"Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws)

[AnonyMint]

I am more pessimistic than you. I wish I wasn't. However one of my main points is the very low entropy of assuming Bitcoin will be more important than the internet, which is actually a very optimistic perspective.

The USA and the NSA will thus be in the driver's seat of the default of $150 trillion in debt. They will not give up this power (thus they will not hyperinflate away their power). They plan to charge to all of us. This is massive deflation.

No major nation in the world has ever hyperinflated away their power. They always self-destruct by attacking their own citizens. Study Rome. Study Germany, etc....

You don't sniff this yet, but Armstrong and I do. Later when you do finally capitulate and realize, that is when the others have also figured it out and it will be mad rush into the dollar and away from all other economies. Then we move into the peak for the USA Sept. 2015, then the USA goes over the cliff and total chaos will ensue. It will be much worse than 2008 and the central banks will be powerless this time. In fact, the Fed has been warning the banks they will not be bailed out again. This is why all the G7 have official bail-in plans (seen on their government websites) to take the money from the depositors instead.

You also don't understand that $150 trillion global debt means every one has been doing the wrong activities and everything is uneconomic.

You don't understand that debt is not just a ledger item, it also reflects real waste of human years, wrong skills acquired, wrong decisions made, etc.. These real problems are not corrected just by changing a line on the financial ledger.

This frustration is why riots and global unrest (and the war cycle) is increasing all over the world right now. There is no way to avoid the global deflation contagion.

This is Gold.

More so the dollar. Gold will go to roughly $5000 - $8000 only, so will only retire about $25 - 40 trillion of the $150 trillion in global debt.

The rest will come from deflating the net worth of western world much via confiscations. I think the G20 will manage to track down most of the offshore real estate purchases too given the NSA listening to everything, etc.. The dollar will become very strong internationally because these confiscations will keep the USA solvent, while the USA is becoming the #1 producer of oil and gas in the world, as well the technology leader with the Knowledge Age upon us and 47% of all existing jobs to be replaced by automation within 19 years (i.e. by 2033) according to Oxford University. The developing world is massively short the dollar by about $10 trillion and there will be a massive capital flight of institutional money from emerging markets in 2015.

Total hell is about to hits us in 2 years or less.

Just in time with the Bitcoin exponential increase hitting 1-10% of the general population. Cause or effect?

Effect. IMO, Bitcoin can not replace the dollar hegemony as I explained in the OP. We might get to roughly $1 - $10 trillion market cap at most, before NSA, G20, and tax authorities step in as I explained in footnote [2] in the OP to effectively take over Bitcoin.

Neither will the altcoin I proposed replace the dollar any time soon, because we don't have enough time to grow it. Rather it is hoped to be a way to protect from confiscation perhaps at most a few $trillion in private capital (hopefully including the smartest technologists who we critically need going forward to avoid a Dark Age and build out the Knowledge Age for maximum employment). Of course I have no qualms if very wealthy want to pile in too. If we can take it to $10s of trillion, that would probably help balance the rabid dollar hegemony that is staring us down into the abyss right now.

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[Jungian]

This is all very interresting and I like the blog you keep referring to. Going to read all the way through it.

May I ask what your own personal strategy for the coming years ahead are?

[barabbas]

All of this is quite technical, caustic and full of assumptions that do not have to happen.

For example, there's an implied foregone conclusion that BTC's price is going much, much higher before "being taken over". This is a total fallcy. There's absolutely no reason or even indication price of BTC is going much higher... if higher at all. BTC is a side-show of the present world economy that has no significance or importance at all to the financial powers of the world that quickly dismiss it because, no matter what kind of extrapolations are made, even the totally wild one, BTC will only represent, in best case scenarios, an extremely minimal (insignificant, really), part of that financial system.

Doomsday scenarios for the world economy notwithstanding, which I will not even enter, from a working perspective I see a very imminent threat to the "BTC system" that, in my layman's opinion, forecast it's possible doom WITHIN THE YEAR. And here, probably, I lack a lot of answers that I would like explained, of course.

Here's the conundrum: The new tech, 20nm-based mining rigs will be fully delivered, en masse,  by Summer thus making the block chain more efficient than ever and the rewards more spread than ever... to the point that, using any calculator and assuming a level of increased difficulty of 50% a month, it will not be cost effective to mine for anyone (the new rigs will never make roi, and they will lose money after costs from day one). Therefore, when difficulty reached 30 million roughly by September, who will pay the pied piper? who will do the mining? who will maintain the block chain itself? Oh the answer that more efficient/cheap machines will come out is simply absurd because they will not be -even if technology would allow it- cost effective to manufacture.

Furthermore, there's no guarantee not even a reason for the BTC price to go higher. As a matter of fact, as we have seen the effect of recent developments, reasons abound to justify the price to remain stagnant or go significantly lower. Even before the Gox/Bitstamp debacle, the price had stayed barely above the level of the previous (China) debacle, for almost 3 months at or closely around $800 per BTC, so it is pretty safe to assume that price of BTC itself in the market will not influence any of that scenario that is pretty imminent.

Food for thought?

