Bitcoin Enables The Ultimate Act of Destructive Charity?

[Fizzgig]

I was reading the Bitcoin subreddit (http://www.reddit.com/r/bitcoin) and came across this post, when I had an intriguing thought... http://www.reddit.com/r/Bitcoin/comments/zwtc7/been_pondering_this/

What if a wealthy man or woman, a titan of the new bitcoin industry, aging and at the end of their life decided to provably and publicly destroy their entire bitcoin fortune? The value of all bitcoin would rise as there are less of them, thus evenly transferring the wealth. The effect would be to evenly donate the value of their estate to every holder of bitcoin.

This idea may appeal to the rugged individualists. The better they serve the public, the greater their fortune. The greatest act of charity is defined as the largest fortune destroyed, finally a way to evenly give to the entire world. They give back all of what they have earned and leave this mortal world.

Does Bitcoin enable the ultimate form of equitable, transparent, and verifiable charity?

Post-thought: I also offer this post as a retort to those who think that infinite inflation is a necessary thing. You are not thinking from a principled position. The elegance of this bitcoin solution allows technologies and ideas that are out of the scope of modern patterns of thought, inflation was never intended to be a feature from a design perspective. It is a way to get Bitcoin off the ground through proper incentivization. Infinite inflation would also distort the long term incentives between miners and fees. When the reward for solving a block pays nothing except fees collected, the Bitcoin ecosystem will balance perfectly because the ecological framework is in place and the social actors will be free to interact (assuming no outside coercive force disrupts this process).

[1715265279]

1715265279

[1715265279]

1715265279

[1715265279]

1715265279

[odolvlobo]

What if a wealthy man or woman, a titan of the new bitcoin industry, aging and at the end of their life decided to provably and publicly destroy their entire bitcoin fortune? The value of all bitcoin would rise as there are less of them, thus evenly transferring the wealth. The effect would be to evenly donate the value of their estate to every holder of bitcoin.

I don't think that is true. Why would destroying bitcoins make the rest more valuable just because there are less? I think the only way destroying bitcoins would affect the value of bitcoins in this case is if the destroyed bitcoins were being lent or used as collateral. If they are just sitting in a wallet somewhere gathering dust, they effectively already don't exist.

[Fizzgig]

"If they are just sitting in a wallet somewhere gathering dust, they effectively already don't exist."

They would be the life savings of the person dieing, their economic activity would cease along with their wealth in bitcoin. The balance between their savings and consumption is obviously way skewed toward the savings side, all of that would be released into the economy reflected by a higher bitcoin price.

"Why would destroying bitcoins make the rest more valuable just because there are less?"

If there were 1 bitcoin in existence because all the others were destroyed, it would have a very high price. If there are 1 trillion bitcoin in existence they would have lower prices each. This property scales, so as bitcoin are destroyed the price will rise proportionally simply due to supply and demand, however this may not be apparent as the price will fluctuate from day to day. Long term it enriches holders of bitcoin.

[odolvlobo]

What if a wealthy man or woman, a titan of the new bitcoin industry, aging and at the end of their life decided to provably and publicly destroy their entire bitcoin fortune? The value of all bitcoin would rise as there are less of them, thus evenly transferring the wealth. The effect would be to evenly donate the value of their estate to every holder of bitcoin.

I don't think that is true. Why would destroying bitcoins make the rest more valuable just because there are less? I think the only way destroying bitcoins would affect the value of bitcoins in this case is if the destroyed bitcoins were being lent or used as collateral. If they are just sitting in a wallet somewhere gathering dust, they effectively already don't exist.

After some thought, I realize that I was wrong. Even bitcoins sitting in a wallet gathering dust are significant because they will eventually be used. The key is that while bitcoins in use have the biggest impact on the the supply, even bitcoins that are being hoarded are potentially part of the supply, and so they still contribute (albeit with reduced effect). Hoarding bitcoins reduces the supply by some amount, but not as much as destroying them.

