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Author Topic: Am I misunderstanding this or?  (Read 7501 times)
Grouver (BtcBalance)
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May 16, 2012, 10:38:50 AM
 #1

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

Thanks for enlighting.

-Grouver-

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May 16, 2012, 10:44:42 AM
 #2

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

Thanks for enlighting.

-Grouver-

Replace "bitcoin" with "gold" and you might be able to answer that yourself.

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May 16, 2012, 11:10:29 AM
 #3

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?

The appreciating value of the currency is not the only factor used when choosing which method to use when making a payment.  The cost savings from using Bitcoin more than offsets the cost to replenish the amount of bitcoins used for spending, thus protecting it from any deflationary spiral.

Described further here:
  - http://bitcointalk.org/index.php?topic=80018.msg887005#msg887005
Grouver (BtcBalance)
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May 16, 2012, 11:11:59 AM
 #4

Put another way, why would anyone keep their Bitcoins sitting around doing nothing when those coins could be put to work producing an economy and accruing interest?

Because the majority are not really into bitcoins and don't want to undertake any complicated investing proces with bitcoins.
They just bought bitcoins with only one reason. It's gonna get scarce and the value will rise. They see it as a long term investment.
I mean, for example why should I buy a steam game with bitcoins if I maybe can buy 10 steam games with bitcoins within 2 years.
Why spend today if I can spend the half of the ammount for the same thing tommorow?

Why sell your gold today if you know (have a feeling) the value is gonna increase tremendously?

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May 16, 2012, 11:24:33 AM
 #5

scarce (wich equals to more value)
Scarcity doesn't make something more valuable. If you can't buy anything with Bitcoin/gold/USD/whatever, it's useless as a medium of exchange.

Why would anyone buy something which has no use?

Being a "medium of exchange" is not the only utility of bitcoin. All "sound moneys" are also useful to store value. And for that, no commerce other than the exchange for other currencies needs to exist.

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May 16, 2012, 11:24:49 AM
 #6

Why spend today if I can spend the half of the ammount for the same thing tommorow?

Ok, so there will be some coins hoarded and others spent regardless if the value will go up or not.  What's the problem then?
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May 16, 2012, 11:27:35 AM
 #7

I mean, for example why should I buy a steam game with bitcoins if I maybe can buy 10 steam games with bitcoins within 2 years.

Because you may want it now.

The same question could apply to any high tech product. Why buy a computer if you know that in two years the same computer will be much cheaper, or with the same amount you'll be able to afford something better? And the answer again is the same: because you want the computer now.

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May 16, 2012, 11:28:16 AM
 #8

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?

The appreciating value of the currency is not the only factor used when choosing which method to use when making a payment. 

+1

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May 16, 2012, 11:37:19 AM
 #9

I am hoarding until Dec 2012 when the price is doubling. Kiss

Why use BTC when I can use USD Huh
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May 16, 2012, 11:41:13 AM
 #10


What utility does Bitcoin have outside of being a medium of exchange? With PMs, they have utility as industrial goods.

Not $1,535 per ounce worth of utility it doesn't.

If Bitcoin can maintain value due to utility outside of being a medium of exchange, then so could all the Bitcoin clones,

Bitcoin very well could have been that one and only one to sneak through the vulnerable startup phase without being attacked.  There was plenty of computing power that could have messed with bitcoin but that never happened because it wasn't seen as a threat to anyone.

This might be remedied for an alternative chain though where it is centralized but still rewards miners with new currency to attract hashing capacity and to circulate the initial coins, and then switch over to a true decentralized, proof of work method at a certain block.

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May 16, 2012, 11:53:16 AM
 #11

scarce (wich equals to more value)
Scarcity doesn't make something more valuable. If you can't buy anything with Bitcoin/gold/USD/whatever, it's useless as a medium of exchange.

Why would anyone buy something which has no use?

Being a "medium of exchange" is not the only utility of bitcoin. All "sound moneys" are also useful to store value. And for that, no commerce other than the exchange of against other currencies needs to exist.
What utility does Bitcoin have outside of being a medium of exchange?

It's right in the text of mine you just quoted: store of value.

If Bitcoin can maintain value due to utility outside of being a medium of exchange, then so could all the Bitcoin clones,

The "clones" haven't managed to convince enough people that they are a good store of value. But, they've convinced a few, that's why they have some value instead of no value at all.

meaning Bitcoins should be worthless due to the lack of scarcity when it's cloned hundreds of times.

They are not actual clones. An identical clone would be a "fake bitcoin", which is impossible. They are different things, different "coins". The original bitcoins remain scarce, no matter how much equivalent implementations are done.

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May 16, 2012, 12:30:35 PM
 #12

"STORE OF VALUE" IS A SYMPTOM OF USEFULNESS!

It's an usefulness in itself. (and why the yelling? getting stressed so easily?)

If I make a sword out of bird shit and just build one -- and let's say nobody else can build it, does it necessarily have value because it's scarce?

If you convince other people it's a good store of value, it might. That's not easy at all, though.
By the way, if at least you value your shit sword, then it already has value - to you, at least.

If people quit using Bitcoins as a medium of exchange to purchase goods, other mediums of exchange, or services, then it would be worthless. It doesn't matter if everyone still has the same number of coins, because you can't buy anything with them.

If you can still trade them for currency at least, it can be used as a store of value.
It's true that if there really isn't any function at all to something, then it will not have value.
The only thing I'm trying to say is that this claim that bitcoin needs to be used in commerce (trading it for goods and services) to have value is false. It doesn't need to, although it helps a lot to have such utility.

Why are Bitcoins worth $5 now, but $.00001 a couple years ago?

Because prices change?

Bitcoins are multitudes less scarce than then, and it has the same ability to store values as it did when it was created (okay - arguably less because the network was less secured).

Prices are a function of scarcity and demand. A particular usefulness of a scarce resource won't necessarily translate into demand until this usefulness is perceived and desired by people.

Bitcoin is a fantastic medium of exchange. It's irreversible, extremely easy to send to someone else, doesn't require a clunky centralized payment processing systems to quickly use online or send internationally, and is pseudonymous. Those are all great, but that doesn't cause Bitcoins to be worth anything -- what causes them to be worth something is because originally, a few people saw potential in it.

Agreed.

Bitcoin doesn't inherently have value - people give it value

That's true for absolutely everything which has value. There's no such a thing as "inherent value".


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Grouver (BtcBalance)
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May 16, 2012, 12:33:41 PM
 #13

To say it simple.
How many people are selling there gold now?
Not alot I guess, since its a long term investment for the most right?
Why do they not sell there gold? Cause they believe its getting worth more in the near future right?

Doens't Bitcoin have the same thing right now?
Also, lets not forget that alot of people bought high when Bitcoin price was at its peak or above $10 and don't want to sell low.
They can just hoard it and wait till it gets high again some time around 2020.

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May 16, 2012, 07:04:39 PM
 #14

Doens't Bitcoin have the same thing right now?
Also, lets not forget that alot of people bought high when Bitcoin price was at its peak or above $10 and don't want to sell low.
They can just hoard it and wait till it gets high again some time around 2020.

I'm trying to suss why you see this as such a problem though.

I don't know the numbers but let's say in the past month, 8 million of the 9 million BTCs issued didn't move, and were not used in any commerce.  Only 1 million BTC were.  But bitcoin being sent electronically with settlement within minutes (e.g., 1 or 2 confirmations) and divisible to a tiny fraction of a penny worth of money, that economy can function no different with 1 million BTC than with 9 million BTC, right?

So what is the problem with people sitting on those 8 million BTC?

I presume the real problem with this is that the exchange rate could easily plummet with the percent of hoarding being such a significant amount of all the currency issued.  But I want to know if that's the reason you are seeing such a problem with the hoarding by some.
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May 16, 2012, 08:00:00 PM
 #15

Why spend today if I can spend the half of the ammount for the same thing tommorow?

So when tomorrow comes and 1 BTC only has the same (or slightly higher buying power) what then? To characterize all users as thinking the value is going to go up 100% daily is kinda silly.  Some users likely will never sell any of their coins or use them to buy anything.  However they aren't the only users.

Even if someone is hoarding for some future payday they all have a point they would cash out otherwise what is the point in hoarding to begin with.

Say hoarder Joe bought 1M BTC @ $0.01 ea.  Today they are worth ~$5.  He lives in an apt w/ his mom has almost no possession, no non-coin wealth, and yet has $5M in value in coins.  Do you think the utility of having his own place, car, life might be worth more than the future appreciation on his $5M?  Say hoarder Joe says "sell @ $5ea (a mere 50,000% gain no way suckers)".  In 10 years Bitcoin is worth $100 ea.  hoarder Joe has a net worth aproaching a quarter billion.  Is he going to sell/use/trade them?  By your logic no because they might keep going up.  In 30 years Bitcoin is worth $2000 ea so trader Joe now has $2B tied up in digital coins.  Does he sell?  Hell no.  He collects welfare and food stamps, but there is no reason to leave any future profits on the table.  In 85 years Bitcoin is worth $1M ea.  hoarder Joe finally did it he became the worlds first trillionaire (in dollars and likely the only remaining Bitcoin millionaire).  Er no he actually died 3 years prior and was buried in an unmarked pauper's grave because he wasn't going to be a sucker and sell out as a "mere billionaire".

Money is an abstraction.  It is an accounting system for what really matters: wealth.  If you never exchange it for any tangible wealth (goods & services) then it really doesn't make any sense to acquire it in the first place does it?  The idea that someone will hold and never ever ever trade/exchange/sell those coins doesn't even make common sense.
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May 16, 2012, 08:02:22 PM
 #16

To say it simple.
How many people are selling there gold now?

Every time someone buys gold, someone else sells it.  So there are as many ounces of golds sold as there are ounces of gold bought.
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May 16, 2012, 10:05:10 PM
 #17

If bitcoins are so valuable to you that you won't spend them near the market rate on stuff you want then you should buy more coins until they aren't so precious to you. If you never reach the point where you'd rather have a dollar or a thing than a bit more coin I'll be very surprised. But if you do, then you should just start working harder or smarter to get more coin. Working harder/smarter just -might- involve using your only asset (now some bitcoins) to get some other thing to improve your bitcoin getting ability.

Short answer: People actually want lots of things and balance them as they like.

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May 17, 2012, 06:56:44 AM
 #18

To say it simple.
How many people are selling there gold now?

Every time someone buys gold, someone else sells it.  So there are as many ounces of golds sold as there are ounces of gold bought.

Very true.  As a further note to the parent, who asked who would sell their gold now, well, lots of people would.  If everyone just sits there with their gold and thinks 'no point in selling, it'll only head upwards' that will only cause a bubble that inevitably pops.  The price can only rise so much before the early buyers think 'wow, great profit, time to sell'.  Remember that you only have a profit when you sell a commodity/share/etc.  Until then it's just a paper profit.

I sold some gold last year as I was applying for a mortgage and needed cash.  The gold had risen in value considerably since I bought it so it was a good investment.  Right now, a year later, gold's price is lower than where I sold it in my local currency.  Seeing as the mortgage costs over 6% (hint: I'm not in the USA), my gold would have had to rise 6%pa every year from last year to make sense keeping it instead of cashing out.



