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Author Topic: THE IMPLICATIONS OF THE MONETARY BASE OF BITCOIN ON ALTERNATIVE CRYPTOCURRENCIES  (Read 1320 times)
vandinn
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September 01, 2014, 10:29:29 PM
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Hi guys,

I wrote a Bachelor's thesis on THE IMPLICATIONS OF THE PREDETERMINED FINITE MONETARY BASE OF BITCOIN ON ALTERNATIVE CRYPTOGRAPHIC CURRENCIES.

Here's the abstract:

The cryptographic currency market has developed considerably since Bitcoin’s inception in 2009, and now has the ability to affect real-world economies. Some economists believe that certain forces (e.g., network effects, switching costs, government restrictions) prevent nongovernment monetary systems to occur. However, the recent growth of cryptocurrencies reveals that they have the potential to challenge the status quo of government-issued money systems. This study examines the forces that could potentially lead to the establishment of a money market leader, and then uses the findings to assess the impact of Bitcoin’s monetary base on Bitcoin itself, as well as on alternative cryptographic currencies. Results reveal that Bitcoin’s economic parameters were useful in the initial adoption of the currency; however, these parameters limit the cryptocurrency to work as an alternative to fiat money.


And here is the rest for anybody who wants to read the conclusion too: https://docs.google.com/file/d/0B6IyNaO3yNICYkFDckJaTTBXY1k/edit


Constructive feedback is welcome!


Martin
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NapoleonBonaparte
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September 02, 2014, 02:49:41 AM
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Bitcoin is still a new idea in its infant stage. There are many still do not believe bitcoin can last another decade.

Technology and changes occur fast. None of the altcoins have prove itself not to be a pump and dump coin yet.

The whole crypto currencies regime still look like a fool paradise to me.
shockinglyugly
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September 02, 2014, 03:07:20 AM
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Hi guys,

I wrote a Bachelor's thesis on THE IMPLICATIONS OF THE PREDETERMINED FINITE MONETARY BASE OF BITCOIN ON ALTERNATIVE CRYPTOGRAPHIC CURRENCIES.

Here's the abstract:

The cryptographic currency market has developed considerably since Bitcoin’s inception in 2009, and now has the ability to affect real-world economies. Some economists believe that certain forces (e.g., network effects, switching costs, government restrictions) prevent nongovernment monetary systems to occur. However, the recent growth of cryptocurrencies reveals that they have the potential to challenge the status quo of government-issued money systems. This study examines the forces that could potentially lead to the establishment of a money market leader, and then uses the findings to assess the impact of Bitcoin’s monetary base on Bitcoin itself, as well as on alternative cryptographic currencies. Results reveal that Bitcoin’s economic parameters were useful in the initial adoption of the currency; however, these parameters limit the cryptocurrency to work as an alternative to fiat money.


And here is the rest for anybody who wants to read the conclusion too: https://docs.google.com/file/d/0B6IyNaO3yNICYkFDckJaTTBXY1k/edit


Constructive feedback is welcome!


Martin
I am not sure how you came to this conclusion. The current state of bitcoin (and all other alts) is such that it is nowhere near challenging this status quo. At best bitcoin is being used side by side with government based fiat.
BitcoinBadger
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September 02, 2014, 03:07:01 PM
 #4

Bitcoin is still a new idea in its infant stage. There are many still do not believe bitcoin can last another decade.

Technology and changes occur fast. None of the altcoins have prove itself not to be a pump and dump coin yet.

The whole crypto currencies regime still look like a fool paradise to me.
You are right,alts are only pump and dump coins that they have survived only due to those people who doesn't uses bitcoin but out of fantasy they use/make altcoins
MightyBTC
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September 04, 2014, 07:00:24 PM
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Many people are making and developing many new alts these days.Bitcoin technology is so irresistible to resist
wasserman99
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September 04, 2014, 10:57:52 PM
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Bitcoin is still a new idea in its infant stage. There are many still do not believe bitcoin can last another decade.

Technology and changes occur fast. None of the altcoins have prove itself not to be a pump and dump coin yet.

