USDX also about to break 100.

Meanwhile, US Dollar Index is about to cross 100.

Tastes like a breakout is coming.

Ah, the old Angry Mob Management^TM.

The trend seems to be tapering off, but it's still alive. Meanwhile Ethereum seems to be taking a "money doesn't matter"/"blockchains are a friggin' database technology" stance even after their huge crowdsale. Here is Vitalik giving his understanding of economics, which he still maintains have nothing to do with Ethereum because he's "not designing an economic system":

http://www.reddit.com/r/ethereum/comments/2ymtqx/vitalik_your_logic_and_thought_process/

He seems to understand a few things he didn't before, but still is lost in the forest.

Absolutely, and that's a great example.

Every rivalrous resource that is now being allocated dumbly, because it's not "on the market," can be allocated smartly, reflecting each person's preferences and priorities. A subset of that enormous set of possibilities is idle resources. The endpoint is zero idle time. Every machine working at full capacity at all times. This is so incredibly far from what we have now that the efficiency gains are staggering to think about. And if every machine of a certain type can go from, say, 9% utilization to 90% utilization, that means the cost to use or own those machines drops tenfold. The technology gets 10x cheaper, just like that. If this were to happen across the board, it would mean a massive increase in the standard of living and far less waste.

The basic use case I imagine is the situation where two machines with two different owners are drawing from the same utility, say electric power, being offered by a third party. Suppose there isn't enough to power both of them. How are the machines to decide who gets priority in receiving the power?

Well, if the owner of Machine 1 has a high preference for the machine to run uninterrupted (say a server), even if it were to be expensive, he can pre-allocate some spending money to the machine, as an insurance policy in case of power shortages. Meanwhile, the owner of Machine 2, maybe a poorer person or maybe someone who cares less if their machine's operations were temporarily interrupted (say a clothes dryer), would not do this. In fact, they may even allow their machine to sell excess power if someone is paying enough for it.

Then the person who values the resource more can pay for it, enriching others who value the resource less.

This could be for electricity, for driverless cars negotiating right of way on the road for users of different income classes or different time preferences (rushing to the hospital vs. someone just going shopping), or for any other rivalrous good.

So it's basically a way to make machines more effective agents on the owners' behalf. Whereas before any situation that required a monetary transfer in order to effectuate a mutually beneficial deal would have required the owners to negotiate directly. If the matter is too trifling, it would just be annoying and a waste of time to negotiate. Instead, have your machines do it. They couldn't do this before, not just because they weren't interconnected, but also because they have no way of transferring value to each other.

Bitcoin enables this. And the scale can be extremely small, so that even the slightest possibility of mutually beneficial trade is capitalized on.

IoT by itself enables this to happen within one's own property, like the different appliances in your own house, because no other owners are involved so no money needs to change hands. The dishwasher doesn't mind taking a 5-minute break to give extra power to another appliance that needs it. It needs no monetary compensation, because the owner owns both appliances.

It's when this kind of exchange happens with someone else, especially a total stranger, that it becomes necessary for money to change hands.

Now some people imagine this as heaven for the rich, like if for example a rich driver could flip all the red lights green. How sucky would that be if you had to wait at extra-long reds? But no. You had already preset the amount you were willing to pay in bidding for the traffic light to change, and it was far less...but more importantly you get paid for your waiting time. If it's not worth your while to wait and get paid today, just set your asking price higher (a dial just for this purpose is on your dashboard). You only wait if the other driver is offering enough to make you interested in waiting.

This guarantees that everyone benefits from the deal. If the rich driver ultimately wins out and gets the light flipped, everyone else - by hypothesis - gets at least enough money to make it worth their while. Of course the more crowded the intersection the more the rich driver would have to pay, but some will. Everyone is better off, because goods (in this case road space and right of way) are allocated most efficiently by the price system.

Augur to go with Ethereum? If you can't figure out how to do a sidecoin/spin-off for Augur, someone else will. Hitching your wagon to anything other than the economic majority, as cumbersome as it may seem, does such a powerful idea a disservice in my opinion. Thinking Ethereum "isn't about being money" is dangerously close to the fallacious mainstream "Forget the currency, it's all about the blockchain technology" meme.

