4 ms·

Gresham's Law technically applies to nonidentical versions of the same legal tender. That's not applicable to Bitcoin, because there is no material difference i

Gresham's Law technically applies to nonidentical versions of the same legal tender. That's not applicable to Bitcoin, because there is no material difference in the manufacture of individual Bitcoins, and nobody is forced to use or accept it. But to think this through, maybe there would be three components to the dynamics of such a theory. 1) Bitcoin will continue to vanish as holders die, forget about their bitcoin, or lose access to their wallets. 2) Up until a certain point, this will cause the value of Bitcoin to increase, as reduction of the Bitcoin supply is deflationary. Those who recognize that this deflation is occurring will hang on to their Bitcoin, because of the expectation that their holdings will appreciate in value. 3) After a certain point, people will realize that much of the total Bitcoin capitalization has been lost/forgotten, and they will be in a hurry to use Bitcoin (sell it for goods) before their holdings become too large in proportion to the total non-lost capitalization still in circulation. Proportionally large holdings are worthless if they cannot be liquidated or used. (Similarly, imagine a currency with two holders, half each; neither is incentivized to accept large transactions because if one sells out, the other is left owning the entire currency by himself.) I predict that people will realize that Bitcoin is incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges, thus defeating its stated advantage of immediacy and anonymity, far faster than individual coins fall out of use.

drtillberg 9y ago
I think anyone panicked right now over the loss of their BTC because of a lost key, broken HDD, forgotten pwd, or the BTC just it isn't there anymore for reasons unknown-- those people will never feel secure holding BTC again in any form. The psychology of loss is powerful, and grown-ups just don't put their life savings in insecure stores of value. The value of BTC is part scarcity and part network effect. In a rational world (what we usually get in the long term) disappearing BTC would have an impact on the network effect. Interestingly, Gresham's Law suggests it would be a positive effect. A likelihood that wealth will be destroyed at death-- I would think that would deter adoption.
- nske 9y ago
  Funny that you mention that because people in many countries panic daily over the loss of their life savings in banks or government-backed hard currency. They have seen them vanish to a scale that can't even compare due to corruption, politics, incompetence, or reasons unknown. The psychology of loss is powerful indeed
nske 9y ago
> incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges Banks/(3rd party) Wallets/(3rd party) exchanges is centralisation. Lightning network hubs for example are not -and could scale much better, with less friction, than any transaction systems that we currently have. But plenty of things are going on, if it's not that it will be something else, it's only a matter of time.

drtillberg 9y ago

I think anyone panicked right now over the loss of their BTC because of a lost key, broken HDD, forgotten pwd, or the BTC just it isn't there anymore for reasons unknown-- those people will never feel secure holding BTC again in any form. The psychology of loss is powerful, and grown-ups just don't put their life savings in insecure stores of value. The value of BTC is part scarcity and part network effect. In a rational world (what we usually get in the long term) disappearing BTC would have an impact on the network effect. Interestingly, Gresham's Law suggests it would be a positive effect. A likelihood that wealth will be destroyed at death-- I would think that would deter adoption.

nske 9y ago
Funny that you mention that because people in many countries panic daily over the loss of their life savings in banks or government-backed hard currency. They have seen them vanish to a scale that can't even compare due to corruption, politics, incompetence, or reasons unknown. The psychology of loss is powerful indeed

nske 9y ago

> incapable of robustly facilitating a global amount of transactions without centralization in banks/hubs/wallets/exchanges Banks/(3rd party) Wallets/(3rd party) exchanges is centralisation. Lightning network hubs for example are not -and could scale much better, with less friction, than any transaction systems that we currently have. But plenty of things are going on, if it's not that it will be something else, it's only a matter of time.