Why Bitcoin’s Fixed Supply is Problematic - According to Yanis Varoufakis
GOOD EVENING STEEMIT,
I’m coming to the end of Yanis Varoufakis’ Talking to my Daughter About the Economy and as a crypto trader with moderate free market economic views, I was excited to come across his thoughts on Bitcoin.
Take a look at the highlighted section below:
I know there are some amazing economics minds here on Steemit and I’d love to start the discussion in the comments below.
Do you agree that Bitcoin’s fixed supply first of all makes a crisis more likely and second of all, makes it harder to alleviate the crisis when it inevitably hits?
The final question I would like to put to the community is, is anyone actually advocating for crypto to fully replace traditional central bank driven currencies, or just compliment them in a way for people to take control of their own wealth?
Leave a comment and let me know whether you agree with the sentiments of Varoufakis above and what you think about the questions posed.
Peace ✌🏻.
Instagram: @forexbrokr
Website: www.forexbrokr.com
To me, it sounds like the Author of the book is making calculations of the value of 'cars and gadgets' based on Bitcoin's value in FIAT, not based on the value in Bitcoin.
The Author therefor accepts that a gadget can't merely cost, for example, 0.00001 Bitcoin, into eternity.
We have to realise that nothing in this world costs more every year because of it's value increasing. It costs more, because the value of FIAT decreases due to inflation.
I'm not 100% accurate on my historical facts, but I believe it was in some Asian Dynasty a few hundred years ago that, for example, a single coin used to buy you a loaf of bread for over 500 years. The price of the loaf of bread didn't increase.
Something else that is possible with the Bitcoin code, is that the decimal point can be adjusted. As stated on the Wiki page for Bitcoin.
"A bitcoin can be divided down to 8 decimal places. Therefore, 0.00000001 BTC is the smallest amount that can be handled in a transaction. If necessary, the protocol and related software can be modified to handle even smaller amounts."
So, in case 0.00000001 BTC ever buys you a house, the protocol can be adjusted to allow for even smaller amounts to be used in order to purchase, for instance, a loaf of bread.
But if people aren't encouraged to spend, then they wont and as a result will end up screwing themselves out of higher wages because there will not be a market for their goods.
Whether they're paid/are spending in fiat or Bitcoin, it doesn't matter, right?
This wont actually fix deflationary pressure from the above issue though? It'll just allow for a true value to be found at the time?
they will get encouraged to spend when there food runs out and the goods they already have needs replacing.
I think the ultimate goal for quite a few is for bitcoin or some cryptocurrency to completely replace central bank currencies and really just be power to the people. There is a chance that some property of bitcoin is not optimal as an everyday currency for spending and buying products.
You could still have a cryptocurrency that changed at a predictable rate, or that could be governed in a defined and specific way by the people, so it would be less prone to corruption and hijacking by special interests.
From what I've seen about bitcoin, I don't know see any reason as to why once the volatility stops and it scales, why it couldn't ultimately be the currency. If you calculate deflation and decrease wages by that amount, I'd expect the average worker would have an increase in standard of living compared to the average worker today getting (partial) inflation matches. It would also incentivize savings.
It's definitely about giving power back to the people without any middle man intervention. Nobody is questioning that. This is pretty much why we are all so passionate abut crypto.
How could it change at a predictable rate without having some sort of external intervention? You mean a more democratic voting process to the coin? Doesn't the development community for coins already have this sort of power anyway?
Hmm, interesting idea to decrease wages by the amount of expected deflation. While it makes sense that your standard of living could still be higher, can you imagine a politician selling this fact to the population? :P
I guess I meant that the supply could change at a predictable rate which doesn't cap out at some number like bitcoin does. And the development community for coins do have this sort of power, which is why I think the critique at bitcoin doesn't really work, especially if you broaden bitcoin to be crypto currencies in general.
Ha, well the world would be very different if we were actually living in that world, but if things kept getting cheaper, I would expect the same to happen to wages or the thing wouldn't be sustainable.
My only comment would be is that by the time is reached maximuim supply , there will be a new kid on the block offering scaling options . I am thinking along the lines of EOS and Ethereum. Therfore there could be an element of creative destruction involved in Bitcoin by 2032 which will therefore negate any crisis
So you're saying that the fact that there will be an entire ecosystem of cryptocurrencies and not just Bitcoin, could help negate any negative effects that could be caused by deflation if it was just the one coin?
Yea I think that by that time the crypto landscape could be very different . I understand the gernal public only knows bitcoin and if there is mass adoption it will all go into Bitcoin . However people coming into the market will see the scaling issues and will look for other options so will go into the new boys. I think within at least five years the new 3rd generation blockchains will be making waves . So it will therefore introduce an element of competition into the crypto space
fascinating subject. I always find it interesting that economists seem to completely ignore ecologists. The natural systems and cycles are the greater environment in which all of our valuation games take place. scarce resources with alternate applications - yet which are the real boundries and will printing more currency help if we break through them?
