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Newbie Central / Client synced & Economics Discussion (on what I think is a problem w/ BTC)
« on: February 07, 2015, 03:52:26 PM »
I got my client synced! It had hung up at block 188528, but when I restarted the program, it started syncing much faster and is now fully-sychronized! 
My address: Dzruwyvh5DZdbeXA1mQdvZAUtg8zM3Mk5i
I took a few baby steps into mining on gld.cryptcoins.net. Anyone else who's used it have trouble seeing the graph in User Stats? I've been mining for about four days with active workers and haven't seen it once. Not sure if the problem is on my end. The only things I've got to mine with are CPUs so my max hashrate is something around 22 KH/s, which is like 2 GLD "pennies," but that was expected as this is not a serious attempt.
And dadgum! I just realized that the only reason syncing sped up after being stuck was because I had set up a mobile hotspot for my desktop to connect to, and the laptop then switched over to the hotspot without me noticing...I was downloading another blockchain too...a large one. Luckily, I wasn't close to my monthly bandwidth at the time...
One thing I've found hard to wrap my mind around is...well...I think there is a problem with BTC currently, that I think needs to be solved. I would like to say first that cryptocurrencies are a crucial new invention, and do like BTC (and I'm optimistic about the future of GLD).
It's just money supply vs. goods supply is how the value of one is determined based on the other, but Bitcoins and altcoins especially don't seem to follow that rule. It seems like the value of BTC & co. is...well...it isn't that they're "overvalued" (since value is what the seller and buyer agrees upon), but that there doesn't seem to be the foundational goods supply to back them. What am I trying to get at?
Well, as y'all know, money supply vs. goods supply determines how much one can be bought with the other (if you're selling goods, you're "buying" money, which used to have inherent value...), so with the creation of any new insular economy, there has to be a form of money that's agreed upon as well as an amount of goods (unless you're in a barter system, where there is no currency medium), so the price of one in terms of the other depends on the quantity of each.
Creating more money with the same amount of goods causes inflation and devaluation of that money, and more goods with the same amount of money causes deflation and makes the goods cheaper (what I usually think of when I hear supply vs. demand).
Okay, so you guys are all nodding your heads by now and whispering "Why is redoak explaining economic basics here? We know all this." I'm actually writing this to collect my thoughts and to help me understand what's what.
The thing is, cryptocoins' overriding determinant of value does not seem to be money supply versus goods supply (i.e. coins minted versus the "GDP" that "exists" or is being bought and sold in that particular cryptocurrency) but it is instead determined by how much fiat currency people are willing to spend for that cryptocoin. In other words, the value of each cryptocurrency is being determined by how many people want to buy vs. sell the currency with fiat currencies, instead of with goods (since when you sell goods, in a way, you're buying the money with your goods, except we no longer buy money that has any worth, e.g. gold and silver).
The goods DO exist, but their price is overwhelmingly based off of the exchange rate for a fiat currency, which fluctuates based off of the current demand vs. supply for that specific coin on exchanges. O.o Imagine the American dollar's buying power at home being determined by what other people are willing to pay in yen/Euro/pound for that dollar, instead of based on how many dollars vs. goods there are.
Let's pretend that each cryptocurrency were its own country. To keep it simple, let's just use Bitcoin. Call it, Bitcoinica (or Bitcoinland, or Bitcoince, or Bitcoimany, whatever you prefer). It's a brand new country, and has got a currency whose traits are better than all the other ones: it's not regulated or produced by a government, its production involves real work (though beyond that it has no inherent value like a useful, precious metal would), it allows instant transactions, unlike the ACH system, etc. It's Bitcoin, no need for more explanation.
Let's pretend that the "founding" group declared independence from other countries, etc. and started switching to this new currency from the old ones that were circulating at the time, (the Spanish pieces of eight "bits" used in Colonial America and early U.S. times come to mind). Things are a bit rocky, but they manage to broker some agreements and make their first purchases (like pizza). Everyone has so much Bitcoin compared to goods for sale (I'm guessing), so it takes a lot of Bitcoins to buy anything, but they're excited that the currency is taking off.
Really, I can only imagine what it was like breaking new, fertile ground like this, having a new currency and everyone is wondering, "How much to charge/spend?" I'd love someone to tell me. But on with this fictional country:
Right now there's a lot more money minted than goods, but the production and introduction of new goods is slowly increasing as this new nation starts growing. However, growth soon takes a turn in a different direction as other countries begin to take interest in this new, revolutionary currency. Foreigners, either tired of what their government's doing with the money supply or just curious about Bitcoin, start buying some Bitcoins and visiting Bitcoinica. Exchanges are created, initially just in Bitcoinica, to facilitate the process of buying and selling Bitcoins, and the buyers and sellers haggle a bit and reach a middle point, and money is exchanged. A lot of foreign businesses take interest in it and the potential new market, and set up shop in Bitcoinica (this is getting annoying to say), take payments in Bitcoins, and then go to the exchanges to convert it back into their home currency. While a few of the businesses do start paying their debts in Bitcoin, the vast majority of their employees, suppliers, expenses, etc... still come from the bordering nations and still need to be paid in foreign coin, so the businesses have to charge however much Bitcoin they need to convert it into the amount of native cash needed to pay off those expenses.
