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Why do people seem to assume that those most capable of implementing the cryptography, networking, or other code are also those most capable of understanding th

Why do people seem to assume that those most capable of implementing the cryptography, networking, or other code are also those most capable of understanding the economics of cryptocurrencies or determining their future? Most of the arguments against the core team revolve around the economics and future of the coin, but the tech team seems to think that somehow their coding experience gives them insight into that. Bitcoin seems like technically great but it fails on many of the economic aspects (e.g. making a currency with a fixed amount basically ensures it can never be used to write long term counteracts in).

hendzen 9y ago
Well, Alex Morcos (one of the Bitcoin Core developers), is a founder of Hudson River Trading - a HFT firm responsible for 5% of US equities volume [0]. So... I'd say Bitcoin Core has some economic expertise available if they need it. [0] - https://blogs.wsj.com/moneybeat/2014/10/15/inside-hudson-river-the-firm-that-does-5-of-all-stock-trading/ https://blogs.wsj.com/moneybeat/2014/10/15/inside-hudson-riv...
- jnordwick 9y ago
  I didn't know that. But i also work in HFT (have heard of Hudson River plenty of times) and I'm not sure that really gives any extra expertise. I say BTC lack economic understanding not from some theoretical view but from some of the almost religious decisions that comes from the project (fixed issue, low tx volume, etc). It is almost like they don't want people to use it for anything important. But i will search out Alex's posts more often though.
  - haakon 9y ago
    The fixed, pre-determined inflation rate has been part of Bitcoin since its launch, and is widely regarded as one of the most fundamental, immutable rules of Bitcoin, much like "software freedom" is to Debian. It is not something that is widely cited by the Bitcoin community as a problem, and I'm unaware of any efforts to change it. It has nothing to do with Bitcoin Core.
    - hendzen 9y ago
      The fixed supply doesn't really make sense if you want BTC to function as a unit of exchange (rather than a commodity). I won't go in to the reasons why since they have been elaborated on by many other people. However, the fixed supply does incentivize holders (ahem hodlers) to increase the value of the coin - whether that is by starting companies that use BTC, spamming HN with BTC/Reddit related posts, etc. It's an interesting way of arranging a bunch of people in a sort of distributed boiler room. That said, once the mining subsidy completely ends (assuming BTC is still actively used then) its possible we will see some calls to increase the supply. Otherwise the transaction fees will need to become huge (or the price will need to rise 1-2 orders of magnitude) to support current levels of mining activity.
      - omarchowdhury 9y ago
        But you do know that a Bitcoin is divisible? A satoshi is one hundred millionth of a single Bitcoin. Why would there need to be an increase in supply to make Bitcoin a unit of exchange if its that divisible? Other than for psychological reasons?
        hendzen 9y ago
        I do, in fact, know a Bitcoin is divisible. That however, is irrelevant to its lack of utility as a unit of exchange. In particular, if Bitcoin is "going to the moon" - i.e. expected to always increase in purchasing power superlinearly, why is it ever rational to spend a Bitcoin (or a Satoshi)? This is the problem with hyperdeflation.
        omarchowdhury 9y ago
        I'm in agreement with you there, there is no rationale to spend BTC in commerce with its current properties.
Hermel 9y ago
As someone who used to read /r/bitcoin daily for years, I can confirm this. Economic and business considerations are often disregarded, for example the concept of a "window of opportunity" that one can miss when moving too slowly. But what alienated me most from the Bitcoin-community is how the two most important forums do not value freedom of speech. For example, I've been permanently banned from bitcointalk.org for saying "Thank you Alex! I couldn't agree more." See: https://bitcointalk.org/index.php?topic=1842146.msg18340002#msg18340002 https://bitcointalk.org/index.php?topic=1842146.msg18340002#...
- slice_of_life 9y ago
  The BTC reddit community is the worst! I no longer go there for any BTC related conversations. Zero decorum, literal insults and intolerance towards on-boarders are some of the reasons I'm personally disgruntled.
beaner 9y ago
Can you explain what a "long term counteract" is and how it relates to a currency's inflation rate?
- jnordwick 9y ago
