Deflation, that is!
I suppose the biggest drawback, according to current economic theory, is
the lack of controls. Without a way to control the money supply, its
value against commodities will fluctuate with the markets, leading to all
the maladies associated therewith. To some extent, increased value
(deflation) will be stabilized by the value of mining bitcoins (higher
value = more money to be made from mining = more people mine; greater
supply = lower value). Presumably, that would more-or-less lock it to the
current ratio of electrical power cost to computing power per watt (until
a more efficient algorithm is found that beats it further, and so on).
But bitcoins are finite, and by the time the last ones are being mined,
the value will no longer be referenced to anything concrete.
For example, an alternative (with government backing, and which supports
all these lovely politician-meddling features..) might be invented, which
in turn causes a bitcoin crash, popping the bubble and costing a lot of
people a lot of investment.
Seven Transistor Labs
Electrical Engineering Consultation
"David Eather" <***@tpg.com.au> wrote in message news:***@phenom-pc...
On Fri, 22 Nov 2013 12:09:22 +1000, Bill Bowden
Post by Bill Bowden
Maybe Bitcoin is the answer to our monetary problems? No more government
control, QE stuff, or inflation. All transactions done by computers?
No. Monstrous inflation! Only a very small and limited number of bit coins
and a large and growing group of people wanting them. One of the early
adopters (2010) bought 2 pizzas with 10000 bit coins. Old write ups of the
event say he paid the equivalent of $50000, then $75000 and at the price 6
days ago $4-million. Thats $25 worth of food (the original cost) now
equaling$4 million thats 2000% pa.
Post by Bill Bowden
MILTON FRIEDMAN famously called for the abolition of the Federal
Reserve, which he thought ought to be replaced by an automated system
which would increase the money supply at a steady, predetermined rate.
This, he argued, would put a lid on inflation, setting spending and
investment decisions on a surer footing. Now, Friedman's dream has
finally been realisedâalbeit not by a real-world central bank.
Bitcoin, the world's "first decentralised digital currency", was devised
in 2009 by programmer Satoshi Nakomoto (thought not to be hisâor
herâreal name). Unlike other virtual moniesâlike Second Life's
Linden dollars, for instanceâit does not have a central clearing
house run by a single company or organisation. Nor is it pegged to any
real-world currency, which it resembles in that it can be used to
purchase real-world goods and services, not just virtual ones. However,
rather than rely on a central monetary authority to monitor, verify and
approve transactions, and manage the money supply, Bitcoin is
underwritten by a peer-to-peer network akin to file-sharing services