The economic model behind Bitcoin is flawed - page 14.

deisik

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Quote from: minor-transgression on December 01, 2015, 07:26:38 PM

I *think* what you are trying to say is that miners are incentivised to hold (save) bitcoin,
thus viewing bitcoin as a monetary store of value. The paradox is that the value of
bitcoin to society is its use in trade (to simplify somewhat) and that no coin can
claim both these features.

Not miners, just holders. Miners nowadays have to pay huge electricity bills with fiat, so they necessarily sell at least some part of their mined coins, so the coins end up in someone else's hands. Regarding the functions of money being antagonistic, I explained this in another thread:

Quote from: deisik on October 03, 2015, 02:54:33 AM

Quote from: virtfund on October 03, 2015, 02:07:01 AM

How are the functions of money being a store of value and means of exchange mutually exclusive?

To be a good store of value money needs to be appreciating (the more the better). Conversely, to be a good means of exchange money should be depreciating at a slow (and low) but constant rate. The former contributes to hoarding while the latter to spending. Hoarding and spending don't live well together and are, in fact, mutually exclusive. In other words, you can't hoard and spend the same (amount of) money at the same time...

But you are welcome with your own take on this

johnyj

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Quote from: deisik on December 01, 2015, 10:30:23 AM

Quote from: johnyj on December 01, 2015, 09:57:25 AM

Quote from: CoinBateman on November 30, 2015, 11:46:02 PM

One of the hardest things to really accept is that because Bitcoin has a finite supply, and the emission of said supply is decentralised, it would be difficult to ever maintain any real stability of it. Monetary policy and government intervention is actually what safe-gaurds most people's money, as well as keep it relatively stable to the extent that we can price things in fiat without having to de-base it and change the price of things all the time.

The price stability of daily consumption is maintained automatically by itself, a change in money supply seldom affect it. A good example is the Ruble crash against dollar, it crashed more than 50% during 2 years, however the price domestically in Russian did not change too much. Another good example is QE, even after FED printed 5x more money, the price of daily consumption still seems stable

It was your fatal mistake that you wrote this here, wtf. You can rest assured that the prices for a lot of the domestically produced goods in Russia (foods before all) did increase, and for some goods prices even more than doubled during the last 2 years. In fact, the crash of the ruble happened within just a few months from around 33-34 up to 70-75 in the summer of 2014. It was a kind of devaluation. Later it retraced back to 50-55, where it had been till oil fell below 50 dollars per barrel...

Now I spend on food twice as much than I spent a few years ago, but my taste preferences and food intake didn't change a lot, lol

Well, I'm not living in Russia, just passed by Moscow airport a few times and did not discover a big change in price. But in Sweden where I'm living, its currency crashed 30% against USD, I can observe that many things just get cheaper, while some high end food get more expensive, like well processed sea food and luxury foods

So, I have never observed any clear relationship between the money supply and the price of food since there are so many different budget shops that you can get cheap food here. A meal in restaurant however get higher and higher price, but I guess that is due to the increase of the value of lunch that companies are allowed to deduct from income tax, it rose from 50 kr in 90s to close to 100 kr. now

minor-transgression

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I *think* what you are trying to say is that miners are incentivised to hold (save) bitcoin,
thus viewing bitcoin as a monetary store of value. The paradox is that the value of
bitcoin to society is its use in trade (to simplify somewhat) and that no coin can
claim both these features.

deisik

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Quote from: Yakamoto on November 30, 2015, 11:24:39 PM

What do you think is most likely to happen to Bitcoin over the long term? Will it, as you say, make it into hell or will it make it into heaven?

Bitcoin will hardly be used for trading real goods in any significant amounts given its monetary model, which encourages saving and profiteering. No one will be selling anything worthy in exchange for it on commercial scale. This seems to be pretty clear by now. We should also take into account the resources that Bitcoin now requires just to support its infrastructure ticking. As I said before, I'm not very knowledgeable about its technical aspects, but it seems that it is very inefficient from a technical point of view. So it is not even guaranteed that it won't hit the wall after the coming halving...

