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phoebusg's avatar

How would cryptocurrencies change society?

Asked by phoebusg (5220 points ) June 4th, 2011

Give http://www.scribd.com/doc/57071530/Bitcoin-Ethics a quick glance and discuss the pros and cons of cryptocurrency. What are the benefits and trade-offs? Lastly, how to counter them?

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6 Answers

zenvelo's avatar

That paper is a little hard to read because of grammar and structure issues. It does not describe how Bitcoin currency is created, nor how the value is determined. It also does not describe the interaction between existing currencies and Bitcoin. Bitcoin can’t replace currency completely because real goods and wages are paid in currency, not in Bitcoin.

So as a marker of relative value for online transactions, Bitcoin is intriguing as a way to avoid friction in foreign exchange. It can be taxed when one converts it to a real currency or a real good. But there seems to be no control over the growth of the money supply, which means a participant is at risk of losing all overnight with no way to predict instantaneous inflation or deflation. And being ex-government, there is no recourse for criminal behavior.

Why counter them? There is no case for saying they should not be allowed.

phoebusg's avatar

@zenvelo check www.bitcoin.org for the technical paper in the sources.

Not necessarily counter them, but inform the users of the currency of the pitfalls of black market economies. At least with the current social states in existence.

The currency is still gaining popularity – with current rate at 17 USD per.

Can you identify other effects or trade-offs?

HungryGuy's avatar

Well, not being a government gook, I see a thriving black market as a good thing rather than a bad thing.

wundayatta's avatar

It seems like the kind of thing that a monomaniacal mind might make up. Such a mind would see some problems and not others. It would explain some things and not others. Like why is it necessary for individuals to generate coins? Why allow people to earn coins by making coins? Is this just part of the cost of creating the system?

And since the number of coins is capped at 21 million, then, over time, each coin will become worth more and more—deflation, which is very destabilizing to an economy. When your coins are constantly gaining value, you have a strong incentive to delay purchasing until you coins are worth more. Delaying your purchases slows the economy, eventually to a near standstill with constant deflation.

Also, they appear to be afraid of wild swings in the money supply. I don’t know why. I think we need flexibility, not rigidity.

In addition, the system is not at all transparent. It requires a good deal of education for people to believe in it.

I don’t think it’ll fly. Some other micro-transfer mechanism will win out.

So what’s the deal, @phoebusg? This is the second time you’ve asked this question, as far as I can tell. Do you work for them? Whoever they are?

zenvelo's avatar

Boy, there seems to a bit of fluctuation in demand for BTC. Up 80% since June 1? Apparently the drug market place Silk Road is causing a run on BTC.

phoebusg's avatar

@wundayatta I’ve asked a completely different question which you seem to be ignoring. Work for them? It’s an opensource group. Developers are volunteers. No I am genuinely concerned what will happen if BTC becomes really popular and say replaces a state’s currency. How would it be affected?

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