Bitcoin, the glibertarian dream currency, lost half its value because China shut down the Bitcoin exchange that trades 1/3 of the world’s Bitcoin. Cry a small tear for BtC hoarding douchebags like the Winkelvi, who seem to have a talent for being screwed out of their investments.
The last time I characterized Bitcoin as glibertarian, I got a lot of angry pushback in the comments. Here’s a little explanation why Bitcoin is, indeed, that:
For starters, BtC is inherently deflationary. There is an upper limit on the number of bitcoins that can ever be created (‘mined’, in the jargon: new bitcoins are created by carrying out mathematical operations which become progressively harder as the bitcoin space is explored—like calculating ever-larger prime numbers, they get further apart). This means the the cost of generating new Bitcoins rises over time, so that the value of Bitcoins rise relative to the available goods and services in the market. Less money chasing stuff; less cash for everybody to spend (as the supply of stuff out-grows the supply of money). Hint: Deflation and Inflation are two very different things; in particular, deflation is not the opposite of inflation (although you can’t have both deflation and inflation simultaneously—you get one disease or the other).
Bitcoin is designed to be verifiable (forgery-resistant) but pretty much untraceable, and very easy to hide. Easier than a bunch of gold coins, anyway. And easier to ship to the opposite side of the planet at the push of a button.
Libertarians love it because it pushes the same buttons as their gold fetish and it doesn’t look like a “Fiat currency”. You can visualize it as some kind of scarce precious data resource, sort of a digital equivalent of gold. Nation-states don’t control the supply of it, so it promises to bypass central banks.
People who think Bitcoin is some great thing are know nothing idiots.
In the interest of completeness, Bitcoins have lost half their value in the last couple weeks, but are today worth 8-10 times what they were worth 4-5 months ago.
Every time one of these bubbles happens, the price shoots up 10-20x, and eventually loses only about half of that.
I also recommend reading this post. It’s really excellent.
Bitcoin, Magical Thinking, and Political Ideology
I think ‘gold fetish’ is the key phrase here. Why not just bury pots of various rare metals at random points underground? What, exactly, would be the difference between that and a gold standard?
@Napoleon: I’d disagree-they’re delusional ideologues.
one more idiocy exposed.
The beauty of it for younger Paulites (and such shrewd Foreign operators that saw an opening arising due to American stupidity) is that since they’re the only ones really interested in it, they’ll be doing the mining and at the end, they’ll be sitting on top of piles of the zero sum deflation currency, with which they can rule the world at the expense of everybody else.
After all, you don’t see many people of color, poor people or women taking the time to do bitcoin mining.
@MarkusOfarkus: Great piece-thanks for posting that link.
In the comment thread on the stross article, somebody said one of their favorite bitcoin conspiracy theories is that bitcoin is a “parody of gold”. Hats off to whoever pulled it off, if this is indeed the case.
I learned all I need to know about bitcoin when I found out that the largest exchange was Mt.Gox.
Mt.Gox used to be Magic: the Gathering Online Exchange.
Bitcoin is the digital equivalent of tulip bulbs.
I think the key difference between a gold standard and any of the other standards people have proposed is that gold has a long history of being used as money, so people are more likely to be suckered into believing that there’s something special about it. Also, too, the grifters have invested heavily in gold with the idea that its price will skyrocket the moment we go back on the gold standard.
What I don’t get about bitcoins is how is the exchange rate to actual money created?
How does it get decided the value goes up or down, since there is no underlying basis to the value of bitcoins beyond the people, who trade in them deciding they have value and will accept them as a form of currency.
Why not just have a group that’s decided to use sea shells as currency and send those around the world to circumvent governments?
Seems to amount to the same thing, from my point of view. Bitcoins are just some arbitrary standard that has value because people decided to give it value.
@Roger Moore: That’s a good point. In the real world, the low-information voter/buyer/seller/investor is an important part of the picture.
Gold is rare compared to other metals.
