Managing a medium of exchange

[ToddMarshall]

I've just begun to look into BitCoin as I'm interested in seeing a change to our current management of our medium of exchange, the dollar.

I didn't have to look very far to sense that BitCoin does not understand the management of an exchange medium.

First: You need to know what the media represents. In a medium of exchange, the media is "promises to complete trades". Thus, new media is created when someone makes a promise and media is extinguished when that promise is kept and the trade is complete. BitCoin seems to have no knowledge of trading.

Second: The manager of the exchange medium is ultimately responsible for broken promises. This is necessary to preserve the integrity of the exchange medium. The manager must observe the relation:

DEFAULT = INTEREST + INFLATION

When someone DEFAULTS on a trading promise, the medium manager must absorb that DEFAULT to maintain INFLATION at zero. From the relation we can see that the manager does this by collecting INTEREST equal to DEFAULTS.

Observation: The failure of BitCoin was obvious when the master of ceremonies of Gavin's presentation commented that he himself had "bought some BitCoins and they had already trippled in value". The media in a properly managed medium of exchange never changes value.

Todd Marshall
Plantersville, TX; USA

[stakhanov]

Bitcoins are not "managed". That's precisely one of the things that make them useful.

[barbarousrelic]

I've just begun to look into BitCoin as I'm interested in seeing a change to our current management of our medium of exchange, the dollar.

I didn't have to look very far to sense that BitCoin does not understand the management of an exchange medium.

First: You need to know what the media represents. In a medium of exchange, the media is "promises to complete trades". Thus, new media is created when someone makes a promise and media is extinguished when that promise is kept and the trade is complete. BitCoin seems to have no knowledge of trading.

It seems you are conflating 'money' with 'credit'.  A promise to pay is credit. The architecture of Bitcoin does not require credit, although individuals are free to promise each other a future payment in Bitcoin.

Second: The manager of the exchange medium is ultimately responsible for broken promises. This is necessary to preserve the integrity of the exchange medium.

This is not how Bitcoin is set up. If Adam borrows 50 BTC from Bob and promises to return the payment, Adam is the one responsible for repayment, not any manager of the money.

When someone DEFAULTS on a trading promise, the medium manager must absorb that DEFAULT to maintain INFLATION at zero. From the relation we can see that the manager does this by collecting INTEREST equal to DEFAULTS.

Inflation can also be kept at zero by having the lender absorb the default. He accepted this risk when he lent the money.

Observation: The failure of BitCoin was obvious when the master of ceremonies of Gavin's presentation commented that he himself had "bought some BitCoins and they had already trippled in value". The media in a properly managed medium of exchange never changes value.

Todd Marshall
Plantersville, TX; USA

Bitcoin is not actively managed, so call that 'improper' if you wish. While we bicker on here about whether it would be better to have new Bitcoins created for a longer time, or forever, the fact that they are created in a predictable and unmanaged way is perhaps the founding principle of what Bitcoin is about. If you don't like this, Bitcoin is probably not something you're going to want to use.

[deadlizard]

The media in a properly managed medium of exchange never changes value.

I was going to insult you but it seems a little bit cruel after this statement
kind of like teasing the special kid at school ...... 

Point me to a medium of exchange that has never changed in value and I will eat my hat.

[db]

Point me to a medium of exchange that has never changed in value and I will eat my hat.

Also, changed in value relative to what? Anything? Then no two things may ever change in value relative to each other.

[ryepdx]

Observation: The failure of BitCoin was obvious when the master of ceremonies of Gavin's presentation commented that he himself had "bought some BitCoins and they had already trippled in value". The media in a properly managed medium of exchange never changes value.

Your failure was obvious when didn't ask "tripled in value in relation to what?" It's nonsensical to say "never changes value," unless you mean "in relation to itself," in which case you're spouting inane tautologies. The value of things are always changing in relation to the medium used to measure value, and in relation to past values as well due to supply and demand. If the dollar falls, for example, everything else rises in value when measured by the dollar; if supply and demand for everything but dollars remains constant for decades and demand for dollars rises, then everything else will fall in value against the dollar.

And allow me to echo everyone else here by saying that the lack of a central manager is one of the great allures of bitcoins for me. The Bitcoin Project aims only to make a readily tradable digital analogue to a commodity. You can build anything on top of that layer if you like, but to build those layers is outside the scope of the Bitcoin Project's vision. Those layers are left as an exercise for the user, so to speak.