Ultimately, it will most certainly switch into a zombie mode and end up in limbo (neither here nor there)

deisik

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Quote from: johnyj on December 01, 2015, 09:57:25 AM

Quote from: CoinBateman on November 30, 2015, 11:46:02 PM

One of the hardest things to really accept is that because Bitcoin has a finite supply, and the emission of said supply is decentralised, it would be difficult to ever maintain any real stability of it. Monetary policy and government intervention is actually what safe-gaurds most people's money, as well as keep it relatively stable to the extent that we can price things in fiat without having to de-base it and change the price of things all the time.

The price stability of daily consumption is maintained automatically by itself, a change in money supply seldom affect it. A good example is the Ruble crash against dollar, it crashed more than 50% during 2 years, however the price domestically in Russian did not change too much. Another good example is QE, even after FED printed 5x more money, the price of daily consumption still seems stable

It was your fatal mistake that you wrote this here, wtf. You can rest assured that the prices for a lot of the domestically produced goods in Russia (foods before all) did increase, and for some goods prices even more than doubled during the last 2 years. In fact, the crash of the ruble happened within just a few months from around 33-34 up to 70-75 in the summer of 2014. It was a kind of devaluation. Later it retraced back to 50-55, where it had been till oil fell below 50 dollars per barrel...

Now I spend on food twice as much than I spent a few years ago, but my taste preferences and food intake didn't change a lot, lol

johnyj

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Quote from: CoinBateman on November 30, 2015, 11:46:02 PM

One of the hardest things to really accept is that because Bitcoin has a finite supply, and the emission of said supply is decentralised, it would be difficult to ever maintain any real stability of it. Monetary policy and government intervention is actually what safe-gaurds most people's money, as well as keep it relatively stable to the extent that we can price things in fiat without having to de-base it and change the price of things all the time.

The price stability of daily consumption is maintained automatically by itself, a change in money supply seldom affect it. A good example is the Ruble crash against dollar, it crashed more than 50% during 2 years, however the price domestically in Russian did not change too much. Another good example is QE, even after FED printed 5x more money, the price of daily consumption still seems stable

Even government is doing nothing, the price of daily consumption will maintain their level automatically and slowly get cheaper and cheaper due to advance in production technology, what banks do is to print more and more and added money work as a tax applied to everyone. Humans are adaptive, you tax them harder, they will work harder

bitcoinstudent19212

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Quote from: CoinBateman on November 30, 2015, 11:46:02 PM

One of the hardest things to really accept is that because Bitcoin has a finite supply, and the emission of said supply is decentralised, it would be difficult to ever maintain any real stability of it. Monetary policy and government intervention is actually what safe-gaurds most people's money, as well as keep it relatively stable to the extent that we can price things in fiat without having to de-base it and change the price of things all the time.

Do you not think that monetary policy and government intervention is what makes storing your money in fiat more dangerous? At the drop of a hat they can flood economies with trillions of dollars all under the name of 'quantitative easing'......everyone suffers then.

Amph

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and who said that bitcoin is not fuction as a currency? i can buy stuff with bitcoin, so it can be used as a currency and not only as investment, yes the primarely purpose for now is an investment

but the same was true for every other kind of money, when they first started, bitcoin is still young, not so much accepted, so it can not be really considered a means of payment for now, because of people hindering its adoption or not adopting it, not because it can not fulfil that role

CoinBateman

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One of the hardest things to really accept is that because Bitcoin has a finite supply, and the emission of said supply is decentralised, it would be difficult to ever maintain any real stability of it. Monetary policy and government intervention is actually what safe-gaurds most people's money, as well as keep it relatively stable to the extent that we can price things in fiat without having to de-base it and change the price of things all the time.

