“Professor Bitcorn” is very worried
The excellent Qntra writes:
Mark Thomas Williams, better known as Professor Bitcorn and for claiming that Bitcoin would crash to $10 by mid 2014, last month appeared at the World Bank Conference in Washington, D.C where he outlined his top ten risks associated with Bitcoin. The PDF is available here or read the 10 threats below.
Lets take a look at these threats, for the OLD SKOOL LULZ…
- Bitcoin Is Not Legal Tender
It is a voluntary currency and its use as a transactional currency is limited to those willing to accept it.If businesses or individuals suddenly decide no longer to accept it, bitcoin will become worthless.
This is the Faulty Appeal to Authority fallacy. Because Bitcoin is not “legal” or certified by the state and its illegitimate force, this is a flaw in Bitcoin. It is a fallacy on its face, and therefore if you know what a fallacy is, no other words need to be wasted to refute that crazyness.
The second fallacy in this is the Appeal to Fear Fallacy, where Mr. Bitcorn tries to frighten people with a movie scenario where the price of Bitcoin falls to nothing, because all of a sudden, by magic, people no longer accept it. It’s absurd of course, and we can only pity this deluded man’s students.
2. Extreme Price Risk
Since inception, bitcoin’s historical price volatility has been over 130 percent. Annual year-to-year price volatility (2010 – 2014) remains well over 100 percent.During 2014, annual price volatility (117%) has increased since 2013 (103%). Daily price movement can reach 10 percent. Extreme price instability undermines its usefulness as a safe and reliable transactional currency. Bitcoin exhibits price risk 7 times greater than gold (18%), 8 times greater than the S&P 500 (15.5%) and 18 times greater than the U.S. Dollar (7%)If the U.S. dollar had similar triple‐digit price risk how many consumers use it?
You and I know that the price of Bitcoin doesn’t matter. Its like professional wrestling; if you can’t wrestle, teach, if you can’t teach, manage. Mr. Bitcorn cant programe, is computer illiterate, and so he is left shouting on the sidelines at the real men who are doing things and changing the world. Its pathetic.
People use Bitcoin precisely because it is not money. They do not need to know that it is not money, any more than they need to understand that the voice at the other end of a phone is not the real voice of their girlfriend saying, “I love you”.
Think about it for a minute.
3. Extreme Price Risk Can Quickly Erase Company Profit Margins
Merchant net profit margins are industry specific but general range from 10 to 20 percent. Given bitcoin daily price movements can be as high as 10 percent, business owners accepting bitcoin could see profit margins reduced or completely erased in a matter of days. This tripe-digit annual price risk makes bitcoin more suitable for Wall Street type trading companies possessing sophisticated management systems, controls and tools than for merchants.
Profit and loss are private affairs of the entrepreneurs who decide to take on risk. If they win, they make a big profit, especially for the early adopters of Bitcoin. If they lose, the eat the loss. This is capitalism.
The price of Bitcoin changes; this is a business opportunity for a software entrepreneur to write code that will eliminate this problem entirely. It has already been done. If this professor really had the iintelligenceto remedy this problem, he would have come up with the software that can remove the price fluctuation risk. That he cannot even conceive of such a tool, is appalling; its clear that he is out of his depth completely, drowning in the rising and all consuming data sea.
Then he goes on to concede that Bitcoin is more suitable for “Wall Street type trading companies”. SO it IS suitable for something, and someone can make a profit from it! I thought that it was broken, useless, a “Ponzi Scheme” etc etc. If Bitcoin has even one use, then it is a success.
4. Bitcoin Is A Hyper Asset Bubble In The Process Of Deflating
At the start of January 2013, bitcoin traded at $13, peaking in November 2013 at $1,000.Over 90 percent of bitcoin are also hoarded setting a temporary price floor.Since this 2013 market peak, bitcoin has dropped by over 70 percent in value.In October bitcoin traded as low as $280.
Bitcoin is not “a Bubble”, “a hyper asset bubble” or “in a Bubble”. Mr. Bitcorn exposes himself as a Keynesian by this misapplication of the term bubble. In order to undersstand why this is so, you need to study Austrian Economics to know precisely what a bubble is, how they are formed, and who is really responsible for their creation. Bitcoin does not fit the bubble model in any way, and that is a fact. Trust me.
5. Growing Concentration And Bankruptcy Risk To Financial Middleman
In an effort to avoid bitcoin’s extreme price risk, merchants are increasingly using the risk-mitigation services of firms such as Coinbase and BitPay. These firms do no eliminate system-wide bitcoin price risk but simply warehouse the risk on their books. Relaying on these two thinly capitalised financial middleman to mitigate risk, creates a dangerous level of industry concentration risk should one or both of these firms fail.
Middlemen are business men who take risk in the aim of making profit. What socialists like Mr. Bitcorn desire is a world where there is no risk, no profit, and everyone lives off of the State, Soviet Style.
This risk is private, and is not a flaw in Bitcoin. Five items in, and Mr. Bitcorn has nothing to offer, like all computer illiterate Bitcoin deniers.
