Cory Doctorow discusses the Pros and Cons of BitCoins

[JesseChisholm]

Check out: http://boingboing.net/2011/05/21/bitcoin-skeptics-and.html

Boing-Boing is a site that hosts lots of "grid-computing" or "cloud-computing" projects.  Basically anything that can be divvied into small work chunks and passed out to a bazzilion personal computers to have the work done in parallel.  typically everyone's computer is an unpaid volunteer.

So it makes sense for them to be interesting in the topic of BitCoins ( where the computational intensity of being a banking system is shared by a bazzilion personal computers ).

I found quite interesting the comparison between BitCoins and Real Money:

BitCoin: designed to be quite difficult to make, and practically impossible to forge.

Real Money: designed to be as cheap as possible to make, and practically impossible to forge.

As near as I can figure the main reason to make BitCoins difficult to create is to pace their deployment over several years.

But with the removal of the mining option from the regular client, and the advent of the dedicated GPU parallel miners, and Mining Pools ... "proof-of-work" boils down to a case of The Rich Get Richer.

The rich (in Real Money) can afford the computer systems to dedicate to mining to become richer (in BitCoin).

I realize that no discussion here is going to change BitCoin or Real Money, but I find it a fascinating (im)balance in monetary systems.

-Jesse

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[justusranvier]

If you want to limit supply, there are cheaper ways to do that, too. And proof-of-work doesn't, anyway (it just gives the lion's share to the guy with the cheapest/biggest hardware).

How the coins manage to come into existence is the least interesting part of how Bitcoin works since mining is just the first data point on a very long series of transactions those coins will make. In the Bitcoin economy seigniorage is only a temporary phenomenon so it doesn't matter in the long run how it is initially distributed. Those miners only get to spend their coins once.

[hazek]

btw the correct spelling is Bitcoin  (protocol, payment system, node network) and a bitcoin or bitcoins (currency units)

[Stephen Gornick]

The rich (in Real Money) can afford the computer systems to dedicate to mining to become richer (in BitCoin).

Right now the miner's profitability is at a higher level than it has been but let's say that this level is a constant for the purposes of this discussion.

So Bob the miner spends today $1,000 on (used) hardware, and gets 1.4 Ghash/s.

He'll earn 0.6 BTC per day, worth about $3.84 at the current exchange rate ($6.59).

His electricity for that rig (725 Watts) costs $2.61 per day, so his gross profit is about $1.23 per day (or 0.2 BTC per day).

Assuming the exchange rate and difficulty do not change over the next one year period, Bob will have taken in about $450 worth of gross profit.

Let's say he then sells his rig, at $800 (just 20% discount for being used another year), and is left with $250 worth of net profit.

So for a $1,000 investment, Bob got a 25% return.  This is not including his time invested.

In this example, Bob did better at mining than using that $1,000 to buy bitcoins outright.

But this is assuming the exchange rate didn't change.

Let's say instead over the next year the exchange rate went up a little over 50%, from $6.59 to $10.00 but let's also presume that the difficulty rises so that the profitability stays at about the same level it is now.

Presuming Bob sells enough bitcoins each month to pay for his electricity costs, he'll have roughly the same 0.2 BTC in profit per day.  So one year later, Bob will have the 0.2 X 365 = 73 BTC in profit, but at $10 per BTC that is a year from now worth $730 USD.

And at the end of the year his equipment can be sold for $800, so subtract $200 from the profit, leaving Bob with $530 for mining, or a 53% profit on his $1,000 investment.

Next take Joe the speculator.   Today Joe simply buys $1,000 worth of bitcoins -- at $6.59 he gets about 150 BTC.  A year from now at $10 per, his stash is worth $1,500 so he profited $500, or about 50%.

Bob went through the effort to mine, including the acquisition and disposal of equipment over the one year and came out no better than Joe.  The reason Bob did no better than Joe was because Bob's $1,000 was invested in hardware that doesn't gain in value.

If the exchange rate were to have gone even higher, Joe the speculator would have made more profit (and a greater ROI) than Bob the miner.

Now what happens in practice is that network-wide the mining capacity lags price so if the exchange rate goes up there are periods of time that margins for mining are generally higher.  But if Bob is in Bitcion for the long term he actually would prefer the exchange rate not rise, at least not while he still is invested in the hardware.  This also means that when the exchange rate drops quickly, miners are better off shutting down so as to not lose money on electricity.

