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.
Quite possible. I don't know how likely it is, or how likely it is to be long-term though... it's not as if the bitcoins will vanish, or lose their utility. And even if they drop to a few cents apiece, they can still be used to send money (if you didn't have enough at that point, you'd just have to acquire more to send.)
EDIT: I realize that this would probably be little comfort for someone who had a lot of $$$ in bitcoins sitting around.
2. The system can be abused but it is "expected" not to be. Mass abuse of the system will drive (Yes, with diminishing returns, I get it) the value of bitcoins up.
I guess I'm not sure what abuse you envision here. Market manipulations? People misusing bitcoin code on other's systems?
3. Botnets are possible. Transactions are a measurable factor in the system that is used to determine operation of the network. Transactions can be artificially inflated.
Well, I suppose bots could increase the number of transactions (until they ran out of bitcoins for transaction fees, anyway.) But I don't see what that would accomplish. More transactions doesn't mean more bitcoins generated. The system is setup so that, regardless of number of transactions, and regardless of number of miners, one transaction block is generated every 10 minutes. And throwing more processing power at it to try to generate the blocks more quickly only results in the security difficulty increasing so that the block rate falls back down to 1 every 10 minutes.
The number and value of bitcoins can be gamed. It is highly risky to buy bitcoins as an investment.
The value, quite possibly, although as the market expands that becomes harder and harder, since buys and sells is pretty much how one would accomplish that.
The
number of bitcoins? Nope. (I'll come back to that below.)
So we're right back to what I've been saying from point one.
Transactions yes, investment no. You seem to agree:
I wouldn't recommend anyone keeping more than a couple hundred $$$ 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.
Mostly.
I think MOST people shouldn't be trying to invest in it.
I would hope that MOST investments are something along the lines of buying enough to be able to satisfy cash-for-bitcoin exchanges, where money is made on the conversion fees, not the actual value of the bitcoins. Bitcoins are IMHO a poor long-term store of value.
I personally can understand some level of outright speculation, considering how much they've risen (and I feel they very well could rise much, much higher in price.) But I would hope only a few people are doing that, or that those who are are doing it with very little money, because there are so many unknowns here, and so much risk, that it's definitely NOT worth, say, sinking one's entire life savings into it (I'm sorry, but having seen that article where someone did that almost made me ill.) Not even a large fraction of one's savings, for that matter.
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.
Hmm.
You know, I jumped at the concept of bitcoins so quickly, and familiarized myself with how it works so soon afterwards, that I guess I didn't realize folks might doubt the rigidity of the 21-million-bitcoin cap.
The way the system is designed, the generation of extra bitcoins beyond the cap is so unbelievably unlikely, and so enormously impractical, that I personally deem it impossible. Again though, me just saying that probably isn't enough. Perhaps an analogy will help:
Suppose you're using torrents for years, and are familiar with how they work. Suppose that suddenly you hear of someone... could be Joe Shmoe, could be Bill Gates... announcing that they're going to release a new torrents client. They claim that it'll offer you faster download speeds initially, but admit that after a week you'll probably be down to speeds less than you get now, and that the speeds will continue to decline perpetually thereafter. Oh, and the client will be totally incompatible with current torrents.
Who would actually want to download such a thing? Would you? If you did, and found only a handful of other people using it, even long after a week into the release, what would be your first step? Would you find it reasonable to believe that a large portion of torrent users would jump on board?
Even if that, by some miracle DID happen, consider the incompatibility: assuming you kept your "normal" torrent client, how big of an impact do you think having a chunk of torrent users switch would have on you? A big enough impact for you to switch to the perpetually-slowing-down client, with a smaller user-base?
That's how it would be for someone to try to undercut the system by introduce a higher cap into the bitcoin protocol. Considering the number is hardwired into the clients (as well as the math of the system), that the clients are open-source, and that anyone who did try to break the cap would have their transactions rejected by everyone else, you'd have an easier time trying to get rich somehow by convincing the mass of casual computer users to switch from Windows to Linux. I just don't see it happening. I do see people trying Bitcoin 2, Localcoin, Inflate-a-coin, etc. But not affecting bitcoin in any significant way.
