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 Author Topic: a flaw in the 21 million BTC?  (Read 7441 times)
Bitconian
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 January 16, 2013, 01:31:25 AM

hey there!

I hope you can solve this issue that it's in my head. There is one thing I can't understand.

In the future there will be only 21 million BTC, right?  Let's pretend that we already have those 21 million out there. (I know it'd be in 2033, but bear with me

Right now the value is 1 BTC = \$14, that would make \$294 millions, if we hit \$100 per BTC this year, that would be \$2,1 Billions on BTC. Correct?

That's not enough money for a worldwide currency...my question is, how the btc is going to compete against others currency that has more value?  Shouldn't the BTC be at least the gross domestic product (GDP) of a small country?

Having the 21 millions of BTC =  \$2,1 Billions (when it reaches the \$100 per BTC), any of the richest men in the world could buy ALL of bitcoins (bill gates has over \$61 Billions) and there won't be any more BTC for the rest of us. They could never transfer their whole fortune into BTC (if they want to), but they can do that now with other currencies.  Shouldn't any currency in the world have enough value to gather at least the richest men's fortune?

Even if the BTC rise to the 1 BTC = \$10,000, which is HUGE, that would be \$210 billions.... that'd be only the top 4 of the richest men.

And also, no country would take btc as currency when there is no enough supply. The GDP of the US is \$15,290 billions and Kazakhstan (at #50 in the world) has a GDP of \$219 Billions. Still more than BTC when (and if) it reaches \$10,000 per BTC.

I know it can be divided into 9 digits, but to get to the point as a dollar, euro or pound where the standard is 3 digits (1 dollar = 100 cents), if in any future, a 0,00000001 BTC = 1 cent, that would make the 1 BTC = \$1 million and I don't see that possible...I wish, because if that happens, many of us here would be millionaire

don't get me wrong...I'm NOT against BTC, I love BTC, it's just something that I don't understand how it will work in the future.

Thanks!

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mccorvic
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 January 16, 2013, 02:01:57 AM

Bitcoins are divisible to eight decimal places. When BTC become valuable enough people will stop trading in BTC and use mBTC (.001BTC). After that, they'll trade in Satoshis (0.00000001 BTC).

There is no problem here

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hardcore-fs
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 January 16, 2013, 02:07:15 AM

Or it could go the other way...... where 21 million bitcoins is worth a buck........

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DannyHamilton
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 January 16, 2013, 02:16:04 AM

. . . if in any future, a 0,00000001 BTC = 1 cent, that would make the 1 BTC = \$1 million and I don't see that possible . . .
And yet if bitcoin ever reaches mainstream use, this is exactly the sort of thing that will happen.  Why don't you see it as possible?

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Gerald Davis

 January 16, 2013, 02:18:58 AM

What is with this all or nothing thinking lately?

Lets say Bitcoin "only" rises to a monetary base of \$10B USD equivalent with \$100B in annual transactions making it larger (in terms of transaction value) than PayPal, Western Union, MoneyGram, GreenDot, Discover and Amex combined?  Is that a failure?  OH NOES Bitcoin out of nothing, became the largest money transfer system on the planet.  Nope it didn't become the one world currency so lets pull the plug and mark it up as a failure?

Is the value of gold = combined sum of net worths of everyone in the world?  Nope?  I guess Gold as a mechanism for storing wealth has "failed" too.
remotemass
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 January 16, 2013, 02:25:13 AM

I guess that even if all the money in circulation was traded for the 21 million bitcoins, 1 satoshi would still be worth less than what you can buy today with 0.001 USD.
Or, the other way around, if you want 2100000000000000 Satoshis * 0.001 USD = 2.1 trillion USD
There is more money in circulation than 2.1 trillion USD. Maybe something like 21 trillion, actually.
So yeah, with 1 satoshi you would buy what you can buy now with 0.01 USD.
And actually I heard someone in a recent bitcoin conference suggesting that Satoshi Nakamoto might have based his number on this.
No idea why he chose 21 million instead of 98 million, though... 21st Century, the new Millenium... who knows,?

Would be great there was a torrent file of all referenced materials of the paper: "How to Build Time-Lock Encryption" by Tibor Jager. And having its magnet link published on bitcoin blockchain!
JoelKatz
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 January 16, 2013, 02:28:52 AM

That's not enough money for a worldwide currency...my question is, how the btc is going to compete against others currency that has more value?  Shouldn't the BTC be at least the gross domestic product (GDP) of a small country?

