It’s still your choice, you decide what it is for you. Nobody is forcing you to believe what you don’t want to believe about Bitcoin. This is not the first time I am seeing people say that Bitcoin is a Ponzi scheme. When I started investing in Bitcoin that’s what a lot of my friends were saying to themselves. I do understand that bitcoin is complicated for a lot of people, because there is no control unit, no building, no people, nothing at all to point at and say that’s what controls it.
It is just our faith that keeps it moving. So it’s difficult for most people to believe in it. But with how far things has gone, you don’t need anyone to tell you that Bitcoin now has a solid background.
Topic: Inflation and Security (Read 127 times)
Perpetual money machine
Bitcoin is a perpetual monetary system. It is a Ponzi scheme. It is self-contained and self-sustained. It relies on its rewards and fees to operate. There’s little external influence. That is good for decentralization. But we don’t have a good way to assess the price and the costs of running the network. If the price remains purely speculative, it could go up as high as people can imagine. The cost of mining would also go up as high as we can afford. It’s the Bitcoin Price Paradox. Bitcoin’s critics make a good point. Unfettered speculation can lead to disastrous energy spend.
Bitcoin is a perpetual monetary system. It is a Ponzi scheme. It is self-contained and self-sustained. It relies on its rewards and fees to operate. There’s little external influence. That is good for decentralization. But we don’t have a good way to assess the price and the costs of running the network. If the price remains purely speculative, it could go up as high as people can imagine. The cost of mining would also go up as high as we can afford. It’s the Bitcoin Price Paradox. Bitcoin’s critics make a good point. Unfettered speculation can lead to disastrous energy spend.
if you say so, try to give us a simple illustration of the Ponzi concept that you really understand, then relate it to Bitcoin? do not consume the article raw. if you are not a researcher, and do not know the procedures of scientific studies, it would be careless to generalize a concept into the Bitcoin creation system.
Simply put, can we get that conclusion simply through a review of your understanding?
Bitcoin's energy consumption can be a positive. It can throw money at green and renewable sources of energy, funding the future expansion of energy sources with a low carbon footprint, globally. There's no motive for cryptocurrency mining operations utilizing coal or fossil fuel based sources of energy aside from it being state subsidized in many regions. Hydroelectric, solar and wind are all cheaper and more affordable than coal at this juncture. The only reason coal is utilized in crypto mining is due to it being state subsidized in places like china.
Mining fees can be sustained by future increases in bitcoin's price. And improvements in mining hardware fueled by moore's law. Its deflationary nature, in theory, will drive demand. Which will in turn elevate price to maintain mining viability. I have yet to see an attempt at an argument for why deflationary currencies should be considered fundamentally flawed by design. Certainly we have political talking points which overwhelmingly support inflationary currencies. But aside from the politics, there isn't sound science that proves being deflationary is bad.
Mining fees can be sustained by future increases in bitcoin's price. And improvements in mining hardware fueled by moore's law. Its deflationary nature, in theory, will drive demand. Which will in turn elevate price to maintain mining viability. I have yet to see an attempt at an argument for why deflationary currencies should be considered fundamentally flawed by design. Certainly we have political talking points which overwhelmingly support inflationary currencies. But aside from the politics, there isn't sound science that proves being deflationary is bad.
An inflation-indexed security is a security that guarantees a return higher than the rate of inflation if it is held to maturity. Inflation-indexed securities link their capital appreciation, or coupon payments, to inflation rates. Investors seeking safe returns with little to no risk will often hold inflation-indexed securities. A common example are Treasury Inflation-Protected Securities.
An inflation-indexed security is also known as an inflation-linked or a real return security.
An inflation-indexed security is also known as an inflation-linked or a real return security.
What's your point OP? Do you agree with this article or not? Won't you tell us what you think about this article? If you believe bitcoin is a ponzi scheme then why are you promoting this crypto called Bitflate?
https://bitcointalksearch.org/topic/m.56522401
If you believe Bitcoin is a ponzi scheme than Bitflate is also a ponzi scheme.
https://bitcointalksearch.org/topic/m.56522401
If you believe Bitcoin is a ponzi scheme than Bitflate is also a ponzi scheme.
Is it a Ponzi scheme or an experiment? It can't be both.
When investors lose money then they call it the Ponzi scheme, and when they profit from it then it is an "interesting money experiment".
Critics argue that energy usage is wasteful. The existing system is way more efficient.
They are not critics in the literal sense of the word, they are opponents of any new technology that does not allow them at the top of the pyramid to continue to control everything around them. Let's say Bitcoin is completely switched to renewable energy sources and this is factually proven, does anyone think that these so-called critics would suddenly change their minds? The existing system will always be more efficient, or in other words more acceptable - the decentralization provided by Bitcoin is diametrically opposed to the current system, and will therefore always be criticized regardless of any aspect that could change for the better.
