[Hypothetical] What if Bitcoin were to restart tomorrow?

[error]

I will say that I grew up poor. So I've seen much of this firsthand.

For the purpose of this discussion, I want to note that the only thing which has stood in the way of my own "upward mobility" has been the government.

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[terroh8er]

I agree with the OP. Also, Apple should liquidate all of their shares and redistribute them evenly because it isn't fair that early adopters in 1980 were able to buy their shares so cheap. If Steve Jobs sold all of his stock within 5 minutes, he could make the price go down a lot and it wouldn't be fair to the people who got in after.  

[DamienBlack]

I will say that I grew up poor. So I've seen much of this firsthand.

For the purpose of this discussion, I want to note that the only thing which has stood in the way of my own "upward mobility" has been the government.

I understand that sentiment. As a small business owner, it seems like rule and regulations hamper me ever step of the way. I can't put signs up without a permit, and when I do get a permit they can only be so large. I can't drop off ads in peoples mailboxes so I have to run ads to people's doors which takes much longer. I can't pass out flyers on the streets without paying a vendors fee. I can't put flyers on windshields parked in public places. It seems that every cheap and easy way for me to advertize is prohibited to me. This allows companies with higher advertizing budgets to outdo me even though I'm willing to put in more time and effort. So I really do understand what you are saying. And then, of course, there is self-income tax.

But, on the other hand, did you get a public education? If you were raised poor in a third-world country, you may not have had any education, permanently limiting your upward mobility. Did your parents receive any public assistance? Foodstamps, welfare, ext? This may have helped them get by at a slightly higher standard of living, providing you with more opportunities. Did you use public libraries? Access to information, even if it is just fiction, helps broaden your horizons and integrate you with mainstream society. Did you go to a public college or receive public scholarships or get publicly backed loans? I myself, would not have been able to go to college if i had needed to pay the cost of private tuition out of pocket, and I think many would be in the same boat.

So perhaps the government has stood in your way, and perhaps the issues and items you are concerned about do need to be addressed. I'm not saying government should be given a free pass to do whatever. But failure to acknowledge where the government has succeeded is shortsighted. Lets figure out what the government does right and reinforce that, and figure out what the government does wrong and eliminate that. I simply will not accept the over simplistic answer, 'they do everything wrong'.

PS - I'll try not to hijack the thread anymore.

[CurbsideProphet]

I agree with the OP. Also, Apple should liquidate all of their shares and redistribute them evenly because it isn't fair that early adopters in 1980 were able to buy their shares so cheap. If Steve Jobs sold all of his stock within 5 minutes, he could make the price go down a lot and it wouldn't be fair to the people who got in after.  

You're twisting my words and adding no value.  I never once said the current situation is not fair.  In fact, this is what I said:

Let me start off by saying this is not a thread about "early-adopter" envy.  They took the risks and had the foresight.  High risk should reap high reward.

Obviously a lot of what I said in that original post was based on mistaken information (ie. the MtGox situation).  I've subsequently come out and said I was mistaken.  

[SmokeAndMirrors]

If bitcoin restarted tomorrow, nothing would be too much different. Assuming the user-base was the same in this hypothetical situation, there would be instant payouts for the first 2016 blocks, then the difficulty would jump up similar to what it is now.

[sunyag]

I am confused by everyone's assumption that the 'early adopters' took a risk...pennies worth of electricity is not a risk on generating thousands of worthless bitcoins is not a gamble. If anything, they gambled their brain power on something they saw as immensely useful. Those that propped up the system and invested in BTC for cash and began to offer goods and services for bitcoin are the ones bearing a risk...basically everyone that came in after the 'earliest adopters'.

The entrants into the current market are the ones bearing the greatest risk. Buying in at $14/per is a lot different than buying in for pennies...

This is quite correct. The early adopters had skill and foresight, and that is admirable - but very modest risk, and enormous payoff potential.

The current wave of adopters have far higher risk factors to consider and far higher barriers to entry.

There is nothing more important that the early adopters can do than donate and invest in startups. Even only 10% of the early bitcoin wealth would catapult this next leg of the economy. And, by extension, make their remaining 90% stockpile far more valuable.

[Hook^]

Anyone that wants to reset simply has to start their own blockchain.  If you can get a bunch of people over to your chain, then you can distribute however you want.

I admit I'm a bit annoyed that I didn't buy in when I first found out about bitcoins 2 years ago.  I was going to download the client, but since it was peer-to-peer I thought it would clog up my network like BearShare.  Now that I know more about it (too late) I realize that it takes almost no bandwidth at all.  I was going to buy some bitcoins on the market at 1/4 of a cent each instead, but I never got around to it.

That being said, I would be against resetting the bitcoins.  It would be the ultimate moral hazard, and would make you no better than Mr. Bernanke and Co.

[Hook^]

All of us here are early adopters. If we weren't, there wouldn't be any discussion about how to get merchants on board, why Bitcoin is stuck at $14, etc. We'd all be permanently retired and living on the beach in Fiji on the proceeds from 15 or 20 BTC while the latecomers fight over why the µBTC is stuck at $14. Yes, I'm taking a long view.

