Monday, April 7, 2014

SHOCK CLAIM Bitcoin Supply Can Be Inflated (and maybe it should in the future)

One of the points that I have been making with regard to the idea that Bitcoin is NOT a libertarian answer to the Federal Reserve is the fact that the terms, of what Bitcoin is, can be altered.  This is
what I wrote a few weeks back:
I consider the fact that Bitcoin can be changed, at all, very alarming. Assuming that Bitcoin becomes a mainstream currency, which I doubt, but if it does, who is to say that in a democracy a majority can't vote to somehow change Bitcoin in a manner that destroys what the essence of what it is today. Very scary.
Nakamoto Satoshi did build in a rule that would prevent the Bitcoin supply from being increased beyond its current set limit of 21 million. However, the entire structure of Bitcoin is based on majority rule.

It is not difficult to see how in a world where the U.S. constitution has been so distorted from the original intent of the founders that the same thing could not happen to Bitcoin rules. To my shock, this is already occurring with regard to Bitcoin. I didn't expect this type of talk for years, but it is in the here and now.

CNBC reports:
The rules governing bitcoin that limit the creation of the open-source virtual currency to 21 million units could one day be modified if a majority of its users were in agreement, said a top executive at one of the world's largest bitcoin "mining" companies.

George Kikvadze, board member and advisor of BitFury, said Monday that if the notion of a finite number of bitcoins was ever altered it would be fair and should not undermine the value. During an interview Monday on CNBC's "Squawk Box," he likened it to when "governments go in and print money." About 12.6 million bitcoins are in circulation now...In fact, Kikvadze pointed out that even Nobel Prize-winning economist Milton Friedman had favored abolishing the Federal Reserve and going to a machine program that would keep the quantity of money going up at a steady rate.
In other words, Bitcoin has the potential to become a Milton Friedman mechanistic centrally planned inflationary currency.

And if that isn't enough to knock libertarian fanboys out of their stupor, Kikvadze went on to say:
Addressing concern in the bitcoin community about government regulation, he said he actually welcomes it as means of giving people confidence in the peer-to-peer payment system. "We need the regulation to get to that stage. Look at the Internet in '93 and '94, [bitcoin] is in the early stage of adoption," he said. "Regulation is good."
It is really time that the fanboys face reality. Bitcoin in no way can compete with gold and silver as an alternative currency.

There is no gold or silver blockchain that tracks every transaction. A majority vote can not change the supply of gold and silver.


  1. I recently attended a Bitcoin user group meetup. One of the attendees matter of factly dissed Bitcoin because of lack of inflation capability, as a bad thing. But said offshoots either working atop the Bitcoin infrastructure, or new cryptocurrency schemes such as Ethereum would have built in inflation capability.
    The point made in this post that ‘the bitcoin community’ could decide to build in inflation is very valid. I think they simply exponentially increase every single bitcoin to suit.

    Another item of interest, Congressman Jared Polis is speaking at a Robocoin ATM Demo on Capitol Hill of which Robocoin CEO Jordan Kelley will attend
    “said Robocoin CEO Jordan Kelley. The meeting will allow Robocoin to tell its side of the bitcoin compliance story and allow congressfolks the opportunity to buy a little bitcoin of their own. Writes Kelley in the invitation:You are cordially invited to a demonstration of Robocoin, the world’s first bitcoin kiosk for buying and selling the popular and controversial digital currency. Come see a Robocoin demo, hear a brief bitcoin talk from Congressman Jared Polis, try buying bitcoin yourself and ask your burning bitcoin questions. This will be fun, plus you’ll see how Robocoin is raising the bar on KYC / AML compliance in bitcoin. Welcome to the future of anti-fraud, anti-identify theft and anti-money laundering – this is customer protection built for the 21st century.”

