This is not true. The value ranges in accordance with demand. There is a huge difference. And what that difference does is open up the opportunity for a transfer of value/wealth by manipulating the supply. Bitcoin is not more reliable in this management, as the spiral up to USD $30 so eloquently proved. Even without early adopters, if we assume the 80/20 distribution of wealth will generally remain true, those with 80% of the wealth have every opportunity to manipulate this supply for their own benefit. Even more so with an arbitrary money generation like Bitcoin's that cannot be changed. At least more effort can go into mining gold to ease supply problems; there is no such possibility with bitcoins.
Supply is not value, therefore your statement of falsehood is incongruent with the argument.
The exchange rate is an indication of
relative valuation, not the inherent value of an item.
Value is not purely associated with demand; it arises from the
interaction between supply and demand.
Correct me if I'm mistaken, but you seem to be suggesting management of unit value in relation to external forms of wealth.
Manipulation? One child learning how to ride a bike more quickly than another could be considered "manipulation" due to greater skill. Does that mean the bicycle is faulty?
Terrestrial gold is a finite resource, no different from Bitcoin. What happens when gold runs out? The argument is absurd, as is the suggestion that Bitcoin is a static system incapable of change.
The point was the monetary base is going to expand whether or not continued production warrants it. I'm talking about Altcoin here. Prices rise, and for no good reason. This may actually encourage a loss of productivity as electricity is wasted to keep your portion of the value of the currency. Don't want to lose value? Mine. Perhaps it makes sense from the standpoint of the security of the network, but it hardly makes real sense.
Supply expands to the extent that it is demanded; the phenomenon known as
elasticity. There is no need to mine in order to maintain value in Altcoins, a simple transfer from Altcoin to Bitcoin (or any other asset that maintains wealth during deflationary periods) works for preservation of wealth. During contraction in demand below what would justify existing supply, the Bitcoin side becomes more attractive and wealth flows in greater volume
out of Altcoin and into the former. This is no different from the current shift of trend from holding wealth in fiat to real assets.
A potential concern might be transaction verification time based on participating nodes. In that case, system participants in need of such a service (e.g. retail merchants) will have to provide additional processing power to maintain transaction speed or contract with providers of such services. There is more to an economy than just the monetary base.
Gold is not excellent for wealth preservation. Its prohibitively limited quantity makes it a speculative vehicle. Speculation is not something one should have to engage in to retain wealth.
http://upload.wikimedia.org/wikipedia/commons/thumb/e/e3/Gold_price_in_USD.png/800px-Gold_price_in_USD.png - Anyone buying in on the way up or near the top most certainly did not preserve their wealth. It
is inflation-resistant though, but that is only because the property of fiat is to be inflative.
By using an analogous dual currency system that mimics gold and fiat, you are asking for the same problems.
I'll let 5,000+ years of history know you disagree. In the meantime, reality just left a message stating that I should tell you an ounce of gold from 2,000 BC is still an ounce of gold.
The dual currency system worked quite well until central banks began managing (read: distorting) supply. Bitcoin doesn't have humans at the helm controlling the supply; the known and verifiable point of failure has been removed from the equation (it isn't perfect - there
are other concerns). This is the core of what makes Bitcoin so powerful. Please try to understand this, otherwise further meaningful discussion will be very difficult.
Do you agree that the USD is a mature system? If you do, then how did we just see a world-wide recession based on the manipulation of credit? Those with the majority of wealth aimed to transfer more wealth to themselves by pushing currency around. And that is in a mature system, and they nearly collapsed the economy. Do you think Bitcoin will be immune to this because of no government? The government had little to do with any of this besides deregulation. Bitcoin absolutely begs for low fractional reserves with its restricted supply. Welcome to debt-based society yet again. Welcome to the manipulations of the top 20% in wealth impressed upon the bottom 80%. No goverment will be able to bail anyone out, so welcome to the recession to end all recessions.
As stated in my comment prior to this: management. Central banks' control over the supply in combination with heavy influence in the rules and regulation thereof. Without the human element now present in existing fiat systems, the one century to collapse we see now might take an order of magnitude longer.
Regulation has been
protective of those in positions to manipulate the money supply. Government is
complicit in the illegitimate expansion of the monetary base which is used as a store of wealth.
Bitcoin has removed the government, banks, regulators and any other direct form of control over the money supply. This is the critical aspect that allows it to function similarly to fiat, only better. It is
market participation, not the market itself, that gives rise to "manipulation" as those whom are more highly skilled at accrual of wealth in a closed system
will accumulate more than those that are not as good.
Just as gold removes the possibility of perpetual expansion, Bitcoin's monetary base limitation precludes subversion of existing wealth. The method that Bitcoin's system enforces the limit is the same way laws become entrenched: distributed agreement upon a tenet.
Interaction being cyclical, the dominant factions of a closed system eventually expend more resources maintaining and defending their share than accumulating, leading to smaller participants being able to make headway. The "manipulators" are
offensive until they can no longer accrue past a threshold, then they become
defensive and the smaller participants become the manipulators.
As an example: for decades, the large banks such as JP Morgan and Deutsche have been the "manipulators" and gamed the system. Recently, the Occupy Wall Street movement has been eroding the dominance exerted by the former that began its decline in the early 2000s. The dominating banks are on the defensive while the smaller participants are building their offense. That is the cyclical nature, and new dominant players will emerge from this populist movement.
Yes, they are representations. But these representations change in value based on external factors. A currency should make these external factors--these manipulations--as difficult as possible. Bitcoin makes it as easy as possible to transfer wealth up the chain. Altcoin makes it somewhat easy to transfer wealth down the chain. Neither is at all optimal. The poor won't use bitcoin, the rich won't use altcoin. Not a very productive currency. Governments attempt to alleviate the disparity by government spending, though we all know that this is another greed-fueled process that rarely benefits the majority.
