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Re: Analysis of Bitcoin by Former IMF Economist / Current Central Banks Advisor

From: Melvin Carvalho <melvincarvalho@gmail.com>
Date: Sun, 26 Jan 2014 03:06:11 +0100
Message-ID: <CAKaEYhLgd_vMNrgoDY8xH88zag_w+gOL8uZsMrpKcFMiYf=zpg@mail.gmail.com>
To: Joseph Potvin <jpotvin@opman.ca>
Cc: Web Payments CG <public-webpayments@w3.org>
On 26 January 2014 01:17, Joseph Potvin <jpotvin@opman.ca> wrote:

> http://wcoats.wordpress.com/2014/01/25/cryptocurrencies-the-bitcoin-phenomena/

Quite an informative piece.  A few inaccuracies, such as he says that
there's a 10 minute wait in the P2P network before a transaction is
confirmed.  Actually most transactions are pretty instant.

This is largely an opinion piece.  He seems to have a strong view on
volatility being inherently terminal.  I think there's a difference between
inflationary currencies and deflationary currencies on this point.  There's
a long held view at central banks (in fact the ECB even made a cartoon
about it) that deflation is bad.  The theory goes that if something is
deflationary people will hold on to their money before spending it, so that
prices come down.  However, prices continually drop in the computer
hardware industry, and yet people still buy computer hardware.  Similarly,
when a store has a "50% sale" to attract customers, it does not mean that
this is the only time they interact with customers.  Inflationary
currencies can achieve stability, but it comes at a price (ie the
inflation).  Dr. Bernanke has described inflation as a tax.

I think there's room for both systems.  As per the quote from the article.

"My expectation is that it will never achieve importance and that it is
likely to vanish all together, giving way to more robust means of payment
of more stable mediums of exchange. However, it deserves the chance to

Most transactions in bitcoin will happen off block by trusted third parties
as part of an IOU system.  If these TTP's are firms they can (and do)
comply with existing laws.  I think it's a reasonable balance because you
choose if you want to use a trusted third party for the fee they charge, or
you choose to go to the block chain, for the fees that miners charge.

> Background:
> Former Assistant Director of the Monetary and Financial Systems
> Department, IMF
> http://www.compasscayman.com/cfr/company/Warren-Coats/
> http://works.bepress.com/warren_coats/
> Joseph Potvin
Received on Sunday, 26 January 2014 02:06:44 UTC

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