In fact, many of the problems that he describes are in fact features and NOT bugs
Since you are a holder and speculator, of course we disagree on that. In my view,
you are one of bitcoin's problems.
a claim that there needs to be a built in approximate 2% inflation (or devaluation) is preposterous because it supposedly addresses a non-existing problem, at least at this time.
so make it a bad investment?
Bitcoin was created to be a currency, not another speculative asset- and dividend-free investment fund (or pyramid scheme, its more honest name). There is no shortage of the latter, and (as I wrote earlier)
that use of bitcoin will not make the world better, create new wealth, or render some useful service; it will just move wealth from some people to other people.
Economists have know for 500 years that a currency must have some inflation, otherwise people will hoard it and it will not be available for use as a currency.
The use of bitcoin for investment and speculation had two other bad consequences. First, it lifted the price to 100 times what it should have been, given its current level of usage. The price is floating in the air, high up, anchored to itself through the hopes of traders and holders. It could crash from there at any moment. No company in its right mind would want to hold it, even temporarily. Imagine a manager accepting a payment of 1000 BTC today, and the price crashing tomorrow, before he can spend or sell those coins. How could he explain that to the company owners? (You can find out there an audio of Overstock's CEO trying to explain something like that to the other shareholders; but AFAIK he is the majority holder, so he won't get fired for that...)
Second, but tied to the first: bitcoin's use as instrument of speculative trade made its price extremely volatile. Even in times of "stability", like the past 7 months, the price has changed by ±10% in a few hours, several times. Volatility is bad for a currency: the user who buys BTC to pay for something will lose money if the BTC price drops between the two actions, and will not really win if it goes up -- because he will be left with a small amount of BTC that he may not find a good use for.
That is why a good cryptocurrency must be designed to NOT be a good investment.
Then the value of 1 coin would be determined by its use for e-payments, according to the money velocity equation.
thats basically how it works now. people buy bitcoin for what the market feels it is worth. economics 101
Not really. The money velocity equation (which I too learned thanks to bitcoin) is P = V × T / N, where P is the value of one unit of the currency (say, USD/BTC), V is the volume of payments using it (USD/day), T is the average time between two payments using the same coin (days), and N is the number of units of the currency in circulation (BTC).
My best optimistic guess for V is 5 million USD/day, and T = 14 days seems a reasonable guess to me. If there was no hoarding and speculative trading, N would be about 14 million BTC. That gives P = 5 USD/BTC.
The 46-fold contrast between that and the price now (230 USD/BTC) is due to hoarding and speculative
From what I have read, I am satisfied that Satoshi intended bitcoin to be what he wrote in the whitepaper: a system for peer to peer payments through the internet that did not require a trusted third party. He believed that the world needed such a thing, but no one knew how to build it, and thought that he had found a way. That seems to have been his motivation to design the bitcoin protocol; and he then implemented it to see whether the idea worked out in practice.
But Satoshi was a computer scientist, not an economist. He thought that it would be nice if the currency had no inflation. For "everybody" knows that inflation is bad, right? I thought so too.
His he pleased about what bitcoin turned out to be? Well, on one hand it is always satisfying to do something big, even if it is a big nuclear accident or the sinking of the Titanic. But I doubt that he is happy about what his creature has become...
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