Quote from: lonelyminer on September 06, 2012, 05:53:00 PM

Quote from: ChupacabraHunter on September 06, 2012, 05:41:01 PM

Just like the gold standard, a paper money system was created with gold as backing, and as gold backing was made redundant at a point. It's equally plausible to create a paper system with 25 million bitcoins and get rid of Bitcoin backing at some point.

As the "paper system" would not decrease transaction costs, it would not be accepted by market participants as a substitute for native Bitcoin. Acceptance is a prerequisite for both credit expansion, and a removal of backing ("fiatisation" of commodities). This is a critical difference between gold and Bitcoin.

An ePaper system can be created, which would decrease transaction costs as well.

Even in the current day economy the instrument that most investment banks create don't have more than 2 parties entering the transaction as long as the two parties are comfortable taking on the credit risk. However the two parties being large financial institutions, they allow the credit risk to cascade further into the economy. Bitcoin is not immune to this effect.