Post
Topic
Board Economics
Re: A less volatile cryptocurency, what would it take to regulate its own market?
by
Impaler
on 17/04/2013, 01:17:56 UTC
And once we've done those two things, we seem to have reinvented the Central Bank. Which is why the best we could do as far as I can see is to still have multiple Central Banks, and the ability for the community to make a decentralized consensus decision to blacklist any that might misbehave.

BitCoin already HAS a Central Bank, but no one seems to want to call it that.  Their is a entity with total control over the money supply and far from rebelling against this overlord the BTC community practically worships it as a demi-god.  It is Satoshi himself or more accurately his protocol rules that he acts through which control the mining rate and caps the supply at 21 million, everyone agrees that the decisions of this entity are ESSENTIAL to maintaining BitCoin, and when it comes to predictability and trust I must admit it beats the conventional bank hands down, you can look at some code and be sure what the protocol will do, heck we can GRAPH it out to 2140.  But the protocol is thus completely blind to the valuation of BTC and makes no attempt to stabilize that value, being blind and non-responsive dose not make an entity powerless or not a Central Bank, it simply replaces human fickleness with the human fallibility of the initial economic design of Satoshi, a design which is clearly failing at the very important job of stability.

Now oddly enough their is another part of the protocol that we can't predict in the future but which we also have a reasonably good faith in, the difficulty adjustment with hash-rate.  We can be confident that it will take roughly 10 minutes to find a block far far into the future without having any idea of what the hash-rate will be, how can that be?  Because this part of the protocol is an ongoing feedback mechanism that continually adjusts.  This principle must be applied to money supply if we want to be remotely confident of future valuation.