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151 sats \ 4 replies \ @Undisciplined 7h \ on: Pleb Economist #8: What game theory can teach us about Bitcoin and self-custody econ
Great post.
I often think about how something similar will happen with respect to the entire legacy financial system. Long before hyperbitcoinization, this kind of game theory will force the fiat system to behave itself a little bit more.
The other point that came to mind is that trustworthiness is not a binary. The better self custody options become, the more trustworthy custodians will have to be.
I remember there was this one academic article I looked at (#734528) where one of the results was that the presence of something like Bitcoin prevents the government from running indefinite deficits.
I didn't fully understand the math of that paper, so I'm hesitant to make strong claims about what's going on, but that result is certainly consistent with your theory.
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I remember that article, but I also wasn’t fully sold on their reasoning, although I felt like they got to a reasonable result.
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I’m at the point where I understand it but cannot articulate it. Which naturally, I’ll try now. My subconscious is much smarter than my conscious mind when it comes to economic and sociological stuff, however my understanding, which may be retarded, is that when a credit based monetary system meets a commodity based monetary system, it’s not a big boom head-on crash, instead one slowly bleeds into the other, resulting in a slow deflation of prices, which is in theory good.
For my part I believe this is inevitable. However governments will need to react to this and it is quite hard to predict how that will play out. Their debts are insanely big, mostly driven by their local banks excessive lending, and the bleeding effect would ideally be a slow and peaceful deflation of prices and ideally keep people that have mortgages paying the same monthly repayments, or even paying it down more quickly.
Imo the most interesting thing about this whole thing is transitioning from credit theory of money world to a commodity theory of money system, it’s going to reshape the world. It will not make financial sense to lend money for the sake of interest, the amount borrowed will grow in value thus making the original borrowed amount easier to repay. This is entirely contrary to the system represented by central banking so expect their full force to come down once they realise bitcoin is more than an investment asset.
With that said, it’s already too late.
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Similar to how a monopolist charging high prices or custodian being untrustworthy end up losing, states that continue debasing their currencies will take big losses.
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