Very long view indeed.  You may be correct that we are still early adopters, but I very much doubt that Bitcoin will ever see the kind of proportional increase that it has already seen.  Just for some numbers to put in perspective:

The total US M2 money supply this year is around 2 trillion dollars.  There is some controversy over M3, which is much higher but no longer used.  So let's just double M2 and say 4 trillion dollars.  The US is about 1/4 of the world economy so multiply by 4.  That gives a worldwide money base of around 16 trillion dollars.

Now divide that by the total market capitalization of bitcoin at around 90 million dollars, and you get a ratio of around 200,000.  In other words, even if bitcoin replaced every currency in every country in the world and was used for every single transaction, a uBTC would still only be worth around $2.80.  I realize that you can't just derive value from the money supply.  But this is useful for a rough estimate.

For a more realistic number assume bitcoin is used for around 5% of all transactions eventually (which is about the size of the underground drug economy).  That means that the ratio is now around 10,000.  Which just happens to be the original ratio of increase (from 1/4 cent per bitcoin to $25 around the peak)

The time it took the original ratio of 10,000 to take place was around one year.  I find it difficult to believe that bitcoin can take over 5% of the world economy in one year.


So basically, the original early adopters have it better than anyone now can ever hope to get.  Not that we can't do well, but the gravy train has already pulled way out of the station.

[error]

All of us here are early adopters. If we weren't, there wouldn't be any discussion about how to get merchants on board, why Bitcoin is stuck at $14, etc. We'd all be permanently retired and living on the beach in Fiji on the proceeds from 15 or 20 BTC while the latecomers fight over why the µBTC is stuck at $14. Yes, I'm taking a long view.

Very long view indeed.  You may be correct that we are still early adopters, but I very much doubt that Bitcoin will ever see the kind of proportional increase that it has already seen.  Just for some numbers to put in perspective:

The total US M2 money supply this year is around 2 trillion dollars.  There is some controversy over M3, which is much higher but no longer used.  So let's just double M2 and say 4 trillion dollars.  The US is about 1/4 of the world economy so multiply by 4.  That gives a worldwide money base of around 16 trillion dollars.

Now divide that by the total market capitalization of bitcoin at around 90 million dollars, and you get a ratio of around 200,000.  In other words, even if bitcoin replaced every currency in every country in the world and was used for every single transaction, a uBTC would still only be worth around $2.80.  I realize that you can't just derive value from the money supply.  But this is useful for a rough estimate.

For a more realistic number assume bitcoin is used for around 5% of all transactions eventually (which is about the size of the underground drug economy).  That means that the ratio is now around 10,000.  Which just happens to be the original ratio of increase (from 1/4 cent per bitcoin to $25 around the peak)

The time it took the original ratio of 10,000 to take place was around one year.  I find it difficult to believe that bitcoin can take over 5% of the world economy in one year.


So basically, the original early adopters have it better than anyone now can ever hope to get.  Not that we can't do well, but the gravy train has already pulled way out of the station.

Oh, sure, I would have loved to get in on this a year before I did.

As for the $2.80 number, you haven't taken into account inflation (both of the money supply and of prices).

[Hook^]

as for the $2.80 number, you haven't taken into account inflation (both of the money supply and of prices).

I didn't take it into account because it is so small compared to the very rough order-of-magnitude estimates.  Bitcoin can't inflate to more than 2x more than what is currently in circulation since 1/3 of it has already been mined.  Mr. Bernanke can inflate to infinity, but I am comparing in terms of current dollar value.

Anyway, I hope that someday Bitcoin takes over a large part of the economy and not just the underground part.  It would be great to see the central bankers neutered by something like this.  And the economy would benefit as well since wealth would no longer get redistributed to politically connected businesses.

Of course, my main reason for hoping the bitcoin economy takes off is for simple greed

[RandyFolds]

So basically, the original early adopters have it better than anyone now can ever hope to get.  Not that we can't do well, but the gravy train has already pulled way out of the station.

No one can read the future. I like to envision a post-apocalyptic steampunk wasteland where holding a whole bitcoin is equivalent to being a millionaire. Let's meet back here in twenty years.

On a side note, how can draw any conjecture on the size of the 'underground drug economy'? Any number you come up with is complete BS speculation. I have never answered a poll about how much weed I sold last fiscal year, nor can I imagine that many other black market operators did so honestly. Any number that LE of governments throw about are extrapolations based on what they caught, which is impossible to calculate because they have no idea what percentage they missed...

I had a business partner with whom I designed and set up legal (usually) grow spaces in Los Angeles and the surrounding vicinity. Before embarking upon that venture, I had no idea how many lofts and warehouses in downtown were housing 20,000 square foot flowering spaces...and that is just what I have seen and worked on...only in LA. The real numbers have got to be exponentially higher. Only one garden I set up got raided out of dozens. Narcs seized about $50,000 worth of wet product out of a 600 square foot canopy space...and they thought they had made a find. 600<<<<<20,000. The proprietor walked after testimony from cannabis expert witnesses and 16 members of his collective.

