Topic: LN+segwit vs big blocks, levels of centralization. (Read 8897 times)

Obviously, I'm not going to say anything to that tune

Velocity doesn't compensate for anything itself since it is the change that does the trick. So I don't know what you meant to prove but it seems not to be relevant to my point. Bitcoin is not stable because since it is made into "good" money of sorts. And Bitcoin is necessarily "good" because what opposes it is "bad" by its characteristics. In other words, it doesn't enter circulation because there are "worse" currencies out there. You fail to understand that it is a difference of kind, not of degree (if you understand what I mean). And if things are going to change (via payment channels or otherwise) and Bitcoin becomes "bad" money, its velocity will go exponential


You are quite dishonest here. I specifically clarified this point before, but you seem to have memory issues as well (in addition to your broken logic apparatus)

Well, is the price of bitcoin stable or not, the last few years ?  If it were to be a currency, then it should be some reliable form of unit of account.  It clearly isn't, its price is immensely variable, so that was "the proof of the pudding", that velocity is not compensating anything.

Ok, your answer will be that the price of bitcoin is NOT made by the demand one has for bitcoin to "buy stuff", but rather mainly for speculative reasons - but that's my point exactly: speculative reasons, so expectation of (significant) rise !  (severe deflation)


Again, *my decision to spend* is essentially what determines velocity ; not "how fast the interaction is processed/confirmed/...." unless it is this which hinders my possibility of spending.  In other words, suppose I do a normal transaction on the bitcoin chain, and it takes 20 minutes to get confirmed, say.  Was the receiver WAITING for these 20 minutes in order to spend this coin again ?  And would he spend it faster if it was only taking 5 minutes ? 

I don't think so.

As such, this "time of confirmation" is NOT what is limiting velocity.

I didn't quite decipher what you meant to say by this part

And still less do I think that it can count toward "the proof of the pudding". I just come to think that this "proof" is no more than a bunch of words correctly connected grammatically, though mostly garbage semantically. Regarding the impact that introduction of instant payments might have on Bitcoin velocity and, consequently, on both Bitcoin prices and volatility, that also remains to be seen. After all, we will walk into mostly unchartered territory after they kick off, so who knows how many times the velocity could increase if it is set to increase at all

Because, on my statement that "bitcoin cannot be a good unit of account, because given the fact that it has an essentially constant monetary mass, and is supposed to have a growing economy to buy by orders of magnitude, it will undergo a spectacular deflationary effect"

you gave a rebuttal that "velocity will compensate for the constant monetary mass to counter the deflationary effect of increasing Q by de inflationary effect by increasing V".

My answer to that was that you are right in principle that V has also an effect, but
1) that this is not an "orders of magnitude" effect (so can be neglected in our discussion - which I tacitly did)
2) there's not really an automatic mechanism that will adapt V so as to counter any deflationary effect from rising Q

But that was theoretical.  Now I come to "the proof of the pudding is the eating".
If it were true that all my theoretical musings were erroneous, and that your statement that the increasing velocity will render bitcoin a stable unit of account, were right, then in my above story, one would easily see that in practice, bitcoin IS indeed, or can be projected to be, indeed, a good, stable unit of account.  Which I take nobody will put his money where his mouth is, and never sign such a contract, formulated in bitcoin.

Why do you tell me all that (again)?

Or, rather, why do you not tell me what I specifically ask you? As I can see, you can explain your point in pretty laymen terms (via "handwaving" in your speak). So I guess you can explain how money velocity works at the level of "a cleaning company" as well, right? Regarding deflation, this is not my point again. Basically, I agree that a heavily appreciating currency is not very suitable for real economy (i.e. as a currency). I just pointed it out that instant payments could somewhat offset this appreciation via increasing money velocity. How much and to what degree remains to be seen and makes a point for further discussion. But it is no use discussing it until you can understand how velocity translates into inflation in respect to a cleaning company

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Oops, because of connection problems, double posting.

Ok, concerning "unit of account", there's in fact a way, way, way simpler manner to show you why an asset in a deflationary spiral is not able to be a unit of account.  Here it goes:

Suppose that I have a cleaning company, and that you have some offices you want to get cleaned.  Would you sign a contract with me, that you pay, say, 3 BTC (right now somewhat less than $5000.-, which we take is a competitive market price for the cleaning offer) every month for me to send you cleaning personnel to clean up your offices ; a contract that engages us for the next 5 years with all possible clauses, except, of course, any reference to BTC's value, because it is the "unit of account" ?

So could you engage in paying, for the next 5 years, 3 BTC per month for a given value of service ?
And would I accept ?

Assuming that both of us would do so immediately if the terms were $5000.- every month for the next 5 years ?

No, I'm saying that this formula gives a rather strict relationship between 4 quantities, *but doesn't describe their dynamics or causal interactions*, which has to be provided by another model (that has of course to be compatible with this formula).

Like I said, if I write that there is a relationship between the length and width of a rectangle, and its surface:

S = L x W

does this mean that it is the length that causes the surface or does the surface causes the length ?

You clearly see that this question is not answered by that relationship, and needs an extra model to be replied to.  For instance, if I say that my rectangle is a painted surface, and I use an externally fixed amount of paint, as well as a given width, I can say that the length of the rectangle is dependent on the given surface (amount of paint) and width.  If I decide to use more paint, the length will be greater.  If I decide to have a wider rectangle, the length will be smaller.  Length is a causal consequence of my choices of amount of paint and width.

However, if I decide to draw a rectangle and I chose the length and the width, then of course the surface is a causal consequence of my choice of length and width.

In other words, the eventual causal relationships or dynamical interdependence of the three quantities S L and W are not given by that formula, which only describes a relationship to be satisfied, but no causality or dynamics.

