11 ms·

It Looks Like Nobel Economics Laureates Don't Like Bitcoin

40 points by champagnepapi 9y ago

romanovcode 9y ago
I don't like Bitcoin as well, even tho I own some. The problem in my mind is that it is just sitting money, it is not circulating therefore it is not good for economy.
- rb808 9y ago
  That's not completely true. It requires a lot of electricity and computers, there are loads of new power stations in China, and loads of new servers built to run BTC.
  - merpnderp 9y ago
    Mining precious metals takes a lot of resources also. Should we stop - as even governments like to hold precious metals in their portfolios?
- merpnderp 9y ago
  Seems like it is a lot like precious metals in that way, a hedge against inflation. Except there are likely a lot more people who will happily exchange bitcoins versus gold, especially over the internet.
- AlexAltea 9y ago
  Bitcoin would be circulating way more if more services and online stores, e.g. Amazon, PayPal, simply accepted it as just another currency. Rejecting it as payment method because it's not circulating is just circular logic. I have been spending plenty of mBTC in the stores (shopping, flights, hotels) that accept it such as Overstock, Abitsky, Destinia, etc. and my experience there has been way more comfortable than shopping with credit cards or even Paypal.
  - noretire 9y ago
    And if it didn’t lose 75% or more of its value every so often. Guess what you don’t want money to do? That. How would you feel if the dollar in your pocket was worth $0.10 tomorrow?
  - popinman322 9y ago
    Shopping with cryptocurrency has always seemed safer to me, personally. I keep all my BTC/LTC/ETH in Coinbase wallets, and whenever I want to send money from those wallets I need to go through multiple 2FA prompts. My debit/credit cards have never required anything more than a static number to be used online.
    - tdb7893 9y ago
      I wish you could get bitcoin with the fraud prevention guarantees that come with credit cards
    - a_c_s 9y ago
      If my credit card gets stolen then I just report it to the credit card company and I get a new card (free) and all of the fraudulent charges reversed. If the bank goes under, my funds are insured by the FDIC. If I lose my wallet I can report that to my banks and get everything (except the cash in my wallet) restored to pre-loss state. If my Coinbase wallet account is hacked because I use a bad password, can I get anything back? If Coinbase as a company goes under, what happens to my bitcoins? If I accidentally send cryptocurrency to the wrong recipient, how do I reverse that transaction? As somebody living in the USA who doesn't transfer funds internationally, I'm quite well covered by existing banking regulations: I'm struggling to see how Bitcoin is 'safer' for me in any way.
  - CupOfJava 9y ago
    How do you get around the high transaction fees? Bitcoin seems too slow and expensive to use.
- bluetwo 9y ago
  That's an interesting point. Unlike dollars, made money doesn't sit in a bank, to be loaned to lenders creating a profit for the bank, part of which gets paid as interest. This drives economic expansion. I don't even know how you would do something like that with bitcoin.
  - fhood 9y ago
    It could though, if places like Coinbase decided to transition into a banking role. The issue with Bitcoin in my mind is that people now view it as more of an investment than a currency.
    - bluetwo 9y ago
      But a loan is an enforceable contact. You would have to marry the loan somehow with something that would give it teeth. This is an interesting problem.
  - maxerickson 9y ago
    Same as with a bank. Transfer some bitcoin to someone and then pursue them when they don't transfer enough back. Charge interest to cover the risk.
    - bluetwo 9y ago
      Banks work in a legal and regulatory environment which bitcoin lacks. That's the problem, there are a lot of details that would have to be worked out to make that happen.
      - maxerickson 9y ago
        Bitcoin operates in exactly the same legal environment as banks. I agree that the regulatory environment is different.
- JChase2 9y ago
  I can conceive of a situation where bitcoin "banks" use people's deposited bitcoins for investment while paying out interest, similar to traditional banks. Then it'd pretty much be the same for markets. Not sure how likely that is, but as it gets more integrated into the system I can't think of a reason why it wouldn't end up being invested.
  - tuxxy 9y ago
    This is a unique idea that I haven't heard before. Any idea what these 'banks' might use the Bitcoin for? With the upcoming Lightning Network additions, this might make an interesting use case where "decentralized banks" are able to help aid the network with payment channels and its members gain interest. By the way, Bitcoin mixers are sorta like this in a way. If you have enough Bitcoin, some mixers look for investments and promise to return interest from it. This is another potential use case for "decentralized banks".
- JustAnotherPat 9y ago
  same for me. I don't even want to move it out of the exchange because it costs too much.
- conanbatt 9y ago
  I think something americans often miss with this use of bitcoin is how much people in the world keep dollars in the mattress. It is often said that the us doesnt have inflation because when more dollars are printed, global demand still captures them. That is, when people in other countries save in dollars, they fund the US and defund their own country. Not making a moral or economic case against allowing people to do that, but its the effect it has. So now, what if the world stopped using dollars and started storing in bitcoin? Then the rise of bitcoin truly would be proportional to the demise of the dollar. In this way, I'm scared the bitcoin fanatics might actually have a point.
- eloisius 9y ago
