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.

#201

Post by sigil » Thu, Jun 02, 2011, 4:54 PM UTC

achompas wrote: post #154

mcantelon wrote: post #149

Earlier quoted context omitted.

>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…

> As they should be, given that populations increase.

Is the U.S. Population increasing like this? [1] That's what the U.S. monetary supply looks like.

More correctly, fiat money supply should ideally match total economic output, not population. But the GDP graph also doesn't look anything like that monetary supply graph.

Given this, the BitCoin phenomenon is understandable: savers are looking for a currency that's not subject to manipulation and is most of all predictable in terms of supply. Whether or not it succeeds, I'm glad there's the pressure of a competing, not-centrally-manipulated currency.

[1] http://research.stlouisfed.org/fred2/graph/?s%5B1%5D%5Bid%5D...

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

#202

Post by topynate » Thu, Jun 02, 2011, 4:56 PM UTC

achompas wrote: post #160

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?

Tyler Cowen argued this quite lucidly at http://marginalrevolution.com/marginalrevolution/2011/04/jer... .

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

#203

Post by weavejester » Thu, Jun 02, 2011, 4:56 PM UTC

cube13 wrote: post #200

weavejester wrote: post #169

Earlier quoted context omitted.

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.

Which has an obvious disadvantage over bitcoins: it has to be delivered in person.

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

#204

Post by Dove » Thu, Jun 02, 2011, 4:57 PM UTC

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…

They're a currency accepted by almost no one as payment

Just a point of interest -- the list of sites that accept Bitcoin (http://en.bitcoin.it/wiki/Trade) is actually pretty long. I read it as a pretty good coverage of everyday commodities, actually. You can't pay for food, rent, or doctor bills with it, but you can buy a lot of other stuff.

I guess you could characterize that as almost no one, but you'd have to mean an insignificant fraction of the larger economy. If you mean useless for buying actual stuff with--and you seem to--you're demonstrably wrong.

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

#205

Post by icarus_drowning » Thu, Jun 02, 2011, 5:07 PM UTC

tptacek wrote: post #183

johno215 wrote: post #166

Earlier quoted context omitted.

Modern (post gold standard) currencies have no intrinsic value either. Their only value is that people think they have value.

No, modern currencies are backed by the full faith and credit of nations, and while reasonable people can disagree about the value of the US credit rating, no reasonable person thinks it is zero. People need to start naming the dubious syllogisms bitbugs deploy in discussions like this.

Bitcoin is, in a way, backed by the value that it brings as a currency-- privacy and anonymity. We can argue whether that value is $10 per BTC, but I also don't think any reasonable person thinks that it is zero.

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

#206

Post by tptacek » Thu, Jun 02, 2011, 5:09 PM UTC

icarus_drowning wrote: post #205

tptacek wrote: post #183

Earlier quoted context omitted.

No, modern currencies are backed by the full faith and credit of nations, and while reasonable people can disagree about the value of the US credit rating, no reasonable person thinks it is zero. People need to start naming the dubious syllogisms bitbugs deploy in discussions like this.

Bitcoin is, in a way, backed by the value that it brings as a currency-- privacy and anonymity. We can argue whether that value is $10 per BTC, but I also don't think any reasonable person thinks that it is zero.

No, in fact, plenty of reasonable people do believe it is zero, and you cannot nerd your way out of that fact.

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

#207

Post by acslater00 » Thu, Jun 02, 2011, 5:11 PM UTC

sigil wrote: post #201

achompas wrote: post #154

Earlier quoted context omitted.

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…

> As they should be, given that populations increase. Is the U.S. Population increasing like this? [1] That's what the U.S. monetary supply looks like. More correctly, fiat money supply should ideally match total economic output, not population. But the GDP graph also doesn't look anything like that monetary supply graph. Given this, the BitCoin phenomenon is understandable: savers are looking for a currency that's n…

Actually money supply should ideally match total demand for money. Real economic output is not super relevant.

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

#208

Post by barrkel » Thu, Jun 02, 2011, 5:20 PM UTC

smokeyj wrote: post #141

barrkel wrote: post #134

Earlier quoted context omitted.

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 fut…

>> 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. Ownership of currency is a claim on the net value and future profit of the currency. How does this address OP?

In principle, you're right, currency is just traded like anything else; but the fundamentals are different. A company is (presumably) engaged in profitable production (the future profit, i.e. it does something) and is composed of various capital assets (the net value, i.e. it has something). A currency has neither attributes; its claim on future production and assets is only valid in so far as people have confidence in it and will take it in exchange for other things. A share, meanwhile, is a direct claim on things themselves.

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

#209

Post by vladd » Thu, Jun 02, 2011, 5:22 PM UTC

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".

That's not the value of the bitcoin, it's the value of the cryptographic code which has been open sourced. Anybody can fork it and create its own "Webcoin", but there's no intrinsic value in any forked instance coin, beyond the publicity that allows early adopters to cash in.

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

#210

Post by dclowd9901 » Thu, Jun 02, 2011, 5:23 PM UTC

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…

Your other points I can't comment on, but the deflation argument is absolute bunk in terms of small, non-durable goods (groceries, electronics, etc), but when it comes to houses and other big purchases (cars, etc.), it absolutely will affect purchasing. You can already see evidence of this now. Houses are at the lowest point in prices that they have been in decades, but people still aren't buying, and they won't until there's some indication that they won't ever be this cheap.