Bitcoin's Shared Ledger Technology: Money's New Operating System

> Huh? Don't supply and demand meet at price? Isn't that mainstream economic theory?

Supply and demand have nothing to do with inherent value. You said it yourself: supply and demand meet at a price. I can personally value gold at $0, yet can resonably expect to sell it at a higher price tomorrow than I could buy it today.

Have a look at palladium. That metal has even higher industrial value than gold, and is rarer. Yet the market price per ounce is drastically lower than that of gold.

Bitcoin is certainly growing. Consider that in 6 years: it went from zero to over 100 000 merchants accepting it (including big names like Microsoft, Dell, Expedia, Newegg, Overstock, etc), from zero to millions of users worldwide, from a market cap of zero to over $3 billion dollars, etc. If someone had predicted Bitcoin would reach these milestones within 6 years when the software was first released in 2009, you would have called that person a lunatic. Yet this happened. Reflect on this for a minute before saying you see nothing.

Bitcoin is a good example of a disruptive technology. If it succeeds, it will happen slowly over time (5, 10, 20 years...) and there will be no special "that's-the-day-bitcoin-won" moment. So don't hold your breath for one.

"the general population just has no use for it"

It has many real-world practical benefits: http://www.coindesk.com/information/why-use-bitcoin/ I would be curious to hear your counter-argument for each of these points.

For example a person in China can instantaneously send bitcoins to his relative living in the US, who can then spend them within minutes on electronics or house stuff on Newegg or Overstock. This is, in itself, incredible. This is fast, reliable, and avoids stupid limits or problems of legacy financial systems, like wire transfers taking days, China exerting capital controls, Paypal suddenly freezing your account because the large amount being transferred triggered a false fraud alert, etc.

Another example: I can't even pay my $2700 monthly rent to my landlord electronically even though we both have checking accounts at the same bank (Wells Fargo), because they limit internet transfers to $2000 a month due to a policy chosen by their fraud and risk analysts. How annoying! Bitcoin lets me pay my landlord without problems because no one is here to tell me how much of my own money I am allowed to spend.

I am not saying that I want to use Bitcoin for every single transaction, eg. paying my lunch at the restaurant, but for certain types of needs like the two examples above, Bitcoin is very useful.

Bitcoin is not required for that, it's not even very good at it.

Cryptographic signing of assets, asymmetric public-key cryptography, digital certificates, etc are not unique to bitcoin and a far simpler system with far fewer fundamental flaws and third party dependencies could be constructed if you want to track assets and replace paper certificates. Trustless, pseudo-anonymous transactions are significantly less useful than verified identity transactions with reversibility, central authorities, regulation, insurance, etc. There are a lot of properties of bitcoin that make it wildly unsuitable for tracking financial assets (or as a digital currency).

Would you trust a Russian stock market?...Your reluctance to engage in these markets means entrepreneurs there do not have access to capital.

How does Bitcoin solve the problems of world peace and corrupt regimes? A simple rubber-hose attack will render up your key or the computer your coins reside on just as it will any other asset, and other assets can be appropriated whether stakes of ownership are stored via the blockchain or not.

> For example a person in China can instantaneously send bitcoins

Once they have bitcoins. Getting bitcoins without using local bitcoins requires use of the traditional financial system. It can also involve snake like middle men if the would be bitcoin user is not very savvy.

1. It's fast compared to international transfers, it's a little slow compared to using cash to buy things or bank transfers.

2. It's cheap - it's cheaper than western union, it's expensive when something goes wrong - you can't reverse/dispute transactions.

3. Central governments can’t take it away. Central governments have all the guns and can make up any laws provided they can be passed. Bitcoin is not a runaway success in Russia for example.

4. There are no chargebacks - this is a bug and a feature.

5. People can’t steal your payment information from merchants - they just go after the middle men - instead of TK Maxx getting hacked, one of the middle men will be. Or indeed the middle man runs away with the goods. That the middle men continue to exist points to inherent difficulties in managing your own wallet.

6. It isn’t inflationary - the number of bitcoins minted every year grows faster than inflation - ultimately it will stop. Then it will be deflationary because coins will be lost.

7. You don’t need to trust anyone else - au contraire - in every transaction you need trust, the same is true in bitcoin as any other system.

8. You own it - it works better as a transfer medium than a 'store of value' because the price fluctuates. In addition the network operators can decide to fork.

9. You can create your own money - sure, so can other people - yet somehow it's not inflationary.

Anyway, for me the biggest argument against bitcoin is that there is no way that its intentionally wasteful proof-of-work system can be actually cheaper and faster than the alternatives. Currently, this cost is hidden because blockchain maintenance is subsidized by newly-minted bitcoins being handed out to miners. If you take out this subsidy then each bitcoin transaction would actually cost around $10 worth of energy, which probably came from burning fossil fuels in China.