For Wayne:Just out of curiosity, how would you have recommended that the 21 million bitcoins have been initially distributed so that the system WOULDN'T be ponzi-like?
First, thanks for your answers. You have verified my primary concerns to be true.
1. Odds are high that if there is a run on bitcoins, no one is gonna be buying them and you'll probably be fucked. A point I was repeatedly trying to get at.
2. The system can be abused but it is "expected" not to be. Mass abuse of the system will drive (Yes, with diminishing returns, I get it) the value of bitcoins up.
3. Botnets are possible. Transactions are a measurable factor in the system that is used to determine operation of the network. Transactions can be artificially inflated.
The number and value of bitcoins can be gamed. It is highly risky to buy bitcoins as an investment.
So we're right back to what I've been saying from point one.
Transactions yes, investment no. You seem to agree:
I wouldn't recommend anyone keeping more than a couple hundred $$$ in bitcoins at any one time. SOME people, those who probably can't handle their own bitcoins (older folks, luddites, etc.) should probably only cash in as needed, to send money, and should cash out as soon as they receive a transfer.
Now, back to your original question - "Just out of curiosity, how would you have recommended that the 21 million bitcoins have been initially distributed so that the system WOULDN'T be ponzi-like?"
I think the better question is "What happens when 21 million is reached?" and I think we both know that the answer, if bitcoin is still running, will be "The cap will be increased, just like any other fiat money." Setting an arbitrary number is just setting an arbitrary number. Artificial scarcity doesn't work.
For Dale: You mentioned that you didn't think that bitcoins were fiat money. Imma answer that one here as well.
"Currency that a government has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. " http://www.investopedia.com/terms/f/fiatmoney.aspTechnically you're sorta right.
Sorta. Doesn't fit the exact definition. But only because of who or what the issuing agent is.
Let me make a tiny change to that definition and see if it still fits.
"Currency that Bitcoin Algorithm has declared to be legal tender, despite the fact that it has no intrinsic value and is not backed by reserves. Historically, most currencies were based on physical commodities such as gold or silver, but fiat money is based solely on faith. "There is
no functional difference between those two sentences. I just changed the name of the issuing party.
If you think that the only problem with fiat money is that government runs it, I would seriously beg to differ.
On my repeated questioning about withdraw limits and so on - The answer to the question wasn't my point there. Maybe I should have asked you a more personal version of the question so you can see what I'm getting at -
"If there were a run on Bitcoins and the bottom was falling out, would you be buying them up? Wouldn't you have a general policy regarding this up front?"
Odds are high that your answers will be "No" and "Yes" respectively.
Do you see my point now? If there is a run on people cashing out of Bitcoins, the rational thing to do would be to stop buying that shit. A whole lot of something (Calling bitcoins a thing is debatable, but whatever) worth nothing is nothing.
It doesn't matter what services are out there and what their individual policies are. I can
guarantee you that if I go to Bob's Bitcoins today, and buy X dollars in bitcoins from him, and I go back to him tomorrow and the
value of Bitcoins hasn't changed relative to what we are trading in and I try to sell my Bitcoins back to him, there will be a mechanism in place by which he will win and I will lose. It will probably not be the same exchange.
My conclusions -
Bitcoin is a high risk investment.
The price mechanism of Bitcoin can and probably is being manipulated.
Early users of Bitcoin (Particularly people who have invested a decent chunk of change) have an incentive to promote the use of Bitcoins to others.
Businesses that are acting as an edge to the Bitcoin network (Large dealers) have an
large incentive to sell rather than buy, especially in the case of a destabilization.
Bitcoin as an investment fits the definition of fiat money in all but name, on the technicality of the Bitcoin algorithm not being a government. It is otherwise functionally identical.
Transactions yes, investment no.