Topic: The current Bitcoin economic model doesn't work - page 5. (Read 96392 times)

I think it will be the best just to ignore him.
He is either trolling us, he is some kid, or his fucked up & overgrown ego won't allow him to ever to listen to anybody but himself.

This thread is a total waste of time.

With Three Letter Acronym MAGIC of course! They are wizards, don't you know?

But how can you lure the other nodes into accepting a brand new blockchain?

Nobody said anything about them accumulating a certain % of the network's processing power. I was talking about them developing a whole new fake blockchain thus luring the honest nodes into accepting their new fake blocks instead of the genuine ones.

The problem isn't in my understanding of the specification, it's in your ability to read.

+1

Thanks. Are you sure you won't be back shortly to waste our time while increasing your Linux pride with even more post count?

If you would understand the specification, you would know that this is impossible.
Even if CIA accumulates 90% of network's processing power, transactions will still confirm. Much slower yes, but they will.
.
.

Playing "smartass" without understanding anything is the domain of the mindless.
So it is clear who is mindless here.

I have no more time to continue this idiotic & fruitless discussion, I'm outta here.

Ah, so freezing the transaction confirmations, thus preventing anyone from spending their money isn't such a big deal huh? I see you're not as smart as your post-count.

Right. So a cow with 1015 decibel noise which moos just for the purpose of mooing probably gives less milk than most.

And I support the idea of creating a bigmouthie forum for bored Hero Members who're desperately trying to increase their post count even by babbling fruitless nonsense.

You talk much, but you really understand nothing about the protocol.

We have a saying in my country, which roughly translates to "A cow which makes a lot of noise, gives little milk". And that is the problem in your case.

BTW, I support the idea of creating newbie forum subsection for such foolish discussions.

The only thing they can do with a longer chain is double spend their own coins or prevent the transactions of others from confirming (as long as their chain is always the longest, harder than it sounds). In order to spend other people's coins you would have to break the ecliptic curve digital signing algorithm, or specifically curve secp256k1.

How easy it is to hypothesize about Bitcoin's susceptibility to attack without even understanding how it works.

They don't need to break anything. If I understood the crypto design correctly, they only need to have their computers working collectively to produce an identical but longer proof-of-work which honest nodes would then endorse. I'm almost certain they started producing it much earlier than now so they'd be ready to launch it once there's a political decision. They'll also probably blame it on Iran, Anonymous, or the imaginary Al-Qaeda for the lulz.

LOL. So they've broken ECDSA (or at least secp256k1) and SHA-256? No, I don't think so, this isn't a made for TV movie.

We don't need The CIA doesn't need to post anything to ruin the project. They have I'm sure they have a fake proof-of-work ready to launch whenever they feel Bitcoin has grown too dangerous. One extra block at that chain's end transferring everybody's money into the CIA account is all what's needed for a clean game over.

OMG, this thread is still going...

I'm starting to think this is a deliberate action to weaken the faith of some people (read: n00bz) in Bitcoin.
Since CIA already admitted its interest in Bitcoin, this is a likely scenario.

Of course, it is not going to be successful. Market verifies everything. People can discuss all the time and even write essays, but the market will verify their claims.

I admit that destroying bitcoins is not easy to accomplish in my proposed bitcoin-generating system. I suggested two possible solutions in my post above, you might be able to find a better solution.



In my understanding, your idea for the value of bitcoins is the following:

If more goods/services/other are added for exchange with bitcoin, bitcoin's value go up.
If less goods/services/other are added for exchange with bitcoin, bitcoin's value will go down.


In my understanding, my proposed system works like this:

If more goods/services/other are added for exchange with bitcoin, bitcoin's value stays the same.
If less goods/services/other are added for exchange with bitcoin, bitcoin's value stays the same.


I own bitcoins now and i expect there will be more goods available in the future that can be bought with bitcoins. I will not exchange my bitcoins for these goods, as they will continue to gain value. For a currency, in my opinion it is important that it has stable value.


alexk

People who do not understand money can say the dumbest things.

Gotcha BTC yet or just here to troll away happily?

That sounds like a sensible conclusion. I think it all depends on what's being done with the printed money. I would be perfectly fine to hold a decent amount of internet money if I knew they are the result of charitable giving, that is most or all printed money were exchanged for dollars that were spent to make the world a better place. If they are abandoned by the market and end up valueless, it's as if every holder of the currency was forced to foot the bill of the initial charity giving - not so bad overall.
OTOH I believe most people will reject money backed partly by a huge electricity and resource waste, partly the result of early speculators getting rich.


Taxing those who trade to the benefit of the hoarders seems like a bad way to regulate the business cycle. It either leads to an economic downturn (people stop economic activity of fear of being taxed), or a rush to get out of the bad, taxy currency and into a better medium of exchange, the hiperinflationary spiral I was warning about.


