Bitcoin. Is it a deliberate con ?

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cremeegg

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It is often said that there can ever be only 21 million Bitcoin in existence. This prompts people to say that it cannot be devalued like other currencies by printing more money, once the 21 million is reached.

However a bit coin is composed of 10^8 base units called satoshis. These are not just subdivisions of the base unit, they are base unit of which bitcoin is a product.

from stackexchange.com "Miners aren't awarded millions of "pieces": their accounts are just credited with an integer number of BTC base units ("satoshis")."

The total number of satoshis which can come into existence is therefore 2.1 by 10^15. Compare this with the number of USD in existence (using M2, cash and checking deposits, savings deposits, money market securities, mutual funds and other time deposits, as the definition of money) which is 1 by 10^10.

In other words there are 200,000 TIMES more satoshi in existence than USD. So while bitcoin cannot be devalued indefinitely, there is lots of scope.
 
fpalb said:
Did you know you can divide a dollar or euro in 100 cents and get 100 times your money?

And wait until you hear about stock splits!
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Yes I did. And that is the point, everyone knows that.

I think I raise a serious objection to Bitcoin, the fact that rather that being limited in amount it is in fact thousands of times more plentiful that USD, and a serious question about the integrity of its sponsors in that they highlight the limited amount in existence, whereas that limit is illusory.
 
It's not the fact that it's limited in usable units that's the point, it's that dividing it into more units does not dilute anyone's share. If I own 1 bitcoin, I have 1/21 millionth of the supply, regardless of what sub-divided unit of bitcoin you use to measure. I have 1000 millibits, or 10,000,000 satoshis. I actually wish we could hurry up and move to a smaller unit already, because the most commonly used unit being at 15k doesn't make sense, it's like measuring gold by the kilogram.

In short, bitcoin could do with a stock split.
 
I don’t think you are right there cremeegg. I think if you own one BTC you can be sure that the entire universe of BTC will never exceed 21m times your holding.

As I understand it the BTC community can agree to increase the supply but you are (pretty well) assured that you will get your fair share of that increase as with share splits. And of course you definitely get your fair share of any process that stops regarding the BTC as the primary unit but regards some decimal fraction of BTC as the primary unit.

This post crossed with fpalb.
 
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Satoshi's game theory is underrated. How do you launch a monetary system with an initial value of zero and get it to critical mass? How do you establish any initial value at all or get people to care about it until it is worth something. It's chicken and egg. Fixed supply and front loaded distribution encourages and rewards the early adopters and helps bootstrap the system.

How is an alt-coin with unlimited supply going to bootstrap itself?
 
If I have a €10 banknote I own one trillionth of the total value of the euro. (Best stat I can find for Euro M2 is 10 trillion). Now tomorrow the ECB can issue more Euro and I get diluted. This is seen as a problem by the crypto currency enthusiasts. However the value of Eurozone out put is also increasing so I own a smaller share of a bigger pot. If the CB over does it we get inflation, if the CB under does it or does it too slowly we get deflation. This is how successful fiat currencies work.

Bitcoin enthusiasts tell us that they cannot be diluted. And for holders of Bitcoin that is true. What they do not tell you is that Bitcoin is set up to be almost endlessly subdividable. Such a currency if widely adopted would return us to feudalism. Bitcoin holders like feudal landlords owning everything with no incentive to spend it. After all there are only 21 million bitcoin why spend them.
 
cremeegg said:
If I have a €10 banknote I own one trillionth of the total value of the euro. (Best stat I can find for Euro M2 is 10 trillion). Now tomorrow the ECB can issue more Euro and I get diluted. This is seen as a problem by the crypto currency enthusiasts. However the value of Eurozone out put is also increasing so I own a smaller share of a bigger pot. If the CB over does it we get inflation, if the CB under does it or does it too slowly we get deflation. This is how successful fiat currencies work.
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The problem is that they inflate way more than they deflate, and many times they inflate a lot. I'm not entirely knocking fiat, having a relatively low volatility is useful for pricing things, and keeping wages steady etc. It works well if the central bank don't create too much too quickly and banks don't go bust due to reckless lending and regulators do their jobs to help ensure the previous two things don't happen. Unfortunately there's no guarantee about those things, as we've seen.

cremeegg said:
Bitcoin enthusiasts tell us that they cannot be diluted. And for holders of Bitcoin that is true. What they do not tell you is that Bitcoin is set up to be almost endlessly subdividable. Such a currency if widely adopted would return us to feudalism. Bitcoin holders like feudal landlords owning everything with no incentive to spend it. After all there are only 21 million bitcoin why spend them.
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Because if you never spend it you might as well never have had it. It's the same reason people buy deflationary goods now even though they know they'll be cheaper next year.
I agree though that the world en-mass adopting a deflationary money would be.... interesting to say the least.

On that note you could argue that we've suffered some bad opposite consequences from inflationary money - you have no incentive to save it, you better spend before it loses more value, and you better borrow as much as you can as soon as you can, because it'll be easier to pay back in future when it's worth less. So everyone is incentivised to go into debt instead of save for a rainy day.
 
If i'm still alive in 5 years time this crazy world may well be madder but where will bitcoin be? Nobody can say. Wish I was the finder of that laptop found in garbage which had a lot of bitcoin encrypted on it. SELL, SELL, SELL, SELL :D
 
fpalb said:
Satoshi's game theory is underrated. How do you launch a monetary system with an initial value of zero and get it to critical mass? How do you establish any initial value at all or get people to care about it until it is worth something. It's chicken and egg. Fixed supply and front loaded distribution encourages and rewards the early adopters and helps bootstrap the system.

