Topic: Scaling bitcoin to world economy is unrealistic. - page 2. (Read 10147 times)

I haven't read the thread but in general I agree with this line of criticism.

Specifically, though, instead of thinking about anyone becoming a trillionaire, just consider what it would take for Satoshi to become as wealthy as Bill Gates.  That's not such a ridiculous outcome.  If we assume, generously, that Satoshi has 1 million Bitcoins, then for him to be worth $60 billion dollars, the value would have to rise to $60,000.  That would make anyone with 17 Bitcoins a millionaire.

It is not necessarily what people do or do not want, but the nature of money. There are many, many things that exist as stores of wealth, there is only one that works really well for trade--and I just mean money in a general sense. Bitcoin has to compete with all the other stores of wealth and loses almost all of its utility in trade in the face of a "better" cryptocurrency, whatever that might be. It is indeed the newest users of bitcoin that are always taking the risk that the demand for bitcoin will increase, or at the very least stay stable. At what point will they decide that the risk is no longer worthwhile?

It's an impossible call to make that any currency will remain around forever, in which case there will always be people left holding the bag. But as I've stated in various posts and in various ways, there are fundamental flaws with bitcoin that will make it very unappealing to new markets when the free market gives them a choice in the matter. People won't use gold loaned from the king's vaults while silver lies around simply needing to be dug up. A bad analogy, but close enough.

Will you change your thesis if it turns out that people do not, in fact, want what you think they "should" want, or will declare your theory to be perfect and blame the world?

That is not what I said. Although it was a harsh criticism, it was referring to people that want to hold on to the idea that a currency will ever appreciate and that no one will be left holding the bag. But people will be left holding the bag if something legitimately better comes along. I was trying more to point out the flawed idea of bitcoin in the face of competition. Bitcoin has no way of competing against a currency that actually promotes trade. Maybe it will be a store of value compared to fiat, but it will unlikely be a better store of value than a better cryptocurrency, because few will want it over the better one. It is speculation though.

All you see are the benefits of a fixed currency, then you talk about how gold led us to the situation we are in. Why would bitcoin be so different? Because it is cheaper to transact in bitcoin than in real gold? The story is not so simple. There is currently a hard limit on the amount of data each block can have; this leads to rising transaction prices. Bandwidth usage for bitcoin is horribly inefficient; this leads to higher transaction prices and fewer people serving the network which means less competition which is never a good thing when it comes to prices. Most people will argue, "well then there will be a banking layer on top of bitcoin! This solves everything!" Except then fractional reserve and digital/paper money becomes easy. And people will accept it because interest rates will be lower. High tx fees and high interest or low tx fees and low interest?

Although there is not much study into the topic, I think that fractional reserve had a significant impact several centuries ago in bringing about the merchant/middle class. Suddenly, the productivity of people was able to be utilized not because there hadn't been enough money prior, but because the money was not being allocated (invested) efficiently. This can be seen in every economic depression. The supply of money didn't disappear during the great depression, it was just nowhere to be found in the hands of the general populace. Prior to FRB, the vast majority of the world's peoples were slaves, serfs, or some other low caste. Why is that? Because gold stayed in vaults or kings and emperors controlled their fiat.

So bitcoin is at stage 1 of gold: making kings, pharaohs, and what have you. But I see no real reason why it would veer from the same path. And that same path leads to present-day economics where banks have amassed the entirety of all the wealth in the world and loan it back to us on their terms. They pay the politicians to write laws that benefit them. They control the media.


Who says the people with the new money will be any better than those with the old? Hopes and wishes?


You forget about the gigantic industry called lending. The goldrich couldn't introduce more money either, yet many of the wealthiest of wealthy families from several hundred years ago are still the wealthiest of wealthy families today. If there is no way to produce new currency, then you must borrow it at interest. This of itself is not necessarily the biggest problem; the biggest problem always arises when those with the money decide to stop lending. Then everything melts down and the richest of rich profit handsomely off the misery of others.


I don't see how a stable value guarantees no risk. Is this a comment toward my proposal? People still would have to accept the value of a thing.


