[cryptography] Bitcoin observation

John Levine johnl at iecc.com
Tue Jul 5 22:51:21 EDT 2011

> Did you know that if a Bitcoin is destroyed, then the value of all
> the other Bitcoins goes up slightly? That's incredible. It's amazing
> and leads to some emergent properties

Let's imagine that there was an artist who we'll call Aldi. He made a
lot of signed prints, which are worth whatever they're worth, with
their value set by specialist businesses that will exchange his prints
for some amount of normal money.  (If I may introduce a little
technical jargon, these businesses are called "art dealers.")

Let's also imagine that Aldi signed 100,000 blank pieces of art paper,
which are sitting in warehouses and could be turned into signed prints
by printing a copy of one of his works on them.  The total supply of
Aldi prints is fixed (he's dead now), but the price of the prints is
held down by the knowledge that there's a whole lot of hoarded
potential prints whose owners could flood the market.  Now let's
imagine that someone takes a match and burns up one of those pieces of
signed paper.  What happens to the value of the rest of them?  Wow,
the value of all of the other Aldi prints goes up slightly. That's
incredible, not. 

Like any other commodity they're subject to hoarding, cornering the
market, and all of the other abuses that regulators like the CFTC
exist to prevent, for the commodities that anyone cares about.

The most amazing thing to me about bitcoins is that so many otherwise
sensible people are willing to believe that they are money, when they
so obviously are nothing like money.  They're pet rocks.


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