Published on: 2013-12-11T01:01:52+00:00
Bitcoin's volatility is attributed to low liquidity and the ease with which a single large player can manipulate the market. The absence of common financial tools like shorting, futures, and options further contributes to this volatility. However, it is important to note that Bitcoin's volatility is a reflection of its future acceptance, which is influenced by inherently volatile sources such as politicians' opinions and government policies. The lack of stability in Bitcoin is also due to the absence of proof-of-work from society's end, which adds to its instability. As time progresses, laws, regulations, and policies will be established, bringing more stability to Bitcoin. This stability is expected to add value to Bitcoin within the range of $0.0001 to $100,000 per coin, regardless of whether the rulings are positive or negative.Discussions surrounding the feasibility of "stablecoins" in a secure and peer-to-peer system have been deemed off-topic and unfeasible on forums. While there have been proposals for stablecoins, implementing them securely in such a system has proven challenging. Participants in these discussions suggest asking questions to understand why these proposals are unfeasible rather than dismissing critiques as closed-mindedness.In December 2013, Mike Caldwell expressed his belief that if there was a consensus that Bitcoin's inflation parameters hindered its economy, merchants could vote for changing the rules. He proposed accepting a new altcoin that would reflect the consensus on inflation. Wladimir agreed with this idea, emphasizing that Bitcoin's economic parameters are fixed and adding a monetary authority to Bitcoin is both impossible and undesirable. However, he suggested that if the lack of inflation in Bitcoin becomes problematic in day-to-day usage, a parallel chain could emerge as the de-facto cryptocurrency for spending.A conversation between Gavin Andresen and Ryan Carboni discussed the tracking of exchanges in Bitcoin. Carboni proposed hard-coding exchanges into the system or allowing miners to choose them, but Andresen highlighted the need to focus on addressing the underlying problem instead of seeking a quick solution.Ryan Carboni argued in favor of the lack of a Central Bank in Bitcoin, stating that it is a feature rather than a bug. He also emphasized that political debates should be directed elsewhere and that the bitcoin-development forum is meant for technical discussions related to Bitcoin's development.Regarding the increase in Bitcoin's money supply, Ryan Carboni contended that it would not violate the trust of those holding the currency, as many people bought Bitcoin with the expectation of its value increasing. However, Jeff Garzik mocked Carboni's proposal, indicating that it was met with widespread laughter.The conversation between Gavin Andresen and Ryan Carboni touched upon the proposal to hard-code exchanges into Bitcoin or allow miners to choose them. However, Andresen pointed out the difficulty in solving the problem associated with this proposal, comparing it to wanting a fast way to travel without addressing the challenging aspects required for it to work.The idea of relying on data from third-party sources outside the Bitcoin network received negative feedback due to the potential vulnerabilities it poses. The proposal suggested hard-coding exchanges or allowing miners to choose, but consensus among miners is crucial to avoid rejected blocks. Many people invested in Bitcoin with hopes of its value increasing compared to other currencies, rather than solely relying on its fixed money supply. Nevertheless, Ryan Carboni's proposal faced mockery and laughter for its impracticality.Ryan Carboni argued that people invest in Bitcoin expecting an increase in its value compared to other currencies, highlighting the importance of exchanges for real goods transactions. However, Jeff Garzik, who works at BitPay, Inc., mocked Carboni's proposal based on its reception.In a 2013 email exchange, Mike/Casascius proposed that if there was a consensus for accepting inflation in Bitcoin, merchants would vote for changing the rules instead of adopting another altcoin. However, Andrew Poelstra argued that any change to the inflation formula would violate the trust of those who obtained Bitcoin under the belief that its inflation algorithm would remain unchanged. Ryan Carboni disagreed and stated that many people bought Bitcoin with hopes of significant appreciation in value. Earlier, Mike/Casascius had advocated for a fixed money supply on Bitcointalk, but his ideas were met with strong opposition.A Bitcoin Improvement Proposal suggested changing Bitcoin's inflation formula to address the lack of price stability, incentivize spending, and reduce speculation. The proposal recommended hard-coding or allowing miners to choose exchanges to track. Miners would compare the cumulative percentage change in exchange prices over preceding blocks, calculating the standard deviation and excluding outliers. This proposal aimed to achieve price stability without pegging Bitcoin to a specific currency. The proposal acknowledges the need for Bitcoin to have a closed economic ecosystem and reduce month-to-month variability, discouraging the perception of it being purely speculative.
Updated on: 2023-08-01T06:50:42.981849+00:00