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Author Topic: We're printing too many bitcoins  (Read 3934 times)
the founder
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August 02, 2011, 03:38:31 PM
 #1

In case you were wondering.

That the adoption rate of bitcoins are not exceeding the additional 50 coins per every 10 minutes dumped on the market.  

Hence the inflationary pressures on bitcoins currently exceed the adoption rate... it's why we're seeing inflation (IE: bitcoins going from 30 USD to 13 USD per BTC) as compared to deflation (13 USD to 30 USD per BTC).

Now that might change over time... but in all honestly though it's not centralized via a central bank we're still "bernankeing" the system.   or better said.. printing too many bitcoins to cause deflation. In fact we're printing more bitcoins in relation to the US dollar because we're seeing the bitcoin exchange rate falling in relation to the US dollar.

If the creation of bitcoins slowed down for the next several months,  we might see it rise in value,  but until that time it most likely will continue to go down for the near term as too many bitcoins are flooding the market.

Better said we need less than half as many bitcoins on the market now to bring it back to 30 USD to a bitcoin.   Or we need to increase the demand by double.

The fact that our bitcoins are being hacked every 10 minutes (mtgox, mybitcoin, wallets vanishing from Poland exchanges, people seeing 25,000 BTC disappear from their desktop wallet) isn't helping increase the demand.

Honestly if you want to grow the currency you need to do the following:

1 - secure our stuff
2 - slow down on "printing" them
3 - make it easier to use for less technically advantaged individuals.

That point we might increase demand and decrease supply, hence leading to an increase in BTC vs USD.



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August 02, 2011, 03:43:12 PM
 #2

In case you were wondering.

That the adoption rate of bitcoins are not exceeding the additional 50 coins per every 10 minutes dumped on the market.  

Hence the inflationary pressures on bitcoins currently exceed the adoption rate... it's why we're seeing inflation (IE: bitcoins going from 30 USD to 13 USD per BTC) as compared to deflation (13 USD to 30 USD per BTC).

Now that might change over time... but in all honestly though it's not centralized via a central bank we're still "bernankeing" the system.   or better said.. printing too many bitcoins to cause deflation. In fact we're printing more bitcoins in relation to the US dollar because we're seeing the bitcoin exchange rate falling in relation to the US dollar.

If the creation of bitcoins slowed down for the next several months,  we might see it rise in value,  but until that time it most likely will continue to go down for the near term as too many bitcoins are flooding the market.

Better said we need less than half as many bitcoins on the market now to bring it back to 30 USD to a bitcoin.   Or we need to increase the demand by double.

The fact that our bitcoins are being hacked every 10 minutes (mtgox, mybitcoin, wallets vanishing from Poland exchanges, people seeing 25,000 BTC disappear from their desktop wallet) isn't helping increase the demand.

Honestly if you want to grow the currency you need to do the following:

1 - secure our stuff
2 - slow down on "printing" them
3 - make it easier to use for less technically advantaged individuals.

That point we might increase demand and decrease supply, hence leading to an increase in BTC vs USD.



1 is a good idea
2 is not going to ever happen
3 will come with time I hope
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August 02, 2011, 03:44:38 PM
 #3

Hence the inflationary pressures on bitcoins currently exceed the adoption rate... it's why we're seeing inflation (IE: bitcoins going from 30 USD to 13 USD per BTC) as compared to deflation (13 USD to 30 USD per BTC).

The monetary inflation, the 50 bitcoins every 10 minutes, was the same when the USD-BTC went from cents to 30USD than when it went down.

The important question is: Why do you want the USD-BTC exchange to go to 30 again? Whats wrong with 13-14?
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August 02, 2011, 03:45:28 PM
 #4

The inflation, unlike government paper, is predictable and predicted with bitcoin.

Therefore it is already priced in.

Therefore price changes that are happening now are simply demand changes.  In such a small market, they are to be expected.  Nothing we can do about them.

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August 02, 2011, 03:45:52 PM
 #5

Hence the inflationary pressures on bitcoins currently exceed the adoption rate... it's why we're seeing inflation (IE: bitcoins going from 30 USD to 13 USD per BTC) as compared to deflation (13 USD to 30 USD per BTC).

The monetary inflation, the 50 bitcoins every 10 minutes, was the same when the USD-BTC went from cents to 30USD than when it went down.

The important question is: Why do you want the USD-BTC exchange to go to 30 again? Whats wrong with 13-14?

Nothing is wrong with it,  but it appears that the adoption rate increased faster when the currency was rising in value.


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August 02, 2011, 03:50:21 PM
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Nothing is wrong with it,  but it appears that the adoption rate increased faster when the currency was rising in value.


