Forgot your password?
typodupeerror
Bitcoin Government The Almighty Buck

Why Bitcoin Is Doomed To Fail, In One Economist's Eyes 537

Posted by timothy
from the wish-I-had-some-to-whine-about dept.
Hugh Pickens DOT Com writes "Economist Edward Hadas writes in the NYT that developers of bitcoin are trying to show that money can be successfully privatized but money that is not issued by governments is always doomed to failure because money is inevitably a tool of the state. 'Bitcoin exemplifies some of the problems of private money,' says Hadas. 'Its value is uncertain, its legal status is unclear, and it could easily become valueless if users lose faith.' Besides, if bitcoin ever really started to take off, governments would either ban it or take over the system says Hadas. The authorities might be motivated by a genuine concern about the stability of a shadow monetary system or they might act out of self-preservation because tax evasion would be too easy in a parallel economy. 'Part of the interest in virtual currencies like bitcoin is that their anonymity can provide a convenient cloak for criminal activity. Part is technological — this is a cool idea. And part is speculative — gamblers bet that bitcoin's value will increase,' concludes Hadas. 'Truly private money is an inferior alternative to the money that comes with the backing of a political authority. After all, no bank or bitcoin-emitter can be as public-minded as a government, and no private power can raise taxes or pass laws to unwind monetary excesses.'" Could be there's something good about money that can't be manipulated by law. Some people at least think there's plenty of value in Bitcoin and similar currencies, despite the risks. And those risks at present probably aren't enough to comfort the unfortunate Welsh fellow who (HT to reader judgecorp) "has realised he threw out a hard drive containing 7500 bitcoins, worth £4 million at today's prices. It is now under four feet of garbage in a landfill site the size of a football pitch."
This discussion has been archived. No new comments can be posted.

Why Bitcoin Is Doomed To Fail, In One Economist's Eyes

Comments Filter:
  • Nope (Score:3, Insightful)

    by Anonymous Coward on Thursday November 28, 2013 @12:04PM (#45548913)

    He's just pissed he didn't mine bitcoins when it was still practical.

    • Re:Nope (Score:5, Insightful)

      by ShanghaiBill (739463) on Thursday November 28, 2013 @12:22PM (#45549081)

      The author doesn't seem to understand how Bitcoin works. He seems to think that some mysterious computer programmer is the "issuer" of the currency. He says that governments will "take control", without explaining any mechanism for them to do so. His grasp of economics is questionable as well. He says that governments have always controlled currency. But prior to the American Civil War, private currency circulated. His claim that governments are better at protecting us from "monetary excess" made me laugh. Bitcoin may fail, but not because of the reasons he gives. But he hedges in his last paragraph, and says bitcoin will thrive "until the authorities do better", which means it may be around forever.

      • Re:Nope (Score:4, Interesting)

        by gl4ss (559668) on Thursday November 28, 2013 @12:39PM (#45549233) Homepage Journal

        yeah it sounds like that.

        if anything it's more legit legally now than when it started.. and yeah, monetary excess. tell that to zimbabwe. very good at protecting from that.

        also, if you're dodging taxes you're dodging taxes.. it's not like using real money or not is affecting that. easy enough for government officials to pop in and check if your store has been declaring any income or not and hey fucking google, apple & all are all moving it through ireland anyways dodging taxes by phony on-paper valuations of their products or services so what new problems would we have again with this?

        except that governments couldn't borrow money from people without asking people - that's what printing or creating more money ultimately is, diluting value of the money already out in circulation and if the money isn't a number on a computer or a stack of paper they print then they just would need to find someone to borrow from if they want to borrow, since they couldn't create bitcoins on a whim. why do governments tend to do that instead of taxing or finding someone to borrow from? well heck it's easier than raising taxes since people don't notice it as fast so you can snowball it for a while before the outrage..

        on the subject of private currencies.. krupp gave out their own currency during the great inflation. normally I'd frown upon forcing you to buy from the company store with your paycheck but damn the government had really fucked up then.

        bitcoin is funny in that it's just numbers, yet people give some value to it because creating the numbers is harder than it is for governments to issue mo' money.

        ultimately it would be fine to have total separation of whoever handles the "money" and the state, which would help people separate their life savings from the state. would be useful. maybe we'll get something like that in a few hundred years.