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May 17, 2012, 07:06:46 AM
 #19

I both horde and spend bitcoins...
I keep a 'savings account' of them, and spend maybe 20% of it infrequently.

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May 17, 2012, 07:10:17 AM
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Quote
Money is an abstraction.  It is an accounting system for what really matters: wealth.

I believe that Bitcoin shows this to be true better than anything else it does.  Just exactly what is a Bitcoin?  Where is it?  Do you really have them?  Where are they kept?  Etc.

The fiat currencies are the same but Bitcoin is better at showing exactly what money is.  As you state is is an accounting system.

Oh and another thing:  hoard or save, please explain the difference to me.  It seems to me that people use the word hoard when they want it to sound "bad" and save (or savings) when they want it to sound "good".  That is the only difference I can see between the two.

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May 17, 2012, 07:16:18 AM
 #21

Oh and another thing:  hoard or save, please explain the difference to me.  It seems to me that people use the work hoard when they want it to sound "bad" and save (or savings) when they want it to sound "good".  That is the only difference I can see between the two.

I suppose the action is identical and only the intention different.

Saving is done with the intent to spend at a later date. Hoarding seems to imply wanting to 'have it all' just out of pure greed.

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May 17, 2012, 02:33:02 PM
 #22

Oh and another thing:  hoard or save, please explain the difference to me.  It seems to me that people use the work word hoard when they want it to sound "bad" and save (or savings) when they want it to sound "good".  That is the only difference I can see between the two.

I suppose the action is identical and only the intention different.

Saving is done with the intent to spend at a later date. Hoarding seems to imply wanting to 'have it all' just out of pure greed.
I hate it when one of my spelling mistakes get quoted for all eternity.

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May 17, 2012, 04:15:33 PM
 #23

If bitcoins are so valuable to you that you won't spend them near the market rate on stuff you want then you should buy more coins until they aren't so precious to you.

Exactly.

Also, as long as I can freely exchange BTC and EUR, regardless of what Bitcoin is worth today or my expectation of its worth tomorrow, if I want to buy an apple, it doesn't matter whether I buy it using BTC or EUR. Instead of keeping some of my money in EUR, I could keep it in BTC, but the value exchanged would be the same.

Let's say, in the ideal condition where I know BTC will be worth more tomorrow (and others don't -- otherwise it would be worth more now), and I can use both BTC and EUR to buy the same things, keeping EUR provides no advantage to me. Nor, using BTC would make me spend less. If this weren't true, then the mere existence of gold (or land, or BTC) would make the market stagnate.

I think the perceived problem is merely psychological. Or maybe the difference is a result of the fact that Bitcoin is not legal tender.
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May 17, 2012, 04:41:02 PM
 #24

For me the answer has something to do with liquidity. Consider our earlier comparison to gold. Unlike gold I can turn my bitcoins into cash or merchandise in a few minutes.

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May 17, 2012, 06:01:31 PM
 #25

Have we not had these discussions like gazillion times? From the consumer point of view hoarding is never an option so I don't know where people come up with this. Yes, you can certainly hoard, but then you'd first of all starve and you'd also not be able to do anything else either. For example, you couldn't use a computer, because you'd instead hoard money. Or watch TV, because you wouldn't buy one. Is this rational behaviour? It isn't. In fact technology seems to develop at an accelerating rate and older technology gets cheap really fast, still people buy stuff like no tomorrow.

Loans and loan based investments is another issue, which is not a problem with Bitcoin either. Bitcoin's monetary model makes loans very expensive during economic growth which means that it's difficult for growth bubbles to form. We would have far less bubbles in general with the kind of monetary model Bitcoin uses, simply because sustaining a strong growth rate is much more difficult since it must be increasingly savings based as the growth rate increases (economic growth increases the value of money in a fixed supply model). I really recommend reading this particular article: http://mises.org/journals/qjae/pdf/qjae6_4_3.pdf

Finally I'd like to add that none of this has actually any relevance to Bitcoin at this point in time. Bitcoin is not used as an independent currency yet. What we're talking about is relevant perhaps next decade. Still I'm confident that Bitcoin's monetary policy could work quite fine even when used independently. It's a very interesting experiment, technically, socially and economically.

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May 17, 2012, 11:36:10 PM
 #26

I should point out, that very few people actually spend all the money they earn.
Spending as soon as you earn it, is stupid, pointless, and not thinking about the future.

But you do have to spend some of it, generally, or as some one else said, you will starve :p

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May 18, 2012, 01:06:59 AM
 #27

I should point out, that very few people actually spend all the money they earn.
Spending as soon as you earn it, is stupid, pointless, and not thinking about the future.

The percentages vary based on how the survey was performed, but the numbers range from 35% to 70% of all Americans live paycheck to paycheck.

 - http://www.nakedcapitalism.com/2011/10/one-third-of-americans-one-paycheck-away-from-homelessness.html
 - http://www.dsnews.com/articles/job-loss-could-put-one-in-three-homeowners-out-of-their-home-2011-09-30
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May 18, 2012, 02:26:37 AM
 #28

Ok, let me rephrase...
very few people SHOULD live paycheck to paycheck if they can help it Tongue

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May 18, 2012, 09:54:36 AM
 #29

hoarding reduces the potential value that can get created in the first place.

Just to make clear, this argument is against the existence of such instruments, not just hoarding. If there is any instrument that will skyrocket, people will invest in them instead of investing in value-generating businesses.

So, (with your terminology) non-value-generating instruments should not deflate as a general rule?

In a low-friction world, that wouldn't make sense because rates would reflect this immediately and then people could get on with their businesses. If the increasing rate is a result of value-generation, then it would make sense to invest in these businesses instead of holding the currency itself.

On the other hand, I agree that there may be causes that make hoarding worthwhile. Maybe you have easier means of getting the item/currency/asset than the rest of the population, for a limited amount of time (e.g. hoarding of food items in famine). Maybe you know something they don't. This is analogous to the case of Bitcoin IMO. Bitcoin nerds (maybe rightfully) think they know something the rest of the population haven't discovered yet. This poses a chicken-and-egg problem though, which does also lead the price down, so how much sense it makes depends on what you know. If we really think the exchange rate of BTC will skyrocket, the Bitcoin-bashers are doing us a service by keeping the price low. Cheesy

In the ideal situation where everyone has clear access to the same information and same trading opportunities, the above wouldn't be a problem. Bitcoin makes this more possible, not less. Doesn't matter how scarce it is or how it's generated IMHO. Transparency removes friction, which reduces the incentive to hoard.
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May 18, 2012, 12:14:41 PM
 #30

I was basically saying that by speculating, I'd have less money to meaningfully invest at the same time. And based on that logic, I guess I was equating hoarding with speculation.

Makes sense actually. Thanks for clarifying.
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May 18, 2012, 12:23:49 PM
 #31

...they know bitcoins are becoming scarce (wich equals to more value) while time passes?



They don't know that, because it's false.
Bitcoins are being created to the tune of 1 fresh one every 12 seconds or so. 
--> They are becoming less scarce. 

May, 2012 


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May 18, 2012, 06:55:56 PM
 #32

Because the majority are not really into bitcoins and don't want to undertake any complicated investing proces with bitcoins.
They just bought bitcoins with only one reason. It's gonna get scarce and the value will rise. They see it as a long term investment.

funny, I thought you were going to say: "They just bought bitcoins with only one reason. To buy gardening supplies from silkraod. They see it as a means of exchange"
[/quote]

I acquired the bulk of my coins in the hope they would rise in value (not USD-value, but use-value). Whenever I'm about to spend some, I just buy some more using fiat for that purpose and keep the ones I already have.

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May 23, 2012, 12:32:55 PM
 #33

I'm willing to spend 30% of my BTC income forever, if that income is steady and sustainable

The biggest problem that no one use BTC is because they do not have BTC income directly, if companies start to give out BTC as salary, then it will make some sense

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May 24, 2012, 03:46:59 AM
 #34

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

Thanks for enlighting.

-Grouver-

Replace "bitcoin" with "gold" and you might be able to answer that yourself.

Or "electronics".  Every day a new gadget is coming out.  Why buy a computer now when you can wait and buy one later that's faster for the same price or cheaper for the same speed?  Deflation isn't always bad, despite what the Keynesians want you to think.
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May 24, 2012, 11:36:31 AM
 #35

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?

Why would the majority of people buy new computers if they can wait half a year and get a significant discount?

EDIT: lol now that I actually read the thread I see several other people pointing out this exact same example  Grin

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May 24, 2012, 11:42:14 AM
 #36

To say it simple.
How many people are selling there gold now?
Not alot I guess, since its a long term investment for the most right?
Why do they not sell there gold? Cause they believe its getting worth more in the near future right?

Doens't Bitcoin have the same thing right now?
Also, lets not forget that alot of people bought high when Bitcoin price was at its peak or above $10 and don't want to sell low.
They can just hoard it and wait till it gets high again some time around 2020.


I'm selling some of my stash whenever I need more fiat to pay the bills.

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May 25, 2012, 02:56:24 AM
 #37

Why spend today if I can spend the half of the ammount for the same thing tommorow?

Why buy my groceries today with my $10 when I can buy them next year, with interest I'll have $10.40!

Answer? I need to eat today.

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May 25, 2012, 03:19:40 AM
 #38

Why spend today if I can spend the half of the ammount for the same thing tommorow?

Why buy my groceries today with my $10 when I can buy them next year, with interest I'll have $10.40!

Answer? I need to eat today.

anyone's in for a snack ?

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May 25, 2012, 07:11:17 AM
 #39

News flash to Keynesians:

There is no guarantee that Bitcoins will be worth more in the future, but even if they are worth more, people prefer to have stuff they want NOW rather than LATER.

For example, I know that in six months, I can get a better and cheaper computer for less money than I can today, so why do I buy one today? BECAUSE I WANT IT NOW.

The fact that there is exchange of currency proves this whole theory false, because the theory is there would be no exchange if everyone thinks the currency will go up in value, yet if you look at the market place, there are transactions being made.

This theory is absurd and false, can we focus on real stuff now? Thanks.

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May 27, 2012, 08:42:20 AM
 #40

News flash to Keynesians:

There is no guarantee that Bitcoins will be worth more in the future, but even if they are worth more, people prefer to have stuff they want NOW rather than LATER.

Then consider this as well:

Let's say you pay a $100 monthly Pay As You Go refill charge to T-Mobile.

Will you pay $100 to T-Mobile using your credit card or will you pay $97.50 worth of bitcoins?
 - http://bitmit.net/en/trade/i/2793-100-t-mobile-usa-prepaid-wireless-airtime-refill/description

One reason T-Mobile charges $100 for that is they are losing $2.75 to the merchant fees (Visa/MC/AmEx).  So they charge you $100 but they only get $97.25.

They do offer a discount to wholesale resellers, but those resellers too pay merchant payment card fees so they don't offer for sale below $100 either.  Especially after considering the extent of the problem they have with chargeback fraud.

But there remains the BTC equivalent of $97.50 for buyiing from Tangible Cryptography (through BitMit)

So even if Bitcoins might appreciate in value in the future, a rational person is going to take advantage of the $2.50 discount today rather than hope to gain more than that $2.50 in the future from speculating.  (Or, more likely, will replenish for the bitcoins from the stash that was used to buy the mobile refill card.)
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May 28, 2012, 06:31:48 AM
 #41

This theory is absurd and false, can we focus on real stuff now? Thanks.

