Edit: Thanks for the correction, meant to say fiat currencies tend to 'inflate', not deflate.
Encouraging people to spend money for the sake of it sounds like a good idea when people have created the concept of 'hoarding' - which is just saving with a scary name. But future productivity has to come through capital appreciation, which has to come through saving. By working against this, wrong investment choices are made because the time horizon is altered.
The concept of fiat currencies in terms of being able to expand the money supply is superior to having a fixed money supply, but the way in which it is implemented works directly against capital formation and feeds directly into misdirected investment and speculation by allowing money creation to run ahead of sensible investment. As aptly experience by the excessive amounts of capital diverted into residential real estate, caused by excessive amounts of new money. Without the easy money, the level of investment in real estate would have been much lower, and the subsequent crash much less destructive.
Fiat currencies have been around for 250 years or so, and not one single one of them have survived that long.
But to be clear: there's a fundamental difference between "saving" and "investment".
1. Saving/Hoarding: Keeping money/cash under the mattress - nobody else has the ability to "spend" the money in the mean time. Also called "sinking funds" by Keynes. This is money kept in a bank deposit. The important point is that you can, at any time, choose to "stop saving" the money and spend it. i.e. you keep the right to spend the money at any time. Nobody else can make use of it. It effectively is out of circulation until you choose to spend it.
2. Investment: Lending the money to someone else for a fixed term - you can't ask for the money back before the end of the fixed term. They can spend it on goods/services for that period of time after which they have to pay it back. The money stays "in circulation".
Absent fractional reserve banking, #2 is the only thing that can actually generate a real return. i.e. real, profitable, economic activity that makes people better off. Without FRB, a checking account cannot pay interest, because #1 cannot be used in any risk-free way to generate value.
For economic productivity, #2 is a good thing, #1 is a bad thing. The fact that everyone is trying to do #1 right now with US dollars and the like is what is considered to be the source of our current economic malaise (according to the economists that I agree with anyway). Fractional reserve banking, QE and the like to some extent lets money that is in category #1 be used for "economic good" in category #2 - effectively fooling the hoarders into "investing" their money.
Of course, bitcoin doesn't have fractional reserve banking - and pretty much by design seems to make it impossible for things in category 1 to be used as category 2. This is why the "hoarding" of bitcoins is considered to be deflationary.
One of the big problem with Keynes.
Money stuffed in a mattress = hoarding.
Money in a bank deposit = still in circulation, able to be lent by the bank.
There is a massive difference. Other people can make use of funds deposited in accounts. This is why banks take in deposits, to lend it out at a higher rate and pocket the spread.
I would also quibble with your definition of investment. Investment should be classified as spending in the expectation of a financial return (ie, not the joy of owning a new shirt, but actual cash returned on cash outlaid). You can say 'a fixed term' but that is a nebulous concept. 24 hours is a fixed term, so is a week, so is a year, so is 30 years. Lending someone money overnight so they can arbitrage some goods by moving them physically from one location to another one is just as much investment as sinking the money into a toll road for 50 years. The definition has to be on the intention rather than the time horizon, otherwise you're just being arbitrary to support an argument.
>(according to the economists that I agree with anyway)
Highly likely you agree with Krugman. I think he speaks out of his hat. We'll leave it at that.
Only because of fractional reserve banking. Absent fractional reserve banking, if I 'lend' something to another party but reserve the right to demand it back at any time, then there is simply no way that they can "use" what I have lent them. They can't use the money while still honouring my right to demand the money back at any time.
So "money" which can be demanded back at any time has he same status as money kept under the mattress - it can't be profitably "used" by anyone.
The important point about "investment" is that the money trully is "tied up" - if only for a day. The shorter the term, the more like "cash" it is.
> Highly likely you agree with Krugman. I think he speaks out of his hat. We'll leave it at that.
You're right I do agree with Krugman (for the most part). I've been reading his blog since 2007 and you know what, he's been right in his predictions pretty much the whole time!
If you think Krugman is speaking out of his hat, who do you recommend instead?
The rate of money supply inflation of Bitcoin is around 12% at the moment. Until 2025 or so, the supply inflation rate of Bitcoin will be greater than 1%.
