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Author Topic: Scaling bitcoin to world economy is unrealistic.  (Read 9810 times)
mobodick
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September 16, 2012, 10:15:41 AM
 #1

I just had a thought.
The crazy thing about it is i have never heared anyone actually talking about something similar.

Let's say the world economy is worth about 63 Trillion dollars.
Divide this by the ammount of bitcoin that will ever be made, 21 million.

63^12 / 21^6 = 3 milion dollar per bitcoin.

Soo...

In the end, for bitcoin to replace all other monies, it would have to be worth the equivalent of 3 milion dolars per bitcoin.

That also means, that everyone with more that 0.3 bitcoin would be the equivalent of a millionaire.

That's basicly everyone in the community right now.
And a lot of other people that will join soon enough.

It also means i'll be filthy rich in the future. Woohoo!

Now let's say Pirateat40 still has the 500.000 bitcoin that supposedly went through him.
He would then have owned $1.500.000.000.000 worth of bitcoin, or 1.5 trillion dollars worth.
He'd be the ritchest person to have ever been conceived.

So my question is, why do people keep thinking up fanasies about how bitcoin will take over the worlds moneys?
Isn't it blatantly clear bitcoin could never scale to a size that would allow it to operate as the worlds currency?
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September 16, 2012, 10:24:10 AM
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The world financial economy and the world tangible economy are 2 real different things. There is a reason if the USD economy is orders of magnitude bigger than the others. Just saying.

Anyway, I don't see why it couldn't happen in 100 years.

Apple shares grow 1000 times in 10 years.

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Bitcointa.lk - Replace "Bitcointalk.org" with "Bitcointa.lk" in this url to see how this page looks like on a proper forum (Announcement Thread)
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mobodick
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September 16, 2012, 10:40:22 AM
 #3

The world financial economy and the world tangible economy are 2 real different things. There is a reason if the USD economy is orders of magnitude bigger than the others. Just saying.

Anyway, I don't see why it couldn't happen in 100 years.

Apple shares grow 1000 times in 10 years.

Yeah, they were early adopters...
And that's why i'm critical of bitcoin when it comes to this.
This small community already owns almost half of the possible bitcoins.
And due to deflation everyone is much more greedy than normally.
How the hell will 99.99999% of the world (almost everyone) agree on using what's left (about half) of the total amount of bitcoin.
Wouldn't that create a much much worse imbalance then is already there in the world?
k3t3r
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September 16, 2012, 10:49:17 AM
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i dont see it as a replacement for other currencies. bitcoin will exist along side other forms of money including fiat currencies and people will choose which they want to use based on what value those forms of money offer.

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September 16, 2012, 10:52:38 AM
 #5

As price goes up, more people will sell/trade their bitcoins away. We can already see this by the super early adopters, they have kept some probaly, but one of the firsts as an example bought himself a new house. The higher the value, the more tempting it will be to buy something.

If for instance bitcoin went up to 1000 $ now, I would sell more then half my bitcoins and buy stuff or diversify my investments.
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September 16, 2012, 10:56:58 AM
 #6

i dont see it as a replacement for other currencies. bitcoin will exist along side other forms of money including fiat currencies and people will choose which they want to use based on what value those forms of money offer.

This is the realistic view. Bitcoin will never be the #1 currency of the world. It will always be a niche currency, but that's good enough for me.

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September 16, 2012, 11:05:23 AM
 #7

The world financial economy and the world tangible economy are 2 real different things.

And the amount of cash that is needed to be in circulation is yet a 3rd very different thing. The value of everything that exists is one thing, but bitcoin only needs to replace the amount of cash in active circulation. Still a substantial amount compared to where it is today but nowhere near 3,000,000 of today's dollars. (unless my math is way off)
mobodick
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September 16, 2012, 11:05:46 AM
 #8

I think a more realistic calculation would be the total number of Satoshi's minus a substantial percentage for loss and divided by the percentage of the worlds population likely to be in a position to use a digital currency.

So if quarter of the coins are lost and half the worlds population use bitcoin there are nearly half a million Satoshi per head.

From there distribute the worlds wealth through the population, 63 trillion / 7 billion = 9000 dollars per head. 9000 / half a million Satoshi's = 0.018 or about 2c a Satoshi, 1.8 million per coin (surprised how close that came out Smiley )

But this distribution would need to be forced somehow otherwise it will never happen.
Or will everyone just allow the coin in their wallet to be distributed over the world?
So we will never see an equal distribution of bitcoin. It is not evenly distributed now and it will never be evenly distributed in the future.
And counting in satoshis is unfair when pople in this community sometimes already own thousands of bitcoin.