Gold has many properties that make it useful, not only for decoration but also for industrial uses.
Therefore there is an actual tangible – I can touch it, hold it type of value – to gold, beyond what bitcoins could ever be.
The key to understanding the Bitcoin fetish is that goldbugs think that gold has an “inherent value” that exists outside the market value that fluctuates according to supply and demand.
The idea is that since the supply of Bitcoins is limited (like gold), it possesses an inherent value (like gold). Market fluctuations therefore depend entirely on demand, which makes them a purer expression of the Most Glorious Free Market. Or something.
The fact of the matter is that once people started trading them, they became no different than any other investment. They are a smart buy when the price is low. Not so smart when they are overvalued.
It’s decided by whatever the suckers are willing to pay.
@gene108: One way of thinking about it is that bitcoins are a pure supply-side play, since they have zero ‘commodity’ value, and consequently, zero demand-side value. So, we shall see. I’d bet on the ‘bubble’ theory, myself.
@sigaba: …until one of the big speculators cashes out, at which point the value will fall through the floor.
Gold is actually useful for something. No electronics industry without it.
Bitcoins are based on having your computer do busy work and then ignoring the answer. There’s no inherent value to the math that gets done, no reason for anyone to do it except to make bitcoins. People will always try to mine gold, the same can’t be said of bitcoins.
Mike in NC
Opened the local rag to see where Krauthammer was weeping “Welcome 2014, our first taste of nationalized health care”. Of course he’d never complain about it in his native Canada or in his second adopted home Israel. Is he on Medicare?
EFT using pubic key cryptography is a cool technology – low cost, verifiable, non-repudiatable, etc.
The challenge is adapting it to real money instead of beaniecoins.
Jack the Second
Hilariously, there is some supply-side stickiness on the price of bitcoins.
There are basically three groups involved in bitcoins. Users, who want to use bitcoins in actual transactions (sometimes but not always drugs). Speculators, who want to invest in bitcoins and make money. And miners, who mine bitcoins on specialized hardware to sell for good old USD.
The third group is the most interesting. All other things being equal, miners will sell their mined Bitcoins for just above the cost of producing them, the cost of the hardware and electricity. They can’t sell for less or else they go out of business, and they can’t (necessarily) sell for more, or else other miners will undercut them.
To make miners’ lives harder, the “mining difficulty” — which, all other things being equal, is the amount of electricity which has to be pumped into the machines to get out a bitcoin — has increased more than a hundred-fold in less than a year. This is necessary to keep mining a constant number of bitcoins when the number of miners has increased a hundred-fold. Consequently, miners have had to increase their prices a hundred-fold just to stay profitable.
So far, speculators and crime-lords’ hidden bitcoins have been bullish enough to keep up with the increased costs of mining, but the costs of mining are going to keep going up. At some point, the speculators will give out, prices will fall significantly below the mining cost on a permanent basis, and we’ll get to find out what happens when the seigniorage of a currency is >> 100%.
Villago Delenda Est
In other words, idiots. Libertarians are, basically, ideological fools who spout the talk but have no respect for anyone but themselves. They are dogshit.
Villago Delenda Est
They really need to have a long chat with the Spanish Hapsburgs about the “inherent value” of gold.
Obviously, they’ve never read The Wealth of Nations which goes on for a couple of chapters explaining, in painstaking detail, why all money is fiat money, no matter whether it’s based on gold, silver, or glibertarian fantasy.
Higgs Boson's Mate
@Mike in NC:
Don’t know if he’s on Medicare. Do know that in late Summer of 2012 he falsely accused the Obama administration of raiding Medicare to pay for the ACA. In the same spew he lied about Paul Ryan’s budgetary hallucinations claiming that they did not reduce Medicare spending.
Krauthammer is an ass among asses.
@Villago Delenda Est:
You could have stopped right there.
Villago Delenda Est
Which makes it…
wait for it…
@Villago Delenda Est:
Fiat money without the backing of any government.
