Topic: market effect of a catastrophic design flaw - page 2. (Read 12568 times)

Then you are just moving towards a trusted third party model.  Is suspect that all such models will be represented within Bitcoin by the time the Bitcoin economy is as large as half that of Paypal or the online segment of the credit card companies.

Yeah.  I feel like every thread eventually devolves into something along the lines of "how do we trust others creditworthiness?"  With regard to the options, yes I agree that shorter time-frames make more sense.  Of course a full continuum would be ideal.

I'm not sure I agree with this, unless you mean that the stakeholders will likely still consider their bitcoins to have value temporarily.  However, if it is well known, even amongst stakeholders, that a superior currency exists they will gradually migrate towards it (even if they tell each other otherwise).  Therefore, in the long run (could be days/weeks/years) bitcoins would become worthless, it might just be more orderly and gradual than instantaneous, but ultimately someone will be stuck with a bunch of worthless data (no offense to Satoshi and the devs).  And I'm just pointing out that this is not the case with a physical currency/commodity like gold.  Even if the entire world abandoned gold as a marketable commodity, the person left holding all the gold could still use the gold for something.  Gold still has a, albeit limited, use value even in the absence of an exchange value.  I can't come up with a use value for bitcoins if there is no exchange value.


I agree that this is the more likely scenario, at least in the short run.  So does this mean that by investing in bitcoins, we are basically betting on our collective ability to write bug and exploit free software?

I was thinking about options, not for 10 years, but more like 10 days. Maybe moving longer out over time.

They could go both ways, people who want to lock in a row rate in case value skyrockets and people who need to hold a bunch for some reason mitigating their risk with a guaranteed floor. Ensuring the worthiness of counter-parties is probably the biggest issue.

That would be impossible to quantify within a finite timeframe, but approaches 1 with infinite time.  A better question would certainly be, "what are the odds that Bitcoin survives for the 120 year inflationary period?"  I would, honestly, give Bitcoin some low odds at this point, for a number of reasons.  But that isn't really important for the adoption of Bitcoin in the present.  After all, the US FRN has not lasted 120 years yet.


Indeed.  If a true "matter de/compiler" were ever developed, there would likely never again be a need for a currency as such.  The 'scarcity' aspect of products sold for such currencies would be forever destroyed, and limited only on the availability of energy.


I would say, no.  If only because the timeframe for the adoption of any widespread technology does not occur instantly or equally across an entire economy.  Bitcoins my suffer via irreversable decline, but there would not be a sudden, or mass, exodus if the value was already reflected within Bitcoin.



Again, an unquantifiable risk over any finite time frame.  This would be vastly more difficult than, say, earthquake insurance; considering that there is no comparable precedent to base any calculations off of.  I would seriously doubt that any costumers could be found, even if the risk could be defined.

The risk of a vastly superior design would be unlikely to collapse bitcoin, because stakeholders still likely consider their bitcoins to have value -- and that's the fundamental underpinnings of any currency including bitcoin, shared idea of value.

It is more likely that a sudden bitcoin collapse could be triggered by a software flaw that permits trivial minting / generating / copying of bitcoins.

I apologize if this has been brought up before.  If it has, please feel free to merely direct me to the applicable thread.  As an investor, one of the hurdles I am having a hard time getting over is the following:  What happens to the market for bitcoins when/if a vastly superior design is found? What is the probability of an unquestionably superior design being found?

To talk about this, let's propose a hypothetical extreme.  Obviously, the technology for this is not possible right now, but I think it makes for a good argument, so please bear with me.  Let's say there is a new P2P currency that comes about, BitBox.  BitBox is a shoe-box and internet enabled device. Inside your BitBox are "goldbugs" which, when you put a gold coin, bullion, etc into the box they literally eat the gold and digitize it to be sent to someone else's BitBox.  Of course, that means that the goldbugs in the recipients BitBox regurgitate gold, but you get the point.  Essentially, what would happen to the value BitCoins if we could literally digitize/destroy gold in one location of the world and recreate it in another?  Assuming the existing BitCoin features stay in place that allow for a desired level of anonymity, I feel that many of us would prefer BitBox to BitCoin.  Of course, I know this sounds ridiculous.

So the question is this: if BitBox existed, would the market value of BitCoins literally drop to zero?  I tend to argue yes.  There would be a mass exodus from BitCoin over to BitBox (because BitBox has successfully bridged the virtual-to-real gap).  So, from an investing standpoint this is not good as the buyer's market for BitCoins would literally cease to exist, and anyone long BitCoins would be left with a very tired CPU and some worthless data.

Being an entrepreneur, I want to provide solutions.  Perhaps there will be a market for "design insurance."  This would be very similar to a Put Option.  What should the premium be for, say, a 10 year Put Option at the current exchange rate?