[cryptography] (off-topic) Bitcoin is a repeated lesson in cryptography applications - was "endgame"

[James A. Donald]

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.
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