The point of all this was to show how if the exchange rate goes up, speculating does better than mining.  If the exchange rate goes down, mining does better than speculating.  Mining can still lose money, but you can lose it a lot faster from pure speculation.

So this "rich get richer" has nothing to do with being able to buy the (relatively) expensive equipment that has caused a high barrier of entry that excludes the poor from mining.  Mining is quite simply just a less risky form of speculating on the bitcoin exchange rate.

But for putting money into speculation, you are exactly right.  A person who has only $25 to speculate will only get $25 richer if the exchange rate doubles.  Where the person who buys $1,000 worth of bitcoin will become a $1,000 richer if the exchange rate doubles.

But for the poor there is no barrier to entry for speculating.  You can buy $50 worth of bitcoins and pay nearly the same rate as that a wealthy person who speculates would pay, for example.

This cuts both ways though.

Eight months ago when the exchange rate was under $3 there were still people calling bitcoin a ponzi and complaining about those who were lucky and got in under $1.   But they weren't expressing concern over those who had bought at $30, $15, $8 and $5 who remained underwater yet or had sold at a loss.  There still are many people holding bitcoins today who are severely underwater on them yet.   Just as the wealthy tend to gain more (dollar gain per capita) on the way up. that same subset of the population were the ones who mostly saw losses on the way down.

[Kazimir]

I found quite interesting the comparison between BitCoins and Real Money:

BitCoin: designed to be quite difficult to make, and practically impossible to forge.

Real Money: designed to be as cheap as possible to make, and practically impossible to forge.

That's quite an incomplete comparison between Bitcoin and 'real' money (strange name by the way, since Bitcoin is just as real money as the euro or dollar). The reality is more like this:

Bitcoin: not owned or controlled by a anyone, independent of banks and governments, nobody has control over your money or transactions, it's anonymous, transparent, transactions are fast and extremely cheap (virtually free), safe, secure, global (anyone can send and pay to anyone else in the world, no messing with currency rates), impossible to counterfeit, and nobody can create it out of thin air.

Fiat Currency: owned and controlled by banks and governments, they can seize your account and monitor or block transactions as they see fit, it's not anonymous (everything is linked to your personal details), not transparent, transactions are slow and they charge ridiculous fees, unsafe, very insecure, local (international transactions are even slower, more expensive, and involve more hassle and different currencies), relatively easy to counterfeit (it's almost common business) and banks can create it by the billions at the press of a button.

[realnowhereman]

Fiat currency is actually designed to be incredibly easy to forge (sorry... "print"); but government's use laws to stop you from doing it -- they want it to be easy so that they can print more when it suits them.

You, on the other hand, can't buy the paper, ink or anti-counterfeit technologies in the currency by law.  None of it is inherently "hard" though.  I've read (but as always can't find the link) that modern counterfeiters are perfectly capable of making currency indistinguishable from the real thing (and are often from countries without the laws that prevent the natives from counterfeiting -- how much does China care to stop its citizen's copying Euros?).  That might actually be why we're seeing such a push from governments to go cashless -- they know that there is a clock on physical cash.

Bitcoin is not legally impossible to forge; it's mathematically impossible to forge (with certain caveats on my casual use of the word "impossible").

[scribe]

Fiat currency is actually designed to be incredibly easy to forge (sorry... "print"); but government's use laws to stop you from doing it -- they want it to be easy so that they can print more when it suits them.

This needs banging home to people. Over the last few years in the UK, I've seen the main GBP "growth" policy as basically being to water it down so it's more widely available. People don't seem to get their heads round the idea that when more money is printed, the money you've got is worth less. Coupled with no incentive to save, it's very difficult to see fiat currency as anything except a way to keep foreign trade balanced and banks happy.

The amazing thing about Bitcoin is that "monetary policy" is basically a feedback algorithm, based on supply and demand rather than political and inter-geographical agendas. That's a strength because it's *predictable* - much more so than a central bank deciding whether or not to "pump money" into an economy because it hasn't got any better ideas.

[realnowhereman]

This needs banging home to people. Over the last few years in the UK, I've seen the main GBP "growth" policy as basically being to water it down so it's more widely available. People don't seem to get their heads round the idea that when more money is printed, the money you've got is worth less. Coupled with no incentive to save, it's very difficult to see fiat currency as anything except a way to keep foreign trade balanced and banks happy.

