Bitcoin’s Security Pricing Problem

I can’t resist this.

Blithely ignoring the utter mess he and his developers have managed to make of the cryptocurrency Ethereum, Vitalik Buterin has written a post on inflation and monetary policy. Wow. Is there no end to his talents?

In this case, there is most definitely an end. Economics 101 is the end, pretty much. I don’t claim to be the world’s greatest economic expert – not by a LONG way – but the errors in this piece leapt out at me.

Firstly, inflation. Here is Buterin on inflation:

The primary expense that must be paid by a blockchain is that of security. The blockchain must pay miners or validators to economically participate in its consensus protocol, whether proof of work or proof of stake, and this inevitably incurs some cost. There are two ways to pay for this cost: inflation and transaction fees. Currently, Bitcoin and Ethereum, the two leading proof-of-work blockchains, both use high levels of inflation to pay for security; the Bitcoin community presently intends to decrease the inflation over time and eventually switch to a transaction-fee-only model.

Inflation? Really? The cryptocurrency whose adherents promote

Read more ... source: TheBitcoinNews