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Author Topic: Bitcoin will never be as good as gold and why ultimatly it will fail.  (Read 8829 times)
jprowl
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June 08, 2011, 09:28:22 PM
 #1

I will explain why the value of bitcoins will fall, the current market price of them is a joke but not from the reasoning people are using on the forums which is faulty. I will explain this below

There is only so much gold in the world, still alot of it has not been mined and will beable to be mined in the future. As for physical currency, out of all the elements, gold is the most desirable followed second by silver. Gold can't be diluted in value, ie a second identical currency coming being different in name only but having all the same properites of gold. Imagine another element that was the same as gold was found, and was able to be found in the same quanities of gold but it had a different color, say light green color and it was called gold2. Half the people began using gold2 in the same way as gold1 is being used. the value of gold1 would be cut in half with the new currency being put into circulation competing parallel with each other. Ofcourse this will never happen, there is no such thing as gold2.

Unfortunately this is not the case with bitcoin. Yes bitcoin is restricted to the total amount of bitcoins that will be found which is 21 million. Unfortunately it is a P2P currency and with the success of bitcoin, other identical P2P currencies will come into existence and the same problem will arise as in the case of gold1 and gold2. With P2P currency, the amount of different named P2P currency will expand. A second P2P currency will come along using the same source code as bitcoin or slightly different but essentially the same. We will call this second currency bytecoin, it has all the same properties as bitcoin as in only being limited in supply to 21 million bytecoins. People with mining rigs will stop mining bitcoins and begin mining bytecoins as it is just starting out, the hash sizes will be smaller and easier to generate more bytecoins than bitcoins. Soon the number of bytecoins in existence will be similar to bitcoins. Half of the people using bitcoins and the other half using bytecoins, also the value of the two P2P currencies is the same because roughly the same number of each are in existence but the orginal bitcoin would be cut in half.

There is incentive for people to move to the new P2P currency as in the early stages it is more profitable to generate P2P currency and as you have seen in bitcoins, the early adopters made the most money.

This process will continue on indefinitely until all P2P currency is worthless. At the end of P2P currencies life, there could be millions of different competing P2P currencies.

Throughout the ages everyone has been trying to turn everything into gold, Lead into gold, paper money into gold and now electronic bits into gold. P2P currency holds alot of the qualities of gold but competing versions of itself can not be created. P2P is a good way to transfer money, conduct business but not as a means of storing value. If the government made a mandate that only bitcoin was to be the only allowed P2P currency to be used on the internet, then it would become very valuable but that is not the case.

If you have bitcoins, you'd be a fool not to sell them at $30. I have also seen a personal website of someone willing to sell gold for bitcoins!!!! It is crazy. I could be wrong in the short term, but in the longterm I will be proven correct. Ideally hold onto your bitcoins until another type of P2P currency comes into existence and becomes being used in mass, that will be the best time to sell as it is when the value of bitcoin will be at it's highest just before people also begin using the second P2P currency as well.

Hope you found this interesting.

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astonix
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June 08, 2011, 09:36:48 PM
 #2

Selling them at $30 would be foolish and way too early. Bitcoin is only just starting to emerge and will continue to rise in price for as long as people have interest in it.

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Ian Maxwell
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June 08, 2011, 09:39:58 PM
 #3

Oh no, I didn't realize other people could also make p2p currencies! Why has there never been a thread about this before!? I'm trading in all my bitcoins for carrots as I write this.

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piuk
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June 08, 2011, 09:40:29 PM
 #4

If many FIAT currencies can peacefully coexist, why couldn't many p2p currencies? All metals, while not exactly the same, do compete as commodities.

jon_smark
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June 08, 2011, 10:09:01 PM
 #5

I do agree that Bitcoin's ultimate demise will not come at the hands of The Powers That Be™, but instead from a new upstart P2P digital currency.  However, I disagree that this new currency will follow Bitcoin's model of having a hard-cap on the total number of coins.  Instead, the new currency may be virtually identical to Bitcoin, but with one tiny exception: it will have an inflation rate that asymptotically approaches a very small but positive number.  In fact, Bitcoin's very likely failure will help to establish the 1st rule of digital P2P currencies: builtin deflation leads to the formation of bubbles, hoarding, and eventual collapse.
jprowl
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June 08, 2011, 10:21:36 PM
 #6

