Gold collapsing. Bitcoin UP.

[AdrianX]

This is confusing bank created credit with supplier credit, these are two completely different things.

Bank created credit is all the things you said, it is false creation of money, artificially lowers borrowing costs, artificially lowers savings return and artificially expands the money supply and inflation. Bank credit is the problem Bitcoin is here to fix.

Supplier credit is none of this though, it is simply a delay in payment (for example pay 90 days after delivery). A supplier is not lending money, it is lending time value of a product. Accounting wise it appears as a loan on the books, but no money was created or exchanged.

My example was a simple one to show how supplier provided credit can make a supply chain more efficient by lowering the working capital costs of downstream participants. This allows downstream participants to operate more lean from a financial perspective and lowers the cost markup they charge.

Suppliers (not banks) will offer this credit (again not a money loan but a delay in payment) because doing so benefits the supplier by lowering the markup charged by other areas of a value chain, which enables the supplier to capture more of the total profit.

If LN was used in these B2B transactions, it not only prevents suppliers from offering credit but reverses the flow of money and forces downstream participants to pre-pay. This in turn would both lower the profit of the supplier while also raising the cost of downstream participants to operate (their working capital would increase and they would have to go to banks to take larger loans). Here both sides would prefer the current supplier credit model to an LN pre-payment model.

My basic point is most industries are very well optimized financially already and there is little room left for improvement by reorganizing finances. To make something like LN work you have to really understand the reasons behind the payment flows, not just say "hey we automated and secured this type of payment" because that usually will not be enough. This is why I don't think LN will ever be a broadly used B2B payment method. I would expect suppliers and purchasers in a Bitcoin world to be scheduling payments the same as they do today...

@rocks you're conclusion is 100% correct. That's where the trust in the system comes from that's where the risk is. That model doesn't need a more secure payment Chanel. It's not a failure in the money that breaks the deal but a misguided business choice.

But there is not as big a difference between bank and supplier credit as you infer. The efficiency in the supply chain working capital are still vulnerable to malinvestment.

In the case where a supplier gives credit to a retailer for stock and the retailer can't sell it, it could be the retailer who made a bad order but it's the supplier who is short payment. It still contributes to the business cycle in some way either as monetary inflation or price deflation.

In this situation the retailer could take bank credit to pay. The fact that overstock.com exists is testimony to this.

 

[VeritasSapere]

https://bitcoinmagazine.com/articles/f-pool-chinese-pools-will-stick-with-bitcoin-core-1453395328

The rumors are true,” Chun said. “Miners in China were scared by Luke Dashjr’s proof-of-work changing pull request.

Its not as bad as it sounds, they where scared off by Luke Jr pull request in Bitcoin Classic to change the POW algorithm, They should reconsider their position, considering that it is some of the Core developers that are promoting this idea, which certainly is scary to the miners, Furthermore from the same article:

At the Scaling Bitcoin workshop in Hong Kong, almost every one of us agreed that block size should be increased, and should be increased as a hard fork, as there was no soft fork solution back then,” Chun explained. “Then, last minute, Segregated Witness was introduced. I admire Dr. Pieter Wuille’s brilliant hack to deploy it as a soft fork. But despite being brilliant, the soft fork Segregated Witness is still a hack. A hack is dirty. Such a technology would be better implemented as hard fork.

Since Segregated Witness will only allow for some 70 percent of added space, a 2-megabyte hard fork would allow for more headroom, which could end the debate for now. People will not only be more satisfied, they’ll also see that we can actually get something done, get something fixed… not just find some detour hack to leave the issue to the next generation.

The perspective of F2Pool does not seem to be that different to our own. I can not imagine they will remain infinitely patient with Core. Especially considering the more concerning increased transaction volume, which should be seen as a blessing but with this limit still in place it represents a dire situation.

At the time of writing this there are 14k unconfirmed transactions in the memory pool, over eleven megabytes which represents an effective backlog of more then two hours. You can definitely say that blocks are presently full.

https://blockchain.info/
https://blockchain.info/unconfirmed-transactions

 

[cypherdoc]

1|Jonathan Toomim:2016-01-20 10:08:06:and what we're realizing now is that users and miners do have that power
1|Jonathan Toomim:2016-01-20 10:08:11:and the core devs are afraid
1|Guy Corem:2016-01-20 10:08:22:Why do you use this term ?
1|Jonathan Toomim:2016-01-20 10:08:27:they're threatening doom and gloom, because fear is the only tool they have left
[doublepost=1453403529][/doublepost]this is great news that many aren't aware of:

1|Jonathan Toomim:2016-01-20 10:26:16:by the way, we've had a lot of companies donating developers to us recently

 

[bitcartel]

It should be clear now that miners are in control and they are the king-makers.

