lmao I hope he gets desperate the next time bitcoin spikes & pays some cryptology firm to 'crack' it and they wipe it by accident.
lmao I hope he gets desperate the next time bitcoin spikes & pays some cryptology firm to 'crack' it and they wipe it by accident.
You know, this brings up a really interesting point about bitcoin that I'd never thought of before. As far as I remember, the number of bitcoins that can be generated is finite, as the mining algorithm becomes more complex until it is impossible to solve. It makes sense in theory; you don't want bitcoins to be generated forever because they would constantly be depreciating in value.
But, on the other side of the coin (heh), bitcoins can be permanently lost. Again, as far as I know, once a Bitcoin has been lost on a physical drive, it can never be recovered. which would mean, that at some point not only will the number of bitcoins in the world stop increasing, it will actually begin to decrease, because there will always be accidents where people lose hard drives, forget passwords, etc.
So doesn't that mean that bitcoin won't exist forever? Unless they divide them into smaller and smaller pieces, which I think also has a limit, at some point the number of bitcoins will decrease until there aren't enough left.
That's not the behavior you want if you think people should use Bitcoin as a currency. You almost never want your currency to increase in value compared to the cost of goods and services. Because this means you're in deflation. Think about it: If all you need to do to get a positive return is leave your money parked in an account doing nothing with zero risk, you have much less reason to invest in actually productive activities where you have a chance of losing money. With deflation, it makes sense to delay all your purchases because everything will be cheaper the longer you wait. Under capitalism, this is a terrible situation. It gets even worse when you consider that anyone who owes money has to pay it back with increasingly expensive money. This is why deflation like what happened in the Great Depression or Japan in the 90s is so crushingly awful. An appreciating currency is about as great as a pail of spit but you rarely hear this from Bitcoin enthusiasts. Don't get me wrong, some people benefit. People who already have huge piles of currency they have no intention of using.
Here's another downside. If Bitcoins can't be generated forever, that means that even if the population increases and the economy grows, the amount of currency in circulation remains the same. More people chasing the same amount of currency in existence. This is also very deflationary. The gold standard suffers from the same problem, which is why it failed so badly no one uses it anymore. You don't want your economy to be straitjacketed by tying it to some weird asset whose size / volume is controlled by something weird like the number of gold mines on your planet.
That said, I once had a brief discussion about this with a Bitcoin fan and he told me Bitcoin actually has a mechanism built in which lets them increase the max number of Bitcoins allowed to exist. This would ... partially... address the problem. (Who decides when to activate the mechanism? Answer: People who have tons of Bitcoin already and don't want to lower is value.) Anyway, Bitcoin is just software which can ultimately be changed whenever people decide to do it. Anyway, our existing money system does this already, much better.
If Bitcoin routinely increases in value, it can only function as an asset like Jackson Pollack paintings or sports memorabilia or something. But we all know Bitcoin is highly volatile in reality, so it fails on that level too. Basically, Bitcoin is useful only for engaging in crime or tax evasion. Plus, it isn't truly anonymous (every transaction can be traced by design) so scratch out that supposed advantage as well.
Totally agree. Bitcoin is fundamentally a money making scheme, not only because it is specifically designed to concentrate wealth through appreciation and mining difficulty, but because it's just dogshit as a currency in general. Add that to the security and anonymity problems, and it basically fails on every point that it was sold on.
I think at some point the premise of Bitcoin becoming a real currency was dropped completely, and now it's only sustained by newcomers' belief that they're going to be the ones who make money from it. Reminds me of a certain bullshit electric car company...
The smallest possible piece of a bitcoin in the current bitcoin implementation does exist, but is pretty dang small.
It's estimated that ~20% of bitcoins are lost forever- worth around $140 billion at the current exchange rate. It's a brilliant lesson on artificially induced scarcity and its effect on market prices. I'm just blown away the more I think about it. Some anonymous programmer decided to code digital money that is inherently deflationary solely on the basis of the algorithm that it's built on- and the whole world decided these tokens have value! One of these days, we're gonna see this spill out into real world wars.
He didn't even code it. Dude just wrote a fucking white paper bad got a bunch of other people to help with the work
Yeah, and that makes it even more astounding. He published a paper about a theoretical currency and got thousands of computer scientists to dedicate their lives to it. Not even Jesus could attract such devoted followers.
CompSci is still in the humors phase of its development as a science or engineering discipline and I'm a software dev.
This isn't quite right. The max number of bitcoins is just based on the number of times you can subdivide a 64-bit floating point number. There's some technical spot in the design where this matters.
The complexity of the algorithm can be scaled up and down pretty arbitrarily, and it's adjusted block-to-block based on some formula in order to keep the average time to solve the algorithm worldwide at 10 minutes. Literally they just change how many digits of the right answer you need for it to be accepted, and I think currently you have to match the least 44 bits of a 256-bit number or something.
I don't remember how the hashing algorithm works exactly, but the basic idea is that it's very easy to determine if the answer is right or wrong, but you can only guess and check. I think there's a 3Blue1Brown video that explains in depth.
The relationship with mining is that the reward for adding a block to the ledger decreases as more bitcoins are added. This was just an arbitrary formula chosen to eventually reach a zero reward before it hit the max number of bitcoins. The only way new bitcoins are created is as a reward for solving the blockchain algorithm and adding a new block to the chain.
The reward isn't the only way miners are paid, though. The size of each bitcoin ledger block is fixed, and can only hold so many transactions (and there's one new block every 10 minutes because of the difficulty scaling). There are very often more people who want to make new transactions in ten minutes than there is room in a block. So when you initiate a bitcoin transfer you can add a bribe for miners to prioritize your transaction. Whoever puts your transaction on the blockchain gets your bribe money (in bitcoins, obviously).
Once the mining reward hits zero, miners will only mine because of bribe money, which the advocates describe as a smooth transition to a system of Market Rate™ transaction cost. But of course it's still deflationary by design.
And by any actual monetary theory accepted by literally anyone but the absolute craziest far-right goldbug whackjobs, you would want new currency to be generated forever so that it's constantly depreciating in value. Inflation is good.
The bribe system is entirely new information to me, thank you. And I agree, the appreciation of bitcoin value only makes sense from the perspective of the adopters, not from an economic POV.
pop
I think bitcoin is infinity dividable
Well NS went missing and his project got hijacked by Bitmain and turned into a shitshow
~
The transaction per second limit is unusably slow for mass acceptance and the tx fees are too high
Also a shit ton of the currency is locked or lost forever :(