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Actually, the "computer" fed is not an inelastic supply.
Actually, any change to government-sponsored money is going to require legislation.
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i think Selgin believes "someone" (who undoubtedly will have a vested interest) can set up a desktop computer, program it for 2% inflation, hardcode the software so that the algorithm can't be changed, and then tie the global financial system to it. I think that "cypherdoc" is pretty dumb, but we already know that. Selgin on the other hand is actually educated and doesn't come off as a dipshit every time he speaks, so I'm pretty sure he is aware that the "computer" from Friedman's original idea is just a tongue-in-cheek metaphor for legislation with an algorithm to determine the money supply. |
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You cannot both presume that BTC will suddenly be popular and worthless at the same time. Either BTC is in widespread use before storage becomes incredibly cheap and therefore BTC become more valuable in dollar terms since they are created at a fixed rate and cannot expand to fit demand. Or BTC is not in widespread use before storage becomes cheap and there is less of a problem with needing to store massive transaction volumes. Miners could also just ask for higher transaction fees to support storage as a stop gap solution.
That's not exactly what I meant, but I was being silly so whatevs. I dunno, me personally, I think the best way to have a p2p decentralized protocol is to have one where running a node is very inexpensive. Nodes don't get paid for transaction fees, so raising the tx fee does not help them. |
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You forgot to account for two things.
1) You don't need to store it for 20 years. Since transactions can be pruned, people don't need to store the entire block chain (on clients that support pruning).
2) The cost of storage is falling continuously, but the size of transactions is constant. You are extrapolating a problem based on today's prices for storage. 1) The issue is about "spam" accounts that have small amounts and stay unused. If the tx out is unspent, it cannot be pruned. Pruning is not the answer to every problem with storage. First you actually need to download the whole block chain first, THEN prune. It is not very efficient. If you trust somebody else's prune, you are trusting them instead of "no one." It saves no bandwidth whatsoever and only eventually saves disk space. 2) See the wiki about 4,000 tps and what kind of storage you'll need. I'm extrapolating; you have a narrow view. BTC would be worth a lot more in dollars which means TX fees would be worth a lot more in dollars. the wheels on the bus go round and round, round and round |
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€0.00000005578994750976563
=
$0.00000004184246063232422
Also, average size of a transaction is roughly 500B, so its even smaller again. You can store 2 million transactions for $0.01
Except that there is more than 1 hard drive in the entire network. Say there's 100,000 users with the block chain $0.00000004184246063232422 becomes $0.004184246063232422 that's about twice as much as the current tx fee. And when bitcoin is big enough that there are hundreds of transactions per second, bandwidth caps/speeds become a big issue. We still want new people to download the chain, right? There have to be at least 100k people that have downloaded the block chain already, who knows how many in the future even if lite clients are the norm. I still think microsoiled -3.0's way of handling this is abjectly stupid, but that is realsolid for you. It really doesn't matter though when there are going to be all of 10 people using it. |
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Why exactly must people lose their money for participating in the currency?
Nobody has articulated that need to my satisfaction.
The problem is the lack of participation. If you store some tiny ass amount in an account and expect it to be there in 20 years, that is ridiculous. Why does everyone have to service you for nothing? Bandwidth and storage are cheap, but they are not free. However, I think the way soiledcoin 3 is doing this is just another early adopter scam joke. Charge inactivity fees after an extended period of time, but not daily fees regardless if there is activity or not. If you are making or receiving transactions, then you are supporting the network regardless of how much is in your account and you shouldn't be charged anything since you are already paying tx fees--and it ensures that the wallet key is not lost. If you have some piddly balance after a year with no activity, yes you should be charged a fee, imo. Bitcoin has made a bunch of self-serving whiners that expect everything to be free on the backs of the people who actually support the network. Although, at this point, a good majority of them are miners too, but this will certainly not always be the case. Not that the bitcoin network is even capable of charging inactivity fees though. |
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If Bitcoin ever moves to the same protocol as MicroCash (which it probably needs to for performance reasons if its successful) then it will have to move to account fees also. Otherwise it could be spammed to death. What is it, in your opinion, that is preventing bitcoin from being spammed to death right now? I'd really like to know. So comparing two different protocols, they both have advantages and disadvantages. Obviously some people familiar with how Bitcoin works aren't too comfortable with the idea of daily account fees but there's no other alternative if you want to move to the same account protocol that MicroCash uses.
