1. Skip to navigation
  2. Skip to content
  3. Skip to sidebar




Introducing bitcoins

Home Forums Archive Infrastructure Introducing bitcoins

This topic contains 48 replies, has 15 voices, and was last updated by Avatar of Ken Sims Ken Sims 2 years, 10 months ago.

Viewing 15 posts - 31 through 45 (of 49 total)
  • Author
    Posts
  • #13912
    Avatar of caveden
    caveden
    Participant

    Carl wrote:

    Similarly a plethora of other P2P cryptocurrencies can be created on the same market that Bitcoins use. The fact that these currencies will not actually be Bitcoins doesn’t seem to matter that much. When there are hundreds of currencies to choose from, and new ones can be created all the time, the scarcity of any single currency will be either very low or meningless.

    In the it boils down to the fact that it is only information, an information is not scarce.

    At least that is what I think. time will tell, I suppose.

    Sorry for not answering it before.

    As you can see, there are not lots of others P2P cryptocurrencies out there devaluing bitcoins yet. :) And, IMHO, what you predict cannot happen.

    Basically, if you invent a new p2p currency, it will fit one of these cases:

    • It’s inferior or roughly equivalent to bitcoins in its features. In this case, why would anyone care to switch from bitcoin, which already has some infrastructure, to your new project, which has no infrastructure at all? Why would people exchange their bitcoins for something inferior or equivalent? This would probably not have any meaninful effect in bitcoins value.
    • Your currency is better than bitcoin. In this case, congratulations! What will happen is that, with time, people will abandon bitcoin and switch to your solution. That won’t be the equivalent of hyperinflation, just a “transfer of value” from one thing to another.
    • You manage to find a niche where your currency is particularly better than bitcoins, but bitcoins keep being better in others. Your currency might end up filling this niche. That will be similar to the point above, only that in a smaller scale. But, again, that’s not the equivalent of hyperinflation since (1) one cannot find as much undersatisfied niches as one wants (so far, no such niche was found, AFAIK) and (2), in order to be taken seriosly, any niche specific currency will need controlled inflation as well, so all that would happen are partial value transfers from bitcoins to these niche-specific currencies, if they ever come to exist. That’s in a way comparable to gold and silver, they used to complement each other.

    I can’t see anything besides these 3 possibilities for new p2p currencies. As none of them is equivalent to hyperinflation, I don’t think we should fear such threat in what concerns p2p currencies.

    #13911
    Avatar of caveden
    caveden
    Participant

    shredder7753 wrote:

    unless he’s right about Nakamoto owning 25% of all the bitcoins.

    Satoshi certainly has a lot of coins, but 25% of all sunds way too much. But even if it was true, it wouldn’t be anything compared to what central banks can do to the monetary supply today.

    shredder7753 wrote:

    let me talk about the mining for a second, as that is one thing i might really disagree with. since when has a currency ever been produced like that. it seems like the most ass-e-nine way ever to produce money. a bunch of personal private computers spinning their wheels doing nothing constructive creates actual real currency? WTF?! thats a bunch of bullshit.

    It is not bullshit, it is necessary work. It is the only way currently known to have a database such as the transaction blockchain in a distributed network. And they are not really “generating coins”, they are generating the blocks of data that compose this distributed database, which contains every transaction done in bitcoins. As a reward for their work, they are granted new, previously inexistent coins. This inflation-reward is supposed to be replaced by transaction-fee-reward in the future, since the inflation rate will be halfed every ~4 years.

    If you have more doubts about mining and the block chain, you can find reading material in bitcoin wiki.

    #13913
    Avatar of shredder7753
    shredder7753
    Participant

    omg bitcoins crashed HARD today! i’ve had the bitcoinwatch.com page open since mid-morning when it was way over a hundred million dollars market cap. i just refreshed and it said 60 million!!!

