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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.

#151

Post by prodigal_erik »

anonymoushn wrote: post #29
madamepsychosis wrote: post #11

Earlier quoted context omitted.

Correct me if I'm wrong, but it seems to me that at some point Bitcoin will stop its deflation. Once Bitcoin has mainstream success, if that ever happens, the value of a Bitcoin will stop growing and people will start spending Bitcoin. At some point, the value of a Bitcoin lost through hoarding will equal the value gained by new adapters.

In the eventual steady state (assuming Bitcoin becomes popular and the number of coins created through mining becomes small compared to the number of existing coins), Bitcoin should constantly experience deflation as the world population continues to grow and per-capita productivity continues to increase.

By design, the rate of coin creation must asymptotically approach zero as the supply approaches 21 million. And every lost wallet of addresses (failed backup-restore, Scrooge McDuck died without writing down his password, whatever) will take coins out of circulation, causing some additional deflation.

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

#152

Post by Kadin »

useflyer wrote: post #121
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…

> all of these smart people with smart computers are crunching numbers on a frivolous exercise and not for something productive. total deadweight loss

That's true of gold mining as well, insofar as the price of gold is significantly higher due to speculation and its use as a currency and store of value than it would just for industrial uses (see comparisons to ruthenium). This increase in price drives a whole lot of mining that wouldn't otherwise occur.

But the whole reason for allowing Bitcoin "mining," I think, is because it provides an incentive to early adopters, solving what would otherwise be a chicken-and-egg problem that might be extremely difficult. Other digital currencies (e.g. Flooz) used various marketing gimmicks to spur adoption, but Bitcoin's method is much cheaper.

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

#153

Post by util »

vladd wrote: post #116
util wrote: post #108

Earlier quoted context omitted.

It seems like this in particular applies to most government-issued currencies as well (except that they have very good marketing and market share). Each currency itself has no intrinsic value and depends on "marketing" (reputation of the government minting it) and market share (number of places accepting it). If people lose faith that a government will do a good job managing its currency or even think that the govern…

A government collects taxes from all the businesses and people in a given country, which is huge in terms of being able to provide value. Bitcoin has no such thing.

Having access to more wealth gives people more faith that the government will be around a long time, will not do crazy things with the currency. That's not the same thing as the currency having more intrinsic value. (Also, it would not seem to make sense to talk about backing a currency with taxes denominated in that same currency, would it? But I'm unclear what you meant by "provide value".)

(What I've heard about bitcoin makes me a bit skeptical, but I want to be skeptical for the right reasons.)

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

#154

Post by achompas »

mcantelon wrote: post #149
achompas wrote: post #142

Earlier quoted context omitted.

I didn't downvote you, (I don't think I'm allowed to!) but the "US Fed" (the Federal Reserve) does not simply add $X million to the money supply--it actually purchases Treasury bills on the open market. The net transaction is $0 (an exchange of currency for T-bills of equal value), but the market now contains more paper money. Meanwhile, I've already discussed Bitcoin's potential as an alternative currency (or lack t…

>The net transaction is $0 (an exchange of currency for T-bills of equal value), but the market now contains more paper money. Whatever the mechanism, fiat currencies are subject to inflation through the pressure of an ever-increasing money supply. >If people demand Bitcoins as a "tax haven" from the government, then Bitcoins aren't long for this world. It'll be interesting to see how the state tackles this. It'll be…

Whatever the mechanism, fiat currencies are subject to inflation through the pressure of an ever-increasing money supply.

As they should be, given that populations increase.

Anyway, even if Bitcoins go underground, they'd have to be priced such that they'd be cheaper than other money laundering channels. Due to their finite supply, though, money laundering through Bitcoins will get very expensive. So their utility re: taxes will be squashed by either the government or the black market.

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

#155

Post by pbhjpbhj »

pbhjpbhj wrote: post #100

I'm wondering if this is an attempt to force down the bitcoin trading price - not necessarily by the author but possibly by the publicists. Force down price, buy up bitcoins, profit. It's like playing at being a city trading firm.

HN has gone to the dogs I think.

What in my idle wondering was so deserving of down voting?

It should be impossible to downvote below 0 without an upvoted response.

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

#156

Post by spot »

brown9-2 wrote: post #137
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.

this is simply false, and that's why it's FUD. the volume can rise as they are traded more often.

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

#157

Post by Kadin »

anonymoushn wrote: post #36
jacques_chester wrote: post #32

Earlier quoted context omitted.

Since that idiot last poo-pooed tulips I've made an absolutely massive return. My retirement is assured! I'm thinking about buying shares in the South Sea Company next.

It is worrying to me that the public exchanges have so few bids and offers most of the time, and that it is extremely common for people to deal in these things privately to avoid moving the price.

This is an issue right now because it's much easier to go long on BTC than it is to go short.

Since virtually everyone in the market is long BTC, they desperately want the price to go up, rather than down. This creates an incentive to do OTC (some might say "under" the counter) trades rather than go through MtGox, particularly if the true market rate is less than what MtGox is showing.

However, if it was easier to go short BTC then you'd have people who wouldn't be afraid (and would in fact very much like!) to see the market price go down, and would be more than happy to see declining prices show up in the public order book.

There's a lot of strange behavior in the BTC market and I think a lot of it is because you can't trade it like most currencies or even commodities. You can't easily go short, you can't trade futures, etc. Allegedly MtGox and others are working on those issues, but it's hard to do significant margin and futures trading where everyone is anonymous.

But the sooner they make other forms of trading available, the sooner I think we'll see the unrealistic bullishness calm down.

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

#158

Post by spot »

larelli wrote: post #23
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.

What he wanted to point to with the twitter stats is the concept of exponential growth of economic (and most other complex) systems.

and if you look at the transaction graph for bitcoin it could just as easily be the start of the twitter graph.

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

#159

Post by spot »

krschultz wrote: post #54
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.

It's FUD because you misinterpretted one statement out of a multi-hundred word essay?

it was one of the few quantitative things he said the rest was emotional and obviously fear based.

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

#160

Post by achompas »

acslater00 wrote: post #148

Hi, I'm Adam, I wrote this answer on Quora. Against my better judgement, I'm going to wade in here and make a couple of clarifying points. 1 - Scam. I regret using the word "scam" in my answer, because I think it overshadows the broader point I was making about Bitcoin's severe structural design flaws. After watching the community react to this debate, I'm pretty confident that the average bitcoin supporter is not in…

Thanks for posting here and on Quora. As someone with an economics background, it's nice to hear a sane explanation based on fundamental theory.

I'm just surprised people aren't considering Bitcoins from a supply-demand standpoint. Why purchase Bitcoins in the long run unless you're laundering money or hiding from the government?

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