Live data from Hacker News

Bitcoin Is Fundamentally Flawed

profitbaron.tumblr.com

131–140 of 209 posts

Re: Bitcoin Is Fundamentally Flawed

#131
post #92

Earlier quoted context omitted.

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.

I think the 'point' here is that as opposed to chests with 100.000.000KG of gold there are actually 'lost' wallet files with enough BTC that it would 'rock' an economy with a currency cap in the future.

I am pretty sure if someone found a stash of gold worth $400.000.000.000 that WOULD actually effect gold prices. Also: Gold has 'real life' uses (production of components etc) and real world costs etc. attached to handling (weight, transport costs etc). None of which BTC has.

Re: Bitcoin Is Fundamentally Flawed

#132
post #124

Earlier quoted context omitted.

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.

I think Interlingua would be even more interesting to you then, since it was designed to be comprehensible to ordinary speakers of French, Spanish and Italian without any special knowledge. It's sort of like a modern idealized Romance language. It would probably serve your purpose better than Ido.

Re: Bitcoin Is Fundamentally Flawed

#133
post #128

Earlier quoted context omitted.

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

Only as long as there are legal uses for it; otherwise, it is as good as laundering money by buying and selling cocaine.

Re: Bitcoin Is Fundamentally Flawed

#134

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…

Just yesterday I would have rather used Bitcoin instead of a credit card to buy a game on my nephew's PS3 over the Playstation Network. The process of entering my contact details took several minutes. Afterwards, we had no idea how to remove my credit card from the system. Simply checking out with a QR code and sending the Bitcoin from my phone would have been easier and not required any of my personal information. I…

I can enter my credit card details in about 15 seconds (30 on mobile). "Qr code" and "simply" do not belong in the same sentence.

Re: Bitcoin Is Fundamentally Flawed

#135

While I don't disagree with the author I would say that the finite supply shines a light on an even more direct problem. What happens to 'lost' coins? The BTC supply is not only finite but in fact dwindling over time, as inevitably the amount of currency is going to diminish due to digital loss. I have personally lost a few BTC due to computer crashes, wallet file lost etc. (In the early days) and considering this th…

"Lost" bitcoins would just cause all of the other bitcoins to effectively increase in value. It's really only a problem for the person losing the bitcoins and a (small) positive for the rest of the bitcoin community. It's conceivable that most lost coins will only be lost until the keys can be cracked. Bitcoin keys are extraordinarily difficult to crack right now, but at some distant point in the future, it's conceiv…

Nope. That's the problem. LOST bitcoin (as you cannot quantify the availability of anonymous data blocks) wouldn't effect anything. ONLY FOUND bitcoins would.

Re: Bitcoin Is Fundamentally Flawed

#136
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.

Nah, that should be a non-issue. US Dollars are anonymous, after all.

Re: Bitcoin Is Fundamentally Flawed

#137
post #64

Actually, nothing stops a government from using fiscal stimulus if BitCoin is pervasively used. The US Government will, I'm sure, never accept taxes in anything other than US Dollars (that being the fundamental base of value the US Dollar is based on, and the subsequent avoidance of jail time due to not paying taxes or otherwise satisfying Uncle Sam), and they will remain free to helicopter-drop as many Dollars on th…

Also, not all of us consider Keynesian stimulus to be some wildly successful proved theory; I for one think you merely need to look out the window to see the failures of the theory to match reality. But fortunately, Keynesian is immune to criticism, because no matter how bad things get, Keynesian saved us from it being even worse, thus, no amount of failure can ever disprove the system. Phew! That said, BitCoin isn't…

For better or worse, I treat economics as a science, and judge an economic theory on its ability to make accurate predictions, not retrodictions. My point about "looking out the window" is that while we've been operating on a supposedly Keynesian theory in trying to repair our economy these past six years, it has consipicuously, repeatedly, and grossly failed to correctly predict the results of its own massive interventions. You don't need fancy economic theories to see how it has failed, you need merely open your eyes and look around. (And I include newspapers and television, etc, in the looking around, so my point is that it is easy to see the failures, not that it's failing literally right outside my window.) You need fancy economic theories to explain how even though the results are awful, we're still doing the right things even so.

Keynesians cover this by claiming it would have been even worse without the near-continuous and now open-ended "stimulus". I don't believe them. Had they said in advance that the current scenario was a significant possibility, I would at least listen, but instead we've been in a world where "recovery is just around the corner" for about four years now. It isn't, it hasn't been, and it continues not to be. I find it a valid theory that Keynesianism is the reason why, rather than the thing saving us. The fact that we're talking about a "new normal" is also code for "Keynesianism is a failure of an economic theory, but rather than give up the theory because we like it too much, we're going to tell people to just get used to being poorer."

(Of course if you want to say that our politicians are only using the name of Keynes for a cover while in fact not acting particularly Keynesian, well, I beat you to it. Keynesianism isn't, really. But nobody seems to open with that defense, only use it as a fallback when attacked. It's true enough in theory, but a useless defense of the theory's current users, which are what I'm actually critical of. The real Keynes is a great deal smarter than the psuedo-Keynes being used to drive policy today, but also a great deal less influential.)

Re: Bitcoin Is Fundamentally Flawed

#138
post #25

Sure, this is a flaw if one only uses bitcoins. As far as I know, there is nothing stopping alternate, new competitors using the same algorithm. So bitcoins run out and everyone hoards? Start a new currency. A smart implementation can overcome the network effect/firstmover advantage of bitcoin. Then people trade between the currencies, and hoarding ceases to be as much of a problem.

Or more likely.. the Bitcoin developers release a new version that allows for more than 21m coins. I think a lot of people don't realize that Bitcoin is still an actively developed beta-version software project. There are several parts of the code that the devs are already thinking about changing (such as the way that transaction fees are calculated, or increasing the number of times you can subdivide one coin). If t…

Can you imagine miners or MtGox voting to devalue their own holdings? I don't think many people are in it for the revolution.

Re: Bitcoin Is Fundamentally Flawed

#139

While I don't disagree with the author I would say that the finite supply shines a light on an even more direct problem. What happens to 'lost' coins? The BTC supply is not only finite but in fact dwindling over time, as inevitably the amount of currency is going to diminish due to digital loss. I have personally lost a few BTC due to computer crashes, wallet file lost etc. (In the early days) and considering this th…

I expect this will cause little problem; if 1M bitcoins are lost, the system will just work as if there were only 20M bitcoins created instead of 21M bitcoins. Everything would be a little less expensive because bitcoins would each be worth about 5% more.

Nope. Since no one can ever satisfactory answer the question of the 'real' amount of BTC in circulation, this will only serve as a factor of uncertainty. Lost bitcoins affect nothing, FOUND bitcoins can affect everything.

Re: Bitcoin Is Fundamentally Flawed

#140
post #4

I still don't understand how people treating bitcoin as an investment rather than a currency is a fundamental flaw in the algorithm.

The reason I said that is because, there are two reasons to own Bitcoin - either to derive indirect utility through purchasing goods with Bitcoin in the future (therefore Bitcoins are being treated as if it’s a currency) OR the expectation that Bitcoin will rise in monetary value which means that, Bitcoin is a speculative digital asset – however, it’s not tied to anything in the way a stock or bond is for example. Cu…

Third use - transfer money easily across borders, for example a migrant worker sending money to family. No red tape, no forex hassles, no worry about future value (unless the value tanks while you're transferring, of course.)
Post reply on HN