Money makes the blocks go 'round. Ethereum will fail unless it understands that, or someone will create Aetherium, or even launch it as a sidechain. The point is that the economic majority, meaning Bitcoin holders, is where the action is. Not fixing Augur's coin distribution to Bitcoin will be needlessly hampering it in the extreme.

In the end, the cost of securing the network has to be paid somehow or other to miners and maybe nodes. If you're concerned about a scenario where transaction fees are not enough and yet transaction fees also cannot be raised without making Bitcoin uncompetitive with other systems, that is a scenario that doesn't really make sense. After all, the idea of securing the network against a 51% attack is that the attacker would have to expend too many resources to make the attack worth it. Whatever that magic number is at any given time, that's what users will pay.

Bitcoin users will always pay roughly the right amount for security, whether by fees or whatever. This may require fee floors or even changes to the block reward, though the latter is held more sacred even though they aren't much different in terms of store of value (all savers eventually spend; likewise, all spenders are savers for some amount of time), but by hook or crook the network will be secured.

Someone still might wonder if the magic number of "cost to attack" might fall below "maximum fee rates that would enable Bitcoin to remain competitive with other systems." It certainly would not for the fiat money system, but some might still wonder about proof of stake and other schemes. People can cook up all the schemes they want, but at the end of the day a full open-participation network that is cheap to secure is cheap to attack. In other words, if no user is given preferential treatment in the eyes of the network - meaning the network is dumb/neutral - it cannot be both cheap to run and expensive to attack, since there's no central authority deciding who's a good guy that should be given a cheap way to vote for what the truth is, and who is a bad guy who should be made to pay a lot to have their say over the network.

If two non-reasons and one technical trendline is all that's holding the Bitcoin price back, that's pretty exciting.

What is ultimately needed is an established way for the economy majority to choose a fork. That would solve both the hard forking problem and the miner incentivization problem in one fell swoop.

My guess is that when push comes to shove the method is already in place: people sell coins in the inferior fork for coins in the superior fork. In other words the market decides. Anyone who sits out the decision process is left with their wealth unchanged. Anyone who actively tries to choose which fork is better will be rewarded or debited according to the accuracy of their judgment.

The lack of understanding continues right up to the eve of Ethereum's planned release. No comprehension of the ledger, still thinking in terms of "tokens" and "blockchain tech is the important thing, not the money."

I've held to the same idea. What is "extraordinary" is a matter of perspective. Back when phlogiston and phrenology were all the rage, it would have been an extraordinary claim to say they were bunk. "Extraordinary claims require extraordinary evidence" is only applicable in a few cases, not in general. Used as a general tool in argument, as with references to the Dunning-Kruger effect, it just becomes yet another way of saying, "You're wrong." It's just a bludgeon used to invoke the authority of the mainstream or popular opinion, and it only has currency with those still mired in authority.

Regarding vaccines, here's a quite balanced and well-sourced article arguing that while the utility and safety of vaccines are grossly exaggerated, it's nevertheless incorrect to say they don't work at all (note: this still doesn't imply that vaccines are a net benefit to society). Although he doesn't emphasize it in the article, the author is in complete agreement that exercise, healthy diet, etc. are the real way to prevent disease.

This is relevant to Bitcoin, too, because many of the fallacies in mainstream medicine arise from the same sources as the mainstream's dismissal of Bitcoin: failure to understand natural order, anti-fragility, and of course the proper way to analyse non-mainstream ideas without bias.

Awesome article, exactly what is missing from the central planning oriented dev talk. Can we get a visual version of this argument? I suspect the two-part article's length and weightiness is limiting its virality as of now.

When you consider it for a bit, it starts to seem strikingly obvious: node operators offer a valuable service to miners and users, and although right now they do so for free, when and if it starts to be difficult for them to do so, a market will form on its own as node operators and other interested parties negotiate their own rules and fees.

Blocksize should have no hard limit. As with everything else, it should be economically limited. The trick is not to panic about "how the market could possibly handle it without central planning." No one is smart enough to figure out all the little rules and stipulations for each economic relationship, let alone do so in advance, let alone get consensus on such rules. Just remove the cap and let the market work. Babying the market with paternalism in the form of artificial scarcity just leaves the space open for competitors to stick their oars in.

More to the point, you bought 0.25 BTC, bidding up the price. If the merchant immediately sells the BTC, it's a wash as far as bidding the price of BTC up or down (but the merchant sees greater value in BTC, incentivizing them toward holding in the future). If the merchant doesn't immediately sell, for the duration that they do hold - whether just a day or a month or long term - there are fewer bitcoins available on the market, pushing the price up.

