What will happen with Bitcoin if it never scales?

[Drnice]

to me, it will be difficult for Bitcoin to be used for micro transaction as a normal form for transaction in the market and as the top in all crypto-sites, it wont  and can't be underrated because of its high price in the market system.
In years coming the price of Bitcoin will still be increasing, other coins will increase but can't beat the price of Bitcoin in the market.

[classicsucks]

That will not work. The main reason that Bitcoin core does not want to increase the blocksize is that they want to force the "fee market" that is supposed to replace block rewards as the means of securing the Bitcoin network, while there is still enough of a block reward left to secure the Bitcoin network.


Having worked closely with the Monero adaptive blocksize, it has become very clear to me that without a minimum block reward the Cryptonote adaptive blocksize limit will cause the total fees per block to go to zero at the same rate as the block reward. This will lead to no incentive for the miners to secure the Monero network. By analyzing the Monero adaptive blocksize and fee structure one can see why "solutions" such as Bitcoin unlimited will fail, since these type of solutions are in effect a much weaker version of what Monero already has. In the Bitcoin unlimited model for example net fees to the miner will fall to zero much faster than with a Cryptonote style quadratic penalty

Edit 1: Litecoin and Dash have fundamentally the same flaw as Bitcoin. In the case of Dash the situation is made even worse since the falling block reward not only has to support the miners but also the masternode network and project funding.

Wait a minute - the main reason that Bitcoin core does not want to increase the blocksize is to force people onto Segwit and over to LN and their other patented solutions. They've stated this publically.  Also, why would bitcoin Core care about fees? Miners will secure the network for meager fees.

Your claims about money supply are interesting. Is it possible that your views about current inflationary economics cause you to regard such systems as normal and stable?

[dinofelis]

Your claims about money supply are interesting. Is it possible that your views about current inflationary economics cause you to regard such systems as normal and stable?

One should distinguish between inflation/deflation (= the change in real world value of a token) on one hand, and debasement (= creating monetary tokens) on the other hand.

In general, a good currency has only very mild inflation or deflation, and what's more important, this mild inflation or deflation is *predictable*.  This makes that the currency is a good representation of value as a function of time, and hence a good "unit of account".   Whether the deflation or inflation is 2% or 3% ... doesn't really matter.  If you KNOW that on average, a currency has an inflation rate of 2%, say, you KNOW that 10 years from now, a given sum represents 20% less value than that same sum today, so you can take this into account in every long term agreement.  If you know that the currency is mildly deflationary, you know that a given sum will represent about 20% more than today, so that too, you can take it into account.
As such, mild inflation or deflation, for a currency, doesn't matter much, as long as it is predictable.

But in order for a currency to keep its inflation or deflation rate close to the "programmed" one, the currency OFFER needs to adapt as a function of its value.  If the currency is too expensive (that is, if the deflation is too severe), more currency needs to be put on the market.  If the currency becomes too cheap, (that is, inflation is too severe), currency needs to be taken out of the market.

A currency with a given production rate, worse, a currency with a decreasing production rate, and an increasing adoption, will be explosively deflationary.  That's exactly what we saw with bitcoin.  Everyone is cheering that bitcoin went up from $0.1 to $1700 or so in about 6 years, but that is a catastrophic deflation.  

Imagine that 6 years ago, you signed a contract with me that I would clean your room for 100 BTC (say, $10) per day, with an indemnity of breach of contract of 5000 BTC (say, $500) if you decide to stop the contract without me failing to clean your room.  Then I'm rich now, and you will be working the rest of your life to pay off the contract !
You cannot do business in such a "currency".  

If that currency would become in general usage, then the economy would fall in a deflationary spiral: as hoarding currency instead of spending it would lead to higher wealth, and as the increase in value of the hoarded currency would outpace any reasonable true economic return on investment (look at bitcoin: what real world economic investments allow a factor of 10000 ROI in 7 years !), nobody would spend, nobody would invest, and everyone would hoard more and more currency, having less and less currency running around, increasing even more the value of the few coins that are available and not hoarded yet, inspiring people to hoard even more.

[Wesimon]

If bitcoin never scales, this will cause bitcoin to lose people's interest. It cannot be used for small transactions and other micro transactions.

[classicsucks]

Your claims about money supply are interesting. Is it possible that your views about current inflationary economics cause you to regard such systems as normal and stable?

One should distinguish between inflation/deflation (= the change in real world value of a token) on one hand, and debasement (= creating monetary tokens) on the other hand.

In general, a good currency has only very mild inflation or deflation, and what's more important, this mild inflation or deflation is *predictable*.  This makes that the currency is a good representation of value as a function of time, and hence a good "unit of account".   Whether the deflation or inflation is 2% or 3% ... doesn't really matter.  If you KNOW that on average, a currency has an inflation rate of 2%, say, you KNOW that 10 years from now, a given sum represents 20% less value than that same sum today, so you can take this into account in every long term agreement.  If you know that the currency is mildly deflationary, you know that a given sum will represent about 20% more than today, so that too, you can take it into account.
As such, mild inflation or deflation, for a currency, doesn't matter much, as long as it is predictable.

