Traditional economics is based upon the ownership and exchange of physical objects, which (traditionally) can't be created or destroyed, but only exchanged. Some anthropologists have even claimed that the most salient feature of modern humans ("homo sapiens") is their engagement in exchange economies, aka "homo economicus". (I.e., _trading_ predates language; indeed, the requirements of trading produced great incentives to develop language.) There have been a number of experiments in massively multiplayer online games about alternatives to "conservative" money, and they haven't worked very well. In this way, the conservation of money is analogous to the "conservative" cellular automata rules, where "conservative" rules produce more interesting behavior than nonconservative rules. Edward Castronova has done a lot of work studying alternative versions of money in online gaming economies. Simulating conservative money with bits is not so easy, because the copying of bits is so trivial. Bitcoin has to solve a distributed agreement problem, which _serializes_ economic exchange events into a _total order_ in such a way that "everyone" agrees about what events happened, and in what order they happened. In a sense,the bitcoin blockchain is the display of a _proof_ of a theorem that says that the initial event of the blockchain is valid, and that every step of the blockchain is valid. Indeed, the blockchain is an inductive proof of the validity of the current state of the bitcoin world. Every observer of the blockchain can check for himself/herself that the axioms are valid, and that the rules of inference are valid. In particular, one of the preserved properties of the blockchain is that the amount of money is conserved (more-or-less, with a small amount going to the blockchain maintainers). The "proof of work" requirement is simply to slow down all the players to enable distributed "arbitration", so that if there are multiple competing (i.e., inconsistent) transactions, that the "first" one of these transactions that presents a completed proof-of-work will "win" -- i.e., cause all the other inconsistent transactions to be ignored. In this way, the growing blockchain is a kind of "Tetris" game, in which the various proposed events rain down on the blockchain, and must be incorporated into the blockchain in real time. Any events that don't fit must be ignored. The bitcoin blockchain concept does not scale at all. In addition to the ever growing massively wasted computation for the "proof of work", there will be massive contention due to the serialization of _all_ of the economic events in the economy. I believe that the best use of quantum computers in the computational currency realm is to eliminate this contention problem. A quantum computer could use some form of quantum "collapse" to get rid of superposed states in which player A gives his money to both player B and player C, but A doesn't have enough money to give it to both B & C. This choice will then be made by quantum mechanics to preserve the conservation of monetary value. The quantum concept could eliminate both the arbitration bottleneck and the "proof-of-work" requirement, and thus lead to a "relativistic" (i.e., parallelizable) virtual money system. Einstein's "spooky action-at-a-distance" could thus ensure the consistency of virtual economies. At 12:44 PM 7/14/2014, Dave Dyer wrote:
At 12:21 PM 7/14/2014, Eugene Salamin via math-fun wrote:
Why is Bitcoin trustworthy?
Money is based on the theory that the value you assign to something today will be similar to the value someone else assigns to it in the future, so it's safe to trade something you value (your time, your house) for money, instead of a direct barter for something else you value (ie; "will work for food")
Producing gold requires a lot of work, and the gold itself is durable and portable; which is why gold is traditionally a trustworthy measure of stored value.
Similarly creating a bitcoin requires a lot of work. The cleverness in the bitcoin system is that the "work" is intimately linked to the process of recording and verifying transactions in bitcoin.