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Author Topic: [CHART] Bitcoin Inflation vs. Time  (Read 505377 times)
agentbluescreen
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April 26, 2013, 10:40:26 PM
 #81


 Meanwhile you've made major strides all alone towards legitimizing bitcoin for its "true purpose".


That's all I'm trying to help to do. Thanks for your time! Smiley
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townf
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April 29, 2013, 06:23:37 AM
 #82

Let's just pretend that one day btc will stabilize vs fiat, or that fiat simply just goes away and we are left with bitcoin only.

The hard cap on the number of btc is a big mistake because it will ultimately be very deflationary.

BTC supply has a halflife due to loss. I don't know what that halflife is, but it is a statistical fact. Therefore mathematically, the number of usable btc's will one day be practically zero. The currency will of course be unusable before then due to scarcity. There is no way around it. People will grow old and die without divulging their keys. People will lose or forget their keys. Computers will fail and lose keys. Just like people thought at one time we will never run out of IP4 addresses, the day will come.

Furthermore, in the meantime, population will grow. New people are born every day. More than the amount who die. These new people will one day be old enough to get their share of bitcoins, sharing the supply with the ever growing number of people who are still alive.

It doesn't matter that btc's are divisible to the nano btc. That's not the point. The point is to have a money supply remain constant in ratio with the population. This can't be done with a hardcap. The halflife due to private key loss exacerbates this problem.

I didn't even get into the fact that new, sustained wealth created by innovation or labor needs to be represented by fresh currency issue to prevent deflation. This type of currency issue requires an issuer to identify brand new wealth and so is not suited for a distributed p2p network of computers, so we don't even need to go there. Maybe just figure out an average and go with it.

Inflation and deflation are 2 sides of the same coin. Both are bad for participants in the economy, through no fault of their own. Either way, some sectors of the economy benefit unfairly and some suffer unfairly. You can't say that deflation is good and inflation is bad. It doesn't work like that. They're both bad. The changing itself of the value of money up or down as the change works its way unevenly through the economy is what hurts people. Both inflation and deflation change the value of money.
hgmichna
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April 29, 2013, 06:36:36 AM
 #83

The obvious solution to bitcoin loss would have been not to reduce bitcoin production. Too bad Satoshi did not see this.

Perhaps there is a way even now to change the bitcoin algorithm to stop the halving of bitcoin production every 4 years and perhaps increase it back to the original 50 bitcoins per block or to some other appropriate number.

In the long run this would create a constant number of available bitcoins, as people would lose as many bitcoins as are produced.

I doubt though that this will be done, because people just don't understand.
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April 29, 2013, 06:38:14 AM
 #84

- snip -
The hard cap on the number of btc is a big mistake because it will ultimately be very deflationary.

Saying it is a "mistake" implies that the result in unintentional.  Bitcoin is intended to be deflationary ultimately.  This may make it an interesting experiment with the concept of a highly divisible deflationary currency, but it doesn't make it a mistake.

BTC supply has a halflife due to loss. I don't know what that halflife is, but it is a statistical fact. Therefore mathematically, the number of usable btc's will one day be practically zero.

The statement that "the number of usable btc's will one day be practically zero" is based on an assumption that bitcoin will never be divisible beyond 0.00000001 BTC.  If we assume that sometime in the next few hundred years the users of bitcoin will agree to subdivide bitcoin further, then the number of usable fractions of a bitcoin become essentially infinite.

The currency will of course be unusable before then due to scarcity. There is no way around it. People will grow old and die without divulging their keys. People will lose or forget their keys. Computers will fail and lose keys. Just like people thought at one time we will never run out of IP4 addresses, the day will come.

Explain why it would be unusable due to scarcity?  Scarcity will increase it's value, but it should still be useable.


It doesn't matter that btc's are divisible to the nano btc. That's not the point. The point is to have a money supply remain constant in ratio with the population.

That is not the point of bitcoin.  The point of bitcoin is to create a currency that is inflationary in supply during it's adoption phase, and then transition to having a shrinking supply in ratio with the population.

This can't be done with a hardcap. The halflife due to private key loss exacerbates this problem.

Agreed.  This is well known and intentional.  That doesn't make it a problem.

I didn't even get into the fact that new, sustained wealth created by innovation or labor needs to be represented by fresh currency issue to prevent deflation.

