Gold collapsing. Bitcoin UP.

[Justus Ranvier]

Gold exists, too, but we still have states. Gold is arguably more cumbersome to use. Still, it is 'hard money' but it didn't make governments obsolete.

Carbonic acid won't dissolve a steel container.

Hydrofluoric acid will dissolve a steel container.

They're both acids though, so why should one be more corrosive than the other?

 

[rocks]

There is no plausible long term distant future in which both Bitcoin and government exist simultaneously.

The existence of Bitcoin is not something governments can survive for very long for many reasons...

You can talk about a long term future that has Bitcoin in it, or a long term future that has governments in it, but not both.

All bitcoin does is remove money from government control, which eliminates government's ability to use inflation to tax 3% of the populace's wealth (not income) every year, and to run up large debts by being the backer of their own debt.

The result is a smaller government, but not no government.

This is the same as the gold standard. Under the gold standard money was outside of the control of governments. This forced much smaller governments as a % of GDP and kept debts reasonable. During busts the US Federal government often had to go to the capitalists of the day to raise funds (which as a stated reason for creating the FED).

It was only after the FED was create in the US and similar central banks created around that world that we saw the massive growth in government size.

Once people lose faith in government money, and walk away to another standard (either gold or BTC), governments will be forced to resize to a smaller level. This is a good thing. But they won't go away.

 

[Justus Ranvier]

All bitcoin does is remove money from government control

That is by no means "all bitcoin does". Removing money from government control is not what I was talking about in the part of my post that you did not quote or address - which was the effect Bitcoin's existence has on government employees, not government subjects.

I'm pretty sure I first described the effect in early 2014 as quoted here:

https://bitcointalk.org/index.php?topic=68655.msg10422612#msg10422612

What have we learned since then?

http://www.wsj.com/articles/former-federal-agents-charged-with-stealing-bitcoins-during-probe-1427735311

http://motherboard.vice.com/read/variety-jones-a-corrupt-fbi-agent-is-hunting-me-so-im-turning-myself-in

See also:

http://nakamotoinstitute.org/mempool/bitcoins-rugged-individualism/

All organizations tend to evolve so as to resist change, but governments, being subject to the problems of socialism, suffer much worse from this because government operations lack a clear concept of efficiency their overall success, the relative importance of any of its parts, or the relative merits of alternative organizational structuring. Consequently, governments can more easily evolve into labyrinthian structures that nobody understands without anyone realizing what is happening.

An eye-opening article called Sinkhole of Bureaucracy describes a surreal example of this phenomenon in an outstandingly incisive way. In an abandoned Pennsylvania mine, which is now an office containing 600 federal employees and endless filing cabinets, process all the federal retirement pensions on paper by hand. The system is widely understood to be insane and dysfunctional, but despite repeated and ceaseless attempts to automate the process beginning in the early 80’s, the system has not changed. It is not a problem of will, but of knowledge: there is no one available with the skills to carry through the transition successfully, no one who knows precisely what those skills would be, and no one who can evaluate anyone else for them. As a result, the attempts to develop an automated process failed because the software engineers did not understand the laws and the bureaucracy well enough to design something correctly, and the bureaucrats did not know how to tell if the software engineers knew what they were doing.

Will the federal government be able to adapt to Bitcoin? This would require building an a system not just for the one department, but for the entire organization, and it would have to be built properly—it must distribute decisions enough so that bitcoins cannot be stolen easily by employees. After reading that article, I think it is reasonable to think that the government may not be up to such a task at all

Also, while I was looking for that post from Bitcointalk, I came across this thread too:

https://bitcointalk.org/index.php?topic=389565

 

[AdrianX]

aaaaha and now I find out why some of you "quote" instead of

quote!

"Also, while I was looking for that post from Bitcointalk, I came across this thread too:
https://bitcointalk.org/index.php?topic=389565 "

Thanks for that I hadn't read it. It appears to me you need to empathize with the needs of your audience when discussing Bitcoin. This is probably why most of us don’t talk about Bitcoin much with or families.

