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On April 19 2013 02:41 Cynry wrote:Show nested quote +On April 19 2013 01:42 0x64 wrote:
The Bitcoin paradox:
The value of the bitcoin comes from how much people trust it. If the value is stable, people will trust it more, if they trust it more, the value rise and people suddenly have no reason trading it, as holding it benefit you more, the value start rising until it become untrusted again and lose value, it's a mathematical pendulum.
That's exactly the point I was trying to make earlier. This seems so obvious, especially as the number of BC is limited. Getting even close to the limit could definitely start a selling frenzy that would burst that bubble. In a way, I think bitcoin are a a uncluttered representation of our monetary system. As much as it is independant, it is not different, because people are attracted by the rising value of the coin, not what they can trade for it. Story of our greedy world...
Actually, the common criticism is that the exact opposite would happen. A finite number of bitcoins means deflation would probably occur and bitcoins would rise in value as the last are mined out. If something you are holding will continue to rise in value, you are more likely to hold onto it rather than part with it (think of it like an out of print baseball card). Great as a store of value, but not very good as a medium of exchange.
Then again, precious metals like gold and silver exist in a finite amount on this earth as well, yet they've been used as money for centuries...
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Its pretty ridiculous to assume someone would hold onto something forever. Sure, Bitcoin being a deflating currency might mean its used less often than an inflating currency, but its just going to encourage savings and thrift--- NOT hoarding. There are other things to consider than purely the rise of your assets, like the desire to, ye know, purchase goods, and to purchase them relatively quickly. The incentives to spend money [on the long term] always outweigh any consideration of simply safely raising your money stock. If this werent true exchange would be impossible with instances of minerals and such...
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I'm sure you have good intentions, but the fact that this was posted immediately on the heels of an bitcoin collapse sets my internal alarm bells ringing. It's like if someone made a "buy gold!" thread right now.
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Oh, I'm not saying that people would hold onto it forever (though a bunch will be "held" forever due to lost/inactive wallets), just that by virtue of being deflationary, you probably wouldn't see a big sell off when the last bitocoin is mined (which isn't going to happen for a relatively long time).
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Its pretty ridiculous to assume someone would hold onto something forever. Sure, Bitcoin being a deflating currency might mean its used less often than an inflating currency, but its just going to encourage savings and thrift--- NOT hoarding.
How does bitcoin not encourage hoarding (safing=hoarding btw)?
The whole rise of the coins was due to hoarding i asume, people who mine them have limited ways to spend them and since the value is expected to increase it makes no sense at all in spending or exchanging them.
They the ultimate investment,always will go up (as long as the system remains popular and people keep confidence in it..)People can sell them when the price went up way to high but as long as everyone who sells one is prepared to buy it back cheaper (and why wouldnt you) the price will go up indefinatly in the end as their will always be new demand.
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how does bitcoin mining work why does running mathematical algorithms generate money out of thin air?
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On April 19 2013 03:25 monkh wrote:
how does bitcoin mining work why does running mathematical algorithms generate money out of thin air?
Read the Wikipedia article, the technical part. The explanation is kinda long.
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On April 19 2013 02:51 SpeaKEaSY wrote:Show nested quote +On April 19 2013 02:41 Cynry wrote:On April 19 2013 01:42 0x64 wrote:
The Bitcoin paradox:
The value of the bitcoin comes from how much people trust it. If the value is stable, people will trust it more, if they trust it more, the value rise and people suddenly have no reason trading it, as holding it benefit you more, the value start rising until it become untrusted again and lose value, it's a mathematical pendulum.
That's exactly the point I was trying to make earlier. This seems so obvious, especially as the number of BC is limited. Getting even close to the limit could definitely start a selling frenzy that would burst that bubble. In a way, I think bitcoin are a a uncluttered representation of our monetary system. As much as it is independant, it is not different, because people are attracted by the rising value of the coin, not what they can trade for it. Story of our greedy world... Actually, the common criticism is that the exact opposite would happen. A finite number of bitcoins means deflation would probably occur and bitcoins would rise in value as the last are mined out. If something you are holding will continue to rise in value, you are more likely to hold onto it rather than part with it (think of it like an out of print baseball card). Great as a store of value, but not very good as a medium of exchange. Then again, precious metals like gold and silver exist in a finite amount on this earth as well, yet they've been used as money for centuries...
With metals, there were other means of transfer, like violence, theft and wars, that were pretty comon, not to mention they did dramatically decrese the rate of population grow. Not to mention all the things that happened in Europe, when new world was discovered and the supply of gold greatly grew. And things that were happening in china due to rising population without the rise of silver supply, before Europeans started to trade them silver from New World.