Or everyone can simply accept deflation, and then new, sustained wealth created by innovation or labor needs to be represented by dwindling currency suply to prevent inflation.

Inflation and deflation are 2 sides of the same coin. Both are bad for participants in the economy, through no fault of their own. Either way, some sectors of the economy benefit unfairly and some suffer unfairly. You can't say that deflation is good and inflation is bad. It doesn't work like that. They're both bad. The changing itself of the value of money up or down as the change works its way unevenly through the economy is what hurts people.

This is an interesting opinion, but I think you'll find that many here will disagree with it.


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April 29, 2013, 06:41:58 AM
 #85

The obvious solution to bitcoin loss would have been not to reduce bitcoin production. Too bad Satoshi did not see this.

I'm quite certain that he did see this.  He intentionally designed a currency that would ultimately be deflationary.

Perhaps there is a way even now to change the bitcoin algorithm to stop the halving of bitcoin production every 4 years and perhaps increase it back to the original 50 bitcoins per block or to some other appropriate number.

Technically?  Absolutely.  But it won't happen.  You'd have to convince everyone (miners and peers) to switch, and far too many people believe in the the benefits of deflationary currency for that to happen.

In the long run this would create a constant number of available bitcoins, as people would lose as many bitcoins as are produced.

I doubt though that this will be done, because people just don't understand.

Sure they understand.  They intentionally chose to use bitcoin to escape the inflationary nature of other currencies.  Now you are going to try to tell them that they should switch back to using an inflationary currency when they are very happy with the currency they have chosen?  Good luck with that.

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April 29, 2013, 02:40:15 PM
 #86

Ok guys please don't think I'm picking on either of you here, but these are the facts. (as I see them)


- snip -
The hard cap on the number of btc is a big mistake because it will ultimately be very deflationary.

Saying it is a "mistake" implies that the result in unintentional.  Bitcoin is intended to be deflationary ultimately.  This may make it an interesting experiment with the concept of a highly divisible deflationary currency, but it doesn't make it a mistake.


The inflationary or deflationary exchange value of the BTCitcoin Over the Counter "Credit Swap Derivative" will have nothing or only very, very little ever to do with it's quantitative monetary "supply" (destruction or mining uncovery) nature. Mining uncovery merely sustains it's uniquely contrived exchange verification (universal blockchain) network.

BTCitcoins are valued and devalued solely by the laws of supply and demand mediated through the market price/valuation mechanisms of bid and ask settlements on trading exchanges. These currently grossly infantile and horrifically ill-suited price-exchanging mechanisms will hopefully become better regulated as we progress here with identifying much better trade-exchanging practices.  Grin


BTC supply has a halflife due to loss. I don't know what that halflife is, but it is a statistical fact. Therefore mathematically, the number of usable btc's will one day be practically zero.

The statement that "the number of usable btc's will one day be practically zero" is based on an assumption that bitcoin will never be divisible beyond 0.00000001 BTC.  If we assume that sometime in the next few hundred years the users of bitcoin will agree to subdivide bitcoin further, then the number of usable fractions of a bitcoin become essentially infinite.


townf please explain the mathematical reason why everybody on earth would "eventually" lose all of their money? Do you know something about hard drives, memory sticks, software and online trading accounts that we don't? Anyone who is clever and sophisticated enough to use/keep a digitally encrypted virtual Over the Counter Credit Swap Derivative as savings will be smart enough to use a backup program to save the current state of their wallet. Over time the number lost should never even approach the number newly uncovered


DannyHamilton it is impossible for a transaction to occur over the network involving less than a further - tenth of a "femtoBTC (1 fBTC = BTC0.000 000 1)".

The smallest possible "atto" 1/100 millionth unit is called a "sitoshiBTC (sBTC) = BTC0.000 000 01 = 1 sitoshiBTC. The blockchain network cannot record nor verify any smaller of a transaction. BTCitcoin will have a vast, nearly infinite universe of "SitoshiBTC pennies" to use should it's valuation ever need some.



The currency will of course be unusable before then due to scarcity. There is no way around it. People will grow old and die without divulging their keys. People will lose or forget their keys. Computers will fail and lose keys. Just like people thought at one time we will never run out of IP4 addresses, the day will come.

Explain why it would be unusable due to scarcity?  Scarcity will increase it's value, but it should still be useable.