The same goes with  M.V = P.Q

This fixes a relationship between these 4 quantities, but there needs to be an extra model on their causal and/or dynamical interactions.  However, the relationship itself remains valid and is a constraint on any model that uses them, because no model can violate that relationship (within the boundaries of the derivation itself of the formula).  In the same way that, no matter what model one has about choosing paint quantity and width, or drawing rectangles, S = L x W must remain valid.

Oh, now you seem to agree that this formula is only a formula

That is, an equation, basically, and it only shows how things allegedly should be, not how they are in reality. Somehow this view defies what you have been claiming before. Many economic schools challenged that formula, and certainly not without reason. My point is that just this formula (or any other formula, for that matter) is not enough, actually nowhere near enough to understand what happens in real life. And you should understand the real life processes that this (or any other) formula is set to generalize, to make sane use of it (as opposed to insane as well as mindless and thoughtless)

There is absolutely no reason to assume that V is the result of the three others being causes.  In fact, you can just as well take the price P as the result of M, T and V.  In a way, this is somewhat more natural, because M, T and V could be seen as "controlled by external factors", and P as the "resulting market reaction" ; even though I agree that it is more complex than that, and P has its effect on T and V too, so you get a more involved causal relationship than this one, but look at it this way:

- M is given by the monetary system one is in
- T is given by the economic production (assuming that there is only one single currency buying up all of the economy, which is the assumption of Fisher's formula)
- V is determined by the habits of people keeping money or not (for instance, they could systematically spend their entire salary uniformly during the month, which would put V = 24).

The market will then settle for the prices of goods and services, P.

Too simple, I agree, as a dynamical model.  But here, we see how P would depend upon a fixed V that comes from a spending habit.

In reality, of course, depending on P, people will refrain or spend more, and hence modify V and T.  So it gets more complicated.

From the beginning of Bitcoin, everyone knows this p2p cash something would end up controlled by datacenters inevitably, and it's good.

But Blockstream wants to hijack Bitcoin's brand to do their thing.

It's absolutely unacceptable that Blockstream has controlled the Core group. https://bitcointalksearch.org/topic/m.18899256

That is what i said - V changes because of M,T,P or any combinations of those 3.

V is not an independent entity and hence it can’t cause anything.

The rest is mumble jumbo irrelevant rubbish. I have explained it all in my post - 06-05-2017, 18:52:00 (A) to (G) as examples - that all economists would understand except for you.

Ah, no, Fishers' formula is not a dynamical description of a causal relationship, in that it would determine that a given quantity DETERMINES another one ("independent" vs "dependent" variables).

In your example, 2 + 2 = 4  can just as well turn into 3 + 1 = 4 than into 2 + 1 = 3.

So, it is not because you change M, that V has to change.  It could just as well be P or Q.  The only thing that Fisher's formula does, is to establish a link between these 4 quantities, that is, only 3 of them can freely be determined by "outside" conditions, and then the 4th has no extra information, but is given by the 3 others.

In other words, Fisher's formula doesn't imply that if you change M (visibly, that means that you can determine M), V will change necessarily.

In fact, there is only a very specific case where changing M, will ONLY change V: that is when the newly printed M is not put into circulation.   This joke is essentially what "quantitative easing" was about.

In my earlier calculation, V = 1/M ( 0 . m0 + 1 . m1 + 2 . m2 + ... + n . mn).

Now, the trick to increase M in such a way that nothing else is affected, but V, is that the whole of increasing M goes into m0 (the coins that don't move).  Then V decreases proportionally to the increase in M, and P and Q remain constant.  In other words, when you print M, but they are never spent.


No, that is an extra constraint you put there.  If you say that the dependent variable is V, and HENCE that you start with the constraint that P, T and M are a given, then of course, you cannot conclude anything about any effect of M on P or T, because you decided yourself that P and T were independent !  So no cigar.

As I said, IF that is your starting point, then the only thing that happens is that the newly printed coins, increasing M, are never put into circulation (all go into m0).



Exchanging bitcoin into fiat is NOT considered into Fisher's formula (well, you can, if you consider fiat another kind of economic good or service, but that's not really the idea ; Fisher's formula works essentially for a closed economy with only one single currrency).


Of course the dollar, the Euro etc... are much, much, much more constant than bitcoin !  Moreover, these are units with a target inflation, so you should correct them with an a priori established inflation (for the Euro, this is 2% per year normally).  
Once you do that, you get percent-level changes over a few years.  The price of a big mac, three years ago, is quite similar to the price of a big mac today.  We will be within an error of less than, say, 10%.

So if I provided a service, worth 200 Big Macs 7 months ago, and I got $ or Euro or ... for it, then, after taking into account the small predicable inflation of 2% a year, I will more or less be able to "displace in time" these 200 earned 200 Big Macs to today.  I can *plan* and *account* for that on the short and medium term.  Yes, these currencies are not perfect, and there is a small uncertainty, but I'm talking on percent-level.  Essentially, I'm quite certain that the $$ or Euro or ... I get for my service 7 months ago, is going to pay for a similar value right now, or vice versa.

This is not the case with bitcoin (or any other highly speculative asset) because it is not a reliable unit of account.

I know that the argument is that big fiat currencies have less volatility because they are simply bigger markets.  No.  They are better units of account because there are MECHANISMS IN PLACE that try to keep their value on a desired inflation curve.  These mechanisms are not perfect, which is why there is volatility remaining.  But at least there is a system in place.  "sound money" collectibles have, explicitly, no such feedback system, and are hence totally devoid of stability.

Look at BTC: 20% change in 7 days !  No "unit of account" can be so unstable.