tag:blogger.com,1999:blog-6704573462403312459.post6622543740634670295..comments2024-03-28T06:53:23.473-04:00Comments on Moneyness: Chain splits under a Bitcoin monetary standardJP Koninghttp://www.blogger.com/profile/02559687323828006535noreply@blogger.comBlogger35125tag:blogger.com,1999:blog-6704573462403312459.post-19244880243889220872017-08-28T10:19:25.827-04:002017-08-28T10:19:25.827-04:00We use metres as a unit for measuring. You can'...We use metres as a unit for measuring. You can't own 1 metre. But you can own a ruler that measures 1 meter. <br /><br />Same thing with money. Both Haitian dollars and U.S. dollars are measuring units. There is no way you can own a Haitian dollar. You can, however, own a dollar bill. That's all I meant by the distinction between conventional and unconventional money.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-11549096030136628422017-08-28T02:52:16.858-04:002017-08-28T02:52:16.858-04:00Excellent post,
I just quibble with the term "...Excellent post,<br />I just quibble with the term "unconventional money" and how it has no physical or digital token behind it.<br />Isn't bitcoin - just like the Haitian dollar - just a derivative? Which means that without the underlying, i.e. conventional money, it would/could not even exist? <br />Hence there is (or hast to be?) a link to a physical or digital token, albeit one or several steps removed.<br />What we are observing in the Haitian and Bitcoin example can best be classified as derivative prices. People are speculating on how much dollars they will get in the future.<br />Or am I missing something?Viennacapitalisthttp://viennacapitalist.comnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-41802829593551624982017-08-28T02:25:22.169-04:002017-08-28T02:25:22.169-04:00If I've understood Anonymous correctly, he mea...If I've understood Anonymous correctly, he means that the split was by many seen as a "moment of truth" -- anything could have happened, much like when year 2000 arrived. It was all rumors and speculation.<br /><br />We shouldn't expect price continuity between pre-split and post-split, as in your example. BTC and BCH prices holding up after the split should be interpreted as a sigh of relief. The world didn't end.Antti Jokinenhttps://www.blogger.com/profile/04778440661520118404noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-81953510934452242532017-08-26T18:43:43.002-04:002017-08-26T18:43:43.002-04:00"...but instead looked at BCH as being ripped..."...but instead looked at BCH as being ripped out of the real value of BTC."<br /><br />Ok, let's rethink this.<br /><br />Bitcoin is worth $1000. A BCH split is proposed. A well designed and fully accessible futures market for BCH is established. The price of BCH in that market rises from $0 to $300. <br /><br />There are two responses that delimit the extent to which the price of pre-split bitcoin will move. A: the price of pre-split bitcoin falls by $300 to $700 as the expected value of the BCH is "ripped" out of it. Or, B: the price of pre-split bitcoin rises by $300 to $1300 as the expected value of BCH is "baked" into it. <br /><br />The split occurs. If A, the price of BTC immediately falls from $700 to $400. If B, the price of BTC falls from $1300 to $1000. For both A and B, this last $300 fall has to occur to prevent a free lunch. Without it, people will buy BTC a moment before the split (paying $700 in the case of A, or $1000 in B), and exiting with a free lunch a moment after the split (getting $1000 in the case A, and $1300 in B). JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-86484675282231303272017-08-25T14:38:14.633-04:002017-08-25T14:38:14.633-04:00I'm sure some thought of it as a free lunch, b...I'm sure some thought of it as a free lunch, but what I am trying to show is that it was more of a fear that BCH would actually damage BTC, resulting in two individually weaker currencies. BCH and BTCb both being less valuable and weaker than BTCa, even if combined. <br /><br />The problem I see is that future markets existed in multiple different areas and due to deposit/withdraw restrictions were essentially in isolation from one another (and devoid of arbitrage). These price disparities mean that the BTC being traded could not have a baked-in price, or if it did, it was not at all consistent as some one could bake in BCH value from one future market while someone else could bake in the value from another. All while others simply shorted it. (I would love to get my hands on Bitcoin shorts data prior to the fork).<br /><br />If the futures markets truly were used as baked in prices, we would have seen BTC trading at over $900 its post fork price, or a different rate that held more volume, etc. Which did not happen. What happened instead was BTC trading slowed leading up to BCH, and price actually decreased, most likely due to uncertainty of how big a fork this would be; and what damage it would have on BTC.