What is with this attitude among bitcoin users? It almost feels like an indoctrination.

Quote
There is no guarantee that Bitcoins will be worth more in the future, but even if they are worth more, people prefer to have stuff they want NOW rather than LATER.

Some people. Anyone who makes a statement regarding economics that says "All people do this" is in for a bruising. Many, many people save via investments. This means they have stuff they want LATER rather than NOW. Like a good retirement plan. Of course there are always the needs that take precedence like food and shelter. It isn't the needs or the lack thereof that could potentially cause a deflationary spiral or just a general sluggishness to the bitcoin economy, it is the wants. But in bitcoin, the long-term wants can often be satisfied just by holding currency instead of actually investing. This, in turn, further reduces the liquidity and further increases the value of bitcoins. If the balance of the long-term wants changes vs. the short-term wants/needs, you can have lots of deflation and inflation and economic turmoil every time it seesaws.

Quote
For example, I know that in six months, I can get a better and cheaper computer for less money than I can today, so why do I buy one today? BECAUSE I WANT IT NOW.

Although I feel like a broken record, I will link this site again since it explains this misinformation so well: http://austrianeconomics.wikia.com/wiki/Deflation

So even if Bitcoins might appreciate in value in the future, a rational person is going to take advantage of the $2.50 discount today rather than hope you'll get more than that $2.50 in the future.  (Or, more likely, will replenish for the bitcoins from the stash that was used to buy the mobile refill card.)

Unfortunately this example is disconnected from reality until bitcoin is pervasive in an economy. Instead, exchanges will be the ones more than making up for that $2.50 discount as well as bank transferring fees. If you want businesses to do business in bitcoins, they're eventually going to need bitcoin loans. Bitcoin loans will always be inherently dangerous for both the lender and the borrower because of the volatility. More people using bitcoin in actual commerce will not lower volatility, it will increase it as bitcoins become more and more scarce. How many decades will it take for bitcoin to be pervasive? How many massive economic swings will bitcoin have on periods of decades?

With this system of money having almost half of all the coins to ever be produced already produced, a banking cartel must either pop up among the early adopters and start giving out bitcoin loans, or we will see more bubbles and bursts like last year, turning away any self-respecting businessmen and heavily delaying any real adoption. This is my opinion, but feel free to call it absurd in your opinion.

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May 28, 2012, 09:32:12 AM
 #42

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

It's an interesting question that I have in the past grappled with.  I sold mined bitcoins for between $7 and $24 in 2011.  At the time this forum was full of proclamations that bitcoin's value would continue to soar.  One post claimed if the price of a BTC wasn't $100 by the end of 2011 he would be "amazed".  Yet, I sold anyway, knowing full well that there is a limited supply of bitcoins.

The key point here is, new bitcoins can become scarce.  But scarce things aren't valuable if lots of people don't want them.  I can sign my name to a drawing.  There's only one in the world.  Yet it's not automatically worth a million dollars because no one wants it.  Same with bitcoin.  Its value will only go up if many more people want to use it, regardless of its designed scarcity.



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May 28, 2012, 09:50:14 AM
 #43

Oh waaaahhh... Says he who keeps using the dreaded "deflationary spiral" boogieman, even though he knows that it relies on a flawed theory that all people (or at least an overwhelming majority) base their personal valuation of bitcoin on recent moves in the exchange rate. Surely the mere existence of people like AnonymousBat makes it less likely that 'everyone' will naively invest in a herd-like manner and thus create another bubble?

If you actually take the time to read and digest what I wrote.. It doesn't have to be 'everyone' doing anything. It is the balance getting upset that causes problems. The balance can be anything between saving/spending/hoarding/investing, but it is the change in those factors that matter. Upsetting that balance is something that financial minds have been instigating for centuries now. Why everyone is so gung-ho to run headfirst into a system of money with ultimate financial control laying with those who hold the most coins is beyond me.

"Personal valuation" is a red herring because it matters not what you think you're worth, it matters what the economy thinks you're worth. If your argument eventually boils down to "it's a better version of gold", then that's fine, but you don't see people trading gold for short-term needs. And while bitcoin may be convenient in the transactional sense, it is, like gold, not so in the financial sense to trade it over something that will depreciate. Since it is unlikely for the reasons in my last post that any significant portion of an economy will ever get paid in bitcoins, the exchange and transactional costs of bitcoin will remain rather high and probably provide little appreciable benefit over credit cards.

If you can't work the whole system through bitcoins, it is always going to be measured by its exchange rate. If you try to work the whole system through bitcoin, you are going to get cycles of massive deflation followed by inflationary sell offs (or spending sprees; or better yet, new loans!). That is bitcoin's only means of expanding its economy in any manner other than the utmost crawl.

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May 28, 2012, 10:03:39 AM
 #44

For example, I know that in six months, I can get a better and cheaper computer for less money than I can today, so why do I buy one today? BECAUSE I WANT IT NOW.
The fact that you could wait and get a better computer for less is already built into the prices you pay for computers. This fact makes a computer worth less, and as a result, someone has to charge less to get you to buy one. What people forget is that future value and future changes, to the extent they are predictable, are already baked into today's market. That's why when a company announces an increase in earnings, but it's less than expected, their stock price drops.

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May 28, 2012, 10:44:17 AM
 #45

Let's remember that price is the indicator that explains the balance point in any economic situation.

As price increases the hoarders make more and more profit... until...  they make the decision to maybe spend a little of that profit to improve their lives.  At which point the hoarders who are driving the price up become spenders who are driving the price down.

Aggregate that over all people with all their individual opinions and the market eventually finds a price where the hoarders' upward pressure on price equals the spenders' downward pressure on price.

That is to say: there is no problem.  The price of bitcoins will adjust until price inflation and deflation are in balance according the the preference of the market.

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May 28, 2012, 10:44:44 AM
 #46

But in bitcoin, the long-term wants can often be satisfied just by holding currency instead of actually investing. This, in turn, further reduces the liquidity and further increases the value of bitcoins. If the balance of the long-term wants changes vs. the short-term wants/needs, you can have lots of deflation and inflation and economic turmoil every time it seesaws.
BS. Holding currency does not "further reduce" or "further increase" anything, this the default situation with a currency that stores value better. It would only "further" anything if people hold more coins than they usually hold. The other thing that is BS is the fact that in a large economy it won't cause swings anywhere regardless of how the short term wants/needs change. The wants/needs might change in a single market but a single market is not enough to significantly affect the entire Bitcoin economy.

This means that even though there are changes in needs/wants, the overall picture does not suddenly change anywhere. In fact the economic "turmoil" would be much less relevant in a Bitcoin-type economy. We would have less growth, less bubbles, less crashes. It would be boring in many respects but the economy would be much more sound. We would have real growth and real growth alone, not growth boosted by keeping cheap credit available at all times.

Quote
Bitcoin loans will always be inherently dangerous for both the lender and the borrower because of the volatility. More people using bitcoin in actual commerce will not lower volatility, it will increase it as bitcoins become more and more scarce. How many decades will it take for bitcoin to be pervasive? How many massive economic swings will bitcoin have on periods of decades?

With this system of money having almost half of all the coins to ever be produced already produced, a banking cartel must either pop up among the early adopters and start giving out bitcoin loans, or we will see more bubbles and bursts like last year, turning away any self-respecting businessmen and heavily delaying any real adoption. This is my opinion, but feel free to call it absurd in your opinion.
I'll do it for him: this is absurd. Nobody knows if Bitcoin will explode or not, grow or not. People will keep selling, in fact they will sell more the higher the price is. Have you not seen the Bitcoin market in the last 6 months? It is getting more liquidity. It is much more stable, much more mature. It is this liquidity that will make things better. It's still likely that we will experience more bubbles in the future but the overall stability will only increase with further growth and increased liquidity.

So far, to this date, Bitcoin adoption and Bitcoin growth is not phased by the volatility. It's growing, getting more serious, getting more liquidity, slowly but surely. Everything Etlase2 is talking about is empirically proven wrong by Bitcoin each and every single day. The single most important reason why Bitcoin-enthusiasts usually sidestep this whole issue is because it HAS NO MERIT. I will worry about this whole "issue" if it ever becomes an issue, meanwhile Bitcoin is doing quite fine just like this.

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May 28, 2012, 10:56:30 AM
 #47

It's an interesting question that I have in the past grappled with.  I sold mined bitcoins for between $7 and $24 in 2011.  At the time this forum was full of proclamations that bitcoin's value would continue to soar.  One post claimed if the price of a BTC wasn't $100 by the end of 2011 he would be "amazed".  Yet, I sold anyway, knowing full well that there is a limited supply of bitcoins.

The key point here is, new bitcoins can become scarce.  But scarce things aren't valuable if lots of people don't want them.  I can sign my name to a drawing.  There's only one in the world.  Yet it's not automatically worth a million dollars because no one wants it.  Same with bitcoin.  Its value will only go up if many more people want to use it, regardless of its designed scarcity.
Indeed Etlase2's argument lacks any thought on the DEMAND of bitcoins. He is talking about the supply only. The fact of the matter is that if the demand for bitcoins is decreasing at a higher rate than the supply decreases (through increased hoarding), there will be in fact inflation, not deflation. Once the hoarders realize this problem they will start getting rid of their coins with a cheaper price, making the coins available and cheaper again which will again increase the demand for coins.

The same goes for loans basically. In a growing economy where demand for coins is increasing, hoarding will undoubtedly increase. Loans will get more expensive. Investing gets more difficult unless the investment is good enough. Most investments would be savings based. This in turn would decrease the growth of the economy and lead to a decrease in the DEMAND for coins. Which would in turn decrease hoarding and that would lead to a decrease in the price of bitcoins. In reality it doesn't go like this though, this implies that there would be wild swings all over the place. That is not true, the market would in fact be at an equilibrium a very high percentage of the time.

Most likely it would lead to an economy with a lower growth rate than traditional economies but at the same time we would have 1000 times less issues with debt. Debt bubbles would not happen and there would be less government/corporate/individual debt problems. Also it would be JUST. With justice I mean that people who save money won't be punished for it at the expense of entities that live on cheap credit. In a free market it's highly unlikely that people would want to hold money that melts while you have it, if there is a convenient alternative. Bitcoin provides this convenient alternative.

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May 28, 2012, 11:25:12 AM
 #48

It would only "further" anything if people hold more coins than they usually hold.

I did say "If the balance of the long-term wants changes vs. the short-term wants/needs" and further explained it in the later post.

Quote
The other thing that is BS is the fact that in a large economy it won't cause swings anywhere regardless of how the short term wants/needs change.

How is it again that bitcoin has solved every economic problem known to man again? "Swings have never happened in large economies... DERP"

Quote
We would have less growth, less bubbles, less crashes. It would be boring in many respects but the economy would be much more sound. We would have real growth and real growth alone, not growth boosted by keeping cheap credit available at all times.

