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

[PaulConventionWV]

Are you high? The value of 1 bitcoin does not equal the value of 1 million bitcoins.

The value of a unit of anything is determined by what people think they can buy with it.

 

[PaulConventionWV]

1.) in this case it is, since the bitcoin is not physical, there is no limit to its divisibility. The supply is not the notional value, rather the supply is the right to divide the notional value. That is all you get when you buy a piece of the bitcoin. You get the right to divide that fraction into an even smaller fraction. So regardless if you buy the number 1 or the number 100 or the number 0.001, all you have bought is the right to divide that number. Of course you could divide it to yourself thereby increasing your notional value. But you do not prevent increasing the supply of rights to divide, since anybody else can still divide whatever there number is infinitely.

2.)The blockchain stores the entire supply of rights to divide. The more rights that are created, the larger the block chain becomes. In fact, the block chain will continue to grow thereby increasing the supply of divisions, even if you never exercised your right to divide, as long as someone was willing to do the math to find the next block. This is how the genesis block was found, by dividing into the nominal value of 0. Of course that process increased the nominal value by 50 thereby guaranteeing that the system would always have a different hash result in the next block (even if no rights to divide had actually been executed, which they hadn't until block 170). Beyond the initial genesis block, the system needed to make divisible each new nominal amount as a piece of the calculation (create an address).

No currency is physical. Just because the world's currencies are usually printed on pieces of paper, the only difference is that the market determines the value of division here instead of a central authority. The fed could do anything they wanted with the divisibility of the dollar, but they don't, just like the market won't infinitely divide 1 BTC. The dollar may not be a data file, but that doesn't change the fact that its numbers mean nothing more than numbers, and people trade for the right to divide those numbers to an amount limited only by the fed's decree. The value of anything in a market economy is determined by what people think they can buy for a certain unit of it. The fact that BTC is "just one big data file" sounds ironically similar to the argument that BTC "has no intrinsic value." Value is whatever the market decides it is.

 

[PaulConventionWV]

btw, thank for taking time to rate the thread. I bet if you could give it half a start you would. Hell you'd probably give it .0000000001 of a start. Im just curious would there really be a difference in 1 star or half a star? Don't think so. Cause for this thread, there can only possibly ever be 5 stars. But wait!

I could get 5 stars from 10 people now and still never actually have a 5 start thread! Why is that? Is it because those stars are infinitely divisible? Why yes, it is. So what value I place on a star? hmm take a wild guess.

If what you are saying is true, then there would be no practical difference between the 21 million divisions of the original bitcoin and 42 million of the same... but the market has decided that there is because, well, the numbers are all just used to measure wealth with 1 as a starting point. The relativity of value of the value of something does not change the fact that infinitely divisible numbers is really all we have to work with when it comes to currency. The market has decided that a certain unit is worth a certain unit of another currency. They're separate; fungible. They exist apart from one another and cannot be mistaken for the other. That is the only key quality that needs to exist in order to prevent hyperinflation. The fact that the market has placed a value on any bitcoins is proof that the market can value something that more practically divisible than most currencies. Just because it contains that practical ability, that doesn't mean the theoretical ability doesn't exist with other currencies. Yet, the market has decided that, indeed, it can have value despite there being no difference between 1 satoshi and 1 BTC according to you. I wonder, if that is true, how we ever got this far.

 

[juleswin]

I just don't understand why divisibility is a problem. I mean wont you appreciate bitcoins divisibility properties if tomorrow it happened to go up another 3000%? Also if it loses value then the small unit will just be rounded up into bigger units.

Of all my problems with bitcoins, its divisibility is the least of it. Also one can technically divide the dollar into units less than 1c and even into smaller fractions electronically.

 

[newbitech]

No currency is physical. Just because the world's currencies are usually printed on pieces of paper, the only difference is that the market determines the value of division here instead of a central authority. The fed could do anything they wanted with the divisibility of the dollar, but they don't, just like the market won't infinitely divide 1 BTC. The dollar may not be a data file, but that doesn't change the fact that its numbers mean nothing more than numbers, and people trade for the right to divide those numbers to an amount limited only by the fed's decree. The value of anything in a market economy is determined by what people think they can buy for a certain unit of it. The fact that BTC is "just one big data file" sounds ironically similar to the argument that BTC "has no intrinsic value." Value is whatever the market decides it is.

