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The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

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Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#81

Post by Strilanc »

bad_user wrote: post #57
sbierwagen wrote: post #40

Earlier quoted context omitted.

This is more along the lines of "SHA256 has not been proven to be secure, therefore, it may be cracked." It would require novel discoveries in mathematics to do so.

Actually many cryptographic algorithms that got defeated, haven't been defeated with " new discoveries in mathematics ". Also, you can't really prove that such an algorithm is secure. You can only prove that it exhibits certain properties that make it more secure versus other algorithms. Judging by how cryptographic methods got defeated in the past, I think it's safe to assume that it's only a matter of time.

It's not impossible to prove cryptographic algorithms are secure. It's just really, really, really difficult. So difficult it's not even proven that one way functions exist in the first place! (For context: if one way functions exist, then P!=NP).

Proving cryptographic algorithms are secure involves proving statements over all turing machines. For example, one definition of a 'secure' pseudo random number generator is one such that no turing machine can distinguish its output from 'true' random (with 2/3 certainty) in polynomial time.

However, we do know a really-really-probably secure one way function. If there are any one way functions, then it is secure. It just isn't really practical. http://en.wikipedia.org/wiki/One-way_function#Universal_one-...

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#82

Post by tatsuke95 »

jcr wrote: post #73

> When the federal reserve "prints money", it doesn't just mail million-dollar checks to random Americans. It does one of two things. It either (a) purchases some other asset [generally US treasury bonds] on the free market, thereby injecting more cash into the system than there had been before, or (b), loans money to a bank, who will then loan it to other people who will then spend it. The part (a) about "purchases"…

No, money is created when the Fed purchases an asset.

Generally, they do so through a repo, whereby they sell an asset with the intention of buying it back with interest on a very short term.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#83

Post by leif »

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

The problem of deflation is worse. There is a finite supply of btc. Read that again. Finite. in fifty years, our whenever the mills run dry, are we just going to stop increasing population? Are we going to stop creating more things of value? Of course not. So what happens then? We have to start dealing in ever-decreasing payments. They will decrease as fast as the sum of things which can be paid for in btc grows, which is damn fast. Nobody will be able to afford to spend money.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#84

Post by barrkel »

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

1) Bitcoin has a bootstrap advantage, not disadvantage; like all Ponzi schemes, it has the potential to return real profit to early adopters.

2) Deflation for a primary store of value in an economy is definitely a bad thing; not least, because it does weird things like causing the value of debts to increase over time, potentially to the point of requiring negative interest; and think about what that would mean - the bank pays you to borrow money from it. Bitcoin probably isn't going to become that, though, so I think it is less of a cause for concern.

3) Convertibility is a systemic problem because it's a confidence game. If the value of bitcoin is on a downward spiral rather than an upward spiral, then you would expect fewer buyers, and those buyers would pay less for declining assets. Paying less in turn sets the market value lower; it becomes cyclical.

And that's where (4) comes in. The reason "when something goes wrong, it will die" is a valid point is because of contagion and panic selling, and the reduction in the number of buyers in the market. It makes perfect sense to me, because it's the exact reverse analogue of why bitcoin has a built-in bootstrap advantage.

I'm getting the impression that people who like Bitcoins are the same kind of people who think gold has an intrinsic worth as a currency, rather than a commodity; in other words, they don't understand that the value of money is a product of supply and demand, no matter whether fiat or specie. Don't forget that 80% of gold production is used in jewellery and industry, rather than bullion etc. What fiat money has going for it is a degree of control to get out of systemic problems.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#85

Post by romaniv »

nl wrote: post #38
richardw wrote: post #34

Earlier quoted context omitted.

Why is deflation a problem? Keep in mind that it's just one currency out of many worldwide. If inflation is required in the service of a country, nothing stops them from inflating. Same with point 4 - instant deflation would just raise the value of existing bitcoins, unless it affected the confidence levels in the currency. What would happen if somebody smoked half the gold world-wide? Deflation of gold, which most g…

Yes, you are right about deflation increasing the value of Bitcoins. That might make them a great investment . But Bitcoins are supposed to be a currency , not an investment. A currency needs to be used to transfer value, not sit around appreciating. If people sit on their Bitcoins as an investment then it will fail, because no one will ever accept it as a currency.

Ideally (from a consumer's standpoint), a currency should be relatively stable. I should be able to either buy things with it, or just keep it for the time when I need to buy something.