I think that anyone who thinks gold was a better currency than fiat does not know their history. They are both bad. And with the perfect information available to us via a cryptocurrency, it is an awful shame that the creators of bitcoin sought to emulate it so closely. I think, like Friedman and other monetarists, like Hayek and other Austrians, that inflation only occurs when the supply of money exceeds demand. There are two flaws with central bank policy: 1) New money goes to those who already control the wealth (banks), 2) the central bank has little idea what the real demand for currency is or how to put currency where it is needed. Both of these problems are fixed in the Decrits proposal. It also gets rid of the need for FRB and the potential vanishing money that comes along with that. And I think, given that it becomes reality, the general population will be much more willing to use a currency that rewards trade rather than old/new wealth. It would be a direct competitor to bitcoin, and bitcoin would lose because it will have to convince people to buy in to the same old shit. When people have a choice in the matter, this will work until you run out of stupid people.

If it isn't me, it will be someone else, and bitcoin will be a long-term losing proposition for the vast majority of people.

@ Etlase2 thanks for putting the spelling mistakes aside,  

Keynesian vs. Austrian - the world isn't one or the other, but my understanding I world lean more credibility to Austrian economics. All I just see is the benefits of a fixed currency.  Gold just leads to gold backed paper which leads to free banking which just leads to central banking, which leads to fiat , Bitcoin is a paradigm shift.

I don't think Bitcoin is sound money, I think it could be a ponzi, but for the fact people are using it as a medium of exchange just like people use money.

yes you could say that, it looks like the same end result at this point in time, but model the Cantillon's principle mathematically and it is a transfer of wealth from the old money to the people with new money.  

Bitcoin is different, the BTC doesn't transfer to the Bitcoin rich every time new coins are introduced. And I too have a problem with the new wealth distribution but once the Bitcoin Rich spend the coins, they can't introduce more they are gone. So to stay Bitcoin Rich you have to contribute to the economy to get new coins. If you are able to get them all they will be worthless.      

If the value is stable then the risk of the early adopters is quantifiable. Early adopters are guaranteed a benefit.   Hording pays off.
If the value is unpredictable then the early adopters have risk. Early adopters are not guaranteed a benefit, so they have to balance the risk. Selling Bitcoin pays off.  

if Bitcoin was guaranteed to be a success the statement " Scaling Bitcoin to world economy is unrealistic."   Would have some merit, But if that statement were fact, it would not scale and the early adopters would not benefit in a disproportionate way. But Bitcoin does have merit and the market is trying to price it, I am not sure if it can technically scale, but I am not worried about users scaling. I have assessed the risk and invested I stand to triad out for a lot of wealth or lose a little money.  My wife thinks I will lose a little money. What do you think?

I think a more appropriate title would be: "Is the idea of Scaling Bitcoin to world economy unrealistic?" and I haven't seen an argument that suggests it isn't?

Sorry, but I'm going to correct some of your English mistakes because it's starting to bug me as they are really bad for someone who seems to have a fairly good grasp of the language. "Trade" not "triad". I don't think that anyone has called bitcoin a ponzi scheme in this thread, though I could be wrong and I don't feel like checking.


Distills, Austrian (it's from Austria not Australia). And I'm getting tired of Austrian economics being used to back bitcoin. Mises specifically may have liked the idea of deflation, but Hayek for example, did not. It is not a matter of deflation = austrian and inflation = keynes. This is deceptive and tired. Most of Austrian economics has to do with government (and ergo central bank) policy. Not even all of them can agree on fractional reserve banking.

So yes, Austrians would agree that bitcoin is good because it is free market. Austrians would not (universally) agree that bitcoin is good because it is deflationary. Austrian = free market, Keynes = central bank policy. Just because bitcoin is a free market currency does not mean it is some ideal, Austrian wet dream of a perfect currency. And arguments that favor bitcoin should compare bitcoin to a potential free market competitor, not fiat. ("Could bitcoin be better than it is?" not "Is bitcoin better than fiat?")