<br /><br />There was rumors among many of the traders (more like FUD) that someone like Roger Ver, who is a strong BCH proponent and took his side in the "Bitcoin Civil War", has allegedly 100,000 BTC and could take advantage of the shallow markets prefork and the increased block size, move his entire fortune to exchanges and single handedly sink BTC to $1 after the fork, while doubling his BCH supply. Thankfully that didn't happen, but we had entire teams trying to track his accounts on the blockchain to provide early warning if he made major moves. <br /><br />"implies that the market was content to assume that no premium whatsoever was built into bitcoin going into the event i.e. it assumes a free lunch."<br />Or that there was no premium built in because hard forks are inherently damaging to the original currency. Hard forks themselves require miners and nodes to leave the original currency to work on the new one. I don't believe that the prices and volumes show that traders saw BTC as having BCH baked in and having a free lunch, but instead looked at BCH as being ripped out of the real value of BTC. damaging both currencies and making them both worse off than prefork.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-13550075356972807822017-08-25T13:26:32.206-04:002017-08-25T13:26:32.206-04:00"All these culminate into an incredibly compl..."All these culminate into an incredibly complex and inaccurate method of pricing for a coin, making the Baked-in idea less likely as futures from different sites had different prices and so on, so that BTC price (if people attempted to bake in BCH) would have no clear indicator of a price to bake in."<br /><br />Oh, no doubt. It was a complex process, and you give a lot of nice institutional detail.<br /><br />But you go too far in saying people have *no idea* about these things. Markets find prices for future events all the time (just look at how prediction markets can arrive at a full set of prices for 2020 presidential candidates). While the price that would have been baked into bitcoin pre-split required inaccurate methods, <i>some</i> sort of price would have nevertheless been baked in. *No idea* implies that the market was content to assume that no premium whatsoever was built into bitcoin going into the event i.e. it assumes a free lunch.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-13672882768462967292017-08-25T08:56:59.751-04:002017-08-25T08:56:59.751-04:00I think we will see cryptocurrencies gaining more ...I think we will see cryptocurrencies gaining more "value" the more we see the crypto market moving away from simply currencies and more to blockchain assets. The Hybrid coins will do the best (Ethereum, I say this because ERC20 and ERC23 assets use Ethereum as "gas" to send their tokens, the success of these other tokens directly results in the success of Ethereum. Like Ford sales benefiting oil suppliers.) though even Bitcoin is having a smart contract layer being built for it that wont require a fork (research Rootstock or RSK). <br />But we are seeing businesses springing up giving real world applications to blockchain technologies that is more than just a medium of exchange, Golem provides Fog computing power, Augur is making wisdom-of-the-crowd prediction markets, Factom is creating auditable record keeping and notary services, Ripple is providing interbank transfers like SWIFT, Komodo (Supernet) is working on anchoring multiple blockchains and currencies to one another for more security and privacy, each one of these can gain value in traditional markets for their services or products as well as their gains in the crypto markets. It's going to be a wild ride, but I think crypto isn't as big as we make it out to be, not yet anyway.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-46478757016690489552017-08-25T08:56:35.200-04:002017-08-25T08:56:35.200-04:00Hi all, I'm the same anonymous as above:
&quo...Hi all, I'm the same anonymous as above:<br /><br />"it's 1999 in blockchain land" Crypto Market cap is about $150b compared to dotcom bubble of well into the trillions. If crypto pops it wont take the entire economy with it like dot com bubble. hell Apple has more than twice as much CASH than the entire cryptocurrency market cap. So I think crypto has a long way to go before it can be compared to the Dot com bubble.<br /><br />"You say that the market would have no idea what Mithril is worth, but say a futures market emerged to discover the price of the Mithril coin, sort of like the BCH futures market that ViaBTC set up, then that solves that problem, no?" <br /><br />I don't believe so, no. Problem with the futures markets, and early post fork trading, is that there were many variables that make any accurate estimate of the potential price unpredictable and futures unreliable. For instance most (possibly even all) exchanges that were initially supporting the BCH chain or futures had only supported BCH internally, meaning for BTC accounts held on site, and did not open deposits or withdrawals until much later. This effectively locked supplies of BCH available on an exchange but allowed anyone on the exchange to try and purchase that limited BCH. This floats the price, and prevents arbitrage opportunities by moving BCH to higher priced exchanges. Because volume was limited on these higher priced sites (some trading $300 higher than others, had few BCH in volume, this was denoted by an asterisk on Coinmarketcap.com) it also allowed the price to stay "stuck" at a high level, a few trolls had jokingly opened up a futures market for BCH on a decentralized exchange and traded back and forth for up to 10X the price on other exchanges, until someone else on the site bit on the inflated price and couldn't sell it because the buyers disappeared.