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Meanwhile, the supply of bitcoins is fixed. For all time. And they are destructible in a way that gold is not. But they are divisible in a way which gold (or e

by miles 13y ago

Meanwhile, the supply of bitcoins is fixed. For all time. And they are destructible in a way that gold is not. But they are divisible in a way which gold (or even dollars) are not: https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F https://en.bitcoin.it/wiki/FAQ#How_divisible_are_bitcoins.3F "A bitcoin can be divided down to 8 decimal places. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts."

jacques_chester 13y ago
I'm not arguing that bitcoin is very fungible; that is by design. I'm arguing that bitcoins, unlike gold, can be irreversibly destroyed. Even the "leaks" from the gold supply are predictable and reversible. A lot of gold is used in electronics these days. It winds up either in recycling centres, where it can be recovered, or in landfill, where if the price of gold rises high enough it becomes commercially viable to mine the landfills. Bitcoins cannot be un-destroyed. They are information without physical laws to guarantee their continued existence. Their manufacture and destruction are both one-way functions. The supply of bitcoin will peak and begin an irreversible process of shrinkage. Indeed, those who cannot steal bitcoin will be incentivised to cause the destruction of other's bitcoin. Call it the Bitfinger Scenario.
- miles 13y ago
  That is commonly claimed, but lost coins isn't a reason to raise the cap. That is because there is no reason why 21 million coins has to indicate that there are 21 million units of the currency. In fact, the present cap is 2,100,000,000,000,000 units of currency, easily enough to serve the Bitcoin community. By comparison, there are 231,100,000,000,000 cents in M1 (the narrow money supply of the US)--there's about 10 times as many units of Bitcoin as there are cents, and cents are already so small they're a burden on the economy. The point still stands, though, what happens when those 2.1 quadrillion units of currency get destroyed trillions at a time? Wont' we run out? Well, yes. However, when that happens we just slap another zero on the end. At present you can break a single Bitcoin into 100,000,000 pieces (known as Satoshis), but perhaps in the future we'll decide to add another 6 zeros on the end. Thus you could have 0.000 000 000 002 Bitcoins (we would almost certainly not speak of full Bitcoins by that point--there are already major movements wanting to use mBTC and uBTC as the standard units since 1 BTC is impractically large for most commerce). This maintains the scarcity model that Bitcoin enthusiasts are so enthused about while dealing with the money supply issue. Source: http://www.reddit.com/r/explainlikeimfive/comments/1rls76/official_eli5_bitcoin_thread_round_ii/cdon5jn http://www.reddit.com/r/explainlikeimfive/comments/1rls76/of...
  - prodigal_erik 13y ago
    Creating smaller or larger denominations of an existing currency is fairly simple. That's not the fundamental problem with deflation or a currency irrevocably committed to it.
  - jacques_chester 13y ago
    I can only repeat myself. Fungibility isn't the same as indestructibility. Once bitcoin is destroyed, it cannot be regained. The total supply, no matter how denominated or subdivided, has shrunk.
jellicle 13y ago
You think gold can't be divided into arbitrarily small units? Really? The smallest unit of gold is (179/(6*10^23)) grams. That's pretty small. Dividing bitcoins into small micro-denominations does not solve the problems of deflation in the same way that adding zeros to Zimbabwean currency doesn't solve the problems of inflation.
- codehalo 13y ago
  Arbitrarily small. Can it be divided down to (179/(6*10^24)) grams? And can you do international online micro transactions with it?

by miles 13y ago

jacques_chester 13y ago

I'm not arguing that bitcoin is very fungible; that is by design. I'm arguing that bitcoins, unlike gold, can be irreversibly destroyed. Even the "leaks" from the gold supply are predictable and reversible. A lot of gold is used in electronics these days. It winds up either in recycling centres, where it can be recovered, or in landfill, where if the price of gold rises high enough it becomes commercially viable to mine the landfills. Bitcoins cannot be un-destroyed. They are information without physical laws to guarantee their continued existence. Their manufacture and destruction are both one-way functions. The supply of bitcoin will peak and begin an irreversible process of shrinkage. Indeed, those who cannot steal bitcoin will be incentivised to cause the destruction of other's bitcoin. Call it the Bitfinger Scenario.

miles 13y ago
That is commonly claimed, but lost coins isn't a reason to raise the cap. That is because there is no reason why 21 million coins has to indicate that there are 21 million units of the currency. In fact, the present cap is 2,100,000,000,000,000 units of currency, easily enough to serve the Bitcoin community. By comparison, there are 231,100,000,000,000 cents in M1 (the narrow money supply of the US)--there's about 10 times as many units of Bitcoin as there are cents, and cents are already so small they're a burden on the economy. The point still stands, though, what happens when those 2.1 quadrillion units of currency get destroyed trillions at a time? Wont' we run out? Well, yes. However, when that happens we just slap another zero on the end. At present you can break a single Bitcoin into 100,000,000 pieces (known as Satoshis), but perhaps in the future we'll decide to add another 6 zeros on the end. Thus you could have 0.000 000 000 002 Bitcoins (we would almost certainly not speak of full Bitcoins by that point--there are already major movements wanting to use mBTC and uBTC as the standard units since 1 BTC is impractically large for most commerce). This maintains the scarcity model that Bitcoin enthusiasts are so enthused about while dealing with the money supply issue. Source: http://www.reddit.com/r/explainlikeimfive/comments/1rls76/official_eli5_bitcoin_thread_round_ii/cdon5jn http://www.reddit.com/r/explainlikeimfive/comments/1rls76/of...
- prodigal_erik 13y ago
  Creating smaller or larger denominations of an existing currency is fairly simple. That's not the fundamental problem with deflation or a currency irrevocably committed to it.
- jacques_chester 13y ago
  I can only repeat myself. Fungibility isn't the same as indestructibility. Once bitcoin is destroyed, it cannot be regained. The total supply, no matter how denominated or subdivided, has shrunk.

jellicle 13y ago

You think gold can't be divided into arbitrarily small units? Really? The smallest unit of gold is (179/(6*10^23)) grams. That's pretty small. Dividing bitcoins into small micro-denominations does not solve the problems of deflation in the same way that adding zeros to Zimbabwean currency doesn't solve the problems of inflation.

codehalo 13y ago
Arbitrarily small. Can it be divided down to (179/(6*10^24)) grams? And can you do international online micro transactions with it?