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Bitcoin seems like it's custom designed to create bubbles, rather than be a useful currency. It is limited to 21 million units, which means that it cannot suppo

Bitcoin seems like it's custom designed to create bubbles, rather than be a useful currency. It is limited to 21 million units, which means that it cannot support a growing Bitcoin-based economy without rapidly appreciating in value versus other currencies, and depreciating the price of assets. One of the core purposes of currency is to provide a relatively stable store of value as a medium of exchange. Rapid inflation or deflation is very undesirable. Currency is not supposed to be a get-rich-quick scheme. It's the oil of commerce. But, bizarrely, it's fundamentally architected into Bitcoin that it will fail at that, preferring instead to promote a rush to scarcity that grabs headlines but provides little utility as currency. Having said that, a cryptocurrency that does its job -- that is, has the features of an actual currency, such as being a stable store of value, by expanding the money supply in proportion to the amount of economic activity it supports -- seems like a very valuable concept. Do any of them do that? I looked at Ethereum, and its design doesn't seem better in this respect.

djtriptych 9y ago
People make these arguments like fiat currencies never crash.
- mavdi 9y ago
  People also think Bitcoin is complicated, while their understanding of fiat currency is shockingly inaccurate.
  - pteredactyl 9y ago
    Exactly
- wyqydsyq 9y ago
  Fiat currencies usually crash due to different reasons though
  - djtriptych 9y ago
    Yeah like losing wars and falling prey to despotic leadership. Which bitcoin is much less susceptible to.
- mediaman 9y ago
  And when they do, they fail at their job as a currency, because in that instance they are a poor store of value. But no major world currency in the last thirty years has fluctuated like Bitcoin has in the last thirty days. Not the yen, the euro, the yuan, the dollar. For lesser currencies that have, it's wreaked havoc on their respective economies, proving that these kinds of fluctuations are undesirable. Crypto currency is a great idea. Getting rid of central control is fantastic, because a rogue central bank is a real risk to a stable currency. But why cripple it with a design that can't succeed as a stable store of value because of its relatively fixed supply? I get that we don't want someone pulling the levers, but couldn't it algorithmically expand in relation to economic activity, such as transaction volume? I just hear a lot of people who seem to be speaking their book instead of addressing real weaknesses that, to me, seem unnecessary to the intrinsic value of a cryptocurrency.
  - deleted 9y ago
    [deleted]
  - monort 9y ago
    You are incorrect in the belief, that currencies of developed world do not fluctuate. Pound sterling: http://www.macrotrends.net/2549/pound-dollar-exchange-rate-historical-chart http://www.macrotrends.net/2549/pound-dollar-exchange-rate-h... Swiss franc: http://www.macrotrends.net/2558/us-dollar-swiss-franc-exchange-rate-historical-chart http://www.macrotrends.net/2558/us-dollar-swiss-franc-exchan... Euro: http://www.macrotrends.net/2548/euro-dollar-exchange-rate-historical-chart http://www.macrotrends.net/2548/euro-dollar-exchange-rate-hi... Yuan is much worse, though it doesn't matter that much due to capital control: http://www.macrotrends.net/2575/us-dollar-yuan-exchange-rate-historical-chart http://www.macrotrends.net/2575/us-dollar-yuan-exchange-rate...
    - rcxdude 9y ago
      I don't recall the GP saying currencies don't fluctuate. But there's a few orders of magnitude difference in the rate at which they fluctuate.
JohnJamesRambo 9y ago
"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts." -Satoshi Nakamoto
- wickawic 9y ago
  That brings up another issue, but what about the original issue that GP brought up? If bitcoin continues to fluctuate wildly in value then it isn’t a great currency.
- baby 9y ago
  “Identity thieves drain our accounts” Isn’t that a US-centric issue? Was it shown that satoshi is from the US?
  - irln 9y ago
    Isn't it a central bank-centric issue?
    - dlp211 9y ago
      It has nothing to do with a central bank and identity theft can be solved easily. The first thing that needs to happen is your credit profile is in a default frozen state. The second is that identity theft is treated properly as bank fraud. Poof, identity theft is nearly eradicated overnight.
    - closeparen 9y ago
      In other countries, the government provides a reasonable authenticator for personal identity; the banking system is not so easily fooled. It's not an essential property of central banking that banks will give you the money in an account, or courts will enforce a debt against someone, simply because you know some basic demographic information about the victim.
