The economic model behind Bitcoin is flawed

[z0rg1nc]

I understood neither the first nor the second. How exactly the service providers get additional profit from their services by accepting your coin as a means of payment?

Remember, that it is no longer profitable to mine your coin

1. It was about your "Because the profitability of mining is essentially limited by the cost of electricity, while your costs (not even speaking about profits) will obviously be higher than the cost of electricity (since they most likely will include it plus a lot of additional expenses)...". There is some misunderstanding i think

I don't know what kind of service you are actually going to provide, but services that don't require a lot of expenses or just popular enough are usually provided for free altogether (like gmail, facebook, whatever). I was initially assuming that you are going to provide something very original, specific, and expensive (like child pornography, lol) to make use of yet another coin justified. That said, you (and other service providers, for that matter) are still bound by the amount of expenses you (them) may have to bear for their services rendered and the price of electricity (as the decisive factor for mining) that miners would pay for mining your coin in the way I described above...

I hope this clarifies the matter

It clarifies nothing Lets leave our services aside, it's not relevant here. And I still don't see the reason why i should pay the miners electricity price.

[z0rg1nc]

2. They'll get additional profit because it's easier faster and cheaper to accept it so more people will buy something

Faster and cheaper than what? There are a lot of coins that are fast and cheap aiming at exactly the same as well as being well-established at that (say, Dogecoin). Do the service providers actually use them? I guess, no, at least, not to a significant degree. Even if we take online gambling as one such "service" (though this is a far cry from what you intend your coin for), I can only name bitcoins, litecoins and doges (in a few places) as being actively used...

Why would the things be different for your coin?

Than any decentralized system, by design. We can process hundreds tps without any limitation of the whole blockchain distributed to another full nodes like almost any altcoin. Plus stable exchange rate due to emission scheme.

[z0rg1nc]

3. Again, mine is not the only way to get the currency, you can sell BTC or some service to miners or previous holders. Why unprofitable mine is so important? Bitcoin is not minable for the most but still is useful.

Until then prices (i.e. exchange rate) will be too volatile. Not that I somehow imply that they won't be so (lol) when mining stops being profitable for the majority of miners (see Bitcoin), but the former is a given for a currency that doesn't have limits on the number of coins mined (see Dogecoin). Needless to say that high volatility of a coin is a big no-no for those who are going to trade goods for that coin...

Essentially, the unprofitability of mining sets the cap on the supply of new coins, which should stabilize the price, at least, theoretically, lol

Price will be falling until some equilibrium price will be found, then volatility will decrease. And i think it'll be soon. So what is the question?

[deisik]

It clarifies nothing Lets leave our services aside, it's not relevant here. And I still don't see the reason why i should pay the miners electricity price.

Okay, let's assume that you are selling an illicit content on the net. Child pornography would do just fine for this task, lol. It is a criminal activity in the majority of jurisdictions (if not in all) and severely punished. So as not to get caught, you create a super-duper cryptocoin, with an unlimited supply of new coins. The mining is no longer profitable, the liquidity is abundant, and the price for this coin is low (due to huge money supply) but nearly frozen (which is good for you). The "content" you provide is very expensive for pretty obvious reason, so you set the price for 1 minute of watching it according to the costs incurred, the exchange rate (since you pay your "employees" in fiat), and add a decent profit margin, of course (just in case, lol). So far so good. Now what happens if miners can mine much more coins with the same expenses than you decided to collect from them by viewing your "special" content (since they pay only for electricity)?

You will be subsidizing them in terms of fiat

[minor-transgression]

"Why would the things be different for your coin?"

There seems to be an acceptance of this paradox of money : that particular
forms of money cannot be both a store of value and a means of exchange.

Stated differently this becomes Gresham's Law:
https://en.wikipedia.org/wiki/Gresham%27s_law

Summary : "Bad money drives out good"

Regarding Government : "When a government overvalues one type of money
and undervalues another, the undervalued money will leave the country
or disappear from circulation into hoards, while the overvalued money
will flood into circulation."

Thus when government introduced their fiat money, specifically paper fiat
money, silver and gold coinage went into hiding. It is instructive to
observe that when the Mongols conquered China, the conquest was greatly
facilitated by the issuance of new paper money (at an extortionate
exchange rate). Fiat money is merely a transfer of power from savers to
the issuer of the fiat money. All fiat money is credit (and debt).

<Insert Rothschild quote here>

These things were once universally known. Today, the internet has made
new forms of money possible, and bitcoin may only be the first of many.
The lessons of history are being re-learned. For some, it may be painful.    
This collective amnesia is surely not accidental - the punishment for
currency debasement could be both gruesome and medieval, hence those
promoting fiat currencies have strong incentives to succeed.

