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Bitcoin Is Fundamentally Flawed

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Re: Bitcoin Is Fundamentally Flawed

#201

Post by scotty79 »

thornkin wrote: post #192
scotty79 wrote: post #152

Earlier quoted context omitted.

Not quite. Losing your wallet doesn't destroy anything beside the proof that the rest of society owes you anything. No actual worth is lost. You just lost the proof that you have a right to something useful or pleasant. It will be claimed by other people. Market will discover how much bitcoins were lost and bitcoin price will raise accordingly so other people holding bitcoin will be entitled to tiny bit more of the v…

That is only true if the loss is actually permanent. If the system comes to assume that there are only 10,000,000 coins in circulation, what happens if a substantial portion of the "lost" 11,000,000 shows back up? Now you just had a 50% inflation overnight... Of course, the chance that huge amounts are lost together is quite low.

I don't think you could double the amount of bitcoins overnight. And even if you could I doubt that it would lead to rapid inflation. Rather gradual as additional bitcoins spread throughout the economy.

Re: Bitcoin Is Fundamentally Flawed

#202

Post by userulluipeste »

SODaniel wrote: post #173
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…

While I agree to an extent, the current $2 billion market cap is far to small to compare with. When/if BTC reaches around $5,000 each ($50 billion or so market cap) I will agree.

What gives you the numbers you've written? I mean why $5000 and not orders of magnitude more or less?

Also, if the currency trading means wealth transfer, just what will come to mean the dollar as currency if it's going to be 5000 for one BTC?

Re: Bitcoin Is Fundamentally Flawed

#203

Post by userulluipeste »

brazzy wrote: post #62
tibbon wrote: post #20

Yes, there will be (at some point) a downward force on the value of Bitcoin due to hoarding. But that will not be the only force. 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. Also- its important to remember that there are relatively few places to 'use' it now compared to most other currencies. I cannot pay my ren…

> 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...

It might happen other way around - MtGox is overwhelmed and stops working _because_ of the fact that the fiat currencies are falling and the only currency that makes sense to estimate things and services into becomes... well, you know it.

Re: Bitcoin Is Fundamentally Flawed

#204

Post by dragonwriter »

Zigurd wrote: post #172
dragonwriter wrote: post #160

Earlier quoted context omitted.

> The important thing to remember is that this currency is not inherently worthless. Yes, it is. Like all fiat currencies, Bitcoins (as distinct from the physical artifacts in which some of them might be housed) have no inherent value, only the value that results from the fact that some people are currently willing to accept them for other things. > As long as people will still accept and trade in bitcoin, Bitcoin wi…

All cases I know of where a currency collapses, it does so because the supply was inflated. Has a currency ever just collapsed without some dubious supply policy causing the collapse?

> Has a currency ever just collapsed without some dubious supply policy causing the collapse?

Private (and what might be called "sub-sovereign" public -- that is, where the entity issuing either isn't sovereign or is notionally sovereign and yet still subordinate to a higher sovereign) currencies have collapsed because of sovereign action making issuance, use, etc. of the particular kind of currency less attractive (including expressly limiting its issuance or use, or prohibiting it outright.)

Sovereign currencies have collapsed as currencies (perhaps with individual artifacts retaining value as collectibles) because of the collapse of the issuing sovereign entity.

Gold as currency (though it became even more sought after as an investment) effectively fell apart globally largely due to deflations in the the late 19th century and early 20th century resulting from supply limits compared to productivity.

I'm not sure if that counts as a yes or a no (each of those causes could be considered "dubious supply policy" issues, just as the limit on the number of BTC can), but it certainly means that hyper-inflationary supply policy isn't the only problem; supply limits are a problem, as well.

Re: Bitcoin Is Fundamentally Flawed

#205

Post by mpyne »

thornkin wrote: post #194
mpyne wrote: post #43

Earlier quoted context omitted.

I think the idea is that it's a classic supply/demand equation: With a fixed supply of Bitcoin available to transact with, each individual Bitcoin will become more expensive as demand goes up. If you sub-divide Bitcoins further to purchase the same items then it's still a deflation: What you used to be able to sell for 1 BTC now you can only get 0.1 BTC for. If all prices drop proportionally at the same time that's n…

Why couldn't loans be made which devalue at a rate pegged to a basket of goods? We track the rate of inflation today, we could just as easily track deflation and loans could be pegged to that. Doesn't that solve the loan problem?

The way I see it, that's simply shifting the problem around. Before your loan was based in BTC, now it's based in (essentially) "Number of equivalent baskets of goods".

I don't think lenders would appreciate the volatility inherent in their loaned-out money having value fixed to the amount of crop yield the farmers can deliver this year, or the amount of oil extracted, etc. Similar logic would apply for those trying to get a loan.

Re: Bitcoin Is Fundamentally Flawed

#206

Post by mpyne »

Houshalter wrote: post #179
vshastry wrote: post #55

Earlier quoted context omitted.

no, because if persons with BTC hoard them as a value store rather than spending them as a currency, the merchant won't see (significant) spending from BTC holders.

The only reason to hoard bitcoins is if you plan on spending them eventually. In the long run the same amount of bitcoins will get spent.

Tell that to the merchant who needs to make payroll this month, not in the long run.

Re: Bitcoin Is Fundamentally Flawed

#207

Post by Zigurd »

betterunix wrote: post #171
Zigurd wrote: post #170

Earlier quoted context omitted.

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.

That is like saying that beer is a currency because there are beer dealers all over the place.

Sort of. I suppose there is some secondary market in beer. Near a college, maybe?

You can readily hock a car for money, so that's a few levels closer to being a currency. You can sell used media.

But there are people in the business of buying and selling gold for the sole purpose of readily converting it to currency and vica versa so that gold can be used as an alternative to paper currency managed by a nation's central bank. That's almost all that gold is used for, and that's what dealers in gold coin and gold bars are in business to enable.

Re: Bitcoin Is Fundamentally Flawed

#208

Post by betterunix »

Zigurd wrote: post #207
betterunix wrote: post #171

Earlier quoted context omitted.

That is like saying that beer is a currency because there are beer dealers all over the place.

Sort of. I suppose there is some secondary market in beer. Near a college, maybe? You can readily hock a car for money, so that's a few levels closer to being a currency. You can sell used media. But there are people in the business of buying and selling gold for the sole purpose of readily converting it to currency and vica versa so that gold can be used as an alternative to paper currency managed by a nation's cent…

Except that in practice, weights of gold are not used as a medium of exchange in almost every market in the world. Gold may be used as a store of value, but so can land, buildings, collector's items, etc. One of the defining characteristics of currency is its use as a medium of exchange in a market.

Re: Bitcoin Is Fundamentally Flawed

#209

Post by paulhodge »

ramblerman wrote: post #198
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…

not quite. The 21m upper limit is one variable that can't change.

Would love to hear more details on this; why can't the 21m limit be changed?
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