It Looks Like Nobel Economics Laureates Don't Like Bitcoin(bloomberg.com)
bloomberg.com
It Looks Like Nobel Economics Laureates Don't Like Bitcoin
https://www.bloomberg.com/news/articles/2017-11-30/so-it-looks-like-nobel-economics-laureates-don-t-like-bitcoin
84 comments
News to me that people still use bitcoin to buy drugs. Everyone i know got out of that game years ago.
My interpretation is that he would disagree with your definition of 'socially useful' in regards to black market purchases.
I'm not saying Bitcoin doesn't provide a value of exchange, after all, it could be said that the storage of gold for holding value is also not a 'socially useful' function.
I'm not saying Bitcoin doesn't provide a value of exchange, after all, it could be said that the storage of gold for holding value is also not a 'socially useful' function.
Citing the black market is not the best evidence for utility. Global remittances is clearly a market that overlaps very well with Bitcoin and I would argue that Bitcoin can achieve the same features at lower cost.
However the skeptics are correct that this particular use can be satisfied by very many other cryptocoins, so it's not unique to Bitcoin.
However the skeptics are correct that this particular use can be satisfied by very many other cryptocoins, so it's not unique to Bitcoin.
I'd guess that approximately zero Nobel-winning economists are keen on the idea of proof-of-work replacing trust. That is the ultimate issue here.
For the important transactions you mention, presumably an escrow service is needed. This reintroduces the requirement for trust in a third party.
For the important transactions you mention, presumably an escrow service is needed. This reintroduces the requirement for trust in a third party.
You can get a little safer than escrow via multisignature wallets; you need M-of-N signatures before bitcoins can be sent. You can tie the extra signatures to machine-interpretable signals like the state of a tracked package (when it hits delivered the funds are automatically released, etc.).
Still some trust involved, but the third party can't pocket your money directly.
Still some trust involved, but the third party can't pocket your money directly.
Presumably you mean "second party", because the concept here is that there is no middleman. EDIT: to clarify, I'm sure there are cryptographic solutions which prevent an escrow agent from doing anything beyond releasing the funds. A system of escrow that involved total trust in the third party escrow service would be an extremely basic proposition. I'd have to research it but it seems like a protocol probably exists; maybe part of the techniques to which you referred. Still, both parties in the transaction count on the escrow service, which is the trust I am talking about.
The example system you mention, which involves having faith in (for example) a courier's delivery notification service, seems to me underline the ubiquitous implicit relationships of trust we implicitly rely on currently, generally being of the form "individual trusts institution/infrastructure".
It hardly needs saying that cypherpunks don't like that unreciprocated trust, or even deny its importance to their own security.
The example system you mention, which involves having faith in (for example) a courier's delivery notification service, seems to me underline the ubiquitous implicit relationships of trust we implicitly rely on currently, generally being of the form "individual trusts institution/infrastructure".
It hardly needs saying that cypherpunks don't like that unreciprocated trust, or even deny its importance to their own security.
Bitcoin isn't even a good currency for the black market anymore, there are other cryptocurrencies that provide more anonymity
In Canada (at least where I live), one can't sell bitcoins to an exchange without providing government-issued ID. I would never use bitcoin on the black market.
What's regulated here is not bitcoin, is the standard currency you want to trade for bitcoin. If you just trade in bitcoins, there is no validation needed ;)
In what way is individuals being able to make illegal purchases of any social utility?
I am guessing that your actually ideology isn't as hardline as the question you asked would imply. But just incase it is; consider a country like North Korea, certainly the black market there provides a lot of social utility.
There's also a good argument that Silk Road provided social utility in the US because anonymous transactions over the internet are less prone to shootouts than the physical black-market.
If you're looking at it from a harm-reduction perspective, people are obviously getting drugs despite prohibition, so you might as well have a less violent drug trade.
If you're looking at it from a harm-reduction perspective, people are obviously getting drugs despite prohibition, so you might as well have a less violent drug trade.
