Bitcoin discussion thread - Page 32

On December 20 2013 18:44 Sbrubbles wrote:


Good explanations aren't exactly easy to find, which is why I came to this thread. I'm trying to understand how Buy bitcoin with USD => Transfer bitcoin => Sell bitcoin for USD is (presumably) cheaper than Transfer USD.

Anyway, what do you mean by "central authority" and why would you apply it to Paypal but wouldn't (I assume) apply it to bitcoin exchanges?

On December 20 2013 04:50 andyrau wrote:

Pretty sure these are all reasons why regulation and monetary management is necessary. Detractors call it manipulation, but if the Fed or PBOC or the ECB didn't exist, a short trip through history shows how disastrous it can be.



IMO, Bitcoin isn't even a currency by strict definition atm, it bears more resemblance to a commodity. The fact that it must use standard currency as a means of valuation inherently disqualifies it as an actual monetary system.
Obviously, one can still buy random shit using Bitcoin, but only if it's a bilateral agreement by both parties in the transaction. In this case, literally anything can be utilized as a transaction medium as long as the buyer and seller are in accord.

I think Bitcoin is similar to gold, and it can still be manipulated like any other currency as long as a large amount is withheld from the money supply in a single person's or organization's control. And like gold, its innate tendency as a deflationary valuation only limits growth.

fun to see when this bubble pops though

On December 20 2013 19:09 Wegandi wrote:


You know this silly train of logic that deflation = limitation on growth is based on what...certainly not any tangible reality or economic maxim. There are two immediate examples to point to:

1) Hong Kong.
2) Technology Industry

There is also the fact about US from 1870 to 1910..., but let's just use recent examples.

http://www.indexmundi.com/hong_kong/inflation_rate_(consumer_prices).html
http://www.indexmundi.com/hong_kong/gdp_per_capita_(ppp).html

From 1999 to 2005 the deflation averaged about 2.1%, meanwhile GDP (per capita) went from 24k to nearly 36k, and had nearly three of those years with higher than 10% growth rates. Now compare this to the highest inflationary period from 1989 to 1995 that averaged nearly 10% inflation per year...GDP went from 16k to 22k, and didn't have one year over 10% growth.

Now, for the technology sector...I mean as young people you'd think the obvious that stares us in the face every year would constitute some awakening, but sadly, no. While technology gets better each year and prices of these goods continually fall every year, you'd think no one would buy any of these devices, or would buy less, but this is not the case, has never been the case in history (re: deflation bogey), and is a bogus claim by sycophantic economists (if you can call them that...). You'd expect the technology industry to be the prime example for their theories of the deflation death spiral, but in fact the complete opposite happens, and not for some magical reason, but because of utility and preference (especially time). Yes, you can wait a few years and get a better device that is cheaper, but you lose out on years of use with said device, and most people prefer the now to the later, meaning even if they can get it cheaper later, it doesn't matter because they want it now. For some reason these inflationist economists have failed basic econ. and maxim's of human action, but of course, they don't believe in those silly notions of a priorism and praxeology, but they should do as they profess - look at the empirical, at the technology sector - to refute their erroneous beliefs...but they don't!

Anyways, continue the bogeyman of deflation. Meanwhile those who abuse the Cantillon Effect laugh all the way to riches and power. Oh, the power of those who can legally counterfeit!

PS: Here is a great article on the matter: http://mises.org/daily/4602

On December 20 2013 19:58 zatic wrote:

Your two examples are consumer prices in a country that lives almost entirely on foreign trade, and again consumer prices in an emerging market? The primary problem with deflation is lack of incentive for investment not lack of consumption.

On December 20 2013 21:15 Wegandi wrote:


I don't understand what free-trade has to do to negatively impact the fact that Hong Kong had much higher growth during their period of deflation than inflation, and secondly Hong Kong was certainly not an emerging market in 1989, let alone 1995, or 2005. Hong Kong in 1989 had a higher GDP per capita than every African country and India today. (so-called emerging countries today) In fact Hong Kong of 1989 is twice as wealthy as China is today (16k GDP per capita to China's 7.5k per capita today).

Hong Kong has always been the bane of Keynesians, never acknowledged, always ignored. For so-called empiricists, it seems to identify more as religion, than scientific inquiry. As for the assertion about deflation, well, you'd be wrong on both counts. The deflation bogey has always been predicated upon the consumption mythos. That deflation creates a death spiral due to consumers waiting for the lowest price (e.g. postponing consumption indefinitely). It's an absurd proposition, but still the dominating mythos in inflationist circles, prodded out anytime inflation dips below their desired commands. As for investment...it's been an economic maxim for a while now that as prices lower, more units of said good is sold ceteris paribus. It is one advantage large firms have over smaller (though off-set by huge bureaucratic cost and waste). In other words, why would investment shrink because of deflation, especially since economic growth tends to follow periods of deflation?