History suggests that store-of-value money is sub-optimal, and that a
trimetallic (gold, silver, bronze) currency has advantages (and
disadvantages). This paper asks the question:
https://www.mpls.frb.org/research/wp/wp536.pdf
"The puzzle, of course, is not why sovereigns carried out debasements
(in fact it might even be why they did not do so more often),
but rather why did private agents respond so."

The author does not directly provide a convincing answer. It seems
probable that an informed merchant, on learning of a forthcoming
debasement, will borrow, then covert the bullion into debased coins,
and replay the debt at profit. Thus proximity to the Mint may have  
determined the market price of the debased silver coinage.

Note also "Accountants and merchants would count in livres of this
or that coin, and convert to gold coins to keep track of the
different values of the silver coins ..."

Monetary systems gravitate toward store-of-value (bitcoin) and
"overvalued money" that floods into circulation. Clearly, banks and other
middlemen are incentivised to keep fiat money circulating. Whether
bitcoin can disintermediate the third party in future transactions is
an open question, and there could be an opportunity for the right altcoin.

[deisik]

2. They'll get additional profit because it's easier faster and cheaper to accept it so more people will buy something

Faster and cheaper than what? There are a lot of coins that are fast and cheap aiming at exactly the same as well as being well-established at that (say, Dogecoin). Do the service providers actually use them? I guess, no, at least, not to a significant degree. Even if we take online gambling as one such "service" (though this is a far cry from what you intend your coin for), I can only name bitcoins, litecoins and doges (in a few places) as being actively used...

Why would the things be different for your coin?

Than any decentralized system, by design. We can process hundreds tps without any limitation of the whole blockchain distributed to another full nodes like almost any altcoin. Plus stable exchange rate due to emission scheme.

What about fault tolerance? You would need a data-center (or two, just in case, lol). All of a sudden, things get serious and much more expensive than previously thought, wow...

And why should we trust you, in the first place?

[z0rg1nc]

It clarifies nothing Lets leave our services aside, it's not relevant here. And I still don't see the reason why i should pay the miners electricity price.

Okay, let's assume that you are selling an illicit content on the net. Child pornography would do perfectly for this task, lol. It is a criminal activity in the majority of jurisdictions (if not in all) and severely punished. So as not to get caught, you create a super-duper cryptocoin, with an unlimited supply of new coins. The mining is no longer profitable, the liquidity is abundant, and the price for this coin is low but nearly frozen (which is good for you). The "content" you provide is very expensive for pretty obvious reason, so you set the price for 1 minute of watching it according to the costs incurred and the exchange rate (since you pay your "employees" in fiat). So far so good. Now what happens if within that same time period (i.e. 1 minute) miners can mine much more coins (despite the electricity costs) than you decided to collect from them by viewing your expensive content?

You will be subsidizing them in terms of fiat

Fairy tail. Some crazy man will spend his electricity for... what is the purpose?
In general miner's cost will pay the client who needs money for transfer and there is not enough on free market, than it becomes profitable to mine that small amount. Seller pay nothing. Client will, if it's the only way. But he'll be able to sell it to the next generation of users, so the full price spreading among all clients.

P.S. I don't think CP is the subject for discussion. Our system will have some rules for such things, probably not for the first time but still.

[z0rg1nc]

2. They'll get additional profit because it's easier faster and cheaper to accept it so more people will buy something

Faster and cheaper than what? There are a lot of coins that are fast and cheap aiming at exactly the same as well as being well-established at that (say, Dogecoin). Do the service providers actually use them? I guess, no, at least, not to a significant degree. Even if we take online gambling as one such "service" (though this is a far cry from what you intend your coin for), I can only name bitcoins, litecoins and doges (in a few places) as being actively used...

Why would the things be different for your coin?

Than any decentralized system, by design. We can process hundreds tps without any limitation of the whole blockchain distributed to another full nodes like almost any altcoin. Plus stable exchange rate due to emission scheme.

What about fault tolerance? You would need a data-center (or two, just in case, lol). All of a sudden, things become much more expensive than previously thought, wow

The whole twitter worked on one DB instance, what data-center? We'll need some infrastructure but it'll be significantly less than BTC with 10$/tr and fiat payment systems with their jurisdiction issues.

[deisik]

2. They'll get additional profit because it's easier faster and cheaper to accept it so more people will buy something

Faster and cheaper than what? There are a lot of coins that are fast and cheap aiming at exactly the same as well as being well-established at that (say, Dogecoin). Do the service providers actually use them? I guess, no, at least, not to a significant degree. Even if we take online gambling as one such "service" (though this is a far cry from what you intend your coin for), I can only name bitcoins, litecoins and doges (in a few places) as being actively used...

Why would the things be different for your coin?

