Topic: Bitcoins Can Inflate Too - Stop worrying about deflation. - page 4. (Read 12326 times)

And on these two statements we agree 100%.

You have your prediction, I have mine.  It will be fun to see how it plays out.

Yes we are xD

The point of having a backup of the seed is so you don't have to make a backup of your wallet everytime you create an address. That's the only use for a sufficiently secure/random with enough entropy deterministic wallet.

I had exactly the same fear when i started with bitcoin, i'm really a mess with everything and i usually lose things. So because of that fear, i did a backup of my bitcoin address (the main one i used) and encrypted it and then store it in a very safe place. Of course, i lost my mobile which had installed the bitcoinSpinner (with a pin number) and some funds. I then realized that was far much easy to lost the mobile than the bitcoins.

Note: I stored the key when i thought bitcoin was something like a file stored in my mobile.  I mean i was a completly noob.

I agree, market forces will bring it if there is a market. But for today, market forces haven't done such a thing. FACT.


Well because it is a fraud. That simply. And moreover that would make that bank credits were less worthy than the bitcoins they were backing (because of inflation) so people would change their 'credits' for bitcoins. Just in case you didn't notice, the market allways exchange something that is loosing value for something that is acquiring value.

I did all this when I was experimenting with bitcoin earlier this year.  Used armory, printed paper wallet, view only wallet, all that jazz...

I put the print out somewhere safe...and now have no idea where that was! My 5BTC is lost in the cloud:)

Stupid?  Yes, I don't deny it...  Easy to replicate mistake for the average punter?  Certainly...

I'd like to buy some more bitcoins, I think there is a reasonable chance they will balloon in value at some point.  But I have zero confidence of my ability to access the money years down the road! I'd need someone trustworthy to manage it for me.

We are talking in circles.  Now we are back to the issue of people who don't take the necessary precautions to protect themselves from loss.  Yes you can create a paper backup, cypher it, and store it somewhere safe, but many people won't.

Again we are talking in circles here.
And when you forget/lose your PIN?

If the seed is sufficiently secure/random with enough entropy, then there is a risk of losing/forgetting it or storing it where someone else will gain access.  If it is simple enough to remember or figure out, then it is subject to brute force and dictionary attacks.

Sorry, but I'm arguing from a point of experience.  I've talked with people who aren't comfortable with bitcoin because they don't have faith in their own ability to protect their money from loss and theft.  They have expressed that they'll take a look at bitcoin again when there is a reliable, trustworthy, insured banking system in place for it.  There is clearly a market for this.  If there is a market, then there are market forces that will bring it about eventually. I don't know if it will be 5 years, or 20, but I don't doubt that it will happen.

Once the banks exist and are holding people's money for them, I just don't see why they wouldn't attempt to engage in fractional reserve to boost their profits.  Again there is market and a financial incentive for it.

Actually, depending on what they do with the max block size (and what happens with bitcoin banking), I don't see your example as being outside the realm of possibility.

However, I see your point and realize that what I meant but didn't say is:
"as more people adopt bitcoin and the number of transactions increases, the exchange value of the necessary fees to get your transaction into a block will likely increase substantially."

That's a good argument. But I still doubt this was going to happen, because you would have to send your bitcoins to the bank, and then operate with something like a mastercard or similar. Ok, merchans would have to accept this mastercard. All this is easy, but suddently it happens that you don't know if the bank still have the funds.  By the way, keeping your bitcoins in your wallet also adds interest to them, as they become more liquid (more people accept them).


You copy the private key in a paper backup so you can recover your funds. You put it inside a safe box. You can cypher it with a pasword if you like.
You set up a pin in order to avoid others accessing your funds in case of losing the usb hardware wallet.

I agree the deterministic wallet is less safe, but it has it's own generator, so i suppose it will choose a complicated one. So I guess you will need years to bruteforce it instead of the whole life of the universe, which yes, is less safe.

It is the year 2030, imagine a fee of 0.0005 bitcoins. HOLLY SHIT! THAT IS THE PRICE OF 5 CARS!!!!