<br /><br />Along with the locked supplies (but tradeable) is locked supplies (untradeable) these include any and all bitcoin wallets off exchanges (as exchanges locked deposits of BCH) and also BTC held on exchanges that would not host BCH (coinbase, Poloniex, etc). This meant that the available supply of BCH was even smaller than BTC. All these culminate into an incredibly complex and inaccurate method of pricing for a coin, making the Baked-in idea less likely as futures from different sites had different prices and so on, so that BTC price (if people attempted to bake in BCH) would have no clear indicator of a price to bake in.<br /><br />Along with this Futures market disparity is, as I said, the potential loss of infrastructure for BTC during the hardfork. Essentially hashing power leaves BTC to work on BCH blockchain and depending on how much ultimately decides to leave (on fork day) there is no telling how BTC or BCH price/functionality would work. Which leads to uncertainty and decrease in buy orders and increase in sell orders, lower BTC price prefork and higher prices post fork when it was determined the scale of damage done to BTC afterwards. Or in other words the exact opposite of the effects of traditional baked-in theory (I'm not sure how traditional baked in is?). <br /><br />I think the baked-in method applies well for shares of companies breaking their stock into two separate stocks, or two separate companies, as the assets can be known for the split (though speculative nature will of course play its part). I think a major factor of the pricing is the fact that splits of companies will likely list both stocks on a single exchange, and that exchange be a major one (NYSE, Nasdaq) which removes the barriers that we see with these hundreds of exchanges for Cryptocurrencies, and doesn't allow for arbitrage, or in BTC/BCH case, restrict arbitrage. The baked-in method works, I just don't think it's applicable in this case.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-68260581364437306332017-08-24T23:06:53.298-04:002017-08-24T23:06:53.298-04:00Jason, you could be right. And yes, there could be...Jason, you could be right. And yes, there could be some collector/ideological demand from the plunge protection team. When it comes to cryptocurrencies, I'm only 59% confident of my conclusions.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-51455772881945989942017-08-24T15:23:10.720-04:002017-08-24T15:23:10.720-04:00This is where I differ from you two. I'd bet l...This is where I differ from you two. I'd bet long on a few of these coins being worth something even after the bubble pops and speculators leave. JP has talked about an ideologically motivated "Bitcoin plunge patrol" holding up the price, but I think it goes deeper than that. Demand for a borderless digital store of value looks durable. Black and grey market demand for a wire service not run by banks looks durable. If some of the next gen Internet projects being built on Ethereum come to life, such as cheap distributed file storage or uncensorable prediction markets, that's real value creation.<br /><br />Don't get me wrong, it's 1999 in blockchain land. This is going to be a bloodbath. But like an dot-com bear laughing at the idiot VCs who gave money those two Stanford grads to go create the 37th search engine, it's easy to lose sight of opportunity amid madness.Jason Treithttp://tagfu.orgnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-72951660742693577362017-08-24T14:02:16.221-04:002017-08-24T14:02:16.221-04:00Hah! The proper price tomorrow is zero. Why did yo...Hah! The proper price tomorrow is zero. Why did you then think it should be 2,700? ;)Antti Jokinenhttps://www.blogger.com/profile/04778440661520118404noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-55987292836843053482017-08-24T11:03:06.235-04:002017-08-24T11:03:06.235-04:00Hah, my head is hurting now! Yes, at some point th...Hah, my head is hurting now! Yes, at some point the metaphor gets too difficult to extend.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-25803776443281066552017-08-24T11:02:17.060-04:002017-08-24T11:02:17.060-04:00" (although I fully understand the logic you ..." (although I fully understand the logic you follow; the problem is, there's no logic in the pricing of this stuff)."