Shorter bitcoiners: “I will trade you these valuable bitcoins for your worthless fiat currency.”
Higgs Boson's Mate
@Villago Delenda Est:
I’ll bet a case of good beer that I could get more actual, spendable money for a 1959 FIAT 600 than I could for Bitcoins.
@Glocksman: I love that – and, of course, Charlie Stross’s critique. Accelerando, anyone?
Villago Delenda Est
And that, right there, is the supreme irony of the entire bitcoin cult.
This. Whether intentionally or not, it is a fascinating experiment in an inherently deflationary currency. I personally think that bitcoin isn’t going away any time soon, and am totally unimpressed by the 50% loss of value. Chinese were running it up and then China said you can’t get yuan out of exchanges and they ran it back down. The same would happen to any commodity or currency when the size of the market shrunk.
What I think we’ll find is that it may be a viable commodity, but it isn’t going to be a viable currency. Why would I spend my bitcoin on goods when I expect that in a week I’ll be able to buy more goods with it?
To those who argue that gold has some inherent value: yeah, but it’s a tiny fraction of its nominal value.
My own personal conspiracy theory proposal:
We don’t know who designed bitcoin. I propose that the NSA created it and they have some special ability to unravel transactions. So the apparently anonymous transactions are only anonymous to everyone outside the NSA. The more we learn about the NSA and crypto, the less crazy this seems.
Villago Delenda Est
The inherent problem is that libertarians have no respect at all for the rights, positive or negative, of anyone outside their little cult.
These assholes think that they’re going to be the new feudal lords, with unlimited freedom to do whatever they feel like doing with the serfs.
As always, old white people who have fealty to the Fed, debt and all the fake money ponzi schemes. Just wait until your ATM machine can’t pump out enough Benjamins to fill up your wheelbarrow.
Jose Arcadio buendia
Shut up and join the DOGECOIN master race.
@Villago Delenda Est:
Meanwhile, they’ll be the red shirts for the feudal lords, getting machine gunned by Bond and the Royal Navy while trying to protect Stromberg.
I’m giving bitcoins for Christmas to every gun freak I can find so they have something to protect.
So this ultimate currency free of all governmental interference can take a 50% haircut because a government shut down a website. Or for that matter, the ultimate store of value can lose half its value because any website shut down.
And @Chyron HR, yet another way it’s like gold. There are plenty of ads for people willing to trade their gold for your worthless currency, and a good proportion of the ads claim you need the gold because the currency will collapse Real Soon Now. Noble of them.
@Higgs Boson’s Mate:
Sod Fiat money. I want Ferrari money.
OT, good headline:
That’s a pretty good summary of asset bubble psychology. The problem is when you run out of suckers who want to buy into the market and the price starts falling. Then you get a great stampede to get out of the market before the value collapses further. For something like bitcoin that has no intrinsic value, there’s no floor to keep the price from falling to zero.
@Jack the Second:
I think you’re wrong that the price is tied to mining difficulty. Clearly, that sets a lower bound on the price, but even at $500-$600 the price is far above the cost of electricity. The limiting factor here is the availability of mining hardware. There have been 4 generations of mining: CPU (your computer), GPU (your graphics hard), FPGA (field programmable gate array), and ASIC (application-specific integrated circuit). Each generation has increased the mining power to electricity power ration by at least an order of magnitude. I don’t think at this point you can make money (if you have to pay for electricity) without an ASIC-based mining rig. These are pretty damn niche and there isn’t an infinite supply of the hardware. So it’s relatively difficult to get into mining at this point. Essentially, miners are getting rent on their mining hardware.
You’d think there would be more self awareness.
I’ve got a cousin who is a goldbug. He’s about 20 years older than me and has been selling off rental homes while plowing the proceeds into gold and silver. He had at least 800K in gold and silver in a safe when we last discussed it 2 years ago – probably up over 1M now.
Tried to get him to liquidate it and to start gifting to kids and grandkids now (he doesn’t need it) but he refused, and is convinced that the dollar is going to collapse any moment, because it has been ready to fall apart since 1913.
