On Tue, 2008-11-04 at 06:20 +1000, James A. Donald wrote:

> If I understand Simplified Payment Verification
> correctly:
> New coin issuers need to store all coins and all recent
> coin transfers.
> There are many new coin issuers, as many as want to be
> issuers, but far more coin users.
> Ordinary entities merely transfer coins.  To see if a
> coin transfer is OK, they report it to one or more new
> coin issuers and see if the new coin issuer accepts it.
> New coin issuers check transfers of old coins so that
> their new coins have valid form, and they report the
> outcome of this check so that people will report their
> transfers to the new coin issuer.

I think the real issue with this system is the market 
for bitcoins.  

Computing proofs-of-work have no intrinsic value.  We 
can have a limited supply curve (although the "currency" 
is inflationary at about 35% as that's how much faster 
computers get annually) but there is no demand curve 
that intersects it at a positive price point.

I know the same (lack of intrinsic value) can be said of 
fiat currencies, but an artificial demand for fiat 
currencies is created by (among other things) taxation 
and legal-tender laws.  Also, even a fiat currency can 
be an inflation hedge against another fiat currency's 
higher rate of inflation.   But in the case of bitcoins 
the inflation rate of 35% is almost guaranteed by the 
technology, there are no supporting mechanisms for 
taxation, and no legal-tender laws.  People will not 
hold assets in this highly-inflationary currency if 
they can help it.  


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