Generally the type of deflation people fear today is the result from banks using a factional reserve system, lending out more money than what they have in deposits. With bitcoin this is not possible. Excessive debt can not build up in a P2P currency. When america was on a real gold standard before the 1913 federal reserve act, prices in terms of gold had been deflating in value to gold for hundreds of years.

jon_smark, it would be correct to say that everything has already been deflating in value in relation to bitcoins. A bitcoin was worth less than $1 afew months ago. This is not a problem because banks have not created extra bitcoins and loaned them out into circulation. There is no debt attached to bitcoins so nobody has any problem defaulting on loans because the value of bitcoins have gone up in value. That is why fiat currency keeps dropping in value so as to make it easier to pay back the money to banks and also provide incentive for borrowers to borrow money, most people expect money to keep falling in value, otherwise they would not take out loans.
comboy
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June 08, 2011, 10:33:55 PM
 #7

I propose new dedicated subforum inside "Economy": "Why I think it's gonna fail", that would make reading forum much easier.

Variance is a bitch!
bcpokey
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June 08, 2011, 10:38:30 PM
 #8

I propose new dedicated subforum inside "Economy": "Why I think it's gonna fail", that would make reading forum much easier.

Or maybe a forum like my little ponies called "My first post" for those whose first contribution is the same grandiose sounding doom and gloom analysis post.
jprowl
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June 08, 2011, 10:45:49 PM
 #9

http://i.ytimg.com/vi/Z454M2uBBxA/0.jpg

I thought that is a funny picture in relation to bitcoins, I know it's not the same thing, but 'kidds' are mining a type of electronic currency.

Why hasn't anyone addressed the issues I raised? nobody has refuted anything, some of the replies appear that some of the posters have not read anything I have written like the first poster who just blurted out that it is far too early to sell at $30 and a recent poster here simply showed annoyance and and suggested that a subforum be created for those who wish to post information on why bitcoin will fail.

Is everyone trying to 'keep the faith'?


astonix
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June 08, 2011, 10:48:16 PM
 #10

It doesn't matter if it's electronic. It will be worth as much as anyone is willing to pay for it, just like everything else on the market. Gold is only worth as much as anyone wants to pay for it. If everyone takes a disliking to Gold, it will crash and burn.

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em3rgentOrdr
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June 08, 2011, 10:50:34 PM
 #11

As new bitcoin forks come about, the market will regulate the value and relative exchange rate for each bitcoin version.  New bitcoin block chains aren't as valuable because their coins will not be accepted at nearly as many vendors as the older more mature block chains.  QED

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
benjamindees
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June 08, 2011, 10:58:40 PM
 #12

In no particular order:

Mining performs the function of protecting the network.  Smaller networks are vulnerable to attack.  This tends to move the market towards a single block chain.

Falling short of global domination wouldn't really be considered "failure".

Otherwise you're right and you're not the first to point it out.

Civil Liberty Through Complex Mathematics
niemivh
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June 08, 2011, 11:02:10 PM
 #13

I imagine price volatility will exist for a long while in BTC until we near the 21 million mark, at least at that point the quantity will remain virtually unchanged and it'll have been around long enough to have some sort stable market value.

Or maybe not.

lol

I'll keep my politics out of your economics if you keep your economics out of my politics.

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comboy
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June 08, 2011, 11:07:38 PM
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Why hasn't anyone addressed the issues I raised? nobody has refuted anything, some of the replies appear that some of the posters have not read anything I have written like the first poster who just blurted out that it is far too early to sell at $30 and a recent poster here simply showed annoyance and and suggested that a subforum be created for those who wish to post information on why bitcoin will fail.

Is everyone trying to 'keep the faith'?

I didnt mean to be rude. It's just that when you google or search on the forum, you will discover there were many discussions closely related to what you have wrote. I don't say it's easy to find it, there is a lot of content on forum, but when you read it for some time it gets boring - yet another click with a hope that maybe that guy nailed it, wrote some constructive argument that haven't been discussed on why bitcoin will fail. And then it's yet another "oh no, only 21M", "oh no, another p2p currency will come"

Once again, no offence, I like your post in the way that it provides some kind of let's say reasonable arguments, I just meant for real that maybe separation would help, you would just look in the subforum and then maybe you would reply in some other thread where OP was having similar thoughts as you.

