Nielsio:Bitcoins are not good for anything besides trading.
Yeah agreed. Kinda a funny video to watch now after the massive rally in Bitcoins. Guess reality does not always conform to the premises of Mises Regression axiom when it might seem to do. An 800% increase in value roughly after the video was posted, what a gag.
Nielso, I think bitcoin is a good means of exchange, but I think until there's a reliable platform to take existing RL monies in exchange for a bitcoin there's no real purpose for it. Also, the current exchange systems (bitcoin-to-cash and reverse) is centrally managed, which means if a federal agency wants to kill the whole thing it's quite easy. Plus, there's no real good way to secure your banking information away from your bitcoin wallet. I hope to do a Masters project on that. :3
"The power of liberty going forward is in decentralization. Not in leaders, but in decentralized activism. In a market process." -- liberty student
I think Nielso has one point wrong about money. Money by itself may have been at some point a commodity of value, but no where in the Regression Theorem is it necessary for all monies to have some economic value. It just happens that commodities are the easiest to bootstrap into indirect exchange, especially if they have limited economic utility and relatively stable economic value.
But anything can be used for money if it meets the criteria: relatively scarce as to keep supply stable, hard to make forgeries and easier to detect forgeries, easily divisible, easily portable, and generally seen as valuable (last and most important, obviously). BTC meets all these quite well. To say otherwise is to pretend the definition has some mythical caveats.
More discussion on Bitcoin here.
Why anarchy fails
Nielsio,
I think you got the argument almost right. I agree with your application of the Austrian School up to the point where you say that Bitcoin does not have non-monetary uses. I think you are prematurely jumping to conclusions.
I submit that Bitcoin does have non-monetary uses other than speculation. The same laws that give the government the power to tax, inflate and confiscate, give the Bitcoin the power to protect you against those intrusions, and do this better than gold. Done properly, government won't find out about your Bitcoins, nor can it confiscate them. You can transact them online without going through the current banking and payment processing system (I used to work in an online payment processing company so I know a bit about this) and being subject to their scrutiny and rules. You can store them encrypted, and keep an offsite encrypted backup on hosting services in another countries. If the government imprisons you, they might be able to get the encrypted copy from one of the devices that you posess, but as long as you don't divulge the password, it's useless to them. Other members of your family can still access the offsite copies and have full access to your hard earned money.
Furthermore, black markets, such as online gambling, drugs and copyright violations can find bitcoin more useful than the alternatives. For example, in the US, banks and credit card companies need to make sure you do not pay for gambling, even if it's a website in another country. Bitcoin does not need middlemen for transactions.
There is a reasonable chance your conclusion would be correct in the absence of a government. But we do have governments. Gold-backed currency competition gets targeted and shut down: Liberty Dollar, e-bullion, e-gold and so on. Pecunix (launched in 2002) is still up, but based on the data from Wikipedia, the total market value of their gold is only about 4 million USD. Compared to the current market value of the Bitcoins, which at the time of writing is about 60 milliion USD (after only about 2.5 years). Goldmoney's stores market value is about 1.9 billion USD, but it does not seem to be very suitable for trading or even microtransactions, plus it requires you to provide them with all kinds of documents to setup (i.e to a certain extent it is still a part of the problematic banking system). Also, Goldmoney's assets can be confiscated, albeit they provide a certain level of protection (they store the metals in London, Zurich and Hong Kong). With Bitcoin, on the other hand, there is no centralisation, so also nothing to confiscate.
Compare, for example, a minter like Nothaus with a Bitcoin miner. Nothaus' business premises were raided and the gold coins belonging to him as well as his customers, presumably) confiscated. If someone raids Bitcoin miner's premises, they can take his mining rigs and other computers. But there is no guarantee that such a raid will confiscate his bitcoins. They can be in anywhere online. To Nothaus, a raid is the end. A Bitcoin miner just has a minor disruption, buys new hardware and off (s)he goes again.
It is a very paradoxical situation. On a genuinly free market, Bitcoins probably would not have value. But in the environment of governments, central banking, prosecution of victimless crimes and legal tender laws, they "magically" (or maybe I'll be bold and claim "praxeologically") gain very real value.
http://forum.bitcoin.org/?topic=6452.0
they're talking about this thread in the bitcoin forum
Hazel Brazell: http://forum.bitcoin.org/?topic=6452.0 they're talking about this thread in the bitcoin forum
As an Austrian dominated community, the Bitcoin forum has long been both amused and dismayed at the general vitrol bitcoiners receive while on this forum. It's to be expected on other forums, but we once held a greater expectation from members of this forum.