Money as it exists today represents human debt that may only be repaid by a human interacting with the physical world. The Fed manipulates the money adding or removing government debt (which is essentially a promise to tax the people aka force them to give up some of their work).

Inside of bitcoin we create "money" by dividing the bitcoin (starting with block0 data). We destroy money by doing nothing with it (or losing the key).

 

[newbitech]

If what you are saying is true, then there would be no practical difference between the 21 million divisions of the original bitcoin and 42 million of the same... but the market has decided that there is because, well, the numbers are all just used to measure wealth with 1 as a starting point. The relativity of value of the value of something does not change the fact that infinitely divisible numbers is really all we have to work with when it comes to currency. The market has decided that a certain unit is worth a certain unit of another currency. They're separate; fungible. They exist apart from one another and cannot be mistaken for the other. That is the only key quality that needs to exist in order to prevent hyperinflation. The fact that the market has placed a value on any bitcoins is proof that the market can value something that more practically divisible than most currencies. Just because it contains that practical ability, that doesn't mean the theoretical ability doesn't exist with other currencies. Yet, the market has decided that, indeed, it can have value despite there being no difference between 1 satoshi and 1 BTC according to you. I wonder, if that is true, how we ever got this far.

Because people are looking at the notional value. Not at the thing it is they are paying for. As long as people keep trading for notional value then we can expect the amount people are willing to pay will increase. But once people come to realize that what they are paying for is simply a right to divide the 1 and only 1 bitcoin into trillions of billions of quadrillions of pieces that may also be divided into trillions of billions of quadrillions of pieces, they will begin to understand that the right to divide the bitcoin isn't that great of thing to own since it has an infinite supply.

It boils down to what you value more.

Do you value 10/infinity more than you value 1/infinity? If so, I have to ask. Why?

 

[danda]

You are not understanding my argument then OP. My argument is that all things are valued according to human judgements. There is no such thing as "intrinsic" value.

Gold is a great example of this. We judge that it is relatively rare here on Earth and that we won't be discovering much more of it quickly. We think we have it mostly "figured out". However, if tomorrow someone discovers how to transmute metals cost effectively (has already been done in the lab, just not cheaply ) then that value judgement may be radically altered. So there is nothing intrinsic in the nature of the gold element itself that we value, only its rarity and difficulty to obtain here where we are located at this point in time.

Likewise, bitcoin has rarity and difficulty to obtain here at this point in time, and people value it according to their best judgement.

Your divisibility arguments are specious and irrelevant to that.

Given current conditions, if one takes a bar of old and divides it up into any smaller amounts you like, you are not going to significantly alter the market price, because gold is still a rare thing. If however you make a discovery that means enormously more gold is available, then you will drive its price down, because there is more to go around. You have inflation of the gold resource.

The mathematics of bitcoin prevent inflation beyond 21 million coins. So it is harder than gold. Unless you can convince a majority of miners it is in their best interest to modify the code and devalue their holdings. Good luck with that.

I'm done with this thread. Here's the litmus test: if you are somehow correct OP, then you should be able to convince enough others of your logic that people will decide bitcoin is worthless and the price will crash towards 0 until bitcoin fails and is forgotten. So when I see that happen, I will agree you were probably onto something. Until then, we'll just have to agree to disagree.

 

[danda]

OP is playing with numbers. One more quick post to drive the point home. Using OPs same "logic".

The earth has just one unit of gold. We will call it 1 EG.

Since the genesis, humanity has divided that 1 EG billions of times, but it is still just 1EG. All humans have done is to play with the numbers and subdivide the 1EG. Gold mining companies and those guys in 1849 are just the ones that have the keys to divide the gold, nothing more!

blah, blah, blah, notional value, blah, division, blah.

But there's still just 1 EG, so gold can't be worth anything!