Couldn't agree more.

Even more amusing (and I use the word quite wrongly), is that the Quantitative Easing so far has been done by depositing loans in the banks' Bank of England account -- they are loans so that the charade that it can be undone continues.  This increases the capital that the banks have on their balance sheets (none of them have actually made use of it yet -- which was what the government claimed was the reason for doing it... "get credit flowing again" and all that).  At the same time the government raised the banks capital ratios, so that money couldn't be lent out.  In effect, the government have supplied the capital needed to meet the regulations they themselves introduced.

Then the game gets even more fun.  The government allows the banks to purchase government bonds and treat them as if they are capital (hence staying within the new capital reserve ratios).

Say what?  The government lent the banks magically created money so that the bank could purchase bonds.  The government spends the cash... which they printed and then borrowed and pays the banks interest on it.

Tell me that's not messed up?

[swissmate]

The rich (in Real Money) can afford the computer systems to dedicate to mining to become richer (in BitCoin).

Right now the miner's profitability is at a higher level than it has been but let's say that this level is a constant for the purposes of this discussion.

So Bob the miner spends ...

Very nice example!

[JesseChisholm]

@hazek, thank you for the spelling corrections.

[JesseChisholm]

@Kazimer, re: "Real Money"
You are correct, this term is not really reflective of what I meant. And too easily taken for something I didn't mean.

And in the sense that a currency is only as "real" as the value people put in it, then Quatloos (in the Star Trek universe) even qualify as "real".

But no, I was not counting "Fiat Currency" as typically in the set of "Real Money".

What I meant by "Real Money" is that it is backed by some physical commodity that has some kind of intrinsic value, like gold.

Most "Fiat Currency" is no longer backed by gold, even if it once was.
Some "Fiat Currency" were originally backed by "proof-of-work". (e.g., carving the stone into a coin)

But "Fiat Currencies", even those backed by gold, seek to get increase supply with the minimum of work expended, whereas Bitcoin is increasing the work expended (over time) to increase the supply.

[JesseChisholm]

@Kazimer, @realnowhereman,
I stand corrected on the "hard/easy to counterfeit" aspect of "Fiat Currency".  Even if I wasn't trying to talk about "Fiat Currency".

Gold, though, is still pretty hard to counterfeit.
It isn't used as a direct currency much these days.

-Jesse

[JesseChisholm]

@Kazimer,

banks can create [Fiat Currency] by the billions at the press of a button.

Well, technically, bitcoin also is "created" at the press of a button.

It just takes lots of computer time to finish reacting to that button push.  Analogous to (but likely longer than) the printing time it take for the Fiat system to react to the button push.

-Jesse

[MoonShadow]

The proof-of-work isn't simply wasted watts to make things hard, it also plays an critical role in the cryptographic security model of the blockchain.  Without it, a trusted central server would be required to produce the currency as well as verify that all transactions are valid, thus reintroducing a central bank and central point of failure.

This system doesnt work without proof-of-work, and other methods of trying to do the same thing have been attempted as code forks and every one has been quickly broken by other community members just to illustrate the point.

[jgarzik]

Check out: http://boingboing.net/2011/05/21/bitcoin-skeptics-and.html

Post is over a year old...

[Kazimir]

What I meant by "Real Money" is that it is backed by some physical commodity that has some kind of intrinsic value, like gold.

One could argue if gold actually has any "intrinsic value".

If people say that dollars are backed by gold (which it isn't as you state correctly, but suppose it were) then what does that mean, really? What is gold backed by?

If people accept that gold doesn't need to be backed by anything, or can act as a means of backing other things, then I don't see why the same wouldn't hold for bitcoins.

Well, technically, bitcoin also is "created" at the press of a button.

Yeah, but (and I know you know this, but I just wanna clarify this to everybody) there's no difference for a bank to create one million, or ten million, or one billion. Money isn't even printed anymore. They just store a random number in a computer, and that amount of dollars suddenly came into existence. Magic.

Bitcoin cannot be created at will. Unlike fiat currency (or gold!) the exact amount of bitcoins in existence is known and public for everybody, and can be predicted for the foreseeable future.

[JesseChisholm]

The rich (in Real Money) can afford the computer systems to dedicate to mining to become richer (in BitCoin).