But in order for a currency to keep its inflation or deflation rate close to the "programmed" one, the currency OFFER needs to adapt as a function of its value.  If the currency is too expensive (that is, if the deflation is too severe), more currency needs to be put on the market.  If the currency becomes too cheap, (that is, inflation is too severe), currency needs to be taken out of the market.

Sounds like a fair summary of current mainstream neo-Keynesian monetary policy. I just wanted to point out to you that this system is by no means normal, stable, or rational, and it has no successful historical precedent. It's just been "the system" for the past 40+ years in G8 countries.

A currency with a given production rate, worse, a currency with a decreasing production rate, and an increasing adoption, will be explosively deflationary.  That's exactly what we saw with bitcoin.  Everyone is cheering that bitcoin went up from $0.1 to $1700 or so in about 6 years, but that is a catastrophic deflation.  

Imagine that 6 years ago, you signed a contract with me that I would clean your room for 100 BTC (say, $10) per day, with an indemnity of breach of contract of 5000 BTC (say, $500) if you decide to stop the contract without me failing to clean your room.  Then I'm rich now, and you will be working the rest of your life to pay off the contract !
You cannot do business in such a "currency".  

If that currency would become in general usage, then the economy would fall in a deflationary spiral: as hoarding currency instead of spending it would lead to higher wealth, and as the increase in value of the hoarded currency would outpace any reasonable true economic return on investment (look at bitcoin: what real world economic investments allow a factor of 10000 ROI in 7 years !), nobody would spend, nobody would invest, and everyone would hoard more and more currency, having less and less currency running around, increasing even more the value of the few coins that are available and not hoarded yet, inspiring people to hoard even more.

Aren't you forgetting that inflation also arises from increased monetary velocity, not just increased supply? So the increased nominal exchange value is not necessarily "catastrophic deflation" at all. As you point out, in a classic deflationary event, the velocity of money spirals downward as the currency becomes more valuable - it's smarter to hold money than buy goods and services. This doesn't effect bitcoin for several reaons: 1. bitcoin not a primary unit of account, and 2. it isn't required to purchase vital goods and services. Furthermore, there is an increasing number of goods and services that can ONLY be purchased using bitcoin. People who aren't taking fiat profits on exchanges are likely buying more of these "exclusive" goods and services as we speak - if they're smart, they know that the price/fiat exchange rate will correct soon anyway. Remember that people buying into the bitcoin currency to acquire goods and services don't care what the fiat exchange rate is - they simply buy the coin and get the product at roughly the same exchange rate (or better if they bought in January). Additionally, remember that bitcoin is a financial asset class of its own, which continues to find new market share and investment. Finally, I doubt that a complete stagnantion of BTC trade and exchange voume would happen on the bitcoin network - most people know that this would kill bitcoin and a devaluation would be close at hand.


I don't think people are really writing up labor contracts for BTC. Just about every store I've seen uses national currencies for pricing and the BTC price is determined by daily exchange rates. There's no real problem with that other than wild fluctuations before exchange. Somebody from Coinbase said in an interview that their large merchants exchange their BTC for fiat once per day day or more. That insulates the merchant from large losses (but also large gains).

[dinofelis]

Sounds like a fair summary of current mainstream neo-Keynesian monetary policy. I just wanted to point out to you that this system is by no means normal, stable, or rational, and it has no successful historical precedent. It's just been "the system" for the past 40+ years in G8 countries.

This is not neo-Keynesian at all, it is rather neo-classical, in Friedman's tradition.  Keynesians want to influence economic activity with monetary policy ; Friedman considers just the monetary value stability.  Keynesians think that one should print more money if the economy depresses, and that one should restrict monetary supply if the economy booms.  Friedman's monetary view is rather that the monetary supply should keep money's value as constant as possible:

https://en.wikipedia.org/wiki/Monetarism

Monetarism is an economic theory that focuses on the macroeconomic effects of the supply of money and central banking. Formulated by Milton Friedman, it argues that excessive expansion of the money supply is inherently inflationary, and that monetary authorities should focus solely on maintaining price stability.

You can hardly think of Friedman as a neo-Keynesian.

One should regulate the money supply so as to keep as stable a monetary value as possible, in the sense of Nash's ideal money.

https://en.wikipedia.org/wiki/Ideal_money

Ideal money is working in the theory similar to the gold standard, but it is generally based on a Nonpolitical Value Standard. "A possible nonpolitical basis for a value standard that could be used for money would be a good industrial consumption price index(ICPI) statistic.

Nash proposes something of the kind in principle as the Big Mac index, but smarter.  The idea is to have *constant economic value* of the money unit even though that notion itself is difficult to define precisely.