Explain what you mean to me a bit more. You're saying that if there is no natural environment to extract raw materials from, then there will be no economy whatsoever?
But does Bitcoin help attention turn to environmental matters? I would say no difference as it's still driven by profit?
In nature the conditions that define the relationships are intrinsic, so it is self regulating.
Our world is nature, but with layers of synthetic control
this alters the relationships in unknowable ways.
Once we mess with the natural flows and cycles,
we become a bit like the magicians apprentice
It just what we do, its not good or bad
It is real
I see crypto as the possibility of surrendering control to pre-assigned computer code.
This de centralisation is mimicking nature
Bio mimikry is our greatest work
simply because it flow nicely
it is graceful in that
it uses the least amount of force, and therefore can remain at least partly open to sensing and self correcting based upon reality rather than a central dogma.
So long as we defer to a set of synthetic inflexible "rules"
we are not in relationship with nature - you know that place where reality takes place lol..
Anyhow, your super smart, I think you get it :)
thanks for your question, it made me question my own stupid assumptions lol..
The predetermined supply is what gives Bitcoin credibility. In the past when government has issued new currency, it's always worked in the short term, but it delays problems. And how many times have governments been irresponsible with this power?
Yes, but can you see the effects of deflation being an issue if Bitcoin becomes the primary source of money?
Would deflation ever be an issue if it wasn't for massive inequality and financial manipulation
Crypto doesn't solve inequality though.
There are still huge questions around what would actually happen if crypto became the primary source of money for society.
It doesn't, but at least it's transparent.
A lot of inequality has stemmed from corruption.
And it does solve the problem of government mismanagement.
The main reason there's still questions regarding crypto it's that it will be the first time in the history of the world where a financial system is incorruptible.
it's fixed so it won't inflate as fiat does
Yes, but Varoufakis is talking about the problems that this fixed supply will present during economic downtimes. Do you have any thoughts on this issue?
every type of currency has problems during a crisis, so he didn't say something eye-opening
But traditional monetary policy gives policymakers control to solve these problems. The problem is trust in these individuals, but there are still mechanisms to solve them.
If Bitcoin is widely adopted, what can be done?
People will simply make another type of currency and move from there
So the solution to deflationary problems in Bitcoin, is simply to view crypto as an entire crypto ecosystem with new coins coming in (printed money essentially), rather than a single, stable coin?
Yes, like in life, one generation dies and is replaced by another. Immortality will only make everything stale.
check out smartcash
And what does smartcash have to do with anything to do with the fixed supply issues of Bitcoin and it's relationship to traditional monetary policy?
Mr Varoufakis brilliant ideas heavily damaged his country economy. I wonder why he doesn’t visit us any more ...
But Greece was fucked either way... Don't you at least respect the way that he didn't want to hand over his people to the EU creditors, essentially forever?
Any idea how the dept was created ? Let me tell you from the inside . EU gave us a shitload of money and instead of using it to improve econemy it was turned into benefits for public sector and of course the private sector benefited equally and undeservingly.
Our current government , Varoufakis was minister of Economy, didn't want to continue the half assed almost decent work of the previous one and finish the greek program. They had other ideas. They didn't want to hand over to bad creditors.
Results : banks closed for the whole summer of 2015, we still have capital controls up to this day and accumulated another 100 billion in debt and they signed two more memorandums and Greece is under surveillance for the next 99 years.
Nice job Mr Minister !!!
I believe that all he wanted, was material for his next book. And I still wonder why he doesn't visit us and lives abroad...
How is the debt accumulated and abused by many governments Varoufakis' fault?
The problems were there long before Varoufakis had any influence. He just happened to be there when the house of cards collapsed.
Didn't say that. I said the previous government made a half assed almost decent job to short things out and they nearly made it, but Varoufakis party at that time Syriza forced elections in 2015 and came to power.
The problems were long before him and still exist.
He just happened to cause more problems in a very small time frame and he was the one the made the house of cards collapse.
He was 100% responsible for the closing of the banks for a good couple of months in 2015 and for capital controls that exist until today.
But at least he sold a lot of books...
I agree with this pendapt.
I think they recommend crypto to completely replace the traditional central bank driven by the central bank to expand the central bank.
Well, do you think that it's a good idea?
if indeed they run it in accordance with what has been applied, maybe it will be very good.
but if they violate the regulations already applied, maybe it will be negative.
Interesting post. I'm not big on Bitcoin, because it's not being used as it's meant to be used. I have a problem with it because the more transactions there are, the slower it gets, and then there are high transaction costs. I would not like it to replace traditional banking, but it's at off to a start, even if not a public one. I look at other cryptocurrencies to innovate further, as well as other blockchain technologies, but not Bitcoin. Did you ever look at something called Hashgraph?