The only way this statement is different than how the Federal Reserve works is that Bitcoin is voluntary (You only join the economic model that you desire to participate in) / non privileged (you don't have to be born into certain groups to participate in how the system works), the system parameters (inflation, etc) are not coercible (The US President can't nominate a Federal Reserve Chairperson to bitcoin to favor policy that favors one special interest group).

>creating wealth out of thin air

The Federal Reserve literally creates money out of nothing for the Treasury Department. Due to seigniorage, Fed banks make money on the inflated currency before the last man on the street can.

>doing useless computations at the cost of enormous electricity

The thousands of servers that run FedWire, ACH, VISA, MasterCard Paypal, Venmo, ApplePay and the Cash-transport Trucks, Physical banks, all waste energy preventing people from trying to steal money too.

How is the current monetary policy better?

Relevant reading: Nothing is Cheaper than Proof of Work 04 Aug 2015 http://www.truthcoin.info/blog/pow-cheapest/

These thousands of servers manage millions of concurrent transactions per second in multiple currencies across multiple jurisdictions worldwide.

The largest cryptocurrency network (Bitcoin) spends more energy than that to handle...10 transactions per second?

Bitcoin has no preventative measures, and as designed most cryptocurrencies can't implement preventative measures or refunds. That's not a positive. That's a massive step backwards.

Actually that's one of the flaws Bitcoin was meant to fix. Charge back fraud is a very real problem for merchants and essentially makes all purchases more expensive as the credit card companies are forced to eat the expenses.

All that addresses directly the problem of moving money around and theft prevention. The amount of upkeep you have to pay is bounded on both sides. Proof of Work, on the other hand, is just about wasting as much energy in the system as you can and ensuring that anyone trying to overtake it would have to waste even more energy. The energy use isn't related to any useful work, and is potentially unbounded.

Inflation is pretty stable and thus predictable. The profits from seigniorage are made by the Fed itself (and thus the government), not the member banks. Member banks can make money from having privileged access to the discount window, but that's still not seigniorage.

Coinbase, Bitpay, et. al. incur all the same kinds of costs as VISA, MasterCard, Paypal, et. al. on top of the Miners' power consumption. Traditional systems might be inefficient because they're running on old hardware or something, but that's a problem that can be fixed. Bitcoin mining is already done on bleeding edge hardware, so its power consumption cannot be significantly reduced. I suspect it isn't enough to be a major concern, but Bitcoin clearly has a higher lower-bound than traditional systems.

Is inflation returned to the people forced to pay it?

If the government "print" new money to create more roads or to give healthcare and this cause inflation is that so unfair?

Only if you consider that you are entitle to a part of the economy, only because you have savings, nevertheless the needs of the society where you live.

I said no such thing.

If you don't want to pay that 2% a year, don't accept payment in dollars, or immediately convert it to another store of wealth upon receipt.

should all families who borrowed for a house be forced to pay those who chose to save?

Not if the price of living increases at a greater rate than the rate of return it doesn't. Which, as you would know, it is doing.

Not really, because lenders factor inflation into their rates.

I hear this often, but while it's a literal fact, maybe it's not that simple. Central banks create money out of the Trust that people put on them, and the trust has been built by the state for years or centuries.

Though the Thing conceptualization doesn't hold up too much when you realize that the practical value of BTC beyond the social value is zero. they're just numbers!

In a way, the system is self-regulated.

In fact, all the "fractional-reserve" thing is a myth. Banks loan when they see the opportunity of profit, and then they search for reserves. Not the other way around.

From the wiki article:

The extrinsic (perceived) value of a specific stone is based not only on its size and craftsmanship, but also on its history. If many people—or no one at all—died when the specific stone was transported, or a famous sailor brought it in, the value of the rai stone increases by reason of its anecdotal heft.

[0] https://en.wikipedia.org/wiki/Rai_stones

There is money and there is real resources. Money is just a real resources distribution technology.

What is important is the real resources of a society. We (as a country, whatever is your country, if it has its own money) will never be short of money.

It can, however, get short of real resource if it leave infrastructure and knowledge diminish.

So borrowing from the future is the best way to think about it we are betting on the ability to keep the system of realized capital much much lower than available. Money is not a thing it's a concept of trust.

All that would happen is prices would go up dramatically basically repeating germany in the 30's if not worse.

Not at all.

Until 1971, a dollar bill was just a piece of paper. However, the US government would redeem it for gold. The US had thousands of tons of gold at Fort Knox. It held tons of gold elsewhere as well.

It also has and had the ability to tax, and collect taxes, the world's largest military and so forth.

In 1971, the gold window was shut. Dollar/commodity ratios did not immediately change much. Why? Because an announcement that the gold window was opening up again would end any problem.