Right in about 12 years when almost all the bitcoins are mined, businesses will have only high-interest credit available to expand the bitcoin economy. The economy that won't be expanding. While it's one thing to argue that inflationary currency may cause runaway growth and the business cycle, bitcoin will hinder the growth process every step of the way. Since the majority of bitcoin "growth" would actually just be existing economies adopting bitcoin, these existing economies must somehow be convinced that borrowing bitcoins is the way forward. Borrow the currency that is easier to pay back as time goes on, or borrow the currency that is harder to pay back as time goes on. Hrmm.

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I'll do it for him: this is absurd. Nobody knows if Bitcoin will explode or not, grow or not. People will keep selling, in fact they will sell more the higher the price is. Have you not seen the Bitcoin market in the last 6 months? It is getting more liquidity. It is much more stable, much more mature. It is this liquidity that will make things better. It's still likely that we will experience more bubbles in the future but the overall stability will only increase with further growth and increased liquidity.

Wowee 6 whole months where bitcoin only doubled and a half in value just after exponentially growing and catastrophically falling. Looks stable to me! And broseph, the point I am making is if bitcoin starts growing, not when. Imagine if walmart were to put in bitcoin checkouts and accept BTC for everything and in fact at a reduced price. Assume they just stored all revenue for a year, $400 billion or so. How many coins are for sale on the market right now? 1% maybe? I can't get on mtgoxlive to check for sure. Let's just say they're all for sale, $400 b/10m = 8,000x the value of today's bitcoin. If only 1% are ever available for sale, it could be 800,000x. And that is just one big business.

Quote
So far, to this date, Bitcoin adoption and Bitcoin growth is not phased by the volatility. It's growing, getting more serious, getting more liquidity, slowly but surely. Everything Etlase2 is talking about is empirically proven wrong by Bitcoin each and every single day. The single most important reason why Bitcoin-enthusiasts usually sidestep this whole issue is because it HAS NO MERIT. I will worry about this whole "issue" if it ever becomes an issue, meanwhile Bitcoin is doing quite fine just like this.

"So far, to this date, Bitcoin adoption and Bitcoin growth is not phased by the volatility." This sounds like a statement that requires facts. Where are you getting your bitcoin adoption numbers and where are you getting the opinion that non-adopters are unphased by the volatility? The issue has plenty of merit, bitcoin-enthusiasts sidestep it because the issue is ugly. Instead you'd rather kick the can like so many politicians do with the world's debt. Good show, works on suckers. Maybe if enough people say it has no merit others will believe it to be true.

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May 28, 2012, 11:42:56 AM
 #49

Isn't it awesome how it absolutely doesn't matter how wrong Etlase2 beliefs about economics are to how Bitcoin functions? I just can't wait till we are like 5-10years down the road when this experiment single-handedly puts to rest all these fallacious theories people who'd like to control other people always promote as the economic truth..

Oh how sweet the last laugh is going to be.  Grin

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May 28, 2012, 12:04:13 PM
 #50

lol as if I've tried to promote anything as economic truth. Am I sitting here expounding upon the benefits of an inflationary currency? No. I'm just telling you that deflation is fucking mental. I'm not trying to control anyone. I don't sticky threads that tell people not to question, nor do I make non-arguments in the same vein. You know, like telling somebody they're wrong but having nothing but at best a quote from the surely unbiased wiki rather than a single, intelligent thought of his own.

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May 28, 2012, 12:19:42 PM
 #51

I'm just telling you that deflation is fucking mental. I'm not trying to control anyone.

And the Bitcoin experiment will show that it's not and that in fact it's you who is mental for continuing to use what we all showed to you were fallacies as evidence for your ridiculous theories.

Awesome right?

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May 28, 2012, 12:22:59 PM
 #52

Don't worry about it, since predictable, long-term deflation of bitcoins is essentially impossible. Predictable, long-term deflation of bitcoins would mean that at some point, rational people would rather have 100 bitcoins next year than 100 bitcoins today. But 100 bitcoins today *includes* the ability to have 100 bitcoins next year. So it cannot possibly be worth less.

Whatever the value of 100 bitcoins today is, it necessarily includes almost all of the present, expected value of 100 bitcoins next year.

To the precise extent expected deflation makes a person want to horde bitcoins to gain the benefit of that deflation, it precisely equally makes other people want to induce that person to part with those bitcoins, so that the other person can obtain that same benefit.

"My bitcoins are going up in value, so I don't want to part with them" is perfectly met with "Your bitcoins are going up in value, so I'll give you more to get them from you". It cancels out. (Not perfectly, of course, but to a first approximation.)

*Unpredictable* deflation, however, is very bad. But then, almost anything unpredictable is bad for an economy.

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May 28, 2012, 12:37:43 PM
 #53

And the Bitcoin experiment will show that it's not and that in fact it's you who is mental for continuing to use what we all showed to you were fallacies as evidence for your ridiculous theories.

Awesome right?

So let me get this straight: to prove my opinion to be based on fallacy, we have to wait for the bitcoin experiment to do something or act in a way in the future that we do not yet know will happen.
Ergo, we need to predict the future to possibly prove me wrong, and that is the best argument you've got. Got it.


Struggling with unpredictable and hard to understand money-printing?
Bitcoin fixes that scourge. Cheesy

ROFL want to run that "greater number of zeros" whatsit by me again?

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Bankers*:
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every economic problem known to man

* footnote: not solved by bitcoin


Don't worry about it, since predictable, long-term deflation of bitcoins is essentially impossible.

...

*Unpredictable* deflation, however, is very bad. But then, almost anything unpredictable is bad for an economy.

I agree with both statements! Cheesy

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May 28, 2012, 12:48:56 PM
 #54

And the Bitcoin experiment will show that it's not and that in fact it's you who is mental for continuing to use what we all showed to you were fallacies as evidence for your ridiculous theories.

Awesome right?

So let me get this straight: to prove my opinion to be based on fallacy, we have to wait for the bitcoin experiment to do something or act in a way in the future that we do not yet know will happen.
Ergo, we need to predict the future to possibly prove me wrong, and that is the best argument you've got. Got it.

No you didn't get it unfortunately. In case your memory is that of a gold fish, not just me but most of us in this thread have already presented several indirect arguments with historical empirical evidence as perfectly valid counterarguments to your theories about Bitcoin's future which to a rational person would suffice to disprove it. The only thing we will unfortunately have to wait for about Bitcoin's future by definition is direct proof - a head on collision with reality - which with delusional people like yourself seem to be the only thing that will shut you up.

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May 28, 2012, 03:26:37 PM
 #55

No you didn't get it unfortunately. In case your memory is that of a gold fish, not just me but most of us in this thread have already presented several indirect arguments with historical empirical evidence as perfectly valid counterarguments to your theories about Bitcoin's future which to a rational person would suffice to disprove it. The only thing we will unfortunately have to wait for about Bitcoin's future by definition is direct proof - a head on collision with reality - which with delusional people like yourself seem to be the only thing that will shut you up.

Can I get your source on historical empirical evidence used in this thread? Just a link or a quote please. And you yourself called bitcoin an experiment.

From wikipedia:

Quote
An experiment is a methodical trial and error procedure carried out with the goal of verifying, falsifying, or establishing the validity of a hypothesis.

How exactly can you be so cocksure about bitcoin's future when the experiment has barely begun? Are you simply a fraud? Because there is simply no other explanation for one who claims to know the outcome of an experiment before that experiment is finished. Nobody in the pro-bitcoin camp can even agree on what the hypothesis is exactly as far as I can tell. Some say it will replace all currency, some say it will just be a store of value, some say it will replace MC/Visa. It is obviously not a simple experiment, nor has one like it been done before, so any "historical empirical evidence" you come up with is misguided at best, fraudulent at worst. However, the real historical evidence in the price volatility of bitcoins should add some credibility to what I say, but of course you will dismiss it for some bumbling reason or another.


Totally. It must've been somebody else educating you the first time round, but I'll do my best.

The question was an ironic retort to your statement that understanding how fiat money is created is difficult.

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May 28, 2012, 04:14:28 PM
 #56

No you didn't get it unfortunately. In case your memory is that of a gold fish, not just me but most of us in this thread have already presented several indirect arguments with historical empirical evidence as perfectly valid counterarguments to your theories about Bitcoin's future which to a rational person would suffice to disprove it. The only thing we will unfortunately have to wait for about Bitcoin's future by definition is direct proof - a head on collision with reality - which with delusional people like yourself seem to be the only thing that will shut you up.

Can I get your source on historical empirical evidence used in this thread?

For example just walk into any computer store you can find and ask them how much the stuff they are selling today cost a year ago and if that makes it impossible to run their business at a profit.

p.s.: You may repeat this experiment how many times you want.

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May 28, 2012, 04:44:59 PM
 #57

For example just walk into any computer store you can find and ask them how much the stuff they are selling today cost a year ago and if that makes it impossible to run their business at a profit.

Sorry buddy, but you are Provably Inaccurate. http://austrianeconomics.wikia.com/wiki/Deflation

Quote
Deflation can cause a fall in prices. But calling falling prices "deflation" is a profound confusion between prosperity and depression. There are two distinct causes of generally falling prices. The leading cause of falling prices is economic progress, whose essential feature is an increasing production and supply of goods and services, which operates to make prices fall. The other is a decrease in the quantity of money and or volume of spending in the economic system. Falling prices is the only effect that they have in common. They differ profoundly with respect to their other effects.

And importantly:

Quote
Falling prices caused by increased production do not reduce the general or average rate of profit in the economic system and do not make debt repayment more difficult.

These are two completely separate concepts of price deflation and they are too often confused around here for the benefit of the pro-bitcoin argument. Additionally, the argument that the same stuff today is a lot cheaper than it was a year ago is a reverse-CPI-like trick to make it look like a deflation-friendly argument. The "average" computer price stays fairly level on a year to year basis, but the equipment that you get for that money improves every year. You can wait several years for the equipment you want to become second-rate and cheap, but by then you will have yourself a second-rate and cheap computer.

So no, this argument does nothing to address the question of how bitcoin's fixed money supply will affect a global economy that is likely to adopt it in spurts rather than a smooth, easy pace over centuries and how this might detrimentally affect almost everyone using it.

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May 28, 2012, 05:07:31 PM
 #58

For example just walk into any computer store you can find and ask them how much the stuff they are selling today cost a year ago and if that makes it impossible to run their business at a profit.

Sorry buddy, but you are Provably Inaccurate.

See? Only the empirical evidence of the Bitcoin experiment will shut you and your delusions up so I'm not even going to bother refuting the fallacies you list..

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May 28, 2012, 05:18:45 PM
 #59

My concerns are delusions but your clairvoyance is infallible and you give up on refuting anything because that means you'd have to, somewhere, actually make an argument.

Take note of the typical pro-bitcoin "argument", lurkers.

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May 28, 2012, 05:20:14 PM
 #60

You still don't get it do you? I DON'T HAVE TO DO ANYTHING. The Bitcoin experiment will disprove your fallacies for me.  Grin

All we need is time.

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May 28, 2012, 05:24:07 PM
 #61

Fallacy redefined as meaning "wrong in my opinion, but eventually will be proven one way or the other"

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May 28, 2012, 05:28:05 PM
 #62

Fallacy redefined as meaning "wrong in my opinion, but eventually will be proven one way or the other"

No, not wrong in my opinion. Wrong according empirical historical evidence which shown to you causes your mind to experience too much cognitive dissonance in order to be able to accept it hence why I wont even bother listing it. I have ZERO doubt Bitcoin will prove me(us) right.