"Bitcoin is not an electronic payments system like PayPal… Bitcoin is not and should not be free… Mass rule is not appropriate for Bitcoin… The pipe dream of some in the Bitcoin community is to govern the system by having ordinary users vote for changes by adopting the corresponding full node software. This approach is not only impractical, it is also not desirable." – BitFury https://medium.com/@BitFuryGroup/keep-calm-and-bitcoin-on-4f29d581276

 

[albin]

Solex (Andrew Clifford) as President!
Aquent (Andrew Quentson) as Secretary!
thezerg (myself) as Developer!

Maximum Andrew centralization!

 

[cypherdoc]

well, looky there. an actual 1MB block. can't get more full than that:

 

[AdrianX]

@cypherdoc:

I guess this means that Blockstream Core are the block space Keynesians, and we're the block space Hayekians. Unfortunately, the Keynesians have been winning for the last century...

Quoted for profound insight.

Keynesians (old school) looked to maintain money velocity by adjusting the quantity of money. Keynesians (new age) look adjust price levels with a fixed supply and velocity by adjusting the cost associated with money velocity.

I'm still baffled how someone can claim to support bitcoin but think this methodology is needed to make it function.

 

[lunar]

@Zarathustra From your linked post.

Money is DEBT! The root of all kind of money (paper, metal, digital metal) is DEBT.
And the root of all private debt is the debt to the war lords, aka the state.

Ungoverned humans who are living beyond the state don't need an economy/market/money. They are self-sufficient, they don't owe tribute to the mafia (state,church, war lords) and therefore they don't create money and a marketplace.

I think I understand the point he (Dr. Paul C. Martin.) is trying to make. It just doesn't seem to describe the whole picture. The idea that ungoverned humans won't need money seems wrong. He claims the only reason for money is to facilitate tribute to a mafia (or similar). Agreed this is probably the origin of modern money, but it without the state it also serves the function as a voluntary tally stick. The ledger. We need this function as a form of communication for the redistribution of resources/work done. In this sense bitcoin is still debt (communicating to the world the holder is owed value)

That's why this statement is appears to me misleading

That would be the end of the economy (homo oeconomicus), since the root and foundation of an economy is Debt.

bitcoin is not removing the concept of debt. Money is debt as you rightly point out. Rather, bitcoin is also debt, the subtlety being its a 'sound' form of debt. It is free from distortion, manipulation and voluntary in nature. (assuming the state can be kept out of it.)

I take back this statement though. Trade is an IOU so can always be considered debt.

Is debt the foundation of economy? His argument seems that debt was actually the earliest form of trade. I'm not however convinced that this can be true.

 

[albin]

Maybe the right approach to get through to miners is that the Core Roadmap commits to Flexcap as a foregone conclusion using vague weasel-words like "cost-based metric", which in the context of the May 2015 mailing list discussions (the last time anybody from Core talked about the issue like a human being) is a weak euphemism for "whatever Friedenbach and Maxwell decide about Flexcap".

And that fundamentally, the concept behind Flexcap is always net punitive to miners. Miners will want to take on more tx volume when marginal revenue still exceeds marginal cost, so for any expansion of blocksize to be worth paying for whatsoever in higher difficulty at any time, the protocol by design has to be systematically low-balling their profit-maximizing condition. Maybe another way to look at it is that by imposing a difficulty premium on blocksize increases, the Core devs are imposing a second artificial pseudo-orphan risk, whose characteristics (unlike actual orphan risk) do not emerge from technological reality.

 

[cypherdoc]

Miners are in control.

"Bitcoin is not an electronic payments system like PayPal… Bitcoin is not and should not be free… Mass rule is not appropriate for Bitcoin… The pipe dream of some in the Bitcoin community is to govern the system by having ordinary users vote for changes by adopting the corresponding full node software. This approach is not only impractical, it is also not desirable." – https://medium.com/@BitFuryGroup/keep-calm-and-bitcoin-on-4f29d581276

that quote is quite naive and represents a Soviet style view. not gonna happen.

but i do agree that Bitfury gaining mkt share is a very good sign. it decentralizes mining away from China which should force their miners to come onboard to bigger blocks ASAP otherwise they risk losing out to a higher BW capable Bitfury who starts hoovering up fees, who i think is playing games in that above article. if you read thru the pastebin above of @jtoomim & Corem, he reveals that sysman, on the Classic channel, is a Bitfury main guy. i saw sysman come into the ClassicChannel over the weekend to @jtoomim's surprise and start posting very pro-bigblock ideas to my pleasant surprise. i immediately asked @jtoomim, in a private pm, who sysman was. he didn't want to tell me for privacy sake and i said "fine". but the language is clearly Russian accented and you can view the archives to confirm what i'm saying.

bottom line is that i think Bitfury is onboard with Classic and bigger blocks. that's good news.