The utter wrongness and pomposity of your comment is appalling. I do hope I've misunderstood you.

Edit:
Sorry for stomping on the newbie. Certain things make my brain hurt. I can't be held liable for what I type when my brain hurts, can I?

[­­­Atlas_]

I believe you need to reread on what Bitcoin actually is.

[NghtRppr]

I didn't have to look very far to sense that BitCoin does not understand the management of an exchange medium.

Who is more likely to be mistaken, some guy that hasn't been studying Bitcoin for very long and came up with some objections off the top of his head or the entire Bitcoin community that has been debating the merits of the system for over a year? I think you should do some more research before making wild accusations.

[Anonymous]

Oh how the statists and central planning whackjobs rage........

[kiba]

Oh how the statists and central planning whackjobs rage........

[­­­Atlas_]

Oh how the statists and central planning whackjobs rage........

He's just critiquing the man's proposed "solutions" of currency management.

[ColdHardMetal]

Subscribing because I just can't believe I read what I did.

[eMansipater]

Edit:
Sorry for stomping on the newbie. Certain things make my brain hurt. I can't be held liable for what I type when my brain hurts, can I?

There seems to be a lot of that going around lately.  This is one of the reasons I believe it would be a great idea to have our own stackexchange site, specifically for answering questions in a dedicated environment.  For one thing, it would clearly distinguish the consistent non-stompers for the newbies' benefits.  To anyone who hasn't already subscribed to the proposal, please do that.

[goatpig]

There seems to be a lot of that going around lately.  This is one of the reasons I believe it would be a great idea to have our own stackexchange site, specifically for answering questions in a dedicated environment.  For one thing, it would clearly distinguish the consistent non-stompers for the newbies' benefits.  To anyone who hasn't already subscribed to the proposal, please do that.

Let's make a distinction here. There are brainwashed central banking and debt based economy lovers who come over this forum to "enlighten" us with whatever rationalization of this wretched system they came up with to make it all fit in their head. Those people don't intend to use Bitcoins nor do they understand it. Those you can bash.

Then there are newbies, who have a genuine interest in Bitcoin and are trying to understand it. Those you should be nice to.

[eMansipater]

There seems to be a lot of that going around lately.  This is one of the reasons I believe it would be a great idea to have our own stackexchange site, specifically for answering questions in a dedicated environment.  For one thing, it would clearly distinguish the consistent non-stompers for the newbies' benefits.  To anyone who hasn't already subscribed to the proposal, please do that.

Let's make a distinction here. There are brainwashed central banking and debt based economy lovers who come over this forum to "enlighten" us with whatever rationalization of this wretched system they came up with to make it all fit in their head. Those people don't intend to use Bitcoins nor do they understand it. Those you can bash.

Then there are newbies, who have a genuine interest in Bitcoin and are trying to understand it. Those you should be nice to.

Listen goatpig, you can probably count me as a "brainwashed central banking and debt based economy lover" myself--although I don't think existing monetary systems are optimal or sustainable I also think they're a hell of a lot better than nothing (Note what the OP himself says about the dollar in his very first sentence).  But that hasn't stopped me from embracing BitCoin as an incredibly powerful technology once I understood it, and it's also led me to ask very useful questions, in my own language, that have helped me understand it better.  Bitcoin is new, poorly explained, and counter-intuitive.  When it comes to helping newbies, check your idealogy at the door and if you don't have something nice to say don't say anything at all.  If you've no respect at all for the post, then don't feed the trolls.  Having a different perspective doesn't mean you can't learn to play nice with others--and my guess is most stompers aren't going to be writing a Ph.D explaining why they know what the hell they're talking about instead of just holding opinions anytime soon.  All I'm saying is have a little bit of respect for yourselves people--there's no need to go crazy on someone just to feel self-important.  Patiently and kindly explaining why someone is wrong (if you know!) will go a long, long way.  And if you're not able to do that, get cracking on launching the stack exchange proposal so we can have a newbie safe-zone for people to work at understanding BitCoin in peace.

@ToddMarshall if you're still around I believe there are actually valid answers to your concerns.  A lot of smart people have taken a pretty close look at BitCoin and found that it either solves a different problem than they thought it did, or that it solves the one they thought it didn't in an elegant and unexpected way.  I'll be happy to answer anything that's phrased as a question if that claim makes you curious.  BitCoin is counter-intuitive.  But I've also come to believe that it works, so ask away!


edit: fixed some unnecessary snarkiness myself

[goatpig]

Ok Mansy!

