Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Bitcoin Is Fundamentally Flawed

profitbaron.tumblr.com

Post reply on HN
Print view View original

121–130 of 209 posts

Re: Bitcoin Is Fundamentally Flawed

#121

Post by seandougall »

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…

> Loans clearly have issues in a deflationary system.

I would think, even more than that, loans would have issues in an anonymous system.

Re: Bitcoin Is Fundamentally Flawed

#122

Post by brown9-2 »

crazygringo wrote: post #120
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…

According to Wikipedia [1]: Whether deflationary spirals can actually occur is controversial. Now I'm not an economist, but I have yet to see a solid, intuitive argument as to why deflation is necessarily a bad thing for Bitcoin. Suppose the value keeps going up, and a few years from now it's at $1,000 / bitcoin -- lots of poeple have been buying bitcoins wherever they can, and not spending them. Well, at some point…

What you have described sounds like the opposite of a stable currency.

Also, the fact that the supply of bitcoins is fixed by the population of the human race is not means that bitcoins are inherently deflationary.

Re: Bitcoin Is Fundamentally Flawed

#123

Post by dnaquin »

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…

The US went off the gold standard before the great depression.

http://en.wikipedia.org/wiki/Federal_Reserve_Act

Re: Bitcoin Is Fundamentally Flawed

#124

Post by krcz »

fusiongyro wrote: post #97
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.

I might try to learn Ido someday. I probably won't talk to anyone in it, but it might be fun. It has one advantage over Esperanto: its vocabulary wasn't chosen by one guy arbitrarily, but by a committee that analyzed various European languages and tried to find common word roots. That way knowing Ido might help me to dig some meaning from French, Spanish, Italian texts.

Re: Bitcoin Is Fundamentally Flawed

#125

Post by oscilloscope »

3am wrote: post #104

The Bitcoin craze is without a doubt one of the most insane things I've lived through. I feel badly for all the late arrivals who are (anecdotally) dipping into long term savings and levering up to buy them. The dynamic is identical to me between this, the NASDAQ at 5000, and the Case Schiller index just under 190. Maybe some economists out there are trying to be polite, but this is just nuts. Best regards to those i…

Weren't those both trillion dollar markets at the time? Bitcoin is tiny by comparison.

Re: Bitcoin Is Fundamentally Flawed

#126

Post by jpalomaki »

If the value of Bitcoins is bound to go up, no matter what, then why don't we all exchange our dollars and euros to bitcoins and stop spending completely?

I think the mistake people make when comparing Bitcoin to historical counterparts is that they don't realize that Bitcoins are easy to split up and exchange. This is not the case with physical currencies. Splitting for example copper coins is not very practical so it is much easier to run "out-of-money" if the supply is limited.

Re: Bitcoin Is Fundamentally Flawed

#127

Post by ryusage »

zacharyvoase wrote: post #75
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…

The principle of dual circulation and 'bad money driving out good' is formulated as Gresham's Law. While this is typically applied to two currencies pegged by fiat, it would also apply to a pair of circulating currencies in which one is appreciating and the other depreciating. The only problem is that Bitcoin does have an end use—as an anonymous digital currency (c.f. Silk Road). And furthermore, whether you believe…

Not completely, no, but it could certainly be stunted. The first question anyone asks about bitcoin is "What can you actually buy with it?" If it becomes illegal for American or European companies to accept bitcoin payments, that would certainly certainly do a lot to prevent it from taking over.

Re: Bitcoin Is Fundamentally Flawed

#128

Post by dcc1 »

BerislavLopac wrote: post #108
betterunix wrote: post #98

Earlier quoted context omitted.

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

Which only means that its value can drop to zero, unlike other commodities.

Actually bitcoin is great for laundering, so it will always have "some" value

Re: Bitcoin Is Fundamentally Flawed

#129

Post by wmf »

seandougall wrote: post #121
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…

> Loans clearly have issues in a deflationary system. I would think, even more than that, loans would have issues in an anonymous system.

You can probably get payday loans in cash, but that doesn't mean the loan is anonymous.

Re: Bitcoin Is Fundamentally Flawed

#130

Post by wmf »

Aloisius wrote: post #89

Out of curiosity, is there any way to design a crypto-currency that is at least marginally adaptive to deflation/inflation? Like say, if the aggregate number of xcoins traded goes down, start allowing more xcoins to be mined and vice-versa?

That is possible, but if the exchange rate is fairly stable you get much less press coverage and much less adoption.
Post reply on HN