 

[AdrianX]

How's this for a pitch:

Bitcoin Mining is big business. Every day, miners go to work and come home with an additional ~$1.5 million dollars of bitcoins ($0.5 billion / year). As demand for Bitcoin grows and as the price rises, this figure could quickly increase to $15 million or even $150 million, creating a market worth between $5B to $50B per year.

To maximize profit, miners must implement strategic fee policies to drive up demand for next-block service while simultaneously capturing as many high fee paying transaction as possible. At the same time, they must optimize their connectivity with the rest of the network to minimize orphaning risk, as the loss of a single block cuts into their already-slim profit margins.

<INSERT CATCHY NAME> helps miners maximize the return on their mining hardware investment. We provide industry-leading fee policy technology, dynamically tuned to network conditions; and we provide access to the fastest and most efficient connections between the network's global hash power.

And if we do our job well, there's no reason the value added from our intelligent fee-selection policy and optimized block propgation doesn't provide more value than the miners' brute hashing power itself. We estimate that we can capture 1/4 of industry profits, which--at 10% profit margin--results in earnings between $125M and $1.25B per year.

At a P/E ratio of 50 (come on, Blockchain is all the rage ), we anticipate a valuation for our company in the year 2020 between $6B and $60 billion dollars.

Would you invest?

@Peter R either I got up on the right side of the bed or you batting well today.

This is exactly how i see it. in fact someone has already built the foundation for the service:
<INSERT CATCHY NAME> = http://www.cointape.com/
[doublepost=1453405466,1453404667][/doublepost]

It would be closer to the pre-paid energy markets in some developing countries i.e. keep topping up your balance or the power stops. Removing credit from consumers and companies is going to make commerce a bit flaky, to say the least.

the bottom line is suppliers and customers need to trust the service (this has been and will always be true), you can't improve the trust in the service by making the payment channel more trustless.

providing credit in the sort term >30 - 90 days is just a way of saying trust us our service is worth it and in good fath we'll deliver it at no extra cost to you.

 

[cypherdoc]

yeah, here you go:

sysman@bitfury.com

 

[AdrianX]

there will still be debt, but it would be more expensive. people and companies can't buy everything from daily/weekly cashflow.

the solution is not to inflate the money supply its to curb the rate of consumption.

 

[Mengerian]

@cypherdoc Interesting conversation you linked to. A few tidbits I founds interesting (there's lots more in there on governance, technical and economic details of a fork, possible scenarios of two forks persisting, etc.):

1|Jonathan Toomim:2016-01-20 07:11:29:i have misgivings about the vision of the fee market as a way to pay for mining, and i think that fee market + lightning would be terrible for earning fees as a miner
...
1|Jonathan Toomim:2016-01-20 07:51:01:i can't explain the classic governance model, because it might be changing if people don't like it
....
1|Jonathan Toomim:2016-01-20 08:05:49:but everybody on the project agrees that the blocksize hard fork is more important than the governance model
1|Jonathan Toomim:2016-01-20 08:06:00:so if you guys want a single guy in charge, we can do that
...
1|Jonathan Toomim:2016-01-20 08:25:29:hard fork infrequently, but as needed to make major improvements, and only if supported by miners and users.
...
1|Jonathan Toomim:2016-01-20 08:43:37:the blockstream developers kept complaining of "vote brigading", which just meant that they kept saying stuff that most people disagreed with strongly

 

[JVWVU]

Soros is laying out the deflation framework - Says we have not seen this since 1930s.

 

[cypherdoc]

@Mengerian

i liked most of what @jtoomim had to say in there. i think he has the proper vision.

 

[Peter R]

<INSERT CATCHY NAME> = http://www.cointape.com/

Bitstream Inc.
"Unblock your revenue streams"

 

[cypherdoc]

@Mengerian

the part i don't agree with @jtoomim is his 75% chance estimation of survival that a CoreCoin with changed POW would have. i think it's more closer to 0%.

i also think a Core w/o a change in POW has about a 0% chance of success as well. assuming we have a majority of miners onboard with Classic, esp if it's over 70%, a convergence to Classic should be pretty quick.

 

[Erdogan]

Change in POW is a distraction. Won't happen.

 

[albin]

I think realistically the CoreCoin would not survive in any economically-meaningful way, because almost no exchanges will bother to support it.