However, I still disagree with belief that the act would be beneficial to everyone. While it would make everyone's bitcoins more valuable, that would be negated by the inflationary effect of everyone being more wealthy. Ultimately, the wealth of a community is the result of its productivity and not the denomination of its currency.

[Fizzgig]

I still disagree with belief that the act would be beneficial to everyone. While it would make everyone's bitcoins more valuable, that would be negated by the inflationary effect of everyone being more wealthy. Ultimately, the wealth of a community is the result of its productivity and not the denomination of its currency.

It would hurt some and help others, the effect of destroying say 2% of all bitcoin would be to raise the price. It would suck to be short, but all of those who are long bitcoin would benefit. The natural course of the market is lower and lower prices, raising the productivity of the entire economy. Destroying bitcoin would simply propel this natural process and serve to enrich the rest of the economy...yeah? o.O

[Rotsor]

By acquiring the wealth the wealthy man has already given away a lot of value by his services to the society. Destroying the money means he is not demanding anything back, which is truly a charitable act.

The alternative could be spending your entire wealth to build a monument for yourself, which would cause harm to everyone by making them work hard.

And the worst possible thing would be giving the money away to someone who does not deserve it.

[myrkul]

The alternative could be spending your entire wealth to build a monument for yourself, which would cause harm to everyone by making them work hard.

Why would giving someone work be harming them?

[Rotsor]

Why would giving someone work be harming them?

Giving someone work may benefit the worker (because this is a trade and trades are usually beneficial to both parties), but will harm everyone else. You are taking resources from the economy that could have been used to give people shelter and making a monument for yourself without giving anything in exchange (except what you've already given when you earned your bitcoins).

You can say that you are taking resources out from the society using the worker as an intermediary. The worker executes your will by spending the money you gave him and eating everything. Normally, the worker would have to build someone a home to eat, but this way he is eating for free, being a parasite.

[myrkul]

Why would giving someone work be harming them?

Giving someone work may benefit the worker (because this is a trade and trades are usually beneficial to both parties), but will harm everyone else. You are taking resources from the economy that could have been used to give people shelter and making a monument for yourself without giving anything in exchange (except what you've already given when you earned your bitcoins).

You can say that you are taking resources out from the society using the worker as an intermediary. The worker executes your will by spending the money you gave him and eating everything. Normally, the worker would have to build someone a home to eat, but this way he is eating for free, being a parasite.

Your understanding of economics is seriously flawed. Whether he came by the money for the food by building a house or a statue, he still needs to buy the food from a food seller. The statue is not depriving the market of a house, for if someone wants a house, they can still get it. You can't even say that the resources used to build the statue would have been better used in making a house, since statues are typically made of marble, or other stone, which typically makes a poor material for building houses from. The statue may be depriving the purchaser of that statue of a house, but since he bought the statue, he clearly desires it more than the house.

[Rotsor]

Your understanding of economics is seriously flawed. Whether he came by the money for the food by building a house or a statue, he still needs to buy the food from a food seller. The statue is not depriving the market of a house, for if someone wants a house, they can still get it. You can't even say that the resources used to build the statue would have been better used in making a house, since statues are typically made of marble, or other stone, which typically makes a poor material for building houses from. The statue may be depriving the purchaser of that statue of a house, but since he bought the statue, he clearly desires it more than the house.

Oh, the model becomes more and more complicated. If you keep introducing entities, I won't be able to keep up. There is no need to consider multiple resources (stone; work; food). The argument of marble vs other materials is completely irrelevant too.

if someone wants a house, they can still get it

No, they can not. Because they don't have enough money anymore. Because the price of real estate has appreciated for two reasons: increased demand and inflated currency supply. I don't much care about the currency supply, but increased demand without anyone actually obtaining shelter is a net loss for the society. I think it's the "broken window" fallacy to say otherwise.

he still needs to buy the food from a food seller...

Please finish the thought next time, because I am doing that for you, probably not the way you meant:

... and by doing that, he makes someone starve because there is not enough food anymore.