Score! Danny =1 town = 0

You couldn't "divide up" and sell-off (allocate) parts of the limited range of IPV4 addresses to more computers than that who needed them, which made their central IP database registry (bitchain) impossible to enlarge.

Unlike an IPV6 address, a single "mommy BTCitcoin" regardless of wether she is plump or skinny, can always be crisply divided up into a 100 million different screaming and burping little SitoshiBTCs who are all totally independent of whats left of her.



It doesn't matter that btc's are divisible to the nano btc. That's not the point. The point is to have a money supply remain constant in ratio with the population.


That is not the point of bitcoin.  The point of bitcoin is to create a currency that is inflationary in supply during it's adoption phase, and then transition to having a shrinking supply in ratio with the population.


BTCitcoin valuation has nothing much at all to do with the supply of it , and everything to do with the demands for it. As a productive global human population increases it's demand for it, it's exchange-valuation-supply will naturally tend to only increase. Should that demand fall it's owner's own independent valuations of it should tend to stay where they were moreso than they tend to fall.

BTCitcoin was designed to be "counter-flationary" owing to independent, local "market-owner" valuations rather than centrally dictated noble-fiat "slave-owner" ones



I didn't even get into the fact that new, sustained wealth created by innovation or labor needs to be represented by fresh currency issue to prevent deflation.


Or everyone can simply accept deflation, and then new, sustained wealth created by innovation or labor needs to be represented by dwindling currency suply to prevent inflation.


No it doesn't, really,


"Monetary devaluation" or decreasing the value of a money (price inflation) is the same thing as making and circulating more of it. It is a moronic tactic used by Tory-Bilderberg Trotskyite Mensheviks to foolishly attempt to prod growth by monetizing slaves debts that you are too greedy and evil to forgive. It only results in making bond loans even more worthless than the debt liabilities they back.

"Monetary revaluation" (seldom heard-of as in 1973 Bretton Woods) or increasing the value of a "limited commodity" foolishly used as money is the same thing as reducing/monopolizing it's supply or a "Gold Standard" doomed to shrink until fraudulent rented-Receipts For It Notes must be used to replace it (1913), then leading to rented They-Owe-Us Notes backed by "bond" debt-slavery pledges to it's former value (1973).

"Monetary iValuation" is the BTCitcoin free market system, where monetary supply and demand determine an ever naturally increasing valuation that profits all who own it and automatically remains "price-inflation neutral" regardless of growth without central control.


If you don't like the "inflation or deflation" of your BTCitcoin you don't have to sell it. But, this may change, hopefully it's price always inflates at a goodly more or less demand-constant premium to encourage saving, rather than it deflating and robbing us.




Inflation and deflation are 2 sides of the same coin. Both are bad for participants in the economy, through no fault of their own. Either way, some sectors of the economy benefit unfairly and some suffer unfairly. You can't say that deflation is good and inflation is bad. It doesn't work like that. They're both bad. The changing itself of the value of money up or down as the change works its way unevenly through the economy is what hurts people.


This is an interesting opinion, but I think you'll find that many here will disagree with it.


Not me  Grin
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April 29, 2013, 03:18:49 PM
 #87

DannyHamilton it is impossible for a transaction to occur over the network involving less than a further - tenth of a "femtoBTC (1 fBTC = BTC0.000 000 1)".

The smallest possible "atto" 1/100 millionth unit is called a "sitoshiBTC (sBTC) = BTC0.000 000 01 = 1 sitoshiBTC. The blockchain network cannot record nor verify any smaller of a transaction. BTCitcoin will have a vast, nearly infinite universe of "SitoshiBTC pennies" to use should it's valuation ever need some.

This is true at the moment.  The current protocol as implemented in the reference client is unable to represent any value less than 0.00000001 BTC in the blockchain.

However, I think it is rather short-sighted to assume that for the next few hundred years, there will be no possibility of engaging in commerce at values smaller than 0.00000001 BTC.

With a consensus of users, the protocol could be modified and the blockchain could represent smaller values.

It might also be possible to create a new transaction type that represents smaller values.

But even if it is never technically possible to represent values smaller than 0.00000001 BTC in the blockchain, it will still be possible for service providers to offer accounts that represent smaller values.

