Hearn: The resolution of the Bitcoin experiment [LWN.net]

Hearn: The resolution of the Bitcoin experiment

Posted Jan 19, 2016 23:49 UTC (Tue) by Cyberax (✭ supporter ✭, #52523)
In reply to: Hearn: The resolution of the Bitcoin experiment by drag
Parent article: Hearn: The resolution of the Bitcoin experiment

Here's a "1" for you! I value it at $100000. Would you agree to buy it from me for that sum?

I don't think so. In reality, it's scarcity that drives the price. The labor/work required to produce an item might be one reason for the scarcity, but it's certainly one of them. Note, that scarcity alone does not determine the value - it's a necessary but not a sufficient condition.

In case of Bitcoins the only way to guarantee scarcity is to make it hard to mine new coins. It's a distributed system, there's no other way.

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Hearn: The resolution of the Bitcoin experiment

Posted Jan 20, 2016 0:19 UTC (Wed) by karath (subscriber, #19025) [Link]

"In case of Bitcoins the only way to guarantee scarcity is to make it hard to mine new coins. It's a distributed system, there's no other way."

Mostly I agree with this but there is one key bit that I think is over-simplified. It's called mining but the activity is not actually creating Bitcoins. The miners are calculating signatures for the blockchain, so that the transactions are publicly logged and irrefutable. As a reward for this activity, the miners are awarded newly created Bitcoins. These Bitcoins are literally created from 'nothing' at a consensually agreed rate. Once all possible Bitcoins are created, the same 'mining' activity will take place but the miners will be awarded Bitcoins from the fees charged to the transactions.

And I hope that I won't be embarrassed by having got this wrong :D