Topic: A Bitcoin Epiphany - page 2. (Read 2624 times)

"…people would agree on a standard set of wholesale prices of commodities to treat as the standard value in which they would prefer to have their currencies kept constant." - F. A. Hayek

"each Hayek is really just a derivative asset. How then would the issuing firm get the public to start treating the Hayeks as money? On the night of the initial auction, after the market price of the Hayeks had been ascertained, the issuing firm would specify a commodity basket (consisting of bread, eggs, milk, and other goods relevant to consumers) that cost, say, $60 at Wal-Mart. Then the firm would announce to the public the following non-binding pledge: "We will use our firm's assets to adjust the outstanding supply of Hayeks such that 5 Hayeks will always (insofar as it is humanly possible) have the purchasing power to buy this specified commodity basket." -https://mises.org/library/hayeks-plan-private-money

The objection you bring up was addressed by Hayek, and his solution was "constant but not fixed value":

"It would be expedient that the issuing institution (preferable a DAO) should announce precisely the collection of commodities in terms of which it would aim to keep the value of the [Hayek] constant. But it would be neither necessary nor desirable that it tie itself legally to a particular standard. Experience of the response of the public to competing offers would gradually show which combination of commodities constituted the most desired standard at any time and place. Changes in the importance of the commodities, the volume in which they were traded, and the relative stability or sensitivity of their prices might suggest alterations to make the currency more popular." - F. A. Hayek

The answer then is that if the price of wheat fluctuates too frequently because of good and bad harvests, then wheat would not be something included in the basket of commodities on which the currency is pegged.

Today?  Certainly, but saying that it will be that way in the future just because it is that way today is not a very convincing argument.


That doesn't make any sense to me at all.

Your expenses don't all come due at the exact moment that you receive payment from your employer.  What are you going to do with those federal reserve notes between the time when you receive them and when you use them?  Wouldn't it make sense to convert most of them immediately to PRECIOUS VALUE STORAGE APPRECIATING VALUE BITCOIN and then just spend the bitcoin directly as needed.


That assumes that you haven't already exchanged your least valuable possessions for more valuable possessions.  If they are so valueless, then why do you even have them?  Furthermore, why were the merchants in the market willing to give away their valuable merchandise for the debased coins?  Any intelligent merchant would have a higher price for their merchandise when customers wanted to pay with debased coins, and a lower price for customers willing to part with the old gold denar coins.


As I just pointed out with the price difference for merchandise depending on the coins used, the validity of this statement depends both on the current exchange rate between gold and silver and the perceived future exchange rate between gold and silver.

If I have a product that you want today and the current public exchange rate is 5 silver coins per gold coin, which would you rather spend for the product, 2 gold coins, or 9 silver?  Does your answer change if the exchange rate between silver and gold has been increasing recently?  How about if it has been decreasing recently?

No.

Fluctuations in the supply of base commodities should be accounted for using their market price sold with a fixed supply of money. You imply that 1 grain of wheat during good harvests is equivalent to one grain of wheat from a bad harvest. Not correct. Fixed supply of money takes account of the differing value of differing rates of supply, as it should.

Yes!  I've been thinking about this a great deal.  I think that bitcoin has a store of value that is overlooked.  Something NEW to consider economically.  The value of social networking!  The groups combined knowledge and utilization of the technology control much of its value.  The whole is much greater than the sum of it parts in ways that are only now starting to be understood.  Hive economics, if you will!  How might one debase the hive?

I agree with what you say, i also think that bitcoin cant really ever be centralised, if it is, say by miners or companies then it will lose what it is and become worthless.

Speaking from experience, i have federal reserve notes because my employer pays me in them and all merchants accept them. All of my expenses are paid first in federal reserve notes, whatever is left over is converted immediately into PRECIOUS VALUE STORAGE APPRECIATING VALUE BITCOIN.

In Rome the government started to debase the gold denar coins with copper. Soon people were hoarding the old gold denar coins and spending only the copper based debased coins in the market. The reason why is easy to see. If you have run out of all money and you need to sell one of your possessions for food, you will sell your least valuable possessions first, you will not sell your most valuable possessions first. The same is true of money. If you have gold and silver, you will buy things with silver first.

The other factor is that a fixed supply, while creates the PERFECT store of value, at the same time makes Bitcoin a poor Unit of Account. The PERFECT Unit of Account would be a money that inflates are deflates at a rate that keeps it's value stable to key core commodities and goods. Such a money would never gain value or lose value, it's value would be fixed. Bitcoin priced in this money however would be going up and down at times, because Bitcoin having a fixed supply, fluctuates in value according to the laws of supply and demand. As the supply decreases and the demand increases, the value of Bitcoin goes up, and that value is stored because the supply is fixed.

A perfect Medium of Exchange and Unit of Account crypto currency would have fixed prices, by sacrificing fixed supply.

My question is:

Why would you have any WORTHLESS VALUE LOSING DEPRECIATING IN VALUE FEDERAL RESERVE NOTES in the first place if you could count on bitcoin being PRECIOUS VALUE STORAGE APPRECIATING IN VALUE?

Since bitcoins can be spent just as easily as reserve notes, wouldn't it make much more sense to dump all that "bad" money, as quickly as possible (perhaps at an exchange, or by convincing your employer to pay you with the "good" money), and only hold on to the "good" money?  And once you do that, you'll only have the "good" money to spend, which means that you (and everyone else like you) will be doing almost all your spending with the bitcoins (since it would be rather silly to pay exchange fees just to convert the "good" money into "bad" money before you spend it).

