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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]

#51

Post by nosuchthing »

stale2002 wrote: post #45
nosuchthing wrote: post #32

Earlier quoted context omitted.

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 t…

The early adopters also took an extraordinary RISK in buying the coins, or spending the money mining them. Bitcoin being mainstream and safe is a very new thing. I remember just a couple years, everyone was freaking out because they were worried that China was going to ban bitcoin. And years before that, the worry was that the US, or whoever, would try to force AML regulations onto it. And a couple years before THAT…

Satoshi's design for the minting of supply to himself and the few individuals who scooped up the first 6-12 million coins is part of the design, for others to consider regardless.

As mainstream adoption took place, we've now seen large capital holders acquiring BTC in proportion with their current wealth.

The hodlers play a game of chicken prisoners dilemma, and it's worthwhile to consider what beanie baby they've acquired and how the sausage was made.

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

#52

Post by nosuchthing »

stale2002 wrote: post #43
nosuchthing wrote: post #12

Earlier quoted context omitted.

Bitcoin is not regulated. It cannot be regulated. There is no need to regulate it because as a system it is committed to the protocol as is and the transaction fees it charges the users are determined by the users independently of the miners’ efforts. There's no need to regulate Bitcoin the protocol or software. The gateways, such as the exchanges are more of an essential element in regard to regulatory and economic…

What if I were to tell you, that if bitcoin were to truly succeed, you won't NEED a gateway or exchange. You will just transact in bitcoin.

In a perfect world no true Scottsman would trade BTC directly.

Bitcoin will struggle as long as their development team struggles with fixing the 3-4 transactions per second limit. $20 fees to process a transaction in 20 minutes? Good luck.

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

#53

Post by SapphireSun »

v45h wrote: post #37
SapphireSun wrote: post #36

Earlier quoted context omitted.

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...

This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency.

The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science experiments but that's not what the gold bugs claim.

However, if you kind of turn the argument on its head a bit, gold is sort of like a ground up fiat currency. It has no intrinsic value and it has no army, but it forms a focal point of public consciousness that renders it deflationary fiat.

However, there are other problems with BTC even if you accept the idea of deflationary fiat. For instance, money doesn't just pool in rich people's pockets, you can literally lose a BTC wallet and the money is just gone forever. Over time, this will result in the number of BTC in circulation approaching zero. I don't know how long that will take.

The other argument against BTC is that its essentially capitalism run amok. We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. It's a satire of capitalism in a world of environmental catastrophe.

As for the Tulips, maybe I'm interpreting the chart incorrectly, but while the options price rose to insane levels, the realized prices, for a shorter duration, still rose to 100x (options were at 200x).

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

#54

Post by runeks »

nosuchthing wrote: post #52
stale2002 wrote: post #43

Earlier quoted context omitted.

What if I were to tell you, that if bitcoin were to truly succeed, you won't NEED a gateway or exchange. You will just transact in bitcoin.

In a perfect world no true Scottsman would trade BTC directly. Bitcoin will struggle as long as their development team struggles with fixing the 3-4 transactions per second limit. $20 fees to process a transaction in 20 minutes? Good luck.

You don’t need to touch the blockchain in order to receive a payment denominated in bitcoins. Every day millions of bitcoin-denominated transactions take place on exchanges using a centralized clearing system (you deposit BTC, transact, then withdraw BTC).

All we need is to standardize this behavior, such that each exchange doesn’t have its own closed system (essentially an SQL database with balances). Rather, we’d using an open clearing protocol, with multiple issuers in the same way we use email with multiple email providers. Each issuer/email provider is centralized, but the system as a whole is decentralized (similar to Git as well).

The simplest example of such a protocol is Stroem[1], which offers trustless micro-payments for consumers/payers, such that only merchants/payees take risks (which are proportional to how often they redeem their BTC on the blockchain). So, merchants get to choose their risk appetite: the longer they wait with redeeming, the lower the per-transaction fee, and the more often they redeem the more the security resembles on-chain transactions, with proportionally higher fees.

[1] https://www.strawpay.com/docs/stroem-payment-system.pdf

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

#55

Post by milkytron »

SapphireSun wrote: post #53
v45h wrote: post #37

Earlier quoted context omitted.

