Topic: The economic model behind Bitcoin is flawed - page 16. (Read 14062 times)

I don't think so. In fact, the economic model behind fiat money, if not abused in application, is actually more fair, since it favors producers, not savers and profiteers, thereby making the whole society richer

Hmm I think that this  is not necessarily true. Obviously in a hyper-deflationary currency then this would be the case,  but in normal times I don't think that the 'Bitcoin economy' would react like that. Most developed countries operate with low levels of inflation, this doesn't stop them spending all of their money as soon as they earn it- despite it devaluaing every day that it is kept in the bank account. People have to spend money to live, so I don't see this being an issue.

However, if bitcoin is working alongside a two-tiered currency system then I do think there is an incentive to hold and speculate- but all it takes is a shock in the other monetary system for that to change....  

What does this example teach us? First, it shows that money has a utilitarian function of facilitating trade in the economy, that it has no value of its own (except for transactional utility). Second, it shows that the claims that early adopters have some "right" to profit from Bitcoin appreciation are unsubstantiated at best and in fact turn out to be socialistic fundamentally

Short version, it (the economic model behind Bitcoin) disfavors trade and production, and thereby undermines the reason for money (Bitcoin) existence as such

Long version, let's assume we have an economy that produces apples and oranges. Say, I have an apple and you have an orange, and we have decided to sell them to each other. We could just exchange them directly, but we decided to use bitcoins to facilitate the trade. Thereby we emitted two bitcoins and agreed not to mint any more bitcoins (the 21 million cap). In this way you have one bitcoin and I have one bitcoin, and we set the price for apples and oranges at a bitcoin per piece. So far so good. In a short while, I produced an extra apple, while you produced nothing. Now we have two apples and one orange in the economy, but we still have only two bitcoins, thereby bitcoins appreciate in value since we can trade for bitcoins only. I don't want apples but need oranges whereas you need apples and want to trade in oranges. In this way, you can demand two apples for your bitcoin, which represents your orange, while I can still get just one orange. Somehow you didn't produce anything but nevertheless became richer (can buy two apples instead of one) while I worked hard to produce an extra apple but actually became poorer (only two apples now allow me to buy the same one orange)...

It is obvious that I will shrink from trading my apples for bitcoins, and unless trading makes me richer, I won't produce either (since I don't need apples)

The economic model behind fiat money is even more severely flawed, but human can still adapt to it, so they will have no problem adapting bitcoin

Dogecoin still halves every 4 years. Just that the supply is kind of huge. I think it was something like 125k per block at the moment. It's like Kenya or some other countries hyperinflationary currency. Would be funny to see what happens if doge hits 1 satoshi. How will they go lower than that? in before 10 doge for 1 satoshi.

As for a more stable inflationary crypto coins, I think that clam is creating a new token every minute via proof of stake, so that would be quite predictable inflationary rate, however due to the nature of that coin you can't predict the supply of it because there are still a lot of clams to be dug out.

It's just as easy to bake in a hard annual inflation limit. Obviously it's too late for Bitcoin to do this but I can see future coins perhaps taking it on board. Doge does it but I don't know if there's an actual limit or whether no one cares enough to refine it. I think we'll be waiting for quite a while before we have a clue what effects a total limit will have.

If there was no hard limit, then that would spook a lot of people away, because why not just use regular fiat money if there's unlimited supply anyway. There's a finite supply of everything on this planet, then how come the money gets to be infinite. However the 21mil hard cap causes a lot of hoarding, which would drive up the prices to abysmal levels pretty quickly. However bitcoin is currently a pretty inflationary currency at the moment and it still manages to increase in price. There is just no telling what would happen if the inflationary would turn to deflationary.

Hmm. I'm not sure we're anywhere near finding what Bitcoin's actual economic model is. It could take the form of several things or be something totally unexpected.

The hard limit is quite extreme and may eventually lord over all other virtues. Time will tell.

I think what they used to forget is temptation to temptation to avoid spending a deflationary currency and keep accumulating instead as that money is getting more and more valuable. This will move most of the money supply into a speculative circle of bubbles and bursts, so it will eventually lose its currency characteristics, as no one will use it for actually buying stuff.

What things do you think they forget?

In my mind deflationary currency is not inherently better or worse than inflationary currency, it just depends how able people are to adapt to the new way of doing things in the economy.

If people can shift focus away from wage increases, and realise that they are matching their purchasing power taking wage cuts then I dont think it is a problem...

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...


They forget a few things, though