Fundamental problems of the economy on Bitcoin
Is Bitcoin suitable as the main currency for a full-fledged economy?
In this article I will emphasize a little not for all the obvious problems that are inherent in the nature of Bitcoin. And also I will suggest you to think together with me and speculate about possible alternatives.
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Bitcoin has a deflationary nature. The creator of the currency put it into it algorithmically, when created. Judge for yourself: the currency has a clearly defined volume of emission, which is strictly falling over time. At the same time, the market is obviously growing, which means that the volume of trade is growing and the need for currency is growing. That is, in fact, a limited issue obviously does not satisfy the market demand for currency. As a result, the value of the currency is growing all the time, that is, there is deflation.
What is the main problem of the economy based on deflationary currency? Stagnation. Roughly speaking, the constantly growing exchange rate encourages people not to spend money, but to accumulate it. In addition, the ability to profit from simple hoarding saves people from having to produce goods and services. The result is a tough crisis of the entire economy, because society cannot live in prosperity when no one does anything.
The second important issue is market speculativeness. When the exchange rate by its nature is forced to constantly grow, bubbles are inevitable. Classic Script:
Bitcoin, by its deflationary nature, is doomed to constantly repeat such bubbles over and over again. For example, over the past two years, two very similar bubbles can be observed: summer 2011 and spring 2013. At the same time, the levels differed 10 times, and the proportions were similar. Such bubbles are almost impossible to hold back: when the currency is constantly growing, even slowly, it is of interest to speculators. Bought cheap, waited half a year, sold expensive. And the more such enthusiasts, the more strongly growth is spurred. This inevitably causes an exponential growth in the currency bubble. With such a bubble, we observe an approximately 20-fold increase in the rate followed by a collapse. And after all, the market does not die after a collapse: bitcoins are actually used, for example, on the same constantly growing Silk Road, and for other sales, whose members want anonymity and lack of control. It turns out that such a picture of a bubble will inevitably be repeated time after time, with a certain periodicity. That is, we will never wait for a stable course, it will always jump many times and even dozens of times. What is the economy can be built?
Bitcoin has a lot of forks offering alternative schemes. But they are all similar in one thing - in their deflationary nature. Because all of them are created for speculation above all.
I invite everyone to think about how to build a real economy based on an anonymous decentralized currency. Such an economy, which will not be "feverish", throwing it into heat, then into the cold, because of bubbles on the main currency. Perhaps you need a certain bitcoin replacement, with other emission algorithms? Or not a replacement, but an addition?
What is the important role of the state in the country's economy? Regulation of the economy, stimulation of its growth, smoothing of crises. For this, in particular, the state has the monopoly right to issue the main currency. This tool can be used so that the country flourishes. But at the same time, everyone is forced to trust the right to issue a certain narrow circle of people whom nobody knows personally. With all the ensuing problems and the constant desire to redo everything in a new way (and in fact, the old, but with new people).
But you can also lay the mechanism of automatic regulation of emissions algorithmically in the currency itself. At the same time, the scheme can be very simple, for example: if the market volumes are growing, we reduce emissions; volumes fall - increase emissions. By analogy with the automatic regulation of the complexity of mining, which allows you to more or less accurately adhere to a clearly defined amount of emissions. Such regulation can achieve a more or less stable value of the currency, which will allow the economy to develop much more fully.
But there is a problem with this approach. How to introduce in society a currency whose price does not grow by leaps and bounds? Pay attention to the peaks of the growing popularity of Bitcoin: they occur quite clearly on the basis of a frantic growth rate. Let's be honest: the majority of people filling the market and giving it growing popularity are driven by a thirst for profit. A very narrow stratum of people who use Bitcoin for its intended purpose - for anonymous, uncontrolled money transfers. And will these people want to move to a new unfamiliar tool with a complex incomprehensible emission mechanism just for the sake of the theoretical stability of its course? The big question.
I want to hear your thoughts and suggestions on this. Let's argue together. It’s possible to build an economy, if not perfect, but much better than the current one. You just need to think how.
