Why BTC is not cash, and why cash is not infinitely divisible.

[newbitech]

Real simple.

Cash transactions have no record of the transaction.

BTC records every transaction.



There is only one(1) Bitcoin in existence. That Bitcoin is the block chain. The reason why the block chain will grow into infinity is because the block chain is a record of all of the divisions of the original bit coin.

From the first "transaction" until today, each time a BTC is "spent" it is simply recording a division of the original bitcoin. Bitcoin creation aka mining is nothing more than mathematically encoding each division into a cryptographically obfuscated set of data (block).

Cash is not infinitely divisible because it is exists as matter. Same for gold. Eventually you will reach the atomic level at a point where if you divided that gold atom, it would no longer be gold.

BTC on the other hand can be infinitely divided. This is the hidden inflation inside of BTC. And of course this manifest thru the easily observed growing size of the block chain.

 

[Neil Desmond]

Inflation does not mean and is not caused by divisibility, regardless of whether it's infinitely divisible or not.

 

[newbitech]

Inflation does not mean and is not caused by divisibility, regardless of whether it's infinitely divisible or not.

You cannot ignore the infinite divisibility of BTC as a source of inflation when it comes to non physical medium of exchange.

There really is no technical difference (or otherwise) between 1 BTC and 21 million BTC. There is really is no technical difference (or otherwise) between 0.00000001 BTC and 1 BTC. The nominal amount of BTC created should not be confused with physical scarcity. The reality is, that each transaction occurs creates a new unique record in the block that represents a division of the original bitcoin.

The token 'inflation' that you see when a machine churns out the next block is nothing more than an amendment to the original block. It would be like writing a 0 next to the 1 on a dollar bill and saying this is now 10 dollars. Or stamping a gold bar with 100 and saying, "This is 100 gold".

What is it that you are actually counting when you say you have 3 BTC?

While it is true that technically cash could also be infinitely divisible, there is no representation for cash that is less than 0.01. On the flip side, we know that cash can be printed infinitely. So cash has infinite multiplicity.

And yet on the other hand, something like gold has constraints on both ends. Gold can't be printed or created, and cannot be divided infinitely.

 

[brandon]

Btc is only divisible to 8 decimal places. That could be increased some but not infinitely... real world hardware constraints would put a limit on it eventually.

 

[newbitech]

Btc is only divisible to 8 decimal places. That could be increased some but not infinitely... real world hardware constraints would put a limit on it eventually.

Yes I am familiar with the nominal divisibility factor. What I am describing is the real divisibility factor. The actual function that describes, "what is a bitcoin". What is the block chain? What does it mean to "spend" a bitcoin?

A bitcoin, we should really say "the bitcoin" is series of data that contains the encrypted record of the manipulation of the data called "genesis block".

This is the genesis block...

refer here to see a better view of the hex dump. http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/