  Doesn’t money taken out of circulation just increase the buying power of money still in circulation? People still need to eat, travel, etc. as much as they would otherwise.
- eigenvalue 9y ago
  You can lend your BTC out for interest on major exchanges to be used for margin loans.
- monort 9y ago
  Actually, bitcoin velocity is comparable to M2 USD: http://charts.woobull.com/bitcoin-velocity/ http://charts.woobull.com/bitcoin-velocity/
  - romanovcode 9y ago
    Isn't this velocity taken only because people are buying it? If so it is of no value.
ukulele 9y ago
I'm not a Bitcoin person, but it strikes me that neither of these people is known for predicting markets successfully, so why would they be relevant predictors here?
elhudy 9y ago
>It doesn’t serve any socially useful function. I never thought I would so heartily disagree with a Nobel Economics Laureate, but this appears to be a misguided opinion. Bitcoin drives an entire black market which enables consumers worldwide to securely and faithfully make purchases that they would be unable to otherwise make. Direct tax generation isn't the only measure of socially useful functions.
- paulgb 9y ago
  Not to mention it's the best-funded behavioral economics experiment in history :)
  - fori1to10 9y ago
    I was thinking about this, since the blockchain is public, there is a lot of data out there steadily accumulating. Are there any published studies exploiting this data already?
- JustAnotherPat 9y ago
  News to me that people still use bitcoin to buy drugs. Everyone i know got out of that game years ago.
  - psyc 9y ago
    What would they use instead? Perhaps the people you know stopped buying drugs from the internet. People in general haven’t.
    - Kiro 9y ago
      Monero.
- Dangeranger 9y ago
  My interpretation is that he would disagree with your definition of 'socially useful' in regards to black market purchases. I'm not saying Bitcoin doesn't provide a value of exchange, after all, it could be said that the storage of gold for holding value is also not a 'socially useful' function.
unknown_apostle 9y ago
The obvious speculation aside, Bitcoin's behaviour is revolving more and more about good vs bad money, aka Gresham's law. "Good money" (bitcoin) is being hoarded because people are starting to trust it as a long term store of value, while elastic moneys like USD/EUR/JPY are being used for paying and playing. Most modern economists just instinctively hate good money because they believe saving is evil. "It doesn’t serve any socially useful function." They use the exact same phrasing when discussing gold. (My only beef with bitcoin and blockchain is that it can become bad money in a matter of milliseconds, without any heads up. E.g. when a major bug is found. Bitcoin may ultimately just be too complex to be good savings money. Its "badness" can be hidden in a massive, single occurence tail risk.)
- fhood 9y ago
  How do you define good money and bad money? I feel like Bitcoin used to be a currency, but it has evolved into an investment game.
  - dnautics 9y ago
    Good money and bad money are well defined concepts in the context of greshams law
  - unknown_apostle 9y ago
    Whenever a person owns two kinds of things which are money-like (fungible, liquid, universal) they will prefer to pay using the bad money. Bad means things like "diluted gold content", reckless behaviour of the emitting central bank, etc. In the case of a widely adopted blockchain like bitcoin, "bad" could mean something like "technically inferior". Or in terms of tail risk: "hacked" or "major bug discovered" or "encryption broken". These tail risks caused by blockchain's complexity would be a sudden event. Unlike e.g. USD or EUR becoming bad money, which is something that unfolds slowly and publicly over many years.
- paulgb 9y ago
  That's not what Gresham's law says. As Hayek put it in denationalisation of money (section VI The confusion about Gresham's Law): > Gresham's Law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law (Emphasis in the original)
deleted 9y ago
[deleted]
ianai 9y ago
It should be outlawed for its environmental cost alone.
- dnautics 9y ago
  Perhaps we should outlaw dollars for its environmental cost, the fact that it inflates (which encourages consumerism instead of conservation) and the fact that a huge percent of it enables immoral wars.
Dangeranger 9y ago
My largest Bitcoin question is this; Bitcoin's continued growth requires the addition of new coins to pay for the cost of verifying transactions. This creates pressure for the price of Bitcoin relative to the dollar to increase, leading to deflation of the dollar, and most other currencies relative to Bitcoin. This will lead to one of two conclusions. Either the hyper-valuation of Bitcoin relative to fiat currencies continues above the rate of rise for the cost of verification, or it doesn't. If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop. If the accelerated price does continue to outstrip the rise in cost, then people won't sell their Bitcoins because they will be worth more tomorrow than they are today. So exchange outside the network will stop. So in both scenarios you have a cease of exchange, the only difference is that one ceases within the network and one outside the network. Isn't this a failure in both cases?
- dnautics 9y ago
  > Bitcoin's continued growth requires the addition of new coins to pay for the cost of verifying transactions Huh?
- tlrobinson 9y ago
  > If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop. The mining “difficulty” automatically adjusts every 2 weeks to always target 10 minute blocks. If the price drops dramatically it can temporarily slow block creation, especially if a different cryptocurrency (with the same mining algorithm) is more profitable to mine, but it will eventually adjust.
thehardsphere 9y ago
Relevant HN discussion of the Bloomberg article from yesterday regarding Stiglitz's opinion of Bitcoin (not a dupe): https://news.ycombinator.com/item?id=15812247 https://news.ycombinator.com/item?id=15812247
