[cryptography] bitcoin scalability to high transaction rates
Ian G
iang at iang.org
Wed Jul 20 06:03:54 PDT 2011
On 20/07/11 9:08 PM, Eugen Leitl wrote:
> On Wed, Jul 20, 2011 at 11:56:06AM +0200, Alfonso De Gregorio wrote:
>
>> I'd better rephrase it in: expectation to have "money backed by
>> bitcoins" exhibiting all the desirable properties of a perfect
>> currency (ie, stable money) are greatly exaggerated.
>
> The question is not whether it's perfect, but whether it's good enough.
The question is whether it is even close. It's pretty clear it can never
be stable enough to be a currency. Pretty much all currencies lean on some
form of stability; BitCoin does not, and suggests "when it's big enough,
supply v. demand will stabilise it..."
Only gold/silver has ever pulled off that trick, and emulating gold is not
what you'd call a winning strategy. Actually there's a name for it:
alchemy. BitCoin is cryptographic alchemy.
> BTC is basically a global version of http://en.wikipedia.org/wiki/Local_currency
> or http://en.wikipedia.org/wiki/Alternative_currency and hence
> isn't something completely new.
Sure, and those things have rules too. Local currency is local; BitCoin is
not. The difference is that in local currencies we can rely on the trust
and reputation networks to stop people stealing. In BitCoin, we can't. In
local currencies, when the currency moves outside the very tight trust
circle where everyone knows each other, they fail, because someone moves
into the currency who has no reputation to lose.
(Alternative currency is just a term used by the regulated currency
people, it doesn't really tell us anything.)
> It would be intesting to see whether BTC's successors
> could improve the scheme, by allowing a (subexponential)
> growth, built-in devaluation to encourage circulation and
> discourage hoarding (this would be probably hard to
> do), and so on.
Not really. It's problem isn't its mathematics or its release rate, but
that it has no ground to stand on. Which is to say, if people want to bid
it to the sky, they can. If people want to dump it to the bottom of the
ocean, they can too...
With a currency that is backed on something stable, the stable commodity
forms an anchor around which value gyrates. So, it is worth holding if
the price goes up too low, because you can always use it for its stable
thing. E.g., in US of A, the american people are quite happy to hold $$$
because they can pay their taxes with it. They really don't care that much
what the exchange rate is doing, up or down. This anchor means USD is a
good currency.
Possibly what people don't realise is that it is very easy to corner a
market. However, the fundamental value of the unit (the commodity) will
stabilise and punish the speculator who corners the market. With BitCoin
there is no underlying anchor to punish the person cornering the market, so
the games will be excessive, and volatility will be too high to be
"current."
iang
PS: having said all that negative stuff, I quite like BitCoin. If it got
the econ right, we'd be having different conversations :)
_______________________________________________
cryptography mailing list
cryptography at 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
More information about the cypherpunks-legacy
mailing list