      • I didn't read this fine article, but having read some similar in the past it seems like some economists have horrible visceral reactions to Bitcoin because they they have firm stakes in how the status quo works. If something comes in and changes the rules then they their value will diminished or their way of life will be gone.

        I don't know if Bitcoin will make it or fail, but something like it is in the works that will take hold and it's threatening to economists, some of which are the "prophets" of the cor

      • Re:Nope (Score:5, Insightful)

        by magic maverick (2615475) on Thursday November 28, 2013 @12:40PM (#45549247) Homepage Journal

        Moreover, even if bitcoin fails as a currency, it still works very very well as a means of money transfer. Which is one of the reasons I support it. Paypal takes a large chunk of any money transfered, Visa and Mastecard take a large chunk, etc. All can (and have) cut off payments to undesirables. Etc. There are so many issues with centralized payment processors.

        Bitcoin though, is brilliant. Being decentralized, it is strongly resistant to attempts to prevent donations going to "undesirables". The fee charged is a small percentage of that the major companies charge (and is not even required at the moment, as most miners will still process transactions without a fee). Etc.

        And, if you don't keep your money in bitcoin (which does mean you have to trust a thirdparty "exchange"), you don't have to worry about exchange rates either. Just have the bitcoin changed directly to the currency of your choice, and withdrawn immediately from the exchange.

        Also, obviously this economist doesn't know enough about bitcoin to pass judgement. It is not an anonymous currency, at most it is pseudonymous. And, just as obviously, this economist doesn't know about history. As an AC has already said, private currencies were very popular before the 20thC. Around the world.

      • For me, bitcoins are to banks what GNU/Linux is to Microsoft & co. Here is where I see bitcoins big value. Of course, it can crash, but its a very interesting idea/technology.
      • Re:Nope (Score:4, Interesting)

        by afxgrin (208686) on Thursday November 28, 2013 @02:09PM (#45549947)

        A government could take control of Bitcoin in multiple ways:

        1) use massive budget spending to fund an organization to stage a 51% attack on the network. The NSA has the capability to do this. They can coerce private industry to develop ASICs in larger volume production than what currently exists, and shutdown any other ASIC reseller.

        2) give power to police services to setup busts on individuals looking to sell/buy Bitcoins for cash, and shut down Localbitcoins.com or any other website that provides such services. It would be a cat-and-mouse game if sites like Localbitcoins were only in the Tor network, however this increases the difficulty to 'cash out' so it could effectively devalue Bitcoins.

        3) coerce ISPs to install multiple Bitcoin p2p nodes with preferential network conditions so non-sanctioned p2p nodes connect to them first within the data centre and monitor which IP addresses are sending or receiving Bitcoins. Kind of a combination of MITM and setting up multiple wave detectors in a pond, then correlating the point source of the ripple.

        4) use information gleaned from this monitoring to tie Bitcoin addresses to IP addresses, then coerce ISPs to hand over the subscriber information.

        A few ways to to stop this: further decentralize the internet and establish a truly global peer-to-peer mesh network. A massive wireless ad hoc network would work if it can cross the ocean somehow. The other possibility is white listing IP addresses within the Bitcoin p2p mesh, but a white listed IP could always get compromised by the state for some unknown length of time. Namecoin might offer a reasonable solution if it also had a tie-in for tunnelling and rerouting traffic and never allowing 'exit node' like Tor does, however everyone would need to use it. I see it suffering from the same problems as Tor though.

        The author makes one solid implied argument: the state has the ability to resort to threat of violence, detention, financial ruin, seizure of assets over its citizenship.

        • 1) use massive budget spending to fund an organization to stage a 51% attack on the network. The NSA has the capability to do this. They can coerce private industry to develop ASICs in larger volume production than what currently exists, and shutdown any other ASIC reseller.

          That won't be easy.

          The required hashing power is ridiculously high:
          - Current hash power of the whole network is 6 Peta-hash/s (OMGWTF: it was still counted in Tera-hashes back when I looked).
          - At the current trend of hashrate/difficulty increase, by the time the NSA puts their evil plan into production, they'll probably need to deploy several exa-hashes.
          Next-gen mining machine are presumed to go into the Tera-hash range by unit. To control the whole network the NSA would need hundreds of thousands of them (

      • by tnk1 (899206)

        The government can "take over" by passing laws that make it illegal to use or exchange bitcoins unless they are registered or have some other control feature. Private money is not illegal in the US, but it doesn't have to stay that way. That wouldn't stop the illegal usage of bitcoins, of course, but having the government go from indifferent or passively hostile all the way to actively hostile will be a serious problem. Even drug traffickers need to get their eventual profits into state-sponsored money f

      • Re: (Score:3, Interesting)

        The author doesn't seem to understand how Bitcoin works. He seems to think that some mysterious computer programmer is the "issuer" of the currency. He says that governments will "take control", without explaining any mechanism for them to do so. His grasp of economics is questionable as well. He says that governments have always controlled currency. But prior to the American Civil War, private currency circulated.

