Bitcoin Forum

I have said it before, but asymptotically limiting the number of bitcoins has bad repercussions.

One of the most serious problems is hoarding. Whenever you have a commodity that has a fixed supply against an increasing demand, inevitably hoarding occurs.

This is one of the key reasons why currencies are designed to expand: steady expansion of a currency improves liquidity.

Bitcoiners complain about non-use of coins and liquidity, but I think it is largely their own fault for capping the bitcoin supply, an elementary design blunder. Not only that, the closer we get to 21 million and the more users there are, the more intense the hoarding will become. This is basic economics stuff. Seriously, people around here need to read Adam Smith. (Hey, I know its a fat book, maybe your mom can help you with the big words.)

Also, as long as I am ranting, the procedure of giving bitcoins to people who run computational server farms is totally off the wall. The natural way to do P2P currency expansion is to award new coins proportionately to those who hold existing coins. Duh.

I see. So the way to solve hoarding is to reward folks that hoard coins is to give them more coins?

I agree with you 100%, but don't expect much traction on this issue here.  Many of the hard-core Bitcoiners are too blinded by their own ideology to recognize the basic fundamentals of economics in the real world.  All you'll get is analogies to gold, which is the heart of Bitcoin's problems as a currency.  Bitcoin isn't gold, neither Bitcoin nor gold are a currency, and neither would work as a global medium of exchange without major disruptions to world economies.

But all they see is that the coins they hold would get really valuable if everybody started using them.  Plus they aren't evil "fiat" money printed by the CIA and used to control their thoughts and therefore automatically good.

Lucky for you there now are several alternate currencies which address your concerns.  See the forum section "Alternate cryptocurrencies" for more info:
  - http://bitcointalk.org/index.php?board=67.0

Personally, I'm sticking with Bitcoin.  I see it this way -- because it is trivial to "restock" my supply of bitcoin, I don't hesitate to choose it as the currency I use for spending.  And because when I spend using Visa/MC/PayPal, the merchant gets less than a dollar for each dollar I spend, I believe it is only a matter of time before we start seeing incentives from merchants driving us to use Bitcoin as the payment method.  i.e., I as a consumer gain more from using bitcoin for a payment than I would gain as a speculator from the increase in its value.

Wait, we're the one's blinded by ideology?

+1
Couldn't agree more!

your point: hoarding is bad because of low liquidity.

How does hoarding impact liquidity? If everyone stopped hoarding, the price of bitcoin would just go down. then it's trading as usual.

I especially use credit/debit cards for small purchases because the banks take a good chunk. I write checks for larger payments because it is slower for the payment to process.

Put your time where your mouth is and support my idea for EnCoin. It requires pretty much a completely new codebase, so it is a bit far yet from being a reality.
If too many people hoard and the prices rise, more people can create new coins (and there are rules governing creation that make it much less profitable for server farms and such).
Merchant reputation provides security for the network and merchants are encouraged to gain this reputation in the form of refunding some of a mandatory transaction fee. Any unrefunded fees go to those who already hold coins.

No big payoff for being an early adopter though since it is attempting to be a currency rather than a commodity. :/

I'm missing the intent ... that causes pain to the merchant, who in turn raises the price -- the only winners are the payment network s and credit card issuers.  Many merchants post minimum charge limits (though their merchant agreements almost universally prohibit that policy) so that their profits don't get demolished by payment network fees with these small purchases (e.g., purchases under $10).

I'm regularly amused by members who do no comprehend Praxeology or Economics telling me how consumers should act.

The intent was sarcasm.

Since you're obviously an expert in both, what do you think will motivate a consumer to use an irreversible method like Bitcoins to buy something online instead of their Visa card? 

Right, the merchant raises prices, which in turn allows banks to make more fees. If the banks get away with charging higher fees to the merchant instead of the consumer, then the merchant again raises prices and the banks make more in fees.
The intent is to break that vicious cycle. At some point, Bitcoin will fit into the picture.

Hopefully (eventually) lower prices.  CC fees are expensive, and merchants routinely lose even more via fraud.  Those aren't "free" and get wrapped into the cost of doing business.  If Bitcoin gets popular enough hopefully merchants will offer discounts for using Bitcoin.  The true cost of doing business with CC is easily 5% when you combine the fraud, charge back fee costs, merchant account costs, and the "vig".  For some high chageback businesses it is north of 10%.

Of course it is a chicken or the egg scenario and it won't be solved overnight but CC aren't free and that offers an oppertunity for Bitcoin to be "better".

The analogy with gold as a global currency is valid.  But bitcoin improves on gold in that it is possible to easily buy/sell/trade in tiny fractions of one bitcoin.  So even though there is a finite supply, the value will simply increase until equilibrium is found.  Since bitcoins are easily divisible--and their divisibility could even be increased from the current 8 digits--it doesn't matter how high their value goes to reach equilibrium.

Gold is not a currency.

Splitting hairs.  Gold has the potential as a currency and it has been used as a currency in the past.  It is generally not used as currency for various reasons as outlined in the post that your replied to.

Gold has fallen out of favor as a medium or exchange because
* it can be counterfitted relativley easily
* the amount of gold in coin can be altered
* it is difficult to have small units of exchange.  For example making a 1/1000th ounce coin would be inpractical.
* as a medium of exchange some value will be lost due to abrasion
* difficult to transport large amounts safely

Bitcoin doesn't have the issues that Gold has and thus would be a more viable global currency.

I'm educated in both.  (Actually, I'm educated in Praxeology, Economics is a subset)  There is no such thing as an expert in either discipline, because they are both social sciences.  Trustworthy Economists don't call themselves "experts", other people do.  It's like the "guru" word among unix programmers, it's a title that you earn, not one you claim.

As the the question, "what do you think will motivate a consumer to use an irreversible method like Bitcoins to buy something online instead of their Visa card?" the answer is very simple.  Lower transaction fees over the Internet, and eventually merchant discounts.  Once upon a time, cash was cheaper than using a credit card, until the credit card companies got wise and started demanding vendors sign contracts to not advertise prices lower than the credit card prices.  This is why the dual price displays on gas pumps disappeared in the 1980's.  But you can still get a cash discount from such vendors on larger items, such as a new tv, if you know who it is in the store you have to talk to.  Online vendors, for the most part, don't sign such agreements; and even if they did, they could be undercut by another website selling the exact same products for bitcoin only.

Visa is not a money.

All of those issues are based on the actual metal and all are solved by using a currency backed by gold. Which, crazily enough, most of the world did until the great depression. Then the world stopped because it caused a deflationary spiral.

This won't happen in Bitcoin because (quoting the wiki) "The key difference is that people don't foresee a fixed cost (unit amount) that they must pay with Bitcoin." So that somehow prevents hoarding, obviously.

See, this is a perfect example.  The term 'deflationary spiral' implies a negative feedback loop occurred, which was true on it's face.  But that same feedback loop would not have occured if not for the monetary intervention of the Federal Reserve, which officially exists to temper the ridgidity of the gold standard.  The depression of 1929-1930 occurred as a correction to the bubble of the 'roaring twenties', which was a bubble, in part, because of loose monetary policy by the Federal Reserve.  It then became "Great" because of misguided fiscal & trade policies of Congress, with the added bad luck of a concurrent famine known as the "dustbowl".  In short, if we were really on a gold standard (without fractional reserve lending to add 'flexibility') then the Great Depression wouldn't have been so great.

But fractional reserve primarily existed because there simply isn't enough gold to go around when the population and economy grows. Either a dollar must be worth less than a dollar in gold--pissing off everyone who holds dollars, or fractional reserve must be implemented to help ease the demand of a dollar being worth wayyy more than a dollar of gold--because a relatively fixed supply of money will otherwise eventually cause massive deflation. The reserve was supposed to keep purchasing power stable. Obviously they failed then and continue to fail now on purpose because it is the only way to ease debt.

A fixed supply of money that slowly trickles in for some useful amount of work would be a nice system, if that were anywhere near what happened with bitcoin. Instead, in layman's terms, one half has the other half by the balls.

The 5000 years of history preceeding 1913 is a glaring contradiction to your premise here.  And even if not all 5000, the preceding 137 years of American experiences with a gold standard and two prior national banks certainly does.

So you think a possible savings of 1-2% will be enough to make most consumers willing to forego the fraud protections and grievance procedure that come with their credit cards?  Won't scammers take advantage of this and set up online Bitcoin shops that advertise lower prices without ever actually delivering anything?  I'm no expert in economics, but as a consumer I can tell you that I value the peace of mind that comes with using my credit card for online shopping far more than a tiny potential discount.  For Bitcoin to have a chance at becoming a currency, this issue can't be shrugged away:  the case will have to be made that one won't lose their money if they buy from what turns out to be an unscrupulous vendor or no one is going to use it.

This sounds like something you completely made up.  Do you have any evidence that online vendors aren't under contractual agreement with the credit card companies to not offer discounted prices on other forms of payment?

It's great that you ignore where I said the goal was to keep purchasing price of a dollar stable. But besides that, if you are of a mind that no one should be able to lend to spur economic growth, good for you, but it isn't going anywhere and any system that tries to thwart that (bitcoin) is going to fail as an economy nowadays. There must be a balance between no lending (leading to stagnation) and terrible lending (leading to eventual collapses). Bitcoin and pure-gold standards will and have led to stagnation.

For most, no.  The credit cards also have the advantage that consumers are used to the system, and thus demand that system from vendors.  Which is why vendors use credit cards despite hating them.  But Bitcoin doesn't need most, only some.  As it chips away at the online market share of PayPal and Visa, it will become ever less obscure to the common consumer, and savvy vendors are going to start offering discounts for bitcoin.  Success need not be defined by the destruction of credit card companies, and likely couldn't anyway.  The advantages of credit cards could literally be added to bitcoin by those same credit card companies, if they so choose.


Some will try, undoutedly.  But try to undercut Walmart.com without a high level of trust from an established customer base.


Why?  Do you send your CC data to vendors online that you wouldn't trust to deliver on their promise?  If so, why would you trust them with your CC data?  There is more criminal profit to be had from selling or using the list of customers' data than from taking your bitcoin purchause and never sending you anything.  This is also why Ebay has vendor feedback, because you can still be screwed by a trickster.  Keep extending your trust online when it's unwarranted, and eventually you are going to have a real consequence.  Perhaps you are always protected by your CC company, but if you're gulible enough, eventually they will drop you like any other insurance company.


