When Bitcoin Grows Up: What Is Money?
lrb.co.uk
lrb.co.uk
When? and Growing Utility?
Bitcoin has decreasing utility since the initial hype.
1. The few companies that accepted it are gradually stoping to support it (Microsoft for instance).
2. We have reached a standstill that shows every bit why highly unregulated systems are difficult to maintain (the miners care only about short term profit and are making bitcoin as a payment system unusable in order to secure short term profit).
3. Even great contributors for the project have come out against it lately explaining the total dystopian mess that is the bitcoin core team and exiting the project.[http://uk.businessinsider.com/bitcoin-has-failed-says-develo...]
4. Bitcoins are in the hand of a very few people that own massive amounts of them (see blockchain.info top wallets) that seem to be going around trying their best to get a few remaining uninformed people to believe in the system long enough so that they can offload their bitcoins. [http://www.bitcoinrichlist.com/top100]
I see very few people trying to get into bitcoin and a see a great deal of somewhat high profile people trying to keep the hype going just a bit more so that they can recover at least part of their investment in a failed experiment.
Still, 2 good things came out of this in the end: the blockchain which is a great tool for a lot of projects; and an eye opener of what can happen for people that want the financial system to have even less regulation.
Taavet Hinrikus, CEO of international-payments app TransferWise, “Bitcoin, I think we can say, is dead. There is no traction, no one is using bitcoin. The bitcoin experiment, I think we can say, is over.”
[http://finance.yahoo.com/news/bitcoin-is-dead-says-prominent...]
For as long as the federal government wants to subsidize mining, bitcoin is probably here to stay. I don't see any of the competitors capturing these subsidies.
Taavet Hinrikus certainly drew from his own failed endeavor. But I don't know how he didn't extrapolate the state of the wider market.
Bitcoin dead for the 130th time. No conflict of interest with Hinrikus making that statement..his motives are purely altruistic - he's looking out for the people.
Very intelligent post sir. You seem to be an expert on the fraud that is bitcoin.
Microsoft still accepts it. http://www.cnbc.com/2016/03/14/microsoft-stops-accepting-bit...
Bitcoin's utility is still valuable for empowering those people stuck with a currency they don't want to hold like Argentina. http://www.economist.com/blogs/schumpeter/2014/06/bitcoin-ar...
Edit: Forgot to point out the lack of utility for us in the developed world is very true.
However, most of the underserved users are in the states.
I think a big problem of bitcoin is lack of inflation. Terry Pratchett makes the point in Making Money that lack of inflation is stagnating. You tie the entire society to the willingness of people with old money to spend it. Why would we want that?
And we're back to the old spending vs saving & investment view of economic growth. I'm squarely in the Austrian camp on this, so I don't really care about spending, especially if it's fueled by government intervention to "spur aggregate demand".
I disagree that you have to have inflation, especially when we talking about gold & bitcoin. The past 100 years of economics has been tuned to a fiat money + fractional reserve banking + debt + inflation paradigm. Considering bitcoin within this framework doesn't even make sense, as it will (probably) not be the currency of a whole economy.
Also, there is more to the story concerning the Fed's balance sheet [1] and the link to inflation.
[1] file:///C:/Users/Clark/Downloads/market-outlook-2014-03-why-the-feds-4-trillion-balance-sheet-isnt-creating-inflation.pdf
https://duckduckgo.com/l/?kh=-1&uddg=https%3A%2F%2Fwww.ubs.c...
Let me ask you this - as a user of currency, why would you want to use a currency that's worth less when you spend it than it was when you acquired it?
But if you must choose, it's better to err on the side of inflation because it keeps currency being used rather than hoarded as just-another-commodity.
He made multiple points that "Steam just went live with Bitcoin today" does not dispute. There is no reason for individuals to buy/sell Bitcoins other than speculation.
Drugs were a crutch to the temporary currency. I love the idea, but without a reason to convert my stable dollars to a speculation currency, I will not - nor will others.
What would be the point in buying Bitcoin with cash/card only to use it on a service that also accepts cash/card?
Steam is a drop in the bucket. The only market that will use Bitcoins is hackers that do not want their main acct banned.
You already listed one other reason - drugs.
> What would be the point in buying Bitcoin with cash/card only to use it on a service that also accepts cash/card?
Only a handful of online services sell gift cards through brick and mortar stores that you can actually purchase with cash. As for the point of not using a card - my main interests in bitcoin as it stands today are: - I don't have to share my identity with the service I'm purchasing from (to validate the credit card), increasing my privacy and anonymity. - Like cash, it limits the risk of fraud and dark patterns (hidden fees, reoccurring charges that you weren't expecting, outright fraudulent charges, etc. don't simply auto-deduct from your account - although you can still not get the service you paid for.)
Well done, friction-free micro transactions for some services (e.g. news websites) might actually convince me to start using bitcoin regularly. Of course, that hasn't happened yet - nor do I know that it will happen with e.g. the problems with dust etc.
Bitcoin isn't completely unregulated. For example, I believe there's due to be a halving of the new block value soon, to slow down the rate of growth. This may have some negative consequences (such as reducing the number of people who mine for Bitcoin), but on the whole may help to stabilise the value of Bitcoin.
http://www.coindesk.com/bitcoin-prices-steady-as-subsidy-hal...