After reading that link my thoughts are people in power often respond by using their power when challenged directly.

Mercantilism did not supplant Monarchism, by threatening it directly, the power was eroded subversively from under their noses while the gold smiths kept the Monarch gold safe in a vault and as they continued to tax there subjects.

 

[cypherdoc]

this reminds me why i don't trade stocks anymore. massive dump pre-hours after the NFP report causing massive gap down at the open for normal hour traders, followed by straight up the rest of the day on a weak report, contrary to what you might expect. it also is why news isn't great for short term trading; the market often does the opposite of what you might expect. we traced around 600 hundred points worth of down, up over the day. talk about volatility. however, i still believe the long term technicals are telling us we're going into another recession. we could get a bounce from here but the cycles say it's too early for that. Monday/Tuesday will be interesting to see:

 

[Kupsi]

Volume in Indonesia is increasing. Exciting!

 

[Justus Ranvier]

it also is why news isn't great for short term trading; the market robots with access to infinite supplies of other people's money often do the opposite of what you might expect.

ftfy

 

[Justus Ranvier]

After reading that link my thoughts are people in power often respond by using their power when challenged directly.

That is very likely, and also not something to be particularly scared of. The extent to which that reaction is predictable is the extent to which it can be triggered in a situation chosen by those who aren't in power.

This is probably a good time to elaborate a bit more about the incentives of various types of government employees. I'll describe three categories which probably fit in to a Pareto distribution:

1. Mercenaries
   1. 80% of government employees fit into the mercenary category. They are people who stay in their jobs primarily for perks, paychecks, and pensions. Mercenaries have low motivation and low risk tolerance. Their default state of job satisfaction is "disgruntled". Mercenaries take the path of least resistance and do the least amount of work they can get away with. If they have an opportunity to use their position to enrich themselves beyond the designated benefits that are part of the job title, they will do so if the risk/reward ratio satisfies their generally low risk tolerance and doesn't require too much effort to obtain.
   2. Carl Mark Force IV and Shawn Bridges may be examples of this category.
2. True Believers
   1. 80% of the non-mercenaries are True Believers. Generally new employees, they earnestly believe in the mission of the organization and want to help achieve it. They are highly motivated compared to the mercenaries. Less frequently, they are people who joined the organization to satisfy some kind of personal moral vendetta (DEA agent whose cousin died of an overdose or something).
   2. True Believers turn into mercenaries at a fairly high rate. Mercenaries enjoy the high motivation of the True Believers like you enjoy listening to fingernails scrape across a chalk board. It is very difficult for True Believers to maintain their enthusiasm in the face of the constant disgruntlement around them and the constant evidence that the reality of their job did not match their preconceptions.
   3. Almost all True Believers are confined to the least-influential levels of the organization, because the average time required to turn them into mercenaries is shorter than the time it takes them to advance to management.
3. Social climbers
   1. The remaining group are those who are using their position as a springboard to future opportunities. Generally this means political or judicial ambitions, lobbying, or consultancy with a corporations closely connected to the state.
   2. Social climbers are very much like mercenaries, except they have higher levels of motivation and risk tolerance and are driven to use the resources available to them to seek positions of greater profit.
   3. The ambition of social climbers is what establishes a minimum floor on the productivity of the remaining two groups. Left to their own devices, the productivity of the mercenaries would drop to zero, dragging the True Believers down with them. The social climber can't allow their springboard to crumble into pieces before they've jumped, so they prevent a complete deterioration of the organization by force of will.
   4. Because of their longer time horizons, the social climbers are very sensitive to the long term viability of the institutions which support their chosen career path. When they (usually unconsciously) perceive that the remaining lifespan of the institutions is shorter than their expected career, they'll change tactics and begin to extract their profits early. Because their motivation, position in the hierarchy, and risk tolerance, their acts of profit extraction have a significant effect on the institution which reduces its remaining lifespan, if for no other reason that they stop expending effort to the mercenaries in line. Other social climbers instinctively sense these effects and begin to change their own strategies accordingly with the same results. This positive feedback loop is why the Soviet state collapsed more rapidly then anyone imagined was possible.
   5. The rogue FBI agent recently described by Variety Jones (if he exists) is probably an example of the social climber employing the second strategy.