IM conversation between me and John James (from Mises Community):
if possible, could you address my point that Bitcoin does have a non-monetary value? To repeat/rephrase it, the non-monetary value is created because government interferes with money (e.g. by legal tender and confiscating gold) and that creates a market gap. As long as government continues to interfere with money, and unless displaced by another new competitor, Bitcoin will have value.
Furthermore, I am not entirely convinced that non-monetary value is even necessary for having a usable medium of exchange. There are plenty of goods whose only value is derived from the context. The best example are positional goods. In general, any information that can be used to affect others in some contexts is valuable. If a new good is specifically designed to affect other people in the context of indirect exchange, and has significant advantages over the encumbents in some of such indirect exchanges, then logically it can displace the encumbent in those situations.
Of course, it does not necessarily mean that the future of Bitcoin will be rosy. It merely means that there is no praxeological refutation of Bitcoin.
You also brought up other technical points. In general, they are not a showstopper for Bitcoin, but still I'd like to address them:
Cost of holding Bitcoins: of course there are some costs, but they not significantly different from costs of keeping other goods. One thing however Bitcoin provides is the flexibility. You can store them on your computer, or leave it to a third party that specialises in this. You can put your private keys onto a usb key and put it into a bank safe. The ability to encrypt the keys makes them more difficult to steal, and the ability to copy the keys makes them more difficult to lose. You can't encrypt or copy gold, so there you have a comparative advantage.
Money laundering: based on my research of the topic, this only affects BTC exchanges as Mt. Gox, not transactions that involve goods. The existing exchanges are as far as I know properly registered businesses.
Few recent vids with Stephan Molyneux of Freedomain Radio:
Frederique,
the analogy makes no sense whatsoever. FRB is based on the assumption that you can promise someone to pay even though you might not have the money to fulfill all promises simultaneously. Of course, sometimes the bank is overwhelmed and without special "protection" it fails. There is no comparable phenomenon in Bitcoin, since noone is promising to pay anything. Who is defaulting on their promises on Bitcoin exchanges? Noone. It makes no sense. All trades require the buyer and seller to conduct business voluntarily. If a buyer cannot find a seller or vice versa, that just means they are unable to meet each other's expectations. If there are fluctuations in market price, some lose and some win. Welcome to free market.
Furthermore, you say that you're glad people are denouncing Bitcoins. This is just another example how the thread is overwhelmed by posts from people who are unable to make coherent arguments and rather use the opportunity to express their emotions.
I am very skeptical about bitcoins, but if it succeeds, it will be the second greatest human invention after the internet :)
(english is not my native language, sorry for grammar.)
I was not comparing bitcoins and FRB as systems, it was more like since both pieces of paper backed by nothing and bitcoins don't have any non-monetary value, it's ironic how the people who realize that and want to get out are stigmatized as ignorants, lobscure people and other insults. Oh, and before you say that bitcoins can be hypothetically used to prevent spam hence they have non-monetary value, that's like saying that dollar bills have non-monetary value because you can use it for personal hygienics purposes.
MaikU: I am very skeptical about bitcoins, but if it succeeds, it will be the second greatest human invention after the internet :)
Pretty much everything about bitcoins is amazing but that's not enough to qualify it as a reliable indirect exchange method, as it doesn't have any use but indirectly exchange goods. I mean, a couple of days ago in a matter of 48 hours its value in dollars went up 50%, went down by 70%, went up by 100%. There is no way we see many retailers accepting something as unstable as bitcoins in exchange for their tangible stuff.
that's one of the reasons why I am skeptical about it. I'd like to believe, but I would rather wait and see what happens.
Explain how Bitcoin qualifies as money more than anything else, like toilet paper and World of Warcraft gold.
Don't Buy Bitcoins, part 2
my response:
http://www.libertariannews.org/2011/06/18/the-economics-of-bitcoin-how-bitcoins-act-as-money/
Bitcoins are not good for anything besides trading. You can't have a worse 'money' than that.
That's too strong a claim since their advantages when used for trading (there are several very important ones), may outweigh the disadvantage that they can only be used for that purpose.
