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Bitcoin, Ethereum, and cryptocurrency spawn a generation of people who worship Austrian economics. This ETH upgrade is making ETH even more deflationary. People

Bitcoin, Ethereum, and cryptocurrency spawn a generation of people who worship Austrian economics. This ETH upgrade is making ETH even more deflationary. People are obsessed with price and want to pump the numbers. These wars are not doing anything to advance adoption and bring freedom to people. Crypto builders are pumping the coins under the banners of freedom and decentralization. The problem with crypto is volatility. The whole market moves in one direction or another, usually with Bitcoin. Scarcity is not the only thing that makes up the economy. We need also need inflation. Stop engaging in these ideological wars. Let's fix the problem and drive adoption. https://bitflate.org/post/2020/04/26/we-need-inflationary-cryptocurrency.html https://bitflate.org/post/2020/04/26/we-need-inflationary-cr...

deleted 6y ago
[deleted]
Barrin92 6y ago
If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then you should just ditch decentralized currencies altogether because then you also get rid of the meaningless complications around mining, energy efficiency or user-friendliness and go to a digital central-bank currency directly which actually has the proper tools to do monetary policy and all you need is a database.
- gruez 6y ago
  >If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then [...] What about as a store of value? Gold is still around despite being heavy and hard to transact with.
  - bluecalm 6y ago
    Wanna store value? Buy actual value - that is things that make the wealth. Stocks in major companies, real estate, land in places people want to live in. The concept that buying promises is a good way to store value is a bizarre concept to me.
    - from 6y ago
      This has always perplexed me too. There's a nice Buffett quote on this (https://www.berkshirehathaway.com/letters/2011ltr.pdf https://www.berkshirehathaway.com/letters/2011ltr.pdf): "Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B." I have noticed that people who advocate for this "store of value" idea have this tendency to insinuate that cash is the only alternative to gold or bitcoin or whatever it is. There has always been alternatives to letting your savings be eroded by inflation (stocks, bonds, etc) and part of the reason for inflation is to incentivize people to invest their money in these productive things.
- treelovinhippie 6y ago
  Lookup mutual credit cryptocurrencies (eg what Holochain plans to do with the HOT swap). In that model supply breathes directly instep with underlying demand. The users themselves are the agents that cause the supply to expand or contract. Tada: maximum velocity with no incentive to hoard.
- wmf 6y ago
  I do think CBDCs are the digital cash that most people want but a decentralized implementation of Keynesian monetary policy would be interesting to see (for the half-dozen people who care).
- dnprock 6y ago
  I don't think cryptocurrencies will replace fiat completely. They're still crypto. They have fixed rules. We still need currency "bridge" between crypto and the real world. Cryptocurrencies offer decentralized options which can address problems with money distribution.
  - CameronNemo 6y ago
    Why can't they replace fiat? Why can't crypto be minted to represent real world assets (like batches of nuts or nickel, not magic pieces of paper)?
    - dnprock 6y ago
      Because real world assets don't get minted like crypto. They are tied to physical world. They are volatile. Bitcoin produces a block every 10 minutes. It's a fairly precise schedule. On the other hand, real world assets grow and contract at unpredictable rates. Even gold mining fluctuates. The real world is volatile. The BTCUSD peg is free floating. It's also volatile. Crypto is rigid. Real world is volatile. It's hard to create a stable peg between crypto and the real world. So some kinds of bridge currencies are necessary. Fiat or some forms of digital fiat will continue to exist. Bitcoin is a deflationary (disinflationary) asset. The BTCUSD peg is volatile. We need better money instruments to reduce volatility. I think an inflationary crypto can help.
      - CameronNemo 6y ago
        I'm not saying it will be an exact peg. I am saying that colored coins can represent specific batches of a real world asset. For example gold mined from a specific mine by a specific company from date x to date y. That company would also create the colored coins that represent a claim to the gold mined. They could even mint the coins ahead of time and they would act as futures on the output of the mine during that time.
        dnprock 6y ago