Sure, but both the price index and the amount of 'economic activity' (MtGox swaps) are imposed externally, by the speculative interest spurred by Bitcoin. So these are the causes of the effects on the other variables, and since they are unpredictable, as all speculative bubbles are, it can't lead to any meaningful conclusion over the Bitcoin economy.



My macro intuition would call any increase in the apparent velocity to be a sign of coming inflation, so the macro model would move to reduce the liquidity, increase the value, create deflation and reward those who hold assets, who are thus incentivized to collude and manipulate the apparent velocity and game the system.
If I'm wrong and you are looking to do the opposite, then the system can be gamed by those who don't own the money they are moving, for example debtors or traders. I could borrow 2 million BTC, buy 1 million BTC worth of gold, then use the spare 1 million to game the system, devalue BTC by 10% in relation to gold, sell back the gold for 1.1  BTC, repay the 2 million and pocket the 100K BTC.
So any reliance on the blockchain for macro adjustments can be gamed by debtors or savers, and can't be countered by the the opposite party.
I wouldn't discount such an influence: if the average BTC changes hands every week - month or so (GDP/M1), the manipulator could spend it in every block, 1680 time a week. So the manipulator can increase the apparent velocity by 10% if he holds only 0.006% of the money supply.

In conclusion, the correct way to achieve price stability is the good old method: aim for constant price for the Bitcoin Standard Commodity Basket which is hereby defined to consist of one alpaca sock, four large carrots and two pizzas.
I doubt inflation estimation can be automated and made 100% reliable and mechanical.

I would rather know by bitcoins exchange value what my bitcoin's share in the total number of bitcoins value are than having to do an additional calculation by calculating my number of bitcoins divided by your now changing number of bitcoins and multiplying that by the exchange value to know what my bitcoin's share in the total number of bitcoins values are.

If more goods/services/other are added for exchange with bitcoin, bitcoin's value go up.
If less goods/services/other are added for exchange with bitcoin, bitcoin's value will go down.

And actually you need to account for the bitcoin expansion already issued to bitcoin generators as well.

So if more goods/services/other are added, for exchange with bitcoin, than bitcoins are issued to bitcoin generators, bitcoin's value go up.
So if less goods/services/other are added, for exchange with bitcoin, than bitcoins are issued to bitcoin generators, bitcoin's value go down.

Alexk:

In essence what you want to do is to transfer the risk/reward of holding bitcoins from the bitcoin holder to the bitcoin generator.  Which is not fair - if you dilute bitcoins, by issuing more, you are punishing bitcoin holders and rewarding the bitcoin generators you are issuing it to.  If the goods/services/other in offered in exchange for bitcoins diminish and the rate of exchange with it - from whom are you gonna retract bitcoins to enable a stable rate of exchange?  Are you only going to retract it proportionally now from all the bitcoin generators who might not even be bitcoin holders at that stage - or are you then going to punish the bitcoin holders and retract it proportionally from them - which would not be equitable because you did not issue more to them when the inverse scenario hold true?

Under the bitcoin's generation system, a bitcoin generator are rewarded by the bitcoin expansion which is quite substantial at present, and which will diminish over time, and minimum transaction fees on a massive amount of transfers will become a replacement for rewarding bitcoin generation / network securing.

Thank you for your reply and for thinking about my proposed idea. This is a very good point.

As you correctly point out, if the number of transactions in the bitcoin economy is decreasing, with my proposed idea the number of bitcoins generated per block would have to be negative. Then there is no more incentive for the miners to let their computers run.

One simple solution would be to set a minimum of 0 created bitcoins per solved block and accepting light inflation, if the bitcoin economy is shrinking. As i don't expect the bitcoin economy to shrink very often, this might be feasible.

Another solution would be, to take some fraction of the transaction fees, that are awarded to the successful miner and remove it from the system. The miner would still get a positive return on a solved block.

There might also be some better solutions to this problem.



In my understanding, the goods in the equation of exchange can be anything that anyone is willing to sell for bitcoins.



Ok, i see how manipulations can be made to this system. For this to be possible though, one has to have a huge number of BTC and must be willing to manipulate the system for more inflation. I don't see how these two requirements can go together.


alexk

And still his Eureka moment did not come  

Thank you for the permission to try and shed light on the matter for you.

After proving a tautology (the Equation of Exchange) in a previous post to you, this is taken as truth, fact, cast in stone (without further assumptions):  M x V = P x Q     -- Simple mathematics, logic and common sense - you can not change it - unless you live in a different distorted reality.