It might be a superior means to store value. The theory is that is as the amount of dollars (or any fiat currency) constantly increases, anyone holding large quantities of dollars will want to exchange them for something with a more fixed supply. Usually this is stocks. Oil futures, property, and gold are also used as stores of value. (In countries with weak currencies, people also hoard dollars as a comparatively stronger source of value).
So the purely monetarist argument says if there are only 21m bitcoins, and an ever-growing amount of dollars, one would expect that the dollar price of bitcoin will only be stable at 0 or infinity. E.g., either the network crashes and bitcoin becomes worthless, or the dollar collapses and bitcoin reigns supreme.
http://nakamotoinstitute.org/mempool/im-hoarding-bitcoins-an... - see here for more on this theory as regards bitcoin.
The counter to this argument is that a. despite seeming logical, money supply inflation doesn't always seem to occur in reality. E.g., quantitive easing hasn't noticeably increased consumer prices.
b. Bitcoin is volatile, which means it isn't actually a safe store of value. One persuasive argument I heard (from goldbugs) is that bitcoin, having a fixed supply, has no mechanism to stabilise the price, and so booms and busts become self-reinforcing. With gold, on the other hand, the amount mined varies depending on the market price, which smoothes out booms and busts.
I'm expecting both gold and bitcoin to increase in value over the next ten years as the EU and US both lurch from crisis to crisis. This will bring a debate over the future of fiat currency into the mainstream, after which things will get very messy and political. (You can't run a welfare state on gold or bitcoin, for one).
It also seems like bitcoin is enjoying a rally, possibly in anticipation of the reward halving in 10 weeks (in theory the reward halving should already be priced in, but the bitcoin market is not the most rational).
Second, you are coming from the assumption that bitcoin is actually a secure and desirable asset to the world at large. Well, it's not, people just don't want into it and they are not getting into it, even the bitcoin exchanges are living with ever decreasing volume since the beginning of 2014.
I can also tell you from a purely personal view, that there are very few people left using Localbitcoins anymore. I used to sell quite a few bitcoins there in 2014, now, nobody is interested anymore, there is no one buying.
The counter to the reduced volumes is the fact that bitcoin has been enjoying a sustained price rally for the last 5 months.
Yeah, the author doesn't understand the difference between the difficulty of factorizing large semi-primes and the elliptic curve discrete logarithm problem.
It might be a little error, but lack of understanding of deep technical issues lead directly to specious statements that bitcoin and the blockchain are going to solve world poverty, privacy, fix the economy and neuter the surveillance state.
It almost makes me wonder if Bitcoin was a "black-flag" operation to bring out the crypto-anarchist nerds who can't look past the fact that Bitcoin is innovative to see it doesn't work for most people.
If people need to know or understand this stuff bitcoin will never work. Success rests on the what not the how. The end user doesn't care if your website was written in php or node. All he cares about is what it does.
Bitcoin is an inflationary private currency with $10 transaction fees that is mostly used for illegal activity. Its value and success is predicated on the ability to buy drugs and pay ransoms with Bitcoin.
> The end user doesn't care if your website was written in php or node.
The end user also gets their wallet stolen. So yeah, I'd say that not understanding the basics is critical when dealing with crypto-currencies.
I like to use this thought experiment when imagining Bitcoin adoption. And then I realise that after all the reading I've done and being fairly technically literate I can barely explain Bitcoin to myself in a coherent way.
The conclusion I come to with this over-simplified view is that highly technical people are creating a larger divide of Us and Them. This isn't through malice, people are free to create and experiment intellectually as they see fit. But it would be nice if the average persons use-case was considered when planning your utopian money system that you have a head start on in accumulating wealth.
I don't think Bitcoin is going anywhere, but it will perhaps regress to a niche and often illegal market. Alternatively, black markets are very volatile anyway, so moving to a better anonymous currency could happen if a worthy competitor steps up.
They don't need to understand it, only trust it.
I understand the sentiment, but what is there that's hard to explain about Bitcoin? Bitcoin is just a form of digital money. Seriously, for the average user, that's all it is.
We already have Bitcoin wallets, which are the equivalent to your personal bank account. Let's imagine for a second that we also have Bitcoin cards you can use to spend Bitcoin in shops. What difference is there between that and a credit card or debit card? For the end user, very little.
Perhaps the issue isn't so much that Bitcoin is hard to understand, but that money as a concept is hard to understand, or at least it's not immediately obvious how it functions. I'd say the main thing to understand about money is that it is just numbers, but we associate value with those numbers, and in order for us to associate value with those numbers we have to assume others will also do the sane. It is this collective agreement which gives value to money, nothing more. So, with regards to Bitcoin, do you think it will continue to be a valid medium of exchange, and do you think more people will also think this way?
[1] http://www.thisamericanlife.org/radio-archives/episode/423/t...
Ethereum has stolen the throne when it comes to advancing blockchains as a technology: Turing complete scripting, promising research into proof-of-stake and exponential scaling, etc...
I don't think Bitcoing growing up is going to change what money is which is basically a trusted symbol of a certain value.
The blockchain on the other hand will change everything from what constitutes a legal entity to how we deal with AI.
So basically the question is more, what is value.