
Why bitcoin’s rise is nothing to celebrate - ldayley
http://blogs.reuters.com/felix-salmon/2013/04/03/why-bitcoins-rise-is-nothing-to-celebrate/
======
dfxm12
_Bitcoin, in that sense, is anti democratic. It’s based on mistrust rather
than trust, it refuses to take any responsibility onto itself – indeed, it
doesn’t even have a self to take responsibility onto. It’s nihilistic._

This is an interesting bit of rhetoric, but I don't follow the logic here. The
author contends that banks are built on trust and Bitcoins are built on
mistrust.

Don't the pages of legislation and regulation prove that we don't trust banks?
What about what's happened in Cyprus recently?

Also, isn't the p2p model of Bitcoin the very crux of trust?

I agree Bitcoin has been volatile, but it isn't based on mistrust.

~~~
SODaniel
I would have to argue that I trust an anonymous computer network and my own
ability to keep a wallet file safe over any bank in the world.

At least a blockchain isn't actively out to scam me out of money.

~~~
lmickh
The blockchain is simply a tool. A bank ledger is not actively trying to scam
you out of your money either. It is the people involved that do so. There has
been plenty of shady dealings around Bitcoin already.

------
kmfrk
I'm not a fan of Bitcoin, but I think we're probably in for a deluge of
#slatepitches linkbaiting us with coarse verdicts for or against Bitcoins for
the next number of weeks and months.

Maybe we'll have to take some measures against these clogging the frontpage of
HN.

I really liked The New Yorker's article on Bitcoin, which also served
excellently to explain its history, purpose, and method:
[http://www.newyorker.com/online/blogs/elements/2013/04/the-f...](http://www.newyorker.com/online/blogs/elements/2013/04/the-
future-of-bitcoin.html).

------
Expez
Bitcoin's role the world economy is unlikely to be as a replacement for all
other currencies. This is partly because of the properties of the currency
inself--a modest inflation is good for the economy--and partly because
governments/unions are not wont to give up complete control over their
currency.

Instead I suspect Bitcoins will be used as a medium to ease transactions. At
present it's both hard, time consuming and expensive to move money around
(banks profit on the exchange rates, VISA taking 2.5% cut out of credit card
transactions, paypal taking a cut etc etc).

The author is quite right that the incredible surge in price isn't good in
terms of bringing about widespread adoption for Bitcions, but the rise in
price is also inevitable. If Bitcoins are to be used as a transactional
medium, then the value of bitcoins have to reflect some percentage (not all
transactions will be in bitcoins!) of the amount of money in transit. At
present the entire bitcoin economy is worth about $1.5B. I have no idea what
say the value of say 1% of all the transactions in world which are taking
place at the present moment is, but I suspect it is a great deal more than
$1.5B.

~~~
dragonwriter
<blockquote>Bitcoin's role the world economy is unlikely to be as a
replacement for all other currencies. This is partly because of the properties
of the currency inself--a modest inflation is good for the economy--and partly
because governments/unions are not wont to give up complete control over their
currency.</blockquote>

And partly because (while commodity-backed currencies have a weaker version of
this trait, in that there are environmental costs of extraction) its the only
currency in the world based purely on the _consumption_ of resources, which is
a massively undesirable feature in a currency.

------
gesman
Bitcoin's rise is a consequence of raising mistrust of people in monetary
policies of their banks and their governments.

Watching your money frozen or being used to pay off for government's failures
is no fun.

Hence - the result.

~~~
Nursie
Right and this is happening in ... Cyprus. So all the money coming in to the
BTC economy at the moment is Cypriot? Really? The whole island went BTC
_crazy_ and kicked this off?

Horse-puckey!

~~~
gesman
I think many Europeans looking at Cyprus taking steps to protect themselves.
Just in case. And there are big players in this game as well.

~~~
Nursie
I respectfully disagree.

------
smosher
This story lacks critical thinking. The price couldn't be anything other than
volatile right now for the simple reason that it is bigger than a breadbox,
but smaller than a house: It has two basic attractors, one is $0—extinction.
If you take the story at face-value, I think you're supposed to think this is
the only one.

The other one is more dynamic, fitting the demand of supplying commerce with
enough monetary units to do business, which if successful should roughly match
the population of the earth eventually.

20-some-odd million units for all of us. _How much does it have to be worth?_
Much more than a hundred dollars.

So the rise in value _might_ be a bad thing, it could be a simple expression
of unbounded volatility. Or it could be a perfectly natural thing, seeking the
greater attractor—the one of persistence over extinction. Proximity to that
attractor diminishes volatility.

It's important to appreciate that the whole mess could come down, and it's
important to know how that might come about and what the signs of trouble are.
But asserting it is going to eventually fall under the weight of these
weaknesses (without being able to show how or even what in particular it will
succumb to) for anything other than hypothetical purposes is a mistake. I've
seen a lot of articles framing it like that way lately, and no support for it.

Equating sharp upward trends with dangerous volatility is just confusing the
signs of natural, healthy progression with the signs of trouble. What's needed
is a more sophisticated way of thinking about it. Solid arguments for why a
given amount in the right direction in a given period of time is a sign of
trouble rather than progress toward the greater attractor. Without these
you're just making up stories. But in all things money the trend is: it's
better to lie than admit you don't know.