Bitcoin is already a currency, what you ask for is a complete banking structure.  That will come, eventually, to whatever extent the market may demand.  As I mentioned, there is literally noting stopping Visa form issuing Bitcoin credit.


Not that I will present, but I'm sure that you could find enough for yourself if you thought about it for a minute.

There was no lending before fractional reserve banking?  There is much history that is going to have to be updated!  Even the Bible must have been mistranslated!

BTW, what you call a 'dollar', isn't.  It's a federal reserve bank note.  A 'dollar' is historicly, and legally, defined as a particular weight in pure silver.  Roughly a troy ounce.  A 'bit' was a silver coin cut into 8 pieces, which is why 'two bits' is a quarter.  The term 'dollar' was an American distortion of the word "Thaler" (http://en.wikipedia.org/wiki/Thaler) and is still very much, legally, a reference to a silver coin.

Did I say that? I don't see where, so I guess like the Bible I'm going to have to update my post to fit!

But the reality is that if holding on to gold/dollars/bitcoins is a better bet than lending because of the "guaranteed" increase in value, there isn't much point in lending! Or if you do lend, it is at a very high interest. This may or may not be a primary cause of stagnation depending on whether you ask the bitcoin wiki or post-global economy history.


Wow thanks for that pedantic and enlightening definition! People might have gotten confused without it, because we know how easy it is to confuse people via obfuscation around here.  :-\

How many times have you been scammed by amazon or newegg or other major brand.  Also true cost of credit cards is more like 5%+ not 1%.  If you could buy everything you currently buy on amazon (or insert favorite retailer here) for 5% less would you?

I thought it was implied, considering I assumed that you were responding to me.  If I was in error, I apologize for my arrogance.


This is actually backwards.  The rising purchausing power of a deflationary currency tends to suppress interest rates in the absence of fractional reserve lending.

You do not understand the 'post-global' economic history.


Just thought I might through that little bit in there to enlighten you. I've got many more.

That's the problem:  there's no way for that to happen.  Imagine Amazon started offering 5% off with Bitcoin.  Visa tells them to stop it or they'll lose their account.  What do you think comes next?  

The big retailers have too much to lose if they can't process credit cards.  Small retailers are unknowns and thus potential scammers.  

Stop living in the fantasy of what the world would look like if everyone used Bitcoin and start thinking through how one could actually get there.  It's far from easy and probably impossible without some fundamental changes to Bitcoin itself.

Never.  I've had one or two people attempt to cheat me on e-bay, but have had no trouble getting my money back.


Not from a Bitcoin vendor, or at least one which did not have a long and stellar history.  The ethics of a high percentage of the people in the community are appalling to me, but this is not surprising when one thinks about it a little bit given the nature of the strengths of the solution.

I'll start to think about patronizing Bitcoin merchants when they start to think about sending my the item first then I pay when I receive it.

I would suspect that it will be a fairly long time before BTC is good for run-of-the-mill mail-order crap (absent an undesirable scenario where it is highly regulated.)  BTC strikes me as being pretty good for either paying periodically for services (e.g., a shell account) or for face-to-face transactions.  And not much more.

Imagine if Borders bookstore told Amazon that they cannot compete with brick and mortar stores because customers can't send cash through the mail? Would it now be Amazon that is bankrupt instead of Borders? Whodathunk it? Stop living in fantasyland that never sees technology advance progress. Visa does not run on magic. Once venture capitalists see the potential of investing in decentralized payment processing, they will flock to places like MT Gox, Trade Hill, Intersango, etc.

You know this is pretty much word salad, right?  This isn't about one business telling another that it can't work for some made-up reason, this is about a real, fundamental disadvantage one payment method has over another that isn't going to go away just because you want it to.

Saying there must be a balance between no lending and too much lending implies that there was no lending before fractional reserve?
Logic 101? Bueller?


6 of one... Either you lend only to the most credit-worthy to bring down the risk premium, or you raise the risk premium higher as the value of the money will be worth more when it is due. Either way, it is much more difficult to obtain investment because the currency itself is a safe investment, regardless of some one-liner on economic theory.


Ooh look an ad hominem to follow up the logic 101 fail.

Bear with me for some US-centric wikipedia quotes:

"The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is the central banking system of the United States. It was created on December 23, 1913 with the enactment of the Federal Reserve Act, largely in response to a series of financial panics, particularly a severe panic in 1907."

"The Panic of 1907, also known as the 1907 Bankers' Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell almost 50% from its peak the previous year. [...] Primary causes of the run include a retraction of market liquidity by a number of New York City banks[.]"

You mean to tell me that the federal reserve was created because a few banks had the power to take down the New York economy? I wonder why that was able to happen.

Surely the time of year had nothing to do with it:

"the money supply in New York City fluctuated with the country's annual agricultural cycle. Each autumn money flowed out of the city as harvests were purchased and—in an effort to attract money back—interest rates were raised. Foreign investors then sent their money to New York to take advantage of the higher rates."

LOL

I'll let you finish reading up on the rest since I'm sure you can figure it out.

Today (at least in the US) merchant agreements can't prohibit discounts for alternatives they can only prohibit increased cost for credit cards.

Here is an example of gas stations offering cash discounts:
http://www.creditcards.com/credit-card-news/gas-discounts-for-cash-1275.php

Now the one con in the article was that cash is inconvenient.  Hmm imagine if someone made a digital cash like system so consumers wouldn't need to carry around cash to get discounts?  Someone should think of that.

I am not saying this will happen tomorrow or that it will EVER happen but VISA and the other CC demand ever increasing profits.  Those costs combined with chargeback fees, and losses due to fraud do add up.  Credit cards aren't free for the merchant and thus aren't free for the consumer either. 

It was asked why a consumer would use Bitcoin over CC.  There is your answer.  Cost savings.  Now trust matters more in Bitcoin but I would have no problem trusting many of the places I shop online with Bitcoins.  I can't remember the last time I made a chargeback but I pay a hidden cost of 5% to 10% tacked onto every item even when no chargeback occurs.  Some transactions are risk and you can always use CC there (or some reversable system built on top of Bitcoin).

Some have mentioned cost savings. Another big reason is that the two parties do not need the permission and approval of a third party (Visa) in order to do business. In some situations, this is a huge advantage.

You're right, hoarding doesn't impact liquidity. There are enough Bitcoin users and speculators that there will always be buyers and sellers, and hence liquidity. To increase liquidity, we need more buyers and sellers, not more Bitcoin.

I've noticed that folks who talk about liquidity are usually ones who are just unwilling to accept the price a market is putting on a good. Hence banks talk about being 'illiquid' rather than being insolvent. House owners talk about the market being 'stagnant' rather than bust.

Now, just to keep us all intellectually honest, it is probable that Bitcoin would prevail over an improved crypto-currency simply because of its momentum and first mover advantage.

That said, the limit on BTC is one of its big advantages. Even Krugman can see that.

How is the limit one of its big advantages? A deflationary spiral isn't possible because early adopters will step in and take a good chunk of the value away?
Even if the coins were distributed in a more realistic fashion such as for real work performed, what measures are there to stop what happened during the great depression from happening with bitcoin? Is there going to be some measure to prevent bad investments? Are we to just hope that bitcoin never becomes large enough compared to the world economy? I mean for crying out loud, bitcoin has already experienced a deflationary spiral, and early adopter money was released from the hoards to resolve it. Demand far outstripped supply, though in this case it was due to the supply being held back by a select few rather than bank failures and what not.

Imagine if there was actual investment going on in bitcoin and the price rose from $2 to $30. How in the ever-loving FUCK would someone pay back a loan? "uhhh, hey bro I can't pay you back for that snickers bar because that amount of money would now buy microsoft, sorry dude"

The problems mentioned stem from a confusion about what Bitcoin is. There is a naive idea that world governments might adopt Bitcoin, and it might become the worldwide currency and so it might impact the economy because of problems associated with inflation and deflation of the money supply and such. Don't worry, that's not going to happen. USGov will stick with the USD whatever happens - and so it is only inflation/deflation in the USD that you need to worry about if you're a USian.

Bitcoin increasing or decreasing in value doesn't matter in the same way that gold increasing or decreasing in value doesn't matter (unless you're holding it, or have borrowed it, or are backing your currency with it).

You might agree to repay someone 10 ounces of gold. The gold price might go parabolic and you'd be stuffed. So what. Not gold's fault. Not bitcoin's fault. Your fault!

If you take a position in Bitcoin, either short or long, it is a speculative one and you should be prepared to lose your shirt.

Price your goods in USD. Denominate your loans in USD. Let the USGov keep the USD stable.

Make and receive your payments in Bitcoin. Cash in, cash out. Let the speculators and hoarders worry about the day-to-day value. It doesn't matter to anyone else.

You didn't answer the question of "how is the limit one of its big advantages?"

If there are a billion bitcoins worth a penny each, that is no different from 21 million bitcoins being worth a few dollars each if all it is is a payment processor.

All this deflationary economy bullshit goes out the window because there is, in fact, no economy. Now we go back to the game of hot potato and wonder not if but when someone decides to sell an early hoard of coins and causes anyone stuck with bitcoins to lose all kinds of wealth for the sake of this payment processor. Anyone who invests in the "currency" plays a game of "when can I predict that the early adopters will be too greedy to keep hoarding," and what you have is a bona-fide pyramid scheme and/or greater fool scheme.

Oh I'm sorry - the limit, or scarcity, gives speculators and hoarders confidence that an issuer can't steal their wealth through printing. (See Weimar Republic, Zimbabwe, Sterling, USD). It makes the game a bit fairer!

Quite right! It is the manner of distribution that is important.


"anyone stuck with bitcoins" = hoarder / speculator
"Anyone who invests" = hoarder / speculator
"greater fool scheme" = speculative mania / bubble

But they have confidence that early adopters won't steal their wealth through selling? They'd rather rely on a bunch of anonymouses with no one to hold them accountable other than themselves?


This will definitely not be true for those transacting in bitcoins. Cash->BTC->cash will *never* be an instantaneous process. And if that process is all bitcoin is eventually relegated to doing, the early adopters are encouraged to sell whenever they believe pending transaction volume is at a high. Will real businesses ever accept BTC knowing they could lose 50% or more of all REVENUE (not profit) for a day or even a few hours? Or will they just accept that they will occasionally lose value as a cost of doing business in BTC, much like visa/mc?


