How to fix bitcoin

[MoonShadow]

of course i'm not certain but one cannot fault the logic.  i understand the inflation logic too but deflation makes more sense to me right now.

You are correct that I cannot fault the logic.

[iya]

they want to force us all to default with another secondary deflationary wave and then take the underlying assets away and OWN America.

This makes no sense. If you're talking about foreclosure, then they already rightfully own those assets, but they cannot make a profit or brake even during a default. All assets not bought on credit will appreciate in value and cannot be bought more easily than before.

Ultimately it's about the government deficit. Higher deficit = more inflation necessary.
The only alternatives are government default or bailout. Europe currently does a combination of both, but the bailout part will hit its limits if bigger countries like Spain or Italy need help. In the case of the US, it's practically impossible.


To the points raised about fiat and intrinsic value:
It's not hard to define. The intrinsic value is the (subjective) commodity value outside of being a medium for exchange. It's not necessary for this to be especially high, like in the case of gold. It just sets a lower limit for marketability.
If trading is done mainly electronically or with 100% backed paper, etc., golds advantages are reduced and it could be that another commodity will win out.

[steelhouse]

IMHO, the best investment right now is shorting stocks.

stocks, gold, silver, real estate are good to buy.

[Alex Beckenham]

IMHO, the best investment right now is shorting stocks.

nonsense it is best to be in 100% stocks at all times.

Especially Lehman, HIH, Onetel, Enron.

[cypherdoc]

"nonsense it is best to be in 100% stocks at all times."

hows that worked out over the last 10 yrs?  2 crashes of over 55% in the last decade.  did you hold on during both plunges?

[steelhouse]

as a holder of PM bullion, i'll argue that PM's have history behind them as well as a physicality.  ppl like to touch and feel there money.  also the hobo on the street can trade it as well as USD.  these are the advantages of the current system.  having said all that, i do see potential in Bitcoin but it has a long uphill battle to fight.  Steelhouse is right, ultimately you need large merchants who will accept it.  all this talk here about how bitcoin is already a currency is way too premature.  i've looked at many of the transactions and they are way too small in value and volume to be conclusive.  in fact, there is an attempt by the geek community to "prop" transactions and commerce to legitimize the bitcoin concept.  not saying it to criticize, but it is what it is.  its just way too early to tell.

I think I figured out the missing link in bitcoin.  IMHO, bitcoin can be cornered and might already be.  This is the method Bill Still said was used to steal 1/2 the homes west of the Mississippi in the 1800s.  Support a high currency then crash it, take loans with it.  Might even be used today in this housing market.

Say you privately back bitcoin at $1 per coin - all 21,000,000 of them.  Suppose one you wake-up and the price is $1.25 you can sell 10000 and make $2500.  One day the price will drop to $0.80 and the manipulator will buy til the price reaches $1.  The manipulator might cause wide fluctuations in the price of bitcoin to create chaos to gain the most.

I think you should find a backer of this currency to publicly back it with a stable currency/commodity like aluminum and announce what the backing rate is.  You can also use part of the transaction fees to create the worlds first appreciating currency.

[cypherdoc]

not to mention CFC, DSL, WM, Wachovia, Bear Stearns, Merrill, Indy Mac, MBIA, Ambac, and how many others?  Financials still in the toilet along with housing for how many years?  Wait til the next plunge and we may be there right now on the precipice.  the only reason for the recent 2 yr ramp is b/c of Ben and the liquidity pump and how sustainable is that?

[steelhouse]

IMHO, the best investment right now is shorting stocks.

nonsense it is best to be in 100% stocks at all times.

Especially Lehman, HIH, Onetel, Enron.

AAPL AZO NVR ... You buy companies with real earnings.  Gold and silver good too.

[cypherdoc]

i'm beginning to wonder if the MtGox price is being manipulated as well.  if i setup 2 different accts funded with USD and decide to bid up the price of pizza back and forth with each transactions $0.10 higher than the last, in a thin mkt like we have i could become the HFT of MtGox.

[cypherdoc]

assuming you're a perfect stock picker and avoided the calamities of the previous teflon stocks like the investment banks.

[FreeMoney]

i'm beginning to wonder if the MtGox price is being manipulated as well.  if i setup 2 different accts funded with USD and decide to bid up the price of pizza back and forth with each transactions $0.10 higher than the last, in a thin mkt like we have i could become the HFT of MtGox.

No one serious cares what the last price was they care about what offers are available now. Some joker playing with himself doesn't affect the top bid and bottom ask.

[cypherdoc]

HFT are forced to take out the bottom ask if you jump in the middle of their manipulation but a determined HFT can move the price up esp. in a thin mkt despite ppl dumping shares to them on the way up.  Many folks believe they have been a major force in the last 2 yr ramp.

[iya]

Are you implying that HFT is a problem?
Every trader who can turn a profit makes the market more efficient. Of course they push the price up and down, but the new price will better reflect reality, i.e. current and future supply and demand.

You can clearly see this in an illiquid market like Bitcoin: every large order creates huge market movements.
If these were anticipated by speculators, volatility would be reduced.

[smellyBobby]

I recall reading(and I Wish I had the link) somewhere that HFT has issues; market makers are paided for each trade that they put through, and that they have designed strategies where, they will buy the ask and sell straight to the bid. They can do this because they have faster access to the exchange than less privileged players in the market.  So in that scenerio it may appear the make a profit simply for intercepting the trade..... Do that multiple times a day.....

There were two other strategies that were used, and in no way helped price the stock, merely took away from other participants in the market.

[benjamindees]

This discussion is now about how to "fix" Bitcoin.

[BitterTea]

This discussion is now about how to "fix" Bitcoin.

Which necessitates a discussion about what exactly is broken and needs fixing.

I still have not seen a convincing argument that Bitcoin is biased toward early adopters in negative way.

edit... Nor does Bitcoin require "backing" by any metal, in my opinion.

[deadlizard]

Which necessitates a discussion about what exactly is broken and needs fixing.

I am unable to inflate the bitcoin supply for fun and profit. it's obviously broken

[steelhouse]

There might be a good reason for someone to control the currency.  BTC has a built in transaction cost mechanism also all the USD/BTC exchanges seem to have a fee involved.  It is in their best interest for these guys to maintain a peg to bitcoin in USD.  Something to think about.  Thus they profit on all transactions.  If I was megawealthy.  I would try to peg bitcoin to a certain amount maybe 1/100th ounce of silver, then run an exchange service.  Just callme JP Morgan or Rothschild.

[steelhouse]

There might be a good reason for someone to control the currency.  BTC has a built in transaction cost mechanism also all the USD/BTC exchanges seem to have a fee involved.  It is in their best interest for these guys to maintain a peg to bitcoin in USD.  Something to think about.  Thus they profit on all transactions.  If I was megawealthy.  I would try to peg bitcoin to a certain amount maybe 1/100th ounce of silver, then run an exchange service.  Just callme JP Morgan or Rothschild.

So, how would this relate to the actual costs involved in operating the Bitcoin network?

None but if the pegger ever decides to close shop and walk away the economy will collapse and the loans will collapse.  Watch the 2 Bill Still videos I recommended.

[em3rgentOrdr]

None but if the pegger ever decides to close shop and walk away the economy will collapse and the loans will collapse.  Watch the 2 Bill Still videos I recommended.

There is no pegger.  Please read the bitcoin faq.