Topic: Doubt about Bitcoin's growth potential (Read 6675 times)

Seems a waste of time to empirically test the obvious. The question is only: Is Bitcoin the cheapest way to borrow money. At present, the answer is NO. A few years down the road, when Bitcoin is in the 4-digits and value increase is in the single digits - and inflation in the FIAT world is deep in the 2-digits, the situation will change because nobody will give you a FIAT loan if inflation can at any time get into the 3-digits or higher unless you pay outrageous interest.

Sorry if cross-posting this here is obnoxious, but it seems relevant and I'd be interested to hear people's reactions. Thanks!

Prissily, not a good idea to borrow Bitcoin's at the moment, unless you can sucker someone into lending them and default.
But I think the point was you can lend and borrow any amount it is not limited by the total supply. (and it has been tested despite the risk)   

But why on earth would anyone borrow Bitcoins at present when you can get a Fiat loan for interest that's lower than inflation?

A Bitcoin loan otoh carries a significant risk of Bitcoin gaining significant value and a default as a consequence.

At some point, when bitcoin is more mainstream, this will change, of course.

Bingo... JoelKatz scores again.

Bitcoins credit can exist just fine. I've made loans, and received loans, both with interest, and both paid back. Guess what... it worked! 

When I made my fist Bitcoin purchase I didn't want to spend my hard earned Bitcoin's so I bought some and used those.  This was the type of action that grows the economy; however I only used Bitcoin because I am an enthusiast.

If the Bitcoin economy were bigger I may be compelled to just buy in. However buying Bitcoin to partake in Bitcoin economy will create a demand for Bitcoin. When you look at the "innovation adoption curve" that demand will be filled by the innovators who have lots of BTC to sell. The people who build the economy are the Early Adopters paying the price and the benefactors are the Innovators. (the Early Adopters are key to the successful adoption of Bitcoin for mass market appeal )

In my view you need the Early Adopters to adopt Bitcoin and build the economy in order for it to propagate.  For that to happen the Early Adopters need a motivation to build the Bitcoin economy.  I see wild swings in boom and bust cycles as the ideal stimulant.  Boom bust to me is like gambling only you can cashing out without loss if you have a stable supply of BTC, it also creates risk for the hoarders, once one is in the economy one eventually establishes a legitimate way to obtain BTC and cash out during the swing, thus the economy slowly builds, and the Early Adopters benefit. ( That is, what I am doing now except I am trickle mining, as opposed to building the economy. So technically Miners fall in the Innovation stage, and Silk Road would fall in the Early Adopter stage)   

Without a transferring of Innovators benefits to the Early adopters benefit,  the Fiat to BTC rate will crash. When it crashes the early adopters benefit, and as the Bitcoin economy grows again the innovators benefit disproportionately to the work done by the early adopters and the system crashes again, and this will go on and on until the wealth of the innovators is eroded.

Just like the sun will rise and fall every day and we will have seasons, the system will optimise over time a decade at the least but it is going to be a rough ride and there will be no guarantees, there is a higher probability of a stalemate along the way, but just to be safe you should mine your [btc20] anyway. 

There is no point in knowing if it will succeed before it succeeds, if you knew that, you could cheat the system, if you could cheat the system it would fail.

These debates are fundamentally about risk taking.  What will cause Bitcoin to fail is the horders unequivocal faith that the system will prevail, and the Early Adopters (labour that builds the economy) choosing life as usual. IE. a stalemate.

This stalemate could be the end of cripocurancy or its collapse, and with all natural systems collapse there is fertile ground for rebirth.   

Why does anyone need to borrow Bitcoin?
There is not much of an economy yet, the bulk of the economy is supported by selling drugs. 

If you have good credit borrows from the bank, and buy Bitcoin's.

If you are lending in this environment you have questionable money management skills.
If you borrowing BTC in this environment you are most likely a doing something any legitimate bank would not condone. 

...like roads.. 

TCP/IP is new system thinking - open-source and non-proprietary. It's becoming the norm with those that grew up with it.

But old system thinking gave you the internet and the computer you wrote your post with.

GO SATOSHI's LAW!!!

It's a little early to draw a conclusion about the right/wrong part, but I would suggest asking him how would he define success? what would he accept as criteria that must be met for bitcoin to be considered successful?

I'm curious as to his response.

We need a real bank, but who certifies it? Do we need to certify it? Security is a huge issue as the hacked exchanges have shown. We can't have safe lending until there is liability.

A contact in Bitcoins is no different than a contract for bandwidth or gold or manure.  Most "contracts" in Bitcoin land haven't been enforced because:
a) they aren't contracts.
b) they are unlawful (i.e. Pirate's savings plan was usurious in every state of the United States).
c) they involve thieves.

Put a,b,c in a "deal" involving dollars and you will be equally broke.

This is a good point but I would not be worried because there are ways to fix this, my concern is wider growth or diversity usage of the currency.  The value of the currency is great but if the use could be diversified then I think stability would grow allowing for greater growth.  Guarantees will follow and there are ways to develop them but that will probably not happen until greater utility. 

Just my thoughts on the subject but I would like to see more guarantees offered too.

My only concern so far with bitcoin is the lack of, or inability to, prosecute fraud and uphold contracts. That's what makes lending difficult in my opinion. Also, we could have institutions that practice fractional reserve banking, but it is not backed or guaranteed (FDIC). This means that customers (lenders) of the bank are at much more risk because of the high percentage of the reserves (customers money) being lent out. This makes their savings illiquid and risky. So in order to do this, the institutions would have to offer high interest rates and not be able to guarantee instant liquidation at moment's notice. 

Define "solidly better".

It can only attain a tiny tiny fraction of current systems unless it is solidly better. Once it is widely accepted and solidly better it's just going to crush. The USD etc are not things that can partly crash. If ~half of the value rushes out of them and into bitcoin the rest will follow.

edit: maybe I didn't read carefully, I was just thinking "current system" and nothing about debt in particular. Debts are going to be denominated in whatever currency people use because that's the only convenient way to do it.

Gresham's law only applies to exchange rates as dictated by law. Bitcoin is a whole new beast as it's rates are beyond what the law can decree, so Gresham's law doesn't apply in this case.

After we see what happens with Bitcoin, perhaps we can formulate Satoshi's Law. 

i little bit of offtopic but it would be interesting to see the arise of the ones who adopted Bitcoin fully, but in the same time rejected every other monetary system. we just need the critical mass of them, for dollars and similar trash to really become useless... that would be "a complete success of Bitcoin", but the starter of the topic (his friend "economist") implies that ones who are heavily dependent on the system as it is right now, should somehow stay wealthy and continue to enjoy their parasite lives instead of being completely broke as they should become, after the full adoption of a Bitcoin.