Topic: Inflation and Deflation of Price and Money Supply - page 66. (Read 1262059 times)

If quantum computing can actually break the hash functions and crypto which are currently used in the blockchain, bitcoin will evolve simply by switching to new crypto and hash functions that are not broken by quantum computing.

The bitcoin protocol allows the blockchain to use any function. Every transaction includes the instructions on what algorithms were used.

As already stated: wallets exist that don't need the entire blockchain.

As to your other issues, I think you've made the mistake of evaluating bitcoin as a standalone currency. Right now it isn't. It will become that eventually if quantum computing doesn't become reality first.

You do not need to concern yourself with price stability as a vendor, simply use a service that converts your inc btc to fiat. Leave the speculation to the speculators, they can hold or trade bitcoins and it won't affect you receiving payments through your service. As an end user, you also don't really need to concern yourself with the price stability most transactions will move in the direction of "purchase item, buy and send bitcoins" rather than a transaction directly from a wallet using bitcoins you already owned. As an early adopter (which is what we all right now) we're a mix of speculators and users... as for wanting to put in the a price and having it be stable over a period of time... why not simply tie it to the exchange rate that your pref exchange uses, then the price would update automagically to whatever fiat they were buying in.

Reputation features are a non-starter on the network level. We're concerned with providing a platform for exchange. This would be best handled by a service or site that does it as part of it's other business. If you see a need for this feature - make that site and transmit the messages on the blockchain, call it something cool, then get wallet providers to include your API to pull that information relative to a public address.

Escrow features are a bad idea on the network level. I know I'd like them also... but really... how could you prevent someone from simply not releasing escrow? Much better to provide this a service linked to the reputation site imo.

I'm not even going to talk about alt-coins.

~

The only tweak I'd love to see would be a massive increase in block generation rate. I want lower difficulty, more blocks (like one ever 30 seconds or per min), the linking of transaction fees to both 'size of tx' and 'difficulty' along with an proportional decrease in the block reward. IMO this has to happen soon and really should be the focus of the devs (or at the very least the foundation) for the simple fact that if we can't service potential transactions we're placing a very real barrier to adoption. I'd love to see 10 confirmations take only 5 mins - lets really focus on exploiting the tech available instead of just saying "it's already way faster than a wire transfer' - because what we really need is for a vendor to be able to take a payment a point of sale - wait 30 seconds and know that it's paid.

To have variable inflation/deflation (chosen by a few) as exists in current fiat money is absurd, akin to entrusting a 3 year old to look after a lollipop for you and expecting it to remain unlicked.

Bitcoins inflation is predetermined as we all know.

The only reason coin inflation is written in is to encourage miners to invest in more powerful nodes to get the network established quickly.

Once the network is established then nodes will gain more from processing transactions. When all bitcoins are mined then transaction processing will be the only incentive to own a node. But this will continue to evolve the network to better hardware as transactors clamor to offer lower commisions using higher hash/watt equipment.

There's something to be said for an alternate currency. Let's make a generic term, "altcoin," to refer to your proposal.

For one thing, it helps people mentally separate the concept of a crypto-currency from bitcoin in particular. It also helps in case there's a huge exploit of bitcoin and everyone is fleeing: at least they can flee to another altcoin instead of back to fiat.

But consider the problem of capitalization: so much time, effort, and money has gone into bitcoin that all the altcoins together have no effect on bitcoin. Most of that capital invested into bitcoin cannot be recovered. I just want to point that out – I wish you luck in creating an altcoin but be aware of the implied investment of capital you're talking about. How are you going to convince people to invest?

feel free to take a look at the link in my sig, although the ideas have evolved a decent bit since then too

hmmm, ok, I have some research to do now on:

 Multibit, BitcoinJ, Electrum,

...I want to put together a crackpot team of economists, freedom lovers, and programmers to do a mega awesome crypto-currency ... not that bitcoin isn't already, but this market is wide open for others and it is the wild wild west of our day ... and of world changing significance.

Plenty already exist! Multibit, BitcoinJ, Electrum, etc...


That won't happen for a long time. Bitcoin is a new thing and is going to be a wild currency to exchange. I would suggest just writing a script to change the prices automatically.


