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All of sinclaire's Comments + Replies

Bitcoins are not digital greenbacks
sinclaire10

Not really. There will be people who like to eat. There will be morbidly obese people who will eat until a heart attack. But there is nothing fundamental about pizza that it's essential to the planet, the survival of the species, the sustainability of the environment, or staying happy and healthy. If it were important then people would buy more pizza, such as if pizza were shown to extend human lifespan then yes people will buy a lot of pizza. But if pizza doesn't do that but vitamins do then people will spend Bitcoin on expensive vitamins instead of pizza but the Bitcoin will always be spent.

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-2lsparrish
Pizza almost certainly would not go away even in a deflationary economy. If anything, more people would spend time creating pizzas in their own kitchens. This would take away from their hours previously available for leisure, education, and jobs. This is just one example of how deflation could make people act in less efficient ways, by relying less on mass production and economies of scale.
Bitcoins are not digital greenbacks
sinclaire00

a) Future abuses via Satoshi having too many Bitcoin or from a Bitcoin elite can be countered right here and right now by supporting alt-cryptocurrencies. If one government backed Bitcoin then back the alts so that that one government competes with all those other government backed alt currencies. My attitude and behavior remains unchanged regardless of who backed Bitcoin initially or who Satoshi is.

b) Backdoors should be assumed to be in Bitcoin already. If you run it on Windows and you didn't compile it yourself then assume the NSA and FBi backdoor is a... (read more)

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gwern130

No. You're not getting it. This is about information, not your vague issues of 'I feel this is a large enough danger to worry about or I can come up with some vague ways to limit the fallout'. The question was: does learning the government did Bitcoin change our beliefs about anything else at all? The answer remains, for all you've said: yes, it does.

a) Future abuses via Satoshi having too many Bitcoin or from a Bitcoin elite can be countered right here and right now by supporting alt-cryptocurrencies.

These tactics are not guaranteed to work, therefore... (read more)

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Bitcoins are not digital greenbacks
sinclaire10

I could agree with you if people were rational but they aren't. People need incentives to do what is rational and deflation provides those incentives by rewarding the rational and punishing the irrational. You can spend in a deflationary currency but if you spend on stuff which isn't worth it then you get to experience buyers remorse or guilt over all the money you could have saved if you had not bought that Pizza. I think that is a really good thing because it makes people give considerably more thought into their investments.

And you're right if people ar... (read more)

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1lsparrish
This is an example of why I don't like deflation, at least not for the economy as a whole. It makes you get buyer's remorse about things like pizza, which actually are a pretty good deal in some situations. You can get fed without having to make food, you can arrange a party without hiring a catering service. The time spent by humans on making the pizzas is drastically reduced on a per-pizza basis because the pizza maker has specialized tools and skilled personnel. So to me the fact that it discourages people from buying pizza is a sign of economic inefficiency. If they were not buying pizza in a market where the choice to hold onto your cash does nothing aside from retaining the ability to make other purchases, it would be a clearer signal that pizzas are not needed, that other things are more important.
Bitcoins are not digital greenbacks
sinclaire00

It could have been created by the UN or by multiple governments. Does it even matter just so long as the code is released, it works, and it solves problems? It wouldn't surprise me at all if Intel agencies utilize Bitcoin nor would it surprise me if operatives helped to develop it. It does not change the utility of Bitcoin for me just because of it's origins.

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gwern150

Does it even matter just so long as the code is released, it works, and it solves problems?

Yes. It tells us information about currently unknown or uncertain variables. Having the source code and seeing that it works by no means screens off any inferences from its origin, any more than reading carefully a paper on smoking should make you not care that it was sponsored by the tobacco industry.

In the spirit of 'name three examples', here are 4 off the top of my head:

  1. future (ab)uses of the <1m bitcoins Satoshi is believed to have mined based on the min
... (read more)
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Bitcoins are not digital greenbacks
sinclaire-40

Yes I know Bitcoins are deflationary and I think that is one of the best things about Bitcoin. I think demand should always increase faster than supply if you look at it holistically. We have a world where population growth is increasing faster than job growth can ever keep up, we have a sustainability problem with pollution and waste, and we have inflationary currencies, credit, and debt contributing to diminished liberty and justice for all. Spending isn't always a good thing when we currently spend on stuff which destroys the planet, which isn't necessa... (read more)

