nightwatch (OP)
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February 10, 2011, 09:09:53 PM |
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I'm new to bitcoin idea and find it very interesting, however I've got a question: how do you protect your wealth from inflation? I know the Bitcoin system is internally protected from an uncontrolled inflation as only a limited amount of currency can be in circulation, but what would happen if Bitcoin became a popular currency with market worth USD millions? Wouldn't it make people clone it and produce an unlimited amount of alternative cryptocurrency systems based on the value of CPU work? Wouldn't these BTC alternatives gradually erode the purchasing power of Bitcoin? Or would BTC value remain constant no matter how many alternatives are there?
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kiba
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February 10, 2011, 09:11:17 PM |
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Why would people want to switch to a cryptocurrency that's a clone of bitcoin?
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Anonymous
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February 10, 2011, 09:13:36 PM |
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Why would people want to switch to a cryptocurrency that's a clone of bitcoin?
It has more features to offer?
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kiba
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February 10, 2011, 09:14:18 PM |
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It has more features to offer?
Then it's not a clone.
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nightwatch (OP)
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February 10, 2011, 09:22:49 PM |
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Not an exact clone but something that serves the same purpose - a digital currency. If an alternative became popular enough (for example, a special version for the chinese market), wouldn't Bitcoin have to give a market share to that alternative, and wouldn't sellers want to accept payments both in BTC and in the chinese alt currency? This way, there would be more digital money in the market and their value would have to drop.
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jimbobway
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February 10, 2011, 09:25:58 PM |
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Not an exact clone but something that serves the same purpose - a digital currency. If an alternative became popular enough (for example, a special version for the chinese market), wouldn't Bitcoin have to give a market share to that alternative, and wouldn't sellers want to accept payments both in BTC and in the chinese alt currency? This way, there would be more digital money in the market and their value would have to drop.
Normally, the first to market wins. Since bitcoin was first to market it has a very big head start. An analogy could be that bitcoin is like gold. And the next currency "x" could be silver.
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nightwatch (OP)
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February 10, 2011, 09:31:03 PM |
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I think the problem with your comparison is that Bitcoin is not like gold - you can't create gold but you can create any number of Bitcoin clones and they are just as good as original Bitcoin.
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Anonymous
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February 10, 2011, 09:33:32 PM |
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I think the problem with your comparison is that Bitcoin is not like gold - you can't create gold but you can create any number of Bitcoin clones and they are just as good as original Bitcoin.
You can "create" gold. Creating Bitcoins is like mining gold and bringing it to the surface.
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nightwatch (OP)
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February 10, 2011, 09:35:54 PM |
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Maybe creating Bitcoins is like mining. But not creating Bitcoin clones - this is rather like creating a truck of gold out of thin air.
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Anonymous
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February 10, 2011, 09:38:29 PM |
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Maybe creating Bitcoins is like mining. But not creating Bitcoin clones - this is rather like creating a truck of gold out of thin air.
Well, you can create Gold from other matter through very expensive processes. Scarcity doesn't require a truly finite limit.
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jimbobway
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February 10, 2011, 09:39:03 PM |
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Maybe creating Bitcoins is like mining. But not creating Bitcoin clones - this is rather like creating a truck of gold out of thin air.
You are more than welcome to take the open source software and create your own network. With a bit of marketing you can probably make it worth something. BTW, there is another bitcoin network, the test network, and people (developers) do trade bitcoins but they are worth a lot less.
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ribuck
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February 10, 2011, 09:39:38 PM |
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Creating Bitcoin clones - this is rather like creating a truck of gold out of thin air. Well, there already has been one Bitcoin clone which is the bitcoin test network, and no-one expects it to reach parity with the US dollar any time soon. But yes, if Google or Facebook created a Bitcoin clone it would be interesting to see how it played out.
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ShadowOfHarbringer
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February 10, 2011, 09:47:29 PM |
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you can create any number of Bitcoin clones and they are just as good as original Bitcoin.
Yes, but any of the clones will not have the same trust and good publicity as the original one. Less trust = less value. What your saying is very similiar to " What would happen if i mixed some chemicals (or manipulated matter at subatomic level) and produced something that looks, smells like gold and has every other property of gold". Nothing special would happen. Depending of how scarce is the thing you are producing, and how easy is it to produce more, it would have bigger or smaller value. The harder is to produce a thing = the more scarce that thing is == the more value the thing has. Also if it is easy to divise, shape and carry, then it can be used as a currency. This rule works with everything.