Not a bad idea to possibly have a reputation listing like they do at bitcoin OTC, but for the entire community, and maybe even integrate a client to utilize that...


Humans will always have to handle an escrow so I'm not sure how it would be built in...


I made a post about this further along in the first page of this thread.


We do! And we're always working on them.  

yes, I especially like your competition in everything quote ... and that's what I despise about fiat currency the most also ... the forced monopoly.

There will be many crypto-currencies 5 years from now and certainly the ones that work best will have the widest adoption.  A currency which maintains some stability day to day will win over one that fluctuates so wildly.  Even in my own personal experience selling bitcoin to an individual who was trying to actually use them (he wouldn't say what for) ... but his request to me was to offer the coins to him at a fixed rate.  The daily fluctuations in price messed up his business model when prices would change before he could complete the whole cycle of a deal.

Managed stability is a good idea ... only problem with the FED system is that it's managed robbery ... lol, as we mentioned before.  So, I would love to work with some folks to design a more useable type of crypto-currency.  We could just start with a wish list.  Some items on my wish list are:

-clients that don't need to download the whole freaking block chain ;-)

-price stability (so I can put an item for sale on a web page and not have to adjust the price every other day).

-built in reputation features ... it could still be anonymous, but it would be nice to see that an address has done some deals and has some positive feedback

-built in escrow features

-backed by something else of value -- Bitcoin blazed the trail and it's not back by anything other than good marketing and perception.  Bitcoin does have value now, and so it could be used to back a new virtual currency.

What about you guys?  Surely Bitcoin has some features you would like to tweak, no?

I will focus on this quote, derived from your linked writing, as I think it sums up the point you're trying to make...


And during all this time, people used Bitcoins to gamble, buy drugs, cars, homes, or other things, build companies and invest in others, etc...

So what I really think deflation does is provide an incentive to critically think before going off and speculating, "investing", or wasting money on frivolous things -- because money will be worth more if it isn't trying to be spent as quickly as possible (mindset of the current wealthy elite in society). I think it truly helps those without the ability to invest (the less wealthy), as their wealth is not unknowingly being eroded as time goes on.

To be clear, I am in favor and would even prefer if both systems existed simultaneously, and each performed well in their own right. I am more in favor of competition in all things, than I am about Bitcoin specifically. It is the fact that fiat currency has no competition which makes me so supportive of Bitcoin, not that it is deflationary. (I also enjoy other features of Bitcoin but that is irrelevant to this lol)

Honestly, I wish we didn't have to use money at all... but a perfect world can never exist in this chaos.

this is long, but I would love to know what you economics types think about my layman's explanation for why we need some features of the Federal Reserve System included with crypto-currency:

http://mrmoneyhustler.blogspot.com/2013/02/a-tale-of-two-currencies.html

LOL yeah looking at it that way, you're actually right  Which is sad.. 

when you think about how much they've stolen, yes ... pretty d@mn genius

alas, we are on the brink of providing the benefit without the theft

There's genius in stealing? 

Greetings everyone,

...little confession here, I think I may be a Keynesian ... but I have thick skin so you can beat me up.  While I despise them, I see the genius of the Federal Reserve system.  I also believe that the federal reserve system is like a dinosaur now as we stand on the brink of a crypto-currency era.

Every economy needs two types of money: one to store value, and the other for daily trade.  Clearly for today's world we use fiat currency for daily trade and a host of assets to store value: gold, real estate, bitcoin, etc.   

Bitcoin is designed to store value and/or appreciate value.  Some have mentioned above how the rate of manifestation of Bitcoins is growing so much slower than the adoption and demand for Bitcoin, and is the situation that is leading to Bitcoin's rapid appreciation in value.  That appreciation affects human behavior and so we hoard Bitcoin rather than trade freely with it.   This is not a weakness of Bitcoin, simply the way it is designed.  It's purpose now, whether we all like it or not, is "value storage" not "trade facilitator".

Agree or disagree, but there is a huge opportunity in the crypto-currency world right at this moment.  We need a cryto-currency that is designed for daily trade.  It can be just as fair and open and free and anonymous as Bitcoin, but it does need to incorporate some of the, I dare say, "Keynesian" design attributes of our common fiat currencies.  With crypto-currency, we have the ability to take the art out of the FED chairman's job and solve the problems of currency/price management with computer code.

