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I really dislike bitcoin (and most of the first-generation cryptocurrencies) for a lot of reasons (as an economist, I consider a deflationary, fixed-supply curr
by qubex 9y ago
I really dislike bitcoin (and most of the first-generation cryptocurrencies) for a lot of reasons (as an economist, I consider a deflationary, fixed-supply currency noxious). But the blockchain is rather fascinating. People seem to not realise what it is, generally speaking. And what it is, is this: a distributed manner of manufacturing scarcity of information in our day and age of infinitely duplicable data. It’s basically a distributed DRM system.
- ineedasername 9y agoThis is very interesting, could you elaborate on what you mean by information scarcity?
- qubex 9y agoI mean that once you have a token (coin) nobody else can use it.
- muzani 9y agoCurious why you don't like a fixed supply currency. Any theories or resources I can read about this?
- qubex 9y agoI keep getting asked this question, this is an article I wrote to answer this: https://medium.com/p/543da352fc49?source=linkShare-229012a5fba0-1514111203 https://medium.com/p/543da352fc49?source=linkShare-229012a5f...
- trevelyan 9y agoYou need to go back and read Keynes -- in a multi-asset world cryptocurrencies will absolutely weaken the ability of Central Banks to stimulate the economy through monetary policy. But the presence of highly-liquid and mildly-deflationary alternatives to cash will also reduce the need for market intervention at all since the people trading INTO crypto will by definition be trading OUT of fiat. And with fewer people holding cash off-market as a long-term investment we will have effectively eliminated the source of liquidity traps, which is the entire justification for monetary policy in the first place. I blame the lack of enthusiasm for crypto among orthodox macroeconomists on the fact that economic history is out-of-vogue and no-one bothers to read the major thinkers anymore. But it's also ironic on the other end -- since for all of the fuss goldbugs make about Keynes, he would absolutely love bitcoin (read his war diaries!). Sure, it is important prices, wages and taxes continue to be denominated in and settleable in a national currency. But as long as that happens cryptocurrencies will be a boon not a curse, although they are also likely to bring about short-term inflation as the purchasing power of digital assets rises relative to those of traditional currencies.
- justaduder 9y agoWho are these people trading with? People trading OUT of cryptos INTO fiat. How does the asset distribution change, net, in that exchange?
- trevelyan 9y agoThe distribution of assets changes and also the relative purchasing power of each, but the total volume of fiat in circulation does not change -- you get it, yes!
- littlestymaar 9y agoBlockchain is indeed fascinating, but its pratical usefulness has yet to be proven.
- KitDuncan 9y agoI am keeping an eye on Modum. They are about to launch Q1 2018 and it's the first blockchain application that makes sense to me.
- littlestymaar 9y agoWhat's the point of using a blockchain in that case though ?
- fredwilson 9y agoyes, without all of downsides of traditional DRM solutions
- malloryerik 9y agoYou might be interested in Hernando de Soto’s project to create a global blockchain registry for land ownership. Podcast interview: https://www.ft.com/content/5887858e-f499-4bff-8f3f-5434b5780714 https://www.ft.com/content/5887858e-f499-4bff-8f3f-5434b5780...
- prostoalex 9y agoWho will mine and how will the miners be compensated?
- malloryerik 9y agoGood questions; I have no idea about any of that. I was guessing that might use an Ethereum Dapp, but the podcast is the first I've heard of the project and it had no technical information, being concerned instead with property rights and economics.
- AboutTheWhisles 9y ago> as an economist, I consider a deflationary, fixed-supply currency noxious I would think that as an economist, you would know better than try to dictate what people in a large system should do and focus more on the incentives that drive them. The part that people who talk about the negatives of a fixed supply currency don't understand is that what economists thank people should do isn't going to come in to play. All else being equal, if someone can choose between a currency that inflates and one that doesn't, why would they choose one that will be stripping their value away? Inflationary currencies benefit only one party - the one that gets to create the money out of nothing. Inflation is good for countries that can't control their spending and need to hide it behind eroding the value of people's wages. It is poor for anyone saving the currency for liquidity or anyone whos pay is denominated in it.
- qubex 9y agoBy way of your reference to incentives I assume by ”those who create the currency” you intend the private banks that through fractional reserve banking create about 97% of the money supply, not the central banks that create the 3% of base currency (”high powered money”). If so, I suggest you look at BaseCoin (which I am not invested in, and not affiliated with) and take a look at the scheme they propose, which makes sense to me. I must however point out that in an inflationary regimen the debtors also gets an advantage, as their debt load becomes progressively easier to service as inflation compounds to inflate their earnings, on average leaving more cash that can be funnelled into covering financial expenses after revenue has been duly deducted of operating expenses.
- karthikvellanki 9y agoIf you lived in a deflationary regime, what incentive would you have to work? You'd rather just sit on your wealth and do nothing. There would be no economic output.
- AboutTheWhisles 9y agoYou do realize that the current monetary system has only really been in place for about 45 years right? The world ran on gold for hundreds of years and somehow people still managed to find the motivation to work without someone printing off the money they use. (Also most inflation pragmatically comes in the form of fractional reserve banking)