Right now the miner's profitability is at a higher level than it has been but let's say that this level is a constant for the purposes of this discussion.

So Bob the miner spends ...

Very nice example!

It is a good example.
But it only looks at Bob.  Not at the differences between Bob and Alice (The Rich).

In your example, the out of pocket expense for Bob is under $2K for that first year.
    ( $1000 + ($2.61 * 365.25 days in a year) )
        (before he can sell the PC and recoup some of that expense)
Bob's mined income for the year is about 219 BTC.
    (0.6 BTC / day * 365.25 days in a year)

That comes to about $9/BTC.
If Bob does get $800 for his old rig, the final cost is about $5/BTC; the profit you calculated.

Bob will only make a profit at all if he can sell the old rig for more than: $510.
(a good probability, but no guarantees in this economy. that's one of the risks Bob is taking.)

HOWEVER, and I think it is a big "however", that initial outlay of $1953 is a larger percentage of Bob's expendable income that it is of Alice's.

If you look at the same percentage of "expendable income" (or "investment capital" as Alice likes to call it) then the rig Alice gets is much more powerful than Bob's rig.

Alice's rig will likely produce at better than 1.4Ghash/s.

My contention is that for the same "percentage of expendable capital" Alice will harvest BTC at a higher rate than Bob will.
( and, therefore, at a better profit margin )

And therefore, my conclusion of: for the same level of personal pain, "the Rich get richer" than the non-Rich.

-Jesse

[JesseChisholm]

Check out: http://boingboing.net/2011/05/21/bitcoin-skeptics-and.html

Post is over a year old...

True, the event is long over, but I was using the quotes/transcripts as a starting point for discussion in this thread.

The differences (especially for us Newbies) between the Bitcoin economic system and other economies is not intuitively clear.

-Jesse

[Gabi]

Boing-Boing is a site that hosts lots of "grid-computing" or "cloud-computing" projects.  Basically anything that can be divvied into small work chunks and passed out to a bazzilion personal computers to have the work done in parallel.  typically everyone's computer is an unpaid volunteer.

Eh? Are you sure you are speaking about BOINC and about https://boinc.berkeley.edu/ wich is totally unrelated to this "boing boing" thing?

[JesseChisholm]

DAG NAB IT!

My session timed out while I was typing my response and the entire thing got lost.

I had done "Preview" many times, but that did not (apparently) save a copy anywhere in the system.

Sigh.

I will attempt to recreate my thought process, but I will remember to Ctrl-A Ctrl-C before I click "Post" from now on.

-Jesse

[the joint]

I actually agree with the "the rich get richer" contention.

But, it's not necessarily because of what's happening now, but because of what has already happened in the few short years of Bitcoins existence.

Bitcoin is already distributed to extreme disproportion.  What was it that Zhoutong claimed?  Something along the lines of '5% of the Bitcoinica population carried 98% of the wealth?'  Not sure whether this was referring to BTC or fiat or if I quoted these percentages correctly, but they are close.

Even still, I think it's fair to say that an overwhelming percentage of Bitcoins are distributed among a relatively few number of people.  It doesn't matter whether this is due to the risk that early adopters took.  If Bitcoin becomes mainstream, it is likely that this disproportionate distribution of BTC wealth will continue to perpetuate itself.

To this extent, I think this is a legitimate issue and it's not an easy one to solve.  Regardless, I think a world with disproportionate Bitcoin distribution is better than one with disproportionate fiat distribution.

I also realize that if Bitcoin becomes totally mainstream to the extent that we hope it will, almost everybody on this forum will be included among the 'relatively few' at the top of the pyramid.  But, I think we're kidding ourselves if we think that Bitcoin is some kind of answer to the wealth distribution problem in the world.  It will take something else entirely to address poverty issues.

[justusranvier]

Even still, I think it's fair to say that an overwhelming percentage of Bitcoins are distributed among a relatively few number of people.  It doesn't matter whether this is due to the risk that early adopters took.  If Bitcoin becomes mainstream, it is likely that this disproportionate distribution of BTC wealth will continue to perpetuate itself.

What does that mean in practical terms? Either they spend those coins or they don't. If they spend them then the don't have them any more. If they don't spend them they aren't consuming any products or services in the Bitcoin economy. Where exactly is the problem?