shubhamjain 9y ago
From a technical standpoint, Bitcoin makes no sense. Bitcoin supply is fixed. How can, then, a currency be valued 100x within a few years when there's no major possibility of finding a magical utility of it. But, neither does Facebook's success. I couldn't have imagined anyone could create a $400B+ social network company. I guess if by being rational you're avoiding burning your hand, you're also missing out on the hen who will lay golden eggs in the future. In a few years, $10,000 might look peanuts to pay for Bitcoin. It seems logically absurd to think so, but time and again, the skeptics have been proven foolish and the believers have made the gains.
- moxious 9y ago
  "Past performance is no indicator of future returns" New things come along, and they don't have to make sense in the old worldview in order to be good. So the analysis of 60 year olds, even the really smart ones, is less valuable than it sometimes appears. HOWEVER -- the opposite is also true, "flavors of the month" come and go, and proving worldwide utility takes more than convincing a lot of people to buy for a period of time. It's going to take years to see the outcome and who is right. Humans are absolutely fucking terrible at predicting the future. Don't buy the hype. Do your own research, run your own experiments, and hedge your own risk.
- Dangeranger 9y ago
  The utility of Bitcoin, and the value it provides right now, is almost entirely the returns it provides relative to a fiat currency during the period of hyper-valuation. If it fails to continue growing relative to the perception of the people buying it, it's value on the market will plummet, and that will likely cause a run on the exchanges.
  - usrusr 9y ago
    Is there even reason to expect exchanges to play along if the value starts to really go south? It's pretty obvious that exchanges would be practically out of business after a total collapse of bitcoin valuation, so a collapse would be an existential threat to them and existential threats are known to inspire desperate measures. What regulation would keep market makers from experiencing "unexpected technical difficulties" in a panic (e.g. until their own holdings are liquidated, and those of their friends)? There are many ways to add arbitrary friction and hidden prioritization to sell offers if you are not under the full scrutiny of all that regulation bitcoin aficionados want so dearly removed. If you were forced to find buyers for your btc on your own in a panic, without the help of market makers, then collapsing nominal market rates would not be the main problem of "btc millionaires", getting that collapsed rate, or even just a significant fraction thereof, would.
golemotron 9y ago
I don't think that they like tulips either.
afsina 9y ago
I think they do not understand it well. Or, they do understand, but it just rubs them the wrong way. Probably because they are either ardent money printing Keynesians or all-powerful-state loving social-democrats.
- moxious 9y ago
  They do understand it but this disagreement masks a deeper issue -- they think economics functions just as it did some years ago and others disagree. With differing underlying assumptions, both sides' arguments are rational.
sunstone 9y ago
You would think that these people would understand that bitcoin, from a financial perspective, behaves like disembodied gold. A store of value outside of legal control. So much so that, very likely that's exactly what its creators hoped to achieve. You mine it after all.
- moxious 9y ago
  Please avoid getting too wrapped up in the metaphor. You don't mine it, there's no TNT involved, that's just a word. And it may behave "like" gold in some respects but in many other crucial ones it does not. BTC is not a useful raw material in any industrial process. It requires a P2P network and extensive global infrastructure, so it won't still be sitting there inert in 1,000 years, when the Power is out, in a crisis. BTC can't be alloyed with other cryptocurrencies to produce other value added products. You can't put BTC leaf on your fancy pastries. There are no other downstream businesses that specialize in assaying the purity of your bitcoin.
- xenophon 9y ago
  Some of the key characteristics of a store of value are durability, limited supply, uniqueness, and portability. Unlike gold, BTC is neither unique nor truly in limited supply, thanks to forks that create "inflation" and altcoins that can substitute for BTC in all pertinent ways. The vast majority of participants in this market aren't parking their money in BTC to preserve it, and neither to use it as a medium of exchange. They're doing it with the expectation of a return. If those returns fail to materialize, the money will move elsewhere.
  - mattmanser 9y ago
    There are a load of comparatively worthless metals, compared to Gold.
mtgx 9y ago
Bitcoin doesn't care if economics laureates don't like it.
googletazer 9y ago
Hyperbitcoinization is not something any "traditional" economist will like.
xutopia 9y ago
This sounds more like a vim versus emacs, dynamic versus static type argument to me. I see Bitcoin as a new form of gold that is more easily transferred and stored. Does he object to gold as well?
jokoon 9y ago
I'm still wondering if bitcoin is currently and possibly being used to launder money. I guess bitcoin exchanges are not really regulated in any way. Or maybe more drug resellers have found a way to sell drugs online using bitcoin, meaning drug users are buying bitcoin en masse, inflating the price. One possible way to launder money, would be to find a way to convert dirty dollar bills to bitcoin at a higher dollar price. https://i.imgur.com/DocUl2S.png https://i.imgur.com/DocUl2S.png
teilo 9y ago
Perhaps because Nobel Economics Laureates are not equipped to deal with a means of exchange that cannot be inflated, cannot be controlled by central banks, and has equivalent utility to cash.