Exactly. There is no perfect solution, only a balance of interaction between opposing forces. It's an
observation that has been made repeatedly throughout history, mostly via religion.
Altcoin is actually something I've agreed in the past as a genuinely better system than bitcoin or fiat. However, the decades it will take before altcoin stops being so volatile make it essentially worthless. It cannot adapt to large changes in demand or productivity. It will likely never have to as no one will adopt it.
This is an understandably confused perspective. It is not
functionally better than fiat: its supply is just governed more reliably. It is not "better" than Bitcoin: it is
complementary.
The key to this concept is the
interaction between components, even more so than the components themselves.
Yeah but I don't pay a 0.65% arbitration fee to move money from my savings to my checking. It is such a gross solution to the issues of bitcoin. "Start a sister currency LOL!"
Well, not really a currency if you can't spend it though, now is it? "Get your bitcoin bullion here! Only a 1% fee!"
You don't "pay" because of the return banks gain from holding your money for you. There are other ways the banks make money from holding your money so that they can entice you into entrusting your wealth to their safe-keeping. Checking accounts can be "swept" overnight to earn a return for the bank, and savings accounts are generally limited to a set number of monthly transactions because interest is paid to the client, precluding the bank from "eating" too many transaction fees behind the scenes.
Costs may be hidden from you, even buried, but there is
always a price to pay. Bankers and politicians are particularly adept at disguising true costs. Remember:
TINSTAAFL.
I did not say must. But if you want to hedge your bets evenly, you have to. Aka not be a speculator with your personal wealth.
No, it becomes easier to use a simple number and go from there without any real economic thought behind it. That is the only logic behind either of these distribution schemes. If you could create a currency that is similar to gold in that it is difficult to obtain but the difficulty of obtaining it stays relative throughout time, you would have a great foundation for a currency. Say you could compact 1 man-hour of work into a coin. 1 man-hour may have different productivity throughout time because of technological progress or whatever, but everyone knows what 1 man-hour is when you spend it. Or save it. Its value should not vary based on the whims of the 20%, its value should not vary based on the whims of the government.
From a trading perspective, hedging bets is prudent. In a mature system, the pace of change is glacial and obviates the need to stare at a screen just to protect one's assets. Having personal wealth in
any currency existing today is speculation anyway, so the point is largely moot.
When travelling abroad, use of traveler's cheques has been preferred to most other forms of transaction (modern digital equivalents notwithstanding for argument sake). This is not the case when conducting general transactions on a day-to-day basis. People use traveler's cheques for certain types of transactions, but they don't
store their wealth using them.
As discussed earlier, value is arrived at from the interaction between supply and demand. This carries to a point. Ultimately, the value of an item in
foreign denomination is determined by the
seller who is choosing to accept (or reject) a currency in exchange for an item with inherent value.
A relationally-static currency (closed system) will still experience "manipulation" as with any other. The distinction is that any additional methods of determination to arrive at the "appropriate" monetary base introduces unnecessary complexity. Simplicity of individual components precludes catastrophic failures while reserving complexity for the interactions between components. This is the same principle that has allowed computer technology to thrive - simple components that interoperate, the interaction of which gives rise to emergent properties (e.g. that internet thing). Monolithic designs easily approach scalability limits and incur the catastrophic failure that simplicity minimizes.
Bitcoin is elegantly simple and effective. Altcoin (or whatever the inflationary complement might be called) simply removes the unit base limit, maintaining simplicity in favor of interaction.
The bailouts were governments protecting the many from the greed of the few. Although in doing so they just let the greedy retain their power. But make no mistake that the greedy had everything to do with the latest recession, not the government. Mature market, nascent market does not matter. Greed will find a way if you give it one.
Really? So politicians actually saved the banks out the goodness of their hearts, and not to keep their own jobs? Right...
You're on the right track with the rest of your assessment, but reversed as to the order. The 2008 crisis was due to over-leveraged financial institutions failing. The most recent has been due to government intervention attempting to prevent widescale bankruptcies in addition to its own demise due to loss of public confidence. The European crisis erupting now is similar to the 2008 crisis of risky financial institution leverage, but that's been triggered early by acceleration of economic destabilization incurred from US gov't intervention. With the confluence and overlapping of numerous factors, the effects are amplified - the perfect storm.
Headlines mean nothing; they are reactionary, responding to undercurrents that have already occurred well before.
Follow the money.
We can certainly agree that greed (or disparities in perception/skill, whatever you want to call it) will find a way to develop - whether it's given a way or not.
Arbitrary feedback. pfft. The point is to come up with something that isn't arbitrary. I know that this is possible may come as a shock to many, but calling something that is not arbitrary, arbitrary, does not mean that it is.
It may not be arbitrary, but it
is unnecessary (even undesirable) for low level implementation. A better place for Encoin's methods to be introduced would be at one level of abstraction higher than the monetary base: i.e. the exchange level.
Encoin<-->Mt. Gox<-->Tradehill
\ /
\ /
ATC<-->BTC
The deflationary and inflationary monetary cores are universal and need to be kept as clean and simple as possible. Abstracting one layer to the exchange level allows all manner of operations to be performed
utilizing the underlying base. If that means providing a service that keeps a steady currency based on external factors, great. What could occur is widespread adoption of the derived exchange-level currency instead of the underlying components.
Risks are present, as centrally-managed currencies like these have shown. However, it should also be possible to construct a
decentralized derivative crypto-currency based off of an Altcoin/Bitcoin platform the same way an exchange would operate, thus retaining the benefits of distributed control. An exchange would just be technically easier to implement, especially during early stages of development and testing.
