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Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

columbia.edu

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Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#31

Post by clarkmoody »

quickthrower2 wrote: post #28
rothbardrand wrote: post #16

This paper is a reasonable attempt to model bitcoin by people who only see the surface of what bitcoin is. Bitcoin is like an Onion- it has layers, and makes you cry. As I have come to understand it there are many layers- both in technology and economics- at work here. Most obvious is layer 2 tech like lightening network, side chains, and segwit. (which is a second layer inside the blockchain.) But as you come to und…

I can buy a coffee with a CC immediately but Bitcoin I need to wait 3 hrs?

Bitcoin clears and settles within a few blocks. Credit cards may reverse a transaction for 90 days.

The merchant could also let you leave after sending Bitcoin if the risk of double-spending was low enough (and network congestion was down).

Lightning Network will enable instant transactions without needing to wait for block confirmation, which is a true payments solution.

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#32

Post by nosuchthing »

AgentME wrote: post #17
nosuchthing wrote: post #11

This paper mainly focuses on the miner-transaction fee-protocol economics, completely neglecting the real world economic interactions and history of BTC. Satoshi's core design of bitcoin minting favored early adopters to mint coins at extremely low cost and processing power, this is why someone traded 10,000 bitcoins for two pizzas because it took no effort to generate those early on. Satoshi decided to decrease the…

>Satoshi decided to decrease the amount of rewards as the network grew older and presumably more users would adopt it, why? Mining needed to have a way to incentivize miners before transaction fees were common, and there needed to be a system to get bitcoins out into users' hands to begin with. Once a critical mass of users have bitcoins and transaction fees support mining, there's less reason to continue minting new…

There was no "getting bitcoins out into user's hands" other then Satoshi and the small group of minters who generated the majority of early coins. It was designed to exploit late adopters, more so when the published price is controlled by only a few unregulated black box exchange "markets".

If you look at the coin supply minted over time, in the first year ~3,000,000 coins were minted, 1/7th the total supply minted to a very very small group of humans. By 2014 half the entire supply was minted. These coins are now in in the pockets of a very very limited amount of users who spent very little resources to mint these and be granted credits in Satoshi's database. Think about this.

There's no real network effect when migration to any of the other altcoins is just as easy. It becomes incentived more so when actual usage of the BTC network is cumbersome with latency of up to several hours, and or $10-$20 transaction fees.

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#33

Post by droopyEyelids »

SapphireSun wrote: post #24
bobbygoodlatte wrote: post #7

Earlier quoted context omitted.

I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boo…

Sorry.... I had to. "I think this is mostly correct, but I see it a bit differently. This bubble is slowly building up real housing for hard working poor and middle class people. Use cases like pay-day loans and sub-prime mortgages become more and more viable as the network size grows. Eventually enough people own mortgages that it makes sense for it to be baked into a CDO, and for it to be used in lieu of liquid ass…

I don't necessarily agree with bobbygoodlatte but it seems like you wrote a themed mad-libs rather than an analogy..

Did you mean for the terms you listed to relate to the bitcoin situation in any way?

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#34

Post by iamrobinhood123 »

Speaking of economic views, I think that people tend to overlook the most fundamental part of the Blockchain based currency phenomenon today. While the technology is great, it tends to overshadow the fundamental observation that these cryptocurrencies are first and foremost currencies and then afterwards technologies. Perhaps Hacker News is not the place to have such a view, but it ought to be stated. There is a lot of misinformation out there and a lot of excitement, we ought to continually remind ourselves of this truth. These currencies and their intrinsic value are subject to the same rules of all regular currencies: supply and demand. Do people believe that these are valuable or not? The economic view trumps the technological view at the end of the day. http://benshieldsblog-blog.tumblr.com/ https://docs.google.com/document/d/18R6MTugMCZaL1A8b0gj_9F_E...

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#35

Post by v45h »

SapphireSun wrote: post #24
bobbygoodlatte wrote: post #7

Earlier quoted context omitted.

I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boo…

Sorry.... I had to. "I think this is mostly correct, but I see it a bit differently. This bubble is slowly building up real housing for hard working poor and middle class people. Use cases like pay-day loans and sub-prime mortgages become more and more viable as the network size grows. Eventually enough people own mortgages that it makes sense for it to be baked into a CDO, and for it to be used in lieu of liquid ass…

I'm not saying it isn't necessarily a bubble, but the bubble analogies tend to be as lazy of thinking as speculating a never ending upward trend.