The global risks for bitcoin far exceed its utility. Take a look at the work of the macroeconomic scholars and see just how risky it is for create more unknowns into our money supply. To date, Bitcoin is nothing more than a ponzu.
The obvious speculation aside, Bitcoin's behaviour is revolving more and more about good vs bad money, aka Gresham's law. "Good money" (bitcoin) is being hoarded because people are starting to trust it as a long term store of value, while elastic moneys like USD/EUR/JPY are being used for paying and playing.
Most modern economists just instinctively hate good money because they believe saving is evil.
"It doesn’t serve any socially useful function."
They use the exact same phrasing when discussing gold.
(My only beef with bitcoin and blockchain is that it can become bad money in a matter of milliseconds, without any heads up. E.g. when a major bug is found. Bitcoin may ultimately just be too complex to be good savings money. Its "badness" can be hidden in a massive, single occurence tail risk.)
Most modern economists just instinctively hate good money because they believe saving is evil.
"It doesn’t serve any socially useful function."
They use the exact same phrasing when discussing gold.
(My only beef with bitcoin and blockchain is that it can become bad money in a matter of milliseconds, without any heads up. E.g. when a major bug is found. Bitcoin may ultimately just be too complex to be good savings money. Its "badness" can be hidden in a massive, single occurence tail risk.)
How do you define good money and bad money? I feel like Bitcoin used to be a currency, but it has evolved into an investment game.
Whenever a person owns two kinds of things which are money-like (fungible, liquid, universal) they will prefer to pay using the bad money. Bad means things like "diluted gold content", reckless behaviour of the emitting central bank, etc.
In the case of a widely adopted blockchain like bitcoin, "bad" could mean something like "technically inferior". Or in terms of tail risk: "hacked" or "major bug discovered" or "encryption broken".
These tail risks caused by blockchain's complexity would be a sudden event. Unlike e.g. USD or EUR becoming bad money, which is something that unfolds slowly and publicly over many years.
In the case of a widely adopted blockchain like bitcoin, "bad" could mean something like "technically inferior". Or in terms of tail risk: "hacked" or "major bug discovered" or "encryption broken".
These tail risks caused by blockchain's complexity would be a sudden event. Unlike e.g. USD or EUR becoming bad money, which is something that unfolds slowly and publicly over many years.
Good money and bad money are well defined concepts in the context of greshams law
That's not what Gresham's law says. As Hayek put it in denationalisation of money (section VI The confusion about Gresham's Law):
> Gresham's Law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law
(Emphasis in the original)
> Gresham's Law will apply only to different kinds of money between which a fixed rate of exchange is enforced by law
(Emphasis in the original)
Why would the same principle not apply to any situation where a person owns two kinds of money (both fungible, liquid, universally accepted), regardless of exchange rate rules? People will always prefer to hoard ("save") the better of the two and pay ("get rid of") using the worse of the two.
Because in an efficient market, if one of the currencies is preferable that will already be reflected in the price. If, based on public information, you would rather hold currency X than currency Y, then so would your counterparty in the exchange, so the buying power of currency X would rise accordingly.
Gresham's law applies when a legally fixed exchange rate means that the price can't reflect the difference between the two currencies.
Gresham's law applies when a legally fixed exchange rate means that the price can't reflect the difference between the two currencies.
I'm not going to get dragged into a discussion on "efficient markets". You win by forfeit.
Efficient markets was just a simplifying assumption to make my point brief, but the second sentence of my explanation does not rely on any more assumptions than Gresham's law does.
In any case, I recommend that chapter of Hayek, it's a quick read and you might find it clarifying.
In any case, I recommend that chapter of Hayek, it's a quick read and you might find it clarifying.
The difference is that someone is not legally forced to accept the inferior currency. All your attempts to horde the better currency can fail when the person you want to buy from either refuses the inferior currency, or accepts it, but at a price that accounts for the difference in relative value so there is no difference.
Edit, this used to say, but that is wrong: The difference is that the which is best changes over time, so you change which one you are hording based on conditions.
