Skip to comments.Where Bitcoin boosters are getting it wrong
Posted on 01/23/2014 7:59:41 AM PST by Errant
In a recent New York Times Dealbook post, venture capitalist Marc Andreessen argued that Bitcoin is here to stay because it provides a payment system better than the one we have now, particularly for online merchants and international transfers. He likened Bitcoin to other disruptive technologies such as the personal computer and the Internet.
These are great analogies. The personal computer has revolutionized the world, but Altair was not one of the winners. (Remember Altair? It was one of the many pioneers.) The Internet was not the first or even the only network for connecting computers. There were several other early networks including Bitnet (the "Because Its Time" network), which was started in 1981. It thrived for a while connecting university computers, but was eventually supplanted by the Internet as we know it today. I believe that Bitcoin will suffer the same fate as Bitnet: a technical advance that will soon be surpassed by even better advances.
Our payment system is undergoing an amazing technical revolution. In a few short years, we have evolved from a world in which most payments were made via paper to one in which most are made with electrons. This evolution has not finished and will continue. There is broad dissatisfaction with the fees involved in the Visa MasterCard duopoly, and definitely room for improvement. We will continue to see innovations that provide even better and more cost-effective payment solutions. Recent innovations include PayPal, Popmoney, and Square. Plenty more are still under development, as many innovators compete to come up with a "digital wallet" that people will actually use.
(Excerpt) Read more at news.cnet.com ...
A PC is tangible asset. A Bitcoin is a virtual currency.
He's just using the PC as an analogy and putting Bitcoin in the same category as a worldwide revolution.
Payment system, currency, or ponzi scheme?
Visa/MC control the majority of electronic transactions, and get to name their price, while having none of their own capital at risk in the process. “Progress” in that sphere is only tightening their grip and doing nothing for the consumer, as it is estimated that 1 in 168 CC transactions are fraudulent. With BC, it’s not an issue.
He's looking at it from an improvement in utility, not so much benefiting or empowering people. I do believe the latter to be the most important aspect, to be used as a tool to put government into cage and not people. To free us from the middlemen in commerce and to better control the purse the government depends upon for its unfettered growth. Governments now have reached the point in fiat creation where it simply tells the Fed to print more money to satisfy their exponentially increasing debt.
IMO, we've come to an intersection in this road we've been on for millennia.
Bitcoin has no backing from the living God. No sale.
It’s both a payment system and a medium of exchange (currency) but certainly not a Ponzi scheme by any definition I’ve ever seen.
In a couple of years AJ Angel will be kicking himself in the butt for “GETTING IT WRONG”!
I love my Coinbase Bitcoin Wallet, especially now I have something in it.
I was with him till that statement. The Gold Standard never "blew up". It was simply ignored; thus were recessions created.
No "flexibility", i.e., printing more money, is needed to deal with crises. It's that very flexibility that creates the crises in the first place.
Completely agree. It is the very act of a central authority stepping in and creating artificial markets which eventually lead to an unsustainable situation, and we are risk of the whole system collapsing from that very thing now.
I probably need to make that move. I’m still using a local wallet.
Please explain how it’s a ponzi scheme?
Just wanted to add that the "Gold Standard" would have been better served if it hadn't been for an arbitrary value assigned (i.e., $20). It should have been denominated by weights, IMO. But then the real problem is centralized control of the money supply, as we've seen in '65 when the government began debasing silver coins. The same would have happened to newly minted gold coins as well. The same happened in Roman times and every other time.
Indeed. If that happens, the Bitcoin will fail as people cash out in droves.
>>Payment system, currency, or ponzi scheme?<<
None of the above. It’s a speculative investment in something that few people understand at all. It can’t serve as a payment mechanism because it’s far too volatile. And it’s not a currency because it’s not generally accepted by everyone doing business in a country (and never will be due to it’s failure to maintain a stable value from one transaction to the next.)
It appears similar to a Ponzi scheme only because early holders are able to sell to new holders at significantly higher prices. But then so do holders of rare collectibles, and no one considers those Ponzi schemes.
Buy it, sell it, speculate in it all you want, but that’s all it is—a speculative investment. It will eventually go the way of carbon credits, toward zero over a short time span, as it’s utility is deemed worthless and the perceived risk of holding it becomes considerable.
Not that Btc needs Ebay...
Has any freeper involved with bitcoins, found an accountant that can do your federal tax return addressing their bitcoins?
I ask because we can’t find one. Care to share by private freep-mail?
It’s not a trivial matter to create and maintain a currency. A successful attempt requires wide acceptance and a high stability of value. People will not willingly accept as a currency something that varies widely in value from one day to the next.
Sure, speculators will, but businesses and individuals generally will not. If one earns, via his labors, the equivalent of one mortgage payment per week, he’s not going to accept being paid in a currency that might suddenly only pay 2/3rds of a mortgage payment that week due to a drop in the value of the currency.