Bitcoin has been touted again and again as an answer to the ills of "fiat" currency. People will be duped into thinking this is some kind of good investment and the pyramid propagates. Is it at all ethical to promote such a system? Doesn't it eventually just boil down to how much value the earliest adopters can siphon from the network before it *might* be stable? With a limited supply, isn't it likely that some new business will eventually control a large percentage of the supply again, and be able to pull off the same stunts, again?

Indeed some people trust the mechanisms of a free market over the machinations of government.

As Bitcoin is adopted, services will be offered to entirely insulate users from the volatility. Wallet services will allow users to hold their balances in USD, converting to BTC only for transactions. Merchant services will allow retailers to accept BTC without ever holding a BTC. (See Bit-Pay).


Some idealists do. Bitcoin is an answer to some of the ills of government fiat currency. The USD etc has its value and its place.

An answer to some of the ills, certainly not to all of them. No matter how you design a new currency - the wealthy will always end up with a big chunk of the pie (my personal conviction, I'd be happy to be proven wrong on this).

Bitcoin will not make the disparity of wealth on this world go away but it might help to lessen it. The current mechanism of fiat money generation inherently siphons wealth from the bottom to the top - Bitcoin simply doesn't have such a mechanism built in.

As for Bitcoin being a good investment - it sure is a high-risk investment from a financial standpoint. From an ideological point of view one might argue differently.

Where do you see the earliest adopters siphoning value from the network? The only way holders of large sums of Bitcoin can profit is by making Bitcoin more valuable to all, which is a nice incentive IMHO and in stark contrast to the traditional money system where the top directly profits from making everybody else lose.

Again, Bitcoin will not magically solve the disparity issue of the world but there simply is no equivalent in Bitcoin to the "stunts" of the fiat money system.

What basis is there for trust? That satoshi went through great lengths to remain anonymous and then disappeared? This is rhetorical though, I don't want to get into a debate on that topic.


"Fees

The automated solution and shopping cart is available for all merchants for a fee of 0.99% of the value of the sale. If the merchant wants to receive a currency other than bitcoins, (e.g. US Dollars) bit-pay can trade the coins for dollars, and send a direct deposit to the merchant's bank account. Merchants have no currency risk of bitcoins at all. The fee for this service is 2.99% of the value of the sale."

Wow, pretty much the same or more fees than a credit card transaction, and much more than a debit transaction (though that gap is closing). And the risk that bit-pay becomes insolvent if the BTC value plummets quickly. Cool service though.


The reason fiat currency inflation siphons wealth from the bottom to the top is because the top gets access to new money first. Banks are the first to receive new cash.
How is who got access to bitcoin first any different? Those who possess lots of coins siphon wealth from those who don't, because they fight over a ridiculously limited supply which is set to become more limited. Those who have coins can decide to take that wealth at any time. It would take around 60-70k coins to drop the "value" in half right now. That is less than 1% of the coins in existence, and satoshi & friends mined at least 1.6 million at a difficulty of 1.


Everybody else does not necessarily lose. Any debt they have is now worth less. And I saw earlier adopters siphoning value by a ridiculously obvious pump n dump from 2->30->2. They regulate the huge majority of the supply, thus ultimately the value of any given BTC as their value is based 100% on supply and demand.


Then please explain how it is possible to see the price swings we have seen. A couple thousand trades on the black market meant that the 6.5 million BTC at the time was worth $200+ million USD?

One trusts that it is very difficult to move the goalposts if they are driven into the ground.

Also don't make controversial statements if you don't want to get into a debate!



You're right - those are crazy fees! If only the free market had some kind of solution for high prices and supernormal profit. Oh, come to think of it - there is. Competition will drive those prices down to commodity levels.



You misunderstand the nature of price. Price implies amount. You might be able to sell 1 Bitcoin for $3 right now, but not 1 million Bitcoin at the same rate.

Businesses criticize each other all the time. You said so yourself.

It's called competition. Amazon will choose bitcoin because it's cheaper. That is unless there are no anti-monopoly laws in which case we are all screwed and will end up paying whatever the banks will force us to pay. If that happens, then a bitcoin based online bookstore will be able to out-compete Amazon for prices.

New Bitcoins are created by miners at a cost that is usually very little below the current market price of Bitcoin. The miners are the ones who provide the service that makes Bitcoin a secure medium of exchange for everyone. That's the mechanism of Bitcoin money creation and it does not siphon any value from the bottom to the top.
If you refer to people who mined back in 2009 and did not sell until now - those are speculators and there's not much difference to somebody spending a few hundred USD back then to buy tens of thousands of BTC.

Bitcoin is not backed by anything and not pegged to anything so it is bound to be extremely volatile as long as it is not widely used as a currency. If you bought AAPL or GLD in 2003 you'd have had similar returns - does this make Apple or Gold a pyramid scheme?

I don't see anybody fighting - besides, this is a one time issue: as soon as somebody spends their coins, they're gone. There is no mechanism in Bitcoin that replenishes their supply.

It is a very young and shallow market - nobody can just drop 100k coins without enormous slippage.

Sounds like we should all take on some more debt to not be on the losing side then, right?

How do you know it was the early adopters? The majority of coins from 2009 did not get moved once and might as well be in lost wallets for all we know. The pump and dump was from speculators who might as well have bought all their coins in April. This has absolutely nothing to do with Bitcoin's design of money creation - any asset can be pumped and dumped by somebody with enough money. And especially the pump simply cannot have originated from some big coin holders - it needed big USD holders. Those were pretty much also the ones selling on the way down, but that's the free market at work - nothing Bitcoin could/should do anything about.

You are probably the most level-headed bitcoin proponent I've ever talked with on these boards, so I wasn't expecting you to really respond to the thing about satoshi anyway. The rhetorical part was more to fend off the masses from attacking with the same old, rehashed fallacies.


I think you're fairly wrong here. Setting up this kind of infrastructure is incredibly difficult. There are only 2 major CC providers. There is only 1 major internet payment service. All these services charge around 3%. What makes you think that competitors to bit-pay will pop up all over the place and bring this fee down? Bit-pay is going to need all kinds of BTC and USD capital on demand.


I was not the one going around claiming that BTC had 200 million in market depth, quite the opposite...


And how are these "speculators" not siphoning wealth off the economy again?


Oh hey look, bitcoin wiki 101 fallacies. Can you show me the product of BTC? Can you show me the corporation that I control a stake in by owning BTC?


Then why are there 7.5 million coins? Why does it cost about $3 to produce 1 coin now if the amount of fiat available to buy those coins can't even handle a 1% increase in the supply?


Yes, for all we know. We know absolutely nothing, and it is a fantastic opportunity to be an early adopter in an anonymous pyramid. In a time (now) where price is relatively stable yet still takes only 1% of the coins in existence to drop the price by half, how many coins do you think it took to actually sell-through to take the price from $30->$15 when there were over a million coins less produced?

good luck with your investockurrencommodity

investockurrencommodity = anonymous pyramid  ;D

Good question - the answer is to do with barriers to entry and the network effect these services currently enjoy. To launch a new CC or Paypal, you're faced with a chicken and egg situation. No-one will use it because no-one accepts it and vice-versa.

Bitcoin adoption faces the same problem, but once it is overcome, no player can erect a barrier to entry in the new marketplace - it will always be easy to enter the market offering the same commodity service because it is based on open money. Setting up a new Bit-pay is trivial compared to setting up a new Visa.

This is not exactly true for paypal. I could send money with an email! :P


This is probably true. But I would imagine the much higher fee involved for USD includes a premium for exposing themselves to BTC price volatility. So while bitpay2.0s may pop up over night with 2% USD fees, they may also crash just as quickly, taking any pending transactions with them. It isn't instant, after all, they pay out USD once a day. Payment processor trust is not an easy thing to gain and it is very easy to lose.

It seems we have a misunderstanding about the concept of siphoning wealth - I was talking about  the inherent process of money generation with fiat currencies which constantly siphons wealth from the bottom to the top. Speculative gains on a volatile asset are not siphoning in my book.

I'm sorry, but gold prices and to a large degree stock prices don't reflect any other "true value" either - they are just a measure of trust and belief that others value them as well - and this measure is their value for all practical purposes. Apple stocks would be pretty much worthless if they couldn't be exchanged for something else. This wouldn't be the case if they had any fundamental value. Yes sure, in theory you own one half of a brick of some Apple store but in practice you don't.

The question boils down to what does ultimately have value? I was not arguing that Bitcoin is a stock, but that the speculative gains from Bitcoin holders are similar to those of stock-holders. Gold didn't gain in value because it was suddenly much more needed in the industry and if it was not valued for anything else it would be pretty much worthless.

Show me what I can do with my Apple shares without exchanging them for something else and I will agree that they are fundamentally more useful than Bitcoin. Just as an additional info: I don't own more than 1% of Apple ;)

So you propose Bitcoin should require its users to list the identity of every coin holder and the purpose for every transaction?

Thank you!

There's a lot of things a processor can do to eliminate their exposure to volatility. Hedging or simply having an equal volume of transactions in both directions. The high charges on CC's are to pay for fraud and cartel profits. Bitcoin eliminates the cartel profits. I'm not sure who pays for the fraud - I'm pretty sure it won't be socialized though.

It is not siphoning in your book because that doesn't fit your view of bitcoin. But the fact remains that bitcoin is designed to make later adopters pay more value to acquire coins. I'm pretty sure I said, in this thread, that a (relatively) fixed supply of money was a big part of causing the great depression because of a deflationary spiral. Bitcoin can do absolutely nothing to fix a deflationary spiral except have early adopters release the hoards. So you can trust the wiki that's written as if an 18-year-old fresh out of econ 101 wrote it, or you can at least wonder why all modern economists (even those who are not, believe it or not, connected to the federal reserve) believe that deflation is bad for growth. And that deflation immensely benefits the holders of a currency over the spenders of a currency. Which, by and large, means those who already have a lot of the currency. If the threat of supply inflation exists this would reduce the value of their holdings, so they are encouraged to spend and invest.


Stocks get dividends for one. They gain value independently of the demand for those stocks. And each share is still a share of the company whether or not you want to believe it.
And gold failed as a currency. If bitcoin is a stock and not a currency, what exactly are we investing in? That's what I want to know. And why is bitcoin touted as a replacement currency when it obviously is not? It can't be both a stock and a currency. If it acts similarly to both, don't you think that's a little fishy? Like, greater fool-like fishy?


