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Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

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Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#91

Post by alex_young »

Klathmon wrote: post #81
drdrey wrote: post #63

Earlier quoted context omitted.

Probably not what OP meant, but mining pools are a way to address that. You team up with N other miners, and if one of them finds a solution then the reward is divided among the pool based on the work that was contributed

Which is actually the exact same system as mining, but with a fractional difficulty. So instead of having to mine a block with a difficulty of 10 million, you are allowed to mine invalid "miniblocks" with a difficulty of 1 thousand. Then when someone in the pool happens to mine a block that is difficult enough to be valid globally, the mining pool software takes that reward and splits it proportionally among all user…

Isn't it a complexity optimization? In the broader system there is no coordination of attempts so multiple nodes 'waste' resources trying the same invalid solutions if I understand correctly.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#92

Post by BenoitEssiambre »

philiphodgen wrote: post #24

I look beyond the “there’s a crash coming” sentiment. In that opinion, he is like all other pundits yammering on CNBC: entertaining rather than enlightening. What I like about his article is the insight — new to me — about the nature of paper wealth vs real wealth. He described it in a way that is useful and enlightening to me. The assertion that a security (stock, bond) is not an addition to net wealth — just a zero…

Yes that is a key insight to understand about macroeconomics and the reason why growth in financial equity and other instruments is not counted in GDP, only production of real things, creation of factories and accumulation of inventories.

One party's debt is another party's saving (the party that the debt is owed to) so debt nets to zero in the aggregate economy.

It is also why cryptocurrencies are potentially dangerous to the economy if they become too popular. The situation could become similar to how gold hoarding caused the great depression (though I don't think it will be that catastrophic unless governments start tying their currencies to crypto tokens like they had done with gold.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#93

Post by Klathmon »

alex_young wrote: post #91
Klathmon wrote: post #81

Earlier quoted context omitted.

Which is actually the exact same system as mining, but with a fractional difficulty. So instead of having to mine a block with a difficulty of 10 million, you are allowed to mine invalid "miniblocks" with a difficulty of 1 thousand. Then when someone in the pool happens to mine a block that is difficult enough to be valid globally, the mining pool software takes that reward and splits it proportionally among all user…

Isn't it a complexity optimization? In the broader system there is no coordination of attempts so multiple nodes 'waste' resources trying the same invalid solutions if I understand correctly.

Yes, but the number of possible "solutions" (valid or invalid) is so large that it's extremely unlikely that 2 people are getting the same invalid solutions (assuming the software is working correctly). so you don't need any coordination.

And "extremely unlikely" doesn't quite get across the magnitude here. We are talking about the likelihood of 2 people generating the same SHA256 hash of what is basically an absurdly large random number.

Trying to mine a block is basically just generating an SHA256 hash of (the previous block + a nonce) that has a given number of 0's on the front of it. (this is crazy oversimplified) The nubmer of zeros is basically the difficulty.

So everyone starts off trying to generate a SHA256 hash of "ABCD" and a random number, that has at least 4 zeros on the front. So a mining pool is setup that says anyone that generates a SHA256 hash of the same thing with 1 or more zeros on the front gets a "share", and when anyone generates an SHA256 hash with 4 or more zeros on the front, the pool submits that share, then gives the profits to everyone that was able to generate "shares" based on how many they generated.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#94

Post by BenoitEssiambre »

psyc wrote: post #57
philiphodgen wrote: post #24

I look beyond the “there’s a crash coming” sentiment. In that opinion, he is like all other pundits yammering on CNBC: entertaining rather than enlightening. What I like about his article is the insight — new to me — about the nature of paper wealth vs real wealth. He described it in a way that is useful and enlightening to me. The assertion that a security (stock, bond) is not an addition to net wealth — just a zero…

It’s zero sum for the individual buyer and seller, but in aggregate it’s how the economy decides what work to do.

