Technical Problems of a Fixed Money Supply
Horizon Kinetics LLC is a NY-based investment firm and author of numerous research reports with increasing experience in the cryptocurrency space. We have been authoring research on cryptocurrencies, and bitcoin in particular, since late-2015. Since our founding over 20 years ago, we have continuously received invaluable feedback on our research from our subscribers. We now share some of our work on cryptocurrencies with the Steem community. Here is our first piece. Additional information on Horizon Kinetics LLC is available at www.horizonkinetics.com. We can be reached via email at [email protected].
We look forward to your comments! –Hugh Ross, COO Horizon Kinetics
When the colony of Virginia made tobacco legal tender, the first problem was that the incentive was created to increase production. The second problem was the creation of very low-grade tobacco that some people refused to accept as payment. The policy ultimately created low tobacco prices for farmers. In 1682, there were riots and the tobacco crops of various farms were destroyed.
The non-uniformity of a currency (apart from paper) is a not a trivial problem. Throughout history, it has been a significant issue. In colonial Plymouth, Massachusetts, the Wampanoag Tribe’s wampum was made legal tender at the rate of six white beads or three purple beads per penny. Unfortunately, supply of beads was limited. It was hard for prices to rise in the sense that the bead, as an instrumentality, was not divisible.(1)
Historically, therefore, the government really needed to take over responsibility for coinage. That created another problem. How does one prevent the government from abusing the privilege by basically destroying the value of the currency by issuance?
Enter Bitcoin. It is very hard to counterfeit since all Bitcoin in existence are always visible in the Blockchain ledger. Supply of Bitcoin is fixed; it is hardwired in the code. This is a possible revolution in currency design. If nothing else, it is a new asset class.
(1)Barry Eichengreen, Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System (New York: Oxford University Press, 2011), 9-10
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Horizon Kinetics LLC (“Horizon Kinetics”) is the parent holding company to several SEC-registered investment advisors including Horizon Asset Management LLC, Kinetics Asset Management LLC, and Kinetics Advisers, LLC. Horizon Kinetics authors research reports based on information available to the public. No representation is made with regard to the reports’ accuracy or completeness and all expressions of opinion reflect judgment as of the date set forth and are subject to change. This document is neither an offer, recommendation nor solicitation to buy or sell securities. Horizon Kinetics and each of its respective employees and affiliates may have positions in securities of companies mentioned herein. You may visit our website at www.horizonkinetics.com to find additional information on Horizon Kinetics. All views expressed in these research reports accurately reflect the research analysts’ personal views about any and all of the subject matter, securities or issuers. No part of the research analysts’ compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by the research analysts in the research reports. Reproduction and dissemination of these reports outside the constraints of this social media space is strictly prohibited. ©Horizon Kinetics LLC® 2016.
So what are the "technical problems of a fixed money supply"!?
What happens if more and more people hold on to a crypto? What remains liquid, seems to be more and more valuable, which may cause some to sell out, but also may cause hoarding and further instability. One way to deal with this is to support and encourage investing. Another solution is to create enough new money to keep the market-gears oiled.
Should we have to use, for a currency, something which is constantly fluctuating and traded? Every time a currency's price is manipulated up or down, or just fluctuates, traders can make income by selling and buying, but it is the every-day user that pays.
I bought and used Bitcoin, but in the process I ended up losing about 10% of my US dollar value, even though the price has ultimately gone up these last few months. This would be impossible with a level or stable currency.
quoted from http://k0in.com/
No offence, but I've flagged your post for the simple fact that the point suggested in the title is never reached in the post. In other words, it is 'clickbait'.
ditto, also flagged, it was shaping up to be a great article before it abruptly ended before making any conclusion related to the title
It's actually a paid advertisement. They effectively just removed $150 SBD from the available amount to advertise their company. So they generated value for every user of steemit in essence.
I recognize that. I don't think any expectations we would apply to an unpaid post should automatically not apply to a paid one.
Yes, bitcoin solves this problem and become like an asset. I believe an improved blockchain currency could also solve the conterfiet/overcreation problem but still not have a "a fixed money supply". My design for this would follow rules like bitcoin, but have a variable rate that keeps demand and price level.
Your post piqued my curiosity, it was interesting reading until it just ended without even getting to any major point.
Basically, there is no article here. In effect, they paid $150 to stick the name, logo, and contact info for their investment advisory service at the top of our promoted list. I applaud this.
While talking or researching about Crypto economy, u need to identify the difference between Crypto Currency and Crypto Asset. Bitcoin is a Crypto Asset, as it has a fixed supply, while Ether is a Crypto Currency, as it has no fixed supply.
This is a disappointing post. It does address the issues stated in the title
If you'd like to hire someone to finish off this article for you, then I'm sure someone would be happy to oblige for a fee.
I think this is the first paid advertisement on steemit. Great initiative doing this to get people to know about your company!