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.

#241

Post by weavejester » Thu, Jun 02, 2011, 6:30 PM UTC

gammarator wrote: post #226

weavejester wrote: post #173

Earlier quoted context omitted.

You don't appear to understand how Bitcoin works. Money does not shift from new investors to the creators of Bitcoin. I'm not quite sure what confusion of ideas lead you to believe this.

0) Bitcoins were easiest to mine at the beginning => the creators & early adopters have a large number of bitcoins 1) New investors demanding a finite supply of bitcoins are increasing the exchange rate of bitcoins/dollar. 2) Early holders of large volumes of bitcoins can therefore cash in their bitcoins for a great deal of real money from new investors desiring to enter the market. ergo, money shifts from new invest…

What you describe is a free market trading a limited resource; not a pyramid scheme.

In a pyramid scheme the wealth always flows up to the creator of the scheme, but the creators of Bitcoin can only make money by selling their own bitcoins - they don't get a cut when anybody else does.

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

#242

Post by weavejester » Thu, Jun 02, 2011, 6:33 PM UTC

cheez wrote: post #225

weavejester wrote: post #195

Earlier quoted context omitted.

What's wrong with the protocol documentation on the wiki? https://en.bitcoin.it/wiki/Protocol_specification

Try implementing that!

Is there anything in the specification that's you think is ambiguous or hard to understand?

There's also the source code to bitcoinj, which is a very well-commented implementation of the protocol.

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

#243

Post by andrewla » Thu, Jun 02, 2011, 6:33 PM UTC

barrkel wrote: post #215

smokeyj wrote: post #140

Earlier quoted context omitted.

> 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…

Suppose you need capital to commence on some enterprise. You'd like to borrow against and/or sell a share of future income. How can you convince a bank[1] to give you money, if the bank's money is already producing a healthy return just sitting in the bank's vault? In an inflationary scenario, money is declining in value. People with a lot of it are actively looking for ways to put it to work, otherwise they'll end u…

I think this is obvious -- a bank will lend you money if you can offer returns in excess of the risk-free rate of return, balanced by the perceived risk and collateral for the loan.

Similarly, an individual will deposit money in a bank rather than keep it under their mattress only if the bank offers returns in excess of what it gets sitting in the mattress.

Since at the moment there is no FBDIC, as an individual you must also balance the risk of depositing in the bank against the return they offer.

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

#244

Post by glenra » Thu, Jun 02, 2011, 6:33 PM UTC

TerraHertz wrote: post #171

I've only recently begun paying attention to Bitcoin, and am still evaluating. Have yet to read the technical details, for instance. So I have nothing to say on the validity of the technology. However I can offer some comments from a political perspective. I find the timing of Bitcoin's appearance rather interesting. Here we are, entering into a whole mess of interconnected monetary crises - * Crisis of confidence in…

> Less than one Bitcoin per person?

There is no necessary relationship between the number of people using the currency and the number of units available, given that units are divisible. But if it makes you happy, define one "New Bitcoin" as 1/1000th of an original Bitcoin. Now there's enough to go around, and you can get 20 for free from the faucet!

See also: Rai stones. http://en.wikipedia.org/wiki/Rai_stones

> TSA, airports, laptops and latex gloves. Where do Bitcoins go in this scene?

That's a huge win for Bitcoins. Store yours in the cloud and you can transfer arbitrary amounts of cash across national boundaries without paying tax, filing paperwork or risking seizure. Try transferring the same amount by carrying out bills or coins and you'll see your stuff silently stolen from your checked luggage or noisily seized either by TSA or customs agents.

> How do you bury Bitcoins in your backyard or out in the bush somewhere?

Back 'em up in the cloud somewhere instead.

> When the police, BATF and FBI break down your door without a warrant, trash your place and take your computer, do your Bitcoins go with it?

If you don't use passwords and don't keep offsite backups, yes. How is this worse than if the authorities steal your cash or silver and freeze your bank account?

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

#245

Post by richcollins » Thu, Jun 02, 2011, 6:33 PM UTC

achompas wrote: post #231

beagle3 wrote: post #189

Earlier quoted context omitted.