<br /><br />That's a fair argument. We shouldn't expect to much rationality during a frenzy. If people are logical enough to price in a chain split, then they should also be logical enough to see bitcoin has a fundamental value of zero. Since they don't price bitcoin at zero, we shouldn't expect them to properly account for the split. JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-18390934103430044022017-08-24T04:23:49.216-04:002017-08-24T04:23:49.216-04:00JP, we have to remember we are in the midst of a s...JP, we have to remember we are in the midst of a speculative frenzy here. You and I seem to agree that all these coins should probably be worth zero.<br /><br />If BTC is priced at $3,000 on the day before BCH introduction, and BCH on the futures market trades at $300, then what should the price of BTC and BCH be next day? It's anyone's guess. It's not like BTC has somehow become exactly $300 less valuable (although I fully understand the logic you follow; the problem is, there's no logic in the pricing of this stuff).<br /><br />A new day, a new price. The people on the futures market were betting on the price of BCH, but on the day of introduction they were pricetakers like anyone else.<br /><br />(Of course I feel like an idiot saying what I say above, but I'm just trying to get into the head of people who invest in this stuff.)Antti Jokinenhttps://www.blogger.com/profile/04778440661520118404noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-35968512035401895482017-08-23T23:13:39.967-04:002017-08-23T23:13:39.967-04:00Jason: I'm just working out the theory. It'...Jason: I'm just working out the theory. It's tough to point to specific examples of increases in the price level caused by substitution from base money to deposits given that the price level is affected by so many different factors.<br /><br />Antti: "I would avoid using the misleading word "deposit", now that we finally have a chance."<br /><br />Whoops, I think I misunderstood your original comment from 2:45, then.JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-80420599828748660742017-08-23T22:57:52.092-04:002017-08-23T22:57:52.092-04:00"The market then has no idea what Mithril is ..."The market then has no idea what Mithril is worth, though they know it's relative quantity available, when it will be available and the rules it will play by. They do not know what it will be traded for, if it will be accepted by anyone, what exchanges will accept it, if it will be lossed in hot wallets (accounts where they will not be able to receive and control the mithril) and probably most importantly they do not know if it will REPLACE the Gold eagle as Gods De-facto coin."<br /><br />You say that the market would have no idea what Mithril is worth, but say a futures market emerged to discover the price of the Mithril coin, sort of like the BCH futures market that ViaBTC set up, then that solves that problem, no? JP Koninghttps://www.blogger.com/profile/02559687323828006535noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-57841704792517588812017-08-23T18:28:41.811-04:002017-08-23T18:28:41.811-04:00I am not the real expert on forks but they vote to...I am not the real expert on forks but they vote to fork comes from transactions with the blockchain. If a few large banks control that portal to the blockchain then they minimize the fork size and likelihood of a fork; they have the votes. So, let the eight large banks, if they wish, form eight large 'side chains' each side chain being a custodial coin. Since the clear laterally, their clearing speeds are an order of magnitude faster than the block chain. The large banks control monetary flow, they have issued the major credit cards, the cards support money market funds in the bitcoin side chain. The large banks call the block chain when accounts check in or out. So, they have geared the calls to block chain way down.Matt Younghttps://www.blogger.com/profile/08404998406161097199noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-6932375561520856312017-08-23T16:27:28.633-04:002017-08-23T16:27:28.633-04:00(Sorry, "redeemable for", not "deno...(Sorry, "redeemable for", not "denominated in".)Jason Treitnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-41813261533901864172017-08-23T15:59:20.584-04:002017-08-23T15:59:20.584-04:00I would avoid using the misleading word "depo...I would avoid using the misleading word "deposit", now that we finally have a chance.<br /><br />Yes, initially it might be the case that banks would hold a reserve of bitcoins, which they bought (note: instead of accepting a deposit, the bank took the ownership of the bitcoin) from non-banks. These non-banks were willing to hold a credit balance denominated in BTC in the bank's ledger, because the bank paid some interest on that balance. The majority of the credit balances, though, came into existence because people took on debt (mortgages, etc).<br /><br />If prices of goods (incl. services; salaries) are denominated in BTC, why would the price level rise if new credit balances are created? I don't think it would, unless demand for goods significantly increased.<br /><br />Later, in case of any bank runs, the government would establish a moratorium on bitcoin withdrawals.