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Author Topic: Bitcoin will never be as good as gold and why ultimatly it will fail.  (Read 9352 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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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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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.

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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.
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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!
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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.
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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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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.

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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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June 08, 2011, 11:07:38 PM
 #14

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
 #15

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.
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June 08, 2011, 11:12:58 PM
 #16

Gold is stupid and useless.
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June 08, 2011, 11:15:39 PM
 #17

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.

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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).
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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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June 08, 2011, 11:32:36 PM
 #21

Gold can not have different competing 'versions' or 'flavors'.

Silver, copper, aluminum, platinum, palladium?

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June 08, 2011, 11:35:33 PM
 #22

Sweft, none of your arguments make any logical sense.

Firstly, Gold is only costly store and guard, due to how much Gold is worth. If Gold was worth a lot less, no one would bother paying to guard it. Also, you say it's only worth as much as people are willing to pay? That's how EVERYTHING gets its price. BTC is only worth as much as people are willing to pay for it. If the value of BTC was to skyrocket, I'm sure some people with a lot of money might invest in securing their wallets and computers more so than usual.

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June 08, 2011, 11:40:47 PM
 #23

I don't really get how alternate p2p currencies would cause Bitcoin to fail. If you store value in Bitcoin and there are 10 other p2p currencies you would of course be able to exchange value between them via any number of exchange houses that would pop up. Bitcoin hasn't really caused other virtual currencies (p2p or not), to fail has it?
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June 08, 2011, 11:51:05 PM
 #24

Other P2P currencies would only cause Bitcoin to fail IF there was high demand for the other currencies, AND no one was trading those other currencies for Bitcoin. The high demand for the other currencies would make investment move from Bitcoin to the other P2P currencies initially, causing Bitcoin's value to drop. If Bitcoin was then to go on a marketing and advertising rally, it would probably get more investment as popularity grew for it again. Just my thoughts anyway.

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June 08, 2011, 11:56:38 PM
 #25

Sweft, none of your arguments make any logical sense.

Firstly, Gold is only costly store and guard, due to how much Gold is worth. If Gold was worth a lot less, no one would bother paying to guard it. Also, you say it's only worth as much as people are willing to pay? That's how EVERYTHING gets its price. BTC is only worth as much as people are willing to pay for it. If the value of BTC was to skyrocket, I'm sure some people with a lot of money might invest in securing their wallets and computers more so than usual.
Gold is only worth how much people are willing to pay for it.

Part of that is input energy.

Gold requires energy to mine.

Bitcoins require energy to mine.

What's the difference?

Bitcoins are much more easily concealable, transferable and encrypt able.  Gold is cumbersome and hard to deal with.
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June 08, 2011, 11:57:24 PM
 #26

trentzb, good question. I am referring that P2P currencies will inflate in supply and their value will go down causing people not to use them as a store of value. Yes you would beable to exchange between P2P currencies and that is the very thing, the total amount of P2P currency in existence would increase. The better way to think about it is not in terms of total supply of bitcoin currency, but as in total supply of P2P currency as they are all the same, ofcourse different ones would have more on issue and others would have larger market penetration which would influence their value. As a new P2P currency is created, the greater amount of P2P currency would be on issue.
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June 09, 2011, 12:14:03 AM
 #27

Bitcoins are much more easily concealable, transferable and encrypt able.  Gold is cumbersome and hard to deal with.

I don't really see how that has any major affect on the value of BTC or Gold. Gold is a commodity, whilst BTC is a P2P currency so there's obviously going to be the differences you pointed out, that doesn't mean one is better than the other.

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June 15, 2011, 06:07:52 PM
 #28

The better way to think about it is not in terms of total supply of bitcoin currency, but as in total supply of P2P currency as they are all the same, ofcourse different ones would have more on issue and others would have larger market penetration which would influence their value.

Well yes. The same is true of fiat currency and precious metals, though. The fact is that there will always be competition no matter what you're talking about. It is unrealistic to expect to sustain a monopoly on anything, though near-monopolies will inevitably arise from time to time. But you don't see people dumping their Facebook shares just because Google's starting a social network of their own, thus diluting Facebook's value. And you certainly don't see people dumping gold because someone struck a fresh, rich (rhetorical) vein of silver that'll double the total amount of silver in the world.

The fact is that P2P currency is an entire category of exchange unto itself. Bitcoin doesn't need to be the only player in order to retain its value. If new P2P currencies spring up, they will face the same uphill battles against Bitcoin that new statist currencies against the other more established statist currencies.

