BitCoin a Currency?
Only if the Valley secedes, calls itself BitCoinia and starts issuing 10yr notes in BitCoin
Is BitCoin a Currency?
Why not?
– BitCoin is a store of value
– BitCoin is not subject to the whims of policy makers
– BitCoin cannot be printed at will and devalued
– BitCoin can be anonymous
– BitCoin is decentralized (peer-to-peer)
Did anyone say “Product-Market Fit”?
Trying to think of it as part Gold, part Dollar and part MasterCard makes for a very confusing positioning.
I agree, BitCoin is a fantastic piece of well-designed technology that solves the problems of decentralization of trust and will have many many real world useful applications.
In a “store of value” commodity (such as Gold or Silver) scarcity is combined with industrial applications or at least desire. BitCoin has an engineered version of scarcity (yes over time it would take more and more greenhouse gas emissions to mine a single BitCoin — I kid you not!)
However, BitCoin has no industrial applications as a commodity not to mention less outside-the-Valley appeal as Google Glass or the Segway. We will not see Indian women wearing BitCoin anytime soon.
Until someone devises a way for there to be no capital gain in sitting on BitCoins, BitCoin will just be a way for Silicon Valley millionaires to become billionaires on the backs of poor third world citizens and their fear of unstable currencies or capital controls. Case In Point: Wonder how much the Winklevaii holdings grew in value when the helpless Argentinians started pouring their money into BitCoins last year? See for yourself.
A currency is not just a “store of value”.
A currency is a reflection of the fiscal health and wealth of a nation.
A currency is backed by the fiscal policy of a nation of earners, tax revenue and productivity or lack of all of the above. It is still a reflection the true nature of the socio-economic landscape of a nation.
Encouraging people to use BitCoin to circumvent an unreliable local currency is like breaking your thermostat because it’s too hot in the house — fixing the AC is a much better idea.
In fact, sometimes (not all the time), the ability to devalue a currency by issuing more liquidity is a good thing and it acts as a pressure valve to ease financial stresses on various constituencies.
The Euro is a perfect example of what happens when a currency is not backed by the fiscal unity of a nation. The only thing that saved the Euro the last time was the German’s agreement to keep “vendor financing” the Greeks et at as long as they keep the trade imbalances going.
Other various basket currencies have failed for similar reasons. Whatever happened to SDR?
At best BitCoin is a very well implemented distributed anonymous transaction system. It’s programability is a very useful attribute. However, in the real world, we need chargebacks (what if I don’t like the blow-up doll when I received it). We need regulation (yes, I know the block chain is out in the open. But I can keep changing keys on a daily basis so you will have to do a lot to find two transactions I did with another guy who is also changing keys daily).
Mt. Gox did the Valley a favor
Until Mt. Gox happened, BitCoin was headed to the stratosphere with every rich geek jumping on it. When Mt. Gox blew up, it finally curbed the Valley’s enthusiasm somewhat and stopped every GP from putting everything they own into BitCoin, LPs money into BitCoin startups and starving other startups of investment dollars — for a while though, it was well on it’s way…
With all due deference to (former Facebook exec) Chamath Palihapitiya, let’s all encourage the Chinese to put just 1% of their reserves on BitCoin.
Fortunately for the US Dollar (and our mortgage market), they are too smart for that.
Originally published at www.senerath.com on May 15, 2014.
