  

This is something that everyone needs to have to fully understand what is going on regarding the creation of bitcoins.

I figured it would start a serious debate,  but facts are facts... and that formula is a fact.

the fact is that we need 1.5 million dollars a month pushed into the system or else it will go down from current rates.

I'd like to see the formula that explains how flexcoin pays interest to its depositors

If all newly mined coins were going straight to market, those calc figures would be spot on

This belongs in economics, not Bitcoin Discussion.

And you're formula is incorrect because:

1) not all mined coins are sold
2) Investors and miners choose the price at which they purchase or sell bitcoin. 

You're formula is from an outsider perspective, as though there is some third party setting the price instead of direct exchange between investors.  You're just another speculator trying to keep the price down for the sake of your own ability to mine or buy coins more easily until you prove otherwise.

This page you put up is a strike against you.  You ought to take it down and rethink  ::)

http://www.flexcoin.com/?page_id=148

that's been there for months...  didn't you ever read it?  I find it fascinating and comical how many people ask the same question but never read it...

This formula shows that if value is not added to the bitoin economy, then there should be inflation. But it doesn't show the scale of this inflation.

There is about 7 211 350  bitcoins. About 216 000 is being generated monthly. It means inflation due to emission is less than 3%/month. If nothing is added to the economy, then the inflation would decrease (since amount of bitcoins grows, but amount of bitcoins generated per month is constant). The inflation will decrease even faster when generation bonus is halfed.

But there are good chances that something will be added to bitcoin economy and compensate this decreasing inflation :)

In fact, many fiat currencies experience much higher inflation due to heavy use of printing press by their central banks.

not to this extent.   We're printing a huge amount of bitcoins, more than Zimbabwe at current rates.

not even close, it's 100% spot on.  If that dollar figure is not added to the bitcoin economy the price will fall.   The value could be in the form of bitcoins being exchanged for t-shirts, or direct to mtgox for dollars added to buy bitcoins, the end result is however that that value is 100% accurate.  

The problem is that you're looking at it from an Insider perspective and not on a macro economic viewpoint,  at the end the macro level will win every single time.

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Also it doesn't belong in economics,  it belongs here because economics would imply that it's just regarding dollars added,  but that's not what that formula represents, it represents t-shirts, services, everything added to it.   It's a technical formula not a economic one.

True: afaik Zimbabwe abandoned its currency and doesn't print any more :) But when it had thousands of %% of inflation, its emission was obviously much much much higher than emission of bitcoins )

I still want to get a Zimbabwe hundred trillion dollar note.   Just to feel rich :)

LOL!

What you are saying is that if amount of bitcoin grows, but amount of goods and services traded for bitcoins doesn't grow, then bitcoins should decrease its value.

This is obviously true and it doesn't depend on bitcion's current price (you can remove it from equation and just show percentage of inflation). To my mind it is not that high for such a risky business, and it will decrease with time :)

Moreover, something is being added to the economy every day (people buy bitcoins, goods and services traded for bitcoins, people loose their wallets and many of them expect that in the long term bitcoin economy will grow)... So there are some deflationary factors as well which are hard to estimate. But if you are interested in crashing bitcoin, then focus on inflation, it is understandable :)

The dollar value is there for a reason, the figures of t-shirts, services MUST equal that amount or else it will go down...  

trust me I know what you are saying..

but it has to be that figure or else the creation of bitcoins will exceed (and currently does) the investment going into it.

Thanks for making the calculator, but it rests on the assumption that every mined coin is sold at market price. As long as people realize that assumption is implicit in that calculation, then it's a valuable observational tool.

It needs to be understood, though, that if miners hold all the coins they mine, then exactly $0 new dollars are needed to keep the price flat, (ceteris paribus).

You can't ignore it by saying "miners will hide it under their mattress"  That dollar figure has to be added each month directly by either direct investment in dollars, silver, gold, Euros whatever... or directly via goods and services sold (not offered, sold).

