Bitcoin : Where can it fail ?

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lgw
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Re: Bitcoin : Where can it fail ?

Postby lgw » Wed Oct 09, 2013 8:12 pm UTC

A brief summary of bitcoin "mining" that's neither an infographic nor a crypto paper:
  • When you "spend" bitcoin you transfer it from your wallet to someone else's.
  • For that to work, some third party must do significant computation to prove the transaction was valid (you're not spending the same money twice, or whatever). Why would a stranger devote his computer to do that for you? Electricity isn't free, after all.
  • As part of that transfer, you offer a small amount of bitcoin as a payment to a transaction processer. These are expected to be tiny payments, so a bunch of them are processed together in a "block" every 10 minutes (there also technical reasons to group them, of course). Anyone can be a transaction processer, and if many validate a block, payment is effectively random.
  • Because bitcoin transactions were expected to be rare at first, with not enough payment per block to be worthwhile, there's another incentive. New (fractional) bitcoins are created with every block, and added to the kitty. That free bonus decreases over time and was intended to eventually become 0, fixing the maximum supply of bitcoins, as transaction volume increased.
  • "Miners" are just transaction processors. But the name is about where their self-interest lies - transaction processing is a for-profit business, not a charity service.
As I understand it, there's been some discussion about whether the creation of new bitcoins as an incentive to miners can really taper to 0, or will transaction fees be high enough to bother people if that happens (since any fee above 0 will bother some people). BTW, the amount to offer as a transaction fee is a bit of a reverse auction - you (well, your client software) choose how much to offer, and miners can simply exclude your transaction if the amount is too low. None of that has mattered yet as the newly created bitcoins still dominate AFAIK.
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Re: Bitcoin : Where can it fail ?

Postby benkapparate » Fri Oct 11, 2013 9:01 pm UTC

As I understand it, there's been some discussion about whether the creation of new bitcoins as an incentive to miners can really taper to 0, or will transaction fees be high enough to bother people if that happens (since any fee above 0 will bother some people). BTW, the amount to offer as a transaction fee is a bit of a reverse auction - you (well, your client software) choose how much to offer, and miners can simply exclude your transaction if the amount is too low. None of that has mattered yet as the newly created bitcoins still dominate AFAIK.


This should hit equilibrium via market forces. Miners will stop mining if transaction fees are too low, and difficulty will decrease. Simultaneously transactions will stop being processed for fees that are too low, until people start including higher fees.

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Re: Bitcoin : Where can it fail ?

Postby Yakk » Sun Oct 13, 2013 8:55 pm UTC

Amd if the price to transact goes too high, people stop transacting. The value of bitcoims plummets, as who wants money that costs a significant percentage of its value in friction to spend? This increases transaction costs when denominated in bitcoins, as the verification costs real world resources. Quickly, only those with large stockpiles process transactions 'in order to maintain the economy' of bitcoins -- which is neat, but suffers from free riding, plus there is the majority problem (if 50% of transactions are processed by, or could be, they can rewrite the rules).
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Re: Bitcoin : Where can it fail ?

Postby ManaUser » Sat Nov 02, 2013 3:18 am UTC

lgw wrote:
  • Because bitcoin transactions were expected to be rare at first, with not enough payment per block to be worthwhile, there's another incentive. New (fractional) bitcoins are created with every block, and added to the kitty. That free bonus decreases over time and was intended to eventually become 0, fixing the maximum supply of bitcoins, as transaction volume increased.

A minor correction: The reward per block is not (currently) fractional, it's a whole 25 bitcoins, or about 5,000 dollars at current prices! What you might be thinking of is the fact that much (most?) bitcoin mining is done in "pools" which divvy that reward up among their members so that each person does indeed get fractional bitcoins.

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Re: Bitcoin : Where can it fail ?

Postby elasto » Sat Nov 30, 2013 1:22 am UTC

A Newport man has been searching a landfill site in south Wales hoping to find a computer hard drive he threw away which is now worth over £4m.

James Howells's hard drive contains 7,500 bitcoins - which is a virtual form of currency for use online. It had sat in a drawer for years and he had forgotten it contained the bitcoins, which he obtained in 2009 for almost nothing, when he threw it out. But this week, a single bitcoin's value hit $1,000 (£613) for the first time. It means Mr Howells's collection is now worth $7.5m (£4.6m).

A few years ago Mr Howells, who works in IT, had dismantled his computer after spilling a drink on it: "I stored a couple of parts away like the hard drive, and the rest of the bits and pieces which were still working I sold for spares," he told BBC Radio Wales. "I kept the hard drive in a drawer in my office for three years without a second thought - totally forgot about bitcoin all together. I had been distracted by family life and moving house. Fast forward to 2013 which is when I had a clearout of my old IT equipment - I hadn't used this drive for over three years, I believed I'd taken everything off it... so it got thrown in the bin."

Mr Howells later realised what was left on the hard drive.

He added: "I had been hearing a few stories of a chap from Norway who had bought a number of coins for a very low price and had sold them for a high price and that's when I got back into checking the price and seeing what I'd done. When I found out what the price was, the penny dropped and I realised the coins I have 'mined' were on the drive I had thrown away. There was not a lot I could do."

