Sunday, July 13, 2014

Thoughts on bitcoin

Cutting edge blogger that I am, I'd like to share some thoughts I've been having on the hot new thing that everyone was talking about last December when the price peaked and then crashed: bitcoin.  There have been a lot of people talking about bitcoin taking over from regular currencies or simply failing horribly.  I do think that failure is a possibility, but it seems to me that if bitcoin or some other crypto-currency does end up succeeding it will be beside conventional state-backed currencies instead of replacing them.

Money is something we all use, and for several different purposes.  You can break out money's main functions as being a medium of exchange, being a unit of account, and being a store of value.  A medium of exchange is something that passes value from person to person, whatever you use to pay someone for something or settle a debt.  A unit of account is what we use to measure prices.  You can imagine a world where everyone expressed prices in dollars but people only carried quarters around.  The store sign says that the book is $2, so you hand the clerk 8 quarters to buy it.  In this case the dollar is the medium of account but the quarter is the medium of exchange.  I think a "store of value" is pretty self explanatory, so I'll just point out that while we mostly only use currency as a unit of account, and only use currency or currency-like thing such as credit cards as mediums of exchange we tend to use a lot of different things as stores of value.

So how does bitcoin shake up in all of this?  Well, it does pretty well as a medium of exchange as far as I can tell.  Digital like a credit card number, but anonymous, unrevocable, and decentralized like cash.  In terms of it's use as a store of value, well, it's generally made money for people who've invested in it but there's an awful lot of risk there.  And as a unit of account it's absolutely horrible.

Bitcoin is designed to be deflationary, and deflation is bad stuff.  People are notoriously loss averse, and sellers become reluctant when the goods that they could sell for BTC 6 yesterday are only moving at BTC 5 today.  And people especially don't like to see their paychecks shrink.

So if bitcoin is ever successful, I expect it to be used as a means of facilitating transactions denominated in currencies without these problems.  People will have a wallet with only as many bitcoins as they need at the moment and use them in transactions denominated in dollars or better yet Australian dollars.

Saturday, July 12, 2014

My Summer Vacation Reading

My parents have a boat and for basically my entire life I've spent at least a week each summer on it with them, sailing along the coast of Maine.  But this post isn't about that, it's about all the books I managed to read when I wasn't steering, fiddling with sails, putting down anchors or so on.

The Rhesus Chart by Charles Stross.  I think this book is now my favorite from the laundry series, and it nails the interplay of office politics and supernatural danger.  I also thought it did a very good job of playing with expectations in one place.

Bad Little Girls Die Horrible Deaths by Harry Conolly.  A short story collection I got access to by backing his Kickstarter.  Fairly entertaining, but read his excellent Twenty Palaces trilogy first.

Technology in World Civilization by Arnold Pacey.  An interesting book on comparative technological development and the transfer of technologies back in the old days.

The Origins of Political Order by Francis Fukuyama.  A big ideas book on how modern states happened.  I found the book tremendously interesting and would probably put it up there with, say, Guns, Germs, and Steel in the world making more sense after having read it.  As an example, I'd been confused by the Ottoman's success in state building and the piece I'd been missing was that when they took in their levy of non-Muslim boys to be made into Jannisaries they tested them and diverted those who seemed to have the most aptitude into the administration, in a sort of parallel to  the Chinese examination system.

A Madness of Angles by Kate Griffin.  A decent urban fantasy book.  I think I might actually have a hard time calling any other series "urban fantasy" now, since this book took the idea of the magic of cities and ran with it in a way that makes it the urban-fantasiest of urban fantasies.

A Case for Climate Engineering by David Keith.  A book about various ways people might use technology to directly offset increases in global warming, their difficulties and consequences, and why they're a good idea even if they're not a panacea.

To Say Nothing of the Dog by Connie Willis.  A humorous book involving time traveling academics, which I haven't actually finished yet but I'm most of the way through.  I was having trouble enjoying it early on because the theory of time travel involved doesn't actually make much sense.  Thankfully, I soon realized that everything that happened was perfectly consistent with the Harry Potter/Twelve Monkeys/acausal theory of time travel.  So I just assumed that was how the world worked but that the protagonists were mistaken about it as they were entertainingly mistaken about so many other things and continued chuckling my way through the book.

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