The need for incentives is true, but the community has—erroneously, in my opinion—conflated 'incentive' with 'currency'.
Follow this:
- The core technology here is a crypto-backed distributed ledger. We call this the 'blockchain'.
- You need a unit of trust to enable the blockchain to work. We call this unit of trust a 'bitcoin', or to be more precise, the smallest divisible unit thereof. (1 Satoshi = 0.00000001 BTC)
- These units of trust have value, which also gives you incentive to create ('mine') them.
If we stop here, that's all well and good. The problem with 'bitcoin' and the currency argument is that we're basically going back to the barter system. Instead of gold or foodstuffs, we're trading one good (a unit of trust) for another (whatever you're buying with BTC). Then, on top of that (and as a result), we've created a speculative commodities market in BTC. There's no true scarcity here.
This is why the arguments get so confusing. I could transfer any currency on the blockchain and get the so-called benefits of bitcoin: immutable transactions, low transaction costs, etc.
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Then you also get gems like this, from the article:
A more radical idea is to use digital currency, issued
and supervised by the central bank, at the retail level
to replace physical cash.
What percentage of retail transactions
today are in physical cash? What percentage of USD holdings (bank deposits, etc.) can be backed up with physical notes and coins? (Hint: not 100%). USD is already a digital currency.