arnavs

You're right to distinguish between currencies with exogenous demand (like USD) and those like BTC. But the "bank run" comment makes no sense, even for beanie babies.

Bank runs exist in a fractional reserve context -- because banks lend out their deposits (which stimulates growth), your listed balance is actually an IOU. That is, an obligation to "cover" deposit balances, which can be met or not.

Now think of people trading beanie babies. One person sells a beanie baby, the other person parts with $10k. What is there to "cover"? Who is keeping what in reserve? The answer is nothing and nobody --- in a world where beanie babies were currency, this would be perfectly fine.

tl;dr you actually need (fractional-reserve) banks for a "run on the bank"

One reason I dislike inflation is that I don't want my currency -- a utility object -- having opinions about my financial life. Inflationary monetary policy and its consistent 'nudge' to spend is the economic equivalent of the pop-up.

Of course, you could argue that a hard cap is equally opinionated. But I think it's a much more 'neutral' position, where it deflates because of real economic growth, and you spend it because of your own time preference.

You're right that BTC has no commodity utility outside of "being money." But I think society needs money, as much as it needs an energy source.

Gold is one object that's served the money function in the past. It has properties (fungibility, durability, scarcity, etc.) that money needs. But it's "dumb" and cumbersome, as physical objects are.

Building digital objects that serve the money function is important. One solution is the centralized ACH/banking system. But this has drawbacks --- poor scarcity, high political exposure, etc. I view BTC as simply building a competitor. You get better money properties, at the cost of more energy, etc.

Is it worth it? I don't know. But that partly depends on how the future produces energy.

Crypto mining produces a service, which is maintaining a ledger of payments that works in a certain way.

This specific problem — settling transactions — is an industry amounting to billions. Think of BTC like a MasterCard or Visa competitor, albeit a unique one.

I use this stack. One extension I wrote is https://github.com/quantecon/instantiatefromurl.jl, to bind generated notebooks to Julia TOML (i.e. Julia's `requirements.txt`) that lives in a git repo. This means they don't depend on local machine state, so can move and run freely.

Bear Stearns declined to participate in the Fed-organized bailout of LTCM. Ten years later, the Fed declined to participate in any bailout of Bear Stearns.