@Roger Moore: IIRC, the tulip bulb craze crashed when someone inadvertently ate an extremely valuable tulip bulb and everyone realized that these things weren’t an awesome store of value. It’s considerably harder to destroy gold. It is possible to “destroy” bitcoin, but it’s easier to protect against. And of course, they’re not naturally perishable like tulip bulbs.
Thank you, Ed.
@replicnt6: See: Extraordinary Popular Delusions and the Madness of Crowds:
Jack the Second
Something like 20% of the current mining hardware came on in the last ~2 weeks.
@Ken: it just goes to show that governments are bad, mkay? Actually, that’s the one part of what passes for libertarianism today that I don’t understand: the idea that the government (or “state” as they like to say) should be dismantled. I get not trusting the government – I’m naturally leery of large institutions. But how you accept the Lockean view of human nature in light of, well, world history, I just don’t get that
Villago Delenda Est
Still, the Spanish Empire, gorged with gold stolen from the Aztecs and Inca, went bankrupt.
So, one note about the “limited supply of BTC”. The brand is limited. Cryptocurrency supply is infinite. I can get Litecoin or Primecoin or Dogecoin, too. If I’m just looking for “arbitrarily defined number that functions as data”, those aren’t in short supply.
The only question is how much someone will pay for my branded random number.
I heard a promo on NPR where some show was going to profile a couple who decided to live for a month spending only bitcoin. They promo bit had them at what sounded like a coffee shop and the woman asking, “Do you take Bitcoin?”
Woman: Bitcoin. The online currency?”
Don’t know how it ended as the promo ended there.
@Violet: At a guess,
Followed by the couple debating for the rest of the show whether they should log on an exchange, convert some bitcoin to US$, and transfer the dollars to their debit card account so they can buy the coffee. One would argue they should, since they want the coffee and the whole point is to show you can live on bitcoins; the other would oppose it because everyone knows bitcoins only go up in value, so tomorrow they would be able to buy more coffee for the same amount of bitcoins.
ETA: I’ll believe bitcoins are taking off when the HTML text editor doesn’t mark “bitcoin” as a spelling error.
@Violet: Sounds like a hungry, hungry couple.
@Violet: That’s funny because my son and I were talking about scratch off tickets yesterday. He asked me if he could take a $2 winner to the store and buy something.
And we discussed that it did have a value, but only to the right venue and was not accepted as a payment for debt by most places.
I somehow doubt we’ll ever see a self-checkout lane that has a “Bitcoin Accepted at This Station” sign.
@Ken: Here’s an article on them. Sounds like they actually succeeded, including international travel. Edit: And it was for three months not one.
Certified Mutant Enemy
Silver, though less rare than gold, is more valuable in regards to uses in industrial processes.
Villago Delenda Est
Because bitcoin violates the one thing that all currencies need to have: widespread acceptability. This is where the evil existing “fiat currencies” have them beat to all hell.
Smith explains in gruesome detail why gold and silver were so useful as mediums of exchange. They were portable, and they were durable. Still didn’t stop the price of grain over a couple of centuries in silver coins from rising as the supply of silver coins (coming out of Potosi) increased in Europe.
@Baud: In their defense, bitcoins aren’t known to cause cancer.
Villago Delenda Est
In Village speak, he’s flip-flopped! Flip! Flop! Flip! Flop!
@Certified Mutant Enemy:
Silver is also in small enough denominations to make little transactions without needing change like a Gold Eagle. (I can’t change it, but if you want to get a semi-trailer you can haul off 1000 gallons of milk.)
@Villago Delenda Est:
He needed flipping. Thanks Edward.
Quibble – a cigarette has utility to a prisoner.
the latest iteration of the “greater fool” theory on which most speculative transactions are based.
@replicnt6: Yeah, the history of cryptography has been “here’s our unbreakable for x years code” followed by someone cracking the code in x/y years, where y is usually 2 to 10…..