To go from "oh no, there will be competition" to "we will fail" is a huge non-sequitur. Anyone who does anything worth doing should expect competition, but that does not mean they should expect to fail. On the contrary: knowing they will have competition, they should work all the harder so that when competition does arise they will be able to meet it and overcome it.
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June 15, 2011, 09:48:08 PM
 #29

You are ignoring a little something called network effects. Gold2 exists and it's called platinum, palladium or many rare earth or long lived isotopes that can only be produced in nuclear reactors and are highly valuable for modern medicine. There's great value of being the first, and gold was.

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June 16, 2011, 03:57:56 AM
 #30

Gold is stupid and useless.

You have no clue what you're talking about.


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$.

That opinion says more about your skewed perspective than about gold.


Quote
It's difficult to transport

?!!!

What are you, a billionaire?! $150,000 in gold is only 100 ounces... not even 10 pounds. Try carrying that around using $20 bills.


Quote
and costly to store and guard. 

Moreso than... what? Silver? Cash? Land? Seriously, what are you trying to compare gold to that this would even pop up in your mind?


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It makes no sense as a store of value or currency, since it's difficult to exchange. 

Again, what is your basis for comparison? Of course you dont buy bread with an ounce of gold. I dont pay the pizza guy with a $100 bill either. Gold is one of the most liquid assets in the world as far as actually exchanging assets though.


Quote
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.

I'll say it again... if gold were as common as dirt, we would be using it everywhere... the only reason we don't is because its scarcity makes it too precious. If you can't even understand why it would be so useful, then you really need to quit trying to talk about it, otherwise you just sound ignorant and clueless.

Bitcoin is the ultimate freedom test. It tells you who is giving lip service and who genuinely believes in it.
...
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In the future, books that summarize the history of money will have a line that says, “and then came bitcoin.” It is the economic singularity. And we are living in it now. - Ryan Dickherber
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The idea that deflation causes hoarding (to any problematic degree) is a lie used to justify theft of value from your savings.
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June 16, 2011, 08:43:08 AM
 #31

Gold and bitcoin compliment each other.

Bitcoin is designed to repalce fiat, not gold/silver.

Lets get that straight!

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June 16, 2011, 09:02:34 AM
 #32


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'?




Many people don't care what you have to say, because the Bitcoin economy keeps expanding. New exchanges keep popping up. Your argument is tired and old. It's not so much faith but instead the value placed behind a private currency that the production of is not centrally controlled.

You are looking at it wrong if you think it should replace metals as well.

Time is money. This means that if you have spare time, you can use it to make money.

Modular, open, and stack-able miner case.
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June 16, 2011, 12:43:48 PM
 #33

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.

amen. Let the battles begin!

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June 16, 2011, 01:58:40 PM
 #34

While I am a fan of precious metals, the OP makes some very weak points. Gold doesn't hold value because of lack of competition by any stretch, as others have mentioned. Copper and silver have been used as money for ages as well. In a sense gold is not as 'useful' as e.g. the platinum group metals which have widespread industrial uses for their catalytic and other properties, but that actually serves to keep prices more stable than other precious metals. Gold has a staying power that can't be expected from a digital currency, but that doesn't mean that digital currencies can't serve a purpose too. That said, if gold went to $300 overnight I'd back up the truck, but if bitcoin prices went down by 80% overnight you'd have to be nuts to put down your life savings.

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June 16, 2011, 02:14:44 PM
 #35

OP ignores network effects. An infinite number of p2p currencies can be created, but only one will have the largest community of users, and the greatest security in its block-chain, and for these reasons, any casual user wanting a store of value in a p2p currency would choose the market leader over the variants. This network effect has a positive feedback loop, where people want to use it because it's the largest currency, which makes it larger, which leads to more people wanting to use.

The network effect is why social networking sites like Facebook continue to get larger, and small social networks that have similar features cannot gain traction. The value of the network increases exponentially as the network gets larger.

Of course, bitcoin still has a relatively small user-base. The network effect will cement its position as the market leader in p2p currencies only IF it continues becoming more attractive to users due to the services that people can use with it.



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June 17, 2011, 12:29:04 PM
 #36

The value isn't in the Mining, its in the users.

I think it's the same as Desktop Operating Systems. Yes, Linux is probably better than Windows, technically, but the users, and therefore the developers (and vise versa.) just aren't there.

Bitcoin2 will appear, but it will need significant advantages over bitcoin to gain value, and even then it will take many years longer to reach the limited success that Bitcoin has seen so far, because the idea is no longer new, and likely early adopter will be already fully vested in bitcoin. Hmm, probably the same reason the banks and governments aren't jumping into bitcoin.
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October 23, 2011, 12:53:46 PM
 #37

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.

Wow, you look pretty silly right about now huh?  Grin

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October 23, 2011, 01:04:23 PM
 #38

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.

