Topic: You guys don't get it - Bitcoin will act like a Ponzi scheme until Dec 2012 - page 2. (Read 5570 times)

The issue with high inflation rate is extremely overrated. A new technology such as this, if there is anything to it (and I believe there is), will grow fast enough to counter even a 30% yearly inflation. Very easily. Look at what the price of 1 bitcoin was last December and it's evident that we have grown much more than 30%. This will most likely continue to be the case. End of discussion.

What part of the value is from speculative demand and what part is from real trade demand is another issue entirely. Speculative demand will never go to 0 with Bitcoin (unless the cryptography fails or something like that), in fact there is a high probability of it growing due to the properties of Bitcoin as a currency. I find the difference between trade demand and speculative demand important though, if it grows too big we enter a bubble. Currently we are not in a bubble, in my opinion.

This argument can be countered though, it's actually possible for bitcoins to reach a very high and fairly stable value even with a large difference between speculative demand and real trade demand. This has been proven with gold, the actual usage of gold in industry or as a medium of exchange is super small compared to its usage as a store of value or as an investment.

I think that the point of forcing 25 bitcoin over the actual 50.
It's a way to give a kick to the price.

Oh I see, wasn't thinking about it that way. 

That is tiny compared to global economy (or even a local economy).  Hell it is small compared to just the time value of those creating/development/running Bitcoin businesses (and services).

Currently (or at least in the past) the economy is/was growing at many magnitudes higher than 33%.  The growth of money supply only results in loss of purchashing power IF the underlying economy is growing slower.  Excluding speculation (and speculation would still exist even w/ no monetary growth) if Bitcoin economy grows 100% this year, the money supply grows 33%, and it was currently fairly valued we should expect the "price" of Bitcoin to rise 300%.

When the economy is very small it is very easy to grow by large %.  I open a shop selling t-shirts.  1 per day.  Some news story hits and by growth rates goes up 500% in a day. If I can turn that into a longer term growth trend maybe I end up w/ 20,000% growth the first year.    Nike is never going to have 20,000% growth and as my T-shirt company gets larger it will never be able to sustain 20,000% growth either.

High monetary growth is only material if the economy is growing slower than the rate of monetary growth.  If Bitcoin (at only really <2 years old) can't sustain 33% growth for a couple years then it has no future. If it CAN then by 2017 inflation is more like 4% per year.  Obviously if Bitcoin is a 1 B economy it can't sustain 33% growth but it certainly can sustain 4%.

For the record when Bitcoin was 1 month old it had a (forward looking) monetary growth rate of 1200%.

Because the currency is issued at a steady rate, so in the first year the monetary base starts at zero and goes to 2620800, then double that again the second anniversary.  So at the second anniversary, the inflation rate is roughly 50%.  The same amount is issued during the third year, so around the third anniversary the inflation rate is about 33%.  Likewise, the same amount is issued during the fourth year, so around the fourth anniversary, the rate is 25%; then the block reward cuts in half, so the rate suddenly drops to 12.5%.  The inflation rate is relative to the monetary base already issued.

indeed.
i think f&f counts money in units like burgers or something. i just tried to find a good example of something that costs around 24mio dollars. first thing i tried was planes, unfortunately, the smallest commercial passenger aircraft from airbus already costs 65mio. didnt bother to look up boeing after that ...

24mio isnt much if you consider how many people already work on bitcoin related software or services.

This answers the thread and should have ended it.


lol A market of 24M USD. Now, do you want a comparison with USD M1 supply, which is above 900 000 000 000 USD and inflating? But why compare with M1, Bitcoin may be as suitable for fractional reserve banking! Good luck with another order of magnitude when you compare to M2. Don't like USD, want me to start Gold comparisons, or any other target market Bitcoin is aiming for?

Estimate of world gold value: $8,338,701,310,883. Gold. Gold! Come on, the stuff is only ever useful as a coating or to look lol-shiny.

What definition of "tiny" do you use? Bitcoin is currently ridiculously small. If it grows, that growth exceeds inflation in no time.

+1  And in a ponzi scheme there is a victim who is unaware of the plan. In Bitcoin, it's open source and there for all to see.

While I agree with the general premise of the OP, I think the term "Ponzi scheme" is not appropriate, as it implies an intent to profit at the expense of new adopters.  While I did profit from the naive speculators who flooded the market with fiat in June/July, I never intended to. I never even hoped to.

The inflation rate is relatively high right now, I agree. However, the potential balancing events are unpredictable. We had a huge influx of fiat money due to "get rich fast" speculators in June/July. Most of them got burned, and left. The exchange rate may now plummet, or it may again pick up due to, for example, a sudden adoption for online gambling or for international money transfers. We will only know in retrospect.

Wait, I thought it was going to cut the block reward in half, why is it going from 33, 25, then 12.5?  

Yes, indeed. The inflation rate of bitcoin is both a product of how the currency is issued as well as an inventive for miners to participate.  It's very necessary.

explain, please.

Yes, you're right.  Sorry.

So next year it will be around 25% then suddenly drop to 12.5%.

That's tiny.

this has been discussed a bunch before,  it reached the point where we had to build a calculator that explains how much money is needed to enter into the bitcoin economy.

http://www.flexcoin.com/calc/

I don't think the production rate matters that much, it's the propensity to sell BTC in general. Maybe since we already know from historical data that bubbles can form, speculators won't hoard so much and the price will adjust more quickly. Since the trade volume occurring on the exchanges is several times the amount of newly produced bitcoins (last 24 hours MTGox trade volume 47k BTC vs 7.2k produced BTC), I don't think this has much effect. Instead of a price stabilisation in Dec 2012, I expect rather that the network hash capacity adjusts itself. But I'm excited to see what happens nevertheless. From economic point of view, it is an interesting experiment, because we do have all kinds of data that is impossible to collect in other situations, and we know in advance when changes happen.

I think the value will continue to fluctuate as long as there are amateur speculators/"investors". Maybe they're all out of money now or learned their lesson about playing against the pros :-)

Bitcoin today is not that tiny. The total market cap of Bitcoin is around 24 million dollars at this exchange rate. And the inflation is 33% not 25%.

high inflation? 25% APR is tiny considering how new bitcoin is.  Most disruptive technologies fail. But the ones that don't fail, usually grow a lot faster than 25% APR in the first few years.  

Holy shit, today i learned the energizer bunny was ripped off from duracel. 

I agree, see this economy:
https://bitcointalksearch.org/topic/a-collection-of-bitcoin-users-words-54016