<br /><br />I don't think it would be a bitcoin standard. Bitcoin standard would see the price of bitcoin being set at a certain dollar amount. Dollar was the unit of account during the gold standard. But now we are talking about BTC being the unit of account.Antti Jokinenhttps://www.blogger.com/profile/04778440661520118404noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-65883734985904659302017-08-23T15:29:56.065-04:002017-08-23T15:29:56.065-04:00JP, this feels paradoxical, I need more convincing...JP, this feels paradoxical, I need more convincing! Did the growth of fractional reserve banking on a decentralized gold standard in places like Canada and Scotland correspond to great surges in price levels as demand for banknotes sapped demand for the base money they were denominated in? Are there recorded instances in the last few hundred years of gold falling close to industrial value, i.e., no "moneyness" premium left?Jason Treithttps://www.blogger.com/profile/18032439392851844044noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-64951327574158040352017-08-23T15:29:52.760-04:002017-08-23T15:29:52.760-04:00Nice discussion!
I first thought JP might be righ...Nice discussion!<br /><br />I first thought JP might be right, but now I find Anonymous's argument more convincing.<br /><br />Valuing BTC and BCH is one hell of a mess. Wild speculation, without any anchors. The price of BTCa might, as Anonymous suggests, dive first because of concerns about the future of BTC, only to experience some kind of relief rally after the introduction of BCH. I say "introduction of BCH" and not split, or spin-off, or whatever, because as Anonymous says, any split there is is a split in the infrastructure (hashing power), not in BTC per se.<br /><br />I don't think we can really think of this as some kind of whole (BTCa) being divided into two parts (BTCb+BCH), can we? It's more like an introduction of yet one new cryptocurrency, which happens to be distributed to the owners of BTC.<br /><br />I was initially very sympathetic towards JP's theoretical point about there being a premium on BTC before BCH is introduced (as there had already been established some kind of market price for BCH), but as I said, there are no anchors, and so the (ex post) price of BTC and BCH was anyone's guess.<br /><br />Thinking out loud here.Antti Jokinenhttps://www.blogger.com/profile/04778440661520118404noreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-85226162380100030132017-08-23T15:01:40.524-04:002017-08-23T15:01:40.524-04:00"for fear that the creation of the Mithril co..."for fear that the creation of the Mithril coins would destroy the gold eagle, and itself*" so the fear could be written as BTCa - BCH = BTCb. but BTCb + BCH < BTCaAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-28379423988228426772017-08-23T14:59:43.244-04:002017-08-23T14:59:43.244-04:00Both of you raise great questions I hadn't con...Both of you raise great questions I hadn't considered.<br /><br />This is where the forked blockchain metaphor gets too convoluted. Unlike a public blockchain, the BoC in Waiting's balance sheet would be centralized, and its monetary policy set by named decisionmakers. The public would want to closely scrutinize both. And unlike the Bitcoin Cash or Ethereum Classic projects, which appear to be running on idle computing resources and volunteers' free time at the outset, the Government in Waiting would need major funding for its operations. They could issue bonds, or run special CWAD printings (a "currency presale", say) in direct exchange for other assets they need. But these financing rounds would force a level of transparency and credibility not present in blockchain forks. What's the plan to build a tax base (Canada Revenue Agency in Waiting, get busy); what monetary and fiscal policies will be implemented day one after a regime takeover; what about the legislative calendar, elections, etc.? I think there are analogous governance design questions for these fly-by-night blockchain projects that simply never get asked because everyone in that ecosystem is partying like it's 1999.<br /><br />JP, great point about CWAD:CAD pegging. Regime collapses tend to be sudden, cascading events. So it wouldn't be very credible to say to all the CAD holders in the new economy, "sorry, you were betting on the wrong horse". That would be macroeconomic suicide.<br /><br />Back in blockchain land, though, nobody has brought up the idea of a post-split peg for any of these new currencies were they to someday fulfill their stated aims. If a code flaw in Bitcoin caused the network to crash, or if a crisis of confidence moved all institutional resources away from Bitcoin and into Bitcoin Cash in a matter of weeks, I think the price of BTC would indeed fall to zero: no peg, no bailouts. If the blockchain economy gets orders of magnitude larger and becomes systemically significant to the rest of the economy, you can bet attitudes on that will change.Jason Treitnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-91620127868328750752017-08-23T14:42:09.101-04:002017-08-23T14:42:09.101-04:00I replied to my own comment before I saw yours.
