[cryptography] Digital cash in the news...

Adam Back adam at cypherspace.org
Mon Jun 13 10:54:04 EDT 2011

Bitcoin does not have to end with the pyramid scheme outcome - where it
stalls and all those still holding any lose - so long as there remain people
willing to exchange goods for bitcoin after the dust has settled.

Anyway my point is even if the deployment phase is a wild ride, with some
winners and some late losers who bought in above the final stable value, so
long as a stable value results at the end, I dont see that as a big problem.

Its not like we havent had bubbles and instability in various phases of any
other forms of money or assets.

If you take out the speculation, currently with people minting coins until
they get to 21 million coins that would be inflation (limited inflation due
to the mining cost); but also that more people are joining is deflationary
(less coins per person).  Then there is supply and demand - supply from
minting (so long as the sell price is above minting cost), supply from
people cashing out, and demand from people buying in.  Cashing out and
buying in maybe for trading or speculation.

Once the 21 million coins are created bitcoin would remain deflationary
during the next phase as until the user base grows to saturation.  Once
bitcoin grows to saturation, the remaining deflation would be limited by the
underlying population and economic growth.  That might be workable rate of


On Mon, Jun 13, 2011 at 11:55:38PM +1000, Ian G wrote:
>On 13/06/11 5:54 PM, Adam Back wrote:
>>Bitcoin is not a pyramid scheme, and doesnt have to have the collapse and
>>late joiner losers. If bitcoin does not lose favor - ie the user base grows
>>and then maintains size of user base in the long term, then no one loses.
>Um, Adam, that's the very definition of a pyramid scheme :)
>No-one need lose as long as the size of the user base grows, long term!
>So everyone is incentivised to bring in new victims^H^H^H^H^H^H users :P
>That's why they're illegal, typically.
>>I think in the current phase the deflation (currency increasing in value)
>>helps increase interest and number of users.
>Um, yeah, whatever.  Look, whatever you do, don't tell anyone of your 
>friends or family to invest in it.
>>Say that in the next phase bitcoin stops rapid expansion and reaches some
>>stable number of users, the deflationary period stops, and the remaining
>>users use it for transactions only (not speculation). I dont see the losers
>>in that scenario.
>No, but the scenario is incomplete:  Those speculating on an increase 
>in value will realise it has reached stability.  So they'll sell.  
>Which will cause a reduction in value.  Which will cause a run, as 
>those that didn't understand the mechanics of a pyramid scheme get 
>their rude lesson.
>>>However. Unless the laws of financial conservation have been repealed
>>>by the design, those who follow have to invest a lot and come out with

More information about the cryptography mailing list