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The BoE has been around since the 1690s but was constrained by the gold standard until the 1920s. The Fed was formed in 1913 and was similarly constrained until 1971. Nevertheless, both the dollar and pound have lost about 98% of their value in the past century.
Contrary to what some people think both the BoE and Fed want to preserve the value of their currencies, not debase them through printing. It is Congress (US) and Parliament (UK) who continually overspend, forcing money printing, inflation targeting and interest rate manipulation. These governments also allow excessive lending by banks, bail them out, and permit a huge shadow-banking system - all of which cheapen the value of currency and cause inflationary pressures.
These currency systems will collapse eventually, like the Mexican and Argentinian pesos have (more than once), or the classic case of the Zimbabwean dollar. When it will happen is the real question. At the current rate it will be some years yet. Perhaps during the 2020s. Bitcoin should be super-strong by then!
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I have 2.5GB of other people's gambling on my hard drive, because it's cheap.
Snap! Me too. Zero-fee transactions are an overhead to bitcoin. One benefit of them might be to encourage take-up by new users maintaining momentum of growth. If they need to be discouraged, then agreed, it could be done by using the max block size limit. An initial split ensuring "high or reasonable" fee transactions get processed into the blockchain within an average of 10 minutes, and "low or zero" fee transactions get processed within an average of 20 minutes might be the way to go. Consider the pool of unprocessed transactions: Each transaction has a fee in BTC and an origination time. If the transaction pool is sorted by non-zero fee size then: fm = median (middle) fee value. The block size limit is then dynamically calculated to accommodate all transactions with a fee value > fm plus all the remaining transactions with an origination time > 10 minutes ago. If a large source of zero fee transactions tried to get around this by putting, say, a 17 satoshi fee on all its transactions then fm would likely be 17 satoshis, and these would still get delayed. A block limit of 10x the average block size during the previous difficulty period is also a desirable safeguard. The public would learn that low or zero fee transactions take twice as long to obtain confirmation. It then opens the door for further granularity where the lower half (or more) of the pool is divided 3, 4, or 5 times such that very low-fee transactions take half an hour, zero-fee transactions take an average of an hour. The public will accept that as normal. Miners would reap the benefits of a block limit enforced fee incentive system. |
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A look at historical stats shows roughly: 500 transactions occurred per day in Jan/Feb 2011, 5000 per day in Jan/Feb 2012, 50000 per day in late Jan 2013, with an average block size of about 180Kb today (Feb 1st). https://blockchain.info/charts/n-transactions?showDataPoints=false&show_header=true&daysAverageString=1×pan=all&scale=1&address=There is a logarithmic progression in transaction numbers which, if this continues, will see block saturation at 1Mb well before the end of 2013. I think it is reasonable to call the max block size limit a " time bomb" within bitcoin. If this limit is reached many transactions will languish for hours or days. People will spread the word that bitcoin is breaking down resulting in negative publicity, panic selling and disinvestment, and websites dropping bitcoin. Perhaps the languishing transactions will then be processed, but great reputational damage will be done to a currency which should be as good as virtual gold. The moral imperative must be to protect the utility and integrity of bitcoin for the public who are using it, the merchant websites accepting it, and the investors who are buying it to hold as an alternative to central bank fiat. When I recently purchased some coins as an investment it was despite the block size limit being a negative factor. I thought it was a temporary restriction for sensible reasons like training wheels on a bicycle. 99% of bitcoin holders are unaware of it, and the crippling ramifications of it. Akka's solution sounds very good, and it makes sense to include another important improvement as MatthewLM suggests. I really hope that something can proceed as it would be a shame for bitcoin to suffer from an internal cause when so many external threats still exist. |
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The max block size seems to me to be a very important issue because 1Mb is certainly too small to support a global currency with a significant user base. Even if bitcoin just has a core function as a currency but not an all-singing all-dancing payment system. Like everyone here I would very much like to see bitcoin one day replace the disastrously managed fiat currencies. My question is: Does increasing the max block size really need to be a hard fork?Couldn't the block versioning be used as already described below regarding the introduction of version 2? "As of version 0.7.0, a new block version number has been introduced. The network now uses version 2 blocks, which include the blockheight in the coinbase, to prevent same-generation-hash problems. As soon as a supermajority, defined as 95% of the last 1000 blocks, uses this new block version number, this version will be automatically enforced, rejecting any new block not using version 2." (source http://blockorigin.pfoe.be/top.php) Lets say a block size solution is determined such as a variable limit, or a simple increase to a new fixed value. And it is planned for block version 3. The new software change could be inactive until a supermajority of the last 1000 blocks are version 3. Then the change to the max block size becomes active. The result is close to a "soft fork" with minimum risk and disruption. This would prevent some of worst blockchain forking scenarios described above. |
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the longer the better baby:   now that would hurt! hahaha. You geniuses got the picture so quickly! Awesome. |
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Ongoing publicity about Bitcoin on financial news sites and magazines will be attracting the interest of serious investors. There are thousands of individuals and institutions for whom 10 or 20 million dollars is a small amount to devote speculatively. Especially, in this case to prevent themselves being blind-sided by arguably the most significant applications-level development to the internet since the world-wide-web itself. An inflection point is approaching, signified by real-world metrics such as the exponential rise in usage of the blockchain.info wallet service. https://blockchain.info/charts/my-wallet-transaction-volume?showDataPoints=false&show_header=true&daysAverageString=1×pan=&scale=1&address=For major investors in small-cap business a target holding of between 1% and 5% is par for the course. In Bitcoin terms, this would mean an investor trying to accumulate between 200k and 1 million BTC based upon the maximum issuance figure of 21 million. Needless to say, only the first and possibly second investor which tries to gain such a holding has any chance of succeeding. The whole ask wall would have to be vaporized repeatedly to achieve it. The long-term small investor should be wary of selling too many bitcoins (when trying to re-buy on dips) because the mother of all green candles could occur at any time, ramping the price, say from $20 to $40 where it would find a new level to continue from. |
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My reading of the imbalance is that the majority of those trading bitcoins are long-term bullish.