40 points by champagnepapi 9y ago

I don't like Bitcoin as well, even tho I own some. The problem in my mind is that it is just sitting money, it is not circulating therefore it is not good for economy.

rb808 9y ago
That's not completely true. It requires a lot of electricity and computers, there are loads of new power stations in China, and loads of new servers built to run BTC.
- merpnderp 9y ago
  Mining precious metals takes a lot of resources also. Should we stop - as even governments like to hold precious metals in their portfolios?
merpnderp 9y ago
Seems like it is a lot like precious metals in that way, a hedge against inflation. Except there are likely a lot more people who will happily exchange bitcoins versus gold, especially over the internet.
AlexAltea 9y ago
Bitcoin would be circulating way more if more services and online stores, e.g. Amazon, PayPal, simply accepted it as just another currency. Rejecting it as payment method because it's not circulating is just circular logic. I have been spending plenty of mBTC in the stores (shopping, flights, hotels) that accept it such as Overstock, Abitsky, Destinia, etc. and my experience there has been way more comfortable than shopping with credit cards or even Paypal.
- noretire 9y ago
  And if it didn’t lose 75% or more of its value every so often. Guess what you don’t want money to do? That. How would you feel if the dollar in your pocket was worth $0.10 tomorrow?
- popinman322 9y ago
  Shopping with cryptocurrency has always seemed safer to me, personally. I keep all my BTC/LTC/ETH in Coinbase wallets, and whenever I want to send money from those wallets I need to go through multiple 2FA prompts. My debit/credit cards have never required anything more than a static number to be used online.
  - tdb7893 9y ago
    I wish you could get bitcoin with the fraud prevention guarantees that come with credit cards
  - a_c_s 9y ago
    If my credit card gets stolen then I just report it to the credit card company and I get a new card (free) and all of the fraudulent charges reversed. If the bank goes under, my funds are insured by the FDIC. If I lose my wallet I can report that to my banks and get everything (except the cash in my wallet) restored to pre-loss state. If my Coinbase wallet account is hacked because I use a bad password, can I get anything back? If Coinbase as a company goes under, what happens to my bitcoins? If I accidentally send cryptocurrency to the wrong recipient, how do I reverse that transaction? As somebody living in the USA who doesn't transfer funds internationally, I'm quite well covered by existing banking regulations: I'm struggling to see how Bitcoin is 'safer' for me in any way.
- CupOfJava 9y ago
  How do you get around the high transaction fees? Bitcoin seems too slow and expensive to use.
bluetwo 9y ago
That's an interesting point. Unlike dollars, made money doesn't sit in a bank, to be loaned to lenders creating a profit for the bank, part of which gets paid as interest. This drives economic expansion. I don't even know how you would do something like that with bitcoin.
- fhood 9y ago
  It could though, if places like Coinbase decided to transition into a banking role. The issue with Bitcoin in my mind is that people now view it as more of an investment than a currency.
  - bluetwo 9y ago
    But a loan is an enforceable contact. You would have to marry the loan somehow with something that would give it teeth. This is an interesting problem.
- maxerickson 9y ago
  Same as with a bank. Transfer some bitcoin to someone and then pursue them when they don't transfer enough back. Charge interest to cover the risk.
  - bluetwo 9y ago
    Banks work in a legal and regulatory environment which bitcoin lacks. That's the problem, there are a lot of details that would have to be worked out to make that happen.
    - maxerickson 9y ago
