How, Why and When the Bitcoin Model will Fail

[jag2k2]

I think that "found" wallets could be more of a problem. Let's say that all but 1000 or so bitcoins remain in circulation in say the year 2200. These would still be viable for an economy as they can be sub-divided to many decimals. But, what if someone finds Grandpa's old computer with 10,000 BTC on it?

That is hilarious!  Nice thought.

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[kjj]

You know, it really isn't necessary to respond to every troll that rehashes these topics.  If the original poster is too lazy to search for the thousands of threads that cover these topics in gruesome detail, why do you feel like you need to retype it all for him?

[myrkul]

What you basically are saying is that Bitcoin is doomed by its increasing value. How is this a bad for the currency?

No. All value is irrelevant. The model is 'doomed' because there will only ever be 21 Million Bitcoins.

That are currently divisible by 8 decimal places, with the capability to expand that if needed.

I don't see a problem.

[myrkul]

And couldn't some crazy advances in computing like quantum computers hack 256bit security?

That would screw up a lot more than just bitcoin, and would be quickly addressed.

[firefop]

What you basically are saying is that Bitcoin is doomed by its increasing value. How is this a bad for the currency?

No. All value is irrelevant. The model is 'doomed' because there will only ever be 21 Million Bitcoins.

That are currently divisible by 8 decimal places, with the capability to expand that if needed.

I don't see a problem.

Agree with Myrkul.

@OP - No, the bitcoins aren't consumed by being spent. We're expecting a slowly declining actual number of bitcoins once we reach 21m - and are prepared to add decimal places to compensate for the associated price increase. Right now we're still inflating the currency via block rewards.

[dg2010]

Your theory doesn't make any sense.

The value of bitcoin doesn't have to drop simply because the money supply is in decline. So what if a satoshi is worth $200. It just means that you can't use it as your primary currency. Instead, you swap your satoshi for BitcoinV2 and trade in that instead.

By that time I do not believe that Bitcoin would be the primary mode of exchange, instead it would become more like gold. It would be held on reserve and people would (hopefully) be using another alt coin as their primary exchange.

I believe Bitcoin will ultimately fail as a global currency because governments around the world will not allow it to happen. People need fiat in the short to medium term because you can't feed your family on Bitcoins. And very few governments around the world will want large amounts of wealth moving into a digital currency

[Operatr]

I think that "found" wallets could be more of a problem. Let's say that all but 1000 or so bitcoins remain in circulation in say the year 2200. These would still be viable for an economy as they can be sub-divided to many decimals. But, what if someone finds Grandpa's old computer with 10,000 BTC on it?

That is hilarious!  Nice thought.

If Grandpa followed proper wallet security and encrypted it like he should have, it might as well have BTC1,000,000 on it.

[alexeft]

I think that "found" wallets could be more of a problem. Let's say that all but 1000 or so bitcoins remain in circulation in say the year 2200. These would still be viable for an economy as they can be sub-divided to many decimals. But, what if someone finds Grandpa's old computer with 10,000 BTC on it?

That is hilarious!  Nice thought.

If Grandpa followed proper wallet security and encrypted it like he should have, it might as well have BTC1,000,000 on it.

 
Imagine that for a moment!!!! 60 years into the future, your grandson finds granpa's wallet with 1,000,000 btc in it and at that moment, a satoshi is 200$!!!!!!


Wow!!!! I'd love to give my grandchildren something like that!!

[BitcoinFX]

You know, it really isn't necessary to respond to every troll that rehashes these topics.  If the original poster is too lazy to search for the thousands of threads that cover these topics in gruesome detail, why do you feel like you need to retype it all for him?

I've not been back on this board that long and yes I have a lot of reading to do. I'm hardly a troll, although you gotta love the trolls, right ?

I was looking way way into the future with this thread, its partly the reason why I don't have the thousands of BTC in my wallet that I once had, in fact I don't think I have any BTC left accessible to me at all anymore.

Please don't misunderstand my original post. Bitcoin is a currency and a commodity. That's its issue!

