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801  Bitcoin / Bitcoin Discussion / Re: Bitcoin becomes a transport protocol (?) on: September 20, 2012, 08:25:59 PM
If you can figure out how to do that and be sybill-attack resistant you can be the next Satoshi.

It is described in the link in my sig. Initial coin distribution is trickier, but could be solved by using a bitcoin-like chain until a sufficient amount of shares are purchased. Or by making it a community effort and awarding shares prior to the start of the chain.
802  Bitcoin / Bitcoin Discussion / Re: Bitcoin becomes a transport protocol (?) on: September 20, 2012, 08:03:56 PM
If you could find a trusted centralized entity to determine what transactions, and in what order, should go in the blockchain, you wouldn't need mining at all.

Or you could find a decentralized entity that determines who puts what transactions in the chain, without mining.
803  Alternate cryptocurrencies / Altcoin Discussion / Re: Solo mining LTC keeps moving to new block - Normal? on: September 20, 2012, 01:27:16 PM
You are building on a block chain, so your software updates when someone else finds a block so that you continue the chain. It doesn't hurt your ability to find new blocks if someone else found one. It's just another piece of random information added to the hash.
804  Economy / Service Discussion / Re: Butterfly Labs CEO 25 Million USD Mail Fraud — A Concise Summary of Evidence on: September 20, 2012, 01:20:55 PM
The title says Re:, was this split from another thread?

And didn't BFL encourage USD pre-orders instead of BTC, saying they would be easier to refund if the product didn't ship or something? I don't keep up with this stuff.

Sorry to hear this though, can't wait to see the response from BFL. Why would they put in a convicted felon as their CEO?
805  Economy / Economics / Fascinating information on saving vs. consumption on: September 19, 2012, 11:06:42 PM
I see a lot of people saying economic quips in defense of bitcoin such as:

He did contribute to the growth over the last 10 years though, by not pulling goods and services out of the economy. He earns a general interest rate of return. All those shoes he produced are in the economy, creating even more growth. Hence, by not spending his coins he is investing in the general economy.

Aha, but again you are ignoring the time-value of money. The producer produced in the past, and deferred his consumption. It is from his delay of consumption that he "earns" more consumption over time. By not consuming something on each day, he enables that thing to be consumed by another market participant - by opting out of consumption, he enables others to opt-in for that same consumption at that price. If he consumed, then he'd be "taking" resources from others (by bidding up the price of those resources upon his consumption of them).

Also remember that by saving that money, he is not taking one iota of wealth from anybody else. Further, everyone has the exact same opportunity to enjoy the benefits of the appreciating money. Anyone who defers his consumption will be rewarded in the exact same way, in proportion to the consumption deferred. There is no special privilege, other than the skills, work, and talents of the individual producer - and these things are bestowed by nature. If you're upset about the unfairness of nature, then take it up with nature Wink  

So I wanted to see if any Austrians believe this.

I found this article on Wikipedia: https://en.wikipedia.org/wiki/Paradox_of_thrift

It is a Keynesian idea that states: "The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth."

Under its criticisms:

"The second criticism is that savings represent loanable funds, particularly at banks, assuming the savings are held at banks, rather than currency itself being held ("stashed under one's mattress"). Thus an accumulation of savings yields an increase in potential lending, which will lower interest rates and stimulate borrowing. So a decline in consumer spending is offset by an increase in lending, and subsequent investment and spending.

Two caveats are added to this criticism. Firstly, if savings are held as cash, rather than being loaned out (directly by savers, or indirectly, as via bank deposits), then loanable funds do not increase, and thus a recession may be caused – but this is due to holding cash, not to saving per se."

So I followed the citation for this criticism, and it is mostly based off of Hayek's discreditation of Keynesian economics. I will quote some things I find interesting.

http://www.auburn.edu/~garriro/cbm.htm

9.3: It is the forgoing of current and near-term consumption, after all, that frees up the resources with which to expand the economy’s productive capacity and make increasing future consumption possible.

[T]he output of consumables begins to rise. And with saving now in excess of capital depreciation, expansion continues in each of the stages of production. The economy experiences a positive secular growth rate[.]

9.4: Is there a market mechanism that brings saving and investment in line with one another without at the same time having perverse effects (e.g. widespread resource idleness) on the macroeconomy?

Some macroeconomists would answer the critical question in the affirmative, taking the market’s allocation of resources to the production of consumption goods and the production of investment goods, the later financed by saving, to be on a par with the market’s allocation of resources to the production of fruits and the production of vegetables.

[T]he Keynesian theory precludes by construction any possibility of there being a trade-off of the sort emphasized by the Austrians.

There is simply no scope in the Keynesian vision for investment to rise at the expense of current consumption. Similarly, market participants willing to forgo current consumption (i.e., to save) in order to be able to enjoy greater future consumption would find their efforts foiled by the market mechanisms that link saving and investment.

