25 ms·

OK, I understand how they're created and how many there are. But why?

by Charuru 16y ago

jackowayed 16y ago
The idea is that it's not under any entity's control, and the amount of currency grows in a predictable (and decreasing) way. This should prevent the crazy inflation we've seen occur with normal currency where the government can always just print more.
- akkartik 16y ago
  Why does the number of bitcoins in circulation converge to an asymptote?
  - jackowayed 16y ago
    Because every few years (4, I think), the number of bitcoins in each "block" (what you generate) is halved. So right now you get 50 BTC when you generate a block. In a few years it'll be 25. Then 12.5. Etc. In a very long time, they'll round from 10^-8 down to 0, but generating a block will still get you transaction fees from the transactions that occurred since the last block generated.
    - akkartik 16y ago
      I asked why, not how :) I understood from the FAQ how it was done, but there's no mention of why it's desirable? Why not either fix the number of bitcoins now for all time, or let them grow unboundedly at a constant rate?
      - jackowayed 16y ago
        Ah, ok. I think they're trying to balance 2 interests: They don't want inflation. One of the impeti for this initiative is to have a currency that some politicians can't decide to print more of. But at the same time, they can't just issue 90% of the total money that will exist right at the beginning. No one's going to buy into a currency where the vast majority of the "wealth" goes to a few early adopters. So it makes sense to have the money supply grow fast at the beginning, when the currency is hopefully getting more popular as well, preventing inflation, and then to gradually slow down the money supply growth to achieve the goal of preventing inflation.
        akkartik 16y ago
        Ah, very cool, thanks.
jerf 16y ago
Bitcoins are a creation by some who don't understand what a currency is. Bitcoins back to nothing and are only useful to the extent that you can fool another ideologue into taking them; for as long as they've been around, it is far, far easier to obtain goods or services with Warcraft gold or Microsoft Points, which aren't even trying to be universal currencies. (Just yesterday I was on a blog that cataloged the reasons Microsoft gave for various bannings, and selling services for Microsoft Points was a very common one. It's so easy Microsoft considers it a pestilence.) Last time this came up on HN BitCoin's FAQ had a question directly asking what useful thing it backs to. I say "asking" because the answer was basically no answer at all. I see it is no longer there. This is because if they can't answer it, it is better for them not to bring the question up at all, so I guess it's a good move for them. Currencies have to back to something. Dollars back to being able to pay the various governments of the US not to throw you in jail for breaking various laws (tax, fines, etc); a dollar is useful even in Africa to someone not subject to those laws, because you can trade it to somebody else who has that use. The way an economy works allows the value of a dollar to appear to become severed from its backing and just float in space, propped up only by mutual consensus, but this is an illusion. When the backing goes, so does the currency. History's full of examples, just look up "hyperinflation". (Also note the difference between backing and rarity. Anybody can make something rare, backing means it's actually worth something even on its own.) Bitcoins provide an interesting technology platform around which to build a currency, but trying to use them directly as currency is only slightly different than using Monopoly money, and the differences aren't relevant.
- po 16y ago
  Bitcoins provide an interesting technology platform around which to build a currency, but trying to use them directly as currency is only slightly different than using Monopoly money, and the differences aren't relevant. The differences are relevant. Monopoly money makes a perfectly acceptable currency for the game of monopoly. It would make for a currency between neighboring households as well except for the fact that it is easy to copy and therefore impossible to trust. In this way you can say bitcoin is backed by the mathematical certainty that hashing functions are hard to reverse.
- 0x6763 16y ago

OK, I understand how they're created and how many there are. But why?

by Charuru 16y ago

OK, I understand how they're created and how many there are. But why?

The idea is that it's not under any entity's control, and the amount of currency grows in a predictable (and decreasing) way. This should prevent the crazy inflation we've seen occur with normal currency where the government can always just print more.

akkartik 16y ago
Why does the number of bitcoins in circulation converge to an asymptote?
- jackowayed 16y ago
  Because every few years (4, I think), the number of bitcoins in each "block" (what you generate) is halved. So right now you get 50 BTC when you generate a block. In a few years it'll be 25. Then 12.5. Etc. In a very long time, they'll round from 10^-8 down to 0, but generating a block will still get you transaction fees from the transactions that occurred since the last block generated.
  - akkartik 16y ago
    I asked why, not how :) I understood from the FAQ how it was done, but there's no mention of why it's desirable? Why not either fix the number of bitcoins now for all time, or let them grow unboundedly at a constant rate?
    - jackowayed 16y ago
      Ah, ok. I think they're trying to balance 2 interests: They don't want inflation. One of the impeti for this initiative is to have a currency that some politicians can't decide to print more of. But at the same time, they can't just issue 90% of the total money that will exist right at the beginning. No one's going to buy into a currency where the vast majority of the "wealth" goes to a few early adopters. So it makes sense to have the money supply grow fast at the beginning, when the currency is hopefully getting more popular as well, preventing inflation, and then to gradually slow down the money supply growth to achieve the goal of preventing inflation.
      - akkartik 16y ago
        Ah, very cool, thanks.

jerf 16y ago

Bitcoins are a creation by some who don't understand what a currency is. Bitcoins back to nothing and are only useful to the extent that you can fool another ideologue into taking them; for as long as they've been around, it is far, far easier to obtain goods or services with Warcraft gold or Microsoft Points, which aren't even trying to be universal currencies. (Just yesterday I was on a blog that cataloged the reasons Microsoft gave for various bannings, and selling services for Microsoft Points was a very common one. It's so easy Microsoft considers it a pestilence.) Last time this came up on HN BitCoin's FAQ had a question directly asking what useful thing it backs to. I say "asking" because the answer was basically no answer at all. I see it is no longer there. This is because if they can't answer it, it is better for them not to bring the question up at all, so I guess it's a good move for them. Currencies have to back to something. Dollars back to being able to pay the various governments of the US not to throw you in jail for breaking various laws (tax, fines, etc); a dollar is useful even in Africa to someone not subject to those laws, because you can trade it to somebody else who has that use. The way an economy works allows the value of a dollar to appear to become severed from its backing and just float in space, propped up only by mutual consensus, but this is an illusion. When the backing goes, so does the currency. History's full of examples, just look up "hyperinflation". (Also note the difference between backing and rarity. Anybody can make something rare, backing means it's actually worth something even on its own.) Bitcoins provide an interesting technology platform around which to build a currency, but trying to use them directly as currency is only slightly different than using Monopoly money, and the differences aren't relevant.

po 16y ago
Bitcoins provide an interesting technology platform around which to build a currency, but trying to use them directly as currency is only slightly different than using Monopoly money, and the differences aren't relevant. The differences are relevant. Monopoly money makes a perfectly acceptable currency for the game of monopoly. It would make for a currency between neighboring households as well except for the fact that it is easy to copy and therefore impossible to trust. In this way you can say bitcoin is backed by the mathematical certainty that hashing functions are hard to reverse.
0x6763 16y ago