When the oil well's dry up are you going to be putting 'gas' into your cars still ? No, it will be something else entirely.

I wrote this topic as a warning for the future, that's all! The current bitcoin model does 'eventually' fail. So, just remember that and develop it along the way with that in mind! Most of all look after your wallets.

I love (to hate) Bitcoin !  

[mestar]

The value of bitcoin doesn't have to drop simply because the money supply is in decline. So what if a satoshi is worth $200.

This what.  At Satoshi worth $0.1, bitcoin uses all the electrical energy produced in the world.  That's kind of a problem.

[myrkul]

The value of bitcoin doesn't have to drop simply because the money supply is in decline. So what if a satoshi is worth $200.

This what.  At Satoshi worth $0.1, bitcoin uses all the electrical energy produced in the world.  That's kind of a problem.

You're going to have to back that up with some maths.

[odolvlobo]

What will happen when all of the 21 Million bitcoins are in circulation?

Bitcoin ... eventual and certain pricing decline, with a strong and continual downwards trend throughout.
Why? Quite simply because the money supply has stopped.
No one will want to buy into a currency that is in constant and perpetual decline. It will effectively be the exact opposite to what we have already seen to date. Bitcoins 'bankers' (the major miners and holders of bitcoins) will be clambering to sell and trade-off their bitcoins, as they become ever increasingly scarce and therefore 'worthless stock'. ...

I don't see the logic here. Less supply (with constant or rising demand) means increasing price, not decreasing price.

Now imagine, what would happen if say the US Federal Reserve one day just decided to stop printing any new money. All of the money in circulation would eventually, in theory, disappear. Moreover, Its overall value as a currency would certainly diminish, in favor of other new / existing currencies, crypto or otherwise. Bitcoins will not even be worth their 'weight' in anything!

Why would the money disappear? Are you talking about dollar bills? The money that the Fed "prints" is electronic, not paper. How can you be certain that people would switch out of Bitcoin into another currency?

[mestar]

The value of bitcoin doesn't have to drop simply because the money supply is in decline. So what if a satoshi is worth $200.

This what.  At Satoshi worth $0.1, bitcoin uses all the electrical energy produced in the world.  That's kind of a problem.

You're going to have to back that up with some maths.

https://bitcointalk.org/index.php?topic=169927.msg1771378#msg1771378

[myrkul]

The value of bitcoin doesn't have to drop simply because the money supply is in decline. So what if a satoshi is worth $200.

This what.  At Satoshi worth $0.1, bitcoin uses all the electrical energy produced in the world.  That's kind of a problem.

You're going to have to back that up with some maths.

https://bitcointalk.org/index.php?topic=169927.msg1771378#msg1771378

Awesome. A list of numbers. How about some maths to back those estimates up?
Show me how you derived those figures.
Unless, of course, you just pulled them out of your ass. I've seen the Goatse image, I don't need to see it again.

[mestar]

Show me how you derived those figures.

Sure, this is the problem we are trying to solve.

If bitcoin uses $200,000 per day in electric power per day,  at what price point does it use total energy same as the total power in the world.

total electric power in the world from wikipedia:  2.3 TW
cost per kWh: $0.1

cost of total worlds el. power usage per day:  2.3 TW * 0.1$/kWh * 24 = $5500 million

$5500 million is  how many times larger than 0.2 million:  27500 times

So, if bitcoin price increases 27500 times, we get the same energy usage.

100$ 27500 = $2.75 million, price of one bitcoin

divide this by 100000000 to get price of satoshi:  $0.027.


That guy said that there would be no problems if price went up to $20 per satoshi. Lol at that.

[JimiQ84]

Show me how you derived those figures.

Sure, this is the problem we are trying to solve.

If bitcoin uses $200,000 per day in electric power per day,  at what price point does it use total energy same as the total power in the world.

total electric power in the world from wikipedia:  2.3 TW
cost per kWh: $0.1

cost of total worlds el. power usage per day:  2.3 TW * 0.1$/kWh * 24 = $5500 million

$5500 million is  how many times larger than 0.2 million:  27500 times

So, if bitcoin price increases 27500 times, we get the same energy usage.

