I see this point of view a lot on Hacker News because it's dominated by people living in places like the US. Let me add a little perspective on how Bitcoin is used in lower- and middle-income countries from my personal experience.
If you live in a country with a highly functional banking system and
no kleptocracy, Bitcoin is probably a bit puzzling unless you have
family in Cuba. But it’s not puzzling at all for those of us who live
somewhere in the middle of the broad spectrum between Switzerland and
Somalia, because most places have a little kleptocracy. Argentina
is a stable democracy, far from being “a failed state,”† but if you
want to send US$500 abroad via non-Bitcoin means it’s basically
impossible, and the only broadly available savings vehicle is real
estate (“ahorrar en ladrillos”), which of course grossly inflates
real-estate prices, with a substantial part of the capital city
occupied by empty apartments someone bought “as an investment”.
Historically, Argentines have saved by buying dollars, but that’s
limited to US$200 a month now, and then only if you have a
non-under-the-table job (about a third of total employment is under
the table):
https://www.ambito.com/finanzas/dolares/cronologia-del-cepo-...>
Something like 300,000 people out of a country of 40 million are legally permitted to buy dollars.
You can see that in September 02019 when this measure was imposed the
price of a dollar was AR$63.50; now it’s AR$305. So whatever savings
you had in pesos in 02019 have lost 79% of their value to peso
devaluation. In fact, whatever savings you had in pesos a week ago have lost 4%.
I’ve been using Bitcoin to get paid for several years at this
point where I live here in Argentina.
It’s currently 14 years after Bitcoin’s invention, and some
people think it’s regressing instead of progressing. Well, 14 years after
the internet’s invention was 01983; not only couldn’t you get so much
as a weather report online, much less IRC, but many of the early
interesting experiments like NLS at SRI had shut down, and more and
more places were disabling guest access to their hosts—you couldn’t
run so much as a game of ADVENT without getting a username. And a
password. Things were seriously regressing. The only people you
could talk to on the internet were other people who really bought into
the subculture.
In 02001 a lot of Argentines had saved dollars in their
dollar-denominated, "government insured" bank accounts.
This did not preserve their savings
through the financial crisis that year; the cash-strapped government
limited withdrawals to a trickle, then converted dollar deposits to
pesos at a one-to-one rate, then released the exchange-rate peg, at
which point peso went overnight from being worth US$1 to being worth
US$0.25 before settling at about US$0.31 for the next few years. The
US did something similar in 01933. There was no recourse for this scam.
You might think alternatives to banks like credit unions
would protect their customers better, since the customers are the owners,
but Credicoop depositors
suffered the same two-thirds confiscation of savings as depositors in
for-profit banks. And they pay the same 3% tax on bank transactions
including checks. That’s more than a fast Bitcoin transaction fee of
US$15 for transactions over US$500.
But we’re not a failed state. There are no gangs of bandits roving
the streets in Argentine cities (though there are some pretty bad
slums where you’ll get robbed if you wander in without knowing
anybody). Courts, free public hospitals, and roads continue to
function, though there are more potholes than a couple years ago. Argentine
infant mortality is 10 per 1000 live births, down from almost 20 in
the late 01990s and the same as the late 01980s in the US; life
expectancy at birth is 77 years, worse than Switzerland’s 84, but the
same as China and Hungary, and better than Saudi or Mexico. (Somalia
is 54.)
Most of the world is worse off than Argentina, although not
necessarily in such a statistically transparent fashion. About one
fourth of the people in the world are unbanked, 51% here in Argentina,
70% in El Salvador;
even advanced countries like Russia, Hungary, and Uruguay have roughly
a quarter of the population unbanked:
https://www.gfmag.com/global-data/economic-data/worlds-most-...>
And if your family lives in a country like Iran or Venezuela subject
to US sanctions, and you live in the US? Good luck sending them an
ACH, instant or otherwise!‡ It’s well known that Bitcoin is very
popular in Venezuela, which kind of is a failed state, so one of the
Venezuelan governments is trying to tax Bitcoin remittances at 15%.
https://archive.fo/ZRXzS>
Bitcoin handles a few billion dollars per year in such
remittances.
A few billion dollars a year might seem like a trivial amount of money to someone
in a rich country, but in poor countries, it’s enough to keep several
million people alive.
Even in the US, it’s common for the police to confiscate large amounts
of paper currency just because they can (“civil forfeiture”); US bank
accounts are probably fine for US$100K but probably somewhat risky for
US$10M if the bank thinks you don’t seem like the kind of person who
ought to have it. US$10M in US$100 bills fits in a box you can wheel
around on a dolly, but Bitcoin is a lot more practical. (And of course
US$10M in dollar bills loses about US$200k per year to inflation.)
Transaction fees are usually high enough that you wouldn’t want to use Bitcoin
to pay for a can of Red Bull or even a restaurant dinner. But it’s
extremely practical as an alternative to Western Union or US$100 bills
or gold; even when transaction fees are high, they're low compared to the
black-market spread.
So, Bitcoin doesn’t have to be a cypherpunk utopia to be a big
improvement on the status quo ante. For those of you living in
stable countries where your worries are things like “instant and
extremely low-fee ACHs” and “decentralized utopia”, this may be very
confusing, but try to remember that most of the world lives in places
with much more pressing concerns, concerns that Bitcoin helps a lot
with. And you may live there too, soon—the loyal subjects of Kaiser
Wilhelm in 01913 certainly didn’t expect that in 15 years they’d be in
the middle of a hyperinflation episode that remains legendary a
century later.
I think that, by providing workarounds to the people who need them,
cryptocurrencies probably not only ameliorate the most immediate and
pressing concerns of poor parts of the population like Venezuelan
immigrants and MS-13 victims, but probably also adjust the power
balance in a more liberal and democratic direction. This will improve
the chance of those concerns being ameliorated by public policy over
the next decades as well. But it’s hard to tell what will really
happen.
Of course, when saving money or making a living becomes illegal, I guess
they count as "buying illegal shit". But that doesn't make them bad.
The potential disaster scenario is that, by making most
taxation impossible, cryptocurrencies destroy the modern welfare state
without providing anything to replace it. So the public hospitals
close, the enormous police force starts to support itself by
extracting tribute, and the infrastructure decays. Pretty similar to
what’s happened in the US over the last 50 years, in fact, only more
so.
However, at this point I think the modern welfare state is already
doing a good enough job of destroying itself without any significant
help from cryptocurrencies—as evidence, I can point to Maduro, Macri,
Bolsonaro, Trump, and Brexit, and metonymically to the social changes
they betoken. So at this point I’m more worried about cushioning the
collapse than preventing it.
____
† We’ve remained democratic since 01983, electing presidents from
three different political parties (UCR, PJ, and PRO), and there’s no
serious insurgency. It’s the economy and government policy that
are ruinously unstable, to a point that seems satirical to anyone
accustomed to the US, but is lamentably common worldwide. Rich people
sometimes say they don’t know of legitimate uses of Bitcoin outside of
“failed states”.
‡ Family remittances are specifically exempted from the US sanctions
on Iran, but good luck finding a US bank that’s willing and able to
take that risk:
https://www.wiggin.com/wp-content/uploads/2019/09/26580_advi...>
See also https://news.ycombinator.com/item?id=27448744.