The Quora post that killed Bitcoins. Please discuss if his arguments are valid. • Hacker News Board

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

#131

Post by pnathan » Thu, Jun 02, 2011, 2:30 PM UTC

inoop wrote: post #28

greyman wrote: post #9

Earlier quoted context omitted.

It takes just a few keystrokes to type "fundamentally flawed", but people seems to not agree whether that's really the case. So why do you think it is flawed?

I don't know shit about economics, so I can't say anything useful about that aspect of Bitcoin. I do know a little about distributed systems and p2p however. Disclaimer: Bitcoin is a bit of black magic so I'm not going to claim I know every detail about it. I did read the original paper, so I'll focus on what I got from reading it. First of all, Bitcoin replicates work over all nodes. This means you need a global bro…

The tps bandwidth argument is a great argument in relation to bitcoin. I think that that is a flaw that will have to be mitigated.

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

#132

Post by motters » Thu, Jun 02, 2011, 2:30 PM UTC

I agree that deflation is probably the biggest criticism of Bitcoin. The finite supply means that there's more of a temptation to sit on your heap of gold rather than to participate in transactions. This could lead to the currency becoming increasingly static and difficult to obtain over time. A better system would be to have a modest but constant rate of inflation, such that there is an incentive not to stash your cash for too long.

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

#133

Post by brown9-2 » Thu, Jun 02, 2011, 2:34 PM UTC

wintersFright wrote: post #3

As an zeroHedge reading, armchair economist i think there are a lot of flaws in that guys argument "Bitcoin does not have a central bank capable of printing and lending bitcoins" >>I rather think thats the point. Lending is inflationary. "Built in Deflation" >> God knows how the computer industry makes money when if i hold my $$$ just a little longer, i can buy an even better machine. "For Bitcoin to work as a curren…

The USD is a terrible store of value. Gold is a store of value. Govt paper is not.

What makes gold a "store of value"?

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

#134

Post by barrkel » Thu, Jun 02, 2011, 2:34 PM UTC

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?

Ownership of a stock is a claim on the net value and future profit of the company. In a theoretically efficient market with perfect information, stock price would be fixed; its value would be the same as the net present value of all income streams associated with that stock. But we don't have perfect information, especially about the future; so a certain amount of the stock price is formed from expectations about future profit.

It is of course possible that there can be a bubble of expectations in a kind of echo chamber that cause a stock to act like a Ponzi scheme, but ultimately over time there must be returns. The return can be as a stock price rise (but that can't go on forever) or dividends; if the cost[1] of the money invested in the stock doesn't match the return over time, then people will sell the stock and it will fall in price. If too much of the stock price is formed from aspirational expectations of the future (i.e. a bubble), then the price fall may be drastic.

[1] Money has a cost; for example, compared with the interest rate on a risk-free government bond. If an investment isn't making at least that much, it's losing money.

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

#135

Post by cheez » Thu, Jun 02, 2011, 2:35 PM UTC

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.

Yes there is. The protocol is not documented at all. That's one of the reason I'm a little hesitant to touch it.

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

#136

Post by mcantelon » Thu, Jun 02, 2011, 2:36 PM UTC

achompas wrote: post #129

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 t…

>Bitcoins have no intrinsic value.

Part of the value is in their utility as an anonymous currency: try taxing the guy that's paid in Bitcoins.

Another part is the integrity of the currency: the currency is backed by math, rather than men, and not subject to hyperinflation resulting from corruption (i.e. the US Fed can create money out of thin air, but there is no authority that can create Bitcoins out of thin air: they must be mined).

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

#137

Post by brown9-2 » Thu, Jun 02, 2011, 2:37 PM UTC

spot wrote: post #18

When he showed the graph of the number of tweets vs the number of bitcoins he lost me. This is an apples and oranges comparison. http://bitcoinreport.blogspot.com/2011/01/bitcoin-transactio... It's just FUD.

The point is that as twitter has become more popular (more people using the service), the volume of the service's transactions - tweets - has risen exponentially.

The volume of bitcoin transactions cannot rise above a certain level if the supply of bitcoins is fixed, which would seem to prevent mass adoption.

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

#138

Post by trotsky » Thu, Jun 02, 2011, 2:37 PM UTC

lorax wrote: post #20

Talk about an overly dramatic headline, the "post that killed Bitcoins"? but the submitter isn't even sure if the arguments are valid? (And has hacker news turned into bitcoin news? it seems like there are several bitcoin links a day)

HN has turned into bitcoin news because bitcoin speculators (enthusiasts if you'd prefer) are constantly spamming social media and other outlets to drive the price up. Hopefully sometime soon HN editors will see their way to giving it a manual penalty similar to politics, or re-evaluate the definition of a voting ring to include this minority spamming and voting.

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

#139

Post by paulgb » Thu, Jun 02, 2011, 2:38 PM UTC

ignifero wrote: post #93

Treating bitcoin as a currency is kind of wrong. It's a commodity with limited and predictable supply, like gold for example. You wouldn't call it a pyramid scheme, just like you wouldn't the gold market a pyramid scheme. His points against its use as currency are sound.

It's a commodity designed to only be useful as a unit of trade. How does this differ from a fiat currency?

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

#140

Post by smokeyj » Thu, Jun 02, 2011, 2:39 PM UTC

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…

> Deflation for a primary store of value in an economy is definitely a bad thing

How can having your assets increase in value be harmful? Traders already account for many stock variables, why would deflation be any different?

> and think about what that would mean - the bank pays you to borrow money from it.

Oh no, not that :P

> "when something goes wrong, it will die"

Sort of like hyper inflation?

> they don't understand that the value of money is a product of supply and demand

They also understand when supply is in control by a few bankers, so is the demand. Who do you trust to ensure supply isn't ramped up: your friendly banker, or math? This isn't hypothetical either http://en.wikipedia.org/wiki/Hyperinflation