 

[angelatc]

For instance, let say a 1cm/1cm block of gold is worth 500 dollars. Do you think that if you divided your gold into 100 pieces that each piece would be worth 5 dollars?

Or another way to see this is, can you buy a pack of gum with a piece of gold? No gold is not infinitely divisible. And neither is it practical to divide gold as you describe.

Well the price of gold does fluctuate, but if it were frozen for a brief time I'm sure I could find someone to sell me a piece of gum for one of my gold pieces. In fact, based on what generally happens when stocks split, I would expect the value of my lower priced pieces of gold to rise faster than the bigger chunks, because the lower price would be more affordable to more people.

 

[PaulConventionWV]

Money as it exists today represents human debt that may only be repaid by a human interacting with the physical world. The Fed manipulates the money adding or removing government debt (which is essentially a promise to tax the people aka force them to give up some of their work).

Inside of bitcoin we create "money" by dividing the bitcoin (starting with block0 data). We destroy money by doing nothing with it (or losing the key).

Yes, that sounds right. Is that supposed to be an argument against it?

 

[newbitech]

I just don't understand why divisibility is a problem. I mean wont you appreciate bitcoins divisibility properties if tomorrow it happened to go up another 3000%? Also if it loses value then the small unit will just be rounded up into bigger units.

Of all my problems with bitcoins, its divisibility is the least of it. Also one can technically divide the dollar into units less than 1c and even into smaller fractions electronically.

you are seeing the obfuscated nominal value in the divisibility question I raise. It's not nominal divisibility that I am looking at. I am calling more into question of what actually is bitcoin.

Is it the nominal value, and all its little parts? Or is it really the right to make a division inside of the data? I speak of the division inside of the data, not the math 21 million divided by .00000001.

Look at the visual representation of the block chain. Its a big tree, click the yellow dots to see how infinite divisibility works.

https://blockchain.info/tree/2893660

 

[newbitech]

Yes, that sounds right. Is that supposed to be an argument against it?

fill in the blank,

If money is created by dividing the bitcoin and the bitcoin may be divided an infinite number of times then the amount of money that may be created by dividing the bitcoin is ___________.

 

[PaulConventionWV]

Because people are looking at the notional value. Not at the thing it is they are paying for. As long as people keep trading for notional value then we can expect the amount people are willing to pay will increase. But once people come to realize that what they are paying for is simply a right to divide the 1 and only 1 bitcoin into trillions of billions of quadrillions of pieces that may also be divided into trillions of billions of quadrillions of pieces, they will begin to understand that the right to divide the bitcoin isn't that great of thing to own since it has an infinite supply.

It boils down to what you value more.

Do you value 10/infinity more than you value 1/infinity? If so, I have to ask. Why?

I disagree that the "realization" of what bitcoin really is has as much impact on its price as you say it does. It's not like people don't already realize that. This pretty simple math, and I don't see why people would have a problem with a BTC being divided into a quadrillion pieces as long as a certain unit of it is trading for a certain amount right now. Just because a BTC is infinitely divisible, that doesn't mean it has to be. It depends on how much faith one places in the market. That remains to be seen, but the fact that it is divisible means nothing as long as people see no reason for the market to give up on it.

What you are essentially saying is that BTC is in one big bubble starting with zero and ending with zero, or very close to it. Up to this point, the market has supported it through 2 bubbles and it's still going with a very promising future. The market doesn't seem to think that everyone is going to wake up and realize that the right to divide it is meaningless because it's still doing just fine. It all goes back to this "intrinsic value" argument. You're basically just saying that a bunch of numbers can't have value, but value is subjective and virtually anything can have value as long as it is fungible, which BTC is.

 

[PaulConventionWV]

Because people are looking at the notional value. Not at the thing it is they are paying for. As long as people keep trading for notional value then we can expect the amount people are willing to pay will increase. But once people come to realize that what they are paying for is simply a right to divide the 1 and only 1 bitcoin into trillions of billions of quadrillions of pieces that may also be divided into trillions of billions of quadrillions of pieces, they will begin to understand that the right to divide the bitcoin isn't that great of thing to own since it has an infinite supply.

It boils down to what you value more.