[tvbcof]

Failure to understand Bitcoin ALREADY 'cost Investors Billions'.

But that's cool.  More $$$ for me and I started to capitalize on my 2011 speculation in a relatively big way at the beginning part of 2014.

[Come-from-Beyond]

The Bitcoin killer will thus have at least the following features.

• provably cpu-only mining with botnet resistance (current proof-of-stake can't redistribute new coins to masses & I posit it isn't secure)
• built-in anonymity (to minimize non-anonymous users)
• small, reasonable perpetual debasement
• zero transaction fees (with economic transaction spam resistance)
• economically limited pool sizes
• oblivious shares
• selfish-mining fix
• mini block-chain design
• faster 1-confirmation block chain, e.g. 1 minute instead of Bitcoin's 10 min delay, if the orphan rate can be contained

Nice. Nxt needs only anonymity... We r working on that.

[AnonyMint]

All of this is quite technical, caustic and full of assumptions that do not have to happen.

Note I added two items (Spiraling Transactions Fees tragedy of the commons and 51% attack gets proportionally less expensive over time) to the Threats section of the OP.

All of this is quite technical, caustic and full of assumptions that do not have to happen.

For example, there's an implied foregone conclusion that BTC's price is going much, much higher before "being taken over". This is a total fallcy. There's absolutely no reason or even indication price of BTC is going much higher... if higher at all. BTC is a side-show of the present world economy that has no significance or importance at all to the financial powers of the world that quickly dismiss it because, no matter what kind of extrapolations are made, even the totally wild one, BTC will only represent, in best case scenarios, an extremely minimal (insignificant, really), part of that financial system.

I mentioned back in November, the shocking disruptive effect of Bitcoin taking over the world's wealth thus being unlikely that society (governments) won't fight back by attacking Bitcoin. If the projections below are correct then the government MUST attack Bitcoin to bring it into taxation (and confiscation) compliance. Bitcoin could continue to grow as a top-down controlled currency with no anonymity and a public ledger of all financial transactions.     Note Bitcoin is essentially top-down controlled now, with a few pools controlling most mining power and tx fees being set top-down to avoid the problems I've mentioned about tx fees in the OP.

A least squares fit projection line puts the price at $100,000 in 2016, which will be in excess of $1.5 trillion market cap. At 10X price appreciation every 13 months, the projection is $1 million price and $18+ trillion market cap in 2017.

However there are other possible technical interpretations:

https://bitcointalk.org/index.php?topic=322058.msg3469380#msg3469380
https://bitcointalk.org/index.php?topic=322058.msg3560319#msg3560319
https://bitcointalk.org/index.php?topic=322058.msg3584735#msg3584735
https://bitcointalk.org/index.php?topic=322058.msg3916390#msg3916390
https://bitcointalk.org/index.php?topic=322058.msg3932761#msg3932761

Note global net worth is roughly $241 trillion - $150 trillion debt = $91 trillion actual net worth when the debt is written down, and much of that is concentration in the upper %1 of the wealthy and not liquid, e.g. real estate.

Doomsday scenarios for the world economy notwithstanding, which I will not even enter, from a working perspective I see a very imminent threat to the "BTC system" that, in my layman's opinion, forecast it's possible doom WITHIN THE YEAR. And here, probably, I lack a lot of answers that I would like explained, of course.

Here's the conundrum: The new tech, 20nm-based mining rigs will be fully delivered, en masse,  by Summer thus making the block chain more efficient than ever and the rewards more spread than ever... to the point that, using any calculator and assuming a level of increased difficulty of 50% a month, it will not be cost effective to mine for anyone (the new rigs will never make roi, and they will lose money after costs from day one). Therefore, when difficulty reached 30 million roughly by September, who will pay the pied piper? who will do the mining? who will maintain the block chain itself? Oh the answer that more efficient/cheap machines will come out is simply absurd because they will not be -even if technology would allow it- cost effective to manufacture.

Why would anyone invest in new 20nm rigs that don't make ROI?

Furthermore, there's no guarantee not even a reason for the BTC price to go higher. As a matter of fact, as we have seen the effect of recent developments, reasons abound to justify the price to remain stagnant or go significantly lower. Even before the Gox/Bitstamp debacle, the price had stayed barely above the level of the previous (China) debacle, for almost 3 months at or closely around $800 per BTC, so it is pretty safe to assume that price of BTC itself in the market will not influence any of that scenario that is pretty imminent.

Food for thought?

See the least squares fit chart link above. The price has languished before after corrections, yet it moves up after falling below the trend line after sufficient delay.

[bitfreak!]

I think most people would agree with you that we need more anonymity and more ASIC resistance and more scalability. But that's why we have alt coins to solve these problems. All 3 of those problems are already solved and being developed as we speak. But that does not mean the resulting coins which incorporate these ideas will "kill" bitcoin. Bitcoin is the original cryptocurrency designed by Satoshi and will never be killed so long as the network remains secure. It has too big of a foothold in the market to ever be killed by an alt coin regardless of how "perfect" that alt coin is.