    ____________

    My work

    “Leadership and do-ership are not the same thing”

    #13914
    Avatar of miscreanity
    miscreanity
    Participant

    shredder7753 wrote:

    this FOFOA guy is a character. cant say i agree with anything he sas tho.

    maybe this bitcoin thing is a pre-curser to a much better currency?

    so heres my scenario: the Arab Spring grows until the poor people of the world are united in one massive democracy. elected leaders put together a cabinet including a monetary leader in charge of a commission. that commission then releases currency based on the “secure” technology introduced by bitcoin. there is NO central private bank (for those who dont know it, the Federal Reserve is a privately owned bank, hence the reason why our country is fucked and poor Emmett could be left where he stands just like the 30,000 mf’ers stranded in Egypt by Mr. Bonaparte, the short Corsican). THEN the money is good. then it is tracked by all its citizens. everyone lives happy ever after?

    Indeed, as are a number of the others there. It’s an interesting community of some independent thinkers with very powerful perspectives on economics and finance. Even if you don’t agree, it’s good to be able to discuss points back and forth on a deep level.

    My thoughts exactly – the Bitcoin system as it exists now may or may not last, but it has established groundwork for a variation on currency that is extremely potent.

    Elected leaders are unlikely to readily relinquish power they’ve obtained. The number of times that’s happened throughout history can almost be counted on one hand. Take the example of Cincinnatus. Another being George Washington. Relying upon the integrity of men, especially in this situation, is ill-advised. It’s much more likely that these kind of crypto-currencies will arise independently under the nose of authoritative and totalitarian regimes.

    One of the real problems that Bitcoin has to overcome is the fact that participation requires computer access. Moving to mobile inclusion, particularly feature phones in addition to smart phones, is a boon that opens access to people in many poorer nations. Another major extrinsic factor is that of general adoption. If not enough people use it, there won’t be sufficient incentive for merchants to use it, relegating the system to niche purposes so long as it can be exchanged for other currencies. That exchangeability, more apporpriately called liquidity, also needs a critical mass of participation to be feasible.

    There is an incentive system within Bitcoin that handles the problem of getting to reasonable levels of participation, which is mining. That is its secondary function, as the primary function is security. I’ll mention that in an extension of caveden’s explanation.

    #13915
    Avatar of miscreanity
    miscreanity
    Participant

    caveden wrote:

    It is not bullshit, it is necessary work. It is the only way currently known to have a database such as the transaction blockchain in a distributed network. And they are not really “generating coins”, they are generating the blocks of data that compose this distributed database, which contains every transaction done in bitcoins. As a reward for their work, they are granted new, previously inexistent coins. This inflation-reward is supposed to be replaced by transaction-fee-reward in the future, since the inflation rate will be halfed every ~4 years.

    Absolutely – that is a major portion of the clever functionality in Bitcoin that makes it similar in nature to a physical commodity. It requires real effort to extract a return, just as with real mining. Without such an incentive, who would bother to increase the supply of Bitcoins that allows the system to grow?

    It is a clever way of increasing participation, but the incentive aspect doesn’t have to exist for the Bitcoin system to function. However, the main function of what mining does is security of the overall system. It is the main reason why there would have to be a majority of control over total processing power in order to cause harm. What seems like wasted effort is only because there is no visible result. Without it, the system would rapidly decay; no different from the way our bodies would be infected by everything external organism if we had no immune system.

    For a more in-depth explanation as to exactly how mining does this, the FAQ is a reasonable source. Otherwise, searching some of the Bitcoin forums has good information. If requested, I’ll try to find the exact sources I pulled from.

    #13916
    Avatar of miscreanity
    miscreanity
    Participant

    shredder7753 wrote:

    omg bitcoins crashed HARD today! i’ve had the bitcoinwatch.com page open since mid-morning when it was way over a hundred million dollars market cap. i just refreshed and it said 60 million!!!

    That’s part of the learning process when something new is introduced to the real world outside of an isolated laboratory environment. Over time, the issues will be resolved. I’d guess that’ll happen over the next year or two.

    caveden wrote:

    I can’t see anything besides these 3 possibilities for new p2p currencies. As none of them is equivalent to hyperinflation, I don’t think we should fear such threat in what concerns p2p currencies.