Yakamoto

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Quote from: deisik on November 30, 2015, 02:55:14 PM

Quote from: Yakamoto on November 30, 2015, 02:15:49 PM

Well I think that overall, money is defined as a form of currency with which you can buy items or services, however, there are more specific definitions like Mike Maloney's "Money is a store of value" and Google's "a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively" definition

Regarding the definition of money as a store of value, this definition looks lopsided and incomplete, since any good money is necessarily a store of value, but not every good store of value is necessarily money. Real estate is considered to be a good store of value, but can it be used as an efficient means of exchange? Therefore, Bitcoin can potentially be a good store of value (which is questionable, though), but this alone still won't make it into money...

Some make it into hell, some make it into heaven

This is true, I didn't phrase it very well.

What do you think is most likely to happen to Bitcoin over the long term? Will it, as you say, make it into hell or will it make it into heaven?

johnyj

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Quote from: deisik on November 30, 2015, 10:25:45 AM

Then Bitcoin is not money, but just a speculative asset. Like many others out there. Or a Ponzi, since it neither functions as a currency (a medium of exchange) nor has any value of its own (yeah, I know nothing has value of its own)...

That, simply put, sums it up

Bitcoin is not traditional money, but some kind of value abstraction far superior than money. The legacy money concept barely made it out of the boarder of a country: When you enter another country, your fiat money suddenly become useless without exchange, while with bitcoin you might still able to find someone accept it in another country without exchange

Why most of the country do not accept foreign currencies domestically? Because all the governments know that fiat money is a taxation on domestic people, it will be stupid to allow some foreign government to tax their people

However, bitcoin is similar to gold, it is wealth, not taxation, so governments might eventually allow it to circulate, since this will bring wealth into their country

deisik

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Quote from: Yakamoto on November 30, 2015, 02:15:49 PM

Well I think that overall, money is defined as a form of currency with which you can buy items or services, however, there are more specific definitions like Mike Maloney's "Money is a store of value" and Google's "a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively" definition

Regarding the definition of money as a store of value, this definition looks lopsided and incomplete, since any good money is necessarily a store of value, but not every good store of value is necessarily money. Real estate is considered to be a good store of value, but can it be used as an efficient means of exchange? Therefore, Bitcoin can potentially be a good store of value (which is questionable, though), but this alone still won't make it into money...

Some make it into hell, some make it into heaven

deisik

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Quote from: Yakamoto on November 30, 2015, 02:15:49 PM

I would say it comes down to the person's definition of what "money" is defined as, however I am not sure how to interpret your definition. Would you mind elaborating? You aren't very clear with what money is, however you do make it clear you don't define Bitcoin as typical money.

There is a concept of money and application of this concept in real life. Regarding the former, as I said earlier, money is a dimensionless measuring rod for valuing goods against each other. Dimensionless means that it has no units (like meters or grams) attached, but has a numerical value. In real life, this concept is implemented in the means of exchange (or means of payment, which is the same), which allows to value goods and provides a device for an effortless exchange of goods...

Since you can't buy anything worthy with Bitcoin directly, it can hardly be considered as money

Yakamoto

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Quote from: deisik on November 30, 2015, 02:06:49 PM

Quote from: criptix on November 30, 2015, 01:37:44 PM

Funny that the lawmakers are saying the exact opposite.
( in the eu btc is money)
U seem to ignore that bitcoin is just 6 years old.

I don't care what lawmakers are saying. You cannot call something "money" which is not used as money. Money is what money does

Well I think that overall, money is defined as a form of currency with which you can buy items or services, however, there are more specific definitions like Mike Maloney's "Money is a store of value" and Google's "a current medium of exchange in the form of coins and banknotes; coins and banknotes collectively" definition.