As a simple example, I am not aware of a U.S. currency (bill or coin) valued at less than $0.01 and yet my local gas (petrol) station charges prices per gallon of $3.949.

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April 29, 2013, 04:13:19 PM
 #88

I for one certainly hope that there never will exist a majority of the hashing power who are convinced that Bitcoin needs to be changed to remove the hard cap. I would dump all my bitcoins for gold if that ever happened. The reason Bitcoin is better than all the fiat currencies of the world is that it has a limited supply. It's true that bitcoins will be lost over time and that 2,100,000,000,000,000 satoshis may not be enough eventually, but the solution to that problem is to make bitcoins more divisible, not to introduce new bitcoins.

Regarding the assertion that the amount of money in circulation should grow in proportion to the population, although on the surface that seems like a reasonable system, it actually steals wealth from individuals. The key point to realize is that, even if prices are holding absolutely steady over time, it can still be true that your wealth is being stolen from you. The natural tendency, given advancements in technology and improvements in efficiency of production, is for prices to decline. We see that natural tendency most exemplified in the high-tech sector. Computers are continually getting cheaper. This is only because the high-tech sector is advancing at such a rapid pace. The slower moving sectors of the economy do not demonstrate price deflation because monetary inflation is offsetting it. If we had a constant money supply, everything would be getting cheaper over time. The fact that we are seeing prices remaining relatively stable indicates that we are having our wealth stolen from us insidiously through monetary inflation. I opted out of that dishonest system by moving most of my savings into Bitcoin. I don't want to see Bitcoin fall into the same criminal pattern as the fiat currencies.
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April 29, 2013, 05:46:56 PM
 #89

Gents, please bear with me, i am new and don't have the hang of quoting parts of posts yet!

agentbluescreen, I realize the current value of btc is based on supply and demand. That is why i prefaced my entire post with "Let's just pretend that one day btc will stabilize vs fiat, or that fiat simply just goes away and we are left with bitcoin only."

As far as the statistical halflife of bitcoin supply, you said "Anyone who is clever and sophisticated enough to use/keep a digitally encrypted virtual Over the Counter Credit Swap Derivative as savings will be smart enough to use a backup program to save the current state of their wallet." That is very different than saying "Every single person who is clever and sophisticated enough to use/keep a digitally encrypted virtual Over the Counter Credit Swap Derivative as savings is smart enough and always does without fail use a backup program to save the current state of their wallet, and this is impervious to all error or malfunction, and not a single key will be lost." If you had said the latter statement, and it were true, then you would have proved your point. But you didn't say that, and it is not true anyway.

Assuredly, coins have already permanently been lost due to human or computer failure, so why wouldn't this continue? I may or may not know more about computer hardware than the next guy, but I don't have to in order to arrive at the conclusion that human error or computer error has and will continue to lose private keys. Hence the halflife of supply.

You said, "Over time the number lost should never even approach the number newly uncovered." The number newly uncovered will be zero one day. Statistically, coins are guaranteed to be lost because accidents happen, so the number lost will surpass the number newly created.

As far as the scarcity thing goes, here is an analogy: The human body is roughly 70% water. If it goes down to 65% it is scarce, but the body will still live. If it goes down to 50% it is scarce, but water still exists, but the body will die. You don't have to go down to 0% water like a piece of beef jerky to die from dehydration. The death from 50% water content is the scarcity I'm talking about. Gold is scarce, but people still use it to store wealth. That's not the level of scarcity that causes it to be unusable. I should have been more clear since you are keeping score.

You said "Unlike an IPV6 address, a single "mommy BTCitcoin" regardless of wether she is plump or skinny, can always be crisply divided up into a 100 million different screaming and burping little SitoshiBTCs who are all totally independent of whats left of her." What point does this prove? 100 million is a finite number.

The unassailable chain of logic is that if the network doesn't constantly create more btc, the supply will ceaselessly whittle away due to loss and population growth. Given enough time, the currency will not be usable due to "dehydration". If you can't deny that loss will occur (humans and computers aren't perfect), and you can't deny that the population keeps growing, and you can't deny there will come a day when no more bitcoins will ever be created again, and you can't deny that you can't subdivide a bitcoin into infinity parts, and you can't deny that time will keep marching on endlessly, then tell me please, how can you avoid deflation?

The other point I was trying to make is that deflation is a bad thing.