  With the fixed supply you have three problems: 1. The value (not necessarily price) of the currency will fluctuate wildly since they money supply cannot grow and shrink along with demand for it. The fixed supply will make these swings even wilder. 2. In a currency which is constantly deflating at say 3% a year, you would never want to take a loan unless you can cover that 3% plus any other return on capital you require. You're going to be paying back BTC that is going to be more expensive every year passing. Imagine a 5 year contract for 10 BTC a year. The next year is it 10.3 BTC (deflation adjusted). And at year five you are paying back BTC worth 11.6 BTC. 3. If you are on the other side, any counter party (default) risk is also huge since you are losing an asset that you could have held on to for zero risk and still gained 3% a year. To enter a contract you need a stable currency. It is like building a house with a yardstick that keeps getting longer and longer. And it is very difficult to figure out what the value and exchange rate of BTC will be in a year from now, much less longer.
twblalock 9y ago
> Why do people seem to assume that those most capable of implementing the cryptography, networking, or other code are also those most capable of understanding the economics of cryptocurrencies or determining their future? I guess I'll give the blunt answer: many proponents of cryptocurrency have views on economics, politics, society, law, and contracts that are ignorant of the way those things really work. Many really do believe that currencies, transactions, and contracts can be implemented entirely by computer programs and that governments and courts should have no jurisdiction over such things. If you don't believe me, go to some of the active crypto forums and get involved in political discussions. You'll see an astounding mix of techno-utopianism, extreme libertarianism, and baseless conspiracy theories about fiat money and governments in general. The blockchain is an interesting technical achievement, and so are smart contracts, but they are not a replacement for laws and governments. Unfortunately, a lot of people think they are. Some people even insist that bitcoin doesn't have governance, but that's clearly not the case because the current controversy about the core developers is exactly about governance. I bring this up because these kinds of beliefs are the reason people in the bitcoin community think the programmers who implement bitcoin are capable of solving the economic problems -- they reject the idea that there are any economic or social problems facing bitcoin that can't be solved with the underlying technology. They don't accept that these are social problems with social solutions.
- brightball 9y ago
  I've never used bitcoin but one of the core appeals as I understood it was mathematically limited supply to create an inflation proof currency. There seem to be lots of fluctuations in the price but eventually it hit a point of relative stability (in theory at least) with value that increases slightly relative the rate that the dollar inflates. If that's the case then it certainly does the job. There are a lot of people out there who are very aware of how their saved money loses value and actively want an alternative that feels "safe". I don't know that Bitcoin is that alternative, but it's definitely trying to be and even I have to admit has been far more successful than I ever would have expected.
  - twblalock 9y ago
wodenokoto 9y ago
> (e.g. making a currency with a fixed amount basically ensures it can never be used to write long term counteracts in). Bitcoin is digital gold. The idea that is should be used as currency only seems plausible to the biggest proponents of a return to gold standards. But for everyone who believe in inflationary currency, bitcoin is still a viable value store, which definitely can be used for all sorts of contracts.
ForHackernews 9y ago
> Bitcoin seems like technically great Does it? It seems horrendously, even criminally, inefficient to me.
SkyMarshal 9y ago
>Why do people seem to assume that those most capable of implementing the cryptography, networking, or other code are also those most capable of understanding the economics of cryptocurrencies or determining their future? Imho on average it's easier for computer scientists and engineers trained and practiced at algorithmic/systems/recursive thinking to learn (and invent) the relevant economics than it is for economists to learn computer science. The emerging field of cryptoeconomics is an amalgamation of high-assurance systems engineering and mechanism design (applied game theory), and computer scientists and engineers are on average better equipped to understand both parts of it than most economists are. There's also an invaluable degree of street smarts and intuition in people who build and work on complex systems of varying non-/determinism and value-at-risk on a daily basis than in folks who just study/model them. >Bitcoin seems like technically great but it fails on many of the economic aspects (e.g. making a currency with a fixed amount basically ensures it can never be used to write long term counteracts in). Fwiw Bitcoin's issuance model is what it is b/c Satoshi wanted a strong incentive for people to bootstrap Bitcoin in the early days via mining, and a scarce deflationary currency was a simple and effective means of achieving that. He succeeded obviously. Any problems down the road resulting from that can theoretically be fixed with some kinds of derivatives, or worst case-scenario with a non-contentious hard fork to change the issuance model. But that would require a clear crisis affecting the value of the currency that everyone could agree would need solving, which likely won't be the case for as long as there are non-trivial mining rewards.