Than any decentralized system, by design. We can process hundreds tps without any limitation of the whole blockchain distributed to another full nodes like almost any altcoin. Plus stable exchange rate due to emission scheme.

What about fault tolerance? You would need a data-center (or two, just in case, lol). All of a sudden, things become much more expensive than previously thought, wow

The whole twitter worked on one DB instance, what data-center? We'll need some infrastructure but it'll be significantly less than BTC with 10$/tr and fiat payment systems with their jurisdiction issues.

Are you kidding? For a moment, you were talking about a payment system (like Visa or MasterCard, for the record), hundreds of transactions per second, 24/7/365

Did you finish school, really?

[deisik]

It clarifies nothing Lets leave our services aside, it's not relevant here. And I still don't see the reason why i should pay the miners electricity price.

Okay, let's assume that you are selling an illicit content on the net. Child pornography would do perfectly for this task, lol. It is a criminal activity in the majority of jurisdictions (if not in all) and severely punished. So as not to get caught, you create a super-duper cryptocoin, with an unlimited supply of new coins. The mining is no longer profitable, the liquidity is abundant, and the price for this coin is low but nearly frozen (which is good for you). The "content" you provide is very expensive for pretty obvious reason, so you set the price for 1 minute of watching it according to the costs incurred and the exchange rate (since you pay your "employees" in fiat). So far so good. Now what happens if within that same time period (i.e. 1 minute) miners can mine much more coins (despite the electricity costs) than you decided to collect from them by viewing your expensive content?

You will be subsidizing them in terms of fiat

Fairy tail. Some crazy man will spend his electricity for... what is the purpose?
In general miner's cost will pay the client who needs money for transfer and there is not enough on free market, than it becomes profitable to mine that small amount. Seller pay nothing. Client will, if it's the only way. But he'll be able to sell it to the next generation of users, so the full price spreading among all clients.

P.S. I don't think CP is the subject for discussion. Our system will have some rules for such things, probably not for the first time but still.

You can substitute CP with anything more decent or legal (lol) but as expensive, though (say, just porno). The result will be the same, unless you decide to cap your coinage one day, indeed. As I said, users will be arbitraging such a system if there would be providers of expensive content/services in it...

But there would be none, obviously

[z0rg1nc]

The whole twitter worked on one DB instance, what data-center? We'll need some infrastructure but it'll be significantly less than BTC with 10$/tr and fiat payment systems with their jurisdiction issues.

Are you kidding? For a moment, you were talking about a payment system (like Visa or MasterCard, for the record), hundreds of transactions per second, 24/7/365

Did you finish school, really?

Every tx around 300B. 300*1000*3600*24*365 oh god the whole 10TB. You live in 90s? Btw we already have node partition design internally too.

[deisik]

Are you kidding? For a moment, you were talking about a payment system (like Visa or MasterCard, for the record), hundreds of transactions per second, 24/7/365

Did you finish school, really?

Every tx around 300b. 300*100*3600*24*365 oh god the whole 10Tb. You live in 90s? Btw we already have node partition design internally too.

Just in case, 24/7/365 means service availability. Think again about a data-center (or two)

[z0rg1nc]

We obviously can't provide 99.999% availability time (as and many other VISA advantages), but it's not necessary, we are discounter Fast and cheap. But of course we'll have failover systems (replication based with rollback time notification smthg like that). But not the whole data-center.

[TripleA]

Hi deisik and hi all
Just have noticed this discussion. I am also a member of BitMoney dev-team. Hope to make all clear about our project, if it is so actively discussed.

- What is it about exchange rate? Will it always fall?
As soon as we integrate many services, people will start to buy BTM for their needs. Most people can't mine as much as they need for usual transactions. So the rate will stabilize, with small inflation like any currency has.

-Well then, what is the reason to integrate it with my service or just use?
And it's the main point. Here we come to the topic subject.
We are developing payment system which should have many obvious advantages if compared with Bitcoin. I just paste here some description from the manual:

* Anonymous (for clients) transfers optionally.
* Small storage requirements
* Ready to work immediately after start.
* Client-server protocols based on the i2p network, most experienced system for anonymous and encrypted communication.
* Client authentication and encryption key exchange based on RSA with 2048 bit keys. Everything including local settings is encrypted with AES-256.

In short, BitMoney transactions are fast, and can not be tracked like Bitcoin payments. This fact and out i2p relation provide many opportunities and we are trying to catch and use all of them (ani-spam system is just the first and one of the most simple examples). I can't say if we shall succeed or not, but the next generation cryptocurrencies have to provide this properties for their users. Bitcoin can't reach it by design, and we are already doing it.
Just for example. Fast transactions provide opportunity for shops to sell goods with a price based on almost current exchange rate, not making 3-10% markup for safe currency exchange. Moreover, low commissions let shops to make even lower prices in BTM, that is good for their consumers.
Offline payments are the other interesting feature. It will be implemented in the future release.
And I can go on long enough.