Wow, you look pretty silly right about now huh?  Grin
Necrobumping is a pretty good indicator on the collapse of an online community.
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October 23, 2011, 01:06:09 PM
 #39

bitcoins is the best currency yet invented, gold is totally impracticable as a currency these days, even as an investment it has big disadvantages. for one, who actually has gold? most people have IOUs. how much does it cost to shift a large amount?
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October 23, 2011, 01:09:40 PM
 #40

OP is a troll.
OMG here we go again...

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October 25, 2011, 02:22:28 AM
 #41

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.

...

If you have bitcoins, you'd be a fool not to sell them at $30.

Prescience and old post aside, I'd like to point out that a P2P currency can only become diluted and worthless if there is incentive to copy it because of the get-rich-early scheme employed by bitcoin and it's 6 or 7 some-odd near exact duplicates nowadays.

A currency that is always difficult to produce, and is only produced when demand is high, would not suffer from the same ills. Feel free to check out my ideas for a currency backed by electricity and secured by a reputation-based consensus.

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November 08, 2011, 07:35:43 AM
Last edit: November 08, 2011, 08:08:10 AM by rahl
 #42

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.

People might think it is more fun to mine if they get more coins but they will all fail unless they are actually better. There is no reason for any trade to move into an identical currency. For the same reason half the people don't move away from Facebook if you where to start an identical Facebook clone...

Merchants have costs for starting to accept a new currency and for each additional currency they trade in. So why would they ever start accepting an identical currency to one they have that have no users? Bitcoin has the network effect advantages that the new currency will not have and thus remain superior.

Platina is actually a better money metal then gold already.

There is a little-bit more of it on the planet then gold, it has much the same dispersion so it is difficult to extract in large quantities anywhere. It has a higher melting point, same resistance to corrosion and it is harder then gold making it overall more durable as coins.
It is fairly recently we figured out how to refine and to melt platina metals properly. They became popular jewelry especially in Japan. But monetary platina has never really been a big hit. The small advantage of platina coins being a little more difficult to scratch (but still rather soft) is just not enough to overcome the network effects of gold.

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November 08, 2011, 09:18:49 AM
 #43

users are gold.

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November 08, 2011, 09:35:31 AM
 #44

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.

Wow, you look pretty silly right about now huh?  Grin
Necrobumping is a pretty good indicator on the collapse of an online community.

Necrobumping. The fact that I understand that term makes me question my sanity. Responding to people that may no longer even be reading this forum makes this medium even more interesting. I think that's the point of Bitcoin. It doesn't care if you think it is relevant, Bitcoin just keeps going for those that believe. The Bitcoin "community" understands that time is on our side.

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November 08, 2011, 02:50:05 PM
 #45

While there are other cyrpto currencies there are also other istopes which could be used as a currency however only Gold (and to lesser extent Silver) was any usage.  Sure if price of Gold was too high a country prior to the abolishment of Gold standard could have fixed their currency to copper, or tin, or Helium3 however Gold was the recognized elemental currency leader.

Bitcoin is in the same position. Unless a crypto-currency is significantly superior to Bitcoin they market cap for that alt-coin will be a tiny rounding error with Bitcoin picking up 99% of market volume.  If the only reason to pick xCoin over Bitcoin (especially say 8 years from now when Bitcoin is a decade old) is too get rich quick then consumers won't adopt it and merchants won't accept it.  My guess is over time the effective lifespan of alt coins will decrease as the pump & dump cycle tightens.   That will only strengthen Bitcoin as "THE standard".  Now if something vastly superior comes along it may replace Bitcoin.  Just like if some massive reserve of gold (like 10x all gold mined so far in human history) is found or some lost cost method to synthesis gold is created, gold would be replaced with some other element as the defacto "standard".

There are about 100 or so isotopes which have no significant industrial use that could be used as a currency yet only Gold/Silver remain.  It is the ebay effect for crypto-currencies.  Ebay came first.  Ebay got big.  Ebay has problems but 99% of consumers will use ebay thus if you want to sell a lot of "something" in auctions likely you need to use ebay.  Other auction houses are niche at best because that first mover advantage is hard to overcome.  As long as Bitcoin is "good enough" it will be the eBay of currencies.
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November 08, 2011, 08:37:56 PM
 #46

...
Bitcoin is in the same position. Unless a crypto-currency is significantly superior to Bitcoin they market cap for that alt-coin will be a tiny rounding error with Bitcoin picking up 99% of market volume.  If the only reason to pick xCoin over Bitcoin (especially say 8 years from now when Bitcoin is a decade old) is too get rich quick then consumers won't adopt it and merchants won't accept it.  My guess is over time the effective lifespan of alt coins will decrease as the pump & dump cycle tightens.   That will only strengthen Bitcoin as "THE standard".  Now if something vastly superior comes along it may replace Bitcoin.  Just like if some massive reserve of gold (like 10x all gold mined so far in human history) is found or some lost cost method to synthesis gold is created, gold would be replaced with some other element as the defacto "standard".

