Based on the notes I made while reading the book, I think Professor White is aware of the issues I brought up, even using the Bitcoin Maximalist lingo on several occasions, however prefers to treat them implicitly and neutrally (with minor exceptions). Just to make it clear, I don’t think professor White is suffering from this expertise delusion. Professor White’s explanation isn’t in the book, but during the webinar he mentioned something along the lines that without price stability one needs to perform complex hedging operations. Unfortunately for Professor White, this doesn’t bode well for the idea of fractional reserve banking. According to most classifications I’m familiar with, including that used by White, the first person has a speculative demand for Bitcoin, and the second person has a transaction demand for Bitcoin. We could try to analyse the aggregate (yuck) demand for Bitcoin, but for that we need to look at what happens at the payee’s end. If you want to claim more bonuses, try an additional faucet level.
Lawrence H. White thinks that Bitcoin is great, but could be improved by having a more elastic supply. As a side note, the argument that people always prefer a more liquid good for monetary purposes, is also wrong. In “Denationalization of money”, Hayek writes that people would choose such a private money candidate which provides the best price stability. Given the current amount of knowledge that has been accumulated by humanity, people can at best be an expert in a very narrow area of an area of an area. The problem is when experts start to believe that just because they are experts, they are experts on everything, or perhaps from a different point of view, every phenomenon can be reformulated to fit into their area of expertise, and therefore evaluating such a phenomenon from the point of view of their area of expertise is useful. The critiques use an invalid area of expertise.
A fractional reserve bank isn’t redistributing wealth, it’s economizing the use of gold (sorry, Prof. White). The central bank isn’t redistributing wealth, it’s conducting open market operations or countercyclical policies. This is why Bitcoin is as it is and why for an engineer nothing else makes sense. Koning is not an engineer. It is a renowned online casino that offers players a transaction speed, multiple currency availability, and high-end security. It has a long legacy of providing security and a straightforward medium to enjoy online casinos. I came to the conclusion that determining whether people holding Bitcoin are speculating with it or using it as a medium of exchange merely based on observing their behaviour (i.e. empirically) is not possible. However, if it was to be replaced by a non-fiat medium of exchange, it would need to be something that still addresses the problems of dilution and censorship. It may yet fail and be replaced by fiat.
The issuer may know the transfers happen, but they only know the transferer is one of their customers, not which one. Proposing pen and paper may be an extreme alternative, but is still a valid alternative, as opposed to nothing. However, there is nothing special about the mechanism of the increase of the quantity of money that causes a relative change in allocation of money. There are a couple of corrections I would like to recommend for the book. They are all the same: if Bitcoin was altered to address the concerns you have, it would cause it to fail. Because they earn Bitcoin rewards for their work, the validators have been called “miners” by analogy to gold miners. Going back to gold would be stupid. At least with Federal Reserve, you have transparency, we know what’s going on, we can influence it. The players can exchange a maximum of 1 Bitcoin with a cap of 10 times per day.
