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<blockquote data-quote="Goweresque" data-source="post: 5201034" data-attributes="member: 818"><p>Bitcoin is interesting, as its effectively backed by energy. Or rather it costs energy to make it, so the supply of it is limited by the amount (and cost) of available energy. Bitcoin is 'mined' by computers solving increasingly hard mathematical problems, once the problem is solved a bitcoin (or fraction of one) is awarded. And as the problems get harder, the computing power to crack them rises, as does the power consumption of those computers. This is why bitcoin miners are increasingly located in countries and regions with cheap electricity, often from hydro-electric schemes.</p><p></p><p>So in the absence of some sudden breakthough in power generation that collapses the price of electricity, the supply of Bitcoin is ultimately limited, as eventually it will cost more in electricity than the value of the bitcoin produced. Which in turn makes it potentially a better store of value than fiat currencies, which can be produced in infinite amounts at the pressing of the Central Bank button.</p><p></p><p>The biggest problem for Bitcoin as I see it is that it is such an obvious independent competitor to the fiat currencies of the major world financial blocs that they will cut it off at the knees if it even has the slightest possibility of collapsing their fiat currency systems. States have the guns and the power and will use them to get their way - if that means outlawing Bitcoin and using State power to enforce that ban, they will. They are not going to allow a few nerds with computers destroy their entire system of finance and governance without a nasty fight. The moment Bitcoin (or any electronic currency not controlled by the State) looks like starting to rival fiat money as a medium of exchange they will outlaw it (there are already mutterings from politicians about Bitcoin facilitating criminal activities), have a few show trials and bang some ringleaders up for a suitably long time pour encourager les autres, and frighten off the masses, which will kill it stone dead.</p><p></p><p>One should view the State as a form of the Mafia - they do not allow newcomers to take over their turf without a fight, and the State will not step aside in a a gentlemanly and democratic manner when faced with a totally legal but existential threat.</p></blockquote><p></p>
[QUOTE="Goweresque, post: 5201034, member: 818"] Bitcoin is interesting, as its effectively backed by energy. Or rather it costs energy to make it, so the supply of it is limited by the amount (and cost) of available energy. Bitcoin is 'mined' by computers solving increasingly hard mathematical problems, once the problem is solved a bitcoin (or fraction of one) is awarded. And as the problems get harder, the computing power to crack them rises, as does the power consumption of those computers. This is why bitcoin miners are increasingly located in countries and regions with cheap electricity, often from hydro-electric schemes. So in the absence of some sudden breakthough in power generation that collapses the price of electricity, the supply of Bitcoin is ultimately limited, as eventually it will cost more in electricity than the value of the bitcoin produced. Which in turn makes it potentially a better store of value than fiat currencies, which can be produced in infinite amounts at the pressing of the Central Bank button. The biggest problem for Bitcoin as I see it is that it is such an obvious independent competitor to the fiat currencies of the major world financial blocs that they will cut it off at the knees if it even has the slightest possibility of collapsing their fiat currency systems. States have the guns and the power and will use them to get their way - if that means outlawing Bitcoin and using State power to enforce that ban, they will. They are not going to allow a few nerds with computers destroy their entire system of finance and governance without a nasty fight. The moment Bitcoin (or any electronic currency not controlled by the State) looks like starting to rival fiat money as a medium of exchange they will outlaw it (there are already mutterings from politicians about Bitcoin facilitating criminal activities), have a few show trials and bang some ringleaders up for a suitably long time pour encourager les autres, and frighten off the masses, which will kill it stone dead. One should view the State as a form of the Mafia - they do not allow newcomers to take over their turf without a fight, and the State will not step aside in a a gentlemanly and democratic manner when faced with a totally legal but existential threat. [/QUOTE]
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