    Bingo. Great explanation. As you drill down into the details, the complexity grows like crazy. I think you might find the last FOFOA post series intriguing. A Bitcoin-like system may be the one-world currency instead of SDRs that the IMF is pushing. We’ll see…

    #13917
    Avatar of shredder7753
    shredder7753
    Participant

    ok heres the thing. now there are 6.5 million btc’s. eventually there could be 21 million btc’s. but i have read that mining is getting harder and harder to make any profit from. you need very powerful computers to really make a profit. we still have a long way to go. what if, at some point, the cost of running these server machines was actually more expensive than the return from even mining them? wouldnt that make the whole thing crash? imagine people get sick of paying their electric bill for the sake of administrating opm. and they all start turning the machines off. how much would that suck?

    ____________

    My work

    “Leadership and do-ership are not the same thing”

    #13918
    Avatar of i_is_j_smith
    i_is_j_smith
    Participant

    emmettvm wrote:
    but in reality, as long as the purchase of commodities with said currency is not banned, then the ability to “opt out” exists. The dollar may not be TIED to gold, but you can buy gold WITH the dollar, meaning you can move out of a dollar-based monetary system, so to speak. I know this is not quite what you meant, but it comes to an essentially similar end.

    But the issue is that you can never guarantee the currency you use will be able to purchase a globally accepted commodity. The purchase of said commodity doesn’t have to be banned…just not possible due to the unacceptance of the currency on global markets.

    If the seastead I am on uses seashells as a currency, how am I supposed to get my hands on some valuable commodity like gold (or platinum, or silver, etc) with which I can then bring with me to another country? No gold exchange in the world is going to accept a shipment of scallop shells as payment for bullion.

    The other problem is that when the currency isn’t backed by the commodity your purchasing power can fluctuate wildly. If the US economy collapses then I can suddenly buy a lot less gold if my seastead uses the dollar as a currency.

    If I know that I have 20 kilograms of gold in a vault somewhere it doesn’t matter if I use pieces of paper, seashells, packets of data, or bellybutton lint to represent that gold. At any time I can exchange my paper, seashells, data packets, or lint and take all my gold with me. And that gold will be accepted anywhere in the world I choose to make my new home.

    #13919
    Avatar of elspru
    elspru
    Participant

    emmettvm wrote:

    While I also am not entirely sold upon BitCoins, I do feel I have to speak out in their defense somewhat.

    First off, there are a few fallacies here that need to be addressed. The first is of intrinsic value, the argument over which I think is stemming from a lack of concensus over the definition of our terms. Keep in mind that when having a discussion from the perspective of economics, you must realize that the economists with which you are speaking will be using economic definitions – dictionary definitions do not suffice. Caveden is quite right when he says there is no such thing as intrinsic value in economics. Some may argue that there are materials or factors which, due to their attributes, behold an all-accepted value, and could therefore be said to be intrinsic, but that is not the same thing.

    A simplified, but apt example: Arguing in favor of the idea of intrinsic value is applying an objective, all-serving valuation to a certain material (lets say gold for this example). We are sailing your boat and you find a man on a deserted island. His food supplies are low, but he happens to have a very nice watch. We have a 1lb brick of gold, and a box of bread on your boat. We want this watch, and offer him the gold in a trade, based upon the idea that gold’s value is intrinsic and a pound of it is much more valuable than a box of bread. To this man, though, the gold is of quite little value, while the bread is of great value, and he demands the bread for the exchange. The point is that valuation is always subjective rather than objective, or more simply, that we all decide for ourselves how much something is worth to us.

    yes that’s why in price-calculation formula is *utility. if person has no use for it then it *0 or even negative if they see it as garbage.

    The term “intrinsic value” seems to really only keep holding ground purely because people like to use it in reference to precious metals, eg gold, silver, platinum, etc. What caveden meant by saying that gold had utility value but not intrinsic value. Gold has many industrial uses, has use in jewelry and decoration, and has historically been used both as an investment metal and as a government backed currency / governmental guarantee to currency. All of these uses are, in economica parlance, utilities. The value, on the other hand, has varied a great deal over the years, even during times when the utility has remained unchanged.

    [/quote]

    due to changes in abundance

    (time+mass)^chakra/abundance*utility = price or value

    Thus, it is the utility which may be said to be intrinsic, but definitely NOT the value.

    sure utility is part of the formula.

    calm aware desire choice love express intuit move

    #13920
    Avatar of OCEANOPOLIS
    OCEANOPOLIS
    Participant

    can pay for 500 tons of diesel, 20 tons of flour, 20 tons of rice, 40 tons of canned foods, and 40 tons of “miscellaneous” fresh and refrigerated food products, 1000 nm offshore?