There are about 100 or so isotopes which have no significant industrial use that could be used as a currency yet only Gold/Silver remain.  It is the ebay effect for crypto-currencies.  Ebay came first.  Ebay got big.  Ebay has problems but 99% of consumers will use ebay thus if you want to sell a lot of "something" in auctions likely you need to use ebay.  Other auction houses are niche at best because that first mover advantage is hard to overcome.  As long as Bitcoin is "good enough" it will be the eBay of currencies.

I'm betting that you are right, and in part because, IMHO, Bitcoin seems to be remarkably tight and free of major functional design defects.

I suspect that the most successful alternate crypto-currencies will end up being ones which use Bitcoin pledged as a backing store.  I believe that it should be fairly doable to parse the existing Bitcoin block chain to validate BTC currency base which is pledged as backing to alternate chains.


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November 09, 2011, 06:10:21 PM
 #47

I suspect that the most successful alternate crypto-currencies will end up being ones which use Bitcoin pledged as a backing store.  I believe that it should be fairly doable to parse the existing Bitcoin block chain to validate BTC currency base which is pledged as backing to alternate chains.

That really doable? I mean would they be actually be re-demable?

I think there is a niche to fill for something like this when it comes to micro-transactions. LiteCoin seems better for micro-transactions then BTC but this would be even better. Then again the need for decentralization is not particular great when it comes to micro-transactions. A central payment house backing with BTC would probably be good enough. They can dump there assets to another server fast enough and even if everyone loose everything in a micro-payment service it is not that big of a deal.

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November 09, 2011, 07:02:28 PM
 #48

I suspect that the most successful alternate crypto-currencies will end up being ones which use Bitcoin pledged as a backing store.  I believe that it should be fairly doable to parse the existing Bitcoin block chain to validate BTC currency base which is pledged as backing to alternate chains.

That really doable? I mean would they be actually be re-demable?

Not redeemable, at least on the basis only of the public block chain, but some other methods may (or may not) be employed to make that possible.

I envision a situation where (say) I as a holder of BTC in the 'Satoshi' block chain wish to support an alternate chain for whatever reason.  The reason might be that they pay me a cut of the proceeds of inflation, a cut of the transfer fees, or simply because I agree politically with the structure and operation of the currency system.  Most likely it would be some combination of these in my particular case.

If part of the value of the alternate currency was the BTC backing it, it could be possible to automatically keep tabs on that aspect of the alternate currency's value.  That is what I mean be parsing the 'Satoshi' block chain.

There are a lot of complexities associated with how to implement a 'backing', and what exactly that means.  Would it be demand redeemable for BTC?  Under what conditions may the backers withdraw their support?  That kind of thing.  I see a bewildering array of possible structures.  I'm hoping that some of them end up being explored and the process of evolution arrives at a solution which works well for everyone (and most well for the actual users of a currency base, or at least better for these people than our current debt-based currency regimes.)

I think there is a niche to fill for something like this when it comes to micro-transactions. LiteCoin seems better for micro-transactions then BTC but this would be even better. Then again the need for decentralization is not particular great when it comes to micro-transactions. A central payment house backing with BTC would probably be good enough. They can dump there assets to another server fast enough and even if everyone loose everything in a micro-payment service it is not that big of a deal.

One of the reasons why the idea of an array of 'specialty' crypto-currencies appeals to me is that I think it would allow the general 'distributed' scheme to scale to an immense size and be a legitimate and compelling alternative to state sponsored solutions which I fear will be presented as 'our only way forward' in the event of some sort of crisis.

I agree with your point about the practicality of centralization in some areas a family of currency systems, but I very much would like to see the actual core remain decentralized.



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November 10, 2011, 02:12:16 PM
 #49

People's behavior changes over time, my father's generation can not imagine children today sitting before a computer surfing all day, internet based consumption need a internet based currency, but the limited amount of BTC supply is really a problem and may ultimately fail it

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November 10, 2011, 02:28:06 PM
 #50

People's behavior changes over time, my father's generation can not imagine children today sitting before a computer surfing all day, internet based consumption need a internet based currency, but the limited amount of BTC supply is really a problem and may ultimately fail it

BTC Supply isn't limited.

There are 2,100,000,000,000,000 Bitcoin units.  That's enough for 350,000 Satoshis for every man woman and child on the planet.  The protocol can support divisions smaller than 1E-8 so if it became a problem we could just use smaller units.
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