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> 1. It's like gold, but it removes some of its technical shortcomings. Bitcoin, or the technology of Proof-of-work and immutable history that is based on it,
by sktrdie 8y ago
> 1. It's like gold, but it removes some of its technical shortcomings.
Bitcoin, or the technology of Proof-of-work and immutable history that is based on it, is not like gold:
One can take the entire history, change specific parameters, and create a new coin (bitcoin cash for instance) that has the same history. Hence people that had bitcoins have the same amount in this new currency.
This is like taking all gold in existence, magically duplicate its exact quantity into say another chemical element which never existed before, and distribute the amounts to all the people that owned gold before; in the same proportions.
Would this make the scarcity property of gold less interesting for using it as a medium of exchange? You bet so! One could magically do this ad-infinitum, possibly creating infinite other chemical elements - what would then set gold apart from the rest?
- jstanley 8y agoOne only needs to try to send LTC to someone who wants BTC to discover that there is indeed a significant difference between a Bitcoin and a Litecoin. Your argument would apply equally to any currency. What stops me printing jstanley dollars and claiming there is 1:1 parity with actual dollars? Nothing! And yet that doesn't devalue actual dollars.
- sktrdie 8y agoI was specifically talking about gold... not other types of currency.
- richk449 8y ago> What stops me printing jstanley dollars and claiming there is 1:1 parity with actual dollars? Nothing! And yet that doesn't devalue actual dollars. If most people had legitimate reason to believe that your jstanley dollars would retain 1:1 parity with US dollars, and they would be able to be used interchangeably with US dollars for most financial interactions for the foreseeable future, then you might devalue the US dollar by printing enough jstanley dollars. That is unlikely though - there is no reason to believe any of those things about your dollars. Whereas if you believe in the model of bitcoin, why don’t you believe in the model of bitcoin2? The best answer I am aware of is “network effects”, but that isn’t a very good one.
- LyndsySimon 8y agoThe network effect is the only thing supporting a fiat currency like the USD - as evidenced by Krugman’s “men with guns” quote in the article.