> Bitcoins have no intrinsic value. Gold has very little - it is used in jewelery, CDR coating, teeth and a few other industries -- but you can't live in it, nor can you eat it. Beans have more intrinsic value than gold of the same weight.... Yet, no one doubts gold as a currency. The main, strike that, ONLY, relevant feature of a currency is the willingness of others to exchange stuff for it. At this point in time,…

Can you exchange your bitcoins for gold or beans? Because right now, bitcoin purchasing power amounts to a hill of beans. Gold is a commodity, not a currency. It is a scarce commodity that is highly demanded as a part of luxury goods. Thus, it commands a high price on the open market. Beans are also commodities, but they are plentiful . Bean demand is easily met, so they're not priced very highly. Bitcoins are not pr…

But you can exchange your bitcoins for goods: http://www.theatlantic.com/technology/archive/2011/06/libert...

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

#246

Post by sigil » Thu, Jun 02, 2011, 6:34 PM UTC

acslater00 wrote: post #221

sigil wrote: post #217

Earlier quoted context omitted.

Milton Friedman disagrees and measures inflation relative to output in his book on monetary phenomena [1]. Since you're an economist (right?) I'd be interested in why you think he's got the wrong measure. [1] http://books.google.com/books?id=ZNAhXe2pz1cC&lpg=PA196&...

I'm not disagreeing with Milton Friedman at all. Read the sentence "Prices might even fall gradually as higher incomes led people to want to hold a large fraction of their wealth in the form of money." Inflation is a Money Supply / Money Demand phenomenon. In the long term, Money Demand tracks real output, but in the short term (such as the recession we're currently in) you can see major swings in demand that counter…

So you agree that in the long term, money supply should closely follow real output. It's only in the short term that the Fed is allowed to untether them for the purposes of intervention. Let's not forget that the Fed's monetary policy in the 2000's helped create this situation: economic intervention necessitates further economic interventions. It's no wonder people are heading for the exits via BitCoin.

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

#247

Post by weavejester » Thu, Jun 02, 2011, 6:35 PM UTC

trotsky wrote: post #138

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.

Half of the bitcoin articles seem to be rather negative, though. If it were just speculators posting, you'd expect to see more positive articles.

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

#248

Post by sigil » Thu, Jun 02, 2011, 6:36 PM UTC

achompas wrote: post #222

sigil wrote: post #201

Earlier quoted context omitted.

> 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…

But the GDP graph also doesn't look anything like that monetary supply graph. Huh? [0] [0] http://www.google.com/publicdata?ds=wb-wdi&met_y=ny_gdp_...

Compare those two graphs from say 2006 on. I am mystified that you would look at a graph with a giant, dominant spike, and conclude my point was about the shape before the spike.

Edits: To make it clear I'm not arguing with the statement that money supply has tracked GDP fairly well until recently. Or that GDP has trended up exponentially.

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

#249

Post by glenra » Thu, Jun 02, 2011, 6:39 PM UTC

achompas wrote: post #182

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.

Well it's more than people--my government believes the US dollar has value too, and it's willing to insure my bank accounts as a result. That's a hell of a vote of confidence.

> my government believes the US dollar has value too, and it's willing to insure my bank accounts as a result. That's a hell of a vote of confidence.

Really? When dollars were "silver certificates" the bank's willingness to let you come collect your silver was a real vote of confidence in the currency. But nowadays if they "insure your bank account" they only pay you back in dollars. They're insuring that its value doesn't drop in dollars. How does that constitute a vote of confidence in the currency itself? I'd say it's only a vote of confidence in (a) the bank, (b) the government's ability to print more money, (c) the government's ability to tax.

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

#250

Post by tg3 » Thu, Jun 02, 2011, 6:48 PM UTC

smokeyj wrote: post #237

barrkel wrote: post #208

Earlier quoted context omitted.

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…

I understand currency and shares are not the same thing, I don't understand this addresses OP. > A share, meanwhile, is a direct claim on things themselves. What if you buy a share of an ETF?

A share of an ETF is a claim on a financial asset that is backed by claims in other financial assets, usually stocks. So while it is one level higher than directly owning securities, it is still a claim on productive economic assets.