[JesseChisholm]

What I meant by "Real Money" is that it is backed by some physical commodity that has some kind of intrinsic value, like gold.

One could argue if gold actually has any "intrinsic value".

Agreed: a moot point.

If people say that dollars are backed by gold (which it isn't as you state correctly, but suppose it were) then what does that mean, really? What is gold backed by?

Physical Reality - as opposed to Computer Modeled Reality, where most modern Currencies live.

If people accept that gold doesn't need to be backed by anything, or can act as a means of backing other things, then I don't see why the same wouldn't hold for bitcoins.

Philisophically, I agree there is no fundamental difference.
You might have a harder time, however, those who have not already, at least in part, become Bitcoin Enthusiasts.  It is only a small percentage of humanity that thinks much about the philosophy they use to view the world.

Well, technically, bitcoin also is "created" at the press of a button.

Yeah, but (and I know you know this, but I just wanna clarify this to everybody) there's no difference for a bank to create one million, or ten million, or one billion. Money isn't even printed anymore. They just store a random number in a computer, and that amount of dollars suddenly came into existence. Magic.

Hopefully not random!  Hopefully it is the amount they decided to create.

Bitcoin cannot be created at will. Unlike fiat currency (or gold!)

If you know how to create gold ....

... the exact amount of bitcoins in existence is known and public for everybody, and can be predicted for the foreseeable future.

That phrase "the exact amount of bitcoins in existence" can be taken two ways:
* the maximum number that are mathematically possible to ever exist
* the exact number that have been "mined" and moved into the economy
Both are known, public, and predictable.
What interests speculators is the rate (and the stability of the rate) that mining moves BTC into the economy.


Which brings to my mind a tangential question about the "creation" of a new economically active bitcoin.

I have not looked at the source code yet, but the question raised is of the fesability of tweaking the generation code. (without Bitcoin Client noticing, or what would be the point)

As I understand it, a bitcoin is:
* a properly check-summed encoding of ...
* a properly calculated hash of ...
* a properly generated term in ...
* a really scary cryptographic equation series.

And, as I understand it, the job of Bitcoin Client is to:
* validate the encoding and check-summing of the hash.
* validate the transaction chain
* * since the creation of this particular bitcoin
* * if not all the way back to the Bitcoin Epoch^(tm) beginning.

Which suggests that the "transaction of creation" (if that is a proper phrase) must contain enough information to verify that the data used to create the hash did in fact come from the scary cryptographic equation series.

And that this "transaction of creation" is still in the transaction chain so the client can verify it and all following transaction (that involve the bitcoin in question).

So the question becomes:
* Is it mathematically feasible to build a "transaction of creation", that passes current tests for validity, using less CPU power than the standard mining process?


I suspect the answer is "No" to the best ability of the cryptologists and programmers behind Bitcoin, else there would be no Bitcoin.

( : I seem to have drifted far from my original topic. : )

-Jesse

[JesseChisholm]

Boing-Boing is a site that hosts lots of "grid-computing" or "cloud-computing" projects.  Basically anything that can be divvied into small work chunks and passed out to a bazzilion personal computers to have the work done in parallel.  typically everyone's computer is an unpaid volunteer.

Eh? Are you sure you are speaking about BOINC and about https://boinc.berkeley.edu/ wich is totally unrelated to this "boing boing" thing?

Darn it all, you are correct.  I saw "Boing" and read "Boinc".
<expression type="facial" category="grin" style="sheepish" />

-Jesse

EDIT: As far as I can tell, there are no Boink projects dedicated to the mining of bitcoins.
Though some teams do declare that they accept donations in BTC.

[JesseChisholm]

Even still, I think it's fair to say that an overwhelming percentage of Bitcoins are distributed among a relatively few number of people.  It doesn't matter whether this is due to the risk that early adopters took.  If Bitcoin becomes mainstream, it is likely that this disproportionate distribution of BTC wealth will continue to perpetuate itself.

What does that mean in practical terms? Either they spend those coins or they don't. If they spend them then the don't have them any more. If they don't spend them they aren't consuming any products or services in the Bitcoin economy. Where exactly is the problem?

re: "If they spend them then the don't have them any more."

A company spends currency in order to reap even more currency.
True, they do not "have" the original items of currency, but they don't care, they have more total value of other items of currency.
If they don't get more (on average over time) then they go bankrupt.

