tag:blogger.com,1999:blog-6704573462403312459.post6200130741758933169..comments2024-03-19T07:46:09.811-04:00Comments on Moneyness: Bitcoin's bootstrapsJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger49125tag:blogger.com,1999:blog-6704573462403312459.post-35445325397789202832018-12-01T10:18:12.071-05:002018-12-01T10:18:12.071-05:00But there is no reason for exchanging something th...But there is no reason for exchanging something that is useless. How can a useless thing have exchange value? At least some utility or future utility has to be foreseen based on the good´s properties. Utility always preceeds value. <br /><br />Being useful as medium of exchange is completely different concept from having exchange value. The former is a characteristic feature of money, the latter is a common characteristic of all economic goods. mpolaviejahttps://www.blogger.com/profile/07019090624748286662noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-5183638144601873582018-11-30T16:06:13.157-05:002018-11-30T16:06:13.157-05:00"So if exchange is an important need, anythin..."So if exchange is an important need, anything that might fulfill that need is useful on itself, no need to look for other different uses. "<br /><br />Yep. If something has exchange value, than of course it is useful. Think of the distinction this way. If something has only exchange value, than the only reason it is useful is because its owner can eventually trade it away. A house has both use value and exchange value, but if the state declared that its owner could never sell the house, and neither could the owner's children, then that would extinguish the house's exchange value, and it would be a bit less useful, and so its price would decline. <br /><br />It's a helpful distinction to make because we can ask how items that only have exchange value (like bitcoin) might emerge, how their price is determined, and what might happen with them in the future.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-47966215849583879732018-11-30T10:11:32.380-05:002018-11-30T10:11:32.380-05:00So if exchange is an important need, anything that...So if exchange is an important need, anything that might fulfill that need is useful on itself, no need to look for other different uses. mpolaviejahttps://www.blogger.com/profile/07019090624748286662noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-5089261319737372052018-11-30T10:09:15.854-05:002018-11-30T10:09:15.854-05:00Ok. That´s a bit confusing for me becuase it is no...Ok. That´s a bit confusing for me becuase it is not within any of the generally accepted definitions of fiat. But for the sake of the debate I´ll take the definition instead of the term. <br /><br />The definition is "the thing in question has no use value".<br /><br />In that respect I refer to the text in my comment below:<br /><br />The need for exchange is one of our most important needs. Without exchange our access to economic goods produced by others would be extremely limited, we would have very little division or labor, we wouldn’t have prices, without prices the economic calculus and coordination would be impossible (Which Mises accurately demonstrated, shame that he was not so good at monetary theory with his very unfortunate and unnecessary Regression Theorem).mpolaviejahttps://www.blogger.com/profile/07019090624748286662noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-32706939397937135762018-11-30T09:30:33.258-05:002018-11-30T09:30:33.258-05:00"I understand that by fiat object you are ref..."I understand that by fiat object you are referring to the fiat definition of “creating something without effort”, which would mean that all raw unprocessed natural resources including gold would be fiat"<br /><br />No, that's not the definition I am using. In the context of this post, fiat means that the thing in question has no use-value, only exchange value. Uselesstainium if fiat. You can touch it, it costs lots of resource to mine it out of the ground, but it has no intrinsic use. If it trades at a positive price, this is pure exchange value. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-74438481482289759192018-11-30T07:53:06.690-05:002018-11-30T07:53:06.690-05:00More on the same issue:
The need for exchange is ...More on the same issue:<br /><br />The need for exchange is one of our most important needs. Without exchange our access to economic goods produced by others would be extremely limited, we would have very little division or labor, we wouldn’t have prices, without prices the economic calculus and coordination would be impossible as demonstrated by Ludwig Von Mises. So qualifying as worthless or useless something that its only use is being medium of exchange is an extremely reckless claim. Here I explain a bit further (2 min read):<br /><br /><a href="https://medium.com/@manuelpolavieja/money-bitcoin-and-social-consensus-505cc6bbc1c3" rel="nofollow"> Money Bitcoin and social consensus </a>mpolaviejahttps://www.blogger.com/profile/07019090624748286662noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-51577267823307769002018-11-30T06:22:41.080-05:002018-11-30T06:22:41.080-05:00I understand that by fiat object you are referring...I understand that by fiat object you are referring to the fiat definition of “creating something without effort”, which would mean that all raw unprocessed natural resources including gold would be fiat, but I suspect that if you qualify Bitcoin as a fiat object is precisely because you thinks gold is not fiat. So the only explanation I can think of is to justify gold is not fiat is the worst I can imagine, which is that as raw gold is barely available for use, the **effort** (costs) involved in mining and refining is what makes it useful. This is labour theory of value, which I fully reject. <br /><br />The reality is that both Gold and Bitcoin are useful because of its natural or artificial intrinsic properties (portable, divisible, difficult to fake, etc), no matter the costs or effort involved in their production.<br /><br />Here I explain with more detail and I also address the other definitions of fiat.