Edit, this used to say, but that is wrong: The difference is that the which is best changes over time, so you change which one you are hording based on conditions.
Nice! Argentina had currency controls and this effect happened immediately.
Gresham's law could happen if the governments...banned bitcoin!
Gresham's law could happen if the governments...banned bitcoin!
Look at the early investors of Bitcoin, they all invested because they saw it as a currency. When this didn't materialize, the hyped it as an investment.
I've heard this idea mentioned recently. Is there suddenly a consensus that bitcoin (or crytpo in general) will never be used as currency? To me it seems pretty arbitrary to say it now. Outside of slow transaction times, I'm not sure what has changed. Volatility is just a fact of life until the market cap is significantly larger. Bitcoin may never get enough investment to stabilize but I don't see how that is now accepted as definite.
Nobody needs hyping anything. Bitcoin was a viable currency until its price started appreciating stratospherically. There is no sense in spending BTC right now, since you can get x10 gains just by holding it. You don't spend stocks right?
I really don't get these snarky comments on how this is a bubble and BTC will die and what not. Just don't buy it and leave it to others that like to have x10-x100 gains in a year.
For me it's quite straight forward that BTC value will appreciate over time. There is finite amount of BTC in this world and Y people. Unless some systemic factor (eg. criminalization of use) or technological factor (eg. crypto is broken) rears it's head it's fair to say that an asset designed to be deflatory in price will increase its price over time. It's not going to be a straight line, and I really hate these massive growth spikes (not sustainable, plus they play with your emotions), but we're well ahead of the times when BTC and/or crypto could be called just a fad.
Not with wall street actively pursuing legal means to invest in BTC.
I really don't get these snarky comments on how this is a bubble and BTC will die and what not. Just don't buy it and leave it to others that like to have x10-x100 gains in a year.
For me it's quite straight forward that BTC value will appreciate over time. There is finite amount of BTC in this world and Y people. Unless some systemic factor (eg. criminalization of use) or technological factor (eg. crypto is broken) rears it's head it's fair to say that an asset designed to be deflatory in price will increase its price over time. It's not going to be a straight line, and I really hate these massive growth spikes (not sustainable, plus they play with your emotions), but we're well ahead of the times when BTC and/or crypto could be called just a fad.
Not with wall street actively pursuing legal means to invest in BTC.
Well, from a technical standpoint, implementation bugs are unlikely to affect savings if you’re not transacting often, and consensus bugs can be fixed with a fork.
The exception would be simultaneous catastrophic breaks in ECDSA signatures and (assuming you’re not reusing adddresses) RIPEMD-160 and SHA256, which seems unlikely.
From a price perspective, yeah, the market could overreact.
The exception would be simultaneous catastrophic breaks in ECDSA signatures and (assuming you’re not reusing adddresses) RIPEMD-160 and SHA256, which seems unlikely.
From a price perspective, yeah, the market could overreact.
I agree, unlikely but not quite zero. As is the general rule with complex things.
But again, until a show stopper is found, I would say that bitcoin will never be popular as a means of payment. People would increasingly use it as a vehicle of savings.
Once it has reached some point of "maximum adoption", it would start behaving exactly like post-1973 gold. It would still go through periods of speculative enthusiasm in which allocation to bitcoin increases, followed by periods of aimless grinding in which it drops again.
It wouldn't follow CPI tick-for-tick, but over very long term periods, it would be nicely mean reverting vs cycles of general price levels and financial market prices. And as such, in terms of bad forms of money like government currencies, it would ultimately just keep rising forever. Or at least never go to zero.
So people who say "bitcoin is a bubble because it's not used much for payments" would be wrong. It's going places exactly because it's not being used much as transaction money.
And so, as Nobel prize winners would move up from the step of calling it a dangerous bubble to the step of decrying it as a deflationary threat, I predict no end to their criticisms.
But again, until a show stopper is found, I would say that bitcoin will never be popular as a means of payment. People would increasingly use it as a vehicle of savings.