fleitz 9y ago
It's designed to appreciate in value / create depreciating asset prices. The fundamental issue is that people dislike depreciating asset prices. If people can adapt to depreciating asset prices bitcoin will work well as a store of value. I see intrinsic issues as an in person medium of exchange due to transaction times.
ringaroundthetx 9y ago
every consider that -coin and -currency were misnomers? these are skeumorphs to a relatable asset class because cryptographic hash units are not relatable. the whitepaper says peer to peer electronic cash system that allows payments to occur without an intermediary, it does that, it also attracts other people to use it because of its properties, that was the point and now you are adding way to much into the misnomers to rationalize your lack of participation.
sp821543 9y ago
Each bitcoin can be subdivided by 100,000,000 units (satoshis).
Frogolocalypse 9y ago
> Bitcoin seems like it's custom designed to create bubbles, rather than be a useful currency. It's the other way around. It is designed to expose bubbles.
- deleted 9y ago
  [deleted]
DennisP 9y ago
I think it would be difficult to make an automated currency that does that. However, the overall cryptocurrency ecosystem is similar to the competing privately-issued currencies advocated by Hayek, who thought they would make a stable monetary system without any need for central control.
- jnordwick 9y ago
  Not too difficult. You make a currency that is pegged to either a basket of commodities, a basket of currencies, both, our even just gold. When the price of the basket goes above the original price (inflation) you reduce the mining reward (or in worse cases remove some of the coin from circulation in various ways). When the price of the basket falls (deflation) you increase the mining reward increasing supply. You would need a trusted oracle, but that is no different than any other smart contract.
sdmadf2834 9y ago
You missed the entire point of Bitcoin - allowing individuals to transact securely across distances without the need for a third party. The blockchain (the entire network) secures the transactions.
- beager 9y ago
  They won’t want to though, so long as the value continues to skyrocket.
- stvswn 9y ago
  I'm critical of BTC but I think this is true. It is a technological breakthrough in this regard. I'm not entirely sure that the transaction costs are so low that most people would prefer to do it via BTC and not through a third party, however, especially if remittance services start competing by using similar technology in their backends. There are specific instances where people do not have remittance services available to them -- getting money across some borders, completing illegal transactions, etc. For BTC to be a mainstream money transfer method, however, it will need to be obviously better than just doing it the old way -- paying a 3rd party to clear the transaction. It's an elegant technological breakthrough in search of a killer app, I think, and that killer app can't just be illegal or extralegal transactions. If that's all it ends up being, governments are going to crack down even more than they already have.
  - colordrops 9y ago
    > especially if remittance services start competing by using similar technology in their backends It's not a technology problem. Transfers could be instantaneous and nearly free without a blockchain. The reason they are not is because of several reasons. Fraud prevention is one. Another is that the cash being held during the transfer is used for investments. Bitcoin makes this faster because there is no middle man or regulations slowing it down, not for technical reasons.
- mediaman 9y ago
  I agree, blockchain is revolutionary because of what you said. But if we only use it for transactions, not as a store, then we have to switch it in/out of traditional fiat currencies at each end, which seems inefficient, rather than both storing it in blockchain and transacting in it. I hope we eventually have a blockchain that could serve both purposes.
benwilber0 9y ago
> It is limited to 21 million units A "unit" consists of 100,000,000 "satoshis", just as 21 million "dollars" consists of 2,100,000,000 pennies. It's just an arbitrary unit of denomination. I guess the difference is there would only ever be 2.1 quadrillion "satoshis", instead of basically an infinite number of "pennies".
- stvswn 9y ago
  This criticism is not meant to say that each BTC will become practically too expensive to buy; we all understand that there are granular subdivisions. It's meant to say that a fixed money supply means that as usage of a currency expands, demand for the currency will increase, and supply cannot match. If the value of BTC continues to rise, you'll never want to buy anything with it -- why not wait 10 minutes for the price to drop? In the same sense, you'd never want to sell anything for bitcoin. You'd need to update the price several times a day! It's not very useful as a currency. This is a fundamental flaw with BTC, because there's absolutely nothing anyone can do to fix it, it's hardcoded. If we're all being honest with ourselves, people are buying BTC now because they expect the price to go up -- not because they expect to use it as a currency in the future. I don't think we know it's a bubble. No one can really know that. I think we do know that it's being used only for speculation at the moment, which makes it a commodity, not a currency.
