3 ms·

Bitcoin is what it is. It doesn't have to become the only currency. It's a useful, fungible, easily transferrable commodity. The argument that bitcoin should n

Bitcoin is what it is. It doesn't have to become the only currency. It's a useful, fungible, easily transferrable commodity. The argument that bitcoin should not to succeed because it's deflationary is silly. Lots of deflationary assets exist and people are free to put their money into them, e.g. gold, stocks, and real estate. That doesn't stop people from transaction.

jacques_chester 13y ago
> It doesn't have to become the only currency. No, but arguing from the analogy of a gold standard hints at doing so. > The argument that bitcoin should not to succeed because it's deflationary is silly. Deflation and inflation are both, at the extremes, destructive. Bitcoin, by intention, is deflationary. However I have already demonstrated that it can easily turn inflationary. Not through the dynamism of an open market, and not through the governance of a central bank. Simply because it is a closed system. Entropy will eventually destroy all bitcoins. And then what?
- crystaln 13y ago
  Entropy will eventually destroy the entire universe. I think 22M bitcoins, given that (with minor changes to the network) can be infinitely sub-divisible with last us until then.
  - jacques_chester 13y ago
    Fungibility is not the same as indestructibility. Subdividing a unit of value does not create new value.
    - crystaln 13y ago
      I was responding to your concern that all bitcoins are going to vanish. Regarding fungibility, bitcoins are definitely fungible. They are interchangeable, of equal value, and sub-dividable. Fungibility does not require that all parts be identical, only of equal value and utility. By your argument, USD is not fungible because old 100 dollar bills may not be accepted in some places. From Investopedia: "A good or asset's interchangeability with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same." http://www.investopedia.com/terms/f/fungibility.asp http://www.investopedia.com/terms/f/fungibility.asp
      - jacques_chester 13y ago
        > Regarding fungibility, bitcoins are definitely fungible. Where have I argued otherwise? Fungibility is not the issue. Irreversible shrinkage of the monetary base is the issue. > By your argument, USD is not fungible because old 100 dollar bills may not be accepted in some places. You are now confusing fungibility with liquidity. And I note that, unlike bitcoin, if I have a damaged $100 note, I can exchange it with the central bank for an new equivalent note.
        crystaln 13y ago
        I conflated you with the other response to my post saying bitcoin was not fungible. Regardless, you seem very adept at unfairly attacking my vocabulary usage and finding inconsequential issues with bitcoin. Other than that I don't see much in what you are saying. It doesn't matter that the number of bitcoins will slowly decline. Bitcoin is infinitely divisible, and whoever lost the money is the only it's a problem for. For everyone else that's a benefit. Even if you were correct, such theoretical long-term concerns will not stop the adoption of bitcoin.
        jacques_chester 13y ago
        I'm "attacking" the vocabulary because, by repeatedly raising fungibility, I felt you were talking about a tangential matter. > It doesn't matter that the number of bitcoins will slowly decline. I don't agree. And it needn't be gradual. > Bitcoin is infinitely divisible, and whoever lost the money is the only it's a problem for. For everyone else that's a benefit. Hence the "Bitfinger" scenario I alluded to. > Even if you were correct, such theoretical long-term concerns will not stop the adoption of bitcoin. No, but I think they would be sufficient to prevent bitcoin ever becoming legal tender.