<br /><br />https://medium.com/@manuelpolavieja/bitcoin-is-not-fiat-7d9864da32e4<br />mpolaviejahttps://www.blogger.com/profile/07019090624748286662noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-23393922836657502842016-05-09T11:30:06.394-04:002016-05-09T11:30:06.394-04:00"Both solve the circularity problem in differ..."Both solve the circularity problem in different ways."<br /><br />Each versus both: They *each* solve the problem in a different way. (They *both* solve it in the same way.)gcallahhttps://www.blogger.com/profile/10065877215969589482noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-61193587922477616932014-01-31T10:23:34.670-05:002014-01-31T10:23:34.670-05:00A Ripple gateway in Singapore is now issuing IOUs ...A Ripple gateway in Singapore is now issuing IOUs backed by gold. It combines the stability of gold with the low transaction costs of cryptocurrencies. It will be very interesting to see how well it will do as a bridge currency compared to Ripple's native XRP.<br /><br />http://www.coindesk.com/bullion-exchange-brings-ripple-physical-world/Martijn Meijeringhttps://www.blogger.com/profile/12081666469671666008noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-26583184716130131662014-01-25T14:52:02.877-05:002014-01-25T14:52:02.877-05:00JP, Was thinking about this while running. Do you...JP, Was thinking about this while running. Do you think the tactics of monetary policy (targeting) is really a bootstrapping problem as well? Using forward guidance, asset purchases/disposals signals, etc., like a stock/art promoter to manipulate the target value? I wonder if the Fed should use more of their dirty market manipulation tactics: phantom trades between market desks (to push key indicators with narrow markets like 30 yr TIPS), unconstrained/unpredictable QE rather than uniform monthly purchases, manipulating securities lending, selected futures manipulation (commodities, fed funds)?jt26noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-64193035381415822842014-01-24T17:46:50.455-05:002014-01-24T17:46:50.455-05:00My memory of notgeld is that they were IOUs of sta...My memory of notgeld is that they were IOUs of states and cities, often denominated in odd units like rye, gold, or US dollars. So I don't think they were just coloured bits of paper. One thing that surely gave them currency was that the Reichsbank agreed to clear & settle approved notgeld at par with official reichsmarks.<br /><br />Let me double check my memory.... aha, here is a quote from Adam Ferguson:<br /><br />"Because the Reichsbank's printing presses and note-distribution arrangements were insufficient for the situation, a law was passed permitting, under licence and against the deposit of appropriate assets, the issue of emergency money tokens, or Notgeld, by state and local authorities and by industrial concerns when and where the Reichsbank could not satisfy employers' needs for wage-payment. The law's purpose was principally to regularise and regulate a practice which had gone on extensively for some years already, with the difference that authorised Notgeld would now have the Reichsbank's guarantee behind it."<br /><br />So bitcoin is something qualitatively different from notgeld since the latter weren't bootstrapped (although I'll grant that unemployment and a shortage of liquidity could explain why each have grown so fast)JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-56157819671215811292014-01-24T11:44:22.101-05:002014-01-24T11:44:22.101-05:00In terms of the 1930's currencies, I was think...In terms of the 1930's currencies, I was thinking more along the lines of notgeld currencies (http://en.wikipedia.org/wiki/Notgeld).<br /><br />Most were simply paper notes, denominated in the legal tender units, but issued by non-legal creditors and usually non-redeemable. They were simply locally/communally agreed to be valuable and exchangeable.<br /><br />Bitcoin is like notgeld or "emergency money" for the unemployed 25-34 demographic who are being hit hardest by systemic unemployment. The notgeld of this demographic just happens to be taking the form of something unique and innovative like bitcoin because we like computers and digital stuff :)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-77561029861964448572014-01-21T19:12:07.761-05:002014-01-21T19:12:07.761-05:00BTW he discusses the bootstrapping problem.BTW he discusses the bootstrapping problem.jt26noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-40019002199968493552014-01-21T19:11:18.533-05:002014-01-21T19:11:18.533-05:00Interesting editorial from MARC ANDREESSEN (I have...Interesting editorial from MARC ANDREESSEN (I have a huge respect for this guy) ...<br />http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters<br /><br />After thinking it over (and with the good comments from Martijn & JP), I think the killer app for bcoin is: an open-source (programmable|) payment system allowing the disaggregation of payment from services (unbundling). Now the question is who will be the next Google or Pets.com? I don't think bcoin itself will be where the value will be created. The first group of winners will be those providing new services with no analog today. The second group will be enabling infrastructure (a global FX exchange, probably based in an off-shore tax haven) and the ones that eat the value add of credit card companies, payment processors, and bundled "reputational/3rdparty" services. The third group will be the companies that specialize in anonymizer services (and defeating the same!), money laundering (using e.g. real trade) etc.. Any thoughts?jt26noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-1699053460624049202014-01-21T16:43:10.093-05:002014-01-21T16:43:10.093-05:00Technically, there are some complemetary currencie...Technically, there are some complemetary currencies that are not IOUs. The Ithaca Hours, for example, is not an IOU and neither is WIR (even though the latter is created through loans). But, they are "kind of" pegged to the dollar/franc.Peter Šurdahttps://www.blogger.com/profile/17346161576941109337noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-35208553465862288582014-01-21T07:27:53.007-05:002014-01-21T07:27:53.007-05:00Interesting point.
