“Bitcoin 2014 Panel: Economic Theory of Bitcoin” with time-based outline
/It was an honor to be among the participants in this panel on 17 May 2014 at the Bitcoin Foundation Conference in Amsterdam. We addressed several issues that tend to recur in discussions of economic theory and bitcoin. The main topics were the regression theorem and bitcoin; bitcoin and the role of units of account and pricing; multiple value standards and the economics of altcoins relative to bitcoin; fractional-reserve banking, lending, and direct versus other-party control; and deflation and fixed versus elastic money supplies. I have added a time-based outline after the embedded video below to facilitate noting and locating particular topics.
Moderator: Jon Matonis (Executive Director, Bitcoin Foundation)
Speakers: Konrad Graf (Author & Investment Research Translator), Robert Sams (Founder, Cryptonomics), Peter Surda (Economist, Economicsofbitcoin.com, Robin Teigland (Associate Professor, Stockholm School of Economics)
1) Introductions, opening comments, and overview
00:00–03:05 Matonis: Introduction of panelists
03:05–07:57 Brief openings by each panelist
07:57–09:06 Economics profession and bitcoin
09:06–11:41 Matonis: Overview of topics
2) Regression theorem and bitcoin
11:41–12:12 Matonis: Introduction of topic
12:12–18:32 Surda: Liquidity, organized markets
18:32–23:16 Graf: Technical versus economic; theory versus history layers
23:16–23:50 Sams: Doubts this is relevant to bitcoin
3) Unit of account, price display, and price intuition
23:50–25:02 Matonis: Introduction of topic
25:02–27:00 Teigland: Depends on who; networks, sub-communities, generation change
27:00–27:23 Matonis: Can bitcoin overcome the existing network effect?
27:23–28:01 Surda: Uncharted area, dollar likely to remain unless deep negative event for it
4) Multiple value standards, room for 300 crytocurrencies
28:01–28:49 Matonis: Introduction of topic
28:49–31:01 Sams: Need distinct specializations; mining costs limit
31:01–32:48 Graf: Strong tendency toward one unit; only other very strong factors could counter
5) Fractional-reserve banking and bitcoin
32:48–33:41 Matonis: Introduction of topic
33:41–38:08 Surda: Money substitutes, transaction costs, price differentials, “reserve” standards
38:08–39:57 Teigland: Other non-traditional financing systems, crowdfunding, P2P lending
39:57–41:34 Sams: FRB based on an illusion, one that cannot be created with bitcoin
41:34–44:12 Graf: Bitcoin allows opt-out from all “trusted” 3rd, 4th, 5th parties. Vote with your mouse.
44:12–46:47 Sams: Who owns what? a pervasive issue; first bitcoin lending likely dollar denominated
6) Deflation, only 21 million units, number of decimal points
46:47–48:37 Matonis: Introduction of topic
48:37–49:46 Teigland: People adapt over time to situations
49:46–53:38 Sams: Deflation arguments misplaced; overheld, underused; other crypto money supplies possible
53:38–55:36 Surda: No need to change the quantity of money, but more to investigate
55:36–58:29 Graf: “Rising-value currency;” any quantity of money will do for society as a whole
58:29–59:26 Sams: Elastic supply could help stabilize exchange rate relative to fixed supply
59:26–59:46 Surda: Unit of account function depends on liquidity not volatility
7) Q&A
59:46–60:55 Q1: Banks allowed to create money; unfair playing field?
60:55–62:28 A1: Sams: 100% reserve banking; taking away private money creation privilege
62:28–62:56 A1b: Teigland: Local alternatives, experimentation
62:56–63:19 Q2: Isn’t buying and holding bitcoins already an investment in all of bitcoin?
63:19–64:06 A2: Sams: To some extent, but could be more with different money supply rule
64:06–65:00 Q3: Fixed rate of supply ignores recent lessons of monetary theory
65:00–65:27 A3: Matonis: Already addressed; Surda: May need to unlearn some of those lessons :-)