      Bitcoin operates in exactly the same legal environment as banks. I agree that the regulatory environment is different.
JChase2 9y ago
I can conceive of a situation where bitcoin "banks" use people's deposited bitcoins for investment while paying out interest, similar to traditional banks. Then it'd pretty much be the same for markets. Not sure how likely that is, but as it gets more integrated into the system I can't think of a reason why it wouldn't end up being invested.
- tuxxy 9y ago
  This is a unique idea that I haven't heard before. Any idea what these 'banks' might use the Bitcoin for? With the upcoming Lightning Network additions, this might make an interesting use case where "decentralized banks" are able to help aid the network with payment channels and its members gain interest. By the way, Bitcoin mixers are sorta like this in a way. If you have enough Bitcoin, some mixers look for investments and promise to return interest from it. This is another potential use case for "decentralized banks".
JustAnotherPat 9y ago
same for me. I don't even want to move it out of the exchange because it costs too much.
conanbatt 9y ago
I think something americans often miss with this use of bitcoin is how much people in the world keep dollars in the mattress. It is often said that the us doesnt have inflation because when more dollars are printed, global demand still captures them. That is, when people in other countries save in dollars, they fund the US and defund their own country. Not making a moral or economic case against allowing people to do that, but its the effect it has. So now, what if the world stopped using dollars and started storing in bitcoin? Then the rise of bitcoin truly would be proportional to the demise of the dollar. In this way, I'm scared the bitcoin fanatics might actually have a point.
eloisius 9y ago
Doesn’t money taken out of circulation just increase the buying power of money still in circulation? People still need to eat, travel, etc. as much as they would otherwise.
eigenvalue 9y ago
You can lend your BTC out for interest on major exchanges to be used for margin loans.
monort 9y ago
Actually, bitcoin velocity is comparable to M2 USD: http://charts.woobull.com/bitcoin-velocity/ http://charts.woobull.com/bitcoin-velocity/
- romanovcode 9y ago
  Isn't this velocity taken only because people are buying it? If so it is of no value.

ukulele 9y ago

I'm not a Bitcoin person, but it strikes me that neither of these people is known for predicting markets successfully, so why would they be relevant predictors here?

elhudy 9y ago

>It doesn’t serve any socially useful function. I never thought I would so heartily disagree with a Nobel Economics Laureate, but this appears to be a misguided opinion. Bitcoin drives an entire black market which enables consumers worldwide to securely and faithfully make purchases that they would be unable to otherwise make. Direct tax generation isn't the only measure of socially useful functions.

paulgb 9y ago
Not to mention it's the best-funded behavioral economics experiment in history :)
- fori1to10 9y ago
  I was thinking about this, since the blockchain is public, there is a lot of data out there steadily accumulating. Are there any published studies exploiting this data already?
JustAnotherPat 9y ago
News to me that people still use bitcoin to buy drugs. Everyone i know got out of that game years ago.
- psyc 9y ago
  What would they use instead? Perhaps the people you know stopped buying drugs from the internet. People in general haven’t.
  - Kiro 9y ago
    Monero.
Dangeranger 9y ago
My interpretation is that he would disagree with your definition of 'socially useful' in regards to black market purchases. I'm not saying Bitcoin doesn't provide a value of exchange, after all, it could be said that the storage of gold for holding value is also not a 'socially useful' function.