        It's difficult to build layers on top of the Bitcoin blockchain. The base asset, Bitcoin, is volatile. Its volatility affects the assets on 2nd layers. There isn't a one-one peg between the 2nd layer and the base chain. You'd need to trust an oracle. In your gold example, you'd need to trust the miner for authenticity and their books. For use-cases with oracles, it's more efficient to use a database. There's no need to use a blockchain. Some projects on Ethereum, like DAI, have explored these use-cases. I think they have not been successful. DAI requires high reserve ratio (1-1.5) to manage the volatility of the base chain. You're using 1.5 USD to get 1 USDDAI. It's not very efficient. I'm less excited about assets on blockchain. I think the market is not ready. We need to reduce volatility first.
seibelj 6y ago
What does “worship” mean? I am a believer of the Austrian theory of economics. Are Keynesian / Monetarists also “worshippers” of a theory? Modern economics is not that old. I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster, just as it has time and again in the developing world (see Venezuela, Zimbabwe, Argentina, Brazil, etc.). If anything, Austrian economics is a reversion to the standard theory of economics for thousands of years. The “innovation” of Keynesian economics is one of the greatest evils ever perpetuated on society. But again - what do I know - I don’t have a PhD from an Ivy. I just protect my assets in a zero-interest world by avoiding government threat.
- colinmhayes 6y ago
  >I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster You are fundamentally wrong. Austrian has worshippers because it's a cult. It has no basis in reality.
- wmf 6y ago
  Austrian economics is a reversion to the standard theory of economics for thousands of years. Thousands of incredibly poor years by today's standards.
  - CryptoPunk 6y ago
    The gold standard's deflation was associated with pretty good results: https://www.nber.org/papers/w10329 https://www.nber.org/papers/w10329 In any case, in a multi-currency world with low-friction electronic exchanges available, it stands to reason that deflation is less likely to be damaging, since the switching costs to more inflationary currencies are low.
- dnprock 6y ago
  Keynesians think money grows on tree. It is true in some senses. Apples grow on tree. At the extreme, they think money is imaginary. They can print as much as they want. Austrians think money grows from hard money. It is also true in some senses. Money is made from money. It's circular and Ponzi-like. It requires you to believe in what hard money is. Austrian thinking leads to some cult-like behaviors. At the extreme, they'd be rent-seeking their precious Store of Value. It's just as evil as the Keynesians. Money is data (Keynesian) with some kind of illusions (Austrian). The money that we need is between the Keynesians and Austrians.
csomar 6y ago
> We need also need inflation. Why?
- rsj_hn 6y ago
  Because people incur nominal debt contracts which causes wages to be sticky downwards --> they can go up more easily than down. With inflation, if wages are too high, you can let inflation eat away at them. If there were no inflation, the downward stickiness would lead to a lot of market failures (bankruptcies and unemployment) when wages were too high. But then why do people incur nominal debt contracts? Because production occurs throughout time but must be settled in some medium. The farmer needs to know how much he will get for his wheat, the shipper needs to know, so someone needs to promise to buy wheat next year for $X and for that contract to be useful, everything else needs to be priced in terms of $ as well, so that the farmer can buy fertilizer for $ today, and agree to hire workers to work the field for $ from today to harvest time, etc. In this way, the farmer can estimate what he will get next year, what he will pay throughout the year, and what investments he needs to make right now. It is nothing special about the dollar -- if everyone used bitcoin for real contracts then wages would be downward sticky in terms of bitcoin, too. But as there is no way of expanding the supply of bitcoin, this downward stickiness would lead to a lot more market failures, and thus a lot more unemployment. We would then be effectively back on the gold standard, but at least with the gold standard, you'd occasionally find lots of gold in a mountain and this would stimulate the economy and increase employment. With BTC, you'd have all the financial crises of sticky prices but without the occasional gold discovery.
- kubanczyk 6y ago
  You don't need inflation with gold but you do need inflation to run the economy. Because no one sane lends money at 0%. Or at -1%, with deflation. Lack of lending brings investements down. Lack of investments brings growth down. The old companies keep grinding old way. The rich pocket money as a super safe way to get even richer. Stagnation. See: Keynes
whitepaint 6y ago
> The problem with crypto is volatility. https://en.wikipedia.org/wiki/Dai_(cryptocurrency) https://en.wikipedia.org/wiki/Dai_(cryptocurrency)
zionic 6y ago
Are you unaware of stable coins such as DAI that run on ETH?