The Typical End Consumer spends to consume, true; but does not typically spend to produce.
The Consumer typically trades "their time at work" for some currency (whether Fiat or Bitcoin or whatever).

The rate are which such a Consumer can acquire BTC is limited to their ability to work.
( e.g., there are only 24 hours in a day )

The rate at which a Rich individual can spend currency to produce currency in not limited in the same way.
( e.g., the more currency I have, the more I can use to produce more currency )

re: Where exactly is the problem?
It isn't a "problem" but an "observation".

In the Bitcoin economy, as in every other economy so far known, "The Rich Get Richer" (faster than anyone behind them).

In this early phase where not all BTC have been mined, then it is determined by who can afford to throw the most CPU/GPU power at mining.

Eventually, when all bitcoins have been mined, that aspect goes away.  The Bitcoin Economy will still be subject to normal economic flows.

-Jesse

[justusranvier]

A company spends currency in order to reap even more currency.
True, they do not "have" the original items of currency, but they don't care, they have more total value of other items of currency.
If they don't get more (on average over time) then they go bankrupt.

But what is the mechanism by which that happens?

What your're talking about it the system in which people can use their money to buy political favors and coercively funnel other people's towards themselves. That's how wealth accumulates to the those at the top but it's a function of the State, not the currency.

Without the ability of a central bank to print an unlimited amount of Bitcoins this wealth transfer mechanism is far less effective. If the early adopters want to hold on to their share of Bitcoins they must either never spend them, and thus never have an effect on the economy or they must somehow produce a value equal to or greater than they consume. If they can't manage to produce enough value their share of the Bitcoins will inevitably decline.

[the joint]

Even still, I think it's fair to say that an overwhelming percentage of Bitcoins are distributed among a relatively few number of people.  It doesn't matter whether this is due to the risk that early adopters took.  If Bitcoin becomes mainstream, it is likely that this disproportionate distribution of BTC wealth will continue to perpetuate itself.

What does that mean in practical terms? Either they spend those coins or they don't. If they spend them then the don't have them any more. If they don't spend them they aren't consuming any products or services in the Bitcoin economy. Where exactly is the problem?

In practical terms it means just exactly what I said -- disproportionate wealth distribution is likely to perpetuate itself.  The consequences of this would likely be similar to what we see in society today, namely that social distancing between the extremely wealth and the non-wealthy leads to things like corruption.

Ok, so they spend some BTC.  Right now that doesn't mean anything because the Bitcoin community is still extremely small.  Again, if Bitcoin becomes totally mainstream, then we will all be a part of that upper echelon.  1% of the world population is ~60,000,000 people.  The problem will come if (the hypothetical if) Bitcoin becomes accepted as the dominant form of currency by billions of people.  As long as you have at least a few BTCs, you will be among the most wealthy Bitcoin owners in the world if this happens.  By this point, prices would be denominated in things like mBTC and uBTC.  

I'm not really sure what you're not understanding.  You're talking about BTCs being spread around the (hypothetical) future 1%, or more like .01%.  It doesn't matter if people are spending them now...it only matters if they spend all of them (e.g. such that they would have a balance of < 1 BTC) at the time that Bitcoin is used globally by the mainstream population.

Edit:  In other words, a likely future scenario is this:
100 people own > 1000 BTC
10,000 people own > 100 BTC
100,000 people own > 1 BTC
7,000,000,000 own ~ .001 BTC

[justusranvier]

In practical terms it means just exactly what I said -- disproportionate wealth distribution is likely to perpetuate itself.

Look at the reply I posted above. Just saying that a disproportionate wealth distribution is likely to perpetuate itself doesn't mean anything unless you explain the mechanism of how.

[the joint]

In practical terms it means just exactly what I said -- disproportionate wealth distribution is likely to perpetuate itself.

Look at the reply I posted above. Just saying that a disproportionate wealth distribution is likely to perpetuate itself doesn't mean anything unless you explain the mechanism of how.

Ok...3 questions:

How many coins have been created already?

How many current Bitcoin users are there?

Now, why do you think that suddenly the rest of the entire world is going to get a proportionate cut of not only the remaining BTC, but also the BTC currently in existence?

If you need another example, I'll give you a personal one.  I keep a balance of between 50-500 BTC in my savings.  It will never go below this.  Why?  Because I've determined so.  Now, how many others do you think keep a minimum balance or a savings balance?  My guess is, quite a lot.