If
M x V = P x Q
and %... means % change of ... ,
as an approximation, this equation may apply:
%M + %V = %P + %Q

Current M = 6,448,200 BTC ( http://www.bitcoinwatch.com )
From 17 August 2010 to 5 June 2011 (292 days):
bitcoin medium of exchange rate _{292 days ago} = 0.07 MtGUS$ / btc Close rate ( http://bitcoincharts.com )
bitcoin medium of exchange rate _current = 16.70 MtGUS$ / btc Close rate ( http://bitcoincharts.com )
In the bitcoin system for the previous 292 days, the following will be
M expansion _{past 292 days} = 50btc/10 min x (6 x 10 min / hour) x 24 h / day x 292 days = (50 x 6 x 24 x 292) btc = 2,102,400 btc
For the past 292 days:
%M = (M expansion) / (Current M - M expansion) = 2,102,400 btc / (6,448,200 btc - 2,102,400 btc) = 48.3777%
%P = (bitcoin medium of exchange rate _{292 days ago} - bitcoin medium of exchange rate _current) / bitcoin medium of exchange rate _{292 days ago} = (0.07-16.70) / 0.07 = -237.57143 x 100% = -23,757.143%
%V = 0 assumed

To calculate %Q:
rearrange above equation to:
%Q = %M + %V - %P
substituting values for past 292 days:
%Q = 48.3777% + 0% - (-23,757.143%) = 23,805.5207%

%Q is the percentage change of goods/services/other offered in exchange for btc.

To calculate the demand for M for past 292 days:  Take %M as zero additionally and substitute into formula to calculate %Q (as %Q - change in goods/service/other offered in exchange for medium of exchange, should equal the change in demand for medium of exchange in a system where the medium of exchange stays constant, the velocity of the medium exchange stays constant and only the value ratio between the medium of exchange and the goods/services/other offered for exchange changes together with the quantity of goods/services/other offered for exchange with the medium of exchange changes):

So %Q = %M + %V - %P
substituting %M as 0% as well together with prior values:
%Q = 0% + 0% -(-23,757.143%) = 23,757.143%

this is however a distortion because %M were taken as 0% and not the correct 48.3777%.  If the medium of exchange did not suffer expansion - the inverse of 48.3777% would have been included in %P in the system and %P would have equaled %P = (-23,757.143%) - 48.3777% = 23,805.5207%

substituting these values in %Q = %M + %V - %P gives:
%Q = 0% + 0% + 23,805.5207% = 23,805.5207%

In other words the change in goods/service/other offered for exchange (%Q) for the medium of exchange (M) will equal the demand for medium of exchange in a system where the velocity of the medium of exchange (V) remains constant (%V = 0%) and this will be reflected in the expansion of the medium of exchange (%M) in combination with the change in the value ratio of the medium of exchange and the goods/services/other offered for exchange (%P).  So if you can measure %Q it will give you the demand for medium of exchange, otherwise you need free market exchange ratio (P) discovery to do it for you and not be tampering with medium of exchange expansion/contraction (%M) or if you do you need to tamper this tampering need to be included in calculating your %Q.

Bitcoin's status quo, without the proposals for changes mentioned in this post, has a known rate of medium of exchange expansion (%M known) - so it is easy to include it in the calculations.  Actually the change in the medium of exchange's market valuation rate is determined automatically by the free market and in known (%P known), keeping the relationship between medium of exchange and goods/services/other offered for exchange intact with regards to the Equation of Exchange.  If you knew the correct change in the velocity of the medium of exchange, and do not want to assume %V = 0, the velocity of medium of exchange will be known as well  (%V known).  From %M, %P and %V known you may calculate %Q if you wanted to.  If you have a very comprehensive network of reporting you may calculate the changes in goods/services/other offered in exchange for the medium of exchange (%Q known) and then you can calculate the correct value for the velocity of the medium of exchange which you assumed as %V = 0.  But then again if the unknown (if no reporting data available to calculate) is proportionally and inversely cancelled by each other in %Q and %V, and you have %P and %M and assumes %V=0% this will give you and adequate relationship to calculate the demand for medium of exchange as reflected in the variable %P.

Thank you for the question.

You are right in your statement, that the current money demand is hard, if not impossible to measure. In my opinion, you can give a pretty good estimate by looking at the past demand of money, the part P*T of the equation of exchange.

How are you going to measure the current computing power of the bitcoin network? It's also impossible. But still, the difficulty is changed dynamically by linking it to some average of past computing power.

My idea for bitcoins is to dynamically change the number of bitcoins created per block dynamically and link it to some average of the number of transactions, to keep the price level constant. As the difficulty to solve a block is already changed dynamically this wouldn't be difficult, i think.


Offtopic:

This is how central banks promised they would opperate, its not how they actually operated.
[/quote]

I'm sure there are more historical details to it, I just wanted to explain the function of the value standard. If you have some more knowledge i would appreciate if you share it.


alexk