Why bitcoin will fail as money

[orthopa]

Just be mindful that there are two types of blockchain network; non-permissioned (Bitcoin), and permissioned (most bank syndicates). The non-permissioned networks are too slow (10 minute mining) for high volume purposes, the miners are consolidating into cartels (independence issue), & it is not really scalable. Permissioned networks have none of these limitations, but are wholly private - and operate under a very different understanding of what 'trust' means (counterparties, software code, etc.); the major downside is a much less robust fault tolerance (excluding mixer and check node workarounds). 

 

Most Bitcoin wallet holders are not spending their coin, they are hoarding it. The argument is that there are a fixed total number of bitcoin, & over time less & less new coin is created; convince a small number of people that bitcoin is a safe store of value (ie: raise demand) and the price of that very limited quantity of it must increase - convince a lot of people, & you get another tulip mania. The kicker is that the existing design total of bitcoin could be changed at any time, simply by mutual consent; collapsing the bubble.

 

You may also want to look up the 3rd party oracle providers, before you go too far down the programing route.

Much of the basics needed to operate and run a blockchain application are already available via cloud providers. It's very basic, but enough for 'proof of concept' - and everyone has to start somewhere.

 

SD 

 

 

 

Sharper I know a while back you noted a risk to Visa was block chain but it appears as if Visa has started to integrate blockchain technology into its network. Do you feel its still a threat?

[orthopa]

From what I gather the momentum behind bitcoin recently has been govt cracking down on paper money such as China and India. My thought is that long term the most likely beneficiary of this is plastic IE, AXP, V and MA. Visa is currently pushing hard into India with the recent ban on low denomination bills.

[orthopa]

Bitcoin down 20% this Am.  :o :o :o

[wachtwoord]

Bitcoin down 20% this Am.  :o :o :o

 

That happened every time the previous ATH was being overtaken. Actually I consider this volatility low. GO check out some old charts. Likely back to today's prices in one or 2 days.

[NewbieD]

A comment on this :"because they won't be able to find them in sufficient quantities for everyday use."

 

Bitcoin is not like the coins you have in your pockets. You can divide them into very small parts. Someone here might now the exact number of decimals that can be handled, I just know it's many.

 

So when hoarding gives a value per bitcoin of a billion USD, you would still be able to pay the right amount for a beer.

 

[rkbabang]

A comment on this :"because they won't be able to find them in sufficient quantities for everyday use."

 

Bitcoin is not like the coins you have in your pockets. You can divide them into very small parts. Someone here might now the exact number of decimals that can be handled, I just know it's many.

 

So when hoarding gives a value per bitcoin of a billion USD, you would still be able to pay the right amount for a beer.

 

 

Bitcoin currently has 8 decimal places.  The smallest possible unit, 0.00000001 BTC is called a Satoshi.  So if it really were to get to 1BTC = $1B, the smallest unit, a Satoshi would be worth about $10.  Long before you get to that point it would be required that bitcoin add a decimal place or two (or another 8), which can be done if 50+% of the mining power agrees to the change.  At 1BTC = $1M a Satoshi would be $0.01, any substantial BTC increase in value from there it would probably be prudent to add decimal places to the protocol.

 

[rukawa]

Thought I would revive this thread since it appears that things are preceding as I predicted. The rise in value of bitcoin is not a good thing for its use as a currency though people seem to think it is. And its already leading to an interesting problem...people are starting to regret spending bitcoins.

 

https://www.wired.com/2013/12/bitcoin-homeless-redux/

[Aberhound]

Thought I would revive this thread since it appears that things are preceding as I predicted. The rise in value of bitcoin is not a good thing for its use as a currency though people seem to think it is. And its already leading to an interesting problem...people are starting to regret spending bitcoins.

 

https://www.wired.com/2013/12/bitcoin-homeless-redux/

Buffett regretted spending a nickel or a quarter when he was young because he realized it was the same as spending thousands of dollars. He knew the effect of exponential math. Now we have Bitcoin we all face Buffett's dilemma.

 

That is a good thing.