How is an alt-coin with unlimited supply going to bootstrap itself?
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Heck I don’t know. As I said before this BTC thing is like Quantum Mechanics. It defies common sense. It defies common sense to me that an entry in a ledger with no other meaning has value just because it exists or just because it records an earlier transaction. Arguing that it’s scarcity gives it value is applying common sense but since the whole concept fundamentally abandons common sense why can’t we abandon the scarcity requirement as well. Some folk think you can anyway; not me as I am too set in my ways to have the courage to abandon common sense in the first place.

But as I say I am fascinated by the subject, not really because of its technology but what an insight it is into the human mindset, even better than tulips.
 
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I have summed up (in my own head) three points that are persuding me more and more of the viability of bitcoin.

1. Technology. Im pretty much lost when it comes to understanding the intricate detail, the terminology, etc...etc...But I am satisfied that there is broad based consensus among the tech heads, no small part to the discussions on this site, to ensure that this is not some elaborate con.
Too much time and energy is being invested by the tech community in this area that at this point, any glich or fundamental flaw in the technology would have been exposed by now.
In fact technological problems are, do emerge, but so far, they have done little to deter the bitcoins advance. That provides confidence.

2. Bitcoin v gold.

Aside from all the debate comparing the two, one aspect that I havent seen considered much is that gold is not, and was not, traditionally available to the peasantry or lower classes in any significant form. It was out of reach for most and hoarded by wealthiest in society - today central governments and central banks hoard the lions share of gold.
Bitcoin however is available to anyone with a smart phone.
Bitcoin can now act as a re-balancing mechanism of central bank and government interference in the monetary system.
As fiat currencies devalue and deflate, bitcoin can act as a store of value, in particular to those who typically suffer most when governments confiscate or central banks devalue.

3. Its the end of the world as we know it

I may be somewhat a lone wolf in this regard, but I believe the 2008 monetary collapse was prelude for even more turbelent times. The central banks are engaged in massive monetary stimulus via asset buying programs, if you are not in that club, or not likely to be a beneficiary of that club, you need alternative way of protecting yourself.
Bitcoin offers that potential.
 
B/S at €15000 per unit the peasantry have hardly more access to BTC than they do to gold. In fact they do need a Smartphone to hold BTC, all they need to hold gold is a wrist or a finger:rolleyes:

One of the huge leaps in our financial infrastructure was the recognition that the constraints of the gold standard were a main cause of the Great Depression. The idea of a currency managed by society (notice I don’t say governments as your faith holds these to be evil) to actually suit the needs of growing economic output was a huge leap in civilization.

You state that fiat currencies devalue and deflate. You obviously enjoy name calling but in fact these two are opposites, it’s like calling Kim thin and fat at the same time (you would never do that I know, Kim is perfect).

As to the 2008 monetary collapse 2008 has led to the most stable period we have seen for fiat currencies, in fact even too stable for the monetary authorities who are trying hard to bring back a wee bit of devaluation.
 
Duke of Marmalade said:
notice I don’t say governments as your faith holds these to be evil)
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Au contraire, governments are gold to socialists...big government, small industry and all that. It's the central banks set up to make the rich richer that are evil

Duke of Marmalade said:
You state that fiat currencies devalue and deflate. You obviously enjoy name calling but in fact these two are opposites, it’s like calling Kim thin and fat at the same time (you would never do that I know, Kim is perfect).
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Duke, how I LOL'd !!!!
 
On that note you could argue that we've suffered some bad opposite consequences from inflationary money - you have no incentive to save it, you better spend before it loses more value, and you better borrow as much as you can as soon as you can, because it'll be easier to pay back in future when it's worth less. So everyone is incentivised to go into debt instead of save for a rainy day.[/QUOTE]



Exactly. If people didn’t spend, money wouldn’t go around and we would all be poorer.

If you want to store value buy property or tins of beans.

If you are really expecting inflation borrow to buy property.
 
Dukie, I think that is somewhat of a stretch to lay the blame of the Great Depression because of the Gold standard. Without diverting topic, a booming economy in the twenties, lax lending practices by banks, a stock market bubble and a feel-good o"this time is different" may have also contributed?
I mean, there was no gold standard in 2008 leading to the Great Recession was there?

As for stable currencies since 2008, its as almost Ireland and Greece going bankrupt didnt happen, or that Portugal or Spain were never on the brink?
Its as almost the threatened collapse of the euro passed you by?

Duke of Marmalade said:
You state that fiat currencies devalue and deflate. You obviously enjoy name calling but in fact these two are opposites
Click to expand...

Perhaps my bad again for not conveying my point.
If you wake up in the morning and the government has devalued the currency (as happened with the punt), your currency has been devalued against assets.

The monetarists in central banks have always argued that the control and application of appropriate interests rates was the most effective weapon in controlling inflation and keeping it in check.
Now they are trying to use inflation, through QE, to control where they want interest rates to be! - its like they are wearing their trousers back to front!!

As for gold watches and rings, for sure that's wealth, and if I want to increase my holding I can have three gold watches, six rings, five chains. If I want to decrease my holding I just need to pop down to the nearest pop-up "We Buy Gold" shop for a good ol' haggle ( or a 75% devaluation).
On the otherhand, with my smartphone, I can increase/decrease my holding of Bitcoin at any given time of day. I don't even need to buy or sell a whole unit of Bitcoin (unlike a gold watch or ring) I can buy / sell part of a Bitcoin.
 
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This is the most bizarre reason to call BTC a scam that I've seen yet
 
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