[cryptography] Digital cash in the news...

[Nico Williams]

On Sun, Jun 12, 2011 at 11:06 PM, Nathan Loofbourrow <njloof at 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
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