Bitcoin Is a High-Tech Dinosaur Soon to Be Extinct(bloomberg.com) |
Bitcoin Is a High-Tech Dinosaur Soon to Be Extinct(bloomberg.com) |
In other words if you strip away everything that makes BitCoin different and unique from its predecessors, BitCoin looks the same as its predecessors.
I agree that bitcoin might be harder to kill due to those technological aspects, that does feel like it was not sufficiently addressed in the article.
I think the point is Bitcoin is revolutionary in many ways than just being a digital currency. It's also P2P, and these type of technologies seem very hard to shut down by governments, after reaching critical mass. There are probably a lot of things governments could do to slow it down, but I'm not sure they could kill it.
So, it's going to be slightly more regulated. Big deal. People say it has no value, but it does. A bitcoin, at this very moment, is worth ~732USD. That sounds like value to me. On top of the value people give it, it has value in that nobody owns the network, nobody can regulate transactions used with it, and anybody with access to a computer can trade it for goods or "real" currency.
I think people who don't like it a) are uninterested and sick of hearing about it b) lost all their money by buying on peaks (or just never bought in when it was $0.20 and are pissy about it) or c) don't have a clue what they're talking about.
At this point, it has to be treated like a volatile stock. Does it have value? As much value as someone is willing to buy it off of you for. Will the price go up or down? Impossible to tell. Is it going anywhere? Doubt it.
I predict that as more people adopt it and as it becomes more mainstream, the value will increase logarithmically and stabilize.
Right now there are plenty of people in both camps. What do we do then? If we're just talking about predicting Bitcoin's price, I don't see that we have much reason to believe we can do better than chance.
You're right. If you have your money in bitcoin right now, you are taking a pretty big risk. However, I personally think that if the past year is any indication, there's not really a cap to the value it has at this point. It could add another few 0s to it's value by next year (subsequently taking other altcoins with it).
At the very worst I think it could drop down to ~100USD, but to go past there would be really difficult as it spent a lot of time building that base between 100-150. Still, that's about 80-90% loss if you were to buy today.
You'd be stupid to put in your life savings, but if you like high-risk, high-reward investments, it might be worth it to throw a few grand in.
The content - the interesting part that should be taken seriously - is about whether basing our economy on Bitcoin is a good idea or not. That is a serious economic question that has nothing to do whatsoever with the technology of Bitcoin.
The content concludes that Bitcoin is a bad idea economically and, unfortunately, the title then highlights the (possibly erroneous) conclusion that this means Bitcoin is necessarily doomed.
It is unfortunate that these different questions surrounding Bitcoin tend to be conflated. Let's try to avoid that here.
FWIW many economists were skeptical of the Euro zone because it failed to satisfy some of the criteria of a currency area. This resulted in problems for some of its members following the 2008 crisis.
* I've <5 USD in bitcoins, so not heavily biased.
People who live in a G4 country are apparently incapable of imagining that the situation elsewhere is seriously different than in their own country.
There are lots of Mickey Mouse fiat currencies around issued by the banana republics that keep debasing them until they collapse. Even the Russian ruble is a joke that became entirely worthless, three times, in the span of two decades.
Instead of dollarizing during a monetary crisis, as these smaller/weaker fiat currency areas used to do in the past, they may elect to bitcoinize.
If that happens, you could end up with an entire country using bitcoin. As soon as this happens, nobody will ever manage to eliminate bitcoin in that country.
History does not repeat itself. Collapsing currencies now face a prospect of hysteresis. Reintroducing fiat currency will not work if people have already moved over to bitcoin.
With smaller fiat currencies collapsing one by one -- as they always do -- bitcoin will keep growing stronger and stronger.
Why not?
> With smaller fiat currencies collapsing one by one -- as they always do -- bitcoin will keep growing stronger and stronger.
Why would Bitcoin be immune from the factors that cause fiat currencies to collapse? If strong fiat currencies can suddenly lose value, it seems likely that Bitcoin could suffer the same fate. Do you have reason to believe that Bitcoin is different?
I think the argument is that the more people whouse it the stronger the currency becomes. It has an extremely low barrier to entry because it can be used alongside other currency, and on top of this is decentralized (no "off" switch).