Having the 21 millions of BTC =  \$2,1 Billions (when it reaches the \$100 per BTC), any of the richest men in the world could buy ALL of bitcoins (bill gates has over \$61 Billions) and there won't be any more BTC for the rest of us. They could never transfer their whole fortune into BTC (if they want to), but they can do that now with other currencies.  Shouldn't any currency in the world have enough value to gather at least the richest men's fortune?
If something is scarce, its value will increase. If there's a great demand for bitcoins relative to supply, the price will go up.

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DannyHamilton
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 January 16, 2013, 02:34:48 AM

. . . No idea why he chose 21 million instead of 98 million, though... 21st Century, the new Millenium... who knows,?
I could be wrong, but I get the impression that he didn't choose 21 million.  He chose 50BTC as a block reward and then chose to cut that reward in half every 210,000 blocks.  If you do the math, that just happens to work out to a bit less than 21 million (20999999.97690000 to be exact).

hardcore-fs
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 January 16, 2013, 02:46:36 AM

bloody stupid..... 100 BTC would have saved all the bullshit with needing ASICS so soon

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DeathAndTaxes
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Gerald Davis

 January 16, 2013, 02:48:48 AM

bloody stupid..... 100 BTC would have saved all the bullshit with needing ASICS so soon

What?  You do understand units are completely arbitrary.  If there were twice as many coins each coin would be worth half as much and as such the total value would still be the same.  Likewise Satoshi could have made the block reward 500,000 BTC and each BTC while low in value would make up for it in quantity.   Instead of someone being willing to sell a silver coin for ~3BTC they might ask for 30,000 BTC.  The first 10,000 BTC pizza probably would have been more like the first 100,000,000 BTC pizza.

Your claim would be like saying if only there were 9 inches in a foot instead of 12 inches then I would be 7 foot tall and thus be tall enough for the NBA. Obviously then the best basketball players wouldn't be 7ft to 8ft they would be 10ft to 11ft tall.  If the minimum wage in the US was increased to \$50 billion a year would everyone have the lifestyle of a billionaire now or would milk simply cost \$20B a gallon?
jl2012
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 January 16, 2013, 02:49:39 AM

Why similar idea is raised repeatedly and repeatedly. If at the very beginning Satoshi had decided the total supply as 21 billion BTC instead of 21M and started with 50k reward per block, the exchange rate today would be \$0.014/BTC instead of \$14/BTC. If he started with 21k BTC, the exchange rate today would be \$14k/BTC. It's arbitrary.

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 January 16, 2013, 02:50:52 AM

Perhaps bitcoin's destiny is to be the gold standard for some other money.

I predict another digital currency at some point (perhaps with reversible transactions, or with the possibility for fractional-reserve lending) that uses bitcoin as its backing (pegged to the value of, and always exchangeable for, bitcoins)

Say it's called a NEUBUX, and 10,000 NEUBUX = 1 BTC. If a bank has 10,000 BTC on deposit, and maintains a 10% reserve on loans, it could lend out 1,000,000,000 NEUBUX to borrowers. The bank could issue a NEUBUX credit card, with reversible charges built into the system.

After all, GOLD transactions are not reversible. Nor is GOLD suitable for fractional reserve lending. But the currencies based on gold are.

DannyHamilton
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 January 16, 2013, 03:12:52 AM

. . . After all, GOLD transactions are not reversible. Nor is GOLD suitable for fractional reserve lending. But the currencies based on gold are.
There are still currencies based on gold?

And transactions using these currencies are reversible?

payb.tc
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 January 16, 2013, 03:15:53 AM

while the initial numbers may have been arbitrarily chosen there was still a major psychological effect (and related media buzz) when it first passed \$1 and \$10.

if there were to be 21 Billion BTC, i think the historical charts would look a lot different, and we might be at something completely different from \$0.014 today.
DannyHamilton
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 January 16, 2013, 03:20:02 AM

while the initial numbers may have been arbitrarily chosen there was still a major psychological effect (and related media buzz) when it first passed \$1 and \$10.

if there were to be 21 Billion BTC, i think the historical charts would look a lot different, and we might be at something completely different from \$0.014 today.

Perhaps, but I guess we'll never know if a slower growth in popularity and recognition would have been better or worse for bitcoin.

Bitconian
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 January 16, 2013, 03:51:45 AM

Thanks guys for the wonderful answers!

Let me ask you a few more questions if you don't mind. And again, I'm asking for the sake of wisdom and I don't mean disrespect to anybody.

Bitcoins are divisible to eight decimal places. When BTC become valuable enough people will stop trading in BTC and use mBTC (.001BTC). After that, they'll trade in Satoshis (0.00000001 BTC). There is no problem here

I know, but that doesn't solve the problem of the value, even if we start using satoshis. If the value of the total 21 millions is around 2 billions, that's not enough money for rich or banks to move their money over this currency, because there is not enough BTC to do that.

