4b. One Possible Scenario: Confusion Stage
The expansion of digital cash will eventually enlarge the cyberspace economy so that it will have a significant impact on the real international economy. For example, suppose the amount of transactions in cyberspace are 5% of the total of all international transactions. There is the possibility then of effects on the exchange rate and money supply. There will be resistance to any sort of control or reform of digital economic activity. This resistance may indeed confuse the general public, politicians, and bureaucrats. It may require the shock of a financial crisis to bring some order to virtual transactions.~http://firstmonday.org/article/view/474/830#problems
The writing sourced above returns us to an interesting paradigm which has been buried by the Bitcoin Maximalist/Marxist narrative (that any alt-coin that isn’t Bitcoin is intrinsically worthless (ie sh!tcoin)).
This above paper doesn’t have this narrative because, like earlier proto-versions of Bitcoin (ie hashcash, b-money, bitgold etc.) it doesn’t anticipate the idea of a single finitely supplied digital money that might arise to be the sole (reserve?!) currency of the world.
When I first started to understand Nash’s Ideal Money and started thinking about its comparable applicability to the poker industry I considered the comparison between poker sites and banks. Of course there are reasons that these two technologies are not comparable but the parts that were relatable allowed me to understand how poker sites might arise with the ability to inflation target the value of the chips that they issue.
This is my go to example of exactly how the ICO model can bring about a new technology that is quite obviously valuable that didn’t (couldn’t) previously exist.
Hal is of course relevant since he was the earliest known contributor to the project and is still one of the top contenders for being Satoshi himself. He is very well respected in this regard and known to be very knowledgeable on the related subjects to digital money.
Tying Everything Together and Observing Bitcoin Maximalism/Marxism in a Knot
Here we can see an obvious contradiction in the narrative that Bitcoin Maximalists/Marxist have walked themselves into. It is, as Finney notes, perfectly reasonable to expect a private banking layer to emerge on top of Bitcoin. And this is exactly what we are seeing.
We see these new issuers of private currencies that act as holders and exchangers of savings (Bitcoin or sometimes conventional money) and then different issuance schedules chosen by communities and groups that are effectively acting as bankers.
Wallets are created and we can think of the Bitcoin maxim: Be your own bank.
And in this it is difficult to suggest there isn’t some form a private banking option being provided for peoples savings to be either held in custody or utilized in building infrastructure and services within the newly emerging and private ecosystems.
So the idea that all alt-coins are simply intrinsically inferior money seems to stem from the willingness to cite and revere Finney but to not actually traverse the sources in which he is getting his wisdom from.
On The Increased Bitcoin Dominance of The Present
The argument of Free Banking Theory is that the markets effectively evolve to become self regulating in their issuance. That banks won’t over issue their private currencies. Actually it is not a matter of creating the optimal supply but noting that there not the same “positive” (nefarious) effects of over-issuing for a bank that does not have the sole control over supply.
It makes sense, however, in an immature ecosystem (I call crypto-exchanglandea) that this self-regulating mechanism hasn’t matured into existence yet.
Without such a mechanism it is quite natural then (I think like the dot com bust) for there to be an initial “over-issuance” or overinvestment in relation to the underlying fundamentals and economies that these currencies might represent.
This isn’t however a suggestion that all altcoins or “proto-digital banks” are intrinsically scams. It is simply a matter of maturity and evolution that is necessary before the self regulating mechanism strengthens the different surviving issuers.
Nevertheless the Bitcoin Maximalist/Marxist agenda and propaganda is shown to be simply self-inconsistent logic based on ignorance of its own cited source material.