Bitcoin and positive vs. normative economics • Hacker News Board

Re: Bitcoin and positive vs. normative economics

#441

Post by eli_gottlieb » Sun, Dec 29, 2013, 12:14 PM UTC

dnautics wrote: post #188

chipsy wrote: post #89

Earlier quoted context omitted.

I think Bitcoin does have a soft floor because that cost would form the natural price target for a miner trying to trade, but the cost is avoidable by switching to proof of stake as done in PeerCoin and Nxt. The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal; you could make a better argument for something like PrimeCoin, which attacks a major computation problem, having this ki…

"The crypto problems solved in Bitcoin don't have the intrinsic utility of a precious metal." So gold was used extensively 2000-3000 years ago. Exactly what was its intrinsic utility then? Plating astronaut helmets and high-conductivity, corrosion-resistant electronics? The intrinsic utility of gold was that it was eminently verifable. It's got a characteristic ductility and it was a yellow metal. You could easily ve…

>So gold was used extensively 2000-3000 years ago. Exactly what was its intrinsic utility then?

Well, usually, the intrinsic utility of gold and silver was that they could be used as jewelry and/or used as instruments of worship. Most bullion money has evolved from substances considered divine.

Remember the Golden Calf?

Re: Bitcoin and positive vs. normative economics

#442

Post by MarkMc » Sun, Dec 29, 2013, 12:35 PM UTC

patrickg_zill wrote: post #293

MarkMc wrote: post #220

> Underpinning the value of gold is that if all else fails you can use it to make pretty things. But this 'floor' only accounts for, say, 3% of the price of gold. Whatever makes the remaining 97% a reliable store of value could also provide Bitcoin with 100% of its store of value. A similar point comes from Tim Harford's fascinating description of the currency used on the Pacific island of Yap: ----------------------…

3% of the price of gold? Where did you get that figure from?

I made it up - in this case it doesn't matter whether the correct figure is 3% or 0.3% or 30%.

Re: Bitcoin and positive vs. normative economics

#443

Post by ahquresh » Sun, Dec 29, 2013, 12:53 PM UTC

mattm wrote: post #440

ahquresh wrote: post #426

Earlier quoted context omitted.

The fact that your comment is correct and wrong at the same time is what really raises red flags for me with regards to bitcoin. Let's look at what you find if you were somebody searching up bitcoin for the first time. You would eventually land on http://bitcoin.org/en/ . bitcoing.org describes bitcoin as open source P2P Money. It says "Bitcoin is an innovative payment network and a new kind of money". You go on Wiki…

> I feel that when money in the form of paper bills was first introduced, there had bound to be people wondering the same thing. After all, taking a step back, who would consider putting such value to pieces of paper that we do in today's day and age? The thing with paper money, at least recently, was that it originally started out as being tied to gold. Instead of having to carry around gold for exchange, you would…

But aren't we just introducing Bitcoin with conventional currencies as its backing?

Re: Bitcoin and positive vs. normative economics

#444

Post by nandemo » Sun, Dec 29, 2013, 1:08 PM UTC

azernik wrote: post #275

mortenjorck wrote: post #31

Krugman is to Bitcoin as Ebert was to video games. The central failure of Krugman's understanding of cryptocurrencies is in the value of mining. It's not simply throwing energy away into solving useless math problems; it's spending energy to create infrastructure. That infrastructure is the part that does have intrinsic value, that can be used for something else in the same way gold can be made into useful things. Lo…

I don't think you're understanding Krugman's point. If the gold price collapses, you can sell it to jewelry and electronics manufacturers at some (low) price point. Gold has a weakness as a store of value because this price point is a lot lower than its market price during good times - and this is why Krugman is also not in favor of it as a store of value. If the price of the dollar collapses, you can sell it to the…

> If the price of the dollar collapses, you can sell it to the Fed

I think this is a dubious argument. It describes what happens most of the time, when the value of the dollar fluctuates. But what if the collapse of the dollar is accompanied by a downfall of the Fed? Hyperinflation has happened in many, many countries that used fiat currencies, and even the US has had high inflation:

http://en.wikipedia.org/wiki/Hyperinflation#Examples_of_hype...

Re: Bitcoin and positive vs. normative economics

#445

Post by mike_hearn » Sun, Dec 29, 2013, 1:37 PM UTC

hfttrader wrote: post #139

natrius wrote: post #92

Earlier quoted context omitted.

