If 10 people on an island have a gold coin each and only use these to trade with, what happens when an 11th person arrives on the island? Will the value of the gold coins increase, decrease or stay the same?
Why are you asking the question? What does the answer tell us? I can't read your mind, so I don't know why you think that an expansionary supply is good and a fixed supply is bad. Consider the same example where they don't have to trade in gold. Would the 11th person try to use an alternative money?
Surely he can exchange his labour in return for gold or whatever else he needs? You either take the approach that you're going to have competing, fixed quantity monies, or you try to let a single currency flex with the user base. Sure, you can have competing currencies (indeed, should). However, if you can use a money which can be flexible to the user base, it makes life easier. I'd suggest reading Hayek's Denationalisation of Money. I've read plenty of Austrian theory, thanks, and agree with much of it. Most of the ideas are better than what we have to put up with now, but we have a chance to make a better system than using simple commodity money. You have yet to tell us why what you are proposing would be a better system, and what is wrong with the system as it is. You've given a value statement, but you haven't explained why the number of coins needs to grow with the user base; what's the reason behind it? What bad things will happen if things are not changed in the way that you suggest? How do you suggest implementing this? How do you decide how much every new user should get? Additionally, we are starting from a point of obscurity - hardly anyone has heard of or use Bitcoins. Do you think Bitcoins would become popular if the supply was already fixed and no more minting could occur? If you limit supply prematurely in 10 years, it would have just as terminal an affect as if you did it now.
I believe that if Bitcoins become popular and are being used 10 years from now, their quality of stability will add, rather than detract, to their attractiveness. There is no guarantee that this will happen, but, independent of all other factors, monetary stability is a plus. |
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3. While the accounting is clean. The market seems subject to manipulation. For example, this forum is obviously a tightly knit group relative to the worlds general population. And this tight group has all the bit coins and decides the rules of how they operate. For example it would be trivial for you bit coin rich to decide that you would keep the community in close beta for a year or two. Thereby assuring yourselves an initial hidden stash. Those coins could be considered "lost" to the latecomers. Then after commodity values begin to rise, this group would control say 30% of all currency. That is as close to a fiat currency and a federal reserve as I've ever seen.
Am I missing something?
It is a bad idea to keep out people, because it mean that your market is limited. There are less goods and services to buy. It would only make sense if you want relative power over others. However, if you're interested in wealth, you would instead open the market up to more people. Right, he's somehow assuming that Bitcoins will be forced on us all and the developers will become our lords, somehow. It just doesn't work like that in a free market where anyone can easily come up with a competing system and easily switch to it. |
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I'll have to disagree that Bitcoin is like a ponzi scheme; there is nothing pyramidal in its nature at all. I believe this criticism stems from a flawed theory of value.
I hate for this to be my first post because I have lots of nice things to say to Satoshi Nakamoto and the team. I'll have to put those in another post though. My first though when I saw bitcoin's disbursement model is that it is structured like a ponzi scheme. Or at least structured like systems people often express frustrations over. Ponzi like things... 1. It may seem like coins are somehow distributed "fairly" but in reality, 1/2 of all bit coin value is distributed to the initial bitcoin operators. (first four years). If you expect bitcoin to go mainstream (exponentially growing number of users, over say 20 years). Then you've created a class of "landed gentry" based upon arrival time rather than outside commodity value. Ponzi designed his scheme the same way. Early "investors" see disproportionate benefit even though everyone is given the feeling they start equally. Well, the coins have to get into distribution somehow. We can't just say "here's the money supply" and be done with it. The way it's done now rewards the early contributors to the system, yes, but without those early contributors, there would be no system. We can discus a better way of distributing the initial set of coins, but they must be distributed somehow. 2. Initially bit coins have limited commodity value. No matter how many you have, there are simply few commodities you can buy with them. Relative latecomers are expected to bring "your" commodity value with them. The more relative latecomers you attract, the more your existing savings is expected to increase in commodity buying power. Ponzi would have been proud.
I don't quite understand what you are trying to say here. Are you saying that as demand rises, Bitcoins can be exchanged for things of more value because people demand them more? Well, that is true by definition. 3. While the accounting is clean. The market seems subject to manipulation. For example, this forum is obviously a tightly knit group relative to the worlds general population. And this tight group has all the bit coins and decides the rules of how they operate. For example it would be trivial for you bit coin rich to decide that you would keep the community in close beta for a year or two. Thereby assuring yourselves an initial hidden stash. Those coins could be considered "lost" to the latecomers. Then after commodity values begin to rise, this group would control say 30% of all currency. That is as close to a fiat currency and a federal reserve as I've ever seen.
Am I missing something?
