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Author Topic: What can we do to improve bitcoin?  (Read 3354 times)
johnyj
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July 19, 2011, 03:01:17 AM
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By classical econonic models, bitcoin has lots of weakness and is still very unmature, but if we are planning the future with a worldwide currency, every existing rules could be changed given good implementation

About the defaltion spiral topic, the human nature of thinking is: If this thing is going up in value, I'm going to hold to it and wait until it gets more valuable

So, in order to counter this kind of thinking, there could be a devaluate design, say if you hold a BTC for more than 3 month, it will disappear

In tradional economy, each money is same, but in bitcoin world, each coin is not the same. So maybe there is a way to get more coin into exchange everyday, a mechanism to encourage people spend those coins, e.g. the exchanged coin goes up in value, while those not used coin will disappear one by one

A currency is of no use if it is not used to spend/investment, it should never be a way to save for the future, for each saved currency, there is corresponding reduced spending power thus bring unefficiency to economy, I have a very simple example can prove this


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imperi
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July 19, 2011, 03:20:28 AM
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Haven't you seen the massive sell-offs? Some of your claims are false.
hugolp
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July 19, 2011, 03:39:32 AM
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About the defaltion spiral topic, the human nature of thinking is: If this thing is going up in value, I'm going to hold to it and wait until it gets more valuable

Merchants are reporting bigger sales when Bitcoin price goes up, not when it goes down. This idea that people dont spend money when its value goes up is just a myth.
KenJackson
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July 19, 2011, 04:01:14 AM
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So, in order to counter this kind of thinking, there could be a devaluate design, say if you hold a BTC for more than 3 month, it will disappear

Anything remotely like that would change the rules and violate the trust that everyone has already put in the system.
Alex Beckenham
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July 19, 2011, 04:07:48 AM
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So, in order to counter this kind of thinking, there could be a devaluate design, say if you hold a BTC for more than 3 month, it will disappear

So, every 2.9 months transfer your coins from desktop to laptop.

You can't really prove someone isn't 'holding': No matter how many transactions are involved, all the addresses might belong to the same person.

johnyj
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July 19, 2011, 04:38:26 AM
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So, in order to counter this kind of thinking, there could be a devaluate design, say if you hold a BTC for more than 3 month, it will disappear

So, every 2.9 months transfer your coins from desktop to laptop.

You can't really prove someone isn't 'holding': No matter how many transactions are involved, all the addresses might belong to the same person.


That's a good point, and that is also true for USD, as long as much of the USD is put into speculation, FEB must keep printing more money.

johnyj
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July 19, 2011, 04:39:55 AM
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Haven't you seen the massive sell-offs? Some of your claims are false.

I believe this is temporary, given the nature of bitcoin supply is very limited

johnyj
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July 19, 2011, 04:45:29 AM
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About the defaltion spiral topic, the human nature of thinking is: If this thing is going up in value, I'm going to hold to it and wait until it gets more valuable

Merchants are reporting bigger sales when Bitcoin price goes up, not when it goes down. This idea that people dont spend money when its value goes up is just a myth.

That's part of the picture, current system consists mostly non-business driven speculative transactions, and these kind of transaction always goes up when the price is rising (And when price crashes suddenly), could be different when the bitcoin really replaced credit card.

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July 19, 2011, 05:01:07 AM
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About the defaltion spiral topic, the human nature of thinking is: If this thing is going up in value, I'm going to hold to it and wait until it gets more valuable

Merchants are reporting bigger sales when Bitcoin price goes up, not when it goes down. This idea that people dont spend money when its value goes up is just a myth.

That's part of the picture, current system consists mostly non-business driven speculative transactions, and these kind of transaction always goes up when the price is rising (And when price crashes suddenly), could be different when the bitcoin really replaced credit card.

No. Read what I wrote. Merchants, real merchants selling stuff, are reporting increasing sales when the value of bitcoins goes up. The theory that people dont buy because the price of money goes up is a myth.
patvarilly
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July 19, 2011, 05:12:37 AM
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No. Read what I wrote. Merchants, real merchants selling stuff, are reporting increasing sales when the value of bitcoins goes up. The theory that people dont buy because the price of money goes up is a myth.

I've heard an argument like this before, but have never been able to get my hands on real data (I've asked but gotten no reply).  Can you post a link to the numbers that back this statement up?
Electrongolf
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July 19, 2011, 05:25:31 AM
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About the defaltion spiral topic, the human nature of thinking is: If this thing is going up in value, I'm going to hold to it and wait until it gets more valuable

So, in order to counter this kind of thinking, there could be a devaluate design, say if you hold a BTC for more than 3 month, it will disappear

I understand your point, but forcing people to spend their money won't improve the economy. It will drive people away from using it.

The focus should be on creating a compelling application, that people want to spend their money on.

The price of BTC is somewhat irrelevant. If a product is good enough, people will spend.






hugolp
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July 19, 2011, 05:27:48 AM
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No. Read what I wrote. Merchants, real merchants selling stuff, are reporting increasing sales when the value of bitcoins goes up. The theory that people dont buy because the price of money goes up is a myth.

I've heard an argument like this before, but have never been able to get my hands on real data (I've asked but gotten no reply).  Can you post a link to the numbers that back this statement up?

There are no official numbers. It was reported by merchants in the forum whether you want to believe them or not i sup to you. But I dont think they would report something that hurts their sales.

Also, you have data of price deflationary periods in history when investment and consumption went up.
patvarilly
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July 19, 2011, 05:36:59 AM
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Also, you have data of price deflationary periods in history when investment and consumption went up.