Asymptotically ideal money is the currency close to but still not ideal money. In John Nash’s lecture, "Ideal Money and Asymptotically Ideal Money" focused on" the connection between fluctuation in inflation and exchange rates and the perceived long-term value of money", he mentioned that: "‘Good money’ is money that is expected to maintain its value over time. ‘Bad money’ is expected to lose value over time, as under conditions of inflation. The policy of inflation targeting, whereby central banks set monetary policy with the objective of stabilizing inflation at a particular rate, leads in the long run to what Nash called ‘asymptotically ideal money’ – currency that, while not achieving perfect stability, becomes more stable over time."[4] That means if a currency has shown a trend to be more stable，it could become an asymptotically ideal money or even the ideal money in the future.

He considered the Euro as a good candidate for asymptotically ideal money, exactly because the European central bank has only a single objective: inflation of 2%, and no neo-Keynesian targets to meet.

Aren't you forgetting that inflation also arises from increased monetary velocity, not just increased supply? So the increased nominal exchange value is not necessarily "catastrophic deflation" at all.

That is true, but velocity is something that is hard to control, is a function of people's habits, mood and so on, and is especially a function of the perception of whether an asset is speculative or not.  When you look at monetary velocity, it is not something that has uniform behaviour, and remains grossly within some boundaries.  You cannot "regulate" velocity.  You cannot make people spend faster or hoard more.  In fact, velocity is at the origin of two instabilities: the deflationary spiral, and hyper inflation.   The deflationary spiral happens when people speculate on the strongly rising value of a monetary asset: they hoard it more and more, lowering as such, the velocity, and hence increasing even more the market value of those few coins on the market, confirming the speculation of rise.  This is bitcoin's behaviour.  
On the other hand, hyper inflation is when people speculate on a strongly falling value of a monetary asset: they try to get rid of it as quickly as possible, increasing as such the velocity to very high values, and hence, decreasing even more the market value of the mass of coins chasing goods in the market, confirming the speculation of drop.  This is what has happened to some famous hyper inflations like the Reichsmark.

The knowledge of a stabilizing mechanism avoids both instabilities, but one doesn't have any handle on people's spending decisions which determine velocity ; as such, the only thing one has a handle on, is the coin emission.

As you point out, in a classic deflationary event, the velocity of money spirals downward as the currency becomes more valuable - it's smarter to hold money than buy goods and services. This doesn't effect bitcoin for several reaons: 1. bitcoin not a primary unit of account, and 2. it isn't required to purchase vital goods and services.

But then it is not in a state to become a currency !  If the argument against why it is not behaving like a currency, is: "because it is not a currency yet", then that's not very convincing as an argument of why it is a good currency, no ?  In fact, the deflationary spiral is even worse for a non-essential asset, because in as much as the deflationary spiral of the principal currency is tempered because after all, you HAVE TO BUY FOOD, here, nothing stops one from hoarding all of bitcoin, because you don't have to spend it to get food.

Furthermore, there is an increasing number of goods and services that can ONLY be purchased using bitcoin.

Apart from ransomware and dark markets, I wonder what ?

Remember that people buying into the bitcoin currency to acquire goods and services don't care what the fiat exchange rate is - they simply buy the coin and get the product at roughly the same exchange rate (or better if they bought in January).

You mean that someone was offering an exclusive bitcoin tooth brush for 0.1 BTC 2 years ago when it was around $200,- (so a brush for $20,-), that same tooth brush will still be sold for 0.1 BTC ($180.- right now) ?  I would hurry cashing out my BTC into fiat and buy 9 toothbrush in the supermarket with it, no ?

Additionally, remember that bitcoin is a financial asset class of its own, which continues to find new market share and investment.

Absolutely.  I don't claim that "bitcoin is dead".  It has a bright future !  I think it will go sky high - but in the same way that complex derivatives could go sky high.  Bitcoin is a hugely speculative asset, it is BY FAR its principal usage.  Look at this forum.  Look at what people say about it.  Look at the volumes.  This is all speculation.  But speculation is a HUGE market.  Hell, it is MUCH MUCH bigger than the fiat market.  The whole financial world is the market.  Not the "payments" application of fiat.  It is a market that is about 10 times the world's economy all by itself.  This is the true nature of bitcoin and most crypto.  It is purely speculative, and once big finance will get into it, it will be HUGE.  But entirely speculative and if it is well done, totally unpredictable (efficient market hypothesis).  

In fact, I think crypto finally invented, what the financial world has been looking for: abstract speculative tokens.  No more need to speculate on derivatives linked in the real economy, like oil, real estate, food, metals, technology or whatever: just abstract tokens to gamble on.

That's not what one pretended, but that's how it was designed.

Finally, I doubt that a complete stagnantion of BTC trade and exchange voume would happen on the bitcoin network - most people know that this would kill bitcoin and a devaluation would be close at hand.

I think that this is again this fallacy of taking a desirable objective as an actual consequence.  It is not because "bitcoin would crash if there wasn't any merchant usage" that "merchant usage will emerge".  But moreover, I don't think that it is true, that bitcoin has what so ever to do with merchant usage.  Merchant usage was a story told in the beginning, to kickstart it, and there IS some marginal merchant usage, but it is not what bitcoin is about, nor what sets its price.  Pure speculation is.  And I think it has a monstrously bright future in that.

[classicsucks]

I am enjoying this thread even if we are a little off-topic. Apologies to OP.

