How is that possible? How? The normal way, create a transaction and submit it. There is not a limit as long as they are valid transactions and any output's corresponding input is included in that or a previous block. The applications of that are huge, it is what will enable shares to be traded in real time on the blockchain for example. Ok I understand, you are combining multiple transactions, then you might need an extra database to track the balance of each clients. I suppose that those movements will not reduce the money supply |
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Actually in my use case, the v is already at its highest Actually, it is not. What if my application need to transact the same satochis multiple times in one block? In effect, you proposal will kill my application. How is that possible? |
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Essentially we need to encourage people to spend and spend so that it becomes a norm. Eventually one day when the mining reward is gone and the network will depend entirely on fees alone to survive, it will become a big problem, because people will continue with similar trend and hold it idling in the wallet.
You don't need to encourage them, the bitcoiners will find out that spending bitcoins is the best way to make their coins worth more thus strengthen the whole bitcoin ecosystem https://bitcointalk.org/index.php?topic=987110.0 |
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The curiosity is great but the process doesn't work as you described. The coin never disappears or shortens supply. As soon as the coin is bought its ownership changes hands, instantly. Likewise, if you pay me for services the coin becomes one as soon as you tell you wallet to send me the coin. The length of the transaction is akin to the time it takes for me to mail you a check or for you to accept a Venmo payment. It has zero influence on the ownership or supply. So the supply doesn't decrease, therefor price can't be moated for this reason.
It's great thinking though.
If you read my use case carefully, you will see that during the whole phase of this trade, Bob's one bitcoin is not available on market, that is the decrease of supply. This is nothing new for those who knows quantitative theory of money, I just analyzed it in a more detailed way However, in fiat monetary system, many transactions are done inside the same banking network, banks using daily settlements to hedge the real move of the money during a day and then mail a check does not change the money supply since it never touches the real money, only changes banks account numbers, just like when you trade bitcoins in an exchange, only numbers in your account changes, bitcoin never moves until you withdraw You can look at an extreme case: I want to transfer 1 billion dollar from US to China, and I bought 1 billion dollar worth of bitcoin on exchanges, at current market price it will be 3 million bitcoins, and I might end up bought most of the coins available on market. And during the time those coins were under transition, the exchanges around the world will have much less coin, say 1000 coins available for sell. If another user comes after me and want to transfer 1 billion dollar, he has to pay a price of 1 million per coin to achieve his goal |
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True, unless the price gets to where people don't feel comfortable buying in again. One of Bitcoin's biggest flaws, IMO, is the number system. People don't like the idea of spending $1000 for a single coin. But they may do $10 for a coin (if there were 100x as many coins it would work out to be the same, but we psychologically infer the values differently). I think this is one of the big hurdles.
Price depends on the unit you are using, you could also use satoshi, anyone with a calculator will be fine. A kilogram of gold cost 36K dollar, one share of berkshire hathaway cost 0.2 millions, no one has a problem with those |
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What you are suggesting is reducing the velocity of bitcoin (that is the v part in the MV=PQ equation).
In theory, it would do exactly what you say, because there is less bitcoins available to be transact3ed at any particular point in time the equation rebalanced itself to make each unit 'cost' more.
Unfortunately, all the applications that take advantage of the extremely fast velocity of bitcoin compared to other mediums (FIAT) get tanked. Not a present side effect reducing the usefulness of bitcoin.
Actually in my use case, the v is already at its highest, other usage like hoarding for weeks or years have much lower velocity. But 3 hours turn around time is still much higher than fiat money, which is days or weeks depends on where you are. Off-chain transactions can finish the trade in seconds like VISA or paypal, but there is no real money moving just numbers exchanging hands inside the same platform, and that will not affect the money supply And you are right, the purpose of letting consumptions passing through bitcoin is not to make extremely fast deals, but make bitcoin worth millions of dollars, is there any problem for this motivation  |
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The issue is that while theoretically this would work, in reality it wouldn't. People would speculate. They would dump. They would manipulate to boost their values, then drop them back down to re-buy (like we already see).
Bitcoin is likely not to become a true currency. Think of it as being more like gold, an investment vehicle. Does it have value? Yes. But you won't take gold to the store to buy things. You'll convert to cash first. Same with Bitcoin. It's simply not feasible for me to stand at a gas pump for over an hour waiting on confirmations.