        Your misrepresenting what he said. His position is not that there never was private currency; rather that publicly issued currency inevitably replace them because of greater trust in government backed money as a store of value. As for governments taking control, not stating how doesn't mean they can't or won't do it. In fact, probably the best way to "take control" is destroy users' trust in them as an anonymous and secure way to conduct business. Attack the users, not the system.

        His claim that governments are better at protecting us from "monetary excess" made me laugh. Bitcoin may fail, but not because of the reasons he gives. But he hedges in his last paragraph, and says bitcoin will thrive "until the authorities do better", which means it may be around forever.

        Bitcoin, as he alludes, is

  • Economist (Score:2, Interesting)

    by Anonymous Coward

    An economists view on this issue means about as much to me as an astrologist's. The whole subject of economy is a joke.

    • by gsslay (807818) on Thursday November 28, 2013 @12:34PM (#45549181)

      Absolutely. The compex nature of money should be left to people who know more about it than economists.

      Like... err...

      Maybe Astrologists aren't such a bad idea...

      • Re:Economist (Score:4, Interesting)

        by linuxdoctor (126962) on Thursday November 28, 2013 @01:15PM (#45549545) Homepage

        Many years ago I compared the general economic forecasts of economists to those of the astrologers in what when then American Astrology magazine, a semi-scholarly attempt at presenting astrology as a legitimate field of scientific inquiry. I followed each of their predictions form five years. The results revealed that economists were right less than 1% of the time while astrologers were right about 10% of the time. Since we all know that astrology is bogus the results say a lot about economists. Maybe it's time to do the study again.

        • by ADRA (37398)

          References cited please before espousing something so ridiculous. By what measure would you call economist's predictions a failure? That the economy was adjusted by a range of basis points?

          That said, the world is a very complicated organism, and predicting the economy has much in common with predicting the weather. We may not have an exact model of what the weather will be like tomorrow, but they understand the general patterns which get pretty darn close. Are they always 'right' in their predictions? No, d

  • Tulips (Score:5, Interesting)

    by Anonymous Coward on Thursday November 28, 2013 @12:09PM (#45548959)

    We've played this game before.

    I look forward to the first Bitcoin Panic, it should be interesting to see what happens...

  • *erior (Score:4, Insightful)

    by J'raxis (248192) on Thursday November 28, 2013 @12:10PM (#45548969) Homepage

    'Part of the interest in virtual currencies like bitcoin is that their anonymity can provide a convenient cloak for criminal activity. Part is technological â" this is a cool idea. And part is speculative â" gamblers bet that bitcoin's value will increase,' concludes Hadas. 'Truly private money is an inferior alternative to the money that comes with the backing of a political authority. After all, no bank or bitcoin-emitter can be as public-minded as a government, and no private power can raise taxes or pass laws to unwind monetary excesses.'

    Everything described here is what makes bitcoin a superior form of money, not inferior.

    • Re:*erior (Score:5, Insightful)

      by CastrTroy (595695) on Thursday November 28, 2013 @12:17PM (#45549035) Homepage
      The only problem I have with BitCoin at the moment is that it isn't something you want to hold on to. Buy it, do your transaction immediately before the value changes. Somebody pays you in BitCoin, immediately cash out before the value goes down. With most currencies, you can put it in the bank, or under your mattress, and be reasonably sure that in a week it won't have lost half of its value. There are lots of people making sure that the value of the US dollar doesn't do that kind of stuff, because it would be terrible for the economy, to have money changing value so often.
      • by compro01 (777531)

        The only problem I have with BitCoin at the moment is that it isn't something you want to hold on to.

        I find that amusing, given that another of the criticisms about bitcoin is that they think the deflationary nature of bitcoin would result in hording.