Of course, Hong Kong is one of the freest economies in the world which allows their productivity to increase the purchasing power and parity of their citizens. Too bad HK was returned to China...they'll ruin a good thing they had.

On December 20 2013 18:19 zatic wrote:

A central authority:

- can't be trusted
- can arbitrarily choose to not serve you
- subject to local legislation
- can choose to or be forced to not allow cross border exchange or do business in certain countries
- can choose to or be forced to not allow certain businesses (porn, drugs, prostitution, etc.. )
- costs money
- can seize your money or have it seized
- can go bankrupt
- can be outlawed altogether
- can change their policies over night

there is probably 100 more reasons to decentralize virtual currency.

On December 21 2013 02:56 ParasitJonte wrote: The method at which bitcoins are gained is just ridiculous. You contribute nothing to no one. It's basically just clock cycles on your GPU being wasted. It represents nothing. For bitcoin to have any value, there would be a need for some type of system that, say, meant you could only mine them by solving someone elses problem. And one bitcoin represented XYZ FLOPS that you could later redeem on someone elses computer. Something along those lines. Of course I know of no practical way of achieving this .

On December 21 2013 02:56 ParasitJonte wrote: The fundamental point is that bitcoin is backed by nothing whereas something like gold has real inherent value. Why would I ever accept a bitcoin for goods and services I produce? The half-assed assumption that there's an even bigger idiot that will in turn accept my bitcoins?

On December 21 2013 02:56 ParasitJonte wrote: Now I very much like the idea of a currency outside of centralized control. The irony is that bitcoin will never be successfull here simply because they are void of value and bitcoin is not under centralized control which would give them artificial value!

On December 21 2013 02:56 ParasitJonte wrote:The second major problem with bitcoin is not that it can be used for criminal activities or whatever. That's another red herring but in the other direction. No, inequality is the major problem. Most coins are owned by very few individuals. And given how coins are produced, that is likely to escalate.

On December 21 2013 02:56 ParasitJonte wrote: So again, why would the general public ever accept bitcoins in return for their labour? I don't think we are stupid enough to play an unfair game over a bunch of meaningless ones and zeros. I don't think it will be forced upon us. So no, bitcoin is seriously flawed and people need to stop speculating over them asap.

On December 21 2013 03:54 TokO wrote:


I think this view is mistaken. From what I understand mining is what maintains transactions. So you contribute something to the people making transactions.



For most people gold doesn't have an inherent value. I have no use for gold. My valuation of gold is conditioned on other people wanting to buy it from me. The same mechanism is true for Bitcoin. And it is also why someone would accept bitcoin. If there is two separate markets buying your goods and services, one transacting in bitcoin and one in normal currency, you would basically open yourself up to both markets by accepting bitcoin in addition to normal currency. For your last sentence. It doesn't matter whether it's idiotic or not that someone else accepts your bitcoins. If it is true that people want your bitcoin, then that is the reality we have consider.



Again, bitcoins are not void of value as long as people want to have bitcoins. Most commodities on the planet are void of value for the individual, but they still trade them because there is a possibility of earning a profit.



You need to elaborate on this. What difference does it make if most of the coins are owned by very few individuals? What makes it a major problem?



You're posing some philosophical questions here, and it's difficult to see exactly what you are attacking, other than Bitcoin in general. You don't have to do mining to be involved in bitcoin, so you don't necessarily have to invest labour. What is this game? And why is it unfair? Nobody is forcing anything on anyone. I see why you think it is flawed, but I don't understand why people "need" to stop speculating. Only bad thing is that money will go from certain people to certain other people, based on their skills in the market, and that's something that's inherent in the real world anyway. Why are you making Bitcoin out to be so dangerous?

On December 21 2013 04:40 ParasitJonte wrote:


That view is not mistaken. It is true that it is used to maintain the transaction chain and that's supposed to make it secure and what not but that's a cost imposed by bitcoin itself :p. Without bitcoin there's no need to do this. That is, the computations do not add to anyones material well-being - save for being able to use bitcoins (the one thing that actually imposes the cost).

A commodity such as gold may be "useless" to you personally, but you don't accept it as payment because you think someone else will. You accept it as payment because you know for a fact that it for example has industrial uses. For precious metals silver is a better example here but both are valid. Bitcoin has no use whatsoever. The situation is not remotely comparable.

For the last point... I'm not trying to say it's dangerous, just stupid and a waste of time. Also, I believe it can save a lot of people a lot of money . The bitcoin protocol is built in such a fashion that mining bitcoins becomes harder and harder and harder as more coins are found. This has two implications. The first is that the ones who were quick to jump on the train back in 2009 have gotten a free ride. At the other end, new coins will be found by people with incredibly expensive hardware.

