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Wei_Dai comments on Bitcoins are not digital greenbacks - Less Wrong
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I'm also quite worried about this, but on the other hand Bitcoin creates an obvious entry gateway into more advanced cryptographic currencies (i.e. once Bitcoin infrastructure is set up, other currencies can use Bitcoin infrastructure if there's a way to exchange them with Bitcoins, lowering the bar to entry).
I've had all sorts of ideas along these lines, in fact. The main reason I haven't published them is that I'm not sure that more advanced cryptocurrency advances FAI over AGI. In fact, you'd think it would be the reverse - the Great Stagnation may be all that's keeping us alive right now.
I'm surprised that you are so interested in this area (i.e., monetary policy for cryptocurrency), given that the subject matter and required backgrounds to study it are not closely related to FAI. I don't even have any strong opinions on what is the right policy, except that the one currently built into Bitcoin is pretty suboptimal (ETA: at least in the long run, in the short run it seems close to optimal for getting Bitcoin some initial scale).
Yeah, me either, or more generally whether cypherpunk-related technologies help or hinder a positive Singularity, which is part of the reason why I stopped pushing very hard on my cypherpunk ideas.
Econ relates to intelligence explosion dynamics, Scott Sumner appears to be a Correct Contrarian.
I don't have any good ideas for how to do NGDP level targeting inside a cryptocurrency in a way that would automatically distinguish more widespread adoption from increased RGDP from somebody gaming the system.
No, he doesn't. Edit: and I've found that his general reasoning to be poor in general. Some examples (which I can source later if anyone plans to update on this):
"Sumner, if what you're saying is true, shouldn't the Fed let anyone, including the average Joe, borrow from the Fed at 0%?" -- > "Yes."
Sumner: "Income" is a meaningless concept.
Critic: No, it's obviously vital to know how much you can spend before becoming unable to buy anything. And how would you value an enterprise but by discounting its income streams?
Sumner: If you want to know what a venture is worth, look at its stock price, not income.
Non-crypto, "real world" currencies have exactly the same problem of gaming the numbers to make NGDP artificially high. They're only worthwhile to pursue when NGDP specifically is targeted, rather than some "close enough" policy.
Right now, the best velocity measure seems to be coin days destroyed. But it is gameable. It is not being gamed in bitcoin because nothing is dependent on it.
The closest GDP measure in a cryptocurrency of the structure of bitcoin seems to be sum of transaction fees. It can be gamed by early adopters, but that is true of almost every measure