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Describe to me how it's a run, I'll tell you why it's not. How about that. Is it really that unbelievable that bitcoin breaks certain economic rules and that

Describe to me how it's a run, I'll tell you why it's not. How about that. Is it really that unbelievable that bitcoin breaks certain economic rules and that some economic theory might have to be rethought? Is that what you are implying? That economics is like "science"?

JumpCrisscross 9y ago
> Is it really that unbelievable that bitcoin breaks certain economic rules and that some economic theory might have to be rethought? Yes. Particularly when the basis of this rethinking is “there are so many people involved, how could it possibly crash.”
- adamnemecek 9y ago
  That's not even my main argument.
Jtsummers 9y ago
> Is it really that unbelievable that bitcoin breaks certain economic rules and that some economic theory might have to be rethought? Yes, yes it is. It's incredibly remarkable that bitcoin could rewrite our economic theories so completely. It offers nothing novel in any way economically.
- adamnemecek 9y ago
  Didn't say completely nor all. "breaks certain economic rules and that some economic theory might have to be rethought?" > It offers nothing novel in any way economically. Ok, can you explain bitcoin in economic terms?
  - Jtsummers 9y ago
    Sure. It's an overvalued, speculative commodity in a bubble. Ostensibly a currency, but without any of the useful features of a currency (effectively unusable for common transactions due to high fees, slow transaction confirmation rates, and highly unstable value). As a currency, assuming that its value stabilized, it suffers from being deflationary which will impede its ability to survive as either a global currency or a multi-generational currency. Its current status is essentially a speculative commodity. But in that regard it has no utility. Most commodities are, well, something tangible or valued based on something else in the world. Bitcoin as a commodity has nothing backing it up other than its distributed ledger and the massive amount of computational power behind that. But the distributed ledger will see a drop in miners as the value of BTC drops, or an increase in fees to make it even less tenable as a currency than it already is. If BTC were a useful currency, then BTC the commodity would at least have that as a backing. In theory the commodity price and currency price would move towards each other (with one leading or lagging behind the other). But BTC the commodity has made BTC the currency essentially impossible to use due to the present overvaluation. Regarding deflation and its inability to survive more than one or two generations, assuming some stability, if it maintains a modest 2% deflation rate the real value of a nominal amount of BTC would double every 32 years. So someone receiving 1 BTC as salary today would receive 0.5 BTC for the same work in approximately 32 years. Halved again 32 years later, the 3rd or 4th generation would receive 1/4 the salary of the first generation (in nominal terms) and have a fraction of the buying power. I suppose a novel aspect of this is that it virtually eliminates the need for pensions as the mere presence of money in your wallet means you'll have more buying power in the future than now. Unfortunately this only makes financial inequality even worse than the situation we have today. Lending would be eliminated, or the terms would be so dreadful only the most desperate would seek it. Savings would go up, but in the "under the mattress" sense rather than the "in the bank" sense, where the money can at least continue to have some utility by being lended out to others by the bank. A massive economic drag. None of this is novel stuff, from an economics standpoint.
    - tbabb 9y ago
      I would also add to: > As a currency, assuming that its value stabilized by pointing out that without a central bank, a stable value is literally impossible, because its price becomes entirely demand-driven. That alone is enough to bring its hope of being a meaningful currency in stable society to zilch.
