Topic: [Discussion]How to decentralize the price of the bitcoin? Self-moderated. (Read 995 times)

I believe yhe problem with backed cryptocurrencies (no matter is usd or gold or silver etc) is that you have to trust the issuer.

Like tether. Everyone will be asking for an audition, for regulator agencies (i.e government) to say that they are backed up ...

So a gold backed cryptocurrency would be a total scam, or an audited centralized currency audited by a regulated agency ... In other words, somewhat controlled by government.


Governments would have a  high control over it, because it would charge taxes, create new regulations, etc and they would need to do all government's demands, or it would not pass the audition.


I believe it's just better to buy gold itself, or  an ETF backed gold (which would be the same as a cryptocurrency but more reliable)

Yeah, my poor English is playing a big role here. Thanks for the clarification. I knew that the Ruble is gold-backed currency but also government-backed too the same time but I had to read a bit more about fiat.



This is quite intriguing.
I just found that > http://www.goldscape.net/gold-blog/gold-backed-cryptocurrency/

Fiat currencies, by definition, are not backed up by anything, just like Bitcoin.

https://www.fool.com/investing/general/2015/12/06/fiat-currency-what-it-is-and-why-its-better-than-a.aspx

Fiat currencies are backed up by government that issues it.

There is no good / silver backing it up anywhere in the world. By definition.if it is backed, it is not Fiat.



I don't think that is a problem for Bitcoin or any other Fiat. There are some cryptocurrencies backed up by gold... But isn't it better to just buy gold or gold etf?

Again the bitcoin price drop is a hot topic, I still think that relaying only on supply and demand factor is not enough to have it stable.
This is a revolutionary 
To make a stable currency, we need to back it up with something valuable. Most of the fiat currencies are backed up with gold/silver. What we do with bitcoin then?

It's not just about demand or supply; has been in the economic model for a long time; Instead, it's about cost effective you can exploit the coins and sell them on the market. In my opinion, you can not really depend and count on electricity bills; labor costs and other things needed to be exploited as they vary between countries. Moreover; supply and demand will always determine the price of any tangible or intangible asset and that is the economic law. So, we need a revolutionary change in bitcoin pricing. It will change so much from one place to another that will eventually be a serious problem. Nothing to do. It would be better if we did not mess with the bitcoin price.

You have a very valid point there, but is the cost of the electricity being used to mine it, the only method to do that? Let's say for one moment that we use that as a measure of cost, would it not give governments a tool to manipulate the price too?

In my country the electricity cost is determined by a government organization and then pushed to the local municipality and they will then add their cost onto that base price. Which price will you then use as the base price? The price that the end user pay or the base price provided by the government?

I would rather live with the price being calculated as a average of several independent global exchanges, than having a price being calculated by some corrupt governments electricity cost.     

The price of everything in the world is speculative. That's the way free market works, bitcoin can be no different.
It depends on the sentiment about the future of that asset, or object, whatever.

I will make some examples
Few months ago there was a truckers strike in Brazil. They blocked refineries, so no gas could reach gas stations.
There were plenty of gas in the gas stations, but there was a sentiment that it could become scarse.

So everyone went to gas stations and tried to buy gas. The price wnet about 40% up, until the government decided to intervene and prohibited more raises in t he Price

Then people thought"if there is no gas, soon there will be no food"

So all good price went about 30-50% up as well.

There was plenty food and gas. There was no shortage. However, the sentiment was that those items could become scarse, so the price went up.

It's the same thing with bitcoin.
The sentiment that China is going to prohibit it, or that the ETF will never be approved, those things affect the price globally, because it is a global asset.

And if you decide to sell 1/2 the market price P2P, I will buy from you and sell on coinbase until all your bitcoin is gone...


Take a look at Turkey fiat currency now.
They have a crazy president who wants to implement an heterodox economy plan.

The country economy is the same today as 20 days ago. However the sentiment is that it will collapse soon, so their fiat currency is about 40% down (don't know exactly).

However if Turkey president (or dictator whatever, I don't know exactly his case) says on TV "I gave up may stupid plan" Turkey fiat will immediately recover, at least a few %. That's purely speculative, based on the sentiment about the future.

That's how everything price is calculated. Freely.

The only way to change this is through coercion (like government intervention)

Why the centralized exchange price has to be determinant for the overall price of the bitcoin?
If you want an non-speculative price then ALL the deals have to go trough exchange which cannot really happen here because people will most likely trade p2p as that's the idea behind the bitcoin, not trough 3rd party + paying extra fees and the KYC s#it.
Same with the banks, they try to push you so most of your deals/trades to be online and "traceable" and do not encourage the use of paper banknotes anymore. You have a limit in withdrawing paper money. In Sweden for example they plan to remove the paper-notes at all, so no shady deals can be done using the Swedish krone without being questioned.

So really we do not know the real Supply/Demand situation, only what is seen on the exchanges. It's kind of a bottleneck if you relay only on the exchanges. We can check the transaction in the blocks to determine approximate movements but this is not exact as people move funds from one wallet to another + soon the LN will move part of the flow off the chain.

As we have seen in the past, some exchange scam schemes can really affect the price, why? As the bitcoin itself is secure enough we based the price on the perception of security on the 3rd parties as they are the weakest link.
I still think that the bitcoin is supposed to be decentralized and the same thing with the forming of the price, that's the only way to the wide acceptance and world financial dominance.


 

The cost to mine 1 btc depends on the region

Electricity costs (low cost near big dams in China), government subsidies (like Venezuela), hardware costs also depends on the region...
This image summary it

Why would someone pay more for a btc than the exchange price?

https://www.investopedia.com/news/how-much-does-it-cost-mine-bitcoin-around-world/N

Not to be pedantic here but you missed the most important word out.