The more favorable credit conditions brought about by the increase in saving is the basis for the rest of the story.

Consider, say, a tenth-order good in the form of durable capital equipment. Testing facilities and laboratory fixtures devoted to product development are good examples. More favorable credit conditions could easily tip the scales toward creating or expanding such a facility. In early stages of production, the time-discount effect can more-than offset the derived-demand effect.

Contrary to Keynes’s paradox of thrift, consumption and investment can move in opposite directions.

“Mr. Keynes’s aggregates conceal the most fundamental mechanisms of change.” (Hayek, 1931) It is significant that those fundamental mechanisms are set into motion by the supply and demand for loanable funds—because it was loanable-funds theory, a staple in the pre-Keynesians’ toolkit, that Keynes specifically jettisoned.

9.5: With their incomes they engage in consumption spending, laying claim to most-but-not-all of the output that they have collectively produced. The part of income not so spent, that is, their saving, bears a strong and systematic relationship to the part of the output that is not currently consumed. These unconsumed resources can be made available for increasing the economy’s productive capacity. In a market economy, there are a number of different financial instruments (bank deposits, passbook accounts, bonds, and equity shares) that transfer command over the unconsumed resources to the business community.

What if some income is neither spent on consumption nor offered as funds for lending? That is, what if people—unexpectedly and on an economywide basis—prefer to add to their cash holdings? The increased demand for cash holdings would constitute saving in the sense of income not consumed but would not constitute saving in the sense of an increase in the supply of loanable funds.

An exogenous change in money demand is rarely if ever the source of a macroeconomic disruption. And an occasional dramatic change in liquidity preference is more likely to be a consequence of an economywide intertemporal coordination failure than a cause of it.


9.6: Hence, if capital depreciation just happened to be equal to the gross investment, the economy would be experiencing no economic growth. Typically, depreciation will be something less than gross investment, and the economy will enjoy a positive growth rate, the frontier itself expanding outward from period to period. In the unlikely case in which gross investment falls short of depreciation, of course, the economy would be in economic decline, the frontier shifting inward from period to period.

A major focus of Austrian theorizing is on the market mechanisms that allow for such movements—and on policy actions that lead to a disruption of these mechanisms.
... It also entails a growth rate that is consistent with intertemporal preferences.

9.8: Suppose that in circumstances of a no-growth economy and a natural rate of interest of ieq, people become more thrifty. ... With the resulting downward pressure on the interest rate, the loanable-funds market is brought back into equilibrium.

If we understand the saving that gave rise to the capital restructuring not as a permanent reduction in consumption but rather as an increased demand for future consumption, then we see that the reallocations are consistent with the preference change that gave rise to them.

But with reduced consumer spending and no change—and certainly no increase—in investment spending, the economy has fallen inside the production possibilities frontier.
NOTE: This is in reference to Keynes "paradox of thrift" and refers to what Keynes thought would cause a recession (he did not believe investment spending would increase).

9.12:  Deflation, like inflation, is a secondary issue in the Austrian literature. Growth-induced deflation, that is, the decline in some overall price index that accompanies increases in real output, is considered a non-problem.

Deflation caused by a severe monetary contraction is another matter. Strong downward pressures on prices in general put undue burdens on market mechanisms. Unless, implausibly, all prices and wages adjust instantaneously to the lower money supply, output levels will fall.




I think there is some pretty thorough analysis here of the different mechanisms between the Austrian and Keynes schools of thought on economic growth. However, all of the Austrian ideas consider that saving drives investment. This is, at least at this point in time, most certainly not the case with Bitcoin.

How then could the two posts I quoted initially be accurate? How can the market find a real interest rate, or at least an acceptable one, when so much investment opportunity is hoarded rather than lent? According to this analysis, there would be economic recession. Since Bitcoin is currently such a small market, I think that implies a lack of any avenue for real growth.

This analysis claims that this would be the fault of economic policy or a problem with the market--"dramatic change in liquidity preference is more likely to be a consequence of an economywide intertemporal coordination failure than a cause of it." Does Bitcoin have an inherent intertemporal coordination failure?

How's about some real discussion.
806  Bitcoin / Mining / Re: Why should we invest in ASIC? on: September 19, 2012, 08:39:34 PM
You mean if Bitcoin activity in general was blocked?

This sort of case has been discussed, but more in the context of forced governmental restrictions.  However, the data could still be encrypted to bypass such restrictions, and unless the restricting government planned to block all encrypted data, they would have no way of knowing what is Bitcoin traffic vs what is other traffic - encrypted traffic all looks very much the same.