Sounds like a fair summary of current mainstream neo-Keynesian monetary policy. I just wanted to point out to you that this system is by no means normal, stable, or rational, and it has no successful historical precedent. It's just been "the system" for the past 40+ years in G8 countries.

You can hardly think of Friedman as a neo-Keynesian.

I'm not familiar enough with the terminology and schools of thought to debate you on this. All I know is that you're backing your arguments with roughly conventional 21st century capitalist economic theory. I don't necessarily refute this theory, but I regard it with a healthy dose of skepticism, and I believe it's not necessarily applicable when analyzing bitcoin. So debates over bitcoin money supply, deflation/inflation, etc. are not necessarily covered by this theory.

Aren't you forgetting that inflation also arises from increased monetary velocity, not just increased supply? So the increased nominal exchange value is not necessarily "catastrophic deflation" at all.

That is true, but velocity is something that is hard to control, is a function of people's habits, mood and so on, and is especially a function of the perception of whether an asset is speculative or not.  When you look at monetary velocity, it is not something that has uniform behaviour, and remains grossly within some boundaries.  You cannot "regulate" velocity.  You cannot make people spend faster or hoard more.  In fact, velocity is at the origin of two instabilities: the deflationary spiral, and hyper inflation.   The deflationary spiral happens when people speculate on the strongly rising value of a monetary asset: they hoard it more and more, lowering as such, the velocity, and hence increasing even more the market value of those few coins on the market, confirming the speculation of rise.  This is bitcoin's behaviour.  
On the other hand, hyper inflation is when people speculate on a strongly falling value of a monetary asset: they try to get rid of it as quickly as possible, increasing as such the velocity to very high values, and hence, decreasing even more the market value of the mass of coins chasing goods in the market, confirming the speculation of drop.  This is what has happened to some famous hyper inflations like the Reichsmark.

The knowledge of a stabilizing mechanism avoids both instabilities, but one doesn't have any handle on people's spending decisions which determine velocity ; as such, the only thing one has a handle on, is the coin emission.

Well, I must disagree with you here: velocity is precisely what is interesting about the last 20 years of monetary, banking, and economic policy and law. The establishment is moving more and more toward systems which CAN control velocity and DO. Read up on the cashless society. The current vast majority of financial transactions use electronic fund transfers which may be FROZEN at any point. People don't even realize how quickly all of their bank deposits could evaporate or move into an inaccessible state. Any future "Electronic bank runs" will end in seconds rather than days. AML laws are becoming so tight that the cash economy is hugely curtailed and has high overhead. If you talk to an economist about controlling monetary velocity, they will even tell you that it's necessary in this age of rampant money-printing to prevent hyperinflation!

So of course it's possible to control velocity - that's precisely what the USA Fed (for example) has been tasked with (control of supply and velocity meets their inflation targets)! They influence velocity by setting interest rates and printing more free money for banks.

Cryptos represent a new challenge to this regime. Velocity is really only bounded by network capacity, and it's not decreasing at all, in fact it's increasing. This is not any deflationary spiral. Furthermore, the coin supply is increasing every day. Controlling the global movement of cryptos is already creating headaches for the financial elite. Imagine if cryptos grow 100-fold in the next ten years - they could fuel a vast Forex arbitrage market, even undermine the central banks' control of exchange rates. Many outcomes are possible.

But then it is not in a state to become a currency !  If the argument against why it is not behaving like a currency, is: "because it is not a currency yet", then that's not very convincing as an argument of why it is a good currency, no ?  In fact, the deflationary spiral is even worse for a non-essential asset, because in as much as the deflationary spiral of the principal currency is tempered because after all, you HAVE TO BUY FOOD, here, nothing stops one from hoarding all of bitcoin, because you don't have to spend it to get food.

Well I guess the conventional view of bitcoin is that it's an asset and a currency, right?

Furthermore, there is an increasing number of goods and services that can ONLY be purchased using bitcoin.

Apart from ransomware and dark markets, I wonder what ?
[/quote]

Yes, these are the primary uses for bitcoin as a currency right now, but the utility of bitcoin applies to global commerce as a whole. With 3 countries outright legalizing bitcoin, I suspect the number available goods and services to skyrocket.

Pure speculation is.  And I think it has a monstrously bright future in that.

Pure speculation sounds like an oxymoron to me... and it's not why I'm here. But the space could degenerate to only speculation. And I think that would be the logical conclusion of the experiment...

[btcforall777]

The issue will be solved its just a matter of if it will take a catastrophe to make it happen and what the aftermath will be.

[HEvangelista]

bitcoin will never scale. no hard fork will happen and the fees will get higher and higher only the rich can use it. small users will go to litecoin and that is why there is a craze for LTC nowadays

[dinofelis]

I'm not familiar enough with the terminology and schools of thought to debate you on this. All I know is that you're backing your arguments with roughly conventional 21st century capitalist economic theory. I don't necessarily refute this theory, but I regard it with a healthy dose of skepticism, and I believe it's not necessarily applicable when analyzing bitcoin. So debates over bitcoin money supply, deflation/inflation, etc. are not necessarily covered by this theory.