I am no economist, but I know your model is oversimplified to the point of irrelevance. The vast majority of the world's wealth is not tied up in paper. I doubt that there will be explosive growth like the month of June again, but I do not doubt a steady stream of takers lining up until some confidence-shattering catastrophe.

[markm]

So basically, the original early adopters have it better than anyone now can ever hope to get.  Not that we can't do well, but the gravy train has already pulled way out of the station.

You are simply being negative, maybe out of sheer laziness.

You don't need as vast a jump in value of the next few blockchains you get into early because you can instead get into more of them, get a larger piece of them, and work harder, with more experience under your belt of what works, to ensure they do acquire value.

You seem to just be trying to make excuses for not getting into new launches and helping them too to grow.

You probably had plenty of reasons not to become an early adopter of bitcoin too, even if people had made sure you were one of the first to know about it.

Seems likely to be more a case of not going to the station until you are sure the train has left than the train leaving too soon.

-MarkM-

[Hook^]

So basically, the original early adopters have it better than anyone now can ever hope to get.  Not that we can't do well, but the gravy train has already pulled way out of the station.

You are simply being negative, maybe out of sheer laziness.

You don't need as vast a jump in value of the next few blockchains you get into early because you can instead get into more of them, get a larger piece of them, and work herder, with more experience under your belt of what works, to ensure they do aquire value.

You seem to just be trying to make excuses for not getting into new launches and helping them too to grow.

You probably had plenty of reasons not to become an early adopter of bitcoin too, even if people had made sure you were one of the first to know about it.

Seems likely to be more a case of not going to the station until you are sure the train has left than the train leaving too soon.

-MarkM-

I'm not being negative, I'm just saying that it isn't going to be like the beginning.  I bought a bunch of bitcoins over the last month, so I do believe that they have a bright future.  But this is tempered with a knowledge on the limits of growth and the size of the whole economy.

[Hook^]

On a side note, how can draw any conjecture on the size of the 'underground drug economy'? Any number you come up with is complete BS speculation. I have never answered a poll about how much weed I sold last fiscal year, nor can I imagine that many other black market operators did so honestly. Any number that LE of governments throw about are extrapolations based on what they caught, which is impossible to calculate because they have no idea what percentage they missed...

I am no economist, but I know your model is oversimplified to the point of irrelevance. The vast majority of the world's wealth is not tied up in paper. I doubt that there will be explosive growth like the month of June again, but I do not doubt a steady stream of takers lining up until some confidence-shattering catastrophe.

I am using the estimates of governments.  They use educated estimates based on things like how much they bust, the size of grow fields in South America, spies in the drug cartels, etc.  Even if they are off by a factor of 4 and the drug economy is 20% of the world economy (A very high number), it still won't allow for increases like the ones we have seen since the beginning of Bitcoin.

You are correct that most of the wealth is not tied up in paper.  But that isn't relevant to the discussion.  What matters is the amount of economic activity measured in existing currency and extrapolating that to bitcoins.  The results are very unlikely to be off by more than a factor of 10, so they are still relevant to fact that bitcoins will  almost certainly never grow larger than 10,000 times their current value.

[Rassah]

I'll just add in reply to te OP that, when everyone is rich, no one is.

[cypherdoc]

On a side note, how can draw any conjecture on the size of the 'underground drug economy'? Any number you come up with is complete BS speculation. I have never answered a poll about how much weed I sold last fiscal year, nor can I imagine that many other black market operators did so honestly. Any number that LE of governments throw about are extrapolations based on what they caught, which is impossible to calculate because they have no idea what percentage they missed...

I am no economist, but I know your model is oversimplified to the point of irrelevance. The vast majority of the world's wealth is not tied up in paper. I doubt that there will be explosive growth like the month of June again, but I do not doubt a steady stream of takers lining up until some confidence-shattering catastrophe.

I am using the estimates of governments.  They use educated estimates based on things like how much they bust, the size of grow fields in South America, spies in the drug cartels, etc.  Even if they are off by a factor of 4 and the drug economy is 20% of the world economy (A very high number), it still won't allow for increases like the ones we have seen since the beginning of Bitcoin.

You are correct that most of the wealth is not tied up in paper.  But that isn't relevant to the discussion.  What matters is the amount of economic activity measured in existing currency and extrapolating that to bitcoins.  The results are very unlikely to be off by more than a factor of 10, so they are still relevant to fact that bitcoins will  almost certainly never grow larger than 10,000 times their current value.

just accounting for currency completely ignores leverage.  i know of several folks who've bought btc on credit.

it would take just a small fraction of the worlds leverage to drive btc much much higher.

[N12]

If you want to experiment with what it would look like with a new block chain, consider buying Namecoins and treating them like money.

Why would that be an experiment? It wouldn’t be any different than the current blockchain in hindsight, as the generation curve is identical. In fact, it would even be worse, as Namecoins are consumed and destroyed by registering domains.

Also, it looks like people like you are already buying them up en masse to hoard, probably much more fierce than Bitcoins were bought at the beginning. The only thing that changed is that the mining window for obscene amounts with little computing power got much smaller.

The situation with Namecoin will probably look the same as Bitcoin now in two years, if it makes it that far.