Once it has reached some point of "maximum adoption", it would start behaving exactly like post-1973 gold. It would still go through periods of speculative enthusiasm in which allocation to bitcoin increases, followed by periods of aimless grinding in which it drops again.
It wouldn't follow CPI tick-for-tick, but over very long term periods, it would be nicely mean reverting vs cycles of general price levels and financial market prices. And as such, in terms of bad forms of money like government currencies, it would ultimately just keep rising forever. Or at least never go to zero.
So people who say "bitcoin is a bubble because it's not used much for payments" would be wrong. It's going places exactly because it's not being used much as transaction money.
And so, as Nobel prize winners would move up from the step of calling it a dangerous bubble to the step of decrying it as a deflationary threat, I predict no end to their criticisms.
I'm not a Bitcoin person, but it strikes me that neither of these people is known for predicting markets successfully, so why would they be relevant predictors here?
You would think that these people would understand that bitcoin, from a financial perspective, behaves like disembodied gold. A store of value outside of legal control.
So much so that, very likely that's exactly what its creators hoped to achieve. You mine it after all.
So much so that, very likely that's exactly what its creators hoped to achieve. You mine it after all.
Please avoid getting too wrapped up in the metaphor. You don't mine it, there's no TNT involved, that's just a word.
And it may behave "like" gold in some respects but in many other crucial ones it does not.
BTC is not a useful raw material in any industrial process. It requires a P2P network and extensive global infrastructure, so it won't still be sitting there inert in 1,000 years, when the Power is out, in a crisis. BTC can't be alloyed with other cryptocurrencies to produce other value added products.
You can't put BTC leaf on your fancy pastries. There are no other downstream businesses that specialize in assaying the purity of your bitcoin.
And it may behave "like" gold in some respects but in many other crucial ones it does not.
BTC is not a useful raw material in any industrial process. It requires a P2P network and extensive global infrastructure, so it won't still be sitting there inert in 1,000 years, when the Power is out, in a crisis. BTC can't be alloyed with other cryptocurrencies to produce other value added products.
You can't put BTC leaf on your fancy pastries. There are no other downstream businesses that specialize in assaying the purity of your bitcoin.
Some of the key characteristics of a store of value are durability, limited supply, uniqueness, and portability. Unlike gold, BTC is neither unique nor truly in limited supply, thanks to forks that create "inflation" and altcoins that can substitute for BTC in all pertinent ways.
The vast majority of participants in this market aren't parking their money in BTC to preserve it, and neither to use it as a medium of exchange. They're doing it with the expectation of a return. If those returns fail to materialize, the money will move elsewhere.
The vast majority of participants in this market aren't parking their money in BTC to preserve it, and neither to use it as a medium of exchange. They're doing it with the expectation of a return. If those returns fail to materialize, the money will move elsewhere.
There are a load of comparatively worthless metals, compared to Gold.
From a technical standpoint, Bitcoin makes no sense. Bitcoin supply is fixed. How can, then, a currency be valued 100x within a few years when there's no major possibility of finding a magical utility of it. But, neither does Facebook's success. I couldn't have imagined anyone could create a $400B+ social network company.
I guess if by being rational you're avoiding burning your hand, you're also missing out on the hen who will lay golden eggs in the future. In a few years, $10,000 might look peanuts to pay for Bitcoin. It seems logically absurd to think so, but time and again, the skeptics have been proven foolish and the believers have made the gains.
I guess if by being rational you're avoiding burning your hand, you're also missing out on the hen who will lay golden eggs in the future. In a few years, $10,000 might look peanuts to pay for Bitcoin. It seems logically absurd to think so, but time and again, the skeptics have been proven foolish and the believers have made the gains.
"Past performance is no indicator of future returns"
New things come along, and they don't have to make sense in the old worldview in order to be good. So the analysis of 60 year olds, even the really smart ones, is less valuable than it sometimes appears.
HOWEVER -- the opposite is also true, "flavors of the month" come and go, and proving worldwide utility takes more than convincing a lot of people to buy for a period of time.
It's going to take years to see the outcome and who is right. Humans are absolutely fucking terrible at predicting the future. Don't buy the hype.