Well, call me conservative, but I'm not buying the idea that whole international pans of economists are in a kind of conspiracy or group think erroneously putting aside a former correct theory of money to replace it with gobbledegook.  Economy is a complex science, because it combines different fields and sociological aspects, but I don't think that world-wide scolars are deluded to the point of defending totally erroneous views on things.  Our state of knowledge advances of course, and what was once thought to be more or less right, turns out to be more subtle than imagined, but I won't just say that most of late 20th century monetary theory is bogus, and that some ideas from the beginning of the century are "obviously" closer to the truth.  In fact, the "classical" story of how money came to be (namely, a generally used commodity that was more and more used as an intermediate good of exchange) is historically proven *entirely wrong*.  Nowhere, ever, a generally used commodity became money.  This is nevertheless on what older theories, such as sound money doctrine, are based on.

And the "this time it is different" story, I don't buy either.  Bitcoin is a monetary asset, just like any other monetary asset, that is, not of direct utility, but only of value to be exchanged for something of value.  It doesn't fall outside of the scope of any theory regarding monetary assets, not more than most other things of which the direct utility is small or non existent compared to its exchange value.  What sets bitcoin apart is its form.  Not its nature.

There is not much difference in principle between private money (as it has existed often in the 19th century) and bitcoin.  The issuers of the private money are the miner pools ; for the moment they stick to a pre-determined emission curve (the famous 21 million coins) - in principle they could change that any moment.  And there is a public auditing system of their ledger.  So the concept is quite well known ; the form is new.

Well, I must disagree with you here: velocity is precisely what is interesting about the last 20 years of monetary, banking, and economic policy and law. The establishment is moving more and more toward systems which CAN control velocity and DO. Read up on the cashless society. The current vast majority of financial transactions use electronic fund transfers which may be FROZEN at any point. People don't even realize how quickly all of their bank deposits could evaporate or move into an inaccessible state.

Well, that's a very radical way of "regulating velocity".  You can hardly call that a monetary policy.  It is an emergency (panic) decision to do so, to try to block a run-away condition.  Things like what happened in Greece at a certain point, was just a measure to avoid Greek banks which were essentially bankrupt, to collapse, the time needed to bring the Greek government back to reason, or to have it decide to step out, so as not to have the whole of Europe pay for Greeks' jokes.

Any future "Electronic bank runs" will end in seconds rather than days.

In the modern fiat system, a bank run doesn't exist any more, because there's no fractional reserve banking any more.  Banks are 1-1 covered in principle by non-monetary assets, which they can use to obtain as much central bank money as they want - the only thing is that it costs them interest, and hence they only keep a small reserve handy ; but normally banks can now obtain as much central bank money as their assets allow them.   It is because, exactly, this was locked for the Greek banks, that they had to restrict money movements at a certain point.  But a healthy bank cannot undergo a bank run any more in the modern system, because it is fully covered.

So of course it's possible to control velocity - that's precisely what the USA Fed (for example) has been tasked with (control of supply and velocity meets their inflation targets)! They influence velocity by setting interest rates and printing more free money for banks.

Yes, but they don't control velocity directly.  By setting interest rates, they influence the desire to exchange non-monetary assets for new money, so essentially, indirectly the monetary mass, because they change the incentive for people to want to borrow (= exchanging non-monetary assets for freshly invented money) and of course, this also has an indirect effect on velocity.

Cryptos represent a new challenge to this regime. Velocity is really only bounded by network capacity, and it's not decreasing at all, in fact it's increasing. This is not any deflationary spiral.

In fact, it is difficult to talk about velocity for a speculative asset, because it doesn't buy goods and services, but it exchanges in and out with other monetary assets, so there is no "Q" that has any meaning.  If I exchange 1 bitcoin once a day for fiat, and back to bitcoin, my contribution to Q is 2 x $1700, and my contribution to the number of coins exchanged is 2 (two trades).   If I exchange this coin 100 times a day, my contribution to the number of coins (velocity) is 200, but my contribution to Q is also 200 x $1700.  So this doesn't modify anything.  Fisher's formula had as an idea that Q was some genuine "irreversible" acquisition of goods and services.  It is still mathematically valid for exchanges, but as Q augments with V, it doesn't change anything.

The deflationary spiral resides rather in the fact that people hoard (even if they quickly trade in and out) coins for the rise of its value, and not because they use it as an intermediate between earning and spending value.  In other words, the deflationary spiral is the monetary equivalent of the speculative bubble run-away but seen from the other side.

Bitcoin's price is not pushed upward by the demand for bitcoin to be used as a currency.  It is mainly pushed by the desire to hold bitcoin when it rises, with the idea to make benefit over it, by "buying low and selling high".  Not by earning for goods and services (say, "salary") and by spending it on goods and services (say, buying stuff).  This happens, I don't deny this, but it is not the demand for salary that pushes the price of bitcoin.  It is the hope for higher prices that makes one buy bitcoins, not the need to use it as a currency. 
If there had been an upper cap on the value of a coin, then this speculative nature wouldn't be there, and bitcoin would *essentially* be used as a currency, because there's no hope for "rise".  Yes, there is volatility, and normal speculation as a side effect, but it wouldn't make its market cap.

