5 ms·

Bitcoin would be a calamity, not an economy

37 points by edward 9y ago

kashif 9y ago
The article doesn't say much other than state the current reality of central banks shaping a lot of market forces in todays paradigm. I disagree and think that the Central bank has inserted itself in things that economic forces would have otherwise managed anyway.
- toss1 9y ago
  The history of massive boom-bust cycles before central banks says otherwise. These cycles haven't been completely eliminated, but the cycles are much more moderated than the way they were before fiscal and monetary interventions. It seems that the best would be for a currency to automatically detect the conditions needing faster or slower creation and algorithmically adjust (as they adjust the hash rate), keeping political adjustments out of it.
zamalek 9y ago
> total number of bitcoins is capped at 21 million [...]. This makes Bitcoin appealing to many people because something that will never increase in supply is more likely to hold its value. A deeper problem is what happens when the economy grows to more than what Bitcoin can represent. For example, what happens when a piece of bread is worth less than 1 satoshi? With a fiat currency, you can simply print more so that said piece of bread can have its value accurately represented. You can't do that with Bitcoin. To make matters worse, if a whole bunch of [flames, edit: money] goes up in flames more can be printed to replace it. If Bitcoin goes missing[1], it's gone for good. Currency was formulated to replace barter (precisely because of indivisibility problems: you have one cow, but I only have three bread to trade). Cryptocurrency is not a currency because it specifically aims to reintroduce problems that currency solves. It could be an alternative solution to the barter problem if a novel workflow is formulated (such as Ripple carrying information and not value), but buying stuff with it is unsustainable in the long run. [1]: https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-value-james-howells-newport-landfill-hard-drive-campbell-simpson-laszlo-hanyecz-a8091371.html https://www.independent.co.uk/life-style/gadgets-and-tech/ne...
- supreme_sublime 9y ago
  Cryptocurrencies are most certainly divisible. You don't have to trade whole "coins". The biggest problem I see is the fact that it is a deflationary currency. Which makes it a pretty great store of value, but it also means that it is almost guaranteed to be worth more tomorrow than it is today. So instead of spending money or investing it for other people to use so it will grow, people will be incentivized to hold onto it. Edit - I was not aware that a "satoshi" is the term for the smallest denomination of Bitcoin. I was under the impression it was a generic kind of cute name for cryptocurrencies.
  - jjnoakes 9y ago
    > Cryptocurrencies are most certainly divisible The parent asked "what happens when a piece of bread is worth less than 1 satoshi?" - as far as I know, one satoshi is not divisible; am I mistaken?
    - zwily 9y ago
      Santiago originally said if we need more than 8 decimal places, it can be done with an update. There’s nothing really fundamental in Bitcoin that is limiting it to 8 decimal places.
      - beiller 9y ago
        You should probably clarify that 1 satoshi = 0.00000001 bitcoins, the current smallest unit. Now people say "we can move the decimal point", but I believe they are stored as 64 bit integers. Which means the smallest unit is not infinitely divisible without moving to say 128 bit integers (which is not much _more_ of a hurdle, but still slightly higher effort than implied by adding more precision).
- abbasaamer 9y ago
  > For example, what happens when a piece of bread is worth less than 1 satoshi That does not seem to be an imminent danger. The price of Bitcoin would have to increase literally 1.4 million times for a satoshi to be worth a penny. > To make matters worse, if a whole bunch of flames goes up in flames more can be printed to replace it. If Bitcoin goes missing[1], it's gone for good. Isn't that the same with paper cash? If by a "whole bunch" you mean enough to cause a worldwide issue, then there are solutions to that. Maybe not great solutions, but there are some. Worst case, a hard fork. That's essentially what led to Ethereum vs Ethereum Classic, isn't it?
ttul 9y ago
“The problem is that in the event of a crisis, there would also be no way to add liquidity to the system, since you can’t “print” more bitcoins.” Arguably, because the rate at which BTC is printed is algorithmically fixed, it makes no difference that there is a cap of 21 million at some time in the future. The fixed rate of issuance is a curiosity. Since everyone know that it exists and how it will play out, this is entirely reflected in the price. If BTC replaced fiat, then yes, there would be no way for anyone to issue more BTC to help provide liquidity. In this way, BTC is just like gold, and we know that backing a currency with gold is a poor idea because it similarly ties the hands of government. However, if governments bought massive stocks of BTC, they could release it when needed to absorb shocks. This would be more like a fiscal stimulus than a monetary stimulus, but in any case I think the article overlooks it as a distinct policy tool if BTC hits the really big time.
- solotronics 9y ago
  I think backing all the global currencies with absolutely nothing is a relatively new experiment and we have yet to see if it works out.
dumbfounder 9y ago
It's not going to supplant the fiat of the world's strongest economies for a long time, but it hopefully will soon for the weakest. For the weakest, the central bank is often the problem, not the solution.
israelsonbj 9y ago
Forking creates too many issues for general public adoption.
nontechdude1 9y ago
Bitcoin is an economy for illicit things. It is a store of value for early adopters trying to get people to basically put money in their pocket. The only thing people care about is its value against USD. That alone refutes the possibility of it as a currency. USD is clearly a great currency. Blockchain has some interesting applications; for example, medical records being secured, and maybe other applications.
dpc_pw 9y ago
This article is soo not worth reading. Nothing new or of any insight there. The argument about fixed supply is soo old, and argued with million times already. Don't worry. Noone is forcing anyone to use Bitcoin. Keep your fiat, enjoy your inflation and central bank always ready to print more of it. :)