If people stopped calling bitcoin a store of value and instead said "it's a stock-like thing that gains or lowers in value purely based on supply or demand but has no backing of any kind," what do you think people would think of it? Do you think they'd be clamoring to buy in? Sure gold is *somewhat* similar, but there is no yet known finite supply of gold, and if the price of gold increases excessively, more people will effort mining gold. And nobody was handed 10% of all the gold in existence for a few pennies.  :-\


No, I propose telling everybody who thinks of putting a penny into bitcoin that they are competing for a market of 10% of the total digital trash tokens in existence while a few people (who are anonymous and untraceable) control the rest and could sell at any time. So bear that in mind when you think the price has nowhere to go but up.

A wise man once said . . .

The problems mentioned stem from a confusion about what Bitcoin is. There is a naive idea that world governments might adopt Bitcoin, and it might become the worldwide currency and so it might impact the economy because of problems associated with inflation and deflation of the money supply and such. Don't worry, that's not going to happen. USGov will stick with the USD whatever happens - and so it is only inflation/deflation in the USD that you need to worry about if you're a USian.

You should either refute that or stop repeating yourself.



Hmm. Maybe the conquistadors.

Anyway, Bitcoin holds the promise of removing the 5% transaction tax levied by the CC companies on all of us, making us all wealthier. You shouldn't let your begrudgery towards the prescient early adopters sour your attitude to the greater good of the whole system.

Not at all - there are many who bought coins at higher prices than somebody who gets in on Bitcoin today. The price of Bitcoin depends much more on the rate of adoption, the degree of speculation, the amount of media attention, the state of the global financial system, the growth of the underlying BTC-economy and the expectations about the future development of all these factors. The rate of money generation or the fixed supply has so very little to do with that. Nothing within Bitcoin says the USD price of BTC will continue to rise, so why do you keep worrying about that?

You do realize that Bitcoin is not legal tender and almost certainly never will be. It is just a digital commodity which happen to work well as money in some applications/markets. Not even I who is pretty enthusiastic about the Bitcoin technology do dream of it replacing some fiat currency. I don't see how Bitcoin could cause a great depression or a deflationary spiral of a whole economy - such speculations are IMHO about as realistic as expecting Bitcoin to one day be worth a million dollars.

Bitcoin is certainly sui generis - not everything that doesn't fit into established classification systems has to be fishy but I can understand that this is why there's so much people calling it a scam. The big difference to a greater-fool scheme is, that Bitcoin does not need an ever increasing user base or an ever increasing (fiat) money supply to work as currency within a certain group of people.

I don't think it is a good idea for anybody to buy something they don't understand themselves or at least have somebody they trust who understands it. In the end, Bitcoin doesn't need marketing and it doesn't matter what you call it - the technology speaks for itself.

Good plan, nobody should buy Bitcoins because they think the price has nowhere to go but up! Bitcoin prices could crash for any number of reasons - Satoshi selling his 500k is probably the one I worry least about. A major flaw in the protocol, people losing interest, exchanges getting closed down, a better alternative catching on, Bitcoin becoming illegal, AML regulations for merchants make accepting Bitcoin too big of a hassle, etc... All these are much more imminent dangers for Bitcoin, but if you think Satoshi is the greatest threat for people buying Bitcoins then you are of course free to continue warning the whole wide world about him and his devilish conception ;)

VISA/MC are a monopoly with massive barriers to entry thus price is high and will remain high. BitPay is a first mover and exploiting that to retain high margins but the barriers to entry are negligble.  I mean it is:
* server
* some modified shopping cart software
* exhcange accounts w/ API linkups
* small amount of capital
* some advertising.

This isn't a slam against Bitpay but any company w/ $100K could build an equivelent or better service.  

No barriers to entry = lower prices.  

Lastly as an ex online merchant if you think CC "costs" 3% you are naive (or already know that isn't true).  I sold phone cards online in late 90s.  Pretty much in the dark ages of the commercial internet when most websites were manual and clunky.  Designed an interface to automate phone card and sold "virtual phone cards".  Obviously a business with instant delivery of cash-like product would love Bitcoin.  I used sophisticated fraud detection/scoring/tracking and still had 5% to 7% charge back rate.   Eventually I sold all my software, and domain names not because of fraud (which although high and costly was still manageable on a product w/ 30%+ markup) but because I saw the writing on wall in the rise of "cheap" cellphone plans w/ long distance included.  My cost between fraud, chargeback fees, (oh the fun of getting an EXTRA $30 loss on top of the fraud), merchant account costs, authorize.net fees, fraud tracking fees, swipe fees, and discount rate was like 7% to 10% of gross revenue.

So even Bitpay would have been an up to 7% savings.  In reality I would expect long term a Bitpay like service to be closer to 1%.

It doesn't matter if the world or the US adopts bitcoin or not. I don't expect it to replace fiat currency. However, that doesn't mean that there will be no bitcoin economy. It doesn't mean that no one will be hurt. And it certainly doesn't stop people from buying in with their real wealth under the mistaken idea that this is in any way a fair(er) system. The group think around here has something to gain by always saying rally when the price moves up, opportunity when the price moves down. There need to be people saying different.


There was no prescience involved, only pyramid. *Maybe* it would have taken a lot longer to reach a critical mass if the coin distribution was fairer, or maybe it would have just attracted a crowd that really believes in improving our monetary system, rather than how to make a buck for nothing. But now you have probably two or three dozen people that could strike fear into the heart of anyone saving bitcoins and might just eventually cause its downfall. That remains to be seen.


"When will you expand to other countries?
 To operate within the law, we need a legal company established, an office location, and a bank account in every country that we operate. This will take time and money to expand around the globe and comply with all laws and regulations."

I'd say that's a pretty big barrier to entry.


:shrug: Well established, high volume merchants pay less than 3%, so it probably evens out in the actual cost to the economy. Just because you ran a small-time business selling a high-risk fraud item online does not mean that is the case for everyone. It is certainly a big boon for small businesses if bit-pay can deliver. But, as laws are starting to regulate a lot of these fees, banks are starting to instead pass the "costs" of scamming the entire economy onto the consumer in the form of monthly charges and so on. So it is likely that the price of using credit cards will go down for businesses, but consumers are still footing the bill in the end. So it would be nice if bitcoin could live up to its promise of being an alternative way to store your wealth.

The underlined portion is 100% false.   "cost" =/= fees.  My discount rate was 2.59% (granted today it is unlikely a high risk merchant like I was would have a discount rate that low but banks were equally clueless on how to price risk in the early years of the commercial internet).

True cost of credit cards is
1) CC fraud - merchant loses 100% of sale.  If 2% of sales are fraudulent then the cost is 2% of gross
2) chargeback fees - $30 per chargeback is an average.  This quickly can add up.  10,000 sales per month and 2% are fradulent you are looking at $72,000 a year in chargeback fees.
3) so called "friendly fraud".  consumer gets the item and doesn't like it or decides they don't want it.  If you refuse because say it is >30 days the report it was fraud (although it isn't).  Either you eat the cost or CC does a chargeback and you eat the cost + chargeback fee.
4) merchant account fees.  $30 to $50 per month
5) swipe fee.  Usually $0.30 which doesn't matter on high ticket items but on small ticket items it adds up.  If your average ticket is $30.00 than that is another 1% there.
6) anti-fraud fees.  There are databases and heuristic programs to flag potential fraud.  They are essential and tend to run $100+ a month in gateway fees plus another $0.30 to $0.50 per swipe.  They don't catch all fraud.

CC are great for VISA/MC.  They don't take any risk. If there is fraud the merchant eats it.  Banks raising rates has nothing to do with fees or fraud it is just greed.  The merchants pay for all the fees AND then they also pay for all the fraud.  However it has become a requirement to do business.

I don't know if Bitcoin will succeed BUT please don't think CC cost 3%.  That is a myth.  

TL:DR

Sounds like OP wants to do something fishy but I'm not accusing him of anything.. Keyword "sounds like"

Either way hoarding will provide more value to bitcoin however... the problem is there is nothing to spend that value until you convert to fiat.



So I will say this

LESS SPECULATION MORE PRODUCTS AND SERVICES!!!!

Drama queen. 2% of sales are not fraudulent (wikipedia says 0.07%). Again, just because 2% of YOUR sales in a high-risk, fraud prone market were fraudulent does not mean that this is the average. POS transactions carry nowhere near the risk, and since the 90s almost all merchants require zip codes and CCV codes which undoubtedly has lowered the risk since.

Most data I can find shows 1.5-1.8% is the typical percentage fee, and 0.15-0.21 (new maximum as of october) is the swipe fee. Yes there are other fees and time and paperwork, but the more business you do with CCs, the less of an impact this has.

Every news article I have found shows that about $2 of every $100 goes to credit card fees (this would include chargebacks and other risks as these costs must be passed on to the consumer), and this obviously includes cash transactions too since products are priced with the costs of accepting CCs in place.

And again, regulation can try to take away banking profits that they feel they deserve, but banks will find another way to stick it to the consumer.

There is a problem with hoarding bitcoins too much but I don't think limited supply is the main reason it is done so much.

In comparison to gold it is also very much hoarded but also used for circulation. The difference with gold is however there are no penalties for hoarding too much.

With gold after a certain amount it becomes too cumbersome to move it around and this also somewhat sets it's value. With gold you can still do any reasonable sized transfer of wealth for almost all purposes.
And while buying something like a larger house or spot of land is and was always possible to transport comfortably with bitcoin there are no limits.

Once bitcoin would become a major currency it would be possible to comfortably buy up whole industries with it, that is something that was never before possible. I impute that the large hoarders are planning exactly for such a coup, which is why I am against a wide spread adaption till these problems are solved.

Nobody is hoarding bitcoins. They are cheaper than dirt and there's a huge surplus for sale.

Huh? That's practically the bare minimum any business would need, regardless of the industry. Sure, it's not something that your average middle-class person could do on their own, but in the business world, that's cheap - almost pocket change.