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I find bitcoin fascinating - unfortunately, in my honest opinion, probably half the value comes from drug/money laundering schemes and the other half comes from the weakness of global currencies/banks (i.e. Cyprus). I have dabbled and made some good money (sold $90 BC for $200+) but the DNS attacks and constant hacks onto major exchanges like MtGox make it a very scary investment. For example, the price got down to a low of $50 (From a high of something like $250) after MtGox had a technical malfunction last week. THAT, is one thing that doesn't happen with major currencies like the USD or Euro.
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On April 19 2013 02:51 SpeaKEaSY wrote:Show nested quote +On April 19 2013 02:41 Cynry wrote:On April 19 2013 01:42 0x64 wrote:
The Bitcoin paradox:
The value of the bitcoin comes from how much people trust it. If the value is stable, people will trust it more, if they trust it more, the value rise and people suddenly have no reason trading it, as holding it benefit you more, the value start rising until it become untrusted again and lose value, it's a mathematical pendulum.
That's exactly the point I was trying to make earlier. This seems so obvious, especially as the number of BC is limited. Getting even close to the limit could definitely start a selling frenzy that would burst that bubble. In a way, I think bitcoin are a a uncluttered representation of our monetary system. As much as it is independant, it is not different, because people are attracted by the rising value of the coin, not what they can trade for it. Story of our greedy world... Actually, the common criticism is that the exact opposite would happen. A finite number of bitcoins means deflation would probably occur and bitcoins would rise in value as the last are mined out. If something you are holding will continue to rise in value, you are more likely to hold onto it rather than part with it (think of it like an out of print baseball card). Great as a store of value, but not very good as a medium of exchange. Then again, precious metals like gold and silver exist in a finite amount on this earth as well, yet they've been used as money for centuries...
SSSSSSHHHHHHH!!!!! SHUT UP.
You will awaken the people to the Orwellian Mind-control state which has insidiously slipped over their sleeping heads. We can't have that...
Central banking is the ONLY way to conduct business! Gold-standards are barbaric and anachronistic! Central Banking eliminates the severity of the Boom and Bust Cycle (pffft, yeah...)!
God, I love Financial Mercantilism ^_^
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On April 19 2013 03:35 UndoneJin wrote:
I find bitcoin fascinating - unfortunately, in my honest opinion, probably half the value comes from drug/money laundering schemes and the other half comes from the weakness of global currencies/banks (i.e. Cyprus). I have dabbled and made some good money (sold $90 BC for $200+) but the DNS attacks and constant hacks onto major exchanges like MtGox make it a very scary investment. For example, the price got down to a low of $50 (From a high of something like $250) after MtGox had a technical malfunction last week. THAT, is one thing that doesn't happen with major currencies like the USD or Euro.
Actually, similar crashes have happened in more famous exchanges:
http://www.mediaite.com/tv/cnbc-report-todays-wall-street-crash-was-triggered-by-a-typo/
http://www.nbcnews.com/id/10394551/#.UXA_HEo6D8
The NYSE has something called a "circuit breaker" in place for things like this, I believe Gox did it manually though.
The beauty of it all is that a bunch of people are now fed up with Gox and working on creating a better exchange software that can handle a higher volume of trading. It's really interesting to see people in the bitcoin scen who see a demand for a service and then try to fill it.
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On April 19 2013 01:34 bonifaceviii wrote:
As someone who works in AML, I'm obviously not Bitcoin's target market. I don't have anything against Bitcoin in principle, but there's some obvious implications to the whole anonymity thing.
It's great for money laundering!
I think the current Bitcoin bubble is a little silly, but I do like Bitcoin for buying things that I don't want traced. I still think of it in terms of conversion to USD though, not as a legitimate currency in and of itself.
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Bitcoins are a great new fiat currency that isn't a fiat currency... because!
Private currencies are great until you realize that a government with billions or trillions at their disposal backs up public fiat currencies and what backs up the private ones? Just the belief of individual people that they have worth. A private fiat currency is much more susceptible to sharp jolts of deflation than a public one just for that.
Private currencies are also a shorter step above bartering than public currencies are. It's a closed market, like farmers bartering and trading equipment or something in their own community, not so much today but the way things were before hard (public) currency became more available in rural communities. You can't take that practice outside of the community and expect it to work very well.
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There is actually an very interesting philosophical way to think about the bitcoin.
It is the paradise of cherry pickers.
You can argue with tons of valid arguments that it's a pyramid scheme.
You can argue it's a great long term investment.
You can argue it's great for day trading.
You can argue it's money laundering.
You can argue it does have "real" value.
You can argue it's the ultimate money transfer.
You can argue it's like carrying huge amount of cash in the dark corners of the Bronx.
But the conclusion is probably wrong but you can easily find tons of example that supports what you are saying and shows that other conclusions are totally biased.
I think a money such as the BitCoin should be the starting point and we should be trying to argue why current Central Bank money flaws are such that we should accept them.
