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The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

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Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#101

Post by hugh3 »

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

1) Early adopters. I couldn't find a point here.

The point is that it's a scam. It's designed with enriching the people who made it up in mind. The only difference between this and my "Hey let's all use these pieces of paper that I printed as money" scheme is that these guys actually got it off the ground by allowing the first few adopters to also print their own money in significant quantities.

2) Deflation. There's a creed in mainstream economics that deflation is bad, repeated here. "if your money is getting predictably more valuable, why would you want to spend it?" It's just false. Would you buy a computer today if you can buy a more powerful one by waiting until tomorrow?

Computers, yes. Food, yes. Other stuff I actually need right now, yes. But I sure as hell am not gonna invest in your startup... or in any other business for that matter, so that's just wiped out half the economy. I'm also not gonna buy a house, I'm gonna rent... but who'd be dumb enough to be my landlord?

Really, the faith which some folks seem to have in this particular bubble-in-value-of-intrinsically-valueless-asset is scary.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#102

Post by mike_esspe »

coderrr wrote: post #80
mycroftiv wrote: post #13

The current design of Bitcoin is obviously not correct for the long term, and I am sure it will be supplanted by more evolved crypto-currency systems. There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model. Given the rewards that have already accrued to Bitcoin early ado…

I think the most interesting aspect of this whole thing is, like you mention, how new bitcoin-like currencies are perceived, valued, and participated in. Will everyone start jumping into new bitcoin-like currencies in hope of massive bitcoin-style investment gains? Will massive bitcoin miners attack new currencies networks with their computing power to protect their or others' investments in bitcoin? Will new bitcoin…

There is such "gold" - Ruthenium.

It's not valued above industrial value.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#103

Post by stcredzero »

pbhjpbhj wrote: post #95
bad_user wrote: post #57

Earlier quoted context omitted.

Actually many cryptographic algorithms that got defeated, haven't been defeated with " new discoveries in mathematics ". Also, you can't really prove that such an algorithm is secure. You can only prove that it exhibits certain properties that make it more secure versus other algorithms. Judging by how cryptographic methods got defeated in the past, I think it's safe to assume that it's only a matter of time.

As someone says, one-time pads are impossible to decrypt without they key. But you can guess the key or use some other brute force mechanism. My guess, SHA-256 will fall to a quantum computing algo in a few years.

As someone says, one-time pads are impossible to decrypt without they key. But you can guess the key or use some other brute force mechanism.

Actually, you can't even reliably brute force a one time pad. The key is always the same length as the message. All plausible messages of length N are equally valid solutions for a brute forcing algorithm.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#104

Post by hugh3 »

shubble wrote: post #97
barrkel wrote: post #87

Earlier quoted context omitted.

"Red gold" would be exactly as valuable as gold is in the same way that gold is; that is, if everybody agreed that red gold was valuable, then it would be valuable. If they didn't, then it wouldn't. Scarcity doesn't give rise to value. You also need demand. In so far as red gold acted in the same way as gold for jewellery and industrial uses, it would probably decrease the value of gold to some proportion, and set a…

I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years. The reason for the scarcity of gold, and it's value, is that this gold is not for sale. One gold owning organization could make a great deal in…

I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults

Quite possible.

A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years

Say what? A few large organizations, who are not governments, hold the vast majority of the world's gold? Are we into conspiracy-theory talk here?

Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same

"Safe" depends on what you mean. For instance, you could say "US dollars have a 99% chance of retaining at least 80% of their value in five years, and a 99.9% chance of retaining at least 10% of their value in five years. Gold has only a 80% chance of retaining at least 80% of its value in five years, but a much higher 99.999% chance of retaining at least 10% of its value in five years".

Gold gives you much more volatility in the short term, but acts as a hedge against the collapse of any particular currency.

I wouldn't buy it though. I'd buy land (with houses on it), which acts as a hedge and pays you income.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#105

Post by cmelbye »

jcr wrote: post #73

> When the federal reserve "prints money", it doesn't just mail million-dollar checks to random Americans. It does one of two things. It either (a) purchases some other asset [generally US treasury bonds] on the free market, thereby injecting more cash into the system than there had been before, or (b), loans money to a bank, who will then loan it to other people who will then spend it. The part (a) about "purchases"…

Money supply is increased by purchasing bonds, reducing the discount rate, or lowering the required reserve ratio.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#106

Post by mike_esspe »

scythe wrote: post #94
cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

>Deflation. There's a creed in mainstream economics that deflation is bad, repeated here. "if your money is getting predictably more valuable, why would you want to spend it?" It's just false. Would you buy a computer today if you can buy a more powerful one by waiting until tomorrow? People do. s/spend/invest/. I mean, why would anyone spend money on food? There's no storable value! I can dream up silly situations t…

This is deflation caused by central bank (due to contraction of credit).

