Bitcoin P2P e-cash paper

Ray Dillinger :
"I think the real issue with this system is the market for bitcoins.

Computing proofs-of-work have no intrinsic value. We can have a limited supply curve (although the "currency" is inflationary at about 35% as that's how much faster computers get annually) but there is no demand curve that intersects it at a positive price point.

I know the same (lack of intrinsic value) can be said of fiat currencies, but an artificial demand for fiat currencies is created by (among other things) taxation and legal-tender laws. Also, even a fiat currency can be an inflation hedge against another fiat currency's higher rate of inflation. But in the case of bitcoins the inflation rate of 35% is almost guaranteed by the technology, there are no supporting mechanisms for taxation, and no legal-tender laws. People will not hold assets in this highly-inflationary currency if they can help it. "
Ray Dillinger November 6, 2008 Cryptography Mailing List November 3, 2008

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