Predicting the Future
carlos.bueno.org
carlos.bueno.org
Such is the case called bitcoins, a cryptocurrency. In two years or so, we will find if my fellow hackers and ciphergeeks and me will find ourselves fools or fricking rich pioneers.
Moreover, we believed that money and free market can be a positive social order. If we do not believe it is so, bitcoins wouldn't have a thriving community, much less an entrepeneural one.
It also raise and illustrate issues about such a voluntary market economy where there is no police and courts to enforce order. For example, we found out that paypal dollars are bad money. They lack the crucial aspect of irreversibility. It even cause a bank run, a rush to bitcoins. We found out that bitcoins doesn't have that negative aspect and can expect bitcoins to hold value. Unpredictable regime like Paypal cause risk-aversion and effort to find much more predictable ability to transfer from one currencies to another.
Bitcoin offer us unique insight of how a new emerging economy might deal with thieves, cheaters, with no guns and no police. Bitcoin show us how a group of political radicals think about problems, and the future at large. It is out of the box, and at time foolish, but sometime brilliance emerge.
All of these things wouldn't be possible without the culmination of technolibertarianism and anarchism. All of these wouldn't be happening if hackerdom didn't emerge as it has.
Where do you get progress in our society in the conventional sphere of democractic government, parliamentary politics, and such? If you believe power and violence are necessary to achieve goals in society, would you have come up with and invent bitcoins?
If the currency did succeed, the inability to increase circulation would result in a natural deflationary spiral over time. Also I guarantee that governments would not appreciate your utopian vision.
21 millions bitcoins that is divisible to the 8th place. Even if the 21 million limit starts to limit bitcoins' utility, it doesn't mean that people can't fork the network and the project to create their own currencies.
If the currency did succeed, the inability to increase circulation would result in a natural deflationary spiral over time.
Price deflation is a good thing. The computer industry are still thriving after enormous amount of price deflation. No amount of price deflation will incentivize people from not buying foods, or even video games and other recreational activities during period of which the purchasing power of money has gone up. They will delay consumption but only to a point. The time-preferences of human beings have a limit. They will not wait 24 years before eating 100,000,000 marshmallows as fast as they could.
so I guarantee that governments would not appreciate your utopian vision.
I don't take it for granted that bitcoin will succeed or will it be an easy road. There has been many such worries in the bitcoin community. Some bitcoiners may be idealistic or utopians but we're also realists.
Either the early bitcoiners become enormously wealthy or bitcoiners were all been fools. I don't know what is going to happen, but I hope that bitcoins will change the world for the better.
I'm sorry, but this statement alone convinces me that there are important facts about economics which you do not understand. Deflation, among many other things, discourages investment. Without investment, economies stagnate.
It would be better to explain why my reasoning is fallacious rather than resorting to opaque statements like these.
I am told that deflation is a bad thing actually assume many things to be true.
1. Deflation is the result of collapsing monetary base. However, the bitcoin economy isn't experiencing anything remotely similar to what you think is going to happen. The Bitcoin economy is experiencing growth deflation.
2. Assumption that retention of cash is not investment. To the holder of cash, it is an investment. The economy, on the other hand, see money retention as a forecast of time preference.
Moverover, an inflationary regime favor investors and producers. A hard money regime like bitcoins favor the average joe who are consumer and savior of money.
The point about investment is that incentive to invest results in money being available for people who have the drive, energy and motivation to change the world to realize their dreams, even if they have not done it yet. If money is not available for investment those people's dreams get shattered before they change the world. This is a Bad Thing. (And generally results in a stagnant economy and persistently high unemployment.)
The current experience of bitcoin should not be deflation for the simple reasons that bitcoins continue to be issued, and should be issued for very good reasons.
You are right that an inflationary regime favors investors and producers. However it turns out that favoring investors and producers results in favoring the people who are most likely to result in investing in our future and producing things that make us all better off. Therefore favoring people who are trying to change the world for the better is a _Good Thing_ (tm).
In the first place, the bitcoin economy is experiencing a phrase of deflationary growth. There were little services and goods before the slashdotting. Now, there are more. The bitcoin economy is not stagnating.
The current experience of bitcoin should not be deflation for the simple reasons that bitcoins continue to be issued, and should be issued for very good reasons.
I assure you, my observation of the bitcoin economy is accurate. There are 7200 bitcoins being created each day, but the price of bitcoins aren't crashing. Demand for bitcoins are growing faster or keeping up with monetary inflation.
Mt. Gox, before the dollars become essentially worthless(thus invalidating Mt. Gox usefulness on indication of demand for bitcoin), reach a record high of 0.12 cents per bitcoin, with enormous amount of volume. 200,000 bitcoins were exchanged. Same thing for bitcoin market, though on a much lower scale.
The dynamics would be opposite were bitcoins the primary currency.
Unfortunately, US government doesn't like private currencies.
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