Post
Topic
Board Economics
Re: Is crytocurrency hyperinflationary?
by
eMansipater
on 05/05/2011, 17:25:02 UTC
The specific reason that cryptocurrencies like BitCoin won't proliferate without heavily differentiated features is security.  Blockchain-based systems become more secure the more people use them, so there isn't a very good reason to use anything but the most secure one out there.  This means that there are very few if any equilibria where similar cryptocurrencies will coexist.  I could see fiatcoins (nondistributed cryptocurrencies with single trusted government issuers like today's paper currencies) and bitcoin carving out separate niches, but for almost any feature that proves worthwhile in a distributed currency it's very likely bitcoin would just add this feature, immediately making that the most secure way to utilise it.  It makes very little sense for there to ever be a competing version of BitCoin unless it is fundamentally different in some respect.

None of this even takes into account the network effects of being already trusted, already accepted, software and services being available for it, etc.  Why weren't there many competing shell currencies in 19th century Africa?  Because only one made sense for a given society at a given time, despite the trivial possibility of more.

Some of the stuff circulating about bitcoin seems to point to it replacing all fiat currency and taking over the monetary world. I've learnt quickly that I should ignore that and focus on more realistic aspirations.
Good!  Such extreme changes in our economic systems are at best very speculative and much longer term (decades or centuries).