I think I understand what you are saying but in macroeconomics it's usually stated the other way. On the aggregate debt and financial instruments net to zero. One person's debt is another person's saving and if you add all financials up, you get zero (or depending on what you are counting, you get the value of the physical assets behind the financial assets such as stuff, factories etc. On the other hand, for sub parts of the economy or for individuals there can be positive or negative financial equity or debt meaning some individuals or parts of the economy owe are are owed more than others.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#95

Post by spookthesunset »

smogcutter wrote: post #83
VMG wrote: post #47

Earlier quoted context omitted.

You need opportunity cost in order to secure the network. Without that, there is no incentive to keep the network secure. There is no cheaper solution to solve this problem, therefore there is no waste.

"Bitcoin is inherently wasteful, therefore it's not wasteful." What?

Welcome to Bitcoin advocate logic. Clearly using more energy than a moderate sized european country in order to process 3 or 4 transactions per second isn't wasteful. Right?

I mean in absolute numbers, says the bitcoin advocate, the fiat banking system has to use more, right?....

....nevermind the fact they do something that is not driven by pure speculation and do it at thousands of times larger scales.

Bitcoin -- the perfect intersection of people who don't understand finance, economics, computer science, scaling, politics, socio-economics, or math.

PS: People only quote Bitcoin's energy use and often times they leave out things like air conditioning. Nobody seems to sum up the total energy required to power the entirety of the crypto "space" including Ethereum, Litecoin, etc.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#96

Post by Yen »

His chart "Nonfarm business sector: Real output per person" shows a notable _slowing_ of the growth rate of per-capita productivity, consistently, over the last 70 years.

I was under the impression that the opposite has occurred - we've achieved mind-boggling amounts of per-person productivity, and rapid rates of growth in productivity, fueled by advances in automation and communication technologies.

Is this chart wrong? Is my impression opposite to reality?

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#97

Post by Zarath »

chickenfries wrote: post #66
squozzer wrote: post #2

What matters more - the size of the theatre or the size of its exits?

Coinbase sent me an email saying that they cannot guarantee uptime during high volatility. The exits are locked.

Oh please, people have had months and months to cash out nearly any time they please.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#98

Post by mcguire »

todipa wrote: post #48

There is a lot to dissect but I would focus on labor force. Our labor force used to be all human labor. Now it includes a large number of bots, both physical and software, that take care of business. The (output = labor . x) doesn't work anymore.

"Bots" don't have a separate economic existence. They are a productivity multiplier like any other tool.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#99

Post by borplk »

smogcutter wrote: post #83
VMG wrote: post #47

Earlier quoted context omitted.

You need opportunity cost in order to secure the network. Without that, there is no incentive to keep the network secure. There is no cheaper solution to solve this problem, therefore there is no waste.

"Bitcoin is inherently wasteful, therefore it's not wasteful." What?

Maybe people are defining waste differently (equating "high cost" with waste).

What you may call waste is in a way the cost of the operation of the network (and its properties and guarantees and so on).

Waste suggests that there is an easy, equivalent, much more efficient solution around the corner but no one cares and wastes resources instead when they could have been doing the same thing with fewer resources.

Re: Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin

#100

Post by junkscience2017 »

exelius wrote: post #32
junkscience2017 wrote: post #18

Earlier quoted context omitted.

sorry but the only answer any investor should care about is achieving their financial goals over the expected investment timeframe. markets tend to rise and as a result market declines tend to be temporary the permabear thesis appeared in the early 80s when the US was in a rut and we also became a debtor nation. the permabear thesis -that debt and fiat currency would produce an economy favoring the pessimistic (but n…

I think these funds are useful as a risk hedge — there is some non-zero risk every year that the economy will collapse. If you invest in a fund that will help offset some of that risk by performing above average in a downturn, you might want to do it as part of a portfolio strategy. Nobody should be putting their life savings into one of these. Hedge funds like this aren’t for that; they’re a risk management lever th…

lots of people here keep using the term "hedge"...none of the permabears market these as hedge funds...they do not internally hedge their own risk positions

these are what they appear to be - bear market funds

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