Seriously, this isn't hard to understand.

[justusranvier]

I keep a balance of between 50-500 BTC in my savings.  It will never go below this.  Why?  Because I've determined so.

That's just magical thinking to say it doesn't go below 50 merely because you determine it to be so.

It doesn't go below 50 because either you don't spend the coins or because you expend resources to obtain more.

[the joint]

I keep a balance of between 50-500 BTC in my savings.  It will never go below this.  Why?  Because I've determined so.

That's just magical thinking to say it doesn't go below 50 merely because you determine it to be so.

It doesn't go below 50 because either you don't spend the coins or because you expend resources to obtain more.

False dichotomy.  I'm a miner, and a certain % of my mined Bitcoins currently goes towards the purchase of gold and silver while the rest gets stashed.  I've already paid off my mining hardware.  So yes, I am spending coins, and I'm also getting more without having to expend any additional resources (especially because electricity is included in my rental agreement).

And yes, I've determined that I will not remove those BTC until it becomes accepted globally.  It's my lotto-ticket-retirement-fund. 

[JesseChisholm]

What you're talking about it the system in which people can use their money to buy political favors and coercively funnel other people's towards themselves. That's how wealth accumulates to the those at the top but it's a function of the State, not the currency.

I disagree that it is a function of the State (or even of the State's Fiat Currency).
I believe it is a function of Human Corruptibility.

If a politician were offered 1M to make a decision a particular way, it doesn't matter if it is in USD or EURO or BTC.  What matters is the character of the politician.

Without the ability of a central bank to print an unlimited amount of Bitcoins this wealth transfer mechanism is far less effective. If the early adopters want to hold on to their share of Bitcoins they must either never spend them, and thus never have an effect on the economy or they must somehow produce a value equal to or greater than they consume. If they can't manage to produce enough value their share of the Bitcoins will inevitably decline.

As I understand it, (which is still a raw Newbie level of understanding in may ways) as the total number of bitcoins approaches maximum, ans as the "deflationary" aspect kicks in, the quantities transferred for a particular commodity could dropfrom 1BTC to 0.001 BTC  to 0.000001 BTC etc.  If the bottom rungs of the economy need to deal with nano-BTC to be meaningful, it will likely mean that some small number of individuals (or more likely corporations) are the only ones for whom 1 BTC is still meaningful.

It doesn't mean that they do not spend.

It means that don't need to spend as much this year as last year for the same thing.
It means that there are a limited number of players who can offer anything to them worth 1K BTC or 1M BTC.

Whether such a deflationary economy will be good for Bitcoin or not, I have no idea.
Whether such a deflationary economy will be good for the average human in this planetary system or not, I have no idea.
Whether it will even turn out exactly that way, I have no idea.

Whether trying something different than what has always failed before is a good idea or not, ..., I think so.

-Jesse

[JesseChisholm]

A company spends currency in order to reap even more currency.
True, they do not "have" the original items of currency, but they don't care, they have more total value of other items of currency.
If they don't get more (on average over time) then they go bankrupt.

But what is the mechanism by which that happens?

What you're talking about it the system in which people can use their money to buy political favors and coercively funnel other people's towards themselves. That's how wealth accumulates to the those at the top but it's a function of the State, not the currency.

Actually, I was talking about normal business practices of spending currency to:
* produce something
* convince Consumers to buy product
* make a profit doing it

-Jesse

[justusranvier]

Actually, I was talking about normal business practices of spending currency to:
* produce something
* convince Consumers to buy product
* make a profit doing it

Ok. If the large holders can produce as much value as they consume by spending bitcoins they will keep the same number of bitcoins. Otherwise they will lose them over time.

Is that a problem that needs to be solved?

[the joint]

Actually, I was talking about normal business practices of spending currency to:
* produce something
* convince Consumers to buy product
* make a profit doing it

Ok. If the large holders can produce as much value as they consume by spending bitcoins they will keep the same number of bitcoins. Otherwise they will lose them over time.

Is that a problem that needs to be solved?
[/quote

Profit implies the ability to acquire more Bitcoins, not keep the same number.  I doubt any company goes in business to break even.

