What is Litecoin?
Litecoin is a peer-to-peer Internet currency that enables instant payments to anyone in the world. It differs from its parent Bitcoin in that can be efficiently mined with consumer-grade hardware. Litecoin provides faster confirmations (targeted at every 2.5 minutes on average) and uses memory-hard, scrypt-based mining to target the CPUs and GPUs most people already have. The Litecoin network is scheduled to produce four times as many currency units as Bitcoin.Litecoin
(h/t Shaun Hingston in the comments)
29 comments:
As long as the programmers were setting out to fix bitcoin, why didn't they change the most pointless and arbitrary feature: the cap on the total number of coins that can be "mined"?
Unfortunately as they are programmers not economists. The community has some fairly entrenched beliefs with respect to Austrian school of thought. So trying to convince the community is rather hard....
Then there is the issue of how the 'fix' would work, e.g would it issue at a fixed-rate? Then what would the rate be? These become political problems which aren't easily dealt with by programs. So addressing the problem would take the complexity to another level.
The purpose of Bitcoin in particular, as indicated by the use of the mining analogy, is to mimic gold, not as a commodity but as an anchor of fixed supply. The Libertarians-Austrian diehards object to it because it is not commodity currency, but digital currency can never be that. However, it is possible to mimic the fixed supply aspect of gold as a price anchor.
Monetarily, the basic idea of behind the value of money is what floats. In a fixed rate regime, assets and goods float against the anchor based on supply and demand for assets and goods, whereas in a floating rate regime, the value of money floats against assets and goods as indicated by the changing purchasing power domestically (inflation rate) and fx rate (appreciation and depreciation).
Fiscally, the basic idea is policy space. A fixed rate regime limits policy space, risking deflation and unemployment, and a floating rate regime expands policy space, risking inflation and currency devaluation.
For those preferring narrow policy space, a fixed and anchored regime is preferable. For those preferring wide policy space, a floating rate untethered regime is preferable.
Generally speaking, until now those preferring a fixed rate tethered regime have preferred gold. Digital alternatives are challenging this preference due to other advantages, chiefly less friction and greater efficiency, especially cross-border. This comes at the cost of a physical anchor, unless a convertible digital currency would be introduced, and I don't that is out of the question. If there is demand for it, entrepreneurs will provide it.
The issue that would have to be faced in a floating quantity system is who controls the float if not government. I don't think that is an issue that will be addressed early in the game, but I'm sure that algorithms can be developed to handle it. This is likely where digital currency will end up as a world standard, whatever than will turn out to be.
I should add that bitcoin is starting to experience specialization and possibly monopolization (or something similar). Basically miners are starting to use specialized hardware, which is creating an entry-barrier into mining. This will probably result in control becoming more centralized. Something that bitcoin is not suppose to be.
Such centralization may stimulate regulation, or significant changes to the bitcoin software... Regulation would be easier, as the state could control the source of such specialized hardware. Naturally, this would threaten the position of pre-existing miners.
Litecoin is suppose to make hardware-specialization more difficult.
Bitcoin/litecoin aren't significantly different from an economics point of view. Anyone want to build an MMT coin with me? ;) It wouldn't be too hard to build off the bitcoin spec and de-austrianize it.
The mining thing is actually useless: consuming real resources (plenty of electricity) to create money. Wasting real resources to create money, these guys miss the point completely (just like goldbugs, as gold mining is a very resource intensive activity).
Fix that before anything else!
Maybe Litecoin is to Bitcoin what silver is to gold.... then copper cannot be far behind...
rsp,
These are all scams attached to the dollar...more musical chairs.
Who ends up with the money when the music stops?
"Maybe Litecoin is to Bitcoin what silver is to gold.... then copper cannot be far behind..."
Nice!
"The purpose of Bitcoin in particular, as indicated by the use of the mining analogy, is to mimic gold, not as a commodity but as an anchor of fixed supply."
Gold supply increases on average by about 2% per year, closely matching population growth, which seems far less deflationary than Bitcoin with its ultimate cap on supply. Litecoin seems to be less restrictive than Bitcoin but still more restrictive (i.e. deflationary) than gold.
"For those preferring narrow policy space, a fixed and anchored regime is preferable. For those preferring wide policy space, a floating rate untethered regime is preferable."
Is there a third option? Would it be possible to create some hybrid between fixed and floating?
I should add that bitcoin is starting to experience specialization and possibly monopolization (or something similar). Basically miners are starting to use specialized hardware, which is creating an entry-barrier into mining. This will probably result in control becoming more centralized. Something that bitcoin is not suppose to be.
Yes, Shaun, and I think this is the underlying tragi-comedy of libertarianism. Libertarians always imagine that if only economic agents had more freedom, that freedom would be self-sustaining. But every powerful corporation, oligopolist, bankster, started out as some small-time entrepreneur pursuing the libertarian dream. Unregulated market activity naturally tends toward power concentration and wealth concentration. The pseudo-freedom of the libertarian is the freedom of the untrammeled individual to build himself into a feudal master.
Only the regulation provided by a powerful and vigilantly mobilized democratic government can preserve equality, protect the vulnerable, limit the rise of plutocracy and preserve human dignity from the ravages of market capitalism.
Who ends up with the money when the music stops?
Exactly. The whole thing is already being taken over by speculators, schemers and venture capitalists.
As long as the programmers were setting out to fix bitcoin, why didn't they change the most pointless and arbitrary feature: the cap on the total number of coins that can be "mined"? Dan K
Common stock as private money has no limit on the amount issued other than the wishes of the stock-holders (at least in principle).
The mining thing is the method for introducing the tokens into the market over a period of time.
