bitcoin as a global medium of exchange (was Re: Interesting take on Sanjuro's Assassination Market)

Sean Lynch seanl at literati.org
Mon Nov 25 17:50:27 PST 2013


On Mon, Nov 25 2013, Javier Liendo wrote:

> isn't the real problem with bitcoin becoming a global currency an
> issue of how to best manage the potential exponential growth in size
> of the blockchain? 
>
> i know this is cypherpunks but please explain like i'm five...

Hopefully Moore's Law will save us, but I actually expect that, should
Bitcoin continue to grow, most payments will be made through payment
services of some kind, with the actual transactions only used to deposit
money in your account with the payment service. This is analogous to how
gold was used once banking became popular.

Should these payment services become full-fledged banks, they could help
with the deflation problem as well by engaging in fractional reserve
banking, the same way banks did with gold. Many people have a negative
impression of fractional reserve banking, but in fact most of the
instability experienced in the US was actually caused by restrictions on
branching and requirements that banks invest in the debt of states that
kept defaulting. Bank failures were much rarer in countries without
these requirements. For example, Canada had *zero* bank failures during
the Great Depression and only created a central bank for the purpose of
facilitating international payments, so that Canadian banks and
businesses didn't need accounts in London.

-- 
Sean Richard Lynch <seanl at literati.org>
http://www.literati.org/~seanl/




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