        crystaln 13y ago
        Bitcoin is legal tender in Germany.
    - crystaln 13y ago
      I'll go back to your original response here. "Subdividing a unit of value does not create new value." So what? Neither does printing money. Mutually beneficial economic activity creates value. The point is, the decline in the number of bitcoins does not impact it's usefulness for those who possess and transact with bitcoins.
      - jacques_chester 13y ago
        Value was the wrong term. Substitute "unit of account" if you wish. Bitcoin units are summative and the maximum is fixed by design. Way up at my original post I was pointing out that bitcoin is not the gold bug's Huckleberry, because the monetary base will peak and shrink. Rothbardians are very exercised by the problems of monetary policy. They take the view that a growing money supply causes distorted behaviour. They view a fixed money supply as less distortionary (and deflation as a net positive over time). Bitcoin's fixed upper limit for total circulating monetary base, at first blush, fits neatly into that worldview. Except that, as I have pointed out, it doesn't. Bitcoin is not like gold because it can be destroyed. In fact I don't think any economic theory has ever seriously addressed the problem of an irreversibly shrinking money supply. The thing is that we know inflation does cause problems. And so does deflation. That's why most monetary policy these days aims at neither. Instead the goal is to maintain approximately stable price levels over time. To do that you must grow the monetary base in rough correspondence to the size of the economy. > The point is, the decline in the number of bitcoins does not impact it's usefulness for those who possess and transact with bitcoins. The point is that it affects the ratio of bitcoins to goods and services in a way that cannot be governed or reversed. Some consider that to be a feature. I don't.
        crystaln 13y ago
        I don't think the money supply will shrink at a rate that has any significant impact. Maybe it will increase deflation from 5% to 5.1% annually. It's money - people don't like to destroy money. There's a natural incentive to keep it. :) The problem with having a mechanism to adjust the money supply in proportion to economic growth is that someone has to make those decisions, and historically they have ALWAYS ended up abusing that privilege. Currently we have representatives of banks, hedge funds, and investment trusts making those decisions. Who's interest do you think are reflected in monetary policy?
lingben 13y ago
useful? not really, unlike money it requires digital equipment, bitcoin is NOT fungible (each bitcoin is uniquely identifiable and can be separated, isolated and even removed from circulation and it is not 'easily transferrable' (a bitcoin transaction takes several hours until it is confirmed)
- crystaln 13y ago
  bitcoins are definitely fungible. They are interchangeable, of equal value, and sub-dividable. Fungibility does not require that all parts be identical, only of equal value and utility. Also, regardless of whether you find bitcoin useful, clearly others do. And several hours for confirmation of a borderless, nearly fee-less, irreversible financial transaction certainly falls with the bounds of "easily transferrable" for me. I'm not really sure what the point of your contrarian position is. Seems just that... contrarian.

