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Thread: Understanding Bitcoin

  1. #1

    Understanding Bitcoin

    UPDATED PDF (see post #5 below):

    Understanding Bitcoin
    Bob Murphy (09 December 2014)

    You guys think I spend my time at the karaoke bar and trolling Scott Sumner. Well, I do spend my time doing those things, but I also co-authored this guide to Bitcoin with Silas Barta. Joking aside, I really worked with Silas to make sure you can read this thing with no prior knowledge of cryptography, and can walk away knowing enough to really see how it works.


    UPDATED PDF (see post #5 below):

    Last edited by Occam's Banana; 12-16-2014 at 12:42 PM.

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  5. #4
    Good material there. I liked the bit on addressing people who get spooked by bitcoin being a "deflationary" currency. That indeed is one aspect of bitcoin that does make it behave quite differently from fiat money, but it's not necessarily a bad thing. When a currency is inflationary it does encourage spending because you would rather cash in on the value of your money instead of sitting on your hands while it loses purchasing power. And deflationary currencies do discourage spending because, if the currency is successful, you might rather hoard the cash as its purchasing power goes up. And bitcoin sure does have a hell of a lot of hoarding going on.

    But if you had to choose between a system that encourages spending, or a system that discourages spending? The way I see it, inflationary currencies encourage people to spend on things that they wouldn't otherwise have purchased. Or in other words, it encourages people to spend money right now on things that they don't really need or want badly. A deflationary currency might encourage people to only spend on things that they do really need or want badly right now. Because of this tendency, the entire economy will produce more of what people really need and really want, and less of what people don't really want or need as much.

    Of course, it gets complicated when you have both fiat money and bitcoin going on at the same time. The incentive is to use your fiat money for spending and to use bitcoins almost exclusively for saving. We'll see what happens...
    Last edited by Crashland; 12-10-2014 at 07:53 PM.
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  6. #5
    Jeff Tucker and I Talk Bitcoin
    Bob Murphy (15 December 2014)

    The updated version of my guide co-authored with Silas Barta (which fixed a slight mistake in a footnote, as well as some typos) is here.

    Jeff has a forthcoming book on peer-to-peer technology, of which Bitcoin is simply the most developed example.

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