deleted 6y ago

[deleted]

Barrin92 6y ago

If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then you should just ditch decentralized currencies altogether because then you also get rid of the meaningless complications around mining, energy efficiency or user-friendliness and go to a digital central-bank currency directly which actually has the proper tools to do monetary policy and all you need is a database.

gruez 6y ago
>If you already come to the very sane and correct conclusion that deflationary and volatile cryptocurrencies are effectively useless as a means of exchange and as a primary tool to run an economy then [...] What about as a store of value? Gold is still around despite being heavy and hard to transact with.
- bluecalm 6y ago
  Wanna store value? Buy actual value - that is things that make the wealth. Stocks in major companies, real estate, land in places people want to live in. The concept that buying promises is a good way to store value is a bizarre concept to me.
  - from 6y ago
    This has always perplexed me too. There's a nice Buffett quote on this (https://www.berkshirehathaway.com/letters/2011ltr.pdf https://www.berkshirehathaway.com/letters/2011ltr.pdf): "Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. Admittedly, when people a century from now are fearful, it’s likely many will still rush to gold. I’m confident, however, that the $9.6 trillion current valuation of pile A will compound over the century at a rate far inferior to that achieved by pile B." I have noticed that people who advocate for this "store of value" idea have this tendency to insinuate that cash is the only alternative to gold or bitcoin or whatever it is. There has always been alternatives to letting your savings be eroded by inflation (stocks, bonds, etc) and part of the reason for inflation is to incentivize people to invest their money in these productive things.
treelovinhippie 6y ago
Lookup mutual credit cryptocurrencies (eg what Holochain plans to do with the HOT swap). In that model supply breathes directly instep with underlying demand. The users themselves are the agents that cause the supply to expand or contract. Tada: maximum velocity with no incentive to hoard.
wmf 6y ago
I do think CBDCs are the digital cash that most people want but a decentralized implementation of Keynesian monetary policy would be interesting to see (for the half-dozen people who care).
dnprock 6y ago
I don't think cryptocurrencies will replace fiat completely. They're still crypto. They have fixed rules. We still need currency "bridge" between crypto and the real world. Cryptocurrencies offer decentralized options which can address problems with money distribution.
- CameronNemo 6y ago
  Why can't they replace fiat? Why can't crypto be minted to represent real world assets (like batches of nuts or nickel, not magic pieces of paper)?
  - dnprock 6y ago
    Because real world assets don't get minted like crypto. They are tied to physical world. They are volatile. Bitcoin produces a block every 10 minutes. It's a fairly precise schedule. On the other hand, real world assets grow and contract at unpredictable rates. Even gold mining fluctuates. The real world is volatile. The BTCUSD peg is free floating. It's also volatile. Crypto is rigid. Real world is volatile. It's hard to create a stable peg between crypto and the real world. So some kinds of bridge currencies are necessary. Fiat or some forms of digital fiat will continue to exist. Bitcoin is a deflationary (disinflationary) asset. The BTCUSD peg is volatile. We need better money instruments to reduce volatility. I think an inflationary crypto can help.
    - CameronNemo 6y ago
      I'm not saying it will be an exact peg. I am saying that colored coins can represent specific batches of a real world asset. For example gold mined from a specific mine by a specific company from date x to date y. That company would also create the colored coins that represent a claim to the gold mined. They could even mint the coins ahead of time and they would act as futures on the output of the mine during that time.
      - dnprock 6y ago
        It's difficult to build layers on top of the Bitcoin blockchain. The base asset, Bitcoin, is volatile. Its volatility affects the assets on 2nd layers. There isn't a one-one peg between the 2nd layer and the base chain. You'd need to trust an oracle. In your gold example, you'd need to trust the miner for authenticity and their books. For use-cases with oracles, it's more efficient to use a database. There's no need to use a blockchain. Some projects on Ethereum, like DAI, have explored these use-cases. I think they have not been successful. DAI requires high reserve ratio (1-1.5) to manage the volatility of the base chain. You're using 1.5 USD to get 1 USDDAI. It's not very efficient. I'm less excited about assets on blockchain. I think the market is not ready. We need to reduce volatility first.