      • Re: (Score:3, Insightful)

        by fozzmeister (160968)

        True BitCoins are very volatile at the moment... But the only reason you think USD is stable is because you are inside the USA. All currencies are very volatile. The big point you are missing is that a currency is worth what people will sell for it as much as an item is worth what people will pay for it.

        • Re: (Score:3, Insightful)

          by Anonymous Coward

          All currencies are volatile, but typically only on the few-percent-per-year level; it's not common news to hear that, e.g., the Yen has changed value relative to the dollar by a factor of two over the past week. Just because all currencies are a little bit volatile doesn't mean that BTC's massive speculation-driven volatility isn't a big issue that sets it apart from currencies useful as currencies (rather than just gambling).

    • Re: (Score:3, Insightful)

      by Calavar (1587721)
      I think you're missing the point. Numbers two and three, interest because of the technological wow-factor and interest due to speculation will fade away with time. At that point, all that will be left is interest in the anonymity that Bitcoin provides. And if governments think that this anonymity facilitates crime, they will do everything within their power to either shut Bitcoin down or take over the system, just as Hadas said.
  • Control (Score:5, Insightful)

    by fredprado (2569351) on Thursday November 28, 2013 @12:12PM (#45548977)
    Seems like this economist is too fond of governments to be really objective. The last quote in the summary was specially awful. No bank or financial institution will ever be able to do as much harm to a population as a bad government.

    That said he has a point regarding government interests in taking virtual currencies down or controlling them. The thing is, technologies evolve, and albeit bitcoin may find its end in government interventions, sooner or later other alternatives that are even harder for governments to control will appear. It was the same with file sharing and it will be always like this. People resent control and given the means to avoid it most will.
    • Re:Control (Score:4, Informative)

      by Calavar (1587721) on Thursday November 28, 2013 @12:29PM (#45549149)

      No bank or financial institution will ever be able to do as much harm to a population as a bad government.

      The Panic of 1857 was caused by the irresponsible printing of paper currency by private banks, and the Panic of 1837 (which in urban areas saw unemployment rates on the level of the Great Depression) was greatly exacerbated by it, so history would indicate otherwise.

  • by caffiend666 (598633) on Thursday November 28, 2013 @12:13PM (#45548985) Homepage
    He's right, but in the wrong way. All currencies are doomed to fail. As long as people are willing to exchange something for something else, both have value. Most FIAT money has value because governments are willing to exchange it for taxes, so then it has value to almost everyone. When a government collapses, or people lose faith in it, it's currency becomes worthless. Seashells are no longer values as currency, but they once were. Gold/Silver have boom/bust cycles. BitCoin had value because of SilkRoad, and the silk-roaders were willing to accept it for... something. Frankly I'm surprised BitCoin still has value after SilkRoad's demise. If something significant replaces SilkRoad, BitCoin will remain valuable. Until then bitcoin's going on momentum. May crash soon, may not. Will crash eventually.
    • If you're looking for famous examples of losing faith in money, there was a period in Germany where exactly that happened. And more recently, Zimbabwe. Both times involved people needing wheelbarrows full of money to buy groceries.

      • by Nidi62 (1525137)

        If you're looking for famous examples of losing faith in money, there was a period in Germany where exactly that happened.

        My favorite picture regarding this (saw it in a history textbook once, have never been able to find it again), was of 2 kids playing with literally (and I mean actually literally, not figuratively) brick-sized bundles of Papiermarks like they were building blocks.

    • by TeknoHog (164938) on Thursday November 28, 2013 @12:52PM (#45549341) Homepage Journal

      BitCoin had value because of SilkRoad, and the silk-roaders were willing to accept it for... something. Frankly I'm surprised BitCoin still has value after SilkRoad's demise. If something significant replaces SilkRoad, BitCoin will remain valuable. Until then bitcoin's going on momentum. May crash soon, may not. Will crash eventually.

      The Silk Road bust put an end to underground drug trade, just like the Suprnova takedown put an end to copyright infringement online.

      Also, there's a metric shitload of things you can legally buy with Bitcoins.

    • Silk Road was only down for a month or two, following the arrest of one individual.

      http://www.forbes.com/fdc/welcome_mjx.shtml

      "On Wednesday morning, Silk Road 2.0 came online, promising a new and slightly improved version..."

    • > Frankly I'm surprised BitCoin still has value after SilkRoad's demise.

      You shouldn't be. The Silk Road indictment reveals their sales represented only 5% of total bitcoin transactions over the period they operated.