Creating utility/value from achieving network effects (something pretty common) isn't really comparable to issuing loans to people who cannot afford to pay them back, regardless if you think there's overvalued speculation or not.

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#36

Post by SapphireSun »

droopyEyelids wrote: post #33
SapphireSun wrote: post #24

Earlier quoted context omitted.

Sorry.... I had to. "I think this is mostly correct, but I see it a bit differently. This bubble is slowly building up real housing for hard working poor and middle class people. Use cases like pay-day loans and sub-prime mortgages become more and more viable as the network size grows. Eventually enough people own mortgages that it makes sense for it to be baked into a CDO, and for it to be used in lieu of liquid ass…

I don't necessarily agree with bobbygoodlatte but it seems like you wrote a themed mad-libs rather than an analogy.. Did you mean for the terms you listed to relate to the bitcoin situation in any way?

Mainly the idea of a bubble resulting in real utility to people. If bitcoin isn't used for transactions, it's a store of value. It's gold + technology people don't understand. I don't understand how that's any different from a tulip except that you don't have to wash the dirt off of it when you uproot it.

EDIT: I was also trying to make a point that CDOs were based in a kind of network effect where the risk was submerged under an ocean of statistics. Yet in the end, the underlying assumptions were faulty and the network effects lit on fire like gasoline.

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#37

Post by v45h »

SapphireSun wrote: post #36
droopyEyelids wrote: post #33

Earlier quoted context omitted.

I don't necessarily agree with bobbygoodlatte but it seems like you wrote a themed mad-libs rather than an analogy.. Did you mean for the terms you listed to relate to the bitcoin situation in any way?

Mainly the idea of a bubble resulting in real utility to people. If bitcoin isn't used for transactions, it's a store of value. It's gold + technology people don't understand. I don't understand how that's any different from a tulip except that you don't have to wash the dirt off of it when you uproot it. EDIT: I was also trying to make a point that CDOs were based in a kind of network effect where the risk was subme…

https://stratechery.com/2017/tulips-myths-and-cryptocurrenci...

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#38

Post by trophycase »

quickthrower2 wrote: post #28
rothbardrand wrote: post #16

This paper is a reasonable attempt to model bitcoin by people who only see the surface of what bitcoin is. Bitcoin is like an Onion- it has layers, and makes you cry. As I have come to understand it there are many layers- both in technology and economics- at work here. Most obvious is layer 2 tech like lightening network, side chains, and segwit. (which is a second layer inside the blockchain.) But as you come to und…

I can buy a coffee with a CC immediately but Bitcoin I need to wait 3 hrs?

You don't need a globally redundant ledger to store your coffee purchases. The benefits of a blockchain over traditional financial systems is borderlessness and censorship resistance. Nobody is stopping you from buying coffee, why would you need a blockchain?

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#39

Post by wbl »

bobbygoodlatte wrote: post #7
rb808 wrote: post #5

That is a very 2015 view - now days people don't buy bitcoin for its use in transactions, they buy bitcoin because it keeps going up. The more it goes up the less people are likely to spend it. We don't need many miners if people never spend it. Here is one high profile example http://avc.com/2017/08/store-of-value-vs-payment-system/ (of course when it starts to go back to zero people will all try to sell and the inf…

I think this is mostly correct, but I see it a bit differently. This initial wave of speculation is slowly building up network utility. Use cases like micro-transactions or Web payments become more and more viable as the network size grows. Eventually enough people own Bitcoin that it makes sense for it to be baked into a browser for micropayments, and for it to be used in lieu of Venmo/PayPal. Speculation is the boo…

I don't need to own bitcoin to carry out a transaction with it for longer then a few minutes. With a global cap of soon to be 28 transactions a second Bitcoin will never be competitive with Visa.

Re: Monopoly Without a Monopolist: An Economic Analysis of the Bitcoin System [pdf]

#40

Post by dajohnson89 »

rj123 wrote: post #27
pmorici wrote: post #19

Earlier quoted context omitted.

The high transaction fees recently are pushing out a lot of the traditional use cases for Bitcoin. Bitcoin Cash appears to be in a position to inherit those use cases.

That's unlikely. Bitcoin cash isn't accepted anywhere yet, and unlike Bitcoin it does not have Segwit, and thus no layer2/lightning network support. It's 8MB blocks only up the on-chain scaling from like 3 tx/sec to ~20tx/sec. That's a negligible difference when compared to credit cards, paypal, etc. Bitcoin will only ever reach that kind of capacity with 2nd layer lightning network, or something like it.

When will btc adopt lightning?
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