The Bitcoin Community Disagrees on What Happens Next
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I love when people who are in finances say that bitcoin has no vale; when actual money today is so complex in determining its value that you could basically say its a virtual coin as well.
http://money.cnn.com/data/commodities/
The reason I think it matters is that when commodities are used as currencies (e.g., gold, silver), the use value supports the currency value. If gold's value as a currency falls to zero, you can still make some nice jewelery. Whereas if people stop accepting dollars or Bitcoins for things you actually want, then they are basically useless.
Bitcoin by contrast is like a rotten borough where all the votes are bought: you get a vote in bitcoin in exact proportion to how much of the mining capacity you own.
But that those currencies issued by dictatorships having value as you say, doesn't really have much to do with bitcoin, apart from being another example of currency.
Those dictatorial governments have real world clout, they can make things happen, by contrast bitcoin's govt is it's users, and as a group the only changes they can affect on the real world are changes directly pertaining to bitcoin.
Also, those currencies issued by dictatorships, for the most part have zones where they are 'the coin of the realm,' meaning they are the only or one of the few currencies widely circulated. This gives a currency value.
A currency's value derives from some combination of it's supply and it's currency(this use of 'currency,' meaning how widely it is accepted as payment for goods, services, etc.)
So there is a lot of value in the US dollar system for example, because it is a currency that is used widely throughout the world.
So it would be nice if Bitcoin would also be exempt from VAT, like gold or currencies.
The statement is only relevant to my comment if the IRS requires all transactions to be reported and taxed. Typically I assume replies to my comments are relevant. That is why I made the inference I did.
The chances of getting away with it may be decent depending on how you obtain and sell your BTC, but that does not make it any more legal than avoiding taxes on cash transactions you do that there's tax liabilities on.
Putting entries in the block chain is not a taxable transaction anywhere that I am aware of, except that you may need to add an allotment for the miner to process your transaction.
I never made that assumption, but many people here seem to have.
The reality is much more complicated. The federal government is made up of many different agencies, and each one is trying to figure out whether they should be regulating it, in case they may take the fall for not preventing the next big Mt. Gox style collapse or scam.
While CFTC have recently decided that they should regulate bitcoin options as a commodity, the IRS have deemed bitcoin as property for capital gains tax purposes, but their FinCEN division (along with NYDFS and most other states) are regulating it very much as a currency under money transmission laws.
In the end this doesn't really matter. The power of bitcoin is that it is decentralized, and, like the internet itself, if an individual is able to connect to the network, then they are able to make transactions with others, regardless of how liberal or oppressive their government is.
TL;DR: Regulations will continue to make it increasingly difficult to run bitcoin businesses in the U.S., but that doesn't matter. Bitcoin's power will always come from the fact that it is a completely open network for individuals.
Bitcoin has had two runups driven by use cases - Silk Road I (drugs), and getting around China's exchange controls. Both were shut down. For most of 2015, Bitcoin has been around $225 ± 25. There were brief bubbles outside that range, and one big drop, but it came back to that trading range. So it's not interesting to speculators any more. Until someone finds a new use case, it's not likely to do much.
There's been progress. Mark Karpeles, who ran Mt. Gox and apparently stole its funds, is in jail in Japan.
I would also guess that there are far more people using bitcoin on dark net marketplaces now than there ever were using Silk Road (mostly due to all the publicity), but I don't have any sources to back this up.
I do agree that we are unlikely to see any significant changes in the price of bitcoin in the medium term though. In the long run, the price of bitcoin is mostly irrelevant when bitcoin is being used as a payment network anyway.
Bitcoin transaction volume in dollars hasn't increased in 18 months. See this graph.[1] The two big spikes were in November 2013 and March 2014. Since then, not much. Bitcoin usage is not increasing.
[1] https://blockchain.info/charts/estimated-transaction-volume-...
They control the updates, what is allowed on their platform, and the way developers make apps for that platform.
