
In Search of a Stable Electronic Currency   - ChristianMarks
http://mobile.nytimes.com/2014/03/02/business/in-search-of-a-stable-electronic-currency.html?referrer=
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panarky
I have immense respect for Shiller, but I think he got a few things wrong in
this piece.

    
    
      The Bitcoin phenomenon seems to fit the basic definition of a speculative
      bubble — that is, a special kind of fad, a mania for holding an asset
      in expectation of its appreciation.
    

Shiller correctly identified the housing bubble long before others did, so he
has a lot of credibility here. But doesn't truly disruptive innovation exhibit
a similar pattern? Whether it's Google, or Tesla, or Netflix, the "mania" to
hold the asset proves to be justified as entire industries are transformed.

    
    
      The central problem with Bitcoin in its present form, though,
      is that it doesn’t really solve any sensible economic problem.
    

The current monetary system is unfree, just like communication systems before
the internet were unfree. I cannot transmit value over space and time, across
borders, to anyone, for arbitrarily small or large amounts, at nearly zero
cost. That seems like a "sensible economic problem" that needs a solution.

Despite its flaws, Bitcoin does a pretty good job solving these problems
today, and future generations of cryptocurrency will only get better.

I don't argue that cryptocurrencies can or should replace government
currencies, but they clearly accomplish something valuable.

After all, if cryptocurrencies had zero utility, why would so much talent be
devoted to stealing them?

~~~
pron
> I don't argue that cryptocurrencies can or should replace government
> currencies, but they clearly accomplish something valuable.

They might, but I wouldn't say it's "clear" just yet. The only _clearly_
valuable thing Bitcoin accomplishes now is the facilitation of illegal trade
online. Valuable – certainly, but a new technology whose crowning achievement
so far is facilitating crime has a big PR problem. And that's not Bitcoin's
only PR problem. Its association with wingnut (hacker-)libertarianism is
another ball and chain, which gives Bitcoin the good old Glen Beck treatment.

I think Bitcoin adopters should market it as a terrific way to spend small
amounts of cash online. Unfortunately, Bitcoin's volatility doesn't help to
make this case, so that is probably the first thing that should be addressed.
Bitcoin supporters should understand one thing: uncontrolled volatility, even
when it's pointing up, perhaps _especially_ when it's pointing up, isn't a
good sign. Every currency is based on one thing – trust – and if Bitcoin is
ever to become a currency, it should loudly declare that it's in the hands of
responsible people; not criminals, speculators and wingnuts.

~~~
lukifer
> The only clearly valuable thing Bitcoin accomplishes now is the facilitation
> of illegal trade online.

How do you figure? Being able to send money across the world for next to
nothing (compare to credit card fees, not to mention the higher prices of
Western Union or hawala) has immense value. Charitable organizations have
already raised large sums using crypto-coins.

You are correct about volatility. It makes more sense right now to treat as a
highly fungible asset than a currency; it will be interesting to see if it can
self-stabilize without any central organization.

~~~
betterunix
"Being able to send money across the world for next to nothing (compare to
credit card fees, not to mention the higher prices of Western Union or hawala)
has immense value."

This is likely to end as Bitcoin exchanges discover the cost of compliance.

~~~
lukifer
The cost of compliance is a serious issue, true. I would hope that at least
some states recognize the value in letting the experiment play out without
interference, as with the early days of the internet, but with real money on
the line it's harder to dismiss as a mere toy.

However, I wouldn't neglect the "gray market" use cases of Bitcoin: things
that happen outside the law, but are not as nefarious or blatantly illegal as
Silk Road. Immigrants sending money home to their families, secondary savings
accounts for those in countries with unstable currencies, etc.