There are also some things in your list of suggestions which are subjective "improvements" which conform to specific monetary theories and not purely technical theories. For example these two points:

small, reasonable perpetual debasement
zero transaction fees (with economic transaction spam resistance)

I don't know how long you're going to argue about this perpetual debasement nonsense. It has to get old at some point. There are already several coins with perpetual debasement built into them, what more do you want? Bitcoin will never change to  match your concept of how money should work. And your suggestion about zero transaction fees is completely socialist imo, there is no reasonable way to separate a spam transaction from a real transaction without fees. People who are willing to pay get what they want faster than those who cannot pay, it's as simple as that and you're concern over spiraling fees is completely irrational imo.

[AnonyMint]

Nice. Nxt needs only anonymity... We r working on that.

Nxtcoin is proof-of-stake correct? Which means top-down controlled not decentralized. See below...

The problem with your estimate is, is that you forget Bitcoin isn't the best coin.

The other altcoins like Feathercoin and Peercoin use less energy/need less miners/have 30times faster transaction times/have more coins/better in every category. Might take another year or two, but the coins with the most benefits will be the higher echelon coins, specifically not Bitcoin(unless someone completely changes everything about it to make it better in every way shape and form).

Bitcoin is only extremely more popular for it's capitalization on early mover and early promoter in the beginning. Other coins will easily be worth more.

Bitcoin is the best coin in the eyes of rich people like me. The energy and miners need be there (the coin economics do not work without it), the confirmations are not reliable if they are much faster than Bitcoin's. "Have more coins" is a joke.

It is possible that there are fringe uses for other coins in the future, but to me it looks unrealistic that all the other coins combined would reach even 25% of Bitcoin's market cap. Main reason why anyone would think otherwise is that they don't have as many bitcoins as they would like to have, and want to amend that the easy way.

I have already explained upthread that Proof-of-Stake is not secure because essentially you must trust those with the largest stake (and it can't distribute new coin out to the people through mining in a competitive manner). Yet we also see the design of Bitcoin has pushed it to be top-down controlled also. So essentially Bitcoin and and PoS are moving towards the same endpoint, but Bitcoin has the market lead. So we can expect in the future, the Bitcoin pools will just cartel and do away with paying for PoW and simply add the transactions round-robin in a fully top-down controlled system that is of course fully compliant with G20 edicts. They can then keep flat transaction fees without affecting mining security. Then all the Threats disappear (and we lose anonymity and submit to the G20 control) including the bubble burst threat disappears.

Bitcoin Take Over Threats

• Coming $Trillion(s) bubble burst will demand world government intervention & cooperation [1] (Bernie Madoff is so much smaller)

As it looks right now, Bitcoin is going to win and it will be the corporate top-down controlled fully compliant government's coin.

The very first thread I started on this forum is looking to be the accurate final outcome. Bitcoin : The Digital Kill Switch. The technical details have become more clear to me since that thread, yet the broad premise remains true in my mind.

Bitcoin Killer Altcoin

The Bitcoin killer will thus have at least the following features.

• provably cpu-only mining with botnet resistance (current proof-of-stake can't redistribute new coins to masses & I posit it isn't secure)
• built-in anonymity (to minimize non-anonymous users)
• small, reasonable perpetual debasement
• zero transaction fees (with economic transaction spam resistance)
• economically limited pool sizes
• oblivious shares
• selfish-mining fix
• mini block-chain design
• faster 1-confirmation block chain, e.g. 1 minute instead of Bitcoin's 10 min delay, if the orphan rate can be contained

The proposed altcoin would attempt to remain decentralized (not top-down controlled), anonymous, and keep mining among the people. In other words, congruent with the freedom internet (e.g. self-published websites, running your own server, etc), not the Google, Facebook, Yahoo, NSA, G20, dollar hegemony corporate-fascist top-down controlled internet.

It would not kill Bitcoin (any time soon). It would be the alternative economy. If the alternative economy will play a key role in this coming Knowledge Age with 47% of existing jobs to be replaced by computer automation according to an Oxford study, then over time it might grow to be larger than the mainstream economy which will be diminishing. I assume the Knowledge Age will be significantly decentralized, e.g. 3D printing objects at home instead of going to a store to buy manufactured goods.

In other words, Bitcoin might grow very fast over next several years and become unified with the mainstream economy. Yet there would be this smaller thing growing faster that eventually overtakes the mainstream economy by 2032.

I am becoming more and more convinced of this bifurcated future.

[AnonyMint]

Any hint as to what PoW you have in mind? Cuckoo Cycle is still unproven.

Refer to all my posts in this thread and this one and this one and this one (which is not the solution, but lead to my epiphany).

I've replied about your Cuckoo Cycle. Are you available to work on an altcoin?

Of course I don't reveal the secret.

I think most people would agree with you that we need more anonymity and more ASIC resistance and more scalability. But that's why we have alt coins to solve these problems. All 3 of those problems are already solved and being developed as we speak.

Per my prior post, one way they are solved is Bitcoin will be run by large pools with ASICs. Later the carteled pools can discard the ASICs and process transactions without any proof-of-work. Solution is already occuring in Bitcoin as long as you agree to accept G20 edicts, such as the coming 10% confiscation (net worth tax). Of course that won't be the last confiscation, because each confiscation will further implode the global economy and the G20 will need to come back for sloppy seconds, thirds, etc..

