Yes, bitcoin is not democratic per se because the majority of users do not decide on the fate of the currency. It is a code-cracy hinging on the fact only the few talented coders that control the development of the currency through the mining pools and core development have a say in bitcoin republic. views · Answer requested by. Bitcoin is therefore not a democracy. Although there is no government, there is leadership. By participating, everyone implicitly agrees to the consensus rules. Decisions are made by all participants. Everyone decides for himself. Suggestions for improvement are discussed in the community. Ultimately, everyone can take the helm and “fork. Bitcoin is not a democracy. In a democracy, the majority rules the minority and the minority is forced to go along with the majority's decision. Bitcoin is opt-in (or opt-out). Mine the chain you like.
Bitcoin is not democracyBitcoin is no democracy and that is a feature, not a bug | CaptainAltcoin
Essential: All decisions are voluntary. In a democracy, the majority must agree to make a legitimate decision. In consensus, this condition is drastically tightened: everyone must agree on this. If there are differences of opinion, the paths fork.
There are then two incompatible networks. However, there is still consensus within the systems. This is where the power of consensus comes into its own. It tolerates a plurality of opinions and everyone can express them. Where in a democracy only one variant can win and is implemented Trump or Clinton? Deutsche Mark or Euro? Whether larger blocks or Lightning are the right way to scale or not, time will show us.
We will see, as both approaches exist. Bitcoin is therefore not a democracy. Although there is no government, there is leadership. By participating, everyone implicitly agrees to the consensus rules. Decisions are made by all participants. Everyone decides for himself. Suggestions for improvement are discussed in the community. But how many people jump on the hard fork is another story. CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses.
None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.
The mechanisms that fund the government taxes and deficit spending are both dependent on the credit system, and it is the credit system that allows the dollar to function in its current construct. The size of the credit system is several times larger than nominal GDP. Because the credit system is also orders of magnitude larger than the base money supply, economic activity is largely coordinated by the allocation and expansion of credit.
However, the growth of the credit system has far outpaced the growth of GDP over the course of the last three decades. The chart below indexes the rate of change of the credit system compared to the rate of change of both nominal GDP and federal tax receipts from to today. This is how the Fed manages the relative stability of the dollar. Debt creates future demand for dollars. If you borrow dollars today, you need to acquire dollars in the future to repay that debt, and currently, each dollar in the banking system is owed 40 times over.
The relationship between the size of the credit system relative to the amount of dollars gives the dollar relative scarcity and stability. In aggregate, everyone needs dollars to repay dollar denominated credit. The system as a whole owes far more dollars than exist, creating an environment where on net there is a very high present demand for dollars. If consumers did not pay debt, their homes would be foreclosed upon, or their cars would be repossessed.
If a corporation did not pay debt, company assets would be forfeited to creditors via a bankruptcy process, and equity could be entirely wiped out. If a government did not pay debt, basic government functions would be shut down due to lack of funding. In most cases, the consequence of not securing the future dollars necessary to repay debt means losing the shirt on your back. Debt creates the ultimate incentive to demand dollars. So long as dollars are scarce relative to the amount of outstanding debt, the dollar remains relatively stable.
Get an addict hooked on your drug and he will keep coming back for more. In this case, the drug is debt, and it forces everyone, on net, to stay on the dollar hamster wheel. And in order to sustain it, the Fed must increase the amount of base dollars. This is what quantitative easing is and why it exists.
In order to sustain the amount of debt in the system, the Fed has to systematically increase the supply of actual dollars, otherwise the credit system would collapse.
Increasing the amount of base dollars has the immediate effect of deleveraging the credit system, but it has the longer-term effect of inducing more credit. It also has the effect of devaluing the dollar gradually over time.
This is all by design. Come with dollars in the future or risk losing your house is an incredible incentive to work for dollars. Create more dollars; create more debt. Too much debt? Create more dollars, and so on. The scarcity of dollars relative to the demand for dollars is what gives the dollar its value. Nothing more, nothing less.
Nothing else backs the dollar. And while the dynamics of the credit system create relative scarcity of the dollar, it is also what ensures dollars will become less and less scarce on an absolute basis. As is the case with any monetary asset, scarcity is the monetary property that backs the dollar, but the dollar is only scarce relative to the amount of dollar-denominated debt that exists.
And it now has real competition in the form of bitcoin. The dollar system and its lack of inherent monetary properties provides a stark contrast to the monetary properties emergent and inherent in bitcoin. Dollar scarcity is relative; bitcoin scarcity is absolute. The dollar system is based on trust; bitcoin is not. The supply of dollars will always be wed to the size of its credit system, whereas the supply of bitcoin is entirely divorced from the function of credit.
And, the cost to create dollars is marginally zero, whereas the cost to create bitcoin is tangible and ever increasing. The hardest mental hurdle to overcome, when evaluating bitcoin as money, is often that it is digital. Bitcoin is not tangible, and on the surface, it is not intuitive. How could something entirely digital be money? While the dollar is mostly digital, it remains far more tangible than bitcoin in the mind of most. While the digital dollar emerged from its paper predecessor and physical dollars remain in circulation, bitcoin is natively digital.
