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An understanding of how to authenticate the blockchain and transactions is obviously essential, however, I haven't seen the same level of discussion on the affe

by irln 9y ago

An understanding of how to authenticate the blockchain and transactions is obviously essential, however, I haven't seen the same level of discussion on the affects of managing (or lack of managing) the crypto-currency's money supply. With bitcoin the total number is finite. With etherium, it appears that money supply management is being debated. IMHO this management of the money supply is a huge issue.

alanfalcon 9y ago
At any given time the supply of etherium is what it is, as with fiat currency. It's still finite, even as it continues to grow. The value of etherium is a function of the current and anticipated future supply, just as the value of Bitcoin is a function of the expected current supply (some amount is known to have been lost, some amount is "known" to have been lost, some amount is expected by some parties never to be touched again, etc.) In practical terms I don't see how this is necessarily a huge issue in the one case and not in the other.
- irln 9y ago
  > In practical terms I don't see how this is necessarily a huge issue in the one case and not in the other. In the case of fiat currency, the supply of money is based primarily on 1) Increases/Decreases in the loans provided by banks and to a lessor extent 2) a central banks balance sheet. I don't believe it's possible to add to the supply of bitcoins simply by loaning them into existence vs. fiat currency. That is, there isn't a closed-loop system similar to the banking system that allows for this elasticity of bitcoin units. I'm not advocating that this is a requirement or even desirable, it's just a limitation that I don't see often discussed.
  - icebraining 9y ago
    I don't believe it's possible to add to the supply of bitcoins simply by loaning them into existence vs. fiat currency. Of course you can. People deposit BTC in your bank, and you then loan that out to others while telling the depositor that they can withdraw at any time.
    - sjeohp 9y ago
      You can give out credit backed by BTC but it's impossible to give out more actual BTC than you hold, much like gold, unlike fiat.
      - chii 9y ago
        and that credit won't be accepted by anyone who doesn't trust the creditor (bank in this case). so it's useless unless you only intend to spend the credit at certain locations that accept this credit cash, on the other hand, doesn't suffer from this predicament, since it's legally must be accepted. so Bitcoin lending via credits can't work, if at all.
        sjeohp 9y ago
        The entire world banking system for hundreds of years was based on credit backed by gold, so it definitely can work. My only point was that this wouldn't equate to more btc in circulation, just more credit.
        irln 9y ago
        > The entire world banking system for hundreds of years was based on credit backed by gold Just adding that the system above, rightly or wrongly was not sufficient for the expanding credit requirements of the world. > so it definitely can work. Depends upon what your definition of work :) > My only point was that this wouldn't equate to more btc in circulation, just more credit. Exactly. And be subject to the problems with bank runs because of the inelastic nature of gold.
    - irln 9y ago
      > Of course you can. People deposit BTC in your bank, and you then loan that out to others while telling the depositor that they can withdraw at any time. First, without a change in bank legislation and/or rules, I'm not sure a bank could take bitcoins as a deposit. Second, even if they could, if a bank loaned out more bitcoins than it possessed it would be subject to the possibility of a run on depositor's bitcoins. Finally, unlike fiat currency, the central bank in order to end the run could not produce "temporary" new bitcoins to make depositors "whole". I use quotation marks because sometimes new fiat is not temporary and all depositors in the system are not necessarily made whole.

by irln 9y ago

alanfalcon 9y ago

At any given time the supply of etherium is what it is, as with fiat currency. It's still finite, even as it continues to grow. The value of etherium is a function of the current and anticipated future supply, just as the value of Bitcoin is a function of the expected current supply (some amount is known to have been lost, some amount is "known" to have been lost, some amount is expected by some parties never to be touched again, etc.) In practical terms I don't see how this is necessarily a huge issue in the one case and not in the other.

irln 9y ago
> In practical terms I don't see how this is necessarily a huge issue in the one case and not in the other. In the case of fiat currency, the supply of money is based primarily on 1) Increases/Decreases in the loans provided by banks and to a lessor extent 2) a central banks balance sheet. I don't believe it's possible to add to the supply of bitcoins simply by loaning them into existence vs. fiat currency. That is, there isn't a closed-loop system similar to the banking system that allows for this elasticity of bitcoin units. I'm not advocating that this is a requirement or even desirable, it's just a limitation that I don't see often discussed.
- icebraining 9y ago
  I don't believe it's possible to add to the supply of bitcoins simply by loaning them into existence vs. fiat currency. Of course you can. People deposit BTC in your bank, and you then loan that out to others while telling the depositor that they can withdraw at any time.
  - sjeohp 9y ago
    You can give out credit backed by BTC but it's impossible to give out more actual BTC than you hold, much like gold, unlike fiat.
    - chii 9y ago
      and that credit won't be accepted by anyone who doesn't trust the creditor (bank in this case). so it's useless unless you only intend to spend the credit at certain locations that accept this credit cash, on the other hand, doesn't suffer from this predicament, since it's legally must be accepted. so Bitcoin lending via credits can't work, if at all.
      - sjeohp 9y ago
        The entire world banking system for hundreds of years was based on credit backed by gold, so it definitely can work. My only point was that this wouldn't equate to more btc in circulation, just more credit.
        irln 9y ago
        > The entire world banking system for hundreds of years was based on credit backed by gold Just adding that the system above, rightly or wrongly was not sufficient for the expanding credit requirements of the world. > so it definitely can work. Depends upon what your definition of work :) > My only point was that this wouldn't equate to more btc in circulation, just more credit. Exactly. And be subject to the problems with bank runs because of the inelastic nature of gold.
  - irln 9y ago
    > Of course you can. People deposit BTC in your bank, and you then loan that out to others while telling the depositor that they can withdraw at any time. First, without a change in bank legislation and/or rules, I'm not sure a bank could take bitcoins as a deposit. Second, even if they could, if a bank loaned out more bitcoins than it possessed it would be subject to the possibility of a run on depositor's bitcoins. Finally, unlike fiat currency, the central bank in order to end the run could not produce "temporary" new bitcoins to make depositors "whole". I use quotation marks because sometimes new fiat is not temporary and all depositors in the system are not necessarily made whole.