There is nothing to say that all coins need a fixed supply. It wouldn't be hard to establish voting to release a given amount of funds/authorize the selling of bonds. All blockchains have a transient central authority, the miner.

This comment is a perfect, concise explanation of why cryptocurrencies are strictly less ideal than fiat currency with a central bank with control over supply.

I do think cryptocurrencies do satisfy some use cases in a superior way to fiat currency. But there are some serious economic advantages that a currency with a central bank gives you that cryptocurrencies will never have (at least, the way they're currently designed).

I have stopped looking at bitcoin as a currency and have started looking at it as a stock or bond without any backing collateral or assets. The only particular properties are that it trades in a special way (in fractional quantities and round the clock) and that the number of shares is known in advance.

Otherwise it has the same volatility as a stock. It can gain or lose half its value in a few hours. Just like a stock the way to take volatility out of it is to diversify.

The volatility has nothing to do in my opinion with the lack of a central authority distributing it. It has to do with heavy speculation of this particular stock. Central banks can only correct for long term price evolutions, not for short term fluctuations.

> The volatility has nothing to do with the lack of a central authority distributing it

If you know/believe that supply will generally adjust to cancel demand, then you have much less incentive to speculate.

Not if you make short term plays. Stock shares are also distributed by a central authority incentivized to make the price go up and therefore constrain supply, yet stocks are volatile.

>Just like a stock the way to take volatility out of it is to diversify.

The problem here though, is that every crypto valuation is linked directly to the value of Bitcoin. It's as if the entire S&P tracked the price of Apple.

Let’s assume that you know that the price of the bitcoin will increase during the holiday season due to many online transactions. Won’t people start to collect bitcoin before the holiday season? In turn it will make price increase earlier. It seems to me that can be a stabilizing factor.

Have you taken a look at the Basecoin project (http://www.getbasecoin.com/)? It's a cryptocurrency system that's designed with a central bank in mind - you feed it the current exchange rate relative to some peg, and the system changes the money supply (through bond sales and purchases) to maintain the peg.

Who feeds the current exchange rate? Wouldn't that require trust from a central authority to determine?

The designers have proposed that as one possible solution. In their white paper (http://www.getbasecoin.com/basecoin_whitepaper_0_99.pdf), page 11, the three options they give are:

* Single trusted feed

* Take the median of the exchange rates from a set of feeds, with that set chosen by vote of holders of the coin (I can personally see this having some conflict-of-interest issues)

* Use what they call a "Decentralized Schelling point scheme" - have coinholders vote on what they think the exchange rate was in a recent time interval, use the median vote, then reward voters who were in the 25th to 75th percentile.

The authors seem to view the third option, with some engineering of the incentives, to be ideal; but I'm skeptical of a system that gives holders of an asset the ability to change the value of that asset. I would honestly prefer the use of a trusted authority - at least that way you have a very clear delineation of what the central authority is supposed to do and can easily audit whether it is doing its job.

Would you get paid in Bitcoin knowing it could be worth 20% less (or more I guess) in real terms on any given day that your company happens to do payrole?

You've misunderstood my comment. I'm not arguing against the idea that Bitcoin is a poor medium of exchange, I'm arguing against the idea that the sort of actions taken by the Fed would help. Rather, the Fed acts on a much longer timescale which are relevant for store-of-value roles.