Bitcoin can be both a Ponzi scheme and a kind of money. It can also be wasteful and useful. It's a piece of technology that people use. So the outcome is dependent on how people use it. The debate will not end until we figure out how much we want to waste for its usefulness.
Is it a Ponzi scheme or an experiment? It can't be both.
When investors lose money then they call it the Ponzi scheme, and when they profit from it then it is an "interesting money experiment".
Critics argue that energy usage is wasteful. The existing system is way more efficient.
They are not critics in the literal sense of the word, they are opponents of any new technology that does not allow them at the top of the pyramid to continue to control everything around them. Let's say Bitcoin is completely switched to renewable energy sources and this is factually proven, does anyone think that these so-called critics would suddenly change their minds? The existing system will always be more efficient, or in other words more acceptable - the decentralization provided by Bitcoin is diametrically opposed to the current system, and will therefore always be criticized regardless of any aspect that could change for the better.
Bitcoin is a perpetual monetary system. It is a Ponzi scheme.
...
Bitcoin is an interesting money experiment.
...
Bitcoin is an interesting money experiment.
Is it a Ponzi scheme or an experiment? It can't be both.
Original Post: https://bitflate.org/post/2021/05/21/inflation-and-security.html
The Bitcoin bull market is here again. Everything is up like, Bitcoin’s price, the total network hash rate. As usual, the amount of criticism has also gone up. The energy FUD around Bitcoin gets louder. Bitcoin’s price directly impacts the amount of energy used in mining. The energy debate is black and white. Supporters argue that Bitcoin is an efficient monetary system, likely the most efficient. Critics argue that energy usage is wasteful. The existing system is way more efficient.
How much energy?
We know that any system consumes some amount of energy. The question is how much energy is efficient. It’s hard to compare Bitcoin and the existing monetary system. Bitcoin bull, Michael Saylor, recently discussed the topic on Twitter. Saylor claimed that the cost of securing the Bitcoin network is 1%. Future efficiency improvement can bring that cost to 0.1%. If Bitcoin is a 100 trillion dollar asset class, the security cost would be $100 billion at 0.1% and $1 trillion at 1%. Comparing this to running the banking system, military, Bitcoin would be more efficient at 0.1%. But it’s hard to decide when the cost is 1%. The difference is significant. A group of crypto researchers (Hasu, James Prestwich, Brandon Curtis) also published a model which recommends 1% inflation for security. Here’s the paper.
Bitcoin reward system is disinflationary. It inflates less and less. And eventually, Bitcoin’s supply has zero inflation. At that point, the incentive for miners transitions to a fee market. Miners no longer have block rewards. They collect transaction fees to pay for mining costs. At 0.1%, the fees may be too low to sustain miners. At 1%, the fees may be too high for Bitcoin users. The difference between 0.1% and 1% is significant. We don’t know the answer. The real cost of running a global monetary system may be higher. It could be 2%, 3%, or 4%. Anything higher than 1% is probably going to make Bitcoin too expensive and too inefficient.
Perpetual money machine
Bitcoin is a perpetual monetary system. It is a Ponzi scheme. It is self-contained and self-sustained. It relies on its rewards and fees to operate. There’s little external influence. That is good for decentralization. But we don’t have a good way to assess the price and the costs of running the network. If the price remains purely speculative, it could go up as high as people can imagine. The cost of mining would also go up as high as we can afford. It’s the Bitcoin Price Paradox. Bitcoin’s critics make a good point. Unfettered speculation can lead to disastrous energy spend.
Inflation and security
Bitcoin is an interesting money experiment. It seems to show that there’s a relationship between inflation and security. A self-contained monetary system needs some inflation to secure itself. It’s a perpetual motion machine. It needs to produce new rewards. As it grows, the amount of reward needs to increase. Otherwise, the system will deflate and collapse. The amount of inflation needed is related to the cost of securing the system. Gold has a 1.5% inflation rate. It didn’t work very well as money. The cost of mining and securing gold is more than the reward. Gold is net deflationary. One can argue that Bitcoin is digital. It’s more efficient than gold. So it needs less inflation. But Bitcoin will eventually have zero inflation.
The US Fed has an inflation target of 2%. This rate may work if the US dollar is a self-contained monetary system. But it is a global reserve currency. The 2% target rate may be too low. It creates to trade imbalance as countries are willing to trade goods for currencies. Trade imbalance leads to a distorted economy and political issues in the US. The long-term M2 average growth rate is 7%. Here’s the data. That seems to be the real inflation rate. One can argue that the USD system is inefficient. It requires a large bureaucracy, a banking system, and a military for security. So the rate of 7% includes high overhead costs. An efficient rate should be lower. If the system becomes more efficient, we can bring the rate down to 4-5%.