From http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation:

"Correlation does not imply causation" (related to "ignoring a common cause" and questionable cause) is a phrase used in science and statistics to emphasize that correlation between two variables does not automatically imply that one causes the other (though correlation is necessary for linear causation in the absence of any third and countervailing causative variable, and can indicate possible causes or areas for further investigation; in other words, correlation can be a hint).[1][2]
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August 02, 2011, 04:11:12 PM
 #7

Honestly if you want to grow the currency you need to do the following:

1 - secure our stuff
2 - slow down on "printing" them
3 - make it easier to use for less technically advantaged individuals.

That point we might increase demand and decrease supply, hence leading to an increase in BTC vs USD.
#1 definitely
#2 more below
#3 definitely

If I've misinterpreted, I apologize, but it sounds like you're advocating putting Bitcoin under centralized control of the currency. 

Short-term fluctuations are to be expected, especially since:
  • The market is currently fairly small in both users and capitalization (approx. USD $88 million)
  • There are relatively few uses in which BTC's utility outweighs its inconveniences. (see #3)
  • It's very new and thus prone to start-up problems
  • News coverage is both a boon and curse, and new stories cause outsized reaction in demand.

Ask the greybeards about when email was a novelty:  on each message, you had to specify the entire path to the destination email server.  Now people hardly ever write "snail mail" letters anymore.

Bitcoin may become another necessity like email, or it could follow a technology path like search engines, or it may peter out and die.

Only time will tell.
the founder
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August 02, 2011, 04:27:54 PM
 #8


If I've misinterpreted, I apologize, but it sounds like you're advocating putting Bitcoin under centralized control of the currency. 


no need to apologize,  I wasn't saying to put it under centralized control,  I'm just stating that the adoption rate is slower than the amount "mined/printed/whatever"  so it will cause the value of each BTC to go down as compared to going up.

this is not exactly the expected result... as many were hoping the adoption rate would grow faster than the mined rate, hence causing them to rise in value.. when in fact the opposite happened...

Now I want to stress I would perfer to see the adoption rate increase..  but that's not going to happen until it's easier to use... and headlines like "man loses 25,000 BTC,  3ed largest exchange loses 17,0000 coins,  mybitcoin vanishes with 1.3 million USD in bitcoins,  mtgox sends price of bitcoins to 1 penny."

In my opinion security and ease of use are the 2 major hinderances,  until that's under control the rate of creation exceeds the amount of people adopting them.

and Correlation does imply causation ---  30 USD per bitcoin caused a media frenzy that sent more people looking at them...



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August 02, 2011, 04:37:56 PM
 #9

Hence the inflationary pressures on bitcoins currently exceed the adoption rate... it's why we're seeing inflation (IE: bitcoins going from 30 USD to 13 USD per BTC) as compared to deflation (13 USD to 30 USD per BTC).

The monetary inflation, the 50 bitcoins every 10 minutes, was the same when the USD-BTC went from cents to 30USD than when it went down.

The important question is: Why do you want the USD-BTC exchange to go to 30 again? Whats wrong with 13-14?

The answer to this is that BTC going up to 30, or for that matter to 30,000, is really a reflection of other things we find desirable. I for one want bitcoins to be trading at 30,000 each, among other reasons, because if they do it'll be due to the fact that they have been adopted by a large segment of the population.

Another reason to hope for higher rates for the BTC is that it will offset the market manipulation by people who don't really know what they're doing. Today, anyone with 20,000 USD can manipulate the bitcoin market up, down and sideways. When each BTC costs over 150 dollars, it will weed out many of the amateurs.
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August 02, 2011, 04:56:33 PM
 #10

The important question is: Why do you want the USD-BTC exchange to go to 30 again? Whats wrong with 13-14?

...Lol was that a serious question?

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August 02, 2011, 08:44:37 PM
 #11

Irrelevant / Did not read past the title.
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August 02, 2011, 09:37:34 PM
 #12

Better said we need less than half as many bitcoins on the market now to bring it back to 30 USD to a bitcoin.   Or we need to increase the demand by double.

If you wanted to use bitcoins as a currency and not just as an easy way to get rich there would be no need to do anything.
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August 02, 2011, 09:39:49 PM
 #13

I see 2 options:

Difficulty increases ... Miners earn less btc and bitcoins take longer to generate.. less new btc on the market.

Market value continues to drop .. mining no longer becomes profitable.. less new btc on the marker

---

What we really need is a secure and easy payment service to rival paypal.

Average joe and jill need to be able to use bitcoins not just techies.

right now supply outweighs demand.

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August 02, 2011, 10:09:03 PM
 #14

Difficulty increases ... Miners earn less btc and bitcoins take longer to generate.. less new btc on the market.