http://en.wikipedia.org/wiki/False_dilemmathis must be RS posting now because I've never seen one person use so many fallacious arguments so regularly |
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Yet you crucify others for nebulous definitions. Quite the double-standard. lol are you talking about the FRB nebulousity? Anyways, again I never did claim a deflationary spiral would happen, I always added a caveat. It was MoonShadow who ignored the caveat and ran with it. There is no problem with debt in any situation, deflation or inflation, unless it is leveraged or there is no means to pay it back. FRB is a form of leverage. Bitcoin is not the issue here. Derivatives that develop based on it may be. I am not saying that debt is the problem; the repayment of it is. What liquidity needs to be retracted from the Bitcoin system? That's like saying gold needs to be destroyed. There is no sensibility to that whatsoever. :le sigh: Wealthy elites/bankers can retract liquidity; the regular joe cannot. The point I was making is that under a bitcoin-like currency, the regular joe will once again be at the whims of the wealthy elite and will be poorer for it through no fault of his own. Attempts will be made to profit off of the Bitcoin base, no doubt. That has nothing to do with Bitcoin itself. At this point, technical issues have far greater potential for impacting the system than economic concerns. This thread is about economic concerns so let's try to stick with that, ok? Gold has stringent limitations because it is physical: it is not infinitely divisible. If it were, there would never have been any need for another currency - just keep dividing gold smaller and smaller. MMT should love Bitcoin because it creates a form of gold in a purely abstract sense. The only problem current economists have is that they can't get past their fervent attachment to fractional fiat. This infinitely divisible crap is so outside anything relevant. Infinitely divisible is not some panacea, it just allows the currency to have a physical limit and still allow for some semblance of expansion. The equivalent with gold is moving on to silver or copper or whatever else for smaller denominations if necessary. Some will be scared back to fiat, but when has fear ever stopped progress? Hint: never. When has fear allowed bad legislation to pass? oops. And I am not referring to potential future legislation that may hurt bitcoin. You would do well to grow some humility before you fade into irrelevance. I've seen your kind come and go like so many gnats. How benevolent of you. Were you wondering why not even the reputable fellow behind Solidcoin wouldn't help you? Now you know. What in the hell are you talking about? Your strategy of dazzling people or, failing that, blinding them with bullsh*t is best left to professional bankers and politicians. I could say the same for anyone who argues for bitcoin as a solid foundation for money. It's practically evoorhees's MO |
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you're confusing fractional reserve banking with a gold standard. A gold standard is, generally speaking, referring to the convertability of a national currency note into a predefined weight of gold. Fractional reserve banking is the idea that a bank can lend out more in loans than it actually has on deposit. MY POINT, my dear, is that they have been intertwined for hundreds of years. This is why I say things like "gold standard as we know it." If the gold standard was a bankers' paradise, we would have never left it anywhere on Earth. Are you really going to claim that bankers don't have influence over governments? Or that the Federal Reserve system wasn't created by and for bankers? The Federal reserve system is why inflation occurs to begin with, and why there was too much cash chasing too little gold. Nixon didn't have any choice, the gold was probably long gone before he ever got there.
