Are you talking about bitcoin or conventional sovereign currencies?
Bitcoin. Traditional currencies have the same problem though, in that they tend to have variable, policy-based inflation rates that confuse the markets. I am arguing in favor of a something designed for price stability, enforced by algorithmic means in accordance to demand.
The future supply of bitcoins is much more certain than the typical currency out there because it’s laid down in advance.
Sure, the physical supply is laid out in advance, but the amount available to do transactions with at any given time, or even in the long term, is not. There’s no reliable way to predict who will choose to sit on their coins (possibly even cryptographically putting them in an unspendable stasis for an unknown amount of time) versus spending them on useful trades or engaging in short-term speculation. The market is rendered more stochastic, with more of a butterfly effect, more black swans, and so forth. Each and every transaction is impacted to some degree by this hidden complexity, which negatively impacts the use currency’s use value.
I don’t see how you’ve explained a problem more predominant with or unique to bitcoins. All currencies have the problem that their usage as a currency can shift. There’s no reliable way to predict who will sit on their money rather than spend it. You’re comparing bitcoin to perfection, not to real currencies.
versus spending them on useful trades
The whole point of money is that it has the option value to spend it now or later, so the fact that its option value isn’t being exercise doesn’t mean it’s failing at its purpose; just the opposite, in fact. If all you care about is how often a currency is used, then the optimal currency would be spent the moment it is earned—but that’s scarcely better than barter.
Bitcoin. Traditional currencies have the same problem though, in that they tend to have variable, policy-based inflation rates that confuse the markets. I am arguing in favor of a something designed for price stability, enforced by algorithmic means in accordance to demand.
Sure, the physical supply is laid out in advance, but the amount available to do transactions with at any given time, or even in the long term, is not. There’s no reliable way to predict who will choose to sit on their coins (possibly even cryptographically putting them in an unspendable stasis for an unknown amount of time) versus spending them on useful trades or engaging in short-term speculation. The market is rendered more stochastic, with more of a butterfly effect, more black swans, and so forth. Each and every transaction is impacted to some degree by this hidden complexity, which negatively impacts the use currency’s use value.
I don’t see how you’ve explained a problem more predominant with or unique to bitcoins. All currencies have the problem that their usage as a currency can shift. There’s no reliable way to predict who will sit on their money rather than spend it. You’re comparing bitcoin to perfection, not to real currencies.
The whole point of money is that it has the option value to spend it now or later, so the fact that its option value isn’t being exercise doesn’t mean it’s failing at its purpose; just the opposite, in fact. If all you care about is how often a currency is used, then the optimal currency would be spent the moment it is earned—but that’s scarcely better than barter.