Yeah. The biggest thing you are missing is that Bitcoins are a voluntary system. If the developers are dishonest, the value of the currency goes to zero. If the early adopters hoard, then other people can make a profit by selling their more valuable Bitcoins. For every action, there is an appropriate reaction. Deflation is bad. Unless of course you hold lots of cash-on-hand. In that case it is invaluable. Early users that hoard bit coins are rewarded for doing nothing to help the bit coin ecosystem. They are simply "lords".
The color purple is bad. Unless of course, you happen to have a lot of purple dye on hand. In that case it is invaluable. Early users that hoard the purple dye are rewarded for doing nothing to help the purple dye ecosystem. They are simply "lords". See, I can assert things if I want to, too. Doesn't make what I say any more than my own subjective hunch. |
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If you're right, and an expansionary money supply is what people want, then people will choose it.
History is not on your side. There was a stable supply of money once in the form of gold and silver but from about the 16th century onwards people picked an expansionary one - this was not forced on them. The first formalised bills of exchange preceded the formation of central banks by somewhere in the region of 200 years. I guess we will see in time - though in actual fact while people are also using other possibly expansionary monies this grand austrian experiment will be somewhat corrupted in terms of experimental purity. What does this have to do with what I've said, or Bitcoin? I haven't said anything about credit. Honest credit is a legitimate function of a free market economy. |
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... I could well imagine that the Bitcoin approach would be the hare, while the alternative expansionary (with user base) money would be the tortoise. We know who won in that race....
You could say that, but that is your hunch based on your imagination, not an objective truth about the future. I assume you agree that the value of Bitcoins will increase, while there is limited supply and growing demand? Follow that rational through and see where it takes your path of thought.
I already have, along with many others. Perhaps you'd like to read "Deflation and Liberty", by Jörg Guido Hülsmann? |
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I sent 21 million bitcoins, and I'm still waiting...
Made my day xD ^^^  |
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I just read this thread - quite a long one there.
I agree with Suggester. I also believe that a competitor to Bitcoin which works in a way he/she describes will be the better currency in the long run. While I agree that competition will run its course and this will become obvious, it would be a shame for Bitcoin - it does so much right and in a clever way, that it would be a shame to see it lose out in the longer run; the team deserve much credit, IMO.
One of his first posts made the point worth repeating: keeping the system as it is, is like a ponzi scheme. As we all know, these have a habit of not lasting the test of time.
I see the usage of CPU resources as a potential roadblock to Bitcoin - better alternatives here may be found. If legal tender collapses, that's a potential roadblock as well, since that takes away some motive for wanting to use things like Bitcoin. In short, there are many things that could happen between now and the future, but you know what? The best way is to experiment and try. If you're right, and an expansionary money supply is what people want, then people will choose it. If I'm right, and a stable money supply is what people want, then Bitcoin will prosper and grow. Either way, the consumer wins, and therefore, we win. Without competition and the test of the market place, we could never know what the consumer wants for sure. There is nothing shameful about this; it's all part of the process of creative evolution, and Bitcoin has already captured an important part of that history. I'll have to disagree that Bitcoin is like a ponzi scheme; there is nothing pyramidal in its nature at all. I believe this criticism stems from a flawed theory of value. |
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If the currency really takes off, then 1000 BTCs could be worth quite a bit in the future. One problem I see with this approach is that the wallet file might be completely unreadable in the future, and thus not spendable.  |
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...
The reason for doing the above, is not to create an inflationary environment, but to keep the number of coins relative to the user base. Failing to do this, will put deflationary pressure on the currency; remember, increasing the demand (number of Bitcoin users) for the currency, is the same as decreasing the quantity (of coins in a fixed Bitcoin user base). If you want to retain a steady, neutral, value of Bitcoins, then this needs to be considered.
Why would we want to retain a steady, neutral value of Bitcoins? This would mean we would artificially decrease the value of each Bitcoin when more of them were demanded, and artificially increase the value of each Bitcoin when less of them were demanded. This seems completely inverse to what supply & demand is telling you. Therefore a constant rate relative to the user base would be ideal. ...
Ideal in which sense? I'm sure an algorithm could be formulated to achieve the above, with the constant rate not being so high as to be inflationary - the target would be to keep the number of coins proportionate to the user base, thus creating 0% inflation*.
How is 0% inflation defined? [NOTE: There may be an argument for the minting rate to track 'GDP' or some such - perhaps based on the number and value of transactions taking place?
GDP is a poor and unreliable indicator. How would you track the number and value of transactions taking place? How would you quantify non-monetary aspects of the transaction, that can only be measured subjectively by the actual players involved? If people are economically active enough to have their node minting coins, maybe the user base may be sufficient/better in creating stability. This is probably another debate in itself, but the above point needs to be agreed on first.]
I'm sorry, but I don't agree. I've seen a lot of "we should do this and that" with no backing arguments. I'll need a little more than just assertive statements to be convinced.  |
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all fixed quantity money schemes must be deflationary by definition under conditions of economic growth.
