[dcc1]

Ah jebus another blogger who misunderstands bitcoin ecosystem, technology and its users. Who is looking for attention for his blog since its good linkbait. Well he/she got it.

Economists (including the armchair variety like this blogger) should be delighted bitcoin exists, it gives them something to compare and measure and write about for their dismal "science"

In meantime some of us continue to build for bitcoin and have profited nicely out of it (not the rise in price but saving on fees and no chargebacks)

If I hoarded all those coins over last few years instead of using bitcoin as a means of exchange, i be a bitcoin millionaire now (personally i am happy bitcoin is where it is now and where its headed), if everyone did that bitcoin be useless, the fact that its not useless now shows that whole "deflationary" argument is flawed here in the real world.

p.s: There is no lack of alternate cryptocurrencies, if you want inflation, go make your own "inflate-a-coin"TM

p.s #2: I bet in next decade we would have some central bank(s) creating their own cryptocurrencies, for example the Fed could create a "Bit-dolla" and set an inflation rate of 2% and they could control all the mining, if they get IRS to agree to accept it for taxation purpose we overnight have a state sanctioned crypt-ocurrency. Actually whats scary about this scenario is the state knowing everything you buy/sell (if your wallet is tied to SSN for example). I could definitely see governments embracing bitcoinlike techonlogies in order to get more power and control.

[grandalf]

Great points. What I think would be interesting is if the Treasury did something like create a variety of your "Bit-dolla" crypto-currencies and let the markets/users decide which ones to use for which purposes. Each would have fixed rate of inflation.

$BD0: 0% annual inflation

$BD1: 1% annual inflation

$BD2: 2% annual inflation

$BD3: 3% annual inflation

etc., maybe up to 15%

That way market expectations of inflation and demand for price stability (and maybe actual laws) would dictate the overall usage patterns of the currencies, without the typical psychological risk associate with central banking systems.

Prices of goods would always be expressible be in terms of each currency, and conversion between them at any point in time would be easy and automatic. Prices of things like flash memory would go down in BD0 but would appear stable in BD4.

Just as businesses/industries settle on accounting practices (FIFO, LIFO, etc.) they could choose which currency to pay employees in, which to store cash in, and which to use to track the value of inventory.

The nice thing about this kind of system would be that we'd actually have much more price transparency, since inflation hides information (such as decreasing real wages).

Laws could be made to require pension funds to use BD2, for example, or to require all taxes to be paid in BD4, or student loans to be issued in BD10.

Treasury bills could be sold against each BD type which would add discipline and certainty to that market as well.

I know this is a sort of silly idea but it's fun to think about.

[XorNot]

Why, why, would a central bank use the concept of "mining" in a cryptocurrency?

They're a central bank, and they want to be able to control the money supply. All they have to do is generate some suitably strong keys, and use regular PKI infrastructure to verify them and transactions with them.

Which you know, they've done - that's the modern credit card system (though I am open to the idea we could create something at a government level that was lower fee.

[cstrat]

it already exists: http://en.wikipedia.org/wiki/Inflate-a-coin

[timpattinson]

Link is returning "page does not exist"

[woah]

I don't understand why a blockchain completely mined by one entity would be any good. wouldn't a relational database be much better suited for this application, since decentralization is no longer an objective?

[dcc1]

I didnt say it be good, I say it probably be implemented since a state (or central bank) controlled crypto-currency could be used to obtain more power over citizenry.

Image the state knowing exactly where you get all your money from and where you spend it (since they would have the blockchain), likes of Revenue/IRS would love it!

It would make it easier to implement welfare and stop tax fraud, this alone could be the argument used to push it thru' (tho I am not sure how politicians would get brown envelopes then) and most people would support it. Just like most people supported current UK censorship creep.

Hell call it "dysto-coin"!