I fully expect the exchange rate to fluctuate wildly until a much larger supply of fiat and Bitcoin sits on both sides of the exchange order book. As it stands, a moderately-capitalized trader could throw the exchange rate around at a whim.
So this argument seems to be rather popular, and on the surface it does seems to make sense. However, it glosses over an important consideration.
Are you buying goods in USD or BTC?
Now if it's the latter, then yes there may be stronger psychological pressure (even though rationally there is not much difference).
However, increasingly goods are being traded in USD using BTC as a backing, in which case it would make little difference if you spend in USD from a bank account, or USD with a bitcoin wallet. Because it is possible to trade USD for BTC almost instantly. (Let's ignore the issue of wire transfer delays for now, because that doesn't change the overall argument).
Consider the person holding say 200 bitcoins today. In this situation, if the transaction is a small amount (say a cup of coffee ($3), at 180USD/BTC is about 0.016 BTC at todays rate. I'd have no problem spending that.
In fact psychologically it may be more likely that people trade with their BTC "winnings", because like a casino it has been shown that that is treated as more disposable than "real money".
Thus if one is spending a fraction of a bitcoin priced in USD, and this amounts to a small percentage of your overall position, it's unlikely to endure as a significant purchasing disincentive.
Also, I'm happy you're patting yourself on the back for all your training and experience. But you still need to make a compelling argument instead of just saying "Things are just so."
Note, its not that people "don't sell homes", it is that homes are prone to rampant speculation that can bring down the entire industry.
His claim is that a fiat currency (ie: Dollar), can repel the liquidity trap with monetary policy. IE: Carefully controlled inflation or deflation.
Of course the irony is that monetary policy causing unreasonably low interest rates (i.e. controlled inflation) was a large factor of that crisis as well.
Why don't you go through the charts. Find me the year that the Fed caused too much inflation, and then tell me how much the dollar was inflated that year.
I doubt you can, because during the housing crisis, the dollar experienced deflation. The Fed acted swiftly, although not swift enough! The dollar failed to hit inflation targets in 2008-2009 as we experienced -0.4% inflation.
For the 2009 to 2010 years, we only experienced 1.4% inflation. Both years, we missed inflation targets of 3%. Worse, the dollar deflated in value in one year.
Every other year, inflation has been the same as always: ~3% since 1990.
Economic data does not match your words. The US hasn't had inflation over 4% for the last 22 years. There is no inflation problem.
If the goal of ~3% inflation is a poor goal, then tell me why.
See how this game is played?
EDIT: Well, that was probably too mean. So lemme ask you this.
Since you agree with Alan Greenspan so much, please tell me what caused the long-term decline of interest rates. HINT: it wasn't the fed, according to Greenspan. After all, the Fed raised interest rates in 2004 and 2005.
Divisibility acts in opposition to deflation to create liquidity.
The idea is in the future you don't trade bitcoins per se, but microbits, or picobits etc (or whatever they will be called).
Anyway, I'm not sure the expression "liquidity trap" means anything when talking about bitcoins.
It would be interesting to see how a currency with a set rate of deflation instead of inflation worked now. Say your money gained 3% per year purchasing power instead of lost it, everyone would be incentivized to spend or invest it in ways that returned either ROI or utility worth at least 3% per year, or otherwise hoard it. Spending and investment (or at least malinvestment) would slow, but capital formation would increase.
Too bad there's no way to test such a thing, see how it works out in practice. BTC unfortunately does not seem to provide a stable rate of deflation, at least for the foreseeble future.
Nintendo and Sony posting record losses as the Yen continues to get stronger and stronger. The $200 Wii console sold the best in 2010 and 2011, but because the Yen deflated so much Nintendo lost money on the USD -> Yen conversion and overall didn't do so well.
BTC on the other hand, if we reach a steady deflationary state, beats the rate of deflation by definition, and just by you sitting on it. Slightly different situation.
--edit-- Also see here - http://eprint.iacr.org/2012/584.pdf
It seems the ~80% of bitcoin are long-term dormant, so people are just holding on to them, regardless of the reason.
I mean lot of investing/speculation is obviously going on, but is there growth in bitcoin based commerce? That's ultimately the problem I hope bitcoin will solve.