Mr Howells checked all of his back up files but could not locate the coins so went to the landfill site in south Wales.

"When I went to the tip the manager took me up to the current landfill site and when I saw it - it's about the size of a football field - my first thought was 'no chance'," he said. "The manager explained that things that were sent to landfill three or four months ago could be three to five feet deep. He confirmed my worst fears when he said that. He did mention that when people were investigating for evidence, they turn up with 15 to 20 people in full protective gear with diggers and dogs as well. The truth is I haven't got the funds or ability to make that happen at the moment without a definite pay cheque at the end of it."


In a letter to the US Senate committee, the FBI said that it recognised virtual currencies offered "legitimate financial services" but added they could be "exploited by malicious actors".

In October, the world's first bitcoin ATM opened in Vancouver, Canada. The machine allows users to exchange bitcoins for cash and vice-versa.

The virtual currency has also been quickly adopted in China, where one exchange - BTC China - is said to be the most active globally. Bitcoin's use in China has been attributed to it being an effective way of reliably getting money out of the country.

Various bitcoin exchanges have been set up around the world, with MTGox - one of the virtual currency's major exchanges - being the most prominent.

Mr Howells added: "I still believe in bitcoin. I believe its value is going to go much, much higher and it's still in its early days. As soon as access to bitcoin is opened up to the general public I think a lot more people will be using it, hence the price will increase further."


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Re: Bitcoin : Where can it fail ?

Postby Arariel » Wed Dec 04, 2013 8:26 pm UTC

Ixtellor wrote:The United States has a vested interest in maintaining the value and integrity in its currency. There is NO situation where a citizen can crash the market for dollars while enriching themselves.

The same can not be said for Bitcoins, which like commodities are subject to market manipulations particularly when its unregulated. Some major stake holder sells all his bitcoins, etc.

Looks like you can crash the market for pound sterling while enriching yourself, though.

Of course, then there's how major is 'major'; the FBI seized 144,000 (Ulbricht) +26,000 (various accounts) BTC from Silk Road, which was probably one of the highest concentrations of BTC there were, if not the highest.

In fact, I'm willing to bet that, ironically, the U.S. federal government is the single largest holder of BTC right now.

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Re: Bitcoin : Where can it fail ?

Postby Tyndmyr » Wed Dec 04, 2013 8:30 pm UTC

So, why choose Bitcoin, and not a different network that is essentially identical to Bitcoin? I don't see a particularly unique reason to use that network vs any other.

And joining a newer network using an identical system will mean I'll get in earlier. From a speculative standpoint, that seems preferable.

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Re: Bitcoin : Where can it fail ?

Postby EdgarJPublius » Wed Dec 04, 2013 10:16 pm UTC

Tyndmyr wrote:So, why choose Bitcoin, and not a different network that is essentially identical to Bitcoin? I don't see a particularly unique reason to use that network vs any other.


The size basically. Larger networks have more purchasing power and more inherent security and stability.
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Re: Bitcoin : Where can it fail ?

Postby Arariel » Wed Dec 04, 2013 10:23 pm UTC

Tyndmyr wrote:So, why choose Bitcoin, and not a different network that is essentially identical to Bitcoin? I don't see a particularly unique reason to use that network vs any other.

And joining a newer network using an identical system will mean I'll get in earlier. From a speculative standpoint, that seems preferable.

https://en.wikipedia.org/wiki/Network_effect
Why would anyone use an identical currency that fewer people accept in addition to being less secure? There are competing currencies, but there are differences between them. Litecoin uses scrypt in its algorithm rather than SHA256, processes transactions faster (some trade-off here with security), and there will be four times as many (not that that really matters since both BTC and LTC are divisible to eight digits). Peercoin, in addition to using the SHA256 for proof-of-work, also uses a proof-of-stake system which is supposed to make 51% attacks more difficult (I also find it interesting from a monetary point of view, since it looks like the money supply self-equilibrates).

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Re: Bitcoin : Where can it fail ?

Postby leady » Thu Dec 05, 2013 4:25 pm UTC



I'm pretty neutral on bubblecoins (unfortunately someone beat me to that name by 10 days....), they might be useful once they stablise. At the moment my suspicion is that people holding bitcoins are effecting holding junk bonds.

Soros didn't crash the pound though, thats a misleading representation. The pound was already crashed and the government was spending a fortune to deny this reality - hard to see a direct equivalent in bubblecoins, no central bank has an interest.

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Re: Bitcoin : Where can it fail ?

Postby Tyndmyr » Thu Dec 05, 2013 4:39 pm UTC

Network effects are a thing, sure...but Bitcoin is still primarily held by speculators, not used as a functional currency. I mean, yeah, you've got a few people using it as a currency, but as currencies go, it's still pretty tiny. The difference between adoption rates of virtual currencies would seem to be so slender as to not matter much.

The technical differences are fascinating, though. I suppose the smart thing to do would be to mine a bit in each of them, so if any of them catches on, you make out pretty decently. Each is individually something of a long shot, but the idea that SOME virtual currency will hit the mainstream isn't too implausible.

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Re: Bitcoin : Where can it fail ?

Postby Ixtellor » Thu Dec 05, 2013 7:09 pm UTC

Ok.... So I didn't realize that if you successfully "mine" a coin (or cipher or whatever the jargon is) you get 50 Bitcoins which has a value of around $5000!