So the sellers are simply not there to match the buyers. However the buyers are not completely chasing the price up either. They are waiting with low bids in hope that a flash crash will get them into a larger position at a cheap price.
Some of the recent momentum is other buyers who are thinking that the bottom is in and that if they wait with low bids they will miss the train - forever.
A lot of the bitcoin forum members have been here for years and *expect* slow progress. However, bitcoin may be where the WWW was in 1995 (four years after it was invented), not yet mainstream, and just before it morphed into the dotcom boom of late '90s.
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Best response to a dullard reporter asking if bitcoin is being used for "money-laundering" ...
.... hmmmm, ahhh, meh.
Well. Has anyone ever heard of the US$ or euro being used by money-launderers? |
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The use of language in the debate is important.
The ECB calls the bitcoin threat "reputational" whereas Professor Hanke, whom Bloomberg interviewed, correctly calls it a "competitive threat".
The established central banks, and regulatory agencies, may well begin a dirty war blaming bitcoin for many problems, e.g. money-laundering.
The bitcoin community should point out that "fiat currencies are being printed to destruction and inflation is a stealth tax on the savings of the hard-working public".
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AurumXchange is a fantastic service and has excellent rates for funding an account at Mt.Gox to buy BTC https://www.aurumxchange.com/(I just use their service - no other connection...) |
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The major types of value seen in currency systems.
A fundamental of exchange and economics is that only products can buy products.
Money is the medium of this exchange and currency is a structured form of money.
Products are produced by work, which could be physical (labor, automation, computation, etc) or intellectual (design, research, planning, creativity, etc).
Currency can encapsulate prior work, e.g. a gold coin, which required much physical work (mining, refining) and intellectual work (finding it, managing its transition from ore to ingot.) Such a coin has intrinsic value. Someone performed prior work and that is passed hand-to-hand as a gold coin buys products.
Currency can encapsulate future work e.g. a Federal Reserve note which is a claim on a proportion of taxation of future work, guaranteed by the US government. Such a FRN has fiat value. Someone is expected to do work, paying tax, and this expectation is passed hand-to-hand as the note buys products.
The fifty-year period from 1921 to 1971 saw a paradigm shift in OECD countries which was a transition from an intrinsic currency system to a debt-based fiat system. This has been emulated by the rest of the world. The "advantage" of a fiat system is enabling pulled forward demand, by monetizing future production. The forty-year period since 1971 has seen this advantage exploited to the full. The credit crisis of 2007, ongoing, is a reflection that as future production has been monetized as can realistically be expected to occur. Unless 100-year mortgages enter the mainstream no new leg up is possible in this paradigm. The problem for OECD countries is their economies have become demand distorted, debt addicted, and production-depressed, riddled with insolvent banks which are excessively leveraged. The advantage of fiat is outweighed by a larger disadvantage. Which is that inevitably more and more currency is issued based upon future production which is unlikely to occur in a realistic time-frame.
Enter Bitcoin.
Consider: IntrinsicValue = PriorWork * Scarcity * Utility
Bitcoin and its blockchain satisfies all three above. The prior work is mostly computational, but also has an intellectual component in the design. It has scarcity, via controlled and limited issuance. It has enormous utility because it supports remote payments (unlike gold).
The Bitcoin network is a return to a hard-currency system with intrinsic value which is a much more sound basis for a world economy, removing distortions and rewarding real productivity. Because it leverages the power of the Internet it has every chance of superseding failing fiat systems. Banks would be forced into a sound model: "one bitcoin of lending to one bitcoin of capital."
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The discussion page is well worth a read too.. https://en.bitcoin.it/wiki/Talk:ScalabilityI note that the trillions in the OP should be per year not per day. It seems that 10 billion global payments per day is nearer the current mark. Many of these do not have to be handled on the block chain (which also solves the 10+ minute confirmation problem) because they can be handled by trusted intermediaries (e.g. banks, credit card companies) who would support instant confirms. Netting down transactions reduces blockchain payment entries. Fraud by double-spending would remain a risk and is a cost of doing business, recouped by the intermediaries through fees, just as the credit card system operates today. |
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Very interesting. But do you see the lows after retrace are always higher than the last all-time high? If this is correct, then we will never go below $31.9 again after the next all-time-high
And $31 is an interesting level because the 365-day average spot (London fix) silver price is $31.15 Expect news headlines when one bitcoin buys more than 1oz of silver. |
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But have they reached a cliff?
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Impressive analysis.
I imagine then that one significant function for banking institutions in a bitcoin future would be to facilitate zero confirm transaction processing (for those merchants with a real-time need to allow them, up to certain value limits). By doing so the banks accept the risk that a small percent will be double-spends, reflecting these losses in their fees, which are spread widely and average out.
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13.5 + 52 = 65.5 by year end
I wouldn't be surpriced.
Bitcoin was up 288% in 2012 which means a target price of $50 in 2013 is achievable. |
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In the sci-fi webcomic "Schlock Mercenary" they seem to have a monetary system which operates very similar to bitcoins, where there are "credits" (or for larger purchases, kilocredits) which are passed around from computer to computer, but require the signature of the sender to be sent. Credits are commonly used as a sci-fi currency. Perhaps one millionth of a bitcoin (100 satoshis) would be usefully known as a credit. Especially as 1 BTC would be about $1million if BTC became a global currency driving out all the fiat. |
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