In 2012 they noted that:
“If we sum up the amounts accumulated at the 609,270 addresses which only receive and never send any BTC’s [bitcoins], we see that they contain 7,019,100 BTC’s, which are almost 78% of all existing BTC’s. Due to the way bitcoins can be repeatedly moved to fresh addresses, some of which can be very recent, we can not claim that all these bitcoins are out of circulation. However,76.5% of these 78% (i.e., 59.7% of all the coins in the system) are old coins", dened as bitcoins received at some address more than three months before the cut off date (May 13th 2012), which were not followed by any outgoing transac-
tions from that address after they were received. One can also argue that very old dormant bitcoins were simply abandoned or lost by users who experimented with the system in its early days, when it was very dicult to buy anything or to exchange bitcoins into dollars. To be even more cautious with our estimation of dormant bitcoins, we decided to ignore all the transactions which took place prior to July 18th 2010, when Mt.Gox started its exchange and price quoting services. The sum of the balances of all the addresses which have not been
active since that date is 1,657,480 bitcoins. Clearly, by considering all these bitcoins as "lost" rather than "hoarded" we are underestimating the number of bitcoins which are kept dormant in "saving accounts". By ignoring these very old bitcoins and repeating the same calculation, we found that 73% of all the remaining BTC's were accumulated at addresses which only receive and never send bitcoins, and that 70% of these 73% (i.e., 51%) are dormant bitcoins in the sense that they were received more than three months before our cuto date but
after it became easy to exchange them. If instead of summing the transaction values we sum the nal balances of all the addresses that were active after July 18th 2010 but became inactive in the last three months, we get that 55% of all
coins in the system are dormant in this sense. This is strong evidence that the majority of bitcoins are not circulating in the system, and since it is based on the address rather than the entity graph, this conclusion is not aected by possible
inaccuracies in the way we associate addresses with users.”
I do wonder what "Bitcoin Banks" like Flexcoin do to these statistics. I "feel" like no one really uses Flexcoin, but that would definitely skew the statistics by a lot.
Its a bit unfortunate that there is no real statistic that can stand on itself... But Ron and Shamir's work there is useful.
Many sites have started accepting BTC now. ( http://bitpay.com makes it possible )
Some sites which are quite popular and known
( Not sure if updated , but here is a small list https://www.spendbitcoins.com/places/ )
Spoiler: you can buy aquarium shrimp in Portland right now for .0164 BTC.
Yes, sellers would earn more money but they too are taking that risk if you are one of those who think its a bubble and BTC would collapse badly.
Checkout how bitpay.com works. Its actually nice.
The recent rate of BDD gives some fuzzy picture of current activity though:
You can see that hoarding increased slightly during March (a day destroying more than about 11 million bitcoin days should roughly reflect the market loosening up, destroying less should reflect the market tightening). Early April is also among the fastest periods (over the entire history of bitcoin) of BD destruction.
There are more bitcoin transactions... but not enough to qualify the 20x increase in value the last three months.
Between February 2012 and today, the number of Bitcoin transactions/day has not grown at all, while Bitcoin prices have skyrocketed by 1000%.
Note they also use the Ƀ (B with stroke) to represent Bitcoin. Kudos to ECOGEX for their discussion a few weeks ago that set this in motion (https://news.ycombinator.com/item?id=5451084).
Source: I've been studying and speaking on Bitcoin since 2010. (http://vimeo.com/27653912)
Congrats on using yourself as your own source. Don't beg the question and stop trolling.
Bitcoin surprisingly doesn't have a standard in its logo and symbol usage. Everybody said BTC for bitcoin though.
No, I noted they used Ƀ and gave the previous article props for bringing that symbol more recognition. Did I say they invented it? No.
All of you need to stop trolling, comments like the ones in response to my OP are what ruins HackerNews.
Perhaps switching to bid/ask would be a good idea to clear up the confusion, but it's potentially more confusing to people unfamiliar with financial markets.
For price/trade data most (all?) exchange have APIs (e.x. https://en.bitcoin.it/wiki/MtGox/API)
For the other data (non-market transactions etc.) you can run the Bitcoin-qt client on virtually any hardware and then connect to its built in JSON API.