The exchange rate at which BTC is selling starts increasing as more and more people buy up Bitcoins, causing more people to start mining (most of them sell the coins off immediately for fiat). A lot of a services spring up centered around Bitcoin and a lot of fiat capital (either from old currency that still exists in the country or from abroad) is "injected" (invested) into those services, foreign businesses [by that I mean businesses that *also* accept money in BTC or otherwise convert back to "FPD" as soon as possible] and also into exchanges, investment platforms, etc...
Soon foreign businesses charging in Bitcoin overtake the fledgling domestic GDP. The majority of Bitcoin that circulates internally is now mostly bought by foreign (fiat) currency at one end, and then sold back for other foreign money at the other. Its usage has grown tremendously, but the value of BTC is now completely determined by exchanges. Speculation and potential regulation by other countries on the usage and exchange of BTC (amongst other factors) causes the value of BTC to shoot up compared to Foreign Pound-Dollar ("FPD"), and then tumble back down (in the case of regulation), and makes the relative value of BTC jump all over the place. The amount of foreigners, or immigrants by this point, who buy BTC with FPD, spend it on a foreign business that then takes the BTC and exchanges it *back* into FPD at a desirable rate as soon as possible(which is then either bought by more visitors or by speculators) overtakes the original "domestic" population that just bought and sold in BTC (except, this is weird, it's almost as though Bitland never stopped using foreign currency, it's like Colonial and early America trying to switch from using Spanish pieces of eights into using American dollars, but in the case of BTC, everything got accelerated into a period of five years and the switch was never fully implemented and got skipped, so to speak).
Here we could incorporate the mining race, as well as altcoins into the story (which mostly are exchanged directly with BTC, and later LTC, and then to FPD, so they're like little enclaves inside Bitcoinland (got tired of "Bitcoinica..."). But this is getting ridiculously long, and it's beside the point.
This analogy definitely has problems, BTC is in a separate dimension, so to speak, or plane of existence than any country and is in fact multi-national/international so this analogy naturally has problems. I also simplified the complex economy that exists in BTC and altcoins. As to the problem, I don't pretend to have a solution, except to suggest that we grow our "domestic GDP." It seems too late to do this easily with Bitcoin, and it's hard to create a complex ecosystem because it requires that so many things already be in place or be introduced at crucial times, because each component depends on many other components and many are mutually dependent on each other. Perhaps this is why the value of BTC naturally came to be pinned to the value of USD, CNY, etc. because that was the easiest way.
And maybe this IS how this is supposed to work, that BTC is a temporary courier of funds, where one person would buy BTC at one end, sell it to someone else at another for a product, after which the BTC is sold off again. Yet maybe what I'm talking about can be done with another, nascent currency, like Goldcoin!
I'd be interested in getting to know more about GLD's technical specifications, in terms of how strictly the supply growth is contained, and what rate it's at. I'm thinking that it's important to focus on the internal economy, and make sure that it grows at least at the same rate as the growth in the supply of GLD, as has historically been roughly the case of gold and goods (this is why so many things that could be bought with a certain amount of gold decades, centuries, and even millenia ago for the most basic things and still often be bought with the same amount of gold)
In the more prominent cryptocurrencies, so much volume flows through them, it's like water through a colander (or would flour through a sieve be more accurate?).
If the exchanges were to somehow all close down, don't you think the value of pretty much every coin would plummet, due to how the majority of products and services available in those markets are from businesses that operate, directly, or indirectly tied to fiat currencies? At least that's my impression. Of course it'd be both impractical and unethical to close down the exchanges (since they're an important part of a free market), but it'd be great if we could have a more self-sufficent system somehow that had more internal volume than external, where more coins were earned providing a service or product, or helping someone else make a product and get paid part of the proceeds or on an hourly basis, than on the current exchange-based economy.
I know I'm just the new kid on the block, so a lot of what I say can be off the mark. I also understand that, for example, American businesses have to exchange BTC payments for dollars because that's the only way they can survive, but the long rant of an analogy was just me trying to communicate, "There's something wrong with this picture, and I'm not entirely sure what is is, but here's my impression of what's wrong. Does that make sense, or is it incorrect?"