If fiat currencies are replaced by bitcoin, then yes it probably would become "stronger" (ie, more value in relation to other currencies). That's assuming a country who's currency/economy collapsed decides to use bitcoin as the national currency. I don't see why they would at this point, though.
I do think it's entirely susceptible to sudden value loss, at least for the next 5-10 years.
Witness the digital signature: When properly done, bound to the signer and the data being signed and entirely unique. A brand new thing that could never have been done before, not even slowly with other tech.
Thousands will criticize bitcoin, etc., for how they are like past things, few will grasp how the world is fundamentally different for their introduction.
How?
How the heck should I know? I'm not that visionary, nor that smart. None of us will really know for a few years yet, perhaps longer.
The state will prefer using force to squash bitcoin, because that's what it's good at, but we already have the recent history of digital media piracy to inform us of how difficult it can be; the only thing that has substantially slowed piracy has been to make the legal market increasingly cheap and convenient.
So regardless of who "wins," the existence of bitcoin acts to motivate a restructuring of top-level policies; employment of the traditional warmongering will drive it underground but not out of sight, since there isn't a "head" or "ringleader" to attack.
If someone tries to make Bitcoin illegal in America, why wouldn't large Bitcoin holders try to distribute bitcoins as widely as possible in an attempt to win over the people and retain as much of the value of their Bitcoin holdings as possible?
Here's a short story that resulted from that thought experiment: http://niran.org/bitcoin-fiction/the-blockchain-letter.html
The rational types have already seen it taxed as capital gains in several countries. It's not even a question of if they will fight it anymore. They were never going to.
And also that bank account does not flow through the existing US controlled international financial system.
And that bank account does not require an ID, residency address, or even your name to open.
Oh, and that bank never lends your money out. They keep a 100% reserve on all deposits.
I suppose this bank also has no bank fees, no wire transfer fees, no wire department transfer latencies, no bank holidays etc.
I should also point out that if you are a US citizen, it's nearly impossible to open a foreign bank account without either 1) foreign citizenship 2) connections 3) a very large minimum balance.
Then, you are correct, it's like a foreign bank account.
BTW, EverBank offers foreign currency denominated money market accounts in the US.
Weak opinion article, with no actual coherent reasons to believe him. "It happened before, it must happen again" is not an argument.
BTW I am not entirely bullish on Bitcoin, but it's not because of this guy's (non-)argument.
Perhaps the timing was bad, but I'm not a stranger to investing in the stock market (technical trading, mainly) and the patterns I see are favorable (although not definitive in any way).
I also just like the idea of bitcoin. I see people bash it all the time for not being a real currency, but the criteria they judge it on applies to all currency besides direct commodities (I'll trade you one cow for two goats).
The USD has as much real value as monopoly money. The gold which used to back it also has no real value. These currencies are a representation of value, but hold no value themselves.
I feel like bitcoin is slightly different. Although it represents value like other currencies (albeit with much volatility) it has the unique characteristic of being distributed and non-regulated (in the sense of visibility into transactions). I can send anybody with an internet connection (or hell, even a street address) bitcoin. I can store enormous amounts of it on in multiple places, encrypted, and effectively have a safe I can access anywhere that only I can open.
So it does have intrinsic value in that it does what other currencies do, but better.
Will it live or die? Live, I hope, because I've got a horse in the race now. I would argue though that if bitcoin were to fail, something very similar would take its place.
No doubt there will be protocol changes to blacklist the government miners, a cat and mouse game will ensure. Bitcoin will survive, but it will be a tiny fraction of its previous size.
The article focuses on the history of money, specifically how governments have increasingly monopolized it. And the conclusion is summarized here:
> Anyone who thinks that Bitcoin will triumph has to believe that it will succeed where earlier generations of private currencies failed -- that Bitcoin will, improbably, manage to overthrow more than century’s worth of accumulated state power, jealously guarded and ruthlessly enforced.
In other words, the argument here is that governments will kill bitcoin (if it becomes big enough).
The basis for the argument is that, while bitcoin is new and unique and in no way similar to those old types of money that existed in the past, it is still money, and it is still being used by people within the reach of national governments. And the argument is that those national governments will keep their monopolies on currency by fighting bitcoin.