jacques_chester 13y ago

> It doesn't have to become the only currency. No, but arguing from the analogy of a gold standard hints at doing so. > The argument that bitcoin should not to succeed because it's deflationary is silly. Deflation and inflation are both, at the extremes, destructive. Bitcoin, by intention, is deflationary. However I have already demonstrated that it can easily turn inflationary. Not through the dynamism of an open market, and not through the governance of a central bank. Simply because it is a closed system. Entropy will eventually destroy all bitcoins. And then what?

crystaln 13y ago
Entropy will eventually destroy the entire universe. I think 22M bitcoins, given that (with minor changes to the network) can be infinitely sub-divisible with last us until then.
- jacques_chester 13y ago
  Fungibility is not the same as indestructibility. Subdividing a unit of value does not create new value.
  - crystaln 13y ago
    I was responding to your concern that all bitcoins are going to vanish. Regarding fungibility, bitcoins are definitely fungible. They are interchangeable, of equal value, and sub-dividable. Fungibility does not require that all parts be identical, only of equal value and utility. By your argument, USD is not fungible because old 100 dollar bills may not be accepted in some places. From Investopedia: "A good or asset's interchangeability with other individual goods/assets of the same type. Assets possessing this property simplify the exchange/trade process, as interchangeability assumes that everyone values all goods of that class as the same." http://www.investopedia.com/terms/f/fungibility.asp http://www.investopedia.com/terms/f/fungibility.asp
    - jacques_chester 13y ago
      > Regarding fungibility, bitcoins are definitely fungible. Where have I argued otherwise? Fungibility is not the issue. Irreversible shrinkage of the monetary base is the issue. > By your argument, USD is not fungible because old 100 dollar bills may not be accepted in some places. You are now confusing fungibility with liquidity. And I note that, unlike bitcoin, if I have a damaged $100 note, I can exchange it with the central bank for an new equivalent note.
      - crystaln 13y ago
        I conflated you with the other response to my post saying bitcoin was not fungible. Regardless, you seem very adept at unfairly attacking my vocabulary usage and finding inconsequential issues with bitcoin. Other than that I don't see much in what you are saying. It doesn't matter that the number of bitcoins will slowly decline. Bitcoin is infinitely divisible, and whoever lost the money is the only it's a problem for. For everyone else that's a benefit. Even if you were correct, such theoretical long-term concerns will not stop the adoption of bitcoin.
        jacques_chester 13y ago
        I'm "attacking" the vocabulary because, by repeatedly raising fungibility, I felt you were talking about a tangential matter. > It doesn't matter that the number of bitcoins will slowly decline. I don't agree. And it needn't be gradual. > Bitcoin is infinitely divisible, and whoever lost the money is the only it's a problem for. For everyone else that's a benefit. Hence the "Bitfinger" scenario I alluded to. > Even if you were correct, such theoretical long-term concerns will not stop the adoption of bitcoin. No, but I think they would be sufficient to prevent bitcoin ever becoming legal tender.
        crystaln 13y ago
        Bitcoin is legal tender in Germany.
  - crystaln 13y ago
    I'll go back to your original response here. "Subdividing a unit of value does not create new value." So what? Neither does printing money. Mutually beneficial economic activity creates value. The point is, the decline in the number of bitcoins does not impact it's usefulness for those who possess and transact with bitcoins.
    - jacques_chester 13y ago
      Value was the wrong term. Substitute "unit of account" if you wish. Bitcoin units are summative and the maximum is fixed by design. Way up at my original post I was pointing out that bitcoin is not the gold bug's Huckleberry, because the monetary base will peak and shrink. Rothbardians are very exercised by the problems of monetary policy. They take the view that a growing money supply causes distorted behaviour. They view a fixed money supply as less distortionary (and deflation as a net positive over time). Bitcoin's fixed upper limit for total circulating monetary base, at first blush, fits neatly into that worldview. Except that, as I have pointed out, it doesn't. Bitcoin is not like gold because it can be destroyed. In fact I don't think any economic theory has ever seriously addressed the problem of an irreversibly shrinking money supply. The thing is that we know inflation does cause problems. And so does deflation. That's why most monetary policy these days aims at neither. Instead the goal is to maintain approximately stable price levels over time. To do that you must grow the monetary base in rough correspondence to the size of the economy. > The point is, the decline in the number of bitcoins does not impact it's usefulness for those who possess and transact with bitcoins. The point is that it affects the ratio of bitcoins to goods and services in a way that cannot be governed or reversed. Some consider that to be a feature. I don't.
      - crystaln 13y ago
        I don't think the money supply will shrink at a rate that has any significant impact. Maybe it will increase deflation from 5% to 5.1% annually. It's money - people don't like to destroy money. There's a natural incentive to keep it. :) The problem with having a mechanism to adjust the money supply in proportion to economic growth is that someone has to make those decisions, and historically they have ALWAYS ended up abusing that privilege. Currently we have representatives of banks, hedge funds, and investment trusts making those decisions. Who's interest do you think are reflected in monetary policy?

lingben 13y ago

useful? not really, unlike money it requires digital equipment, bitcoin is NOT fungible (each bitcoin is uniquely identifiable and can be separated, isolated and even removed from circulation and it is not 'easily transferrable' (a bitcoin transaction takes several hours until it is confirmed)

crystaln 13y ago
bitcoins are definitely fungible. They are interchangeable, of equal value, and sub-dividable. Fungibility does not require that all parts be identical, only of equal value and utility. Also, regardless of whether you find bitcoin useful, clearly others do. And several hours for confirmation of a borderless, nearly fee-less, irreversible financial transaction certainly falls with the bounds of "easily transferrable" for me. I'm not really sure what the point of your contrarian position is. Seems just that... contrarian.