I would love get feedback on this analogy as well as advice from someone more knowledgeable, and from people more experienced in this area. Thanks.
My address: Dzruwyvh5DZdbeXA1mQdvZAUtg8zM3Mk5i
I took a few baby steps into mining on gld.cryptcoins.net. Anyone else who's used it have trouble seeing the graph in User Stats? I've been mining for about four days with active workers and haven't seen it once. Not sure if the problem is on my end. The only things I've got to mine with are CPUs so my max hashrate is something around 22 KH/s, which is like 2 GLD "pennies," but that was expected as this is not a serious attempt.
And dadgum! I just realized that the only reason syncing sped up after being stuck was because I had set up a mobile hotspot for my desktop to connect to, and the laptop then switched over to the hotspot without me noticing...I was downloading another blockchain too...a large one. Luckily, I wasn't close to my monthly bandwidth at the time...
One thing I've found hard to wrap my mind around is...well...I think there is a problem with BTC currently, that I think needs to be solved. I would like to say first that cryptocurrencies are a crucial new invention, and do like BTC (and I'm optimistic about the future of GLD).
It's just money supply vs. goods supply is how the value of one is determined based on the other, but Bitcoins and altcoins especially don't seem to follow that rule. It seems like the value of BTC & co. is...well...it isn't that they're "overvalued" (since value is what the seller and buyer agrees upon), but that there doesn't seem to be the foundational goods supply to back them. What am I trying to get at?
Well, as y'all know, money supply vs. goods supply determines how much one can be bought with the other (if you're selling goods, you're "buying" money, which used to have inherent value...), so with the creation of any new insular economy, there has to be a form of money that's agreed upon as well as an amount of goods (unless you're in a barter system, where there is no currency medium), so the price of one in terms of the other depends on the quantity of each.
Creating more money with the same amount of goods causes inflation and devaluation of that money, and more goods with the same amount of money causes deflation and makes the goods cheaper (what I usually think of when I hear supply vs. demand).
Okay, so you guys are all nodding your heads by now and whispering "Why is redoak explaining economic basics here? We know all this." I'm actually writing this to collect my thoughts and to help me understand what's what.
The thing is, cryptocoins' overriding determinant of value does not seem to be money supply versus goods supply (i.e. coins minted versus the "GDP" that "exists" or is being bought and sold in that particular cryptocurrency) but it is instead determined by how much fiat currency people are willing to spend for that cryptocoin. In other words, the value of each cryptocurrency is being determined by how many people want to buy vs. sell the currency with fiat currencies, instead of with goods (since when you sell goods, in a way, you're buying the money with your goods, except we no longer buy money that has any worth, e.g. gold and silver).
The goods DO exist, but their price is overwhelmingly based off of the exchange rate for a fiat currency, which fluctuates based off of the current demand vs. supply for that specific coin on exchanges. O.o Imagine the American dollar's buying power at home being determined by what other people are willing to pay in yen/Euro/pound for that dollar, instead of based on how many dollars vs. goods there are.
Let's pretend that each cryptocurrency were its own country. To keep it simple, let's just use Bitcoin. Call it, Bitcoinica (or Bitcoinland, or Bitcoince, or Bitcoimany, whatever you prefer). It's a brand new country, and has got a currency whose traits are better than all the other ones: it's not regulated or produced by a government, its production involves real work (though beyond that it has no inherent value like a useful, precious metal would), it allows instant transactions, unlike the ACH system, etc. It's Bitcoin, no need for more explanation.
Let's pretend that the "founding" group declared independence from other countries, etc. and started switching to this new currency from the old ones that were circulating at the time, (the Spanish pieces of eight "bits" used in Colonial America and early U.S. times come to mind). Things are a bit rocky, but they manage to broker some agreements and make their first purchases (like pizza). Everyone has so much Bitcoin compared to goods for sale (I'm guessing), so it takes a lot of Bitcoins to buy anything, but they're excited that the currency is taking off.
Really, I can only imagine what it was like breaking new, fertile ground like this, having a new currency and everyone is wondering, "How much to charge/spend?" I'd love someone to tell me. But on with this fictional country:
Right now there's a lot more money minted than goods, but the production and introduction of new goods is slowly increasing as this new nation starts growing. However, growth soon takes a turn in a different direction as other countries begin to take interest in this new, revolutionary currency. Foreigners, either tired of what their government's doing with the money supply or just curious about Bitcoin, start buying some Bitcoins and visiting Bitcoinica. Exchanges are created, initially just in Bitcoinica, to facilitate the process of buying and selling Bitcoins, and the buyers and sellers haggle a bit and reach a middle point, and money is exchanged. A lot of foreign businesses take interest in it and the potential new market, and set up shop in Bitcoinica (this is getting annoying to say), take payments in Bitcoins, and then go to the exchanges to convert it back into their home currency. While a few of the businesses do start paying their debts in Bitcoin, the vast majority of their employees, suppliers, expenses, etc... still come from the bordering nations and still need to be paid in foreign coin, so the businesses have to charge however much Bitcoin they need to convert it into the amount of native cash needed to pay off those expenses.
