> Humans have used currencies such as gold which has a relatively fixed number of units in the past, which may have been less flexible but still worked
It worked, horribly. Europe didn't industrialize until it embraced fiat money. They had a few false starts because they didn't fully understand how to handle it - "The Moneymaker" [0], a short biography of John Law, is an enjoyable read and survey of the history of this economic development.
A currency should have an inflationary mechanism, because trade is the basis of wealth. In general, inflation encourages trade, and deflation discourages trade.
Anyway, that's just the belief of the field of economics.
> it doesn't explain why BTC is worth more than LTC
It worked, horribly. Europe didn't industrialize until it embraced fiat money. They had a few false starts because they didn't fully understand how to handle it - "The Moneymaker" [0], a short biography of John Law, is an enjoyable read and survey of the history of this economic development.
[0]: http://www.amazon.co.uk/The-Moneymaker-Janet-Gleeson/dp/0857...
A currency should have an inflationary mechanism, because trade is the basis of wealth. In general, inflation encourages trade, and deflation discourages trade.
Anyway, that's just the belief of the field of economics.
> it doesn't explain why BTC is worth more than LTC
Momentum and confidence.