tag:blogger.com,1999:blog-1764328218611568829.post6817076295457914950..comments2024-03-13T19:49:05.520-07:00Comments on The Adventures of Shylock Holmes: The economist's case for at least agnosticism about BitcoinShylock Holmeshttp://www.blogger.com/profile/00446165270035271752noreply@blogger.comBlogger3125tag:blogger.com,1999:blog-1764328218611568829.post-23510234785725221182017-06-03T12:15:47.039-07:002017-06-03T12:15:47.039-07:00E-coins are uniquely capable of being used inside ...E-coins are uniquely capable of being used inside smart contracts, i.e. self-monitoring, self-transacting, self-settling dutch auctions between computers (e.g. between SatNavs and Road pricing sensors, between music files and streaming services etc etc). That is the Web 3.0 and it will be several orders of magnitude bigger than what e-coins are used for todayPeterhttps://www.blogger.com/profile/01575288626167813061noreply@blogger.comtag:blogger.com,1999:blog-1764328218611568829.post-48119906756518687482017-05-31T05:34:46.588-07:002017-05-31T05:34:46.588-07:00Interesting point, I hadn't really thought abo...Interesting point, I hadn't really thought about that. That probably actually is the biggest obstacle to using it for day to day money at the present time. But in some sense, this would go away if everything were denominated in Bitcoin, as the Bitcoin then mostly becomes invisible. Which is to say, we do think much about the price of the dollar, we just think about the price of bananas or iPhones IN dollars. The only time you notice the dollar itself is in periods of hyperinflation. There have been plenty of hyperinflationary currencies, but they existed only by fiat (in the true sense) - one suspects that in Zimbabwe or Weimar Germany they would have switched to USD if allowed and practical.<br /><br />The biggest menu cost aspect to Bitcoin as money is that it's deflationary - you need to keep adjusting the price of goods downward. Which would be somewhat odd, but I imagine you could get used to. Deflation used to be a lot more common under the gold standard.<br /><br />But it's harder to know what to make of it if you think of Bitcoin as gold. It's definitely true that massive volatility is undesirable in a hedge asset. Though if it lasts, I suspect the volatility will settle down.Shylock Holmeshttp://shylockholmes.blogspot.comnoreply@blogger.comtag:blogger.com,1999:blog-1764328218611568829.post-589378774533434832017-05-31T05:33:59.928-07:002017-05-31T05:33:59.928-07:00Shouldn't we distinguish between "store o...Shouldn't we distinguish between "store of value" in the strict sense (like the chemical properties that make gold a better "store of value" than ice cream) and the stability of supply and demand for the money-commodity (whether extrinsic factors like demand for gold from jewelers or "intrinsic" factors like demand for USD from the IRS and the NY Fed)? That latter kind of stability is what makes the difference between a possible medium of exchange and a *liquid* medium of exchange (one that isn't vitiated by volatility, by sudden bubbles and crashes in the value of the currency) and a *reliable* unit of account (one that is not only easily quantified and measured out, but which can be used to denominate contracts and leases over a period of years without requiring some form of indexing inside the contract itself).<br /><br />I imagine the relevance of this q. to BTC is obvious to you, but to be pedantic and spell it out; what if the problem with BTC as a currency isn't backwards induction and isn't a total lack of any extrinsic value, but is that it will always be too volatile to function as actual *money*? It can have novelty value; it can be a convenient medium of exchange for criminals (like cigs inside a prison), which creates demand and raises the novelty value further; uncertainty about how high the price of BTC will go can create speculative bubbles; but ultimately the unpredictability of black-market activity and the bubbles to which it gives rise make BTC volatile, so it will never be monetized.Quincy Latham.https://quaslacrimas.wordpress.comnoreply@blogger.com