I would say it comes down to the person's definition of what "money" is defined as, however I am not sure how to interpret your definition. Would you mind elaborating? You aren't very clear with what money is, however you do make it clear you don't define Bitcoin as typical money.

criptix

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Quote from: deisik on November 30, 2015, 02:04:02 PM

Quote from: criptix on November 30, 2015, 01:37:44 PM

Quote from: deisik on November 30, 2015, 03:14:06 AM

Quote from: criptix on November 29, 2015, 08:18:06 PM

this is wrong, because when the currency is appreciating the cost of raw materials is going down.
there arent less profits either.
in absolute numbers the final cost is less but through appreciation your buying power is the same.
hoarding raw materials happens - but not at the magnitude you are describing.
(in the end it is also another form of price speculaton)

supply and demand will lead to a equillibrium, it is not possible to hoard forever(=0 demand).

Simply put, you don't understand what you are talking about. Then again this is not a place for discussing such things, but you can go and discuss the question in this thread. Most likely that all your arguments you can ever think of have already been brought forth there (so you'd better read first)...

I strongly recommend against raising the issue of deflation vs inflation here

Please provide proof and dont show me a 22 page thread where the answer might be or not.

What proof should I provide? At first you say that "the cost of raw materials is going down" and right after that you claim that "your buying power is the same". Is this not enough to prove that you don't know what you are talking about?

Go and read finally that thread carefully (it has all the answers)

How about you carefully read what i wrote?

1. Money appreciates
2. Raw material cost down
3. final price of product goes down

What should change in the buying power??

Cherry picking at its best or full choo choo retardness.

deisik

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Quote from: criptix on November 30, 2015, 01:37:44 PM

Funny that the lawmakers are saying the exact opposite.
( in the eu btc is money)
U seem to ignore that bitcoin is just 6 years old.

I don't care what lawmakers are saying. You cannot call something "money" which is not used as money. Money is what money does

deisik

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Quote from: criptix on November 30, 2015, 01:37:44 PM

Quote from: deisik on November 30, 2015, 03:14:06 AM

Quote from: criptix on November 29, 2015, 08:18:06 PM

this is wrong, because when the currency is appreciating the cost of raw materials is going down.
there arent less profits either.
in absolute numbers the final cost is less but through appreciation your buying power is the same.
hoarding raw materials happens - but not at the magnitude you are describing.
(in the end it is also another form of price speculaton)

supply and demand will lead to a equillibrium, it is not possible to hoard forever(=0 demand).

Simply put, you don't understand what you are talking about. Then again this is not a place for discussing such things, but you can go and discuss the question in this thread. Most likely that all your arguments you can ever think of have already been brought forth there (so you'd better read first)...

I strongly recommend against raising the issue of deflation vs inflation here

Please provide proof and dont show me a 22 page thread where the answer might be or not.

What proof should I provide? At first you say that "the cost of raw materials is going down" and right after that you claim that "your buying power is the same". Is this not enough to prove that you don't have a clue what you are talking about?

Go finally and read that thread carefully (it has all the answers)

Yakamoto

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Quote from: smoothie on November 30, 2015, 03:19:27 AM

Quote from: deisik on November 28, 2015, 05:05:31 AM

Bitcoin apologists and supporters often recklessly claim that a controlled supply with the 21 million coins cap is good and beats the shit out of fiat monies as well as cryptocurrencies that don't have a limit on the number of coins mined...

Quote from: Sourgummies on November 27, 2015, 06:41:29 PM

Why is there any question at all? It's in the code. You can't change that; it's a systematic part of the entirety of Bitcoin. Otherwise, inflation occurs and everything goes to crap, just like FIAT currencies. Well... it's just that people haven't noticed that things will get out of control with FIAT yet. That, or they're reliant on them.

They forget a few things, though

Bitcoin is an experiment.

It is mimicking the gold/silver supply which is limited on planet earth.

Fiat doesn't do that as now you can write $1,000,000,000,000 and now you have $1trillion.

