Bitcoin India

Gaurav Ghosh: Trust and Bitcoin

The English-language Indian daily newspaper The Economics Times published an article by Gaurav S Ghosh on Bitcoin.  Excerpts:

But why would anyone trust a virtual currency that was nothing but a few lines of code generated anonymously by a process indecipherable to a non-expert audience.

There are huge inequities with respect to the bitcoin mining process, whereby early miners were able to mine much larger quantities of bitcoins than newer miners.

The author makes an argument that Bitcoin cannot be trusted and uses Zimbabwean inflation as an example — a delicious irony as the ZMD was ruined as the result of inflation and Bitcoin’s raison d’être is its protection from that very same occurrance.

Bitcoin never promised that those who were speculating in bitcoins at bubble levels would incur no losses.  There was however the expectation that the amount of bitcoin currency issued is limited and that it would occur at a predeterminted rate (roughly 7,200 bitcoins per day at current levels).  That promise is encoded in the software and enforced by massive amounts of computing power provided by those mining.  That promise has been kept.  Trust that this system can continue to meet this expectation has not lessened but has strengthened in the past few months.

The author also writes that the when a rapid increase in the money supply occurs that prices would increase afterward is just “one of many competing theories of how the economy works” so at least he is clear on his bias.  Sadly the readers will need to learn from elsewhere the benefits that Bitcoin offers.

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