Friday, January 18, 2019

The Bitcoin Problem

Bitcoin was invented to fix the problems caused by fractional reserves and essentially be similar to gold in that it has a fixed supply and has inherent value. The main problem with this is that Satoshi Nakamoto (the inventor of Bitcoin) did not realize that without changing human nature, creating digital gold would not change the selection pressures of currency which made the dollar move from being backed by gold to the dollar not being backed by gold.

Because the incentive structure of humanity hasn't been changed, cryptocurrency as a whole is following the pattern of money itself: fixed supply (bitcoin) to fractional reserve and derivatives (Ethereum and everything built on top of that.)

We left gold for a reason. We are leaving bitcoin for the same reason: human greed. People don't want a fixed supply currency in analogue form, thus they don't want fixed supply currency in digital form.

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