    This is the same Congressman that produced what he now terms ‘satire’ respecting ending the use of the dollar bill. How much of this is satire, and the way they really think about dollars, perhaps physical gold, silver?
    “Today, U.S. Congressman Jared Polis (D-CO) sent a letter to federal regulators seeking a ban on United States dollar bills, a currency that is unregulated and unstable, and has been used in illicit activity, including drug trafficking and money laundering. The letter was sent in response to a letter from Senator Joe Manchin (D-WV) calling for the banning of BitCoins. Congressman Polis expressed similar concerns about the negative effect dollars have on America’s economy
    By way of background, a physical dollar bill is a printed version of a dollar note issued by the Federal Reserve and backed by the ephemeral “full faith and credit” of the United States. Dollar bills have gained notoriety in relation to illegal transactions; suitcases full of dollars used for illegal transactions were recently featured in popular movies such as American Hustle and Dallas Buyers Club, as well as the gangster classic, Scarface, among others.
    Printed pieces of paper can fit in a person’s pocket and can be given to another person without any government oversight. Dollar bills are not only a store of value but also a method for transferring that value. This also means that dollar bills allow for anonymous and irreversible transactions.
    The very features of dollar bills, such as anonymous transactions, have created ubiquitous uses from drug purchases, to hit men, to prostitutes, as dollar bills are attractive to criminals who are able to disguise their actions from law enforcement. Due to the dollar bills’ anonymity, the dollar bill market has been extremely susceptible to forgers, tax fraud, criminal cartels, and armed robbers stealing millions of dollars from their legitimate owners. Anonymity, combined with a dollar bills’ ability to finalize transactions quickly, makes it very difficult, if not impossible, to reverse fraudulent transactions.”

  2. Wenzel, why do you insist on insulting Bitcoin enthusiasts? If your criticisms are sufficient to destroy their arguments, isn't that enough? By insulting them consistently, you reveal the weakness of your arguments.

    You don't feel the need to insult dollar enthusiasts everyday. Yet that system is murdering, stealing, and destroying economies all over the world. At least Bitcoin is a voluntary system. There are no bombs being bought with printed Bitcoins RIGHT NOW. Yet you find the need to denigrate it on a daily basis. You are so sad. Even if a change occurs in the future to allow expansion of the supply, that supply will still not be put in the hands of warmongers upon printing. You would still have an opportunity to opt out that system immediately, which is right now very difficult for people in the dollar. Even if Bitcoin is all the bad things you say it is still vastly better than fiat currency. You are really betraying your professed principals with your words.

  3. "In other words, Bitcoin has the potential to become a Milton Friedman mechanistic centrally planned inflationary currency..."

    Toadja so (...said the frog...). The phrase I used was "Digital Friedmanite Monetarism". 'N you can look it up. On this site.

    The addition you make to the discussion is in asserting that a Bitcoin Politburo can vote to increase the M1(Btcn) rate of growth. There would be 3 possibilities:

    1. Decrease the growth rate of Bitcoin.
    1.1: Do not increase Bitcoin once it reaches its Design Specification. This is a negative deviation from the constant planned growth rate now, so it is a "decrease".

    2. Keep the growth rate going at the Design Specification after it has reached its "Maximum".

    3. Inflate growth by some arbitrary %.

    Remember, this is a Scholastic exercise in a Toy Universe. "Value" accrues to expected growth being "Neutral" from its Design Specification. Friedman used the example of the Czarist Ruble that appreciated in value after the Bolsheviks took over since there were no more of these Rubles being printed and the Soviet currency hadn't reached everyone. Anything other than its "Natural Growth" in mathematical terms must be apparent in language or mathematics. Neutral growth might be obtained by using a "System Dual Math" algorithm , but again, that's math.

    Anything other than that is emotion. "We must inflate Bitcoin to take care of *X*..." No.

    What is needed is time for the statistical fluctuations to die down and for us to play Scientists. If the growth of Bitcoin is indeed linear and fluctuations in value never settle down to a approximation of the line, then there will be a Real World experiment showing that Friedman's Monetarism cannot work.

    My guess is that we'll never reach that point. The Pro-Bitcoin people will have their vote and the Anti-Bitcoin people will will produce endless Papers showing that there is no convergence based on "Reasonable Assumptions".

    The Austrians have stated that the people will adjust to the currency, which is an "inverse" of the Monetarist paradigm. Bitcoin is, however, Digital Friedmanite Monetarism.

    RW: Why didn't you believe me?

  4. The key point here is, "if a majority of its users were in agreement"

    The miners would all have to agree to the changes. I doubt that would ever happen. What COULD happen is that the government comes out with it's own version of bitcoin that can be inflated on a separate network. Any attempt to inflate the currency as it presently stands would result in a blockchain fork, with the new fork being orphaned because no one in their right mind would agree to mine it.

    Basically, there is no way to inflate the number of bitcoins in existence. The guy being quoted knows this, but he's playing a political game with his rhetoric.