But that does not mean the resulting coins which incorporate these ideas will "kill" bitcoin. Bitcoin is the original cryptocurrency designed by Satoshi and will never be killed so long as the network remains secure. It has too big of a foothold in the market to ever be killed by an alt coin regardless of how "perfect" that alt coin is.

The other way they are solved is if a popular enough truly decentralized altcoin solves all the issues. I have yet to see any such altcoin. And yes per my prior post, this will not kill Bitcoin any time soon. Only if the top-down, mainstream, non-anonymous economy withers relative to the new Knowledge Age economy can such an altcoin kill Bitcoin.

There are also some things in your list of suggestions which are subjective "improvements" which conform to specific monetary theories and not purely technical theories. For example these two points:

small, reasonable perpetual debasement
zero transaction fees (with economic transaction spam resistance)

I don't know how long you're going to argue about this perpetual debasement nonsense. It has to get old at some point. There are already several coins with perpetual debasement built into them, what more do you want? Bitcoin will never change to  match your concept of how money should work. And your suggestion about zero transaction fees is completely socialist imo, there is no reasonable way to separate a spam transaction from a real transaction without fees. People who are willing to pay get what they want faster than those who cannot pay, it's as simple as that and you're concern over spiraling fees is completely irrational imo.

Decentralized mining can't be funded without perpetual debasement. Period. See this...

Bitcoin Take Over Threats

• Lack of perpetual debasement means 51% attack gets less expensive (proportional to market cap) over time.

It is possible to stop spam transactions while also having 0 tx fees. I will not tell you how now. It is a secret.

P.S. perpetual debasement also has very important monetary theory benefits. These are explained in the links from the Errata section of the OP. But even if you don't agree, you can not refute the above point that you must have perpetual debasement else you can't have a decentralized PoW that is secure against 51% attack. Thus if you don't like perpetual debasement, then your only choice will be a corporate top-down controlled fully compliant government's coin. Period. I believe that Impaler and myself are philosophically correct (see links below in addition to those in the Errata section) that we can't have freedom without diluting the money supply. Selfish savers want their past efforts to be a perpetual friction on the backs of those new innovators. Rather a small, reasonable debasement (or demurrage) provides a balance to neutralize the parasitic rent that usury has on society.

https://bitcointalk.org/index.php?topic=354573.msg3816209#msg3816209
https://bitcointalk.org/index.php?topic=342848.msg3788809#msg3788809
https://bitcointalk.org/index.php?topic=342007.msg3788782#msg3788782

Errata

I am in the process of gathering links to my prior explanations of and math on why the people lose and wealth is concentrated under both deflation and inflation, and that debasement is not correlated to whether the people attain greater or less prosperity. Check back in this section later, as I will add them below.

https://bitcointalk.org/index.php?topic=365141.msg4379076#msg4379076
https://bitcointalk.org/index.php?topic=222998.msg3615848#msg3615848 (math)
https://bitcointalk.org/index.php?topic=195275.msg3357270#msg3357270
http://armstrongeconomics.com/2013/01/10/why-hyperinflation-is-nonsense/

It is centralized control over debasement that is very detrimental to the people (because for example the Fed can make a hockey stick of the money supply chart at-will), whereas decentralized debasement is a boon to the people as explained in the above links. Unlike in the 1800s when we had more frequent bank runs and depressions, central banking has enabled delaying the debt defaults and write-downs so now even the IMF admits we are at a 200 year debt peak and thus is recommending that massive confiscation of wealth is required. Most people don't realize we had a depression in the USA in 1919, but we recovered in 2 years because the government did not delay the defaults. Whereas, the 1929 Great Depression lingered for decades and required a World War to resolve, because of FDR's New Deal and preventing the defaults and chaotic correction. Frequent defaults correct the economy before it gets "too big to fail" (TBTF). Now we potentially face an Apocalyptic or Mad Max outcome because we grew our debt to a 200 year high. My hope is that the better crypto-currency could help protect private capital from "socialism gone insane" so that the worst outcome can be avoided.

Why are you so selfish as a saver that you don't want to pay 2.5% - 5% per year to fund the security of mining to keep it decentralized so the government can't come tax + confiscate 50+% of your savings? You know that even gold is debased at 2 - 2.5% per year.

The new coin goes out to the people who are the miners, especially with a provably cpu-only coin.

The increased value of the coin and the increased productivity gains (Q in the Quantity Theory of Money) in the society due to not having the government meddling will far exceed that 2.5% - 5% per year cost.

Selfish people deserve the corporate top-down controlled fully compliant government's coin.

[CoinCube]

In other words, Bitcoin might grow very fast over next several years and become unified with the mainstream economy. Yet there would be this smaller thing growing faster that eventually overtakes the mainstream economy by 2032.

I am becoming more and more convinced of this bifurcated future.

I also think a bifurcated future is likely.

One currency for the physical economy (government coin) that is not anonymous (pseudo-anonymity the government can easily breach will be tolerated).
Another currency for the knowledge economy (crypto coin) anonymous and untraceable.

