I meant to post this in here a few days when I actually wrote this up but forgot. Would love to get the opinions of the btct community on this.
BITCOIN IS MEMORY
William J. Luther & Josia Olson – Kenyon College
Traditionally, the concept of money as memory finds base in the proposition that “any allocation that is feasible in an environment with money is also feasible in the same environment with memory.” (Kocherlakota 1998) In other words, both memory and money can facilitate exchange, a quality which provides an analytical platform for equilibrium.
But what about Bitcoin as memory? It would appear that this relationship should extend to the bitcoin ecosystem. Well it does. In fact, it can be argued that Bitcoin is a better form of ‘money as memory’ than traditional fiat. Here is what William J. Luther and Josia Olson of Kenyon College have to say about it:
“The bitcoin system serves as a functioning application of memory. Every peer on the bitcoin network stores a complete copy of all past transactions, similar to the public ledger Kocherlakota (1998) terms memory. Moreover, the bitcoin protocol effectively checks new transactions against this ledger prior to authorization. Unlike the theoretical construct, where past transactions are attributed to a particular agent, the bitcoin system records transactions by account. Given that an agent might possess several accounts and cryptography is used to obscure one’s identity, it is difficult to get a full picture of the past transactions of a particular agent. In other words, the unit of analysis in the bitcoin system differs from that of the theoretical construct. Nonetheless, it is reasonable to describe the bitcoin system as memory”
“Having contended that bitcoin resembles an imperfect form of memory, we next consider whether recent experience with bitcoin is consistent with the theoretical literature on memory. In particular, we consider the following three implications:
Both money and memory might facilitate exchange.
If memory is imperfect and money is costly to store and/or verify, equilibria exist where both money and memory are employed.
3. As the expected cost of storing and/or verifying money increases, memory is more likely to be used.
…It is rather straightforward to show that the bitcoin experience is consistent with the first two implications of the theory. As described above, bitcoin is used to facilitate exchange in a variety of contexts. Cyber security, web domains, and leisure activities—just to name a few items—can be (and have been) acquired with bitcoin. In these contexts, bitcoin works in much the same way as traditional monies. At the same time, it is certainly not the case that bitcoin has replaced traditional monies entirely. Rather, bitcoin is often one of many payment options. In other words, since bitcoin is an imperfect form of memory and traditional monies are costly to store and/or verify, both are employed to facilitate exchange. Recent experience in Europe provides some evidence that, as the expected cost of storing and/or verifying traditional monies increases, bitcoin is more likely to be used.”
What strikes me as powerful about this idea is the increasing role bitcoin’s public ledger will have in substantiating its market and use value. Because bitcoin’s blockchain is cryptographically secure, it is reasonable to assume that as a form of memory, bitcoin is far superior to fiat. Fiat has no public ledger and the historical transaction data that does exist is not shared publicly.
This is nothing new of course, but when viewed as memory I believe bitcoin only becomes stronger. In fact, normal monies will lose traction in the face of bitcoin’s ‘public’ memory, for one cannot extract history from a bill’s ‘private’ memory (serial numbers can be tracked, but that data is not available to public). Each bill is passed from person-to-person in the vacuum of that transaction. As our relationship with memory shifts with bitcoin’s adoption, so will our desire for transparency in all forms of money. How do you guys feel about this? Is it a fair extension of the money as memory concept?
Original post:
https://btcgsa.wordpress.com/2013/06/07/the-memorychain/Source:
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2275730