Um how do I do that? What are the odds of mining and getting the bitcoin reward?
I assume you download a program and set it to work.

I am going to assume its incredibly lucky to to successfully mine that.

I stand by earlier comments that Bitcoins are a speculative commoditity and I would not invest in them, but I would love to get some free ones and INSTA sell them.
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Re: Bitcoin : Where can it fail ?

Postby Tyndmyr » Thu Dec 05, 2013 7:27 pm UTC

Ixtellor wrote:Ok.... So I didn't realize that if you successfully "mine" a coin (or cipher or whatever the jargon is) you get 50 Bitcoins which has a value of around $5000!

Um how do I do that? What are the odds of mining and getting the bitcoin reward?
I assume you download a program and set it to work.

I am going to assume its incredibly lucky to to successfully mine that.

I stand by earlier comments that Bitcoins are a speculative commoditity and I would not invest in them, but I would love to get some free ones and INSTA sell them.


The "download a program and set it to work" is basically it, yeah. That said, some computers are much more efficient at mining than others.

Additionally, I believe rewards are distributed evenly between the miners according to the work contributed over the period. So, expected reward from mining should not be luck-based, but instead, scales inversely with the popularity of mining.

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Re: Bitcoin : Where can it fail ?

Postby Arariel » Thu Dec 05, 2013 10:59 pm UTC

leady wrote:I'm pretty neutral on bubblecoins (unfortunately someone beat me to that name by 10 days....), they might be useful once they stablise. At the moment my suspicion is that people holding bitcoins are effecting holding junk bonds.

Tyndmyr wrote:Network effects are a thing, sure...but Bitcoin is still primarily held by speculators, not used as a functional currency. I mean, yeah, you've got a few people using it as a currency, but as currencies go, it's still pretty tiny. The difference between adoption rates of virtual currencies would seem to be so slender as to not matter much.

Sure, they're mostly being used as speculative commodities, but that doesn't mean Bitcoin isn't/can't currently be used as currency or a medium of transaction. Silk Road, after all, processed over a billion dollars' worth of orders, and plenty of legal businesses make a decent chunk of revenue through purchases with Bitcoin.

Soros didn't crash the pound though, thats a misleading representation. The pound was already crashed and the government was spending a fortune to deny this reality - hard to see a direct equivalent in bubblecoins, no central bank has an interest.

No doubt he had an effect on it, though.
But the statement that there is "NO situation where a citizen can crash the market" for some fiat currency while "enriching themselves"? Completely false as Soros demonstrated. If banks release the trillions of dollars produced under QE in a short period of time, that will cause massive hyperinflation which one could easily profit off of by shorting the dollar, so it's not impossible.

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Re: Bitcoin : Where can it fail ?

Postby Ixtellor » Fri Dec 06, 2013 9:47 pm UTC

Arariel wrote:[No doubt he had an effect on it [Black Wednesday when the British pound collapsed], though.
But the statement that there is "NO situation where a citizen can crash the market" for some fiat currency while "enriching themselves"? .


Except that didn't happen. This is Serious Business.
Soros purchased $6.5 Billion over the course of several months in a market that trades $6billion + daily. The British Government spent $15Billion JUST on interest that year trying to prop up the pound.
The pound collapsed because it was highly over valued (by treaty) and keeping it at that valuation was unsustainable and the second the British government realized it was taking a bath on interest payments the BRITISH government crashed their own currency. (which greatly benefit the nation)

If banks release the trillions of dollars produced under QE in a short period of time, that will cause massive hyperinflation which one could easily profit off of by shorting the dollar, so it's not impossible


Source please. Your basically saying "if every depositer in Bank of American withdrew their funds on the same day it would destroy the bank".

Also, there is no evidence it would cause hyperinflation regardless of how you define it.

Also banks don't 'release' money -- they loan it. So unless there is demand for the loans they couldn't just inject it into the economy. Based on the latest crash - the idea that millions of dollar users would suddenly be clamoring for outrageous loans in a down economy is absurd... not to mention the banks WOULDN'T do that because they dont want to loan trillions of dollars in a down economy...
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Re: Bitcoin : Where can it fail ?

Postby sardia » Sat Dec 07, 2013 7:26 pm UTC

To be fair, the banks did take extraordinary risks that caused the great recession, because a bunch of smart guys said MATH makes it ok. And then they did loan several trillion dollars for the 99% chance of making a profit, so long as the math held up to reality.

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Re: Bitcoin : Where can it fail ?

Postby Tyndmyr » Mon Dec 09, 2013 6:18 pm UTC

Ixtellor wrote:Source please. Your basically saying "if every depositer in Bank of American withdrew their funds on the same day it would destroy the bank".

Also, there is no evidence it would cause hyperinflation regardless of how you define it.

Also banks don't 'release' money -- they loan it. So unless there is demand for the loans they couldn't just inject it into the economy. Based on the latest crash - the idea that millions of dollar users would suddenly be clamoring for outrageous loans in a down economy is absurd... not to mention the banks WOULDN'T do that because they dont want to loan trillions of dollars in a down economy...