A metal money thats sufficiently costly to store, protect, transport may very well work out, for many people, to be a 'worse' money than bitcoin wrt its ability to satisfy people's wants.
It is irrational to trade something which is a good for something which is not a good.
It would be, but since Bitcoin is an economic good, this doesn't apply.
This thread is incorrectly titled... should be "Can't buy Bitcoins." I'm not usually one for gloating and Schadenfreude but those damn Bitcoin people were really annoying, so... nyah, nyah told you so!!!
:-D
@Clayton: 'Can't buy Bitcoins'
Puzzling thing to say.
@Nielsio: It's not clear to me how the cartoon addresses the rejoiners posted here already, it doesn't seem to as far as I can see.
What are you talking about? Bitcoin is being traded like normal on TradeHill, Bitomat, Bitcoin7, Bitmarket, Britcoin as well as over the counter. Price is 14-15$, which is still pretty bubbly imho. Anyway, the whole point of Bitcoin is that it's decentralized, so in my opinion this is just a good example of that. The largest, most vulnerable part of Bitcoin - MtGox - got completely taken out, yet the currency goes on without problems.
The only places where people ran into trouble is where they were over-reliant on MtGox, so for example a lot of automatic price converters got taken down, they should be made such that they use the prices from multiple exchanges. And of course people who left all their coins in MtGox can't get at it now, which is kind of a like having your gold at an insecure bank - you have institutional risk. In this case they should be ok once Gox comes back online, but let it be a lesson and don't keep your coins at an exchange, put it on USB sticks at multiple secure locations.
The whole thing does show though that a lot more work has to be done until Bitcoin is ready for the mainstream. This kind of vetting is necessary, the free market is getting rid of the insecure exchanges - they either adapt or they will go broke.
Where is all the money for these shiny new websites coming from? This whole Bitcoin thing is as fishy as a can of cat food.
Maybe I should start a new thread warning people not to learn English, because it's not backed by commodities or by force, and if one day people lose interest in it it will wither away. Instead people should use hieroglyphics, because it has a good solid foundation (rock or at least papyrus), is very scarce and has been around for thousands of years. Clearly, an abstract language is pointless, because it has no other uses than communication. Hieroglyphics are superiour: you can use the rock to smash your opponents' head, and the papyrus to wipe your ass. That gives hieroglyphics a starting value and network effects will eliminate other competitors. By using induction, this proves that without a starting value a competitor will lose.
@Peter: I think you Bitcoin guys keep getting confused... we're not saying people shouldn't try things. I'm happy to see this Bitcoin experiment and it's actually fascinating to watch except for the sometimes annoying and know-it-all attitude of the hardliners. That said, the theoretical foundation for Bitcoin just isn't there. It's like an alternative energy research experiment... interesting and could even uncover some new facts and technology along the way but if close investigation shows the proposal is not consistent with the laws of physics, it's just not going to fly. Nick Szabo (one of the largely uncredited grandfathers of Bitcoin who is also mega-brilliant) has written a defense of Bitcoin here (scroll down, he links to an article he wrote on the origin of money). Unfortunately, Szabo suggests that Mises's regression theorem is just an account of how money can arise, rather than the only way money can arise. The simple fact is that something could never have been used in indirect exchange which was not first demanded in direct exchange. This is a praxeological fact, it's not just "one way things could be." From this fact, it immediately follows that a medium of exchange must have its origins either directly as a commodity or in a regressive chain of money substitutes which can ultimately be traced back to a commodity of some sort.
Let's look at Bitcoin from a purely physical point of view. The bits are mined by expending electrical energy. The proof-of-work bit string is basically a certification that such-and-such watts of electricity have been expended. This can be translated back into terms of physical goods expended to generate the proof-of-work... so many barrels of oil were drilled and burnt or so many tons of coal mined or so many cubic meters of water spilled over a generator, and so on. However, unlike a commodity substitute (a certificate for a bushel of wheat or a barrel of oil or a gold banknote), the proof-of-work certifies purely wasteful expenditure of energy. This is the polar opposite of how money arises. The point of using shells as money is not that it's costly to dive and find the right shells and then craft them into the desired shape. The point is that the shells were demanded for adornment (jewelry) and eventually became used as a medium of exchange for the usual reasons... high liquidity, fungibility, etc. Szabo is very brilliant but, in focusing solely on the issue of the costliness of producing a monetary commodity, he commits a rather elementary blunder. The near-zero cost of producing fiat money is not its only problem or even its most important problem. Instead of using paper to manufacture dollars, we could use soot from the burning of fossil fuels, stamped into the shape of a coin. Such tokens would be costly to produce (require the burning of fossil fuel) but would make horrible money because they have no commodity value. There is no demand for the monetary medium for its own sake in alternative (non-monetary) uses. This is the closest physical analogy I can think of to what Bitcoins actually are... with the exception that carbon soot coins could at least be produced as a by-product to some useful enterprise (powering an electrical plant) whereas Bitcoins would be equivalent to just burning up fuel for the sole purpose of creating the soot to create the coins.
