Bitcoin - Part 2

[Mycroft]

So prove me wrong.

The rule is if it's your claim then the onus is on you to prove it right.

There is no such thing as "having economic value" - only return on investment.

Not true. If I'm manufacturing tool sets, they have an economic value in that people need them to make a living and to maintain and build the machines we need to live. That's an economic value in addition to what money they can be traded for.

Bitcoins only value is that speculators keep them in hopes of making a profit if it increases in value. It's value to transfer funds from place to place is a secondary attribute.

 

[psionl0]

The rule is if it's your claim then the onus is on you to prove it right.

You didn't ask for proof. You flatly contradicted me. Strictly speaking, that puts the onus back on you.

But just to indulge you, suppose that 5% of a forest can be sustainably logged each year. If you can get better than a 5% return on your investment then it would be more profitable to raze the entire forest and sell the wood. Even if you can't by passively investing your money, there may still be more profitable things that you could do like raze the forest and build apartment complexes or something.

Not true. If I'm manufacturing tool sets, they have an economic value in that people need them to make a living and to maintain and build the machines we need to live. That's an economic value in addition to what money they can be traded for.

That is double counting. Other than that it is just the forest example in a different setting. Economics is not concerned with how something is used. It is only concerned with how much money can be made from it.

Whatever income might be derived from using the tools may well be exceeded by selling the tools and investing the money instead. The tools themselves might be melted down and cast into statues that can be sold for even more money.

It is true that the greater good (and even the greater economic good) is best served when sustainable practices are adopted. However, individuals are best served financially by adopting the opposite.

 

[Mycroft]

That doesn't explain why you singled out bitcoin out of all of the wasteful ways of consuming energy.

Because it's a thread about bitcoin?

 

[Mycroft]

You didn't ask for proof. You flatly contradicted me. Strictly speaking, that puts the onus back on you.

Nope. That is not a technicality that reverses burden of proof.

But just to indulge you, suppose that 5% of a forest can be sustainably logged each year. If you can get better than a 5% return on your investment then it would be more profitable to raze the entire forest and sell the wood. Even if you can't by passively investing your money, there may still be more profitable things that you could do like raze the forest and build apartment complexes or something.

I don’t see how that supports any of your assertions.

That is double counting. Other than that it is just the forest example in a different setting. Economics is not concerned with how something is used. It is only concerned with how much money can be made from it.

It’s not “double counting” to recognize both the value of your asset as well as what you can do with the asset.

You are unnecessarily and incorrectly limiting the scope of economics.

Whatever income might be derived from using the tools may well be exceeded by selling the tools and investing the money instead. The tools themselves might be melted down and cast into statues that can be sold for even more money.

If that were so nobody would ever buy tools, but even if true it doesn’t prove any point you’re trying to make.

It is true that the greater good (and even the greater economic good) is best served when sustainable practices are adopted. However, individuals are best served financially by adopting the opposite.

Individuals may be better served by doing the opposite. But even so, this argument doesn’t prove any of those assertions you were trying to prove.

 

[AlaskaBushPilot]

A year ago come January 1 I met a retired American in the Philippines while there with my wife. He was going into Bitcoin.

You don't see a lot of white people in our place there, so you notice. But he hadn't time to talk much because he was on his way to an appointment. To a Bitcoin consultant of some kind. So we arranged to meet later. He was going to invest. It is the last I ever saw of him. It was in the $13K range then. And he would have made money that first week. But any longer than that and my God... he would have lost 30% on it to date.

I've lost about 5% in the last year. I figured on worse. I have been telling my wife for over a year now her little pile is not to be counted on so dearly.

Talk about a bubble. But what can you do? One must invest. The IRA or Tax Deferred Compensation money, it has to be in the market.

Before Bitcoin became well known, I got an email from a former student. It was in the very beginning years of me even being on email. He wrote me at my work, as he had my email from class.

He was writing to tell me he had found what he was looking for, as it was free of government regulation. It was a bit vague on how the supply of bitcoin were determined, and it was my instant reaction. He could not explain it to me cogently.

I have never gotten the "elevator pitch", as they say in marketing or academic parlance - a really lucid, elegant statement.

For example: Only gold that is discovered, mined, and refined in the ground can be added to the existing stock of gold.

See how simple that is? But I have not seen a simliar statement for Bitcoin. I know they can be "mined" somehow, and that great resources are expended to "mine" them. And yet, it is still a mystery to me how new ones are coming into existence.

I can mine gold. I work for miners doing my own specialty work. Freighting in the winter on ice roads. With a 'dozer.

