What the Early Adoptors Don't want you to know

[truthcracker]

Hi,

I have an Economics Degree From Sydney University and also hold a MCSE - I run an IT company.

The reason all the early adopters - read people with a shit load of bit coins, don't want to talk about the fact bitcoins is designed for deflation is because what it really means is this.

1 They mine themselves millions of bitcoins at the start for almost nothing
2 As speculators and Nebbies pile in on the action bitcoin goes up and up
3 The longer they can keep it going the more their bitcoins are worth.

How about you create an inflationary Peer-to-Peer currency and we will see which of the two will be used by more people after 10 years? Would people invest as much as they do now (millions of dollars) in hardware and electricity to protect the network if Bitcoin was an inflationary currency?

Aint a choice between the two.

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[truthcracker]

The deflation causes hoarding and the initial distribution allows intervention like a central bank - they can crash it anytime they like or someone can steal it from them and do a mnt Gox.  There's no one using it as a currency - you need vendors first.

This is exactly what we've been screaming about at Bitcoin Venture Capital. Without a thriving economy based upon Bitcoin, Hackesr AND the early adopters CAN and WILL control the market the exact same way GS and a handful of others control the stock market.

I tried posting on this forum multiple times to bring attention to our site which matches people running startup that take ONLY BTC as currency with early adopters who are sitting on a bunch of BTC.

So far we have haven't had the interest I'd hoped for, and in fact when I even suggested it some early adopters came on the forum and chewed me out -- trying to explain to me that it would be awesome if Bitcoin just acted as some unregulated forex.

The better model is to get vendors and customers interested via market research first, target groups of people you know want the service then launch it.  This 'service' has the conceptual mantra of a religion with suitable punishments for the heretics, trance like followers and a wary population.

[truthcracker]

... you need vendors first.

Actually it has to be the other way round. In the beginning, bitcoins had no demonstrated value. What vendor would have traded their real products for Satoshi's first mined block?

The speculators can see the potential future value of Bitcoin. Through their speculation they propel bitcoin's market price towards its potential future value.

Then, when the market value gets big enough, it will attract plenty of vendors. In the meantime, there are lots of people working on interesting products to layer on top of the Bitcoin system to provide vendors with greater usability in the form of website code, pricing tools, arbitration and escrow services, etc.

The fact that 25% of the bitcoins are owned by 10 people does not make vendors want to subsidise this otherwise worthless stock.  THEY are creating the value, and the coins are only worth what THEY say you can spend them on.  No, this is the only way to get it up and running.  The rest of you have just give cash to people who generated coins for free, and you'll be left holding the tokens.

[bitcoin.monger]

Any new technology has early adopters who invest time, effort and money to make it successful. As it is usually the case, the early adopters will profit more than late users. This is not something characteristic only to bitcoin. Actually (IMHO!) the users with the largest stashes of bitcoins are NOT the early adopters, but the ones who first developed GPU mining. There were some users who were doing it long before the first open source miners were released etc. However, I don't think the system was designed to give an advantage to early adopter, it's just how things work in real life 

[BitcoinPorn]

I read this thread subject in this guys voice

[bitsnbytes]

I'm going to find a serious forum on bitcoins....

What a crowd.

Sorry if I've included some people unfairly in this description.

Yes, everybody not agreeing with you is either inserious or crowd aka idot.

Your "sorry" makes it only worse.

[flailing Junk]

The initial distribution was unfair. Bitcoin's are still have advantages over every other currently existing medium of exchange.

You'll get over it.

[conspirosphere.tk]

A very good commentary on the Doug Casey interview posted above:

The Economics Of Bitcoin – Doug Casey Gets It Wrong
http://webabuser.blogspot.com/2011/06/economics-of-bitcoin-doug-casey-gets-it.html

[lathomas64]

Truthseeker: Why is the initial distribution unfair? What would be a fair distribution? What changes do you think should be made for your hypothetical bitcoin II?