He could have just as easily set a constant block reward of 50 BTC forever. This is what makes me think most that he had the intention of making Bitcoin a digital gold. There is a finite amount of gold below ground and as it is mined the easiest to extract gold comes in to supply and as time goes by it gets ever more difficult to mine the gold that is left.

It's just a personal opinion but everything about the design tells me this was always the intention. The words in the genesis block  “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks”. It wasn't that banks were going to fail and depositors would lose money, it was that governments were devaluing our money to bail them out. We all paid for those bailouts.

I agree with your statement. As to what satoshi mentioned in his paper, his main intention was to use the electronic transaction without a third party and to prevent the double spending problem which was prevailing in the earlier predecessor of bitcoin (hashcash and b-money). He has never discussed about the inflation, though he has stated that his main goal was to create a immutable currency. He might have thought that the capped supply could prevent inflation in the value and a stable price would be reached. But since miners receive the coins every 10 minutes, this speculative value won't reach a stable price soon.

Gold and silver were both originally used as currency. I think that the similarity with the limited supply and the mining analogy show that it was very much the intention to have a deflationary money. You have to remember the context of the time Bitcoin was created. It was the aftermath of the 2008 financial crisis which led to central banks running huge QE programs where peoples wealth held in fiat currencies was deliberately devalued by government policy. That can't happen in a decentralised system with a finite supply. That's exactly why people that understand that part of Bitcoin would rather store their wealth in it.

As the quote reads "Bitcoin market is highly speculative and largely unregulated. Invest in them which you can afford to lose". This wasn't the one satoshi thought and investing in btc ain't an investment. Does anyone consider having money in their fiat raise in future? For instance, one has $10000 this year and has kept them in secret shelf for 10 years. Once after 10 yrs, this would be the same $10000. Bitcoin is meant to be used as a payment tool and a digital alternative to the fiat money rather than investing and Holding them for future profits. Bitcoin was not created to be used as an alternative to Gold/Silver which would appreciate in future. Limitation in total supply is another factor which is why Bitcoin is being compared to Gold.

Hence there should be adequate adoption of btc in the daily lives of people. For this to happen there needs to be a large portion of the coins to be circulated among the people rather than whales holding them in wallets. Moreover the cryptocurrency has become more of a holding stock rather than a using them as a digital money.

Above all, mining also consumes huge volume of electricity and money and price of the coin is also somehow based on the value to create a new one. Hence unless there isn't a larger adoption by the population,global acceptance and holders holding the btc, we won't see the speculation to end and the price will pump and dump always. There may be a larger adoption and global acceptance in future, but holders liquidating their btc would never happen and hence the rich gets richer. Also, btc is becoming more of a centralized currency with bitmain dominating the mining part. These doesn't seem to be a good road for btc dominating the fiat money.

Generally; I do not agree with the statement that price of bitcoin is controlled by the others. I believe that price of crypto currency in the market is determined by the supply and demand. There can be manipulation of such demand but I think bitcoin is not involved in that.

The price levels are not hampered or affected by the exchanges. It is the demand among the people that they hold for the coins. If the coin has higher demand; the price will be high and vice versa.

There is only one major force that will affect the price of the coins; that is the demand and supply of the coin the people holds for it. Other then that; no other factors can be responsible to manipulate the price level.

Bitcoin is being famous around the world day by day and new miners are staring to mine bitcoin. So we do need a revolutionary change in bitcoin pricing. But it is simply not possible to make the price based on ones cost. It will vary too much from place to place which will eventually be a serious problem. So selecting one standard is the only way to stop a chaos to spread around the bitcoin world. There is nothing to be done. Sometimes centralization is necessary for proper management. It will be better if we don't mess with the price of bitcoin.

That would only be true if Bitcoin had no competitors - not only cryptocurrencies, but also gold and other "real world" assets, and if all Bitcoiners were hodlers (and nobody would sell sometimes to take profits).

And I think people are over-estimating the influence of block halvings. Block halvings only reduce supply inflation by the half, the impact on total supply available on exchanges is much more limited (because miners are, by far, not the only people selling BTC). But inflation is already pretty low.

The long-term bull market we're still in (despite the last bearish months) is mainly caused by the fact that Bitcoin is still a new asset, and only in 2017 it achieved a significant "market cap". I believe that there's still potential to the upside, but the phenomenal gains from the last years will not be possible anymore. The curve will be flatter and flatter, and bearish/sideways phases will tend to be longer.

If Bitcoin goes up other 20x then it will be probably a bad moment to buy. The price increases do not "come out of thin air", you must always take into account that if you want to profit from simple hodling, then after a certain time you'll want to sell (for other currencies or goods/services) them for significantly more to another person who also thinks he/she will make profit, and so on. That cannot go on infinitely, so there will always be crashes, and at some moment the long term bull market will transform into a sideways market, but still with crazy swings. The only way to fix that is to use it more like a currency.

According to me you cannot really depend and count the price based on electricity bills; labor costs and other things required for mining as they vary from country to country. So; it will be unfair for people who have to pay a lot of money as electricity bills to compete with other miners who have access to cheaper electricity. Moreover; demand and supply will always decide the price of any tangible or intangible assets and that's the law of economics.

I think the reason is we can't ensure the same environment; resources and cost for everyone and every country. These factors will always defer from one place to another. So; it is not only about the demand or supply; which has been there in the economic model for a long time; rather it is about how cost effectively you can mine coins and sell them on market. That is why we can't see people settling for a single price worldwide.