Tuesday, April 9, 2013

Exceedingly Stale Commentary on Bitcoin

If some libertarian-tinged, anti-government separatists with crackpot views on monetary policy decided they would set up an alternate currency backed by ... I dunno, rare seeds ... and start using it in the Interior West (Eastern Montana, Utah, Wyoming, Western South Dakota & North Dakota, etc.) to engage in anonymous, untraceable financial transactions, including illegal activity and semi-organized crime, and the total size of the market were a few hundred million or maybe $1 billion, we would either not notice or not care.

However, because the motherfuckers who came up with Bitcoin are "technologists" who are trying to "disrupt the status quo", people take them seriously.

The extent to which this lesson applies in other fields (education, transportation, etc.) is left as an exercise for the reader.


Ursula said...

All I'm saying is that when peak seed comes, that seed-based currency will be worth a lot.

Anonymous said...

Knock it if you like, but while Paul Krugman was writing earnest articles in the New York Times fruitlessly trying to persuade the government to print money and drop it out of helicopters, we free software developers went ahead and made up two billion dollars and gave them to ourselves.

Anonymous said...

On Nicholas's main point, if the seeds could be transferred for almost nothing anywhere in the world in seconds, removing the need to deal with the hideous, expensive technological hairballs maintained by PayPal or the credit card companies, I think we would in fact notice.

It might have been nice if the "store of value" people had left this for people who actually wanted to make transactions on the internet and gone off and made their own currency based on Ayn Rand's ovaries. But there is a very important actual technology here.

Nicholas Beaudrot said...

Krugman snark aside, I think that's mostly a fair point. There's a difference between "Bitcoin as a frictionless anonymous currency" and "Bitcoin as an alternative to fiat money". The former is useful, the latter ... notsomuch. Humanity invented fiat money and central banking for a reason. If anything these institutions have historically had anti-inflationary bias (c.f. the ECB today)

That said, when bitcoin prices are up, the trading market shows the Joker lighting piles of fiat on fire, so I'm not sure how many people are actually big on the former but don't care about the latter.

Greg Hao said...

bitcoin actually suffers from the fact that it's trying to be a commodity and currency at the same time.

the fact that it's worth $1B or $2B or whatever right now is actually a very big problem and will prevent it from wider adoption.

Felix Salmon and FT Alphaville have wasted a lot of digital ink over it.

Also, as Alphaville points out, bitcoin, because of its fierce anti-government stance is quite beloved by lbertarian kinds.

Greg Hao said...

@edmundintokyo & nick - http://medium.com/money-banking/2b5ef79482cb

Anonymous said...

I read the Felix Salmon piece that says the commodity-ishness is going to kill Bitcoin for transactions. The problem with it is that it seems to start from the assumption that Bitcoin replaces regular currencies. Some people in the Bitcoin community do indeed say this, but I don't really understand why he chose to premise his piece on the deranged delusions of lunatics.

Once you assume Bitcoin is going to be used for some online transactions but the economy is still mostly going to work in dollars, you don't really have the same problem. You price things in Bitcoins and convert automatically when you pay, so the volatility doesn't hurt too badly there. Neither do I really have an incentive to hoard rather than spend: If the vendor allows payment in Bitcoins, and it's handier for me to pay with them instead of PayPal or whatever, I do. In the event that I thought Bitcoins would rise against the dollar I might top up from time to time by selling dollars, but in practice the market should already have priced that in. I think it's fair to say the current Bitcoin price isn't entirely based on their current utility, and already prices in an allowance for the fact that they may rise in value in future.

Anonymous said...

"You price things in Bitcoins" should say "You price things in dollars".