cacheson

Cryptocurrency will never replace government money so long as it doesn’t improve on its ability to avoid periods of deflation or hyperinflation.

Quibble: Hyperinflation typically only happens due to government mismanagement of their currency, and not as a result of regular market forces.

As it stands, the monetary supply of bitcoin may be increasing with each minted block, but it is also tempered by the amount of bitcoin ‘burned’ - people losing their keys, or dying with no-one inheriting access to their account.

The effect of this should be minimal once infrastructure around and knowledge of Bitcoin becomes more fully developed.

Ending the minting of new coins will not cause stability in the price - its price will still fluctuate with demand.

My point was that the current level of instability, with 2000% increases and 80% drops, is only a result of the low current level of adoption, combined with uncertainty over whether Bitcoin is going to be the global currency to replace all others, or a fad that is going to die out. Once the "final" level of adoption is reached, you wouldn't leave your money "sitting in the blockchain" in hopes of a big return. It'd be more like having your money in treasury bonds. Some return, sure, but fairly unexciting.

Take an absurd and simple model of the world where the entire population uses bitcoin: an increase in the population means the same amount of coins for more people

Annual population growth from 1950 to the present (the era for which we have good numbers, I assume?) topped out at 2.24% in 1964. We're currently at 0.88%, and projected to go negative in the 2080s. I assume it won't be negative forever, but figure maybe 1-2% annual price deflation over the long run?

What do?

Shifting gears a bit. Let's say for the sake of argument that the deflation thing is actually very bad. Maybe not catastrophically bad, but at least bad enough that we should prefer that Bitcoin does not succeed.

What alternative do we, as anarchists, offer to the world? Besides anarcho-communism, that is. I'm skeptical of it as a totalizing vision, and a lot of people just won't go for it.

I assume that in a post-state society:

• There will be some kind of hard currency that is widely but maybe not exclusively used
• The world will standardize on a single unit of account, probably the aforementioned hard currency
• People will remain at least moderately self-interested

Let's say that all of the other altcoins were obliterated, and that only Bitcoin and Dogecoin remain. Dogecoin would be the better option for society as a whole, due to the supply inflation. However, for individuals it's preferable to only accept Bitcoin and refuse to accept Dogecoin (Thiers' law). Dogecoin is unlikely to catch on because of this, even if we ignore Bitcoin's first-mover advantage.

What other good alternatives are there? I don't think "anarcho central banking" would be viable.

I think I understand the economics side a little better, though I admit I’m not an expert.

Possibly. I do have some familiarity, though it's more with "political economy" than economics proper. I don't usually have much patience for dry nonfiction books, though articles and long essays are fine. As a result, my knowledge here is less coherent and more shallow.

Why is Deflation Bad for Currency?

I broadly acknowledge your points here, and I don't have a full rebuttal, though I'm not yet prepared to change my mind on the issue. I'm just going to respond to the points where I have something to say.

‘Inflationary’ and ‘deflationary’

I do understand inflation and deflation, and it doesn't seem like there's been any misunderstanding thus far. There's supply inflation and price inflation. Central banks use supply inflation and deflation to influence the economy. Increase supply to encourage investment when the economy gets sluggish, decrease supply to rein in price inflation.

While inflation has an effect on real wages, raising the minimum wage and negotiating salary increases compensate for this effect.

Wages haven't actually kept up with productivity, though. Arguably it would be better to have real wages increase by default through deflation, and make employers deal with negotiating pay cuts. That way inaction favors the (hopefully unionized) workers and squeezes the employer, instead of the other way around. This may give worker co-ops a competitive advantage in retaining experienced workers, whereas employers may be inclined to fire workers when pay cut negotiations fail.

Your claim about the US having abandoned the gold standard around the great depression didn't sound quite right to me, as I remembered we were on the Bretton Woods system until 1971. It turns out there was indeed a gap in the 30s though.

In looking at the chart on the Bretton Woods article, I remembered that the decoupling of real wages from productivity (article) also started in the 70s. I wonder if there's any connection. I know that Reaganomics was a thing, but that would have started in the 80s. (I promise I'm not doing a conspiracy theorist "ah ha!" thing here, the correlation may be entirely coincidental, but may also be worth further investigation.)

Because banks and the wealthy are incentivized to hold on to money, less infrastructure is built, loans are harder to get, and the amount of jobs available and total economic activity decreases.

This is a result of the credit monopoly. If we can break that, then the supply of credit should expand as needed, and the effects of deflation of the unit of account should be limited.