[COLOR=#666666][FONT=monospace]00000000  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#magicnetworkid"]f9 be b4 d9[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#blocklength"]1d 01 00 00[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#blockformatversion"]01 00 00 00[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#prevblockhash"]00 00 00 00[/URL][COLOR=#666666][FONT=monospace]  |................|00000010  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#prevblockhash"]00 00 00 00 00 00 00 00  00 00 00 00 00 00 00 00[/URL][COLOR=#666666][FONT=monospace]  |................|00000020  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#prevblockhash"]00 00 00 00 00 00 00 00  00 00 00 00[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#merkleroot"]3b a3 ed fd[/URL][COLOR=#666666][FONT=monospace]  |............;...|00000030  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#merkleroot"]7a 7b 12 b2 7a c7 2c 3e  67 76 8f 61 7f c8 1b c3[/URL][COLOR=#666666][FONT=monospace]  |z{..z.,>gv.a....|00000040  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#merkleroot"]88 8a 51 32 3a 9f b8 aa  4b 1e 5e 4a[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#timestamp"]29 ab 5f 49[/URL][COLOR=#666666][FONT=monospace]  |..Q2:...K.^J)._I|00000050  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#bits"]ff ff 00 1d[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#nonce"]1d ac 2b 7c[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/txncount"]01[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_ver_no"]01 00 00 00[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in_count"]01[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]00 00[/URL][COLOR=#666666][FONT=monospace]  |......+|........|00000060  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]00 00 00 00 00 00 00 00  00 00 00 00 00 00 00 00[/URL][COLOR=#666666][FONT=monospace]  |................|00000070  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]00 00 00 00 00 00 00 00  00 00 00 00 00 00 ff ff[/URL][COLOR=#666666][FONT=monospace]  |................|00000080  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]ff ff 4d 04 ff ff 00 1d  01 04 45 54 68 65 20 54[/URL][COLOR=#666666][FONT=monospace]  |..M.......EThe T|00000090  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]69 6d 65 73 20 30 33 2f  4a 61 6e 2f 32 30 30 39[/URL][COLOR=#666666][FONT=monospace]  |imes 03/Jan/2009|000000a0  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]20 43 68 61 6e 63 65 6c  6c 6f 72 20 6f 6e 20 62[/URL][COLOR=#666666][FONT=monospace]  | Chancellor on b|000000b0  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]72 69 6e 6b 20 6f 66 20  73 65 63 6f 6e 64 20 62[/URL][COLOR=#666666][FONT=monospace]  |rink of second b|000000c0  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]61 69 6c 6f 75 74 20 66  6f 72 20 62 61 6e 6b 73[/URL][COLOR=#666666][FONT=monospace]  |ailout for banks|000000d0  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#tx_in"]ff ff ff ff[/URL][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#output"]01 00 f2 05  2a 01 00 00 00 43 41 04[/URL][COLOR=#666666][FONT=monospace]  |........*....CA.|000000e0  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#output"]67 8a fd b0 fe 55 48 27  19 67 f1 a6 71 30 b7 10[/URL][COLOR=#666666][FONT=monospace]  |g....UH'.g..q0..|000000f0  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#output"]5c d6 a8 28 e0 39 09 a6  79 62 e0 ea 1f 61 de b6[/URL][COLOR=#666666][FONT=monospace]  |\..(.9..yb...a..|00000100  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#output"]49 f6 bc 3f 4c ef 38 c4  f3 55 04 e5 1e c1 12 de[/URL][COLOR=#666666][FONT=monospace]  |I..?L.8..U......|00000110  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#output"]5c 38 4d f7 ba 0b 8d 57  8a 4c 70 2b 6b f1 1d 5f[/URL][COLOR=#666666][FONT=monospace]  |\8M....W.Lp+k.._|00000120  [/FONT][/COLOR][URL="http://james.lab6.com/2012/01/12/bitcoin-285-bytes-that-changed-the-world/#output"]ac 00 00 00 00[/URL][COLOR=#666666][FONT=monospace] f9 be b4  d9 d7 00 00              |............|0000012c[/FONT][/COLOR]

This is also represented on the block chain site here...

http://blockexplorer.com/b/0

with the raw JSON data looking like this.

[COLOR=#000000]{[/COLOR]
  "hash":"000000000019d6689c085ae165831e934ff763ae46a2a6c172b3f1b60a8ce26f",  "ver":1,  "prev_block":"0000000000000000000000000000000000000000000000000000000000000000",  "mrkl_root":"4a5e1e4baab89f3a32518a88c31bc87f618f76673e2cc77ab2127b7afdeda33b",  "time":1231006505,  "bits":486604799,  "nonce":2083236893,  "n_tx":1,  "size":285,  "tx":[    {      "hash":"4a5e1e4baab89f3a32518a88c31bc87f618f76673e2cc77ab2127b7afdeda33b",      "ver":1,      "vin_sz":1,      "vout_sz":1,      "lock_time":0,      "size":204,      "in":[        {          "prev_out":{            "hash":"0000000000000000000000000000000000000000000000000000000000000000",            "n":4294967295          },          "coinbase":"04ffff001d0104455468652054696d65732030332f4a616e2f32303039204368616e63656c6c6f72206f6e206272696e6b206f66207365636f6e64206261696c6f757420666f722062616e6b73"        }      ],      "out":[        {          "value":"50.00000000",          "scriptPubKey":"04678afdb0fe5548271967f1a67130b7105cd6a828e03909a67962e0ea1f61deb649f6bc3f4cef38c4f35504e51ec112de5c384df7ba0b8d578a4c702b6bf11d5f OP_CHECKSIG"        }      ]    }  ],  "mrkl_tree":[    "4a5e1e4baab89f3a32518a88c31bc87f618f76673e2cc77ab2127b7afdeda33b"  ] [COLOR=#000000]}[/COLOR]