unknown_apostle 9y ago

The obvious speculation aside, Bitcoin's behaviour is revolving more and more about good vs bad money, aka Gresham's law. "Good money" (bitcoin) is being hoarded because people are starting to trust it as a long term store of value, while elastic moneys like USD/EUR/JPY are being used for paying and playing. Most modern economists just instinctively hate good money because they believe saving is evil. "It doesn’t serve any socially useful function." They use the exact same phrasing when discussing gold. (My only beef with bitcoin and blockchain is that it can become bad money in a matter of milliseconds, without any heads up. E.g. when a major bug is found. Bitcoin may ultimately just be too complex to be good savings money. Its "badness" can be hidden in a massive, single occurence tail risk.)

fhood 9y ago
How do you define good money and bad money? I feel like Bitcoin used to be a currency, but it has evolved into an investment game.
- dnautics 9y ago
  Good money and bad money are well defined concepts in the context of greshams law
- unknown_apostle 9y ago
  Whenever a person owns two kinds of things which are money-like (fungible, liquid, universal) they will prefer to pay using the bad money. Bad means things like "diluted gold content", reckless behaviour of the emitting central bank, etc. In the case of a widely adopted blockchain like bitcoin, "bad" could mean something like "technically inferior". Or in terms of tail risk: "hacked" or "major bug discovered" or "encryption broken". These tail risks caused by blockchain's complexity would be a sudden event. Unlike e.g. USD or EUR becoming bad money, which is something that unfolds slowly and publicly over many years.
paulgb 9y ago
That's not what Gresham's law says. As Hayek put it in denationalisation of money (section VI The confusion about Gresham's Law): > Gresham's Law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law (Emphasis in the original)

deleted 9y ago

[deleted]

ianai 9y ago

It should be outlawed for its environmental cost alone.

dnautics 9y ago
Perhaps we should outlaw dollars for its environmental cost, the fact that it inflates (which encourages consumerism instead of conservation) and the fact that a huge percent of it enables immoral wars.

Dangeranger 9y ago

My largest Bitcoin question is this; Bitcoin's continued growth requires the addition of new coins to pay for the cost of verifying transactions. This creates pressure for the price of Bitcoin relative to the dollar to increase, leading to deflation of the dollar, and most other currencies relative to Bitcoin. This will lead to one of two conclusions. Either the hyper-valuation of Bitcoin relative to fiat currencies continues above the rate of rise for the cost of verification, or it doesn't. If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop. If the accelerated price does continue to outstrip the rise in cost, then people won't sell their Bitcoins because they will be worth more tomorrow than they are today. So exchange outside the network will stop. So in both scenarios you have a cease of exchange, the only difference is that one ceases within the network and one outside the network. Isn't this a failure in both cases?

dnautics 9y ago
> Bitcoin's continued growth requires the addition of new coins to pay for the cost of verifying transactions Huh?
tlrobinson 9y ago
> If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop. The mining “difficulty” automatically adjusts every 2 weeks to always target 10 minute blocks. If the price drops dramatically it can temporarily slow block creation, especially if a different cryptocurrency (with the same mining algorithm) is more profitable to mine, but it will eventually adjust.

thehardsphere 9y ago

Relevant HN discussion of the Bloomberg article from yesterday regarding Stiglitz's opinion of Bitcoin (not a dupe): https://news.ycombinator.com/item?id=15812247 https://news.ycombinator.com/item?id=15812247

shubhamjain 9y ago

From a technical standpoint, Bitcoin makes no sense. Bitcoin supply is fixed. How can, then, a currency be valued 100x within a few years when there's no major possibility of finding a magical utility of it. But, neither does Facebook's success. I couldn't have imagined anyone could create a $400B+ social network company. I guess if by being rational you're avoiding burning your hand, you're also missing out on the hen who will lay golden eggs in the future. In a few years, $10,000 might look peanuts to pay for Bitcoin. It seems logically absurd to think so, but time and again, the skeptics have been proven foolish and the believers have made the gains.