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May 28, 2012, 05:43:20 PM
 #63

Are you suggesting that a rise in the USD:BTC exchange rate should actually be correlated with some kind of depression?? You're being ridiculous.

Are you implying that you don't know anything about what happened during the great depression or on lesser scales in all kinds of other depressions? Have you not paid a whit of attention to the worldwide housing crisis and what has happened to the price of houses? All of a sudden your dollar buys a lot more house, but this doesn't come for free, it comes at the expense of the debtor.

Quote
1) Bitcoin is not "debt money". The economy doesn't get bankrupted for being unable to pay enough interest to the banking parasites.

Either people will borrow bitcoins or they won't. I think a very large part of the economy needs to be lending. If people are borrowing bitcoins, people have to repay bitcoins and an easy way to do that is to accept payment in bitcoins. But if the price spikes at any point during a loan (the business will have to charge less for its goods and services, LIKE A COMPUTAH), it may become impossible to repay and the debtor will default.

Quote
2) What massive parasitic cost (such as paying for wars) is reducing your productivity in the Bitcoin economy?

As if buying into bitcoin to privilege the adopters earlier than you isn't a parasitic cost.

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Keynesians... Sheesh...

More like monetarist, but thanks for trying.


I CAN PREDICT THE FUTURE

No you can't.

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May 28, 2012, 05:46:32 PM
 #64

I CAN PREDICT THE FUTURE

No you can't.

And you can huh?

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May 28, 2012, 07:33:54 PM
 #65

The most important thing to understand is that Bitcoin is a free market currency. It's never going to exist in a vacuum. There will be other currencies. In fact, there will be no Bitcoin if it's proven that its monetary model is a failure. It's an experiment, a voluntary experiment. A great experiment. We will find out what happens. All we need is time, just like hazek said. Someone will get their last laugh.

For me personally it's important that a cryptocurrency is doing something very different than what mainstream economics is about. That's crucial. I wouldn't be very interested in the whole thing otherwise. I believe mainstream economics suck and that is one of the main reasons we have so many economical problems going on right now.

We need to at least experiment with a totally different alternative. Bitcoin provides this alternative. Time will tell how well it works. So far it has been doing very well in my opinion. It has no government behind it, no company behind it, no marketing machine behind it. Yet it has managed to come this far in just 3 years. I'm impressed.

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May 29, 2012, 05:08:29 AM
 #66

A common misconception is that electronic currencies / bitcoin is limited and thus bound to increase.  In fact electronic currencies could experience a very high amount of inflation.   

Bitcoin is currently unique in being the only major electronic currency, however at some point one or more of the alternative currencies will succeed.  Just because many of the previous attempts at creating alternative currencies have been done by people seeking to get rich quick, doesn't mean that this will be true in the future.  The BTC alternatives of the future could come from the same open source software or be sponsored by a bank, corporation, or government.

One of the many possibilities is that the US government (or EU) cracks down on BTC (by cutting off the exchanges) and creates its own electronic currency.


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May 29, 2012, 09:25:00 AM
 #67

As if buying into bitcoin to privilege the adopters earlier than you isn't a parasitic cost.
Anyone can buy or mine bitcoins. Nobody has a legal privilege to prevent anyone else from creating or buying bitcoins. Calling this "parasitic" is symptomatic of ideologies that prefer violence and are driven by envy of other people's wealth.

Even if I take a neutral view on the economic validity of Gesell's theory, it still requires a monopoly production. Without force, it cannot work. This can be clearly seen on Gesell's work in the Bavarian Soviet Republic (freigeld was supposed to be legislated), or the Miracle of Wörgl (scrip and stamps were not produced competitively).

It is absurd and hypocritical to label voluntary production and trade as "parasitic" while simultaneously advocating the use of violence as an alternative.

This is why the Austrian approach is still the only one that make sense. Here's one of my favourite quotes:
Quote from: Gary North in Mises on Money
This theory of endogenous money is unique to Mises and his followers. No other school of economic opinion accepts it. Every other school appeals to the State, as an exogenous coercive power, to regulate the money supply and create enough new fiat or credit money to keep the free market operational at nearly full employment with nearly stable prices. Every other theory of money invokes the use of the State's monopolistic power to supply the optimum quantity of money.
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May 29, 2012, 09:39:01 AM
 #68

Are you sure you're not a closet Communist? I have a feeling you'd be much happier in a society where everyone is given a nominal wage to subsist on, regardless of merit. Who knows, you might strike it lucky and get a government job?

The merit you seem to think earlier adopters deserve is about as substantive as the merit that bankers are the only ones trust/credit-worthy enough to create money. They do nothing and add nothing productive to society, but reap rewards of other people. It isn't just the situation right now, this has to happen every time a market or a geographic area started moving over to bitcoin. It is up to the holders and speculators alone to control how many bitcoins a new sector of the economy will have access to. Mining can't fill this need now and mining is about to halve. Every new large source of demand relative to the bitcoin economy is a new large source of volatility unless the bitcoin existing holders at large agree to sell at certain prices or to keep the price of money down in general.

People are going to wise up after the 2nd or 3rd time this happens and start ignoring bitcoin as an alternative, imo.


As if buying into bitcoin to privilege the adopters earlier than you isn't a parasitic cost.
Anyone can buy or mine bitcoins. Nobody has a legal privilege to prevent anyone else from creating or buying bitcoins. Calling this "parasitic" is symptomatic of ideologies that prefer violence and are driven by envy of other people's wealth.

 Cheesy "I will take my own, completely made up context to make what you say sound bad."

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It is absurd and hypocritical to label voluntary production and trade as "parasitic" while simultaneously advocating the use of violence as an alternative.

"I will build the most egregious strawman possible and follow it up by saving the children."

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May 29, 2012, 10:21:24 AM
 #69

As if buying into bitcoin to privilege the adopters earlier than you isn't a parasitic cost.
Anyone can buy or mine bitcoins. Nobody has a legal privilege to prevent anyone else from creating or buying bitcoins. Calling this "parasitic" is symptomatic of ideologies that prefer violence and are driven by envy of other people's wealth.

Even if I take a neutral view on the economic validity of Gesell's theory, it still requires a monopoly production. Without force, it cannot work. This can be clearly seen on Gesell's work in the Bavarian Soviet Republic (freigeld was supposed to be legislated), or the Miracle of Wörgl (scrip and stamps were not produced competitively).

It is absurd and hypocritical to label voluntary production and trade as "parasitic" while simultaneously advocating the use of violence as an alternative.

This is why the Austrian approach is still the only one that make sense. Here's one of my favourite quotes:
Quote from: Gary North in Mises on Money
This theory of endogenous money is unique to Mises and his followers. No other school of economic opinion accepts it. Every other school appeals to the State, as an exogenous coercive power, to regulate the money supply and create enough new fiat or credit money to keep the free market operational at nearly full employment with nearly stable prices. Every other theory of money invokes the use of the State's monopolistic power to supply the optimum quantity of money.

lonelyminer, I like your attitude (also your argument, of course)

http://en.wikipedia.org/wiki/Endogenous_money, interesting

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May 29, 2012, 10:34:45 AM
 #70

Are you sure you're not a closet Communist? I have a feeling you'd be much happier in a society where everyone is given a nominal wage to subsist on, regardless of merit. Who knows, you might strike it lucky and get a government job?

The merit you seem to think earlier adopters deserve is about as substantive as the merit that bankers are the only ones trust/credit-worthy enough to create money.

Throwing in the current bogeymen of the world, the bankers, does nothing to make your case.

Early adopters do deserve credit.  Without the early adopter, there is no late adopter.  If you want to buy Bitcoin's now, you want to because they are desirable.  Why are they desirable though?  The answer is: the early adopters made them so.

The early adopters risked money when it was, perhaps, foolish to do so.  Either they saw potential that others did not, or they were better informed than others, or they were lunatics who acted entirely randomly.  Whatever their reasons for buying a collection of zeroes and ones, or buying the electricity to run a bitcoin node, that was a risk that could easily have come to nought.  As it's turned out, there is a distinct possibility that their willingness to invest time or money early on has resulted in enough momentum to create a potentially world changing financial instrument.

You are, of course, entitled to value that creation at whatever you wish; but then so is everyone else involved -- and they might value it differently from you.  How then shall we set a price?  What about that most excellent method for price discovery: a market.  Ta da.

Without one there is no two, without two there is no three, without three there is no four.  You might value the early adopters at very little; and you are free to do so.  Your valuation is no better than anyone else's though and you may express that valuation in the form of purchasing or not purchasing at your option.  What, exactly, is wrong with that (other than you, personally, don't like early adopters profiting)?


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May 29, 2012, 10:47:33 AM
 #71

The merit you seem to think earlier adopters deserve is about as substantive as the merit that bankers are the only ones trust/credit-worthy enough to create money.

Throwing in the current bogeymen of the world, the bankers, does nothing to make your case.

Early adopters do deserve credit.  Without the early adopter, there is no late adopter.  If you want to buy Bitcoin's now, you want to because they are desirable.  Why are they desirable though?  The answer is: the early adopters made them so.

I try to be careful about my words in the hopes that the meaning is actually conveyed. I said "earlier adopters" for a very specific reason, and I expounded on this reason:

Quote
It isn't just the situation right now, this has to happen every time a market or a geographic area started moving over to bitcoin...  Every new large source of demand relative to the bitcoin economy is a new large source of volatility

How much credit are we willing to give to the first half of the Earth that adopts bitcoin over the second half of the Earth? Because they are going to have the same advantage. The only ones who don't get this benefit is whoever comes last. It's stupid and it will be incredibly disruptive in the short term each time. That makes for a long term serious instability. Cycling, if you will.

Quote
The early adopters risked money when it was, perhaps, foolish to do so.  Either they saw potential that others did not, or they were better informed than others, or they were lunatics who acted entirely randomly.  Whatever their reasons for buying a collection of zeroes and ones, or buying the electricity to run a bitcoin node, that was a risk that could easily have come to nought.  As it's turned out, there is a distinct possibility that their willingness to invest time or money early on has resulted in enough momentum to create a potentially world changing financial instrument.

Yeah whatever the tired argument that a few dollars of electricity and participating in a hobby is a gigantic risk worth millions. I really don't care about this, which is why I am specific with my words. But it is so easy and tempting to quote part of a paragraph and bite in as if there weren't anything else clarifying it.

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May 29, 2012, 12:53:36 PM
 #72

How much credit are we willing to give to the first half of the Earth that adopts bitcoin over the second half of the Earth? Because they are going to have the same advantage. The only ones who don't get this benefit is whoever comes last. It's stupid and it will be incredibly disruptive in the short term each time. That makes for a long term serious instability. Cycling, if you will.

So, what do you propose exactly? Lay down the alternative proposal so we can discuss the comparative merits. If something isn't plausible (though in this case we don't even know that something), then we can safely assume its lack of existence as a natural condition until it becomes realizable. Nothing is clear cut, economy is about trade-offs.

Yeah whatever the tired argument that a few dollars of electricity and participating in a hobby is a gigantic risk worth millions. I really don't care about this, which is why I am specific with my words. But it is so easy and tempting to quote part of a paragraph and bite in as if there weren't anything else clarifying it.

