The competition or co-existence of virtual currencies with fiat currencies is often discussed with reference to Gresham’s law that predicts that bad money drives out good money. Unfortunately, Gresham’s law cannot be applied to virtual currencies in most cases as the price of virtual currencies is generally not fixed to existing fiat currencies. Since this paper demonstrated that changes in the price of virtual currencies caused by the demand of potential users and speculators deprives the currencies from its intended usage, one could argue that its design is driving itself out. Fixing the price to fiat currency with an implicit government-backing could alleviate the problem and also allow an application of Gresham’s law. However, whilst a fixed price may solve one major problem it would not be consistent with the decentralized, libertarian and free-market designs of most virtual currencies. Regional currencies are an example of a virtual currency that is fixed to an existing currency but those types of alternative currencies are neither decentralized nor global.
Interesting conclusion.], what we plan to do, is just a stable decentralized currency and ‘good money’ drivers ‘bad money’ out.
This is one of my major disappointments besides losing a lot of money. I currently believe that this is not feasible having the lessons learned from the last 2 years. With anonymous shareholders you are at high risk that one or small groups (<5) or shareholders have a majority stake in the network.
Not only is the distribution of shares a challenge but also the lack of transparency going forward. Other than a externally verified shareholder/identity register built into the blockchain I don’t see any solution with current technology to e.g. prevent shareholders of owning more than say 2% of all shares. I believe anything beyond that will likely have to be considered as centralised (e.g. less than 25 shareholders).
So I think it is not possible with current technology to have a decentralised stable currency. I consider Nu only a privately owned or freemarket stable currency when the peg is established. However due to the ability of one or a handful of shareholders to obtain a majority it is by default centralised.
I have been thinking about this but I believe anonymity and decentralisation can’t be guaranteed to exist together. It would require significant advances in identity technologies to ensure identities are unique and solely tied to one person and their holdings. Ideally that would be an anonymous identity, but I doubt whether that would be possible in the near future.
We are still in early stage, and in 2009 early Satosi controlled majority hashrate. You are a bit pessimsim.
Bitcoin will never change the basic ecomomics rules, and will never become successful currency for future, just a speculative asset, that’s all.
Cryptos never come into mainstream untill the Hayek crypto types emerge. As per F.A. Hayek 's theory, a successful private currency don’t have to be decentralized. We want/like decentralization because it is more reesistant to governments, so it is from the political reason not economics rules.
With you on that. However, decentralization also provides more robustness in general on the longer term. Time will tell whether that will exceed the economic incentive to centralise. I believe it is going to be that way.
From an economic and business POV, even if we could “prevent shareholders of owning more than say 2% of all shares” I still believe networks like we have today would still be victims of the so called Hostile Takeover.
So we’d still need to think and build some kind of defenses/barriers (like Poison Pills) for that too.
In fact you’re correct. We’re pioneers in this unexplored and unregulated wasteland just like JJ Astor, Vanderbilt, Rockefeller, Carnegie and JP Morgan were in the begining of the last century when there were no labour legislation/rights, no anti-trust rules, monopolies all around the place, insider trading allowed, endless dilution of shares down the throat of small sharesholders, etc… “Wild Capitalism”
Now here we are: in the “Wild Fintech” era…