DannyHamilton, you seem to think you speak for the majority here that think this isn't so. Maybe you do speak for them, but that may not be a good thing. It seems to me like a lot of people here don't even understand the effects of changing the value of money up or down except that "inflation is bad" and are blindly gulping the deflationary koolaid simply because bitcoin is stuck with it. This doesn't add any weight to any argument.

You said referring to satoshi, "I'm quite certain that he did see this.  He intentionally designed a currency that would ultimately be deflationary." How do you know this was his intent? Im just asking because im new here and you have a lot of posts. I'd like to see some opinions from the founders (or anybody else who knows what they are talking about) saying why they think constantly increasing the value of money is actually a good thing for the economy. I've already read much and thought much on the subject and have to disagree.

You said, "Sure they understand.  They intentionally chose to use bitcoin to escape the inflationary nature of other currencies." I think the people you speak for don't quite understand that you don't have to be totally deflationary to avoid inflation. This is like saying, "Sure, the reason they stripped naked and jumped into that slushy, ice filled pool instead of a 72 degree room was so they could get out of that burning house."
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April 29, 2013, 06:11:12 PM
 #90

you can't deny that you can't subdivide a bitcoin into infinity parts

I do deny this.  Or rather, I deny that it will necessarily always be true.  It may be true at the moment, but I have no reason to believe that won't change in the future.

The other point I was trying to make is that deflation is a bad thing.

DannyHamilton, you seem to think you speak for the majority here that think this isn't so.

I do not claim to "speak for them". I simply point out that it is clear that many (I'm not even certain it is a majority) people here have expressed that belief.

Maybe you do speak for them, but that may not be a good thing. It seems to me like a lot of people here don't even understand the effects of changing the value of money up or down except that "inflation is bad" and are blindly gulping the deflationary koolaid simply because bitcoin is stuck with it. This doesn't add any weight to any argument.

Certainly.  And there are a lot of people here don't even understand the effects of changing the value of money up or down except that "inflation is bad" and are blindly gulping the inflationary kool-aid simply because that's all they've ever known in a currency.  That doesn't add any weight to any argument either.

You said referring to satoshi, "I'm quite certain that he did see this.  He intentionally designed a currency that would ultimately be deflationary." How do you know this was his intent?

I think it can be safely inferred.  It seems pretty clear that the person or group known as "Satoshi Nakamoto" had a decent pool of intelligence to draw from.  He/they created a protocol that clearly would stop producing new currency after 6,930,000 blocks.  It is difficult to imagine that he/they could do all this without realizing that loss and destruction of bitcoins would lead to a deflationary supply after that.  As such, I can infer that the deflationary design was intentional and not accidental.  If you need further proof, consider this 2009 post from Satoshi:

- snip -
"natural deflation"... I like that name for it.  Yes, there will be natural deflation due to payment mistakes and lost data.  Coin creation will eventually get slow enough that it is exceeded by natural deflation and we'll have net deflation.

I'd like to see some opinions from the founders (or anybody else who knows what they are talking about) saying why they think constantly increasing the value of money is actually a good thing for the economy. I've already read much and thought much on the subject and have to disagree.

I certainly won't try to speak for Satoshi, I suppose if you search through his old posts you'll probably find some discussion on the matter.  Regardless, I think it is clear that many disagree with your particular opinion.

You said, "Sure they understand.  They intentionally chose to use bitcoin to escape the inflationary nature of other currencies." I think the people you speak for don't quite understand that you don't have to be totally deflationary to avoid inflation. This is like saying, "Sure, the reason they stripped naked and jumped into that slushy, ice filled pool instead of a 72 degree room was so they could get out of that burning house."

If someone would like to create a crypto-currency that is not deflationary in supply, they are welcome to do so.  The code is all open source and available for modification.  If that turns out to be the better design, it will succeed as bitcoin fails.  There is not need to convince people to "change bitcoin", bitcoin is exactly what bitcoin is designed to be.  Simply create an alternative and convince everyone to use the alternative instead.  There are already several alternatives out there.