The US still holds thousands of tons of gold at Fort Knox. Germany is repatriating its gold back to Germany. Why? Why spend so much guarding gold?

The answer is the gold implicitly backs the dollar. Any currency panic can be immediately stemmed by an announcement that the gold window is open.

I mean since 2008 there's been plenty of discussion of how the US financial sector grows not only by FDIC assurances, but the implicit assurance that when banks are in trouble, like the 1980s S&Ls, or the 2008 banks, that the taxpayer will bail out the banks. There has been a lot of literature on this, and you can read it if you want.

If banks are implicitly backed by the US government, as they obviously are, then dollar convertibility is even more backed by the US government, even if it is not official policy.

Otherwise, why does the taxpayer pay to guard tons of gold in Fort Knox?

We have over $1.5 trillion USD in circulation around the world but the government has only about $200 billion in gold.

I also said the US government had "the ability to tax, and collect taxes, the world's largest military and so forth".

Executive Order 6102, the Gold Reserve Act and measures such as this show how the US government has dealt with such things in the past.

Also I don't think gold has a magical quality - silver will do just as well, or platinum, or any commodity. Although obviously some commodities have the qualities that make a good currency, such as durability, uniformity, portability, divisibility and so forth.

I also would add tangential to this, that cryptocoin advocates seem desperate to find things which have a cost but no inherent utility or usability. They cast about, with almost nothing in the world to point to, until they come upon the dollar and euro. They point to it and say they are mystified as to why these things have a cost but no utility, and then say Bitcoins should have a price as well, because they're "just like" the dollar but "better". Of course, this all is a silly argument.

Bitcoins don't even have the value the dot bomb stocks like Pets.com and Webvan had. Bitcoins are completely worthless. Which means the cryptocoin market will inevitably crash, no matter the lofty rhetoric of Silicon Valley VCs. I mean, they spouted the same rhetoric about the dot bomb stocks as well, those VCs which were around way back then. The publication of the book "Dow 36000" back at the height of the dot bomb bubble, October 1999, by two American Enterprise Institute "scholars", saying that the Dow was undervalued, should have been a sign of such things. It's 17 years on and the Dow still has yet to hit that mark.

It kind of works if you have a place to run off too, but nobody in the federal government can just go take the gold and hide for a bit. The incentives are aligned so that the gov't does "the right thing" (stem the fall)

The worldwide gold standards (in any form, or even silver backed) were dead by WW1.

There’s no implicit backing of the dollar since then, at all, and convertibility was a (really terrible) relic of that period.

There's not a confusion between the Gold Window and the Gold Standard. It's just the Gold Window is the only real bottom line. There can be different types of gold standards, and some of them are abstractions of the Gold Window. The Gold Window is not abstract, it is an exchange of paper for gold.

> The worldwide gold standards (in any form, or even silver backed) were dead by WW1.

They were dead and what happened to Germany's currency? The Papiermark fell into complete worthlessness.

> There’s no implicit backing of the dollar since then, at all, and convertibility was a (really terrible) relic of that period.

If it was a "relic" it was something that existed because it needed to exist.

As I said in another post, I don't think gold has a magical commodity. It is a commodity which has good qualities for a currency, or backing a currency - it is uniform, divisible, durable, portable etc. An announcement that the gold window was open again would quickly stem any currency panic and would give government officials time to deal with it. There is no magic in a gold commodity, silver would work as well, as would platinum, as would any commodity (although the more currency properties the commodity had the better).

If there's no implicit backing of the dollar, then why does the US government, at great expense, store thousands of tons of gold at Fort Knox and elsewhere?

Why did Germany start repatriating hundreds of tons of gold from overseas five years ago if these gold reserves mean nothing? What are they for other than as an implicit backing of currency?

I know the US government would like to have a magic printing press that printed out hundred dollar bills and had them be worth something without any connection to anything. But things don't work like that.

Why did the price exchange of a Papiermark collapse after World War I if convertibility has no relevance to paper currencies?

It's like the invention of the internal combustion engine. In the early days (late 19th century) someone might look at it and wonder how noisy polluting engines can make the world better. A hundred years later, it's very obvious that making transportation easier and faster enormously contributed to improving the world's economy.

I remember reading an article a while ago detailing how the network could work transactions faster if some value was changed, but Chinese farmers refused to change the value for whatever reason and because they represent such a large share of the network the whole network is stuck with those sub-optimal values.

It's already possible to fully "track/monitor" (without centralization) because all transactions are recorded permanently in the blockchain.

As to "censor" it would not be possible even if Bitcoin was mostly centralized (I assume you are talking about miners centralization). As long as some miners are honest, even if it's a small fraction, your transactions that others attempt to censor will still eventually be confirmed, whenever these honest miners find a block, because given the P2P nature of the Bitcoin protocol, all transactions can reach all nodes.