100$ 27500 = $2.75 million, price of one bitcoin

divide this by 100000000 to get price of satoshi:  $0.027.


That guy said that there would be no problems if price went up to $20 per satoshi. Lol at that.

But technology progresses. ASIC needs only 6-10W/(GH/s). That's missing in your calculation. Also "$200,000 per day" is wrong in current situation.

[mestar]

But technology progresses. ASIC needs only 6-10W/(GH/s). That's missing in your calculation. Also "$200,000 per day" is wrong in current situation.

Change to ASIC has nothing to do with it.  Economic incentives for mining do not stop at a certain hash point, they stop at a certain profit point, (that is, where there is no profit.)   

A easy market force argument will always push the mining running costs to be in the order of magnitude proximity to the total awards.  Perhaps in the 50% to 75% range.  For the next 3.5 years this is 50% of 3600 * price.   

If $200.000 per day is wrong, then give us what you think is the correct number.

[JimiQ84]

But technology progresses. ASIC needs only 6-10W/(GH/s). That's missing in your calculation. Also "$200,000 per day" is wrong in current situation.

Change to ASIC has nothing to do with it.  Economic incentives for mining do not stop at a certain hash point, they stop at a certain profit point, (that is, where there is no profit.)   

A easy market force argument will always push the mining running costs to be in the order of magnitude proximity to the total awards.  Perhaps in the 50% to 75% range.  For the next 3.5 years this is 50% of 3600 * price.   

If $200.000 per day is wrong, then give us what you think is the correct number.

I am just saying, that for asics to be unprofitable miners don't need to use up all the energy created on Earth. That's just impossible (common sense).

I don't know the correct number and I am not in the position to fabulate one. I just know that your number is incorrect. Actually, on blockchain.info is this info:

Electricity consumption is estimated based on power consumption of 650 Watts per gigahash and electricity price of 15 cent per kilowatt hour. In reality some miners will be more or less efficient.

Asics tend to use 6-10W, which is 100 times more efficient than estimation for $150,000-$200,000. How much of hashrate is created by asics? I don't know, maybe half.

[jubalix]

Yes but by then BTC could fork to a PPC like solution, adds a bit in proportion to lost coins, or another Coin will be invented to address this and BTC could still be like a reserve currency

I think you have confused the imutability of the 21 million coins which is not true, and the vested interest in BTC to change how the coins works

The bitcoin model will eventually fail. Don't worry this won't happen for a very long time (perhaps not). In fact, for everyone reading this, it probably won't happen within our lifetime. Although, it will certainly start to happen in around 130 years (for sure), if not way before. I'm not talking about worth or value, bulls and bears, up and down trends etc., I mean it can't survive as a long-term 'currency'...

When bitcoin was first established, a bitcoin was worth nothing, except perhaps for the cost of the hardware (software), an internet connection, the electricity and the time required to generate them, as in fact it remains today.

When I first joined this forum NewLibertyStandard had an electricity meter plugged into the wall socket for his PC to calculate the exact cost required to generate a bitcoin. Thus, fixing a simple exchange rate for PayPal and the US dollar, of just a few cents.

Whilst most forum members at that time were aware the price would probably increase with a growing demand for 3rd party exchangers and 'real world' exchange for goods and services, few (including myself) could of predicted the very fast inflation or increased 'value' against real currencies.

However, what I did model at that time and what I will share with everyone now are the reasons why bitcoin will imho eventually fail as a currency. The model is inherently flawed and unfair.

Bitcoin has a hard limit of about 21 Million bitcoins. See: http://bitcoin.org/en/about

As per. the wiki page See: https://en.wikipedia.org/wiki/Bitcoin "...a hard limit of 21 million bitcoins is reached during the year 2140."

Most studies into bitcoin have focused on price, inflation, technical specifications and the model up to the end of this graph. This is certainly the boom time?

Bitcoins are divisible to 8 decimal places yielding a total of approx. 21×10 14 currency units.

What will happen when all of the 21 Million bitcoins are in circulation?