There was a deflation during all 19th century, when gold were money, without any ill consequence. And it was a century of growth due to industrial revolution.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#107

Post by Goladus »

dogas wrote: post #22

I think the other article ( http://apenwarr.ca/log/?m=201105 ) written about bitcoin failing is more detailed and contains potentially more plausible ways of how bitcoin can fail. The openwarr article refers to potential failures with the SHA256 backbone of bitcoins. "With bitcoin, a single failure of the cryptosystem could result in an utter collapse of the entire financial network. Unlimited inflation. Fake transac…

> IANA cryptography expert. Is this feasible in the way the author predicts? Could SHA256 be cracked quickly, a la MD5? My gut is that it won't be able to, but I can't back up my argument.

IANA cryptography expert either, but my understanding is that the biggest threat to SHA is quantum computing.

http://en.wikipedia.org/wiki/Grover%27s_algorithm

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

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#108

Post by util »

vladd wrote: post #39

Bitcoin is a marketing-based currency in the sense that it has no real value besides the fact that it was the first currency with cryptographic properties that gained widespread adoption: if someone would take the code and fork it into an alternative ("Webcoins"), the intrinsec value of a Webcoin would be zero (unless it also found a way to gain market share or early adopters). That's very similar with a Ponzi scheme…

It seems like this in particular applies to most government-issued currencies as well (except that they have very good marketing and market share). Each currency itself has no intrinsic value and depends on "marketing" (reputation of the government minting it) and market share (number of places accepting it). If people lose faith that a government will do a good job managing its currency or even think that the government will disappear soon, the worth of the currency (in terms of what people will give you for it) will probably fall.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#109

Post by achompas »

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't.

Actually, all of Adam's criticisms deal with the supply and demand of currencies, and they are pretty strong and damning as a result. In sum, the supply of Bitcoins is finite (despite a growing population) and the demand for Bitcoins depends on (a) confidence in Bitcoins as a currency and (b) consumers' ability to convert between Bitcoins and fiat money with little friction.

(1) Adam's point is not the unfairness of early adoption, but that early adopters control all the rents. Today's miners will control currency as it appreciates, but after a point (say, the supply of mine-able Bitcoins is exhausted) there is zero reason to demand Bitcoins unless they supplant paper money (very, very unlikely).

(2) I'm weak on my deflation theory, but I don't think the computer-purchasing analogy is 100% right. Instead of buying the computer with paper money, consider buying the computer with gold bullions during the commodity boom. Why buy that Macbook Pro with x bullions today if you can buy it with x-y bullions tomorrow? Adam isn't arguing that "deflation is bad," but rather that the supply of Bitcoins as currency will dry up as their value appreciates.

(4) You can't hand-wave this away. Consumers have confidence in US dollars because the Federal Reserve and U.S. government can step in during a crisis and back people's assets. There is no similar guarantee for Bitcoins once something goes wrong.

(3) Why is convertibility not a systemic problem? Lack of convertibility falls out of all the previous points! Why accept bitcoins for cash if (a) they're not backed by a central authority, (b) almost no one else accepts them as money, or (c) they will be obscenely expensive once the supply dries up?

I can't believe Bitcoins have gotten this far. They're a currency accepted by almost no one as payment, guaranteed by no governing body, and artificially supplied as precious commodities without the benefits of said commodities (Bitcoin engagement ring? 24K Bitcoin watch?). They're a great theoretical exercise, but their real-world value will trend to $0 in the long run.

EDIT: barrkel gets to the point when he/she says "the value of money is a product of supply and demand, no matter whether fiat or specie." The fundamentals of Bitcoins are such that (a) supply will artificially dry up and (b) unlike precious metals/commodities, there will be little demand for Bitcoins aside from use as a currency (or a Ponzi scheme).

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#110

Post by sethg »

tomjen3 wrote: post #21
ap22213 wrote: post #14

I would love to see a currency like this work, and I would be interested in using one, but the major issue for bitcoin, for me, is that deflation is built into its core. Inflation is a good thing. Inflation encourages holders of capital to use it to invest in other things. That is, inflation encourages productivity. The inflation has to be relatively low, of course. Probably low enough to allow someone to retire with…

An inflationist currency is great if you are deep in debt or like cheap consumer credit. Deflation (or really constant value) means that those who save, build things and invest wisely will benefit. And no, I am not going to starve today, so that I can get marginally more bread a year from now.

In order for one person to be able to save (or invest), someone else has to be willing to borrow (or sell stock).
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