[ExI] Bitcoin

[Gordon]

Mirco,


>> As I wrote to another fellow here on ExI, my concern for the long
>> term is that even while Bitcoin is structured such that there is a
>> maximum number of coins which can be mined, ensuring scarcity and
>> thus in this respect making it similar to a precious metal, there
>> is no limit to the number of digital currencies which might compete
>> with it. I know of at least six, including Litecoin which is said
>> to be silver to Bitcoin's gold. But are digital currencies really
>> analogous to precious metals? I rather doubt it. I can make a new
>> digital currency but I cannot make a new precious metal.

When I wrote those words above, I was alluding to the possibility that although bitcoin is ingeniously structured to ensure scarcity of bitcoins over the long run, analogous to what nature has done for gold, the proliferation of alternative digital currencies might nonetheless inflate the overall digital money supply into the indefinite future. Just as central banks can "print money" out of thin air, so too can anyone create a new bitcoin-like digital currency. If am correct about this then the scarcity of digital money is illusory and it loses an important advantage over ordinary fiat money. I would rather be incorrect. What is wrong with my thinking here?

Gordon
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