Central banking is just the next step. The gold standard and central banking coexisted, and inflation has risen about the same with and without the gold standard during that time. Nixon could have just decreased the amount of gold per dollar, but why bother with the farce and potentially lose all our gold? There is a difference between pre- and post- central banking modified "gold standard" though, and that is the point I have tried to make time and time again as the reason why bitcoin will fail as a replacement currency. Inflation is not obvious theft; wealthy elites liquidating stock markets and large banks to restore the economy in a bust cycle is very visible and very irksome to the public. People demand change, and the bankers (JPM specifically) are more than happy to "help" the politicians write some laws to "regulate this problem." The first time a major event like this happens in bitcoin, the public will be running back to their inflationary ignorance. It may have already happened with last year's run-up. How many entrepreneurs were turned off by it? Who knows. Bitcoin will absolutely fail as a replacement currency because of the 21 million limit and other factors, in my typically not so humble opinion. So scream for liberty and freedom from government and all that jazz, but you're screaming at the wall. People will not adopt bitcoin as anything more than a token novelty or for the occasional black/grey market purchase. With all the problems we both recognize with fiat currency, I had hoped bitcoin was that replacement currency. But then I researched it more and understood how flawed it was. And then I loudly made my opinion known and you deleted my posts and got my original account squelched, thus the notorious 2 on my user name.  I was really disappointed with bitcoin and obviously still am. And I will create a competitor, it's just a matter of time. |
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How do the ones who provide liquidity and debt leverage liquidity? Leveraging liquidity to leverage liquidity? I don't get it, but maybe it's just over my head rather than three words cobbled together.
I'm curious to where you get the idea that "bankers don't like the gold standard." First off, bitcoin really should stop being compared to the gold standard. The gold standard as we know and talk about it is a complete bastardization of gold as money. Governments would add and drop the standard when it suited them; they would raise and lower the conversion price at will; and fractional reserve made it essentially meaningless. As long as paper money is legal tender, the reserve can drop to 5% by law to effectively double the money supply. Instead of going that route, we have central banks and interest rates. It's really not much different from fiat other than the warm feeling that your money is backed by 10% of what it says it's worth in pretty metal.
Gold standard as we know it was a banker's paradise, just like modern fiat. Until I understand how to leverage liquidity fluctuations and what that may or may not have to do with retracting liquidity, I can't really respond an appreciable way. I agree though that traditional bankers will not like bitcoin very much because they cannot hope to retain the power that they have now. 50% of the currency to ever be in circulation will already be in circulation by the end of this year. However, this most certainly does not preclude some kind of bitcoin cartel from emerging.
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There remains no evidence that a deflationary spiral is a real threat, or even a real economic theory. I find this to be one of the most amusing things about this viewpoint, let's explore it a bit, please.
The theory, at it's root, is that if the value of the bitcoin increases too much, people will
hoard' it, increasing it's value further. This leads to a crash in the exchange volume as some other comparable currency is used in it's place. Grisham's law in effect. While this sounds reasonable to an academic, it ignores the reality that we are talking about common people doing common things, not the rational speculator looking for an ideal exit. Real people don't hold currency for it's own sake, nor to trade for some other currency in the hopes of turning a nominal profit on arbitrage. Real people hold currency in order to spend it later, and real people don't consider only the future value of a currency in choosing to spend it now or later. Real people have real problems that often require them to spend money sooner rather than later, and for those people the future value of the currency is irrelevant.
Whatever, I just use the term deflationary spiral because it basically gets the gist across. I don't think bitcoin will ever have a deflationary spiral--and I basically said as much in that post but explicitly said it a couple posts up too; so enjoy your amusement. What it will have are deflationary "jerks" where there are sharp periods of deflation among more mellow periods. This causes massive problems for debt (and massive problems with adopting bitcoin as a replacement currency). But the "real people" argument still doesn't hold water. "Real people" aren't the ones that control the wealth of a nation (for example). Real people aren't the ones packaging subprime mortgages into a CDS. Real people aren't the ones who cause credit crunches--whether real or imagined(/fabricated). This all falls into the hands of the top 1% or so. Real people have no power to retract liquidity, only the wealthy/banks do. So what real people do or do not do is irrelevant. Wealthy people are going to find themselves in positions to be able to manipulate the bitcoin economy in unnatural ways. This is never good news for "real people." |
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And the less bitcoin is used as just a payment processor the more likely a deflationary spiral and people bailing. We're going in circles here. Bitcoin is not going to be an effective medium of exchange by my logic. We can agree to disagree, but I most certainly did not miss the point that bitcoin is not just a payment processor.
