quarta-feira, abril 10, 2013

Bitcoin - competing currencies

A Rebuttal To Bitcoin: Money of the Future or Old-Fashioned Bubble?:
Korda writes, “ .. there are numerous knockoffs such as litecoin, namecoin, and freicoin in place.” By this statement, it seems that Korda doesn’t understand that none of the digital currencies mentioned are in anyway interchangeable, that they all have different underlying economic structures, and none of them share a common ledger or network. They are all totally independent digital currency systems.

So in essence, what we are seeing here is the market at work. I personally think competition in currencies is a good thing. The guys who created Litecoin think their system of money creation is better than the guys who came up with Bitcoin, so they are putting their currency out there in the hopes that people will chose it over other alternatives. So far, the market seems to prefer Bitcoin by a large margin. Korda seems to think this is a point against digital currency systems, while to me, this is an exceptionally strong point in favor of them. Competition will only breed better currencies.

Korda goes on to say, “Those who compare bitcoin to a language neglect the fact that most people do not have an incentive to create a new language out of the blue. On the other hand, a great chunk of human history consists of people searching for the philosopher’s stone to magically produce gold.” I would argue that people don’t have an incentive to change currency systems unless the one they are presently using is under attack by a gang of marauding counterfeiters and thieves. Further, comparing Bitcoin to the magical production of gold is just plain silly. There is nothing magical about resource intensive computational algorithms. Bitcoins require real world resources to produce and they come into existence as a money in the same way gold nuggets do, people mine them up and trade with them.

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