This proposal would not change relative price levels and would thus have no effect on purchasing power, and no effect whatsoever, good or bad.
? Err.. I have to disagree. Agreed that 'relative' prices stay the same, but what about Price Stability ? 1)Price stability makes it easier for people to recognise changes in relative prices since such changes are not obscured by fluctuations in the overall price level. This enables firms and consumers to make better-informed decisions on consumption and investment. This in turn allows the market to allocate resources more efficiently. By helping the market to guide resources to where they can be used most productively, price stability raises the productive potential of the economy. This sounds more like a service than an alt-coin to me. Design some method to determine the general price level and then create a website which keeps an up-to-date value of the result expressed in terms of bitcoins. Equipped with a simple API, wallets and shops can (as per your claims) use this to allow their users/customers to make "better-informed decisions on consumption and investment". |
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... then bitcoin will soon lose it's most valuable asset - trust. Trust is the only thing that keeps people buying or hodling.
The entire foundation of Bitcoin is designed to reduce the need for trust. I believe that the problems you are citing can be solved effectively by a sufficiently free market. Don't get me wrong, the free market won't do anything to help people who choose to put their life savings on a shady new exchange. I just don't perceive this as a problem. |
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I have the best computer out there today and it is still unable to download the block chain without crashing something.
The IBM Lenovo ThinkPad X60 (with coreboot and Trisquel) is unable to download the blockchain without crashing! More details please. I was planning to buy one as soon as gluglug.org.uk start accepting bitcoin and this revelation might well change my mind. |
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Any novice that can securely generate a 1-bitcoin paper wallet (clean, single-output, new address) has every reason to be proud. Such a feat would require, research, persistence, risk-tolerance, and significantly above average computer skills. Holding it for about 3 years (accruing 1000 bitcoin-days) will suggest an understanding of Bitcoin and a strength of mind that few seem able to muster.
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[Bitcoin] has not been bear-market tested...
Bitcoin dropped 15-fold over 5 months in 2011. Add a trip to the zoo to your general education todo list. |
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Don't forget, Koreans love gambling even though gambling is generally prohibited (there are some government-blessed exceptions).
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Going to be a hectic day if I keep looking at the ticker  . I bought in at 1073, hit around 1140 then pop. I am not one to panic sell, but I can't afford to keep losing. Anyone think it will get back to up at least 8-900 this week? You've over invested. If you can't afford to lose any more then, of course, you must sell everything now. Perhaps you can afford to lose a little more but even then my advice would be to immediately sell enough that you can afford to lose the rest. Certainly don't panic sell or panic buy. Do your own calculations and only place orders with a clear mind. |
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The problem with this thread, and the many others like it, is that definitions get pulled out of asses, and it turns into a fight over which rectal definition is right.
I agree. Rather than arguing over whether Bitcoin is "backed", when we all agree on its properties, let's instead talk about what the consequences of those properties are. I'm with both of you in spirit but have a fondness for trolling trolls that all too often bests me. Does that make me a bad person? |
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JK you of all people are not allowed to repeat such idiocy, YOU KNOW THE CODE, Cryptography has ZERO do do we keeping BTC scarce, their is only a simple IF statement in a line of code that either accepts or rejects a block as valid based on the mining quantity that is standing between a finite supply of BTC and unlimited debasement. The mining pools and exchanges have not chosen to edit that line of code on their software, but that choice is all to is guaranteeing BTC rarity, you can argue about how hard/unlikely/self-defeating it would be for them to do that, but it is NOT a cryptographically secured part of the Protocol.
Agreed! Indeed, we could all decide to redifine the word "bitcoin" to mean 1 ounce of cheese. As cheese is not limited to 21 million ounces we must conclude the possibility of inflating the supply of bitcoin without defeating any cryptography whatsoever. JoelKatz is usually pretty sharp but can't always be expected to keep pace with the likes of us. Fortunately, he's not in charge of anything of tantamount importance. |
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"embit" is such an ugly name. I don't want to use that. There was a proposal to use the term "Gox". Sounds great.
I still find email ugly but it stuck. Future convention will be what it will be. For now, I'm enjoying the freedom and pronouncing "mBTC" "mill" (or "mills" for the plural). |
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I can make neither head nor tail of your "shorthand markup" column.
