Fiat is Effective: fiat for the crypto crowd [pdf] • Hacker News Board

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#261

Post by rphlx » Tue, Oct 17, 2017, 2:45 AM UTC

a_c_s wrote: post #204

irln wrote: post #100

Earlier quoted context omitted.

Not advocating for or against the fed or advocating for or against crypto currency but instead attempting to answer your three main questions. > What do you think the Fed was attempting to do? The Fed was attempting to save a system from complete collapse. > it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates) This is the cru…

> management of the supply of that currency that is equitable to all participants remains illusive The interests of participants are mutually exclusive: debtors want high inflation, lenders want deflation.

And that's precisely the problem that an immutable issuance schedule, like Bitcoin's, attempts to solve (fairly successfully so far). It prevents either of those 2 sides from unilaterally manipulating the currency supply to rob the other side after a contract or borrowing arrangement is signed.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#262

Post by cryptodogemoon » Tue, Oct 17, 2017, 2:53 AM UTC

zeroxfe wrote: post #229

cryptodogemoon wrote: post #159

Earlier quoted context omitted.

The production curve Satoshi designed was to produce the largest supply of Bitcoins for the least amount of effort/resource input to the smallest group of users running the software. Half of the supply was produced this way in the first few months. Blockchain and Bitcoin is different than physical resources because it's so easily produced. Crypto tokens are different from other traded instruments because of the excha…

> The production curve Satoshi designed was to produce the largest supply of Bitcoins for the least amount of effort/resource input to the smallest group of users running the software. The total supply was fixed from the start and the supply curve was designed to incentivize mining. When it was initially deployed, there was no reason to believe that Bitcoin would become as huge as it is now, and lots of coins were si…

> Blockchain and Bitcoin is different than physical resources because it's so easily produced.

  The whole point of PoW is that it 
  is not easy to produce Bitcoin -- 
  physical goods have scarcity 
  enforced by nature; Bitcoin has 
  scarcity enforced by mathematics.

This is not true. The math in Satoshi's mining algorithm produced most of the coins for extremely low value input.

Most people are simply unaware how the supply was gathered very early on, effectively in the style of a pump and dump scheme.

To be more specific, half the supply was minted at low computational effort from 2009-2013. Mining was made easy so Satoshi could maximize ownership of the supply, hoping speculators would purchase the units for a sum surpassing the value it took to produce the coins.

Bitcoin advocates try to dismiss how easy it is to produce blockchain tokens. Satoshi could just as easily have made the algorithm produce bitcoins in limited quantities early on especially with each coin being divisible to 100000000 units each. Instead Satoshi choose a very easy way to generate the coins before other users took notice of his network.

Along with how easy it is to manipulate prices on exchanges. Exchanges will make huge profits during freefalls because they have no oversight on their order books. There's a reason the exchanges often set up shell companies and use off shore banks in jurisdictions often associated with gambling and credit card fraud.

The market is hardly user driven, it's now at the whim of which exchange can fake their order books while surviving public relations to avoid their solvency getting called out for. Take note how often exchanges have delays with customer withdraws.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#263

Post by rphlx » Tue, Oct 17, 2017, 3:10 AM UTC

soniman wrote: post #48

Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into b…

> Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar.

FWIW Bitcoin has already come back from a >85% decline at least twice, if you use intra-day data.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#264

Post by rphlx » Tue, Oct 17, 2017, 3:17 AM UTC

bjarneh wrote: post #45

> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?

Nope, you mostly devalue existing claims which is - depending on your perspective - either a nice feature or a glaring bug.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#265

Post by hn_throw_1234 » Tue, Oct 17, 2017, 5:11 AM UTC

wyager wrote: post #226

hn_throw_1234 wrote: post #133

Earlier quoted context omitted.

> USD is inflationary. Ceteris paribus, a rational actor would generally prefer to hold something deflationary. The (epsilon-) no-arbitrage argument suggests that the frequently raised “but then no one will ever invest in things” objection doesn’t actually make any sense. This is only true for savers and the vast majority of Americans, likely the world, are debtors (source: http://time.com/money/4709270/americans-die…

Interest rates would be lower with bitcoin. Again, consider this from the no-arbitrage angle. If interest rates weren’t correspondingly lower for loans denominated in deflationary assets, there would be an obvious and low-overhead arbitrage opportunity. So debtors don’t actually gain anything unless the loan is fixed-rate and the inflation rate increases .