So you have a situation of seriously inequitable distribution of the supple of (supposed) money. It boggles my mind, then, why anyone would choose to trade their real assets in exchange for virtual coins that have just been created out of thin air for the betterment of nothing and no one. For the refutation of the fiat analogy, see previous post.

Again, if the mining was actually productive in some way, the situation would at least be a little different. But for it to be a currency it would need actual value.

On December 20 2013 19:09 Wegandi wrote:


You know this silly train of logic that deflation = limitation on growth is based on what...certainly not any tangible reality or economic maxim. There are two immediate examples to point to:

1) Hong Kong.
2) Technology Industry

There is also the fact about US from 1870 to 1910..., but let's just use recent examples.

http://www.indexmundi.com/hong_kong/inflation_rate_(consumer_prices).html
http://www.indexmundi.com/hong_kong/gdp_per_capita_(ppp).html

From 1999 to 2005 the deflation averaged about 2.1%, meanwhile GDP (per capita) went from 24k to nearly 36k, and had nearly three of those years with higher than 10% growth rates. Now compare this to the highest inflationary period from 1989 to 1995 that averaged nearly 10% inflation per year...GDP went from 16k to 22k, and didn't have one year over 10% growth.

Now, for the technology sector...I mean as young people you'd think the obvious that stares us in the face every year would constitute some awakening, but sadly, no. While technology gets better each year and prices of these goods continually fall every year, you'd think no one would buy any of these devices, or would buy less, but this is not the case, has never been the case in history (re: deflation bogey), and is a bogus claim by sycophantic economists (if you can call them that...). You'd expect the technology industry to be the prime example for their theories of the deflation death spiral, but in fact the complete opposite happens, and not for some magical reason, but because of utility and preference (especially time). Yes, you can wait a few years and get a better device that is cheaper, but you lose out on years of use with said device, and most people prefer the now to the later, meaning even if they can get it cheaper later, it doesn't matter because they want it now. For some reason these inflationist economists have failed basic econ. and maxim's of human action, but of course, they don't believe in those silly notions of a priorism and praxeology, but they should do as they profess - look at the empirical, at the technology sector - to refute their erroneous beliefs...but they don't!

Anyways, continue the bogeyman of deflation. Meanwhile those who abuse the Cantillon Effect laugh all the way to riches and power. Oh, the power of those who can legally counterfeit!

PS: Here is a great article on the matter: http://mises.org/daily/4602

On December 21 2013 02:40 ParasitJonte wrote:


There's one more issue people have with deflation. That would be the huge debts that automatically become even more huge in real value terms.

I'm curious what the Austrian position is on this. In a decent world of course we would never have these amounts of debt but now we're possibly at the end of debt super-cycle where western households and governments will need to delever and save (any Keynesians worst nightmare).

On December 21 2013 02:56 ParasitJonte wrote:
My general opinion on bitcoin is pretty one sided.

When I originally heard about it in 2010 or so I didn't really understand it and wasn't all too interested. Lately it has popped up ever more frequently and is now probably as known as it has ever been.

First of all, and this is the most crucial point, a bitcoin is completely void of any inherent value. Enthusiast try to side-step this and claim there is some inherent value in the network and transfer system. I think these are just red herrings. There are many competing currencies that replicate this and it's not as if things don't change in technology. Bitcoin doesn't have a free ride just because it was first. It might as well be MySpace.

The method at which bitcoins are gained is just ridiculous. You contribute nothing to no one. It's basically just clock cycles on your GPU being wasted. It represents nothing. For bitcoin to have any value, there would be a need for some type of system that, say, meant you could only mine them by solving someone elses problem. And one bitcoin represented XYZ FLOPS that you could later redeem on someone elses computer. Something along those lines. Of course I know of no practical way of achieving this .

The fundamental point is that bitcoin is backed by nothing whereas something like gold has real inherent value. Why would I ever accept a bitcoin for goods and services I produce? The half-assed assumption that there's an even bigger idiot that will in turn accept my bitcoins?

At this point bitcoin enthusiasts will of course point to the fact that all currencies are void of value in this very same sense. This is true but with one twist. We are all forced to use these fiat currencies in order to pay taxes and more. That's the only reason they exist, because of central mandates.

Now I very much like the idea of a currency outside of centralized control. The irony is that bitcoin will never be successfull here simply because they are void of value and bitcoin is not under centralized control which would give them artificial value!

The second major problem with bitcoin is not that it can be used for criminal activities or whatever. That's another red herring but in the other direction. No, inequality is the major problem. Most coins are owned by very few individuals. And given how coins are produced, that is likely to escalate.

So again, why would the general public ever accept bitcoins in return for their labour? I don't think we are stupid enough to play an unfair game over a bunch of meaningless ones and zeros. I don't think it will be forced upon us. So no, bitcoin is seriously flawed and people need to stop speculating over them asap.