Massive increases in M0 definitely are correlated with hyperinflation. I think it's reasoanble to generalize and say that the lower the monetary level, the greater the effect of an increase on inflation...so yes, banks do have a fair degree of influence on the economy via their use of money because they can fairly easily shift funds to lower quantities...though typically not to M0. If trillions of dollars were shifted suddenly to a lower level, yeah...there'd be some negative effect there.

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Re: Bitcoin : Where can it fail ?

Postby elasto » Tue Dec 10, 2013 2:11 am UTC

China has banned its banks from handling transactions involving the Bitcoin virtual currency. The ban came in a notice issued by the People's Bank of China, financial watchdogs and the nation's IT ministry. Bitcoins were a "virtual good", had no legal status and should not be used as a currency, it said.

The decision comes after bitcoins' rapid rise in value was called a "bubble" by Alan Greenspan, former US Federal Reserve chairman.

The ban was imposed because bitcoins were not backed by any nation or central authority, said the notice. It added that it was planning to step up its efforts to curb the use of bitcoins to launder cash.

Individuals were still free to trade in bitcoins but should be aware of the risks involved, said the People's Bank of China (PBOC), adding that it planned to formalise the regulation of exchanges that dealt in the digital cash.

Experts told Reuters the PBOC was moved to make its decision because Chinese nationals were heavily involved in trading the virtual currency. Many believe this is because it helps them avoid controls on trade in the yuan.


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Re: Bitcoin : Where can it fail ?

Postby Arariel » Wed Dec 11, 2013 4:19 am UTC

Ixtellor wrote:Except that didn't happen. This is Serious Business.
Soros purchased $6.5 Billion over the course of several months

Wrong. Soros's fund purchased $10 billion. He short sold 6.5 billion pounds.

in a market that trades $6billion + daily.

Present current trading volume is somewhat over 6 billion pounds or around $10 billion daily. In 1992, trading volume was around $1B.

The British Government spent $15Billion JUST on interest that year trying to prop up the pound. The pound collapsed because it was highly over valued (by treaty) and keeping it at that valuation was unsustainable and the second the British government realized it was taking a bath on interest payments the BRITISH government crashed their own currency.

No, they crashed it because the speculators had forced their hand. Soros individually may have had only a minor effect, but combined with every other speculator betting against the pound (and you don't think a large hedge fund manager publicly and heavily shorting the pound might have an effect on that?), the Treasury couldn't afford to keep buying pounds.

(which greatly benefit the nation)

Long-term, maybe, but they lost over 3 billion pounds doing this and raised the unemployment rate by about a per cent.


If banks release the trillions of dollars produced under QE in a short period of time, that will cause massive hyperinflation which one could easily profit off of by shorting the dollar, so it's not impossible


Source please. Your basically saying "if every depositer in Bank of American withdrew their funds on the same day it would destroy the bank".

Also, there is no evidence it would cause hyperinflation regardless of how you define it.

Pardon me for assuming quadrupling the monetary base might just have some effects.

Also banks don't 'release' money -- they loan it.

I was unaware you could loan money without releasing it.

So unless there is demand for the loans they couldn't just inject it into the economy.

There could be, but the Fed has literally been paying interest to have the banks sit on the money, in order to prevent that quadrupling of the monetary base from actually being used. How long they can keep that up (especially if an economic recovery raises interest rates), who knows.

Based on the latest crash - the idea that millions of dollar users would suddenly be clamoring for outrageous loans in a down economy is absurd... not to mention the banks WOULDN'T do that because they dont want to loan trillions of dollars in a down economy...

Which is great if you assume the economy is going to be perpetually down. Once the economy picks up, what do you think is going to happen? And if any significant inflation occurs, you can bet those banks will be letting go of the several trillion they have like a hot potato.

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Re: Bitcoin : Where can it fail ?

Postby Ixtellor » Wed Dec 11, 2013 7:06 pm UTC

Arariel wrote:No, they crashed it because the speculators had forced their hand. Soros individually may have had only a minor effect, but combined with every other speculator betting against the pound (and you don't think a large hedge fund manager publicly and heavily shorting the pound might have an effect on that?), the Treasury couldn't afford to keep buying pounds.


So you just disproved your own point. Soros can not crash the pound.

The pound crashed because it was horrifically, artifically inflated. Soros realized this and made money of the inevitable crash. You lack causation.

When Soros shorted the US housing market, he didn't cause the housing market to crash....

Arariel wrote:There could be, but the Fed has literally been paying interest to have the banks sit on the money, in order to prevent that quadrupling of the monetary base from actually being used. How long they can keep that up (especially if an economic recovery raises interest rates), who knows.


They did that to lower the federal fund rate which allows banks access to both liquidity as well as an incentive to loan money. Liquidity keeps banks from going under and the additional loans from banks that dont have excess reserves stimulate the economy.

Do you have a source saying the Fed is enouraging execess reserves to prevent inflation? (perferably from the Fed)

Even if your right ( I doubt it) it counters your argument that hyper inflation is coming. Because by your own example (which I think is fraudulant) it would prove they are preventing hyper inflation not causing it.

I will give you the same challenge I pose to all monetarists "When is the hyper inflation coming or what is the latest that you see it coming?"