We need a cryto-currency that people won't tend to hoard.  It needs to hold it's value day to day, but generally decrease in value over the long term in a similar way as fiat currency.  The job of the FED can be accomplished with an open formula for all to see so that it is fair and people know what they are getting.  Money supply can be controlled in real time in response to several factors like "money velocity", "adoption rate", and whatever other economic factors that must be accounted for to keep prices relatively stable, yet slowly inflating.

Adding to the money supply is easy, but there is a need for a mechanism to pull down the money supply when economic conditions dictate.  So, we would need a reserve bank of sorts to store a valuable asset (like Bitcoin) and then sell off that asset when needed as a means of pulling the trading crypto-currency out of circulation when needed.

Does anyone have other ideas for actively managing the money supply of our new crypto-currency world?  Could we manage money supply in a decentralized way?  Could we make every client their own little central bank?

Carefully read what I wrote and try again. I am trying to neutrally define a term without any accompanying effect, not deny an effect happening.

From your OP on money supply deflation:
"so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate."

You are doing the same thing as the keynesian definition but to the opposite effect.

*I* am not claiming that money supply inflation has an effect one way or the other. *I* am defining a term without judgment or predilection. Before you can determine a value or a change in value, you need to know the demand or change in demand. The terms "money supply inflation" or "money supply deflation", in the clearest sense of the words, can only mean an increase or decrease in the money supply. That's the whole point of writing "money supply" in front of the words. Unfortunately and less clearly, "money supply" can mean the total number of individual undivided units (including the money multiplier for most measurements), or it can mean those units in circulation (this one, more often than not).

Either way, it is not a measurement of value. An example of the "right" way to use these terms:

The Fed expanded the money supply by 3.6% last year. That money supply inflation is believed to have caused most of the 3.1% price inflation over the same time frame, leaving 0.5% to real growth.

See how clear and direct that statement was? That's because cause and effect are clearly portrayed, and they can also be clearly argued for or against if necessary. The sentence asks, "do you have better data to refute this claim?" not "what kind of fuzzy logic can you come up with to confuse the average joe?" like what happens when the words inflation and deflation are tossed around naked.

To top this off: there are plenty of periods that actually exist in history where you could make this statement "The fed expanded the money supply by x% last year. That money supply inflation is believed to helped encourage the x+1% growth over the same period." Maybe they're not as common, maybe it's a sign of a bubble, but the fact remains that you cannot say for certain that the same cause always has the same effect. There are WAY TOO MANY VARIABLES. In the same vein, you can't be sure the same effect has the same cause. So the cause has to be separate, without bias and analyzed on its own merit.

By separating out money supply inflation/deflation vs. price inflation/deflation, your goal should be to clearly and simply define those terms--then use them to make the statement that you want to make (and make an attempt at being unbiased--do not make guarantees), not make your statement within the definitions. It is dishonest otherwise, but perhaps just misguided.

"Keynesian economic theory proposes that changes in money supply do not directly affect prices, and that visible inflation is the result of pressures in the economy expressing themselves in prices." -Keynesian view of inflation



Lethn, get out the way man! Let the trolls economists have their serious discussion, alright?

That's the thing though, you guys are getting trolled, by those damn neo-keynesians

You've been around here for all of 2 months and feel qualified to say that? You should do some more reading.

Please, the definition of inflation is not that controversial of a topic!

I have the feeling somebody is getting trolled here.

Didn't we already go over this? Money supply inflation means there is more money in the money supply than previously. Supply on its own has nothing to do with value (in a vacuum, admittedly), it is only a quantity; only when it is combined with demand can you determine a value or price.


So you are using the "keynesian" economic definition to make an argument? I thought this thread was about avoiding that. The gist of what people who dislike the contemporary meaning of inflation is that it is talking about an effect rather than a cause, something you have unfortunately not grasped in your posts, and really have fallen into the very trap for which the term is disliked.


I am capable and willing to use my brain to derive the meaning of the word inflation from the context. Around here, that is generally frowned upon because of something a monetarist once said that was misattributed to an austrian.