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> bitcoin (and the other cryptocurrencies in existence) seem to have quite a few fatal flaws going forward from just our understanding of normal economics How

> bitcoin (and the other cryptocurrencies in existence) seem to have quite a few fatal flaws going forward from just our understanding of normal economics How long would Bitcoin have to survive these flaws before you start to question your understanding of economics?

pedrocr 9y ago
It's not enough to survive it has to become a relevant currency and/or store of value worldwide. At 40B$ in market cap bitcoin is still a curiosity in financial terms. Worldwide dollar supply and US GDP are in the 15-20 T$ range. If Bitcoin reaches half that in value and in transactions without fixing any flaws I'll be impressed.
- guscost 9y ago
  This isn't consistent with your original claim ("fatal flaw" implies that the perception of any existing value will be destroyed), but OK. I'll check back in ~25 years.
  - pedrocr 9y ago
    I specifically said "fatal flaws going forward". Nobody cares if your magic cards trading platform is not very economically sound.
    - guscost 9y ago
      That's a wispy rhetorical straw you're grasping now, but I won't deny it is a real straw. Fair enough. The phrase "limiting flaw" would be less confusing.
      - pedrocr 9y ago
        There's nothing rethorical about saying that something that currently works at a small scale can reveal fatal flaws when it tries to reach a large scale.
        guscost 9y ago
        To be honest I'm a bit baffled. Are you claiming that once these flaws are revealed, the perceived value in Bitcoin will be destroyed? If no, what purpose does the word "fatal" serve? If yes, couldn't you answer my original question? As an aside, the phrase "rhetorical question" has a special meaning, but the adjective "rhetorical" just means anything relating to discussion. I was trying to say that you veered off into a meta-argument about the words we were using, which unfortunately I'm now continuing.
        pedrocr 9y ago
        It seems like you're nitpicking terminology but in case my original intent wasn't clear I'll try again. I'm saying that bitcoin has fatal flaws to work as a global currency at scale (I've estimated what that means) that aren't fatal flaws to work as a niche currency (it's present scale). So the answer to your original question is that surviving at it's present scale forever would not be surprising. Scaling and then revealing its flaws would indeed be fatal as there's no going back to being a niche once it scales and fails to work properly.
        guscost 9y ago
        Do you have an example of a flaw in all existing cryptocurrencies? I've heard about the current scaling challenges with Bitcoin.
        pedrocr 9y ago
        >"a cryptocurrency where the founder owns 5% of all the currency that will ever exist and deflation is builtin and fixed seems like it fails some fairly basic things we know about standard economics" This is the flaw I was pointing at. Others have said that while there's some research there doesn't seem to be a solution for it. A cryptocurrency that scales it's size in rough proportion to its trading and thus keeps prices in check with maybe slight inflation would be interesting. It's almost surely difficult to accomplish given the restrictions in what you can do in a distributed consensus type of setup. I'm not convinced it even matters though. Of all the important things we need solutions for in the world cryptocurrency doesn't seem to help any than I can see.
  - PeterisP 9y ago
    The current market cap is not appropriate for the current usage of bitcoin - it's like a startup valuation that "prices in" the assumption that the usage will massively increase. Thus any limitations that would prevent a large growth in adoption would also destroy most of the existing/stored value, since whenever "the market" would believe that the usage growth is going to stop, the price and the market capitalization would drastically decrease.
    - guscost 9y ago
      > whenever "the market" would believe that the usage growth is going to stop If you're talking about transactions-per-second, how could the market not already know that this is the case? Computers have finite resources, and a decentralized immutable proof-of-work ledger would be really inefficient to run on ten billion devices forever. But if you mean growth in total perceived value, Bitcoin's use as a trust-less standard for floating other currencies could continue indefinitely. I'm not able to talk seriously about the proof-of-work/proof-of-stake argument, or the inflation/deflation argument, but there's no known technical reason that each Bitcoin can't be worth a trillion dollars in the far future. In addition to the economic and political theory, you're basically betting that asymmetric crypto, SHA, and the Bitcoin source are all mathematically sound, and probably that physics imposes serious limits on computing power, if you want to make that (super) long play.