      There are now at least 24,000 merchants using bitcoin - that's the number using the two largest payment processors, Coinbase and BitPay. You can also buy gift cards for hundreds of major stores with bitcoin through Gyft and eGifter. That's a big channel to spend bitcoins, even if the stores

  • Money is by no means "inevitably a tool of the state." Of course, the state always acts to seize control of the mint or printing press, but money (e.g., gold, silver) would of course exist regardless of the state.

    And if money is a tool of the state, why do we allow a private banking system to issue our money?

    • by dkleinsc (563838)

      If you mean the Federal Reserve, that may be technically private, but all the people in charge of it (the board of governors) are appointed by presidents and confirmed by the Senate. If you don't like what the Federal Reserve is doing, put your blame on the people who appointed those governors and accepted those appointments, and vote accordingly.

      It is true that the Fed is somewhat insulated from politics. That's because otherwise it would be very very tempting for a president to make sure that the Fed did

  • where?! (Score:2, Insightful)

    by Gravis Zero (934156)

    "has realised he threw out a hard drive containing 7500 bitcoins, worth £4 million at today's prices. it is now under four feet of garbage in a landfill site the size of a football pitch."

    dude, i want to know where this landfill is! for £4 million, you can automate the searching process or pay idiots to do the work for you! sensitive metal detectors can sure cut down the searching process. plus, think of all the other hard drives you will find and could sell on ebay as "used". ;D

    • by CastrTroy (595695)
      Kind of brings up a problem with Bitcoin though. If money can cease to exist due to a bad hard drive, and there is a limited amount of Bitcoin, then eventually a decent amount of it will be lost. If the average person starts using it, with their usually ability to keep things safe and backed up, it probably won't take long to disappear a significant amount of the money. The government could even destroy any Bitcoins it takes possession of through drug busts or other means, simply by deleting the wallets.
      • by khallow (566160)
        So what is this problem? Every bitcoin the government destroys means the remaining ones get more valuable. And if for some reason the currency becomes nonviable due to this process, we can always start from scratch with new bitcoins.
  • "Economist Edward Hadas writes in the NYT that developers of bitcoin are trying to show that money can be successfully privatized but money that is not issued by governments is always doomed to failure because money is inevitably a tool of the state.

    Centuries of history tell us differently, because throughout much of history, "money" was either stuff that was intrinsically valuable to people, or it was slips of paper referring to actual, valuable stuff stashed away in private vaults. In fact, it is governme

    • by dkleinsc (563838)

      or it was slips of paper referring to actual, valuable stuff stashed away in private vaults.

      I'm assuming you're referring to gold convertability. It's nonsense: The reason gold is valuable is that societieshave historically used it as currency. The commodity price of gold has little to no reference to its actual uses (jewelry, electronics, etc), and everything to do with people thinking that if the US dollar collapses there will be people willing to exchange gold for other more-useful stuff.

      For a very long time, bronze was an important and valuable currency. It isn't now, and that isn't primarily

  • Tax (Score:5, Insightful)

    by michaelmalak (91262) <michael@michaelmalak.com> on Thursday November 28, 2013 @12:24PM (#45549101) Homepage
    I'm just waiting for the first tax audits of BitCoin users who get dinged for not having paid capital gains tax. I give it a few years.
    • by mark-t (151149)
      I give it less than that, personally. Probably by next year, in fact.
    • umm... what part of anonymous currency didnt you understand? you can only be tracked by something that leaves a paper trail.

      note: if the nsa can rapidly decrypt internet traffic then they may be able to track bitcoin exchanges at specific sites... or maybe they or the fbi will hack the servers. land of the free. ;_;

  • by foobar bazbot (3352433) on Thursday November 28, 2013 @12:24PM (#45549103)

    'Bitcoin exemplifies some of the problems of private money,' says Hadas. 'Its value is uncertain, its legal status is unclear, and it could easily become valueless if users lose faith.

    Cash's value is uncertain, its legal status is ... well, not unclear, but situationally dependent in a pretty bad way[1], and like anything, it becomes valueless if nobody wants it.

    1. In the US, at least, while it's legal to use arbitrarily large amounts of cash in any legal transaction, it's not legal to use it for drug deals, money laundering, etc.. Sounds reasonable so far, but there's a whole boatload of policy and precedent to the effect that having large amounts of cash constitutes evidence that you were using it for drug deals, money laundering, etc., which combined with civil forfeiture, means that having large amounts of cash permits the state to seize that cash, unless you can prove that you were doing something good with it. Short of being an employee of a bank, vending machine company, etc., that's pretty hard.