That's a genuinely interesting point.  The only one I have heard of is 1870s US, but I don't know enough about what was going on at the time to make up my mind whether deflation contributed to these things, or whether these things happened despite the deflationary environment (don't take this as a statement either way, I genuinely don't know).  Out of context, I can't make up my mind (e.g., there are inflationary periods where investment and consumption have gone down, despite the pull of inflation in the opposite direction).  Can you point me in the right direction to learn about these episodes?
hugolp
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July 19, 2011, 05:56:46 AM
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Also, you have data of price deflationary periods in history when investment and consumption went up.

That's a genuinely interesting point.  The only one I have heard of is 1870s US, but I don't know enough about what was going on at the time to make up my mind whether deflation contributed to these things, or whether these things happened despite the deflationary environment (don't take this as a statement either way, I genuinely don't know).  Out of context, I can't make up my mind (e.g., there are inflationary periods where investment and consumption have gone down, despite the pull of inflation in the opposite direction).  Can you point me in the right direction to learn about these episodes?

Canada during the XIX century was that way (and btw, they had no central bank and no banking panics). There are other numerous examples.

For raw data about the USA XIX century one of the best sources is the book Milton Friedman and Anna Swartz, although the book has very flawed conclussions due to their lack of valid economic theory. Rothbard's History of Money and Banking in the USA from the... is good to understand what happened.

Then you can read Lawrence White about Scotland during the XVII century or George Selgin about Canada.
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July 19, 2011, 06:01:19 AM
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Canada during the XIX century was that way (and btw, they had no central bank and no banking panics). There are other numerous examples.

For raw data about the USA XIX century one of the best sources is the book Milton Friedman and Anna Swartz, although the book has very flawed conclussions due to their lack of valid economic theory. Rothbard's History of Money and Banking in the USA from the... is good to understand what happened.

Then you can read Lawrence White about Scotland during the XVII century or George Selgin about Canada.

Thanks for the pointers.  I'm usually deeply skeptical of Austrian economics, but I'll try and get a hold of these to see what the data and their arguments are.
hugolp
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July 19, 2011, 06:05:09 AM
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Canada during the XIX century was that way (and btw, they had no central bank and no banking panics). There are other numerous examples.

For raw data about the USA XIX century one of the best sources is the book Milton Friedman and Anna Swartz, although the book has very flawed conclussions due to their lack of valid economic theory. Rothbard's History of Money and Banking in the USA from the... is good to understand what happened.

Then you can read Lawrence White about Scotland during the XVII century or George Selgin about Canada.

Thanks for the pointers.  I'm usually deeply skeptical of Austrian economics, but I'll try and get a hold of these to see what the data and their arguments are.

Read "free banking" theory, you will be surprised. The mentioned Lawrence White and George Selgin along with Steve Horwitz are the main proponents of free banking (that I know).
johnyj
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July 19, 2011, 08:05:09 PM
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No. Read what I wrote. Merchants, real merchants selling stuff, are reporting increasing sales when the value of bitcoins goes up. The theory that people dont buy because the price of money goes up is a myth.

OK, that could be TURE, I remember there is a theory saying that people will spend more when they FEEL they are getting richer (because of the rising value of their asset). And people will spend less when their asset is devaluating

And that could still be part of the picture, this only applies to those already have enough bitcoin, so that small amount of spending does not hurt their saving. It could indicate that there were many guys holding lots of bitcoins because of the hoarding during the early days, without hoarding happened at the first stage, this phenomenom might not be observed




 

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July 19, 2011, 09:26:05 PM
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When people discuss the deflationary bias of bitcoin, I think they're implicitly comparing it to the current inflationary-biased dollar. That's not the right way to think about it. If you imagine an economy where bitcoin *is* the currency, and we're not measuring it against the dollar or anything else, the deflation simply becomes the status-quo baseline. I don't hoard bitcoins because they're deflating; that's simply the field on which I'm playing. I try to do better than average, *against* that reference frame. This all becomes intuitive and sub-conscious if that's the world in which you've been operating for a while. ... Now, transitioning to that world does indeed have some other dynamics going on, but that's not usually the point of these theoretical-merits-of-a-deflationary-currency discussions.

Bitcoin is the first monetary system to credibly offer perfect information to all economic participants.
But Bitcointalk & /r/bitcoin are heavily censored. bitco.in/forum, forum.bitcoin.com, and /r/btc are open.
Best info on Casascius coins: http://spotcoins.com/casascius
KenJackson
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July 20, 2011, 01:56:37 AM
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When people discuss the deflationary bias of bitcoin, I think they're implicitly comparing it to the current inflationary-biased dollar. That's not the right way to think about it.

You're talking theory.

But the comparison to the dollar is the real world, since we will continue to pay our mortgages and buy gas for our cars and food for our table with dollars for the foreseeable future.  So the comparison with the dollar is a necessity.
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July 20, 2011, 02:07:36 AM
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Sorry but it is a bad Idea to centrally plan bitcoin. To say people aren't using it correctly so we need and incentive to make people spend it more is pure hubris.  The same fallacy could say, computer prices HAVE to go up because if they went down no one would ever buy one.  Well we have been in an economic experiment for decades that shows that people STILL buy even though they know in 6 to 18 months the computers will provide more bang for the buck.

Bitcoin, though not perfect, is well thought out and is modeled after mining a precious mineral (unobtainium perhaps) and it behaves like that. It would not help the gold market to make gold that spoiled. One thing may be true. the inflation of modern currencies has caused too little savings.

Bitcoin is a free market currency and people will be attracted to it for it's lack of inflation. The future value will eventually be factored into prices and loan interest.


Not as good as gold, BETTER.
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