As one way to help with that, I've got some ideas for a friend-to-friend credit network inspired by the Lightning Network and the original (pre-shitcoin) RipplePay. (No blockchains involved, it's not a cryptocurrency.) The core of it would be a simple app for tracking lending among friends (for example, Alice pays for lunch for her and Bob, and they note this in the app instead of exchanging cash). It would also allow routing in order to make "IOU" payments to friends-of-friends(-of-friends, etc) where no direct trust relationship exists. This could then be used as a sort of community currency. My ideas are still kind of half-formed, I need to look more into the details of how the Lightning Network works, as well as how the shitcoin version of Ripple works to see if they have any ideas worth stealing.

The one thing that does bother me that I can't answer in a satisfactory fashion is that compared to an inflationary currency, deflation imposes a hard floor on the effective interest rate of lending. If the currency deflates at a rate of 2%, and you get a zero-interest loan, the real value of your debt is still increasing by 2% per year. I assume there's some level of need for actual hard currency that's relatively stable in the long term, and that people can't just use credit exclusively. "My friends owe me money" is not a great way to store one's life savings, after all.

Obviously the US must have shut down the Beijing LGBT Center in order to make China look bad. C'mon guys, try to keep up.

(Big /s)

I need one of those keyboards

Huh, that's cool. My own experience with this stuff is pretty sparse. I learned a bit of OpenGL 2.0 about 20 years ago, and never quite got to the point of understanding model files. My "models" were just arrays of 3d vertices that I adjusted by hand.

OpenGL 3.0 and onward are totally different from 2.0, so I had to basically relearn everything. Mostly I used these videos to get caught up, though I didn't get all that far in. One of them covers Blender OBJ model files, though that may be too heavy for your purposes. Are you just doing 2D? I'm not aware of any formats for that... SVG maybe? Also likely overkill. You might be able to make 2D stuff in Blender, but I've never used it.

I agree, though protests are still useful for networking and movement-building (and sometimes they achieve some of their goals). But yeah, they shouldn't be our sole focus.

(I say this as someone who tends to avoid protests due to social anxiety, so take it as you will.)

Yep. I tend to be skeptical of anarcho-communism, but at least it fails gracefully. Worst case scenario, people just start trading again. I still want people to try it, because what if they're right? Or what if they're not completely right, but we learn something useful?

I'm guessing that when you hear "socialism", like most people you think of state socialism. USSR, China, etc, as well as the various political parties trying to implement socialist policies through the electoral process. The socialist movement has always had a significant anarchist faction as well. Basically, things went like this:

• State socialists: Right, we're going to do state socialism
• Anarchists: That's going to go very badly, let's do anarchism instead
• State socialists proceed to do state socialism, and it goes very badly
• Anarchists: Okay, now that we all have the benefit of historical hindsight, let's do anarchism now?
• State socialists: No, we're going to do state socialism again
• Anarchists: Oh for fuck's sake

It looks like the post to personalfinance doesn't show up in the threads section of your profile, but it does show up in the overview. So that's weird.

Usually when a thread or comment fails to propagate to other instances, you can edit it to force a retry. Maybe that would help here.

In general, for bug mitigation:

• Don't block any domains, otherwise random stuff will get hidden
• After making a post, go to the "newest" view and upvote it so that it actually gets sorted correctly in the "hot" view instead of buried
• The error that you get when posting doesn't seem to affect anything, the post still gets made

Should post this to @MagHub. This one is just for posts that are looking for a magazine.

Pump and Dump Scams

Being deflationary doesn't make an asset a good target for a pump-and-dump scam. PnDs are best executed on assets that are low-valued enough that you can easily force the price up or down using the funds that you have available to you. Being deflationary causes an asset to leave this territory sooner.

Bitcoin is not a good target compared to altcoins, and as far as I'm aware PnD scammers have largely moved on to those. Bitcoin also has a culture around it that is resistant to the PnD scams. The general advice given to people that are new to Bitcoin (after "only invest what you can afford to lose") is to dollar-cost-average by investing fixed amounts at fixed intervals, to avoid trying to time the market, and not to panic about large price movements. Following those rules makes one immune to the PnD scam. Newer people are less disciplined about following them, but over time the group of "core holders" continues to grow.

This makes bitcoin attractive as a store of wealth, but its value derives from its use as currency.

"Store of wealth" is one of the uses of currency. People tend to get worried that Bitcoin isn't being used as a medium of exchange as much as they think it should, but there isn't actually a problem there. As Bitcoin's value grows, it's price will become more stable. This gradually makes it a worse growth investment, but a better medium of exchange and unit of account.

While there are over 19 million bitcoins minted, only a small portion of those are ever in circulation.

Nearly all of them can potentially enter circulation though, and with very little advance notice. If the order books on the exchanges get wiped out and the price starts spiking wildly upward as a result, those non-circulating coins will start to move.

The principles behind this are based on the lessons learned from economic mistakes during the great depression.

I don't think we should value the lessons of mainstream economic analysis too highly, as they take the existence of the state for granted. Maybe this one is a point in favor of the communists, but I'm not ready to concede it just yet.

