On 16 May 2011 15:36, Alaric Snell-Pym <ala...@snell-pym.org.uk> wrote:
> > What do you folks think about Bitcoin? It looks interesting, in that > it's a digital currency with no trusted third parties, and all the > "rules" (such as: you can't just print your own money) enforced by the > fact that only transactions which the majority of computers in the > system accept get considered "accepted" globally. > > There's a process to create new money, which is basically allocated to > people via a lottery (and you increase your chances of winning by > contributing more CPU power to the algorithms that prevent people > cheating, so there's a nice feedback loop), such that the amount of > money in the system will, in the long run, tend towards a fixed amount, > that will just increases in value by deflating as the economy grows. > > I've written some thoughts on the implications: > > http://www.snell-pym.org.uk/archives/2011/05/12/bitcoin-security/ > > http://www.snell-pym.org.uk/archives/2011/05/16/lords-of-a-new-economy/ > > http://www.snell-pym.org.uk/archives/2011/05/13/aurum/ I don't understand how this can be used for transactions other than where the cost of an item in bitcoins can be calculated based on the item's price in dollars. This might work in the US, Canada, and some European countries where the 'value' of a dollar remains more or less constant across borders. This of course cannot be true in most other countries as the degree of connectedness (?) between the economy of that country and most of the developed world is low i.e. the value of a dollar in the UK would not be the same as in India, especially for smaller transactions (less than about a million). So if bitcoin is ever to replace the dollar as the international standard, you're assuming that it would be used only for large transactions where such arbitrages disappear quite quickly. And of course, unless there is enough trading on the currency (precisely such large transactions), it is hard to determine its value vis-a-vis other currencies of the world. And no, this can't be accomplished by just converting using the dollar as the base and using the exchange rate of that currency to the dollar (I'm pretty sure of this, those more learned in the finer points of economics might be able to confirm). Kiran