I'm talking about the economics of this community owning already half of the future total of bitcoin.
Then, even with your evaluation, this little community will own about half of the worlds currency.
Of course some of that will be spent, but it would still be the biggest amount of wealth owned by the smallest group of peaople ever in history of humanity.
mobodick
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September 16, 2012, 11:09:07 AM
 #9

i dont see it as a replacement for other currencies. bitcoin will exist along side other forms of money including fiat currencies and people will choose which they want to use based on what value those forms of money offer.



Realistically i agree completely with you.
I strongly feel that bitcoin is fully dependent on current underlying economic structures so it can only integrate with current systems but not replace them completely.

But i hear a lot of revolutionary talk on these fora and frankly i'm getting a bit scared by the completely unrealistic projections some people tend to dream up.
So i'm trying to point out flaws in that line of reasoning.
And frankly it's not very hard..
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September 16, 2012, 11:16:34 AM
 #10

I think a more realistic calculation would be the total number of Satoshi's minus a substantial percentage for loss and divided by the percentage of the worlds population likely to be in a position to use a digital currency.

So if quarter of the coins are lost and half the worlds population use bitcoin there are nearly half a million Satoshi per head.

From there distribute the worlds wealth through the population, 63 trillion / 7 billion = 9000 dollars per head. 9000 / half a million Satoshi's = 0.018 or about 2c a Satoshi, 1.8 million per coin (surprised how close that came out Smiley )

But this distribution would need to be forced somehow otherwise it will never happen.
Or will everyone just allow the coin in their wallet to be distributed over the world?
So we will never see an equal distribution of bitcoin. It is not evenly distributed now and it will never be evenly distributed in the future.
And counting in satoshis is unfair when pople in this community sometimes already own thousands of bitcoin.

I'm talking about the economics of this community owning already half of the future total of bitcoin.
Then, even with your evaluation, this little community will own about half of the worlds currency.
Of course some of that will be spent, but it would still be the biggest amount of wealth owned by the smallest group of peaople ever in history of humanity.


So you haven't heard of the Rothschild's then.

k3t3r
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September 16, 2012, 11:24:38 AM
 #11

i dont see it as a replacement for other currencies. bitcoin will exist along side other forms of money including fiat currencies and people will choose which they want to use based on what value those forms of money offer.



Realistically i agree completely with you.
I strongly feel that bitcoin is fully dependent on current underlying economic structures so it can only integrate with current systems but not replace them completely.

But i hear a lot of revolutionary talk on these fora and frankly i'm getting a bit scared by the completely unrealistic projections some people tend to dream up.
So i'm trying to point out flaws in that line of reasoning.
And frankly it's not very hard..


agreed


Quote
but it would still be the biggest amount of wealth owned by the smallest group of peaople ever in history of humanity.
i dont see this as a huge problem. and certainly not worse than under a central banking system. for the most part we live in a world were the money supply is largely owned and controlled by a handful (as a generous estimate) of families or corporations.
Etlase2
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September 16, 2012, 11:25:11 AM
 #12

I'm talking about the economics of this community owning already half of the future total of bitcoin.
Then, even with your evaluation, this little community will own about half of the worlds currency.
Of course some of that will be spent, but it would still be the biggest amount of wealth owned by the smallest group of peaople ever in history of humanity.

This is the flaw of a closed supply. Even if everybody on earth was given 1 BTC, wealth will trickle its way up to those that lend or what have you, which in itself is not a problem, the problem is that the closed supply means that manipulation is much easier. So once someone gets ahold of a large part of the supply, they can manipulate it to make themselves even more and more wealthier. The same problem as gold. The same problem that is "baked in" to fiat currencies because the people with the gold influence the politicians to write the laws. Otherwise why would any government be silly enough to give up its right to produce currency, yet almost every single country in the world has done so. (Though admittedly many have done it by force of the influence of the more powerful countries.)

i dont see it as a replacement for other currencies. bitcoin will exist along side other forms of money including fiat currencies and people will choose which they want to use based on what value those forms of money offer.

So ^this is often the response. "Bitcoin wasn't particularly meant to be revolutionary, just a cheap way to send money."

See my signature for a palatable solution to having an unbounded supply that has significant protection against inflation and could actually replace fiat currency.

k3t3r
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September 16, 2012, 11:48:05 AM
 #13

i dont see it as a replacement for other currencies. bitcoin will exist along side other forms of money including fiat currencies and people will choose which they want to use based on what value those forms of money offer.

So ^this is often the response. "Bitcoin wasn't particularly meant to be revolutionary, just a cheap way to send money."

See my signature for a palatable solution to having an unbounded supply that has significant protection against inflation and could actually replace fiat currency.

thats not really what i meant. i think of bitcoin as a form of money not just a way to send money.
Etlase2
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September 16, 2012, 12:00:57 PM
 #14

thats not really what i meant. i think of bitcoin as a form of money not just a way to send money.