Or it could go the other way...... where 21 million bitcoins is worth a buck........

We hope not!

. . . if in any future, a 0,00000001 BTC = 1 cent, that would make the 1 BTC = \$1 million and I don't see that possible . . .
And yet if bitcoin ever reaches mainstream use, this is exactly the sort of thing that will happen.  Why don't you see it as possible?

Why do you? Honestly, I'd like to know. I just don't think is that possible because it has never happened with any other currency in the world (1 currency = \$100,000), why would it happen to BTC? (I hope you are right

Lets say Bitcoin "only" rises to a monetary base of \$10B USD equivalent with \$100B in annual transactions making it larger (in terms of transaction value) than PayPal, Western Union, MoneyGram, GreenDot, Discover and Amex combined?  Is that a failure?  OH NOES Bitcoin out of nothing, became the largest money transfer system on the planet.  Nope it didn't become the one world currency so lets pull the plug and mark it up as a failure?
Is the value of gold = combined sum of net worths of everyone in the world?  Nope?  I guess Gold as a mechanism for storing wealth has "failed" too.

How can you come up with \$100B? is the 21 millions btc = \$10B, why is \$100B in annual transactions? Sorry, but I have no idea how that works.

I guess that even if all the money in circulation was traded for the 21 million bitcoins, 1 satoshi would still be worth less than what you can buy today with 0.001 USD.
Or, the other way around, if you want 2100000000000000 Satoshis * 0.001 USD = 2.1 trillion USD
There is more money in circulation than 2.1 trillion USD. Maybe something like 21 trillion, actually. So yeah, with 1 satoshi you would buy what you can buy now with 0.01 USD.

so, are you guessing that bitcoins can reach the ratio 1 BTC = \$100,000?

Why similar idea is raised repeatedly and repeatedly. If at the very beginning Satoshi had decided the total supply as 21 billion BTC instead of 21M and started with 50k reward per block, the exchange rate today would be \$0.014/BTC instead of \$14/BTC. If he started with 21k BTC, the exchange rate today would be \$14k/BTC. It's arbitrary.

But it seems more believable to see that a  \$0.014/BTC can reach a \$10/BTC in the future than a \$14/BTC becoming a \$14000/BTC.

Again, it's just "hard" to believe that if you have a wallet of 10 BTC (\$140 today), that can become (in the future) a \$1,000,000

thank you all!
B.

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DeathAndTaxes
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Gerald Davis

 January 16, 2013, 03:56:59 AM

I think you are confusing certainty with possibility.

Is it possible the money supply of Bitcoin is someday worth billions, or even trillions?  Sure.  Is it certain?  No.

Nobody knows what the future holds for Bitcoin.  It could die off, it could remain a small marginalized darknet tool, it could be fringe mainstream with millions of users, it could become completely mainstream with billions of users and trillions in market cap.  Nobody knows for sure.  Plenty of people have ideas but nobody knows with absolute certainty.  Your posts seem to indicate because nobody knows the future it isn't possible.
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1h79nc

 January 16, 2013, 04:09:59 AM

With division down to 8 decimal places, There are really 2,099,999,997,690,000 (just over 2 quadrillion) maximum possible atomic units in the bitcoin design.

The value of BTC is dictated by supply and demand, and can go up and down. Super crazy exchange rates have happened many many times in the past with other currencies, see this article on hyperinflation for some examples...

Zimbabwe is a recent case, with hyperinflation since 1980 which had 10 000 000 000 000 000 000 000 000 ZWL = 1 ZWD, and today 361 ZWD = 1 USD...
jl2012
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 January 16, 2013, 04:12:09 AM

Quote
if there were to be 21 Billion BTC, i think the historical charts would look a lot different, and we might be at something completely different from \$0.014 today.

Quote
But it seems more believable to see that a  \$0.014/BTC can reach a \$10/BTC in the future than a \$14/BTC becoming a \$14000/BTC.

Again, it's just "hard" to believe that if you have a wallet of 10 BTC (\$140 today), that can become (in the future) a \$1,000,000

Yes but that's purely psychological. The long-term fair market-cap should be more or less the same

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 January 16, 2013, 04:50:42 AM

Remember the 8 decimals is not set in stone we could easily make it 16 decimals
put that in your pipe and smoke it!

the problem is not that we can't fit the worlds economy into bitcoin ( we can ... even with only 8 decimals )
the problem is having the network process all the worlds transactions every sec of every day.

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