[Abiky]

It is possible other cryptocurrencies might want to take the lead. The thing is the fact that bitcoin got accepted today massively is as a result of the huge increase in value over time. Personally, I believe storing it for a long time would definitely make me a bigger boy later. A time will definitely come when we will stop seeing bitcoin as an asset instead of a means of transaction.
Nevertheless, the ease of transaction too is something but if another crypto currency decides to offer something better, people may want to give it a chance but I don't think that will stop bitcoin from still operating.

Yeah. Bitcoin has been established as a solid cryptocurrency for several years now, and it would make it extremely difficult for another cryptocurrency to take the lead. Due to Bitcoin's value proposition such as decentralization, deflation, and the highest network hashrate among other cryptocurrencies, it will stay as the top crypto for years to come.

However, that may be subject to change, if Bitcoin doesn't reach a resolution for its scalability controversy soon. It is up to this date, where Bitcoin hasn't increased in transaction capacity, while other altcoins have successfully done so. Dash for example, has managed to reach consensus among its community for an increase in block size up to 2mb. Even BitBean has higher transaction capacity than most altcoins nowadays with a block size of 20mb.

So the more transaction get unconfirmed in the Bitcoin network, the more it would be closer towards becoming less used by everyday people as they would want a cryptocurrency that it is highly efficient in processing transactions. They would shift to another cryptocurrency that could deliver high speeds in transaction confirmation time, and well as low fees (unlike Bitcoin which continues to increase in fees). Just my thoughts. 

[jak3]

For me it's clear Bitcoin is no longer an cryptocurrency that can bring our requirements for the daily life. it's true that many altcoins can replace Bitcoin but to be clear we all are waiting for Bitcoin to reach its previous height again. I believed that solving only the transaction problem is not our exact solution we should think about future about how the block size is going to fulfill and how all the other blocks are going to mine because day by day the Bitcoin mining goes on the network will face another stress.

[GetClams.com]

It is not a question of if the issue is never resolved. It is a matter of how much pain the community has to go through until it gets handled. Will the price plummet? Will it cause bitcoin to be passed by another coin? St some point it will get fixed. Lets hope it is before too much damage is done.

[classicsucks]

I'm not familiar enough with the terminology and schools of thought to debate you on this. All I know is that you're backing your arguments with roughly conventional 21st century capitalist economic theory. I don't necessarily refute this theory, but I regard it with a healthy dose of skepticism, and I believe it's not necessarily applicable when analyzing bitcoin. So debates over bitcoin money supply, deflation/inflation, etc. are not necessarily covered by this theory.

Well, call me conservative, but I'm not buying the idea that whole international pans of economists are in a kind of conspiracy or group think erroneously putting aside a former correct theory of money to replace it with gobbledegook.  Economy is a complex science, because it combines different fields and sociological aspects, but I don't think that world-wide scolars are deluded to the point of defending totally erroneous views on things.  Our state of knowledge advances of course, and what was once thought to be more or less right, turns out to be more subtle than imagined, but I won't just say that most of late 20th century monetary theory is bogus, and that some ideas from the beginning of the century are "obviously" closer to the truth.  In fact, the "classical" story of how money came to be (namely, a generally used commodity that was more and more used as an intermediate good of exchange) is historically proven *entirely wrong*.  Nowhere, ever, a generally used commodity became money.  This is nevertheless on what older theories, such as sound money doctrine, are based on.

Straw man argument. I'm not replacing economic theory with "gobbledegook", I'm simply pointing out to you that mainstream theory just supports the current system, which is neither stable, normal, or rational (surely you don't you believe that, right?). Imagine what the "economists" said about the spending and lending of the king and his court... I'm sure it was favorable. Many of these so-called scientists are just rationalizing the current system. Friedman is precisely such an ass-licker - do you know that he advocated "shock therapy" for people starving in third-world countries? If you've read Austrian economists or any libertarian arguments you should know that there are many theories that aren't in concert with your line of thinking.

Well, I must disagree with you here: velocity is precisely what is interesting about the last 20 years of monetary, banking, and economic policy and law. The establishment is moving more and more toward systems which CAN control velocity and DO. Read up on the cashless society. The current vast majority of financial transactions use electronic fund transfers which may be FROZEN at any point. People don't even realize how quickly all of their bank deposits could evaporate or move into an inaccessible state.

Well, that's a very radical way of "regulating velocity".  You can hardly call that a monetary policy.  It is an emergency (panic) decision to do so, to try to block a run-away condition.  Things like what happened in Greece at a certain point, was just a measure to avoid Greek banks which were essentially bankrupt, to collapse, the time needed to bring the Greek government back to reason, or to have it decide to step out, so as not to have the whole of Europe pay for Greeks' jokes.