Market value continues to drop .. mining no longer becomes profitable.. less new btc on the marker

The amount generated by the network as a whole is the same. Whether or not the coins are brought to the market is dependent on the particular individual.

What we really need is a secure and easy payment service to rival paypal.

Average joe and jill need to be able to use bitcoins not just techies.

right now supply outweighs demand.

I cannot agree with this more. This is the most critical flaw in the Bitcoin design. It's aimed at techies and not Joe.

For example:
How can you convince any shop owner to begin accepting Bitcoin as a payment method? And then having to explain the entire system?

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August 02, 2011, 11:57:47 PM
 #15

For example:
How can you convince any shop owner to begin accepting Bitcoin as a payment method? And then having to explain the entire system?

C'mon.  Once we had to explain how a mouse worked and once we had to explain what google was.  But if it's useful people pick it up.  PayPal was scary and different when it started and is now a "safe" solution for most people to send money online.  It'll take time but it will get there.

One thing people seem to be missing is that as bitcoin expands as a common currency those blocks the miners are creating will pay off with more and more transaction fees.  The whole idea of weaning off block bounties is so that those btc are replaced by the fees charged for using the service.

We could slow down or speed up production to make the USD rate fluctuate but the only real way to make it sustainable is to expand its use to the point where enough people use it in enough transactions that we can actually afford the infrastructure to provide it without the bounty.

The ONLY way to make bitcoin viable is to make it more available, useful and just plain common.  Staging mining strikes or whatever won't do jack but make it more difficult to encourage adoption.

As far as bad press about hacks.  It's amazing.  It's huge news when a start-up btc exchange or business scams people but it happens every day, all over the world with whatever currency people are holding.  Some guy got screwed in the peso market today.  Some huckster swindled someone out of their life savings in Florida.  Some goat herder got royally screwed on a cheese deal.

Yes, it's bad press and yes it shows we all need to pay attention to security but I'm delighted because it means bitcoins are worth something, just like a peso or your life savings or a chunk of goats cheese... 
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August 03, 2011, 12:54:36 AM
 #16

I think there is a critical point when BTC value and difficulty combined cause that each mined BTC can not pay for the electricity, then most of the profit-driven mining operation will stop

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August 03, 2011, 02:08:35 AM
 #17

Some on this thread seem to be unaware that the rate of bitcoin "printing" can't change.

If interest drops, and only a dozen miners are left, then once the difficulty adjusts, there will be 50 new bitcoins every 10 minutes (on average.)

If China sets up a million new miners, then once difficulty adjusts, there will be 50 new bitcoins produced every 10 minutes.

That's the point of the difficulty adjustments: to ensure that the rate of new bitcoin production remains constant. The only way to change that is to alter the bitcoin protocol itself. Good luck getting a majority of the bitcoin community on board with that.  Undecided

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The idea that deflation causes hoarding (to any problematic degree) is a lie used to justify theft of value from your savings.
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August 03, 2011, 01:25:04 PM
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We're not producing enough products/services In BTC land. EXPORT Cheesy
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August 03, 2011, 01:56:09 PM
 #19

Some on this thread seem to be unaware that the rate of bitcoin "printing" can't change.

If interest drops, and only a dozen miners are left, then once the difficulty adjusts, there will be 50 new bitcoins every 10 minutes (on average.)

If China sets up a million new miners, then once difficulty adjusts, there will be 50 new bitcoins produced every 10 minutes.

That's the point of the difficulty adjustments: to ensure that the rate of new bitcoin production remains constant. The only way to change that is to alter the bitcoin protocol itself. Good luck getting a majority of the bitcoin community on board with that.  Undecided



I know this ...  i'm just stating the fact that more bitcoins are being produced than are being adopted / used in commerce / etc... ... hence why you're see BTC going to single digits. 

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August 03, 2011, 03:57:24 PM
 #20

Some on this thread seem to be unaware that the rate of bitcoin "printing" can't change.

If interest drops, and only a dozen miners are left, then once the difficulty adjusts, there will be 50 new bitcoins every 10 minutes (on average.)

If China sets up a million new miners, then once difficulty adjusts, there will be 50 new bitcoins produced every 10 minutes.

That's the point of the difficulty adjustments: to ensure that the rate of new bitcoin production remains constant. The only way to change that is to alter the bitcoin protocol itself. Good luck getting a majority of the bitcoin community on board with that.  Undecided



I know this ...  i'm just stating the fact that more bitcoins are being produced than are being adopted / used in commerce / etc... ... hence why you're see BTC going to single digits. 

Therefore the title should be : Economy not keeping up.
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