  - cwkoss 9y ago
    Bitcoin is still useful for settlement. It's not so useful for pricing things.
    - jnordwick 9y ago
      No its not. Of BTC is constantly in flux you would never want to write or buy bonds in it. You wouldn't know what you are getting paid back in. Strongly related, if you settle in btc the currency risk (that the fx rate would change) is too great.
  - ponco 9y ago
    That's the fundamental thing people are missing I think. Menu costs are a thing.
mrb 9y ago
I don't know why critics like you always have this perspective that it must be an "all or nothing" situation, that Bitcoin must either be designed so that the entire economy can function based on Bitcoin only, or that Bitcoin must not exist at all. «cannot support a growing Bitcoin-based economy» Bitcoin doesn't need to support a growing economy. Our economy is fiat-based therefore Bitcoin can do just fine, serving its purpose as a parallel currency to the economy. Its purpose is to provide censorship-resistance, to allow people to escape inflation, to solve merchant fraud with irreversible payments, etc.
- mediaman 9y ago
  But why arbitrarily limit its potential in this way? If we could run the economy on blockchain, why not? Like you say, blockchain as a concept has many desirable traits that make it superior to a fiat currency. But if Bitcoin in particular were designed in a way that allowed it to avoid rapid fluctuation, I could see it slowly rising in use, until after many years it's powering a lot of commerce instead of the US dollar. As it is, it's going to reach a ceiling of usefulness that a differently architected blockchain wouldn't have.
  - psyc 9y ago
    There are more than 1000 cryptocurrencies. One of them must have the properties you're looking for.
    - nrhk 9y ago
      Not a single one of them has the ability to scale. At least nothing close to production ready. You have the PoS folks, IOTA's got an interesting strategy and some other paradigms but for now its still conjecture. Decentralized distributed technologies will likely always be slower than centralized monoliths.
      - revmoo 9y ago
        > Not a single one of them has the ability to scale. Cryptos don't have to scale. Cash doesn't scale. Visa is the answer to cash's scaling problems. I'm always baffled when people argue about the scaling issue as if it couldn't be easily circumvented by placing a settlement layer on top of it. The correct way to attack cryptocurrencies is to draw attention to potential issues like fatal wealth-destroying software bugs or possible economy-ruining monetary policies, not trifling tech growing pains. "Cryptos can't scale" is the "nobody needs more than 640k" of the 2000s.
psyc 9y ago
I count six times you used the word "currency". Yes, some people thought it would be that, but it isn't. It's Bitcoin. "Digital gold" isn't a perfect description, but it's close. Thus, you're flogging a straw horse. It is not limited to 21M "units", and it never was. It's arbitrarily divisible into whatever units you like. Again, since it is not a national currency, it doesn't matter. It isn't "deflation" when the price of gold goes up. I guess some people can't let go of the idea that Bitcoin is "supposed" to be like a dollar-denominated debit card.
- wwweston 9y ago
  > I count six times you used the word "currency". Yes, some people thought it would be that, but it isn't. It's Bitcoin. Presumably "some people" includes its creators, given that "coin" is in the name. If that isn't meant to evoke currency, that's quite an oversight. > It is not limited to 21M "units", and it never was. It's arbitrarily divisible into whatever units you like. This response doesn't seem to address the parent's related point: that bitcoin as implemented seems to have inflation and deflation built in. > Again, since it is not a national currency, it doesn't matter. It isn't "deflation" when the price of gold goes up. It's certainly the giant problem it would be if it were a national currency, but that doesn't mean it doesn't matter. Speculation in anything can have consequences that are undesirable, and for that reason, it's often regulated.
  - psyc 9y ago
    I've been wrong about the use cases of half a dozen things I've created. Satoshi was a programmer, not a pope. I doubt that people using the word "deflation" in this context understand what deflation is. Deflation in currency follows from the economy going bad, not the other way around. This is why we don't call gold and real estate appreciation "deflation".
