Who would have spent their Yens in 1910, then? Why, noone of course!
What is wrong is your assertion that people will not exchange a currency because it will invariably increase in value...
People need goods to survive, the medium will have to exchange in order to satisfy the time preference...
Someone spending $1 now to create $1 worth of coins isn't a person who needs goods to survive. He's probably an investor, or will end up paying his coins to an investor.
Are you suggesting someone will hoard a virtual asset because it will increase in value and never use it?
Well this is silly, (in this case bitcoin trade-able production) the value will increase as the amount of products that are exchangeable for bitcoin increase, it is an increase in utility that will determine the fate of bitcoin...
This increase is one of the main reasons Bitcoin is doomed under the current model. I think you lost me.
As it is an alternative currency, it will have the drawback of the bi-metal fiasco, but the expectation is because there will be a cap in the amount of bitcoins ever available, bitcoin would win the value race IF, and only IF we can generate a real economy with bitcoin as the monetary agent.
Which will not happen under the current model due to its enormous "investability".
How to do this...
Stability, utility is important to gain the acceptance, stability will retain it, so long as we are operating outside legislation and people individually need to make the choice...
Which will also not happen under the current model due to increasing generating cost.
Bickering about theory when action is necessary is useless...
Taking thoughtless action without proper planning is catastrophic.
Good discussions, valid points and constructive arguments are offered by all in this thread.
I disagree for obvious reasons :p
(1) I don't currently see Bitcoins as a currency. At the moment they are a commodity with potential 'real' economic value for the future. When investigating Bitcoins as a valid currency (using neural networks and comparisons with other existing currencies, commodities and existing markets) the more I see Bitcoins future model behaving somewhat like Gold i.e. a fairly stable 'base' commodity / currency.
Gold didn't become increasingly difficult to mine from the first day it was discovered. And by the time it becomes impossible to mine anymore, nobody would be using it as a medium of exchange. And if they were, the world would be doomed by depression because everybody would be saving as much as they can because their gold would be worth more tomorrow. Mild inflation (or stability at least) solves this problem.
(2) I don't see the current Bitcoin economic model as unsustainable. The fact that their are a finite number of Bitcoins, is precisely what gives them any potential / actual economic value at all.
That doesn't make sense. All (infinite) fiat currencies have a value. Infinite milk and infinite corn have a value. Infinite electricity has a value. Why are you people so obsessed with the idea of "finite supply"?
(3) Bitcoins are a finite 'base' commodity / currency. So, when 'production' eventually slows down to an unacceptable and perhaps unusable rate you simply introduce a 2nd 'Bitcoin' client which provides an infinite supply of eCurrency which is based on 'real' Bitcoin production and / or exchange rates.
Let's call it 'Bitnote' i.e. an infinite electronic 'paper money' which is based on real Bitcoin 'value' and Bitcoins existing model. Similar to what the banks did with the inception of real 'paper money' !
Why not just use more decimals on the existing coin?
(4) Concerns over hoarding, bot net control, government and bank intervention etc. can largely be solved by increasing Bitcoins user base as quickly as possible. No one wants to see a monopoly for a peer-to-peer network based anonymous digital currency.
With 144 daily blocks, you can hardly keep a large user base interested. Sooner or later (especially if a botnet or a supercomputer began competing with us) you'll need to work months before seeing a single block appear. All this has to change.
Get ready for the 'Gold Rush' !
Soon to be followed by a 'Gold Crash' (probably)
Hoarding is a silly notion, sure someone may do such, but at the peril of the thing they are hoarding becomes useless and therefore destroys the value, if I were to control all the bitcoins, as there is no mandate securing the use of such a media, everyone can move to another media, and additional to this fact, since we have left the realm of legality, what stops someone from creating a competing currency, or any number of people, which if hoarding takes place utility diminishes and value decreases, people then move their product in other free market money supplies...
The commodity is not the coin, it is the products that the coin is accepted in trade for, it has no inherent value of its own, just a value in relation to what one may obtain for a certain unit of it...
Right. Consider it an un-self-fulfilling prophecy. Because people with reasonable economic background and thought can predict right now that all this would happen, they wouldn't probably use Bitcoin in the first place.