 

Now if you are an environmentalist you should be praying for the day that fiat is gone as once there is only appreciating cryptocurrencies the propensity to spend will be reversed. Fiat encourages wasteful spending. That is the design. It is designed to cause inflation. It is designed to constantly create new money for those close to the spigot so they can better fund wars etc.. Once you are able to end the power to create money and issue debt then governments lose that power.

 

This caused me to invest in cryptocurrencies because I realized that globalists like the Rothschilds etc. have been trying for decades to create a world government and now the major obstacle is national governments. I have always thought that the Rothschilds work for somebody else the same way that JP Morgan turned out to be a front for the Rothschilds. Accordingly I suspect the globalists created Bitcoin and the like to destroy the last remaining power of national governments to create money which is the power to sell debt. Taxation power and power to create money were already limited, the former by pushing it to the limit and the latter by agreement when the power was handed to the banks in most places in the early seventies when Bretton Woods collapsed. So we can predict that now all the banks which enable the Italian government and the like to continue to sell debt will now go bankrupt and soon the ECB will reach its limit to create money and to buy debt so the ESM will make a cash call to the national governments to recapitalize the ECB.

 

The Trump tax cut is likely designed to increase the pressure on EU national governments to hasten this collapse so I suspect it is US or UK based globalists who created Bitcoin.

 

Now after the world government exists the plan is likely to switch from a consumption society to a conserving society which means we will only have appreciating cryptocurrencies. It will be similar to the gold standard. People will hate it because economic growth becomes stagnant unless there is technological change or an increase in freedom. If we get cartels and restricted access to technological change it will be stifling. If we get freedom and free spread of knowledge and rapid technological change it will be wonderful. I am watching Randall Mills technology closely as cheap power has always been the key to prosperity.

[John Hjorth]

... This caused me to invest in cryptocurrencies because I realized that globalists like the Rothschilds etc. have been trying for decades to create a world government and now the major obstacle is national governments. I have always thought that the Rothschilds work for somebody else the same way that JP Morgan turned out to be a front for the Rothschilds. Accordingly I suspect the globalists created Bitcoin and the like to destroy the last remaining power of national governments to create money which is the power to sell debt. Taxation power and power to create money were already limited, the former by pushing it to the limit and the latter by agreement when the power was handed to the banks in most places in the early seventies when Bretton Woods collapsed. So we can predict that now all the banks which enable the Italian government and the like to continue to sell debt will now go bankrupt and soon the ECB will reach its limit to create money and to buy debt so the ESM will make a cash call to the national governments to recapitalize the ECB. ...

 

Aberhound,

 

Pardon my ignorance here, what are you referring to here? The book by Mr. Dean Henderson? Other?

[Aberhound]

... This caused me to invest in cryptocurrencies because I realized that globalists like the Rothschilds etc. have been trying for decades to create a world government and now the major obstacle is national governments. I have always thought that the Rothschilds work for somebody else the same way that JP Morgan turned out to be a front for the Rothschilds. Accordingly I suspect the globalists created Bitcoin and the like to destroy the last remaining power of national governments to create money which is the power to sell debt. Taxation power and power to create money were already limited, the former by pushing it to the limit and the latter by agreement when the power was handed to the banks in most places in the early seventies when Bretton Woods collapsed. So we can predict that now all the banks which enable the Italian government and the like to continue to sell debt will now go bankrupt and soon the ECB will reach its limit to create money and to buy debt so the ESM will make a cash call to the national governments to recapitalize the ECB. ...

 

Aberhound,

 

Pardon my ignorance here, what are you referring to here? The book by Mr. Dean Henderson? Other?

 

There is no single book as I read many. The best single book on the methods of the mercantalists is The Fruits of Graft by Wayne Jett. For example, Jett explains that to cause the great depression the mercantalists:

 

1. Pass Smoot Haley tariffs to cripple world trade and served as a signal to the mercantalists to short the stock market.