    - pas 9y ago
      Standard monetary deflation happens exactly when the growth of the economy outpaces the growth of the money supply. Things become cheaper, money will be worth more.
wmf 9y ago
There are several attempts at stable cryptocurrencies like MakerDAO and BitUSD, but because the price never changes they get no press coverage.
- mediaman 9y ago
  Thanks. I'll check those out.
disordinary 9y ago
Bitcoins won't run out until 2140, that is far enough into the future that most people won't ever think about it. What seems to be the case though is that the decimal is placed at the wrong part of the number. Perhaps what we know of as a micro bitcoin should actually be what is called a bitcoin. The problem is that people see whole things which makes bitcoins seem unaffordable.
- Cyphase 9y ago
  ~80% of the 21 million already exist, and ~95% will exist by 2025, barring some cataclysmic event. So it's a bit misleading to just say that it "won't run out until 2140".
WalterBright 9y ago
The fact that a fixed number exists does not limit its utility, as arbitrarily more bitcoins can be created using fractional reserve banking techniques.
Laforet 9y ago
There has been a wave of minor cryptos in 2012-2013 experimenting alternative economic models such as long tail emission, stable inflation, unlimited issue tied to difficilty, demurrage, etc. Most perished during the last major market crash and the only old school alts that survived are Dogecoin (2% fixed inflation p.a.) and Litecoin (almost 1:1 copy of bitcoin).
deevolution 9y ago
Let me ask you this... Where does the value in the USD come from? Why does the world accept the USD as a globally accepted standard? What migjt cause that sentiment to change? Where is the value in usd???
- pesmhey 9y ago
  A combination of belief and the threat of violence.
panarky 9y ago
> expanding the money supply in proportion to the amount of economic activity ... If that's what you want, then Bitcoin is not for you. You should be satisfied with dollars, yen and euros. Others have different priorities where an open-source, global, fungible, non-government, fixed-supply commodity is a better fit. Live and let live, to each his own. We're happy to coexist.
- ch4s3 9y ago
  > priorities where ... deflationary commodity... is a better fit Um, like what? Why would you want a deflationary currency?
  - darawk 9y ago
    Because its value goes up.
    - ch4s3 9y ago
      Well sure, tulip price rise too if you can convince people to buy them. It's a pretty undesirable property for a currency though, unless you never plan to sell anything to anyone who uses a different currency. I guess what I'm getting at is that it is deflationary as a currency which is bad. As an investment vehicle or value store it seems to be unmoored from any fundamental value.
    - pdkl95 9y ago
      Which screws over any business that has a time lag between buying parts and selling the final product. If the value of money goes up as the product is manufactured, you have to reduce the price. If money deflates ~faster than your profit margin, profitable business is impossible. [1] after expenses and other minutia
      - darawk 9y ago
        You can hedge to fix that problem, if you are so inclined.
blueprint 9y ago
I believe you're looking for Monero.
zaarn 9y ago
Ethereum does have a long-term plan which aims (IIRC) at a low inflation rate of around a percent or less. Plus the PoS is in development which would greatly reduce energy waste.
nwah1 9y ago
>Having said that, a cryptocurrency that does its job... seems like a very valuable concept. Do any of them do that? Why? What particular problems does it address that other currencies do not, and what would ultimately ensure its value or price stability? Commodity currencies have value because they have non-currency uses. Gold is useful in electronics, manufacturing, biotech, and jewelry, and so on. Fiat currencies are backed by tax authority, and control over territory... or in other words violence. We know fiat currencies are valuable because people have to use them to pay taxes, to use natural resources, etc. Remind me why we should use a currency that someone merely imagines into existence. At least if I hand you an IOU scrawled on a piece of paper, I'm promising you something, and anyone who would find that valuable would be placing a bet on my trustworthiness, as dubious as it may seem to some. But bitcoin doesn't even offer that.
jimmies 9y ago
> It is limited to 21 million units, which means that it cannot support a growing Bitcoin-based economy without rapidly appreciating in value versus other currencies, and depreciating the price of assets. Gold is like that too, you can't dig a lot more gold even if the global economy suddenly explodes. Yet gold is a reasonable way to store my assets. Why do you think of BTC anything different?

