[ExI] Bitcoin

Gordon gts_2000 at yahoo.com
Thu Apr 4 00:07:09 UTC 2013

From:Aleksei Riikonen <aleksei at iki.fi> wrote:

> For people new to Bitcoin, I recommend Rick Falkvinge as a thoughtful proponent who's well worth reading. Here are some recent things he's written, that also link back to earlier things worth reading:

> http://falkvinge.net/2013/03/06/the-target-value-for-bitcoin-is-not-some-50-or-100-it-is-100000-to-1000000/
> http://falkvinge.net/2013/04/03/why-bitcoin-is-poised-to-change-society-much-more-than-the-internet-did/

Thanks, Aleksei The first link did not work for me. The second is an excellent article, and it reminds me of a concern I have about the long term potential for digital currencies.

From the article:

"As nobody is in control of the money supply (it is set to grow predictably at a slowing rate until 2140), and demand increases with a limited supply, the price for each bitcoin increases. This is what we’re seeing now, as more and more people realize bitcoin’s business potential."

While the supply of bitcoins will eventually and automatically be capped, ensuring scarcity and in this respect making it comparable to gold or any other precious metal, there is no limit to the number of digital currencies that might arise to compete with it. I know of at least six. Litecoin for example is considered by some to be to bitcoin what silver is to gold. But does the precious metal analogy really make sense? I can create a new digital currency but I cannot create a new precious metal. 

For the long term, I worry that digital currencies could proliferate like the fiat money they are supposed to replace. In that case, they would not hold their value relative to hard commodities like oil and precious metals. Any thoughts?

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