The mining system provides the block chain that verifies transactions; yes. And eventually the payoff to miners becomes dominated by transaction fees rather than by payouts for finding blocks.
One of my concerns with Bitcoin is that today, on the margin, choosing to accept BTC in exchange for goods means agreeing to give lots of goods, on demand, to the people who currently are sitting on a lot of BTC — who have not (on the whole) done anything particularly useful to earn that wealth. Even a merchant who thinks a Bitcoin-like system is a good idea may be reluctant to agree to participate in making a bunch of nerds with video cards very, very rich.
Even a merchant who thinks a Bitcoin-like system is a good idea may be reluctant to agree to participate in making a bunch of nerds with video cards very, very rich.
I don’t think the merchants really care about that. They care about make themselves rich. If making nerds with video cards also rich is a side effect, so be it. But if nerds with video cards can dilute the value of their currency, they may have a problem. If this dilution occurs on a known schedule and will slow down over time and eventually stop altogether, and competing currencies can be diluted at any time by central bankers, it may not be much of a problem.
A bit of a tangent, but the increase in supply of bitcoin is not the only thing that affects the value of bitcoin. A key determinant is how much people want to hold bitcoin. How much people want to hold a currency is not a very stable thing, meaning that the even with a fixed quantity of bitcoin in circulation, the future value of bitcoin will be highly uncertain. This will also tend to produce gluts and shortages of bitcoin, which have their own negative effects.
Well the problem is arguably worse with regular money since the number of bitcoins that will ever exist is limited, whereas with regular money governments can, and sometimes do, print arbitrarily large quantities.
The mining system provides the block chain that verifies transactions; yes. And eventually the payoff to miners becomes dominated by transaction fees rather than by payouts for finding blocks.
One of my concerns with Bitcoin is that today, on the margin, choosing to accept BTC in exchange for goods means agreeing to give lots of goods, on demand, to the people who currently are sitting on a lot of BTC — who have not (on the whole) done anything particularly useful to earn that wealth. Even a merchant who thinks a Bitcoin-like system is a good idea may be reluctant to agree to participate in making a bunch of nerds with video cards very, very rich.
I don’t think the merchants really care about that. They care about make themselves rich. If making nerds with video cards also rich is a side effect, so be it. But if nerds with video cards can dilute the value of their currency, they may have a problem. If this dilution occurs on a known schedule and will slow down over time and eventually stop altogether, and competing currencies can be diluted at any time by central bankers, it may not be much of a problem.
A bit of a tangent, but the increase in supply of bitcoin is not the only thing that affects the value of bitcoin. A key determinant is how much people want to hold bitcoin. How much people want to hold a currency is not a very stable thing, meaning that the even with a fixed quantity of bitcoin in circulation, the future value of bitcoin will be highly uncertain. This will also tend to produce gluts and shortages of bitcoin, which have their own negative effects.
Doesn’t regular money have this same problem?
Sure, in a sense; but merchants don’t really have a meaningful choice of whether to accept it. BTC is new.
Well the problem is arguably worse with regular money since the number of bitcoins that will ever exist is limited, whereas with regular money governments can, and sometimes do, print arbitrarily large quantities.