I don't think deflation in itself is a problem, but the current rate of deflation of BC does worry me. I wonder whether this might be caused by a relative lack of way to spend it.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#86

Post by njs12345 »

ap22213 wrote: post #65
njs12345 wrote: post #50

Earlier quoted context omitted.

Of course, most forms of wealth people have aren't inflationary anyway - the very wealthy tend to have little in terms of actual liquid currency and more stock and property. It has been argued ( http://en.wikipedia.org/wiki/Inflation_tax ) that inflation can be thought of as a regressive tax for this reason.

Exactly. As nl stated [1], bitcoin would turn the currency into an investment. The very wealthy who would otherwise hold stock and property would instead have incentive to just hold the bitcoin currency. [1] http://news.ycombinator.com/item?id=2611613

My point was more of an observation about the aristocracy point. Often the rich do still take significant risks with their wealth even though the effects of inflation are negligible on them.

I'm unsure about the deflationary aspect of bitcoin - in my opinion the degree to which it is problematic depends on the rate of depreciation compared to other assets. It seems more of a problem if you wanted to use bitcoin to replace a sovereign currency, rather than use it as a currency on a smaller scale intended for grey market/black market transactions. I think the appreciation of the currency over time was probably intended to ensure it originally took off by providing an incentive for early adopters; its dubious legal status probably means it's a poor long term investment choice anyway.

To some extent this discussion is entirely academic anyway - bitcoin is being used as a currency right now (see the Silk Road Market), so in that sense it's already succeeded..

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#87

Post by barrkel »

coderrr wrote: post #80
mycroftiv wrote: post #13

The current design of Bitcoin is obviously not correct for the long term, and I am sure it will be supplanted by more evolved crypto-currency systems. There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model. Given the rewards that have already accrued to Bitcoin early ado…

I think the most interesting aspect of this whole thing is, like you mention, how new bitcoin-like currencies are perceived, valued, and participated in. Will everyone start jumping into new bitcoin-like currencies in hope of massive bitcoin-style investment gains? Will massive bitcoin miners attack new currencies networks with their computing power to protect their or others' investments in bitcoin? Will new bitcoin…

"Red gold" would be exactly as valuable as gold is in the same way that gold is; that is, if everybody agreed that red gold was valuable, then it would be valuable. If they didn't, then it wouldn't. Scarcity doesn't give rise to value. You also need demand.

In so far as red gold acted in the same way as gold for jewellery and industrial uses, it would probably decrease the value of gold to some proportion, and set a base level on this red gold production. But this is like asking why diamonds are valuable, or designer clothes, or expensive watches. In many cases, it's a combination of marketing, status display effects (ostentatious useless consumption), artificial restriction on supply, and market fixing (e.g. arranging to buy watches on secondary markets at headline prices for PR purposes). They too are confidence games, and if the confidence goes due to a bad association with the brand, the price will fall through the floor. All that is left is productive uses like industry.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#88

Post by awt »

Vivtek wrote: post #75

It's a pyramid scheme, just dressed up in high-tech, vaguely libertarian clothing. That's why sensible governments (not the "bank lobby") are starting to ban it - it's inherently a bad idea (unless you're an early adopter - just like any pyramid scheme). Bitcoins are no different from tulip bulbs.

Why is it inherently a bad idea? Why is it a pyramid scheme?

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#89

Post by weavejester »

Vivtek wrote: post #75

It's a pyramid scheme, just dressed up in high-tech, vaguely libertarian clothing. That's why sensible governments (not the "bank lobby") are starting to ban it - it's inherently a bad idea (unless you're an early adopter - just like any pyramid scheme). Bitcoins are no different from tulip bulbs.

Bitcoin looks nothing like a pyramid scheme. There is a relationship between the value of a bitcoin and the demand, but that's true for any product.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#90

Post by hugh3 »

thomasz wrote: post #68
njs12345 wrote: post #50

Earlier quoted context omitted.

Of course, most forms of wealth people have aren't inflationary anyway - the very wealthy tend to have little in terms of actual liquid currency and more stock and property. It has been argued ( http://en.wikipedia.org/wiki/Inflation_tax ) that inflation can be thought of as a regressive tax for this reason.

That proves the point. They have to invest their wealth in stock, real estate etc. instead of putting it in a chest/thumb drive and burying it on a lonely island in order to keep it.

... which is surely a very good thing? If cash paid a better return than most investments then we wouldn't have anyone to invest in things.
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