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Author Topic: Bitcoin QE  (Read 1771 times)
camem
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August 16, 2012, 09:45:25 PM
Last edit: August 16, 2012, 10:50:02 PM by camem
 #1

The 21m limit is by reasonably unanimous agreement between the existing users. That is, more than 50% of clients would have to decide to fork and run a different client to change it.

Let's say that the existing users are a small proportion of the people that will use bitcoin over the years. About 1%, if you will.

By and large, existing Keynesian economic policies use expansion of the money supply during lean times to devalue everything a little bit now and in the future, to get a lot right now, in order to "prime the economy", save/create employment, see us through the bad times, pay bankers bonuses etc etc. By and large, democratic countries at least do this because it wins votes right now, putting the burden on those who will vote later.

In a world where the 'other 99%' have started using bitcoin, but have less money than today's average user and don't use bitcoin as a savings vehicle (let's say price is largely stable so there are better investment opportunities elsewhere) why shouldn't they get together via a grassroots campaign during a global crisis, to move to a client that has a larger money supply ? The argument would be that the bitcoins are unfairly distributed and the rich have too many of them anyway. The regulation/cartels/barriers-to-entry/institutions that protect the super rich today from this happening more often are less likely to exist in bitcoin. In effect a majority agreement to apply a type of QE into the bitcoin economy. Would this be justifiable ? Would it have the desired effect on the worth of the newly issued bitcoins in people's pockets ? Would it stimulate anything, or make anything more equal ? Is there a technical reason why it couldn't happen in practice ? And what about going the other way ? While bitcoins are still being issued, is there any tipping point where users might want to make the block reward asymptote at less than 21m ?
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August 16, 2012, 09:49:05 PM
 #2

People usually want to dilute OTHERS savings and NOT their own. For this simple reason I don't see QE happening with BTC.

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August 16, 2012, 10:00:07 PM
 #3

I think some general education about forking the block chain is in order -- for myself included, as I am not an expert or terribly well-informed. However, I believe that if such changes were to occur, they would have no impact on those already holding Bitcoins. These new rules would define a new crypto currency and people would likely give it a new name; however, if they didn't, it would be really confusing.

Hardforks aren't that hard. It’s getting others to use them that's hard.
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August 16, 2012, 10:35:47 PM
 #4

I believe at this point it would be wise to draw a distinction between exchange unit and wealth.   Many people believe Bitcoin to be both.   If you raised the limit you would then reduce Bitcoin's ability to be a storage medium of wealth.  The problem is that we already have many exchange mediums in circulation (Dollars, Euros, Won, etc...), what we are lacking is more mediums to store wealth.  This is one of the reasons I believe Bitcoin is so popular and has been appreciating.

As soon as you loosen the supply, it ceases to be one of the par excellence stores of wealth and you would see people not use it for this reason and likely that would open the door for another crypto-unit to fill that role, promising to never increase the supply.   We need more value storage in a time of unprecedented credit & debt expansion. 

Please consider these words and let us know what you think.

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August 16, 2012, 11:00:05 PM
 #5

The 21m limit is by reasonably unanimous agreement between the existing users. That is, more than 50% of clients would have to decide to fork and run a different client to change it.

That's not how it works.  There would need an economic majority before a fork would be likely to succeed.

Here's more:

 - https://bitcointalk.org/index.php?topic=99928.msg1093084#msg1093084

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unclescrooge
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August 17, 2012, 12:19:51 AM
 #6

The 21m limit is by reasonably unanimous agreement between the existing users. That is, more than 50% of clients would have to decide to fork and run a different client to change it.

Let's say that the existing users are a small proportion of the people that will use bitcoin over the years. About 1%, if you will.

By and large, existing Keynesian economic policies use expansion of the money supply during lean times to devalue everything a little bit now and in the future, to get a lot right now, in order to "prime the economy", save/create employment, see us through the bad times, pay bankers bonuses etc etc. By and large, democratic countries at least do this because it wins votes right now, putting the burden on those who will vote later.

In a world where the 'other 99%' have started using bitcoin, but have less money than today's average user and don't use bitcoin as a savings vehicle (let's say price is largely stable so there are better investment opportunities elsewhere) why shouldn't they get together via a grassroots campaign during a global crisis, to move to a client that has a larger money supply ? The argument would be that the bitcoins are unfairly distributed and the rich have too many of them anyway. The regulation/cartels/barriers-to-entry/institutions that protect the super rich today from this happening more often are less likely to exist in bitcoin. In effect a majority agreement to apply a type of QE into the bitcoin economy. Would this be justifiable ? Would it have the desired effect on the worth of the newly issued bitcoins in people's pockets ? Would it stimulate anything, or make anything more equal ? Is there a technical reason why it couldn't happen in practice ? And what about going the other way ? While bitcoins are still being issued, is there any tipping point where users might want to make the block reward asymptote at less than 21m ?


