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The Bitcoin Report 2 [pdf]

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Re: The Bitcoin Report 2 [pdf]

#21

Post by samegreatsleeve »

Aqueous wrote: post #13
vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

This describes what happens in the short term, probably repeatedly. But what happens in the long term? Traders learn; they adjust with respect to risk. People will become acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result. People will hold onto the currency longer because they've seen it crash before and recover. The curve will flatten and become a slope.…

>Traders learn; they adjust with respect to risk.

Ha ha ha ha

No. Traders learn, and then they die, and are replaced by new traders, who haven't learned.

Re: The Bitcoin Report 2 [pdf]

#22

Post by dragonwriter »

klochner wrote: post #6
tdicola wrote: post #3

Earlier quoted context omitted.

Nice article--I like that it's concise and sticks to the data to make its point. This article last week from Forbes makes the same point with Paul Krugman's babysitter's co-op column: http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k...

The deflationary aspect is only important for currencies backing an economy - if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time. It is interesting to consider alternatives though - bitcoin could be the Friendster of crypto-currencies.

> The deflationary aspect is only important for currencies backing an economy - if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time.

What the value is doing over short periods of time (particularly, volatility and liquidity in BTC markets) will affect the transaction fees that will need to be associated with that kind of transaction in order for anyone not to go broke fulfilling them.

Re: The Bitcoin Report 2 [pdf]

#23

Post by samegreatsleeve »

ricardobeat wrote: post #16

Does it even make sense to consider Bitcoin as a separate economy containing "no real value"? I see it more as an alternative banking system, the money it contains comes from real-world value and gets converted back into real-word products; it's not a virtual currency.

It's only a separate economy to the extent that it isn't instantly being converted back into some other currency.

There is a genuine bitcoin economy, and it is centered around the trade of goods that are illegal: child porn, weapons, viruses, credit card numbers, and most important of all: illegal drugs.

The question is not whether there is potential for a non-government backed digital currency. The question is whether bitcoin will be effective in that role given the design of the currency.

If a better currency is invented that includes some kind of inflationary mechanism, perhaps the drug trade/etc will take up that currency. In that case bitcoin truly will die.

Re: The Bitcoin Report 2 [pdf]

#24

Post by surrealize »

klochner wrote: post #6
tdicola wrote: post #3

Earlier quoted context omitted.

Nice article--I like that it's concise and sticks to the data to make its point. This article last week from Forbes makes the same point with Paul Krugman's babysitter's co-op column: http://www.forbes.com/sites/pascalemmanuelgobry/2013/04/05/k...

The deflationary aspect is only important for currencies backing an economy - if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time. It is interesting to consider alternatives though - bitcoin could be the Friendster of crypto-currencies.

if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time

If you expect the value of bitcoins to keep going up, why would you only hold them for short periods of time? You're suggesting that people would wait until the last possible moment to change their dollars into bitcoins. But by doing that, they're losing money if the value of bitcoins is going up relative to dollars. In that case, the best strategy is to switch into bitcoins as early as possible, and hold them as long as possible.

Re: The Bitcoin Report 2 [pdf]

#25

Post by carmaa »

A "report" not covering the greatest current use case for the currency - namely anonymously buying weed through the Internet tubes? Not saying it is a good thing, just that there's actual value creating going on. Right now.

Re: The Bitcoin Report 2 [pdf]

#26

Post by zenocon »

dragonwriter wrote: post #18
zenocon wrote: post #17

Earlier quoted context omitted.

Did he? Time will tell. Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground. There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.) The charts were interesting, but the headline is pure bunk. No one knows -- but one thing is for sure: this is disrupti…

> Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground. In what relevant sense to deflation and its effects is it new? > There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.) How are any of these relevant to the incentives created by deflation?

Bitcoin is an infant. Hoarders will happen, sure. We'll see what happens in the long term. Gold as a fixed medium may not be practical to slice to 8 decimal places, but then again...the central authority that is in charge of deciding that never tried. They just gave up and Keynes won. Let's see what happens.

Re: The Bitcoin Report 2 [pdf]

#28

Post by klochner »

surrealize wrote: post #24
klochner wrote: post #6

Earlier quoted context omitted.

The deflationary aspect is only important for currencies backing an economy - if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time. It is interesting to consider alternatives though - bitcoin could be the Friendster of crypto-currencies.

if you just use bitcoin for quick anonymous transactions, say dollar-->bitcoin-->purchase, then you don't care what the value is doing over time If you expect the value of bitcoins to keep going up, why would you only hold them for short periods of time? You're suggesting that people would wait until the last possible moment to change their dollars into bitcoins. But by doing that, they're losing money if the value o…

You wouldn't hold bitcoin if you're not interested in currency speculation.

I'm arguing that despite likely wide swings in the value of bitcoin, it's value as an anonymous transaction currency will prevent it from going extinct.

People hoard it, driving the price to $10,000 and driving speculators to tears of joy, still people can make quick transactions in fractional bitcoin. It goes bust and the value dives to $10, yet the people using it for transactions could care less.

Re: The Bitcoin Report 2 [pdf]

#29

Post by brown9-2 »

Aqueous wrote: post #13
vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

This describes what happens in the short term, probably repeatedly. But what happens in the long term? Traders learn; they adjust with respect to risk. People will become acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result. People will hold onto the currency longer because they've seen it crash before and recover. The curve will flatten and become a slope.…

Or perhaps the masses will never adopt a currency that requires them to become "acquainted with the volatility of the BitCoin currency and adjust their buying and selling practices as a result", especially when the current status quo offers none of these pitfalls.

Re: The Bitcoin Report 2 [pdf]

#30

Post by illuminate »

zenocon wrote: post #17
vyrotek wrote: post #7

"There is no capital nor wealth creation to speak of; only as much money as was put in. While somebody may buy a bitcoin for $1 and then sell it for $200, no value was added in this process, so it is simply a transfer of wealth. The people who profit will do so by taking from those who lose. As the deflationary feedback amplifies the desire to hoard, the exchanges will become illiquid. Eventually, buyers will give up…

Did he? Time will tell. Every article that portends doom via deflationary measures trots out the same 'ol tired arguments and examples (great depression, hoarders, etc.) You have to admit this is new ground. There are a lot of new ideas here (i.e. divisible to 8 decimal places, de-centralized, etc.) The charts were interesting, but the headline is pure bunk. No one knows -- but one thing is for sure: this is disrupti…

"You have to admit this is new ground."

No. It's always "different" ground, same outcome.

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