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2lsparrish
That there may be environmental advantages to deflation (and/or environmental harm from inflation) is not something I had deeply considered, but it makes a certain amount of sense. Thank you for pointing it out. My long-term goals are to live as long as possible, to eventually establish residence off planet, and to minimize the number of people who die from preventable causes like (as I see it) aging. I think that can be done without harming the environment, but I much less sure deflation and an overall shrinking of the economy is beneficial to that goal. Stable currency that lets you send clear market signals about your desires in the form of expenditure and investment seems better. Digital goods are already pretty popular in an inflationary economy, and I see this growing as they get better. Cleaner tech will tend to become more widespread as well, which is again a form of economic growth. That's an okay near term perspective. Bitcoin currently serves that niche, for people who have bitcoin and view it as spendable. It could get replaced in that niche fairly quickly by something viewed as more stable. But then, digital content has little investment cost so it is plausible that bitcoin could continue to dominate there due to lack of need to borrow money for this kind of production. It's a complicated question. But I think people may underestimate how well bitcoin has picked the low hanging technological fruit and/or how adaptable it is. Most of the cryptocurrency money is apparently in bitcoin form, and it has massive physical infrastructure in the form of mining FPGAs and ASICs supporting it.
Bitcoins are not digital greenbacks
sinclaire10

So what you're basically saying is that we must increase the supply of fools by offering cheap money so they can buy stuff which isn't valuable(junk) so as to inflate the economy. I disagree if that is what you suggest.

The reason for my disagreement is because I disagree when you say people wont be willing to spend. People are willing to spend on entertainment provided they have an income. People will spend on entertainment because there is no guarantee any of us will be alive in 10 years when Bitcoins could be worth 1 million a coin or whatever high value... (read more)

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2lsparrish
Of course I do not advocate people buying (or selling) junk. The whole point is to allow suppliers to more accurately gauge the level of interest in things on the part of consumers, by measuring their willingness to spend money without confusing interference from a changing currency supply. I would argue that both deflation and inflation are forms of noise that inhibit market signals from traveling because they introduce more complex variables to the equation which don't actually do anything. Volatility is probably worse than either of these things. Any of the three is probably tolerable in small amounts, but they will tend to act as a burden on the system. If people are saving rather than spending, it's a signal that products aren't good enough to spend on, which should trigger investment in better products. If people hold cash savings instead of loaning it out to businesses, this makes it harder for businesses to find adequate capital to produce a better product.
Bitcoins are not digital greenbacks
sinclaire30

Saving and investment are the solution to debt. Bitcoin encourages both saving and investing. Investing isn't the same as mere spending because you earn profits on investing. The majority of people in the USA are in debt because of inflation, credit, loans, etc.

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3lsparrish
I agree that it encourages saving. But does it really encourage investing? It would seem that the faster bitcoin's value is rising the less incentive there is for me to allocate my scarce bitcoins towards stocks, startups, etc. -- it's safer to hold onto them. Also note that in the absence of as much spending, there are fewer profitable investments. That would also mean less jobs, less income, and possibly a deflationary spiral where nobody spends more than the bare basics for survival.
Bitcoins are not digital greenbacks
sinclaire10

And speculation is popular because it's perhaps the easiest way to make profits from Bitcoin. People don't create money to waste money unless it's inflationary on purpose. People tend to want to earn, save, and invest. Bitcoin allows people to earn, save, and invest, but the reason why people don't like to spend is because it's very hard to earn.

People do like to save, invest and speculate. The point is if I own any Bitcoins I'm not going to spend it on a Pizza which once I eat it those Bitcoins are gone forever and I can never get them back? No I'm instea... (read more)

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0Decius
Is that how you spend dollars already?
Bitcoins are not digital greenbacks
sinclaire30

a) When I can earn Bitcoins I will be more likely to spend them. Dollars as inflationary but I'm not likely to spend the last dollar in my pocket on something I don't actually need. Bitcoins are inflationary but I'm not likely to spend my last Bitcoin on something I don't really need. It's currently very hard to earn a significant amount of Bitcoins so no one is ready to spend them and at the same time there aren't many places to spend them either. So while the deflation is good we need to be able to replace every Bitcoin we spent to make it spendable like... (read more)

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2lsparrish
a) Bitcoins are deflationary in the sense that supply does not increase as fast as demand. If you have any bitcoins, your incentive is to hold onto them for dear life -- unless your expenditure is a very safe strategy to net you more bitcoins. You can't easily loan them because as the value increases over time the pressure to default will increase. Maybe this creates creative pressure to minimize risk or some other positive trait, but I'm cautious of labeling it good for the long term economy. The strategy I've outlined minimizes risk of losing your bitcoins by letting you loan them out in a form that will be worth the same later, which means defaulting on a loan has less severe consequences and less extreme incentives. b) Volatility is a huge concern for contracts. If you can't count on it being worth the same tomorrow, a given contract costing you so much makes it much harder to juggle long term financial gains and losses from holding many contracts with many different businesses and individuals. This imposes extra accounting costs that I would argue make it much harder to do complex business without incurring extreme risk. c) I do agree that bitcoin does not need to replace the dollar to coexist with it. However, the case for it being a major financial instrument is better if we can define a niche that it fills better than the dollar. Also, if you are planning to hold long-term, it is important to distinguish whether its value is mainly fad/signaling based or not. Right now it seems like something geeks and hipsters use to buy each other coffee -- which is neat, but could easily lose popularity when something else comes along.