There is likely only to be one big winner in each category. Both of these winners look poised to do incredibly well.  Remember to keep you records in order if you invest in the bank coin. The taxman will be along shortly to take his huge chunk.

My question for any developer of an altcoin (especially one with new and innovative features like anonymity) is why not try to capture both markets? Why not release a government coin version and a crypto coin version. Just because bitcoin is first does not guarantee it status as the official bank coin of the future.

Selfish people deserve the corporate top-down controlled fully compliant government's coin.

I imaging we will all need some government coin.
Government coin may be the better short term play. Crypto coin the superior long term investment.

[AnonyMint]

My question for any any developer of an altcoin (especially one with new and innovative features) is why not try to capture both markets? Why not release a bank coin version and a crypto coin version. Just because bitcoin is first does not guarantee it status as the official bank coin of the future.

I argue in the OP that network effects can not stop a decentralized altcoin, because we don't need to go change all the servers on the internet. The network effects for financial institutions adopting Bitcoin is real and probably already insurmountable. So I think the door is wide open for a decentralized altcoin, but it is already closed for a centralized competitor to Bitcoin. Rpietila has been correct on every point, except that he doesn't appear to acknowledge that Bitcoin will be the centralized coin. I hope we can get his response.

Selfish people deserve the corporate top-down controlled fully compliant government's coin.

I imaging we will all need some government coin.
Government coin will probably be the better short term play. Crypto coin the superior long term investment.

Agree we do. I don't think we can conclude that about investment. The smaller altcoin will be more volatile but probably appreciate faster overall if you invest in the correct altcoin that is the winner yet you could lose it all if it fails or you invest in the wrong one. And the tax you pay on Bitcoin capital gains and net worth could approach 90% if we return the tax rates we saw during the Great Depression. The government and society is $150 trillion in global total debt and I estimated upthread only $241 trillion in global net worth but much of that $91 trillion balance is concentrated among the upper 1% and much illiquid such as real estate.  

In the past one could argue that sticking with the mainstream was the most conservative and safest option. Safety at this point doesn't exist any more. Massive risks on the horizon. Choose your poison. I prefer freedom.

[wishsss]

Nice. Nxt needs only anonymity... We r working on that.

Nxtcoin is proof-of-stake correct? Which means top-down controlled not decentralized. See below...

The problem with your estimate is, is that you forget Bitcoin isn't the best coin.

The other altcoins like Feathercoin and Peercoin use less energy/need less miners/have 30times faster transaction times/have more coins/better in every category. Might take another year or two, but the coins with the most benefits will be the higher echelon coins, specifically not Bitcoin(unless someone completely changes everything about it to make it better in every way shape and form).

Bitcoin is only extremely more popular for it's capitalization on early mover and early promoter in the beginning. Other coins will easily be worth more.

Bitcoin is the best coin in the eyes of rich people like me. The energy and miners need be there (the coin economics do not work without it), the confirmations are not reliable if they are much faster than Bitcoin's. "Have more coins" is a joke.

It is possible that there are fringe uses for other coins in the future, but to me it looks unrealistic that all the other coins combined would reach even 25% of Bitcoin's market cap. Main reason why anyone would think otherwise is that they don't have as many bitcoins as they would like to have, and want to amend that the easy way.

I have already explained upthread that Proof-of-Stake is not secure because essentially you must trust those with the largest stake (and it can't distribute new coin out to the people through mining in a competitive manner). Yet we also see the design of Bitcoin has pushed it to be top-down controlled also. So essentially Bitcoin and and PoS are moving towards the same endpoint, but Bitcoin has the market lead. So we can expect in the future, the Bitcoin pools will just cartel and do away with paying for PoW and simply add the transactions round-robin in a fully top-down controlled system that is of course fully compliant with G20 edicts.

As it looks right now, Bitcoin is going to win and it will be the corporate top-down controlled fully compliant government's coin.

The very first thread I started on this forum is looking to be the accurate final outcome. Bitcoin : The Digital Kill Switch. The technical details have become more clear to me since that thread, yet the broad premise remains true in my mind.

Bitcoin Killer Altcoin

The Bitcoin killer will thus have at least the following features.

• provably cpu-only mining with botnet resistance (current proof-of-stake can't redistribute new coins to masses & I posit it isn't secure)
• built-in anonymity (to minimize non-anonymous users)
• small, reasonable perpetual debasement
• zero transaction fees (with economic transaction spam resistance)
• economically limited pool sizes
• oblivious shares
• selfish-mining fix
• mini block-chain design
• faster 1-confirmation block chain, e.g. 1 minute instead of Bitcoin's 10 min delay, if the orphan rate can be contained

The proposed altcoin would attempt to remain decentralized (not top-down controlled), anonymous, and keep mining among the people. In other words, congruent with the freedom internet (e.g. self-published websites, running your own server, etc), not the Google, Facebook, Yahoo, NSA, G20, dollar hegemony corporate-fascist top-down controlled internet.