hendzen 9y ago

Well, Alex Morcos (one of the Bitcoin Core developers), is a founder of Hudson River Trading - a HFT firm responsible for 5% of US equities volume [0]. So... I'd say Bitcoin Core has some economic expertise available if they need it. [0] - https://blogs.wsj.com/moneybeat/2014/10/15/inside-hudson-river-the-firm-that-does-5-of-all-stock-trading/ https://blogs.wsj.com/moneybeat/2014/10/15/inside-hudson-riv...

jnordwick 9y ago
I didn't know that. But i also work in HFT (have heard of Hudson River plenty of times) and I'm not sure that really gives any extra expertise. I say BTC lack economic understanding not from some theoretical view but from some of the almost religious decisions that comes from the project (fixed issue, low tx volume, etc). It is almost like they don't want people to use it for anything important. But i will search out Alex's posts more often though.
- haakon 9y ago
  The fixed, pre-determined inflation rate has been part of Bitcoin since its launch, and is widely regarded as one of the most fundamental, immutable rules of Bitcoin, much like "software freedom" is to Debian. It is not something that is widely cited by the Bitcoin community as a problem, and I'm unaware of any efforts to change it. It has nothing to do with Bitcoin Core.
  - hendzen 9y ago
    The fixed supply doesn't really make sense if you want BTC to function as a unit of exchange (rather than a commodity). I won't go in to the reasons why since they have been elaborated on by many other people. However, the fixed supply does incentivize holders (ahem hodlers) to increase the value of the coin - whether that is by starting companies that use BTC, spamming HN with BTC/Reddit related posts, etc. It's an interesting way of arranging a bunch of people in a sort of distributed boiler room. That said, once the mining subsidy completely ends (assuming BTC is still actively used then) its possible we will see some calls to increase the supply. Otherwise the transaction fees will need to become huge (or the price will need to rise 1-2 orders of magnitude) to support current levels of mining activity.
    - omarchowdhury 9y ago
      But you do know that a Bitcoin is divisible? A satoshi is one hundred millionth of a single Bitcoin. Why would there need to be an increase in supply to make Bitcoin a unit of exchange if its that divisible? Other than for psychological reasons?
      - hendzen 9y ago
        I do, in fact, know a Bitcoin is divisible. That however, is irrelevant to its lack of utility as a unit of exchange. In particular, if Bitcoin is "going to the moon" - i.e. expected to always increase in purchasing power superlinearly, why is it ever rational to spend a Bitcoin (or a Satoshi)? This is the problem with hyperdeflation.
        omarchowdhury 9y ago
        I'm in agreement with you there, there is no rationale to spend BTC in commerce with its current properties.

Hermel 9y ago

As someone who used to read /r/bitcoin daily for years, I can confirm this. Economic and business considerations are often disregarded, for example the concept of a "window of opportunity" that one can miss when moving too slowly. But what alienated me most from the Bitcoin-community is how the two most important forums do not value freedom of speech. For example, I've been permanently banned from bitcointalk.org for saying "Thank you Alex! I couldn't agree more." See: https://bitcointalk.org/index.php?topic=1842146.msg18340002#msg18340002 https://bitcointalk.org/index.php?topic=1842146.msg18340002#...

slice_of_life 9y ago
The BTC reddit community is the worst! I no longer go there for any BTC related conversations. Zero decorum, literal insults and intolerance towards on-boarders are some of the reasons I'm personally disgruntled.

beaner 9y ago

Can you explain what a "long term counteract" is and how it relates to a currency's inflation rate?

