As far as I am aware there isn't any real debt owed in Bitcoin. So everyone who uses it has some positive value of Bitcoin. That means each and every one of them would individually benefit from widespread deflation, but that would have a negative long term impact on the currency as a whole. I am not sure if I trust the public to make the right long term monetary policy decision over something in their own personal interests.

People absolutely do loan each other bitcoin with high interest rate. Unless you meant something different for "real debt".

I'm not arguing for it or against it, I agree with you that it is fascinating. However, my casual observation is that the pro and con of being in the wild wild west is that you are in the wild wild west.

Sure there is. Someone can sell insurance, and you can choose to pay for it.

> (at least not 100%)

Perhaps not, but I wouldn't call the FDIC's insurance "100%" either. I doubt it would take very many simultaneous bank runs for problems to arise, even with the FDIC.

> otherwise half of all circulating BTC would be in an insurer's accounts

I'm not sure why half of all BTC would need to be in insurers' accounts, and I'm not sure why that would be an inherent problem even if it were the case.

Some assumptions: 1. Bitcoin insurance is a viable business; 2. People will trust the insurer.

PS. You will enjoy reading this post on the origins of money, in which among other things the author analyzes the common properties of many commodities used as money throughout history -- including not just gold and silver but less-well-known materials like wampun shells, ivory beads, and ostrich egg shells: http://szabo.best.vwh.net/shell.html

I'm curious as to the foundations of the benefits of inflation. I understand the principle that it discourages hoarding currency because your hoard decreases in value, but I'm not convinced that the net result is good for an economy. Wouldn't any method of hoarding satisfy the hoarders. Right now that seems to be gold.

The other aspect I find interesting is the Number of BitCoin. In one Sense there are A=21Million Bitcoin. In another sense there are B=11Million because that is the potential maximum in circulation right now. There is also C=??? Which is the amount of Bitcoin actively in circulation now (C = B - BitcoinHoarding).

Which of these should be the basis of a currency valuation? Only A can be considered deflationary (until 2140 anyway) from the principle that the quantity of bitcoin is not increasing but the economy is(hopefully).

In the past when we were using gold, like during the Civil War, we couldn't pay soldiers so we went to greenbacks (paper money like today). That allowed the soldiers to get paid so we could continue to fight the war. Gold obviously has a physical practical limit that can be traded and transfered. When a gram becomes worth so much it buys a house that makes other purchases of food and bills become impractical and people stop buying, and when building a billion dollar construction project moving it and protecting it has another set of problems and overhead. Bitcoin does not have the division problem--a single coin can be divided into pieces 10^8 pieces as the code currently works. That can also be changed in future versions to be divided even smaller. Ie, when one bitcoin can buy a house, you can just pay 0.0000001 for your stick of gum. So, we are then left with the argument, "Oh My God people won't buy because of the psychology that 0.01 coin today that currently buys a pack of gum being able to buy a car in the future." But, that's almost true now with savings and stocks and people still spend their money today and go into debt. Everyone knows if you save starting in your early 20s compounding interest it will be worth a ton more in 10 years, 20 years, etc.

Loans clearly have issues in a deflationary system. If you loan someone $10 today and that's worth $100 tomorrow how do they ever have a chance to pay it back? Payback would have to be on some growth rate where you owe "less" the longer the life of the loan with some interest built in. Venture Capital also would have issues, but if the rate of return on investments is greater than growth of the currency price that wouldn't be an issue either and one would expect it to stabilize over time.

Inflation is built into the current model to encourage investment and prevent concentration of capital. Clearly, given the wealth divide that isn't working (blame exploitation of 3rd world or robots). The argument from the anarcho-libertarians and socialist-libertarians is to try something new.

But yeah, great reaction piece, +1 for excellent fulminations.