While I've been skeptical about BitCoin here, this is a terrible argument against them. Broadly speaking, there is one market, the global market. Dollars aren't <i>that</i> special, really, they're just one more asset in a pool of millions of different asset types with every imaginable attribute and every imaginable kind of customer. (Yes, they are a bit special, but in the grand scale of things there are <i>all kinds</i> of special assets, like food, water, gold, housing, medical care, professional skills, "when everything is special, nothing much is". Dollars aren't <i>that</i> special.) The only way to carve out a piece of that global economy is to very aggressively build yourself a walled garden. Certain entities do that, like those running MMORPGs with internal currencies, who aggressively prevent people from using MMORPG currency in the real economy (mostly because of the sudden and horrific tax implications if they permitted it to act like true currency). They deliberately make their currencies as useless as possible outside their walled gardens to avoid scrutiny by the IRS. (And they don't do a perfect job. But the walls are usually high enough.)<p>This is not what BitCoin should or can do. It wants to join the pool of millions of different asset types and bring some new and unique characteristics to the party. It can not become a separate economy, because very, very powerful (and completely impersonal) forces drag everything into the global economy. If you try to separate the economies, all you actually do is create arbitrage opportunities, and the act of exploiting those returns the currency to the general market.<p>For BitCoin to remain fully separate basically <i>requires</i> them to be utterly useless as anything but tokens in a video game. The posted argument is complete gibberish.
The distinction between currency and asset can be fuzzy. Would you rather be paid in USD, gold, bitcoin, Google stock? How much extra would you charge to accept any of the above? I'd personally take bitcoin rather than gold today, because bitcoin can be exchanged for USD around the clock from the comfort of my chair.
As the author says, building a real Bitcoin economy would take time. But I don't think an isolationist attitude would help; it seems like it would take <i>longer</i>.
This really only applies if you completely ignore the nature of the internet and everything that a digital currency implies and treat bitcoin just like any other paper currency. It is totally feasible to run bitcoin pricing with dynamically updating btc prices based on an underlying fiat value in any merchant situation.<p>Most of the markets right now where actual trade takes place rather than speculation are simply taking this exact approach, whatever the exchange rate is for the currency at the time of the trade, the value will be decided based upon an underlying stable value. That's totally not possible with a traditional currency where you print price stickers and put them in shopping aisles, but it's par for the course for btc right now and probably will remain so until a stable value for the currency can be worked out, but this is no big deal.
On its way to becoming an asset indeed. Over the last year bitcoin has seen a ~20,000% return rate. If bitcoin gets uberpopular (i.e. each coin is worth ~ US$2m) within 20 years, then BitCoin would have a return rate of ~ 85% per year consistently for the next 20 years. There is practically nothing else with that close a return rate, so the only financially sound course is to hoard your BitCoin, not spend them.
The BitCoin community created this speculation bubble by rewarding early adopters and miners. That could have been entirely avoided if they didn't choose such a strategy for initial distribution.