With a decentralized currency, you can't spend it into existence - there is no one who holds the currency with whom a real good can be exchanged.
The mining process allows the tokens to be generated for some basically meaningless activity (well, it IS meaningful for the currency scheme - the block chain gets extended). The point is to introduce a time element to signify value.
The great thing about private currencies is that we can have so many of them!! The free banking period all over again - woo hoo.
Also, while the number of BCs are limited, they can be divided down to something like 8 decimal places. The idea being to design a tendency toward falling prices in BC.
You can criticize the libertarians all you want - but the notion that prices should decrease as productivity increases is progressive. Today's problem is that principle is only applied to wages.
From a store of value perspective - the idea that there will be some fixed limit of BCs provides an incentive for speculation - don't underestimate that motivation.
From a facilitating exchange perspective, it doesn't really matter if there is 1 Bitcoin or a bazillion - since it is basically a number, it can be divided up as needed. You don't run out of numbers either going up or down.
With a decentralized currency, you can't spend it into existence - pebird
Wrong. Common stock is a private money form that can be spent into existence.
What's wrong with people? Didn't they learn in kindergarden to "share?"
pebird: "The great thing about private currencies is that we can have so many of them!! The free banking period all over again - woo hoo."
IIUC, there were some 50,000 private currencies in the US just before the Federal Reserve Act. Sounds like a nightmare for retailers.
pebird: "You can criticize the libertarians all you want - but the notion that prices should decrease as productivity increases is progressive."
The persistent deflation of the late 19th century spawned the Progressive Movement -- in reaction against its consequences.
pebird: "From a store of value perspective - the idea that there will be some fixed limit of BCs provides an incentive for speculation - don't underestimate that motivation."
Well, there is a paradox here. The ever increasing purchasing power of bitcoins will encourage hoarding. In fact, speculation, then crash, then hoarding of private currencies brought us the depression of 1837.
IIUC, there were some 50,000 private currencies in the US just before the Federal Reserve Act. Sounds like a nightmare for retailers.
Those currencies worked because they were local and transportation and communications technology were in their infancy, so the being locally recognized the transaction cost was relatively now and risk somewhat measurable. However, that is no longer the case and that means a huge jump in transaction cost and risk as more research is required. Of course, that could be supplied by "rating agencies" with all the issues of agency.
"communications technology were in their infancy.."
good point Tom... this was the "game changer"... people dont realize this fact or the impact...
rsp,
I disagree. Modern communications and computers should make alternative currencies MORE doable, not less.
I appeared on The Attitude today to discuss Bitcoin. I just posted the link to the podcast over at New Economic Perspectives, along with some further reflections on Bitcoin and deflation. Most of what I saide and wrote is pretty close to things I have said here several times.
http://neweconomicperspectives.org/2013/04/talking-bitcoin.html
Modern communications and computers:
"Your grocery bill comes to $55.23. All you have is 23 Youwannabucks? Let's pull that up on the computer. The bid is $!.89 and the ask is $3.11. I'll give you $2.00, but you're still $9.23 short."
Right!
Modern communications and computers should make alternative currencies MORE doable, not less.
That are more doable but the transaction cost is higher. People are going to research tens, hundreds and even thousands of currencies in terms of the tradeoffs, or just make less than fully informed decisions? And will the necessary information (transparency) be available anyway?
F,
Running a state currency system is not like predicting the weather... to do it right you need coordination and coordination requires communication...
We're not on "Common Stock Money" now just like we're not on the metals anymore, we're on state currency (again) and it requires as near to real time information systems as the technology of the times can deliver...
Back during the times Tom is talking about we were just getting into wireless (ie radio) communications....
Without coordination facilitated by communications, we have to go to metals as "an equalizer" because you can't tell what the other side of the deal is all about if you have no outside information so you use metals as "an equalizer" or guaranty in settling the deal....
rsp,
F,
Reagan used to say "trust but verify"... without comms you can't 'verify' so you go to the metals...
Once the Empire fell, the comms channels were severed and ushered in the dark ages where metals ruled small little warring fiefdoms....
rsp,
PS this is a feature of Bitcoin...
Once the deal is done IT IS DONE.
With Visa/MC/AMEX, merchants are at risk of holds if the customer complains to the card companies... if the issue is not settled with the customer, the merchant will have their deposits reduced by the card companies...
Card companies typically charge a bit over 2% and amex over 3 to the merchant....
The bitcoin processors IIRC charge only 1% so their is huge amounts of processing fees at risk for the banks/card companies if bitcoin starts to become a preferred choice for use in electronic commerce or what are now "card services"...
Maybe Walmart will start to accept it as they are always at war with the banks/card companies over their usurious processing fees...
rsp,
"Once the deal is done IT IS DONE."
I think this is referring to the receipt being identical with the transaction record property of Bitcoin. All transactions are recorded in the block chain. If instead this is a reference to how Bitcoin exchanges operate, that is not be a property of Bitcoin, but of how each exchange handles any transaction disputes.
Also with cash, when the deal is done, it is done - but that does not mean you can't have a resolution process over disputes.
And will the necessary information (transparency) be available anyway? Tom Hickey
If it isn't, then don't accept the money.
Look, it may well be that a universal bailout with new fiat plus the elimination of all government privileges for the banks is sufficient to cure the money problem. But if it isn't, I'm merely pointing out an ethical form of endogenous money creation, common stock, that could fill the gap.
Right! Bill
Well, good ole fiat would still be an option and most people would use fiat exclusively UNLESS it was mismanaged by, say, bailing out the banks and/or not providing it in sufficient quantities (austerity) to the general population.
My point is that government privileges are not necessary for endogenous money creation.
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