Encrypted traffic does not all "look very much the same". Before you can encrypt, you must handshake--this is typically a dead giveaway. Even if a handshake was unnecessary, the bitcoin data stream is open to the public and can be monitored, so it would be excessively easy to find encrypted traffic matching the same patterns. The only significant way to combat this is to use steganography or excessive padding to the point where the real data may only be a small portion of the padding. And even in the latter case, it may still be obvious because there are not many protocols that do this sort of thing.

Right now, someone could develop their own ASIC and EASILY have and hold 90% of the hashrate with a small number of devices (say, 200 devices @ 1 TH/s each).  Once ASICs are in the wild, and the hashrate is pumped up to 500 TH/s (my estimate of where it will be after BFL finishes its current preorders), it would take 5,000 of those same devices @ 1TH/s each to gain the same 90% advantage over the Bitcoin network.

So yes, it would make it more difficult and expensive for an attacker to stage a disruption using ASICs.

Why would you need 5,000 TH/s to attack 500 TH/s? If anything, spending a few million to develop your own ASICs and using significantly less power and space seems a lot better than buying 50,000+ GPUs and the power and space requirements that go along with that. Bitcoin is quickly going to approach the spot where there is no profit to be had in mining which means sales of ASICs will stall, especially after the award halve. Who is going to buy specialized hardware to not see a return? GPU mining is only so popular because most everyone already has one. Once ASIC power is the norm, the network can only support so many ASICs per price of a bitcoin. Either transaction fees have to start rising significantly, or the value of BTC has to keep going up for the network to be continually better protected.

PS - The price from existing ASIC manufacturers should probably drop significantly after they recoup the startup costs.
807  Bitcoin / Bitcoin Discussion / Re: Bitcoins: the evil currency of the new century! on: September 19, 2012, 08:02:36 PM
I am totally out of my element when it comes to Tor, but symmetric encryption does not affect the size of the payload, so unless Tor uses some kind of padding scheme (which it certainly might), that is not protection to just say "it's encrypted." However, I believe if someone happens to be watching both ends they can make some very educated guesses about where data is going to and from. But unless it's a honeypot site, they won't know what that data is. However, since most bitcoin data is very similar in bandwidth, I don't think they will ever be able to make a strong correlation in this scenario. Again, I am not a Tor expert, take it with a grain of salt. Some of this may depend on whether or not it's an onion site or in the clearnet, but I think we're talking about onion sites here.
808  Economy / Economics / Re: Bitcoin is a Zero-Sum Game - Long-term interest bearing instruments viable? on: September 19, 2012, 07:33:42 PM
I did say commodity-like, and gold is often considered a commodity, though it has very little practical use. The commodity of bitcoin is how much value can I make by not using it? Rather silly, if you ask me.
809  Economy / Economics / Re: Bitcoin is a Zero-Sum Game - Long-term interest bearing instruments viable? on: September 19, 2012, 06:18:38 PM
The price of Bitcoin's is not being driven by the output of the economy. But more accurately it is the demand for Bitcoin (or more appropriately the push from fiat by the actions of central banks all over the world) that is driving up the cost of Bitcoin.

The result is that the price change is not conveying correct information about the growth rate of the overall Bitcoin economy.

This is the nature of a currency-like commodity. The commodity is always going to interfere with the function of the currency.
810  Bitcoin / Bitcoin Discussion / Re: Mining reward on: September 19, 2012, 05:18:50 PM
I think this poll will show all the people who go on about how "Bitcoin is doomed because it doesn't have unlimited currency creation" are completely missing the point. The limited aspect of Bitcoin is a signifigant factor with regards to why people prefer Bitcoin to its competitors.

You think that a poll, on a bitcoin messageboard, will show that people like the way bitcoin is? Egads, stop the presses.
811  Bitcoin / Bitcoin Discussion / Re: What will the state do? on: September 19, 2012, 03:55:10 PM
Just federal debt alone, is 16T, 1.1T is just what 7%? yeah that's what I consider tiny. Not to mention we have state and municipal debts, that has already cause a number of municipality to declare bankruptcy. This is just government debt. US companies have another 40T of corporate debt.

It's >25% of foreign-owned debt. The Fed and other US agencies own something like >20% of the total debt, which is fairly meaningless. Any money the fed makes on interest is transferred to the treasury. What do local and corporate debts have to do with this thread?
812  Bitcoin / Bitcoin Discussion / Re: What will the state do? on: September 19, 2012, 01:18:05 PM
China owns tiny portion of US debt, and almost no US asset.

I'm not sure how $1.1T can be considered tiny.

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt
813  Bitcoin / Bitcoin Discussion / Re: What is the real risk of a 51% attack? on: September 19, 2012, 03:05:38 AM
A first world government could launch a 51% attack on Bitcoin, but it would be quite pointless. The blockchain would just be reset back to before the attack happened and a patched client that rendered the 51% attack useless would be released.

Interesting... This makes me feel all warm and fuzzy inside. Is there any hardcore assessment of the risks/defenses?