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

This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency. The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science…

> We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself.

What did you mean by "extract dollars"?

Also, the digital transfer of money throughout the globe and even just domestically requires a significant amount of processing (which requires raw energy) by many different entities. It makes me wonder if a transaction within a cryptocurrency payment system is actually more or less efficient, even with all of the miners.

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

#56

Post by Nursie »

clarkmoody wrote: post #10
Nursie wrote: post #9

Earlier quoted context omitted.

Micropayments are not that feasible when the fees per transaction are in the multiple dollars, surely?

Not on the blockchain. This is what Lightning Network and other Layer 2 technologies seek to enable: nearly-free micropayments.

Firstly, well the post I replied to implied that it was already there - AFAICT lightning is not in production use yet.

And secondly, frankly, I think Bitcoin dreadful for micropayments. It's really hard to get hold of for most people, requiring all sorts of setup and accounts.

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

#57

Post by Nursie »

mikekchar wrote: post #42
nosuchthing wrote: post #22

Earlier quoted context omitted.

What's a practical use case? It sounds like you have to deposit a balance into a lightning channel, meanwhile wait for the block to be accepted, and once the funds are in the channel any activity still needs to be verified by another block being processed and accepted into the main chain.. This process effectively doubles the required amount of transactions and time spent for the 'lightning' transaction to take place…

In Japan there are cards (and, indeed, your cell phone) that work exactly the same way. Debit cards don't really exist in Japan. Instead you buy a smart card (often the ones used for paying train or bus fares). You put some money on the card using a machine (you insert cash and it encodes the money on the card). Then you can flash the card onto a reader to pay for things (often train or bus fares, but in the past 10…

Only two blockchain transactions, still costs multiple dollars right now.

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

#58

Post by SapphireSun »

milkytron wrote: post #55
SapphireSun wrote: post #53

Earlier quoted context omitted.

This is an interesting critique. I don't deny that other alt-coins might make use of blockchains to solve other problems that aren't currency. The thing I'm taking away from the article is that it compares BTC to gold favorably, which is an interesting angle. I generally think that gold is an irrational investment, after all there is no intrinsic value to gold other than for jewelry electronics, and high tech science…

> We already destroy the environment to extract dollars, but now with cryptocurrencies, we actually have to destroy exponentially more raw energy to fuel the monetary system itself. What did you mean by "extract dollars"? Also, the digital transfer of money throughout the globe and even just domestically requires a significant amount of processing (which requires raw energy) by many different entities. It makes me wo…

I mean literally extracting resources: mining, logging, fishing, oil extraction. As resources become more scarce, the market system causes the price to shoot up, incentivizing the completion of the process to extinction. In the case of cryptocurrencies, it's abstracted somewhat since we use electricity, but those energy resources must come from somewhere, and right now it's not renewables for the most part.

I get what you're saying, but the entire idea of bitcoin is literally an exponential ramp. Each new technology that improves speed (CPU->GPU->ASIC) will be a linear step up, but mining will get exponentially harder. There are network effects from the banking world, but I don't think they should grow even as (N^2 where everyone is connected to everyone else) as they probably use something between than and a spoke and hub model.

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

#59

Post by solotronics »

wbl wrote: post #39
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…

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.

the problem currently has not been the number of TPS but the fact that different groups have incentive to "spam" the blockchain with fluff transactions 1) miners do this to set a minimum floor for transaction fees 2) subversive elements do this to make a point that Bitcoin cannot handle the use cases it was originally intended for

really thinking about this it is probably not a problem because the free market should find the true price for an on-chain immutable transaction. coffee transactions will happen off chain and be settled up on-chain (lightning network)

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

#60

Post by mrb »

JumpCrisscross wrote: post #13
virtuexru wrote: post #6

Earlier quoted context omitted.

> people don't buy bitcoin for its use in transactions I'd beg to differ.. sure there is definitely a percentage of HODL'ers but to say people don't use it in transactions is straight up lunacy. https://blockchain.info/charts/n-transactions?timespan=all https://blockchain.info/charts/trade-volume?timespan=all

Those data don't differentiate bitcoins bought for investment and for trading.

It does, because investors typically do not transact in Bitcoin. Buying and leaving BTC in an exchange wallet does not create a transaction on the blockchain.
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