djtriptych 9y ago

People make these arguments like fiat currencies never crash.

mavdi 9y ago
People also think Bitcoin is complicated, while their understanding of fiat currency is shockingly inaccurate.
- pteredactyl 9y ago
  Exactly
wyqydsyq 9y ago
Fiat currencies usually crash due to different reasons though
- djtriptych 9y ago
  Yeah like losing wars and falling prey to despotic leadership. Which bitcoin is much less susceptible to.
mediaman 9y ago
And when they do, they fail at their job as a currency, because in that instance they are a poor store of value. But no major world currency in the last thirty years has fluctuated like Bitcoin has in the last thirty days. Not the yen, the euro, the yuan, the dollar. For lesser currencies that have, it's wreaked havoc on their respective economies, proving that these kinds of fluctuations are undesirable. Crypto currency is a great idea. Getting rid of central control is fantastic, because a rogue central bank is a real risk to a stable currency. But why cripple it with a design that can't succeed as a stable store of value because of its relatively fixed supply? I get that we don't want someone pulling the levers, but couldn't it algorithmically expand in relation to economic activity, such as transaction volume? I just hear a lot of people who seem to be speaking their book instead of addressing real weaknesses that, to me, seem unnecessary to the intrinsic value of a cryptocurrency.
- deleted 9y ago
  [deleted]
- monort 9y ago
  You are incorrect in the belief, that currencies of developed world do not fluctuate. Pound sterling: http://www.macrotrends.net/2549/pound-dollar-exchange-rate-historical-chart http://www.macrotrends.net/2549/pound-dollar-exchange-rate-h... Swiss franc: http://www.macrotrends.net/2558/us-dollar-swiss-franc-exchange-rate-historical-chart http://www.macrotrends.net/2558/us-dollar-swiss-franc-exchan... Euro: http://www.macrotrends.net/2548/euro-dollar-exchange-rate-historical-chart http://www.macrotrends.net/2548/euro-dollar-exchange-rate-hi... Yuan is much worse, though it doesn't matter that much due to capital control: http://www.macrotrends.net/2575/us-dollar-yuan-exchange-rate-historical-chart http://www.macrotrends.net/2575/us-dollar-yuan-exchange-rate...
  - rcxdude 9y ago
    I don't recall the GP saying currencies don't fluctuate. But there's a few orders of magnitude difference in the rate at which they fluctuate.

JohnJamesRambo 9y ago

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts." -Satoshi Nakamoto

wickawic 9y ago
That brings up another issue, but what about the original issue that GP brought up? If bitcoin continues to fluctuate wildly in value then it isn’t a great currency.
baby 9y ago
“Identity thieves drain our accounts” Isn’t that a US-centric issue? Was it shown that satoshi is from the US?
- irln 9y ago
  Isn't it a central bank-centric issue?
  - dlp211 9y ago
    It has nothing to do with a central bank and identity theft can be solved easily. The first thing that needs to happen is your credit profile is in a default frozen state. The second is that identity theft is treated properly as bank fraud. Poof, identity theft is nearly eradicated overnight.
  - closeparen 9y ago
    In other countries, the government provides a reasonable authenticator for personal identity; the banking system is not so easily fooled. It's not an essential property of central banking that banks will give you the money in an account, or courts will enforce a debt against someone, simply because you know some basic demographic information about the victim.

fleitz 9y ago

It's designed to appreciate in value / create depreciating asset prices. The fundamental issue is that people dislike depreciating asset prices. If people can adapt to depreciating asset prices bitcoin will work well as a store of value. I see intrinsic issues as an in person medium of exchange due to transaction times.

ringaroundthetx 9y ago

every consider that -coin and -currency were misnomers? these are skeumorphs to a relatable asset class because cryptographic hash units are not relatable. the whitepaper says peer to peer electronic cash system that allows payments to occur without an intermediary, it does that, it also attracts other people to use it because of its properties, that was the point and now you are adding way to much into the misnomers to rationalize your lack of participation.

sp821543 9y ago

Each bitcoin can be subdivided by 100,000,000 units (satoshis).