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nightwatch (OP)
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February 10, 2011, 09:52:10 PM |
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If Google or Facebook created a digital currency they would probably completely wipe Bitcoin out just by creating a market million times bigger than current BTC market.
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jimbobway
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February 10, 2011, 09:53:18 PM |
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If Google or Facebook created a digital currency they would probably completely wipe Bitcoin out just by creating a market million times bigger than current BTC market.
It's only a matter of time, I think, that a corporation would create an initiative to copy Bitcoin. But, I think Bitcoin would remain competitive since it was the first. Here is a question for you. Has any corporation copied bittorrent?
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nightwatch (OP)
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February 10, 2011, 10:02:29 PM |
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No, haven't seen anyone clone Bittorrent, but who would want to do that and for what purpose? Maybe the SecondLife currency (LindenDollars) would be a better example? Many companies want to have such a market where they can control the currency and its purchasing power and that's why there are so many MMORPGs. (FYI, I don't have a SL account and don't know the SL economy at all but as long as people want to pay 'real' money for your digital currency the business is worth a lot).
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jimbobway
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February 10, 2011, 10:06:51 PM |
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No, haven't seen anyone clone Bittorrent, but who would want to do that and for what purpose? Maybe the SecondLife currency (LindenDollars) would be a better example? Many companies want to have such a market where they can control the currency and its purchasing power and that's why there are so many MMORPGs. (FYI, I don't have a SL account and don't know the SL economy at all but as long as people want to pay 'real' money for your digital currency the business is worth a lot).
Bitcoin is a P2P technology like Bittorrent. If companies want to control the currency then Bitcoin is not for them.
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marcus_of_augustus
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February 10, 2011, 10:14:51 PM |
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Bitcoin will have competitors, clones, other P2P crypto-currencies but it doesn't matter. They will all tend towards the cost of computational power on the network that backs them, plus some premium based on perceived trustworthiness, brand recognition and other intangibles. At the moment Bitcoin has huge head start in terms of both computational power and recognition, trustworthiness. There will be others, but that's all good. The more crypto-currency networks the less chance the statist, scumbag banksters will have of bringing money under their control again. This is the beginning of the end of over 200 years of domination by these evil bastards and their fiat currency bullshit. Megabanks and the central bank models are threatened to the core of their failed premises by this concept. It is going to be great entertainment to watch them fall, ringside side you have here fellas. Congrats on all who got it this far, you have been midwives to something unique in human history that will remembered for the ages. Celebrate, we have a bonfide people's money again! (but bitcoin is not money for legal purposes of course ![Wink](https://bitcointalk.org/Smileys/default/wink.gif) )
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nightwatch (OP)
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February 10, 2011, 10:22:07 PM |
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Bitcoin is a P2P technology like Bittorrent. If companies want to control the currency then Bitcoin is not for them.
Yes, I agree, but we are talking about a currency here. The currency's value is not that it's decentralized but that it can buy you something. Some time ago all money was decentralized as well - if you had gold and silver coins you didn't need any central authority to tell people what is the value of your money. The gold coin was worth as much as the gold it was made of, the same with silver. Then money was centralized -you have a piece of paper with a number on it and the government's job is to convince everyone that the piece of paper has a certain value, much greater than the paper itself. So, this is still money, even if the 'underlying architecture' has changed, and still people want to (or have to) use it. But this diverts quite a lot from my original question which was: how new digital currencies will reduce the purchasing power of existing ones? maybe if the cryptocurrency's purchasing power will equal the real cost of creating it it won't matter how many new currencies are created, their value will not drop below the cost of creating a new currency unit? Just like the real metal coin - it will never cost less than the metal its made of. (yeah, I think I got what moa was talking about)
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marcus_of_augustus
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February 10, 2011, 10:33:25 PM |
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Yes, a crypto-currency has real (objective) value, at a minimum the asset cost of the computational power backing the network plus energy costs to run and 'mine' the encrypted transaction blocks. In the future, not as far off as you might think given the state of failed monetary systems around the globe, I'm seeing hedge funds in the Cayman's with FPGAs lining up to join the crypto-currency networks. And medium-size rogue banks in Panama or Switzerland putting Cray XMT http://www.cray.com/products/XMT.aspxsize machines onto the network ... think big guys this is gonna blow your minds! Financial companies already have this kind of hardware at their disposal and once they get the concept they'll be coming .... then there'll be the dying megabanks and cronys at NSA trying to bring it down by bringing there big-iron guns on-line but just adding to the compute power, it's gonna get crazy.
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