Monday, 11 August 2014

Is Bitcoin fatally flawed?

The fact that bitcoin has a fixed supply limit - 21 million - may mean it may be fatally flawed in its attempt to be money (a monetary item possessing the three attributes of money) because the limit in supply may result in it never being able to be relatively stable in real value: an essential requirement for money. 

Bitcoin may thus never be able to be used as a relatively stable unit of measure for accounting purposes. Bitcoin may thus never be able to replace fiat money. 

However, bitcoin may come to dominate the market for a cheap, digital medium of exchange if its exchange technology could be improved to make it a very cheap, instantaneous, peer-to-peer, digital medium of exchange. 

See: Hayek: Stability in value would prove to be the decisive factor

Nicolaas Smith Copyright (c) 2005-2014 Nicolaas J Smith. All rights reserved. No reproduction without permission.

No comments:

Post a Comment