    - Giorgi 9y ago
      >effectively unusable for common transactions due to high fees, slow transaction confirmation rates, and highly unstable value Correct, but you somehow missed how demand for bitcoin was actually created - it is somewhat untraceable currency therefore used in "black market" transactions. As those markets develop they will demand such currency in one way or another and that's novelty from an economics standpoint.
      - Jtsummers 9y ago
        This is true, I didn't mention that. That is a useful detail but ended up being a short-lived portion of bitcoins life overall as its pseudonymity was fairly quickly foiled through network analysis. Other crypto currencies will fare better in that regard and could become one of or the crypto for black market trade. But that was also something that held back bitcoins valuation. In 2011/2012 anyone who heard of it either understood its technical features, or thought it was "that thing for buying drugs online". Once it stopped being the latter (at least in common perception) the speculation really began in earnest as the exchanges were able to gain access to banks and other financial institutions. A blackmarket crypto that retains that reputation, whether used for legitimate business or not, will likely find its global valuation impaired by that reputation like bitcoin and it will be difficult for average folks with no interest in the blackmarket economy from "investing" in it. It certainly will be interesting.
    - adamnemecek 9y ago
      You are missing a lot of things. Like it's not just economic. Also your argument talks about bitcoin but not the other cryptocurrencies that might not have the some of the features you describe. > Sure. It's an overvalued, speculative commodity in a bubble. Overvalued compared with what? Speculative is an opinion. > Ostensibly a currency, but without any of the useful features of a currency With a fundamentally different set of features. Like being able to exchange with literally anyone in the world is unprecedented. Again, Bitcoin has opened many new markets, e.g. I can trade with North Korea with it. It also lets the underbanked people fight back against their government. E.g. I can pay a worker in Zimbabwe much easier than before. This could drive up the adoption rate to unprecedented levels. > Most commodities are, well, something tangible or valued based on something else in the world. Bitcoin as a commodity has nothing backing it up other than its distributed ledger and the massive amount of computational power behind that. The backing part of commodities is greatly exaggerated. Who cares? Is that why you are using dollars? It's a protocol that lets me plugin to the world economy. That's unprecedented. You talk about BTC but like BTC is not the end all. There's like 7000 crypto, some of which are shit but some have like ...serious research behind them. As a trading instrument it's so much better than stock. With stock you have to wait three days. I guess the closest is Forex but forex is just so boring.
tbabb 9y ago
Here's how this comment sounds: "I don't understand what a run is, but somehow I'm pretty sure it's bullshit. I don't understand how economics works, but I'm pretty sure all the rules have been rewritten in some unspecified way that makes bitcoin invulnerable, and I'm in a better position to know this than people who actually have the understanding that I'm rejecting. My ignorance, which I have no burden to dispel, is better than your knowledge." If that's not your viewpoint, then I'd love to hear what exactly you were getting at.
- adamnemecek 9y ago
  I understand what a run is, and like, is this high school economics or something? I just dont think that it entirely matches a run. You could say that same thing about stock. I'm not saying all economics, but some currently held believes might be generalized. Also what exactly do you think is the required knowledge for this? Just economics? If so, you are off.
  - tbabb 9y ago
    > I understand what a run is, and like, is this high school economics or something? Yeah, we could start there. So what's a run and what causes it? Still waiting.