If you have any experience in investing, you would see the current realities are constructed this way. Again, please lay down your alternative view, but as it stands, you are not complaining because it was easy and obvious to make the investment upon discovery of Bitcoin (I for one didn't, even if I knew about it very early on), but because it is transparently so. You see it as a problem because you see it. If it was another instrument you just wouldn't see it. Also, do you think Bitcoin would be adopted if it were designed differently (regardless of that design being inherently good in your model)? If no, then what are we talking about exactly? If yes?

Apparently, I tend to agree that Bitcoin isn't a game changer in this aspect. I also think that there are none, without extreme disadvantages. Regardless, this has nothing to do with the OP.
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May 29, 2012, 01:27:48 PM
 #73

So, what do you propose exactly? Lay down the alternative proposal so we can discuss the comparative merits. If something isn't plausible (though in this case we don't even know that something), then we can safely assume its lack of existence as a natural condition until it becomes realizable. Nothing is clear cut, economy is about trade-offs.

This is a heavily loaded question. And most of my ideas will be considered implausible by most until they see it for themselves. A very old version of my ideas can be found here: https://bitcointalk.org/index.php?topic=49683.0. And I get flack for the fact that these ideas have not materialized, but unlike SolidCoin for example, the point is to change everything which is no small task.

Quote
If you have any experience in investing, you would see the current realities are constructed this way.

But to realistically function as a replacement currency, bitcoin cannot be seen as an investment. This is all well and good for some people, but then these people turn around and make jabs at fiat and government-controlled currency when bitcoin does not have the ability to perform the same function.

Quote
Also, do you think Bitcoin would be adopted if it were designed differently (regardless of that design being inherently good in your model)? If no, then what are we talking about exactly? If yes?

It's a good question and one that is hard to answer. I think the ideals that a P2P digital currency has can ring strongly with libertarian and populist types. The adoption period might be a lot slower, but if it can properly expand when necessary, then you won't have to worry about bubbles and crashes causing many to lose confidence and, ultimately, a lack of real adoption.

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May 29, 2012, 02:04:51 PM
 #74

The merit you seem to think earlier adopters deserve is about as substantive as the merit that bankers are the only ones trust/credit-worthy enough to create money.

Throwing in the current bogeymen of the world, the bankers, does nothing to make your case.

Early adopters do deserve credit.  Without the early adopter, there is no late adopter.  If you want to buy Bitcoin's now, you want to because they are desirable.  Why are they desirable though?  The answer is: the early adopters made them so.

I try to be careful about my words in the hopes that the meaning is actually conveyed. I said "earlier adopters" for a very specific reason, and I expounded on this reason:

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It isn't just the situation right now, this has to happen every time a market or a geographic area started moving over to bitcoin...  Every new large source of demand relative to the bitcoin economy is a new large source of volatility

"Early", "earlier" -- both are referring to the same people... those who came before those who haven't yet adopted.  Assuming an ever increasing price -- their gain being proportional to the earliness of their adoption.

That's true to an ever decreasing degree.  You also assume that demand will come in waves.  Why isn't it more likely to come as a continuous (percentage wise) stream?

How much credit are we willing to give to the first half of the Earth that adopts bitcoin over the second half of the Earth? Because they are going to have the same advantage. The only ones who don't get this benefit is whoever comes last. It's stupid and it will be incredibly disruptive in the short term each time. That makes for a long term serious instability. Cycling, if you will.

Again with the cycling; I don't see the source of that.  You also make it sound like each of your imagined cycles is the same size.  By the time half the earth adopts bitcoin, then half of the potential gains to earlier adopters will have happened.  If it was cyclic then each cycle benefits in exact proportion to its foresight.  Therefore that is the amount of credit we are willing to give them.

You make it sound like these early/earlier adopters are stealing their benefit or that there is some external party giving it to them unfairly.  Everything is a choice and everything has risk.  There were identical screams about early adopters last year as the price went from $10 to $30 -- are those who bought in at $15 "early adopters" who should be denigrated in your theory?  Perhaps those who choose to be late adopters prefer lower risk than higher reward?

Finally (in this paragraph) you incorrectly conflate increased demand with "disruption" and "instability".  These are words that our current political masters throw around without regard to their meaning.  Who is to say that they are desirable?  Bitcoin is certainly disruptive, and it is good that it is so.  As for "instability"... well, stability is only beneficial if you like where you are when you are stable.

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The early adopters risked money when it was, perhaps, foolish to do so.  Either they saw potential that others did not, or they were better informed than others, or they were lunatics who acted entirely randomly.  Whatever their reasons for buying a collection of zeroes and ones, or buying the electricity to run a bitcoin node, that was a risk that could easily have come to nought.  As it's turned out, there is a distinct possibility that their willingness to invest time or money early on has resulted in enough momentum to create a potentially world changing financial instrument.

Yeah whatever the tired argument that a few dollars of electricity and participating in a hobby is a gigantic risk worth millions. I really don't care about this, which is why I am specific with my words. But it is so easy and tempting to quote part of a paragraph and bite in as if there weren't anything else clarifying it.

The worth of an action is the value that action results in.  Without those early adopters risking those "few dollars" there would be no millions.  I didn't quote your "clarifications" because they weren't very clear or were observably wrong (it's fashionable to hate bankers, but to suggest they don't add anything to the world is simply false -- if it were true, then why has the collapse of banks been so traumatic?).

The question, fundamentally, is: who are you to tell people what they should or shouldn't pay or ask for a bitcoin at any moment?  That, in the end, is all we have -- offers and acceptances of offers.  You would prefer, perhaps, that you be put in charge of price, is that it?  You would presumably pick the correct price right now?  You would also favour a law that told the population of the world that bitcoin is inevitable and they should immediately convert their capital at your chosen optimum price in order that nobody benefits from future price changes?


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memvola
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May 29, 2012, 02:33:44 PM
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most of my ideas will be considered implausible by most until they see it for themselves

Maybe you sound too confident, considering you are backing your arguments with something so impalpable? Elaborate designs are known to be prone to failures and abuse. It may very well be impossible to accomplish creating an instrument that satisfies what you want. I assume you are familiar with the transformation problem? Whether your design is plausible or not borders on that, and it's a very very complicated issue. You yourself can't know if your design is sound as there is no analytical approach to the matter.

But to realistically function as a replacement currency, bitcoin cannot be seen as an investment. This is all well and good for some people, but then these people turn around and make jabs at fiat and government-controlled currency when bitcoin does not have the ability to perform the same function.

In other words, Bitcoin is scarce and fiat currencies aren't? That lack of ability is intentional. That is the merit of Bitcoin.

Actually, if something like you want were successfully implemented, then it would be the perfect complementary to Bitcoin. I would go so far as to say that Bitcoin needs something like that for further adoption. Can it be done? If not, then this debate is pointless. Bitcoin imitates the idea of gold; that idea been around for a long time. It's easy to criticize, but notoriously hard to defeat.
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May 29, 2012, 02:52:32 PM
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"Early", "earlier" -- both are referring to the same people... those who came before those who haven't yet adopted.  Assuming an ever increasing price -- their gain being proportional to the earliness of their adoption.

That's true to an ever decreasing degree.  You also assume that demand will come in waves.  Why isn't it more likely to come as a continuous (percentage wise) stream?

Because if it comes as a continuous, slow percentage, bitcoin is getting nowhere. Again, maybe it works as a store of value here, but not as a replacement currency. I gave what I think are reasonable assumptions to why demand will come in waves. Certain markets or certain geographic regions are what is likely to get bitcoin's name on the map. Maybe chipset manufacturers in Taiwan are sick of the local currency's inflation and decide to start hedging in bitcoins. They will accept payments for better prices and merchants will start looking to get some bitcoin business. This type of activity will spawn rampant speculation on top of the increased demand for bitcoin in trade.

The logistics just simply aren't there for any orderly expansion. 50% of the currency is already in existence and it is held by a small number of people. Every time the market expands, either a small group has to sell a large sum or a large group has to sell a small sum in an orderly fashion to get the orderly expansion. How many bitcoins does it take to double the price right now? I gave the example of walmart's revenue raising the price of a bitcoin by 8,000 times--and that's IF all the bitcoins become for sale. $1 billion is enough to multiply it by 20. This is a very tiny amount compared to the world economy.

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Again with the cycling; I don't see the source of that.  You also make it sound like each of your imagined cycles is the same size.  By the time half the earth adopts bitcoin, then half of the potential gains to earlier adopters will have happened.  If it was cyclic then each cycle benefits in exact proportion to its foresight.  Therefore that is the amount of credit we are willing to give them.

lol my point was what credit does anyone deserve for being in the first half of the world? The system has obviously already taken off and needs nothing to prove, yet every last person of that first half will still benefit off of the second half.

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You make it sound like these early/earlier adopters are stealing their benefit or that there is some external party giving it to them unfairly.

No, I don't actually. I make it sound like this won't work in an economic system designed to replace world currency. Please do not put words in my mouth that give you an argument to attack.

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The question, fundamentally, is: who are you to tell people what they should or shouldn't pay or ask for a bitcoin at any moment?

I'm not sure where you got that question from because I implied or told no such thing. I just question how irrationally stupid people would have to be to buy into bitcoin after it has bubbled and bursted several times within a decade. For these bubbles and bursts not to happen, either A) "earlier" adopters need to do a complete about-face and not let anything like what happened last year happen again or B) bitcoin will have to be adopted at such a snail's pace that it really isn't having any major affect on the world.



Maybe you sound too confident, considering you are backing your arguments with something so impalpable? Elaborate designs are known to be prone to failures and abuse. It may very well be impossible to accomplish creating an instrument that satisfies what you want. I assume you are familiar with the transformation problem? Whether your design is plausible or not borders on that, and it's a very very complicated issue. You yourself can't know if your design is sound as there is no analytical approach to the matter.

As impalpable as running a currency of bits over the internet?  Tongue I've actually simplified some major ideas since then, but I've also had more ideas to add.

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In other words, Bitcoin is scarce and fiat currencies aren't? That lack of ability is intentional. That is the merit of Bitcoin.

Scarcity isn't the issue, it's the lack of control (from the people's perspective) and the preference for those already in power. It isn't that fiat inflates that is the issue, it is that preference for new money is given to those who are already wealthy. It is that banks do not have to compete for savings because of fractional reserve and central banking lenders of last resort. If fiat inflated just by giving everyone a little bit more money proportionally, it wouldn't unbalance the system.

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Actually, if something like you want were successfully implemented, then it would be the perfect complementary to Bitcoin. I would go so far as to say that Bitcoin needs something like that for further adoption. Can it be done? If not, then this debate is pointless. Bitcoin imitates the idea of gold; that idea been around for a long time. It's easy to criticize, but notoriously hard to defeat.

Bitcoin may imitate gold, but it attempts to do so on an insanely accelerated scale. The rush is already over and a few dozen people won. I don't think you will be able to convince the world at large that this is the best way out of the bankers' and politicians' hands.