Keep in mind that people used paper banknotes long before there was fiat paper notes. But no one ever accepted a paper banknote with really fancy un-counterfeitable designs (by the technology of the day) on it because "it's useful in exchange" and "has value solely on its usefulness in exchange." People only accepted paper banknotes insofar as such banknotes were immediately and directly convertible into money. A banknotes is a money substitute. A banknote is a bearer title and this is what any money substitute is. Bitcoins are title to nothing. A technology like Bitcoin could certainly be viable as some kind of money substitute. A full-dollar-reserve Bitcoin would be fantastic if you could solve the auditing-anonymity problem.
Clayton -
For those interested in a simple English explanation of why bitcoin is doomed, based on Mises in Human Action, just drop in on my blog:
Bitcoin Takes a Beating.
My humble blog
It's easy to refute an argument if you first misrepresent it. William Keizer
Peter Schiff:
http://www.youtube.com/watch?v=vTr_hTC90oQ#t=3m14
Dough Casey:
"L: Do they have value in themselves?
Anyone still holding Bitcoins at $12 (on the 2nd largest BTC exchange listed on the above website) is crazy.
Nielsio:
Maybe if the UN starts denominating its member fees in Bitcoin... :-P
Guys, esp. Clayton and Nielsio,
I have been trying to point out for a while that the regression theorem is based on arbitrary normative assumptions and induction. It's not praxeological. I thought my little analogy with the English language demonstrates the logical fallacies involved in the regression theorem, but it looks like I wasn't successful in communicating it.
If the regression theorem was true, by the same logic we would not have languages. The only use of languages is in communication, they have no use outside of it. Yet, they outcompeted other methods of communication. So it is not true that in order for a good that is subject to network effects (which also includes money) to outcompete others, it requires a value which is not related to that specific use that is covered by the network effects. Network effects were known at the time of Mises, but did not receive a systematic treatment yet, so he probably thought money is special. It's not, it's just another good subject to network effects, like communication.
Wikipedia says about network effects:
Network effects become significant after a certain subscription percentage has been achieved, called critical mass. At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service. As the value of the good is determined by the user base, this implies that after a certain number of people have subscribed to the service or purchased the good, additional people will subscribe to the service or purchase the good due to the positive utility to price ratio. A key business concern must then be how to attract users prior to reaching critical mass. One way is to rely on extrinsic motivation, such as a payment, a fee waiver, or a request for friends to sign up. A more natural strategy is to build a system that has enough value without network effects, at least to early adopters. Then, as the number of users increases, the system becomes even more valuable and is able to attract a wider user base.
A key business concern must then be how to attract users prior to reaching critical mass. One way is to rely on extrinsic motivation, such as a payment, a fee waiver, or a request for friends to sign up. A more natural strategy is to build a system that has enough value without network effects, at least to early adopters. Then, as the number of users increases, the system becomes even more valuable and is able to attract a wider user base.
(emphasis added by me)
Clearly, Bitcoin does have some value to early adopters. Based on the quote from Wikipedia, once it reaches critical mass, it won't matter that it does not have value to other people apart from the network effect itself.
Furthermore, in another thread I listed at four normative assumptions that I could think of the regression theorem is based on. Two of them are untrue, one of them is science fiction but hypothetically can be incorrect and the last one is simply unsubstantiated. Here is the list again.
- the non-existence of government interference with money. This can create a gap and the gap can be filled by something that does not fulfill the regression theorem
- the non-existence of the digital. The digital is not a commodity, nor property, yet it can behave as quasi-commodity. Digital clearly outcompetes physical alternatives in some areas.
- the non-existence of replicators (Star Trek). Replicators make the value of all physical goods with known composition dependant on their weight, i.e. a kilogram of dung would have the same value as a kilogram of gold. There would still be scarcity (like there is still scarcity with computers and internet), but commodities would not be practically usable as money.
