The 2 biggest problems with bitcoin right now, affecting its growth, are security (which is being addressed) and difficulty of use. Most people do not want to download a client. It is a hassle. Bitcoin.org should let people get an address, send/receive payments. Get them to register with an e-mail address. Build a list and start marketing bitcoin like you would a business. For bitcoin to be successful, it needs to be easy. Not everyone will participate in the p2p, but they need to be involved in the bitcoin economy. I will let IT people chime in with the technical requirements for this.
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Economist with graduate training in Economics.
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Graduate degree in econ and the OP is what you have to show for it? The education system have failed you miserably or the troll university you attended have done you much good.
Very curious to know your training in economics.
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You're basically mentioning coase's theorem right? Doesn't matter how the initial resources are split up, in the end the wealth distribution turns up the same?
I tend to think of Coase's Theorem in terms of property rights in a micro framework, but, yes my suspicions are that bitcoin will not alter the wealth distribution aside from creating a few rich people. Another response earlier provided a good example of how the same result has occurred with the internet. I don't see evidence yet that bitcoin represents a fundamental shift aside from an adventurous monetary policy change.
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I am curious what economic theories you subscribe to, if you think encouraging spending is the solution to a bad economy..
Clearly that's a Keynesian idea, but it's just an example. I'd rather not get into politics. The key point is the bitcoin economy is decentralized and we don't know what that will do in the long run.
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Disclaimer: I am not an economist If there was widespread adoption of BTC, as in more than 50%, wouldn't the frame of reference change? IE, goods and other currencies would be priced relative to BTC, making BTC the standard and therefore stable? And fluctuations would in practice mean that other currencies are unstable vs BTC. Certainly it will become more stable than it has been lately and we won't see 50% swings, but I worry about how it will fare in bad economic times. When the economy is bad, how can a bitcoin economy encourage spending? Hoarding seems to be the end result which would destroy the bitcoin economy.
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I'm tempering my enthusiasm for bitcoin because scarcity is not enough to create value. Yes bitcoin has scarcity built-in by design but that is the only thing it seems to have.
The main thing here is developing a market for bitcoins. I am actually optimistic about this happening. I saw an article about a small restaurant in NYC now accepting bitcoins. This is crucial. It needs to go beyond small techie products to really gain traction. Given network effects, I think bitcoin can succeed in this area. I am actually quite confident bitcoin will be around in 5 years, but whether or not it will change things much I'm not so sure.
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Well, then no country will be able to inflationate the currency by printing loads of money like they do now...
That is true. However, the USA sets a target of a little inflation for the reason that they want to encourage spending and keep the economy moving. With a deflationary currency, as you know, people are more inclined to save since their savings are growing in value. I am tempering my enthusiasm for bitcoin because I don't know how it will deal with recessions. There is a role for the government in those economic times and bitcoin doesn't provide for that. We shall see, though.
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I have been getting excited about bitcoin, but now I'm not so sure about it. Think about if bitcoin is successful. If many merchants decide to accept bitcoin. What will happen? Well....the big banks will still be the big banks and hold the most bitcoin. Sure, a few early adopters will get rich much like the founders of Google and other companies got rich, but the rest of us? Not so much. We'll just be paying more with bitcoins and less with dollars. Our lives might be a bit easier since payments are easier, but as we've seen lately we still need banks and we'll still get gouged with fees. We'll just be getting taken advantage in terms of bitcoins rather than dollars.
Now, onto the Fed situation. Yes, bitcoin is deregulated. I know many think this is a chief benefit of bitcoin, but nobody really knows. Opponents of bitcoin would argue that deregulation is going to make the currency very volatile and as most people are risk-averse, this means most people would rather not live in terms of bitcoins. Maybe bitcoins will be stable. Who knows?
My point is the main change that would result from wide adoption of bitcoin is the unknown. Our lives won't get much better. We'll just be in for a surprise. Now I like reading a good thriller as much as anyone else so this isn't the worst thing in the world, but it certainly isn't the utopia some people make it out to be.
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