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

David Vorick david.vorick at gmail.com
Mon Nov 25 18:12:22 PST 2013


As I was telling Jayvan, the idea would be that early adopters use the
currency for its inherent uses to them, as opposed to its speculative
potential.

Right now, bitcoin is almost exclusively speculative. It's worth a lot of
money because the value has been increasing consistently. That's tulipmania.

In a perfect world you would have some way to protect a currency against
speculation. The volatility in bitcoin makes it less useful as a currency,
therefore the speculation is damaging bitcoin.

I don't have a solution, and I'm not suggesting one, I'm merely suggesting
that a solution might exist that would be a substantial improvement.



If bitcoin was based on something that had inherent value, say cloud
storage, then a spike in value would be followed by a spike in the amount
of storage being contributed to the network (bitcoin currently does this, a
spike in price is followed by a spike in mining). The key here though is
that the network would be protect from dramatic dips in value. When bitcoin
drops in price, all of the abundant mining does nothing to save bitcoin,
because the bitcoin mining doesn't actually add any value to the network.
Nobody cares how many petaflops the network is pulling, because the
petaflops can't be put to use somewhere else.

But if the mining was based on cloud storage, a dramatic drop in the price
of the currency would result in a dramatic drop in the cost of storing data
on the network. That's something that actually has use, and so people would
let the price fall unreasonably low (instead they would find a way to make
use of the cheap storage). This would allow the currency to ride arbitrary
spikes in price while being protected against arbitrary drops in price.

Jim, the amount of mining being done on the bitcoin network has no impact
on the price. The price might have an impact on the volume of mining, but
because the mining is specific to the bitcoin network (double sha2 hashing
or something like that) it can't be sold or used for other applications.
Bitcoin mining is only good for bitcoin mining, which means the demand for
the mining is exclusively based on value of the bitcoins being mined every
day.


On Mon, Nov 25, 2013 at 8:54 PM, coderman <coderman at gmail.com> wrote:

> On Mon, Nov 25, 2013 at 5:43 PM, David Vorick <david.vorick at gmail.com>
> wrote:
> > ... How do you prevent the early adopters from becoming stupid
> > wealthy if the currency takes off?
>
> high risk, high reward.
>
> why should early adoption with high risk not pay more than late
> adoption with significantly less risk?
>
>
> i agree that the externals affecting BTC exchange rate are volatile
> and annoying, but this hardly seems like bitcoin's fault.  do you
> fight tulpenmanie with currency controls?  good luck!
>
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