 

The money doesn't have to come directly from new investment now. If the volume of transactions processed increases the value of bitcoin as a product increases, which can be used to settle the deficit in future. The is not happening though (http://pi.uk.com/bitcoin/charts/n-transactions?showDataPoints=false&timespan=&daysAverageString=7)

So basically flexcoin is a pyramid scheme? it relies on new investors (and not income of its own) to supply the money owed to people?

huh?  Where the hell did you get that from?   it's based on transaction fees from income it generates.   Like everything you stated it's the exact opposite.

http://www.flexcoin.com/?page_id=148

Read that than come back..  seriously I am really tired of posting it over and over again...  people need to read how it's formulated.  Better yet I don't think you would understand it...  I'll post it here:


--------------------------

Fees:
Flexcoin to Flexcoin = FREE
Bitcoin to Flexcoin = FREE
Flexcoin to Bitcoin = .01 BTC or one half of one percent (whichever is greater)

- NOTE: the bitcoin miner fees will be distributed from the fees we collect on outbound transfers, not added on.  The fee listed above is the only fee you will pay for an outbound transfer.

70% of the fees collected are disbursed to the account holders as discount payments on any fees already paid or any potential future fees, based on the following formula…

(your account balance / total balance of all flexcoin accounts) * ((all fees collected – miner fees) * 0.7)

It is important to note, as you can see in the formula listed above, MINER FEES WILL BE PAID ON ALL EXTERNAL TRANSFERS. Flexcoin will add appropriate bitcoin transaction fees whenever coins are transferred to an external bitcoin address.  Flexcoin-to-Flexcoin transfers are 100% FREE, and instantaneous.

What This Means: an individual can transfer bitcoins into Flexcoin (from an external bitcoin address / client), and then send and receive coins for free (via Flexcoin-to-Flexcoin transfers). This person would also receive a discount payment, even if they don’t make an outbound transfer (netting them a discount against any future fees for outbound transfers).

This makes a Flexcoin account the world’s perfect bitcoin solution.

---------------------


In simple english,  when someone transfers out to a BTC address 1/2 of 1% is fees.   70% of that goes back to the account holders.  

The other issue is that the bitcoin market cap is actually going down.

Lets say we will have 10 million Btc in a year. Each worth $6. Thats $60 million.
Now its sounds much but It only requires 200.000 to believe in Btc and each put in $300 thats it.

Now the price sounds very easy to hold and achieve.
Even if there are only 100.000 guys who believe in Btc, some of them will buy much more than $300 worth of coins.

And a couple of month ago there were around 60.000 who had accounts at Mtgox. Now since then there are atleast two chinese, a canadian, a british Bitcoin exchange.

So a price of $6 should be easy to hold if the markets thinks its worth it, considering how revolutionary Bitcoins are.

Erik is correct.  The supply of bitcoins is determined by the quantity offered for sale.  The demand is determined by the quantity requested for purchase.  The current price is simply the point of equilibrium where the demand matches supply.  Hence, all that is required for the price to remain stable is the number of bitcoins offered to balance the number requested for purchase at that price.

As a result of mining, somewhere between 0 and 50 new bitcoins are entering the supply every 10 minutes, but you can't be sure of the exact number.  Your calculation assumes all 50 newly minted bitcoins are being offered for sale every 10 minutes, in which case ~$1.4 million in value would need to change hands to support the price.  Now, if the price does hold steady over a period of a month, then it is true that the notional value of all bitcoins in existence would have grown by ~$1.4 million.  But that's very different than saying $1.4 million new money has entered the bitcoin economy.

Steve all I am saying is that the bitcoin economy has to exceed the increase in supply.   If the supply increases faster than the economy is developing and growing,  you get inflation.

in this case we get about 50 new coins added every 10 minutes...  $300 at current prices...  so if the bitcoin economy doesn't grow at 300 dollars every 10 minutes we'll have a decreasing value.

that means 300 dollars has to enter the economy every 10 minutes.. or 300 dollars worth of services added to the economy... regardless of how you spread it,  300 dollars every 10 minutes has to be added in value to the bitcoin economy.