Bitcoin will, in theory, experience some years of perceived stability (with some initial price 'spikes') with a long-term 'table top' like chart, although still with the potential for sizable peeks and troughs, although leading to eventual and certain pricing decline, with a strong and continual downwards trend throughout. If you like, a 'wonky' table with two short legs!

Why? Quite simply because the money supply has stopped.

No one will want to buy into a currency that is in constant and perpetual decline. It will effectively be the exact opposite to what we have already seen to date. Bitcoins 'bankers' (the major miners and holders of bitcoins) will be clambering to sell and trade-off their bitcoins, as they become ever increasingly scarce and therefore 'worthless stock'. On this basis, some may also retain bitcoins, with the hope of price increases in relation to rarity, moreover there will be inevitably less and less people to actually trade bitcoins with...

Consider in 200+ years just how many of these 21 Million bitcoins will of been 'lost' forever. The 8 decimal places are irrelevant long-term.

Now imagine, what would happen if say the US Federal Reserve one day just decided to stop printing any new money. All of the money in circulation would eventually, in theory, disappear. Moreover, Its overall value as a currency would certainly diminish, in favor of other new / existing currencies, crypto or otherwise. Bitcoins will not even be worth their 'weight' in anything!

Printing to much currency against your GDP output is very problematic. Again, its boom time for a while and then total bust (in theory). This is currently true for the Euro and the Dollar.

See: http://www.youtube.com/watch?v=O_TjBNjc9Bo

Not printing enough currency is also very problematic.

See: http://www.youtube.com/watch?v=vm3DixfL9o0

What is much much worse is to stop printing anymore currency whatsoever!

Ironically, the bitcoin supply had to be limited for the purpose of implementing the original client protocol, by design. It is in fact the limited and finite supply that gives it any 'value' in the first place. It created the 'gold rush'... Satoshi remains a genius cryptographer, over being an economist? This project remains an experiment, although it is a fantastic and innovative one.

The frantic necessity to generate and to save bitcoins is currently inherent amongst bitcoin users.  "I sold all my bitcoins and now the price has sky rocketed" or "I bought into bitcoin high and now the price has plummeted" or "I spent thousands on mining hardware and can never recover my costs" etc. It's very difficult to know what the best thing to do with your bitcoins really is at any given moment actually is, right?

In Modern Money Mechanics, money is only actually money if it is 'moving'. All money is effectively 'debt' i.e. it is owed to someone by somebody for something. If this wasn't true, then we wouldn't need any currencies at all i.e. we would all still be happy swapping say apples for oranges etc.

The crypto model adopted by bitcoin is inherently 'unfair' and 'flawed' imho, just like in capitalism where the already rich and powerful become increasingly richer and more powerful at the expense of others. We are already seeing this with bitcoin. Soon, (if not already) only established and large corporations, big banks, already very wealthy individuals, governments and nation states, with access to super computers will be the only people able to generate any bitcoins. This 'free market' will be totally monopolized, this has already started to happen.

I believe there is a better model and a better approach, although that is entirely another topic.

So, when does the bitcoin bubble actually burst? Probably, at exactly the very moment when the 21 Million bitcoins are generated, followed by a 'spike' and then a theoretically 'steady' decline back down to zero? A bitcoins intangible 'true worth'? Probably. Until then, there will be many new bitcoin adopters, users and investors that will come and go, we will see more bullish and bearish movements, although imho the major price trend can only really go one way, until all of the coins are in circulation and perhaps it will even continue beyond that, maybe not!

Is bitcoin really the internet currency of the future? I'm not so sure about that. Something very similar to bitcoin probably stands a very good chance for true internet and financial freedom for the masses and there are certainly much worse alternatives.

Bitcoin is a 'bubble' !?! http://www.youtube.com/watch?v=A7TuFy0fcuw

[Faraday]

Why? Quite simply because the money supply has stopped.

No one will want to buy into a currency that is in constant and perpetual decline.

This is where you lost me. Care to explain why no one will want to buy into bitcoin just because the total amount in circulation is decreasing?