  • by gman003 (1693318) on Thursday November 28, 2013 @12:36PM (#45549199)

    The selling feature of Bitcoin is that it is not backed, nor traceable by, governments. That's the main drive behind this boom - very little trust remains in the US government, or in many others. That covers the Silk Road-type drug-trade users - they have a very good reason not to trust the currency of a government that has declared war on them. That covers the technological side - tech-savvy people tend to be much less trusting of any government, and we in particular were betrayed by their widespread monitoring. And it even covers the investment bubble - the marketplace wants US monitoring of damn near everything to stop, and anything that steps in to fill that need will find a ready consumer base and investor backing. Those are the three groups *he* identifies as behind the Bitcoin boom, and each one is motivated, directly or indirectly, by a fear and hatred for the American government (note that it's specifically the government, not the American people, that are the target here).

    Bitcoin will die as soon as we can get similar guarantees of security for official, government-backed currencies and banking systems. Oh, and not just from America - a currency that is secure not just from the issuing country, but all others.

    Yeah, even if Bitcoin dies (I can see a big enough crash destroying the brand, and any currency is only as strong as the collective desire to use it), something else will come up to replace it.

  • Even with the relatively still small subset of the population that is participating in it, they have made BitCoin untenable as a currency. It's simply too volatile. Over the last few hours, the 'value' has increased by 20%. Now that *sounds* to BitCoin advocates like awesome news, but it means I can't negotiate an annual salary or a reasonably establish terms for a loan or really much of any sort of long term planning.

    While people may rail against a central bank manipulating a currency, the aggregate beh

  • by pla (258480) on Thursday November 28, 2013 @12:44PM (#45549271) Journal
    they might act out of self-preservation because tax evasion would be too easy in a parallel economy [...] no private power can raise taxes or pass laws to unwind monetary excesses.

    Way to miss the point, Ed.

    The governments of the world have proven themselves much too irresponsible to manage fiscal policy. We-the-Fuckin'-People have, therefore, decided to take that power back from the government.

    When a government can't keep its own spending in check, "raise taxes" does not count as a valid response, whether or not they have that power by virtue of having the biggest guns. The interests of the world's governments have drifted so far away from "public-minded" as to make your entire suggestion laughable. No, we obviously can't trust most private entities to act in our best interests - But I could name literally a hundred that do a hell of a lot better job than any world government.

    The federal reserve and the ECB need to cease to exist, ASAP. No more of this "implicit taxation through inflation" crap - If governments can't play on the same monetary field as the rest of us, they need to go away and have something better able to live within its means replace them.
    • by hibiki_r (649814) on Thursday November 28, 2013 @02:55PM (#45550253)

      Implicit taxation through inflation? First, inflation is extremely low on the entire western world. Second, inflation only eats away at you if you are sitting on currency as assets, which is a terrible thing to do. If most of your wealth is being productive somewhere, changes in the medium of account shouldn't matter a bit.

      Now, having zero inflation, or all the way into deflation, is not a good thing for an economy. We have this fundamental problem called Money Illusion. It's been measured in a whole lot of studies, just look it up. As long as there's money illusion, in practice, economies work better when economies grow in a predictable manner, which implies some mild inflation. Without said inflation, velocity drops, and with it economic activity. We really, really, don't want a shrinking GDP. A central bank is a compromise to make sure that someone, in some way, is actually altering the money supply to achieve that objective. What we need though is a way to make sure central banks are making less decisions that look like reading entrails, and more that are empirically testable and forward looking.

  • by Ralph Spoilsport (673134) on Thursday November 28, 2013 @12:51PM (#45549331) Journal
    " 'Truly private money is an inferior alternative to the money that comes with the backing of a political authority. "

    in other words, state sanctioned VIOLENCE.

    FTFY

  • by tlhIngan (30335) <slashdotNO@SPAMworf.net> on Thursday November 28, 2013 @12:55PM (#45549369)

    Bitcoin is just alternative currency. There are plenty of that around - most of them are pegged to some other currency though, but they are, for the most part alternative currency.

    Think: Gift Cards (Amazon/Apple/Steam/Google/etc), alternative store currency (Canadian Tire Money), etc. Then there's non-traditional currency, like WoW Gold.