[MoonShadow]

What you're talking about it the system in which people can use their money to buy political favors and coercively funnel other people's towards themselves. That's how wealth accumulates to the those at the top but it's a function of the State, not the currency.

I disagree that it is a function of the State (or even of the State's Fiat Currency).
I believe it is a function of Human Corruptibility.

Truth, and the next obvious point to be made is that all fiat currencies that were designed by (presumedly honest) human beings are still being run by human beings.  Do you still presume them honest?

I  can pretty much assume that the math functions in my computer are honest, as the souless machine has no vested interest in any particular outcome.  Humans do, and that is the root of the problem with fiat currencies.  Sure, they're great in theory, but in practice they require levels of integrity and wisdom from people in the positions of power that cannot (logicly) be maintained over generations.

[JesseChisholm]

I  can pretty much assume that the math functions in my computer are honest, as the souless machine has no vested interest in any particular outcome.  Humans do, and that is the root of the problem with fiat currencies.  Sure, they're great in theory, but in practice they require levels of integrity and wisdom from people in the positions of power that cannot (logicly) be maintained over generations.

If you are unwilling to assume that the human beings are honest enough,
Then why would you assume that the math functions in your computer are honest?
Wasn't the software written by human beings?
    Open Source Software is not a panacea.
    You either have to read and understand all the code yourself.
    Or you have to _trust_  someone else who did.
        ( or the community of many who did )

re: the souless machine has no vested interest in any particular outcome.
The soulless machine has exactly the interest in a particular outcome that someone programmed it to have.

If that were not so, then there would be no debate about electronic voting machines being used to subvert an election.

re: Humans do, and that is the root of the problem with fiat currencies.
If the very Human "love of (fiat) money" is the root of all evil, then how is the "love of bitcoin money" any different?

-Jesse

[Gabi]

Boing-Boing is a site that hosts lots of "grid-computing" or "cloud-computing" projects.  Basically anything that can be divvied into small work chunks and passed out to a bazzilion personal computers to have the work done in parallel.  typically everyone's computer is an unpaid volunteer.

Eh? Are you sure you are speaking about BOINC and about https://boinc.berkeley.edu/ wich is totally unrelated to this "boing boing" thing?

Darn it all, you are correct.  I saw "Boing" and read "Boinc".
<expression type="facial" category="grin" style="sheepish" />

-Jesse

EDIT: As far as I can tell, there are no Boink projects dedicated to the mining of bitcoins.
Though some teams do declare that they accept donations in BTC.

There is one

It's a sub-project of GPUGRID

http://www.gpugrid.net/

and is called Donate@Home http://www.donateathome.org/ Basically you mine for them

(and it's Boinc, not Boink )

Edit: i wonder if they know about the Butterfly Labs ASIC  How to make their project useless 

[JesseChisholm]

Boing-Boing is a site that hosts lots of "grid-computing" or "cloud-computing" projects.  Basically anything that can be divvied into small work chunks and passed out to a bazzilion personal computers to have the work done in parallel.  typically everyone's computer is an unpaid volunteer.

Eh? Are you sure you are speaking about BOINC and about https://boinc.berkeley.edu/ wich is totally unrelated to this "boing boing" thing?

Darn it all, you are correct.  I saw "Boing" and read "Boinc".
<expression type="facial" category="grin" style="sheepish" />

-Jesse

EDIT: As far as I can tell, there are no Boinc projects dedicated to the mining of bitcoins.
Though some teams do declare that they accept donations in BTC.

There is one

It's a sub-project of GPUGRID

http://www.gpugrid.net/

and is called Donate@Home http://www.donateathome.org/ Basically you mine for them

(and it's Boinc, not Boink )

Edit: i wonder if they know about the Butterfly Labs ASIC  How to make their project useless 

Ah!
I had not checked for "sub-projects", only those listed at the top level of Boinc's project list.

Interesting that GPUGRID does not list Donate@Home as one of their sub-projects.
    Well, not directly.
    If you go to their "Donations" page, it is quietly mentioned.

Also interesting that at Boinc it is only mentioned in a forum.  I guess sub-projects are second class citizens.

-Jesse

[Gabi]

Well the BOINC website only list main projects. Donate@Home is an experiment of GPUGRID

Lol, in the donation page they look for 7970 People who don't know Bitcoin will think "why they are looking for ATI gpus if the project (gpugrid, not donate@home) is nvidia-only?"