Society advances through infrastructure, and while the Solarpunk project requires different infrastructure than what is currently planned, it still requires resources.

Fair point, I wasn't thinking about the infrastructural retooling aspect.

I do think "more saving" is a point in favor on the anti-capitalist side, though. People that have savings are less inclined to tolerate shitty employment arrangements, and more able to go on strike or start their own ventures.

Bitcoin hucksters would prefer they spend it on Bitcoin, with the promise that it might make them more money for less effort by sitting in the blockchain doing nothing.

As I touched on in my other reply, Bitcoin won't be a growth investment forever. Once it reaches the point of maximum adoption, any further increase in value should be relatively slow. Going from slightly inflationary to slightly deflationary will have some effect, but I don't think it'll be as severe as you're implying.

Popularity -> Energy -> Scarcity

The income from fees is something that can we can change by adjusting the block size. Doing so requires broad consensus among Bitcoin's users, but it can be done. The main question is how much mining is needed to keep the network secure against a 51% attack.

If things were to get dire, we could even end the block subsidy early through the same mechanism. While consensus between users is needed, such changes can actually be pushed through against the will of the majority of miners.

I'm going to reply to both of your replies in this part of the thread, because I don't want to split this up 3 ways. 5000 character limit is really annoying here. -_-

I appreciate the effort you put into this post. I welcome this kind of discussion, and I hope this will contrast with the kind of bad-faith hucksterism that typically comes from grassroots cryptocurrency sales initiatives.

I'm down to discuss a bit more, though I may also wander off because very ADD.

I’ve also watched bitcoin and cryptocurrency with interest since the days it cost thousands to buy a pizza.

This is good to hear. I find that a lot of times, people that are skeptical of {thing} tend to also not be particularly informed about {thing}, due to a relative lack of interest. I also just don't like to see stuff that I consider promising abandoned to the right. I'm glad you're still keeping track of it even if you're skeptical.

I suspect you may be able to teach me some things, but I also think there are some things you are missing.

In terms of what you've brought up, I think it's more that we weigh things differently. I also tend to be biased more towards optimism than pessimism.

Trying to objectively evaluate the gaps in my knowledge here: I'm a software developer, and I've dug through Bitcoin Core's code a little bit, but not extensively. I'm not particularly well informed about more recent developments, like the Taproot upgrade. My deep dives into Bitcoin stuff tend to correlate with price rises and overall excitement in/around the Bitcoin community (because ADD). During the doldrums I tend to drift off. I was heavily involved in the "Block Wars", so I've got a pretty decent understanding of the Segwit upgrade and the debate and events surrounding it. My understanding of the internals of the Lightning Network is weaker than I'd like. I kind of get the HTLC stuff, but I have no fucking idea how payment routing actually happens. "Economic" arguments tend to make sense to me, though I have basically zero formal education in the subject.

I also have a definite "because it's cool" bias.

Pre-mining Scams

I would definitely categorize pre-mining as shady, though not necessarily an outright scam. I know that a number of altcoins do disclose ahead of time the amount by which they're pre-mined and what purposes those funds will be used for. I dislike these arrangements, and think they're yet another good reason to stay away from those altcoins, but it doesn't qualify them as a scam. It becomes a scam if the pre-mine isn't disclosed, or if the pre-mined funds are spent in a manner contrary to what buyers had been led to believe.

Pre-mining is also not a Ponzi scheme. A Ponzi scheme involves a scammer holding money on behalf of investors, drawing from the held funds to make payouts that give the appearance of productive returns whiling lying about the actual balances held, and then running away with the money once they've tricked enough investors.

When you buy cryptocurrency tokens, it's an exchange. The dollars you pay are not held in your name by the creator of the cryptocurrency. Those dollars are not yours anymore. Instead, you have the tokens, which may rise or fall in value. You are not being promised any returns. If the cryptocurrency you bought is part of a pre-mining scam, at some point the creator will sell their stake, reducing the value of your tokens. You were scammed by being lied to about the properties of the thing you bought, but that is not the same thing as a Ponzi scheme.

As for Bitcoin, Satoshi did everything right in this regard that they realistically could. They released the design on a public mailing list in advance of launching the system. They embedded a recent newspaper headline in the first block to prove that it couldn't have been created before that headline was written. So in that sense, Bitcoin isn't pre-mined.

However, as you allude to, they were "shouting into the void" by themselves for a while, and amassed a sizeable number of coins. There is debate about how much of the early coins actually belong to them. Hal Finney was also known to be involved fairly early on. In any case, whoever created Bitcoin almost certainly has a large number of coins. It's not unreasonable to be concerned about, but I don't think it's right to lump it in with pre-mined altcoins, and calling it a scam is too much of a stretch.