Wednesday, December 25, 2013

In Coins We Trust

Milton Friedman argued for government giving everyone money, as in, cold hard cash, getting this money to people's hands. Once they had money, the argument goes, they would spend it according to their likes; so "the many" keep exercising their choices, pricing signals continue to work. Income inequality, economic stagnation, solved.

There is  a downside here however; there is still the central distributor in the middle - the government, and the entire setup would create a psychological situation where people are waiting, hat in hand, for their money to appear at a certain time, sent by a some large entity.

Digital currencies can, maybe, in a way fix this problem as well. Noone needs to give anyone money, you create it. Individuals cannot go crazy with the creation, mining introduces an artificial delay into the process, which is good. Side benefit: no more central banks.

One thing I do not like in all of the current __coin schemes is this however; I'd prefer mining to continue indefinitely, so there is always enough __coin quota to allow people to mine. Maybe a way to do that is introducing time limits to every coin, i.e. each one is good for.. 10 years. So the money ages (old money!). Or there is a limit in # of transactions that can be used for each coin (this is doable because the coin network knows all, sees all, it knows every transaction, and how many coins are "out there", etc). This can disincentivize hoarding / sitting on money for a long time.