------
cs702
Many currencies in existence are now riskier and less stable than Bitcoin.

Yes, it's true. As of right now, there are 182 official currencies
worldwide[1], most of which you've never heard of in your life, and many of
which have total market capitalization lower than Bitcoin.[2] Others are
subject to extreme sociopolitical, economic, or military-conflict risks. Would
you rather own bitcoins, which are traded globally, or, say, Libyan dinars,
North Korean wons, Syrian pounds, etc.?

Even the US dollar and euro, supposedly bastions of stability, have seen their
exchange rate jump from US$0.80 per euro in 2002 to US$1.60 in 2008 (100%
jump), only to drop back down to US$1.20 in 2010 (25% drop), then jump to
US$1.45 in 2011 (20% jump), only to drop back down to around US$1.29 today.[3]

If Bitcoin survives the horrific economic crises in countries like Spain,
Greece, and Cyprus, and the even more horrific military conflicts in countries
like Syria and Sudan, it will continue gaining credibility as _the currency of
last resort_ \-- the global digital commodity that will survive even if your
country or economy goes to hell.

\--

Edit: changed "most currencies in existence" to " _many_ currencies in
existence," which is what I actually intended to write.

\--

[1]
[http://en.wikipedia.org/wiki/List_of_circulating_currencies_...](http://en.wikipedia.org/wiki/List_of_circulating_currencies_by_country)

[2] [http://reason.com/24-7/2013/04/01/at-1b-bitcoin-holds-
more-v...](http://reason.com/24-7/2013/04/01/at-1b-bitcoin-holds-more-value-
than-20-n)

[3]
[https://www.google.com/finance?chdnp=1&chdd=1&chds=1...](https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=Linear&chdeh=0&chfdeh=0&chdet=1364991894838&chddm=1773204&q=CURRENCY:EURUSD&ntsp=0&ei=gh9cUaDRGbKr0AG8tQE)

~~~
chjj
If your point is, "other currencies suck too", it's not a good one. The entire
goal of bitcoin was to be better than these currencies. The writer of this
article simply said bitcoin doesn't work as a currency. The fact that there
are (unsurprisingly) a lot of failed currencies out there doesn't make bitcoin
a better currency. This isn't a school paper where the grade is curved.

~~~
RickHull
BTC is still the adoption / speculation phase. As the market share increases,
it should tend to stabilize. If Felix is saying that Grandma shouldn't take
out a BTC loan, then I agree completely. But it might be a different story in
a few years.

Also remember that there are two sides to currency volatility. If the USD/BTC
rate is changing, it could indicate USD volatility.

~~~
Nursie
It's difficult because bitcoin has to keep deflating in the long run, and with
deflationary currency loans are less attractive - every BTC is worth more
tomorrow than today so they are harder to pay back and you can make money just
by sitting on them.

~~~
iSnow
We are a long way from that - but ultimately this could result in a
competition between BTC and $ where loaners would prefer BTC and debtors would
rather take out loans in $.

In the end this would result in a much higher interest rate for $-denominated
loans and near-zero interest rate for BTC-loans.

------
rlpb
The article uses bank and bank deposits as an example of trust, and presumes
that because Bitcoins lack these, it is based on mistrust.

But this is a false analogy. Bitcoins are analogous to cash, not to banks.
Those involved in Bitcoin expect Bitcoin banks to spring up.

Those who are trading on Mt Gox are already trusting Mt Gox with their
Bitcoin.

~~~
jbverschoor
You can still have bitcoin banks that are allowed to "print" money like they
do now.

It would be the bitcoin dollar. It will first be backed by actual bitcoins.
After a while, banks would negotiate the rights to lend out money they don't.
They'd only need a small ratio. We then have the same situation as now ;)

The good thing about BTC is that it's a cheap fast and safe way to transfer
money and the supply is limited

~~~
dmm
Bitcoin banks can be full-reserve. Meaning that savings and loans are maturity
matched. So if the bank wants to give someone a 2yr loan they have to find a
saver willing to make a 2yr deposit.

Demand savings accounts would have negative interest, meaning you would pay to
have a regular savings account that you could access any time.

------
dj-wonk
The article says "That’s by design: bitcoins were created to be the most
fungible commodity the world had ever seen". Could someone please share a
citation for that?

I understand that both currencies and commodities are undifferentiated and so
are more easily traded, so I can see similarities.

But, from a common usage perspective, as well as from an economic viewpoint, a
commodity is defined as a good, having value in itself. So the above claim
seems rather misguided. Am I missing something?

------
mtgx
Why hasn't anyone made a currency that is similar to Bitcoin with the only
difference that it can grow infinitely, with an inflation of roughly 2% per
year?