We can also model inflation based on the human population growth rate. If the population grows between 1.5% to 2% with 1.5% to 2% as the overhead cost, the long-term average money inflation would be somewhere between 3% and 4%. Bitcoin supporters are likely too optimistic. The system may not rely on less than 1% to sustain itself. Critics may be wrong about energy usage. A monetary system needs 3% to 4% inflation to sustain itself. Bitcoin’s energy usage within or below that range (1.5% to 2%) should be acceptable.
The Bitcoin bull market is here again. Everything is up like, Bitcoin’s price, the total network hash rate. As usual, the amount of criticism has also gone up. The energy FUD around Bitcoin gets louder. Bitcoin’s price directly impacts the amount of energy used in mining. The energy debate is black and white. Supporters argue that Bitcoin is an efficient monetary system, likely the most efficient. Critics argue that energy usage is wasteful. The existing system is way more efficient.
How much energy?
We know that any system consumes some amount of energy. The question is how much energy is efficient. It’s hard to compare Bitcoin and the existing monetary system. Bitcoin bull, Michael Saylor, recently discussed the topic on Twitter. Saylor claimed that the cost of securing the Bitcoin network is 1%. Future efficiency improvement can bring that cost to 0.1%. If Bitcoin is a 100 trillion dollar asset class, the security cost would be $100 billion at 0.1% and $1 trillion at 1%. Comparing this to running the banking system, military, Bitcoin would be more efficient at 0.1%. But it’s hard to decide when the cost is 1%. The difference is significant. A group of crypto researchers (Hasu, James Prestwich, Brandon Curtis) also published a model which recommends 1% inflation for security. Here’s the paper.
Bitcoin reward system is disinflationary. It inflates less and less. And eventually, Bitcoin’s supply has zero inflation. At that point, the incentive for miners transitions to a fee market. Miners no longer have block rewards. They collect transaction fees to pay for mining costs. At 0.1%, the fees may be too low to sustain miners. At 1%, the fees may be too high for Bitcoin users. The difference between 0.1% and 1% is significant. We don’t know the answer. The real cost of running a global monetary system may be higher. It could be 2%, 3%, or 4%. Anything higher than 1% is probably going to make Bitcoin too expensive and too inefficient.
Perpetual money machine
Bitcoin is a perpetual monetary system. It is a Ponzi scheme. It is self-contained and self-sustained. It relies on its rewards and fees to operate. There’s little external influence. That is good for decentralization. But we don’t have a good way to assess the price and the costs of running the network. If the price remains purely speculative, it could go up as high as people can imagine. The cost of mining would also go up as high as we can afford. It’s the Bitcoin Price Paradox. Bitcoin’s critics make a good point. Unfettered speculation can lead to disastrous energy spend.
Inflation and security
Bitcoin is an interesting money experiment. It seems to show that there’s a relationship between inflation and security. A self-contained monetary system needs some inflation to secure itself. It’s a perpetual motion machine. It needs to produce new rewards. As it grows, the amount of reward needs to increase. Otherwise, the system will deflate and collapse. The amount of inflation needed is related to the cost of securing the system. Gold has a 1.5% inflation rate. It didn’t work very well as money. The cost of mining and securing gold is more than the reward. Gold is net deflationary. One can argue that Bitcoin is digital. It’s more efficient than gold. So it needs less inflation. But Bitcoin will eventually have zero inflation.
The US Fed has an inflation target of 2%. This rate may work if the US dollar is a self-contained monetary system. But it is a global reserve currency. The 2% target rate may be too low. It creates to trade imbalance as countries are willing to trade goods for currencies. Trade imbalance leads to a distorted economy and political issues in the US. The long-term M2 average growth rate is 7%. Here’s the data. That seems to be the real inflation rate. One can argue that the USD system is inefficient. It requires a large bureaucracy, a banking system, and a military for security. So the rate of 7% includes high overhead costs. An efficient rate should be lower. If the system becomes more efficient, we can bring the rate down to 4-5%.
We can also model inflation based on the human population growth rate. If the population grows between 1.5% to 2% with 1.5% to 2% as the overhead cost, the long-term average money inflation would be somewhere between 3% and 4%. Bitcoin supporters are likely too optimistic. The system may not rely on less than 1% to sustain itself. Critics may be wrong about energy usage. A monetary system needs 3% to 4% inflation to sustain itself. Bitcoin’s energy usage within or below that range (1.5% to 2%) should be acceptable.
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