And through all this, anyone holding runs the risk that satoshi decides to just utterly collapse the market one day and buy his private island.
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That is an interesting perspective, and it may very well prove true. Yet, Bitcoin was designed to be cash on the Internet, and thus in person transactions are actually an expansion of the protocol in the same way that Paypal is an expansion of the 'protocol' for fiat currencies on the Internet. So even if Bitcoin is always a niche medium of exchange, that's still a huge niche.
I'm not sure of the point you're trying to make with cash on the internet. Businesses accept CCs online, and they still pay a fee. If online businesses want to accept BTC and convert it to something else, they're going to pay a fee. And not that you are the only one guilty of this, but I'm tired of the "but bitcoin is this" statements whenever it seems to apply in the most beneficial way to make a point. Lots of people believe bitcoin is the second coming of currency, and I'm just pointing out that it is going to have an incredibly difficult if not impossible time trying to fulfill that role. No, the deflation aspect and 21 million limit don't really mean anything if bitcoin is mostly just a payment processor with a few speculative nerds hoping to make money on volatility here and there. As far as 3% for currency exchange vs the current 1.5ish mtgox fee, convenience does always come into play. If BTC is popular enough for banks to do the conversion for businesses, then they may well pay the extra percent or so. I don't know how easy or hard it is to become a forex trader and what the fees are like there (and how many int'l businesses bother with it instead of a bank? no idea) and it's hard to predict how the exchange situation will play out with bitcoin in the future, so it's hard to predict what businesses/people will typically be paying for this service. You have to keep in mind though that it is unlikely that many people will be paid in BTC, so they will be buying it and there is the fee involved there too. How much that fee matters depends on how often each coin gets used in trade before being exchanged, which is impossible to predict. Without a fully up and down bitcoin economy, I don't see it being that often. Regardless, it is unlikely people will be seeing any "massive savings over credit cards" in pricing by using bitcoin. |
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If SLC has figured out, how prune this massive "transaction list", we better copy this or BTC/LTC become useless faster, than any of us wants to imagine.
It's already been implemented in some of the Bitcoin clients. This is not the same thing as a lite client. It is using an account ledger instead of a transaction ledger. It is a completely different system, and one that, imo, makes a lot more sense. Although from what I can tell they are doing a piss-poor job of implementing it and removing a lot of the features of bitcoin. RS claims to have "just thought it up" but there are a good 10 or so threads on bitcointalk about it, including the various proposals I've made for encoin. Probably the original thread: https://bitcointalk.org/index.php?topic=505.0 |
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Well, first off, the money necessary to cash out bitcoins is less than CCs by a significant margin if you're running a business and can wait a week or two for the money to get through the pipeline; going through Mt. Gox + Dwolla has fees of (25c for Dwolla + 0.6% for MtGox + 5c network transaction fees) which is going to work out to much less than the 3%-ish charged by the Big Two credit card companies. And if you're worried about exchange rate volatility, you can always use Bitcoinica to hedge (about 1.4% fees, which still puts you in a better position than using credit cards). Have you ever exchanged one money for another before? Have you ever noticed you get 2-4% less than the forex conversion rate? Yeah, there is no magical cure with bitcoin that is going to prevent the profit of currency exchange. And I'm not even talking about what MtGox charges, I'm talking about what the people actually selling will charge in an established market. Sure, really large businesses will be able to get better pricing, but the same is true for credit cards. But if you can get enough people accepting Bitcoin as a transaction processor, you stop having to cash out; you can just spend the coins again. Again, this is not the case. There needs to be an actual reason for someone to demand bitcoin. Businesses need to be able to pay their bills and salaries in it. If the bitcoin economy cannot expand via debt, and the act of taking on debt is a dodgy affair with deflation, you are not going to have many investment opportunities in bitcoin. This leaves black & grey markets as I mentioned. And if you can get enough people who you can count on accepting Bitcoin for the foreseeable future, then that's currency confidence and all of a sudden it isn't just a transaction processor anymore.