You want to ban that so drug dealers have to find a more creative way to make money? (And they'll find a way. I'm still surprised they managed to find a way to use Tide detergent as currency to sell drugs).

http://nymag.com/news/features/tide-detergent-drugs-2013-1/

What point are you trying to make? Sounds an awful lot like the "Let's ban peer-to-peer filesharing, because it's used for copyright infringement" argument.

The "cost of enormous electricity" is important - this is proportional to the amount it will cost to reverse transactions or double spend.

> It seems we'll replace bankers and oil millionaires with miners and early adopters... and the average Joe is where it was always.

Miners and early adopters don't get to create coins out of thin air. That's the key difference.

EDIT: And furthermore, there's absolutely nothing stopping the "Average Joe" from becoming an early adopter. Bitcoin is open to everyone.

Expending time, effort, and money on mining gives you a chance of mining blocks.

Decentralization of mining is an issue, but decentralization of nodes is a far more important thing to maintain.

The point is it's closer to 100% perfect than any other system we have. Incremental improvements are still improvements even if they aren't all things to all men.

See the comment here https://news.ycombinator.com/item?id=14572940 for a more eloquent explanation. From the link: "The individual ability to buy anything, much like the individual ability to read anything, is both an important personal freedom and an engine for social progress specifically in the areas where society's mores are wrong."

This is not a new observation or a universal property of crypto projects. Alternatives to POW, are an active subject of research, and are very important to several active crypto projects. You don't even have to look too far down the market-cap listings to find them.

PoS has many of its own problems, but I think it is undeniably better from a waste point of view.

http://www.investopedia.com/terms/g/greaterfooltheory.asp

Which cryptocurrencies have social justice goals?

IMHO the cryptocurrency movement's politics are mainly libertarian -- get government out of the way (by establishing a means of payment outside government control), so people are more free to transact with each other as they please.

Social justice is almost the opposite platform -- give government more control over how resources are spent, so resources can be targeted toward disadvantaged populations.

> How are we any better for it? A select group gets rich, there is rampant speculation and fraud... but we're fighting "the man" so it's all good?

Any "social justice" goals are misconceived or a lie. Bitcoin was literally created to implement a gold standard based on goldbug conspiracy theories about the Federal Reserve.

https://davidgerard.co.uk/blockchain/the-conspiracist-gold-b...

Also stating that traditional currencies require a lot of trust in banks, especially central banks is a fact.

This is why Bitcoin economics is so weird and doesn't work in the real world. The process is:

1. If you buy into this weird ideology, you'll get rich for free!

2. Don't worry if you don't understand it or it doesn't make sense - just keep doing the things and you'll get rich for free!

This is why the worst Bitcoin advocates come across as fanatical cultists, and why they got the social reputation they have.

I agree. It does sort of suck when you realize that the rich are again getting richer, but the point of Bitcoin, and crypto as a whole (minus the scams), is not to redistribute wealth, but rather, make finance open and permissionless. The question is, are the economic consequences of adoption worth the benefits of it's mainstream use? I, and many others, believe so.

As an example, while it might take complex rounds to turn desired SETI analysis into verified SETI analysis work, with more payout/work going to winning verification rounds than the analysis rounds, I would presume 1-5% of all future SETI coinage would be the actual past computations cost for that public good, that is going to be a lot of computations for the public good.

If many future coins are really backed by different useful work, we could then have a decentralized way to achieve global computation projects, and the currency market becomes a means to vote on the large scale human endeavours with ones liquidity.

What I find destructive in Bitcoin is that the removal of the central banks should not just prevent the abuse and printing benefits governments get when their currency is used by throwing all of it in energy value down the toilet. The value should be going to public good computations in each coinage so we can vote on global projects with our wallets.

The way that bitcoin, and most block chains, work is that almost all of the work has to be wasted, because you want someone to find "the best" answer for a very hard problem. Also, some part of the answer to that problem has to involve the transactions.

You could do something like: Find the best match to (say) a polynomial of the SETI data of today, if I randomly corrupt it with the hash of some bitcoin transactions, except that isn't useful if the corruption destroys the problem you really care about, and it isn't useful (for bitcoin) if the transactions don't significantly effect the problem.

The difficulties should be pretty normal. Past blocks need to influence new cycles such that the current chain doesn't speed up work for building a new alternate, etc.

If a chain needed to pull a satisfactory reference from the Bitcoin chain and reward the transaction parties its new coin that wouldn't change Bitcoin's status which is either backed by it's own Bitcoin transactions or not.

Therefore, I see no need for tight coupling between real work chains and coin chains to start making rewarding real work a social requirement/pressure for any new coinage.

Yeah, I'd personally feel better about cryptocurrencies if they were computing something huge and actually arguably useful like SETI or the Human Genome or something.