But if there is a banking system in place, nobody has to "withdraw" their bitcoins to spend.  If I am a customer of the bank and I am that person who deposited 11 bitcoins, and you are another customer of the bank (with 3 bitcoins), I can "pay" you by telling the bank to send you 11 bitcoins.  The bank then updates your account to indicate that you have 14 bitcoins on deposit (even though only 11 "real" bitcoins exist), and my account is updated to indicate that I have 0 bitcoins on deposit.  There is only a "run" on the bank if enough people try to withdraw more than the total reserves.  It is obviously necessary for the bank to maintain a large enough reserve, and that amount may be more than 10% (or may be less).  It will be up to the insurance company to determine how much risk they are willing to take on and audit the bank regularly to make sure that they maintain large enough reserves.

The example we are using is a bit simplistic, because it assumes that the deposits of one individual is 10% of the entire bank deposit balance (making it possible or even likely that one person could create a run by closing their account).  In the real world, the amount held in reserve would be more than any one or two people could withdraw if they shut down their account.

A smaller increase in supply is still an increase in supply, this does not by itself cause the value of BTC to rise.

True, and if/when bitcoin transitions to mainstream use this will create a skyrocketing value, but eventually the popularity will reach a saturation point and the price will stabilize.
 
And there will be some projects that will be able to outperform the growth in GDP.  Those projects will benefit from the abilty to take out a loan to provide working capital.

If people regularly make purchases in such small amounts, the software will be calibrated to price things in a useful unit. Instead of pricing things in btc, we will be using millibitcoins (mBTC) or microbitcoins (µBTC) or satoshis.

Another form of inflation people should consider is alternate cryptocurrencies, like litecoin or namecoin.

But if there is a banking system in place, nobody has to "withdraw" their bitcoins to spend.  If I am a customer of the bank and I am that person who deposited 11 bitcoins, and you are another customer of the bank (with 3 bitcoins), I can "pay" you by telling the bank to send you 11 bitcoins.  The bank then updates your account to indicate that you have 14 bitcoins on deposit (even though only 11 "real" bitcoins exist), and my account is updated to indicate that I have 0 bitcoins on deposit.  There is only a "run" on the bank if enough people try to withdraw more than the total reserves.  It is obviously necessary for the bank to maintain a large enough reserve, and that amount may be more than 10% (or may be less).  It will be up to the insurance company to determine how much risk they are willing to take on and audit the bank regularly to make sure that they maintain large enough reserves.

The example we are using is a bit simplistic, because it assumes that the deposits of one individual is 10% of the entire bank deposit balance (making it possible or even likely that one person could create a run by closing their account).  In the real world, the amount held in reserve would be more than any one or two people could withdraw if they shut down their account.

A smaller increase in supply is still an increase in supply, this does not by itself cause the value of BTC to rise.

True, and if/when bitcoin transitions to mainstream use this will create a skyrocketing value, but eventually the popularity will reach a saturation point and the price will stabilize.
 
And there will be some projects that will be able to outperform the growth in GDP.  Those projects will benefit from the abilty to take out a loan to provide working capital.

There are never 110 bitcoins worth of spending power in the whole economy. If you look at the first person, he have 11 BTC worth of saving at bank, but bank already loaned out 90% of that money to other people, if he try to withdraw all that money and spend, he will cause a bankrun. The same apply to everyone else who saved at banks during this multiply process, so the only way they can withdraw and spend without causing the total failure of the banking system, is that they never withdraw more than 10% of their saving, so 110x10%=11, you will get 11 BTC spendable which is the original BTC in existance

You are operating under the assumption that holding Bitcoin will continue to provide a higher "ROI" than other projects indefinitely.  I assume that the exchange rate will eventually even out and increase through deflation of the spendable supply at a slower rate providing an opportunity for other projects to provide higher (and safer) ROI.
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BTC's value will rise because:
1. The supply increase is less and less
2. The popularity is higher and higher
3. When all the coins have been mined, if the economy (GDP) still grows, then the corresponding BTC will keep rise in value

And you can already lose your mobile, have it stolen, or otherwise lose access to those private keys.  The idea behind a bitcoin bank providing reliable, safe access to your bitcoins is that you can make a payment without needing access to a private key.  The private keys can be kept safe by the bank, and payment can still occur. Perhaps this is a service that nobody will ever want.  My opinion is that they will.