That leaves open the question of whether they will succeed. Certainly governments have not succeeded at killing another bit* thing, bittorrent.
However, the story is not quite a parallel, as bitcoin will be used in different ways, and likely require far more of a connection to "normal" monetary markets - people will want to exchange bitcoin for standard currency. Governments might be capable of fighting that very effectively, even though they have proven mostly powerless against bittorrent.
As far as I can see, btc is now two things - a protocol which could be used as technical implementation for any number of things, and also implementation of a currency which isn't backed by any concrete asset or entity (other than end users). For the currency, the main value and insurance against risk seems to be in the brand (i.e. what makes a bitcoin worth more than a foocoin).
But it's trivial for a government to kill commercial use of btc as an alternate currency within their jurisdiction. It's not legal tender and therefore can be banned for use in transactions by registered companies - that can be easily enforced by tax authorities and police. It's also quite justifiable on the basis of collecting taxes, protecting the economy generally, and protecting citizens from being caught with paper that isn't backed by law or national banks. Black markets are by definition illegal - the only question is to what extent they are tolerated and that is largely a question of their size and impact on the formal economy.
We need a "foreign country" (or something vaguely like it) to actually use bitcoin. Of course it has the problems of all other byzantine protocols : it's not fast, which would be an impediment, and it requires global connectivity. Also, I think the tracking is a mistake. It allows people to see the obvious problems with the distribution of bitcoin.
Imho, bitcoin is a large step forward, and it's close. Very close. But it's centralized dependencies mean it can't resist governments.
I'm not sure if Bitcoin is perfect. But I do think it's like the Internet was to a lot of older tech, but with respect to money. That says a lot about its potential and its niches. I know that as an engineer it's been frustrating for years, if not decades, being aware that money is essentially just a score, just bits of information, a number, and that moving money around is just like incrementing/decrementing two money fields in a database, but somehow the government banking and paper monetary systems seemed to make it so much more complex and slower and bureaucratic that in needed to be. (Also taxation has been made ridiculously over-complex, partly by malicious intent, I think, and partly and innocently by the momentum of the less tech available in an earlier age, the age before electronics, computers and the Internet.)
In short, Bitcoin is one particular way of letting money be as simple as a shared distributed scoreboard, as just bits in a database. It's not perfect. But it's much closer to what money fundamentally is at its heart.
What about something like this:
* A sufficiently large group of people decide for whatever reason to sell their Bitcoin.
* Prices drop.
* In response, tons of people start selling their Bitcoin.
* Positive feedback loop. Bitcoin loses almost all its value.
Since Bitcoin has no fundamental value, there's nothing to stop its price from plummeting. I think the above scenario is fairly probable.
I'm not saying a crash is impossible, but it's going to take a lot more than a lot of people selling to bring the perceived value down to 0. I think something like an exploitable flaw is a much more likely reason.
The current market cap of Bitcoin is $10 billion (source: https://blockchain.info/charts/market-cap). In the absolute best case, Bitcoin will be adopted as the de facto currency of the entire world, in which case its market cap should rise to about $10 trillion—an increase by a factor of 1000.
That said, it's highly doubtful that Bitcoin will take over all world currencies in the near future. It may be reasonable to expect Bitcoin to grow, but it's almost certainly not going to increase its value by 100x in the next few years.
I can see plenty of good arguments for non-physical currency. Bitcoin seems to combine the downsides of the Gold Standard and the Euro, though. Deflationary currency is a bad idea. Giving up control of one's currency is a bad idea.
Perhaps we can ask each other some questions:
My first question: BTC is designed with very limited bandwidth for transactions (right now it can only do 7 transactions per second). Is there an actual solution in place to deal with this? All I ever see is hand-waving about how the limits could be raised or eliminated, though that appears that it would create a problem with block chain size and bandwidth.
Is there a proposal someplace that actually addresses BTC's current lack of capacity that doesn't just create a rather massive bandwidth and storage problem?
This also has the advantage of instant and micro transactions with minimal fees, while retaining most of the properties of Bitcoin itself (decentralized, trustless, irreversible)
Beyond that, I found their choice of reference level of traffic oddly low given the stated ambitions of most serious BTC proponents.