If you're inferring that a competitor needs to operate in several countries in order to compete with Bit-Pay once they do, that's wrong. That business is one such that each local subsidiary would be pretty much independent. The only things gained in the industry that Bit-Pay is in by serving additional countries is that you don't need to re-write your site's code, and the marketing efforts aren't wasted toward people who live in countries that you don't serve. A good part of the code problem would go away if someone released open-source code that does what they do, and the marketing problem doesn't matter all that much if you're targeting your ads properly.

How many times do you think these guys can cash out? It's part of the volatility of the new market. You don't seem to understand that a one-time event has no real bearing upon bitcoin unless that one event is the cracking of SHA-256.

Stock gains value independently of the demand for those stocks? Really? Do you understand how a stock market works? And basic supply and demand economics? Good, now put the two together.

Gold is most definitely finite. Do you understand how quantification works? Do you agree that the earth is not infinitely large? Good, now put the two together.


Refer to the above.








Side Note:
MoonShadow, I dug the history lessons.

Do you understand that: 1) if early adopters release cash, it is inflating the money supply, thus "fixing" a deflationary spiral 2) this can only be done so many times and each time generally to a lesser degree 3) ergo I understand what I said and I said what I meant rather clearly. There is no permanent fix for a deflationary spiral in the bitcoin economy. Other than "people don't believe in a value of what they need to pay for things" from the esteemed wiki.


Apparently you haven't a clue. What a surprise coming from a mouthbreathing bitcoin proponent. http://en.wikipedia.org/wiki/Dividend


Where did I say gold was infinte? Do you think that by putting words in my mouth you somehow invalidate what I actually said? I said there is "NO YET KNOWN FINITE SUPPLY". As in, we don't yet know how much there is. Perhaps my wording wasn't as clear as it could be (finite was a bit ambiguous), but you'd have to be among the dumbest on the planet to infer that I meant the supply was infinite. Or you think I'm among the dumbest on the planet, but you don't even know what a dividend is so I'll leave it at that.

It sure does seem like you are pretty dumb. What does linking dividends have to do with your claim that supply and demand do not affect the prices of stock? Why is insolvent Groupon still worth money?

How do you think the problem of somebody owning a large amount of Bitcoins could be solved?

It can be argued, that the 2009 miners acquired their coins at negligible cost and this is an inherent disadvantage for everybody wanting to acquire coins now. The sad fact however is, that there are many many people on this world, who could just buy, say 100k BTC, at (for them) negligible cost even today. Once any potential new currency started to take off, expect the big players to jump on and buy huge chunks of the pie.
It is completely irrelevant how such a currency would be designed - even if you somehow made sure that every person on this planet gets a fair share initially - once they gain in value, the wealthy would just exchange some of their assets (fiat, gold, real estate, food,...) to acquire large chunks of the new currency.

I think the basic problem you would have to solve is that of the highly unequal wealth distribution on this world and while I wished nothing more than for this problem to go away, I fear you won't succeed.

This problem is however nothing Bitcoin or any other new currency could do anything about. I would be happy to hear your ideas however!

I think you've hit the nail on the head.  Rich people will buy most of just about anything which pops up.  A fascinating aspect of  Bitcoin, for me, is that it is ultimately supported by users and they can withdraw that support much more practically than they could under a gold-backed system or one enforced by entrenched political apparatus.

My idea for a solution:

1) consider and treat BTC (and other currencies) as a solution for transferring value rather than holding it.

2) use BTC as a 'backing store' for an almost endless variety of cryptocurrencies which evolve and are adopted based on their usefulness to the end user.

Being the grand-daddy of cryptocurrencies with a strong existing block chain, a good history of security, and being 1/3 through it's development into maturity (once the time domain is switched to inflation), it is a natural choice as a backing store.

The value that BTC would have would be in lending support to alternate crytocurrencies, and the successful cryptocurrencies will be the ones which strike a good balance of reward to all of the users of the system as a whole...particularly the end-users.  The holders of BTC will be forced into competition with one another and the more 'altruistic' they are, the stronger their competitive edge will be.

Well, at first the geometric series could have been chosen differently, awarding early adoption on one thing, making them a new elite is another. The block reward could start low, increase steadily and then decrease again at the end of the distribution cycle.
If I would ever advocate an alternate cryptocurrency as a replacement this is what I would vouch for. But I am still not convinced the problem can't be solved in the current blockchain. The falling prices might do something about that, or not or possibly another incentive which brings me to my second point:

As for the inherently presence of a wealth differential in society we would need a system triggering rapid economic growth by enabling ever person to participate on equal terms, this has to be done from day 0 and the development would have to be either so fast that a substantial part of the world economy joins the new system within a single day (the media would bring critical mass within 3 days) or it would have to be so subversive that the hierarchical paradigm suspects nothing until it is too late.
The first is pretty much out of reach for bitcoin but the latter might still be a possibility once we return to a smaller, more involved community.

I never understood why deflation is supposed to be so horrible. We have massive other problems with money, what's the big deal in some initial liquidity troubles?

Initial distribution is largely irrelevant; someone hoarding from the start can sell his coins only once. So it will happen a few times, lol volatility. Life goes on. Speculators will have to take this into account and do some calculating, then the problem will fade as someone figures it out. A bit of the money will go to these speculators. Oh well.

What's the big mythical problem here? The problems with international payment are huge, it's nowhere near the scale of some money supply trouble.

What is more, it's all out in the open. Once people know how the market behaves, rules won't suddenly change as they did in the Euro in the last years. This is very, very, extremely important! I can live with quite a few issues if I get clear and stable rules in return. The deflation issue just isn't that important.

The problem of unequal wealth distribution can't be solved by a currency. The problem of the currency facilitating this distribution can, or at least it can be mitigated, if you agree with the Austrian school of thought that a government/bank controlled money supply really only benefits those with existing wealth. However...


"Initial distribution is largely irrelevant" is a fun factoid that everybody loves saying around here. Someone hoarding from the start does not need to sell his coins only once if he holds a huge portion of the total supply to ever be produced, that in fact would be silly in a totally fixed supply of money. As I pointed out earlier in the thread, it would currently take about 1% of the total supply in existence to drop the market value of BTC in half.

Now, the bigger the market depth, the less BTC it takes to pull a fortune of wealth out of the economy (assuming hoarders continue to hoard anyway). If BTC were worth $1000 each, it would take 1,000 coins to be a millionaire. Assuming the economy continues to slowly adopt BTC as its currency of choice, the 1.6 million bitcoins mined at a difficulty of 1 could be spread over generations and generations of descendants who would never have to lift a finger to become incredibly wealthy. This is the solution to fixing the wealthy who stay wealthy in fiat currency?

All it does is change one Man for another, it doesn't solve anything (lol except payment processing). And it encourages misguided individuals to believe they might be part of a new wealthy elite for doing nothing but "smart, early investing" with a few dollars of electricity and so they do the advertising work for the even earlier adopters. "The Bitcoin Dream" lol. Congratulations on continuing to be pawns for somebody else.

I don't think that a limited supply necessarily leads to this scenario. It enables it yes but until now, in any limited commodity this was prevented by the impossibility to move, store and protect the asset for a single individual. If you take gold as an example, one could store a large amount of wealth in one place but it would be impossible to move it out of the way if an attacker approaches, could not use a significant fraction of it to pay for a very large transaction and since it is a physical object it cannot be stored away for eternity.

I think if bitcoin would mimic some of those limitations we wouldn't see people with 5-6 figure wallets.


I agree that if nothing changes with the bitcoin wealth pyramid it would be a less preferable system than even the current system, this however might change. What would be needed is an incentive to use these large holdings not for hoarding but for spending, way before the price reaches anywhere near that numbers. If this never happens then we would either face a dire future were the imminent threat of economic cornering would lead to violence or the failure of bitcoin be used as originally intended.

I was under the impression that you agreed that a currency cannot solve this problem?

You don't know what those with a large Bitcoin position do or do not contribute to Bitcoin. They sure have the highest incentive to see Bitcoin succeed. Yes there may be some that expect to get something for nothing, but unfortunately that's life. On the other hand many of the early adopters are developers for example.

I agree, but mainly because it would be much less useful.

I don't think that it is fair to call Bitcoin a less preferable system due to its wealth pyramid. Even the largest Bitcoin holder owns currently less than 1 million USD worth of Bitcoin. That's less than 0.001% of the currently largest USD holder and "only" about 10,000 times the yearly income of the poorest people on this planet. In fiat currency the disparity between richest and poorest is more like 100,000,000:1

One single Bitcoin would have to reach a value equal to about 150,000 USD in order to make the person with the most Bitcoins equally rich as Carlos Slim. Apart from the fact that this will simply never happen, the Bitcoin distribution would almost certainly become less skewed on the way to such price levels. I am dead certain that most of the non-lost coins mined in 2009 would be sold well before 1 BTC reaches 10,000 USD. Please don't forget that even IF Bitcoin would one day become extremely valuable, it would still be a very bumpy ride (certainly not a straight way up) - this makes it even more unlikely that somebody clings to his coins till the very last.

Bitcoin is not as fair as it should be, but its wealth distribution will certainly always be fairer than that of the dollar.

You'd have to extrapolate such a situation, what people adopting bitcoin at this point would be able to obtain. Then the differential looks way more steep. Also the problem is not that under a scenario where bitcoin value would rise dramatically large holders could exchange it for a large sum of fiat money, but rather the effect on bitcoin itself.
There is now way around it, someone owning a significant portion of the total supply is not desirable, at any point. Now it is less drastic but it has to change in order (and what I see from your theory it might) to enable the development of a healthy economy.

I see it from that perspective:  Carlos Slim doesn't own a significant portion of the worlds wealth.

Bitcoin for me is a closed system.

A currency can't solve the fact that there are a limited amount of resources to go around. The problem that the Austrian school has with fiat currency is that central banks inflate the supply by giving those who already have wealth cheap access to new currency first. Everybody else down the line has to pay more value in to take on debt. This benefits them doubly.

For example: Bank of America gets a 0.25% interest loan from the central bank for 1 million dollars. Bank of American turns around and loans 95% this money directly to consumers at a 4% interest rate.
Not only does Bank of America profit by the interest made on the loan, they also profit on the 5% they didn't loan that can buy products and services right now before the value of the dollar reflects the fact that 1 million dollars has been created. A big part of the 5% example would be paying CEOs.