moxious 9y ago
"Past performance is no indicator of future returns" New things come along, and they don't have to make sense in the old worldview in order to be good. So the analysis of 60 year olds, even the really smart ones, is less valuable than it sometimes appears. HOWEVER -- the opposite is also true, "flavors of the month" come and go, and proving worldwide utility takes more than convincing a lot of people to buy for a period of time. It's going to take years to see the outcome and who is right. Humans are absolutely fucking terrible at predicting the future. Don't buy the hype. Do your own research, run your own experiments, and hedge your own risk.
Dangeranger 9y ago
The utility of Bitcoin, and the value it provides right now, is almost entirely the returns it provides relative to a fiat currency during the period of hyper-valuation. If it fails to continue growing relative to the perception of the people buying it, it's value on the market will plummet, and that will likely cause a run on the exchanges.
- usrusr 9y ago
  Is there even reason to expect exchanges to play along if the value starts to really go south? It's pretty obvious that exchanges would be practically out of business after a total collapse of bitcoin valuation, so a collapse would be an existential threat to them and existential threats are known to inspire desperate measures. What regulation would keep market makers from experiencing "unexpected technical difficulties" in a panic (e.g. until their own holdings are liquidated, and those of their friends)? There are many ways to add arbitrary friction and hidden prioritization to sell offers if you are not under the full scrutiny of all that regulation bitcoin aficionados want so dearly removed. If you were forced to find buyers for your btc on your own in a panic, without the help of market makers, then collapsing nominal market rates would not be the main problem of "btc millionaires", getting that collapsed rate, or even just a significant fraction thereof, would.

golemotron 9y ago

I don't think that they like tulips either.

afsina 9y ago

I think they do not understand it well. Or, they do understand, but it just rubs them the wrong way. Probably because they are either ardent money printing Keynesians or all-powerful-state loving social-democrats.

moxious 9y ago
They do understand it but this disagreement masks a deeper issue -- they think economics functions just as it did some years ago and others disagree. With differing underlying assumptions, both sides' arguments are rational.

sunstone 9y ago

You would think that these people would understand that bitcoin, from a financial perspective, behaves like disembodied gold. A store of value outside of legal control. So much so that, very likely that's exactly what its creators hoped to achieve. You mine it after all.

moxious 9y ago
Please avoid getting too wrapped up in the metaphor. You don't mine it, there's no TNT involved, that's just a word. And it may behave "like" gold in some respects but in many other crucial ones it does not. BTC is not a useful raw material in any industrial process. It requires a P2P network and extensive global infrastructure, so it won't still be sitting there inert in 1,000 years, when the Power is out, in a crisis. BTC can't be alloyed with other cryptocurrencies to produce other value added products. You can't put BTC leaf on your fancy pastries. There are no other downstream businesses that specialize in assaying the purity of your bitcoin.
xenophon 9y ago
Some of the key characteristics of a store of value are durability, limited supply, uniqueness, and portability. Unlike gold, BTC is neither unique nor truly in limited supply, thanks to forks that create "inflation" and altcoins that can substitute for BTC in all pertinent ways. The vast majority of participants in this market aren't parking their money in BTC to preserve it, and neither to use it as a medium of exchange. They're doing it with the expectation of a return. If those returns fail to materialize, the money will move elsewhere.
- mattmanser 9y ago
  There are a load of comparatively worthless metals, compared to Gold.

mtgx 9y ago

Bitcoin doesn't care if economics laureates don't like it.

googletazer 9y ago

Hyperbitcoinization is not something any "traditional" economist will like.

xutopia 9y ago

This sounds more like a vim versus emacs, dynamic versus static type argument to me. I see Bitcoin as a new form of gold that is more easily transferred and stored. Does he object to gold as well?

jokoon 9y ago

I'm still wondering if bitcoin is currently and possibly being used to launder money. I guess bitcoin exchanges are not really regulated in any way. Or maybe more drug resellers have found a way to sell drugs online using bitcoin, meaning drug users are buying bitcoin en masse, inflating the price. One possible way to launder money, would be to find a way to convert dirty dollar bills to bitcoin at a higher dollar price. https://i.imgur.com/DocUl2S.png https://i.imgur.com/DocUl2S.png

teilo 9y ago

Perhaps because Nobel Economics Laureates are not equipped to deal with a means of exchange that cannot be inflated, cannot be controlled by central banks, and has equivalent utility to cash.