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Author Topic: The hoarding problem  (Read 3395 times)
twolifeinexile
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January 15, 2013, 05:32:10 PM
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The total possible bitcoins is only 21M, and now half of that is out in people's hands. It is limited in supply, I think for most people bitcoin is also not their major assets, so they do not have to worry to liquidate them to get back resources they need.

All these factors make it so easy to be hoarded and price go up and up and up, but actually normally economy forms around it.

In real life, people will still use fiat, bitcoin become a collectable that is in the process of forever wasting resources (blockchain hashing), doing nothing. (price may still go up and up)

What if this is the end result?

(Not saying I agree with this viewpoint, but I think there is merits and people should think about this)
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alexeft
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January 15, 2013, 06:01:10 PM
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If the economy around bitcoin goes up, bitcoin is going to go up because it's supply will not grow accordingly.
It's the basic law of supply and demand.
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January 15, 2013, 06:46:12 PM
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. . . (Not saying I agree with this viewpoint, but I think there is merits and people should think about this)
People have though about it.  It has been discussed many times here.

There are people who are concerned that a deflationary currency cannot survive due to the incentive for hoarding.  Those people choose to either not use bitcoin at all or to attempt to time the market and jump out just before it crashes.

There are others who believe that there will always be a need to spend bitcoins, and as such hoarding will not present a problem.  Those people continue to use bitcoin as a currency comfortable in their belief that it will endure.

Only time will tell us who is right.  It will be fun to watch and see, yes?

DannyHamilton
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January 15, 2013, 06:49:21 PM
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The total possible bitcoins is only 21M . . .
Well, first you have to realize that 1 BTC is really an abstraction.  It is a name created for 100,000,000 units.  So in reality the bitcoin system supports 2,100,000,000,000,000 (2.1 quadrillion) units (a unit commonly referred to as a "Satoshi").

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January 15, 2013, 06:57:29 PM
 #5

That must be why gold has become valueless. People hoard it.

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twolifeinexile
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January 15, 2013, 07:02:43 PM
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That must be why gold has become valueless. People hoard it.

Here I mean the reverse, because people hoard it, it become expensive and keep being so, just not significantly part of economy.
Anything with limited supply and some kind of usefulness (which bitcoin has) will have a value and if really limited, people hoard it.

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January 15, 2013, 07:05:38 PM
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So what happens in 10 years when there's 100x more people that want Bitcoins but there's only a set amount?

I guarantee there's already a large amount of lost Bitcoins that will never be put back into the system (Lost wallets, forgotten accounts, etc.). So what happens when the demand keeps increasing and the supply keeps decreasing, sooner or later they're all going to be gone.



To touch back on what I said, I could also see 1BTC eventually being worth $1000+, and then deals would insinuate at that, so instead sending BTC's at a time you would only be sending very small fractions of a BTC. That's crazy, there's got to be more behind all this. The people who have 1000+BTC are now millionaires, it just seems like there's so many back-ties to the origination of BTC and , I don't really know how to explain it.

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January 15, 2013, 07:12:16 PM
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i thoroughly expect the value of my silver to increase a great deal in the future. despite this fact i still look for opportunities to spend it on other things that i value, even if i do not expect those things to increase in value in the future. So long as im not the only person who is willing to do this we can expect bitcoin to circulate even in a deflationary environment. Now granted this is making things overly black and white, any amount of deflation is going to cause malinvenstment in the form of supra-optimal levels of investment in currency and sub-optimal levels of leveraging. Similarly any amount of inflation is going to cause underinvestment in currency and supra-optimal levels of leveraging. What is most desirable from a technical standpoint is currency with a stable value but this would require a benevolent central planner and it is highly unlikely that such a thing will ever exist. So with that being said it would seem that we are forced to make a choice between automating a process that will cause deflation (bitcoin) or automating a process that will cause inflation. Given those option i would personally opt for a deflationary currency since net result will be a retarding of economic growth where as the net result of inflation is systemic risk resulting from over-leveraging.

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DannyHamilton
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January 15, 2013, 07:20:43 PM
 #9

. . . That's crazy . . .
No. It isn't.

. . . there's got to be more behind all this . . .
Not sure what you mean.

The people who have 1000+BTC are now millionaires . . .
Yep, and the people who have 18.5 kg of gold are now millionaires as well.

mintymark
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January 15, 2013, 07:28:50 PM
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Many things increase in value over time:- As I child, I could buy old GPO telephones for less than a £. Now they are worth over £100 each as antiques. Wish that I had brought a 1000!.

The person who brought a pizza for 10000 bitcoins, wow!

The worry about deflationary currency is a real argument, but in my opinion does not and will not (for a very long time) apply to bitcoin. This is because if everyone in the world spent 1% of their income using bitcoin, then we would all agree that bitcoin had been successful beyond our wildest dreams. Point is that the other 99% which people would still use at the corner shop, would prevent a deflationary crash, exactly as it has done with gold. Its only when gold is the only currency that people may decide that they need to hoard to survive, and start to think it is better to buy 2 loaves of bread tomorrow rather than one today. Trouble is, when tomorrow comes, the baker has gone out of business.

In practice there are many things you can invest in already that are like hoarding, if you have the money. Antiques, Lego, (Yes, honestly!) Gold, Silver, other precious metals, stamps, early marvel comics etc. You need to think what they are worth, will be worth and why.

