I find this concept is hard to explain to people, but the price of bitcoins and the number of bitcoins is irrelevant. If say half of all bitcoins were lost suddenly then the market would adjust. Assuming the same demand, the remaining coins would simply be worth twice as much. Since they are *basically infinitely divisible this is easy to accomidate.
Compare it to gold again. If half the worlds gold were to disappear then it's scarcity would be higher and so would the price. This could be true even if there were so little gold that it were traded in atoms instead of ounces.
RodeoX, you might like Murray Rothbard's explanation in the first part of his book What Has Government Done to Our Money? He gets to the question in chapter 8. It's not exactly easy reading up till that point, but the thought experiment he gives in that chapter is understandable enough to explain to your grandmother. |
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(Not saying I agree with this viewpoint, but I think there is merits and people should think about this)
Since I don't see possible hoarding as a problem, I'll stick with bitcoin, but thanks for the thought. A lot of economists have said that hoarding is not a problem. I think there is merit to what they have said, and you should maybe read what they have to say and think about it. |
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This is a discussion I had on another forum: Him: Bitcoin violates the regression theorem. Bitcoin is purely synthetic, it was never tied to any consumer good, nor was it derived from any other currency that was tied to a consumer good. Me: Him: Nope.
Why are people willing to accept money as payment for goods today: i.e. why does it have purchasing power? Because those people expect it will have purchasing power tomorrow, and this expectation is grounded in their knowledge that money had purchasing power yesterday. So why did it have purchasing power yesterday...and so we begin the regress. But it's not an infinite regress, it concludes when the answer to the question "why does money have purchasing power today" is "because this 'money' is a consumer good, something valued in its own right."
But, as I said, bitcoin is not a consumer good, nor does it have any connection (present or historical) to any consumer good.
Me: Ok seems like you get the regression theorem but you are misapplying it to Bitcoin.
I don't know if you know this but back in early 2010 when 1 bitcoin was theoretically valued a fraction of a fraction of a cent (this was just an approximation of how much it cost to produce it, no actual trades happened that would set this price) something strange happened. Some guy decided to put up a forum ad asking to exchange 10.000 BTC for 2 pizzas. And then something "stupid" happened, someone said yes and they carried out this transaction.
But what exactly did happen there? There was this guy with two perfectly good pizzas and he decided to exchange them for 10000 bitcoins?! Now why would he do that if not because he personally saw "something valuable in their own right" in them? And I argue that's exactly what he saw back then. To him bitcoins were a digital token, digital jewellery like gold earrings.
And then something even more stupid happened, there were more and more people who showed up wanted to "wear" this digital "jewellery". Now why is that, why would all these people show up and want to own these tokens worth practically nothing?? Was it just because it was a novelty? Was it because they were speculating they might get filthy rich one day if Bitcoin happened to catch on. Remember there was no trading back then and the currency was used by so few in effect it was dead so any expectation of a higher exchange rate were a lot less likely than merely a long shot.
But it doesn't matter why more and more people showed up wanting to hold them and exchange something of value for them. The important fact is they did and this is what drew the initial demand. Bitcoins, to them, for what ever reason were valuable in their own right.
And voila, regression theorem satisfied. Did I get any of the facts wrong? Is my reasoning flawed? Thank you for this explanation. I think your reasoning is correct, and this is a good way to explain it. I would also argue that prior to being exchanged for goods and other currencies, bitcoins were valued for interest sake alone. I know that when I first started investigating bitcoin, I was concerned that they didn't appear to have a prior value on the market, until I realized that I was so interested in them I was interested in purchasing them merely to try them out. That proved they had value as entertainment, education, etc. I'm not sure if that's materially different from your "jewelry" analogy. Today it's clear bitcoins have value in a number of cases, international currency transactions being one prime example. Now that they do have value, they satisfy the regression theorem. |
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Sorry for my ramblings. Does that make any sense to you?
Yes, it does! Thank you for the explanation. |
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I was surprised to see a comment on one thread here that it was more profitable to mine litecoin that bitcoin. I didn't realize any of the alternative currencies had enough uptake to make them that profitable yet. What currencies are more profitable to mine that bitcoin right now, and what is making them more profitable?
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coinapult for new, casual users. It can be driven from a cellphone, and the users don't have to handle the bitcoins and bitcoin addresses themselves.
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An attacker could trivially change the timestamp. It is just a number.
Say I pay you and it gets included in a block with a timestamp of X. What would prevent me from just making another block with an earlier timestamp where I didn't pay you. Absolutely nothing. Of course anyone could do that to any transaction and the coins would have no value at all. The proof of work makes it have a real economic cost to attempt such revising of history and unless you have more than all the "good guys" combined the odds are stacked against you being successful.
Each block has a pointer to the previous block, though, so how could this attack work? After you pay me in the block with timestamp X, you could forge another block with timestamp X-5 in which the money went somewhere else, but a traversal of the blockchain from the block with timestamp X would show that your new forged block was not in the chain, right? What am I missing? I am speculating that it has something to do with chain forks and orphan blocks.... |
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If you have a need to be allowed into the forum beyond before you have completed the required 5 posts and 4 hours logged in, please post your request here. You must provide evidence that shows that you either understand more about Bitcoin than the average newbie, Well, it'd be nice, and I think I understand bitcoin more than the average newbie (even though I'm probably asking a stupid question on the thread I started here in the newbie forum). But I can wait.  Four hours is not that long, and this is my fifth post (which is why I'm making it). I've dug through the bitcoin client source code and the code for bitcoinj. I'm particularly intrigued in how the nodes in the network peer with each other, locating seed nodes through DNS lookups (formerly through IRC - I didn't understand that IRC wasn't used anymore until I did some heavy reading). I don't quite get yet how the blocks in the chain are exchanged, but I'm hoping to figure that out soon. I'd like to try my hand at implementing a bitcoin-like mockup prototype some time soon, not compatible with bitcoin, but basically working my way through the concepts in the whitepaper. I get a kick out of bitcoinj's generate node function, with a comment stating that of course you could never use this for real mining. It's still educational. |
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The purpose of the block isn't just to timestamp the transaction. It is to prevent a duplicate of the coins being spent (a double spend). Since "good" miners will reject double spends it provides security in that if a tx is included in a block a replacement can't be accepted by the network unless some bad miners conspire to attack the network. Why is timestamping alone not sufficient to protect against double spending? I get that the ten minutes is essentially arbitrary; i.e., there's nothing special about the number ten, other than trying to balance the amount of work that has to be redone as transactions arrive. |
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Hi, I'm Walter. I program, I imagine I know a few things about economics and morality, and I'm interested in bitcoin. I've been following along for over a year now. The MtGox hack of 2011 and the halving day last year both heightened my attention.
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This whole question is confusing. If you think bitcoin is morally illegitimate, the burden of proof is on you to demonstrate so. You haven't cited any grounds for bitcoin being immoral. It's not any more immoral than a store that you don't like: if you don't like the product, don't buy it. Now, if you think bitcoin is illegitimate as a currency, i.e., unsuited for a currency on some practical grounds, I wouldn't call that immoral. I'd just state what your objections are to it and why you believe people would be better off not using it. I like bitcoin. Convince me not to use it. My using it does not hurt you in any way. |
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I've read the bitcoin whitepaper, and I understand the purpose of block generation to timestamp transactions. What I don't understand is the need to regularize the block generation interval. Why the attempt to space blocks out by a ten minute interval? What would happen if blocks could be generated instantly?
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