It would not kill Bitcoin (any time soon). It would be the alternative economy. If the alternative economy will play a key role in this coming Knowledge Age with 47% of existing jobs to be replaced by computer automation according to an Oxford study, then over time it might grow to be larger than the mainstream economy which will be diminishing. I assume the Knowledge Age will be significantly decentralized, e.g. 3D printing objects at home instead of going to a store to buy manufactured goods.

In other words, Bitcoin might grow very fast over next several years and become unified with the mainstream economy. Yet there would be this smaller thing growing faster that eventually overtakes the mainstream economy by 2032.

I am becoming more and more convinced of this bifurcated future.

Interesting. Will read.

[CoinCube]

I don't think we can conclude that about investment. The smaller altcoin will be more volatile but probably appreciate faster overall if you invest in the correct altcoin that is the winner yet you could lose it all if it fails or you invest in the wrong one. And the tax you pay on Bitcoin capital gains and net worth could approach 90% if we return the tax rates we saw during the Great Depression.

Fair enough. We both agree that both the government coin and the crypto coin should do well. Exactly how well and for how long is not that relevant to the topic at hand.
  

In the past one could argue that sticking with the mainstream was the most conservative and safest option. Safety at this point doesn't exist any more. Massive risks on the horizon. Choose your poison. I prefer freedom.

I choose both. Hard to know exactly how fast the knowledge economy will grow or exactly how hard the crash from the debt bubble will be. Best to hedge and invest in both.

I am not yet convinced that bitcoin's network effects (while real) are insurmountable. Its status as top centralized coin is vulnerable from the ground up, via, a significantly more nimble competitor, (perhaps a CPU only coin without anonymity). It is also vulnerable from top down via a cryptosystem rolled out by the banks/governments/corporations.  Nevertheless, it is definitely a serious contender to take the position of top centralized/government coin. If it become clear that bitcoin will take this role I will buy a few.  


 

[bitfreak!]

You know that even gold is debased at 2 - 2.5% per year.

You do know that there is a finite amount of gold on the Earth and that eventually all of it will be mined?

I don't necessarily have anything against a coin with perpetual debasement, as long as the cost of creating the new currency is equal to or more than the value of the new currency, and it happens in a decentralized fashion. Like you said, the main problem is centralized debasement, and it's because it costs them very little to generate the new currency and because they hand it out to a small group of banks instead of to the average joe. I don't necessarily care if my savings go up in value or not, what I care about is that my savings HOLD THEIR VALUE. The reason people save their wealth in gold is because they trust gold to be a secure store of value, and the reason they trust it is because they know gold cannot be created out of thin air. The same thing essentially applies to Bitcoin, I know that bitcoins are very difficult to create and it requires a lot of electrical energy to generate them.

The stone money used on the island of Yap is a good example of why it's important for a currency to be hard to create, but it's also an example of why perpetual debasement can work so long as the currency is hard to create. It was extremely difficult for them to create those huge donut shaped stones, so every time a new stone coin was created the market didn't freak out because the market knew a lot of energy was burnt up in their creation. And there was essentially no limit to how many coins they could create, so long as they didn't find an easy and cheap way to craft the stones into a donut shape then they could keep making them and adding new coins into circulation without worrying about price inflation. You can even have an increasing money supply while the value of the currency is increasing at the same time, in fact that's exactly what has been happening with Bitcoin for the last few years.

The problem with government fiat money is not necessarily the fact that they debase it, it's that they can cheaply and easily put new currency into circulation and they don't have to hand it out in a decentralized fashion, they simply hand it out to large member banks. And they create so much that they not only prevent price deflation, they debase the money supply to such an extreme degree that they cause consistent price inflation. That is the type of perpetual debasement I dislike, excessive and stupid debasement used to fund wars and other nonsense that no one wants. Bitcoin was designed precisely to make that sort of thing impossible, it was supposed to be a finite resource in a digital form, like digital gold in other words. That is the fundamental philosophy behind the way Bitcoin is designed.

Fundamentally I agree with you that perpetual debasement can be a good thing, what I don't agree with you about is that a finite money supply is a bad thing. They both have their advantages, gold will always be trusted so long as the amount on this planet always remains finite. Bitcoin will always remain relevant for the same reason. Obviously there are things which make a better currency than gold, just as there may be cryptocurrencies better for use as a currency. But that doesn't mean gold or bitcoin cannot be used to conduct trade, and the finite nature of gold and bitcoin doesn't make them some sort of evil "corporate top-down controlled fully compliant government's money". How you reach such an absurd conclusion is beyond me. The centralized nature of mining could take away some of the decentralization of Bitcoin, but that's just about the limit of it.

But that's not a "flaw", the people with the most resources will always have the most power, that's just a simple rule of the world and it will aways exist. Of course we can attempt to minimize the effectiveness of their resources but they will always have an advantage by having more resources at their disposal. People will always be attracted to Bitcoin because of its features, but there's no reason Bitcoin can't coexist with other cryptocurrencies which improve upon the basic design. You need to learn that there is a place for everything, stop looking at things with such a black and white perspective. Bitcoin is not flawed, it simply is what it is, and if you want something different then build it and prove to us how much better it is.

Edit: added extra paragraph to expand on my explanation.

[AnonyMint]

You know that even gold is debased at 2 - 2.5% per year.