Edit: Oh, maybe that was what you meant. Did you mean that the consumption by the builder does not depend on what he builds? I actually can agree with that, but it also shows that the builder didn't really gain anything from building a statue instead of a home. Did anyone?

By the way, I have no economic degree, so feel free to demonstrate the flaws, which well may exist. But try to avoid the introduction of too many entities and keep the world model simple.

[myrkul]

Your understanding of economics is seriously flawed. Whether he came by the money for the food by building a house or a statue, he still needs to buy the food from a food seller. The statue is not depriving the market of a house, for if someone wants a house, they can still get it. You can't even say that the resources used to build the statue would have been better used in making a house, since statues are typically made of marble, or other stone, which typically makes a poor material for building houses from. The statue may be depriving the purchaser of that statue of a house, but since he bought the statue, he clearly desires it more than the house.

Oh, the model becomes more and more complicated. If you keep introducing entities, I won't be able to keep up. There is no need to consider multiple resources (stone; work; food). The argument of marble vs other materials is completely irrelevant too.

You claim that by building a statue you're withdrawing resources that would otherwise be used to make a house. The only resource that is actually being diverted from building a house is the worker's labor. (I suppose your average statue might deprive the market of 5 or 6 countertops, but there are plenty of other options than marble.) Labor is one of those resources, however, that there's almost never a shortage of. Somebody wants a house, there's plenty of people who can build it for them.

if someone wants a house, they can still get it

No, they can not. Because they don't have enough money anymore. Because the price of real estate has appreciated for two reasons: increased demand and inflated currency supply. I don't much care about the currency supply, but increased demand without anyone actually obtaining shelter is a net loss for the society. I think it's the "broken window" fallacy to say otherwise.

When money is spent, it doesn't go away. It just changes hands. The only person who is deprived of the ability to buy a house by building that statue is the person who bought the statue. (This is known as opportunity cost, giving up the second best option for the the best one.) Everyone else, however, still has the same amount of money, except, of course, the worker who built the statue - who might even decide to build a house with the money. The broken window fallacy doesn't apply here, since there's no loss which is claimed would "stimulate" the economy. This is simply a person choosing a statue over a house (or whatever else he might have bought with that money).

Did you mean that the consumption by the builder does not depend on what he builds? I actually can agree with that, but it also shows that the builder didn't really gain anything from building a statue instead of a home. Did anyone?

Yes, that's what I meant. If the builder builds a house, or a statue, either way, he receives the money from the purchaser, and passes it along to someone else. Building a house or a statue is functionally identical, from the perspective of the builder's wallet. And someone did benefit from the purchase of the statue instead of a home: The person who wanted a statue more than he wanted a home.

[Fizzgig]

You guys are making things too complicated. Let's look at an example:

Let's take a look at some future Bitcoin billionaires who build pyramids for tombstones as monuments to their greatness. Their resources are being funneled into the construction industry and being spread throughout the economy by the workers who spend their wages. If they had destroyed the money instead, the resources would not all go toward construction, but evenly spread into the pockets of every person who holds bitcoin, in it's proper ratio according to the number of bitcoin each person owns (i.e. the price goes up). Those members of the bitcoin economy now have more capital with which to invest, spend, whatever. The point is the distribution of wealth is perfectly even.

This would be an act which displayed confidence in the future of humanity. It would spread the wealth evenly rather than fund and perpetuate their own institutions which linger and decay through the passage of time.

[casascius]

It is very easy to destroy Bitcoins in a visible manner.  MtGox has done it by accident.

Just send it to a bitcoin address that no one could possibly have the private key for, like 1111111111111111111114oLvT2.

[Explodicle]

What I Like About Scrooge

[odolvlobo]

It is very easy to destroy Bitcoins in a visible manner.  MtGox has done it by accident.

Just send it to a bitcoin address that no one could possibly have the private key for, like 1111111111111111111114oLvT2.

Yes, please do! That's my wallet!