To bring you the the economist and bitcoin content on our sites and applications, Meredith partners with third party advertisers to serve digital ads, including personalized digital ads. Those advertisers use tracking technologies to collect information about your activity on our sites and applications and across the Internet and your other apps and devices. The Economics of Bitcoin Robert P. No external technological or physical event could cause Bitcoin inflation, and since no one is in charge of Bitcoin, there is no one tempted to inflate ‘from within.
Its inbuilt scarcity provides an assurance of purchasing power arguably safer than any other system yet conceived. But to understand these claims, one must first understand the basics of Bitcoin. My conclusion is that, in principle, nothing stands in the way of the whole world embracing Bitcoin or some other digital currency. Yet I predict that, even with the alternative of Bitcoin, people would resort to gold if only governments got out of the way. Anyone who wants to participate can download the Bitcoin software to his or her own computer and become part of the network, engaging in “mining” operations and helping to verify the history of transactions.
To fully understand how Bitcoin operates, one would need to learn the subtleties of public-key cryptography. In this section, I’ll focus instead on an analogy that captures the economic essence of Bitcoin, while avoiding the need for new terminology. Interested readers can find various online articles that explain how a network of computers implements Bitcoin. Imagine a community where the money is based on the integers running from 1, 2, 3, , up through 21,000,000. At any given time, one person “owns” the number 8, while somebody else “owns” the number 34,323, and so on. In this setting, Bill wants to buy a car from Sally, and the price sticker on the car reads, “Two numbers. Bill happens to be in possession of the numbers 18 and 112.