I suppose if the JSON endpoints support CORS that'd be as good...
However, my (unauthenticated) test attempts against blockchain.info and bitcoincharts.com, with the "Origin:" header, didn't give the right "Access-Control-Allow-Origin:" header in response.
Coming back to if withdrawn in as local currecny.
Income that is earned through the exchange of services with another person, whether in the form of bitcoins, any other currency or even barter; is included in gross income, and would be subject to income tax.
So practically bitcoins could be subject to self employment tax if BTC is considered a commodity like gold.
If considered as a currecny or a debt then the gained currency could be taxed based on market value at the end of each tax year. Also, IRS never conisders currency as long-term investement so if treated as another currency then it would be taxed as holding an account in any non-functional (foreign) currency.
All this is just assuming its your owned BTC via trading/exchanging and not via business which accepts BTC or via selling items online or via mining.
Edit : Forgot to answer your question "Where can I buy BTC?"
Here are few reliable places
https://blockchain.info/wallet/sms-phone-deposits ( Hybrid wallet + small exchange )
Honestly if I had $10 million in BTC gains I'd get a tax professional and seek a private letter ruling from the IRS to clarify the situation. I imagine that misreporting $10 million of income would be an unpleasant experience.
All of those would be taxable too. The only question is when: every year at their current market value, or when traded for (official) currency.
What I meant to say for businesses accepting BTC would have other and extra taxes apart from Income like Sales/Excise
For miners I assume it would be either considered as a owned commodity or intagible personal property.
I would assume just like any other commodity the current market value is considered if you have not traded in local currency.
Also if you have bought BTC and sold to make some profit by trading, there would be commodity tax.
As for tax, this is probably taxed as any other profit you make on buying and selling stuff, at least in my country (Norway). If I buy an art painting and sell it with a profit, I am obliged to inform on this on my tax sheet. And the same goes for bying/selling other currencies as well, but bitcoins are harder to track for the government (but not impossible).
Not sure what the tax situation would be if you mined them - perhaps they would count as income?
The only thing I'd be sure of is that if you did have $10m worth of coins in the UK then you'd be silly not to speak to an accountant who specialises in tax planning for individuals - excellent ones do exist!
You can't. You couldn't convert even a small slice of this amount without collapsing the market. It's simply too illiquid.
> and would the governments tax you?
I'd imagine (in the UK at least) that they would be subject to capital gains tax.
I have spent some time trying to understand the various hash rate estimates people come up with. Basically, I've determined that they're all 100% bogus. People like to work from the difficulty using bad/incorrect statistics since that's the most obvious way to get to something in the units of hashes/s, but I can never understand exactly what the process is. I'm genuinely curious to know what people do in practice, since I'm genuinely curious to know the "real" answer.
The current target hash is "0x000000000000022FBE0000000000000000000000000000000000000000000000"
This means that to solve a block, you must find a SHA-256 hash of that block's transactions + nonce that hash to a value equal or below that target. Since the output of a SHA-256 hash is essentially random, the probability of finding a nonce that evaluates to hash at or below that target is roughly [target]/[possible sha256 outputs] or 3.51e60/2^256, or 3.034e-17. On average, that means it takes 1/3e-17 or 3.3e16 hashes per block. To calculate average hashes per second of the network, we look at number of blocks solved in the last x unit of time (if you want a 24 hour average, take the number of blocks in the past 24 hours). As of the time of this post, 170 blocks have been solved in those 24 hours. This implies an expected 24*3.3e16 or 8e17 hashes have been computed. Divide by 86400 (seconds in a day) and you get 9.26e12, or 9.26 TH/s. The site reports 6.5 TH/s, presumably because it uses a longer window than 24 hours (probably 7 days).
Just because it's a statistical average instead of the exact rate doesn't mean it's 100% bogus. If you want, you can use fairly standard statistical models to find an acceptable error margin.
You're right that you can compute the N-second average rate easily. But nobody reports the "network hash rate" as such. And since the denominator matters a lot in determining what the number means, pretty much all the numbers you find out in the world are (1) misreported and (2) bogus.
When I search for "bitcoin network hashrate" on google, the first link is http://bitcoin.sipa.be/, which does in fact report the N-second average rate. It reports the 7-days, 14-day, and 30-day average rate.