Gold and silver have served as currencies, but only in societies where no central bank has been established. Once a central bank establishes a currency successfully, that currency drives out gold and silver as transaction mediums simply because they are too volatile.
That said, very few governments are capable of running monetary operations so as to maintain a stable value of the currency over decades. And when some fail to do so, they fail spectacularly. The dollar is an accepted worldwide currency because it has generally maintained stability albeit with a persistent tendency toward inflation year after year. That inflation is consistent enough that people generally accept it, and just expect relatively small inflation adjustments to their salaries, and to their purchases, year after year.
Bitcoin has no hope of supplanting a government-issued currency, for it will always trade up and down with significant volatility, more even than gold and silver now do.
That said, I fear the current Federal Reserve Chairman has created a situation that could easily result in a spectacular failure of the dollar sometime in the next few years. However, he has operated well outside the normal boundaries of typical Fed operating procedures.
From the article you cited: “PayPal’s CEO David Marcus recently tweeted: ‘We treat BTC and any FX the same way. We’re believers in BTC though.’”
That’s one similarity to a Ponzi scheme. Both take believers. Another similarity will be the end result when the believers realize they were wrong.
Again, for something to serve as a suitable currency, it must provide stability of value. Otherwise it will never gain general acceptance for that purpose. And bitcoin will never attain stability of value, ever.
I would think treating any bitcoin transaction the same as you’d treat a foreign exchange transaction would be appropriate. In most cases, you ignore FX transactions because you’re just spending after tax dollars, converting them first to FX before spending them in, say, France.
However, whatever the rules for speculating in a foreign currency are, i.e., buying 1,000 Euros with dollars, sitting on them for a time, then selling them at a profit or loss in dollars, would seem to apply. That is, I’d look to the tax rules for investing in foreign currencies.
One thing’s sure. If you own a bunch of bitcoins and sell them at a huge profit, Uncle Sam is going to want his cut. Whether he views it as a long-term gain or a short-term gain is another issue, as is whether he can ever discover the fact that you made the transactions at all.
He’s trying to put a benign face on a monstrous open secret - the world currency system is a shambles.
Bitcoin is a giant, market-volunteered vote of no confidence in the global monetary system.
What is the problem/issue you are having calculating what you owe? Have you even had any Bitcoin transactions? If you invest/trade and realized a profit once converted to dollars, it’s a capital gain. If you’ve mined them and sold/traded them for something for your personal use, it’s income. What’s so hard about calculating taxes on that. Keep good accurate records so you can determine your basis/expenses and then profit/income which is what is taxed. At least you have another two months to figure it out, if you even had a transaction in ‘13.
Later, have to walk the dog. ;)
There is bitcoin income from mining activity.
It can be posted multiple times a day
There is no ‘real’ exchange or market so the conversion to dollars isn’t rocket science.
It is an accounting nightmare. No place to find charts that show day to day market values.
If anything it will be the accounting nightmare that the i.r.s. imposes that is the death of bitcoin.
It is really much more than a currency.
The process is the paradigm shift.
The peer to peer nature, with minimal fees, is the key. Large and small merchants can save millions in fees by adopting the payment system.
I am not saying that Bitcoin is the ultimate winner. But it clearly is the Gorilla. Of course AOL and Yahoo were the Gorillas back in the day. They are pretty much spider monkeys to Google today.
Once a central bank establishes a currency successfully, that currency drives out gold and silver as transaction mediums simply because they are too volatile.
Not exactly, bad money drives out good. Read more about Gresham's law here: https://en.wikipedia.org/wiki/Gresham%27s_law
Sure, speculators will, but businesses and individuals generally will not.
On the contrary, many people (including yours truly) respect the virtue of diversification. It's why I believe everyone should hold at least some wealth alternatives to the dollar or other fiat, Btc being a possible part of such a portfolio.
The dollar is an accepted worldwide currency because it has generally maintained stability albeit with a persistent tendency toward inflation year after year.
That good name is being eroded daily. Other countries are already looking for an alternative. And unfortunately, we may see a collapse of many fiat currencies worldwide in the near future, then massive inflation as a result.
Bitcoin has no hope of supplanting a government-issued currency...
You're missing the point. Bitcoin (crytocurrency) as a medium of exchange, MAY eliminate the need for government-issued currency - as breathtaking or impossible as that may sound for now.
No more so than say a tree farmer (forester) would have. She plants her plot, keeps up with and claims yearly expenses, and may only realize income from the operation after a good number of years; perhaps a dozen or more at the first thinning. She doesn't have to keep track of the daily price of timber. She is only taxed on the price less costs at the time of sale, same for a miner of BTC or any other producer of a certain "commodity".