seibelj 6y ago

What does “worship” mean? I am a believer of the Austrian theory of economics. Are Keynesian / Monetarists also “worshippers” of a theory? Modern economics is not that old. I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster, just as it has time and again in the developing world (see Venezuela, Zimbabwe, Argentina, Brazil, etc.). If anything, Austrian economics is a reversion to the standard theory of economics for thousands of years. The “innovation” of Keynesian economics is one of the greatest evils ever perpetuated on society. But again - what do I know - I don’t have a PhD from an Ivy. I just protect my assets in a zero-interest world by avoiding government threat.

colinmhayes 6y ago
>I fundamentally believe printing as much money as we are across the rich world is going to lead to disaster You are fundamentally wrong. Austrian has worshippers because it's a cult. It has no basis in reality.
wmf 6y ago
Austrian economics is a reversion to the standard theory of economics for thousands of years. Thousands of incredibly poor years by today's standards.
- CryptoPunk 6y ago
  The gold standard's deflation was associated with pretty good results: https://www.nber.org/papers/w10329 https://www.nber.org/papers/w10329 In any case, in a multi-currency world with low-friction electronic exchanges available, it stands to reason that deflation is less likely to be damaging, since the switching costs to more inflationary currencies are low.
dnprock 6y ago
Keynesians think money grows on tree. It is true in some senses. Apples grow on tree. At the extreme, they think money is imaginary. They can print as much as they want. Austrians think money grows from hard money. It is also true in some senses. Money is made from money. It's circular and Ponzi-like. It requires you to believe in what hard money is. Austrian thinking leads to some cult-like behaviors. At the extreme, they'd be rent-seeking their precious Store of Value. It's just as evil as the Keynesians. Money is data (Keynesian) with some kind of illusions (Austrian). The money that we need is between the Keynesians and Austrians.

csomar 6y ago

> We need also need inflation. Why?

rsj_hn 6y ago
Because people incur nominal debt contracts which causes wages to be sticky downwards --> they can go up more easily than down. With inflation, if wages are too high, you can let inflation eat away at them. If there were no inflation, the downward stickiness would lead to a lot of market failures (bankruptcies and unemployment) when wages were too high. But then why do people incur nominal debt contracts? Because production occurs throughout time but must be settled in some medium. The farmer needs to know how much he will get for his wheat, the shipper needs to know, so someone needs to promise to buy wheat next year for $X and for that contract to be useful, everything else needs to be priced in terms of $ as well, so that the farmer can buy fertilizer for $ today, and agree to hire workers to work the field for $ from today to harvest time, etc. In this way, the farmer can estimate what he will get next year, what he will pay throughout the year, and what investments he needs to make right now. It is nothing special about the dollar -- if everyone used bitcoin for real contracts then wages would be downward sticky in terms of bitcoin, too. But as there is no way of expanding the supply of bitcoin, this downward stickiness would lead to a lot more market failures, and thus a lot more unemployment. We would then be effectively back on the gold standard, but at least with the gold standard, you'd occasionally find lots of gold in a mountain and this would stimulate the economy and increase employment. With BTC, you'd have all the financial crises of sticky prices but without the occasional gold discovery.
kubanczyk 6y ago
You don't need inflation with gold but you do need inflation to run the economy. Because no one sane lends money at 0%. Or at -1%, with deflation. Lack of lending brings investements down. Lack of investments brings growth down. The old companies keep grinding old way. The rich pocket money as a super safe way to get even richer. Stagnation. See: Keynes

whitepaint 6y ago

> The problem with crypto is volatility. https://en.wikipedia.org/wiki/Dai_(cryptocurrency) https://en.wikipedia.org/wiki/Dai_(cryptocurrency)

zionic 6y ago

Are you unaware of stable coins such as DAI that run on ETH?