I think this is a lousy defense of Bitcoin. I cringe whenever I read "oh it's new technology of course people will be scared!" or worse yet, "you must be jealous because you didn't get in on the ground floor." I think it's a really cool technology but the economics don't make a lot of sense. There are a few major issues I see:<p>-What problem does it solve? Many claim that it's a more efficient way to transfer money, but after paying high spreads & fees on illiquid exchanges or a place like coinbase, it doesn't look so good. International wires are expensive but paying 30 bps each way in exchange fees plus enormous spread concessions to trade even relatively small amounts like $1mm USD are much more expensive.<p>-What backs it other than speculation? Scarcity itself does not imply value. I don't see a significant "bitcoin economy" out there. Yes, you can buy things with them, but most of these things are priced in dollars. Sellers are accepting bitcoins only because they can sell them for USD, EUR, etc. to speculators. They have no particular attachment to bitcoins themselves and could just as easily accept another crypto currency provided speculators were active enough in the market. How many people are paid a salary or renting an apartment for a <i>fixed</i> amount of BTC per month?<p>-Many bad actors in the market with little regulation. There have been numerous scams and untrustworthy exchanges out there. It's like taking a trip back to the depression-era bucket shops.<p>-Consumer unfriendly: the average "man on the street" can't secure his wallet file and even many technically sharp people have been ripped off. Non-reversible transactions aren't a positive for most users and requiring traders to use an escrow service further increases costs. Network can't handle high transaction volumes and sellers need to wait for confirmations or risk fraud, so the use case of everyone buying their morning coffee with bitcoin seems shaky.<p>-Extreme volatility and lack of liquidity make it a poor store of value or unit of record, two things that are extremely important in a currency. Yes most government issued currencies experience inflation, but I can keep my paycheck in the bank for months or years without its value changing wildly, and I know what a loaf of bread costs in USD within a tight range.<p>Some of these are fixable and I see some growth potential in micropayments or as a money transfer mechanism for people who don't have access to traditional financial institutions, but what is the general purpose use case? What can I do with bitcoin that I can't with paypal or even a bank account (many let you instantly transfer money these days for no/low fees to pay friends, landlords, etc.)?
I had more optimism for Bitcoin before I saw people so aggressively evangelize it. I think it has great potential as a digital currency but some people are making into what's almost a totem.
Benjamin, you're conflating bitcoin the protocol with bitcoin the 'currency'.<p>This is an all too common mistake, so please don't feel too too bad about it. Bitcoin protocol does have some interesting things to offer us and I'm sure it will be built upon in novel ways.<p>Bitcoin 'currency' on the other hand is a non-starter and as time goes on we will see it discarded.<p>I hope more people would concentrate on the protocol but about 99% of what you hear and the energy of people is set on bitcoin 'currency'.
The problem with bitcoin is that no one is using it for its intended purpose - to buy things. People are using it as an investment or are speculating on it, which is not the purpose of a currency.<p>What you end up with is the anemic system that exists right now, where no one is advancing the actual bitcoin cause, everyone is just setting up exchanges to make money from transactions.
The absurdity of this kind of thought is just profound. Thinking like this may be useful as a means of encouraging hope when all hope is lost, but Bitcoin is nowhere near there yet. Most of all this kind of talk smacks of <i>deep desperation</i> - "why won't people love me?"<p>I understand fully why one might feel so desperate. Bitcoin may have the potential to be truly revolutionary. Bitcoin solves the problem of orchestrating an international currency in a manner that limits the implementation details to the design, not banking/payment industry/political types who historically - for one reason or another - end up building in significant <i>rigidities</i> to the system.<p>It doesn't take a PhD in Economics to see the potential benefits of eradicating PayPal and consumer banks (although it may take one to see the potential pitfalls). More than this though, Bitcoin opens the door to truly free capital flow. It is possible to work in the Western world for a month or two and move, say, far East, and live like a king on the savings for a year or more. Why can't we just buy the stuff over there cheaply and consume it at home? One major reason is the rigidities in capital flow - it is hard, risky business in the current system. As a large company in a Bitcoin world you don't have to worry about a great class of risks of international trade, dumping money into the Cambodian economy is no longer a question of FX risk and "can I get it back out?"<p>This is a great step forward on the way to homogenising international capital stores i.e. <i>ceteris paribus</i>, rich people buy where things are cheapest, like in Cambodia, thereby flowing capital to, and driving up prices in, Cambodia. Cambodians get richer and the West gets poorer. Bitcoin has the vague potential to be the great equalizer.<p>We have seen some evidence of this at work in the EU with the Euro, if you look past the troubling dynamics of transition. Imagine how very different the US would be if every state had a different currency and payment processing rules, the diversity in income would be profound.<p>An educated economist will see a great many problems with this utopian vision, but will likely agree the aim is noble and that the basis - Bitcoin - is the closest thing we have so far to a workable solution.<p>Bitcoin may be as revolutionary as the fanboys want it to be, even if they don't understand why. My personal thought is that Bitcoin will soon be seen as the thing that started it all, but the solution won't be Bitcoin itself. There are too many problems - no matter how many times you read that a fixed supply currency is the greatest thing since sliced bread, it <i>really</i> isn't. It's also woefully easy to steal and the mining/verification mechanism is far too resource intensive and encouraging of looney speculation making its value at any point in time completely impossible to reason about.<p>If you love BTC today, don't spout bullshit strings of meaningless words in some grandiose display of being ahead of the times. Make it stronger and better because if you don't history will judge this whole thing very severely in 10 years time, when it really is just a way of buying drugs and hitmen.