[mmdough]

I'd say truthcracker knows more than 95% of people around here.

I've been looking for a way to reliably take a short position, but anonymous cash does not really lend itself to lending.

Maybe try here:
https://bitoption.org

[Vladimir]

what a bunch of rear view drivers   

[coinage]

I've been looking for a way to reliably take a short position, but anonymous cash does not really lend itself to lending.

It's good to be able to take brief short positions, although that is probably not the ultimate direction of this market, despite all the recent news.

Fortunately, it appears possible already.  Have you looked at https://bitoption.org/ ?  All bitcoin markets are in their early stages but already the machinery exists to buy put options.

Their FAQ explains how that's possible: "Is this Escrowed trading?  YES. You are guaranteed to be able to execute once you've purchased a contract."

Of course you said "reliably" and there you may disagree, because the site has so far relied on using the MtGox exchange.  But since these are separate businesses (AFAIK), they'll change that if enough of their users don't regain faith in MtGox.

[Brutus]

The seen and the unseen.

Let's say that we take the OP suggestion that btc's design creates or created an unfair distribution.  I ask the following with no malice intended and am just interested to know what an alternative might look like.

What would an alternative cryptocurrency look like and how would interest in such a currency be promulgated?

Let's say further that this cryptocurrency was introduced with a finite supply.  How would it be distributed with a subjective fairness or otherwise?  How would interest be generated for use by users, merchants, speculators, market exchanges, etc.?

Don't forget that this is new and has never been tried.  The design in and of itself whereby people mine to bring the currency units into existence builds interest in and of itself.  That is IMO brilliant.  Then the market makers follow providing liquidity and then hopefully more minds are focused on the challenges to make this useful in POS systems, online sales, gaming, etc.

The fact that I can accept a payment wile vacationing in Vietnam by somebody working on a ship crossing the Indian Ocean while my wallet is on a USB stick in a safe in Mexico City and then confirm the transaction online is simply mind blowing.  

Also this endeavor must be compared against the use of fiat currency which are at this time the most widely used tool for commerce .  This is somewhat philosophical but so was the original question.  Centrally controlled inflationary currencies are the single most criminal and destructive thing to be wielded against individuals throughout time other than outright murder.  They steal purchasing power over time in a hidden manner while reducing the ability for participants to effectively plan how to allocate assets and time thus throwing a wrench into the works of civilization itself and its progress.  Once the distribution of coins evens out over time this type of thing will seemingly become nonexistent.  

With regard to the benefits or detriments to fractional reserve banking I have not read the threads on btc and the impact to fractional reserve banking or lending in particular.  

[coinage]

I've been looking for a way to reliably take a short position, but anonymous cash does not really lend itself to lending.

Lending is about growing trust with third parties, not so much about the type of money involved.

So if you withdraw cash from an ATM off of your credit card (therefore, a loan), the bank doesn't care whether they could ever trace the serial numbers on those particular bills later on.

With bitcoin, even though the money can be almost anonymous, the users don't have to be.  If you so chose, your brokerage could know all your relevant details, and you could know theirs, and if you failed to send them bitcoins you lost in a bad short trade, or to meet margin calls, or whatever, in many countries they would be able to pursue collections through the legal system just as they could enforce their contracts with those paying in older currencies.  (Contract law is about agreeing to do something beneficial to both parties, and the law doesn't reject agreements just because they might be unusual.  That is, except where politicians may react by restricting the legal rights of bitcoin holders.  In that case, your broker must fall back to a "sorry, no more business with you" stance.)

Amazingly, since senders and recipients can actually undeniably prove whether or not bitcoins have been sent and received as promised (see below), your broker would have to wait at most a few hours before beginning collections, rather than the 90 days it can take for some banks and money order companies to confirm & process claims.

(However, even though it's possible, I'm not advocating running to authorities to enforce bitcoin contracts.  We should solve these problems mostly with technology.)