Pretending that just giving away 10-20% of all the money to ever exist to a few dozen people is a better system is downright ridiculous. You don't like banks making all the profit off of inflation, but you're totally cool with some anonymous fart knockers doing it? The bitcoin elite are akin to bank CEOs with their ridiculous paychecks that are earned by essentially taking value away from everyone else. All in all, it is the exact same scenario except that hopes and wishes say that the bitcoin CEOs will cash out all their chips at once and let the economy work itself out. Except they already proved that that's not what they intend to do by the $30 run-up. They PROVED it. Yet many of you are still unwilling to believe that the bitcoin CEOs are just looking for that gigantic paycheck just like the bank CEOs, and the only way they can do that is by taking value away from others. Except now instead of a system that is at least somewhat accountable to the people, they are anonymous overlords that can do whatever they want, whenever they please. Perhaps they will only trickle in and let their descendants profit for ages to come; perhaps they will decide that they really want that island, and they don't particularly care if they crash the economy.

Since they waited so long, and since the distribution is so ridiculously flawed, there is really no way they can do anything to fix it. They are guaranteed to, at some point, steal a metric fuckton of wealth from everyone who invests into bitcoin. If they sell a huge chunk now, the economy is likely to collapse and never recover as all faith is lost. If they trickle in, they are the same as bank CEOs vulturing from the economy at will. The only way they can really solve it is by destroying coins. Let me know in what parallel universe that happens.

A) Destroy the economy in one shot (for each person that has a big chunk of coins)
B) Be a bank CEO
C) Destroy coins

A means it's a pyramid/pump n dump. B means it's effectively no different from fiat currency (the pyramid just has different overlords). C is not something that is likely to ever happen.


Isn't it so great how you can use the appeal to ignorance for basically every argument for bitcoin? Why is it that I don't know what those with a large bitcoin position do or do not contribute to bitcoin? Oh yeah, because the creator(s) made every effort to be COMPLETELY FUCKING ANONYMOUS. And the design of the protocol itself and the fact that the exchanges are anonymous in the protocol certainly doesn't help.


there are so many new types of fallacious arguments that need to be described just for bitcoin. It is like a petri dish for logicians.

Do you have any proof wealth is that concentrated.

That none of the early adopters simply turned off their computers and deleted their wallet.dat assumming that the coins were an interesting but worthless experiment?

That none of them cashed out rapidly as the price rose because they never had the longterm vision?

That none of them lost any of the coins over the years through system issues, corrupt wallets, wallet stealing trojans, failed hard drives, etc?

That none of them were defrauded aka MyBitCoin.Com?

I believe the wealth is far less concentrated that you believe.  Even if 1 or 2 millions coins were held by early adopters and never sold, lost, or defrauded that is 5% to 10% of the economy.  If some people are richer than me ... I don't really care.  Unlike some I don't have wealth envy.

You can believe that all you want, but your beliefs are based on ignorance. It is fallacious logic.

I argue that we cannot know, therefore we must assume that these situations are possible based on the information we have.
You argue that we cannot know, therefore we must (or should) assume that these situations aren't possible in spite of the information we have.

Do you see the difference? I say "this is what CAN happen" based on what we know, you say "this is what MIGHT HAVE happened" based on what we have no way of knowing.

Which form of logic passes the test?

No you said this is what happened not what could have happened.

Then again I don't have wealth envy.  No economic system will be perfect.  The "early rich" will either cashout and eventually no be rich or they will never receive the benefits of that wealth.  You are just the type of person who is upset someone has more than them.  The same time of person who believe in redistribution of wealth (as long as it is from someone else not you).  Meh.  It is sad.

Thanks for proving the point.  You have absolutely no idea how concentrated the wealth is.  None what so ever.

When at first you don't succeed

http://www.desmogblog.com/sites/beta.desmogblog.com/files/blogimages/strawman2.jpg

These topics remind me about conspiracy theory discussions. They always end up with people discerning proof and neither party being able to provide one.
Amazing isn't it?  :o

You still haven't addressed how one-time events can continue to affect prices after the sell off. When someone cashes out, they can never cash out again. Distribution of wealth solved.

Deflationary spiral not  :-\

Alright. So stop talking about early adopter/large holders like they can actually affect things long term.

Wait, so this can only possibly go one way but not the other? There are many possible scenarios for the future of bitcoin, I wouldn't limit myself to discussing only one. If the currency were reasonably distributed, it is very well possible that the deflationary spiral would never happen as there will (likely) always be alternative currencies. But that would concede that bitcoin has failed at being a better currency if people need to switch to another to properly exchange money. This effect is already obvious in so many services popping up to resolve the BTC->USD issue more quickly for merchants.

pay it back with a snickers bar.

There have to be mechanisms to absolve debt in any system, the ones in a deflationary system are just different than those in an inflationary one.

I don't think a bank is going to take payment in snickers bars in lieu of the BTC you signed a contract to pay back.

I fully agree but I am personally also convinced that this will change (see above). As for the effect on Bitcoin itself: the price would surely plummet if somebody quickly sold 500k BTC, up to the point where many people might start questioning the future viability of Bitcoin. But for one thing, this is a one-time problem, it simply cannot be repeated again with Bitcoin's limited total quantity and for another, Bitcoin's price might crash for so many other reasons as well - I really feel Satoshi selling off is not the greatest danger for Bitcoin. Besides, once it was done, people might actually gain more confidence, immediately starting the next bubble ;)

No he doesn't, but neither does one with a few 100k BTC unless 1 BTC equals more than 1 million USD and by that time I honestly believe that there won't be any one left with a few 100k BTC anymore.

But I fully agree that somebody owning a significant portion of the total supply is not desirable!

Etlase2, I wonder if you'd be better off spending your time explaining why your new coin is superior rather than arguing with the choir about the inequity of BTC distribution.

I, for one, am interested in your idea but based on the skimming I've done it looks like it is too complicated for me to understand without investing significant time in it right now. I'm not prepared to put that time in because you're making some pretty bold claims (being able to stabalize its value and that this coin will retain value without scarcity). If there were an authority backing up that claim, or a lot of people behind it, I might risk my time on it and maybe become a believer. I'd suggest you create an 'Idiot's Guide' for your new coin to help spread your idea.

As far as BTC inequality goes - I think it has helped the spread of BTC more than it has hindered it so I think of it as a necessary aspect of a successful crytocurrency.

By arguing with the choir, those in the chapel can hear it and make their own decisions, rather than only seeing one-sided group-think.


Herein lies the problem--I'm not claiming to be infallible. I need people to come in and give opinions and ideas. As of yet, Red is the only one who has provided any kind of counterpoint. By dumbing it down further, the only responses I am likely to get are "this is cool when's 1.0?" or "this is lame, bitcoin is better." Neither is helpful in the least. If you are worried about how it tries to achieve stable value, the only two sections you have to read are those on moore's and koomey's laws. They do need to be discussed with a fine-toothed comb, but I can only do so much discussing with myself. I'm not sure what "authority" you expect to back up this claim, but you have a serious chicken-and-egg problem if you wont risk your time unless there are a lot of people behind it.

I am working on making it easier to digest, that's why I have switched to a wiki rather than a proposal. I'll probably be doing a few youtube videos or powerpoint slides soon to help aid the digestion further. But it all takes time. And until this latest proposal, I was very unsure about a lot of the properties of the system. Now I know at least that everything I write about is possible (from a technical standpoint), and I believe the system behind it is sound. But it still needs tweaking and discussion, and other viewpoints can and have already enlightened my understanding of ways to do it better.


Yes, but this thinking comes from the fact that there has been only one successful cryptocurrency. The status quo is never the only way to achieve something; thinking that way is a great barrier to progress.

The only reason people would hoard money is if the market is in chock. Something has happened like a natural disaster or more commonly some form of government intervention like creating inflation.

In such a scenario the best thing to do is to hoard money until trade slowly picks up again and entrepreneurs can see what the demand actually is. So this is not a problem.

In a stable market you will be getting a higher risk weighted return from your money if you save them then if you hoard them and saving money just means they will end up in capital goods and technologies instead of in consumer goods. Hoarding money for most people that (have filled there desire for emergency cash and aren't Scrooge McDuck) is a terrible value payoff. It is the very last option only resorted to if all savings are very risky and you don't know what you will need in the immediate future...

I don't envy you that problem. I'm probably not the right person to help you with it. I have the humility to understand that had someone handed me Satoshi's paper 2 years ago, I would have dismissed it without reading it, snorting coffee through my nose, 'Who is this fool who thinks he can create p2p money! I shan't waste my time looking into that!'
I'm an early adopter, but not that early!

If someone tells me they have a perpetual motion machine, I ask 'How do you overcome the laws of thermodynamics?'. If I can't understand the answer, I assume the answer doesn't make sense.

So I ask you 'How do you stablize the value of something without scarcity?' and 'How to you stabilize the value of a currency without billions of dollars?'. You should have some snappy answers to those questions at the very least. Assume fixed energy prices, and zero inflation - those only complicate the matter without addressing the fundamental concerns.

I was always first concerned with whether or not I could get away from the block chain because that was necessary to separate the security of the network from the creation of currency. If I couldn't achieve one, there was no way I could achieve the other. That is why the majority of the proposal is based around explaining it while the scarcity aspect is only a small portion.


The simple correlation is to gold. It still isn't the same, but it is closer than bitcoin's correlation. Gold costs about $320/oz to mine, this price does not change easily. Imagine now where gold is like $1500/oz because of high demand due to currency volatility that you could turn on your computer to mine gold. It still costs you $320/oz to mine, but it is accessible to everyone. Eventually the price for gold will come down to $320/oz. If gold is selling for less than $320/oz, anyone who tries to mine will do so at a loss. In bitcoin, people do not have the power to bring the price down because the supply is fixed and measured. So even if bitcoins were reasonably distributed, eventually an 80/20 type scenario will emerge where the wealth is concentrated in the hands of a small number of people. I'm not saying this is bad, it is just reality. Now that small percentage that controls 80% of the supply controls the price of the currency. This is bad. You need an unfixed supply to counter this. Unfixed does not mean unscarce.

Okay, I can understand the analogy. Let's say any computer can make an ounce of gold for $320. Many people will make gold and sell it into the market until the price is $320.

Now I wouldn't want to own gold in this world. I have downside (everyone might lose faith in Gold, so it might fall in value), but no upside (its price won't go above $320). I would sell immediately upon realizing this, and so would others. The price might go to 0 or it might hover somewhere between 0 and 320 and fluctuate as confidence in gold waxed and waned. Either way, no stability.

