Topic: Is spending bitcoins an example of a prisoner's dilemma? - page 2. (Read 3566 times)

This is my plan, so I can show "something".
 
Every week I will spend/trade/whatever half of my bitcoins (I only have 8, so it's not like it's a big deal)
 
Every month that bitcoins rise in value, I will "cash" out at the end of the month if they've risen at all, even a dollar, and then start over.
 
I will always hold on to one, forever, in the off-off-off chance that they ever become worth a million each, at which point I will cash in that remaining one.
 
 
So this way, if their value ever plummets, I will have something to show for it.   If they rise in value, then obviously that will be better when I do my weekly/monthly sell-offs
 
I followed this and sold them all off when it hit 30 (all 13 of my coins, heh), and am slowly (very slowly) mining more for each weekly sell-off.
 
I would have done this if I had 100,000 coins or only 2 coins.  Of course I kind of wish I had had 100,000 when it hit 30

The more valuable bitcoins get, the stronger the incentive to spend them because of the risk that they will lose value in the future. It's the incentive to "lock in" your profits.

For example, a good plan would be to sell or spend  1% of your investment for every 5% rise in price. The one percent is the percentage of what you have left, not your original investment. That way, the value of your hoard goes up, you never run out of bitcoins and you get to spend some too.

Those with tens of thousands of coins actually have a strong incentive to spend them, becuase if they don't, and bitcoin fails, they gain nothing. If they spend half, and bitcoins succeeds, then the remaining half is a fortune. Same old; would you rather 100% of nothing or 50% of something big? I think that the more coins you have, the bigger the stakes are to make sure you have the '50% of something big'.

*edit* I guess what I'm getting at is, it's not all or nothing like your example (they dont have to spend all their fortune). I think the equilibrium would be to hedge your bets, which unlike the prisoners dilemma is actually not the worst outcome.

Hi,

A prisoner's dilema is a construct in game theory where there are 2 isolated prisoners and both are given the idea that if they testify against the other, they can get away. the dilemma is to cooperate with the other prisoner or to defect against him.

If neither testifies(defects), that is the best outcome for both of them(both cooperate) - there is no evidence. they both go free.
If one testifies (defects) and the other doesn't (cooperates), then the defector gets the good deal and walks free. The cooperator goes to prison.
If both testify, both go to jail.

The stable equilibrium is the one where both defect. (least value to all)

I feel spending bitcoins with merchants today is an example of the prisoner's dilemma. Those who are more well versed with economics and game theory, please correct me if I'm wrong.

If everyone spent coins (both cooperate) that is the best thing for everyone. The economy grows by more merchants entering, seeing the money spent and bitcoin gains prestige as an alternate currency.

If you spend coins, you're spending money that can earn you more of the same tomorrow. But you are cooperating and not defecting.

The people hoarding coins on the other hand are doing the equivalent of defecting by not spending, hoping for some other chump to pay up for the merchant, while their coin gains in value.

If everyone hoards, there is no currency to speak of.

Is this analogy correct? Where are the assumptions wrong?