    ’cause if they can’t, they are useless,…

    PS: Spru, “(time+mass)^chakra/abundance*utility = price or value”, brilliant dude!

    #13925
    Avatar of caveden
    caveden
    Participant

    shredder7753 wrote:

    omg bitcoins crashed HARD today! i’ve had the bitcoinwatch.com page open since mid-morning when it was way over a hundred million dollars market cap. i just refreshed and it said 60 million!!

    Crashed? Each unity was worth less than U$D1 a few months ago. I’ve just checked the price and it’s around $17 in many markets. It oscilates strongly, of course, since it’s a small market very subject to temperamental behaviors. But I’d say it’s still in a strong rally, with strong ups and downs.

    #13928
    Avatar of shredder7753
    shredder7753
    Participant

    several reports said it dropped yesterday from $17.50/ BTC to only a few pennies. the people who run mt. gox froze all trading and hit rewind:

    http://www.theinquirer.net/inquirer/news/2080235/mt-gox-restore-bitcoin-value-following-hack

    ____________

    My work

    “Leadership and do-ership are not the same thing”

    #13930
    Avatar of miscreanity
    miscreanity
    Participant

    shredder7753 wrote:

    ok heres the thing. now there are 6.5 million btc’s. eventually there could be 21 million btc’s. but i have read that mining is getting harder and harder to make any profit from. you need very powerful computers to really make a profit. we still have a long way to go. what if, at some point, the cost of running these server machines was actually more expensive than the return from even mining them? wouldnt that make the whole thing crash? imagine people get sick of paying their electric bill for the sake of administrating opm. and they all start turning the machines off. how much would that suck?

    The US went off the gold standard in 1971. Did that cause gold to disappear or lose value?

    Bitcoins are primarily equivalent to fiat but also have the core properties of gold. I won’t get into detail for now; the combination affords the flexibility of paper money and the stability of gold. Liquidity is another issue that will come with greater adoption if the system succeeds and doesn’t burn itself out before achieving critical mass.

    shredder7753 wrote:

    several reports said it dropped yesterday from $17.50/ BTC to only a few pennies. the people who run mt. gox froze all trading and hit rewind:

    http://www.theinquirer.net/inquirer/news/2080235/mt-gox-restore-bitcoin-value-following-hack

    Troubling as this is, it was one exchange. The security breaches mainly involved individuals, and the response from Mt. Gox has been far more rapid and transparent than that from Sony during the PSN debacle.

    If the algorithm, SHA-256, were compromised… then there’d be cause for concern. The Bitcoin network itself is still intact and in no immediate danger that I know of. From what I know of hash algorithms, they tend to be eroded over time, not broken suddenly. Kind of like a levee that starts to show signs of stress before finally failing; there should be sufficient time to take corrective action, possibly including switching to another algorithm.

    [edit] The case of markets dropping to 1 cent has occurred in traditional markets as well, particularly recent “flash” crashes since 2008. Similar techniques were employed using the Mt. Gox exchange, albeit not as sophisticated. There are some very sinister activities in current commodity and stock markets (NYSE, NASDAQ, S&P, DOW, COMEX, etc) that make the Bitcoin incident seem like a minor hiccup.

    Personally, I’d rather deal with the potential unknowns in Bitcoin and diversify across several exchanges while encrypting my wallet than the nightmarish bank-controlled fiasco that is the established global marketplace. As soon as it (or a successor crypto-currency) becomes large scale enough to be avilable for all necessary goods and services, I’m done with dollars. Bitcoin and gold for me.

    OCEANOPOLIS wrote:

    can pay for 500 tons of diesel, 20 tons of flour, 20 tons of rice, 40 tons of canned foods, and 40 tons of “miscellaneous” fresh and refrigerated food products, 1000 nm offshore?