If it is some kind of math algorithm, no problem. Just write an equation down. I can handle that. What am I not seeing?

 

[psionl0]

Nope. That is not a technicality that reverses burden of proof.

A counter assertion is still an assertion and if you make it then you are bound by the same rules of evidence.

I don’t see how that supports any of your assertions.

I can't give an entire course in economics in a single post. All I can say is that you won't find a single economist in the world that doesn't preach "growth".

How much endless growth can this planet stand?

It’s not “double counting” to recognize both the value of your asset as well as what you can do with the asset.

You are unnecessarily and incorrectly limiting the scope of economics.

Yes it is. You are counting the income from using the tools then counting the products made with these tools again.

In economics money is money. Why do you think that so much capital expenditure these days is money purely invested in money?

 

[psionl0]

For example: Only gold that is discovered, mined, and refined in the ground can be added to the existing stock of gold.

See how simple that is? But I have not seen a simliar statement for Bitcoin. I know they can be "mined" somehow, and that great resources are expended to "mine" them. And yet, it is still a mystery to me how new ones are coming into existence.

It's not really all that mysterious. Each block that is added to the blockchain has a pre-determined number of bitcoins in it. Only when a block is added to the blockchain are the bitcoins in it added to the existing stock of bitcoins.

In slightly more detail, each miner creates a block by adding transactions to it (usually the ones that offer the highest transaction fees). Then there is a race between the miners to generate the correct "nonce" for their block. This is basically a trial and error process. The first miner to get the correct nonce gets to add their block to the blockchain (after it is verified) and has the pre-determined number of bitcoins and the total of all the transaction fees in that block deposited into their bitcoin wallet.

Here you can see the details of a typical block.

 

[Ampulla of Vater]

... Only when a block is added to the blockchain are the bitcoins in it added to the existing stock of bitcoins.

In slightly more detail, each miner creates a block by adding transactions to it (usually the ones that offer the highest transaction fees...

How is a block added to the blockchain?

How does a miner add transactions to a block?

I have read this thread for months. I even once opened or obtained a wallet, although I have no idea where it is or how to access it any longer. I don't think I am stupid (of course stupid people never really realize that they are, in fact, stupid) but I really do not understand blockchain or Bitcoin to save my soul.

 

[Mycroft]

A counter assertion is still an assertion and if you make it then you are bound by the same rules of evidence.

No.

I can't give an entire course in economics in a single post. All I can say is that you won't find a single economist in the world that doesn't preach "growth".

Of course economists preach growth, because growth is better than non-growth.

But the economy doesn't always grow, and it doesn't cease to function when it doesn't grow.

How much endless growth can this planet stand?

That's one of those questions where it seems as though you've contributed something by asking it, but really you haven't. Why? Because the answer is unknown and unknowable.

What I can point out is that new technology is always opening up new avenues of growth. The market today for high capacity wind turbines is much larger today than it was ten years ago. Ten years from now markets will have grown over new and surprising extrapolations of the technologies we have today, and likely completely new technologies you and I haven't though of yet. What's the limit for that? I dunno, it's driven by the creativity of this planets seven billion residents, and that a huge force.

Yes it is. You are counting the income from using the tools then counting the products made with these tools again.

And why wouldn't you count them? It's part of the overall economy too, right?

In economics money is money. Why do you think that so much capital expenditure these days is money purely invested in money?

I'm really not sure what you're trying to say here, but the value of money is always tied to what it can be traded for; the goods and services available for trade in that economy. For example, right now the value of Venezuelan money has collapsed because the production of the Venezuelan economy has also collapsed. Money doesn’t function as a pure abstract independent of the economy it represents.

 

[psionl0]

I'm really not sure what you're trying to say here, but the value of money is always tied to what it can be traded for; the goods and services available for trade in that economy.

 

[psionl0]

How is a block added to the blockchain?

How does a miner add transactions to a block?

I have read this thread for months. I even once opened or obtained a wallet, although I have no idea where it is or how to access it any longer. I don't think I am stupid (of course stupid people never really realize that they are, in fact, stupid) but I really do not understand blockchain or Bitcoin to save my soul.

Without knowing how clued up you are on the technicalities of the internet I don't know what level of detail to go into.

The blockchain is a "distributed" network meaning that each miner stores a copy of it on their computer.

When an individual initiates a wallet transaction let's say that this transaction is "broadcast". Each miner can then read and validate the transaction. Part of the validation is going through your copy of the blockchain to verify that the individual has enough bitcoins to make the transaction (this eliminates "double spending"). Once a miner assembles a block and generates the correct "nonce", they "broadcast" the block. The other miners then read it and once they verify that it is a valid block (and that all the transactions in it are valid), they add it to their copy of the blockchain.