JumpCrisscross 9y ago

> Is it really that unbelievable that bitcoin breaks certain economic rules and that some economic theory might have to be rethought? Yes. Particularly when the basis of this rethinking is “there are so many people involved, how could it possibly crash.”

adamnemecek 9y ago
That's not even my main argument.

Jtsummers 9y ago

> Is it really that unbelievable that bitcoin breaks certain economic rules and that some economic theory might have to be rethought? Yes, yes it is. It's incredibly remarkable that bitcoin could rewrite our economic theories so completely. It offers nothing novel in any way economically.

adamnemecek 9y ago
Didn't say completely nor all. "breaks certain economic rules and that some economic theory might have to be rethought?" > It offers nothing novel in any way economically. Ok, can you explain bitcoin in economic terms?
- Jtsummers 9y ago
  Sure. It's an overvalued, speculative commodity in a bubble. Ostensibly a currency, but without any of the useful features of a currency (effectively unusable for common transactions due to high fees, slow transaction confirmation rates, and highly unstable value). As a currency, assuming that its value stabilized, it suffers from being deflationary which will impede its ability to survive as either a global currency or a multi-generational currency. Its current status is essentially a speculative commodity. But in that regard it has no utility. Most commodities are, well, something tangible or valued based on something else in the world. Bitcoin as a commodity has nothing backing it up other than its distributed ledger and the massive amount of computational power behind that. But the distributed ledger will see a drop in miners as the value of BTC drops, or an increase in fees to make it even less tenable as a currency than it already is. If BTC were a useful currency, then BTC the commodity would at least have that as a backing. In theory the commodity price and currency price would move towards each other (with one leading or lagging behind the other). But BTC the commodity has made BTC the currency essentially impossible to use due to the present overvaluation. Regarding deflation and its inability to survive more than one or two generations, assuming some stability, if it maintains a modest 2% deflation rate the real value of a nominal amount of BTC would double every 32 years. So someone receiving 1 BTC as salary today would receive 0.5 BTC for the same work in approximately 32 years. Halved again 32 years later, the 3rd or 4th generation would receive 1/4 the salary of the first generation (in nominal terms) and have a fraction of the buying power. I suppose a novel aspect of this is that it virtually eliminates the need for pensions as the mere presence of money in your wallet means you'll have more buying power in the future than now. Unfortunately this only makes financial inequality even worse than the situation we have today. Lending would be eliminated, or the terms would be so dreadful only the most desperate would seek it. Savings would go up, but in the "under the mattress" sense rather than the "in the bank" sense, where the money can at least continue to have some utility by being lended out to others by the bank. A massive economic drag. None of this is novel stuff, from an economics standpoint.
  - tbabb 9y ago
    I would also add to: > As a currency, assuming that its value stabilized by pointing out that without a central bank, a stable value is literally impossible, because its price becomes entirely demand-driven. That alone is enough to bring its hope of being a meaningful currency in stable society to zilch.
  - Giorgi 9y ago
    >effectively unusable for common transactions due to high fees, slow transaction confirmation rates, and highly unstable value Correct, but you somehow missed how demand for bitcoin was actually created - it is somewhat untraceable currency therefore used in "black market" transactions. As those markets develop they will demand such currency in one way or another and that's novelty from an economics standpoint.
    - Jtsummers 9y ago
      This is true, I didn't mention that. That is a useful detail but ended up being a short-lived portion of bitcoins life overall as its pseudonymity was fairly quickly foiled through network analysis. Other crypto currencies will fare better in that regard and could become one of or the crypto for black market trade. But that was also something that held back bitcoins valuation. In 2011/2012 anyone who heard of it either understood its technical features, or thought it was "that thing for buying drugs online". Once it stopped being the latter (at least in common perception) the speculation really began in earnest as the exchanges were able to gain access to banks and other financial institutions. A blackmarket crypto that retains that reputation, whether used for legitimate business or not, will likely find its global valuation impaired by that reputation like bitcoin and it will be difficult for average folks with no interest in the blackmarket economy from "investing" in it. It certainly will be interesting.
  - adamnemecek 9y ago
    You are missing a lot of things. Like it's not just economic. Also your argument talks about bitcoin but not the other cryptocurrencies that might not have the some of the features you describe. > Sure. It's an overvalued, speculative commodity in a bubble. Overvalued compared with what? Speculative is an opinion. > Ostensibly a currency, but without any of the useful features of a currency With a fundamentally different set of features. Like being able to exchange with literally anyone in the world is unprecedented. Again, Bitcoin has opened many new markets, e.g. I can trade with North Korea with it. It also lets the underbanked people fight back against their government. E.g. I can pay a worker in Zimbabwe much easier than before. This could drive up the adoption rate to unprecedented levels. > Most commodities are, well, something tangible or valued based on something else in the world. Bitcoin as a commodity has nothing backing it up other than its distributed ledger and the massive amount of computational power behind that. The backing part of commodities is greatly exaggerated. Who cares? Is that why you are using dollars? It's a protocol that lets me plugin to the world economy. That's unprecedented. You talk about BTC but like BTC is not the end all. There's like 7000 crypto, some of which are shit but some have like ...serious research behind them. As a trading instrument it's so much better than stock. With stock you have to wait three days. I guess the closest is Forex but forex is just so boring.

tbabb 9y ago

Here's how this comment sounds: "I don't understand what a run is, but somehow I'm pretty sure it's bullshit. I don't understand how economics works, but I'm pretty sure all the rules have been rewritten in some unspecified way that makes bitcoin invulnerable, and I'm in a better position to know this than people who actually have the understanding that I'm rejecting. My ignorance, which I have no burden to dispel, is better than your knowledge." If that's not your viewpoint, then I'd love to hear what exactly you were getting at.

adamnemecek 9y ago
I understand what a run is, and like, is this high school economics or something? I just dont think that it entirely matches a run. You could say that same thing about stock. I'm not saying all economics, but some currently held believes might be generalized. Also what exactly do you think is the required knowledge for this? Just economics? If so, you are off.
- tbabb 9y ago
  > I understand what a run is, and like, is this high school economics or something? Yeah, we could start there. So what's a run and what causes it? Still waiting.