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Bitcoin Is Fundamentally Flawed

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Re: Bitcoin Is Fundamentally Flawed

#161

Post by mesm »

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.

Mike Hearn has talked some on how you could use existing functionality in the bitcoin protocol to issue loans. Around 25:50 he talks about ripple + bitcoin which is a practical autonomous lending system. A little bit simpler than the smart property way which is pretty deep down in the protocol.

http://www.youtube.com/watch?v=mD4L7xDNCmA&t=17m30s

Re: Bitcoin Is Fundamentally Flawed

#162

Post by dragonwriter »

richardw wrote: post #140
itsprofitbaron wrote: post #40

Earlier quoted context omitted.

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.)

> 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.)

The "no red tape, no forex hassles" are largely because of immaturity in the regulation of "virtual currencies" that exist largely because most states haven't gotten around to addressing them because of scale issues compared to traditional soveriegn currencies.

This is already starting change.

Re: Bitcoin Is Fundamentally Flawed

#163

Post by mayneack »

SODaniel wrote: post #131
ph0rque wrote: post #92

Earlier quoted context omitted.

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 han…

So I don't know how much gold it would take to rock the price, but I'm guessing it's enough as to be non-trivially "lost" however, any random flashdrive could contain any number of btc.

Re: Bitcoin Is Fundamentally Flawed

#164

Post by dragonwriter »

SODaniel wrote: post #131
ph0rque wrote: post #92

Earlier quoted context omitted.

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 han…

> I am pretty sure if someone found a stash of gold worth $400.000.000.000 that WOULD actually effect gold prices.

Yes, it would. Spain essentially demonstrated this in the 16th Century, with the New World as the "stash".

Re: Bitcoin Is Fundamentally Flawed

#165

Post by dragonwriter »

wmf wrote: post #138
paulhodge wrote: post #74

Earlier quoted context omitted.

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.

> Can you imagine miners or MtGox voting to devalue their own holdings?

I can imagine, if Bitcoin was perceived as a serious currency, nation-states and existing large and wealthy financial institutions investing large amounts in becoming participants in the network.

Can I imagine those institutions acting with regard to Bitcoin the same as they act with regard to traditional sovereign currencies? Easily.

Re: Bitcoin Is Fundamentally Flawed

#166

Post by dragonwriter »

betterunix wrote: post #100
cseelus wrote: post #84

Earlier quoted context omitted.

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?

> Yeah, and there are very few markets in the world where the weight of some quantity of metal is used as currency.

Well, now there are few. Historically, though...

Re: Bitcoin Is Fundamentally Flawed

#167

Post by dragonwriter »

bbbhn wrote: post #33

Recessions and depressions happen to economies . To critique Bitcoin for its potential to induce a recession or depression is ridiculous, because the USD -- and its influence on the economy -- isn't going anywhere anytime soon.

> Recessions and depressions happen to economies. To critique Bitcoin for its potential to induce a recession or depression is ridiculous, because the USD -- and its influence on the economy -- isn't going anywhere anytime soon.

Its not ridiculous when one of the arguments for adopting Bitcoin is how much better it would be for our economy to be dependent on it than existing soveriegn currencies. Certainly, one reasonable response to this is to argue that the assumption that Bitcoin could displace those currencies is far-fetched, but its also reasonable to accept, for the sake of argument, that it could and then address whether or not it is desirable.

Re: Bitcoin Is Fundamentally Flawed

#168

Post by erikpukinskis »

DanBC wrote: post #8
return0 wrote: post #6

I was worried that they would expose a fundamental flaw in the encryption algorithm, however the post goes on with irrelevant FUD. It s a lot less flawed than even paper currency, and the fact that there haven't been any forgeries is a testament to its success. The argument about identifying transactions is a bit disconcerting, but how much of a real concern is it? After all, even paper money has a trail of DNAs from…

> and the fact that there haven't been any forgeries is a testament to its success. There has been a successful double spend.

Not really. The possibility of a short lived double spend is a valid state for the system to be in. What is vanishingly unlikely is a long lived double spend. There are currently no long lived double spends in the block chain, and that means no double spend has ever been successful.

Re: Bitcoin Is Fundamentally Flawed

#169

Post by uiri »

itsprofitbaron wrote: post #142
crazygringo wrote: post #120

Earlier quoted context omitted.

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…

I have yet to see a solid, intuitive argument as to why deflation is necessarily a bad thing for Bitcoin So deflation is a general decline in prices which usually caused by the reduction in the money or credit supply (in Bitcoin’s case it’s the Money Supply). However if prices are falling through deflation then, you’re not incentivised to spend because; you’re going to get a better deal tomorrow. Now as currencies ar…

Once people are reluctant to spend then, the economy will stay depressed because, people expect deflation AND deflation will continue because the economy remains depressed.

Please correct me if I am wrong, but isn't the value of the total money supply supposed to equal something like the total value of the goods and services in the economy that that money supply represents (not sure if the wording is correct but hopefully I got the idea across). If that is the case, then won't a decrease in spending cause the total value of the money supply to decrease, meaning the expectation of deflation will cause some amount of inflation, such that the system stabilizes? Because of this, I don't see how you can have a deflationary spiral in a depressed economy based on anything other than speculation (and thus a Bitcoin bubble which will eventually pop). I do agree that Bitcoin is naturally deflationary; if there is economic growth, the money supply can't expand to keep up. And Bitcoin's deflationary nature slows this economic growth. Thus, I think that Bitcoin will eventually reach a stable real value. I think there must be a flaw in this reasoning because I'm sure many economists would disagree but I can't seem to find it myself.

Re: Bitcoin Is Fundamentally Flawed

#170

Post by Zigurd »

betterunix wrote: post #143
pbreit wrote: post #141

Earlier quoted context omitted.

Same way I'd pay for it if you gave me a Euro. Except that I know where I can turn gold into cash.

Except that there are markets where Euros are the currency. Can you actually name a market where weights of gold or other metals are used as currency without first looking it up?

Yes, there are gold dealers all over the place. You might get a lousy deal, but the currency exchange at the airport will give you a lousy deal on a pocket full of Euros, too.
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