I think this article nails the description of a problem that Russ Roberts also alluded to on EconTalk -- that bitcoin can change and those changes are made somewhat democratically.(http://www.econtalk.org/archives/2011/04/andresen_on_bit.htm...). I think libertarians assume that the bitcoin network will be full of other libertarians. The article is right that the network may also be full of big entities whose behavior is regulated. Whatever your feelings about regulation, this would seem to make bitcoin less interesting.
I think one option is to accept that the bitcoin protocol will be forked massively and design it from the ground up to support exchanges between various versions of the protocol. That way, libertarians could avoid versions with inflationary policies. In this setup, would there be any reason for an entity to choose an inflatable flavor of bitcoin? Perhaps certain businesses and banks would be coerced to through regulation and that would create more widespread demand for those forks. It seems possible that most users would use the regulated bitcoins and the libertarian version might become a black-market currency.
All this feels not too different from the current situation where you can invest in gold or leave your money in a fiat currency. I guess the main difference is that the "gold" (i.e., the non-inflating bitcoin forks) might be less traceable and more liquid than true gold is today. I'm beginning to suspect that, while bitcoin is a damned-cool technical idea, it isn't likely to massively change the world other than, perhaps, to grease the wheels of black-market transactions.
>I think one option is to accept that the bitcoin protocol will be forked massively and design it from the ground up to support exchanges between various versions of the protocol. That way, libertarians could avoid versions with inflationary policies. In this setup, would there be any reason for an entity to choose an inflatable flavor of bitcoin? Perhaps certain businesses and banks would be coerced to through regulation and that would create more widespread demand for those forks. It seems possible that most users would use the regulated bitcoins and the libertarian version might become a black-market currency.
And to do this, that means that you need some trusted way to determine the price of Bitcoin 1.0 versus Bitcoin 2.0.
Which means you need a centralized place, let's call it an exchange, to determine the rates between the two version. Since you probably want the rates to be consistent across the entire network at any given time(otherwise, what's the point of a non-inflationary currency), it's probably a decent idea to maintain a centralized location for that that decides the rates. A decentralized method may be possible, but I sincerely doubt that it will work in a way that would actually encourage people to convert to the other currency to purchase things.
In either case, you still need something that can regulate the transactions to make sure that everyone is behaving correctly. If people aren't(which should be the first assumption you make about anything), you'll need some method of dealing with it.
So... yeah. You just created the Federal Reserve and money markets.
Realistically, given that it's a democratically run, the current Bitcoin implementation is in the same boat, if the biggest users decide to change their policies, the entire network can end up in a similar situation where a Bitcoin from X is worth a different amount from a Bitcoin from Y.
I don't really understand how Bitcoin is better than the current currency system. It's just different because it's on the internet.
A decentralized version is virtually guaranteed in the absence of a centralized one. If you have many exchanges, and they offer different rates, arbitrageurs will exploit this and make the rates match.
This is why, for example, the price of RIM is virtually identical on both TSX and NASDAQ.
I think one option is to accept that the bitcoin protocol will be forked massively and design it from the ground up to support exchanges between various versions of the protocol. That way, libertarians could avoid versions with inflationary policies. In this setup, would there be any reason for an entity to choose an inflatable flavor of bitcoin? Perhaps certain businesses and banks would be coerced to through regulation and that would create more widespread demand for those forks. It seems possible that most users would use the regulated bitcoins and the libertarian version might become a black-market currency.
All this feels not too different from the current situation where you can invest in gold or leave your money in a fiat currency. I guess the main difference is that the "gold" (i.e., the non-inflating bitcoin forks) might be less traceable and more liquid than true gold is today. I'm beginning to suspect that, while bitcoin is a damned-cool technical idea, it isn't likely to massively change the world other than, perhaps, to grease the wheels of black-market transactions.