A 100% reserve bank would not have a liquidity mismatch. I’ll continue using the phrase “fractional reserve banking” tyvm
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So I set myself the challenge of using my computer science knowledge to design a trust-minimized form of digital money, and the result was bit gold.
I hoped such money would be convenient enough that economies would return to vulnerability-minimized money. We still see the trust-the-convenient-exchange vs. hold-your-own debate today, but Bitcoin gives us a better chance to minimize the vulnerability of money than gold did.
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Nick, what are the reasons why you think BTC is less vulnerable than gold as money?
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Thanks. As I understand this, gold's main problem as a money is its physicality/locality?
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Physicality itself brings a lot of disadvantages to the table: easier to counterfeit or debase, hard to transact, harder to split, hard to guarantee fungibility.
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Besides Bitcoin's better security (with good key management), gold is much harder to validate (assay, in gold terminology). It was so costly that for the vast majority of transactions trust in a central validator was introduced by using coins instead of personally assaying.
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Got it. So, physicality and costly validation, which led to trusting centralized entities. What would you say are BTC's biggest flaws/challenges right now?
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What was the reason for Bitgold's failure? I never saw a write-up on this, if there was one.
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I'm no expert, but Bit gold used network addresses instead of hash power (like Bitcoin) to solve the double-spend problem, which makes it much more vulnerable to sybil attacks. Satoshi was inspired by bit gold and other and solved this problem.
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Satoshi greatly improved on the design of bit gold by inventing Nakamoto consensus in place of BFT. There are ssome big market cap cryptos out there that think bit-gold-like use of BFT is just fine, as it gives many more TPS. But I come squarely down on the side of Satoshi here.
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Glorious! (not in bit golds failure but with bitcoin's ingenuity). Being now able to identify the missing piece in bitgold after the fact, is there any missing piece with Bitcoin that can keep it from lasting the next hundred plus years?
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It might be a good thing, once decentralized exchanges become sufficiently trust-minimized yet performant, to move from Bitcoin's supply schedule to bit gold's market-based method which like gold itself more flexibly responds to demand.
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You mean bit gold's supply was elastic? That I didn't know. How elastic? Do you have an article or paper that describes it?
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I’ll need to take some time to wrap my head around this one, lol
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But there is no yield without trust. And without yield on capital, it's the dark ages.
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The desirability of loans does not mean that money itself must come in the inherently insecure form of IOUs.
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Agreed money is not (and should not be) an IOU.
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Point was that even with trust-minimized money, you are only halfway to heaven. You still need trust-able entities to deploy that monetary capital productively. Otherwise we are all hoarding or dishourding our monetary capital and praying we don't outlive it.
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Sure, the rational people in this space are not trying to solve every problem in the world.
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What innovations remain for BTC? Or is it mission accomplished for digital trust minimized money?
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