&...I replied to my own comment before I saw yours.<br /><br />"But if God suddenly decrees that all gold Eagles are going to magically throw off a new gold coin tomorrow, then the market will drive up the price of Eagles by the expected value of the new gold coin. And once the magic event has transpired, the market price of those Eagles will fall in value by the price of the new gold coin, because they no longer promise to throw off a new gold coin."<br /><br />Well the gold eagle is not throwing off a new Gold coin, it's throwing off a coin that is not fungible with the original eagle, but that is also not something that is already in existence, so we can't say silver (otherwise it's price would be valued in silver) we would have to say something like Mithril (Is that real?) and that Mithril would have to be in exact quantities of those gold coins. Anyway, I just needed to adjust your analogy a bit.<br /><br />The market then has no idea what Mithril is worth, though they know it's relative quantity available, when it will be available and the rules it will play by. They do not know what it will be traded for, if it will be accepted by anyone, what exchanges will accept it, if it will be lossed in hot wallets (accounts where they will not be able to receive and control the mithril) and probably most importantly they do not know if it will REPLACE the Gold eagle as Gods De-facto coin. <br /><br />Additionally we need to think of this Gold eagle as having LOST something in this creation of the mithril coin. This last point is what creates uncertainty. Just how much of that something will the Gold Eagle lose in order to create the Mithril coin, and will the mithril coin be worth more than the Gold Eagle. This uncertainty, I believe, is why we saw price of BTC actually sit at lower support levels leading up to the split. People, instead of buying gold eagles and pushing the price up to the expected value of the additional mithril coins, actually opted out for fear that the creation of the Mithril coins would destroy the gold eagle.<br /><br />I feel like I'm talking about Lord of the rings or something.<br /><br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6704573462403312459.post-28839344961520548232017-08-23T14:27:33.631-04:002017-08-23T14:27:33.631-04:00"a bitcoin standard would be an awkward thing..."a bitcoin standard would be an awkward thing, the economy being thrown into an uproar every time a chain schism occurs as millions of economic actors madly reformat their sticker prices in order to preserve the real value of payments." <br /><br />Forgot to add this. If you look at a split for what it is, a divergence of hashing power from one currency to another, the prices of goods do not need to be constantly adjusted (so long as the split doesn't destroy the currency, like losing so much of its hashing power that transaction times are delayed days or longer)<br /><br />I think of it in this way: If a small US credit union decides to move to Europe and only use Euros, it certainly has an effect on the availability of USD and credit in an area but does not collapse the dollar in all areas because it is small. It is a part of the entire ecosystem for that currency and therefore its loss should be felt, but it isn't, this would be compared to a single miner leaving BTC for another coin. If on the other hand a major bank decides to move and only deal in Euro, that will directly affect the USD and credit availability, like our forks where percentages of miners leave together at the same time to work on another coin. <br />A split is taking that institutions power and benefits provided to that currency and allocating it to another currency instead. It presumably would have an effect on credit availability and money supply but it does not, why?<br /><br />Most likely because of monetary policy adjustments are made to handle the loss of institutional power available. If there are less banks available to lend, the Fed can lower the reserve ratio and allow banks to lend more of their money to cover the "missing money" or some other tool. Bitcoin and many other Cryptocurrencies may not do this with increasing money supplies(kind of, miners are still rewarded with "Newly minted Bitcoin") but they do this with Block difficulty and rewards. If a split takes a decent chunk of hashing power the block difficulty goes down and the reward is greater for the remaining miners. This allows miners (institutions) to handle more transactions and get rewarded appropriately for the increased load. It also makes the mining market more profitable and more miners can come in.<br /><br />in conclusion: the price of BTC does not have the value of a fork "baked in" as it theoretically would have to have the value of every hard fork ever baked in, and the institutional loss of a hard fork has little effect on the use and value of the currency as it's designed to adjust for miner fluctuations. <br /><br />This is all assuming the prices have found some type of stability that Toyota feels comfortable in pricing in it.Anonymousnoreply@blogger.com