You can hand me dollar bills, but how many dollar bills do you have? I just counted. I have $36 in bills in my possession. I should to go to the ATM today to get more in case I run out. Eventually, Bitcoin will be similar in that most of our wealth won't be stored in the actual currency, but in bank deposits. I could withdraw actual currency from a Bitcoin bank with the tap of a button and have it on my phone in 10 m…

But why does transferring large amounts of dollars take days? There is nothing physical preventing banks from supporting fast transfers. They can do fast transfers with BTC or USD. Transfers are slow because there is little need to transfer large amounts of money quickly, and slower transactions help address issues with fraud. If you are buying a car, or paying for a house there is little need for a fast transactions…

It's got nothing to do with fraud checks. Transfers take days because banks largely run on mainframes programmed in the 1970s. Because of the (by todays standards) peculiar designs those machines had, the bulk of the work is done at night in batch jobs. The vast size and complexity of the software, combined with archaic platforms, their business-critical nature, and almost total absence of competition means that banks don't upgrade to more modern systems unless forced (see the UK same day payments initiative). Then the banking network is not a perfectly connected system so sometimes payments must be routed via intermediate banks. That's why it can end up taking days.

Re: Bitcoin and positive vs. normative economics

#446

Post by blahbl4hblahtoo » Sun, Dec 29, 2013, 1:38 PM UTC

greyman wrote: post #181

paul wrote: post #159

I'm most bullish on bitcoin when I read articles such as this one, and most skeptical when I read the thoughts of the bitcoin believers. It's truly the most interesting technological development in years, if only because it reveals how little anyone really understands money or economics. Here's another interesting (though imperfect) way of thinking about bitcoin: it's a decentralized corporation, where bitcoins are o…

I am not a libertarian and do not have a political agenda, but it is imaginable that certain parts of the government could be replaced with the structure like this one. I don't know how the transition could happen, but at the end, the mining in the network will be done by citizens, bitcoins will be named "bitvotes", and every citizen will mine those bitvotes, or they could be distributed fairy (one bitvote to each ci…

That is a fundamentally bad idea.

Votes and "dollars", what ever your concept of dollar is, should never be the same thing.

Re: Bitcoin and positive vs. normative economics

#447

Post by mike_hearn » Sun, Dec 29, 2013, 1:39 PM UTC

slurry wrote: post #162

prutschman wrote: post #142

Earlier quoted context omitted.

> I am not about to take out a loan in a hard currency when perfectly good inflationary currencies are easily at hand. Assuming the interest rates are the same, I'd agree. Would they be?

> Assuming the interest rates are the same, I'd agree. Would they be? I doubt they'd be the same in either nominal or real terms. But that's a side issue. You could already do what you're talking about with gold. A bank could offer gold savings accounts that pay interest on gold loans. They don't do it. Borrowers are deflation-averse and no one wants to deal with the exchange rate fluctuations. BTC has some legit use…

It isn't designed to deflate. That's a common misconception:

http://bitcoin.org/en/faq#wont-bitcoin-fall-in-a-deflationar...

Re: Bitcoin and positive vs. normative economics

#448

Post by blahbl4hblahtoo » Sun, Dec 29, 2013, 1:40 PM UTC

jellicle wrote: post #323

ReidZB wrote: post #251

Earlier quoted context omitted.

The typical US voting system allows coercion? When I voted, I went into a publicly visible booth, recorded my vote, pressed submit, and went about my business. I suppose I could have been forced to take a picture with a cellphone, but I could have just selected the option they wanted, taken the picture, and then swapped back to the candidate I wanted. Is there something I'm missing here? Any way you slice it, even if…

You perhaps are not aware of absentee voting.

Voter fraud just isn't a large problem, no matter how much some people would like it to be.

Re: Bitcoin and positive vs. normative economics

#449

Post by mike_hearn » Sun, Dec 29, 2013, 1:41 PM UTC

swalsh wrote: post #429

tlrobinson wrote: post #206

I was not disappointed to find this as the top comment (at the time I viewed the article): 1998 - Another "evil" prediction from Mr. Krugman: --- The growth of the Internet will slow drastically, as the flaw in "Metcalfe's law"--which states that the number of potential connections in a network is proportional to the square of the number of participants--becomes apparent: most people have nothing to say to each other…

Maybe as an economist, his predictions about economics will be more accurate than his predictions about technology?

The two cannot really be unentwined, especially not now.

Re: Bitcoin and positive vs. normative economics

#450

Post by randallsquared » Sun, Dec 29, 2013, 2:17 PM UTC

ahquresh wrote: post #443

mattm wrote: post #440

Earlier quoted context omitted.

> I feel that when money in the form of paper bills was first introduced, there had bound to be people wondering the same thing. After all, taking a step back, who would consider putting such value to pieces of paper that we do in today's day and age? The thing with paper money, at least recently, was that it originally started out as being tied to gold. Instead of having to carry around gold for exchange, you would…

But aren't we just introducing Bitcoin with conventional currencies as its backing?

No, backing implies that someone has a legal obligation to supply something in exchange for the thing backed. Gold originally backed USD because paper dollars were literally a contract to pay the bearer a certain amount of gold. Gold and USD now have the same sort of relationship that USD and bitcoin do: neither USD nor bitcoin is backed by anything.

Both are still worth something, at the moment, though, which is all you need for an exchange to be possible.