Do your own research, run your own experiments, and hedge your own risk.
New things come along, and they don't have to make sense in the old worldview in order to be good. So the analysis of 60 year olds, even the really smart ones, is less valuable than it sometimes appears.
HOWEVER -- the opposite is also true, "flavors of the month" come and go, and proving worldwide utility takes more than convincing a lot of people to buy for a period of time.
It's going to take years to see the outcome and who is right. Humans are absolutely fucking terrible at predicting the future. Don't buy the hype.
Do your own research, run your own experiments, and hedge your own risk.
The utility of Bitcoin, and the value it provides right now, is almost entirely the returns it provides relative to a fiat currency during the period of hyper-valuation.
If it fails to continue growing relative to the perception of the people buying it, it's value on the market will plummet, and that will likely cause a run on the exchanges.
If it fails to continue growing relative to the perception of the people buying it, it's value on the market will plummet, and that will likely cause a run on the exchanges.
Is there even reason to expect exchanges to play along if the value starts to really go south? It's pretty obvious that exchanges would be practically out of business after a total collapse of bitcoin valuation, so a collapse would be an existential threat to them and existential threats are known to inspire desperate measures. What regulation would keep market makers from experiencing "unexpected technical difficulties" in a panic (e.g. until their own holdings are liquidated, and those of their friends)? There are many ways to add arbitrary friction and hidden prioritization to sell offers if you are not under the full scrutiny of all that regulation bitcoin aficionados want so dearly removed.
If you were forced to find buyers for your btc on your own in a panic, without the help of market makers, then collapsing nominal market rates would not be the main problem of "btc millionaires", getting that collapsed rate, or even just a significant fraction thereof, would.
If you were forced to find buyers for your btc on your own in a panic, without the help of market makers, then collapsing nominal market rates would not be the main problem of "btc millionaires", getting that collapsed rate, or even just a significant fraction thereof, would.
I'm still wondering if bitcoin is currently and possibly being used to launder money.
I guess bitcoin exchanges are not really regulated in any way.
Or maybe more drug resellers have found a way to sell drugs online using bitcoin, meaning drug users are buying bitcoin en masse, inflating the price.
One possible way to launder money, would be to find a way to convert dirty dollar bills to bitcoin at a higher dollar price.
https://i.imgur.com/DocUl2S.png
I guess bitcoin exchanges are not really regulated in any way.
Or maybe more drug resellers have found a way to sell drugs online using bitcoin, meaning drug users are buying bitcoin en masse, inflating the price.
One possible way to launder money, would be to find a way to convert dirty dollar bills to bitcoin at a higher dollar price.
https://i.imgur.com/DocUl2S.png
I don't like Bitcoin as well, even tho I own some. The problem in my mind is that it is just sitting money, it is not circulating therefore it is not good for economy.
Actually, bitcoin velocity is comparable to M2 USD:
http://charts.woobull.com/bitcoin-velocity/
http://charts.woobull.com/bitcoin-velocity/
Isn't this velocity taken only because people are buying it? If so it is of no value.
That's not completely true. It requires a lot of electricity and computers, there are loads of new power stations in China, and loads of new servers built to run BTC.
Mining precious metals takes a lot of resources also. Should we stop - as even governments like to hold precious metals in their portfolios?
Seems like it is a lot like precious metals in that way, a hedge against inflation. Except there are likely a lot more people who will happily exchange bitcoins versus gold, especially over the internet.
Bitcoin would be circulating way more if more services and online stores, e.g. Amazon, PayPal, simply accepted it as just another currency. Rejecting it as payment method because it's not circulating is just circular logic.
I have been spending plenty of mBTC in the stores (shopping, flights, hotels) that accept it such as Overstock, Abitsky, Destinia, etc. and my experience there has been way more comfortable than shopping with credit cards or even Paypal.
I have been spending plenty of mBTC in the stores (shopping, flights, hotels) that accept it such as Overstock, Abitsky, Destinia, etc. and my experience there has been way more comfortable than shopping with credit cards or even Paypal.