You spelled it wrong. Again you associate a fixed supply of money with Austrian and an inflating one with Keynes. Austrians would be quite happy with regional bank currency competition I think, which without a doubt inflates the money supply. The statement I bolded is akin to saying "there were no money controllers in the gold world." That is an incredibly naive point of view that flies in the face of facts about both gold and bitcoin.


You make the premise that bitcoin is sound money, but you offer nothing to back this up with. The topic of this thread is that, hey, maybe it isn't so sound. Ignoring that and assuming that it is defeats any point of discussion. You've won the thread without even trying (except, you didn't).


"Furthermore, [Cantillon] posited that the original recipients of new money enjoy higher standards of living at the expense of later recipients." Isn't that precisely what has happened with bitcoin? And will continue to happen for each new market that adopts bitcoin? The only time this wouldn't be the case (where bitcoin inflates the existing supply via entering markets) would be when bitcoin is used as currency in almost all transactions around the world. And when or if that is ever the case, you fall back to "who controls the money supply?" And that will of course be the bitcoin bankers, just like the gold bankers. And the cycle of shit money continues because bankers control the money rather than the people.


How does stability give hoarders charity? I don't follow that at all.

Good point, but you have to consider the free market.
It is not going to happen overnight.

The fact remains, If no economy grows to support that kind of value then Bitcoin is a ponzi and the investors / suckers (demand for high value Bitcoin) will dry up.

The market result of a ponzi is the price will crash to $0

Bitcoin is not a ponzi for 2 reasons.
1) People do uses it for trade. (tnx Etlase2) (Silk rode reportedly does $1,900,000 per month in trade.)
2) It is such a good idea whose time has come (meaning benefits for users - all resulting from sound money) - this point alone puts it on par with the wheel; farming; the printing press; the internet.

note:
2) is the only point worth debating  and that distils down to Australia v Keynesian economics.
To be insulting I'll spell it out ( Austrian = 1+1=2,  2+2=4,  4+4=8... tangible mathematics, the only social since is the practice of humans imperfect decision making process:  eg. are 2 gold nuggets worth 1 dead deer, everyone throughout history and in the future will have has a radically different answer to that depending on their circumstances.)
(Keynesian = 1+1=2.3 [it the central authority thinks you have too much, or 1+1=1.8 if the central authority thinks you should spend more] Keynesian Economics becomes infinity complex over time and distorts the free market, the central authority doesn't = a benevolent government; it = the money controllers (by contras there are no money controllers in the Bitcoin world.)

The other technical argument for point 2 is, can you cracks the mathematics behind the system and cheat it?

To get to the point of the ponzi  (let's say I understand the economy of goods traded to be in the realm of  $1,900,000 per month) - I don't know how to calculate the total Bitcoin value based on the total number of people trading goods and services by the frequency of trades and by the relative value associated with those trades (the subjective value defined in the eg. 2 gold nuggets are worth 1 dead dear)  but by conventional methods it looks like Bitcoin evaluations is already overvalued by more than 1000% based on Silk roads GDP.  (i know it isn't the only measure for economic base just an illustrative example)

Now the irrelevant actual value aside, how valuable is sound money to the population of the world?

I know our current money system causes global poverty and concentrates wealth in the hands of the few by use of a sound logic derived from the Cantillon Effect, unless someone can in a pleasant and fun way convince me I am wrong through an argument based on logic, this is a fact the people just need to be educated.  

Now is 1BTC worth 2 gold nuggets - I don't know; only silly humans like me can make that choice for themselves.

I think by my calculation Bitcoin is undervalued in relation to the benefits it brings. But if you fears or concerns are true then Bitcoin will be horded and no economy will develop and if that happen there will be no value to the population of the world, and Bitcoin will resemble a ponzi and collapse.

If it collapses it will be worthless to most, and very valuable to the people who participate in the Bitcoin economy, and so the ponzy will start up again because it is a good idea not just a Ponzy and this cycle will go on and on over the next 3month 5 days and 16 years, at which point it will be worth $1302.58 + in today dollars.