pedrocr 9y ago

It's not enough to survive it has to become a relevant currency and/or store of value worldwide. At 40B$ in market cap bitcoin is still a curiosity in financial terms. Worldwide dollar supply and US GDP are in the 15-20 T$ range. If Bitcoin reaches half that in value and in transactions without fixing any flaws I'll be impressed.

guscost 9y ago
This isn't consistent with your original claim ("fatal flaw" implies that the perception of any existing value will be destroyed), but OK. I'll check back in ~25 years.
- pedrocr 9y ago
  I specifically said "fatal flaws going forward". Nobody cares if your magic cards trading platform is not very economically sound.
  - guscost 9y ago
    That's a wispy rhetorical straw you're grasping now, but I won't deny it is a real straw. Fair enough. The phrase "limiting flaw" would be less confusing.
    - pedrocr 9y ago
      There's nothing rethorical about saying that something that currently works at a small scale can reveal fatal flaws when it tries to reach a large scale.
      - guscost 9y ago
        To be honest I'm a bit baffled. Are you claiming that once these flaws are revealed, the perceived value in Bitcoin will be destroyed? If no, what purpose does the word "fatal" serve? If yes, couldn't you answer my original question? As an aside, the phrase "rhetorical question" has a special meaning, but the adjective "rhetorical" just means anything relating to discussion. I was trying to say that you veered off into a meta-argument about the words we were using, which unfortunately I'm now continuing.
        pedrocr 9y ago
        It seems like you're nitpicking terminology but in case my original intent wasn't clear I'll try again. I'm saying that bitcoin has fatal flaws to work as a global currency at scale (I've estimated what that means) that aren't fatal flaws to work as a niche currency (it's present scale). So the answer to your original question is that surviving at it's present scale forever would not be surprising. Scaling and then revealing its flaws would indeed be fatal as there's no going back to being a niche once it scales and fails to work properly.
        guscost 9y ago
        Do you have an example of a flaw in all existing cryptocurrencies? I've heard about the current scaling challenges with Bitcoin.
        pedrocr 9y ago
        >"a cryptocurrency where the founder owns 5% of all the currency that will ever exist and deflation is builtin and fixed seems like it fails some fairly basic things we know about standard economics" This is the flaw I was pointing at. Others have said that while there's some research there doesn't seem to be a solution for it. A cryptocurrency that scales it's size in rough proportion to its trading and thus keeps prices in check with maybe slight inflation would be interesting. It's almost surely difficult to accomplish given the restrictions in what you can do in a distributed consensus type of setup. I'm not convinced it even matters though. Of all the important things we need solutions for in the world cryptocurrency doesn't seem to help any than I can see.
- PeterisP 9y ago
  The current market cap is not appropriate for the current usage of bitcoin - it's like a startup valuation that "prices in" the assumption that the usage will massively increase. Thus any limitations that would prevent a large growth in adoption would also destroy most of the existing/stored value, since whenever "the market" would believe that the usage growth is going to stop, the price and the market capitalization would drastically decrease.
  - guscost 9y ago
    > whenever "the market" would believe that the usage growth is going to stop If you're talking about transactions-per-second, how could the market not already know that this is the case? Computers have finite resources, and a decentralized immutable proof-of-work ledger would be really inefficient to run on ten billion devices forever. But if you mean growth in total perceived value, Bitcoin's use as a trust-less standard for floating other currencies could continue indefinitely. I'm not able to talk seriously about the proof-of-work/proof-of-stake argument, or the inflation/deflation argument, but there's no known technical reason that each Bitcoin can't be worth a trillion dollars in the far future. In addition to the economic and political theory, you're basically betting that asymmetric crypto, SHA, and the Bitcoin source are all mathematically sound, and probably that physics imposes serious limits on computing power, if you want to make that (super) long play.