Economists need to be able to make good predicitions or else your 'science' is junk. (Janet Yellen = good predictor)

So tell me when the hyper inflation is coming. Then plan your excuse for why it fails to materialize or admit your wrong when it doesn't.

Going on 5 years of chicken littles being wrong.
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Re: Bitcoin : Where can it fail ?

Postby Arariel » Thu Dec 12, 2013 1:37 am UTC

Ixtellor wrote:So you just disproved your own point. Soros can not crash the pound.

The pound crashed because it was horrifically, artifically inflated. Soros realized this and made money of the inevitable crash. You lack causation.

When Soros shorted the US housing market, he didn't cause the housing market to crash....

Apparently events cannot have multiple causes. Particularly:
The pound crashed because it was horrifically, artifically inflated.

This is the reason why the pound could crash, but the Treasury could have continued to prop up its value had it not been for the speculators.

They did that to lower the federal fund rate which allows banks access to both liquidity as well as an incentive to loan money. Liquidity keeps banks from going under and the additional loans from banks that dont have excess reserves stimulate the economy.

Do you have a source saying the Fed is enouraging execess reserves to prevent inflation? (perferably from the Fed)

New York Fed, page 8 wrote:Some observers have expressed concern that the large quantity of reserves will lead to an increase in the inflation rate unless the Federal Reserve acts to remove them quickly once the economy begins to recover. Meltzer (2009), for example, worries that “the enormous increase in bank reserves—caused by the Fed’s purchases of bonds and mortgages—will surely bring on severe inflation if allowed to remain.” Feldstein (2009) expresses a similar concern, noting that“when the economy begins to recover, these reserves can be converted into new loans and faster money growth” that will eventually prove inflationary. Under a traditional operating framework, in which the central bank influences interest rates and the level of economic activity by changing the quantity of reserves, these concerns would be justified. Now that the Federal Reserve is paying interest on reserves, however, matters are different.


Even if your right ( I doubt it) it counters your argument that hyper inflation is coming. Because by your own example (which I think is fraudulant) it would prove they are preventing hyper inflation not causing it.

'You're wrong, wrong, wrong, wrong, wrong, and you're a liar!' is essentially what I'm getting from you.
I literally said they were trying to prevent hyperinflation. That doesn't mean they'll succeed.

I will give you the same challenge I pose to all monetarists "When is the hyper inflation coming or what is the latest that you see it coming?"

So tell me when the hyper inflation is coming. Then plan your excuse for why it fails to materialize or admit your wrong when it doesn't.

Going on 5 years of chicken littles being wrong.

I will give you the same challenge I pose to all anti-smokers: 'When am I going to get lung cancer or what is the latest that you see it coming?'

Economists need to be able to make good predicitions or else your 'science' is junk.

Economics is not a science.

(Janet Yellen = good predictor)

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Janet Yellen, 2005 wrote:...

In my view, it makes sense to organize one’s thinking around three consecutive questions—three hurdles to jump before pulling the monetary policy trigger. First, if the [housing] bubble were to deflate on its own, would the effect on the economy be exceedingly large? Second, is it unlikely that the Fed could mitigate the consequences? Third, is monetary policy the best tool to use to deflate a house-price bubble?

My answers to these questions in the shortest possible form are, “no,” “no,” and “no.” In the most thorough possible form, my answers might take a few hours, and would give full play to the many gray areas that are involved. Since the short answer is not satisfactory and the thorough one overwhelms our time limits, I will compromise and give just a brief explanation for my trio of “nos.”

In answer to the first question on the size of the effect, it could be large enough to feel like a good-sized bump in the road, but the economy would likely to be able to absorb the shock. For example, a reversion to the long-run price-rent ratio would appear to represent a shock that is only about half the size of the U.S. stock market collapse in 2000 and 2001.

...

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Re: Bitcoin : Where can it fail ?

Postby elasto » Fri Dec 13, 2013 3:26 pm UTC

Coinbase, a start-up that lets people trade Bitcoins, has raised $25m (£15m) in venture capital funding - the largest by a Bitcoin start-up.

...

Coinbase said it will use the funding to "educate the market, and promote the mainstream adoption of Bitcoin. We are nearing a tipping point for broad adoption of Bitcoin - what we at Coinbase believe to be one of the most important shifts in the global economy in our lifetime,"

...

Coinbase said the number of people who use its Bitcoin wallet had doubled to more than 600,000 in the past two months and almost 10,000 new people were signing up every day. It said it was also working with 16,000 merchants to provide Bitcoin payments.


It's a bubble, and it will crash hard at some point. The only question is whether it will maintain relevance once it has done so. I think its volatility will prevent it ever becoming mainstream though.

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Re: Bitcoin : Where can it fail ?

Postby Nylonathatep » Wed Dec 18, 2013 5:56 pm UTC

News on Bit-coins

http://business.financialpost.com/2013/ ... rom-china/

BEIJING — A Chinese bitcoin exchange platform announced on Wednesday that it had stopped taking Chinese yuan deposits, sending the price of the virtual currency down sharply as China broadened its crackdown on domestic bitcoin trading.

Shanghai-based BTC China, the world’s largest bitcoin exchange by volume, posted a notice about the new regulations on its website, two weeks after Beijing banned financial institutions from trading in bitcoin, due to the risks involved.

“Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim,” BTC China said in the notice.