The whole crypto currencies regime still look like a fool paradise to me.
You are right,alts are only pump and dump coins that they have survived only due to those people who doesn't uses bitcoin but out of fantasy they use/make altcoins
I disagree. The altcoins that have survived are the ones which have been early to the crypto currency "game". They were the first ones to enter into the market after bitcoin had showed early success. Except for these very early to the crypto currency world have had very little to no real trade outside of currency to currency exchanges.

odolvlobo
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September 05, 2014, 08:00:24 AM
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Bitcoin’s money supply is set so that it halves roughly every four years, until it reaches 21 million coins in circulation (Nakamoto, 2008).

The increase in the money supply halves, not the money supply itself.

More importantly, your assertion that value of a bitcoin is more volatile because of the fixed money supply is flawed. The flaw is the conflation of "supply" in "supply and demand" and "money supply". The meanings of the word "supply" in these two concepts are very different. The quantities of bitcoins available to meet demand (the "supply") comes from holders of bitcoins. You cannot claim that supply is fixed just because the money supply is fixed.

As the quantity in the supply curve approaches the money supply limit, we can assume that the price and slope approach infinity, and near that point the supply is inelastic and the price is very volatile as you claim. However, note that increased hoarding of bitcoins (or simply holding) raises the supply curve and moves the intersection with the demand curve away from the money supply limit and towards higher elasticity and decreased volatility.

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lihuajkl
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September 05, 2014, 09:29:27 AM
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Bitcoin's success attracts lots of scammers who ether create crap coins or exploit the flaws of the protocol or exchange to grab a lot of money, which in turn make the cryptocurrency have bad reputation. And it delays the mass adoption.

My blog:http://coinour.com/
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vandinn
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September 09, 2014, 10:59:57 PM
 #9

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Bitcoin’s money supply is set so that it halves roughly every four years, until it reaches 21 million coins in circulation (Nakamoto, 2008).

The increase in the money supply halves, not the money supply itself.

More importantly, your assertion that value of a bitcoin is more volatile because of the fixed money supply is flawed. The flaw is the conflation of "supply" in "supply and demand" and "money supply". The meanings of the word "supply" in these two concepts are very different. The quantities of bitcoins available to meet demand (the "supply") comes from holders of bitcoins. You cannot claim that supply is fixed just because the money supply is fixed.

As the quantity in the supply curve approaches the money supply limit, we can assume that the price and slope approach infinity, and near that point the supply is inelastic and the price is very volatile as you claim. However, note that increased hoarding of bitcoins (or simply holding) raises the supply curve and moves the intersection with the demand curve away from the money supply limit and towards higher elasticity and decreased volatility.

Thank you for your response; I really appreciate someone is actually reacting to what I wrote. You are absolutely right about the increase in the money supply, I'm not sure how that mistake slipped into the paper.

I don't understand your distinction between money supply and supply (to meet demand). There will be 21 million Bitcoins in the future, and unless fractional reserve banking is adopted that will also be the money supply. (Fractional reserve banking is likely to be adopted only in a limited form, due to Bitcoin's inherent volatility and illiquidity.) I don't see how Bitcoin's supply curve might be raised by the increased hoarding of Bitcoins. If you mean the amount of Bitcoins offered on exchanges, then if Bitcoin is hoarded, its price will rise, encouraging some of its holders to sell it and profit on the trade. But there will still be the same amount of Bitcoins among its users. Because the price must rise to accommodate the increased demand (no new Bitcoins can be created), it makes Bitcoin's price unstable, hence volatile, not ideal for money.
odolvlobo
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September 10, 2014, 12:08:16 AM
 #10

I was thinking along the lines of this supply/demand graph. Purple is demand, red is supply, green line would be supply with increased hoarding.

But, now that I look at the graph, it is not clear to me that hoarding would necessarily increase elasticity because it depends on many factors that affect the curves.



My distinction between money supply and supply (to meet demand) is simply that money supply is a limit and represents only one point on the supply curve.

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NeedsMoreBTC
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September 10, 2014, 06:40:56 PM
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Most alts are shit and they just want more BTC, but some are legit.
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September 10, 2014, 06:53:27 PM
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Every1 want more BTC  Grin

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