But the gist is you're apologizing for the fact that bitcoin has its faults and that people will see that it isn't as revolutionary as it sounds. If bitcoin can't deflate in a stable manner, then fiat will be seen as more stable, and people will not store wealth in bitcoin as anything other than a risky investment. If bitcoin can't deflate in a stable manner, what incentive is there for people to "invest" in it? Why not just invest in gold instead? Oh because you can send money cheaply (then use it when you need to send money, like WU)? Because you can "fight the man" by getting in at the bottom of a pyramid and hoping more will do the same after you?

There is not much upside to anyone who wants the utility of a cryptocurrency that has had 50% of its money given away already who doesn't already have a vested interest. There will be competitors, and they will cause bitcoin stagnation at best, inflation at worst. Deflation is far from guaranteed. Once people realize that, what advantage does bitcoin have at all?

mobodick
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September 16, 2012, 12:14:08 PM
 #15

I think a more realistic calculation would be the total number of Satoshi's minus a substantial percentage for loss and divided by the percentage of the worlds population likely to be in a position to use a digital currency.

So if quarter of the coins are lost and half the worlds population use bitcoin there are nearly half a million Satoshi per head.

From there distribute the worlds wealth through the population, 63 trillion / 7 billion = 9000 dollars per head. 9000 / half a million Satoshi's = 0.018 or about 2c a Satoshi, 1.8 million per coin (surprised how close that came out Smiley )

But this distribution would need to be forced somehow otherwise it will never happen.
Or will everyone just allow the coin in their wallet to be distributed over the world?
So we will never see an equal distribution of bitcoin. It is not evenly distributed now and it will never be evenly distributed in the future.
And counting in satoshis is unfair when pople in this community sometimes already own thousands of bitcoin.

I'm talking about the economics of this community owning already half of the future total of bitcoin.
Then, even with your evaluation, this little community will own about half of the worlds currency.
Of course some of that will be spent, but it would still be the biggest amount of wealth owned by the smallest group of peaople ever in history of humanity.


So you haven't heard of the Rothschild's then.

Sure i have and that is my point.
Bitcoin would only shift the situation, not actually change it.

mobodick
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September 16, 2012, 12:20:30 PM
 #16

thats not really what i meant. i think of bitcoin as a form of money not just a way to send money.

But the gist is you're apologizing for the fact that bitcoin has its faults and that people will see that it isn't as revolutionary as it sounds. If bitcoin can't deflate in a stable manner, then fiat will be seen as more stable, and people will not store wealth in bitcoin as anything other than a risky investment. If bitcoin can't deflate in a stable manner, what incentive is there for people to "invest" in it? Why not just invest in gold instead? Oh because you can send money cheaply (then use it when you need to send money, like WU)? Because you can "fight the man" by getting in at the bottom of a pyramid and hoping more will do the same after you?

There is not much upside to anyone who wants the utility of a cryptocurrency that has had 50% of its money given away already who doesn't already have a vested interest. There will be competitors, and they will cause bitcoin stagnation at best, inflation at worst. Deflation is far from guaranteed. Once people realize that, what advantage does bitcoin have at all?

This is an interesting point and i will have to contemplate it. Smiley
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September 16, 2012, 12:31:42 PM
 #17

Technically the Bitcoin network could handle all trade in the world.
It would require some updates, but no hard forks:

1. Swarm client; thought it up myself, allows smaller computers to participate in a VISA+ sized network with no sweat. It can be bridged to the current full node network no problem as the only change is in the communication protocol - a bridge would spread blocks from both networks into the other, with no one being able to see the difference.

2. Ledger update; every 10-20 years the BTC beyond this time would be put in a public ledger and earlier blockchains deleted to save HD space. The BTC would still be there and spendable, but stored in a simpler fashion. 10-20 years to avoid temporary 51% attacks to completely rewrite history in the ledgers. (ala the genesis block)
These clients would still be able to communicate with older clients, but would simply not answer any requests for blocks 10-20 years old.
(This one is not my idea btw)

3. Possible cryptographic breach/ECDSA update due to quantum computers; the protocol already more or less supports new address/key systems, slowly or quickly switching to a safer standard would not require a hard fork.

4. Running out of units; the client can be hard forked to allow more decimal places - however this is such a natural update that I doubt anyone will object when the time comes. (1 Satoshi would no longer be the smallest unit)

Simply put; as long as you are operating within a space sphere of maybe 1 light minute (0.125 AU) in diameter - Bitcoin can last forever and for any size economy. (assuming the current understanding of physics and no practical wormholes)


There may be other cryptocurrencies, but I really think Bitcoin will remain the new "gold standard" for at least a hundred years as it has no weak points and there is no really good reason to use other copy currencies.