 

2. Wall street fraud allowed to prevail so as the stock market crashed the mercantalists could naked short stocks.

 

3. Mercantalists like Bernard Baruch publish books where they lie about their activities. Baruch for instance says he liquidates his stocks in August 1929 after getting a bad feeling while hunting grouse in Scotland. His book never mentions shorting the market which he likely was heavily involved. Kennedy for instance describes his thoughts as being exuberant during the crash indicating he was shorting heavily.

 

4. Monetary policy was excessively tight during the crash as confirmed by Friedmans Monetary History and Bernanke's writings. Notice that neither mention the harmful policies enacted by Hoover and Roosevelt which are detailed by Jett.

 

5. In 1931 UK defaults on its debts and ends the gold standard. European competitive devaluations while world trade collapses due to Smoot Haley tariffs. Sovereign defaults set off a debt deflation vicious circle of contraction.

 

6. 1932 Hoover allows dramatic increases in taxes to try to balance budget as unemployment heads to 25% and prices drop by 1/3rd and the tax rate is made retroactive to the start of 1932 and there are no payroll deductions so all taxes come due at once in early 1933 caused a drain on bank deposits and then massive bank defaults.

 

7. Roosevelt comes to power announces a bank holiday and shuts down banks and confiscates gold at $20.67 and ends gold contracts. Taxes raised ever year he is in power except 1939. Roosevelt uses revenues to buy gold and increases reserves from 6000 to 32000 tons using tax revenues draining cash from the private economy and then he sterilizes all gold purchases, both domestic and foreign to prevent a monetary stimulus to the economy where everyone is starved of capital except for the mercantalists who were warned!

 

8. Baruch for instances in 1933 buys 25% of world silver and then the silver price doubles when Roosevelt cause the US to buy silver as well as gold. Mercantalists feast on cheap assets for instance JP Getty buys his oil business for pennies on the dollar.

 

I was trained in economics at Queen's University in Kingston which has an excellent economics faculty. We studied the causes of the great depression. None of this was explained demonstrating that the mercantalists control what is taught in universities in the 1980s and probably today. It is not hard to discover similar mercantalist policies today. The methods are always the same with the same intent to harm the middle class to better monopolize power and wealth. For instance in the Great Depression the mark to market rule was in effect until it was ended in 1938 as being too harmful. The same rule was then enacted in 2008 to allow GS and JPM to bankrupt their competitors. Now in Europe they introduce a rule forcing banks to hand over the assets held as security for loans which will go to a government body which is required to immediately liquidate the assets. Meanwhile bail in rules mean bank deposit holders get worthless bank shares instead of deposits and then how do they pay their debts? Meanwhile crypto means 90% of the banks are no longer required. Then at this time the EU raises taxes while US drops the tax rates? Meanwhile the mercantalists support ISIS to radicalize the poor arab masses then move the worst of them to EU to spread crime? Meanwhile the EU passes restrictive carbon controls for a climate problem caused by the sun for no purpose except to cripple the economy while the US avoids the burden of the same? At this time the US decides to leave the Middle East allowing Saudi Arabia to descend into chaos while the US allows the biggest oil field in the world at Gull Island to come online for the first time since the 1970s at the same time they perfect fracking technologies in the mainland? So oil prices spike causing harm in Europe and cause a boom in North America. The US stock market then the USD both rise sharply and interest rates rise, at oil prices rise causing sovereign debt defaults in many over indebted poor countries?  It is no a coincidence that all this occurs while the fascists running the EU are trying to federalize, end socialism and weaken national governments. So asset prices will get very cheap in the EU and expensive in the US and then after the mercantalists gorge on cheap assets, socialism is ended in the EU, the Silk Road creating Eurasian trade and prosperity is finished, trade explodes and asset prices take off in the EU.

 

The trick to seeing mercantalist policies is to ignore the spin and look at the effects and understand that most of their policies are designed to harm. There is no such thing as "unintended consequences" as the harmful effects are usually the intention of the policies. Carbon taxes for instance are intended to create artificial scarcity, food shortages, and violence so that we are like rats righting each other over scarce resources instead of cooperating.  The mercantalist brought in Trump to cause the boom in the US. Notice Trump is portrayed as being against the globalists. The reality is that Trump is advancing the mercantalist agenda the same as every other president. So carbon taxes  and Trump are simply the two extremes of available policies and the mercantalists use the extremes at both ends of the political spectrum to control the middle.

