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Bitcoin Is Fundamentally Flawed

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Re: Bitcoin Is Fundamentally Flawed

#91

Post by fusiongyro »

leishulang wrote: post #36
base698 wrote: post #3

This is the classic argument you hear a lot, particuarly from Keynsian economists is: bitcoin is bad because it's deflationary like gold. In the past when we were using gold, like during the Civil War, we couldn't pay soldiers so we went to greenbacks (paper money like today). That allowed the soldiers to get paid so we could continue to fight the war. Gold obviously has a physical practical limit that can be traded…

"but if the rate of return on investments is greater than growth of the currency price that wouldn't be an issue either and one would expect it to stabilize over time." Well, for last couple weeks, bitcoin is the best investment, just saying ....

Well, why don't you put your money where your mouth is and throw all your savings into it today? I mean, if it keeps growing like it has for the past couple weeks, you stand to be a gajillionaire even though you didn't buy when it was low, right?

Re: Bitcoin Is Fundamentally Flawed

#92

Post by ph0rque »

mayneack wrote: post #58
mtgx wrote: post #35

Earlier quoted context omitted.

Then Bitcoin increases in value, and you keep dividing a Bitcoin more. Nothing really changes. Does it really matter if you have 20 million Bitcoins that are worth $1 trillion or if you have 10 million Bitcoins that are worth as much? No, it doesn't. The 21 million number was pretty arbitrarily chosen to begin with. This would be a problem if say half of available Bitcoins would be wiped out overnight - somehow. But…

That works for long as you keep more than you lose. If we get down to 1000000 btc at a reasonable value, what happens when I find my old thumb drive from 2011 that has 100k btc on it? That will be quite a shock to the btc economy. I don't think this kills bitcoin, but this is part of the "lost coin" problem.

What happens if I find an old chest with a 100kg in gold/diamonds/unobtainium? I think this situation is quite a good analogy to your question, the consequences of which are readily known.

Re: Bitcoin Is Fundamentally Flawed

#93

Post by GhotiFish »

Has anyone worked out the math on the divisibility of bitcoin?

Here are some questions:

  Bitcoin gets world wide adoption. It's used in transactions by
  ~3 billion people (right now). 
  * What's the expected value of a bitcoin? 
    (how much BTC for a stick of gum?)
  * What is the average permanent loss rate of bitcoins now? 
    (when a bitcoin wallet is accidentally deleted, the coins are lost forever)
    What about in the future? Would it go up or down?
  * accounting for human growth, how many people will there be?
    (50 years down the road? 100?)
Answering all these questions, then the big one.

  * How long can bitcoin last until it the satoshi 
    (the minimum divisible unit of currency) 
    is greater than a stick of gum?
That's how long bitcoin could functionally last in society. It DOES have a limit. I just want to know if it's an unreasonable huge limit.

Will it last a century? A Millennium? Until Sol becomes a red giant?

Re: Bitcoin Is Fundamentally Flawed

#94

Post by Sambdala »

bcantrill wrote: post #46

This fundamental flaw is absolutely glaring to anyone who has any understanding of economic history -- and it's amazing to me how many technologists willfully disregard several centuries of accumulated experience. Because of their built-in deflationary spiral, Bitcoins can never meaningfully be used as a medium of exchange: it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instea…

1. There's an equilibrium rate that will be reached.

2. Time preference exists.

3. If this is the one thing in the world that can only get more valuable as time goes on, why aren't you spending your entire net worth on it as we speak?

Re: Bitcoin Is Fundamentally Flawed

#95

Post by betterunix »

tibbon wrote: post #71
brazzy wrote: post #62

Earlier quoted context omitted.

> At some point, it will seem that its probably not going to rocket upward any more, and it might fall a little and then people start actually using it. No; then people start selling their BTC in a panic, MtGox is overwhelmed and stops working, and a lot of temporary millionaires start looking for work...

That's the state of things now- but in a year? More exchanges could appear. I don't see why they won't. Panic selling will only happen so many times before people stop freaking out over little things.

"More exchanges could appear. I don't see why they won't"

Regulations. The US government has already indicated its stance on what regulations apply to Bitcoin, and other governments will likely follow suit if it gains any more momentum.

"Panic selling will only happen so many times before people stop freaking out over little things."