For small consumptions like gas pump you might not need confirmation, and I suppose that you have already stored your bitcoin before you go to gas station, so average holding time is already longer than 3 hours, mission completed  Holding it long term like gold works the same as spending it around all the time. but the weakness of holding method is that eventually you must spend it, and that will cause an excessive supply on market, but when you spend it all the time, it just never become available on market Speculation just add another layer of volatility above fundamentals, the fundamental is increased consumption will decrease supply, thus create long term appreciation tendency |
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Nothing beats backup, back up the key in different geographical locations remove the need to protect a single point of failure, and keeping several copies at your relatives might give them chance to retrieve it once you were caught by an incident
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Imagine such a use case:
Bob is a bitcoiner, he spend $300 to buy 1 bitcoin from exchange A, then he pays a merchant in another city to buy some car parts, and that merchant sell the bitcoin to exchange B to get dollar back
Looking at the whole process, the action has no net effect for the market: The bitcoins on exchange first decreased by 1 bitcoin and then increased by exactly 1 bitcoin. However, the details are more interesting
After Bob bought his coin, he need to transfer it to his wallet, this will take an hour. Then it takes another hour before his coin reach the merchant's wallet, and another hour before the merchant could send coin to exchange and sell it. So this trade makes one bitcoin disappear from the exchange for 3 hours. If Bob make one trade every 3 hours, one bitcoin will permanently disappear from the market, not available for purchase at any moment
If there are millions of users doing one such purchase every 3 hours, then there will be millions of bitcoins disappear from the market, thus make the coin extremely difficult to get, and its value will skyrocket
This process does not cost anything, and it does not hurt anyone:
- Bob does not take any risk since he immediately spend his coins and he might even get some discount
- Merchant get increased income due to lower fees and more customer
- Exchanges earn commission both ways
- Bitcoin become more scarce and more valuable
- Dollar is not affected since same amount of fiat money are still needed to initialize and finalize the transaction
It is an all-win situation
From Bob's point of view, he has motivation to make all his daily consumption pass through bitcoin, since that will make his coin more valuable. Some other people might choose to purchase in batch, and spend after a long time, from weeks to years, that will generate the same effect. Holding a bitcoin indefinitely is the same as using it every day, it just make this coin occupied and not available on market forever
So, increased usage will make bitcoin more scarce and raise its value, and raised value will increase its usage, a positive feedback loop. This could be the trend for the coming years
We all know that MV=PQ is a formula for quantitative theory of money. But what is the effect of above case on this formula, e.g. by converting dollar first into and then out of bitcoin during a trade?
It seems nothing changed for dollar: You still need same amount of dollar to do the trade, and the speed that dollar flows is the same (Dollar settlements between banks are done once a day)
This means, if we could make all the economy activity pass through bitcoin, it will make bitcoin economy exactly the same size as existing economy without affecting the original one, just like duplicating the whole economy into bitcoin monetary system
(Edit: 2015-03-17, added some calculations)
Suppose that 2 million bitcoin users, average monthly spending is $3000, they buy $3000 worth of bitcoin (10 bitcoin at today's price) when they receive their salary, and spend them during a month. But this means that they would have to buy 20 million bitcoins, which is impossible: The coins in circulation is around 1 million maximum. So, bitcoin's price will have to increase at least 20 times to reach $6000 to make that happen
This purchase happens during the beginning of the month, and later the price will fall back due to more and more coins flowing back to market. Average holding time for these coins can be regarded as 15 days, if people don't all buy at the same time, it will cut the coin demand by half, so a price of $3000 is more likely
If the user base increase to 2 billion, then price will be at 3 million per coin. Notice that no matter how high the coin price is, most of the coins would still be held as long term storage, the coins in circulation will never be above 2 million
And this is all very rational calculation, in reality the market can be more crazy than people can imagine when the shortage of coins are overwhelm, I'm not surprised to see a price of 1 million with much smaller amount of users
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The idea of money being an illusion used to be a major economic concept until the 1970s when it was replaced after criticism from Milton Friedman. He argued that you can fool people once, but not all the time. He argued that people would catch on to the government’s scheme. So if inflation was 5% they would demand a wage rise of 5%. This would nullify any government action.
That is the theory, in reality, if workers demand a 5% wage rise, they will be fired. They would still be fired if they do not accept a wage cut |
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Yeah, me too. I want to sequence my DNA and then encode it on the blockchain so my DNA is on millions of computers around the world. I hope you don't have a problem with that.