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April 29, 2013, 06:54:42 PM
 #91

ok agent, so we kind of kludged the point with the subdividing the mommy bitcoin. There is really two different points to make here. It is the act itself of nominally revaluing in btc a piece of real wealth, whether by a whole decimal point or not, that causes inflation or deflation, regardless of how many decimal places are available. Separately, the fact there is only a finite amount of satoshis is what makes the supply halflife and scarcity problem dangerous to the currency.

dannyhamilton, deflation hurts borrowers and producers. How many 30 year mortgages are going to survive when the borrowers wages are constantly going down, but the principal amount of the loan remains the same? I'm not arguing that loaning out money for 30 years at compound interest to buy a house the lender didn't drive a single nail into is a good system to live under, I'm just pointing out that's not going to work out very well. Maybe that's a good thing. But deflation also hurts producers, who pay a certain amount to produce one day, but have to sell what they produce at a cheaper price at a later date, at risk of loss.

What all participants in an economy need in general overall, is for the value of money to remain constant over time. That is practically the whole point of using currency. I'm not arguing for inflation, I'm arguing for the currency to have the same buying power over time.

I'm not sure how you can subdivide a currency into infinity and still use it to exchange goods and services with it.

Thanks for the reference of satoshi's opinion on deflation. I can't say I agree with it though.

I realize there are other cryptocurrencies out there, and some do address this problem, and that this probably how this problem is going to get solved. I'm not calling for bitcoin to change, but if it does, that is great as it is the most popular cryptocurrency currently. I'm just pointing out what i see as one of its shortcomings.
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April 29, 2013, 07:03:33 PM
 #92

dannyhamilton, deflation hurts borrowers and producers. How many 30 year mortgages are going to survive when the borrowers wages are constantly going down, but the principal amount of the loan remains the same? I'm not arguing that loaning out money for 30 years at compound interest to buy a house the lender didn't drive a single nail into is a good system to live under, I'm just pointing out that's not going to work out very well. Maybe that's a good thing. But deflation also hurts producers, who pay a certain amount to produce one day, but have to sell what they produce at a cheaper price at a later date, at risk of loss.
Right. Fiat encourages borrowing and discourages saving. Bitcoin encourages saving and discourages borrowing. I'm quite certain that's a good thing overall.

And you're missing a key point about producers. Yes, they'll be selling their goods possibly for a lower price than they paid to acquire their inputs, but that's not because their goods are worth less; it's because the currency is worth more. Their next round of inputs will cost even less than their proceeds from this round.

What all participants in an economy need in general overall, is for the value of money to remain constant over time. That is practically the whole point of using currency. I'm not arguing for inflation, I'm arguing for the currency to have the same buying power over time.

That's one possible goal for a monetary system. It's not the goal of Bitcoin. If you want a money that exactly maintains its buying power over time (impossible to achieve objectively, but you can try), then you might create a Bitcoin clone and change its rules so that its money supply schedule isn't predetermined. I won't use it, but I'm sure lots of folks will, at least at first, until they realize that they're losing out compared to how they'd be doing if they were using Bitcoin.

I'm not sure how you can subdivide a currency into infinity and still use it to exchange goods and services with it.

Why does it matter whether a car costs 100 BTC or 0.0001 BTC (100 µBTC)? The number is arbitrary. If 0.00000001 BTC represents too much buying power to be useful for small transactions, then we'll increase the precision of the protocol.
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April 29, 2013, 07:09:53 PM
 #93

whitslack, im talking actual infinity. Somehow i got the impression danny thinks that infinity subdivions is possible. It's probably not worth pursuing.

How is a producer going to stay in business even with cheaper inputs the next go round when he takes a loss everytime or even one time?
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April 29, 2013, 07:17:40 PM
 #94

- snip -
im talking actual infinity. Somehow i got the impression danny thinks that infinity subdivions is possible.
- snip -

Seriously?  You're saying that you can't tell that the point being made is that in the future it will likely be possible to subdivide bitcoins as far past 0.00000001 as needed?  You think that I'm suggesting that it will be necessary to have and transact in literally "infinitely small" divisions of bitcoin?

Here I though maybe I was engaging in educated discussion with someone at least capable of keeping up with the basics.  Had I realized you were an uneducated troll, I never would have bothered responding (perhaps I should have taken a hint from your grammar, punctuation, spelling, and capitalization shortcomings) .  Seems like a good time to click the "ignore" button.

whitslack
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April 29, 2013, 07:42:36 PM
 #95

How is a producer going to stay in business even with cheaper inputs the next go round when he takes a loss everytime or even one time?

