Topic: Bitcoin India: Do hell with GOI's seigniorage. Isn't it? (Read 2277 times)

Sorry for deviating discussion as frankly speaking I was not able to understand a lot about 'seigniorage" and its implications with Bitcoin. I searched a bit and got a good read, thanks for that. Learned few new things.

Again below arguments may considered as offtopic as they are strictly not related 'seigniorage' but are related to other issue where it is feared that India will loose out in terms of gaining Bitcoin ( Bitcoin mining is just one way of gaining Bitcoins ), but just trying to put my understanding on discussion.

I already accepted we lost first battle in bitcoin mining. But if that is the argument to just ignore Bitcoin and its economics than I disagree.

Bitcoin have three options in future :
1. Bitcoin will be life changer and revolution and will change everything including possibility of replacing FIAT and what not. IMHO, will not happen.
2. Bitcoin will fail measurably to fight the established methods due to resistance from established interests or its own weaknesses ( Bitcoin does have some weakness when we think it will go mainstream ). IMHO, less likely to happen as it is not revolution or something like that as people think. Its just a new protocol which is superior than existing protocols and methods with its own new weak points.
3. Bitcoin/Bitcoin protocol will prove its usefulness and will improve its accountability, usage patterns and will find a place inside current economy for its best usage pattern. Most likely will happen.

Mining is just one aspect of the economy. Payment systems and Micro payment is one aspect of economy. If India/Indians still wants to have a say on Bitcoin economics the only way is building economy around it. You can gain much more Bitcoins than mining if you can run services around it. For example odesk and elance. If India/Indians can bring up a service which will take lead in freelance market for getting paid in Bitcoin it can make some awesome amount of Bitcoins.
oDesk and elance together billed around 750 mil $ in 2013 which is just ~5% of US market and very negligible part of global freelance industry.

But Bitcoin protocol is actually much much bigger than the currency and its valuation. I firmly believe that true potential of Bitcoin is not in the currency but the underlying protocol ( which is open source and can be tweaked to anything where you need distributed voting or decision power without trusting any one and guaranteed to have temper proof based on underlying cryptography )

Again I am sure above arguments are not related to discussion you wanted to start, but just my two cents,

Regards

My apologies! I should have laid down in simple layman terms. You want us to import 1st very important usable Bitcoin for $1000 dollar and next for $1001 dollar and next for $1002.. so on.. considering prices increases with demand so that we can run it within domestic economy. Think it like a fluid in commerce artery, that will be running across globe that can be restricted by no one. Then, why are we going crazy over branded fluid? Sorry! Discussion was about 'seigniorage' ...Chuck it!

You've been into Bitcoin from a long time and seems to understand more than average people. How many Bitcoins can India(or other poor countries)mine at max? Any rough approximation?

P.S: I never denied possibility of India gaining from IT opportunities.

Thanks Samuel! I must rectify my baised suspicious thoughts. I'm sorry!

Was reported and moved by another mod.
It has been moved back to India/.

Well, this is not off topic for sure.

Also some of the arguments are really subjective.


a. "If we adopt Bitcoin, we'll be paying to same to 'computing countries'. Dicussion needed!"
- Well at this moment you are not paying it to country, you are paying it to miner ( or group of miners ) and they can be anywhere. If one country which sees future in mining and encourages economy surrounding it, it will have better chance of getting more shares in it. Think it like IT. India encouraged IT and right now they are gaining more share of IT economy revenues. China encouraged mass manufacturing and production and they are enjoying good revenues there. But I agree with you more or less that as far as mining concerns India may have already lost the first battle. But well, with this argument this absurdly contradicting. With this argument we are accepting that Bitcoin will play a huge role as International medium of exchange while at the same time we think that since India does not have enough resources to be part of this, they should ignore it.

Also most of the time people giving arguments on stopping Bitcoin does not understand the very unique difference between stopping other traditional instruments and Bitcoin. You can not stop it, technically.

b. Can you please name one Indian payment processor which is global in processing payments across borders. So at this very moment also it is not getting any kind of share in the fees charged by payment processors. Still indian government is making money based on the remittances when they convert to Indian rupees. Same rule should apply here. We have to understand that when some one receives Bitcoin he will have to spend them for goods, services or INR at some point of time in India or outside. These are the points where you charge taxes.


Again I am not expert in above areas, but just my 2 cents.

Regards

Moved to off-topic? Surprised!
Dear, moderator can you please justify, how this posts belongs to off-topic?

Years ago, while I was in my college, I was amazed to learn that in some poor countries whose governments collected very little revenue, not much more than import or export taxes, 'seigniorage' financed a large part of public outlays. In poor countries a chunk of public revenue comes from the government monopoly on printing bank notes. As a consequence, inflation in those countries runs relatively high with government always strugging not to keep more then 2% theoretically. In fact, countries inflation rates can be interpreted as a monetary tax levied by the government on the whole economy. I learned that income from seigniorage, though it still exists, represents a considerable amount of public revenues for goverment.

It is obvious that fiat money leads to seigniorage income for the sovereign(India), but I think decentralized Bitcoin would not give chance to Mother Indian earn seignorage income.Thinking about Bitcoin design, it allows only those with enough computing power(developed countries) to extract two forms of seigniorage income:

a. In the early years(2009-2016) of Bitcoin, computing power allows the mining of new bitcoins. This is pure seigniorage for them(almost 100% of market value considering it took little resource to mine earlier coin during initial years and recently mined coined would earn them Market Value minus cost of mining a coin i.e $900-$20 approximately). Right now, we're paying seigniorage to government. If we adopt Bitcoin, we'll be paying to same to 'computing countries'. Dicussion needed!

b. When most of the coins have been mined, computing power is going to be used to charge transaction fees on every bitcoin transaction irrespective of border. This is also seigniorage income in the form of an all encompassing Tobin tax beyond the wildest dreams of the proponents of that tax and Bitcoin enthusiast. What if India isn't able to catch on arms race of mining(i.e. future payment processor)?


Basics
Seigniorage is part of public finance and government's meagre earning source like income tax and VAT. If we have to define seigniorage, we can say, it is earning of government for monopoly issuing new notes.

Example:
Suppose Govt. of India issued Rs. 100000 new notes and it was given for purchasing Gold of any other company. After one year, govt. of India sells this Gold and receives Rs. 200000 due to inflation and increasing the price of gold. Then Rs. 100000 is seigniorage. In seigniorage, govt. receives profit due to decreasing the value of currency.

Formula of Calculating Seigniorage
Seigniorage= Net profit on producing of new notes and coins

Suppose Indian goverment produced  Rs. 500 one note and its cost for printing was just Rs. 100. If govt. of India pays Rs. 500 for repayment of his loan, then  Rs. 400 net profit on producing of new note will be the seigniorage of govt. of India.

Any thoughts my fellow enthusiast with flag of revolution in hand?
Strictly for Indian enthusiast