Funny you should mention Greece... you do realize that their entire collapse was caused by a combination of criminals who retired from the Greek government, the ECB, and Goldman Sachs? And you do realize that the "Troika" was nothing short of a coup? Not much economics to discuss there - it was outright fraud and theft.  Or maybe you just listened to the mainstream account and stroked your beard? How about Cyprus? Did you know that 50% of private citizen's bank deposits were simply stolen by the government to pay private bond holders (Goldman again, I believe)? This is precisely why the global system is highly unstable - confidence is likely at all-time lows, and the level of fraud is unprecedented.  When the "economic laws" are in the elites' favor, they invoke theory, when they're not, they quietly break all the rules and print money or just steal it.

The term "radical" is relative in this context.

My point about velocity is that the central banks are able to print trillions because of the very fact that they can and will cut velocity when needed. Remember daily withdrawal limits on bank accounts? Notice how long it takes an international wire to process, and how often they are frozen? Inflation would be massive if velocity couldn't be tightly controlled when needed.

Bitcoin is a whole different animal. Funny that Blockstream attempts to control the velocity of bitcoin in their own way...

[dinofelis]

Straw man argument. I'm not replacing economic theory with "gobbledegook", I'm simply pointing out to you that mainstream theory just supports the current system, which is neither stable, normal, or rational (surely you don't you believe that, right?).

I simply think that economist's understanding of things like money improved over the years.  A bit like medical knowledge improved over the years, and that medical theories from beginning the 20th century are maybe less accurate than those of end of the 20th century.

Imagine what the "economists" said about the spending and lending of the king and his court... I'm sure it was favorable. Many of these so-called scientists are just rationalizing the current system. Friedman is precisely such an ass-licker - do you know that he advocated "shock therapy" for people starving in third-world countries?

This is what I count under "conspiracy": that bogus scientists are just ass-licking power, and that all academics in the whole world nicely repeat that, and even though they could perfectly understand why it is wrong, they conspire in continuing to tell bullshit for their master's sake.

My simple point was that the Austrian vision, namely that a collectible is perfect money, has serious problems of stability.  I don't even think the Austrians deny this.  What the Austrians do, is to prefer this monetary stability over having central power that regulates its value, because they consider this regulatory aspect as a source of corruption.   They are right of course that it is a source of corruption.  But that doesn't mean that collectibles are good money: they simply revert to collectibles because they hate so much central control, that they couldn't think of anything else.  

However, people have been thinking more about the ideal functions of money, what money should do and not do, if it were to accomplish its function better, and most probably Nash's definition comes closest to what ideal money's behaviour is.  The reason is that if money behaves differently, it has undesirable consequences, essentially by replacing value in a non-ideal allocative way.  Seigniorage is such an example.  There is no "economic merit" in acquiring value from others, simply because one is printing money, or simply because one is sitting on a stash of money.  This doesn't allocate means in any efficient way, and doesn't solve economic problems for anybody.  

Money as an economic lubricant works best when it has a stable value on which one can count, that's essentially the conclusion of economists.  However, it is not because an abstract model of money is like that, that one knows how to make an asset that works like this.  The Austrians couldn't think of anything else but a collectible, but a collectible doesn't behave, by far, as ideal money, simply because it is an inelastic offer that confronts a variable demand.

If one could make a monetary system that has stable value, that would always be better money than a collectible.  Fiat money tries to implement that.  The problem with fiat money is when the regulator of the money supply also has political goals, and if one of these goals is to give seigniorage to the state, the compromise is to make a slightly inflationary money: that gives enough seigniorage to the political caste, while at the same time providing an asset to the market that approaches ideal money: its value is not entirely stable, but is predictable.
 
What crypto currrencies pretend to do, it to take the corruption of central control out of the system.  However, bitcoin and most alt coins revert back to Austrian visions of collectibles, which are not stable.  What crypto currencies should have done, was to take more advanced visions of money from modern economy, and implement that in a non-centrally controlled way.  I've indicated a way to do that.

It is ironic that bitcoin, which wants to "fight" the "corruption" of central control (which comes down essentially to seigniorage, that is, giving loans to the state), has itself a HUGE seigniorage effect because of its instability.  The seigniorage is not "during its life time" but "at its beginning", and is far worse than any central bank has ever done.  If ever bitcoin achieves its goal of "replacing fiat", it will have made a few early adopters more rich due to early-printer seigniorage than the entire US government over many years !

If you've read Austrian economists or any libertarian arguments you should know that there are many theories that aren't in concert with your line of thinking.

I know rather well Austrian economy, I'm actually quite favourable to many of their arguments.  However, it is an OLD school.  Understanding has evolved since. On the monetary issues, they only had embrionic understanding, and economists evolved since then.   Austrian's vision on how money came about is simply wrong, and historically invalidated.  Nowhere, ever, a rare commodity evolved into a currency all by itself and market forces.  I know very well Rothbard's work, and it is appreciable as a critique of central control, but it is not a good theory of money.  It is a theory of how we could do without central banks, and they could only think of collectibles.
You should also read David Graebers' Debt, the first 5000 years.  It has a much better historical account of money than the Austrians.
In any case, bitcoin solved the issue of central control, but put in the wrong issuing function, to turn it into a rare collectible, with huge initial seigniorage, instead of turning it into a stable currency without seigniorage, even though all the technical elements were on the table.  As such, it does behave as a rare collectible, and not as a stable currency, because that's how it was designed.