Now back to your regular bank that totally loses track of their paper bills once they hand them over the counter to you.

Tracing that money might be easier with bitcoin, since there's a globally available database tool called Block Explorer that anyone can use to see certain aspects of the entire history of every "coin".  To a very foolish criminal, a bitcoin bank could conceivably say "You're actually still holding the money we gave you, so you can pay it back!" -- something impossible with paper currencies.  However a careful user's privacy is only slightly compromised.

(This also could allow you to verify YOUR bank is still holding YOUR money separately for you as agreed, but only if things were set up with that in mind.  I don't want to mislead anyone into thinking you can do this with today's companies like mybitcoin.com, which tend to pool the funds they receive.  Once funds are transferred even once after you deposit them, they can* become vastly harder to trace unless your "bank" takes steps to help you do so.)

*For completeness I should add that there is a peculiarity in the bitcoin client which may leave unexpected traces if someone sends funds directly back to themselves after receiving them.  This is processed differently from standard transfers to other parties.

[vector76]

Yes, I had already looked at bitoption.org.  Nothing worthwhile is there for buying, and I won't be leaving open orders to write contracts unless I can babysit the market 24/7.

The other thing I thought of is mining contracts, which are effectively short BTC.  I could sell a "mining contract" with no hardware at all, and purchase the BTC to cover it at a later time.

Lending is about growing trust with third parties, not so much about the type of money involved.

This is a good point.  I was wrong, that the nature of the vehicle (anonymous cash) does not really prevent lending.  It's the trust that the lender has that they will be repaid, which could be interpersonal trust, legal recourse, or maybe collateral.

[RodeoX]

I guess I'm an early adopter? But I don't care what you know.
Oh and now I'm an early adopter at my local food co-op. As such I get a good deal from my farmer. Also I bought into some radio frequency licenses early on and now my shares are worth more than if I bought them today. 

"The early bird catches the worm."

[ribuck]

I guess I'm an early adopter?

Everyone who uses Bitcoin anytime in 2011 is an early adopter. Probably 2012 also.

[rocker340]

now you are making me wonder is i should just forget about bitcoins for now

[memvola]

Has truthcracker responded to the multitude of questions about how a "fair" distribution would be?

Btw, since the number of active users are growing, it's certain that earlier adopters have more coins than late adopters on average, but that doesn't mean that it would hold for individuals. I suspect most devs have much less than miners that came actually later. I don't see them whining though...

[NghtRppr]

I have an Economics Degree From Sydney University and also hold a MCSE - I run an IT company.

The reason all the early adopters - read people with a shit load of bit coins, don't want to talk about the fact bitcoins is designed for deflation is because what it really means is this.

1 They mine themselves millions of bitcoins at the start for almost nothing
2 As speculators and Nebbies pile in on the action bitcoin goes up and up
3 The longer they can keep it going the more their bitcoins are worth.

See below a post ENCOURAGING Nebies not to question this fact, they then lock the topic.

Some freemarket - this is not the implementation of an idea I support - wait for bitcoins II or III or a similar idea which is more fairly distributed - the only way they are going to get money for free is from YOU when you buy THEIR bitcoins.  And who's going to buy them from you?

I'm sure you'd say the same thing about people that had the foresight to buy into Google's IPO. Life is unfair because nature makes it that way. The early adopters had no way of knowing for certain that BTC would increase in value. They took a risk, forwent other opportunities and fortunately for them, it paid off. Do you think any other crypto currency is not going to have early adopters? Any system that doesn't give early adopters an advantage is going to be worthless as a currency. There's a reason why the banks don't all just say "everyone has a million dollars in their account". That's because we aren't all equally productive and equally consumptive. You're probably a neoclassical economist judging from your post, which is probably worse than being completely ignorant of economics altogether. That kind of economist knows just enough to sound convincing and mislead others with damaging beliefs because it sounds like stuff the public wish were true or want to hear.