Topic: Is crytocurrency hyperinflationary? - page 2. (Read 5255 times)

You're missing the point. It doesn't matter if there are more countries, or if there were new countries created every day. Even if they make a new currency each and flood the market with bills, it wouldn't affect the price of other currencies. Same with bitcoins.

@emansipater

The Swiss dinar example you give is very interesting. Key points are the fixed (slightly falling) supply and wide recognition.

But also the lack of alternatives and (paper) cash economy. I suspect the Kurds have very little access to banking, foreign currency, and especially not internet banking or offshore accounts.

So it looks like a more or less closed system within their territory, with no meaningful monetary competition.

Thanks. I didn't know this on the transaction / security point.

I'll look at the other thing.

My point exactly on actually wanting something.

But let's say you have bitcoins or dollars. Bitcoins are strong and dollars are weak. Why buy your food with bitcoins? Much better to dump your dollars, until you run out.

In the long term, transaction levels and security are correlated.  If bitcoin stops being used, it will decrease in security and eventually go away.

Regarding a tangible real-world example of how currencies function when they are in limited supply and without a backing entity, see the so-called "Swiss dinar" in Kurdish Iraq.

New countries a rarely created or destroyed. Only after major upheavals. So the numbers of "normal" currencies are in more or less fixed supply, even if the quantity of "notes" of each of them isn't.

Cryptocurrencies can be created on a whim, just like bitcoin was.

So I don't think your analogy works.

NB you'll have more success spreading the word if you don't hack the arms and legs off potential converts.

They could be more successful if they were easier to use, easier to obtain.  Perhaps the distribution through mining was too steep with Bitcoin.  Perhaps someone creates a slick new client for theirs that is easier for casual users to have.  Perhaps someone markets it better.  I guess you guys are all on Friendster since why would anyone ever displace them since they were first to market.

You just reminded me of a great "Blackadder" episode in series 2, where Lord Percy tries his hand at alchemy.

He succeeds in creating a blob of "purest green".

Thanks.

You can make another currency based off of bitcoin, but it wouldn't have the economic backing that bitcoin does. It wouldn't have the network security that bitcoin does. It wouldn't be worth what bitcoin was worth, because it isn't bitcoin. That's like worrying that the US Dollar will hyperinflate because other countries make their money out of cloth with security features as well.

As for anti-trust, there's no trust or company to go after, just a protocol. That's like trying to break up gasoline burning cars because they're almost a monopoly.

All of these arguments are nonsense.

Especially, by the way, the deflationary spiral one. We've hashed that one over way too many times - learn to search, even just the wiki has a dedicated page for it.

Unless you had no alternative, or ACTUALLY WANTED SOMETHING.  Gee, I'll just live in a cardboard box hoarding my bitcoins since tomorrow they might be worth more.  I guess I won't eat today anything more than cat food and out of a dumpster since I have to eat something, but the I'll save the rest for the magical day that I actually want to spend my bitcoins.

This is my #2 worry, besides a government crackdown.  Might even be #1.  Imagine being able to instantly create something that was just like gold, but green.  Then purple.  Then red.  Then any other color.  And there was just as much of that to be mined as there was gold.  And then repeat 1000 times.  Gold isn't looking that great then.

Thanks this is helpful perspective.

You've just provoked another thought though. If bitcoin is super successful in the crytocurrency space, taking say 90% market share in 10 years time, then it will be time for the antitrust regulators to start getting heavy.

Maybe the technology makes this hard. Maybe the supranationality makes it hard. Maybe the de-centralisation makes it hard. But where there's a will there's usually a way.

Bitcoin hoarding might be an issue as well. Price deflation (measured in bitcoins) would make it a bad decision to ever spend them unless you have no alternative.

Lower transaction volumes would reduce its utility as a form of exchange. Then it becomes more of an investment tool than a transactional tool. Plus it would gravitate towards the hands of a few rich people, as with all forms of wealth since time immemorial.

The specific reason that cryptocurrencies like BitCoin won't proliferate without heavily differentiated features is security.  Blockchain-based systems become more secure the more people use them, so there isn't a very good reason to use anything but the most secure one out there.  This means that there are very few if any equilibria where similar cryptocurrencies will coexist.  I could see fiatcoins (nondistributed cryptocurrencies with single trusted government issuers like today's paper currencies) and bitcoin carving out separate niches, but for almost any feature that proves worthwhile in a distributed currency it's very likely bitcoin would just add this feature, immediately making that the most secure way to utilise it.  It makes very little sense for there to ever be a competing version of BitCoin unless it is fundamentally different in some respect.

None of this even takes into account the network effects of being already trusted, already accepted, software and services being available for it, etc.  Why weren't there many competing shell currencies in 19th century Africa?  Because only one made sense for a given society at a given time, despite the trivial possibility of more.

Good!  Such extreme changes in our economic systems are at best very speculative and much longer term (decades or centuries).

Who's to say. It would be organic. It will be fascinating to see how it works out. Unfettered libertarian capitalism, for now at least.

A niche would be a "success", but by definition not "huge".

My business targets investors outside the mainstream Wall Street advice. Many would even call themselves "fringe libertarians", including a lot of the people I work with. The guy I share office space with even calls himself an anarchist - basically a libertarian under his definition.

Anyway, it's a very successful niche. But we'll probably never have more than a few thousand customers worldwide.

Some of the stuff circulating about bitcoin seems to point to it replacing all fiat currency and taking over the monetary world. I've learnt quickly that I should ignore that and focus on more realistic aspirations.

OK, let's say you forked the bitcoin chain right now. Would you expect robm-coin to be more succesful than the main chain? If so, why? If not, why would other copycats be better off?

If you don't agree on a currency you can't trade, it's as easy as that.  Which means that it pays off to use a chain/cryptocurrency that other people use as well.

@forever-d

Put another way, bitcoin's success could sow the seeds of its ultimate failure.

Copycats and government intervention in other words.

There will always be people with more risk appetite.

How big would a niche have to be to be a "success"? Even if it targeted only fringe libertarians, there'd be enough of those on the world to keep it alive.

The current price might not be sustainable. But I'm pretty sure that BTC will eventually settle at some price.

This makes sense.

But if everyone does this then it never gains the network effects to make it successful.

So you still need a lot of people to take the plunge.

Not absolutist, just questioning.

I agree it could well have a niche that lasts for a long time. So not a "complete failure", as you put it.

But there just seem to be good reasons to believe it's unlikely to go mainstream, or be a "huge success".