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Comment by Jabbles | Hacker News Reader

I think the incentives of the bitcoin system to hoard money and the massive bias towards early adopters will be the downfall of bitcoin. All the advantages of anonymity and irreversibility are voided if there is every reason to keep hold of your money and let it increase in value. Several people on HN claim to have hundreds of thousands of bitcoins, making them worth more than 0.1% of the entire economy. Whilst the real world has its (possibly unfair) share of billionaires, the majority of these have come through substantial business innovation. Bitcoin "billionaires" come through luck and early adoption, and in my view it makes it more unfair than our current system.

I think that bitcoin will continue to have some success in areas that wish for privacy, but will not reach the heights that some people predict.

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No. The "hoarding" argument has been beaten to death. Evidence shows people are not hoarding the coins: every day, 40 thousand coins change hands on the single largest exchange: http://bitcoincharts.com/markets/mtgoxUSD.html This is six times the number of coins created daily (7 thousands).

In other words, people are not hoarding them, but are trading them very, very frequently.

And this is just measuring MtGox's volume. Other trades (merchant sales, other exchanges, etc) are likely surpassing MtGox's volume in aggregate...

Are there any statistics what those might be used for? Is there a list of sites/services that use Bitcoin with published numbers?

How many coins were created daily 3 years ago?

The same 7200, it halves every 4 years.

Add: so 7200 coins/day in 2009, 3600 coins/day starting 2013, 1800 coins/day starting 2017 etc.

I apologise for re-hashing old arguments, I haven't been following them, and I'd be interested to read rebuttals if you know where they are.

I'm not sure that evidence of trading is evidence of non-hoarding. It's only 0.5% of the total number of bitcoins out there that are traded daily. Is that a lot? I'm not sure, but I don't think we can compare it to the number of coins created daily and draw conclusions from that.

Some people are hoarding them. A lot of them. Or at least they claim to be.

How much of this volume are traders trying to flip bitcoins? I am willing to bet it could be as high as 95%.

As someone who has mined, bought bitcoins, and tried using them at bitcoin stores, there is really nothing special I can buy with them, and can and have dropped 20-50% in a matter of hours.

> Evidence shows people are not hoarding the coins: every day, ... This is six times the number of coins created daily (7 thousands).

That's not very convincing. A better comparison evidence would compare the daily exchange to the total inventory.

However, the real question is more granular. If we look at #exchanges/age for each bitcoin, what do we find?

I'd expect to find that some bitcoins have higher turn-over than others even if there's no hoarding, but what fraction have never been traded, or have been traded less than 3 times?

Early adopters used powerful computers; then GPUs; then GPU farms; now people are using FPGA clusters. They've seen considerable investment in hardware depreciate, and now they're stuck with a massively powerful setup that isn't much use to them. (Perhaps well-funded scientific groups should start buying all these hobbyist GPU farms while they're being sold cheap and put them to use folding proteins or modelling whatever?)

Will anyone go to the expense of an ASIC?

Would a well funded group with access to FPGA technology early on in the chain, when others were using GPUs, have been enough to crash the currency?

And does anyone believe that a government would not be able to destroy bitcoin, trivially, by spending a few days mining?

The most the government could do is generate all the new coins, this would drive up the price of coins until it became economical compete.

Given the almost limitless divisibility of bitcoins I don't think it's much of a threat. I'd be far more worried about laws being passed that made bitcoins punishable by jailtime.

Actually, at least as of a couple of months ago, if you are generating all new coins, you can prevent all transactions from being validated (by refusing to include them in your blocks) or undermine community faith in bitcoin integrity by double spending. Both capabilities would be pretty devastating.

You need more than 50% of the total bitcoin network computing power to do that kind of attack.

While goverments have the money to do it, do they have the capabilities and incentives?

Of course many governments have the capability.

The main reason a government would want to do this is that control over the coin of the realm is a major source of state power. If a government ever concluded that bitcoin posed a credible threat to that power, that would be a strong incentive to undermine it.

Capability =/= Ability

Sorry, not sure what your point is. Could you say a bit more about it?

Just because the government has the resources to throw at a problem it does not mean that they will do so effectively or efficiently.

What?

You think NSA or GCHQ[1] don't have the knowledge to implement an efficient bitcoin machine? You think they don't have the money? You think they don't already have significant computing power?

Or are you suggesting they'd be hampered by legal oversight issues?

[1] GCHQ probably have the most powerful computing facility in Europe. That puts them amongst the most powerful computing centres world wide.

>Perhaps well-funded scientific groups should start buying all these hobbyist GPU farms while they're being sold cheap and put them to use folding proteins or modelling whatever?

This seems likely. I don't imagine that FPGA clusters depreciate much over periods of a few years. I bet you could make most of the investment back by selling them off to some research firm once the return from the mining dropped. There must be plenty of hi-tech research based startups that need to do serious number crunching on a budget.

I don't disagree with you, but there are a significant number of hereditary billionaires (in the real world), which inherit money through luck and early adoption (of business or banking)

> Bitcoin "billionaires" come through luck and early adoption, and in my view it makes it more unfair than our current system.

I don't see how the hoarding/early adopter thing would destroy bitcoin. Bitcoin isn't fair, but lack of fairness doesn't necessarily make the project unsuccessful.

If people don't think bitcoin is fair they won't adopt it, and may even fight against it.

I don't know. Money isn't fair. Some people have it, some not.

And usually people don't purchase things because they are "fair". People purchase luxury cars, big houses, drugs etc. for purely selfish reasons, to enjoy life. If we think that currency is just another selection in the market, people will use the currency that will benefit them most. Fairness has nothing to do with it.

The point is that they have no choice but to use fiat currency.

That is not the case with bitcoin so far.

>> fair

I was going to post exactly that. People are funny. If they perceive something is biased against them, they are much less likely to adopt its' use or even encourage its' existence. In fact, I bet there is a fair bit of quiet satisfaction around here every time another "$xxxx bitcoin stolen" story gets posted simply because most of us feel as tho the ship has sailed and we missed it. FWIW, I don't really care one way or another - if this currency exists in ten years, it'll just be another opportunity I missed early on. I'm at peace with that, but I am also not going to buy a bitcoin mining rig. :P

That was my opinion in the beginning, but I'm not convinced anymore. First of all, the bitcoin billionaires have a strong incentive to spend, because if they don't, the currency will crash and they will lose their money.

Second, if you were to create "inflatacoin", with a small but real inflation rate, who would adopt it? It would probably be better economically speaking, but people prefer putting their money in things that stay stable or grow over time.

If people are spending their money in fear of a crash then hoarding is not bitcoin's main problem.

I don't know the solution to bitcoin's deflation, but IMO it's still a problem.

There is a huge psychological bias for this argument. I believe it is 'sunk cost bias' or something like that.

It goes like this. Say you are a miner. You mine. At the moment you get your bitcoins, you've realized value in the sum of ( $Bgenerated - $Bcost (your hardware, etc)).

From that point on 'hoarding' is no different than going to an exchange and buying $Bgenerated in bitcoins with dollars.

So your argument for 'hoarders' having a tremendous unfair advantage is seriously flawed. They have no greater advantage than any speculator going and making a bet in bitcoin long term value.

The real value generated is the one they capture at mine time, and there is a super efficient market for that with very slim profits.

http://tpbitcalc.appspot.com/

" the majority of these have come through substantial business innovation." [citation needed]

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