On 2012-02-26 1:18 AM, Benjamin Kreuter wrote:

You left out, "...and that they can eventually exchange it for their nation's currency." The demand for Bitcoin as a currency is driven by its properties as a digital cash system; people still need to get their nation's currency at some point (e.g. to pay their taxes, to repay debts, to satisfy requirements imposed by courts, etc.).

When hyperinflation hits, everything becomes money except money. Nails are money, gold is money, moonshine liquor is money, antibiotics are money. But when hyperinflation hits, paper is not money. When that day comes, the problem will not be that bitcoin is cut off from fiat money, but that fiat money is cut off from bitcoin - and perhaps more importantly cut off from nails, from gold, and from moonshine liquor. The day comes when you offer a trillion dollars for some nails, and no one will sell you the nails because they don't know, and don't much care, whether it is a British trillion or an American trillion, nor whether that makes any difference. Paper money has been adopted several times over the last thousand years of recorded history. What do you think happened each of the previous times? Of course gold has a lot more history behind it than bitcoin, so chances are will go to a gold standard rather than a bitcoin standard. Everyone knows that gold is money, even African peasants, while only a few geeks think that Bitcoin is money. But the way the wind is blowing we are going to be off fiat money soon enough. Supposedly we are wiser now, and can now make fiat money work. But if you look at the Assignat hyperinflation, they knew how to make fiat money work back then - until they started executing people for suggesting that inflation was happening and that it was caused by the government printing too much money, whereupon everyone who was politically correct forgot how to make fiat money work. Something similar happened in Weimar Germany. In Weimar Germany, unlike Revolutionary France, they did not cut off your head for noticing that inflation was happening or explaining what was causing it, but it was extremely bad for your career to notice such things, so all the most learned economists were firmly of the opinion that there was no significant inflation, and that printing more money to provide more welfare was extremely good for the economy, indeed so vitally necessary that there needed to be a lot more of it. To doubt the consensus was, as Paul Krugman frequently explains, to oppose economics and science. _______________________________________________ cryptography mailing list cryptography@randombit.net http://lists.randombit.net/mailman/listinfo/cryptography ----- End forwarded message ----- -- Eugen* Leitl <a href="http://leitl.org">leitl</a> http://leitl.org ______________________________________________________________ ICBM: 48.07100, 11.36820 http://www.ativel.com http://postbiota.org 8B29F6BE: 099D 78BA 2FD3 B014 B08A 7779 75B0 2443 8B29 F6BE