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Personally, I see backing as an IOU - a liability - where the thing that is backed has a promise from someone else that they will give you something in return.
Precisely! Thank you. It's true that gold and oil have value but are expensive to store and transport. Paper and database entries are much more efficient as media of exchange but lack sufficient value density and stability. Certainly, being backed by the former imbues the latter with some value and stability, but the newly forged currency can only be as reliable as the backer itself. Bitcoin is still very young and is far less reliable as a store of wealth than practically every alternative. However, if Bitcoin (or any crypto-currency) continues to grow in value and stability, it will eventually establish a reputation greater than any group of people can muster, becoming more reliable than any gold-backed currency can ever be (but still less reliable than physical gold). That is, of course, unless someone can invent a currency backer which is not, at bottom, a group of people. |
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Maybe that is where my theory is wrong. I view the re-distributive power of monetary inflation as only occurring when it is not predictable (i.e. in the way the fed does it). If we were to know 100% for sure what the fed would do next week, there wouldn't be a problem being ready for it. In fact, we can see this type of preparation whenever the fed discusses tapering (or the converse, more "QE"). This type of knowledge would actually take the teeth out of monetary inflation, as prices would adjust before the new money could be spent. I could certainly have this wrong; any thoughts?
Inflation implies wealth redistribution in all cases. I agree that the system you propose lacks the teeth of "Quantitative Easing". I think it's the ability to print more "when more money is needed" that Keynesians argue can be used to "smooth out the bumps" in economic growth and thereby boost the efficiency of financial planning. I'll admit that I'm far from an expert on such matters. Unfortunately, even a basket of goods is subject to changes in supply. As examples, natural disasters can decrease supply and technological innovation can increase supply. On the other side, demand can also change; people want bananas instead of oranges this month, next month they decide apples are the hot fruit (my wife is eating an apple right now, hence the fruit example  ). I completely agree (and I've just finished an apple myself). However, I believe we were concerning ourselves not with prices in the short term, but with the general price level in the long term. I don't believe that the price fluctuations brought on by supply and demand as you have illustrated are within the purview of monetary inflation. Perhaps I can make my illustration more direct: Let us assume that approximately 2% of all bitcoins are truly lost each year. Let us define a "fixcoin" as (100% - 2%)^n BTC (where n is the number of years since Bitcoin's genesis). Thus: - in 2009, a fixcoin was equivalent to 1000 mBTC;
- in 2010, a fixcoin was equivalent to 980 mBTC;
- today (2013), a fixcoin is worth about 922 mBTC.
By pricing everything in fixcoin rather than bitcoin (including Bitcoin wallet balances) we bring the concept of a 2% per year monetary inflation to life. The only difference is that, instead of going to miners, the extra money appears in Bitcoin wallets as though it were 2% interest. As I remarked earlier, I don't see how an entity's financial plans can be undermined by receiving such interest. I believe it would help because static inflation would offset, at least partially, the dynamic deflationary effects of coin loss. Doing so would give people a certain offsetting amount that they could plan against. Basically, given uncertainty in one direction certainty in the other direction helps balance things out, although admittedly not entirely.
I agree that the inflation would partially compensate for the deflationary effect of coin loss. However, you've not convinced me that the balance achieved provides any economic or planning benefits whatsoever. If you can expand on and supply concrete justification for your intuition here then you'll receive more constructive feedback. There two other benefits I see as well and, although these are a bit off-topic for the purposes of this thread, I'll put them in here.
1) Miners would have further incentive to continue providing network security.
2) Fees could be kept low, as miners would will receive rewards from #1.
Certainly, such an inflationary scheme would be a boon to long-term network security. However, there are serious drawbacks to consider and, as you note, this is somewhat off-topic. |
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Bitcoin is not issued therefore it is not backed. Bitcoin's lack of central authority is a strength, not a weakness.
For an established currency, a backing is a liability. The backing tells us that some part of the value or stability of the currency is dependent on the promise of some entity. What would happen if that entity were to break the promise? (see: Nixon Shock)
If Bitcoin can establish value and stability without a backing, more power to it. If Bitcoin can be taken seriously without a central authority, so much the better. We should not be shoe-horning Bitcoin into the model of centrally issued tokens to gain approval; we should be celebrating Bitcoin's potential to provide a viable alternative to centrally issued tokens as a means of exchange.
