By having users volunteer the CPU power to mining, websites could find that they will earn more from mining than from subscriptions or ads. This could change everything.
Bitcoin and Blockchain
There are two important differences between modern cryptocurrencies and the competitive monies F.A. Hayek envisioned.
It is absolutely essential to understand the distributed model even to have a first-level conception of what cryptocurrency really is. It is not a proprietary product. It is not a company. It is not even a brand. It is a technology. It is a technology that, by design and structure, doesn’t have an owner – or, more accurately, it is owned by anyone and everyone. It is a distributed ledger. The purpose of it is to carefully delineate ownership claims and provide a chronological and immunity audit trail of changes in ownership rights. Bitcoin is a token that provides evidence of authority and access to make changes in the ledger, and thereby absorbs and reflects the value of the services provided by the ledger itself.
Many people disagree with government regulation of cryptocurrencies and initial coin offerings (ICOs), but one could do a lot worse than Switzerland’s financial regulator, Swiss Financial Market Supervisory Authority (FINMA).
Ever since the invention of cryptocurrency, people have asked whether governments will just create their own to compete directly with private issuance. Many governments have talked about doing so. In the greatest of ironies, it was Venezuela (socialist “paradise” of hunger, poverty, and massive emigration) that has made the most public attempt with the pre-sale of a new token called the Petro. It was a fiasco.
Liberty Street Economics, the New York Fed’s blog, recently did a question-and-answer session with Fed economists Michael Lee and Antoine Martin about cryptocurrencies. It’s a largely neutral and factual interview, but the economists do make one provocative comment: “Cryptocurrencies arguably solve the problem of making payments in a trustless environment, but it is not obvious that this is a problem that needs solving, at least in the United States and other advanced economies.”
The parable of top-down socialism vs. bottom-up Bitcoin tempts one to adopt a general theory of the relationship between ideas and social change. It might be the case that bad ideas come from the top down and good ideas from the bottom-up, as a general expectation and principle. That seems to cover most use cases, until the point comes when liberal intellectuals become hugely influential in academia. We’ll wait a long time for that to be the case.
We’ve worked to counter the negative opinions of people at once-mighty institutions like the Bank for International Settlements and on. And the research you read here truly matters. AIER is not just another Medium account; it is one of the world’s most respected voices in economics. We have both the credibility and longevity.
To win this battle requires both theory and practice. The sustainability of this revolution depends on both. So please pull out those wallets and donate today. The AIER needs you. Crypto needs you. The future of freedom needs you.
Blockchain technology won't truly be pervasive until people gain enough intuitive understanding of the technology to trust it. That could be a slow process.
It only takes a quick glance at recent news to know Bitcoin is volatile; its fluctuations in price have made headlines for months now. But exactly how volatile is it relative to commonly used currencies, and how does that affect this cryptocurrency’s ability to actually be a usable medium of exchange?
Cryptocurrencies are still quite new and seem to just be scratching the surface of their potential. If they are to succeed — not only as a fringe medium of exchange or speculative investment, but as real competitors with government currencies — some new programmers are going to have to come along and make currencies whose digital coins are created in a much different manner than the current ones. Perhaps digital coins whose supply is determined by demand will lower volatility enough to cut the future uncertainty of prices. Those may be adopted as true media of exchange. Until that time, Hayek’s vision of private currencies will not be quite realized.
While the nature of the news events does not necessarily explain the magnitude of Bitcoin’s price changes or its daily volatility, it does suggest that the market is not being driven entirely by manipulation or the behavior of small numbers of traders.
Like clearinghouse associations, the blockchain technology will further stabilize the banking system.
Is there a bubble in the ICO/blockchain startup space? Short answer: yes. Long answer: still yes, but it involves very little of the irrationality most people associate with such things, and shows just how important the underlying blockchain technology truly is.
Blockchain is a technical innovation. But it is not an innovation in how we aspire to live. There is a big difference. The blockchain allows people to achieve something we have always wanted to do but haven’t been able to do until now. The stone money on the island of Yap is an example.