You do know that there is a finite amount of gold on the Earth and that eventually all of it will be mined?

Pedantic and irrelevant part of our discussion don't you agree? There is gold throughout the universe. And we are not close to tapping all the gold on earth. Mankind's technology for tapping gold on earth and throughout the universe will continue to improve. Malthusians always annoy me, because throughout the history of the world they have never been correct.

I don't necessarily have anything against a coin with perpetual debasement, as long as the cost of creating the new currency is equal to or more than the value of the new currency, and it happens in a decentralized fashion. Like you said, the main problem is decCentralized debasement, and it's because it costs them very little to generate the new currency and because they hand it out to a small group of banks instead of to the average joe. I don't necessarily care if my savings go up in value or now, what I care about is that my saving HOLD THEIR VALUE. The reason people save their wealth in gold is because they trust gold to be a secure store of value, and the reason they trust it is because they know gold cannot be created out of thin air.

Then you and I are very much in agreement.

The same thing essentially applies to Bitcoin, I know that bitcoins are very difficult to create and it requires a lot of electrical energy to generate them.

A few pools control more than 51% of the hash processing power. A cartel of them could eliminate the requirement to use Proof-of-Work (PoW) and so then we are right back to fiat again (even if controlled by corporations, those corporations are beholden to the government and can be "nationalized"). I am confident that this is the coming outcome for Bitcoin. How could it go any other way given the facts presented in the OP?

The stone money used on the island of yap is a good example of why it's important for a currency to be hard to create, but it's also an example of why perpetual debasement can work so long as the currency is hard to create. It was extremely difficult for them to create those huge donut shaped stones, so every time a new stone coin was created the market didn't freak out because the market knew a lot of energy was burnt up in their creation. And there was essentially no limit to how many coins they could create, so long as they didn't find an easy and cheap way to craft the stones into a donut shape then they could keep making them and adding new coins into circulation without worrying about price inflation. You can even have an increasing money supply while the value of the currency is increasing at the same time, in fact that's exactly what has been happening with Bitcoin for the last few years.

Great example! And I'm giddy to see you write that, since you were disagreeing a few months ago when we debated in your mini block chain thread. I really admire people can refine their philosophies. Very few people can do that. I expected you might be one, since your mini block design is excellent.

Fundamentally I agree with you that perpetual debasement can be a good thing, what I don't agree with you about is that a finite money supply is a bad thing.

It is impossible to have a finite supply of anything without a top-down controller stealing the thing. Ponder that. You would essentially have to steal human innovation, e.g. to stop technological progress at mining gold.

They both have their advantages, gold will always be trusted so long as the amount on this planet always remains finite.

Gold is not trusted because the total is not finite. It is trusted because it takes real effort to mine it, thus the supply can't be debased egregiously in corrupt ways, i.e. it won't go hockey stick tomorrow as Bernanke did. And the mining of gold is thus competitively available to everyone. Humans want a fair game of competitive opportunities not a corrupt one of top-down slavery. Actually many humans want socialism where they get everything equally without competition, but this is a failed economic system (The government and society is $150 trillion in global total debt and I estimated upthread only $241 trillion in global net worth but much of that $91 trillion balance is concentrated among the upper 1% and much illiquid such as real estate.  )

Bitcoin will always remain relevant for the same reason. Obviously there are things which make a better currency than gold, just as there may be cryptocurrencies better for use as a currency. But that doesn't mean gold or bitcoin cannot be used to conduct trade, and the finite nature of gold and bitcoin doesn't make them some sort of evil "corporate top-down controlled fully compliant government's" money". How you reach such an absurd conclusion is beyond me. The centralized nature of mining could take away some of the decentralization of Bitcoin, but that's just about the limit of it.

Once you centralize the mining, then you centralize which transactions will be blocked (by the full clients), and everything else in the protocol can be changed by the top-down controllers at-will. (perhaps you will next argue that the users running simple clients have the power to vote on which protocol they will support so see below)

You are right back to democracy and fiat again. They can then debase at-will as well.

You have not technically refuted the Threats section of the OP which drive Bitcoin to a centralized control. If Bitcoin can be taken over by vested interests, then we are back in the same predicament, just a different set of slave masters.

Decentralized means the vested interests can't take control, only contribute in a decentralized competition. Centralized means it gets swept into the power vacuum of democracy.

Democracy = the majority force their will on the minority. Or actually all the minorities force their will on the majority. Democracy binds everyone together in a monolithic outcome and a power vacuum.

But that's not a "flaw", the people with the most resources will always have the most power, that's just a simple rule of the world and it will aways exist.

The difference is that with decentralization, the small guy always can compete for part of the pie (no one is bound together in a monolithic outcome). With centralization, the winner takes all.

Rich hate decentralization, because they can't possibly invest in all those small opportunities that can double capital in a month. In decentralization, the small guy grows his capital at a faster percentage rate than the rich guys.

Of course we can attempt to minimize the effectiveness of their resources but they will always have an advantage by having more resources at their disposal.

With the altcoin design proposed in the OP, the rich can not take it over and it will remain decentralized.