37 points by edward 9y ago

The article doesn't say much other than state the current reality of central banks shaping a lot of market forces in todays paradigm. I disagree and think that the Central bank has inserted itself in things that economic forces would have otherwise managed anyway.

toss1 9y ago
The history of massive boom-bust cycles before central banks says otherwise. These cycles haven't been completely eliminated, but the cycles are much more moderated than the way they were before fiscal and monetary interventions. It seems that the best would be for a currency to automatically detect the conditions needing faster or slower creation and algorithmically adjust (as they adjust the hash rate), keeping political adjustments out of it.

zamalek 9y ago

> total number of bitcoins is capped at 21 million [...]. This makes Bitcoin appealing to many people because something that will never increase in supply is more likely to hold its value. A deeper problem is what happens when the economy grows to more than what Bitcoin can represent. For example, what happens when a piece of bread is worth less than 1 satoshi? With a fiat currency, you can simply print more so that said piece of bread can have its value accurately represented. You can't do that with Bitcoin. To make matters worse, if a whole bunch of [flames, edit: money] goes up in flames more can be printed to replace it. If Bitcoin goes missing[1], it's gone for good. Currency was formulated to replace barter (precisely because of indivisibility problems: you have one cow, but I only have three bread to trade). Cryptocurrency is not a currency because it specifically aims to reintroduce problems that currency solves. It could be an alternative solution to the barter problem if a novel workflow is formulated (such as Ripple carrying information and not value), but buying stuff with it is unsustainable in the long run. [1]: https://www.independent.co.uk/life-style/gadgets-and-tech/news/bitcoin-value-james-howells-newport-landfill-hard-drive-campbell-simpson-laszlo-hanyecz-a8091371.html https://www.independent.co.uk/life-style/gadgets-and-tech/ne...

supreme_sublime 9y ago
Cryptocurrencies are most certainly divisible. You don't have to trade whole "coins". The biggest problem I see is the fact that it is a deflationary currency. Which makes it a pretty great store of value, but it also means that it is almost guaranteed to be worth more tomorrow than it is today. So instead of spending money or investing it for other people to use so it will grow, people will be incentivized to hold onto it. Edit - I was not aware that a "satoshi" is the term for the smallest denomination of Bitcoin. I was under the impression it was a generic kind of cute name for cryptocurrencies.
- jjnoakes 9y ago
  > Cryptocurrencies are most certainly divisible The parent asked "what happens when a piece of bread is worth less than 1 satoshi?" - as far as I know, one satoshi is not divisible; am I mistaken?
  - zwily 9y ago
    Santiago originally said if we need more than 8 decimal places, it can be done with an update. There’s nothing really fundamental in Bitcoin that is limiting it to 8 decimal places.
    - beiller 9y ago
      You should probably clarify that 1 satoshi = 0.00000001 bitcoins, the current smallest unit. Now people say "we can move the decimal point", but I believe they are stored as 64 bit integers. Which means the smallest unit is not infinitely divisible without moving to say 128 bit integers (which is not much _more_ of a hurdle, but still slightly higher effort than implied by adding more precision).
abbasaamer 9y ago
> For example, what happens when a piece of bread is worth less than 1 satoshi That does not seem to be an imminent danger. The price of Bitcoin would have to increase literally 1.4 million times for a satoshi to be worth a penny. > To make matters worse, if a whole bunch of flames goes up in flames more can be printed to replace it. If Bitcoin goes missing[1], it's gone for good. Isn't that the same with paper cash? If by a "whole bunch" you mean enough to cause a worldwide issue, then there are solutions to that. Maybe not great solutions, but there are some. Worst case, a hard fork. That's essentially what led to Ethereum vs Ethereum Classic, isn't it?

ttul 9y ago

“The problem is that in the event of a crisis, there would also be no way to add liquidity to the system, since you can’t “print” more bitcoins.” Arguably, because the rate at which BTC is printed is algorithmically fixed, it makes no difference that there is a cap of 21 million at some time in the future. The fixed rate of issuance is a curiosity. Since everyone know that it exists and how it will play out, this is entirely reflected in the price. If BTC replaced fiat, then yes, there would be no way for anyone to issue more BTC to help provide liquidity. In this way, BTC is just like gold, and we know that backing a currency with gold is a poor idea because it similarly ties the hands of government. However, if governments bought massive stocks of BTC, they could release it when needed to absorb shocks. This would be more like a fiscal stimulus than a monetary stimulus, but in any case I think the article overlooks it as a distinct policy tool if BTC hits the really big time.

solotronics 9y ago
I think backing all the global currencies with absolutely nothing is a relatively new experiment and we have yet to see if it works out.

dumbfounder 9y ago

It's not going to supplant the fiat of the world's strongest economies for a long time, but it hopefully will soon for the weakest. For the weakest, the central bank is often the problem, not the solution.

israelsonbj 9y ago

Forking creates too many issues for general public adoption.

nontechdude1 9y ago

Bitcoin is an economy for illicit things. It is a store of value for early adopters trying to get people to basically put money in their pocket. The only thing people care about is its value against USD. That alone refutes the possibility of it as a currency. USD is clearly a great currency. Blockchain has some interesting applications; for example, medical records being secured, and maybe other applications.

dpc_pw 9y ago

This article is soo not worth reading. Nothing new or of any insight there. The argument about fixed supply is soo old, and argued with million times already. Don't worry. Noone is forcing anyone to use Bitcoin. Keep your fiat, enjoy your inflation and central bank always ready to print more of it. :)