...or when Bitcoin fails, which is the overwhelmingly more likely outcome.

Re: Bitcoin Is Fundamentally Flawed

#96

Post by kruhft »

bcantrill wrote: post #46

This fundamental flaw is absolutely glaring to anyone who has any understanding of economic history -- and it's amazing to me how many technologists willfully disregard several centuries of accumulated experience. Because of their built-in deflationary spiral, Bitcoins can never meaningfully be used as a medium of exchange: it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instea…

Bitcoin is a commodity backed by Mathematics with the convenience of transfer of ownership through electronic rather than physical means. When the last coin is mined in 2140 the point of deflation might hold if it was a currency, but it's not. It is a faith based value store based on supply and demand, just like gold, which has next to no useful properties other than being shiny, non-tarnishing, conductive AND PEOPLE THINK IT'S VALUABLE.

With the FED and Monetary Easing the total amount of dollars in the economy is increasing, but the actual value (purchasing power) of every dollar is decreasing. But since the number of dollars (numerically) that people are holding is increasing there is no speak of deflation because prices aren't going down due to the inflation of the amount of dollars. The actual purchasing power is deflating but due to economic slieght of hand everyone has more dollars. Win win!

The value of money is not the number of dollars but the distribution of the dollars throughout society. Double everyone's bank account and nothing would change after the initial emotional frenzy - prices would settle at twice the original values.

Deflation may be an 'economic carcinogen' but what name is given to the systematic reduction of value and spending power in an economy where there is almost no saving and for what saving there is there's no interest?

The price of gold has been increasing to greater and greater highs for the past decade due to the monitary policies during that time. Bitcoin is reaching a point where it can stand along side with it in some people's minds because it has a strong Mathematical backing rather than a flimsy backing by governments. Gold was taken over as a currency by paper; maybe BTC will end up the same way some day.

Re: Bitcoin Is Fundamentally Flawed

#97

Post by fusiongyro »

pg_bot wrote: post #21

Why hasn't anyone forked bitcoin and started mining a new currency from scratch?

I'd expect it to work about as well as Ido, the better-than-Esperanto: not well. The whole point of currency (and language) is exchange. As you limit yourself to ever-smaller numbers of people in the search for more ideal manners of exchange, the missed point becomes harder and harder to ignore.

Re: Bitcoin Is Fundamentally Flawed

#98

Post by betterunix »

chipsy wrote: post #90
bcantrill wrote: post #46

This fundamental flaw is absolutely glaring to anyone who has any understanding of economic history -- and it's amazing to me how many technologists willfully disregard several centuries of accumulated experience. Because of their built-in deflationary spiral, Bitcoins can never meaningfully be used as a medium of exchange: it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instea…

IMHO, this isn't a failure. We know that it's not going to be a business-as-usual currency. Easy credit is an incentive for business; inflation is an incentive for consumers. Governments have much better control over that. BC is better understood as a commodity market with a simpler financial instrumentation. Instead of trading contracts for goods, you are able to trade the good itself, at internet speed and scale. T…

Except that Bitcoin is not a commodity (as the term is commonly understood) because it has no use other than as a currency.

Re: Bitcoin Is Fundamentally Flawed

#99

Post by ph0rque »

chrisrhoden wrote: post #15

Watch this: From now on, for the purposes of transactions, I am going to refer to bitdollars. In any software using bitdollars, one bitdollar is equal to 0.001 bitcoins. Nobody needs to feel less or more rich.

I prefer the term nanobitcoin. That way, the conversion to bitcoins is built-in.

Re: Bitcoin Is Fundamentally Flawed

#100

Post by betterunix »

cseelus wrote: post #84
bcantrill wrote: post #46

This fundamental flaw is absolutely glaring to anyone who has any understanding of economic history -- and it's amazing to me how many technologists willfully disregard several centuries of accumulated experience. Because of their built-in deflationary spiral, Bitcoins can never meaningfully be used as a medium of exchange: it will always be tempting to keep your Bitcoins in your pocket and let them appreciate instea…

Again, the same is true for gold and several other metals.

Yeah, and there are very few markets in the world where the weight of some quantity of metal is used as currency. Let's put it this way: if you had no money at all, and I gave you a gold coin, how would you pay for your dinner?
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