The chance of two hashes being equal is small but the number of two hash pairs grows exponential to the number of hashes.
For a 256-bit hash, you expec a collision in a group of 2^128 hashes. That is still huge. Absent a weakness in the hash being found, it's unlikely anyone will ever generate two colliding hashes.
There is a linear relationship between the hash rate and the difficulty (there is further discussion at that link).
It's in your last sentence that you go wrong. There's a relationship between the number of expected hashes per new block and the difficulty. That tells you something about the hash rate, but not the rate itself. Actually, it tells you something about the number of unique hashes being tried per new block (in expectation). And for some applications, that may, in fact, be what you care about.
Specifically, the appearance of new blocks is, if you like, a random variable with an exponential distribution. You can, in principle, estimate the rate parameter for this distribution using the difficulty and the timestamps in the Bitcoin log, but it's not straightforward. The last time I got into it, I was halfway through building a Bayesian estimator for the rate parameter using the log before I had to give up and move on to real work. I'll do it soon.
In what applications would the likely immediate hash rate be more useful than the historical average hash rate? I guess the obvious one is turning some bit of mining hardware on and off.
Chrome 26.0.1410.43, Linux
Coins in circulation 10994200
that's 201798541 ɃTC
edit: ah, it's showing USD value but putting BTC as the currency
blank page or other such confusing non-function : bad
"your browser sucks" - page still doesn't work : poor
"please enable scripts or get a newer browser" - page still doesn't work : fair
"please enable scripts or get a newer browser" - page works for non-js users but is somewhat crippled : good
page works perfectly without js : excellent (you could use headers to have it auto reload every few seconds?)
Whats the tradeoff in terms of development time vs. supporting a small set of users?
A transaction can be made up of a different number of inputs, if the inputs don't exactly match the output (the amount you want to send), there is "change".
The change is sent to a new address (belonging to the sender). So blockchain.info and this site are guessing as to which of the outputs was the intended sending amount and which was the change.
But since bitcoin transactions work by sending "change" back to yourself this value is not that relevant. In most cases 90% of the transaction amount is sent back as change.
If the ratio of 'money spent'/'total volume' is 1/5, does that mean that people are, on average, spending one fifth of their wallet?
This means that the Bitcoins in somebodies wallet is conceptually the list of transactions that have been made to them (that haven't been spent yet). It also means that a nice big graph can be made of how money is (or isn't) flowing through the system.
Bitcoin wallets generally contain multiple addresses, and transactions will be created with inputs associated with only a subset of these addresses.
> Coins in circulation
> that's 224,516,226.80 kr
That's not right, $2,049,318,880.00 ~ 13,192,490,290.00 SEK
For example, many heard about "some guy bought a $25 pizza with 10,000 bitcoins", but no one has thought about what this means. It means someone now has that 10,000 "coins" (which is close to 2'000,000).
This also means someone had this amount (and possibly much more).
And, finally, no one questions who posseses the first "coins".
That's why the creator is anonymous.
Just my 2 cents.
This is thoroughly documented https://en.bitcoin.it/wiki/Mining
So, this is a free Out of jail card.
While he may be in possession of the earliest coins, he obtained them after the public release of the software, as it would have been impossible for him to include that quote in the genesis block before the day he announced the release to the whole internet.
The quote: "The Times 03/Jan/2009 Chancellor on brink of second bailout for banks"
You could have had any of those blocks. I had several.
People trading Bitcoins and working on it are doing no harm to anyone, so I find it odd that anyone could get upset about it. It's like getting upset about people who trade dolls or toy soldiers or rare oil cans.
But, the "Ponzi scheme" people are essentially engaging in name calling, because its definitely not a Ponzi scheme. There is no Ponzi (or Madoff) at the top running the scheme.
Better to rationally call it what it is: an enormous ramp in the spot price driven almost purely by speculation.
Some people say it's a classic bubble. Bitcoin already had one of these in 2011, this could be another.
Some people say bitcoin is different than other commodities, that this is not a bubble, but more of a "tipping point" event where bitcoin has gained enough traction/attention that it is rocketing up to its "true" value.
Pick your side, and if you're so inclined, place your bets.