Frogolocalypse 9y ago

> Bitcoin seems like it's custom designed to create bubbles, rather than be a useful currency. It's the other way around. It is designed to expose bubbles.

deleted 9y ago
[deleted]

DennisP 9y ago

I think it would be difficult to make an automated currency that does that. However, the overall cryptocurrency ecosystem is similar to the competing privately-issued currencies advocated by Hayek, who thought they would make a stable monetary system without any need for central control.

jnordwick 9y ago
Not too difficult. You make a currency that is pegged to either a basket of commodities, a basket of currencies, both, our even just gold. When the price of the basket goes above the original price (inflation) you reduce the mining reward (or in worse cases remove some of the coin from circulation in various ways). When the price of the basket falls (deflation) you increase the mining reward increasing supply. You would need a trusted oracle, but that is no different than any other smart contract.

sdmadf2834 9y ago

You missed the entire point of Bitcoin - allowing individuals to transact securely across distances without the need for a third party. The blockchain (the entire network) secures the transactions.

beager 9y ago
They won’t want to though, so long as the value continues to skyrocket.
stvswn 9y ago
I'm critical of BTC but I think this is true. It is a technological breakthrough in this regard. I'm not entirely sure that the transaction costs are so low that most people would prefer to do it via BTC and not through a third party, however, especially if remittance services start competing by using similar technology in their backends. There are specific instances where people do not have remittance services available to them -- getting money across some borders, completing illegal transactions, etc. For BTC to be a mainstream money transfer method, however, it will need to be obviously better than just doing it the old way -- paying a 3rd party to clear the transaction. It's an elegant technological breakthrough in search of a killer app, I think, and that killer app can't just be illegal or extralegal transactions. If that's all it ends up being, governments are going to crack down even more than they already have.
- colordrops 9y ago
  > especially if remittance services start competing by using similar technology in their backends It's not a technology problem. Transfers could be instantaneous and nearly free without a blockchain. The reason they are not is because of several reasons. Fraud prevention is one. Another is that the cash being held during the transfer is used for investments. Bitcoin makes this faster because there is no middle man or regulations slowing it down, not for technical reasons.
mediaman 9y ago
I agree, blockchain is revolutionary because of what you said. But if we only use it for transactions, not as a store, then we have to switch it in/out of traditional fiat currencies at each end, which seems inefficient, rather than both storing it in blockchain and transacting in it. I hope we eventually have a blockchain that could serve both purposes.

benwilber0 9y ago

> It is limited to 21 million units A "unit" consists of 100,000,000 "satoshis", just as 21 million "dollars" consists of 2,100,000,000 pennies. It's just an arbitrary unit of denomination. I guess the difference is there would only ever be 2.1 quadrillion "satoshis", instead of basically an infinite number of "pennies".

stvswn 9y ago
This criticism is not meant to say that each BTC will become practically too expensive to buy; we all understand that there are granular subdivisions. It's meant to say that a fixed money supply means that as usage of a currency expands, demand for the currency will increase, and supply cannot match. If the value of BTC continues to rise, you'll never want to buy anything with it -- why not wait 10 minutes for the price to drop? In the same sense, you'd never want to sell anything for bitcoin. You'd need to update the price several times a day! It's not very useful as a currency. This is a fundamental flaw with BTC, because there's absolutely nothing anyone can do to fix it, it's hardcoded. If we're all being honest with ourselves, people are buying BTC now because they expect the price to go up -- not because they expect to use it as a currency in the future. I don't think we know it's a bubble. No one can really know that. I think we do know that it's being used only for speculation at the moment, which makes it a commodity, not a currency.
- cwkoss 9y ago
  Bitcoin is still useful for settlement. It's not so useful for pricing things.
  - jnordwick 9y ago
    No its not. Of BTC is constantly in flux you would never want to write or buy bonds in it. You wouldn't know what you are getting paid back in. Strongly related, if you settle in btc the currency risk (that the fx rate would change) is too great.
- ponco 9y ago
  That's the fundamental thing people are missing I think. Menu costs are a thing.

