[sjg007]

Nothing stops anyone from doing that. But you’d now have a 3rd party saying you own the bitcoin but your ownership is not recorded in the blockchain. So do you really own it? You could get fancy and issue another cryptocurrency backed by bitcoin too. I think the recording keeping just gets difficult. There are also forks of bitcoin to introduce lower fee and faster transactions but who knows if they will take over. For bitcoin to continue you need miners to validate transactions and they will only do so if it makes economic sense.

[logicallee]

The essential property of bitcoin versus every other currency is that in an essential way it is deflationary: there are only so many bitcoins. It's not minted by fiat.

This is the essential property it shares with gold. So if we use worldwide gold market cap to set some kind of standard, why shouldn't we use certificates as is used for gold?

By the way, again excuse my ignorance, but what keeps gold certificates from being inflationary? Why can't Goldman Sachs physically own 100 gold bars, and sell me a certificate for 50, you a certificate for 50, and Tom a certificate for 50? Where is the limit? After all, they have enough money to buy gold on the market even if you, I, and Tom all ask them for the physical gold at once. What keeps them from inflating gold certificates out of thin air?

[sjg007]

Nothing stops the except the law. What they are doing in your scenario is fractional reserve banking. They could create more "money" in this case up to whatever leverage limit they would be allowed by law. So at some point your gold hits a max value and your economy can't grow beyond that point. This causes deflation. As far as I understand it deflation means that something that cost $5 now costs $2.5 in real terms. However, producing that thing may still cost $3 so unless you've made productivity and efficiency gains you are losing money. More importantly there is no incentive to spend money today because your money will buy more tomorrow. So then you only buy what you absolutely must.

[logicallee]

thanks, this was interesting.