 

Trump and Putin are good examples to understand the mercantalists. Many mercantlists, like Putin and Trump, do not drink and they deeply understand human psychology and motivations. They constantly create a lot of drama to distract us. Their intentions remain hidden. They want us to stop the stupid, to end the drug use, stop watching the boob tube and to read books but they are realists with low expectations of human nature. So they continue with the same methods of control which have worked for thousands of years. HG Wells' book Anticipations demonstrates what they think about the rest of us and their intentions towards us.

[John Hjorth]

Thank you for getting back to me, Aberhound,

 

Very dense post from you. I'm by no mean sure I understand it, but I will try. So, just one question here to you, to get me on some kind of track with regard to get a better understanding of your post:

 

You use the word "socialism" a few places in your post with regard to Europe. How do you define "socialism" yourself, in the context of what you've posted?

[Cigarbutt]

Aberhound,

Yes, interesting read.

Not sure, I follow you down the conspiracy path against the oligarchs but believe in cycles, and sometimes wonder about collective intelligence.

Your post reminded me of a quote I recently came across:

"Economic life is not a race, nor a game. It's simply housekeeping, and getting maximum enjoyment from available resources."

 

If you like to read, you may enjoy the biography of Bernard Baruch by James Grant. It is long but meticulously researched and you may discover some surprises.

 

[Grant]

The post below explains the situation well. Basically bitcoin will fail if it succeeds. Lets say Bitcoin succeeds. Everybody starts using it. Problem is that bitcoins tend toward a fixed total number which cannot be increased by design. So if it succeeds then people will start hoarding it because as the economy grows and demand for bitcoin as money increases so too will the value of bitcoins. As a result people will hoard them and as they hoard them bitcoins will increase in value still further since there will be less of them. Eventually people will stop using them as money because they won't be able to find them in sufficient quantities for everyday use. At this point the hoarders will have something that has no intrinsic value (unlike gold or silver hoards) and in addition no longer has value as a form of money since no one is will to accept it (try paying with Gold at Amazon). Eventually it will be realized that its worthless. So the correct value for a bitcoin is zero.

 

https://smilingdavesblog.wordpress.com/2013/10/18/why-greshams-law-means-the-death-of-bitcoin/

There's a lot of cryptocurrency analysis out there, and very little of it is informed by actual monetary economics. This wordpress post is no exception. Gresham’s Law applies to two currencies with differing intrinsic values given the same value by law. e.g., if silver dollar coins and dollar bills are both valued at $1, the silver coins will be hoarded and the bills will be spent. This can't be the case with bitcoin, which is valued by supply and demand.

 

Traditional currency is state-mandated, but cryptos are not. For them to succeed they must be adopted voluntarily; i.e. there must be good reasons for individuals to prefer bitcoin as money over the status quo.

 

Bitcoin will fail to become money because individuals prefer their money to have stable value. Savers, creditors and workers may like it's potential to appreciate, but borrowers and employers do not. Its fixed supply means that changes in demand will cause changes in value. Moreover, bitcoin users, developers and enthusiasts are incented to keep it this way, as they want their investments in bitcoin to keep appreciating.

 

Money shouldn't be a good investment; that's what actual investments are for.

 

Some people point to the many recessions caused by monetary instability, and use these to claim bitcoin will fail. I disagree with these assessments, because bitcoin won't be adopted on the basis of economy-wide stability. It will or won't be adopted based on the choices of individuals, and each individual has practically zero effect on the stability of an entire economy. There's the potential for market failure here if individual incentives aren't aligned with what is best for the economy; fortunately I believe they are, and individuals will continue rejecting bitcoin as money due to its instability, high transaction cost and other issues.

 

This said there are some neat cryptos out there, but IMO bitcoin's (great) value is how it advanced the science, not in bitcoins themselves.