mrb 9y ago

I don't know why critics like you always have this perspective that it must be an "all or nothing" situation, that Bitcoin must either be designed so that the entire economy can function based on Bitcoin only, or that Bitcoin must not exist at all. «cannot support a growing Bitcoin-based economy» Bitcoin doesn't need to support a growing economy. Our economy is fiat-based therefore Bitcoin can do just fine, serving its purpose as a parallel currency to the economy. Its purpose is to provide censorship-resistance, to allow people to escape inflation, to solve merchant fraud with irreversible payments, etc.

mediaman 9y ago
But why arbitrarily limit its potential in this way? If we could run the economy on blockchain, why not? Like you say, blockchain as a concept has many desirable traits that make it superior to a fiat currency. But if Bitcoin in particular were designed in a way that allowed it to avoid rapid fluctuation, I could see it slowly rising in use, until after many years it's powering a lot of commerce instead of the US dollar. As it is, it's going to reach a ceiling of usefulness that a differently architected blockchain wouldn't have.
- psyc 9y ago
  There are more than 1000 cryptocurrencies. One of them must have the properties you're looking for.
  - nrhk 9y ago
    Not a single one of them has the ability to scale. At least nothing close to production ready. You have the PoS folks, IOTA's got an interesting strategy and some other paradigms but for now its still conjecture. Decentralized distributed technologies will likely always be slower than centralized monoliths.
    - revmoo 9y ago
      > Not a single one of them has the ability to scale. Cryptos don't have to scale. Cash doesn't scale. Visa is the answer to cash's scaling problems. I'm always baffled when people argue about the scaling issue as if it couldn't be easily circumvented by placing a settlement layer on top of it. The correct way to attack cryptocurrencies is to draw attention to potential issues like fatal wealth-destroying software bugs or possible economy-ruining monetary policies, not trifling tech growing pains. "Cryptos can't scale" is the "nobody needs more than 640k" of the 2000s.

psyc 9y ago

I count six times you used the word "currency". Yes, some people thought it would be that, but it isn't. It's Bitcoin. "Digital gold" isn't a perfect description, but it's close. Thus, you're flogging a straw horse. It is not limited to 21M "units", and it never was. It's arbitrarily divisible into whatever units you like. Again, since it is not a national currency, it doesn't matter. It isn't "deflation" when the price of gold goes up. I guess some people can't let go of the idea that Bitcoin is "supposed" to be like a dollar-denominated debit card.

wwweston 9y ago
> I count six times you used the word "currency". Yes, some people thought it would be that, but it isn't. It's Bitcoin. Presumably "some people" includes its creators, given that "coin" is in the name. If that isn't meant to evoke currency, that's quite an oversight. > It is not limited to 21M "units", and it never was. It's arbitrarily divisible into whatever units you like. This response doesn't seem to address the parent's related point: that bitcoin as implemented seems to have inflation and deflation built in. > Again, since it is not a national currency, it doesn't matter. It isn't "deflation" when the price of gold goes up. It's certainly the giant problem it would be if it were a national currency, but that doesn't mean it doesn't matter. Speculation in anything can have consequences that are undesirable, and for that reason, it's often regulated.
- psyc 9y ago
  I've been wrong about the use cases of half a dozen things I've created. Satoshi was a programmer, not a pope. I doubt that people using the word "deflation" in this context understand what deflation is. Deflation in currency follows from the economy going bad, not the other way around. This is why we don't call gold and real estate appreciation "deflation".
  - pas 9y ago
    Standard monetary deflation happens exactly when the growth of the economy outpaces the growth of the money supply. Things become cheaper, money will be worth more.

wmf 9y ago

There are several attempts at stable cryptocurrencies like MakerDAO and BitUSD, but because the price never changes they get no press coverage.

mediaman 9y ago
Thanks. I'll check those out.

disordinary 9y ago

Bitcoins won't run out until 2140, that is far enough into the future that most people won't ever think about it. What seems to be the case though is that the decimal is placed at the wrong part of the number. Perhaps what we know of as a micro bitcoin should actually be what is called a bitcoin. The problem is that people see whole things which makes bitcoins seem unaffordable.

