What is the deal with hoarding?

[Crazy]

Well they're not flowing at all if they're being hoarded by miners. And if they're being sold it's immaterial what exchange they're sold on, it will still require $X/coin to maintain the current market value or the value will adjust downward due to inflation. Point is -- to maintain current market value with an inflation rate in existence, new money must flow in at around 3600 coins/day @ current market value. Somewhere in the bitcoin economy, this must happen. Whether from new adopters or miners.

[Elwar]

Well they're not flowing at all if they're being hoarded by miners.

Or being used as currency. Spent on bitcoin purchases for goods or services.

[Crazy]

Or being used as currency. Spent on bitcoin purchases for goods or services.

That's still an inflow of capital (labor/services), and it would have to be an inflow sufficiently high enough to maintain current market value.

[Elwar]

Or being used as currency. Spent on bitcoin purchases for goods or services.

That's still an inflow of capital (labor/services), and it would have to be an inflow sufficiently high enough to maintain current market value.

So...it would be better for the Bitcoin economy if miners hoard their coins...in order to avoid this requirement for an inflow of capital. Correct?

[Crazy]

No, because if they hoard it then their mining costs are the new inflow of capital.

[Elwar]

No, because if they hoard it then their mining costs are the new inflow of capital.

Which could actually end up costing less than transaction fees at an exchange.

And at the current price, the cost of mining is miniscule compared to what you get in return. (currently a 64% profit margin, not including the rising price after you have mined).

[Crazy]

That's fine. So then 36% * $168 * 3600 = new inflow required to maintain $168.

[Elwar]

That's fine. So then 36% * $168 * 3600 = new inflow required to maintain $168.

Which helps in spending because Bitcoin is inflationary. Which helps the Bitcoin economy because people will be more likely to spend their bitcoins because the value of a bitcoin keeps going down.

And according to Krugman that is good because more people will spend and that helps the economy.

So miners are not only helping to secure the network, they are stimulating the Bitcoin economy.

So much for anyone hoarding.

[Crazy]

The point of this discussion has been that new inflows must come in at certain rates to maintain current value. No one is arguing where it comes from in particular. Also Bitcoin is deflationary by design, but for the time being there is a degree of inflation.

[odolvlobo]

..snip..

However, the second chart shows the amount of transactions in USD has increased tremendously, almost as much as the price. This indicates that hoarding is not as prevalent as some people think. That's good news.



..snip..

I hope you realize that a very large portion of the height of the line on this graph is due to people transferring bitcoins to and from currency exchanges, and not buying goods/services with bitcoins. The value of economic transactions (other than currency trading) that occur via bitcoin is an unknown quantity, and it is much smaller than this graph suggests. Although sources suggest it is growing rapidly.

The current run-up is largely due to expectations of future growth in the bitcoin economy (and probably also some manipulation). And one can only guess how well the future growth will actually pan out. I'm cautiously optimistic, but a lot of people need to get the facts straight..

That is true, but I can only work with the data that is available. A better chart would be "Estimated Transaction Volume excluding 100 top sites in USD" but that chart is not available.

[mestar]

I am not sure of the exact price as I cannot view all of the charts at work but I would guestimate that selling 3600 BTC right now on MtGox would bring the price down near $100/BTC.

Has there been any indication on MtGox that all miners are selling 3600 bitcoins per day?

Or are miners different from other users that would somehow imply that they are not like the rest of the Bitcoin community where only .6% trade on a daily basis.

Looking at what that amount does in a day misses the point.  You have to think what happens when this amount hits the market every day for the next 3 years.

Most miners are in it for the profit.  Saying that their volume contribution the same as the total average is silly. 

As for the proof, look at this chart.  Volume never falls bellow double the 7200 daily that was then, but look at the price. 

[mestar]

Well they're not flowing at all if they're being hoarded by miners.

Or being used as currency. Spent on bitcoin purchases for goods or services.

Only if merchants themselves are hoarding.

[KTE]

This is so funny and sad at the same time. In recent months BTC has seemingly lost its true utility -- a currency -- and has become a speculative asset that provides no utility because if you use it, you'll potentially be leaving money on the table. Amazing Everyone start paying with Paypal and Dwolla again

Even though Bitcoin is rising sharply, it doesn't mean that you wouldn't want to use it as a currency. Think about it:

1) Who wouldn't want to receive bitcoins now if they were fine with them before?
2) Why would you prefer any other form of payment if you would have to pay someone?

[wopwop]

I am moving from hoarding dollars to holding a currency of value.

So, no attempt at answering the question of who is paying $0.5 million per day so that your currency of value can hold value?

When Google was paying their CEOs in the early days with stock options, were they bringing in the amount of money per day to pay for those stock options in order to hold value?

The inflation created by mining is already priced in.

The inflation is not priced in.   It would be priced in if all the minig costs were in BTC.  They are not, electricity costs you must pay in a local currency.

There is a reason that they get stock options, and not actual stocks that they could sell on the exchange right away.  The reason being that in the early days those quite large amounts of stock would push the price down.

Miners are not paid in BTC options, they are paid in BTC.  It is not only that they can sell them right away,  they must do so to cover the running costs.  Otherwise it is them that are bringing in the fresh money.

So, any other answer attempts on who must pay a large chunk of those $0.5 million daily?

Currently it's 'fresh money' pouring into Bitcoins that's paying for the power expense + miner's profits

This 'fresh money' is stupid because it doesn't understand that mining will bring back Bitcoin's unit price to its real value, zero. The price of bitcoins will trickle down at some point, to zero, not because it wants to, but because it has to.

I myself find this super entertaining to watch that some people are going to lose this rigged game bigtime.

Several people in this game, like Trace Mayer, are trying to put that inevitable loss to the current millionaires of the world by convincing them to buy bitcoins in the press. That's why I love that guy, he'll make our time with bitcoins worthwhile if he succeeds.

[dg2010]

This 'fresh money' is stupid because it doesn't understand that mining will bring back Bitcoin's unit price to its real value, zero. The price of bitcoins will trickle down at some point, to zero, not because it wants to, but because it has to.

I myself find this super entertaining to watch that some people are going to lose this rigged game bigtime.

Almost everything you say is complete bollocks.

Currently the only known force which is guaranteed to bring the value of Bitcoin to zero is Entropy. And when that occurs nothing else will matter.

Your assumption is that the value of a bitcoin is pegged to the cost involved in mining it and making the false conclusion that when mining ends the value of bitcoin will return to zero. That is completely untrue because miners are only a single part of the puzzle.

By the time all coins have been mined, we hope Bitcoin will be as ubiquitous as Paypal or even Gold, and by that time we hope that millions and millions of people will be using Bitcoin to buy and sell services. That demand will not disappear when the last block is mined.

[Crazy]

Pardon my ignorance, but even after the lost block is mined, do miners need to stick around to validate transactions? Or no?

[dg2010]

Pardon my ignorance, but even after the lost block is mined, do miners need to stick around to validate transactions? Or no?

Yes there needs to be a network of computers to validate transactions, and there will be fees to be made from that, whether that will be profitable I don't know, and how much hashing power will be required will depend on the number and size of those transactions.

[Crazy]

Ok, figured as much. I wasn't sure if it was the avg BTC user that would contribute to this validation process since everyone has the blockchain, or if it had to be dedicated individuals.

[Luckybit]

The only thing worth spending Bitcoin on is getting more Bitcoin.
Invest it.

It's also probably a good idea to spend Bitcoin to protect Bitcoin.

[chrsjrcj]

Savings is only delayed consumption.