But it still doesn't addr...Interesting point. <br /><br />But it still doesn't address my points. Things like stamp scrip, LETS, and other community currencies are not bootstrapped assets. They are essentially promises or IOUs, and this feature ensures they achieve a positive value. Bitcoin isn't an IOU. It's a purely fiat object, which (I think) is why it rises and falls so markedly. Stamp scrip and the rest are/were stable currencies because they aren't/weren't bootstrapped assets, so they are neither volatile, nor can their value be competed down to $0 as is the case with bitcoin.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-16370828171586778832014-01-21T02:27:38.803-05:002014-01-21T02:27:38.803-05:00You ought to consider Bitcoin as a community respo...You ought to consider Bitcoin as a community response to economic depression. Many alternative currencies popped up in the 1930s. In a way it is a natural response of non-credit-worthy people to low money velocity. An independent currency can increase their liquidity and thus their ability to participate in markets, which they had been shut out from prior due to loss of income from the established currency.<br /><br />I think bitcoin will be successful (as in: significant use in exchange) for as long as the economy fails to recover and unemployment is elevated. And considering the future prospects of oil production, the horizon of economic recovery is receding faster than we are moving toward it.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-19967634381671381012014-01-20T18:55:23.325-05:002014-01-20T18:55:23.325-05:00"I thought that selling bitcoin (and buying) ..."I thought that selling bitcoin (and buying) was supposed to be their prime use ;)"<br /><br />Is buying and selling GBP, Euros and Yen the "prime use" of dollars?<br /><br />"Geek cred would be help to regulate bitcoin's price if you were expected to buy it for a fixed 1BTC"<br /><br />Exactly. There's a finite supply of BTC.Anonymoushttps://www.blogger.com/profile/07764121138421838787noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-79925395711205325772014-01-20T16:50:19.167-05:002014-01-20T16:50:19.167-05:00What's unique about Reality Keys is that they ...What's unique about Reality Keys is that they merely "certify" that an event happened. This can be used as an input to Bitcoin scripts, causing money to be transferred to one address or another based on the certification. RK need not know the content of the transactions and cannot run off with the funds. RK is trusted only to be a reliable certifier of information, the Bitcoin network itself is the trusted third party that keeps the funds until either the true or false key is released.Martijn Meijeringhttps://www.blogger.com/profile/12081666469671666008noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-61501099405896809102014-01-20T12:16:25.407-05:002014-01-20T12:16:25.407-05:00Maybe the art market has some insights on bootstra...Maybe the art market has some insights on bootstrapping, marketing, liquidity, store of value ... currency for rich people ... http://blogs.reuters.com/felix-salmon/2014/01/17/adventures-in-art-market-commodification-enhanced-hammer-edition/jt26noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-30118668991822798262014-01-20T07:08:02.858-05:002014-01-20T07:08:02.858-05:00Your bootstapping point does indeed still stand. I...Your bootstapping point does indeed still stand. I mentioned the intrinsic value more because I think it suggests the combined market cap of all cryptocurrencies won't go all the way to zero eventually.<br /><br />So what was it that got Bitcoin bootstrapped? I think people started mining Bitcoin because in their judgment it was technically capable of serving as a global payment mechanism and because of the 21M cap it would have to appreciate spectacularly to get to that point.<br /><br />The uncertainty was more one of mass psychology, could the majority be convinced it was technically sound, and could they be persuaded everybody else would start using it too? That's still an open question, but even if Bitcoin ultimately fails it's been a remarkable achievement so far.<br /><br />And initially mining was almost free, so it was only a small bet with a very high upside potential. In essence that is still the value proposition. On the one hand the price has increased dramatically, so the potential upside has been reduced considerably, but is still large. On the other hand, adoption and ownership have also increased, thus increasing the plausibility it could see widespread global adoption.<br /><br />So while the general timestamping functionality is technically at the core of the Bitcoin protocol, you're right it's not what people had in mind when they got into Bitcoin. It has some finite value and companies like GlobalSign and DigiStamp provide similar services. It's possible Bitcoin and similar systems could disrupt that market.