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Francesco (OP)
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April 11, 2013, 02:21:13 AM |
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People buy bitcoins under the assumption that it will increase in value forever; because it is limited in supply.
But is it really so?
So, ok. Assuming we don't change the code (and we could decide to resist the switch, so it is unlikely), there will never be more than 21M coins physically. I mean, digitally, but you understand me: stored in the bitcoin protocol.
But. For one: banks multiply money by lending it. It isn't an inherent property of fiat money -it is an inherent property of lending. The borrower has the money to spend -the lender still counts that money as his. Voilà. Even with out need of banks, even lending privately -you just expanded bitcoin money supply, for the size of the lending. And this goes on without limit, theoretically.
As for this, well, ok. A limitation on the fraction that one can lend, either imposed by the law or by common sense, would stop this mechanism to a fixed factor. So you would get maybe not 21M, maybe 210M, but as long as this is fixed, it's the same story.
But, it gets worse. You see, people had gold, back then. You used gold as an actual currency -printing money with it; and they only had value because of it. Then they started putting it inside banks -and issuing paper representing it. Then they started devaluating that paper.
Mark: no one really made a fuss about it. They accepted the "new" money. The old, gold-pegged money alreday looked exactly the same, after all; and that's enough.
You see. In fact, it's already happening. Every time you are not using the actual bitcoin program, but trust any third entity (be it an exchange, a bond market, or a bank), you run the risk of counting on money that's not actually there. If they inflated their balances, as the central bank does with fiat money... well, chances are, as long as there isn't a bank run, nobody would notice.
So, that's what I think will happen. They will say bitcoin is too complex. Or dangerous. Or they will just invent some shiny wonderful thing you can't do with standard bitcoin.
Why take care of a physical wallet? Your computer could get infected, or break, you'd lose everything -it's not safe! Plus, it's not pratical. The blockchain takes space; confirmations take time -so on. Deposit them with us -you'll get protection, praticity, and amazing services!
People are already ditching their computers (and paying big money, on top of it) for limited and heavy-locked smartphones, you see, just because they are handier, simpler, and better advertised...
So, it will become like gold. Some will hoard it, no problem. Some others will trade it. A little minority. Most bitcoins will be amassed into highly protected supercomputers under banks -just like gold is now. People will be driven to use surrogates.
Then, who will notice, if they add some zeroes to some balances?
And, voilà. Bitcoin will heve gone fiat.
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