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Re: Bitcoin : Where can it fail ?

Postby KnightExemplar » Thu Jan 09, 2014 4:09 pm UTC

https://bitcointalk.org/index.php?topic=406152.0

GHash.IO looks like they're going for 51%. Apparently, GHash.IO was involved in a double-spend attempt a few months ago. So... this may get interesting guys.
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Re: Bitcoin : Where can it fail ?

Postby CorruptUser » Fri Feb 28, 2014 4:44 pm UTC

So... Apparently it is failing at the moment thanks to Mt Gox, the site that ran 90% of all bitcoin transactions ever, being robbed. The irony being that by stealing the bitcoins and causing a collapse, the robbers get nothing.

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Re: Bitcoin : Where can it fail ?

Postby Xeio » Sun Mar 02, 2014 3:24 am UTC

It's fun watching the people into bitcoin discuss it though. Gox was clearly a cancer upon bitcoin. It can only be a good thing the largest bitcoin exchange failed. They all knew it was bad for years!

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Re: Bitcoin : Where can it fail ?

Postby snowyowl » Sun Mar 02, 2014 3:16 pm UTC

It's a shame that Bitcoin is tied up in all these is-it-isn't-it a real currency, with amateur economists and investors coming out of the woodwork. As an amateur computer scientist, I think the blockchain is a great invention that should stand on its own merits, with the currency a secondary consideration.

A P2P system for distributing data where anyone can add new data to the end as long as they have the permissions to? Well, we already had that. But to make it irreversible, so that it can be used for currency transfers and contracts and predictions of the future, with no hope of ever taking back something that's already been committed? That's very clever indeed.
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Re: Bitcoin : Where can it fail ?

Postby CorruptUser » Sun Mar 02, 2014 5:13 pm UTC

But even if it works as a currency, why the hell would it be a good thing to switch to a currency that doesn't have a central bank? Do people not understand just how disruptive it is to the economy when the currency constantly changes value? Other than the Austrians, but you have to be willfully ignorant of the evidence in order to still be an Austrian.

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Re: Bitcoin : Where can it fail ?

Postby Thesh » Sun Mar 02, 2014 5:45 pm UTC

Well, the idea behind bitcoin from an economic standpoint is that if it was used as a real currency and derived its value from that, it would constantly deflate as the economy grows, which is, of course, a good thing because inflation is bad :roll:

Right now the value is based entirely on perception, but it's used more as a payment method than a currency. An anonymous currency/payment method is probably a good thing in general, but unfortunately I don't think this is practical for widespread use; it has the disadvantages of cash (if it's stolen, you're fucked), and it can be stolen by malware on your computer. As a payment method it's cumbersome, requiring you to exchange dollars for bitcoins, usually costing you a fee, and then you risk potentially not having enough to pay if the exchange rate fluctuate, and then you have delays while you wait for confirmations (could you imagine using this at a grocery store? All your frozen goods would melt!).
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Re: Bitcoin : Where can it fail ?

Postby Ormurinn » Sun Mar 02, 2014 6:12 pm UTC

CorruptUser wrote:But even if it works as a currency, why the hell would it be a good thing to switch to a currency that doesn't have a central bank? Do people not understand just how disruptive it is to the economy when the currency constantly changes value? Other than the Austrians, but you have to be willfully ignorant of the evidence in order to still be an Austrian.


Having a central bank has disadvantages of its own though - principally theft-by-inflation. You have to balance the costs of price volatility with the risk of having your assets diluted into nothing.

The more up to date your information, the less price volatility affects you. BTC are internet based so transactions can incorporate real-time pricing.
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Re: Bitcoin : Where can it fail ?

Postby CorruptUser » Sun Mar 02, 2014 6:50 pm UTC

Umm, no, it's a problem if you have 10,000 bitcoins and the car you want to buy constantly shifts from 8000 to 8200 to 8100 bitcoins every minute. It's a problem if you sign a contract to be paid 1000 bitcoins a month and the value drops, or if you employ someone at 1000 bitcoins a month and the value spikes.

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Re: Bitcoin : Where can it fail ?

Postby sardia » Sun Mar 02, 2014 9:07 pm UTC

Ormurinn wrote:
CorruptUser wrote:But even if it works as a currency, why the hell would it be a good thing to switch to a currency that doesn't have a central bank? Do people not understand just how disruptive it is to the economy when the currency constantly changes value? Other than the Austrians, but you have to be willfully ignorant of the evidence in order to still be an Austrian.


Having a central bank has disadvantages of its own though - principally theft-by-inflation. You have to balance the costs of price volatility with the risk of having your assets diluted into nothing.

The more up to date your information, the less price volatility affects you. BTC are internet based so transactions can incorporate real-time pricing.

If we ignore the heavily loaded bs of calling inflation theft... If inflation is theft by the government, then pushing deflation is theft by gold standard groups.(Or whatever deflationary policy currently being touted) So instead of the government robbing you, you have Ormurinn robbing you.

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Re: Bitcoin : Where can it fail ?

Postby poochyena » Sun Mar 02, 2014 9:48 pm UTC

the currency in just about any online game is more stable, and more useful than bitcoin.
really though, why bitcoin, why not just use neopet currency or WoW gold? with sites like ugamesclub.com you can exchange gold for real money, and most online games require the same type of time and energy to get gold as mining bitcoin.
Also, besides illegal activities, what is the need for bitcoin?