Exactly; Bitcoin mimics a limited supply that had value, while fiat money is completely unlimited, be it banks or the government. That's the reason that gas costs $3/gallon; ever since the central banks were installed the numbers have just kept going up, and there is no indication that it's slowing down or that we'll see the monetary supply become stagnant.

criptix

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Quote from: deisik on November 30, 2015, 03:14:06 AM

Quote from: criptix on November 29, 2015, 08:18:06 PM

this is wrong, because when the currency is appreciating the cost of raw materials is going down.
there arent less profits either.
in absolute numbers the final cost is less but through appreciation your buying power is the same.
hoarding raw materials happens - but not at the magnitude you are describing.
(in the end it is also another form of price speculaton)

supply and demand will lead to a equillibrium, it is not possible to hoard forever(=0 demand).

Simply put, you don't understand what you are talking about. Then again this is not a place for discussing such things, but you can go and discuss the question in this thread. Most likely that all your arguments you can ever think of have already been brought forth there (so you'd better read first)...

I strongly recommend against raising the issue of deflation vs inflation here

Please provide proof and dont show me a 22 page thread where the answer might be or not.

Quote from: deisik on November 30, 2015, 10:25:45 AM

Quote from: johnyj on November 30, 2015, 08:36:54 AM

Quote from: deisik on November 30, 2015, 03:21:27 AM

Quote from: johnyj on November 29, 2015, 07:30:12 PM

Ture, bitcoin will benefit the savers, however, everyone can be a saver, not only central bank. It will indeed encourage saving, but as observed during recent years, when bitcoin price rose, people spent them more, because they were richer, so deflation is not a problem for the same reason that inflation is not a problem either

What did they actually spend them on, I'm sorry? Personally, I converted my bitcoins to fiat and got done with that. Did they buy any goods en masse? I remember some poor wretch having sold his home for bitcoins (meaning someone did actually buy something real for crypto), when the price was almost at the top...

People felt very sorry for him, though

People also felt very jealousy for those bought a lot at $5, like Winklevoss twins Wink

You spend bitcoin by first convert to fiat money and then buy goods, just like when you are traveling in Japan, your dollar/euro can not buy anything there, you have to first exchange to Japanese Yen and then spend

Then Bitcoin is not money, but just a speculative asset. Like many others out there. Or a Ponzi, since it neither functions as a currency (a medium of exchange) nor has any value of its own (yeah, I know nothing has value of its own)...

That, simply put, sums it up

Funny that the lawmakers are saying the exact opposite.
( in the eu btc is money)
U seem to ignore that bitcoin is just 6 years old.

deisik

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Quote from: johnyj on November 30, 2015, 08:36:54 AM

Quote from: deisik on November 30, 2015, 03:21:27 AM

Quote from: johnyj on November 29, 2015, 07:30:12 PM

Ture, bitcoin will benefit the savers, however, everyone can be a saver, not only central bank. It will indeed encourage saving, but as observed during recent years, when bitcoin price rose, people spent them more, because they were richer, so deflation is not a problem for the same reason that inflation is not a problem either

What did they actually spend them on, I'm sorry? Personally, I converted my bitcoins to fiat and got done with that. Did they buy any goods en masse? I remember some poor wretch having sold his home for bitcoins (meaning someone did actually buy something real for crypto), when the price was almost at the top...

People felt very sorry for him, though

People also felt very jealousy for those bought a lot at $5, like Winklevoss twins Wink

You spend bitcoin by first convert to fiat money and then buy goods, just like when you are traveling in Japan, your dollar/euro can not buy anything there, you have to first exchange to Japanese Yen and then spend

Then Bitcoin is not money, but just a speculative asset. Like many others out there. Or a Ponzi, since it neither functions as a currency (a medium of exchange) nor has any value of its own (yeah, I know nothing has value of its own)...

That, simply put, sums it up

Topic: The economic model behind Bitcoin is flawed - page 14. (Read 14061 times)