I didn't have to look very far to sense that BitCoin does not understand the management of an exchange medium.

Considering the first thing you learn about Bitcoin is that it is decentralized, I guess this guy is a troll and I fed him. Mea culpa.

[no to the gold cult]

I've just begun to look into BitCoin as I'm interested in seeing a change to our current management of our medium of exchange, the dollar.

I didn't have to look very far to sense that BitCoin does not understand the management of an exchange medium.

First: You need to know what the media represents. In a medium of exchange, the media is "promises to complete trades". Thus, new media is created when someone makes a promise and media is extinguished when that promise is kept and the trade is complete. BitCoin seems to have no knowledge of trading.

Second: The manager of the exchange medium is ultimately responsible for broken promises. This is necessary to preserve the integrity of the exchange medium. The manager must observe the relation:

DEFAULT = INTEREST + INFLATION

When someone DEFAULTS on a trading promise, the medium manager must absorb that DEFAULT to maintain INFLATION at zero. From the relation we can see that the manager does this by collecting INTEREST equal to DEFAULTS.

Observation: The failure of BitCoin was obvious when the master of ceremonies of Gavin's presentation commented that he himself had "bought some BitCoins and they had already trippled in value". The media in a properly managed medium of exchange never changes value.

Todd Marshall
Plantersville, TX; USA

[Gavin Andresen]

Be nice, y'all.  Todd emailed me directly and I steered him here because I don't have time to talk about economic theory with everybody who emails me these days.

Todd:  if you were designing a new currency, what would it look like?  Are you imagining a LETS-like system of credit?

Bitcoin is designed to be like a scarce natural resource, which is pretty conservative, really-- scarce natural resources have a long history of being used as currency.  I don't know enough about the alternatives to know whether or not they could work as an Internet currency-- the LETS systems I've heard about all rely on local interactions and trust to keep people from cheating.

PS: I'm going to move this thread to the Economics forum.

[ffe]

I've just begun to look into BitCoin as I'm interested in seeing a change to our current management of our medium of exchange, the dollar.

I didn't have to look very far to sense that BitCoin does not understand the management of an exchange medium.

First: You need to know what the media represents. In a medium of exchange, the media is "promises to complete trades". Thus, new media is created when someone makes a promise and media is extinguished when that promise is kept and the trade is complete. BitCoin seems to have no knowledge of trading.

Second: The manager of the exchange medium is ultimately responsible for broken promises. This is necessary to preserve the integrity of the exchange medium. The manager must observe the relation:

DEFAULT = INTEREST + INFLATION

When someone DEFAULTS on a trading promise, the medium manager must absorb that DEFAULT to maintain INFLATION at zero. From the relation we can see that the manager does this by collecting INTEREST equal to DEFAULTS.

Observation: The failure of BitCoin was obvious when the master of ceremonies of Gavin's presentation commented that he himself had "bought some BitCoins and they had already trippled in value". The media in a properly managed medium of exchange never changes value.

Todd Marshall
Plantersville, TX; USA

Todd,

I think of four uses for money; Store of Value, Medium of Exchange, Unit of Account, and Stabilizing Demand (by governments manipulating the supply of money).

With bitcoin, as you've probably gathered, the amount of bitcoin produced is preset and not subject to “management”. This makes it a desirable store of value. If it ever gets easy to go into and out of bitcoin it becomes a great medium of exchange due to ease of use and anonymity properties.

It's only when you start thinking of bitcoin as the unit of account (salaries and prices) for the wider economy that stabilizing demand through managing the supply of bitcoin is an issue. I think most people interested in bitcoin don’t feel that that is a desirable use of bitcoin. They’re happy the total demand in the economy is something that cannot be nudged up or down by producing or destroying the currency their wealth is stored in.

As has been said elsewhere, bitcoin will probably never be the unit for setting salaries or prices in the real economy. Business loans will not be denominated in bitcoin and interest rates will not be driven by inflation or deflation in bitcoin. So I guess bitcoin will not be the "change in the dollar" that you desire.

On the other hand these forums are a great place for discussing "what if" variations building on the core technologies of bitcoin. What properties do you think bitcoin should have to consider it a replacement for the dollar? Why would it be any better than the dollar if it can be "managed"?

[Gluskab]

*Grunch*

"I knew the failure of the dollar was inevitable once I bought some in 1912 and they had (officially) lost 98% of their value not even 100 years later."