[cryptography] bitcoin scalability to high transaction rates

adg at crypto.lo.gy adg at crypto.lo.gy
Wed Jul 20 02:57:44 EDT 2011

Sorry for top posting.

With regard to gold, gold standards, and currencies what follow is the most evident difference I can see between Bitcoin and gold. A difference so major on its own that makes us understand we are contrasting apples with oranges.

At the current market depth and without a widespread adoption, Bitcoin exhibits a high volatility. Conversely, gold's value is the most stable we observed, ever. This is why currencies has been pegged to (but not necessarily backed by) gold. As David Ricardo remarked in 1817, "A currency, to be perfect, should be absolutely invariable in value" -- something acknowledged in the motivation for the design of Bitcoin.  

So far, and AFAIK, nobody traded precious metals in Bitcoins. Such a market would provide us an effective mean to measure Bitcoin's depreciation and assess if a Bitcoin system can achieve a (somewhat) stable currency value.

At the same time and as long as we give it value, Bitcoin has value. Hence, I look with interest at its demand.


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-----Original Message-----
From: "James A. Donald" <jamesd at echeque.com>
Sender: cryptography-bounces at randombit.netDate: Wed, 20 Jul 2011 14:22:31 
To: lodewijk andré de la porte<lodewijkadlp at gmail.com>
Reply-To: jamesd at echeque.com,
	Crypto discussion list <cryptography at randombit.net>
Cc: Crypto discussion list<cryptography at randombit.net>
Subject: Re: [cryptography] bitcoin scalability to high transaction rates

James A. Donald
 >> The obvious next step is to have chaumian money and
 >> account money which has rapid low cost transactions, which
 >> money is converted into bitcoins at leisure, analogous to
 >> having gold, and account money and banknotes backed by
 >> gold.

On 2011-07-20 3:25 AM, lodewijk andré de la porte wrote:
 > This would revive many of the things people have aspired to
 > kill with bitcoins. Among others the "creation" of money (I
 > can borrow and "store" more money than I have). It would
 > also mean moving the scalability problem to a centralized
 > system, a trusted party.

Not centralized if there are several entities issuing bitcoin
backed account money.  Nor is trust a big problem if value is
only stored in accounts and chaumian coins for a relatively
short period, with accounts being settled up in actual bitcoins
at the end of the day, or the end of the month.

 > In other words: wouldn't having money backed by bitcoins
 > instead of gold essentially improve nothing?

Right now we don't have money backed by gold.

If we did, it would improve a lot.

Bitcoins have an advantage over gold that they are inherently
electronically transferable, and disadvantage relative to gold
in that gold has been money for a very long time, and that gold
as non monetary value as well as monetary value.
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