Hypothetical scenario:

I am a widget manufacturer. My factory takes sprockets and tweaks them to produce widgets. I start out with 1000 BTC. I purchase a cargo container full of sprockets for 800 BTC. My factory turns those sprockets into widgets over the next two weeks. Then I sell all of my widgets for 700 BTC.

Your assertion is that I've lost money. I paid 800 BTC for my inputs but only got 700 BTC for my outputs. Nominally, you're correct. But the 700 BTC that I received for my outputs today is worth more than the 800 BTC that I paid for my inputs two weeks ago. And now I'll buy another container of sprockets today for 600 BTC and sell the widgets in another two weeks for 500 BTC.

If the value of bitcoins continues to increase, then it's true that my BTC balance at the end of each production cycle will be less than my BTC balance at the beginning of that cycle. And it's also true that I would have been better off simply to hold the bitcoins and not produce anything at all. But that is the luxury of 20/20 hindsight. It's also possible that bitcoins could have held steady in value over those two weeks or may even have declined in value, and in that case I would do better by manufacturing than by holding. In effect, my manufacturing widgets is a hedge against declining bitcoin value. The cost of the hedge is the difference between the bitcoin-price of my inputs and the bitcoin-price of my outputs.
townf
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April 29, 2013, 07:46:55 PM
 #96

wow danny calm down. I said it wasn't worth pursuing because i am giving you the benefit of the doubt. That's why i said "got" the impression not "getting". Good grief relax.

Here's what was said anyway in case you don't remember:

i said, "you can't deny that you can't subdivide a bitcoin into infinity parts"

you said, "I do deny this.  Or rather, I deny that it will necessarily always be true.  It may be true at the moment, but I have no reason to believe that won't change in the future."

Based on our actual words i thought we were talking about actual infinity here. That's why i called it out on the next post, based on the actual words. Whether you were still talking about actual infinity at the end of your paragraph or switched and meant 1/1000000000000000000000000000000 without saying so is immaterial. Either way it's not worth pursuing. Chill out and give me the benefit of the doubt of being convinced that anybody would actually think you can commerce with 1 over infinity units (even if that is exactly what they said). Give yourself the benefit of the doubt that somebody wouldn't think that of you. No need to fly off the handle and hurl insults.
townf
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April 29, 2013, 08:03:36 PM
 #97

The premise to all this is that btc is in deflation, not speculation. If you know beforehand that the value of btc is going to increase against real stuff, there is no 20/20 hindsight about it. You would choose to not produce anything. In your example you would be 100 btc richer for doing nothing. This is an insane environment for participants in an economy to operate in, as is inflation. Come on, just admit it.

We would have an economy full of hoarders and lenders with no one to lend to. Much like we have an economy overblown with borrowers and spenders in this fiat inflation we are in. Two sides of the same coin. The obviously sane thing to do is to keep the value of money constant. That is the whole point of money. Come on now, you know im right, say it
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April 29, 2013, 08:05:24 PM
 #98

danny lets be friends, i truly didn't think you thought that a system will work using 1/sideways8 units of exchange. That's silly c'mon
hgmichna
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April 29, 2013, 08:30:25 PM
 #99

Let me add that the points made here may well turn out to be moot, because bitcoin in its current form is just the first version of an independent, decentralized currency. It would surprise me very much if it were not succeeded by something better in due time.

Bitcoin's design is ingenious. It deserves to function for years to come. But it is not the ultimately perfect currency. It has some shortcomings. For example, it is unsuitable as a world-wide micropayment system, because a very high number of transactions would overwhelm its current blockchain design. It is also too slow for daily casual payments, if you want to wait for an hour or more (in fact for an indefinite time) for the usual six confirmation blocks before you can fully trust a transaction.

It could very well serve as a back-end for future micropayment systems built upon it, for example, by providing a clearing system to balance accounts after a number of micropayments have been done on some yet to be created front-end system.

But it still seems unlikely to me that bitcoin is the ultimate currency and nothing better would ever be invented. Therefore I propose to use bitcoin as much as possible for as long as it lasts. I don't think it will be for so long that coin loss will become a major problem.

In short, don't worry needlessly. If you worry, then worry about government interference, because that will likely become a much bigger problem much earlier than deflation due to coin loss.
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May 02, 2013, 12:09:41 AM
 #100

hgmichna true dat
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