Sorry for getting carried away Suggester. I get frustrated when I encounter someone as stubborn as myself.
NP. I'll probably keep frustrating you for quite some time then
I again changed my mind for my preferred way for some Bitcoin variant to work. I don't like the idea I had of increasing at the rate of worldwide human population growth because it creates ugly fractions.
You never stop surprising me with your analysis man.
If the rate at which blocks are generated is on average constant and the amount of bitcoins awarded for generating a block is constant then bitcoin availability is not really infinite. Sure, infinitely in the future there are infinite bitcoins, but if you pick any point in the future, you know exactly how many bitcoins are available.
That doesn't make it "finite". It's infinite but accurately predicted.
On the other hand if the amount of bitcoins awarded for generating a block is variable, then the botnet operator becomes the bitcoin reserve. Likewise, if a botnet decides to work hard on Bitcoin under the current model for 32 years, he is then and forever the reserve. I don't like the current model or Suggester's model because it allows for the currency to be horded by the few. It gives advantage to whoever has access to more processing power than everyone else. I like my model because it gives as much of an advantage to the people as is possible. Sure the the person with lots of computing power can edge everyone else out, but only so long as he keeps working on it forever. The moment he stops, or whenever people collectively offer more computing power, the advantage doesn't completely balance out, but it becomes less skewed.
Stop worrying about botnets, please. They're gonna have an edge under any model. Plus they don't change anything economically. They are just as if normal people donated their coins to a charity or whatever. Limited blocks means people need to wait more for coins to appear in their console, which means less people interested in joining the network after some threshold (maybe 1000 connected machines or something. 500 machines 4 years from now, etc). Bitcoin needs more people to join in order to both spread the system worldwide and for the proof-of-work to be strong.
At best, they'll discredit Bitcoin with endless propaganda. At worst, they'll hunt us down as "criminals" and "terrorists".
I think that it's in the benefit of everyone, including the rich when the gap between the rich and the workers is under control.
dwdollar, I think we can safely add add "communists" to your list.
On a side note, NLE, my model of unlimited coin production is very communist because it doesn't grant any advantage to early starters. You won't need to exert double the effort in 4 years to generate the same amount of coins today. Just put your CPU to work (or buy electricity-in-the-form-of-BTCs from an Indian exchanger) and you'll get what you paid for in untraceable, nontaxable, spendable coins. Plain and simple. It's not fair to grant this huge advantage to early adopters on the expense of later comers (even it wasn't going to crash the whole thing!)
Infinite BTC production will cause the same issues we have today, inflationary bubbles and then busts, this will deter people from using BTC as they will already have the same
service with government mandated Fiat, and no risk of penalty for using that...
This has to be the most biased statement in this thread. Compared to fiat currencies, bitcoin is a wild crazy horse which will undergo extreme bubbles and bursts. Fiat currencies are fairly stable in price.
You are forgetting the point that BTC only has any real value in trade, so the people generating the coins will have to trade them in order to maintain their value. If I hoard 20 million BTC, the Value of the other Million will decline as utility will not support BTC, I do not think it will need to come to that with the precariously small number of coins. Hoarding will be seen, by economic tells, within a 10% share hoard. I will tell you right now, there is "hoarding" because of the small amount of available business in BTC,
So the hoarder will spend some of his coins in order to give value to the rest? This will only lead to another hoarder jumping at this chance to add some more to his hoarded hoards. If the current system was successful (which it won't be), investors will gladly liquidate some of their 10%-yielding assets to purchase the 20%-yielding coin. You guys are missing the whole point. Hoarding = No exchange, period.
I am, but my "hoarding" is waiting for products I want, there is little utility as of yet in BTC for me, though I am willing to do business in BTC.
Ain't gonna happen if the current model isn't rectified.
The democratic governments is what is wrong with the current monetary system which inspired this creation, maybe we should stop considering them as good. They violate human rights as a constant activity, they murder on wholesale levels, the rob entire populations, they enslave humans, all without any threat of punishment...
True. But the problem is, dictatorships weren't/aren't any better.