Cyphase 9y ago
~80% of the 21 million already exist, and ~95% will exist by 2025, barring some cataclysmic event. So it's a bit misleading to just say that it "won't run out until 2140".

WalterBright 9y ago

The fact that a fixed number exists does not limit its utility, as arbitrarily more bitcoins can be created using fractional reserve banking techniques.

Laforet 9y ago

There has been a wave of minor cryptos in 2012-2013 experimenting alternative economic models such as long tail emission, stable inflation, unlimited issue tied to difficilty, demurrage, etc. Most perished during the last major market crash and the only old school alts that survived are Dogecoin (2% fixed inflation p.a.) and Litecoin (almost 1:1 copy of bitcoin).

deevolution 9y ago

Let me ask you this... Where does the value in the USD come from? Why does the world accept the USD as a globally accepted standard? What migjt cause that sentiment to change? Where is the value in usd???

pesmhey 9y ago
A combination of belief and the threat of violence.

panarky 9y ago

> expanding the money supply in proportion to the amount of economic activity ... If that's what you want, then Bitcoin is not for you. You should be satisfied with dollars, yen and euros. Others have different priorities where an open-source, global, fungible, non-government, fixed-supply commodity is a better fit. Live and let live, to each his own. We're happy to coexist.

ch4s3 9y ago
> priorities where ... deflationary commodity... is a better fit Um, like what? Why would you want a deflationary currency?
- darawk 9y ago
  Because its value goes up.
  - ch4s3 9y ago
    Well sure, tulip price rise too if you can convince people to buy them. It's a pretty undesirable property for a currency though, unless you never plan to sell anything to anyone who uses a different currency. I guess what I'm getting at is that it is deflationary as a currency which is bad. As an investment vehicle or value store it seems to be unmoored from any fundamental value.
  - pdkl95 9y ago
    Which screws over any business that has a time lag between buying parts and selling the final product. If the value of money goes up as the product is manufactured, you have to reduce the price. If money deflates ~faster than your profit margin, profitable business is impossible. [1] after expenses and other minutia
    - darawk 9y ago
      You can hedge to fix that problem, if you are so inclined.

blueprint 9y ago

I believe you're looking for Monero.

zaarn 9y ago

Ethereum does have a long-term plan which aims (IIRC) at a low inflation rate of around a percent or less. Plus the PoS is in development which would greatly reduce energy waste.

nwah1 9y ago

>Having said that, a cryptocurrency that does its job... seems like a very valuable concept. Do any of them do that? Why? What particular problems does it address that other currencies do not, and what would ultimately ensure its value or price stability? Commodity currencies have value because they have non-currency uses. Gold is useful in electronics, manufacturing, biotech, and jewelry, and so on. Fiat currencies are backed by tax authority, and control over territory... or in other words violence. We know fiat currencies are valuable because people have to use them to pay taxes, to use natural resources, etc. Remind me why we should use a currency that someone merely imagines into existence. At least if I hand you an IOU scrawled on a piece of paper, I'm promising you something, and anyone who would find that valuable would be placing a bet on my trustworthiness, as dubious as it may seem to some. But bitcoin doesn't even offer that.

jimmies 9y ago

> It is limited to 21 million units, which means that it cannot support a growing Bitcoin-based economy without rapidly appreciating in value versus other currencies, and depreciating the price of assets. Gold is like that too, you can't dig a lot more gold even if the global economy suddenly explodes. Yet gold is a reasonable way to store my assets. Why do you think of BTC anything different?