Skip to comments.A Prediction: Bitcoin Is Doomed to Fail
Posted on 12/02/2013 8:26:08 AM PST by Star Traveler
The developers of bitcoin are trying to show that money can be successfully privatized. They will fail, because money that is not issued by governments is always doomed to failure. Money is inevitably a tool of the state.
Bitcoin relies on thoroughly contemporary technology. It consists of computer-generated tokens, with sophisticated algorithms guaranteeing the anonymity, transparency and integrity of transactions. But the monetary philosophy behind this web-based phenomenon can be traced back to one of the oldest theories of money.
Economists have long declared that currencies are essentially a tool to increase the efficiency of barter, which they consider the foundation of all organized economic activity. In this view, money is a convenient instrument used by individuals to get things done. It is not inherently part of the apparatus of government.
I think of the concept of privately issued tender as right money, because the whole idea appeals instinctively to right-wing thinkers. They dislike centralized authority of all sorts, including monetary authority. For example, Friedrich Hayek, Margaret Thatchers favorite economist, proposed replacing the states monopoly on legal tender with competing currencies offered by rival banks.
(Excerpt) Read more at dealbook.nytimes.com ...
Asserted with out proof. Without even defense.
Ah... so we see a hatin’ on the right in the middle of the “analysis”.
This guy hates bitcoin BECAUSE the government can’t manipulate it.
“This guy hates bitcoin BECAUSE the government cant manipulate it.”
To many (about 40%) in this country Government is both spouse and deity. And that number is growing.
Bitcoins have value because other people think that they do.
“Similarly, truly private money is an inferior alternative to the money that comes with the backing of a political authority.”
Right. There could very well come a time when that “truly private” chicken is worth more than that corrupt “political authority” $100 bill. In fact, I’ll bet on it.
Federal Reserve Notes have value because other people think they do.
This article has actually made me curious about the validity of Bitcoins. The article misses the most important component of ALL currency. Confidence, followed closely by demand. Unadulterated barter between two entities engaged in commerce is not affected by the currency or any government. The entities must decide on what is traded, whether money, gold, bitcoins, goods, services, etc. Commerce should not be reliant on the government. So from where an agreed upon currency comes from should make no difference of its success or failure.
Bitcoin is supposedly limited to only 21 million units. Similar to Gold, it is a limited supply (no even yet fully distributed). Confidence may be a problem if you can’t hold it, feel it, smell it and taste it. You have to trust another entity to hold (or recognize) your bitcoin.
Demand is another story. A Bitcoin value is based on demand which is ironically based on confidence and security. If I have 4 tons of Gold divided into 1 once units in my basement, it’s a good bet it will always be of value to others. But if the power goes out, I can’t spend a bitcoin.
I’m going to look into it some more, but only as an investment, not as a viable currency. How could I make money on this and at what risk? When the dust settles, what will a Bitcoin be worth? How easy will it be to trade as the value goes up and down? How secure is it? Will it be recognized as wealth in a portfolio?
They’ll have value as long as there is confidence that the next guy will accept them in exchange for a desired good or service.
The “backing of a political authority” means they can put a gun in your face and make you accept it.
Lefties love this concept to an equal degree that they deny that it’s true.
You can do a printout but that still is just a check that sez you have zeros and ones somewhere on the internet.
And I've heard all these stories on how bitcoin is infallible and safe yet they've already had incidents wherein people gamed the algorithm and produced illegal bitcoins.
So no thanks.
I'll put my trust in precious metals. Copper Brass Lead Aluminum and Steel.
5 minutes after the first genius thought of trading in gold coins a “political authority” thought of mixing a little led with the gold to make it go farther.
Yep. But then the truly private chickens will become nationalized.
The idea of an online currency was predicted in N. Stephenson’s great book “Cryptonomicon”.
Right. We have a currency backed by nothing but the flimsy concept of confidence. What could possibly go wrong? lol
Bits and Bob [analysis of Bitcoin]
This is true of course. But he could have offered proof and defense because it is not hard to do. Here is how:
Bitcoin is a threat to all governments everywhere.
Bitcoin is a threat to all banks everywhere.
Bitcoin allows unaudited exchanges between free individuals.
Governments and Banks cannot allow bitcoin to succeed.
Ergo Bitcoin will fail.
Actually I believe the above is correct. The only question is when. I just don't believe that our government can allow bitcoin to succeed as it is currently implemented. The laws restricting it's use are certain to come pouring out of Congress sooner if not later. The Supreme Court may or may not accept the inevitable challenges to these anti-freedom laws. I would not be surprised if the Supremes dodge the issue completely assuming the lower courts rule in favor of the government.
But I will make yet another prediction. Bitcoin will just go underground. Transactions should be easy. Purchasing bitcoins somewhat harder. I'm not sure how that will be done.
I thought this was from The Onion.
The biggest liability and IMO the failure mechanism, is that there is no tangible value for a bitcoin. It is merely an internet creation relying on popularity hence value. Once the fad fades, bitcoins evaporate in value.
The New York Times is a contrarian indicator for me. While I never believed in BitCoin before, now that the NYT hates them, I love them.
Yep. Just like the Federal Reserve Note.
All fiat currencies are scams.
Bitcoin, or something like it, will thrive until the authorities do better.
In other words government currency is inherently better, but the people in charge are letting us down. Same argument as the GOPe - big government is the answer, as long as we are in charge.
I thought this was from The Onion.
Not quite that authenitic or reliable a source: merely the New York Times.
