Topic: The economic model behind Bitcoin is flawed - page 15. (Read 14062 times)

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

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

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

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.

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

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).

also you might want to look at scarcity theory - i think it is very interesting and closely related to bitcoin and other economic processes.

In fact, it is very difficult to understand that the current system you are living in is a huge scam, but try watch some youtube videos and you will get to that conclusion sooner or later 

Inflation or deflation is not the problem, the problem is that the money creation must be done by work or exchange resources of a value similar to its face value, that is what makes money valuable, since everyone has to work or exchange valuable resources to get money (except robbery and stealing). But fiat money is not created by any thing of similar value, so it is some kind of robbery/stealing, which impoverish the whole society

Notice that inflation or deflation is just a small variable in the big picture, you can print 2 trillion dollars to get inflation, and print 1 trillion dollars to get deflation, both do not change the fundamental flaw in the existing system

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

Freicoin does that. If you continue to hold it it slowly eats itself. This is a classic example of the total unworldliness of crypto developers. Would you bother with a currency that slowly kills itself? I can't think of a single normal human on the planet who would be interested in such an idea.

"accumulation of bitcoin will reduce the price of bitcoin,"

That makes no sense.

"what if there was a fee for holding bitcoins for a long term?"

That is not a solution. There is already a free market for cryptocurrencies.
The solution is to invent a better cryptocurrency, or more specifically, a
cryptocurrency that does some things better than bitcoin.

Think ahead. What happens when the next halving occurs? Will the miners
have to raise the fee to stay viable?

accumulation of bitcoin will reduce the price of bitcoin,

what if there was a fee for holding bitcoins for a long term?

I'm not going to discuss this matter here since it is off-topic and of no interest to me (as I had already said everything I wanted to say on the issue long ago). This has been discussed a lot of times already, and if you want to continue, you are free to make a new topic. A short version, you are wrong since the production cycle of most producers is not instantaneous, and inflicted losses remain losses even in terms of an appreciated currency...

You would just be better off if not producing at all (which impoverishes society, though)

Sure I think that you're right to some extent, but you are only focusing on the supply element of the trade. If people have the feeling that they are wealthier then they will naturally pay more in order to maintain the same standard of living as before.

Take a normal fiat economy for example. If I have $100 of savings in my account and there is deflation in the economy of 5%. A product that previously cost me $10 now costs me $9.50 - you're right, in this sense the producer has lost out - to the tune of 5%. But if the price level has fallen by 5% then it also means that the producers costs have fallen by 5% too - so technically they have not lost out at all.

Furthermore, if you just focus on the consumer (the guy with $100 of savings) - his savings are now worth 5% more than they were before. So if the price of the good increased by 5% then he would still buy the good. This only doesn't hold if he is irrational and doesn't value goods based on his ability to consume.

I would also make the same point again - people will adapt to continuous deflation. If you have a deflation-linked salary then you remove any excess saving incentives. In the same way that by having inflation linked pay rises in the public sector acts to protect workers from their earnings being eroded over time.

There is a simple free market solution to any of the problems from companies suffering losses- they either increase prices or as you mentioned stop production. As the least efficient leave the market it allows room for the most efficient to flourish and rebalance their supply to meet the demand.

And fiat, which is intrinsically useless, serves this purpose the best. It is the closest approximation to the concept of money, i.e. a dimensionless yardstick for measuring the value of goods against each other

As I have already said, the claims of a "payoff" are neither substantiated nor fair. This technology (at least as it is declared to be) is not to profit early adopters, since its alleged aim (a universal payment system) is downright antagonistic to such an idea, unless you are going to use Bitcoin for something other than a means of payment. The claim of bearing the risk of early adoption is also unsubstantiated since there would be none if it had actually been used for making business (risky only for businesses that sell goods for it). Really, why would you want to hold Bitcoin if it was conceived for selling and buying goods?

Unless you deem it as a means of profiteering and the whole enterprise as a Ponzi scheme, indeed. But then it is good old risk of a speculator losing his money, nothing romantic or moral about it

They won't be able to do this since their prices are determined on market terms, i.e. through the balance of demand and supply. If the currency is appreciating, raw materials actually end up more expensive to you, since your profits are diminished when you sell finished goods for less price (due to currency appreciation)...

I have explained it many times already how exactly an appreciating currency hurts producers up to a point they begin suffering losses and stop production

I think that is true, but I would imagine that producers would be changing their prices in order to make sure their production remains profitable for them. If I was a producer, then I would also be profiting from the fact that the revenue I am receiving is constantly appreciating, so my raw materials will end up being 'relatively' cheaper. Furthermore, if the currency is appreciating then I can pay my workers less and they will maintain the same purchasing power, this gets carried through the economy and as long as producers/workers are dynamic then it should not cause problems.

Sure there are some people who have a 'stash' but there is a limit to how long they can keep this without spending it, I guess this is the 'payoff' from being someone who adopts the technology early and bears the risk of it failing.

In terms of my comment on monetary system, I just meant that it is impossible to have a medium of exchange that isn't intrinsically useless. Even systems like the gold standard relies on people's perception that gold is valuable. People can argue that it is nice for jewelry/pretty but that is mainly because it is expensive to start off with - like everything else, the value is based on societies perceptions (rightly or wrongly we cant change this!)     

If the economy expands, more goods are being produced overall, but given the limited money supply, it leads to currency appreciation (more goods chasing less money) which allows the savers to become richer for doing virtually nothing (by being able to buy more with their stash). It essentially means that producers are sharing (socializing) their profits with do-littles...

I didn't quite understand what you meant by "monetary system which is backed up with something intrinsically useless"

I think when bitcoin was created im not sure he expected asics and all these bitcoin farms all over the world to pop up - I would guess with the upcoming halving that no one could expect the difficulty would of got this quick this fast.  The whole asic mining concept is very flawed and almost impossible to ROI without free electricity.  I miss the good ole days of mining with a 5850 video card after playing wow lol

But isn't that the problem with any monetary system which is backed up with something intrinsically useless?

Having a means of exchange which lets you buy services without having to do direct swaps with something you have produced is incredible practical and something that I don't think anyone would want to get rid of. Personally I don't want to have to carry around loads of t-shirts that I've made until I find a restaurant owner who is willing to give me a meal in exchange for one of my t-shirts. Having a token which expresses and proves the value of my production, although technically worthless, is worth something as long as someone else is willing to take it.

However, I think I might have missed the point you're trying to make?

 

Okay, I agree that my example is an oversimplification of matters (I tried to keep it as simple as possible). But it still serves the purpose of showing the major flaw behind the Bitcoin monetary model, namely, that the savers (who produce nothing) obtain an unjustified privilege of sharing profits from producers (who actually make society richer). Let's assume that we have an unlimited demand for apples, but the producers of apples see no reason to produce more apples exactly because of the system which should, ironically, facilitate production...

Why would producers want to miserably give away a part of their produce (revenue) for free because of something which doesn't even have value of its own?

I think that the fundemental flaw in the argument is to do with minting the new coins. This example would be the same if we produced extra coin. Unless you give the coin to one individual who becomes richer as a result of that - not through his production, then you have to split the coin equally. If both individuals are left with 1.5BTC, then they have the same dilemma. It is not a question of not having the money in question, it is the point that there has been an over-production of one good which has caused it to fall in price/value. Even if this was an economy which didn't have a fixed monetary supply there would still be the dillema. If you valued the orange at more than the value of two apples, then you would do the trade. In the same way, if I thought that my orange was worth what it was at the start (one apple) then I would still do the trade too.

In your example it is a question of utility preferences for each good, not a problem with the monetary supply.