Hoyt A. Stearns Jr. <hoyt-stea...@cox.net> wrote:
> It's supposed to be analogous to mining gold. The minimum value is > determined by the value of the effort > to extract it ( man-hours or power equivalents, etc. ). That's why they > call it mining. > > That sets the lower limit on its value and prevents much inflation -- > brilliant. > No, it does not set the lower limit. The value does not depend only on the difficulty of digital mining. If no one trusts them, no one will want them, and the value will be nil. If there was no way to protect gold, no one would want it no matter how hard (or easy) it is to get the stuff. DeLong describes the ceiling and floor for gold and for money, and then writes: "Placing a ceiling on the value of gold is mining technology, and the prospect that if its price gets out of whack for long on the upside a great deal more of it will be created. Placing a ceiling on the value of the dollar is the Federal Reserve's role as actual dollar source, and its commitment not to allow deflation to happen. Placing a ceiling on the value of bitcoins is computer technology and the form of the hash function... until the limit of 21 million bitcoins is reached. Placing a floor on the value of bitcoins is... what, exactly?" Since the supply of BitCoins is limited, it will be deflationary, like 19th century gold-based money. - Jed