So if the hoarders mess it up they loos, while it may not be a specific design feature, it does enable a free market, and that is a feature of the free market. IE. a corrective balance. The market will insure Bitcoin becomes viable, we don't want stability as you point out that gives the hoarders charity.

We want believers in sound money; and it is not the responsibility of the Bitcoin community that is Ben Bernanke's job. The Bitcoin communities job is make sure it is sound money - a P2P system that can't be cheated, and can never inflate past 21,000,000

I am much more worried about security protocols of the users 
... and that's why I think that it will remain forever a geek's money -and maybe it's better that way-.

Anyone using money today has to trust technology anyway. Might as well make the money ours as opposed to using someone else's digits flying across the wires.

No one has identified a flaw that I think is serious.
my biggest worry is there is a security flaw in the protocol; (here the correction is motivated by enthusiasm for the system.)

So yes there is risk.

But most of the issues raise here were once concerning for me I now think of them as benefits.

Chart of the day, from http://feedproxy.google.com/~r/RunToGold/~3/6kn8JveK2c0/

You put way too much trust in technology. I mean, what do you mean exactly by "all the problems self correct "?
Bitcoin has some specific features but that doesn't magically make all problems self correct.

Who's going to spend when they can have a ROI of 900% in 5 to 10 years?
Or even a ROI of 9000% if they wait a bit longer?
There will bot be enough of an economy to justify a large scale use of bitcoin.

Earlier there was a post that bitcoins could not be taken by force. I disagree. You simply transfer coins to a different address that you don't control, under threat of force (whether that's you or someone else.) Because they know you control a certain amount of bitcoins and can easily verify in the blockchain.

So the rule now is to protect your identity against your public bitcoin addresses so that people (like bad guys) do not know how much you really control.

As to scaling, I conservatively predict $100 per bitcoin in the next 5 to 10 years, then $500 to $1000 in the next 10 to 15 years. The number of people adopting bitcoin would be in the range from 100,000 people to maybe a few million people (like a small country) within that time frame.

You wouldn't be hoarding bitcoins because people would be spending them to buy stuff. But you'd accept them from others in exchange for fiat money.

The flaws of bitcoin, of course.

There is one big difference with a fixed currency like Bitcoin, this will happen but we won't end up with the poor we have today.

An increase in the money base (money inflation) transfers wealth from the working class to the money class by means of the Cantillon Effect. It is not an ideology of Bitcoin users that prevents this, but a biproduct of a fixed money supply.

Cantillon Effect.
When the money supply is increased it affects relative inflation. That is the disproportionate rise in prices among different goods in an economy over time, that will benefit those who are first to receive the money and diminish the wealth of those in the economy who have to experience price inflation before earning the new money.

This was my big problem with Bitcoin, think about this. The success of Bitcoin is not guaranteed, it has to succeed in a free market system. If it is horded and not distributed it will die. If anything goes out of balance it will die.

But being so well designed all the problems self correct you don't have to do anything except depend on your greed to make it succeed.

IE. Sell your Bitcoin when you think the system is about to fail (and so will all the other greedy people in this community.)   If it really looks bad and I am sure it may, the "old" coins will flood the market too. If things stay healthy the people will continue to save.  And if you see benefits in buying Bitcoin buy some, that benefit you see is part of the distribution process. You must not buy in to Bitcoin if it is going to fail, because that would be charity for those (clueless Austrian cripto, anarco egnaramuses.) of us that understand the problems with the fiat system.

We are all investigated in it, what is there to hide?

I will go one further and say most of the value is comparable to a ponzi.
The economy needed to justify the current value has not developed yet, leaving a collapse as a viable option.

There is the economic circumstances in which Bitcoin has been developed and don't be fooled the timing is perfect.

Humans has to evolve so far as to adopted the wheel. Those idiots who thought it a fad all had to come around and pick it up later or fade away to Darwinian selection. Bitcoin will be that wheel, and if it isn't, I still have faith in Darwinian selection,  and my kind will disappear.