-What is the reason to mine BitMoney anyway, if my electricity doesn't cost ~0?
First, for small amounts it's easier to mine BTM than to buy it. It's most about different ani-spam services (look our forum or build-in chat for example).
Second, we have plans to provide a kind of investments with BTM, but it's not about HYIP pyramids or something alike. It should be a kind of investment in external services implementation, clean and profitable for all sides with a goal of further project development. But now it is all I can tell about that.
Third, BTM mining is still profitable just to buy BTC with current rates.

Finally, if we are speaking about Bitcoin. It is also not profitable to mine for most of users. But they use it, and not because of profitable mining, but for its comparative security and anonymity.

-Where is admin's profit?
We have commissions for most of transactions like any other payment system has.  But our commissions are much lower.

-What happens, if you have problems with fbi?
https://bitcointalk.org/index.php?topic=1241229.msg12975575#msg12975575

Please, just check our news sometimes. We are in constant development and have ideas how to implement our plans in reality, with benefits for everyone.

[deisik]

Hi deisik and hi all
Just have noticed this discussion. I am also a member of BitMoney dev-team. Hope to make all clear about our project, if it is so actively discussed

The one million dollar question... Why should we trust you?

[1aguar]

A recent survey showed:
50% of merchants who accept bitcoin convert it all to fiat. 10% keep the bitcoin. 40% take a mix of fiat and bitcoin.
I conclude that the use and acceptance of bitcoin as money is growing.
Another recent survey showed:
Bitcoin acceptance and use is growing faster than the internet but slower than mobile phones because the latter network was able to utilize existing networks while the former had to create a new network from scratch. This indicates that trade conducted in bitcoin is growing, and not diminishing.
I have thought about how VAT and sales taxes are often comparable to the loss incurred by a barter transaction (up to 10%); it seems to me that avoiding VAT and sales tax is a great use case for bitcoin, and obviously certain groups of people will try to use it for most of their transactions. Also, Since there is apparently not enough money to pay back all the loans with interest, the fiat system creates economic distortions on a massive scale, so bubbles in fiat assets are somewhat comparable to those of crypto-assets.

[TripleA]

Hi deisik and hi all
Just have noticed this discussion. I am also a member of BitMoney dev-team. Hope to make all clear about our project, if it is so actively discussed

The one million dollar question... Why should we trust you?

It's the weakest point of the system, you are absolutely right. Trust shall be accumulated due the time of stable work, but it will never be enough.
The main point: we are developing it and we have profits from BitMoney stable work and popularity. Absolutely no reasons for us to harm the project or our clients interests.
I hope that build-in exchange will not be the main BTM market, so users will not have to rely upon us in this point either.

[deisik]

A recent survey showed:
50% of merchants who accept bitcoin convert it all to fiat. 10% keep the bitcoin. 40% take a mix of fiat and bitcoin.
I conclude that the use and acceptance of bitcoin as money is growing.

What fraction the merchants accepting Bitcoin convert to fiat is not as important as the total amount of goods traded for it (in terms of both fiat and Bitcoin). What is it equal to, does it grow and how fast? If two people sold something to each other for bitcoins and kept them, we would have 100% of "merchants" loyal to Bitcoin, wow...

But does this "statistic" tell us anything?

[calkob]

I miss the good ole days of mining with a 5850 video card after playing wow lol

The good ole day..... i would have loved to have known about bitcoin back then.  it must have been really interesting doing that, who actually got you into it was it a friend or sumthin?

[1aguar]

A recent survey showed:
50% of merchants who accept bitcoin convert it all to fiat. 10% keep the bitcoin. 40% take a mix of fiat and bitcoin.
I conclude that the use and acceptance of bitcoin as money is growing.

What fraction the merchants accepting Bitcoin convert to fiat is not as important as the total amount of goods traded for it (in terms of both fiat and Bitcoin). What is it equal to, does it grow and how fast? If two people sold something to each other for bitcoins and kept them, we would have 100% of "merchants" loyal to Bitcoin, wow...

But does this "statistic" tell us anything?

The number of goods traded for bitcoin is basically a function of the market cap.
I don't think that the market cap is as important as the fact that it is a viable alternative that works; I can and DO trade ALL of my bitcoin for goods because there are many advantages to using bitcoin for trading in goods, the first one being that one gets to "starve the banks"! As mentioned in another thread:

~Anyone can (in ~complete security) use Bitcoin to send ~any amount of money ~anywhere in the world, ~instantly and for ~free.

To me, that seems like a fucking miracle on the order of life, consciousness, wheels, fire, and Teflon.  Where's the issue?

In exactly what way does Bitcoin not work just fine?