Bitcoin zero sum theory
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Since bitcoins are not useful as a medium of exchange, or desirable in themselves, their true value is zero. At the time of writing, the market price is halfway between that level and zero.
Pay your money or not and take your chances. My understanding is, vanishingly little of the actual money supply consists in paper bills. Bitcoin comes out of the lates cypher-punks. A lot of its dedicated followers are libertarians, or at least anti-statist and of a very low opinion of Wall Street.
You really think the value of gold as an asset class derives primarily from its industrial uses or the desirability of shiny yellow jewellery?
Is this question even meaningful? But that just makes the argument stronger. I think the easiest way to understand Bitcoin and various other cryptocurrencies is by looking at it as, essentially, a fandom. Crypto is obviously parasitic on the existing economy and money system were it not, what would even be the point of citing conversion rates? Nevermind that the vast bulk of the coins are held by the early adopters who got in when the mining was easy and that the rest of the mining is now helping to generate environmental catastrophes worldwide.
But hey, it gives you the opportunity to cosplay the brave libertarian without getting off your couch. Dear John Quiggin, Thanks so much for that great article on bitcoins. I come to Crooked Timber to read discussions on classic literature and forgot that you are an economist — most of that has to do with your smooth style.
And thanks for those two nuggets: Anyone who thinks of bitcoions with these two notions in mind will certainly avoid them as they plunge into the depths of valuelessness. Bitcoins were fascinating as a concept as was the world of cryptocurrencies. How will we fare this time? People need to embrace economic solutions to inequality and bitcoins has all the worst characteristics of Capitalism whose ultimate motive is to promote and glorify inequality.
Ten workers organized by complementary skills and abilities pool their borrowing power to finance the construction of a house. They agree to a prearranged structure of pay so that creditors are rewarded and those devoting specialty work or longer hours are commensurately compensated. When the house is sold on the open market they, presumably receive a larger share of the profit and are given higher credit ratings to boot.
That means wealth where it is needed most to prevent the conflagration associated with unequal economic growth pointed out by Piketty. Co-ops support co-ops, giving them better deals and top priority; with the understanding that they coordinate like a political party with open primary votes where Co-op candidates stack up against the others. If they appear to give strength to a Republican or another whose politics are intolerable and the Socialist candidate is in the minority they drop out.
But if they garner more votes than does the Democratic candidate we urge them to drop out. This game of Primary Chicken gives the Party the opportunity to articulate the advantages of the co-op structure which is the real purpose of the party. The Republican Party is dead man walking — the Russia-gate scandal as well as the willingness of the Party to represent the interests of the. This seems like a curious statement, since it was literally the standard currency for most of civilization.
It still would be if we wanted a deflationary currency like bitcoin. It has no inherent usefulness except for negligible material costs. The US Government will always accept dollars for tax debts.
Except that thousands of years of gold being used as both a means of exchange and a store of value kind of contradict that point. If I have gold I can make and sell jewelry from it in pretty much any society. This gives it a base value as a commodity.
Bitcoin has zero value as a commodity. There is literally nothing that I can make from it. Money is a system of transferable debt. How it is recorded clay tablet, metal, paper, computer is immaterial. What counts is who owes it. The entire US community owes debts created by the issue of US notes or coins.
It is not clear to me that the owners of Bitcoin debt have any substantial backing. Now if gold could be physically teleported by somebody sitting at a computer to anyone else on earth with a computer, then its usefulness as a means of exchange would more closely resemble that of bitcoin. As for people desiring gold because they know they can turn it into jewelry… you can turn a lot of things into jewelry. What makes gold a significant asset class for investors? Not its convertibility into jewelry.
When the price falls to zero it will be because nobody wants one. And then it will be worthless. I actually checked and convinced myself I had the right order of magnitude. Moz of Yarramulla A quibble, but silver was always — right up to the C19 — more common as base money than gold.
Plus of course many other commodities have been tried as a base to secure banknotes or equivalent against. The French tried assignats in the revolution — property claims on land aided by Madam La Guillotine disposing of rival claims. And as JK Galbraith pointed out, tobacco had a longer run in the southern US as a monetary base than either silver or gold — the main problem was that it was hard to control the money supply as it was easy to pass other weeds off as tobacco.
The base money for well over a thousand years before coins were invented was the IOU, mostly but not always denoted in some common unit. And this continues to be the usual form of money. The medieval villager had a tab at the mill and a tally-stick for the royal taxes. The medieval merchant settled accounts at the great fairs by netting out debts, then accepting an IOU or coin for the balance depending on his assessment of creditworthiness. We do it with a letter of credit and a set of accounts at central banks.
My own sense is that the final? That way the whole volatility and speculation issue could have been avoided. Does anyone have an explanation why they chose this route, unless volatility and speculation were intended by design?
I can buy and sell gold online at WAY more places than bitcoin. Maybe someday botcoins of some sort will have the social construction behind them that gold does, but gold is so much easier for a human to grasp as it were. Dollars are a social construction that owns an army and a navy and so will have legs for now. Wouldnt the right headline be negative sum game?
Theres also a sentence repetition: Unfortunately for Bitcoin fans, the chances of this happening are a lot less than five to one. Because if you use dollars, you have to comply with US law including all the know-your-customer reporting that bitcoin is designed to avoid: Yes, bitcoins can function as a medium of exchange.
The important function of a monetary unit is as a stable counter for credit transactions. You can sell many things online whether it be gold, used laptops, furniture etc. MPAVictoria please explain how I can use a piece of gold that I have in my house to buy something from someone on the other side of the world without leaving my house.
Scott P; again, so what? Gold is not today money. It is still a significant asset class. Is this because investors are attracted to its shiny yellow lustre? Or because they choose investments on the basis of jewellery-convertibility? Indeed the change in the value of crypto currencies since Prof Quiggin first predicted a bitcoin price of zero is the manifestation of this evolving social construction. Demanding bitcoin an entirely safe to them way of making their victims squirm; is it not possible that some would do this more or less for sick fun?
Hence yet more incentive for hackers to launch bitcoin based ransomware attacks…. I doubt the equilibrium of this is truly zero value. Wildly impractical, but theoretically possible? Coinlove, so colorably the equivalent of acquiring an army.
Or to put it differently, they could call it whatever they want but specify in advance a fixed exchange rate with an existing currency, or hwy not with gold. This should have no implications for its legal status.
Just a tiny bit. Obviously bitcoin etc is not issued by any state and does not settle liabilities to any state. They lack this critical property that would make them resemble cash-money.
Why is gold stored in bank vaults and not other things used to make jewelry? Accordingly, some of the math majors around this might be able to explain in more detail, adding it to almost any portfolio reduces its volatility and can increase its expected risk adjusted return though not necessarily its absolute return. This is despite gold being fundamentally a negative yielding asset i. Right now Bitcoin would add volatility to nearly any possible portfolio and adding volatility via a negative return asset reduces expected risk adjusted returns across nearly any portfolio — no one would want that, so for now, it remains an inferior asset.
Proponents will only be right if a decided majority agrees they are right like a fandom …. The existence of a cheaper imperfect substitute stabilises the price of the preferred-but-expensive option, and this effect is very big with gold. How do you conclude on how much value jewelry and industrial uses drive the price of gold? But brass and gold are both shiny and the phenomenon you describe should have a stabilizing effect on both prices at least relative to each other.
Also if gold has a high own-price elasticity of demand I think you mean the demand curve is nearly horizontal not nearly vertical.