It shouldn't give you the warm fuzzies because it's inaccurate. If a government wants to take the chain down, they ignore all other miners' blocks and refuse all transactions. This attack can't be "patched out", a completely different metric other than hashing power for the block chain must be devised.

There's no real hardcore assessment. Anyone willing to devote a couple million could probably accomplish it.
814  Economy / Economics / Re: Bitcoin is a Zero-Sum Game - Long-term interest bearing instruments viable? on: September 19, 2012, 02:56:27 AM
He did contribute to the growth over the last 10 years though, by not pulling goods and services out of the economy. He earns a general interest rate of return. All those shoes he produced are in the economy, creating even more growth. Hence, by not spending his coins he is investing in the general economy.

If anyone can actually link me to a non-bitcoinomist that has ever said anything remotely close to this, I will give them a cookie.
815  Economy / Economics / Re: Bitcoin is a Zero-Sum Game - Long-term interest bearing instruments viable? on: September 19, 2012, 02:52:51 AM
However, I don't see this as a bad thing... people borrow too much money, and it is, in large part, due to inflation being present in the money we use.  Inflation encourages overspending and too much debt.  Deflation encourages saving and too little debt. Maybe it is time we bring deflation into our lives and see what happens?

People borrow too much money because the real wage-earners have been titanically screwed in favor of the financiers for the last 3 decades or so. Unsurprisingly, this came about the same time that money became unbound from gold, and banks were allowed to print as much as they wanted from thin air. Saving money is punished when the banks don't need your money and just print their own. It isn't inflation that encourages overspending and too much debt, it is the central banking system that is designed to separate the classes even further that does so.
816  Economy / Economics / Re: Scaling bitcoin to world economy is unrealistic. on: September 17, 2012, 10:50:31 PM
Will you change your thesis if it turns out that people do not, in fact, want what you think they "should" want, or will declare your theory to be perfect and blame the world?

It is not necessarily what people do or do not want, but the nature of money. There are many, many things that exist as stores of wealth, there is only one that works really well for trade--and I just mean money in a general sense. Bitcoin has to compete with all the other stores of wealth and loses almost all of its utility in trade in the face of a "better" cryptocurrency, whatever that might be. It is indeed the newest users of bitcoin that are always taking the risk that the demand for bitcoin will increase, or at the very least stay stable. At what point will they decide that the risk is no longer worthwhile?

It's an impossible call to make that any currency will remain around forever, in which case there will always be people left holding the bag. But as I've stated in various posts and in various ways, there are fundamental flaws with bitcoin that will make it very unappealing to new markets when the free market gives them a choice in the matter. People won't use gold loaned from the king's vaults while silver lies around simply needing to be dug up. A bad analogy, but close enough.
817  Bitcoin / Development & Technical Discussion / Re: Security 'expert' clams bitcoin vulnerability. Presenting at Ekoparty Conf. on: September 17, 2012, 10:21:27 PM
I trust that Sergio is working with bitcoin's best interests and there is nothing to fear, but this thread reminds me of someone who claimed to have found a vulnerability several months back on some website, but I don't remember what (or if anything) became of it.
818  Bitcoin / Bitcoin Discussion / Re: Is a bitcoin can be divided with more than 8 zeros or not?? on: September 17, 2012, 10:13:02 PM
The width of the field is not the problem, the meaning is.  Hiding silly codes in the top few bits is just as much work as just making the field wider and changing the scaling factor.

Doesn't require more bandwidth or storage though. Smiley

Quote
And all of this talk of digits makes me sad.  The field is binary.  log22.1e15=~50.899 bits

Could you explain further please.
819  Economy / Economics / Re: Scaling bitcoin to world economy is unrealistic. on: September 17, 2012, 10:06:15 PM
Constantly promoting your own cryptocurrency is one thing but saying everyone who uses bitcoin is stupid to do it is sinking low.

That is not what I said. Although it was a harsh criticism, it was referring to people that want to hold on to the idea that a currency will ever appreciate and that no one will be left holding the bag. But people will be left holding the bag if something legitimately better comes along. I was trying more to point out the flawed idea of bitcoin in the face of competition. Bitcoin has no way of competing against a currency that actually promotes trade. Maybe it will be a store of value compared to fiat, but it will unlikely be a better store of value than a better cryptocurrency, because few will want it over the better one. It is speculation though.
820  Bitcoin / Bitcoin Discussion / Re: Is a bitcoin can be divided with more than 8 zeros or not?? on: September 17, 2012, 09:55:22 PM
I'm not sure what you wrote means znort, but 64 bits is 18.4x10^18, while all the satoshis in existence is 21x10^14, meaning you can get 3 more zeros for free, and a fourth if you presume no one will have more than 9.9999...m bitcoin in a single account.

edit: beaten
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