The Value Storage property is not derived from it's utility, it is derived from it's scarcity. This, I think, is a very important to understand and may actually require some research into the field of economics and money theory to really grasp. But if you don't understand that the Value Storage property comes from having a fixed supply, then you may be tempted to eliminate the supply clap in order to increase utility under the false assumption that utility is what causes the Value Storage property. In this case, in removing the cap you would effectively destroy the Value Storage property overnight and the value would eventually plummet.

Yes, it can be used to buy a cup of coffee. But the problem is mostly Grisham's Law, which says that bad money drives out good. Why would you pay for something as trivial as a cup of coffee with you PRECIOUS VALUE STORAGE APPRECIATING IN VALUE BITCOIN, when you could just toss over some of your WORTHLESS VALUE LOSING DEPRECIATING IN VALUE FEDERAL RESERVE NOTES? People tend to want to get rid of their "bad" money first, and save and hold onto their "good" money.

For instance, you could use gold to buy a cup of coffee, but you'd rather just keep your gold locked up in a safe. Bitcoin serves the same purpose for crypto currencies as gold has served for legacy currencies. It stores value. It can be used to trade and transact, but something else is probably better for that. Something with a flexible supply that keeps the value stable.

Sure, Bitcoin is the grand-daddy of crypto currencies. It's - by far - the MOST dominant in terms of the amount of hash power people throw at it on a daily basis. Therefore it's the most secure. Which is why it has secured billions in venture capital and is having a state of the art, world wide infrastructure built around it. Just like the Internet in the late 80's and early 90's.

So is Bitcoin here to stay, 100% yes.

Will it be the defacto currency of the world? Perhaps... But, I don't think it has to be.

The "petro-dollar" is the "world reserve" currency, but there is still a plethora of other fiat currencies that enjoy widespread usage.

Most of the purported "replacements" and "usurpers" of bitcoin's throne (ETH etc) all draw value from the BTC market since you must first buy BTC before you can interact, financially, with any of these alternatvies.

So, I see Bitcoin eventually assuming the role of a reserve currency for the internet, rather than the world at large

Centralization is to give the Bitcoin keys to companies like Coinbase.

Some might survive but the general risk of cryptocurrencies being banned totally is still there. Which means they might survive as a currency in the dark, with way lower values.

On the other hand it did not happen yet. And the more important persons and organizations would be interested in it the more safe it will be against being banned.

Though the current situation really puts that at risk. The discussion over the future is surely not good.

The masses don't give a damn about centralization or not and they don't know enough to care. And are we decentralised now? don't really feel that way when the direction it's taking is decided by a room full of Chinese guys being ordered around by a bunch of americans.

bitcoin can carry on as a minor thing but it'll never get anywhere if it isn't accessible to more.

I agree with most of the OPs points. However, to retain the value in the store, you need an element of usage. As Bitcoin cannot be used as jewellery, or used in industrial processes, then the usage will have to be as a money transfer service. Centralisation is the major threat at the moment, and centralisation of mining is the emerging focus for this.

When, not if, the R3CEV group finishes their $9B blochchain R & D collaboration, then they will have a technology that will be placed within their current banking platform's infastructure (there'll be a button in everyone's online banking app that say's "click to pay with R3CECcoin") and it will be bootstrapped with a pre-existing market.  It will then be easier to pay for coffee with R3CEVcoin than Bitcoin.  However, Bitcoin's value will remain intact due to the nature of it's pseudo-anonymity and its decentralized virtue.  We'll still store, trade, and transfer value with bitcoin like we're doing already but we won't be burdened with the scalability issues of VISA size networks....eazy peezy!  That's my prediction!

bitcoin is anonymous that's what the greater advantage... bitcoin cannot be stopped suddenly... if it meet some downs one day it has ups the other day... so it will survive and grows far and far everyday..

In regards with centralization being the key for stopping BTCitcoin, I do agree but couldn't agree with other points made. Although at the moment BTCitcoin usage isn't the ideal case for everyday purchase of coffee, I don't think it would stay like that forever and surely things will develop along the way that will make this happen and honestly couldn't see any other crypto-currency that would do it better than BTCitcoin. Surely it has it's flaws but there's developers in the back-end that constantly try to find solutions to problems, even though there are clear differences (it's just matter of time).

Its always a interesting discussion when you see some people want to control bitcoin and let government have control.
Always wonder how these people found bitcoin in the first place when they are so willing to give up the anon factor.
If you are not about creating a system outside government or any agencies control,then I am not with you.

I agree that Bitcoin is here to stay.
I agree it is the gold standard of Internet currency.
I agree the value of Bitcoin will rise.
I do not agree that it cannot be used (as satoshis) for the proverbial cup of coffee. If it is not used, then where will it's value come from? Utility is one of the essential prerequisites for value. I can see it being used alongside another coin, like Litecoin or maybe even eth, like gold and silver were used in the past. However I do not see it as being not used yet still considered valuable.

That being said, I agree entirely with the premise - centralization is death.

OP you're way too optimistic and sure of yourself.   I have doubts as to whether any cryptocurrency is going to survive, but perhaps I'm just in a pessimistic mood.  I agree with some of your points, like bitcoin not succeeding as a currency.   It's way more useful as a store of value but does have utility in dark markets.