Why don't the same arguments apply to gold as it stands? The main reason is that the price of gold deposits under the ground varies with the price of gold, and they're scarce. Also, as you mine the easier $320 gold, you only have the $330 gold left to mine.

Uhh I hate to break it to you, but every currency is based on faith that someone else wants it in lieu of a real good. Fiat, gold, bitcoin. This is not an argument against making a currency that works similarly to gold, it is an argument against currency period. If the price fluctuates between $300 and $340, it is still within a reasonable range that merchants do not have to worry about daily swings or what have you, and thus can always charge a consistent price, just like they do with fiat (though obviously it eventually increases as the supply is almost always outgrowing economic activity). If the price is on the low end, people are encouraged not to sell unless they've lost faith in the currency. Low price does not equal low faith, just high supply.


Actually, the main reason is time. The supply of gold can only increase by about 2% per year unless many more people devote time and effort into mining gold. Bringing up new mining operations costs a lot of money, takes a lot of time, and will have to wait many years before seeing a ROI. Allowing easily accessible ways to mine ENC means that the demand will never (maybe) get too far ahead of supply. And if it does, holders are encouraged to sell because the price will get back to parity (cost to produce + return on investment) much quicker than with gold.

There's no need to get catty. I'm just trying to understand your idea.


Now, why would you assume it would bottom out at $300? Gold prices lost 60% from top to bottom in the eighties. Why would I hold something at $300 that might drop to $150 but only increase to $340? Even if the market didn't lose all faith and it went to zero, you'd still have huge swings based on confidence. Am I missing anything?

Reversibility comes at a cost. A reversible transaction is essentially an insured irreversible transaction.

Insurance isn't free, you know?  Some people would rather not pay insurance because they trust the merchant.  With your Visa card, you are forced to purchase this insurance and you are forced to bail out people who use their visa card irresponsibly.

Real life example: The shop where I buy electronics is a "bare-bones" merchant. Very limited customer service, very low margins, and so on. That's why they can afford to charge 10-20% less than the high street merchants.  The also charge 3% extra for credit card transactions as compared to cash-in-hand because that is how much it costs them, and it's the type of shop that likes to pass the savings to the customer. 

Some low-cost airlines do the same thing.

Just because most merchants effectively subsidize credit card customers, don't assume that all of them do and don't assume that some customers don't want that choice.

Lol I'm not being catty, I'm just pointing out that you are not making an argument against my idea, but against all currency. I can't solve everything, ya know. ;)


Gold lost 60% of its value because most of its value was, surprise surprise, based on demand. Just like bitcoin. Just like gold's value is now. Now is a fairly terrible time to buy gold unless you think that faith in fiat currency will continue to drop and continue to drive demand to gold. Speculation. Gold didn't drop below its cost to produce. Its cost to produce is a huge portion of the value of gold when it isn't inflated by speculation.

Now imagine a commodity that is relatively unlimited (electricity) but is extremely difficult to pack into a currency (processing cycles + time), but anyone can do it. The people control the direction of the currency.

No, you've lost me now. Explain to me again, why is it something like gold (I was just following your analogy) could drop by 60%, but Encoin could not?

I just want to be able to pump and dump EnCoin. Is that too much to ask for ? And a viable ETA because ATM it is all just talk no walk.

Because demand could never get too far out of line with supply. The main issue you have with my idea--that it isn't scarce. Which isn't true, it's just that gold and bitcoins will be more scarce.

I gave you the example of "what if everybody could mine gold at $320/oz?" You countered with "what if people lose faith?" If gold is $600 an ounce and I can produce it slowly at $320/oz, you can bet your bottom dollar I'm going to be spending a lot of time mining gold and so will a lot of other people. So if gold gets to $600, it won't stay there long, and everybody knows it won't stay there long because they can make more themselves. If gold is $300 an ounce, no one in their right mind would bother mining it. Gold lost 60% of its value because the speculative bubble burst. If gold never got so far above its cost to produce, it would not have happened.

ENC will not ever get so far above its cost to produce because everyone can produce it.

http://en.wikipedia.org/wiki/File:Gold_price_in_USD.png

If you look at this chart, since around 1973 gold's price has never dipped below $380ish (inflation adjusted). I don't know what the cost to produce gold has been throughout that time, but you can probably infer that it has been level at around $320/oz (inflation adjusted) since then. (Yes it was cheaper before 1973 as most of the "easy gold" was now probably mined.)

So look at that crazy graph and tell me there is no parallel to bitcoin. Now do you think the graph would look so crazy if everyone could make gold, but it still always cost $320/oz to do so?

No, I've moved on from that. You've explained to me that it will only be created if it's price goes above a certain value, and so its supply is limited. Only the irrational would produce it at a higher cost than to buy it. That prevents bubbles, and sets a maximum price. Understood. Nice feature (if you like that sort of thing!).

What I don't understand is how you can hope to maintain a minimum price.


I don't find that convincing. Things don't necessarily maintain their value because they were expensive to produce. Why would I hold something at $300 when it might drop to $0, but can't be worth more than $340? That seems like a bad bet to me.

This is part of what I like about Bitcoin. With the CC system, the cost of fraud is borne by the retailer (and then socialized amongst the customers) who can do nothing to fix the situation. Bitcoin, a customer can have his Bitcoin stolen, but the customer is the one who can put measures in place to prevent this.   

Gold has done it throughout history, for example. This is why it has been a good starting point for currency. There is nothing particularly special about gold except that it is a small portion of the material on Earth and it is pretty. Pretty doesn't put food in my mouth or a roof over my head.


This is starting to get frustrating. I explain to you that gold has never gone below its cost to produce, yet you worry that something similar will drop to 0. And this worry is based on faith, apparently, which is the basis for all currency (almost all of which, nowadays, has a near zero cost to produce). So there is apparently something inherently unfaithful about ENC, but not about everything else used as currency.

Then you find it unconvincing that gold has, in recent history, cost around $320/oz to produce, that it has never fallen anywhere close to that price, and that when gold was selling for $2900/oz that this wasn't a speculative bubble? I'm not making up the $320/oz number. That is what it costs to produce gold. The reason why gold doesn't back currencies anymore is because it caused a deflationary spiral when economies started growing faster than the gold supply. Now money is backed by zilch. Bitcoin as a currency works in the same, silly way as gold during deflation and results in speculative bubbles.

I propose a happy medium where the commodity is always very difficult to produce, but as much of it can be produced as necessary. In what way do you think people will lose faith once it is adopted as a currency? People haven't lost faith in a useless element on the periodic table. People have kind of lost faith in currency backed by the will of the government. This currency would be backed by the will of the people. It is only produced if people WANT it, which means there must be some faith. The cost to produce is just a base line, the same as $320/oz for gold. It is proof that EFFORT went in to getting this thing called an encoin (bitcoin has no such proof as early coins were mined for thousandths of a cent). Faith is faith and I can't make any guarantees about that, but I can guarantee that speculative bubbles won't exist because you are guaranteed to lose value. Every time.

Not sure where you get this gold has routinely been sold below cost of production.  Production of gold today varies from as low as $200 per oz to as high as $650 an oz (and that is just among publicly traded companies).  When gold falls below the price of production for an individual mine that mine idles.  Many mines operated through short term negative pricing simply because the cost of idling and restart didn't warrant it in volatile markets.

Not much different than Bitcoin.  Hashing power has gone down with price.  When Bitcoin fell below cost of production miners shut off their rigs.  Now Bitcoin has a lot of non-business people who don't see the folly of mining when they could be buying but that is more a reflection of an imperfect market.  Eventually Bitcoin hashing will become big business and someone with a $50,000 hashing farm isn't going to just keep hashing below the cost of production.

That's great and all, but it is mostly irrelevant to the discussion. I am talking about the average cost to produce and over time. Of course you can nit pick specific instances in time or in place, but all you are doing is nit picking and obfuscating the heart of the argument.


Yeah, and the gold bubbles are not so much different from bitcoin either. And the problem with bitcoin is that it compressed 5,000 years of the history of gold into 3 years. All of the easy to find gold got mined in the first year, then it got exponentially more difficult. It never had a chance to be actually used as a currency before the enormous amount of easy gold was put into the hands of a small number of people. Throw history out the window, fuck it let's do it all over again. Humans are gluttons for punishment, after all. Tell me what to do, wealthy overlord, for I am your slave.

Not at all. Gold might drop to $10 next year (or whatever its value is as an industrial commodity), or Bitcoin might lose 99% of its value - there are many who will tell you it will do just this. Not a problem for Gold or Bitcoin though, there is no maximum price, so the upside balances the downside for holders.

You've explained how you've taken the upside away from Encoin. But I still don't see how you've taken away the downside.

It is not a nitpick.  The ONLY REASON why average cost to produce is lower than average retail price is because higher cost mines are idled which lower the average cost to produce to below average wholesale cost.  There isn't some magic intrinsic value to Gold.  If gold fell to $200 next year then all mines with cost >$200 would idle and yeah the average cost to produce in 2012 would be lower than the average wholesale cost but that would only be because of the idled capacity.

There are spec "mines" running now which siphon gold from waste slurry.  Cost of production is something like $1000 oz+.  They only exist because Gold is trading at 400%+ over average cost of production.  Those mines are just temp operations and will shutdown if the cost falls.

Money should strive to be neutral. The purchasing power of money should stay the same. The net gain on society when the value of gold or bitcoin goes up is zero. As gold rises in value, some people will inevitably sell. It is most likely going to crash again unless world currencies start dropping like flies. When it crashes is not predictable, so that is what fuels the speculation. Money should not be a speculative vehicle. If its value rises, those who have more of it transfer wealth from those who have less. If its value drops from supply inflation as with fiat, the wealthy still transfer wealth because they are the ones at the top of the currency food chain. This is what is causing the class disparity and OWS and all that jazz. Again, even if bitcoin were reasonably distributed, just like what happened with gold-backed currency, the wealthy become wealthier and you enter a recession because the middle and lower class can no longer afford to pay for things the rich provide.

The purchasing power of money should stay the same in a perfect currency. Austrians believe this, Keynesians believe this. Bitcoin doesn't even make an attempt to do this. It attempts to encourage people to gain wealth for nothing productive. This is why we are in a recession, playing with the value of money. Those at the top with the power end up happier, those in the other 80% are oppressed.