If the NSA didn’t invent it, damn straight they’re dedicating a few clock cycles to cracking it…
The key thing is that bitcoins have no intrinsic value, which makes them a piss poor store of value. They may not be as easily destroyed as tulip bulbs, but they have even less intrinsic value. You can’t even eat them when you’re hungry.
In any case, there are some scaling problems with the bitcoin protocol that will prevent it from growing beyond a certain size. Basically, you can’t keep a distributed system that doesn’t depend on people trusting each other synchronized when the average time between transactions is shorter than the time needed to transmit a record of the transaction to the distributed system that records it. IOW, when the time between bitcoin transactions is shorter than an average ping time, the system breaks down. Bitcoin will never scale to tens or hundreds of millions of transactions per day, which means it will never be more than a toy currency.
You overlook the masturbatory benefits of owning bitcoins.
Yes they have…..x infiinity. :)
No upper limit on someone creating a competing electronic currency.
@Certified Mutant Enemy:
Not really. Silver is used more than gold precisely because it is more common and cheaper. If gold were as common and cheap as silver, industry would find a lot more uses for it. If it were cheap enough, gold would find all kinds of uses that you’d never believe. For example, it would be better than copper for plumbing and electrical wiring if only it were cheap enough to make that practical, and it would be a great choice for environmentally friendly shotgun pellets. It sounds crazy to think about using it that way, but it’s only scarcity and price that prevent us from doing so.
Whatever gets you through your day.
Whatever gets you through your day.
Hmm. Betcha a dollah that’s correct.
Well, taking solace in one-liners ain’t gettin’ it.
@replicnt6: So now we’re going to find someone writing a virus to ‘bot an army of miners.
@doug r: Already done.
@Baud: Bitcoins inherently make masturbation better? Or is it like a different category of pr0n?
So, when I get tired of watching my collection of bronies/furries slash-fic animations, I then switch it up a little and log into my bitcoin account wallet?
Trying to determine if they do in fact have inherent value. For a friend.
@MattF: Don’t get me started on real estate.
You don’t say!?!
So the problem isn’t that the NSA is actually doing something wrong, but that Snowwald have made people think the NSA is doing something wrong. And in response, the government is going to compromise its ability to defend the country as a PR move.
Considering it would require replicating the conditions of a supernova, I’ll go with “impossible.”
did Fiat money buy Chrysler?
And because converting them to dollars would mean you can’t actually live on bitcoins.
I’m thinking some small country can be used to open the bitcoin bank. Exchange is one thing. But I’m not going to worry about the dollar until folks start banking with it.
Why don’t you stick with obsessing over Snowden/NSA you glorified reddit poster muckymux. You clearly know shit about currency and virtual currency. You read something Krugman wrote about it once and now you think you are some kind of expert.
Reminds me of the time wr0ng way Cole bought into the whole “see, stock market is down the day after Obamacare was passed therefore it’s a failure”.
Here is a little tip. People with ADD have no business saying shit about currency/stock/comodity markets that run on cycles that take decades to play out.
@Mike in NC:
Krauthammer is disabled, and presumably has significant medical needs. I don’t begrudge him whatever help he gets for this – but it’s a certainty he’s getting care that is massively subsidized, most likely by getting good insurance coverage through a large group plan obtained through his employer (or even perhaps his union!). This means, of course, that he is getting a lot of the benefits the ACA promises other people: bans on Preexisting Conditions and on Rescission, Community Rating (in his case, the most extreme Community Rating imaginable, given he’s an oldish but infra-Medicare aged man with serious medical issues), probably some others – even including the ACA’s extensive mental health provisions (his Wikipedia page says he’s got a histor of mental issues).
Darn nice of him to be so alarmed the ACA is getting these advantages he so enjoys to other people.
BItcoin is the Pets.com of the modern era.
@MarkusOfarkus: after reading that, what the bitcoin market reminds me of is the Confederacy. But it’s typical of libertarians: how do you make people follow the rules without enforcement.