Shopping with cryptocurrency has always seemed safer to me, personally.
I keep all my BTC/LTC/ETH in Coinbase wallets, and whenever I want to send money from those wallets I need to go through multiple 2FA prompts. My debit/credit cards have never required anything more than a static number to be used online.
I keep all my BTC/LTC/ETH in Coinbase wallets, and whenever I want to send money from those wallets I need to go through multiple 2FA prompts. My debit/credit cards have never required anything more than a static number to be used online.
If my credit card gets stolen then I just report it to the credit card company and I get a new card (free) and all of the fraudulent charges reversed.
If the bank goes under, my funds are insured by the FDIC.
If I lose my wallet I can report that to my banks and get everything (except the cash in my wallet) restored to pre-loss state.
If my Coinbase wallet account is hacked because I use a bad password, can I get anything back? If Coinbase as a company goes under, what happens to my bitcoins? If I accidentally send cryptocurrency to the wrong recipient, how do I reverse that transaction?
As somebody living in the USA who doesn't transfer funds internationally, I'm quite well covered by existing banking regulations: I'm struggling to see how Bitcoin is 'safer' for me in any way.
If my Coinbase wallet account is hacked because I use a bad password, can I get anything back? If Coinbase as a company goes under, what happens to my bitcoins? If I accidentally send cryptocurrency to the wrong recipient, how do I reverse that transaction?
As somebody living in the USA who doesn't transfer funds internationally, I'm quite well covered by existing banking regulations: I'm struggling to see how Bitcoin is 'safer' for me in any way.
I wish you could get bitcoin with the fraud prevention guarantees that come with credit cards
How do you get around the high transaction fees? Bitcoin seems too slow and expensive to use.
That's an interesting point. Unlike dollars, made money doesn't sit in a bank, to be loaned to lenders creating a profit for the bank, part of which gets paid as interest. This drives economic expansion.
I don't even know how you would do something like that with bitcoin.
I don't even know how you would do something like that with bitcoin.
It could though, if places like Coinbase decided to transition into a banking role. The issue with Bitcoin in my mind is that people now view it as more of an investment than a currency.
But a loan is an enforceable contact. You would have to marry the loan somehow with something that would give it teeth. This is an interesting problem.
Same as with a bank. Transfer some bitcoin to someone and then pursue them when they don't transfer enough back.
Charge interest to cover the risk.
Charge interest to cover the risk.
Banks work in a legal and regulatory environment which bitcoin lacks. That's the problem, there are a lot of details that would have to be worked out to make that happen.
Bitcoin operates in exactly the same legal environment as banks.
I agree that the regulatory environment is different.
I agree that the regulatory environment is different.
I can conceive of a situation where bitcoin "banks" use people's deposited bitcoins for investment while paying out interest, similar to traditional banks. Then it'd pretty much be the same for markets. Not sure how likely that is, but as it gets more integrated into the system I can't think of a reason why it wouldn't end up being invested.
This is a unique idea that I haven't heard before. Any idea what these 'banks' might use the Bitcoin for? With the upcoming Lightning Network additions, this might make an interesting use case where "decentralized banks" are able to help aid the network with payment channels and its members gain interest.
By the way, Bitcoin mixers are sorta like this in a way. If you have enough Bitcoin, some mixers look for investments and promise to return interest from it. This is another potential use case for "decentralized banks".
By the way, Bitcoin mixers are sorta like this in a way. If you have enough Bitcoin, some mixers look for investments and promise to return interest from it. This is another potential use case for "decentralized banks".
same for me. I don't even want to move it out of the exchange because it costs too much.
I think something americans often miss with this use of bitcoin is how much people in the world keep dollars in the mattress.
It is often said that the us doesnt have inflation because when more dollars are printed, global demand still captures them. That is, when people in other countries save in dollars, they fund the US and defund their own country. Not making a moral or economic case against allowing people to do that, but its the effect it has.