And I simply disagree with you.  One of us will be wrong.  It will be interesting to see how it plays out.


Right now, with government backed local fiat, people have the option of depositing their money in interest bearing deposit accounts, or investing in company stocks.  Some choose the stocks, many choose the deposit accounts.  Why?  I suggest that they choose the deposit accounts for increased liquidity (can spend the money on deposit without having to first find a buyer for the stock and engage in a stock sale transaction), and reduced risk/volatility (there is a better chance of a stock losing value in the short term than there is of the deposit account losing value over the same timeframe).

If you save a copy of the private key, then you have just eliminated the safety feature of the PIN.  If the wallet is deterministic, then you either have a complicated seed to keep safe and keep track of, or you have significantly reduced security.

There is currently a limit on the blocksize of 1 megabyte.  The protocol is designed to keep the average rate of block creation at 1 every 10 minutes regardless of how powerful the computers "pushing the transactions through" are, so unless they increase the max blocksize, the blockchain does not support much more than 6 megabytes per hour of transactions.  The miners get to choose which transactions they include in the block that they mine, and they get to keep the transaction fees from the transactions that they include.  So if there are 10 megabytes of transactions waiting for a block, and only 1 megabyte worth of space in the block, do you think the miners are going to choose the transactions that have no fees, or do you think they will choose the transactions with the highest fees?  So, if someone wants their transaction into a block quickly, they will need to increase their transaction fee high enough to be chosen by the miners.  This creates a bidding war for quick inclusion into a block, and drives up the necessary fees.  You can still send a transaction with zero fees (or extremely cheap fees), but you will have to wait for a time where there aren't many unprocessed transactions laying around for a miner to decide to go ahead and fill up the unused block space with the free transactions.  Right now this can take hours sometimes.  In the future, depending on how the max blocksize changes over time, it could be weeks or months before free transactions make it into a block.

You can already transfer bitcoins with your mobile, that's why i addressed that.

I simply don't agree.

What kind of liquidity? You can sell your shares and have bitcoins again. Or you mean liquidity by using the multiplier?

As i told you, google for this. You're saying nonsense. The hardware wallet has a PIN, so even if someone steals it, he will need the PIN. It has a deterministic wallet and you can save a copy of the private key of the seed address just in case you break it. That way you will recover all your addresses. Its small and portable.  If you lose it or someone steals it.. .you can use the copy of the private key to restore your wallet in another place and send the funds to another wallet.

Btw. If the market chooses to create banks i will be ok with it. But there isn't any reason to this to be done. Maybe, in the future, banks will just keep a record of the blockchain. THAT may be possible. And will be the ones in charge of mining. But i doubt they're going to keep nobody's bitcoins.

People sending their bitcoins to other people will find another pirateat40... so it's more probable that the market will learn and stop doing so.

Why would it cost more to go into a block you can even send for free? I'm new so I don't completely understand everything, but the way I'm seeing it is that the United States government is spending tons keeping the USD in circulation, surely they could turn on some super computers with solar panels along with the governments of other countries, and push transactions thru for free.

Card, mobile, paper check, doesn't matter. The point is providing a fast, reliable, safe, easy way to pay.

As for the transaction fees, as more people adopt bitcoin and the number of transactions increases, the necessary fees to get your transaction into a block will likely increase substantially.

The reason to make deposits instead of investing in stock exchange is liquidity.  The same reason people put their local fiat currency into interest bearing bank deposit accounts instead of investing in the stock market.

As for the USB Hardware wallet, as long as someone has the ability to lose access to their bitcoins through theft or forgetfulness, there will be people willing to turn over their bitcoins to a reliable insured organization (bank) to maintain that access for them.

Interesting, mastercard wants you to pay with a mobile and you want to pay with a card.
reduced transacton fees? EVEN MORE?
small interest rate on deposits? Better to invest in companies using an stock exchange.

So, this leads us to this: You want a bank because you think that you may lose your private key or because you think people may enter in your computer and stole your bitcoin? for the second answer you may want to google: usb hardware wallet (in development).

There are already members on this forum in process of designing one.

This:

Because there isn't a reason for the opposite.