The re-solution of bitcoin and Ideal Money.

Nash explains that an “Ideal Money” would necessarily be pegged to an index of prices that are the most stable over time, and furthermore “Ideal Money”, or good money, in this respect has a relatively high level of predictability in this regard.

There is an interesting revelation in regard to bitcoin and something that Satoshi said that I feel very very few people in this world would claim in his position:

The price of any commodity tends to gravitate toward the production cost.

In this respect, bitcoin is ultimately pegged to the cost of energy. (Although what I think Satoshi failed to point out, that Szabo does very well in his articles, is that sometimes commodities play the role of inflation hedges, and this necessarily increases their value well beyond the cost of production)

One might suggest that if all of a sudden producing energy to mine bitcoins and transaction became essentially “cost-less”, it might be the that future value of new bitcoin's would decline as well. But Satoshi attends to this point in bitcoin's design:

If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more. At the same time, the increased production would increase the difficulty, pushing the cost of generating towards the price.

Which is interesting because Nash seems to re-solve it as well:

We can see that times could change, especially if a “miracle energy source” were found, and thus if a good ICPI is constructed, it should not be expected to be valid as initially defined for all eternity. It would instead be appropriate for it to be regularly readjusted depending on how the patterns of international trade would actually evolve.

I don't know how bitcoin came about, but for those of you that are not familiar with Nash's works, or refuse to give it a sincere read, I maintain that his proposed solution is that of bitcoin presented from a different perspective than what “Satoshi” came to us from. I don't know what that means, but its true, and I have never had a sincere player even ATTEMPT to refute this.

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