"The correct view is that the free market should determine the amount of money that is available."
price deflation and monetary deflation are equivalent when viewed from the point of view of the scales that weigh money against everything else, which is all that most people care about. The same applies to monetary inflation and price inflation.
That much should be obvious to anyone except an austrian or keynsian fanatic.
I also agree that the correct view is that the free market should determine it. However, I am curious how you can see price deflation and monetary deflation as equivalent. Do you want to explain why this is, and how you arrived at this conclusion? Furthermore, I'm not clear on how you see monetary stability a bad thing, and you are implying that it is. The point is, the bitcoin user base isn't fixed - the number of coins need to grow with the user base. If it doesn't then you are increasing the value of the coins already held by existing users. Therefore, the more popular bitcoins become, the more valuable each coin will get. You've given a value statement, but you haven't explained why the number of coins needs to grow with the user base; what's the reason behind it? What bad things will happen if things are not changed in the way that you suggest? How do you suggest implementing this? How do you decide how much every new user should get? "Therefore, the more popular bitcoins become, the more valuable each coin will get." Which is what simple supply & demand would dictate. Let me give my own value statement in the form of a question, in return: What would happen to the purchasing power of all existing gold users if we could somehow conjure up a 400oz bar of gold out of thin air and give it to every citizen who immigrated to North America? I recommend you read these threads for further info: http://bitcointalk.org/index.php?topic=376.0http://bitcointalk.org/index.php?topic=382.0http://bitcointalk.org/index.php?topic=57.0And here is some further reading: http://blog.mises.org/6828/the-principle-of-sound-money/http://mises.org/Community/blogs/lilburne/archive/2009/06/19/224252.aspx |
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... Monetary deflation and price deflation are not equivalent in any way, and they cannot be conflated (which is what scepticus is attempting to do). One is a cause and the other is a potential effect. They may be linked in a causal way but they cannot be substituted for one another. All discussion which does this is nonsensical noise.
...
Thank you. He might not be making the conflation intentionally; after all, the discussion is conflated when we learn and study about economics in school. Many people are simply not aware that they are talking about two different things. I admit that I've tripped over this many times in the past, myself. |
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I also agree that the correct view is that the free market should determine it. However, I am curious how you can see price deflation and monetary deflation as equivalent. Do you want to explain why this is, and how you arrived at this conclusion? Furthermore, I'm not clear on how you see monetary stability a bad thing, and you are implying that it is.
if you presume that price deflation is OK and monetary deflation is bad, presumably you'd also hold that monetary inflation is bad and price inflation is OK? No, I wouldn't, because general price inflation without monetary inflation means that society as a whole is getting poorer and worse off. There might not be anything immoral with the situation on the face of it (unlike monetary inflation as practiced), but it is not desirable. |
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Subscribed; definitely something to debate. Even on the pc, downloads will eventually reach an unwieldy point. It's an inconvenience to first timers even today. This could also help with privacy if it "flattens" the older transactions.
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The total money supply of USD, for instance, is somewhere between $1 Trillion and $10 Trillion: http://en.wikipedia.org/wiki/Money_supplyNow imagine the extreme scenario where Bitcoin replaces all USD transactions in the world: That would mean that each Bitcoin would be worth approx. 1e13/2.1e7 = 480,000 USD. The smallest possible unit would be worth 480,000/1e8 = 0.48 cents In other words, even in most wildly optimistic future scenario, a divisibility of 8 figures would more than suffice. I think you made a pessimistic mistake in the calculations. I get 10 trillion / 21 million BCs = $476/BC. The smallest possible unit would be worth 0.000476 of a cent. Actually, you were right and I was the one that screwed up, by missing 3 zeroes. My bad. A trillion dollars is truly a huge sum.. |
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If bitcoins are backed by electricity(sort of) what effect will carbon taxes have?
Does It mean bitcoin will be supporting the government by paying it massive carbon taxes?
The government is proposing $40 a tonne carbon taxes which will pretty much double my electricity bill.