Bitcoin is too unstable to serve as a currency. As soon as something becomes primarily a speculative investment, it loses the stability it needs to be transactional. A menu is impossible if the prices change significantly each day. You have to pick one, and the market is picking speculation. It’s still functioning (poorly) as a currency mainly because for illicit activity, it’s difficult to beat, so they’re suffering through its limitations. It’s better than Tide, at least.
Do you really believe that gold’s value is largely intrinsic? It’s somewhat useful for some things, but it’s not going to feed you. I have a friend whose brother is into guns, gold, and bitcoin. He thinks civilization is going to crash or something. I keep wondering why he thinks people are going to want gold when they need food.
Is that really true? If so, it’s fascinating, though I’m skeptical. Transactions take considerably longer than the ping time (which, is an issue in itself when the price is volatile). I think a transaction isn’t completed until one or two blocks have been produced which is 10-20 minutes.
Not really. Gold exists as a single stable isotope, 197Au. If you irradiate that with neutrons, it will absorb them and turn into unstable 198Au, which decays to 198Hg with a half-life of about 2.7 days. I’m sure there are other nuclear reactions you could carry out with gold using a cyclotron that would convert it into something else. You need some moderately sophisticated equipment to destroy gold, and it will take a lot of power to do it on an industrial scale, but it’s a far cry from requiring a supernova.
@Roger Moore: Cool. Reverse alchemy.
No, but I don’t think it’s a good store of value, either. It’s obviously subject to large-scale speculation, which is why it’s off almost 30% this year. And I think I misunderstood the way the block chain works, so that my claims about the scalability of bitcoin are wrong; it should be able to handle more transactions than I believed.
Anybody who’s ever collected coins, or stamps, or baseball cards, or Hello Kitty Beanie Babies, knows that rarity != value. Rarity + desirability = value. Bitcoins are not money. Full stop. End of argument.
They’re not backed by anything, not even the possibility that, unlike that Mark McGuire rookie card in your attic, you can put one in a frame and hang it on the wall. It’s not even useful, like WoW gold, actual gold, Canadian Tire money, or Green Stamps. It’s just something some guy made up, like Scientology or Objectivism. It’s worthless because you can’t justify its value.
@Roger Moore: Argh. I figured I was being a little too glib.
Here’s a fun thing to play with: an interactive chart of the nuclides. The row for gold–Au–is at Z = 79; the black nuclei making up the spine are the stable ones. The zoom tool is at the upper right.
@Joel: Or the pet rock.
As I said to my quasi-wingnut brother-in-law a while back,
“A currency backed by the full faith and credit of a sysop? What could possibly go wrong?”
“In the interest of completeness, Bitcoins have lost half their value in the last couple weeks, but are today worth 8-10 times what they were worth 4-5 months ago.”
They shot up to being valued at 8-10 times what they were 4-5 months ago for a short period, and now are down to only 4-5 times what they were worth 4-5 months ago. At any rate susceptibility to hyper-inflation followed by rapid hyper-deflation isn’t exactly a selling point for a currency….
“Every time one of these bubbles happens, the price shoots up 10-20x, and eventually loses only about half of that.”
Given the absurdly low volume of trade it’s hard to say what they are actually worth in the first place. Most likely any substantial amount of them is worth significantly less than what is reflected on the exchanges though.
Also, it could be diluted to the point where it isn’t practical to recover, e.g. by dissolving it (aqua regia) then spraying the solution over the open ocean.
GHayduke (formerly lojasmo)
Derp is a glibertarian asshole? Hoocoodanode?
There is a lot of value in a system for disintermediation of electronic funds transfers. There is not much value in a currency that fluctuates wildly and is primarily a vehicle for speculation. One hopes that bitcoin 2.0 can solve the problem with wild speculation. Some sort of functional equivalent to a central bank would be helpful here.