At least until ruled differently...
It is getting exhausting but every one of the professor’s assertion can be shot down. There just isn’t enough time. I think he’s from the Krugman school of economics. Weather Bitcoin the currency survives is of little consequence if a more useful crypto emerges. The underlying breakthrough encrypted, decentralized blockchian is not going anywhere!
We are big enough to handle our own security and transactions and in no need of a nanny.
The problem with the professor is just that,he’s a professor. Living in a protective bubble world of theory and young minds that he can bulldoze.
Marc Andreessen is a visionary innovator who has shaped the future and the likes of Professor Angel could not carry his pocket protector.
First, you don’t appear to understand Gresham’s Law. For starters, it has nothing to do with the reason silver and gold are rarely used for transactions today (although it is the reason you won’t find a silver dime in your change anymore, and it will eventually lead to the demise of the penny.)
Second, wealth is rarely invested in currency. It is invested in assets. And while a dollar bill could be considered an asset, it is a poor investment because, like a bitcoin, it earns no interest. Unlike a bitcoin, it is relatively stable in value so it will continue to be favored by most businesses and individuals over bitcoins when used as a medium of exchange.
Third, compared to the bitcoin, the dollar is a paragon of stability. People have been disparaging the dollar for decades (with justification in the 1970’s), but it remains one of the world’s most popular currency for transactions.
Fourth, in my opinion, the bitcoin will fall into disfavor for any number of possible reasons long before the dollar does, unless Bernanke’s mismanagement of the Fed’s excess reserve position leads to a hyperinflation, as it could.
>>”Payment system, currency, or ponzi scheme?”
Yes, that is accurate. The result of wild speculation, pure and simple, with the miners taking the place of the growers. At the end, they will be left with an inventory consisting of used computers instead of piles of unsold bulbs, wondering how $10 million of bitcoin inventory could become worthless nearly overnight.
Its failure to maintain a stable value from one transaction to the next makes it impossible to budget. That’s what will keep it form ever becoming our next form of worldwide cash. Only those with extra speculative cash can afford to use it and since too many people live week to week it fails to meet their needs.
TIGER DIRECT is now accepting tulip bulbs!
Payment system, currency, or ponzi scheme?
Bitcoin is a giant, market-volunteered vote of no confidence in the global monetary system.
Obviously, or at least not at your level. ;)
I thought it was. The Gold Standard Act of 1900 defined the dollar as "consisting of twenty-five and eight-tenths grains (1.67 g) of gold nine-tenths fine".
But I'm interested to know if you think I'm mistaken.
Thanks. Many don't.
Below is an example of a Gold Certificate. Silver certificates were similar. IMHO, it would have been far better to have them denominated by amounts. For example, on the gold certificate below, it could had had: "Pay To Bearer On Demand 500 Ounces Of Gold" printed on its face instead of "as authorized by law", an arbitrary value that actually did change from time to time. Then they also set the value of gold per ounce did they not? Hence the coin should have also carried its weight as Eagles have today.
In reality, it matters not if there is a gold standard or not, governments always have ways of debasing whatever currency is being used. What's more important is who has control over the money supply - ask the Rothschilds about that. Crytocurrency may allow for control to be shifted into the hands of the people instead of governments or banksters. They're the ones most affected by the changing values.
Of course you’re not mistaken. His understanding of the gold standard is on a par with his understanding of Gresham’s Law.
If you’re going to define a dollar in terms of gold what other measure would you use besides weight of the gold? Brightness, tensile strength, hardness? Obviously the weight of gold per dollar has to be specified for the gold backing up the dollar (the meaning of a “gold standard”) to have any meaning whatsoever.
Today, with the gold unmoored from an official amount per dollar, it moves daily in a free market. It could serve as a medium of exchange, but it’s just too inconvenient to do so, plus it suffers the same disadvantage as bitcoins; it’s price is quite volatile whereas a medium of exchange needs to be relatively stable in value from day to day for people to trust its use.
People can cheer on bitcoins as long and as hard as they want. Something as volatile in value as a bitcoin will never, ever, be accepted by the overall public as a preferred medium of exchange, i.e., as a currency.
Incidentally, for those of you who think that EBay or PayPal are going to use bitcoin out of the goodness of their heart (or because they think it’s a preferred currency), consider the possibility that the real reason they would adopt its use is because they’ve found a way to make money off of people’s use of bitcoins. And they will make that money in dollars, probably by finding a mechanism by which they are always pricing bitcoins on a spread, the same as any foreign exchange transaction.
Just to be clear. If the dollar were defined as a specific portion of an ounce of gold, the volatility would disappear. Americans [or any dollar-users] would buy and sell gold at the pegged weight.
It wouldn't change.
Yes. I have never meant to give the impression that I believe a gold standard can overcome a dishonest government.