Money as a Ledger
The shift in the mainstream discourse surrounding bitcoin from "it will never work" towards a recognition of the value of decentralized trustless ledgers has been pointed out several times in this thread, in particular by Cypherdoc. Acceptance is growing for bitcoin as a "ledger," but with plenty of doubt reserved for bitcoin as a "currency." Here's a relevant opinion piece from 'The Economist' (Insights) that demonstrates this effect:http://www.economistinsights.com/technology-innovation/analysis/money-no-middleman/tab/1
The author claims that finance experts are intrigued by a distributed ledger:
"The aspect of the Bitcoin protocol that finance experts find intriguing is its distributed ledger, the Bitcoin blockchain."
"This ability to move value across ledgers cheaply and publicly has a myriad uses."
yet are skeptical of the currency aspect:
"Bitcoin, the currency, is a risky investment."Such thinking is incongruous.
"There is growing interest in treating Bitcoin not as a currency but as a digital equivalent to a notary’s stamp: using the blockchain as a way to authenticate digital transactions, offering irrevocable proof of ownership with a traceable history."
To simultaneously claim that Bitcoin's blockchain is useful as a ledger yet unsuitable as a currency belies the very essence of what money is. Money is
a ledger. Melbustus has posted links to Wences Casares' (XAPO CEO) video talks, and here's another where, in 7 minutes, Wences explores the evolution of money, and the technological and economic advancements that transformed it from for a balance sheet stored in the community's collective memory, to an analog ledger implemented with tokens of gold, to what we have today with bitcoin:http://bigthink.com/users/wences-casares
This view of the history of money is hardly controversial (the view that rather than evolving from barter, money came from the need to better remember what value was owed to which person). In this blog post, David Andolfatto (SFU professor and VP of Federal Reserve Bank of St. Louis), "scores one for the anthropologists" and provides several references arguing against the barter myth, in favour of the memory view:http://andolfatto.blogspot.ca/2014/07/debt-first-5000-years.html
He makes the comment here
that "Bitcoin will retain its value as long as it records information in a useful manner (whether or not it possesses legal tender status)," focusing on the importance of its memory ("records information") function.
This aligns with Kocherlakota's (President of the Federal Reserve Bank of Minneapolis) "money is memory" view. Kocherlakota argued that all historical forms of money were imperfect attempts at creating a system for remembering what value was owed to which person: "in the monetary environment, money is merely a physical way of maintaining this balance sheet" [Kocherlakota, 1996]. http://www.minneapolisfed.org/research/sr/sr218.pdfhttps://www.minneapolisfed.org/research/qr/qr2231.pdf
He proves that under very general conditions "any allocation which is incentive-feasible in an environment with money is also incentive feasible when agents have access to memory" [Kocherlakota, 1996]. Tying this post back to the thread's topic "Gold collapsing. Bitcoin UP." is easy: Bitcoin is the first example of a technology that can implement Kocherlakota's "memory function" without the need for physical tokens (gold) [or the need for trust]. Bitcoin supersedes gold.
As the world slowly comes to recognize the usefulness of decentralized trustless ledgers, and later comes to understand money as an entry on such a ledger, I believe the detractors to the currency-aspect of bitcoin will lose their voice. What could be better money be than entries on a global trustless Ledger, freely-accessible via bitcoin's protocol rules, and secured by the largest single-purpose computing network ever created?
I'll end with this comment that made me smile:
----------------By the way, I've become a big fan of David Andolfatto since discovering his blog a few days ago. He is an independent and critical thinker, asks questions when he doesn't understand something, and has a wealth of knowledge and insight to share. He has three interesting articles related to bitcoin that I suggest you check out http://andolfatto.blogspot.ca