On Sun, Jun 12, 2011 at 11:06 PM, Nathan Loofbourrow <njloof@gmail.com> wrote:

So a monetary authority is printing BitCoins and spending them on fiscal stimulus. In spite of that, money is entering the economy because as stores of value go, the alternatives aren't that great either. Reminds me of the US dollar.

Yes, exactly. If you want stable money then you need either a natural resource with naturally limited growth (e.g., gold) (and some other features), or an artificially limited resource (e.g., paper money). The latter is always susceptible to politically caused inflation. Any cryptographic coin based on proof of work is a disaster because of Moore's law and because the "work" is wasted energy -- and energy, you'll note, is a very precious resource. Ergo, a cryptographic coin needs to be based on trusted issuers (or something else I've not seen before nor thought of), and that means, effectively, a fiat currency. Crypto is NOT a solution to political problems; never has been, never will be.

I wonder whether BitCoin would have been nearly as successful if a demand for stores of stable value did not happen to be higher than they have been in a decade. If we were all rich on housing appreciation and stock speculation, BitCoin would be like the passbook savings account at the local bank paying a whopping 0.65%.

Here's a thought experiment: if the present value of all actual, tangible property, things, capital (production and service capacity), as well as less tangible things such as people, and institutions -altogether, basically, a nation's patrimony- were far, far exceeded by nominal value stored in money in banks and mattresses, would that money really be worth all that much? I suspect that the answer is "no". I suspect that the most valuable feature of money is not to store value in the long-term, but to lubricate commerce, that is, to enable transactions on a basis better than barter.

But the only part of that that's about crypto is: crypto is hard, and you can get people to perform it on their computers if you pay them. Surprise, surprise. Bet you wish you'd thought of something *you* wanted people to employ thousands of computers to do that paid them money that doesn't even come out of your pocket. I don't know if Satoshi is rich from BitCoins, but if he made a bar bet that he could convince people to run billions of SHA256 hashes a second without paying them even a nickel, he won himself a beer.

It's always possible to get some people to do things that are not in their interest. See various cults. (Note: I'm not saying bitcoin is a cult.) Nico -- _______________________________________________ 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