[cryptography] Digital cash in the news...

Nathan Loofbourrow njloof at gmail.com
Mon Jun 13 00:06:10 EDT 2011


Ian G wrote:

> The way to do this is a /contract/ which is a defined format of promise to
> deliver, date, consideration, etc.  You write that down in boring ascii:


To your point, each issued BitCoin is a contract -- well, the completion of
one, anyway. The contract states as follows:

"I have performed a task you have asked me (among many others) to perform.
That task is to certify the transaction log of BitCoin exchanges. Here is my
proof of work; now pay me."

If you were to argue that that task is currently overpaid, I would agree
with you; it has been heavily subsidized, to the tune of 50 bitcoins
generated by agreement that they have been issued. In spite of this
overpayment, the currency appears to be rising in value over the long term.

Fortunately, this subsidy wanes. It drops to 25 bitcoins, and then again,
and then again, until it drops to nothing. Signing the transaction log is
worth only what transactors voluntary choose to pay for the privilege of
having their transactions signed. Is that signature worth paying for? Well,
it prevents double spending, so probably, yes.

So a monetary authority is printing BitCoins and spending them on fiscal
stimulus. In spite of that, money is entering the economy because as stores
of value go, the alternatives aren't that great either. Reminds me of the US
dollar.

I wonder whether BitCoin would have been nearly as successful if a demand
for stores of stable value did not happen to be higher than they have been
in a decade. If we were all rich on housing appreciation and stock
speculation, BitCoin would be like the passbook savings account at the local
bank paying a whopping 0.65%.

But the only part of that that's about crypto is: crypto is hard, and you
can get people to perform it on their computers if you pay them. Surprise,
surprise. Bet you wish you'd thought of something *you* wanted people to
employ thousands of computers to do that paid them money that doesn't even
come out of your pocket. I don't know if Satoshi is rich from BitCoins, but
if he made a bar bet that he could convince people to run billions of SHA256
hashes a second without paying them even a nickel, he won himself a beer.

n
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