So now, what if the world stopped using dollars and started storing in bitcoin? Then the rise of bitcoin truly would be proportional to the demise of the dollar. In this way, I'm scared the bitcoin fanatics might actually have a point.
It is often said that the us doesnt have inflation because when more dollars are printed, global demand still captures them. That is, when people in other countries save in dollars, they fund the US and defund their own country. Not making a moral or economic case against allowing people to do that, but its the effect it has.
So now, what if the world stopped using dollars and started storing in bitcoin? Then the rise of bitcoin truly would be proportional to the demise of the dollar. In this way, I'm scared the bitcoin fanatics might actually have a point.
Doesn’t money taken out of circulation just increase the buying power of money still in circulation? People still need to eat, travel, etc. as much as they would otherwise.
You can lend your BTC out for interest on major exchanges to be used for margin loans.
My largest Bitcoin question is this; Bitcoin's continued growth requires the addition of new coins to pay for the cost of verifying transactions. This creates pressure for the price of Bitcoin relative to the dollar to increase, leading to deflation of the dollar, and most other currencies relative to Bitcoin. This will lead to one of two conclusions.
Either the hyper-valuation of Bitcoin relative to fiat currencies continues above the rate of rise for the cost of verification, or it doesn't.
If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop.
If the accelerated price does continue to outstrip the rise in cost, then people won't sell their Bitcoins because they will be worth more tomorrow than they are today. So exchange outside the network will stop.
So in both scenarios you have a cease of exchange, the only difference is that one ceases within the network and one outside the network.
Isn't this a failure in both cases?
Either the hyper-valuation of Bitcoin relative to fiat currencies continues above the rate of rise for the cost of verification, or it doesn't.
If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop.
If the accelerated price does continue to outstrip the rise in cost, then people won't sell their Bitcoins because they will be worth more tomorrow than they are today. So exchange outside the network will stop.
So in both scenarios you have a cease of exchange, the only difference is that one ceases within the network and one outside the network.
Isn't this a failure in both cases?
> Bitcoin's continued growth requires the addition of new coins to pay for the cost of verifying transactions
Huh?
Huh?
> If the accelerated price of Bitcoin fails to outstrip the rise in cost, due to public perception, regulation or any other reason then the network will cease verification and exchange within the network will stop.
The mining “difficulty” automatically adjusts every 2 weeks to always target 10 minute blocks.
If the price drops dramatically it can temporarily slow block creation, especially if a different cryptocurrency (with the same mining algorithm) is more profitable to mine, but it will eventually adjust.
The mining “difficulty” automatically adjusts every 2 weeks to always target 10 minute blocks.
If the price drops dramatically it can temporarily slow block creation, especially if a different cryptocurrency (with the same mining algorithm) is more profitable to mine, but it will eventually adjust.
I think they do not understand it well. Or, they do understand, but it just rubs them the wrong way. Probably because they are either ardent money printing Keynesians or all-powerful-state loving social-democrats.
They do understand it but this disagreement masks a deeper issue -- they think economics functions just as it did some years ago and others disagree. With differing underlying assumptions, both sides' arguments are rational.
Relevant HN discussion of the Bloomberg article from yesterday regarding Stiglitz's opinion of Bitcoin (not a dupe): https://news.ycombinator.com/item?id=15812247
Perhaps because Nobel Economics Laureates are not equipped to deal with a means of exchange that cannot be inflated, cannot be controlled by central banks, and has equivalent utility to cash.
This sounds more like a vim versus emacs, dynamic versus static type argument to me. I see Bitcoin as a new form of gold that is more easily transferred and stored. Does he object to gold as well?
Bitcoin doesn't care if economics laureates don't like it.
Hyperbitcoinization is not something any "traditional" economist will like.
I don't think that they like tulips either.
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I never thought I would so heartily disagree with a Nobel Economics Laureate, but this appears to be a misguided opinion. Bitcoin drives an entire black market which enables consumers worldwide to securely and faithfully make purchases that they would be unable to otherwise make. Direct tax generation isn't the only measure of socially useful functions.