Bennbo Posted June 6, 2014 Share Posted June 6, 2014 Disclaimer: Cryptocurrency is a great idea and i believe will be the eventual solution to corrupt central banks. The biggest flaw with Bitcoin is going to arise from the very thing many people believe is its' greatest strength: the finite supply. The fixed total number of Bitcoins that will ever be created is not in itself the problem. The problem stems from the fact that bitcoins are perishable. Due to lost passwords, hardware error, etc. A small percentage of bitcoins are being permanently removed from the monetary base at a constant rate. This is fine in the short run as more bitcoins continue to be mined to replace the "lost" ones. However once all possible bitcoins have been added to the monetary base this gradual loss will continue. Extrapolating this phenomenon over the long term means a bitcoin monetary base will be constantly deflationary. This is great for savers in the short run but eventually the monetary base will reach such a low level that is will become prohibitive to easy economic exchange. With the gold standard the monetary base was slowly expanding as new gold was mined and traded. Additionally, the rate of monetary destruction in the gold standard was never permanent like it is with Bitcoin, an individual could lose his sack of gold, but that gold never ceased to exist like a lost bitcoin does. In order for cryptocurrency to work, i believe an analysis of this rate of bitcoin loss/destruction needs to be studied and a methodology to offest this monetary loss in order to maintain a constant monetary base must be established. otherwise you'll eventually run into a situation where the entire economy is being traded with the last remaining bitcoin in existence. software guys...i'm looking at you to fix this! Link to comment Share on other sites More sharing options...
TheRobin Posted June 6, 2014 Share Posted June 6, 2014 well, unlike gold you can break down a bitcoin in as many fragments as you like without it losing its utility Link to comment Share on other sites More sharing options...
dsayers Posted June 6, 2014 Share Posted June 6, 2014 I had wondered about lost Bitcoins too. However, I think it's a leap from acknowledging that this happens to suggesting that the tech is doomed outright. I'm no Bitcoin maven, but it is my understanding that they can be meaningfully divided to X decimal places. If the day should come where 1/X^10 is too valuable to make small purchases with, people can just adapt the standard to go to more decimal places, dividing it up further. Also, you mention the rate of loss as being constant, and I question where that idea comes from. It makes sense that as Bitcoin is more widely adopted the ways in which people who will be increasingly informed can and will protect against loss would increase, thus decreasing the rate of loss. Finally, I view the acceptance of crypto-currency but rejection of Bitcoin to be contradictory. As I understand it, there's nothing a Bitcoin competitor could do that Bitcoin couldn't incorporate. While I accept that tech might come out in the future that would supersede crypto-currency, I think that one would have to identify a shortcoming of Bitcoin before it could be superseded. Link to comment Share on other sites More sharing options...
Magenta Posted June 7, 2014 Share Posted June 7, 2014 Bitcoin is infinitely divisible, you'll never have just one left. Move the default unit of account a few decimal places down and you effectively have a stock split. Problem solved. Link to comment Share on other sites More sharing options...
ParaSait Posted June 7, 2014 Share Posted June 7, 2014 Bitcoin is infinitely divisible, you'll never have just one left. Move the default unit of account a few decimal places down and you effectively have a stock split. Problem solved.Sorry to be nitpicking, but bitcoins aren't infinitely divisible. They're divisible up to a satoshi, which is an atomic 1/100000000 of a bitcoin. Link to comment Share on other sites More sharing options...
Lians Posted June 7, 2014 Share Posted June 7, 2014 Sorry to be nitpicking, but bitcoins aren't infinitely divisible. They're divisible up to a satoshi, which is an atomic 1/100000000 of a bitcoin. If an upgrade becomes necessary, nothing prevents developers from extending the precision to 64-bit, 128-bit or even an arbitrary precision (i.e. MPFR library). Link to comment Share on other sites More sharing options...
ribuck Posted June 7, 2014 Share Posted June 7, 2014 By the time the mining of new bitcoins ends, the world's population will probably be in decline (based on current predictions). So deflation won't be an issue at all. The system would still work with just one Bitcoin. At the moment a bitcoin is subdivisible to 10^8 satoshis. If necessary, it could be subdivided further, although this would need near-universal support since it implies a hard fork of the block chain. There are already some spare bits in the protocol's data structures, so from a programming point of view it's not a big deal. Link to comment Share on other sites More sharing options...
st434u Posted June 8, 2014 Share Posted June 8, 2014 This is not a problem. As more people hold on to bitcoins the exchange value goes up, but as more people start demanding other forms of money instead, the value goes down. This incentivizes the people who were holding it for appreciation, to spend again, and so on. If nobody ever starts demanding other forms of money instead of bitcoin, and the value just goes up and up, then there is no problem. Any given amount of money is enough to carry all economic transactions needed, so long as the money is divisible enough. Gold was being consumed in various ways when it was being widely used as money. At any given point in time the situation could arise where more gold was being consumed than was being produced. This did not stop gold from being a good money. Also, gold that was lost (or hidden) and never found was, as it regards market dynamics, destroyed. If you want to know the real reason why bitcoin will fail, consider these threads: https://board.freedomainradio.com/topic/38337-bitcoin-intrinsic-value-and-mises-regression-theorem/ https://board.freedomainradio.com/topic/39541-bitcoin-fanatics-say-the-darnedest-things/ Link to comment Share on other sites More sharing options...
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