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Why Bitcoin Will Fail As A Currency

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Re: Why Bitcoin Will Fail As A Currency

#71

Post by mikey_p »

All these bitcoin articles are getting more than old. Here are some major issues I've been seeing with all of them:

1) Assigning some fixed dollar amount to coins for the purpose of demonstrations in the article. This will never happen, it's in flux, and it's a scarce resource. Does gold or any other precious metal stay at a fixed resource, does anyone hoarding gold make it any less valuable?

2) As mentioned above, bitcoins can be traded in almost any fraction thereof, simply having each coin be worth 2 million dollars, is irrelevant.

3) If too many people start hoarding and there is no exchange of coin, it is possible that the value of coins will decrease instead of increasing. Please remember that the only value assigned to the coins will be the value that individuals are willing to assign to it, or pay to acquire it, or amount of coins willing to exchange for goods or services.

4) We've had commodity backed currencies for much, much more of recorded history than we've had fiat currencies and yet we've brought civilization to where it is today. Can we please stop assuming that any commodity backed currency is destined to be a failure because we currently favor a currencies that are by definition even more worthless than Bitcoin?

Re: Why Bitcoin Will Fail As A Currency

#72

Post by pnathan »

sorbus wrote: post #67
hcho wrote: post #57

Earlier quoted context omitted.

They might legislate against it, but will they be able to enforce the legislation?

Throw a non-negotiable 1-year imprisonment into whatever penalty they enact for using bitcoin. Then imprison the thousand most prolific users (business that accept it, people who publicly exchange it, etc.), and continue doing sweeps of anyone who admits to using bitcoin for the next few years. Suddenly, the only people who are willing to use bitcoin are those who are already using it for illegal things. Keep in mind…

Exactly. Add to that a propaganda stream, "Only Evil du jour will use Bitcoin. Are you Evil? No! Then you won't use Bitcoin either!"

Re: Why Bitcoin Will Fail As A Currency

#73

Post by weavejester »

rmc wrote: post #44
seles wrote: post #28

This whole hoarding argument is bogus: it assumes bitcoin will fail because bitcoin will be so successful that people will hoard.

Prisoners Dilemma. BitCoin as a whole would get more popular if people spent it. However if lots of people spend/use it (and the price goes up), then it's better for you to hoard it. However everyone/lots of people will think this way and hoard it. This means it can't take off and get popular.

But as the amount of people hoarding it goes up, the value of bitcoin will eventually drop. You can't have a market that climbs indefinitely on the basis of speculation alone.

Re: Why Bitcoin Will Fail As A Currency

#74

Post by mikey_p »

3am wrote: post #38
reedlaw wrote: post #22

Earlier quoted context omitted.

You seem to suggest in all these cases that spending is inherently good. Estate tax = incentive to give away. Inflation = incentive to buy now. I understand this is one of the core concepts of Keynesian economics. But there exists an alternative school of thought that posits that inflation causes volatile business cycles and central banks are inefficient at allocating resources. Success of a bitcoin-based economy wou…

That doesn't have the slightest thing to do with Keynesian economics.

The concept of hoarding in the original article and in this thread is fundamentally identical to a liquidity trap.

Re: Why Bitcoin Will Fail As A Currency

#75

Post by vrotaru »

caf wrote: post #9
kiba wrote: post #2

How many time are people going to scream...bubble? http://bitcoinweekly.com/articles/comic-reaction-after-drama... Anyway, hoarding is not a problem. http://bitcoinweekly.com/articles/one-apple-today-two-apples... Even if we need to use the satoshi(the lowest unit of bitcoin), we can extend decimal space. Does anybody actually have anything new or novel criticism for bitcoin? Or are we going to repeat trending the sa…

That article on why deflation is allegedly not a problem does not address the concerns raised. In particular: Deflation, on the other hand, can damage the economy by placing an incentive to save, rather than spend. Over-saving can be just as damaging as over-spending. But unlike saving, you have to spend some eventually, so there's a built-in incentive to spend: continued survival. A deflationary economy can also sti…

Marginal utility, marginal utility, marginal utility.

It's true for USD, BTC, EUR, PLN... you name it. The more money you have the less valuable the last unit (coin) is. Or seems. Value is subjective, anyway. So what we have here is just another feedback mechanism which will regulate the level of saving/hoarding according to individual preferences of savers/hoarders. This way, hoarding, it self-regulates.

Re: Why Bitcoin Will Fail As A Currency

#76

Post by teilo »

This is all just one argument, the same argument others have been making: Bitcoin will inevitably deflate. That is true. Whether the conclusions are true remain to be seen. It's the old Keynsian vs. Austrian argument.

What makes this an especially interesting experiment, is that Bitcoin is far more divisible than any other currency in history. This alleviates many of the typical objections to a fixed currency, and introduces a dynamic that, frankly, I don't think anyone understands yet.

There still remain the question of whether the process of deflation itself makes a currency unviable. Herein lies the actual debate. I for one am going to enjoy watching it, and see how it all works out. There is a lot that we can learn. Let's hope governments don't get in the way and stop the experiment in-vitro.