jnordwick 9y ago
With the fixed supply you have three problems: 1. The value (not necessarily price) of the currency will fluctuate wildly since they money supply cannot grow and shrink along with demand for it. The fixed supply will make these swings even wilder. 2. In a currency which is constantly deflating at say 3% a year, you would never want to take a loan unless you can cover that 3% plus any other return on capital you require. You're going to be paying back BTC that is going to be more expensive every year passing. Imagine a 5 year contract for 10 BTC a year. The next year is it 10.3 BTC (deflation adjusted). And at year five you are paying back BTC worth 11.6 BTC. 3. If you are on the other side, any counter party (default) risk is also huge since you are losing an asset that you could have held on to for zero risk and still gained 3% a year. To enter a contract you need a stable currency. It is like building a house with a yardstick that keeps getting longer and longer. And it is very difficult to figure out what the value and exchange rate of BTC will be in a year from now, much less longer.

twblalock 9y ago

> Why do people seem to assume that those most capable of implementing the cryptography, networking, or other code are also those most capable of understanding the economics of cryptocurrencies or determining their future? I guess I'll give the blunt answer: many proponents of cryptocurrency have views on economics, politics, society, law, and contracts that are ignorant of the way those things really work. Many really do believe that currencies, transactions, and contracts can be implemented entirely by computer programs and that governments and courts should have no jurisdiction over such things. If you don't believe me, go to some of the active crypto forums and get involved in political discussions. You'll see an astounding mix of techno-utopianism, extreme libertarianism, and baseless conspiracy theories about fiat money and governments in general. The blockchain is an interesting technical achievement, and so are smart contracts, but they are not a replacement for laws and governments. Unfortunately, a lot of people think they are. Some people even insist that bitcoin doesn't have governance, but that's clearly not the case because the current controversy about the core developers is exactly about governance. I bring this up because these kinds of beliefs are the reason people in the bitcoin community think the programmers who implement bitcoin are capable of solving the economic problems -- they reject the idea that there are any economic or social problems facing bitcoin that can't be solved with the underlying technology. They don't accept that these are social problems with social solutions.

brightball 9y ago
I've never used bitcoin but one of the core appeals as I understood it was mathematically limited supply to create an inflation proof currency. There seem to be lots of fluctuations in the price but eventually it hit a point of relative stability (in theory at least) with value that increases slightly relative the rate that the dollar inflates. If that's the case then it certainly does the job. There are a lot of people out there who are very aware of how their saved money loses value and actively want an alternative that feels "safe". I don't know that Bitcoin is that alternative, but it's definitely trying to be and even I have to admit has been far more successful than I ever would have expected.
- twblalock 9y ago

wodenokoto 9y ago

> (e.g. making a currency with a fixed amount basically ensures it can never be used to write long term counteracts in). Bitcoin is digital gold. The idea that is should be used as currency only seems plausible to the biggest proponents of a return to gold standards. But for everyone who believe in inflationary currency, bitcoin is still a viable value store, which definitely can be used for all sorts of contracts.

ForHackernews 9y ago

> Bitcoin seems like technically great Does it? It seems horrendously, even criminally, inefficient to me.

SkyMarshal 9y ago

>Why do people seem to assume that those most capable of implementing the cryptography, networking, or other code are also those most capable of understanding the economics of cryptocurrencies or determining their future? Imho on average it's easier for computer scientists and engineers trained and practiced at algorithmic/systems/recursive thinking to learn (and invent) the relevant economics than it is for economists to learn computer science. The emerging field of cryptoeconomics is an amalgamation of high-assurance systems engineering and mechanism design (applied game theory), and computer scientists and engineers are on average better equipped to understand both parts of it than most economists are. There's also an invaluable degree of street smarts and intuition in people who build and work on complex systems of varying non-/determinism and value-at-risk on a daily basis than in folks who just study/model them. >Bitcoin seems like technically great but it fails on many of the economic aspects (e.g. making a currency with a fixed amount basically ensures it can never be used to write long term counteracts in). Fwiw Bitcoin's issuance model is what it is b/c Satoshi wanted a strong incentive for people to bootstrap Bitcoin in the early days via mining, and a scarce deflationary currency was a simple and effective means of achieving that. He succeeded obviously. Any problems down the road resulting from that can theoretically be fixed with some kinds of derivatives, or worst case-scenario with a non-contentious hard fork to change the issuance model. But that would require a clear crisis affecting the value of the currency that everyone could agree would need solving, which likely won't be the case for as long as there are non-trivial mining rewards.