People will always be attracted to Bitcoin because of its features, but there's no reason Bitcoin can't coexist with other cryptocurrencies which improve upon the basic design. You need to learn that there is a place for everything, stop looking at things with such a black and white perspective. Bitcoin is not flawed, it simply is what it is, and if you want something different then build it and prove to us how much better it is.

Did I say Bitcoin can't exist also? Please read the entire thread more carefully. I wrote that Bitcoin's decentralized premise is threatened and flawed.

[bitfreak!]

Pedantic and irrelevant part of our discussion don't you agree? There is gold throughout the universe. And we are not close to tapping all the gold on earth. Mankind's technology for tapping gold on earth and throughout the universe will continue to improve. Malthusians always annoy me, because throughout the history of the world they have never been correct.

No I think it's very relevant to this discussion. Even if we get the ability to move gold to earth from other planets at a cost less than the worth of the gold, there's still a finite limit to how much we can bring to earth because there's a limit to how much we can increase the mass of the Earth before we risk destabilizing the orbit. It doesn't matter how large that limit is, the fact is there's a limit. Of course there's always a risk that we learn of a method to turn stone into gold, and that is why cryptocurrency is so amazing, we can use mathematics to ensure that the limit will never be undermined.

And yes, I meant to say centralized debasement is is the problem, I have corrected that mistake in my original post.

A few pools control more than 51% of the hash processing power. A cartel of them could eliminate the requirement to use Proof-of-Work (PoW) and so then we are right back to fiat again

And the moment they attempted to change any such critical aspects of the system would be the moment everyone lost faith in Bitcoin and then those pools would have doomed their entire business to failure. But I don't think that will happen because when ever a pool gets near 50% of the hashing power we always see a rebalancing of power by concerned parties. The network seems to have a natural tendency to ensure that no one entity will ever gain the majority of the hashing power. And now that we have decentralized pool software it's even less likely that one entity will ever gain more than 50% of the hashing power.

It is impossible to have a finite supply of anything without a top-down controller stealing the thing.

Why, explain to me the exact reason why that would be true.

And the mining of gold is thus competitively available to everyone.

How so? I surely cannot afford to buy the mining equipment required to mine gold. I might be able to sift out a few flakes of gold worth a few dollars if I spend hours panning down at a river, but I doubt anyone would be willing to buy a few specks of gold from me. Gold mining is a highly centralized industry which requires large and expensive machinery. So why is it ok when gold mining is so centralized but when it happens to Bitcoin its the end of the world? I designed the mini-blockchain scheme because I was worried about the centralized mining og Bitcoin, but that doesn't mean I think it will lead to the downfall of Bitcoin and it doesn't mean I've lost my faith in Bitcoin. I accept Bitcoin for what it is.

[Come-from-Beyond]

I have already explained upthread that Proof-of-Stake is not secure because essentially you must trust those with the largest stake (and it can't distribute new coin out to the people through mining in a competitive manner).

It seems to me that the creator of Nxt fixed PoS by adding Transparent Mining. He also invented another "mining" algo that doesn't use "coin-days".

[AnonyMint]

I have already explained upthread that Proof-of-Stake is not secure because essentially you must trust those with the largest stake (and it can't distribute new coin out to the people through mining in a competitive manner).

It seems to me that the creator of Nxt fixed PoS by adding Transparent Mining. He also invented another "mining" algo that doesn't use "coin-days".

You see they tried to solve it by invoking trust and reputation "knowing who all the miners are", but I already explained upthread that is just another low entropy (i.e. low security) result:

I strongly posit proof-of-stake will be proven insecure. It lacks the expanding entropy of proof-of-work.

Trust via reputation (i.e. social capital) or stake (i.e. capital share) inherently degrades to centralization and low entropy outcomes.

Only Satoshi's Proof-of-Work can solve the entropy security issue and remain decentralized. Period. I have thought about this deeply.

[Come-from-Beyond]

Only Satoshi's Proof-of-Work can solve the entropy security issue. Period. I have thought about this deeply.

Oh, I thought u were an open-minded person. Sorry for disturbing u.

[AnonyMint]

Only Satoshi's Proof-of-Work can solve the entropy security issue. Period. I have thought about this deeply.

Oh, I thought u were an open-minded person. Sorry for disturbing u.

It is a fundamental mathematical insight. Someday I need to write a whitepaper on this. (Any mathematician readers who have some time to do this now?)

I am open-minded to that which isn't already evidently mathematically irrefutable.

Essentially proof-of-stake requires you to move to trust and reputation and call that "security". But that is not the type of security I want, because it ends up as "winner takes all". It is just democracy and fiat again. I want decentralized security which does not have the power vacuum. Only Satoshi's Proof-of-Work has that.

I sent a private message to Adam Back (inventor of Hashcash the precursor to Satoshi's insight) and ask if he can assist.

Adam Back discusses centralization due to pools at 25 min, regulation at 30min, and non-anonymity coin taint fungibility at 49 min:
http://letstalkbitcoin.com/e77-the-adam-back-interview/#.UuK0zWTTnrk

http://en.wikipedia.org/wiki/Adam_Back
http://www.cypherspace.org/adam/