Variance is a bitch!
jprowl
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June 08, 2011, 11:11:04 PM
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em3rgentOrdr, no I am not talking about bitcoins forking into different versions, I believe those forks will be worthless and I never mentioned forks. The issue is the emergence of competing P2P currencies.

astonix, P2P currency is potentially limitless in quantity, Gold can not have different competing 'versions' or 'flavors'. If bitcoins reached a stable value for P2P currency due to supply & demand, it reached an equilibrium finally in the market and it's price stabilized at $50, well if 10 new different flavors of P2P came out onto the market, had the same amount of 'units' in circulation and the use of each of these different flavors became equal to bitcoin, then bitcoin's value would fall by 10 times. The amount of P2P currency in existence would increase by 10 times making the orginal bitcoin worth less.

Tell me, if a competing P2P came out tomorrow and you could earn 10 times as many 'units' as you could with bitcoin, ofcourse everyone would jump onto the new P2P currency to mine it until the amount and difficulty came inline with bitcoin. People are not just going to stick to Bitcoin because it is 'Bitcoin' and was the first one to come out on the internet.

Hans0, "Bitcoin is not just Gold, it is Gold 2.0: anonymous and uncontrollable. There is an incentive to switch to bitcoin, but no incentive to switch to bytecoin cause it is just the same with the single difference that nobody demands it."

People will use the other P2P currencies, there is no reason why only bitcoin will be the only P2P currency people will demand. I have explained the incentive many times why people will switch, again like many here ignoring what I have written.

comboy, nobody as addressed the rise of competing P2P currencies. Everyone seems to only be fixated on bitcoins limited 21 million unit supply, when infact the issue is P2P currency in existance, not simply one type or flavor of P2P in existence.
Sweft
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June 08, 2011, 11:12:58 PM
 #16

Gold is stupid and useless.
newMeat1
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June 08, 2011, 11:15:39 PM
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A lot of quality programming time has been put into bitcoin. It's a solid system (as far as we know, so far). I think that's what makes it valuable.

Hans0
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June 08, 2011, 11:16:50 PM
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Hans0, "Bitcoin is not just Gold, it is Gold 2.0: anonymous and uncontrollable. There is an incentive to switch to bitcoin, but no incentive to switch to bytecoin cause it is just the same with the single difference that nobody demands it."

People will use the other P2P currencies, there is no reason why only bitcoin will be the only P2P currency people will demand. I have explained the incentive many times why people will switch, again like many here ignoring what I have written.

You are right, I did not properly respond. You said that the incentive to switch will be that it would be more lucrative. I do no think this is true because just like bitcoin the new bytecoin will be a fiat currency. Mining insane amounts of bytecoin will help nothing if nobody wants bytecoin. Everybody wants the existing and working bitcoin. => The price of bytecoin will be ridiculously low and never rise.

bitcoin is not to bytecoin as bitcoin is to gold: There acre clear incentives to switch from gold (easier to handle and illegal transactions). Bytecoin has nothing to offer (I disproved you point that it is lucrative).
em3rgentOrdr
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June 08, 2011, 11:16:59 PM
 #19

So what?  There is no problem with competition from future emerging P2P currencies.  Competition is good.  Let the weak ones die and the fittest survive.

"We will not find a solution to political problems in cryptography, but we can win a major battle in the arms race and gain a new territory of freedom for several years.

Governments are good at cutting off the heads of a centrally controlled networks, but pure P2P networks are holding their own."
Sweft
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June 08, 2011, 11:19:35 PM
 #20

Gold is the most useless commodity.

Copper, silver, oil, wheat all have multiple uses.  Gold is pretty much useless to me and I could care less if it cost 1$ or 1000000$.  It's difficult to transport and costly to store and guard.  It makes no sense as a store of value or currency, since it's difficult to exchange.  It is a store of value in as much as quacks are willing to buy it and opprotunistic quacks are willing to mine it for them at significant profits.
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