<br /><br />Is that market worth the $11B market cap of Bitcoin? I don't think so, at least not yet, that market cap is still mostly speculative. The interesting thing is if you start using such technology for timestamping ordinary fiat transactions (or stock, bonds, gold etc) . You can do that with Bitcoin, but Ripple is specialised for it.<br /><br />I think your comparison with a subway token is appropriate. You need a small amount of XRP to start using Ripple (currently 31 XRP ~ $0.67) and the functionality of Ripple is very useful for fiat payments, especially across borders, regardless of the price of XRP. But the price itself is of course among other things a function of its utility, so that could make XRP more stable in value than Bitcoin.<br /><br />On top of that Ripple Labs has the ability to practice a monetary policy of sorts given that it still controls most XRP in existence. It could use that to further stabilise XRP and could be doing so already.<br /><br />But I think the decisive factor is the automatic currency conversion that will lead to extensive use of XRP without users even needing to be aware of it. If you start selling your wares abroad through Ripple by holding an account at SnapSwap in order to receive USD IOU payments, you will be generating additional use of XRP whether you like it or not.<br /><br />I don't know if there is enough liquidity to make the conversion rates interesting at the moment, but since international wire transfers are very expensive for small amounts they might be.Martijn Meijeringhttps://www.blogger.com/profile/12081666469671666008noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-81137297972438589292014-01-19T20:41:39.904-05:002014-01-19T20:41:39.904-05:00Even in the gold standard days the contract was no...Even in the gold standard days the contract was not set in stone -- currencies would be revalued relative to gold, and sometimes were made inconvertible for periods of time (the pound was delinked from gold from 1796-1821). Sometimes they'd be switched over to silver convertibility or vice versa.<br /><br />A central bank abandoning inflation targeting would be very much like the experience of the pound going off of gold. There would be a lot of uncertainty about the nature of the IOU. One focal point would be the possibility of the central bank readopting an inflation target or gold redemption at some point in the future, assuming that it retained sufficient assets to enforce that possibility. But without clarity, the value of the IOU would probably fall.<br /><br />Could a new currency debut if it promised inflation of 1-3%? Good question. I think so, but don't hold me to that answer until I can find a good example.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-46008432994483576682014-01-19T20:24:55.071-05:002014-01-19T20:24:55.071-05:00Could be. I lean towards the theory that credit ca...Could be. I lean towards the theory that credit card fees are so high because credit card companies are entrenched oligopolies extracting rents out of merchants.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-43010510362856192512014-01-19T20:19:59.300-05:002014-01-19T20:19:59.300-05:00Interesting. However my point still stand that bit...Interesting. However my point still stand that bitcoin very probably began as a bootstrapped asset. The first instance of Bitcoin carrying a positive price would not have emerged because people wanted a token to pay for valuable time-stamping services. Secondly, now that bitcoin has been bootstrapped and its time-stamping qualities are emerging, is it the case that the cost of replicating these services comes out to $20b? Can't all the other coins now in existence replicate these same services? If these services are indeed that valuable, then we've got Cowen's "semi-stability". I'm not convinced.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-66051319449804420572014-01-19T18:46:11.366-05:002014-01-19T18:46:11.366-05:00You both raise an issue re;trust.
JP. Most of ...You both raise an issue re;trust. <br /><br />JP. Most of the 3% that PayPal charges (directly and indirectly via the credit card co's interchange fee) is perceived value of anti-fraud (or reputational) insurance for the seller and buyer. Just look at the growth of third-party sellers on Amazon Marketplace or eBay (and the buyer/seller guarantee).. <br /><br />MM. Escrow.com offers human escrow services. Reality Keys looks like just a (futures) clearing house for prediction markets. Also, how is this different then any gambling site or off-track betting? Again there may be the advantage of fees but this is not bcoin specific.jt26noreply@blogger.com