- homogeneity of requirements for a medium of exchange. Same as with languages. Or programming languages even.
While you two have been sticking to rational approach and unlike some others not resorted to emotional reactions to Bitcoin, I would like to stress that the issues I have raised have not been addressed yet.
Peter Šurda: Guys, esp. Clayton and Nielsio, I have been trying to point out for a while that the regression theorem is based on arbitrary normative assumptions and induction. It's not praxeological. I thought my little analogy with the English language demonstrates the logical fallacies involved in the regression theorem, but it looks like I wasn't successful in communicating it. If the regression theorem was true, by the same logic we would not have languages. The only use of languages is in communication, they have no use outside of it. Yet, they outcompeted other methods of communication. So it is not true that in order for a good that is subject to network effects (which also includes money) to outcompete others, it requires a value which is not related to that specific use that is covered by the network effects. Network effects were known at the time of Mises, but did not receive a systematic treatment yet, so he probably thought money is special. It's not, it's just another good subject to network effects, like communication. Wikipedia says about network effects: Network effects become significant after a certain subscription percentage has been achieved, called critical mass. At the critical mass point, the value obtained from the good or service is greater than or equal to the price paid for the good or service. As the value of the good is determined by the user base, this implies that after a certain number of people have subscribed to the service or purchased the good, additional people will subscribe to the service or purchase the good due to the positive utility to price ratio. A key business concern must then be how to attract users prior to reaching critical mass. One way is to rely on extrinsic motivation, such as a payment, a fee waiver, or a request for friends to sign up. A more natural strategy is to build a system that has enough value without network effects, at least to early adopters. Then, as the number of users increases, the system becomes even more valuable and is able to attract a wider user base. (emphasis added by me)
I think there is a logical problem with your analogy of language since communication itself is a network and language (I assume you mean spoken language) is just one medium by which humans communicate.
Anyway, the quote you gave from Wikipedia answers your argument: "A more natural strategy is to build a system that has enough value without network effects, at least to early adopters. Then, as the number of users increases, the system becomes even more valuable and is able to attract a wider user base." That is precisely what the regression theorem says... the early adopters of what would eventually become recognized as money were not consciously going about trying to establish a medium of exchange or reach a "critical mass", they simply found the use of highly liquid goods as media for indirect exchange to be profitable. As Dr. Hoppe says on the subect, all we need to do is assume self-interest and from this flows the division of labor and from this flows indirect exchange (money). So, yes, the regression theorem and the Austrian account of the emergence of money is praxeological and not inductive.
The regression theorem does not assume non-interference from government. Please listen to this lecture on the subject by Dr. Hoppe (a bit long, but definitely worth it). In fact, this was one of the central insights of the regression theorem... even government is subject to the regression theorem. Nobody can escape the regression theorem so long as any form of voluntary exchange is possible (i.e. outside of complete tyranny).
This is gibberish as far as I can tell. I'll help you out and suggest that perhaps you mean that certain cryptographic protocols (hashing, public-key signing, etc.) are possible with the assistance of a computer that would not be possible with just static production technologies (i.e. minting, printing, etc.)?
I reject this as a valid objection.
You'll have to elaborate, I don't understand how you're using these terms.
Clayton wrote: The point is that the shells were demanded for adornment (jewelry) and eventually became used as a medium of exchange for the usual reasons... high liquidity, fungibility, etc
When you phrase it like that, the parallel with Bitcoin becomes apparent.
Just as shells were first demanded for adornment, so were Bitcoins. For two years they were generated and traded as nothing more than a sign of "geek coolness". That's just as genuine an adornment as the wearing of shells.
What made Bitcoins "cool" for geeks? Cool enough that geeks would adorn their forum signatures with their Bitcoin public keys? The geek coolness probably arose from the excitement factor of "hey wow, we're the first people to be using this cool new peer-to-peer digital commodity that's independent of banks and might one day supplant fiat currency".
Then, after a couple of years, a guy offered 10,000 bitcoins for a couple of pizzas (pretty-much for lolz) and eventually found someone to trade with, and Bitcoins started to become used as a medium of exchange for valid reasons: low transaction cost, fast confirmation, easy use across national boundaries, irreversibility, etc.