The problem with many of these theories is that they are conspirational.  I also consider the state as the enemy of the people, but not as a conspiracy.  The state is simply a powerful entity, made of humans, and as all humans are enemies of other humans, of course the state is a powerful enemy.  There's nothing special about that.  However, the "new elite" that would emerge if ever bitcoin became world currency, that is, the profiteers of early adoption, are most probably just as bad as current states are.  Enemies are there were collectivity and community spirit is important.  Whether that's a state, a corporation, a wealthy group of people or just a large collection of friends doesn't matter.   The state is no exception to that.  But the state has nothing special apart from being the current winner of the law of the strongest.  Take it away, and another one will win the law of the strongest.   There's nothing special about that: we are social animals, which means that we want to dominate, or be dominated, we want to abuse, or be abused, we want to extort, or be extorted.  It is just our nature.  No conspiracy.  We're just like that.
As such, bitcoin, as it is designed, is only a palace revolution.  It replaces the powerful and corrupt (that is, humans) by other powerful and corrupt.  It is not a design of ideal money at all.

[dinofelis]

Funny you should mention Greece... you do realize that their entire collapse was caused by a combination of criminals who retired from the Greek government, the ECB, and Goldman Sachs? And you do realize that the "Troika" was nothing short of a coup? Not much economics to discuss there - it was outright fraud and theft.

I think it is much more complicated than that, but the essential problem of Greece is that an economy that was used to an inflationary currency and a state that was used to cover its ill-controlled finances with extra loans in an easily obtained own currency (which was at the root of the inflationary currency), suddenly got propelled into a much stricter financial system, with a very low inflation currency (the Euro), where loans weren't tempered by inflation "on command".   In fact, Greece was simply economically not ready to join the Euro zone, but this was done for essentially geopolitical reasons.  Goldman Sachs accepted the mission to falsify the Greek books so that the political goal could be met.

In the beginning, the state and the economy continued to live like before, but with a much stronger currency, which lead them to believe in an apparent sudden wealth.   Moreover, the Greek state borrowing money like crazy, was the feast of German banks !  Everything seemed to go for the best.  Do you know that Greece, at a certain point, was the highest importer of Porsche sports cars per capita ?  They spend themselves to ruins with the Olympic Games in 2004.

However, when pay day came, things became more difficult.  The Greek state and the Greek economy were used to push debts away with inflation - this was not possible any more with the Euro.   Their way of handling money was simply adapted to a highly inflationary currency, and their fast integration into a strong currency system made them live a lot above their means for a while, and put them into debt beyond what was reasonable.

Put the international banking crisis on top of that, and the story is complete.

  Or maybe you just listened to the mainstream account and stroked your beard? How about Cyprus? Did you know that 50% of private citizen's bank deposits were simply stolen by the government to pay private bond holders (Goldman again, I believe)?

I agree, but this could have been solved in exactly the same way without doing that: putting a tax of 50% on all possession.

I'm always amazed at how people seem to think that the financial system is "stealing" them, while they pay 10 times more taxes than what they lose in the financial system.   If inflation is a form of theft, then it is of the order of 2%.  Nobody pays 2% of taxes.  I pay around 60% or so if I count everything (social security, income tax, VAT, propriety tax, local tax....).  I couldn't care less about those 2% or so.

[Abiky]

It is not a question of if the issue is never resolved. It is a matter of how much pain the community has to go through until it gets handled. Will the price plummet? Will it cause bitcoin to be passed by another coin? St some point it will get fixed. Lets hope it is before too much damage is done.

Exactly. One way or the other, miners will recognize that a consensus would be needed for Bitcoin to scale, otherwise their profits would become reduced when people shift to other cryptocurrencies and prices start to decline. I believe that Bitcoin should've had a different consensus mechanism than PoW in the first place, because it may lead to mining centralization where it is happening right now.

Big mining manufacturers like Bitmain, have the most hashrate, making it more difficult for Bitcojn to reach full consensus for SegWit approval. It is said that Bitcoin is China's coin due to the fact that it is the country where most of the hashrate resides.

Only time will tell what Bitcoin's future would be like if it continues as is. Just my opinion. 

[easynote]

Nothing negative will happen to Bitcoin if Bitcoin does not scale. Since the price of Bitcoin is only relevant to the amount of people that are purchasing it, the people that are holding Bitcoins will know that they will have to hold onto their Bitcoins even longer because the sending a Bitcoin transaction will be pretty slow.

[SwagGirl]

The same thing will happen to bitcoin that happens to other industries that dont improve if it doesn't scale. There are too many others waiting to take its place.

But all of this is moot because it will scale.

[iluvpie60]

ETH price will go up and more people will use it. No reason to use btc right now. 1.66 usd fee to transfer. Yikes. People sell stuff on forums here for 10 and 20 bucks. Paying 1.66 usd is insane fee for nothing. That is 5 to 10percent fee...