On December 21 2013 07:13 Wegandi wrote:


There is no such thing as 'inherit value'. Value is derived from the subjective valuations of the individual, not from some objective measurement. The reason gold is valued as currency is not because of some innate value, but because of its properties that make it useful as a currency over other commodities. It's scarce, easily changed (e.g. melted down), relatively easy to store and transfer, does not have an expiration date, and doesn't take up too much space like say cotton or other perishable commodities. The reason bitcoin is valuable is because of these and others - such as anonymity, skirting State control, can be broken into extremely small units, redundant and easy to store and transfer (decentralized), and again, allows transactions outside the Eye of the State (especially the IRS).

That's where it derives its value from, among many of the same reasons gold does. Value is subjective, not objective!

On December 21 2013 03:32 Acrofales wrote:


You realize most of those are equally valid for ANY payment system, whether it's centralized or decentralized. And most people would argue that some are DISadvantages.

That bit about libertarianism and Leninism is a point I've been making for quite some time now (and earning me some angry feedback from Marx aficionados.) Both libertarianism and Leninism assume a sort of human perfection that simply doesn't exist in the real world. Leninists believe that with just enough training, everyone can be brought to a total selfless regard for species being, or at least for motherland and local community in such a way that everyone will be content to hard work with each receiving according to his "need" (however we define that) and toiling away according to his "ability" (however we define that.) We already know that doesn't work. Increasingly totalitarian structures of management are required to try to force it to work and then, human nature being what it is, those managers inevitably become their own corrupt elite.

Libertarianism has a similar problem. Libertarianism assumes a rational marketplace where everyone spends their time figuring out exactly how to maximize their benefit, and where labor and capital meet their perfect equilibrium at their perfect price. In this magical land there is presumed to be some sort of police force protecting everyone's basic property rights and persons against harm and theft. But, of course, the world doesn't work that way. In the real world, there are valuable and essential commodities that only large organizations can purchase (healthcare, sewage, street lights, roads, food inspections, etc.). Without a government to purchase them, large numbers of people simply must do without those commodities. But since people need those commodities, they are immediately and ruthlessly exploited by nongovernmental entities. Moreover, most people lack the time or inclination to thoroughly research all their supposed choices in the marketplace, leading to an enormous power gap between corporations with armies of researchers and deceivers, and consumers without the capacity to make sense of it all. Also, in the real world people aren't automatons able to simply travel and conform themselves to whatever and wherever the jobs are. In the real world people have interests, skills, communities and families that tie them to more than simply wherever the labor market can use them most efficiently. A perfectly efficient labor market would be a hell of human misery.

And finally, of course, human life and dignity are incredibly cheap on the open market. Left all to itself, the free market becomes like a game of Monopoly: a few people have all the money, and the rest beg for their crumbs. That is, in fact, exactly what happens when comparatively more equal civil societies with broad middle classes (such as the Roman Empire) collapse into feudal societies. The middle class disappears, and all that is left is barons and serfs. And once all the power and money are in a very few hands, that tiny government small enough to drown in a bathtub immediately becomes subject to corruption and either disappears or becomes a wholly owned arm of the barons, leading to totalitarian kleptocracy simply by another route.

A monetary system designed by and for libertarians in order to weaken central governments predictably begins to display all the prominent characteristics of libertarian social failure. It can't fail fast enough.

On December 21 2013 03:54 TokO wrote:


I think this view is mistaken. From what I understand mining is what maintains transactions. So you contribute something to the people making transactions.



For most people gold doesn't have an inherent value. I have no use for gold. My valuation of gold is conditioned on other people wanting to buy it from me. The same mechanism is true for Bitcoin. And it is also why someone would accept bitcoin. If there is two separate markets buying your goods and services, one transacting in bitcoin and one in normal currency, you would basically open yourself up to both markets by accepting bitcoin in addition to normal currency. For your last sentence. It doesn't matter whether it's idiotic or not that someone else accepts your bitcoins. If it is true that people want your bitcoin, then that is the reality we have consider.



Again, bitcoins are not void of value as long as people want to have bitcoins. Most commodities on the planet are void of value for the individual, but they still trade them because there is a possibility of earning a profit.



You need to elaborate on this. What difference does it make if most of the coins are owned by very few individuals? What makes it a major problem?



You're posing some philosophical questions here, and it's difficult to see exactly what you are attacking, other than Bitcoin in general. You don't have to do mining to be involved in bitcoin, so you don't necessarily have to invest labour. What is this game? And why is it unfair? Nobody is forcing anything on anyone. I see why you think it is flawed, but I don't understand why people "need" to stop speculating. Only bad thing is that money will go from certain people to certain other people, based on their skills in the market, and that's something that's inherent in the real world anyway. Why are you making Bitcoin out to be so dangerous?