Money it seems to me is anything that both parties agree to exchange for goods or services. If enough purveyors are willing to accept bitcoins in exchange for their goods or services bitcoin will succeed. The government by necessity will use every attempt in their power to stop the idea of bitcoins because at this point they have no control over them.
One of my all time favorite books!
Bobby Shaftoe is a riot!
When he runs around screaming "Abandon SHIT, Abandon SHIT...!" after the ship he was on crashed into Norway I laughed so hard I actually came close to passing out from lack of air...
“They will fail, because money that is not issued by governments is always doomed to failure. “
I have no opinion as to whether bitcoin will succeed or fail, or whether it is a great idea or foolish; but I do not accept the premise of this article because it is obviously wrong. Whenever governments do a poor job of regulating commerce you get a black market. We have a black market for many things in the US. Russia has an even bigger one. Black markets thrive because they are either more efficient than government regulated ones or because they provide access to things the government does not want to be bought or sold.
If this person’s theory was correct then illegal drug trade would have collapsed as a business because they do not have government support.
If countries attempt to outlaw it, it will become even more valuable.
It is certainly going to be an interesting aspect of economics.
You’d probably like Stephenson’s “Quicksilver/Baroque” trilogy as well then.
The ancestors of the characters in Crypto are there except for the mysterious Root guy, who, I think is the same guy in both tales.
Bitcoin might fail but not for the reason this doofus says
I have some deep doubts about bitcoin but for very different reasons.
Guess he missed the period 1800-1863 in American history where money was ALL privatized. The ONLY thing government can do-—and it is legit-—it accept the payment of a certain money for taxes. That is how they give national fiat money value (and why Confederate notes failed so miserably).
Economic history shows that different money forms (gold, bank notes, Bitcoin, etc.) can co-exist as long as government does not demand monopoly power over over media of exchange. For the near future, the dollar will tend to be preferred because (1) the public is used to dealing in dollars and (2) governments demand dollars for payment of taxes, purchase services in dollars, and pay benefits in dollars. But this could change if inflation takes-off.
I heard an interesting description of bitcoin that sort of clarified it in my mind.
Imagin a society where the currency is large rocks. You can trade large rocks with each other for goods and services, and you can even go to work in the rock mine to mine your own new rocks.
Everyone is happy with the system.
But on the way back from the rock mine, you drop a large rock into the lake. It still exists, but it is underwater.
Well, as long as you and everyone else agrees that you still own that rock, you can buy and sell the rights to own that rock, as long as everyone is in agreement.
That is bitcoin, everyone participating agrees on the value and ownership of bitcoins, but no actual rocks exist.
No. Money is most definitely not the sole domain of the state. And any currency lacking any backing can be expected to eventually fail. Dollars or Bitcoins or Monopoly money
Hmmm ... that sounds like a description of the US Dollar ... :-) ...
Print up some of your own and you will definitely believe they have value when they throw your sorry ass in jail!
Gold could be used in place of bitcoins in this argument. If gold can be managed, so can bitcoins.
The same reasons and techniques to shutdown E-gold can be used to shutdown bitcoin. Well, except that e-gold had actual gold to raid, and there's no pot of treasure behind bitcoin that can be confiscated.
There is a place for digital currency though. Suppose the Chinese government decided to create it's own digital currency but backed each unit with gold. The fact that it would be an online currency means that it could be in world wide use almost instantly. Backing with gold means that it would be more trusted than the FRN or bitcoin, once folks got used to trusting the Chinese government (dumber things have happened).
Hey, to some who trade those things its still currency. Just not enough people got involved to make it universal. Only time will tell what happens with bitcoin but I’m thinking that something is going to replace the US dollar or any other current exchange. And it will be worldwide.
All fiat currencies are scams.
I don’t want any of your bitcoins but I’ll take any dollars you don’t want.
“But if the power goes out, I cant spend a bitcoin.”
Can’t spend ‘em if the internet goes down either. In fact, if the power or internet goes down I’m not sure they really exist any more. Of course, under those, circumstances the dollar is in almost the same boat, excepting the little bit of actual cash that might be stashed.
The idea of an online currency was predicted in N. Stephensons great book Cryptonomicon.
Bitcoin is backed by nothing.
FRNs are backed at least by the potential of the US to tax future generations.
“And I’ve heard all these stories on how bitcoin is infallible and safe”
Not safe from stupidity though. Last week a UK guy lost 7,500 bitcoins (then 9 million worth) when he threw out the hard drive that contained them and he had no backup. Buried in a landfill with little to no chance of retrieval.
“A Prediction: Bitcoin Is Doomed to Fail”
So is the dollar. All fiat currencies are doomed. Not a single one has ever survived in all of history.
Bitcoin is a commodity the value of which depends on the supply and demand. The supply is fixed as the formula has a fixed number of solutions. As folks become leery of government manipulations of currency this one seems more reliable.
I say Bitcoin is going to be around for a long time and will become ubiquitous - you will be able to use it in all countries without the need for currency exchange.
You purchased secure cash and it was supposed to guard against fluctuations and whatever. At first the government tried to stop businesses from accepting it, how do you tax it? The IRS didn't know what to do with Secure-Cash certificates. So acceptance from offline businesses was slow.
Bitcoin fulfills a lot of that, doesn't it?
Here’s something from Wired Magazine that gives you some background and history on how it started. However, it’s not a current article as it’s two years old.
The Rise and Fall of Bitcoin