Krugman has said over and over again that bitcoin is bubble. He is right. But Krugman has failed to understand a crucial aspect about bitcoin - it is truly an international currency. Here is why this is so important. Krugman argues that someday news about bitcoin will come out that is so bad it will scare people away from bitcoin. This will certainly happen, as it has happened already. But bad news is localized. Just because China may ban bitcoins does not mean that people will stop using it elsewhere. The "bad news" would have to be truly world-wide for everyone to abandon bitcoin altogether. Anything short of that, and the bubble will continue onward.
Bitcoin solved a major technical problem, but not an economic one
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Re: Bitcoin solved a major technical problem, but not an economic one
#22This analysis is true to a point, but overlooks that the 'decentralized cloud bank' innovation now allows a whole bunch of other technologies to be applied into an important economic domain without the old gatekeepers and limitations. Those other technologies are a bit more familiar to people: • global always-on connectivity • encryption constructs • easy discovery/formation of communities-of-interest • open source c…
Bitcoin to money is what app store is for mobile software, or the web is to newspapers etc. It's decentralization of power. There's no gatekeepers to prevent new innovative payment services. You need $100 to create a new payment service, not millions. You don't need to ask anyone permission to do what you want.
In practise, individuals will now have the power that only large corporations used to.
Re: Bitcoin solved a major technical problem, but not an economic one
#23The scenario with a large number of people wanting to cash out already assumes Bitcoin lost as a currency, so I'd say it could be a result, not the cause of Bitcoin's failure. Bitcoin succeeds or fails on whether you can buy useful stuff with it, buying other currencies is secondary.
The scenario with people cashing out because of regulation also assumes that most bitcoin users live under a single regulatory area, which is untrue. Banning bitcoin in the United States, for example, might decrease it's value, but not destroy it, as there's the rest of the world.
Re: Bitcoin solved a major technical problem, but not an economic one
#24This analysis is true to a point, but overlooks that the 'decentralized cloud bank' innovation now allows a whole bunch of other technologies to be applied into an important economic domain without the old gatekeepers and limitations. Those other technologies are a bit more familiar to people: • global always-on connectivity • encryption constructs • easy discovery/formation of communities-of-interest • open source c…
Bitcoin to money is what app store is for mobile software, or the web is to newspapers etc. It's decentralization of power. There's no gatekeepers to prevent new innovative payment services. You need $100 to create a new payment service, not millions. You don't need to ask anyone permission to do what you want. In practise, individuals will now have the power that only large corporations used to.
I'd disagree that Bitcoin is to money what the app store is for mobile software. If you are talking about the Apple App Store, they are the gatekeepers to what software you can load.
Re: Bitcoin solved a major technical problem, but not an economic one
#25Bitcoin is far more than "just" a solution to the Byzantine Generals problem.
Inside every Bitcoin transaction is a small program that contains no loops. If that program when executed returns true, the transaction is valid.
The simplest, most boring kind of transaction--but the one that most people assume "is Bitcoin"--is a transfer from address P to address Q. Where things get more interesting is in using those little programs in more creative ways; e.g., k-of-n escrow, attestation of ownership, etc.
A whole generation of kids is going to grow up soon routinely using small Bitcoin escrows to hedge everyday scenarios. They won't quite able to believe that their parents operated in a world based on centralized authority subject to rent-seeking corruption.
Re: Bitcoin solved a major technical problem, but not an economic one
#26Krugman has spent the past few months qualifying, trivializing and disclaiming his previous asinine and uninformed remarks about bitcoin. Does he have a single shred of dignity left? Insufferable. Moreover, Krugman is blissfully unaware of the hundreds of millions of people that don't have access to stable or reliable banking. How does opening the markets to untold millions, via peer-to-peer transactions, not solve a…
What's the overlap between people with access to stable or reliable banking and stable or reliable power and stable or reliable internet access?
Majority of Africans own a cell phone, and they already use it for payments.
Re: Bitcoin solved a major technical problem, but not an economic one
#27Not true. Bitcoin did two things that I am aware of: 1) Create a universal currency which can be easily exchanged and that appreciates rather than depreciates (over the long run I mean, I am not referring to short term market fluctuations). 2) It created a mode where many underground (eg: gray or black market dealings) can take place without the need for laundering money. [Note: I don't condone, just pointing out the…
You're right. The black market gives Bitcoin a "floor" value, just like Gold or Silver. It is a very efficient means of currency for the black market, as proven by the Silk Road and others.
I don't believe bitcoin has a floor value in the same sense as gold or silver. A currency doesn't need to have a floor value just because currencies traditionally had. Besides, modern currencies are fiat money without a true "floor" value.
Re: Bitcoin solved a major technical problem, but not an economic one
#28Earlier quoted context omitted.
Bitcoin to money is what app store is for mobile software, or the web is to newspapers etc. It's decentralization of power. There's no gatekeepers to prevent new innovative payment services. You need $100 to create a new payment service, not millions. You don't need to ask anyone permission to do what you want. In practise, individuals will now have the power that only large corporations used to.
I'd disagree that Bitcoin is to money what the app store is for mobile software. If you are talking about the Apple App Store, they are the gatekeepers to what software you can load.
I agree that it's not a perfect analogy. App stores (I'm talking in general, not referring to Apple's store) are still centralized and act as gatekeepers, but the "gatekeeping level" is in another level to what it used to be. Before app stores it was practically impossible to for a lone developer to create an application and release it.
Re: Bitcoin solved a major technical problem, but not an economic one
#29The success of bitcoin, in large part, relies on faith that people will support it as a currency. If its market cap and/or trade volume isn't high enough, then a secure mining network cannot be supported, and the entire system, including all of its extra features touted by techies, will collapse.
Bitcoin will succeed if enough people believe that it will succeed, and bitcoin will fail if enough people believe it will fail.
Krugman is attempting to damage the future prospects of the system by spreading asinine notions about how it's not "economically viable". This really hits a nerve, because it serves no purpose other than to gain readership and to make him feel better for not investing in it. There is a risk that he, and others, could destroy bitcoin's future by convincing enough people that it shouldn't be trusted.
No economic arguments (especially Krugman's) about it are valid. Bitcoin's success or failure is entirely a self-fulfilling prophecy.
Two factions will form (or have already formed) - supporters and haters. The system needs enough supporters (and their investments) for it to be viable. The hope is that the supporters will grow in number or at least remain unchanged. Krugman is trying to turn supporters into haters, reducing the viability of the system.
Re: Bitcoin solved a major technical problem, but not an economic one
#30Bitcoin is far more than "just" a solution to the Byzantine Generals problem. Inside every Bitcoin transaction is a small program that contains no loops. If that program when executed returns true, the transaction is valid. The simplest, most boring kind of transaction--but the one that most people assume " is Bitcoin"--is a transfer from address P to address Q. Where things get more interesting is in using those lit…
That's what so many people miss. They see "Bitcoin" and forget about the technology behind it. The ability to create "cryptocurrencies" at no cost is going to be very interesting, I can't wait to see what we can build on this basic logic.