Bitcoin vs. Ben Bernanke • Hacker News Board

Re: Bitcoin vs. Ben Bernanke

#31

Post by PaperclipTaken » Sun, May 05, 2013, 4:51 PM UTC

There are a few challenges facing Bitcoin, and I think that in the long run Bitcoin will not be the chosen digital currency of the world.

The first problem is that there is a highly predictable and (at the moment) constant supply of bitcoins, which means that the value of the coin will adjust like a commodity as more or less people start to use it. It's like Gold or Oil in the sense that when people want it, it's worth a lot, and when people don't want it, it's not as expensive. That chains the value to the demand, meaning that any time you use bitcoin as a store-of-value, you are putting yourself at the complete mercy of the market.

Many advocates believe that as the number of people using bitcoin grows the price will stabilize, but I think that using bitcoin as a store-of-value is going to end up like using the gold standard, especially because some early adopters have tens of thousands to even a million (Satoshi is believed to have a million) bitcoins, and any of them could decide to 'cash out', which would dramatically change the supply and potentially affect the whole market.

Another problem is that the currency is highly traceable, and while you can do things to obfuscate your spending habits there are lots of techniques involving statistical analysis that shed doubt on the effectiveness of obfuscation. You can take this back to the "I have nothing to hide" argument, but there are plenty of powerful parties that will be more interested in a currency that can't be traced (imagine big business or big finance), and an untraceable currency would certainly be more attractive.

But to me the biggest current problem with bitcoin is the uncertainty. There are many conflicting schools of thought in economics each with their own reasons why bitcoin is good or bad. But beyond the basics, macroeconomics often involves a lot of voodoo, and for any new paradigm there will be major schools of thought that will believe the new paradigm is bad or unstable in some way. There is no real way to fight this except to accept that we ultimately have no idea how new economic paradigms will affect our world, and that some of the naysayers may be correct and thus caution should be used.

Re: Bitcoin vs. Ben Bernanke

#32

Post by bob13579 » Sun, May 05, 2013, 4:54 PM UTC

parasubvert wrote: post #24

Shinkei wrote: post #14

Earlier quoted context omitted.

Rant much? I wanted to actually learn something from your post but it reads like a madman wrote it. I own exactly zero bitcoins, but following the market since 2011 has proven that it is getting easier to use and more prevalent. People will be putting down bitcoin as a serious entity even after PayPal is accepting them.

Have you atudied economics? The OP reads like someone who has and is utterly incredulous at the statements being made by Bitcoin's proponents. In fairness, the gentleman interviewed in this article insisted it was all an experiment. But the WSJ editorial board has a long time habit of being very non-mainstream and almost Austrian with its economic views, so this interview was likely intended to play into a political…

You seriously have to be kidding about the non mainstream stuff. When have they advocated for a gold standard? Several prominent mainstream economists write for their op-eds, including Nobel laureates. I can't recall one Austrian.

Re: Bitcoin vs. Ben Bernanke

#33

Post by bayesianhorse » Sun, May 05, 2013, 4:54 PM UTC

Can we please stop talking about Bitcoin replacing the Dollar? Bitcoin isn't suited for local transactions or for contracts on a large scale. That might change, but the value of the bitcoin protocol is in other applications.

Re: Bitcoin vs. Ben Bernanke

#34

Post by bob13579 » Sun, May 05, 2013, 4:55 PM UTC

parasubvert wrote: post #30

1337biz wrote: post #28

Earlier quoted context omitted.

"right-wing/Austrian economists" Stopped reading right there. Seriously, if you want to frame Austrians as evil at least try a little harder to be subtle about it.

Some would say "left-wing" is actually a euphemism for evil. What you read into "*-wing" is in the eye of the beholder. All I said was these views were non-mainstream, though there are interst groups working to change that such as the WSJ and certain entrepreneurs or business leaders and think tanks. Not that the views are evil. Please point me to some left wing Austrian-school economists to refute the association.

What? The burden of proof is on you. What examples of non mainstream economics are you citing with the WSJ? Links to actual articles that prove your point, please.

Re: Bitcoin vs. Ben Bernanke

#35

Post by lucian303 » Sun, May 05, 2013, 4:59 PM UTC

"Thousands of mostly small online merchants are already accepting payment in Bitcoin, though this virtual currency has no intrinsic value and isn't tied to anything that does."

True and also true:

Thousands of mostly small online merchants are already accepting payment in _US Dollars_, though this _physical_ currency has no intrinsic value and isn't tied to anything that does.

Re: Bitcoin vs. Ben Bernanke

#36

Post by em70 » Sun, May 05, 2013, 5:00 PM UTC

I have yet to see it being pointed out that none of the encryption in use for these cryptocurrencies will necessarily remain extremely hard to break for long. A good question is: what if bitcoin or something alike does effectively gain traction and one day a math breakthrough (or a computational tech one) make the crypto weak? How much wealth will be destroyed then? Who would you turn to for help? Our system is not perfect, but taking central banks out of the loop is not a way to improve it. It would be much more useful to find ways to push down financial transaction and currency exchange costs.

Re: Bitcoin vs. Ben Bernanke

#37

Post by wfunction » Sun, May 05, 2013, 5:00 PM UTC

The terrifying part of his job is that almost all of the current Bitcoin services now use the same software, so that "any change to the core code has potentially disastrous impact. If everybody rolls out a new version and there's some problem with it, the whole Bitcoin payment network could grind to a halt."

This is the part that has always scared me.

Re: Bitcoin vs. Ben Bernanke

#38

Post by parasubvert » Sun, May 05, 2013, 5:00 PM UTC

Retric wrote: post #26

parasubvert wrote: post #24

Earlier quoted context omitted.

Have you atudied economics? The OP reads like someone who has and is utterly incredulous at the statements being made by Bitcoin's proponents. In fairness, the gentleman interviewed in this article insisted it was all an experiment. But the WSJ editorial board has a long time habit of being very non-mainstream and almost Austrian with its economic views, so this interview was likely intended to play into a political…

"An economy is a closed system" that's not quite true. The economy is a balance between things that create value and those that destroy it. In a healthy economy more value is created than destroyed so as long as the 'savings' is close to the amount of new wealth created there is no problem. The problem is when people try to store more value than than the genuine amount of new wealth created. Often it's as simple as a…

You're right. I was referring to exchange transactions, to simplify. Ie. you need a buyer and a seller (or an investor and an entrepreneur). It's not closed in the strict sense, because there is growth.

Our current situation is similar to your final sentence - that of heavy liquidity preference - there are a lot of sellers and too few buyers, and investors who are mostly storing wealth in cash or liquid assets.

Re: Bitcoin vs. Ben Bernanke

#39

Post by nijk » Sun, May 05, 2013, 5:05 PM UTC

lolcraft wrote: post #5

I'll admit that the WSJ here is not as laughably bad as some quotations from their infamous op-eds had led me to believe. Maybe I was too harsh with them. They seem to do the balance thing, or more correctly here, the common sense and economics thing, at least passably well. Either way, there are some real pieces of work here, misconceptions about economics that were dispelled before, again and again. You're going to…

WSJ is a mediocre paper. WSJ OpEd is editorially a separate paper, and famously insane.

Re: Bitcoin vs. Ben Bernanke

#40

Post by nijk » Sun, May 05, 2013, 5:06 PM UTC

wfunction wrote: post #37

The terrifying part of his job is that almost all of the current Bitcoin services now use the same software, so that "any change to the core code has potentially disastrous impact. If everybody rolls out a new version and there's some problem with it, the whole Bitcoin payment network could grind to a halt." This is the part that has always scared me.

This already happened in he 0.8 fork