That's a great idea when clone technology is ready in future, but maybe winklevoss twins can afford that  |
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Money is an imaginary concept, but humanity is enslaved by it - while this is generally the truth is is also not the whole truth. Humans needs some form of easy exchange tool. Money is that tool. Bitcoin and gold, and any other precious metals and minerals are too. The only difference is the level of acceptance of certain payment method. While you can't pay for your grocery shopping with your gold ring, you can sell it in specialized shop. And that is the difference of acceptance.
Sure, universal acceptance is the prerequisite for a medium of exchange, and that is most easily done by government making a law or announcement. It is also easy to see why central bank won't use bitcoin as national currency, they just need to pass a law then they could start to print money for themselves. If they use gold or bitcoin, they will lose all that previlege And there is a requirement for universal acceptance: It must actively flow in the economy. Crypto currencies might be superior, but if people have to convert their own currency into another currency and then spend, they need some strong motivation to do that on a daily basis. In this regard, the first mover advantage of fiat money as a medium of transaction is very clear Luckily, with bitcoin you have that motivation: If every bitcoin investor first buy bitcoin and then spend on daily consumptions, then the increased monetary activities in bitcoin economy will raise the demand thus raise its value. Of course another motivation is to escape the fiat money robbery, but I guess few really have the urge to do that since the robbery is almost invisible and almost can not be felt |
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When the time comes, everything's value, including fiat money, will be measured by bitcoin. People will talk about how much Satoshi a house worth, how much Satoshi a dinner cost etc... And Satoshi will be the universal scientific standard of value, just like meter and kilogram, it is mathematically complete  What is the standard unit of value, this purely depends on the majority of people's consensus. When that consensus is reached among billions of people, then the standard is established. But other standard could also co-exist, just like foot and pound were also used widely |
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Money isn't really the problem, it is how people tend to overvalue it over any other things. It is the greed of people that enslaves his kind, and money is just a medium on where Man can exhibit his greed.
Like George Carlin says << the World are fine, the people are fuc**ed>> and I think he has right. The problem here isn't the money but the people and for the moment there isn't a valid solution. It was people who invented the idea of money - a universal exchange medium that can exchange anything, and when that ability holds over time, it also becomes a store of value The problem comes when some economists look at the fact that money is never consumed, and regard it as merely a token of exchange, then they had the idea of producing this token out of thin air to just meet the demand for exchange. This in turn gives the purchasing power of newly created money to money creator for free, thus the money creator step by step becomes the largest slaveholder, and they try to create any crisis that can make them print more money It is the fact that some of the people can get money for free created slavery. If money creator need to pay equal amount of value to create money, just like a gold miner or bitcoin miner do, then there is no slavery, producing money will be the same as any other business |
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It seems EUR USD parity is a sure thing now. I'm not surprised to see a ratio of 0.8 or lower
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When people discovered that they are forever too late in the fiat money game(E.g. no matter how much fiat money they get, FED will always print more and make their money worth less), then comparing with bitcoin, they will understand that everyone enter bitcoin anytime is in fact an early adopter, since there are no future bitcoin can dilute his holding indefinitely
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We are not all slaves. Some of us choose to like the idea of collecting a big pile of money. The big pile of money that you collected are just some numbers banks write on their book, the original ownership of these purchasing power belongs to banks who wrote it out of nothing. The more you collect those money (by doing various work or business activity), the more they write, that is the slavery Uh... not really. For example, I play a MMORPG, where literally all game money is created by the creators of the game at will. I play the game to earn game currency, does that mean I'm a slave of the game creators? And real life isn't like that. Banks/government doesn't have 100% control like you think they do. If they print too much, they end up breaking a delicate balance, and harming themselves along with everyone else. In a sense yes, you are the slave of the game designer when you play the game, since all your time and labor is used to exchange some tokens he can create infinitely, but you get some fun in the game environment as exchange (you typically get enough coins to buy super nice things that you can't find in real life), and you can give up playing the game anytime at will But in reality, you don't have a choice, you are forced to play this game "life", and the designer of the monetary system decided that you have to use this token called fiat money. You work to earn some 100 dollar every day, and they print trillions to buy anything they want, and all those things are manufactured by people like you. Of course they have a limit to not cause heavy inflation, but give me the right to create money and I will invent hundreds of ways to put inflation under control without limit the money that I can print for myself |
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This again proved that deflation has nothing to do with money supply (Base money supply has increased 5X and M2 also keeps increasing).
Deflation is just a result of severe wealth shrink for majority of people, including middle class and low incomes. There is no way to greatly change this by printing more money. Of course government can do some deficit spending and drive some large projects, but in today's society which is highly automated, the effect is neglectable
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