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I have over one trillion nBTC. Where does that place me?
That puts you at a rank of about 1070. Well done! |
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But that's just it. The deflationary effect of lost Bitcoins is already offset by the risk involved with holding them. There's already balance.
I think I am starting to see what you are saying here. Is it something along the lines of "people know about the risk of losing Bitcoins and account for it accordingly"? Sorry, I'm probably being dense on this one... Don't worry, I was oversimplifying my point and I guess that led you astray. Some people have claimed that general coin loss causes people to hoard bitcoins but they fail to account the risk of personal coin loss faced by the hoarders. Your latest post has given me a much better understanding of what you're thinking about and it seems I was slightly off-topic; my apologies. I feel that we are aiming for the stability of subtly different things.
I am looking to make economic calculation as easy as possible. The more stable prices are (i.e. the degree to which they are likely to change over time) the more easily someone can plan for the future. I'm certainly with you here. Planning should be made as fruitful as possible and this implies eliminating all unnecessary uncertainty in the currency itself. However, I don't see how predictable monetary inflation (which is essentially predictable wealth redistribution) can fundamentally assist planning. In particular, how would having more money that expected impact negatively on a person's plans? Coming at this from another angle: if price stability is the goal then why not price everything, including bitcoins, in terms of a more stable commodity (perhaps a basket of goods and services). Instead of having a fixed balance and falling prices, people will see their balances rise (like receiving interest) and enjoy stable prices. Please tell me what you think about the following scenario (you may assume no variation in the size of the underlying economy, no coin loss, no block rewards, and no divisibility limit):
I design an altcoin called Deflatacoin. This is identical to Bitcoin but where on each day, the balance of each wallet is reduced by 0.1% (0.1% of all deflatacoins are destroyed). This causes serious price deflation (about 44% per year).
Is this price deflation economically problematic? Should it be countered by an equal amount of monetary inflation? Is this currency more stable with or without the extra inflation?
I would say it is not problematic as it is a static amount each day, which is something people can account for. If the amount were variable, as in the case of lost Bitcoins, there is no way people could account for such loses. Giving them a know offsetting amount allows them to plan better, although still not perfectly. Thanks, I see. But if the unpredictability of coin loss is the problem, how would predictable monetary inflation help? Surely the sum of these two effects will be practically as unpredictable as the former. |
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I am a bitcoin millionaire.
What is a "bitcoin millionaire"? Do you have a million bitcoins? |
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It is very interesting to try to grok what might happen in the far future if Bitcoin has taken significant stake in economies. We can scale all the way down to 1 Bitcoin so 100% loss is certainly not likely in our, or our great grand childrens, lifetime.
To clarify: Even if a whopping 10% of all available bitcoin were lost every single year it would take more than 175 years (from genesis) to reduce the total supply to 1 BTC. This is about as far from "problem" as it's possible to be. |
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Again, I don't seek to find a perfect equilibrium, as I'm fairly certain that isn't possible, but instead to offset the deflationary effect of lost Bitcoins. For me, the best way to do this seems to be via predictable inflation.
But that's just it. The deflationary effect of lost Bitcoins is already offset by the risk involved with holding them. There's already balance. I feel that we are aiming for the stability of subtly different things. Please tell me what you think about the following scenario (you may assume no variation in the size of the underlying economy, no coin loss, no block rewards, and no divisibility limit): I design an altcoin called Deflatacoin. This is identical to Bitcoin but where on each day, the balance of each wallet is reduced by 0.1% (0.1% of all deflatacoins are destroyed). This causes serious price deflation (about 44% per year). Is this price deflation economically problematic? Should it be countered by an equal amount of monetary inflation? Is this currency more stable with or without the extra inflation? |
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when it went down from $30 to $2 i was so close to turning off the lights and walked out never to return.
Oddly enough, this is when my faith was restored. I bought many coins as they went below $5. It was the sudden rise in value from $1 to $8 (May 2011) and corresponding explosion in greedy, mindless evangelists on the forum (I was a lurker at the time) that had me selling furiously and recommending my friends do the same. I recall one of my friends, about to retire, asking me about my bitcoins. He was interested in buying some from me (1000 BTC) as a speculative portion of his retirement portfolio. I advised against it.  |
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