    ’cause if they can’t, they are useless,…

    Exactly – the issue of liquidity. It’s an issue that all general-purpose currencies have to overcome. Of course, even if Bitcoin remains a niche variant, it is still extremely useful on small scales. A seastead with several thousand residents could make use of it internally and avoid paper forms of currency altogether. Other currencies would need to be used with the rest of the world, but otherwise it’d be no different than each traditional nation-state issuing its own fiat.

    caveden wrote:

    Crashed? Each unity was worth less than U$D1 a few months ago. I’ve just checked the price and it’s around $17 in many markets. It oscilates strongly, of course, since it’s a small market very subject to temperamental behaviors. But I’d say it’s still in a strong rally, with strong ups and downs.

    As an exercise, I decided to estimate the point at which a death spiral would ensue. That’s a situation where holders of Bitcoins engage in a mass exodus due to loss of confidence in the system itself.

    Considering the energy and hardware costs involved with Bitcoin mining effort alone, there is a bare minimum valuation level below which a contraction could completely disincentivize mining. A rough calculation with present numbers puts that minimum around USD$2-3 per BTC (for a long enough period to cause panic) to keep mining borderline profitable without any other form of capital flow (assuming $0.15/kWh [฿0.01/kWh]). Below that exchange ratio, the electricity costs (operating expenses) to maintain a mining rig would turn negative and the cost of the rig hardware (capital investment) couldn’t be recouped, much less turn any profit.

    Personally, I’d stop mining around USD$8-10 per BTC – it’d take a year or more to get a positive ROI under that rate. Of course, just because the mining slows down or stops doesn’t mean a collapse is guaranteed. Once demand increases again, pushing the Bitcoin to gold or USD ratio up, mining will return to profitability and attract miners. This ebb and flow is a normal effect.

    #13931
    Avatar of shredder7753
    shredder7753
    Participant

    shredder7753 wrote:

    ok heres the thing. now there are 6.5 million btc’s. eventually there could be 21 million btc’s. but i have read that mining is getting harder and harder to make any profit from. you need very powerful computers to really make a profit. we still have a long way to go. what if, at some point, the cost of running these server machines was actually more expensive than the return from even mining them? wouldnt that make the whole thing crash? imagine people get sick of paying their electric bill for the sake of administrating opm. and they all start turning the machines off. how much would that suck?

    i think i have a better answer for my own question:

    once the cost of mining BTC’s goes up substantually, it WILL weed out the less aggressive miners (those unwilling to invest in higher power machines) AND reduce the profitability – which we have already seen happen. but all that will do is increase the trade value of bitcoin, because there are fewer bitcoins in the market. hence driving up the price and leveraging the cost of the privately funded infrastructure. ALSO; what I think we will see is some extremely powerful private machines coming online. i mean individual machines that might crack the bottom of the top 500 supercomputer list.

    it all stops at 21 million btc’s tho? wtf? that cant go on forever. somewhere in the future they will want to increase it. im not sure i like this limitation.

    #13934
    Avatar of miscreanity
    miscreanity
    Participant

    Good explanation. I don’t know if it’d quite be worthwhile to build supercomputers to mine Bitcoins, though lol. With the current crop, at least you can use them for gaming after Bitcoin.

    shredder7753 wrote:

    it all stops at 21 million btc’s tho? wtf? that cant go on forever. somewhere in the future they will want to increase it. im not sure i like this limitation.

    There are two pertinent entries on the “myths” page.

    I still have my concerns about the hard limit as well. This is like the IPv4 vs. IPv6 issue that’s causing such a headache. Even precious metals don’t have a truly hard limit. I think it would be possible to retain the flexibility of an inflatable currency by internally monitoring certain variables to calculate overall demand and then increase the Bitcoins available in the same manner as a company makes a secondary stock offering. Drop in demand that deflates the currency could work the same as a reverse stock split.

    That might be implemented in a Bitcoin variant, possibly Open Transactions. In any case, this is still a workable financial system for seasteads. We use key cards at hotels that stay at the hotel, don’t we? Might as well use a money system that’s designed for a specific location too.

Viewing 15 posts - 31 through 45 (of 49 total)

The forum ‘Infrastructure’ is closed to new topics and replies.



Posted on at

Categories:

Written by

Blog/Newsletter

Donate