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Comment by InclinedPlane | Hacker News Reader

Long term? People stop using bitcoin.

You theorize that the boom/bust swings will diminish in intensity until eventually bitcoin becomes stable.

Others theorize that the boom/bust cycles will grow in severity until eventually everyone just gives up on bitcoin.

So far there's very little evidence for the stability option and a lot of evidence (and economic theory) for the speculative bubble theory.

Do you have any evidence of the "market share" of bitcoin users who are in the market for purely currency reasons growing relative to that of those who are in the market for purely speculative reasons? From everything I can find out it seems as though the reverse is true.

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I've very rarely seen something with a > 1 Billion market cap and millions of users simply disappear. (To use an unrelated example, even MySpace still exists :)

Very simply, the more users are in Bitcoin the more vendors there will be who accept BitCoin. The more goods and services can be bought in Bitcoin during the relatively smooth periods the greater the proportion of people who like to have the currency for currency purposes, because it can be used to buy goods and services. There will be 'induced traffic', a network effect - more roads into Bitcoin will pop up because there's an incentive to start an exchange (you make money off of each transaction, after all!). More roads = greater demand for more BitCoin. It is the fact that some buying power of BitCoin still exists even given the boom/bust cycles that will support the currency in the long run, and that this buying power will on average be higher on every contraction than the previous contraction. The fact that an anonymous, decentralized currency that prevents double-spending is desirable (i.e. has inherent value) to a lot of people will also support this buying power, and support the currency in the long run.

Geocities, lycos, CompuServe, Excite@Home, so many others.

Those were all companies which sold at a billion dollars or many billions of dollars and have sense been shut down or are worth a tiny fraction of that amount today.

And those are just examples from the last 20 years, we could go back to nearly countless examples of other speculative bubbles going back centuries.

If ever there were a textbook example of apples/oranges, this would be it.

The example is helpful, though. In each of those cases something very much better came along to replace it.

The same thing could very well happen with BitCoin. Someone mentioned forking BitCoin and tweaking the algorithm to remove the artificial ceiling of 21 million units, and replace it with an algorithm which monitors all the transactions taking pace and adjusts monetary policy in response to them, in order to produce a steady inflation rate. Such a currency might very well be more desirable than one with deflationary tendencies.

Bottom line - unless someone figures out a way to replace BitCoin with something better, I see no reason to believe BitCoin is going away anytime soon.

Oh, the memories seeing those names bring back.

So happy to have been there for the through the 90's.

The Zimbabwe M1 was worth $2.4 billion in 2001, and millions of users are forced to use it. (Zimbabwe professors, teachers, etc. etc.). And of course, that entire money chain is practically worthless today.

There is no guarantee that BTC will survive. Larger currencies have fallen before it.

What a false dichotomy. So people are either buying Bitcoin purely for its use as a currency or purely speculating? You're missing the forest for the trees.

Do you want to see real political and economic change in your lifetime? Campaign finance reform: not the answer. Term limits: not the answer. Voting Libertarian: waste of time. "Balance the budget": too little, too late. Political activism: occupy my asshole.

The only solution: flip societal power structures upside down, and let us geeks take the reigns.

Now, you may argue that everything is Hunky Dory like tptacky, but I'd beg to differ. We need real social and economic change, right now, to ensure our continued prosperity into the forseeable future, and we're just not getting it from Washington. Make excuses or justify a Big Brother Statist tyranny driven by propaganda and ignorance all you want, ultimately none of that shit works long term and meanwhile we have a lot less freedom.

Let's play a different game now ...

You are so full of yourself and living in a fantasy world it's sad to watch. Bitcoin isn't a revolution, you've been duped. It's just another pyramid scheme being used by those with more power, more money, more information, and fewer morals to take advantage of folks like you who just want to believe.

Do you really want to change the system? Write blogs. Write books. Start a business. Do investigative journalism. Speak at rallies. Work on a campaign. Run for mayor. Run for congress.

There are a million ways to empower yourself and others, using bitcoin isn't any of them.

Imagining that bitcoin is the answer is about as naive as imagining that hitting "like" on your facebook feed is going to magically feed some starving child somewhere.

To be fair, bitcoin has a number of interesting technical promises. The economics of bitcoin are... probably going to be bad, for many reasons.

But some decentralized digital coin in some form seems like a good idea. The concept of a transaction log that tracks your money from start to finish is also interesting.

Bitcoin will remain a pyramid scheme due to its deflationary nature. But maybe a future coin can be invented that solves the problems with bitcoin?

To be truly decentralized you need something like "digital cash", but nobody's been able to come up with a good way of implementing that, yet. Also, I'm not sure people are prepared to mix the problems of cash and electronic transactions just yet, there are some advantages to the banking system we have now, such as the ability to reverse fraudulent transactions.

I think the example from fiction, Cryptonomicon, is actually very helpful, because they understood they needed a big honking pile of gold to kick-start the legitimacy of the whole thing, if it's just free floating then it too easily becomes a pyramid scheme and you have people who just do currency exchanges but who never actually use the new currency as money. You want people to hold onto money because it's money, not because they think the money can go up in value, that's precisely what you don't want.

Unfortunately, there are now a lot of people in the bitcoin world who do what the exchange rate of bitcoins to go up, because they view bitcoin's as an investment and they still view dollars as "real money". And in most ways they aren't wrong. But they're also making it harder for anyone else to use bitcoins just as money.

This is exactly right. The problem is in some respects worse than stated. After the last bubble, it appears as though speculators did leave. However, every time the demand increases sharply for bitcoins, they return. After all, who could resist such a fantastic arbitrage opportunity?

>Long term? People stop using bitcoin.

Long term? People stop using Weimar Deutschmarks, Austro-Hungarian Whatevers, French Francs, shells/wampum, doubloons, US dollars ...

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