The exchange rate at which BTC is selling starts increasing as more and more people buy up Bitcoins, causing more people to start mining (most of them sell the coins off immediately for fiat). A lot of a services spring up centered around Bitcoin and a lot of fiat capital (either from old currency that still exists in the country or from abroad) is "injected" (invested) into those services, foreign businesses [by that I mean businesses that *also* accept money in BTC or otherwise convert back to "FPD" as soon as possible] and also into exchanges, investment platforms, etc...
Soon foreign businesses charging in Bitcoin overtake the fledgling domestic GDP. The majority of Bitcoin that circulates internally is now mostly bought by foreign (fiat) currency at one end, and then sold back for other foreign money at the other. Its usage has grown tremendously, but the value of BTC is now completely determined by exchanges. Speculation and potential regulation by other countries on the usage and exchange of BTC (amongst other factors) causes the value of BTC to shoot up compared to Foreign Pound-Dollar ("FPD"), and then tumble back down (in the case of regulation), and makes the relative value of BTC jump all over the place. The amount of foreigners, or immigrants by this point, who buy BTC with FPD, spend it on a foreign business that then takes the BTC and exchanges it *back* into FPD at a desirable rate as soon as possible(which is then either bought by more visitors or by speculators) overtakes the original "domestic" population that just bought and sold in BTC (except, this is weird, it's almost as though Bitland never stopped using foreign currency, it's like Colonial and early America trying to switch from using Spanish pieces of eights into using American dollars, but in the case of BTC, everything got accelerated into a period of five years and the switch was never fully implemented and got skipped, so to speak).
Here we could incorporate the mining race, as well as altcoins into the story (which mostly are exchanged directly with BTC, and later LTC, and then to FPD, so they're like little enclaves inside Bitcoinland (got tired of "Bitcoinica..."). But this is getting ridiculously long, and it's beside the point.
This analogy definitely has problems, BTC is in a separate dimension, so to speak, or plane of existence than any country and is in fact multi-national/international so this analogy naturally has problems. I also simplified the complex economy that exists in BTC and altcoins. As to the problem, I don't pretend to have a solution, except to suggest that we grow our "domestic GDP." It seems too late to do this easily with Bitcoin, and it's hard to create a complex ecosystem because it requires that so many things already be in place or be introduced at crucial times, because each component depends on many other components and many are mutually dependent on each other. Perhaps this is why the value of BTC naturally came to be pinned to the value of USD, CNY, etc. because that was the easiest way.
And maybe this IS how this is supposed to work, that BTC is a temporary courier of funds, where one person would buy BTC at one end, sell it to someone else at another for a product, after which the BTC is sold off again. Yet maybe what I'm talking about can be done with another, nascent currency, like Goldcoin!
I'd be interested in getting to know more about GLD's technical specifications, in terms of how strictly the supply growth is contained, and what rate it's at. I'm thinking that it's important to focus on the internal economy, and make sure that it grows at least at the same rate as the growth in the supply of GLD, as has historically been roughly the case of gold and goods (this is why so many things that could be bought with a certain amount of gold decades, centuries, and even millenia ago for the most basic things and still often be bought with the same amount of gold)
In the more prominent cryptocurrencies, so much volume flows through them, it's like water through a colander (or would flour through a sieve be more accurate?).
If the exchanges were to somehow all close down, don't you think the value of pretty much every coin would plummet, due to how the majority of products and services available in those markets are from businesses that operate, directly, or indirectly tied to fiat currencies? At least that's my impression. Of course it'd be both impractical and unethical to close down the exchanges (since they're an important part of a free market), but it'd be great if we could have a more self-sufficent system somehow that had more internal volume than external, where more coins were earned providing a service or product, or helping someone else make a product and get paid part of the proceeds or on an hourly basis, than on the current exchange-based economy.
I know I'm just the new kid on the block, so a lot of what I say can be off the mark. I also understand that, for example, American businesses have to exchange BTC payments for dollars because that's the only way they can survive, but the long rant of an analogy was just me trying to communicate, "There's something wrong with this picture, and I'm not entirely sure what is is, but here's my impression of what's wrong. Does that make sense, or is it incorrect?"
I would love get feedback on this analogy as well as advice from someone more knowledgeable, and from people more experienced in this area. Thanks.