Do you value 10/infinity more than you value 1/infinity? If so, I have to ask. Why?

Because the market does. I'm not worried about the infinity part of it any more than I'm worried about the infinity part of the dollar. As long as people aren't worried about it, it doesn't matter. So, then, I have to ask you why you think it will matter. Do you have any evidence that people will even care about what you're talking about? The problem with your assessment is that you're looking at it from a cryptographic perspective, not a market perspective. Your understanding of the market isn't nearly as good as your understanding of computers and code.

 

[PaulConventionWV]

fill in the blank,

If money is created by dividing the bitcoin and the bitcoin may be divided an infinite number of times then the amount of money that may be created by dividing the bitcoin is ___________.

decided by the market.

 

[newbitech]

OP is playing with numbers. One more quick post to drive the point home. Using OPs same "logic".

The earth has just one unit of gold. We will call it 1 EG.

Since the genesis, humanity has divided that 1 EG billions of times, but it is still just 1EG. All humans have done is to play with the numbers and subdivide the 1EG. Gold mining companies and those guys in 1849 are just the ones that have the keys to divide the gold, nothing more!

blah, blah, blah, notional value, blah, division, blah.

But there's still just 1 EG, so gold can't be worth anything!

ah but you may not infinitely divide gold. We could use silver as a smaller denomination, or something of lesser value (which is more abundant) so there would be no real need to actually divide gold into those small tiny little pieces to buy things for 2 or 3 dollars like lottery tickets or a can of bubbly.

There is an infinite amount of subdivisions of bitcoin. That is all you get when you pay for control over that number inside of the data file. The right to divide it as many times as you want. That is infinite.

You don't even get a real piece of the actual bitcoin since it is owned by no one and used by all. This is remarkably unlike gold. Gold is also not derived from a central source, unlike the bitcoin which derives from the genesis block. All access and rights to modify the data come from the genesis block. There is no limit to the amount of times the genesis block may be modified, which again is all you are paying for when you buy a piece of the bitcoin, the right to modify that data. Even miners all they are getting in return is right to modify equal to the token amount set in place to perpetuate and guarantee a different hash on the next iteration of the data after code execution.

Yes there is one earth gold and it is finite.

 

[muh_roads]

The community isn't going to decide on dividing infinitely. Someone can try that if they want and they'll fork.

We'll worry about dividing by 100 trillion when 1 BTC = $1 trillion dollars. AKA probably not going to happen.

 

[newbitech]

decided by the market.

It's not decided by the market tho. It's actually infinite as long as someone manipulates the huge data file either thru mining for until 2149(last block that adds to the special number used a base for the division) or making 1 transaction every 10 minutes.

I agree the market has the ability to manipulate the bitcoin how it sees fit. But the market is still deciding, is it not? I believe the market will recognize the infinite nature of bitcoin divisibility and attribute value accordingly.

 

[PaulConventionWV]

The community isn't going to decide on dividing infinitely. Someone can try that if they want and they'll fork.

We'll worry about dividing by 100 trillion when 1 BTC = $1 trillion dollars. AKA probably not going to happen.

The abbreviation "AKA" means "also known as." Please use it accordingly.

 

[newbitech]

The community isn't going to decide on dividing infinitely. Someone can try that if they want and they'll fork.

We'll worry about dividing by 100 trillion when 1 BTC = $1 trillion dollars. AKA probably not going to happen.

You are still looking at the notional amount. That number is meaningless. It is inside of the bitcoin, not a way of counting the bitcoin.

If you want to count a more important number, count how many times the notional in the genesis block has been divided and subdivided. This is where any appreciation in your investment will be realized. It also where the more times the arbitrary number is divided the more rights are created that people will attempt to trade for.

There is infinite number of those rights. How much you pay for 1 grain of sand? How about enough grains of sand to fill up a hole 10x10 acres and 50 feet deep?

Now, take that 1 grain of sand and divide it by 21,000,000. How much you pay for that? Every fraction of a grain of sand represents the right to manipulate the data in the bitcoin.

Are you saying eventually people will stop dividing the bitcoin? Do you know the only way to make that happen is to not use bitcoin and to stop mining it?