On 12/06/11 8:29 AM, Jeffrey Walton wrote:
On Sat, Jun 11, 2011 at 4:13 PM, John Levine<jo...@iecc.com> wrote:
Unlike fiat currencies, algorithms assert limit of total volume.
And the mint and transaction infrastructure is decentral, so there's
no single point of control. These both are very useful properties.
Useful for something, but not useful for money. I can't help but note
that the level of economic knowledge in the digital cash community is
pitifully low, and much of what people think they know is absurd.
OK, I bite - who has the knowledge? Is it the expert folks who have
the US 14 trillion or so in debt? Or is it embodied in experts in
other countries, such as Greece?
Unfortunately, those in central banks and other similar places have
largely forgotton a lot of the processes of new issuance. Also, they
are really only familiar with their own type of issuance (e.g., worried
about inflation). They don't need more knowledge because it is no
advantage to them to promote free market issuance.
Issuance is somewhat a lost art. Before 1900 or so we knew a lot more
because free banking was prevalent. The 20th century can be described
as the century of the central bank, which unfortunately split the
issuance of monies into various components, so the knowledge stagnated
and dispersed. What then became important to central banks as
custodians of the already issued national unit was monetary economics,
which isn't the same thing as issuance.
Some of that knowledge has been re-learnt in the financial cryptography
tradition. You can see some of the lessons in e.g., the history of
Paypal, e-gold, webmoney, goldmoney etc. Other parts of that knowledge
are vested in IPOs and the bond markets. Yet other parts are found in
contract law, accounting, and governance. Another important part would
be applications, which could be seen as a cross between software
architecture and startup venture innovation.
I wrote a paper about John Levine's observation of low knowledge, way
back in 2000, called "Financial Cryptography in 7 Layers." The sort of
unstated thesis of this paper was that in order to understand this area
you had to become very multi-discipline, you had to understand up to 7
general areas. And that made it very hard, because most of the digital
cash startups lacked some of the disciplines.
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