The decider for me with bitcoin is the technical elegance which will slowly and gradually will underwrite the value as more and more people 'getit'. Now ask yourself this question: if bitcoin fell to half tomorrow would you sell? I for one would buy and so would many others, and it is that that also keeps the price high.

Slowly, gradually, the hoarders may provide a market but an economy also forms on the back of that. In short its all good.

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Jakers
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January 15, 2013, 07:32:11 PM
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. . . That's crazy . . .
No. It isn't.

. . . there's got to be more behind all this . . .
Not sure what you mean.

The people who have 1000+BTC are now millionaires . . .
Yep, and the people who have 18.5 kg of gold are now millionaires as well.


So what are you trying to say?

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DeathAndTaxes
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January 15, 2013, 07:32:53 PM
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To touch back on what I said, I could also see 1BTC eventually being worth $1000+, and then deals would insinuate at that, so instead sending BTC's at a time you would only be sending very small fractions of a BTC. That's crazy, there's got to be more behind all this. The people who have 1000+BTC are now millionaires, it just seems like there's so many back-ties to the origination of BTC and , I don't really know how to explain it.

Then buy 1000 BTC now and you can be a millionaire too.   My guess is that the reason you can't explain it is because it basically boils down to "people got more stuff than me and it isn't fair".

Someone will 1000 BTC could opt to sell it now just as you could opt to buy it.  Nobody is preventing you.  Of course it is possible that BTC crashes and burns and if that is the case the person selling 1000 BTC right now made the right decision.
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January 15, 2013, 07:33:29 PM
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The person who brought a pizza for 10000 bitcoins, wow!



Anyone in need of a pizza? I make very nice pizza!  Grin
DannyHamilton
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January 15, 2013, 07:41:24 PM
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So what are you trying to say?
Mostly?  That I can't figure out what you are trying to say.

lassdas
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January 15, 2013, 07:53:14 PM
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Its only when gold is the only currency that people may decide that they need to hoard to survive, and start to think it is better to buy 2 loaves of bread tomorrow rather than one today. Trouble is, when tomorrow comes, the baker has gone out of business.
Hoard to survive?
I don't give a damn that I might get 2 loaves of bread tomorrow, 20 next week and maybe 500 next month when I'm starving today.
You can either hoard and die, or get that damn food today, your choice.  Wink
Walter Rothbard
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January 15, 2013, 08:10:27 PM
 #16

(Not saying I agree with this viewpoint, but I think there is merits and people should think about this)

Since I don't see possible hoarding as a problem, I'll stick with bitcoin, but thanks for the thought.

A lot of economists have said that hoarding is not a problem.  I think there is merit to what they have said, and you should maybe read what they have to say and think about it.

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January 15, 2013, 08:17:33 PM
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(Not saying I agree with this viewpoint, but I think there is merits and people should think about this)

Since I don't see possible hoarding as a problem, I'll stick with bitcoin, but thanks for the thought.

A lot of economists have said that hoarding is not a problem.  I think there is merit to what they have said, and you should maybe read what they have to say and think about it.

hording is a problem. the same way that having an itch is a problem. it sucks but it really isnt that big of a deal.

Rep Thread: https://bitcointalk.org/index.php?topic=381041
If one can not confer upon another a right which he does not himself first possess, by what means does the state derive the right to engage in behaviors from which the public is prohibited?
RodeoX
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January 15, 2013, 08:18:24 PM
 #18

I find this concept is hard to explain to people, but the price of bitcoins and the number of bitcoins is irrelevant. If say half of all bitcoins were lost suddenly then the market would adjust. Assuming the same demand, the remaining coins would simply be worth twice as much. Since they are *basically infinitely divisible this is easy to accomidate.
Compare it to gold again. If half the worlds gold were to disappear then it's scarcity would be higher and so would the price. This could be true even if there were so little gold that it were traded in atoms instead of ounces.    

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January 15, 2013, 08:34:46 PM
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I find this concept is hard to explain to people, but the price of bitcoins and the number of bitcoins is irrelevant. If say half of all bitcoins were lost suddenly then the market would adjust. Assuming the same demand, the remaining coins would simply be worth twice as much. Since they are *basically infinitely divisible this is easy to accomidate.
Compare it to gold again. If half the worlds gold were to disappear then it's scarcity would be higher and so would the price. This could be true even if there were so little gold that it were traded in atoms instead of ounces.    

The way computers manage numbers does not allow bitcoin to be infinitelly divisible. The reason is kind of the same why there is also an upper limit. When you start dividing bitcoin further then you end up with a heap rounding issue. If you fuck around with the decimal point you better make sure that you don't fuck it up for people that use "old" computers.

DannyHamilton
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January 15, 2013, 08:44:37 PM
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. . . Since they are *basically infinitely divisible this is easy to accomidate . . .
The way computers manage numbers does not allow bitcoin to be infinitelly divisible . . .
Each bitcoin is currently divisible into 100,000,000 pieces.  That should be plenty for a long time.  Will we ever need to divide it further?  Impossible to predict, but if we do I feel certain that the modifications necessary will be possible.  It isn't going to happen for as long as it isn't necessary, and I'm probably going to be long gone and dead before it becomes necessary, so I'm not too concerned how they choose to handle it.


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