You are falling for the same shit that you are stuck in with fiat, except that you think you can become the 20% or the 5% or the 1%. And by you I mean anyone who thinks bitcoin has a solid foundation for monetary policy. Because if you don't accept the fact that to gain value with bitcoin others are losing value then you are deluded. Wealth is not created by a currency or how scarce that currency is. A currency is just a means for moving wealth around. And both bitcoin and fiat have measures to move wealth involuntarily up the chain to those who already have wealth. It takes it away from those with less.

I am not going to link wiki garbage or anything else to prove this point. It should be self-evident.

A currency that the people actually control, not some computer-driven distribution that is arbitrarily limited, will probably engender more faith than any government currency ever could. It cannot be manipulated by those with wealth, it cannot be manipulated by those without. It is driven by the will of the people as a whole. Should this not be what we strive for? Never before in history was something like this possible, and bitcoin absolutely blew it. Maybe it was a lack of vision, maybe it was just plain old greed, the same shit that got us looking to alternatives. An alternative that makes YOU the 1% is no alternative for the other 99%.

Maybe X should be whatever. Not really interested. I'm just trying to understand your idea and if it is viable.

I assume you've given up trying to explain to me why people are going to hold a currency with downside but no upside risk. You're going to need to explain this to people even dumber than me if your currency is going to be adopted. I suggest you think of this as practice!

Oh I couldn't let this go!

Trade creates wealth. Bitcoin lowers the barriers of trade, allowing more trade, creating more wealth.

Bitcoin makes the pie bigger for everyone. It doesn't necessarily distribute it evenly, but don't think it's zero sum, it ain't.

And you don't seem to get that by having no "upside" which you define as gaining wealth for nothing productive, there is no "downside" either. Oh yes, faith could be lost. But faith could be lost in any currency. Faith is being lost in the USD because of currency manipulation. By what manner would faith be lost in a currency that is nearly manipulation-proof? If hoarders hoard, people create more currency. Hoarders know they will do this, so it is in their best interest not to hoard. The currency can't be created except for a lot of electricity, processing power, and time. None of these things are free. A value can be put on them. This value will oscillate over time, but it is highly unlikely to oscillate in such a way that it loses 95% of its value such as the USD over the last hundred years, or gain 1 million % in value such as bitcoins then lose 1000% in value over the period of a couple years.

What is more likely to engender faith? That which oscillates mildly, or that which loses 95% of its value or oscillates between +1 million and -1000 in a matter of a few years. Is it just the fact that there is an actual dollar value on a BTC that makes you have so much faith in it?


Bitcoin may lower the barrier to trade, but it doesn't do anything that an encoin couldn't do. It still transfers wealth whether or not it helps create some in the process.

Well the downside is that I might accept 100 Encoin for 100 barrels of beer today, but only be able to buy 75 barrels of beer tomorrow for 100 Encoin, with no chance that I might be able to buy 125 barrels of beer.

You're relying on people to act in a fundamentally irrational way. That won't happen. I hope I've been of help in pointing out the major flaw, or at least the question that needs to be answered. I've got other things to attend to now.


True. Any viable p2p currency would gain the benefits of increased trade.

Do you understand what oscillate means? Honest question.


LOL @ bold. No, you haven't been helpful in pointing out how you think a currency needs to be manipulated for it to be successful. I disagree. Economists disagree, but they don't really have a better way than the status quo. Or if they do, they believe the current scheme is so entrenched in the government/bank hegemony that there is nothing to be done to wrest it back, so they wistfully talk about it like Mises.

You are apparently only willing to have faith in something that you can currently see a dollar value next to, but nothing else. It's short-sighted. Not exactly a surprise when you have people around here clamoring to give their wealth to satoshi.

So you claim but it is unproven.  Why not make it rather than making grand claims.  I will believe a manipulation proof currency when I see one. 

One that actually exists.  One that is even plausible to exist.  I read you papers.  The amount of complexity is staggering.  How are you going to convince people to have faith in something 99% of planet won't understand.  CryptoCurrency is a leap upward in level of understanding required.  Your scheme is a couple magnitudes higher.

A currency nobody uses has no value.  Nobody uses enCoin.  It has no value.   I predict that 5 years from now you will still be railing on about the unequal distribution of early coins (which will be a smaller and smaller portion of monetary base) and enCoin still won't exist.


It exists.  It does a lot that enCoin doesn't.  If your claim is Bitcoin isn't perfect well nobody believes it is.  However the most "perfectly engineered currency" that is so massively complex it never gets off the ground created no value.

I like you proposal and it sounds good. Why not implement it already mate ? I feel you like to talk a lot but little coding or actual doing the coin :)

Any benefits for early adopters or did I get that wrong too ?

To the skeptics : nothing is ever 100% perfect. Not Satoshi. Not bitcoin. Nothing.

Because I can't, that was part of the proposal. I don't have any network programming experience. I could eventually learn, sure, but that would involve spending a lot more time than I already have before I could even begin. IF enough interest is generated, I'd probably be willing to pay to have someone help. As yet, no emails.


Drama queen again. I could program most of the complexity in a few hundred lines of pseudo-code if it wasn't a waste of time. It took satoshi what, 9 pages to describe only the block chain in his white paper. He didn't touch on anything about the network protocol, the coin distribution, potential economic effects, etc. whereas all this is included in my 20 page proposal. I could describe the transaction block chain and how it provides security in my proposal easily in 9 pages or less.


I predict that 5 years from now bitcoins will be worth pennies again. *shrug*

They may be but at least they existed and people learned from it, and at pennies would still have some value. 

Napster is gone but it lead to decentralized file sharing and then eventually bittorrent.

I've never knocked on bitcoin as a proof of concept; I think it is amazing that it has proven something like this is possible. I think relying on hashing power to secure the network will end up being a very large flaw though, either in wasting computing resources and electricity for as long as bitcoin exists or by the possibility of someone subverting it during a period of low faith or by finding an improvement in the hashing of SHA2 and using it against bitcoin. It is highly inefficient and inelegant. But I don't knock satoshi for that, it was the first try after all.

That is a misnomer. It isn't wasting anything. 

The money and electricity spent is what protects the network.  It isn't like network security is magic and then miners waste electricity looking for coins.  There is no other mechanism to secure transactions that doesn't rely on 3rd party trust. 

Ironically bittorrent is a worse system than lets say gnutella or edonkey or ever heard of directconnect?

Learning doesn't always mean that the best solution is chosen, what matters most is what kind of people are attracted to it.

That is not the definition of misnomer. :P And I came up with a solution to secure transactions that doesn't rely on 3rd party trust, only the combined trust of the network. It is a similar manner as 51% in hashing, except that no electricity or hashing power is needed (except for transaction verification anyway). You sure you read my proposal?


I've heard of and used them all, and I still think bittorrent is light-years better. :) They fit different forms of sharing, but bittorrent is by far the easiest and most efficient.

No you didn't.  By definition anyone other than the sender or receiver is a third party.  Your system requires trusting in third parties.  Bitcoin doesn't.

At this rate, we're never going to hit the cap anyhow.

So you don't have to trust a miner to put his transaction in his transaction block? It's amazing how much credit you are willing to give bitcoin that isn't there.

No.  I can put my own transaction in a block if you are willing to wait long enough.

So in what way is that different from my system? Anyone can join the tradenet. Anyone will eventually get a transaction block.

Because it involves people.  People who can be bribed, coerced, tricked.  There is a well know vulnerability to Bitcoin "the 51% attack" but it is well known.  There is no need to trust miners just numbers.  If attacker has 51% of hashing power they can attack the network. 

The more complicated the system and the more it involves fallible human the more likely there are yet to be known vulnerabilities.  How many unknown vulnerabilities exist in enCoin well given it's insanely high complexity in every aspect I would imagine a lot. 

Miners aren't people? LOL

Whatever.  Obviously your intent it just to troll, misrepresent and obfuscate. 

Welcome to ignore, an accomplishment as you are the first.

You are quite right there mate. All talk no walk. We want to see EnCoin actually launched. Too much talking no doing around these parts.

Take a hint from Satoshi : "I'm better with code than with words though." ;)

Unlike Satoshi, I am actually trying to put thought into and get input on monetary policy.

Except that your pursuit of monetary policy opinions tend to filter out those whom you disagree with.  Not that there is necessarily anything wrong with this, as it has to be done in some fashion; but the end result is the same as Satoshi's.

The only one who has actually put any input on monetary policy has been Red, and he has done oodles and I have incorporated a lot of his ideas. Most everyone else just argues it won't work for one misguided reason or another, and I spend my time explaining how it could. Bitcoin has turned a lot of people into monday morning quarterback economists, often ignoring the fact that a lot of the good part of bitcoin's economy is lack of government intervention, not fixed supply. I go one step further and say hey, instead of having an arbitrary amount of money in the supply, how about we let people decide how much money is in the supply.

It's not as if there is no school of thought behind this: http://en.wikipedia.org/wiki/Monetarism


Note how austrian economists criticize a property that would not exist in encoin; citizens create the money based on whether or not it is profitable. Far different from the government deciding on when the money is too valuable and more must be created. No goverment spending, no liquidity traps, currency may be created more easily based on economic growth factors (this is in my most recent post in the thread), etc. It fixes a hell of a lot of the problems with a government-backed currency without having to fall back to the problems of a fixed supply.

I have personally offered advice in the past, including but not limited to the "that won't work" type.  A polite refusal to consider is still a rejection of opinion, so my point stands.

Well, the last time you responded to anything about it was on revision 2 before I had really laid down the foundation.

"I won't fault you for trying, but I can't agree that artificial attempts to suppress the cost/value of coin creation are worthwhile."

That was what you responded with in a PM, I don't remember what I said originally or how I responded, but it is a statement borne on the back of bitcoin's monetary policy without understanding mine. Status quo bias, et al. I believe you are the one that politely refused to consider. Even calling it artificial, as if bitcoin's monetary policy is anything but.

I wish this would work but you just cannot control the market like you want to. Take a look at RS and his bait and switch methods for 32->5 SC reward drop. Price is 0.009 now but still hashrate is declined and less profitable than before etc.

I advocate demurrage (http://en.wikipedia.org/wiki/Demurrage_(currency)) to discourage hoarding. How a positive interest in accounts can discourage hoarding?