[Cryptography] Shorting Bitcoin [was Cryptocurrency: CME Approved]

[Henry Baker]

At 08:08 AM 12/4/2017, John Levine wrote:
>In article <E1eLXkZ-000En5-IF at elasmtp-masked.atl.sa.earthlink.net>, Henry Baker  <hbaker1 at pipeline.com> wrote:
>>That's an interesting question.
>>
>>Yes, Bitcoin futures will be traded, so you could "short" those, but wouldn't it be simpler, and more in line
>>with the general philosophy of cryptocurrencies, to simply allow *negative* balances, so "shorting" would
>>already be built into the cryptocurrency blockchain?
>
>But that's not how shorting works.

Yes, I know how shorting works -- currently.

But the whole point of cryptocurrencies is that they don't have to mimic every feature (or bug) in current currency systems.

The tendency with any new technology is to preserve the lifestyles and heuristics that worked for the old technology; it may take a century for the new technology to "come into its own" and start to take advantage of its differences from the old technology.

The real crypto currency revolution won't happen until things like loans, short selling, futures, options, etc., become *integrated* with a crypto ledger.

In the early 2000's, there was a lot of experimentation in *massively multiplayer online games* of different types of exchange value systems, and there was some analysis by economists of which types worked better than other types.

The consensus at the time seemed to be that "exchange" depends upon some quantities which are more-or-less conserved, and that game play lasted longer & was more interesting under these types of systems.

This result is also more-or-less in line with Wolfram's observation that cellular automata which obey conservation principles are far more interesting than those that don't.

But standard physics provides at least one example where "negative" (anti) particles work, so there is hope for currency systems which incorporate "short" positions naturally.