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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.

#121

Post by useflyer »

rglover wrote: post #47

The problem that Bitcoins will have in gaining traction is inherent in this post. Experienced economists and financial experts will stomp it into the ground. Granted, this post made a lot of strong points, however, it was a bit of a witch hunt at the same time. To call Bitcoins a scam outright is the sign of a person who may not have tried putting money into the system to see how it actually works. As with anything n…

Economist/founder here. And somebody who has not yet commented on bitcoins. Watching otherwise intelligent people adopt these is hilarious. I won't speak to the tech side (I'm sure its strong). Bitcoins are, in fact, an outright disaster/scam.

1 - as highlighted by the author: bitcoins are equity positive in their creation. we can trade with seashells as the medium (painted red so distinguish them as special currency, of course), but every time somebody goes to the beach with a bucket of paint, they get rich. money creation in its traditional sense (generally, except countries with serious issues) does not create equity, it only increases liquidity. major difference. tomorrow we could all adopt a new currency, but we would generally have to back it with something else of value (sort of authors point #2, weakly explained). bitcoins are the creation of 'free money' out of thin air. we can assign it value (if we dupe others into taking it for goods/services), but its value-less 2 - the computing power devoted to this game is completely wasted. look at this from 30,000 feet -- all of these smart people with smart computers are crunching numbers on a frivolous exercise and not for something productive. total deadweight loss

bitcoins are the equivalent of beanie babies. you could buy a car with those, and they became currency, albeit very briefly. but the inherent value is that of a stuffed doll. bitcoins have a negative inherent value

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

#122

Post by pizza »

barrkel wrote: post #84
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…

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

Can't the same be said for people who bought Apple or Google stocks early on?

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

#123

Post by barrkel »

shubble wrote: post #97
barrkel wrote: post #87

Earlier quoted context omitted.

"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…

I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years. The reason for the scarcity of gold, and it's value, is that this gold is not for sale. One gold owning organization could make a great deal in…

Google around. General consensus seems to be that 75-80% of gold production goes to jewellery, and there's some fraction going to industry too. As the most ductile element, it's used in microelectronics, though of course in small quantities.

http://symmetricinfo.org/category/goldprices/ estimates 50% of gold stock is in jewellery, 12% in industry. Of course, some fraction of that jewellery is bought because people believe that the gold will be a store of value, not just because of how it works; though I wouldn't expect selling jewellery for its gold content to give particularly good returns.

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

#124

Post by jerf »

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…

"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."

Broadly speaking, the more desirable properties you try to obtain at once, the more you constrain the design, and it is absolutely possible to constrain the design to the point where there are zero solutions. Arrow's theorem shows an example of that in a voting context. You can not have all of the five desirable properties laid out in the theorem, and it isn't a matter of finding a clever algorithmic solution; they are actually contradictory. You have to loosen the requirements somehow.

There is no guarantee that any given set of desirable properties has a solution. There is no guarantee that BitCoin is even close to having a solution, there's no guarantee that it is merely one requirement over the line, it may well contain multiple contradictions. There's no guarantee that there is anything more optimal than government fiat money.

I'm in favor of experimentation to find out, in general. But it should be pointed out that there is not necessarily going to be a solution at all, and I certainly would say it's not going to be easy to just "take BitCoin and fix the problems" or any variant thereof. There is something stopping people from just "creating an alternative", it's going to be freaking hard, and again, I don't just mean hard in the way that creating an open source operating system from the efforts of thousands of not-centrally managed programmers is, I mean, potentially hard in the way that proving P != NP is, really, actually, hard. Starting from BitCoin isn't necessarily even starting from a useful base.

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

#125

Post by hugh3 »

rglover wrote: post #47

The problem that Bitcoins will have in gaining traction is inherent in this post. Experienced economists and financial experts will stomp it into the ground. Granted, this post made a lot of strong points, however, it was a bit of a witch hunt at the same time. To call Bitcoins a scam outright is the sign of a person who may not have tried putting money into the system to see how it actually works. As with anything n…

To call Bitcoins a scam outright is the sign of a person who may not have tried putting money into the system to see how it actually works.

lol. (I don't usually say "lol" but it seems appropriat here.) So the only people worth listening to on the subject of bitcoin are people who own bitcoin and hence have an incentive to further talk it up?

Is it really a "scam"? Yes and no. It's not an outright scam in that the inventors really hope it will work (and that making themselves short-term rich off other people's money is just a side effect).

Smart psychics are a scam -- they know they're lying to people and they're taking their money by selling 'em something worthless. Bitcoin is more like a dumb psychic, one that doesn't know she's peddling bullshit.

On the other hand, from the point of the view of the person who has given up real money for the insight that they will meet a tall dark stranger, the intentions of the originator don't matter.

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

#126

Post by achompas »

pizza wrote: post #122
barrkel wrote: post #84

Earlier quoted context omitted.

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…

1) Bitcoin has a bootstrap advantage, not disadvantage; like all Ponzi schemes, it has the potential to return real profit to early adopters. Can't the same be said for people who bought Apple or Google stocks early on?

Set A may be a strict subset of set B, but that doesn't mean the elements in B are in A as well.

Alternatively: the profits generated by Apple and Google would argue otherwise.

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

#127

Post by gsmaverick »

sethg wrote: post #98
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…

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 value The governors of the Federal Reserve are appointed by the President and confirmed by Congress, and politicians, for all their numerous faults, understand that if the economy goes in the crapper it hurts their chances of getting re-elected. So th…

The Fed does not have accountability to anyone as seen in their resistance to being audited. After they are confirmed they can do what they want, as a board, without any direct accountability.

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

#128

Post by pnathan »

I think his arguments sum up to, "It's not a government currency", and represent a fear of the unknown.

Further, after I spent some time reading economics books, economics sounds nothing so much like some people with suits on giving opinions, and then having their opinions proved wrong, then claiming that people should still listen to them.

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

#129

Post by achompas »

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…

Looked at in another way, think of Bitcoin as something more like MMORPG loot. If people are willing to spend vast amounts of "real money" on items for their WoW character, spending that money on Bitcoins instead makes it seem like a sane investment rather than just flushing it away.

What is the intrinsic value of Bitcoins, then? That people are willing to spend money on Bitcoins?

As an investment vehicle these are terrible. Commodities (diamonds, zinc, gold, wheat, oil, etc.) will always be demanded as factors of industrial production or farming. Equities generate real-world wealth for investors in the form of dividends. Both are demanded because they generate real value for investors.

Bitcoins have no intrinsic value. If you're in to make a quick buck, that's fine--this is a big arbitrage opportunity. But for any decently-sized time T, Bitcoins --> $0 as t --> T.

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

#130

Post by Groxx »

romaniv wrote: post #85
nl wrote: post #38

Earlier quoted context omitted.

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.

The current rate is insane, yes, but it's almost solely because there's been so much attention around it lately. People want to get in on it, but don't have mining rigs handy, so they buy from an ever-decreasing supply of sellers who were around earlier. The rate will slow down significantly if it gets a lot bigger, until it's just a trickle.
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