Bitcoin is the Linux of the money system. An Open Source OS for money, where developers can build apps without asking permission, and the community actually has a say in the progress of the OS, whether that's a good or bad thing we'll find out.
The deflation issue is complex. It's hard to imagine a stable situation where money has a fixed supply. The simplest steady state one can imagine is constant economic growth r, which is also the real interest rate. If we further assume a constant velocity of money (so the total value of all money is a fixed percentage of GDP), then any currency where the total supply of currency was fixed, would have a deflation rate equal to the real interest rate. Therefore holding currency or zero interest bonds would be equivalent. But money has some transaction value that makes it more valuable than zero interest bonds, so this situation could not be an equilibrium.
Most economists think that in practice there is no way to have a stable currency except by forcing inflation by printing money (which in the current implementation is injected into the economy by buying bonds). I don't think it is possible to create an inflationary currency except through central banks. So I really think that bitcoin faces long term problems.
How so? A number of alt.coins has built in inflation, either through continuous mining, or via staking (such as ReddCoin) or a mix. There may certainly still be plenty of issues, such as lack of ability to adjust the rates without widespread consensus that might make it hard to respond to various situations, but making the currencies inflationary doesn't seem to be a problem.
I don't see why that would be the case. Would not "Bitcoin, but the mining rewards don't decrease" be an inflationary currency?
The harder problem is that without a central bank you can't track changes in the size of the economy. The more you want to avoid deflationary periods, the more you have to inflate "just in case". And high constant inflation has its own problems.
So it's better to say that it's extremely hard to create a mildly-inflationary currency without a central authority.
Why not, if you have the total list of transactions being made - ie., the blockchain? Seems to me like it wouldn't be hard to measure the "Bitcoin GDP" and adjust accordingly.
Really, if we wanted to stabilize a coin, I think we'd want to be measuring how it's moving relative to other things, which is definitely external info. It would be a challenge to come up with a means of folding these observations into the system in a secure (and ideally trustless) way.
The main problem is that by its competitive nature, mining rewards are actually deadweight loss. Every dollar value of bitcoin that is given to a miner is value that is destroyed. To see this, imagine that a Chinese bitcoin mining farm is making a profit mining bitcoins, gaining $10 of bitcoins for every $8 of operating expenses. Then another farm could start up with an even lower profit margin. This would continue until the economic profit was zero, i.e. every dollar's worth of bitcoin mined cost a dollar in operating expenses, which are deadweight loss to the economy.
However, none of this implies that a constant inflation rate is not possible. As long as a dollar's worth of bitcoin generates more than $1 of value to the economy, the system should be stable, and the higher this number, the less wasteful bitcoin would be. Given the various figures for velocity[0][1] I've seen, it's not clear whether this system would be prohibitively wasteful or not.
[0] https://en.wikipedia.org/wiki/Velocity_of_money
[1] Note that velocity is the ratio of total money to nominal GDP but since one is a stock and the other is a flow, this doesn't measure how much economic activity a single dollar generates/supports.
The equilibrium price would be set by the demand for money-as-currency. But in the limit of instantaneous (electronic) settling of payments, this demand premium converges on zero, with the only residual demand being for money-as-store-of-value.
The purchasing power of hard money increases with time only to the extent that reality changes, i.e., for the same reason that each year you can buy more CPU cycles per inflation-adjusted dollar. And it's exactly as "deflationary" as the falling price of CPU cycles. This is perceived to be a problem only because of a double meaning of the word deflation: a contraction in the money supply causes a potentially harmful general drop in prices, whereas increased productivity causes a beneficial increase in the purchasing power of money. Those who fear the latter need to explain why it's bad that, e.g., smartphones keep getting better and cheaper every year.
Unfortunately, the usual strategy is to describe both kinds of price decreases as "deflationary", point out that deflation has historically been harmful, and then conclude that hard money must be harmful as well. That this logic is applied to hard money and not to smartphones is most parsimoniously explained by the political incentives that led to the abandonment of hard money in the first place, together with the associated displacement of descriptive "political economy" by prescriptive economics.