In this article I will emphasize a little not for all the obvious problems that are inherent in the nature of Bitcoin. And also I will suggest you to think together with me and speculate about possible alternatives.
')
Problems
Bitcoin has a deflationary nature. The creator of the currency put it into it algorithmically, when created. Judge for yourself: the currency has a clearly defined volume of emission, which is strictly falling over time. At the same time, the market is obviously growing, which means that the volume of trade is growing and the need for currency is growing. That is, in fact, a limited issue obviously does not satisfy the market demand for currency. As a result, the value of the currency is growing all the time, that is, there is deflation.
What is the main problem of the economy based on deflationary currency? Stagnation. Roughly speaking, the constantly growing exchange rate encourages people not to spend money, but to accumulate it. In addition, the ability to profit from simple hoarding saves people from having to produce goods and services. The result is a tough crisis of the entire economy, because society cannot live in prosperity when no one does anything.
The second important issue is market speculativeness. When the exchange rate by its nature is forced to constantly grow, bubbles are inevitable. Classic Script:
Bitcoin, by its deflationary nature, is doomed to constantly repeat such bubbles over and over again. For example, over the past two years, two very similar bubbles can be observed: summer 2011 and spring 2013. At the same time, the levels differed 10 times, and the proportions were similar. Such bubbles are almost impossible to hold back: when the currency is constantly growing, even slowly, it is of interest to speculators. Bought cheap, waited half a year, sold expensive. And the more such enthusiasts, the more strongly growth is spurred. This inevitably causes an exponential growth in the currency bubble. With such a bubble, we observe an approximately 20-fold increase in the rate followed by a collapse. And after all, the market does not die after a collapse: bitcoins are actually used, for example, on the same constantly growing Silk Road, and for other sales, whose members want anonymity and lack of control. It turns out that such a picture of a bubble will inevitably be repeated time after time, with a certain periodicity. That is, we will never wait for a stable course, it will always jump many times and even dozens of times. What is the economy can be built?
Bitcoin has a lot of forks offering alternative schemes. But they are all similar in one thing - in their deflationary nature. Because all of them are created for speculation above all.
What to do?
I invite everyone to think about how to build a real economy based on an anonymous decentralized currency. Such an economy, which will not be "feverish", throwing it into heat, then into the cold, because of bubbles on the main currency. Perhaps you need a certain bitcoin replacement, with other emission algorithms? Or not a replacement, but an addition?
My thoughts on alternative currency
What is the important role of the state in the country's economy? Regulation of the economy, stimulation of its growth, smoothing of crises. For this, in particular, the state has the monopoly right to issue the main currency. This tool can be used so that the country flourishes. But at the same time, everyone is forced to trust the right to issue a certain narrow circle of people whom nobody knows personally. With all the ensuing problems and the constant desire to redo everything in a new way (and in fact, the old, but with new people).
But you can also lay the mechanism of automatic regulation of emissions algorithmically in the currency itself. At the same time, the scheme can be very simple, for example: if the market volumes are growing, we reduce emissions; volumes fall - increase emissions. By analogy with the automatic regulation of the complexity of mining, which allows you to more or less accurately adhere to a clearly defined amount of emissions. Such regulation can achieve a more or less stable value of the currency, which will allow the economy to develop much more fully.
But there is a problem with this approach. How to introduce in society a currency whose price does not grow by leaps and bounds? Pay attention to the peaks of the growing popularity of Bitcoin: they occur quite clearly on the basis of a frantic growth rate. Let's be honest: the majority of people filling the market and giving it growing popularity are driven by a thirst for profit. A very narrow stratum of people who use Bitcoin for its intended purpose - for anonymous, uncontrolled money transfers. And will these people want to move to a new unfamiliar tool with a complex incomprehensible emission mechanism just for the sake of the theoretical stability of its course? The big question.
I want to hear your thoughts and suggestions on this. Let's argue together. It’s possible to build an economy, if not perfect, but much better than the current one. You just need to think how.
Source: https://habr.com/ru/post/181356/
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