It would also need to have the same difficulty increases of Bitcoin, to
account for future mining technology, other if the difficulty stays too low,
someone with some breakthrough hardware could generate and "print" a lot of
new units.

~~~
jvm
I think the two reasons are

1\. Because that's not anarchist enough for some of the rabid anti-society
supporters.

2\. Perhaps a bigger deal, it's actually easier said than done. What metric
will be used to determine value? If the network is tracking global GDP or US
CPI or something, how will it avoid being tricked by some malicious party?

It would be a great idea. Inflation doesn't even have to be positive, it could
just be fixed at a stable value. I think #2 is actually quite tricky though
but I'd be really interested to hear people's thoughts on it.

------
luckystarr
I'm still not sure what to think about this whole development.

It looks and feels like a bubble about to burst.

On the other hand it feels different because there is vested interest in
owning bitcoins that differs from owning "regular" money, i.e. relative
obscurity of spenders identity, etc.

------
xradionut
I think that Bitcoins are a sign of mistrust that people have in corrupt banks
and governments.

------
Ologn
"It's a bad idea to turn a currency into a commodity"

But a currency is already a commodity. Many commodities have been used as
currency through history - wheat, rice, cows etc. Precious metals like gold
became popular as currencies because they make good currencies for a number of
reasons - gold is not organic and deteriorates very slowly, gold is easy to
divide and combine, it is easy to transport, one ounce of gold is no different
than another ounce of gold, gold has value when used in industrial machinery
etc.

US coins used precious metals for a long time, although that is being phased
out. US currency was backed by gold until the 1970s. Historically, currencies
delinked from having the real underlying value of a useful commodity have not
lasted long. Two years before I was born the dollar was still backed by gold.

A paper currency and electronic currency with no underlying utility can always
become worthless, gold has retained worth for thousands of years. There is a
long list of useless and worthless electronic and paper currencies - Flooz,
Beenz, Confederate dollars etc. German marks had a period of hyperinflation
even before World War II ended, so they lost their value twice.

------
cinquemb
Come on everyone, we cannot possibly work together in any meaningful societal
capacity without having upmost trust and faith in banks and our respective
governments.

/sarc

------
steven2012
I'm willing to bet that once the dust settles on this a year from now, some
sort of huge Wall Street-esque conspiracy or fraud will be exposed that
propelled the price up so insanely, and then all crypto-currencies will be at
risk. All other bubbles we've seen in the last 15 years have been frauds, be
it the dot-com bubble, the housing bubble, etc. This is no different, and
reeks of fraudulent behavior.

~~~
loqi
I know it was probably just a figure of speech, but I'll take that bet. If,
one year from now, some huge Wall Street-esque conspiracy to pump Bitcoin has
been exposed, I pay you $115 (1 BTC's worth of USD at the current rate). If no
such conspiracy has been exposed, you pay me 1 BTC. Sound fair?

------
TomGullen
> Imagine a sucker who took out a loan in bitcoins a few weeks ago — she’d
> never be able to pay it back today. That’s a pretty good sign that bitcoins
> don’t work as a currency.

Is this a fundamental flaw that's always going to plague Bitcoin? Or is it
just a growing pain whilst the currency grows and stabilises?

------
powatom
I've thought a similar thing about Bitcoin before - it seems like this is the
'goldrush' era - people are grabbing as many Bitcoins as they can before they
become too scarce. Assuming there is no sudden drop-off in interest, will we
not eventually see a new digital currency, acting as a representation /
guarantee of future value? The currency itself has no worth, merely the idea
that it can be traded at some point for something WITH worth (i.e an
individual Bitcoin).

It's like trading in gold rather than money, and all this current rush is
going to do is force an eventual emulation of real-world banking systems.

~~~
lmickh
So eventually Ron Paul will be trying to push us back to the Bitcoin standard?

------
raldi
_> Imagine a sucker who took out a loan in bitcoins a few weeks ago — she’d
never be able to pay it back today_

...unless her income is also paid in Bitcoins.

~~~
Nursie
> ...unless her income is also paid in Bitcoins.
    
    
      ...unless her employer has to buy them in and now can't afford to
      ...unless they charge customers in bitcoins and can afford to
      ...unless their customers can't now buy any bitcoins to pay them
      ...unless their customers are all miners!
    

This game is fun!

~~~
raldi
The best part is that you can replace "bitcoin" with any other form of
currency, and all the arguments remain equally valid.

------
johnminter
The real key to any currency is it acceptance. When paper currency was first
developed, it became widely accepted because the issuing government declared
that it would be accepted as payment for taxes. Given the ubiquity of taxes, I
understand the acceptance. What I don't understand is on what basis one can
conclude that the acceptance of bitcoin will continue.

------
taariqlewis
If for every news article, the price of BTC rises, then trading in Bitcoin
simply for appreciation may not be such a bad idea...at least for the short
term trader. Ain't nothing wrong with a little press-driven price action.

------
jstalin
I expect to see more and more attacks on the concept of bitcoin because it
exposes the flaws in modern fractional reserve banking and fiat currency
issued by central banks.

------
codehalo
Not clear what his agenda is, trying to post on every site some moronic
opinion on bitcoin instead of investing some time in understanding it better.
A lot of folks on this that post here seem quite misguided in their knowledge
of something they clearly dont understand. Trust me, it would serve anyone who
has only passing knowledge of bitcoin to inform themselves by going to
bitcoin.org than getting opinions from the pompous morons on this site.