And if you followed the rest of the conversation about why a deflationary spiral won't happen.... confidence will flow right out of the currency at the beginnings of any spiral, and you can be quite sure that no one will want to take on bitcoin debt again after. Bitcoin will never get far as a medium of exchange when the people willing to take on debt are burdened further whenever the market expands. This leaves it as probably a good store of value, but a very so-so payment processor, and a niche medium of exchange. |
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If there is no bitcoin debt, there will be no significant bitcoin industry. There will be no real demand from businesses for bitcoins. Why would they bother accepting bitcoins when they have to spend the same amount or more (vs. CCs) just to get the currency they actually need? And overall the costs will probably be much higher since people need to pay those same fees to actually buy the currency. You seem to suggest that bitcoin is just a payment processor with a few extra benefits, namely those that hold get to profit when there is an activity spike. Everyone who actually uses will face lots and lots of fees. A lot of people around here think that it will take down "gubment fiat." Or at least put a big chink in its armor. Or at least they hope so. If it can't even attempt that, then it is relegated to online porn, drugs, laundering, and other black and grey market type stuff. And as far as velocity, MoonShadow made a pretty good point which I agree with: Bitcoin will find it's own velocity, eventually. After which time whatever effects on overall prices that bitcoin's ever changing velocity has will be lost in the daily transaction noise, too small an effect for anyone to define nor care about. |
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First of all, yes, pennies were hoarded during the great depression. Got a source? What were people using as currency? Only barter? Isn't one of the main arguments that a deflationary spiral isn't possible in bitcoin because "people will still buy bread"? Second, yes the effects of the depression would have been alleviated with more complementary currencies such as bitcoin, had they been available at the time. Nobody asked this question, and this is not what you said in your post. You're right though, if it looks like deflation is getting out of control, people will start bailing on bitcoin and this fact may actually help bitcoin be saved from itself. But, that means bitcoin isn't a particularly good medium of exchange. In the absence of internet, cities started then issuing local "fiat" currencies that were beneficial to the local economies but insufficient in scope. Nobody asked this question. Wall Street lobbyist after WWII made sure that a law be passed forbidding cities from issuing local currencies.
Source? Anyways, you don't have a very good understanding of what effect a major deflationary event has on a currency. Debts cannot be repaid (credit shrinks), bankruptcies run amok, unemployment skyrockets, etc. Allowing it to be used in smaller and smaller amounts does not solve anything. To think that it would... whatever, not like I've come to expect more around here. |
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Ok then, so if pennies had been infinitely divisible, the great depression would have been averted then. Is that what you're saying?
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The "textbook" deflationary spiral happens when "scarcity of money" combines with price deflation, further accelerating it.
Trouble is for economists, it's the first time in history there is money (bitcoin) that is indefinitely divisible (even beyond the granularity of satoshis).
So there is no such thing as scarcity of money in bitcoin. So what you're saying is pennies were scarce during the great depression? Do you even think about what you're saying? |
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Actually, in 1978, computer scientist Leslie Lamport wrote an extremely influential paper linking the order of events in distributed systems to relativity. In my opinion, Lamport is one of the most important computer scientists, though he hasn't won a Turing Award yet. Linking, sure, but not saying that relativity is actually the cause of distributed system mayhem. It just conveniently works to think that way. On the other hand, bitcoin cares very, very little for accurate clocks and specific ordering of events. It is just a binary "did it happen yet?" which is determined by whether or not a block has been found with the tx included. |
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