@Clayton: Is there any empirical evidence you can imagine that would overturn your belief (as far as I can tell) that BitCoin cannot be legitimate money? Or persuade you that your complaints against it are not relevant? (eg. a given market size, a certain coverage of accepting traders, etc)
Clayton,
ribuck already pointed out the obvious. Let me address your post in a bit more detail.
Clayton:I think there is a logical problem with your analogy of language since communication itself is a network and language (I assume you mean spoken language) is just one medium by which humans communicate.
Communication is not a network. But if you combine the need for communication and the fact that communication is more subject to network effects than other needs, you get a network. Just like people want to communicate, people want to trade. That creates a demand for a medium by which to communicate or by which to trade.
Clayton:that is precisely what the regression theorem says... the early adopters of what would eventually become recognized as money were not consciously going about trying to establish a medium of exchange or reach a "critical mass"
The wiki quote does not say that it's necessary that the early adopters are unaware of the potential network effects. As ribuck pointed out, Bitcoin is valued, because otherwise people would not use or trade it. The wiki quote implies that the original reason for the value is irrelevant to the utility of the network effects manifesting themselves later. The regression theorem (or at least the interpretation that is used to refute the utility of Bitcoins), however, combines those two by an arbitrary connection. The connection may quite well be often there, but it is not a praxeological connection. That's the fatal error in it. It's inductive reasoning (based on observation of some historical facts) rather than deductive. Observing other historical facts refutes the connection.
Clayton:all we need to do is assume self-interest and from this flows the division of labor and from this flows indirect exchange
But the self-interest does not require either that people are ignorant of the potential future network effects, nor does it require that there is a separate value in that good for other people than the critical mass. Two more unfounded assumptions.
Clayton:The regression theorem does not assume non-interference from government.
If it did not, then people would choose gold (or something like that) whenever force was absent from the relationship. But the network effects work both ways. People often use fiat even in situations where there is no force involved. I for example often buy things from Asia, and I pay in US dollars. I live in Europe. US dollars are not legal tender either here or there. Once you realise this, you can also realise that just like negative reinforcement can affect the outcome, positive reinforcement (e.g. a community project like Bitcoin) can also influence the outcome. That makes the whole argument fall apart.
Clayton:Nobody can escape the regression theorem so long as any form of voluntary exchange is possible (i.e. outside of complete tyranny)
See above. Network effects can influence the outcome in both ways. While network effects have natural causes and are, from this point of view, unavoidable, it does not mean that people who are aware of this cannot influence the outcome to their advantage. If the regression theorem was merely saying that money is always subject to network effects, I would be fine with that. But a claim like that has a very limited use and you certainly can't derive the superiourity of gold or the inferiourity of Bitcoin from it. Furthermore, as I elaborated above, regression theorem says more, it says that the result of the network effects cannot be deliberately influenced. I provided multiple counterexamples as well as theoretical reasoning why this is untrue.
Clayton:This is gibberish as far as I can tell.
This point is difficult to explain for me. But read Kinsella's Against Intellectual Property. You cannot own the digital, and you cannot trade it or steal it. But it can nevertheless exhibit some behaviour of goods. Furthermore, if I was using the same inductive reasoning before the age of computers, I could "prove" that there would forever be physical books because that is what always happened, and there would never be books that are not sold or traded in a media-agnostic way (e.g. by downloading). I thought the example with hieroglyphics demonstrated the absurdity of the argument but evidently it is not easy get it through.
Clayton:I reject this as a valid objection.
The example with replicators is a reductio ad absurdum of the regression theorem. You do not provide a reason why this should be rejected (other than, of course, not rejecting it would show that your argument is invalid).
Clayton:You'll have to elaborate, I don't understand how you're using these terms.
People look for certain features in a medium of exchange, like divisibility, high value per unit of weight, durability, being easy to transport and so on. A specific good provides a specific combination of these in different ratios. In order for the regression theorem to be correct, it would require either that one good trumps all the others in all of these features, or at least a the ratio of these features required for all transactions is stable and constant. Neither of these is true (I think this is obvious, but if you do not believe and want examples, I can of course provide). This is just another way of saying that there is a limit to the network effects.
Do you mean they are crazy because you expect the market price of Bitcoin to move towards zero? If you are right, you can make an absolute killing with Bitcoin put options.
Anyway, Bitcoins are trading on that same exchange for $15 now, so I don't think the holders are too upset.