Carbon taxes are something that is not only a scam but something that will never happen. You can debate with me on this point on another thread (preferably on the off-topic area) as to the merits or lack thereof for carbon taxes, but the political support for the idea simply isn't there in Congress, and too many people in the U.S. Congress want to get re-elected to vote for the idea before November. It would also be nearly the first thing proposed for repeal by the subsequent congress if it ever were enacted during a lame duck session. The votes simply aren't there for it to be passed. As for the role of bitcoins, I think it is a wrong notion to make that bitcoins represent electricity in the first place. They don't. What they represent is a method of distribution more akin to a lottery where people have to submit millions or even billions of "tickets" with the off chance that one of them might be a winner. That it may consume a whole bunch of electricity to produce the bitcoins and those who squander electricity strictly for the purpose of creating bitcoins may have to pay some extra taxes for that privilege, it isn't and should never be something tied directly to the value of bitcoins in the first place. Also, bitcoins represent that effort that has already been expended in that manner, not the future effort that will happen. The rationale of a carbon tax is to discourage the future generation of energy that would supposedly produce CO2 into the atmosphere, which would imply that it would be the generation of bitcoins that is the issue and not the use of already generated bitcoins. The amount of energy needed (including CPU processor time and network bandwidth) for processing bitcoins is relatively trivial and in fact quite comparable to other currency transactions. To reiterate, bitcoins don't represent electricity or CPU cycles or any such nonsense, but represent a mathematical difficulty to prevent a widespread devaluation of the currency. That is a huge difference. I should have pointed out it is the Australian government I am talking about.They have the green fever very badly and will bring it in for the votes.In my opinion it is a con-job on us all.Thanks for the explanation on bitcoin being viewed as a representation of electricity,it seems to be a widespread misconceptioin.I guess once all the coins have been generated the energy usage will drop significantly,unless the amount of coins ever changes.... The funny (and sad) thing here is that carbon is a fundamental element of life. Sure, too much of it in the atmosphere in the form of CO2 isn't good, and sure, humans are adding to atmospheric concentrations, but compared to all the other problems on this earth, I think this one is pretty far down on the list. A small boost could even be beneficial. I'm all for clean, green technologies, but it seems that whenever CO2 taxes are implemented, some people get rich and a lot more people get screwed. |
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Thanks to those who have flipped a few coins my way as well, especially Mr. 1337! |
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I would love to see an explosion of Bitcoins on the web; I think slowly, more and more people are becoming aware of it. It is already far more successful than alternatives such as Ripplepay (at least the last time I checked).
Hi, ripplepay is not an alternative to bitcoins, it is complementary. Leaving aside some issues I have with the bitcoin model for the moment, the power of a combination of a cryptocurrency with a peer to peer credit network like ripple is awesome. bitcoins are cash, ripple does credit. Any cash system will always get credit derivatives of it created, since if a system works as cash then it must be scarce, and demanded, which naturally causes credit derivatives to appear. bitcoins can be used to clear debts accrued in ripple. in particular, ripple provides for peer to peer credit clearing. Currently the residual debts left at the end of a ripple chain must be cleared outside the system using whatever currency the two parties agree (the debt can even be settled by a favour, like having the debtor wash your car or something). But when these dents are settled for money, the two parties still have to go to a clearing house like a bank to settle the debt. however with cryptocurrency, it becomes possible to settle debts peer-peer without using the mainstream clearing houses. This also opens the possibility of having automated settlement - that is, when your ripple connection hits their credit limit with you, the system can be setup to automatically transfer bitcoins to settle the debt, even if both parties are asleep. THis would help to ensure that the ripple network maintains maximum liquidity, and makes ripple more attractive to maerchants, who'd get paid immediately rather than havnig to settle debts outside the system after the fact. This is quite an interesting post... this could be a valid use case for RipplePay and would provide a layer of trust for the extension of credit using Bitcoin. I think the routing would be complicated once both interest rates and transaction fees come into play; how do you figure which is the "least cost" path when it is dependent on how long it takes you to pay back the debt? Could get messy... but I'm sure there are ways around this. |
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The narrative that suggests that if you cause the scales to tilt full swing in one particular direction or another then everything will be well is a delusion whether it is peddled by austrians or keynsians.
That much should be obvious to anyone except an austrian or keynsian fanatic.
An Austrian would consider many types of deflation a good thing, but it doesn't mean that they consider all inflation a bad thing. It's my experience that someone throwing around phrases like "fanatic" has already made up his own ideas in his mind. Still, we can try to have a reasonable discourse |
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all fixed quantity money schemes must be deflationary by definition under conditions of economic growth.
"The correct view is that the free market should determine the amount of money that is available."
price deflation and monetary deflation are equivalent when viewed from the point of view of the scales that weigh money against everything else, which is all that most people care about. The same applies to monetary inflation and price inflation.
That much should be obvious to anyone except an austrian or keynsian fanatic.
I also agree that the correct view is that the free market should determine it. However, I am curious how you can see price deflation and monetary deflation as equivalent. Do you want to explain why this is, and how you arrived at this conclusion? Furthermore, I'm not clear on how you see monetary stability a bad thing, and you are implying that it is. |
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Bitcoiner, before someone does delete this thread, do you know if my debug.log should have "proof-of-work" in it. It only has a log of khash/s. Is this correct or is my client/setup borked? I ask because in the thread you refer to, it would appear that it should be in my logs but isn't  I unfortunately can't answer this question cause I have no idea  . I think one of the mods would probably be able to help out with this one! I've also seen a couple of threads related to this; could it be that "proof-of-work" only appears once coins have been generated? |
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