I can't see how the no arbitrage hypothesis applies here. You're talking about different currencies. No arbitrage doesn't mean that whatever you do to the world won't change anything.

That said, you're probably right that interest rates would be lower since the demand for debt would go down since Bitcoin is deflationary but then again that goes against what you stated in the first place.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#266

Post by hn_throw_1234 » Tue, Oct 17, 2017, 5:17 AM UTC

PKop wrote: post #191

hn_throw_1234 wrote: post #133

Earlier quoted context omitted.

> USD is inflationary. Ceteris paribus, a rational actor would generally prefer to hold something deflationary. The (epsilon-) no-arbitrage argument suggests that the frequently raised “but then no one will ever invest in things” objection doesn’t actually make any sense. This is only true for savers and the vast majority of Americans, likely the world, are debtors (source: http://time.com/money/4709270/americans-die…

How’s that been working out? If only saving was incentivized. Bitcoin true believers have a positive view of increasing savings

Pretty well actually. There may be too much debt but debt is clearly a good thing.

Also don't forget if you want to save, to earn interest means you need to lend so at the end of the day you're going to need debtors.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#267

Post by pja » Tue, Oct 17, 2017, 11:50 AM UTC

rphlx wrote: post #260

pja wrote: post #116

Earlier quoted context omitted.

And you could still refuse and accept your jail time. In most jurisdictions (including the US) the sanction for contempt of court is potentially unlimited: the convicted individual may find that they are only freed when they comply with the court’s requirements. IOW, good luck with that.

My understanding is that in general under current law a US citizen cannot be held in contempt or put in prison indefinitely for failing to disclose a password. The 5th ammendment protection there is not entirely void, but it can be void under certain specific circumstances (such as the "foregone conclusion doctrine", where LE can prove that specific illicit content both exists, and can be decrypted, by the accused).

Refusing to provide the password to a BitCoin wallet found on a computer you own is probably going to fall under that particular doctrine. I look forward to the first test case...

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#268

Post by jbrun » Tue, Oct 17, 2017, 12:49 PM UTC

rphlx wrote: post #258

jbrun wrote: post #170

Earlier quoted context omitted.

We had privately created money in Europe for centuries. It was a disaster.

I would strongly disagree with that characterization. The bank note system - the major form of private money - worked reasonably well for centuries in Europe, evolving into the check clearing systems that virtually every first-world nation has today.

That was much later on. I am talking about basically end of Roman Empire to 1600.

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#269

Post by jbrun » Tue, Oct 17, 2017, 12:50 PM UTC

urza wrote: post #197

jbrun wrote: post #85

Earlier quoted context omitted.

No, that is not at all the argument. The argument is that you cannot have an economy run on a deflationary currency, which bitcoin is. An effective economy requires a bit of inflation and the ability to issue new money when necessary for socio-political reasons. Crypto currencies are a cult, though the underlying tech is interesting.

Then the author does not understand how cryptocurrencies work. There is nothing preventing to have inclationary currency, and indeed many such exists.

Isn't bitcoin limited in the number of coins that can be issued?

Re: Fiat is Effective: fiat for the crypto crowd [pdf]

#270

Post by wyager » Tue, Oct 17, 2017, 1:36 PM UTC

hn_throw_1234 wrote: post #265

wyager wrote: post #226

Earlier quoted context omitted.

Interest rates would be lower with bitcoin. Again, consider this from the no-arbitrage angle. If interest rates weren’t correspondingly lower for loans denominated in deflationary assets, there would be an obvious and low-overhead arbitrage opportunity. So debtors don’t actually gain anything unless the loan is fixed-rate and the inflation rate increases .

I can't see how the no arbitrage hypothesis applies here. You're talking about different currencies. No arbitrage doesn't mean that whatever you do to the world won't change anything. That said, you're probably right that interest rates would be lower since the demand for debt would go down since Bitcoin is deflationary but then again that goes against what you stated in the first place.

Arbitrage opportunity if bitcoin and USD interest rates are the same, but the EV of holding a bitcoin is higher than holding a dollar: borrow dollars, buy bitcoins, loan bitcoins at current rate, sell bitcoins at repayment, your returns are equal to interest returns plus deflation returns, sell bitcoin, pay back dollar loan. Your profit is equal to the deflationary increase in bitcoin. Bread and butter arbitrage. Financiers would keep doing this until bitcoin loans are lower interest rate enough that this doesn’t make sense.