With regards to the above, here's a couple anecdotes worth pondering:

http://usnews.nbcnews.com/_news/2012/04/16/11228993-ex-gsa-head-apologizes-for-823000-las-vegas-spending-spree

http://www.dailytech.com/As+Economy+Tanked+SEC+Employees+Watched+Porn+at+Work/article18231.htm

http://www.wsj.com/articles/u-s-government-struggles-to-attract-young-savvy-staff-members-1402445198

http://www.cnn.com/2015/03/12/politics/secrect-service-scandals-gate-crasher-dui/

 

[cbeast]

A gram of gold is 0.035274 oz. A gram is the minimum unit commonly traded. The minimum bitcoin transaction is 0.0000543 BTC and should have a name as well. This minimum unit is most commonly used for creating contracts.

 

[cypherdoc]

Today maybe. What about when that is worth 10 cents?

 

[Justus Ranvier]

Its premature to worry about people not using btc to denominate their contracts while we're still experiencing so much inflation.

After the third reward halving we should see a lot more willingness to denominate long term contracts in btc terms.

 

[cypherdoc]

 

[awemany]

Carbonic acid won't dissolve a steel container.

Hydrofluoric acid will dissolve a steel container.

They're both acids though, so why should one be more corrosive than the other?

The problem is that IMO we all still don't know whether Bitcoin is akin to hydrofluoric acid on a steel container - or maybe just acetic acid. I agree that it is probably not just carbonic acid

 

[cypherdoc]

https://www.reddit.com/r/bitcoinxt/comments/3nclri/if_f2pool_can_construct_multi_dust_input_single/

 

[ladoga]

I have even a better idea:

1. reduce the blocksize limit to 1kB
2. watch in awe how demand far outpaces "what technology allows"
3. call bitcoin a success

...sounds like a plan.

 

[cypherdoc]

Interesting new info from Mark on SC's and merge mining:

 

[humanitee]

Interesting @cypherdoc.

Now that I think about it though it makes sense, someone could send you sidecoins and redeem them for Bitcoins if the blocks weren't synchronized.

I think it could still be done though if moving in and out was only allowed at certain bitcoin blockheights. If bitcoin blockheight is x, then the sidechain collectively settles at that block. Transactions between the chains would stay locked until x, which occurs say every 12 blocks or some limit. In between those blocks sidechain blocks could be quicker.

 

[Peter R]

Interesting new info from Mark on SC's and merge mining:

Can someone ELI5 the implications of this? Am I correct that this makes sidechains less useful than originally imagined?

Also, does anyone know if there is actually a working implementation of the "compact proofs" to move coins from the side chain back to the main chain? Appendix B from sidechains.pdf reads to me as a hand-wavvy "it should be possible in theory but we don't really have the details worked out."

 

[humanitee]

@Peter R , it just means they can't be faster than Bitcoin. They could still be good playgrounds for Bitcoin privacy features and whatnot.

IIRC they had a federated peg that was being run by a few universities, a true decentralized peg didn't exist. This was when the elements paper was first released so it may have changed. And yes, at that time it was all a hand wave though they were pretty confident it could be done, it just needed a lot of work.

 

[Peter R]

@humanitee
Thanks for the info regarding merge mining.

I did know that Blockstream had run federated sidechains and I can easily imagine how a two-way peg could be implemented in that case. What I don't understand is exactly how the compact SPV proofs will work in the non-federated case [bringing coins back to the main chain]. It sounds like they still don't know either. I wonder if it's turned out to be a much harder problem than Blockstream initially imagined.