[Cryptography] On Security Architecture, The Panopticon, And "The Law"

[Russ Nelson]

Natanael writes:
 > @IanG: Everybody is expecting Bitcoin to stop *somewhere*. It's obvious it
 > can't rise forever.

Cryptographer's hat off, economist's hat on. No, Bitcoin *can* rise
forever, and it predictably *will* rise forever.

A currency can be viewed in several ways. One, as the product of a
suspended barter between two people. Two, as a commodity which
everyone will take in trade because everyone will take it in trade
(yes, I am aware of the recursive nature of that definition.)

When people are free to trade as they wish, every trade creates value,
whether it be barter, goods for goods, or a currency trade for goods,
then a goods trade for currency. So the entire value of the economy is
constantly rising, even if no new goods are produced, even if nothing
is consumed.

I'm underlining the key point in the next paragraph.

What happens to the currency in this situation? What if there is a
fixed amount of the currency (which is a feature of Bitcoin)? _As new
goods are brought into the economy_, whether by import (e.g. by
Overstock.com announcing that it was entering the Bitcoin economy) or
by production of new goods, more goods may be purchased with the
currency, but there is not new currency being made. So, the value of
the currency goes up ........ _without limit_.

Now, people are getting a bit confused, I think, by Bitcoin mining. As
our own Ben Laurie has pointed out, the computation needed to create
bitcoins is not an essential feature. What is important, though, is
that Bitcoins were easily gotten at first, and the growth of bitcoins
in the economy slows down. People are thinking that bitcoins are
becoming more valuable because more people are chasing
them. No. Bitcoins are becoming more valuable because you can buy more
things with them, and because as people trade, the value of bitcoins
increases.

Bitcoin's crypto is pretty simple. It's just a signing system. "I
discovered this hash; here's my key." "I'm giving this much of this
key to that key." It's more like a bearer title system than ecash
(particularly given the transaction time of about an hour).  The
hashing thing is just a way to distribute bitcoin more-or-less
fairly at the beginning -- and we're still at the beginning.

Satoshi is more of an economist than a cryptographer.

-- 
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