The dollar and euro are likely doomed, but I guess people could choose many other things than bitcoin to hedge with/panic to. 100% penetration is unlikely for anything, but Bitcoin could feasibly become the world reserve currency like dollars are today in 20-100 years.

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September 16, 2012, 12:43:18 PM
 #18

I envision a day when large governments will realize the value of bitcoins and begin buying up huge sums of them in an effort to control the wealth.  Then at some point they'll print currencies backed by bitcoins to better protect their stash and to control the rates of exchange as well as provide a means of tracking the bitcoin economy.  When they realize that they've printed too much money and fearing a run on their bitcoins, they will by decree order the citizens to hand over all their bitcoins to the government in the name of national security. Many will follow their patriotic conscience and do as they are told, but many will not.  Fearing that a rogue hoarder will dump a large amount of bitcoins someday that would devalue the governments huge stash, they declare that their printed money is now backed by ... trust in God maybe and happily print ever after. Wink

So, if history repeats itself, bitcoins and bitcoin transactions will go the way of gold and at some point become merely a very valuable curiosity vaulted away till needed.  At that time the size of the block chain and relative value of individual coins will become unimportant.

mobodick
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September 16, 2012, 12:47:15 PM
 #19

Technically the Bitcoin network could handle all trade in the world.
It would require some updates, but no hard forks:

1. Swarm client; thought it up myself, allows smaller computers to participate in a VISA+ sized network with no sweat. It can be bridged to the current full node network no problem as the only change is in the communication protocol - a bridge would spread blocks from both networks into the other, with no one being able to see the difference.

2. Ledger update; every 10-20 years the BTC beyond this time would be put in a public ledger and earlier blockchains deleted to save HD space. The BTC would still be there and spendable, but stored in a simpler fashion. 10-20 years to avoid temporary 51% attacks to completely rewrite history in the ledgers. (ala the genesis block)
These clients would still be able to communicate with older clients, but would simply not answer any requests for blocks 10-20 years old.
(This one is not my idea btw)

3. Possible cryptographic breach/ECDSA update due to quantum computers; the protocol already more or less supports new address/key systems, slowly or quickly switching to a safer standard would not require a hard fork.

4. Running out of units; the client can be hard forked to allow more decimal places - however this is such a natural update that I doubt anyone will object when the time comes. (1 Satoshi would no longer be the smallest unit)

Simply put; as long as you are operating within a space sphere of maybe 1 light minute (0.125 AU) in diameter - Bitcoin can last forever and for any size economy. (assuming the current understanding of physics and no practical wormholes)


There may be other cryptocurrencies, but I really think Bitcoin will remain the new "gold standard" for at least a hundred years as it has no weak points and there is no really good reason to use other copy currencies.

The dollar and euro are likely doomed, but I guess people could choose many other things than bitcoin to hedge with/panic to. 100% penetration is unlikely for anything, but Bitcoin could feasibly become the world reserve currency like dollars are today in 20-100 years.

Yeah, but in the same 'technical' way fiat can also be kept alive...
I started this discussion on basis of how bitcoin would actually relate to the social reality of current world economy.
That is a completely different set of technicalities.
Decentralised currency system is absolutely not the same as decentralised wealth but it is often confused.
If bitcoin would handle anything near the volume of the worlds trade then most people on these fora would become stinking filthy rich and will act accordingly (like in the good old days of fiat).
So bitcoin will not solve our global social problem of skewed economic relations, it will accumulate even more wealth in an even smaller number of pockets.

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September 16, 2012, 01:07:22 PM
 #20

So, if history repeats itself, bitcoins and bitcoin transactions will go the way of gold and at some point become merely a very valuable curiosity vaulted away till needed.  At that time the size of the block chain and relative value of individual coins will become unimportant.
Gold did not go away because the US government said it should. It went away as a means of trade because its a bitch to carry around or send across the world.

Gold is however STILL used as a store of wealth and is STILL traded among big central banks and goldbugs. If the US announced tomorrow that all their gold in fort knox was gone, the dollar would likely drop a little.

Bitcoin does not have the problems of golds bulkiness and will become the new "easy" currency - except it is also BETTER, not "just" easier than fiat.

Yeah, but in the same 'technical' way fiat can also be kept alive...
Fiat could be very strong in the hands of a trustworthy government - however with all the temptation in the world to print and no reasons NOT to the incentive model of fiat is flawed.
The incentive model of something might not be technical, but it cannot be changed and is fundamental - and for fiat heavily flawed.

Quote
So bitcoin will not solve our global social problem of skewed economic relations, it will accumulate even more wealth in an even smaller number of pockets.
But:
1. Poor people can save up in Bitcoin while in fiat they would loose on inflation (and since they are poor, they have very few other options).
2. The elite cannot print bitcoin and so hoard less.

Given these two facts, I would say Bitcoin is MORE fair and will over time lead to a BETTER distribution of wealth.


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