When someone claims to own "a" bitcoin, what they are actually claiming to own is a piece or the division of "the" bitcoin.

incidentally, the number "50" here is strictly nominal. It doesn't matter if it's 50 or 50 billion, or .0000000000050. What matters is the entire collection of data. That is what is actually being "mined".

The system gives the "miner" the right to add (as in addition) a hard coded nominal value (50, 25,12.5 etc..) to the original nominal value of 50. Further, the system requires that along with addition to the nominal value, a division in the data be created. These divisions are colloquially known as "transactions". Nothing is actually "transacted". These are simply markers in the code where the nominal amount is divided into different "addresses" or "wallets".

The addresses themselves have the distinct feature of providing access control and the right to further subdivided (create a data marker) to whatever nominal value has been assigned to that address.

There is an infinite "supply" of bitcoin subdivisions. When you understand that, you can see that it doesn't matter what the nominal amount is. The real amount is, 1.

You don't actually "spend" the bitcoin. You simply alter it by dividing it (creating a marker against the genesis block), and assigning a unique key to that market that gives whoever has that key the ability to make the next division.

 

[robert68]

Have a question about bitcoin. One of the main selling points of bitcoin by its enthusiasts is that it gives the users anonymity. Now credit transactions are a significant portion of any healthy economy. Why would/will any party loan bitcoins to someone who’s anonymous to them?

 

[erowe1]

Cash is not infinitely divisible because it is exists as matter.

First of all, that's not really true. By adjusting fractional reserves, the amount of non-material cash can theoretically grow or shrink without limit.

Second of all, even the cash that exists as matter isn't really just matter, it's particular arrangements of matter. The amount of cash that a given piece of paper represents is determined by a number printed on it. And there's no limit to what that number can be. They could theoretically make googolplex dollar bills.

Ultimately, all of this cash is equal to the total value of all of the goods and services it represents. You could think of it as a basket-of-goods, only it's not a sample, but it's the whole economy. This whole-economy basket of goods is divided up into however many dollars there are in circulation. And this number of dollars can grow ad infinitum.

 

[Tod]

When someone claims to own "a" bitcoin, what they are actually claiming to own is a piece or the division of "the" bitcoin.

Wait a second.....it sounds like you are just re-defining units. Kind of like saying a metric tonne is actually a gram.

1 BTC is defined as one 21millionth of the total value of the currency.

 

[brandon]

Have a question about bitcoin. One of the main selling points of bitcoin by its enthusiasts is that it gives the users anonymity. Now credit transactions are a significant portion of any healthy economy. Why would/will any party loan bitcoins to someone who’s anonymous to them?

Bitcoins aren't anonymous.

 

[robert68]

Bitcoins aren't anonymous.

But assuming they were, since bitcoin enthusiasts seem to believe anonymity is a quality real money can have.

 

[newbitech]

First of all, that's not really true. By adjusting fractional reserves, the amount of non-material cash can theoretically grow or shrink without limit.

Second of all, even the cash that exists as matter isn't really just matter, it's particular arrangements of matter. The amount of cash that a given piece of paper represents is determined by a number printed on it. And there's no limit to what that number can be. They could theoretically make googolplex dollar bills.

Ultimately, all of this cash is equal to the total value of all of the goods and services it represents. You could think of it as a basket-of-goods, only it's not a sample, but it's the whole economy. This whole-economy basket of goods is divided up into however many dollars there are in circulation. And this number of dollars can grow ad infinitum.

Even non material cash may not be infinitely divisible. Let us remember the current system of money is a debt system. These debts are human debts. Humans must interact with the physical world to repay their debts (eliminating cash which is subtraction) or create new debts which is adding.

