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Adam Smith Hates Bitcoin

krugman.blogs.nytimes.com

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Re: Adam Smith Hates Bitcoin

#51

Post by loqi »

pavanky wrote: post #45
guylhem wrote: post #29

Maybe, just maybe, it's not Adam Smith who hates bitcoin like this misleading title suggest, but Krugman. The guy may have a nobel prize, but his strong leftist views seems to be clouding his judgement. Never before in history was there anthing like bitcoin. It's not a commodity like gold - is is pure fiat money, fully based on trust. Hoarding gold or silver or any metal or rare thing was a bad idea because of the al…

The only way bitcoins are being generated is by wasting computer cycles solving problems that are of no use to anyone. Krugman's problem is not with the concept of bitcoin, but the process of mining. I may not be an economist, but the method used for mining seemed.. illogical to me as well. If a bitcoin was released into the wild based on running real world problems like folding@home or something else it would have m…

It's hard to design a proof-of-work scheme that is both secure and performs "useful" work.

Re: Adam Smith Hates Bitcoin

#52

Post by bcoates »

slg wrote: post #14
teraflop wrote: post #11

Earlier quoted context omitted.

The resources are required to process transactions securely in a distributed network. You could do the same thing much more efficiently by putting all your trust in a central authority; it's called a bank. But that's not solving the same problem.

Ok, let me rephrase my prior point. If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? If there is no noticeable benefit from my single PC then the resources being used by that PC aren't contributing to anything of value. Yes, resources are required, but the amount of resources used far and away exceeds the amount of resources required.

> If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way?

Yes, there's a computational power threshold to perform certain attacks against the network, and removing your node marginally decreases that threshold.

Is it necessary? That depends on your priorities and your threat model.

Re: Adam Smith Hates Bitcoin

#53

Post by wmf »

NewAccnt wrote: post #46
pavanky wrote: post #45

Earlier quoted context omitted.

The only way bitcoins are being generated is by wasting computer cycles solving problems that are of no use to anyone. Krugman's problem is not with the concept of bitcoin, but the process of mining. I may not be an economist, but the method used for mining seemed.. illogical to me as well. If a bitcoin was released into the wild based on running real world problems like folding@home or something else it would have m…

But you're both completely missing the point that mining for coins will become exponentially more efficient over time, with new mining techniques and hardware.

When more energy-efficient mining equipment is created, people buy enough of the equipment to use the same amount of power that they used to have. For example, one might replace a 300 W GPU with a 300 W ASIC miner. The total amount of mining is determined by the exchange rate; since the exchange rate is expected to increase due to deflation, the amount of power spent on mining is also expected to increase dramatically.

Re: Adam Smith Hates Bitcoin

#54

Post by andyakb »

think33 wrote: post #21
penny500 wrote: post #18

Earlier quoted context omitted.

It's certainly not being used as a currency, its original intention. It's being used by speculators to get rich. Sure you might find a few examples of buyers and sellers using bitcoin currency, but you'll find a lot more speculators buying and selling bitcoins to profit from the spreads.

It is being used as a currency, and any metric on this far exceeds where people thought it would be a few years ago. It's also having massive adoption from a wide number of people. The reason the price is moving is not "speculation" as people seem to assume, but adoption. MtGox said they were getting 20,000 new accounts a day recently. By definition, new accounts are not "speculators" putting in trades to manipulate…

"By definition, new accounts are not "speculators" putting in trades to manipulate the price, they are people putting in trades to acquire their first bitcoins."

What definition are you talking about? That sounds exactly like speculation. You do not need to manipulate anything to be a speculator, you simply need to be making a gamble that what you are betting on will increase [or decrease if youre betting against] in value.

Re: Adam Smith Hates Bitcoin

#55

Post by pavanky »

NewAccnt wrote: post #46
pavanky wrote: post #45

Earlier quoted context omitted.

