You've validated my statement. Your problem is if bitcoin becomes a world economy. That means bitcoins usage grows by something like 2 orders of magnitude. Except that bitcoins are already halfway mined, which means that the circulation will not keep up. That is what drives the price up.
If you want a currency that will scale with it's global usage (IE when the market cap hits $21 trillion, there are 21 trillion in circulation), you need some mechanism that knows how to equate 1 bitcoin to 1 dollar, that way more bitcoins can be printed as the market cap goes up. On Mon, Nov 25, 2013 at 6:17 PM, Jim Bell <[email protected]> wrote: > I don't agree with your statement, "Bitcoin is only deflationary because > the number of people who use it is growing faster than the number of coins > in circulation.". To the contrary, my understanding is that a number of > factors have combined with the net result that Bitcoin is > hyper-deflationary. One major factor has been the shift of bitcoin > 'mining' from computer CPUs, to video graphics processors (GPU's), to FPGA > (Field Programmable Gate Arrays), and ultimately ASICs (literally, > "application-specific integrated circuits"; what used to be called 'custom' > IC's decades ago.) While I don't have a specific number, I would not be > surprised to hear that an ASIC miner is 1000x faster than even the fastest > x86 CPU. If that were the only factor, it would appear that new bitcoins > should be 1000x more available than in, say, 2009. However, I also > understand that the 'difficulty' of mining bitcoin has been algorithmically > increased regularly, in order to make it more difficult to compute to find > individual bitcoins. This is programmed into the entire bitcoin system. > In fact, it is to the point where the limiting factor to the cost of > 'mining' bitcoin is the electricity cost of running the machines, not the > cost of the machines themselves. The bitcoin system 'programs' the > appreciation of bitcoin by gradually increasing the difficulty of that > mining operation. This translates into an increase in the market value of > bitcoin. > In fact, this is essential to the (theoretical) outcome of bitcoin. I > think of it this way: The system is programmed to only allow the > generation of 21 million bitcoins. If bitcoin is ultimately to be used to > run the entire world economy (why not?) there should be at least one > million times more. (Say, 21 TRILLION; 21,000,000,000,000 bitcoins, if we > think of the ultimate value of a bitcoin as being roughly equal to the > current value of the US dollar, the Euro, the British Pound, etc.) But > since they are limited to 21 million, by algorithm, the value of a 2013 > bitcoin will have to be increased by a factor of 1000 to stretch to the > task of funding a world's market. And that means that the 2 million BTC > currently in the wallet most likely owned by Satoshi will presumably > increase in value to $2 trillion (USD). "Nice work if you can get it". > Is this a problem? Who, instead, would claim that it ISN'T a problem! > Bitcoin has many great features, its possibility (through Zerocoin) of > being anonymous one of the most intriguing, but there is nothing about a > digital currency that requires that it deflates at the rate historically > associated with bitcoin. I view this deflation as being arbitrary and > capricious, and wildly too large. Like I've said, I don't begrudge Satoshi > $1 billion (USD), but I DO begrudge him $2 trillion. If Satoshi's bitcoin > rescues us from all governments (enabling 'AM'), perhaps he should be > entitled to $10 billion (USD), but not $2 trillion (USC). > Jim Bell > > > > > ------------------------------ > *From:* David Vorick <[email protected]> > *To:* Jim Bell <[email protected]> > *Cc:* Kelly John Rose <[email protected]>; "[email protected]" < > [email protected]> > *Sent:* Monday, November 25, 2013 2:20 PM > > *Subject:* Re: Interesting take on Sanjuro's Assassination Market > > How do you think something like that could be managed? > > Bitcoin is only deflationary because the number of people who use it is > growing faster than the number of coins in circulation. But how can you > measure the number of people who are using it, and how can you measure how > much they are using it? (IE are they speculating, are they actually using > it to hide money from their government, are they buying needs like > food+water?). > > Any cryptocurrency hoping to 'appreciate by at most 5%' has to have some > reliable metric for measuring it's value in the real world. Otherwise coin > generation algorithms are just a shot in the dark, hoping to mimic the > expected growth of the coin or having some authority that can provide input > about it's real dollar value. And anything that tries to get insider > metrics will need some defence against liars and sybil attacks. > > > On Mon, Nov 25, 2013 at 5:07 PM, Jim Bell <[email protected]> wrote: > > > > ------------------------------ > *From:* Kelly John Rose <[email protected]> > *To:* [email protected] > *Sent:* Monday, November 25, 2013 8:00 AM > *Subject:* Re: Interesting take on Sanjuro's Assassination Market > > On 11/25/2013 4:26 AM, Lodewijk andré de la porte wrote: > > >> Why suddenly all this attention for yet another assassination market? > >> Because it's more "hit them and earn the bounty", like at a fair, style? > > >I wonder what would happen if multiple people claimed the same date for > >the death of a celebrity. > > I haven't read enough of the 'AM' system to know what that system would > do, but it seems to me that a logical outcome would be to split the reward > based on the size of the contribution included with each prediction. For > instance, if Person A correctly predicted with 1 BTC, and Person B > correctly predicted with 9 BTC, Person 1 should get 10% of the reward, > while Person B should get 90%. > > Incidentally, one problem I see with Sanjuro's 'AM' (Assassination Market) > system (at least, so far) is the setting of a minimum bet at 1.0 BTC, which > is about $800 when I checked a few seconds ago. In writing my AP essay, I > anticipated that very small bets (say, 10 cents US) would be allowed. > Except in unusual situations, few people would want to donate $800 (USD) to > see somebody dead; Far more would be willing to donate $1 (USD) for that. > > I don't know if the current minimum bid in 'AM' has something to do with > the granularity of 1.0 BTC, but the existence of digits to the right of the > decimal point in the prediction totalizations suggests that this is not the > case. If the problem is that the prediction totalization is currently > being done manually, rather than automatically, that is a limitation that I > think must be fixed in order for 'AM' to operate well. And with a minimum > bet of 1.0 BTC, it might be portrayed as if 'AM' is a tool of the wealthy, > rather than that of the average person. > > To the extent that this is a problem now, it will be worse as Bitcoin > continues to deflate (increase in value) as it was no doubt intended to > do. What happens when 1 BTC = $10,000? I consider that one of the few > disadvantages or problems with Bitcoin is its hyper-deflationary nature: > How can a currency function as a currency, if it is 'scheduled' (by > algorithm) to appreciate in value far faster than any commodity? Another > related problem is that Bitcoin is effectively programmed to excessively > reward early-adopters. While I feel that the inventor of Bitcoin should be > richly rewarded for doing the work necessary to give us such a beneficial > addition to society, the limit of my generosity is about $1 billion (USD). > Ultimately, I think that a replacement for Bitcoin ("Bitcoin 2.0"?) is > necessary, one that won't appreciate in value more than, say, 5% per year. > Jim Bell > > > Disclaimer: I am not associated with Sanjuro's 'Assassination Market' in > any way. > > > > > >