I will say i love the idea of bitcoin, i just think there currently is no need for it.

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Re: Bitcoin : Where can it fail ?

Postby Thesh » Sun Mar 02, 2014 9:59 pm UTC

The advantage of a cryptocurrency protocol like bitcoin is that you could theoretically buy online services in a totally anonymous manner. This is great for things shipped digitally, such as videos, music, porn, web hosting, etc., where your location isn't important. It's intended to allow cash-like transactions online. This is good for people who don't like to have megacorps owning a record of every single purchase they make.
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Re: Bitcoin : Where can it fail ?

Postby PeteP » Sun Mar 02, 2014 10:21 pm UTC

poochyena wrote:the currency in just about any online game is more stable, and more useful than bitcoin.
really though, why bitcoin, why not just use neopet currency or WoW gold? with sites like ugamesclub.com you can exchange gold for real money, and most online games require the same type of time and energy to get gold as mining bitcoin.
Also, besides illegal activities, what is the need for bitcoin?


I will say i love the idea of bitcoin, i just think there currently is no need for it.

Game currencies stable? O_o (Compared to bitcoins but still.) Even if they couldn't be farmed by in-game activities, and were already in the hands of countless people: You would need to trust the security of the game, trust that you aren't banned, you are subject to all decisions of the server owners relating to gold and need to trust that they don't suddenly bring a patch which changes something important in regard to the in-game currency and trust that they don't lose data from a server problem which has happened in online games. (And regarding server shutdowns, downtimes are bad enough but some game servers just close forever.) And bit coins may be instable but at least it doesn't have regular expansions like wow. You would need to get rid of your game gold before every expansion as all numbers including gold income tends to increase drastically with expansions. (Though non mmorpgs might work better in that regard.)
But most of all games aren't interfaces made to facilitate currency transfer. Automatically verifying that someone paid you is possible but inconvenient and always being ready to receive money is also inconvenient in many games. And the server owner would be privy to every single transaction (and depending on the game they even know your real name.)
And paying would also most likely be less convenient than in something made only to facilitate currency transfer.

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Re: Bitcoin : Where can it fail ?

Postby KnightExemplar » Mon Mar 03, 2014 3:03 am UTC

Thesh wrote:The advantage of a cryptocurrency protocol like bitcoin is that you could theoretically buy online services in a totally anonymous manner. This is great for things shipped digitally, such as videos, music, porn, web hosting, etc., where your location isn't important. It's intended to allow cash-like transactions online. This is good for people who don't like to have megacorps owning a record of every single purchase they make.


Because instead, the record is permanently published to the blockchain. :roll: :roll:

Bitcoin anonymity is a myth. At best, you got pseudonymity. Unless you create a new wallet for every transaction, and unless you use a mixing service (aka: illegal money laundering) to transfer money between wallets... every single transaction is tracked in the blockchain.

For an example of the permanent BTC record, here's one big one that made the news a while back.
https://blockchain.info/tx/1c12443203a4 ... fafb0cd204

Some dude in Germany moved 194,993 BTC on 2013-11-22 17:38:09. This record will forever be known to all players in the BTC market... by nature of how transactions are cryptographically proven.

Ormurinn wrote:Having a central bank has disadvantages of its own though - principally theft-by-inflation. You have to balance the costs of price volatility with the risk of having your assets diluted into nothing.


Inflation Protected Securities exist ya know. If you don't trust that, go with Gold. The main problem with inflation-protected stuff is that they're illiquid by their nature. BTC is similarly illiquid, because hoarding is encouraged.

The more up to date your information, the less price volatility affects you. BTC are internet based so transactions can incorporate real-time pricing.


The fastest a BTC transaction can occur is 10 minutes, due to how the blockchain moves. No matter your information, it will always be 10-minutes out of date. IMO, this is a major issue with BTC, and has been attempted to be solved with LTC / DOGE by having faster confirmation times. It appears that the proof-of-stake algorithm (NXTcoin) is also superior to the proof-of-work algorithm used in BTC.

I'm overall bullish on Cryptocoins in general. But BTC in particular is likely to play the important "first implementation" where people will experiment... lose money... and fail. Some future coin will then fix the flaws of BTC and then life becomes better.
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Re: Bitcoin : Where can it fail ?

Postby Ormurinn » Mon Mar 03, 2014 12:07 pm UTC

sardia wrote:
If we ignore the heavily loaded bs of calling inflation theft... If inflation is theft by the government, then pushing deflation is theft by gold standard groups.(Or whatever deflationary policy currently being touted) So instead of the government robbing you, you have Ormurinn robbing you.


I'm sorry, could you please elucidate the difference between me taking half of your Ormcoin denominated assets, and me doubling the number of Ormcoins in existence and granting all the new Ormcoins to myself?

Now there are reasons to encourage a baseline rate of inflation ( principally to encourage capital holders to make investments) but there are advantages to a baseline rate of deflation too - discouraging high levels of debt, bursting bubbles and increasing purchasing power.