When the federal reserve "prints" money, what it is really doing as adding more debt, human debt to the economy. This means a human being must interact with the physical world to repay this debt (when government does it, it has to tax to make the debt good, or simply claim that the debt doesn't exist).

The federal reserve cannot take and existing debt and divide it infinitely. It can take and existing multiply it infinitely (INTEREST which is what creates the price inflation).

I understand that the nominal value can have the shifty decimal place, just like BTC. I am not talking about the nominal division. I am talking about the real division. What cash actually represents is not determined by the nominal value on the cash. Of course the nominal value can take on any form. It is the connection to human debt which may only be repaid or created out of the physical environment. The lower bounds of the division of human work in the physical environment is limited by how quickly a human may perform a task.

A human will not ever be able to for instance type 10,000 words per minute. The work therefor may not be divided this far, likewise the existing debt may not be able to repaid in those small increments (or sold or traded or whatever, cash would not exist at that level, it would be impossible).

However, a human being can have the debt to type 10,000,000,000,000,000,000,000,000,000,000 words (infinitely multiple). This can be repaid perhaps in that human's life time and if not passed on to their heir.

BTC does not represent humans interaction with the physical environment. BTC clearly represents human beings doing one thing. Altering the genesis block by creating divisions in the nominal value. That is all BTC will ever represent in real terms. Nominally, sure it can and has already begun representing all sorts of things. At it's core however, it really is just representative of one thing a person can possibly do with it, divide it.

Like the debt of typing all those words (infinite multiple), there is no bounds to how many times BTC nominal value may be divided. That just means that the nominal supply is indeed infinite, just like FED "money".

 

[erowe1]

I understand that the nominal value can have the shifty decimal place, just like BTC. I am not talking about the nominal division. I am talking about the real division.

So am I.

The total value of all dollars in existence is a set limited value equal to totality of the economy in which these dollars circulate. This total value of all dollars is divided up into tiny fractions, called dollars. And these tiny fractions can be made into smaller and smaller fractions of the total economy by increasing the number of dollars in circulation. There is no limit to this.

I know next to nothing about bitcoins. But as I understand your own description of the one Bitcoin and its infinite divisibility, this is perfectly analogous to the infinite divisibility of the economy into dollars of limitlessly decreasing value.

 

[newbitech]

Wait a second.....it sounds like you are just re-defining units. Kind of like saying a metric tonne is actually a gram.

1 BTC is defined as one 21millionth of the total value of the currency.

There is only one BTC unit. You can put whatever nominal value you want on it, it's still only one. That one unit is shared by everyone with keys to subdivide that unit.

You may divide the unit into infinity.

Your definition of 1 BTC probably subconsciously reflects my point.

"The total value of (the currency)".

The currency.

The currency is just a 900 pound data file. The value of that data file is 0. It is unownable at this point and may be breathed in just like oxygen.

What you are actually claiming to own is the right to manipulate that data by subdividing it's nominal value, which one day will be something like 21,000,000.

So that's nice you paid $1,200 for the right to divide 1BTC as many times as you want. Are you hoping that someone else will also pay 1200 or trade you something for that right?

 

[newbitech]

So am I.

The total value of all dollars in existence is a set limited value equal to totality of the economy in which these dollars circulate. This total value of all dollars is divided up into tiny fractions, called dollars. And these tiny fractions can be made into smaller and smaller fractions of the total economy by increasing the number of dollars in circulation. There is no limit to this.

I know next to nothing about bitcoins. But as I understand your own description of the one Bitcoin and its infinite divisibility, this is perfectly analogous to the infinite divisibility of the economy into dollars of limitlessly decreasing value.

Yes that is called inflation. However, it would be possible for the central bank to not introduce inflation by not tampering with the supply. With bitcoin, it is not possible to prevent anyone from tampering with the supply, the supply being the ability to divide the bitcoin. In fact that is an organic part of the network.

BTC inflation won't be nominal. BTC inflation is already real and is hyper. With each new adoptation of bitcoin, the value inflates further and further. In fact the only way to prevent BTC inflation is not to use it at all. Rest assured this is already happening too. The people hording and hoping that BTC reaches 100,000 xchange value are helping to put a leash on runaway inflation of the one BTC that actually exists.