I refuse to support bitcoins in any other way than buying them, using them. I refuse to argue that they are good, bad, evil, risky and so on.
I you start telling arguments why the bitcoin is great, you sound automatically like any pyramid scheme salesman.
If you see the bitcoin as something that will fail because private users won't back it up, then you lack of trust and you think everyone else thinks like you making it without value, therefor the argument is flawed. The opposite is true as well.
Thinking a government backs up the value of a money is very silly. How did the Zimbabwe do that in the 90's? The only thing backing up euros and dollars is the collective trust we have in the money, most of the value created as a token of the paper printed has gone a long time ago.
Yet there is one way of thinking about money I love because of its simplicity.
Bread is a good food and that's where it's value comes from.
Bread would be a terrible money, bread as a trading good has very low value.
Money (be it dollars, euros, gold, Bitcoins) value comes from how good it is as a money.
You want money that can't be counterfeited.
+Gold
+Bitcoin
You want money that can be created at unpredictable arbitrary amounts
+Gold
+Bitcoin
You want money that have a stable trading value for the goods you want to trade
+Paper money
You want to be able to trade in all shops around you
+Paper Money
You want to be able to instantly pay
+Paper Money
+? Bitcoins
you want to be able to give it to whoever you want easily
+Bitcoins
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I'm all in favour of non central bank currencies, but bitcoin isn't backed by anything, its only value is trust and its vulnerable to hacking etc. I would guess its doomed to fail eventually although money laundering etc probably makes it pretty useful for some people.
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Actually you can't say it is vulnerable to hacking. The current price just is a proof that no known (efficient/working) hacking method is known.
It just like saying the current electronic bank transfert and paypal and anything on the internet is vulnerable to hacking. People are trying non-stop that is guarantied.
Mtgox is not Bitcoins but sadly, 80 % of trades goes there, it is a weak point.
There should be more of a stock market model, where you have brokers that are connected to the market and the mass of trading people would go through the brokers.
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On April 19 2013 02:45 spinesheath wrote:
If I read that correctly, Bitcoins require an exponentially increasing amount of storage space and processing power as the number of users and transactions increases. Not exactly something I would consider a long term solution...
Why not? Sure, at some point all the bit coins will be mined and then there will be something like 21 million BTC in circulation, but that won't make the currency any less useful. Bitcoins can at least in theory be subdivided an arbitrary amount of times (I think currently 8 decimal digits is the maximum), so even in the unlikely event that at some point in the distant future the world economy is all run on bitcoin, the low number of bitcoins will not be an issue.
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On April 19 2013 06:21 Drunken.Jedi wrote:Show nested quote +On April 19 2013 02:45 spinesheath wrote:
If I read that correctly, Bitcoins require an exponentially increasing amount of storage space and processing power as the number of users and transactions increases. Not exactly something I would consider a long term solution... Why not? Sure, at some point all the bit coins will be mined and then there will be something like 21 million BTC in circulation, but that won't make the currency any less useful. Bitcoins can at least in theory be subdivided an arbitrary amount of times (I think currently 8 decimal digits is the maximum), so even in the unlikely event that at some point in the distant future the world economy is all run on bitcoin, the low number of bitcoins will not be an issue.
The 8 decimal digits thing, that would be an exponential increase from the 21 million, right?
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I am still seeing lots of questions regarding the "mining" of coins and how everything works. Here is an infographic that does a pretty good job of explaining it for beginners. Note that the the block reward has been halved from 50 coins to 25 recently, and will continue being halved every few years.
http://spectrum.ieee.org/img/06Bitcoin-1338412974774.jpg
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On April 19 2013 06:25 DeepElemBlues wrote:Show nested quote +On April 19 2013 06:21 Drunken.Jedi wrote:On April 19 2013 02:45 spinesheath wrote:
If I read that correctly, Bitcoins require an exponentially increasing amount of storage space and processing power as the number of users and transactions increases. Not exactly something I would consider a long term solution... Why not? Sure, at some point all the bit coins will be mined and then there will be something like 21 million BTC in circulation, but that won't make the currency any less useful. Bitcoins can at least in theory be subdivided an arbitrary amount of times (I think currently 8 decimal digits is the maximum), so even in the unlikely event that at some point in the distant future the world economy is all run on bitcoin, the low number of bitcoins will not be an issue. The 8 decimal digits thing, that would be an exponential increase from the 21 million, right?
No, that's would be like saying being able to divide a dollar into 100 pennies makes a hundred-fold increase in USD. If the value of 1 bitcoin increases due to deflation, you simply spend 0.1 bitcoins, or 0.01 bitoins, or 0.001 and so on.
The opposite happens for inflationary fiat currencies. As the dollar is worth less and less, you have people start to talk about abolishing the penny and having transactions round to the nearest 5 cents.
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EPT
