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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.

#191

Post by 3am »

spot wrote: post #158
larelli wrote: post #23

Earlier quoted context omitted.

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.

He's talking about the amount of currency in circulation, not the aggregate transaction volume. And BitCoin cannot follow the Twitter graph, because the money supply growth is controlled algorithmically. You are incorrectly interpreting the graph (which, to be fair, is a bad analogy).

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

#192

Post by cube13 »

peteretep wrote: post #161

These points are weak - there are other weaknesses of BitCoin, but these aren't really them. Almost every issue he raises attacks BitCoin as a medium of exchange (which it doesn't need to be) rather than as a medium for storing value. Taking them one at a time: > Severe Problem Number 1: Seeding Initial Wealth He doesn't really explain why this 'problem' is a bad thing. There is a limited supply, and there needs to b…

Re: Deflation

>A bad thing if you're trying to replace a country's currency system with it, and excellent thing if you see them as a store of value. This is the same as people complaining that any other asset deflates over time.

Currencies aren't investments. They have little to no inherent worth. They're the medium used to make investments, and the medium that investments pay out to the investors. If you're approaching Bitcoins as an investment asset, you're missing the entire point of creating a new currency.

Assets, on the other hand, have inherent worth. Gold is used for jewelery and in electronics. Fine art's worth is it's existence itself. BTC does not have any worth past the confidence in the other currencies used to exchange for them.

The fundamental problem with deflationary currencies is that there is no risk in keeping it around, which removes a lot of the incentives for investing. People are encouraged to not use BTC because they will appreciate more doing nothing than actively going out and investing it. Instead, they'll hoard it until the point where it becomes too expensive for people to buy. At that point, there will be a run on the exchanges, which will kill the entire worth of the economy around it.

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

#193

Post by rglover »

hugh3 wrote: post #125
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 in…

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?

Not at all. I personally agree with the author that the whole idea is flawed. With any new system, there needs to exist some sort of vetting process, though. What I'm referring to here is whether or not the author of the post vetted the system. In other words, went through the process of using bitcoins to match their conclusions. A good analogy might be the sample table at the grocery store. If you're skeptical about how something might taste, you try it and give your opinion. Here, it's almost like looking at the food, deciding not to eat it all and then telling people it's complete shit without having ever tasted it. In regard to using the system first, I'm not suggesting that the user put in a large sum of money, but enough to see how it works and what the outcome of that experiment was. I'm not dismissing the points here, but I've always respected the opinion of those who try what their reviewing/opining about first. I don't think that's unreasonable at all.

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

#194

Post by rmc »

mcantelon wrote: post #136
achompas wrote: post #129

Earlier quoted context omitted.

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: th…

Easy. Lock the guy in prison till be pays you what you think you are owed.

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

#195

Post by weavejester »

cheez wrote: post #135
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.

What's wrong with the protocol documentation on the wiki?

https://en.bitcoin.it/wiki/Protocol_specification

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

#196

Post by svv »

achompas wrote: post #109
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…

One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. Actually, all of Adam's criticisms deal with the supply and demand of currencies, and they are pretty strong and damning as a result. In sum, the supply of Bitcoins is finite (despite a growing population) and the demand for Bitcoins depends on (a) confidence in Bitcoins as a currency and (b) consumers' abi…

Instead of buying the computer with paper money, consider buying the computer with gold bullions during the commodity boom. Why buy that Macbook Pro with x bullions today if you can buy it with x-y bullions tomorrow?

People have different time preferences. Some value Macbook today high enough to pay y more bullions than they would if they waited till tomorrow. There're many currencies that depreciate faster than the dollar, but it does not stop people stuck with those currencies from buying Macbooks -- even though they could theoretically change their money to dollars (or invest in gold) and wait.

Adam isn't arguing that "deflation is bad," but rather that the supply of Bitcoins as currency will dry up as their value appreciates.

There actually is a possible problem with Bitcoins "drying up" connected with its deflationary nature, but it is not the one mentioned by Adam. AFAIK there's a limitation on the minimal amount of Bitcoin transaction. That means that as Bitcoins appreciate in value at some point it may be impossible to set and pay small enough prices -- and such transactions will require alternative payment methods.

This is a pretty much technical problem with the current Bitcoin implementation. It might be perfectly possible to design a deflationary crypto money system without this flaw.

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

#197

Post by Daniel_Newby »

smokeyj wrote: post #140
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…

> 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 under…

"How can having your assets increase in value be harmful?"

Ponder the implications of bread jumping to an effective price of $25 a loaf. That can and has happened in deflationary collapses, as the reserve fraction jumps toward 100% (due to credit panic).

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

#198

Post by mseebach »

nl wrote: post #74
mseebach wrote: post #61

Earlier quoted context omitted.

And why wouldn't that argument work for all other goods, too, rendering the deflation argument misguided?

Because most goods don't have the extreme pressure of Moore's law.

Bitcoin is being criticized for having built in deflation (not incidental deflation), thus comparing it to a category of goods (computers) that is also exposed to almost algorithmic deflation is relevant.

So, given the built in deflation of Bitcoins, if you have some Bitcoins and need or want product X, why is knowing that you can have two X in a year, or four X in two, if you just hold on to your coins, going to keep you from getting your X now?

Isn't that too, as you state, a question of whether "the utility they will derive from it outweighs the monetary cost" ?

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

#200

Post by cube13 »

weavejester wrote: post #169
achompas wrote: post #118

Earlier quoted context omitted.

Because Bitcoins are being suggested as an alternative to fiat money. However, given their current rate of appreciation, Bitcoins are actually an investment , not a currency . What is their inherent value, then? Commodities (whether precious or industrial) can be used in production or for luxury goods. Equities generate profits, which are subsequently shared with investors. What do Bitcoins do? Nothing.

What do Bitcoins do? Nothing. That's not true. Bitcoins can be securely transferred between accounts without the need for a centralized broker. That's not "nothing".

Cash, delivered in person, does the same thing.
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