When those people decide that the right to divide 1 BTC nominal has reached their desired exchange rate, BTC will inflate. There also will, interestingly enough, never be a BTC deflation.

It is heralded by many to be a deflationary currency. If you think about it, that is ludicrous.

 

[amonasro]

There is only one(1) Bitcoin in existence. That Bitcoin is the block chain. The reason why the block chain will grow into infinity is because the block chain is a record of all of the divisions of the original bit coin.

I'm having a difficult time wrapping my head around what this is supposed to mean, but it's wrong from a technical perspective. And the fact that you're spelling bitcoin as "bit coin" tells me you're not ready to make this kind of assumption.

BTC on the other hand can be infinitely divided. This is the hidden inflation inside of BTC. And of course this manifest thru the easily observed growing size of the block chain.

This is also incorrect. There will never be more than 21 million bitcoins in existence, ever. The block reward halving every 210,000 blocks dictates that we get very close, but never surpass that number. Even if your argument assumes that Bitcoin is wildly successful and we're all trading in millionths of a satoshi (A satoshi is .00000001BTC), the halving of these tiny fractions will ensure that the money supply is properly limited.

Also there is no positive correlation in blockchain size and amount of bitcoins in existence other than the fact that they both increase over time. The blockchain grows as a block is mined, then added to it every 10 minutes. That block can contain 0 or 100 transactions. Bitcoins are simply digital rewards for finding and adding a block to the blockchain, as are the small (but significant) tx fees.

 

[amonasro]

Have a question about bitcoin. One of the main selling points of bitcoin by its enthusiasts is that it gives the users anonymity. Now credit transactions are a significant portion of any healthy economy. Why would/will any party loan bitcoins to someone who’s anonymous to them?

If the lender can tie your identity to an address, and you sign a message with the private key of that address proving that you control it and broadcast it to the blockchain, he could be can be certain you are who you say you are. Anonymity is optional with Bitcoin; obviously with lending it wouldn't work very well.

Blockchains are a trusted third party, like a notary public, that live in a cloud of decentralized computing networks. In the digital currency realm, blockchains are trusted to control the money supply and manage the network. In a different application, blockchains could be used for all kinds of things, like voting, since they are incorruptible and accountable to everyone so long as they are kept properly decentralized.

 

[amonasro]

The system gives the "miner" the right to add (as in addition) a hard coded nominal value (50, 25,12.5 etc..) to the original nominal value of 50. Further, the system requires that along with addition to the nominal value, a division in the data be created. These divisions are colloquially known as "transactions". Nothing is actually "transacted". These are simply markers in the code where the nominal amount is divided into different "addresses" or "wallets".

Now this is just way off. The system doesn't give the miner a right to anything except the block reward. Back to the Bitcoin wiki with you.

 

[Sanguine]

Bitcoin doesn't inflate after max Bitcoins, it deflates at a rapid pace (as it gets smaller and smaller thanks to aggregate demand, it will be worth more). Rather, Bitcoin is infeasible as this deflation isn't actually infinite, and deflation itself promotes saving over spending.

 

[FSP-Rebel]

This is also incorrect. There will never be more than 21 million bitcoins in existence, ever. The block reward halving every 210,000 blocks dictates that we get very close, but never surpass that number. Even if your argument assumes that Bitcoin is wildly successful and we're all trading in millionths of a satoshi (A satoshi is .00000001BTC), the halving of these tiny fractions will ensure that the money supply is properly limited.

Also there is no positive correlation in blockchain size and amount of bitcoins in existence other than the fact that they both increase over time. The blockchain grows as a block is mined, then added to it every 10 minutes. That block can contain 0 or 100 transactions. Bitcoins are simply digital rewards for finding and adding a block to the blockchain, as are the small (but significant) tx fees.

Given the OP's clear bias against BTC, I'm wondering if this thread was commenced to deliberately muddy the waters for those that are new and trying to comprehend the BTC ecosystem. Anyways, +rep.

 

[Kotin]

And don't you have to download the block chain and update it with every transaction?? What about when the file gets too big to store in most computers?