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May 29, 2012, 02:56:32 PM
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But to realistically function as a replacement currency, bitcoin cannot be seen as an investment.
Without people wanting to hold a prospective medium of exchange, it would not become a medium of exchange. Unless you perform some trick (e.g. voluntary peg to another medium of exchange), a medium of exchange that decreases in value has to be forced on people.
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May 29, 2012, 03:07:17 PM
 #78

But to realistically function as a replacement currency, bitcoin cannot be seen as an investment.
Without people wanting to hold a prospective medium of exchange, it would not become a medium of exchange. Unless you perform some trick (e.g. voluntary peg to another medium of exchange), a medium of exchange that decreases in value has to be forced on people.

Well, it can surely be seen as an investment in the case that it will not go down in value, e.g. better to hold it than fiat. Your "rainy day" fund or somesuch. But to buy it in the hopes that it is, of itself, a money making venture is not going to promote a well-functioning bitcoin economy. It just turns it into another game for wall street types to play.

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May 29, 2012, 03:11:30 PM
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Well, it can surely be seen as an investment in the case that it will not go down in value, e.g. better to hold it than fiat. Your "rainy day" fund or somesuch. But to buy it in the hopes that it is, of itself, a money making venture is not going to promote a well-functioning bitcoin economy. It just turns it into another game for wall street types to play.
You missed the point, which is that even if this was a problem, the alternatives do not fix it.
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May 29, 2012, 03:24:49 PM
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Yeah whatever the tired argument that a few dollars of electricity and participating in a hobby is a gigantic risk worth millions. I really don't care about this, which is why I am specific with my words. But it is so easy and tempting to quote part of a paragraph and bite in as if there weren't anything else clarifying it.

A few dollars in electricity in hardware would only be worth millions if the person decided not to cash out.  So pretending they only risked a few dollars is intellectually dishonest.  You simply say it because it reinforces your point of view.

Say someone mined 100K coins and it only cost them $300 (hardware, time, electricity).  When Bitcoin was worth $0.01 ea that investment suddenly was worth $1K.  As soon as they had the potential to sell some or all of their coins at the market price that became what they risked by not selling.  By not accepting $1K and holding they were no longer risking $300 they were risking $1K.  The same thing applied as the price rose from $0.01 to $0.10 to $1.00 and all the way up to $30.00 and then back down to $2.00 and back up to $5.00.

At each point the holder was risking the current value (in fiat) against the potential of future appreciation (which isn't guaranteed).  The only way someone ends up a Bitcoin millionaire is not by merely "risking a few dollars" but also being willing to continually risk the current value and not "cash out".

You claim the Bitcoin early adopters are unfairly enriched for their minimal risk.  However that enrichment only happens unless they either have already sold out (like getting a Pizza for 10K coins) or Bitcoin continues to expand.   If Bitcoin fails which you continue to claim it will then the early adopters won't be enriched millions. 

It seems you want to have your cake and eat it to.  Bitcoin early adopters will be unfairly rich by holding coins,  the very same coins which have no value if Bitcoin fails.  So which is it?  The early adopters are unfairly enriched to the tune of millions or Bitcoin will fail?

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May 29, 2012, 03:36:34 PM
 #81

As impalpable as running a currency of bits over the internet?  Tongue I've actually simplified some major ideas since then, but I've also had more ideas to add.

Come on, I'm talking about impalpability within the realm of ideas. For instance, even if Bitcoin wasn't an actual functioning economy, or even implemented, its "assumed" answer to the transformation problem is pretty much established (not solvable, non-polynomial, etc.). In comparison, you didn't even care to try. I'm not criticizing your action, just pointing out that it's too complicated to be so confident about. I would rather have the answers first.

Bitcoin may imitate gold, but it attempts to do so on an insanely accelerated scale. The rush is already over and a few dozen people won. I don't think you will be able to convince the world at large that this is the best way out of the bankers' and politicians' hands.

How did it come this far then? I don't understand why you think the early (earliest?) adopters' BTC holdings will not dissipate. If you are indeed right, the rational choice for early adopters is to sell their bitcoins at this point, no? Didn't the ones who didn't sell at $30 lose money?

Also, what D&T said.
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May 29, 2012, 06:01:09 PM
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Come on, I'm talking about impalpability within the realm of ideas. For instance, even if Bitcoin wasn't an actual functioning economy, or even implemented, its "assumed" answer to the transformation problem is pretty much established (not solvable, non-polynomial, etc.). In comparison, you didn't even care to try. I'm not criticizing your action, just pointing out that it's too complicated to be so confident about. I would rather have the answers first.

I assume you're referring to the 1 enc costs 1 enc to produce thing, which is an outdated idea. It went through revisions, originally being 10kWh, and so on like that until it has just basically become a bunch of ideas to reach equilibrium quickly between the existing money supply and the demand for new money. I detail it a bit more here: https://bitcointalk.org/index.php?topic=76750.msg852204#msg852204 but even since then I've made a lot of revisions to my ideas. I don't know that it will be insanely stable or anything like that, but I think it can work out to be a much better store of value than fiat while being resistant to bank (or earlier adopter) created liquidity crises.

How did it come this far then? I don't understand why you think the early (earliest?) adopters' BTC holdings will not dissipate. If you are indeed right, the rational choice for early adopters is to sell their bitcoins at this point, no? Didn't the ones who didn't sell at $30 lose money?

How did it come this far? The same could be asked of any successful, long-term scam :rimshot: The bitcoin market is still extremely small, we haven't seen how it is going to react when and if some bigger market finds it agreeable. As far as dissipating holdings, the answer is--it hasn't happened yet, and we can't know when it will. Even if billions are added to the market, any reasonable assumption as to the amount of bitcoins the Satoshi Group mined will be enough to empty it. Due to the nature of bitcoin, the earliest of adopters could trickle in the money over time or they could make you only think that they are doing so and really retain their coins, and you could not be sure (heyyy look the market is absorbing all these early coins without dropping, rally!!). But as it is, the great majority of the initial 2 million coins or so are unspent. fun graph: http://ecdsa.org/stats.html To me, this situation boils down to the fact that everyone has to trust satoshi or others with huge sums of money that has never entered the market to be responsible. I thought we were supposed to be getting away from the whole "having to trust someone" thing.

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May 29, 2012, 07:38:51 PM
 #83

I assume you're referring to the 1 enc costs 1 enc to produce thing

No, I'm referring to the theoretical difficulties in creating a non-scarce AND objectively balanced currency. I'm talking about the possibility of your idea in general, not necessarily Encoin. It seems impossible to me (that's why I referred to Marx's work), so I'd like to know what assumptions are made and what trade-offs are introduced (by Encoin or as a general idea) to attain that goal.

(I read material on Encoin several times, there a multitude of technical points that just aren't convincing, however what interests me is only the abstract idea, not the design itself.)

any reasonable assumption as to the amount of bitcoins the Satoshi Group mined

FUD much?

everyone has to trust satoshi or others with huge sums of money that has never entered the market to be responsible. I thought we were supposed to be getting away from the whole "having to trust someone" thing.

With this kind of reasoning, any group of people with a few million USD lying around as of now can do the same (ALL bitcoins are worth less than $50M), so we have to trust everyone who has that kind of money (tens of thousands of entities?) in the world to be responsible too. Or are we to assume that only the fictional Satoshi Group has a beef with Bitcoin?

I think you're focusing on a single point and forgetting how the world itself operates.
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May 29, 2012, 08:11:25 PM
 #84

But to buy it in the hopes that it is, of itself, a money making venture is not going to promote a well-functioning bitcoin economy.

Shame, it's the only thing that ever has.

Quote from: Adam Smith
It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.

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May 29, 2012, 08:38:30 PM
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No, I'm referring to the theoretical difficulties in creating a non-scarce AND objectively balanced currency. I'm talking about the possibility of your idea in general, not necessarily Encoin. It seems impossible to me (that's why I referred to Marx's work), so I'd like to know what assumptions are made and what trade-offs are introduced (by Encoin or as a general idea) to attain that goal.

Not to be nitpicky, but no theoretical limit does not mean non-scarce. More like a renewable resource, but extracting resources is not free. And the gist of the system is that when enough people attempt to create money, people saving and transacting on the network will also be given new money until the miners decide it is no longer worthwhile for the time being. The tricky part is making sure another CPU->GPU type scenario will not be disastrous.

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any reasonable assumption as to the amount of bitcoins the Satoshi Group mined

FUD much?

Difficulty of 1 for the first 1.6 million coins with an average solution time being over 13 or so minutes meaning there were not even enough CPUs to satisfy 2-3MH/s.
It is logical to conclude that whatever group started bitcoin were the only people mining for coins until a year or so after the launch. Any other explanation would be awfully forced.

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With this kind of reasoning, any group of people with a few million USD lying around as of now can do the same (ALL bitcoins are worth less than $50M), so we have to trust everyone who has that kind of money (tens of thousands of entities?) in the world to be responsible too. Or are we to assume that only the fictional Satoshi Group has a beef with Bitcoin?

I don't follow "this kind of reasoning". How can a group of people with a few million USD do the same? They could certainly increase the price very quickly, but they run the risk of earlier adopters selling out the floor. The early adopters, shockingly enough, don't have any risk except if they decide not to sell as you have already mentioned.

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I think you're focusing on a single point and forgetting how the world itself operates.

No, the debate invariably gets focused in the direction of the specific early adopters despite my trying to avoid it, because many of you just can't help but believe it is a matter of jealousy. I try to consciously argue against bitcoin as if the initial currency distribution made a whit more sense, and specifically avoid "focusing on a single point." I am most definitely not forgetting how the world operates, I am doing the best I can to actually change it--which I wholly admit is probably a lost cause. But bitcoin, in general, in my opinion, is ripe for manipulation. One way or another, the status quo of the "wealth transfer" property seemingly required of money is present and accounted for in bitcoin.

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May 29, 2012, 10:37:02 PM
 #86

Not to be nitpicky, but no theoretical limit does not mean non-scarce

Yes, thanks for the correction.

More like a renewable resource, but extracting resources is not free. And the gist of the system is that when enough people attempt to create money, people saving and transacting on the network will also be given new money until the miners decide it is no longer worthwhile for the time being. The tricky part is making sure another CPU->GPU type scenario will not be disastrous.

Still, it feels like unforeseen developments messing up the system would be the norm. I'll check the documentation again later, either they are too cryptic or I had too much coffee. Maybe a programmer could produce an introductory summary?

How can a group of people with a few million USD do the same? They could certainly increase the price very quickly, but they run the risk of earlier adopters selling out the floor. The early adopters, shockingly enough, don't have any risk except if they decide not to sell as you have already mentioned.

In your scenario, a group of early adopters are holding large chunks of coins, and somehow don't have conflicting interests (this is very implausible, but let's assume they are all the same person), so collectively they are a danger to the economy. If you have a few million dollars today, by following a good strategy (borrow, sell, buy), you can become as BTC-rich as this conspiracy. Unless there is a bigger conspiracy, I don't get how you "acting irresponsibly" would be any different from them.

the status quo of the "wealth transfer" property seemingly required of money is present and accounted for in bitcoin.

Yes, it "seems" that it's required. Smiley
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May 29, 2012, 10:45:33 PM
 #87

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

Thanks for enlighting.