So a purchase made through buy-and-replace is at worst slightly positive for the BTC price, and at best substantially positive.

Simpler way to think about it: The more bitcoins "in the pipeline" of transaction processing, the less available on the market, hence the higher the price. Like if you had a bunch of buckets of water with hoses running between them. The more hoses and the more full they are, the less water will be in the buckets at any given time. Less water available means water is scarcer, dearer, more expensive.

What about people just spending their coins? Insofar as this is understood (consciously or unconsciously), any spending that happens will merely be in lieu of selling, by holders who are looking to unload some in order to rebalance their Bitcoin-to-fiat portfolio. In that case the same applies: at worst slightly positive, at best substantially positive.

But what about the case of an impulse buy where a holder acts temporarily against their own portfolio balancing target and spends their coins even though they are already low on BTC? Well there is no obvious reason to think there wouldn't be an equal number of holders who temporarily act against their portfolio target in the opposite direction. It's a wash.

Overall, then, merchant adoption is at worst slightly positive for the price, just in terms of the economics, not even taking into account the positive publicity effects and the increased value in the eyes of merchants who are now getting a revenue stream via Bitcoin.

All that said, I don't think merchant adoption is the main thing that will drive the price higher for the next few years. The main thing is good old fashioned hoarding.

Conclusion: Don't worry about merchant adoption. If it happens, good, it will just add a little extra boost to the exponential growth. If it doesn't it's nothing to worry about. Investors are the ones that will drive the lion's share of growth for the foreseeable future.

It's not pessimistic to say HODL. It's optimistic, just on a longer time horizon. It might go up from here, but I see no particular reason that this is anything other than a rebound from the recent dip. There is not really any way to know for sure when Bitcoin will make its next order of magnitude run, even assuming it will, so you'd best get comfortable with it. I repeat, if Bitcoin continues growing exponentially, that still provides no real guidance for the short term. It could do anything in the meantime, and history has shown that it generally will. Relax and wait.

Impatience is a warning sign that you're about to lose money

This guy gets it. Does anyone keep a shortlist of who is on the investor side, prominent figures and/or forum and reddit posters? I could name a few people off the top of my head, but it might be useful to have a list.

Good thought, and I like where that article is going.

There are many relics from the old way of thinking about things. From the days of gold to fiat, the idea of "backing" became important. Then Bitcoin, analogous to gold, came along with the 21M coin limit. That said loudly to those familiar with gold vs. fiat that "no politician can inflate this at their whim." However, ultimately what matters isn't that there's a hard limit, but that the limit is neutral, as you say, and (as a consequence of neutrality) quite predictable with low inflation.

I say "quite" predictable because if (if!!) there were ever an absolute need to change the issuance schedule, say due to sidechains disrupting mining, it could would only be done in a neutral way since people would freely decide which schedule to adopt so it wouldn't be political. The result would never be chaotic or result in high inflation or the enrichment of some politically connected people at the expense of others. That doesn't sell quite as well as the 21M coin limit (which is sort of false because of mining fees), but since ultimately people just need sound money (neutral money), and we have decades to go between now and then, the nuances should be more appreciated by then, especially when Bitcoin is mainstream and not fighting just to be noticed.

If you're talking about 100 years from now, sure, that's a new thing. But the idea that this new thing is of any relevance stems from the idea that money supply matters at all. Before that can be seen as any kind of concern, there needs to be a reason why that might be a concern. Otherwise it's no more remarkable than the fact that it's unprecedented that a money system is named "Bitcoin" or that it starts with a B. 

We may be in agreement here. I would argue that there is a chance block rewards will need to be reworked, though not in a way that will affect current holders much, or at least not for a very long time.

A better way of making the point I want to make is that the bar for scrapping the entire ledger is extraordinarily high. If reworking the coin issuance schedule is necessary, it makes sense to do just that rather than have a completely different competing ledger.

Turning to an argument based on magnitudes, if we assume the "backup ledger" is worth 10% what Bitcoin is, the Bitcoin ledger would have to be something like 90% screwed up before it would make sense to change over. Coin issuance changes wouldn't be that level of change, at least not for maybe several hundred years(?).