bitcoin

Is bitcoin a reasonable alternative money?

The first problem is that bitcoin appears to be created by useless work. Solving a mathematical puzzle is what earns new bitcoins.

The second problem is that the quantity of bitcoin is limited to a fixed amount. This suggests that ultimately there will be deflation in bitcoin. In other words, bitcoin will be worth more and more through time. If investors in bitcoin realize this, the spot bitcoin price will jump upward to reflect a rate of appreciation that is roughly the market rate of interest . . . but not the rate in bitcoin. What do you think the bitcoin interest rate will be? Will there be a bitcoin credit market?