There are many technicalities involved including how to deal with "forks" (where 2 or more miners broadcast a valid block at the same time) but you will need to look up a more technical website if that is the sort of detail you are looking for.

 

[Roger Ramjets]

When an individual initiates a wallet transaction let's say that this transaction is "broadcast". Each miner can then read and validate the transaction. Part of the validation is going through your copy of the blockchain... they add it to their copy of the blockchain.

Yep, and the size of the blockchain is continously increasing. Right now it's just under 200 Gigabytes, but for Bitcoin to become widely accepted it will have to get much larger.

If we lived in a Bitcoin future, how big would the blockchain have to be?
Hint: It’s NOT pretty…

So let’s recap. If Bitcoin took over the world today, a single Bitcoin node operator in the United States:

would have to purchase a machine capable of providing 3TB of memory, that would probably cost well above $10,000

would need $2,413 per year in order to store the blockchain on the machine

would have to route blocks through a CDN operator that would cost over $600 per month. Gone are the days of Google Fiber and AT&T!

would face block validation times of up to one month per block. So our node might not be doing much of anything at all.

All of this, just to run a single Bitcoin node.

But hey, it beats those onerous bank charges - right?

 

[psionl0]

Yep, and the size of the blockchain is continously increasing.

And water is . . . . . .

The shortcomings of bitcoin's blockchain and POW algorithm are well documented. You are not adding anything new and certainly this doesn't prove that bitcoin has had its day.

 

[kayle]

How I enjoy those stories like the one above by psion about how magical bitcoin is (how, exactly, does it explain the economics behind it???). Like an alchemist telling you: see, this is a piece of crap. and then I do some hard-work-requiring magic, without central banks being involved, and voila -- it's a gold nugget just throw in: block, blockchain, network, miner, transaction, verify, assemble...

 

[kayle]

Yes it is. You are counting the income from using the tools then counting the products made with these tools again.

I might be misunderstanding the point you are arguing about, but... there is no miraculous income from using the tools. there is income from SELLING the products made with them (having the cost price+etc etc)

 

[psionl0]

How I enjoy those stories like the one above by psion about how magical bitcoin is (how, exactly, does it explain the economics behind it???). Like an alchemist telling you: see, this is a piece of crap. and then I do some hard-work-requiring magic, without central banks being involved, and voila -- it's a gold nugget just throw in: block, blockchain, network, miner, transaction, verify, assemble...

Then you are not paying attention.

I might be misunderstanding the point you are arguing about, but... there is no miraculous income from using the tools. there is income from SELLING the products made with them (having the cost price+etc etc)

Any price that you might sell the tools for already has its productive value built in. This may or may nor may not exceed the value that you might get from investing just in the finance industry.

 

[Mycroft]

Not sure what you find to be so funny, but I'll assume it revolves around some fundamental different in understanding about how economics works.

Any price that you might sell the tools for already has its productive value built in.

Why would the productive value be factored into the cost of a tool? Like anything else, that price is predominantly driven by supply and demand.

This may or may nor may not exceed the value that you might get from investing just in the finance industry.

"May or may not" certainly covers all the possibilities, but why is comparing the cost of tools to the return from investing in finance relevant?

 

[Mycroft]

...there is no miraculous income from using the tools. there is income from SELLING the products made with them (having the cost price+etc etc)

Typically one would sell their labor. Labor which is facilitated by the tools.

The guy who fixes your car doesn't create anything new, but he does perform a service that wouldn't be possible without his tools.

 

[fromdownunder]

"May or may not" certainly covers all the possibilities, but why is comparing the cost of tools to the return from investing in finance relevant?

Investing in Finance? You invest with a bank who lends the money to a tooling factory, or buy shares in the tooling factory directly. The same tooling factory makes and sells widgets to another company who has borrowed invested money from the Bank and uses the widgets to make gurdihurbles, which they sell back to you.

The tooling factory makes money, pays its staff in cash who spend it at McDonalds, or on Bitcoin which produces nothing except 000's and 111's, but is great at attracting speculators and losing money for the people who invested in all the 000's and 111's last December at $15,000 - $20,000, and can't afford McDonalds or gurdihurbles any more.



Norm

 

[abaddon]

I can't give an entire course in economics in a single post. All I can say is that you won't find a single economist in the world that doesn't preach "growth".

You surprise me that you are totally unaware that scads of economists do not.

What on earth provoked you to make such a false claim?