Re: Why Bitcoin Will Fail As A Currency

#77

Post by masterzora »

pdx wrote: post #49

Since it's legal for me to pay legal tender for software, for jpegs, for mp3's, and other digital constructs, how could a legitimate argument be made to make it illegal for me to pay legal tender for a bitcoin? Since it's legal for me to take legal tender for software, for jpegs, for mp3's, etc., how could a law be passed to make it illegal for me to take legal tender in return for a bitcoin? If I advertise that I wa…

Since it's legal for me to pay legal tender for software, for jpegs, for mp3s, and other digital constructs, how could a legitimate argument be made to make it illegal for me to pay legal tender for copyright-infringing files?

Since it's legal for me to take legal tender for software, for jpegs, for mp3s, etc., how could a law be passed to make it illegal for me to take legal tender in return for copyright-infringing files?

If I advertise that I want to buy copyright-infringing software, how can they stop me from spending my dollars/euros on them? If I advertise that I have copyright-infringing files to sell, how can the stop me from doing so?

I won't pretend it's not silly, but only so long as you stop pretending that governments have never made illegal the exchange of certain bit patterns.

Re: Why Bitcoin Will Fail As A Currency

#78

Post by pdx »

tokenadult wrote: post #60
pdx wrote: post #49

Since it's legal for me to pay legal tender for software, for jpegs, for mp3's, and other digital constructs, how could a legitimate argument be made to make it illegal for me to pay legal tender for a bitcoin? Since it's legal for me to take legal tender for software, for jpegs, for mp3's, etc., how could a law be passed to make it illegal for me to take legal tender in return for a bitcoin? If I advertise that I wa…

In principle, a government can make any kind of property contraband.

Nonsense. Either bitcoins are illegal now, based on already existing law, or they are not.

If they are not already illegal, than the paranoid among us can say they will be made so later. However, such an action does not happen in a vacuum. That law must be written in some way so as to continue to allow other forms of digital commerce.

The discussion I would like to have is whether such a law could be written, which would disallow commerce in a particular digital commodity which harms nobody (not stolen cc numbers, not child porn, etc) while allowing other forms of digital goods to continue unhindered.

The thing that jumps immediately to mind, of course, is child porn, which is a digital commodity that is illegal to buy/sell/own/ or even possess. I question whether they would have as much success in the court of public opinion with bitcoins.

Re: Why Bitcoin Will Fail As A Currency

#79

Post by jerf »

vrotaru wrote: post #70
jerf wrote: post #30

Earlier quoted context omitted.

"Every single criticism of Bitcoin I've seen is based on the assumption that it will fail because it's not a fiat-based currency." Then you're being willfully blind. Even in the very article at hand, it points out that there is a standard economic criticism applicable to deflating currencies that BitCoin may be vulnerable to. That has nothing to do with its fiat-ness, it is simply a characteristic of deflating curren…

Even in the very article at hand, it points out that there is a standard economic criticism applicable to deflating currencies that BitCoin may be vulnerable to. Yes, the armchair deflationary spiral theory . With the exception of labor theory of value, I do not know of any other economic theory whose premises are a) so thoroughly laughable b) lacking any kind empirical evidence. In an attempt to reduce the noise/sig…

That's your persuasive counterargument? "That theory sucks"? I don't deny the standard case is controversial (which is also, BTW, not the same as "lacking in any evidence"; there's plenty of evidence, it's just that what it means is still debated), when discussing deflation spirals of a relatively small size, but when you're talking about a currency that will deflate by orders of magnitude, and that necessarily must do so if it going to be any sort of successful, I think you need more than "Ha ha ha! I laugh in the face of your argument!" I do not know of a real world parallel of such a thing, and when it comes to systems this complicated the presumption by any sane systems engineer is that your new proposal won't work. I for one am not going to take it as axiomatic that BitCoin is inevitably going to work and the burden of proof is on those who think it won't work (another psychologically tempting position). Quite the opposite.

You claim to have done your homework... have you considered actually sharing it with us? Or are derisive italics all you really have?

Re: Why Bitcoin Will Fail As A Currency

#80

Post by tabsa »

sorbus wrote: post #67
hcho wrote: post #57

Earlier quoted context omitted.

They might legislate against it, but will they be able to enforce the legislation?

Throw a non-negotiable 1-year imprisonment into whatever penalty they enact for using bitcoin. Then imprison the thousand most prolific users (business that accept it, people who publicly exchange it, etc.), and continue doing sweeps of anyone who admits to using bitcoin for the next few years. Suddenly, the only people who are willing to use bitcoin are those who are already using it for illegal things. Keep in mind…

I'm sorry but this is silly. What you are suggesting has been already tried in prohibition of alcohol, in war on drugs and now in a more civilized way in a "war on car downloaders".

The main outcome was that black markets flourished. If people want what Bitcoin provides, they will get it in one way or another.

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