The only way bitcoins are being generated is by wasting computer cycles solving problems that are of no use to anyone. Krugman's problem is not with the concept of bitcoin, but the process of mining. I may not be an economist, but the method used for mining seemed.. illogical to me as well. If a bitcoin was released into the wild based on running real world problems like folding@home or something else it would have m…

But you're both completely missing the point that mining for coins will become exponentially more efficient over time, with new mining techniques and hardware.

I understand that. I said it would make more sense than the existing one. It would not be a perfect solution, and I would not have participated in that xCoin system either.

Re: Adam Smith Hates Bitcoin

#56

Post by bcoates »

penny500 wrote: post #50
smokeyj wrote: post #37

Earlier quoted context omitted.

Central planners like central banking? Get out.

Mainstream economists aren't central planners. I don't mean just economists from both administrations. I meant mainstream economists from every school on the US News and beyond.

But Krugman isn't complaining about Bitcoin's monetary policy here; he's complaining about the operation of the network itself. It's a pretty weak argument; he's claiming that the network costs too much without doing any kind of serious cost-benefit analysis, just an inapt comparison to gold coins.

Re: Adam Smith Hates Bitcoin

#57

Post by pavanky »

loqi wrote: post #51
pavanky wrote: post #45

Earlier quoted context omitted.

The only way bitcoins are being generated is by wasting computer cycles solving problems that are of no use to anyone. Krugman's problem is not with the concept of bitcoin, but the process of mining. I may not be an economist, but the method used for mining seemed.. illogical to me as well. If a bitcoin was released into the wild based on running real world problems like folding@home or something else it would have m…

It's hard to design a proof-of-work scheme that is both secure and performs "useful" work.

Then it is not a useful monetary system. When people trade money (paper or electronic), they are trading time they invested in doing useful work for someone else. When bitcoins are traded, you are trading wasted computer cycles.

Re: Adam Smith Hates Bitcoin

#58

Post by smosher »

slg wrote: post #14
teraflop wrote: post #11

Earlier quoted context omitted.

The resources are required to process transactions securely in a distributed network. You could do the same thing much more efficiently by putting all your trust in a central authority; it's called a bank. But that's not solving the same problem.

Ok, let me rephrase my prior point. If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? If there is no noticeable benefit from my single PC then the resources being used by that PC aren't contributing to anything of value. Yes, resources are required, but the amount of resources used far and away exceeds the amount of resources required.

There is a correspondence between the output and the resources consumed. If your output is negligible, then your resource usage was proportionally negligible to the end of providing the network with monetary units.

Your argument neatly cancels out your conclusion.

Re: Adam Smith Hates Bitcoin

#59

Post by emiliobumachar »

slg wrote: post #14
teraflop wrote: post #11

Earlier quoted context omitted.

The resources are required to process transactions securely in a distributed network. You could do the same thing much more efficiently by putting all your trust in a central authority; it's called a bank. But that's not solving the same problem.

Ok, let me rephrase my prior point. If I have my PC mining and then disconnect it, does the Bitcoin network suffer in any noticeable way? If there is no noticeable benefit from my single PC then the resources being used by that PC aren't contributing to anything of value. Yes, resources are required, but the amount of resources used far and away exceeds the amount of resources required.

If you stop paying taxes in a typically sized country, the country's finances do not suffer in a noticeable way, either.

The network is made of the nodes.

Re: Adam Smith Hates Bitcoin

#60

Post by aristidb »

tatsuke95 wrote: post #44

> Whatever Kurgman says, it is good to keep in mind that he is an economist turned partisan-politics hack. Funny thing,I called MG Seigler a hack, and was attacked. Even PG came out of the word works to say he was "embarrassed" by the comment. Now we are calling Nobel prize winning economists hacks and asses? The economic illiteracy of this place is what is embarrassing.

This should have been a reply. Attacking somebody else's comment by citing him in a new top-level comment is bad form.
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