Reply To: Economic calculation and Bitcoin


So Rothbard was not making the case that a capped money supply is the most efficient one, but any supply of money will do to perform its function as a medium of exchange? Also, do you know what book that was from? I do not remember.

So it makes sense that Bitcoin may not be a desirable money due to the excessive price deflation, but there are other cryptocurrencies like Ethereum that do not have a supply cap. There is a certain algorithm (the difficulty) that regulates how much is produced. When more people mine for cryptocurrencies like Ethereum, the difficulty rises, and each person mines less and less slowly over time. In order to find the “perfect” cryptocurrency, it seems that there must be a good algorithm, one that doesn’t allow so much do be produced at once, and at the same time not produce enough.

But there are a few other things that may make it hard for any cryptocurrencies to become money. One is the amount of people that currently trade it. While gold has a very wide market and many people trade it, the market for cryptocurrencies is way smaller and way fewer people trade it. Is a good that isn’t widely traded make it less likely to become a money?

Also, if something is not traded widely were to try to become a money, wouldn’t the value of that good have to increase dramatically? For example, Bitcoin is not widely used right now as a money, and it is valued above $2000 right now. If it were to become a widely used money, it seems that the value would have to increase dramatically, making it to where prices fall rapidly, leading to the problem with economic calculation.