Let's start with the empirical evidence. Velocity of money has not grown much at all, over the last 50 years[0]. Surely if the issue was mainly technological, then technological changes up till now would have resulted in a bigger change in velocity.
The alternate explanation is that the transaction value of money is driven by other kinds of economic frictions, in particular agency problems. Although it's not very popular, Holmstrom and Tirole have some theoretical work on the relationship between collateral, liquidity and agency problems. But the general idea is quite intuitive: any contract, whether debt or equity, changes the incentives of the counterparty and results in moral hazard. This places a limit on how much we can rely on credit instead of money.
That this logic is applied to hard money and not to smartphones is most parsimoniously explained by the political incentives that led to the abandonment of hard money in the first place,
Given the above, do you still think that the you know the simple obvious truth and that mainstream economics has ignored it out of willful blindness? Does your parsimonious explanation apply to me?
[0] https://en.wikipedia.org/wiki/Velocity_of_money#/media/File:...
And they don't care about the numbers in general, unlike certain other cases where people have tried to restrict numbers entirely.
They just regulate transfers of control of value. You can communicate transfers of control of value with anything. Rocks, flags, numbers, dance. Doesn't mean governments want to regulate "magic rocks".
If I posted a number which happened to have a value of $14,001 USD in this post, I would be breaking the law. If I sold t-shirts with bitcoin private keys printed on them, I would be considered an unlicensed money transmitter by FinCEN.
1. Ownership of the deposit box is not define by pin holders
2. Deposit boxes are tangible
3. Deposit boxes and contents have intrinsic value
3. Forgetting a pin doesn't effectively destroy the box and contents
4. The security of a deposit box is not defined by only math
I'm not trying to be pedantic, I'm just saying it is more complicated than that.
Some people might not know about Rai stones.
https://en.wikipedia.org/wiki/Rai_stones
> While the monetary system of Yap appears to use these giant stones as tokens, in fact it relies on an oral history of ownership. Being too large to move, buying an item with these stones is as easy as saying it no longer belongs to you. As long as the transaction is recorded in the oral history, it will now be owned by the person you passed it on to—no physical movement of the stone is required.
On a philosophical take, I'd say that informal "favor currencies" that people in small places use are an earlier form of money as speech, though admittedly, it's a less precise form of money.
I didn't know there are options for Bitcoins. Does anybody know more about this?
They made a Show HN some time ago: https://news.ycombinator.com/item?id=7461343
I don't understand how there could really be a community that revolves around a crypto currency. It's just some people with a libertarian agenda, who don't like banks or government, and want to make money.
I would gladly hear about the community of programmers who actually write code and try to design new decentralized technology. The "bitcoin community" is not that. I don't think you can find many expert on how bitcoin works.
I would rather call those people finance tech entrepreneurs.
Sounds like a community to me.
There are many communities that are accidentally or intentionally atheistic, of course. But that doesn't mean there's a community of atheists.
Given both the Bitcoin and libertarian tendencies against centrality, I'd be really surprised to discover that there was really a single Bitcoin or libertarian community. I'd expect a number of relatively distinct communities that interact around common resources or interests.
As an example, consider the Great Lakes. There isn't really a Great Lakes community; people in Toronto and Chicago don't have much sense of shared identity. But the shared resource demands joint action, so you see things like this:
https://en.wikipedia.org/wiki/Great_Lakes_Compact
https://en.wikipedia.org/wiki/Great_Lakes%E2%80%93Saint_Lawr...
"I admit to not understanding this thing, yet feel okay spouting off some smug opinions about it."
Ok.
You obviously have not met any of the bitcoin core developers. There are many talented people pouring their time and energy into bitcoin, not because they have a libertarian agenda or want to get rich quick, but because they believe in building a new decentralized technology.