At any point of bitcoin adoption, why would anyone in his right mind want to switch to a currency where more and more units are printed? I mean, if bitcoin is to succeed, it is, among other reason, because we can't print more than a limited nulber of them.

Printing money doesn't create wealth. Anyway...
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August 17, 2012, 12:31:52 AM
 #7

In a world where the 'other 99%' have started using bitcoin, but have less money than today's average user and don't use bitcoin as a savings vehicle (let's say price is largely stable so there are better investment opportunities elsewhere) why shouldn't they get together via a grassroots campaign during a global crisis, to move to a client that has a larger money supply ? The argument would be that the bitcoins are unfairly distributed and the rich have too many of them anyway.

You're merging ideas. It doesn't work like that. You don't go from 1% usage suddenly to another 99% usage. That's why bitcoins come into existence over time, all the way to 2033. [1]

There is plenty of time for people at any stage of hearing about bitcoins to get a hold of a good number of them.

Your other point asks why people wouldn't collude to start a different kind of bitcoin, one that suits them better somehow.

Guess what: they can!

That doesn't mean anything to bitcoins.

People currently understand exactly what bitcoins are, including how many there are, because it's spelled out in the rules of the protocol everyone agrees to by using it. If you change the rules it is no longer the bitcoins the majority of people consider bitcoins.

Anyone is perfectly welcome to change any rules. Bitcoin is open-source. But the challenge is getting enough people to go along with you to have any value.

There currently exist other crypto currencies such as Litecoin. These have been around a long time now and their exchange rate value is still nowhere near bitcoins. This challenge awaits any other currency. You have to convince people you have a better thing going than the people already convinced about using bitcoins. Good luck with that.

Even if people say they will go along with whatever new currency you start, if they have bitcoins, say just 1 of them, and that one bitcoin is worth $50K do you think they will get rid of it? Not likely. They will use both currencies to the best of their advantage. For example, even bitcoiners now hold and use dollars because it works in their interest to do so. In the end people will look out for their own best interests. The new currency exchange rate would NOT start out at $50K per coin. Again, you can't just jump from one thing to another, merging ideas.

Luckily, any value bitcoins do have is earned value, and not simply government decreed value aka fiat money. That makes them really hard to devalue and/or compete with.

[1] https://en.bitcoin.it/wiki/File:Total_bitcoins_over_time_graph.png
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August 17, 2012, 02:43:47 AM
 #8

I think some general education about forking the block chain is in order -- for myself included, as I am not an expert or terribly well-informed. However, I believe that if such changes were to occur, they would have no impact on those already holding Bitcoins. These new rules would define a new crypto currency and people would likely give it a new name; however, if they didn't, it would be really confusing.

Right.

Even if 50, 90 or 99.99% of people start allowing 100 or 1000 new coins per block or new coins for some other reason your client will reject them because they are not bitcoins. You have to decide to allow fake coins by changing your software.

In practice this will never happen because it can't get started. It's really as silly as writing down that you have more bitcoins on a piece of paper, no one else accepts that so what value is it to you? A merchant (any person) won't want them because no one else takes them. I'm not saying this logic is completely foolproof, it's the same reason I don't think alt coins will gain traction. Of all things like bitcoin, bitcoin is the best because it is the most widely accepted so more people accept it and the gap grows. As soon as you make one change you lose this huge network effect.

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August 17, 2012, 02:51:47 AM
 #9

Yay, the weekly Bitcoin inflation thread!


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camem
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August 17, 2012, 05:48:27 PM
 #10

There would need an economic majority before a fork would be likely

Thanks all for your replies. For me this one spelt out the bit I hadn't grasped. If 99% of the users representing only 2% of the supply/demand/wealth go and do something else, the effect on bitcoin is low.

Maybe one day we can find a way to artificially decrease the supply of inflation threads...




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August 17, 2012, 06:55:37 PM
 #11

There would need an economic majority before a fork would be likely

Thanks all for your replies. For me this one spelt out the bit I hadn't grasped. If 99% of the users representing only 2% of the supply/demand/wealth go and do something else, the effect on bitcoin is low.

Maybe one day we can find a way to artificially decrease the supply of inflation threads...



Artificially decreasing the supply would be the only way to make them valuable, and I'm not sure that would work.  Smiley

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