    If anyone says Bitcoin isn't a "money" they're plain old lying. It can be used to facilitate trade (which is the purpose of currency).

    Of course, there are a few fundamental problems with Bitcoin, but there are problems with all currencies.

    When any economist, banker, etc., says Bitcoin is doomed, the real reason is them saying is "we haven't figured out a way to make money on it yet". No currency is invulnerable to making money by doing things of little value, Bitcoin included. It just means the quants haven't sat down to figure out schemes to exploit to get bitcoins for little effort. Either it's because the entire bitcoin market is too small so the benefits of skimming 1/1,000,000th of a Bitcoin from every transaction is barely worth the effort, or other reason.

    That's the real message.

    • by ADRA (37398)

      "Gift Cards (Amazon/Apple/Steam/Google/etc) ... (Canadian Tire Money)"
      All of these are pegged directly to real gov. currencies and hence are legislated to be honoured as an obligation for cash exchange within the bounds of their own rules. There may be terms on maintaining balance/etc, but it's illegal to withhold payment if in good standing. That's what makes these things a currency, and that is also what makes these tax free (gov's don't double dip by charging tax to 'purchase' the item), though if you ac

  • by Stradivarius (7490) on Thursday November 28, 2013 @01:08PM (#45549479)

    First, a brief correction: the author of the op-ed is not an economist. He's a journalist [google.com] and former financial analyst who writes on economics topics for the NY Times.

    Second, the op-ed makes a number of errors:

    1. He asserts without evidence that non-government currency is inherently inferior to government currency, without defining the purposes for which it is supposedly inferior and in what ways. Medium of exchange? Unit of account? Store of value?

    2. His argument relies upon his unsubstantiated belief that "no bank or bitcoin-emitter can be as public-minded as a government", and that "no private power can raise taxes or pass laws to unwind monetary excesses". This ignores the signficant body of research on the not-so-public-mindedness of public officials. It ignores the fact that the "monetary excesses" he needs to unwind are frequently caused by government monetary policy, rather than being inherent to currency. It also ignores the fact that Bitcoin's cap on supply was designed precisely to avoid such monetary excesses. Perhaps Bitcoin's design in this regard is deficient, but the author apparently could not be troubled to make any argument detailing how.

    3. He criticizes "private money" such as Bitcoin for having uncertain value, and for its potential to lose value if users lose faith, despite these problems applying to state-backed currencies as well. It's not as if we've never seen runs on banks, unexpected inflation or even hyperinflation with government fiat currency.

    4. He further criticizes Bitcoin for its alleged anonymity and thus a potential for tax evasion, neglecting the fact that Bitcoin is less anonymous than the goverment paper currency known as "cash".

    5. He repeatedly makes the argument that because we've had state-backed currencies for a long time, they must be superior. This neglects the possibility that effective non-government currencies were not feasible at scale in the past simply due to a lack of technology (crypto and global instant communications). And it neglects the possibility that the future of currency is not either-or, but both.

    This is what happens when the poltical-media establishment tries to shoehorn a story about technology and economics into the same tired left-vs-right, government-as-perfection vs. government-as-catastrophe narratives. You get an incoherent, poorly researched, poorly argued mess. The author may end up being right that Bitcoin won't last, but he's not given us any sound argument to support his claim.

  • by Connie_Lingus (317691) on Thursday November 28, 2013 @01:11PM (#45549511) Homepage

    ...and once it gets (and its inevitable people) linked to a 1. worldwide child porn ring 2. high-viability murder-for-hire 3. terrorist act that kills many citizens in some random country or 4. large scale drug operations, it will be legislated away with the blessings of the state-run media, the banking system, and the average person in the street as something exotic and hard-to-understand-and-therefore dangerous.

    so play in the sandbox while you can, its not going to be around for long....and for you people who say nothing can stop it? lol wait til they make it a 3rd degree felony to have a wallet on your harddrive.

  • by jcr (53032) <.jcr. .at. .mac.com.> on Thursday November 28, 2013 @03:12PM (#45550351) Journal

    Government money fails because governments can't be trusted to meet their contractual obligations. The US dollar has had a pretty good run, but once FDR stole our gold and Nixon broke the Bretton Woods treaty, its eventual demise became inevitable.

    -jcr

There's a whole WORLD in a mud puddle! -- Doug Clifford

Working...