Edward Castronova, the leading economist of online gaming, writes that “Experience with game currencies makes me skeptical about Bitcoin“.
Game currencies are good currencies. What are the features of those currencies?
- You get money only by doing things that can be interpreted as “productive work.” No freebies or handouts, and nothing abstract. You don’t solve puzzles to get coin, you run FedEx quests.
- Mild inflation. As in the real world, mild inflation makes people happiest. Small enough to be unnoticeable in the short run, yet gives people a sense over time that their wealth and power is rising (even if it isn’t).
- It assumed that the currency will be hacked and exploited. A strong central authority is in place to seize illicit funds and roll back damage.
Bitcoins don’t have these features.
One thing, though: the last point is probably not consistent with strong anonymity. If you think that’s a valuable part of your coin model, you usually have to pay a price on the repudiation front.