With the dollar, there is a physical representation that anchors our mental models in the tangible world; with bitcoin, there is not. While bitcoin possesses far more credible monetary properties than the dollar, the dollar has always been money for most of us , and as a consequence, its digital representation is seemingly a more intuitive extension from the physical to the digital world.
The supply of the dollar on the other hand has no limits. Remember that the dollar does not have any inherent monetary properties.
It leveraged the monetary properties of gold in its ascent to global reserve status, but in itself, there are no unique properties that ground the dollar as a stable form of money, other than its relative scarcity in the construct of its credit-linked monetary system.
When evaluating bitcoin, the first principle question to consider is whether something digital could share the quintessential properties that made gold a store of value and a form of money. Did gold emerge as money because it was physical or because it possessed transcendent properties beyond being physical?
Of all the physical objects in the world, why gold? Gold emerged as money not because it was physical, but instead because its aggregate properties were unique. Most importantly, gold is scarce, fungible and highly durable. While gold possessed many properties which made it superior to any money that came before it, its fatal flaw was that it was difficult to transport and susceptible to centralization, which is ultimately why the dollar emerged as its transactional counterpart.
While gold is relatively scarce, bitcoin is finitely scarce and both are extremely durable. While gold is fungible, it is difficult to assay; bitcoin is fungible and easy to assay. Gold is difficult to transfer and highly centralized. Bitcoin is easy to transfer and highly decentralized. Essentially, bitcoin possesses all of the desirable traits of both physical gold and the digital dollar combined in one, but without the critical flaws of either.
When evaluating monetary mediums, first principles are fundamental. Ignore the conclusion or end point, and start by asking yourself: if bitcoin were actually scarce and finite, ignoring that it is digital, could that be an effective measure of value and ultimately a store of value? Is scarcity a sufficiently powerful property that bitcoin could emerge as money, regardless of whether the form of that scarcity is digital? While money may be an intangible concept, so long as there are benefits from trade and specialization, there is real demand and utility in money.
Money is the tool we use to be the arbiter in determining relative value among more abundant consumption goods and capital goods. It is the good that coordinates all other economic activity. The absolute quantity of money is less important than its properties of being scarce and measurable. If supply of the unit of measure were constantly and unpredictably changing, it would be very difficult to measure the value of goods relative to it, which is why scarcity, on its own, is an incredibly valuable property.
While the value of the underlying measurement unit may fluctuate relative to goods and services, stability in the supply of money results in the least amount of noise in the relative price signal of other goods.
Despite being digital, bitcoin is designed to provide absolute scarcity, which is why it has the potential to be such an effective form of money and measure of value. There will only ever be 21 million bitcoin, and 21 million is a scarily small number in relative and absolute terms.
Despite dollars, euro, yen and bitcoin all being digital, bitcoin is the only medium that is tangibly scarce and the only one with inherent monetary properties. However, it is insufficient to simply claim that bitcoin is finitely scarce; nor should anyone simply accept this as fact. It is important to understand how and why that is the case. While there are countless building blocks that collectively allow bitcoin to function with a reliably fixed supply, there are three key columns of security within the bitcoin network which are woven together and reinforced by the economic incentives of the currency itself:.
While a consensus of the bitcoin network could theoretically determine to increase the supply of bitcoin such that it exceeds 21 million, an overwhelming majority of bitcoin users would have to collectively agree to debase their own currency in order to do so. In practice, a global and decentralized network of rational economic actors, operating within a voluntary, opt-in currency system would not collectively and overwhelmingly form a consensus to debase the currency which they have all independently and voluntarily determined to use as a store of wealth.
In bitcoin, a full node is a computer or server that maintains a full version of the bitcoin blockchain. Full nodes independently aggregate a version of the blockchain based on a common set of network consensus rules.
While not everyone that holds bitcoin runs a full node, everyone is able to do so, and each node validates all transactions and all blocks. By running a full node, anyone can access the bitcoin network and broadcast transactions or blocks on a permissionless basis.
And nodes do not trust any other nodes. Instead, each node independently verifies the complete history of bitcoin transactions based on a common set of rules, allowing the network to converge on a consistent and accurate version of history on a trustless basis.
This is the mechanism by which the bitcoin network removes trust in any centralized third-party and hardens the credibility of its fixed supply.
All nodes maintain a history of all transactions, allowing each node to determine whether any future transaction is valid. In aggregate, bitcoin represents the most secure computing network in the world because anyone can access it and no one trusts anyone.
Whereas a Gini coefficient of 1. As for blockchain itself, there is no institution under the sun — bank, corporation, non-governmental organisation or government agency — that would put its balance sheet or register of transactions, trades and interactions with clients and suppliers on public decentralised peer-to-peer permissionless ledgers.
There is no good reason why such proprietary and highly valuable information should be recorded publicly. Moreover, in cases where distributed-ledger technologies — so-called enterprise DLT — are actually being used, they have nothing to do with blockchain. They are private, centralised and recorded on just a few controlled ledgers. They require permission for access, which is granted to qualified individuals. And, perhaps most important, they are based on trusted authorities that have established their credibility over time.
As such, blockchain has not even improved upon the standard electronic spreadsheet, which was invented in Topics Cryptocurrencies Project Syndicate economists.