 

what

the bitcoin economy...  you know.. the sum of all the trades from person to person, what is used to buy products, what is used to make trades on mtgox , campbx ...  etc.

if someone buys something on bitmunchies that is contributing to the bitcoin economy.

if someone buys coins on mtgox that is contributing to the bitcoin economy.  It would be considered roughly equal to the disbanded M3 money supply chart (they did away with that in the mid-2000's)

Is there a "PayPal economy" or "Credit card economy" too? Haven’t heard of that yet.

Bitcoin is not a currency, it’s a payment method/USD proxy. Noone receives wages in Bitcoin. Noone produces the most basic goods for Bitcoins. There’s no cycle.

If no miner sold any mined bitcoins for an entire month, then the supply would increase by exactly 0 bitcoins... 0 new dollars would be required to support the price (all other things being equal).

But you don't know that...we could get 50 new coins in the supply every 10 minutes, or we could get 0...it depends on whether the miner contributes those coins to the supply or whether they keep them.  If the miner keeps them, no new money is required to keep the price where it is (again, all other things being equal).

I just mined a block and I'm keeping the bitcoins...tell me, where do any new dollars or services come into play?

They have to go somewhere eventually unless they are destroyed....  IE: Poland exchange ...  they could sit on his desktop for 20  years,  but eventually they will go somewhere..  hence circling back to where we are now.. delayed.. but 20 years from now those 50 coins will show up and we have to account for it.  plus we are stuck in a negative cycle.   See if the value is increasing people hold on to them thinking they will be worth more..  if the value is decreasing people dump them assuming they will be worth less tomorrow...  currently it's decreasing hence the "hording" isn't happening ... but dumping.. that's happening big time.  Would you hold unto silver if the price was decreasing every day by 20% ?   most likely you'd dump it hoping to buy it cheaper later..   this is what is happening..  I suspect most of these coins are being dumped at any price ...  in 2013 these people will be kicking themselves in the ass... but they have an electric bill to pay now.


keeping it and passing it down for 20 generations,  eventually they come into play.. or as I noted before it's possible they could be destroyed...  which at that point it would be as if they were never created.  

What generally happens is the miner gets a 2000 dollar electric bill,  and sells his coins to pay it...  every single month.

The point I am trying to make is that there is a reason those coins are made.. either to be spent.. horded.. whatever... but they are generated for a purpose...  most likely a financial reward.. or to be used in commerce..   other than somone deleting their wallet.dat or harddrive failure those coins will eventually come into play.. or at least that's how they are designed...  why else give a 50 coin reward?

Trust me the bitcoin algorithm is designed to accept an increase of 50 coins every 10 minutes... the expansion rate should match that ... Satoshi assumed that it would grow at X rate for 1 year..  Y rate for year 2  .. Z rate for year 3

The problem is that we hit growth of year 3 during year 2 ... hence the problem...

the adoption rate DIDN'T keep up with the inflation rate....  now it's correctable.. we just need 1.5 million new dollars entering the market (or equal to in services and demand) ..

This sounds like alot of money... but it's the price of 1/2 a Palm Beach Florida house...  it's not that much money in the grand scheme of things.... that would keep the price stable...  OR we could ride it out with a decreasing price until 2013 when the miners get half as much.. new money is entering the system.. just not enough of it to keep the price stable at 50 per block... but most likely enough to keep it stable (or increasing) at 25 per block ...

Yes there is a paypal economy and credit card economy...  it's what paypal reports each month... same with visa and mastercard.

...  yes I am not disagreeing with you..  I am just stating that if it was just a proxy as you stated it would be tied at a set rate for the USD... and it's not... hence why it's a "weird" entity .

Wow! 3 multiplications! An engineering masterpiece!  :P

PS: please subtract my mined coins, because I don't sell them.

what makes it masterful is the fact that it's simple...   you think E = mc² became popular because it was hard to understand ? :)