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Old 11-10-2012, 07:35 AM   #191
herzmeister
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We have to reimagine what money is.

What is money? Money is information. That's all it is. Who owes what to whom.

All monetary systems up to date cannot reach the simplicity of this ideal. All have their advantages and disadvantages, in a free world we would learn them and use these systems in parallel, depending which is best suited in a given situation.

Gold coins are already an abstraction to this ideal of money as information. They're a tool. Nothing more. A tool to store and transport this information. (This is also said in the movie afai remember.) Use the right tool for the right job. You can't send a gold coin over the internet.

Free digital currencies already existed, but have been shut down. If you peg such a currency on gold, then you need a central organization that can easily be seized. Also you'd have to trust this organization that they don't lie and don't go fractional reserve.

Gold-backing isn't needed anyway. A ledger of transactions, e.g. barter system over the internet, like Ripple, would be fully sufficient to handle an economy. This comes also closer to the idea of money as information.

However, such barter systems have issues of privacy, necessarily, because they are ultimately based on trust and on identities of individuals and their reputation.

Bitcoin enables privacy by cryptography and by simulating a scarce commodity, hence the 21 million limit (with up to 8 decimal places btw, so no liquidity shortage). It's just as arbitrary as the universe's decision how much gold to put on planet Earth. Scarcity is all that is needed for a good to become valuable and function as money. Also Bitcoin is decentralized and peer-to-peer, it's not *that* private, it is owned by no one, so it can't be shut down.

Bitcoin may have disadvantages though. Because it is essentially a simulated commodity, as said, it is expected to act deflationary in the long-term, it has a price and is speculative, unlike units mostly used in barter systems. But I see no problems of liquidity in a free world where also other currencies can be used.

If you're afraid that the internet would be shut down or a nuclear war, then, well, we'd have other problems anyway, better hoard rather food than gold in this case. Generally, don't keep all eggs on one basket, right?
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Last edited by herzmeister; 11-10-2012 at 07:39 AM.
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