Gold has some industrial uses, but the fluctuations in price over the past few decades have made is undesirable as an industrial feedstock, so lots of substitution away from gold. Industrial use justifies maybe a few percent of the current price.
Anyway, who wants a useful substance for money? Just increases the opportunity cost of the money stock. I think one of the reasons gold and silver have been popular as money is that there never has been a whole lot of industrial uses for them. At times, they could be used for things and there were few substitutes, but those industrial uses could never come close to absorbing the stock used for money, by orders of magnitude.
Interesting that gold is shitting the bed too. And in real value, gold has permanently shat the bed for twenty years now, unless you are into speculation on medium term nominal price run-ups.
Bit-coin will never be a popular medium or exchange or store of value as long as it has fluctuations of 5, 10 20 percent on short term bases. That is just ridiculous for a money. It will be play thing of fools and rich speculators.
@Spike: I agree. But a system of electronic transfers is mostly what the money we, and big corporations, and banks, and financial firms, use as money now. What is needed is something like a central bank to act as a lender of last resort, pool liquidity risk, and ease quick payment and transfer of funds. And if bitcoin had that, then it would be pretty much like Eurodollars, or shadow bank money backed by MBS and such like. it would not fit into the galaxy of incoherent glibertarian fantasy worlds anymore.
@jl: Sorry, when I said ‘Eurodollars, or shadow bank money backed by MBS’, I wasn’t thinking. What I meant was the fed funds market.
Eurodollars, or shadow bank money backed by MBS have the same problem as bitcoin in that there is no central risk pooling, or lender of last resort, or resolver of liquidity risk. Which is why those two money markets started acting a little bit like bitcoin during the 2007/8 financial panic. (Edit, and when these markets started acting even a little bit like bitcoin, they were basically done, over, trashed, through dead dead dead as money, in course of a couple of weeks, until the Fed and ECB and governments stepped in to save them).
So, for bitcoint to be a real money, it would need either big bad big gummint (US Treasury) or big bad big business (current private bank clearing houses, which no one hears much about, but are the first backstop for liquidity risk every day before the fed funds market clears) or you need a mix of big bad big gummint and big bad big business (U.S. Fed).
So, bitcoin is another case of reality 1, libertarians 0. Too bad. They should leave off of childish things.
(Re, the valuation of bitcoins)
That brought up images of the dirty socks and jocks available on Ee-bay for exorbitant sums that appear solely to be offered for the amusement of the sellers. At least I hope so.
Haters gonna hate. But, since everyone here loves pets so much, why not go long on Dogecoin instead?
I don’t think there needs to be a lender of last resort for Bitcoin 2.0. Those are in place to keep national economies from collapsing. Major corporations would need to be keeping their books in bitcoin, and I don’t see that happening anytime soon.
But what there does need to be is some means of enforcing price stability. Libertarians are so freaked out about the possibility of inflation – and hyperinflation – that they built a currency that is susceptible to the exact opposite problem. Hyperdeflation.
If there were some means of ensuring bitcoin hums along at a nice, steady and predictable 5% inflation rate, that would go a long way toward making it a viable means of exchange. But the known way to manage that is with central bankers, and the mere thought of central bankers gives libertarians nightmares. Thus, there will need to be some sort of further innovation – decentralized bankers, perhaps – in order to make price stability possible without alienating bitcoin’s primary audience.
” If there were some means of ensuring bitcoin hums along at a nice, steady and predictable 5% inflation rate, ”
Well, then, we need to find some other means then. What would they be? Hundreds of years of experimentation with banking systems, public and private, have come up with clearing houses, mutual insurance systems that at some point have to be controlled by some social coercion, some means of imposing both price discipline to force payment, and some form of payment elasticity and delay to prevent liquidity crises.
That leads to central clearing houses, backed by big private or public organizations, lenders of last resort, mutual insurance pacts, ‘printing’ money from time to time, all of which libertarians don’t like.
Something like bitcoin might work in the future, but libertarians and glibertarians will not be the ones able to pull it off.