Your comparison doesn't make any sense. Inflation in effect takes value from all a currencies stakeholders and deposits it at the central bank. Deflation increases the value of all currency held, in proportion to the amount held. You can't fund spendthrift policies by deflation.

KnightExemplar wrote:
Ormurinn wrote:Having a central bank has disadvantages of its own though - principally theft-by-inflation. You have to balance the costs of price volatility with the risk of having your assets diluted into nothing.


Inflation Protected Securities exist ya know. If you don't trust that, go with Gold. The main problem with inflation-protected stuff is that they're illiquid by their nature. BTC is similarly illiquid, because hoarding is encouraged.

The more up to date your information, the less price volatility affects you. BTC are internet based so transactions can incorporate real-time pricing.


The fastest a BTC transaction can occur is 10 minutes, due to how the blockchain moves. No matter your information, it will always be 10-minutes out of date. IMO, this is a major issue with BTC, and has been attempted to be solved with LTC / DOGE by having faster confirmation times. It appears that the proof-of-stake algorithm (NXTcoin) is also superior to the proof-of-work algorithm used in BTC.

I'm overall bullish on Cryptocoins in general. But BTC in particular is likely to play the important "first implementation" where people will experiment... lose money... and fail. Some future coin will then fix the flaws of BTC and then life becomes better.


I'm aware there are other inflation hedges, but to dismiss lack of inflation in a currency as an advantage is shortsighted. It amuses me how much effort MMTists and Krugmanites go to to disparage bitcoin.

Thank you for the explaination of confirmation times. Still, a 10 minute lag time is hardly a Weimar Germany "the money you were paid this morning can't buy dinner" situation.

In the future I could see the functions of unit of account and unit of exchange being more separate, with exchanges taking place in cryptocoins and wealth being held in a less volatile form - as I understand it this already takes place, with the unit of account being government scrip.
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Re: Bitcoin : Where can it fail ?

Postby Tyndmyr » Mon Mar 03, 2014 12:50 pm UTC

Ormurinn wrote:
I'm aware there are other inflation hedges, but to dismiss lack of inflation in a currency as an advantage is shortsighted. It amuses me how much effort MMTists and Krugmanites go to to disparage bitcoin.

Thank you for the explaination of confirmation times. Still, a 10 minute lag time is hardly a Weimar Germany "the money you were paid this morning can't buy dinner" situation.

In the future I could see the functions of unit of account and unit of exchange being more separate, with exchanges taking place in cryptocoins and wealth being held in a less volatile form - as I understand it this already takes place, with the unit of account being government scrip.


It isn't so much the lack of inflation as it is the inherently deflationary nature that's an issue. The perfect currency is neither inflationary nor deflationary in value, with the total quantity in circulation changing to keep the value perfectly constant. Obviously, this is very difficult in practice, though with real world currencies, we have gotten better at avoiding large swings.

Bitcoin, however, has been fairly volatile, which is fine for investments, but pretty terrible for a currency. It's eventually going to cap out at a fixed amount, while the demand for currency will continue to increase(because generally speaking GDP, etc rises). So, inherent deflation. Add in the issue of lost coins being permanently removed from the pool, and the issue worsens. This tends to encourage hoarding...ie, not being used as a currency.

So, it's a real barrier to adoption of bitcoin as a real currency.

This disadvantage does not necessarily apply to all cryptocoins, though.

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Re: Bitcoin : Where can it fail ?

Postby firechicago » Mon Mar 03, 2014 1:35 pm UTC

Ormurinn wrote:I'm sorry, could you please elucidate the difference between me taking half of your Ormcoin denominated assets, and me doubling the number of Ormcoins in existence and granting all the new Ormcoins to myself?


Not everything that takes away value is theft. The government takes money out of my paycheck but we don't call that wage theft. If I build a tower next to your property and block your view we don't call that view theft. Theft is a morally loaded term which carries the assumption that the action so described is unjustified and immoral. In a discussion about whether or not inflation is a good thing, calling it theft is begging the question. It's like insisting on referring to an accused person as "the murderer John Doe" in the very court proceedings designed to determine whether John Doe murdered anyone.

Ormurinn wrote:Your comparison doesn't make any sense. Inflation in effect takes value from all a currencies stakeholders and deposits it at the central bank. Deflation increases the value of all currency held, in proportion to the amount held.


If inflation is theft from anyone with current assets, then deflation is theft from anyone with current liabilities. If I sign a contract to make a defined monthly payment and then deflation makes that payment larger, I am poorer just as surely as I would be if my bank account were being eroded by inflation.

Ormurinn wrote:You can't fund spendthrift policies by deflation.


And you also can't fund prudent policies. If you want to make the argument that deflation is good because it radically constrains government spending, then you first have to make the argument that radically restraining government spending is a good thing. Again, you keep throwing around morally loaded terms like "theft" and "spendthrift" presumably because you like their rhetorical force. But all you're doing is revealing the unexamined assumptions and circularity of your own arguments.

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Re: Bitcoin : Where can it fail ?

Postby CorruptUser » Mon Mar 03, 2014 2:55 pm UTC

Orm, have you taken any economics courses? Because you seem to be using anarcho-capitalist rhetoric, and I have yet to meet an ancap that has ever had a degree in economics. It's always some other social science or media studies or philosophy, never economics.


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