-Grouver-

Last week, I spent almost $400 worth of bitcoins to buy exactly $400 worth of prepaid cell phone top-up card numbers.  I got a discount from face value of 4% compared to the precise exchange rate at the time.  I did it, in part, because I knew that Virgin Mobile USA was just about to alter their resalers' terms in such a way that future discounts were unlikely.  Since my monthly service rate is $25 per month, I'm sitting on 16 months worth of cell service that I know that I will use.  Yes, I was just as likely to gain as much or more over the next 16 months by holding the bitcoins and paying as I go, but that's a risk.  I still have bitcoins to do that with, and still plan on buying more, but the phone card numbers are a solid win so long as Virgin Mobile USA doesn't go bankrupt in the next 16 months and I don't lose those numbers before I can use them.

Basicly, I'm hedging against a fall in the bitcoin exchange rate.  I believe that bitcoins are going to stay pretty much the same for most of that time, and I neither believe a drop nor a rally is likely, but I don't know. 

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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May 29, 2012, 11:06:24 PM
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Bitcoin may imitate gold, but it attempts to do so on an insanely accelerated scale. The rush is already over and a few dozen people won. I don't think you will be able to convince the world at large that this is the best way out of the bankers' and politicians' hands.

How did it come this far then? I don't understand why you think the early (earliest?) adopters' BTC holdings will not dissipate.

As for myself, most of my 'early adopter' wages have already been spent.  I did profit well in the several years since I bought my first 1000 BTC, but I can profit little more now.  I now have less than 100 BTC left from that original set.  My son asked me not so long ago, "If the price has increased so much Dad, do you regret spending what you had for less?"  My reponse was, "No, because I did well by speculating early and gained much of what I wanted to buy when I sold them; much more (speaking in the context of value to my son) than the original bitcoins cost me.  I literally couldn't lose now if the value of a bitcoin dropped to zero tomorrow."

I've bought video game licenses, handmade jewlry off of Etsy for my daughter, pretty rocks for both of them, server rentals, clothing, cell service on several occasions, food of several sorts (mostly candy) and recently baklava; among other things that shall remain unmentioned.  The key to selling stuff for bitcoins, and thus seperating early adopters from their bitcoins, is to offer an advantage with bitcoin versus other (more established) alternatives.  You could offer a small discount compared to credit cards/paypal, or a more private or more convient alternative than standard methods.  Silk Road depends upon this, and can charge a premium because their method of handling bitcoins are a huge advantage concerning the limitation of legal risk for buyers as well as sellers.

"The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent meetings and conferences. The apex of the systems was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank...sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world."

- Carroll Quigley, CFR member, mentor to Bill Clinton, from 'Tragedy And Hope'
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May 30, 2012, 03:18:15 AM
 #89

I spent almost $400 worth of bitcoins to buy exactly $400 worth of prepaid cell phone top-up card numbers

I got a discount from face value of 4% compared to the precise exchange rate at the time.  I did it, in part, because I knew that Virgin Mobile USA was just about to alter their resalers' terms in such a way that future discounts were unlikely.

I would have done the same thing.  We bitcoiners sure are a bunch of penny pinching-cheap bastards, aren't we?
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May 30, 2012, 03:30:18 AM
 #90

I spent almost $400 worth of bitcoins to buy exactly $400 worth of prepaid cell phone top-up card numbers

I got a discount from face value of 4% compared to the precise exchange rate at the time.  I did it, in part, because I knew that Virgin Mobile USA was just about to alter their resalers' terms in such a way that future discounts were unlikely.

I would have done the same thing.  We bitcoiners sure are a bunch of penny pinching-cheap bastards, aren't we?

No, no, you're doing it wrong! You should have waited! Those coins will be worth x times more in n years!

Or you could just replace them in bulk I guess... Hmm... *rubs his chin*
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May 30, 2012, 03:37:45 AM
 #91

No, no, you're doing it wrong! You should have waited! Those coins will be worth x times more in n years!

Or you could just replace them in bulk I guess... Hmm... *rubs his chin*

Correct ..., bitcoins can be used for spending to save 4%, and then in response more can be purchased at an exchange to replenish at a cost of 0.6%.  It's a form of arbitrage.  And for that reason, no matter what future expectation I have for bitcoin's exchange rate, the fear of spending my "good money" isn't a factor when deciding whether to pay with bitcoin or pay with VISA/Mastercard or other payment method.
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May 30, 2012, 07:24:31 AM
 #92

No, no, you're doing it wrong! You should have waited! Those coins will be worth x times more in n years!

Or you could just replace them in bulk I guess... Hmm... *rubs his chin*

Correct ..., bitcoins can be used for spending to save 4%, and then in response purchase more at an exchange to replenish at a cost of 0.6%.  It's a form of arbitrage.  And for that reason, no matter what future expectation I have for bitcoin's exchange rate, the fear of spending my "good money" isn't a factor when deciding whether to pay with bitcoin or pay with VISA/Mastercard or other payment method.

That is an unbelievably good point. I'm amshamed of myself for not appreciating that before.

Thanks.

Doesn't that provide excellent refutation for all the Gresham's law naysayers?

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May 30, 2012, 07:39:48 AM
 #93

Doesn't that provide excellent refutation for all the Gresham's law naysayers?

Well, one thing that I'm assuming is that payment cards will always be higher than the bitcoin exchange rate.  They could drop to 2%, let's say, if bitcoin or other systems (e.g., Dwolla or PayPal's wallet-based point of sale system) were to become a threat.   And the difference between 2.0% and 0.6% gets to be less of an incentive.  

And let's compare between Dwolla or Bitcoin, for a $50 purchase.  Dwolla is 0.5% and bitcoin is 0.6%, for example.  So it is cheaper to pay with Dwolla than to buy bitcoins and transact with bitcoins.   So it really is only payment card versus Bitcoin where there is a significant cost difference.

But consider that if a lot of the legitimate, low-risk business starts to use wallet/cash methods for purchases (at Dwolla's $0.25 rate), but nearly 100% of fraudulent purchases remain using VISA/Mastercard, that not only wouldn't allow the merchant rate to be lowered and instead it could potentially force it to go up (at least for "card not present" type of ecommerce transactions).

Here's a related post where I made basically the same argument on the payment network charge arbitrage:
 - http://bitcointalk.org/index.php?topic=80018.msg887005#msg887005
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May 30, 2012, 10:43:48 AM
 #94

But consider that if a lot of the legitimate, low-risk business starts to use wallet/cash methods for purchases (at Dwolla's $0.25 rate), but nearly 100% of fraudulent purchases remain using VISA/Mastercard, that not only wouldn't the merchant rate drop but it could potentially be forced to go up (at least for card not present type of ecommerce transactions).

Yeah, haha. I agree. VISA is for criminals. All the good souls use bitcoin.

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May 30, 2012, 04:47:35 PM
 #95

Judging by some of the comments in this thread, it seems that Etlase et al might have been somehow 'damaged' by the shocking revelation (/sarc) that nobody is directly in charge of bitcoins' scarcity in any Big Brother government-like way.

This might be a shocking revelation: nobody used to be directly in charge of gold's scarcity, but goldsmiths used the ideas behind modern banking to rise to immense amounts of power and wealth. Bankers financed dozens of wars and have had a hand in writing who knows how many laws. It is because of the power of gold that fiat money and the banking system work the way they do.

Quote
1) Bitcoin's adoption doesn't have to grow. If people don't want to buy any bitcoins, nobody is forcing them. There is no "evil government-like entity" giving early adopters an unfair advantage by forcing everyone else to participate and artificially inflate the price.

And I have acknowledged that if you don't believe bitcoin will be a replacement currency in any real respect, then yeah it can do what it's doing now.

Quote
This feature could also protect against severe price shocks. For example, if Bitcoin ever has a sudden burst of popularity, some of the additional demand is bound to be absorbed by new currencies that suddenly pop up, thus stabilising its price against relatively large benchmarks like the USD.

This is such a terrible answer though. "Bitcoins are high this week, have to buy/accept bitcoin2s to conduct business". It's basically admitting that bitcoin has a massive flaw: it's not a good medium of exchange. More people want to use it, but can't or are turned off by it enough to use something else. That's a pretty big failure, imo.

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May 30, 2012, 08:32:20 PM
 #96

This might be a shocking revelation: nobody used to be directly in charge of gold's scarcity, but goldsmiths used the ideas behind modern banking to rise to immense amounts of power and wealth. Bankers financed dozens of wars and have had a hand in writing who knows how many laws. It is because of the power of gold that fiat money and the banking system work the way they do.
The power of bankers comes from credit expansion, which can increase the money supply at lower costs than producing new gold. Without credit expansion, there is no reason why the profitability of facilitating loans be any different than the profitability of other businesses.

This is such a terrible answer though. "Bitcoins are high this week, have to buy/accept bitcoin2s to conduct business". It's basically admitting that bitcoin has a massive flaw: it's not a good medium of exchange. More people want to use it, but can't or are turned off by it enough to use something else. That's a pretty big failure, imo.
First of all, we know that money exists. So this is not an insurmountable problem, because the spread of any money that is nowadays in use already happened in the past. People initially did not use a particular money but later switched. And some of these even occurred without a corresponding act of state. I'm sure there were plenty of skeptics and naysayers who preferred the old way for one reason or the other. But Bitcoin's advantages over the alternatives (decentralisation, predictable supply, low transaction costs) are still here and, in my opinion, remain unchallenged. Either it's sufficient for a switch, or it's not. Other than helping to provide an pleasurable experience for the potential user, there is not much else that can be done.
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May 31, 2012, 11:25:12 AM
 #97

I was talking about alt-chains ..

This negates your earlier complaint that Bitcoin is unable to expand its supply in response to increases in demand.

mm hmm

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June 18, 2012, 01:46:19 PM
 #98

Doesn't that provide excellent refutation for all the Gresham's law naysayers?
Gresham's Law is commonly very misunderstood. It does not apply to bitcoin at all. Gresham's Law is only applicable when you have a fixed exchange ratio between two different kinds of money, such as when the government forces people to accept debased gold coins at face value.

Basically, Gresham's law is a special case of price fixing. When you have a fixed mandate of the exchange rate between two goods you get a glut of one of them and a shortage of the other (and usually a black market to go with that). Thus, bad money only drives out good money when you are forced to accept the bad money at a higher price than the market price. Absent of price fixing, good money will outcompete bad money since merchants will be willing to offer better prices for good money. If Gresham's Law was universally applicable to all money at all times, gold would never have been money before the governement destroyed it. The market place would have ended up with the worst good possible for the purpose.

There is no problem the right price can't fix. If people get less inclined to sell their bitcoins (i.e. buy goods and services for them) because the expect the value to rise, then we should, for the same reason, expect that people will be more inclined to buy bitcoins (i.e. sell goods and services for them). This leads to an increase in the price of bitcoins, and thus lowers the expected return of hoarding to the level where people are ready to spend them again.
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June 18, 2012, 02:24:21 PM
 #99

Why would the majority of the people that have bitcoins spend them if they know bitcoins are becoming scarce (wich equals to more value) while time passes?
And to get the value of bitcoin raising you need a running economy right?
Doesn't these two things conflict with each other or am I misunderstanding something here?

Thanks for enlighting.

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The counter-question is, why should the majority of merchants not give better deals priced in bitcoins if they know they are becoming scarce and more valuable? There are two parts in every trade you know, and the right price will make every trade possible.
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