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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