6. Bitcoin Exchange Bankruptcy Risk
The industry remains unregulated with little oversight which has opened the door for unscrupulous operators to take advantage of bitcoin buyers and sellers, increasing fraud and bankruptcy risk.In November 2013, bitcoin exchange, GBL based in Hong Kong, closed its doors, costing investors over $4 million.In December 2013, the European Banking Authority also warned of the dangers of other exchanges failing and lack of investor protection.In February 2014, Mt. Gox, the Japanese based exchange filled bankruptcy costing consumers up to $400 million.Since 2009, t he majority of bitcoin exchanges that have opened for business have also failed.
Bitcoin Exchanges are not Bitcoin. This is an absurd schoolboy howler fallacy. Can you pick the right one?
7. Bitcoin Use Can Trigger Significant Tax Risk
Unlike “legal tender”, bitcoin has been designated by the IRS, for tax purposes, as property.This designation is significant. Unlike “legal tender”, consumers that use bitcoin can be subject to additional taxes.This tax ruling provides a further incentive to hoard bitcoin and not utilise it for transactional purposes also reducing market liquidity.
This is not a flaw in Bitcoin, this is the evil of the State. Once again, in order for Bitcoin to trigger this risk, it must work as described and firm using it must profit, causing a “tax liability”. If Bitcoin cannot work and is going to cause men losses, then no tax is due. If it collapses, its game over. Its only if Bitcoin succeeds that this becomes a problem. Is Mr. Bitcorn now claiming that Bitcoin can succeed? I thought he was claiming that it is a sure thing that it cannot succeed!
Even if it does not succeed, clever accountants can write off losses against income and save themselves some tax, meaning that their money was put to good use; experimenting with new profit models. This is what capitalists and entrepreneurs do. “Professors” like Bitcorn do not understand this, or the profit motive.
8. Transactional Fraud Risk – Double Spending
Under Bitcoin protocol all new transactions are validated through the blockchain, a public ledger that is independently verified every 10 minutes. This 10 minute windows posses potential risk should two businesses be paid with the same bitcoin.If double spending occurred during this time gap, the last merchant to report the transaction would have little recourse to collect on payment.
The Double Spending Problem is what Bitcoin solves. No one allows goods to be released until there are several confirmations stacked up. This objection once again, is not only completely stupid, it concedes that Bitcoin works, and that there is a window after which transactions are secure. Once again, does Bitcoin work or does it not work? Make up your mind!
Software developers mitigate risk by sorting transactions into risk categories. We already know that once a transaction has enough confirmations, it cannot be reversed or the Bitcoin double spent. If we are talking about $20 worth of Bitcoin to buy a bottle of ink, its not worth an attacker mounting an assault on a transaction. If its $2,000,000 on the other hand, the reward is much bigger. All it means is that you have to wait 30 minutes instead of releasing the goods immediately.
Bitcoin works, and that is the bottom line. Part of using it correctly means waiting for confirmations on large transfers. Everybody knows this, its not a weakness or secret vulnerability. This is not a valid objection at all; it is in fact, the Appeal to Fear Fallacy.
What this imbecile is claiming is that Overstock is going to double spend attack its shoppers, and that is why Bitcoin is bad. Its patently absurd.
9. Significant Consumer Protection Risk
Although numerous governmental agencies have issued stern consumer warnings (e.g., CFBP, FINRA) there are no laws in place for protecting consumers against theft, fraud or human error.Bitcoin is an anonymous, digital currency that eliminates banks as financial middleman and in doing so eliminates the legal protections offered by such structures. Unlike chargeback protection offered through credit cards, once bitcoin transfers are made they are irrevocable leaving consumers with no recourse for dispute resolution. Bitcoin features also make it an ideal target for cyber criminals. If an e-wallet is hacked and coins stolen or transferred by mistake, they are lost forever. It is estimated that about 10 percent or 1.3 million bitcoins totalling over $500 million have been lost and are permanently out of circulation.
The fact that there are no laws in place that touch Bitcoin, has nothing to do with whether or not it works. If it is about to collapse and become useless, as this numbskull claims, why should any legislator waste time writing a law to govern Bitcoin? Does it work, or not Professor Bitcorn?!
Consumers always have recourse through the law when a retailer does not deliver the goods he has sold. To say otherwise is simply a lie. Then this miscreant folds in the risk of having your Bitcoin stolen, as if this were a unique risk to Bitcoin. As for transferring by mistake, as I said before; this man is a communist who wants all men protected like children by the State as Father. Absolutely appalling.
10. Sovereign Attack Risk
If adopted in its current raw form, bitcoin has the potential to undermine the longstanding bond between sovereign and its currency.Sovereign power and the responsibility is intertwined with currency creation, control and regulation. Governments exercise a monopoly power on currency creation with the understanding that doing so will provide its citizens with a greater level of economic stability.Citizens are given the ability to use “legal tender” to satisfy public and private debts including paying taxes. Under the Bitcoin model, those who create the algorithm, protocol, manage the transactional ledger and mine virtual currencies would become the new central bankers, controlling a monetary basis, an immense power and responsibility. Bitcoin has a fixed growth rate and built-in scarcity capped at 21 million e-coins by 2140. This naive approach assumes that a currency supply formula derived today can automatically meet th ebbs and flows of economic cycles over 130 years without monetary interventions or input of human judgement. Such an approach is also dangerously deflationary. If bitcoin were allowed to co-exist as “legal tender” it could also create a situation where under Gresham’s Law “Bad money drives out good”. In such a scenario, bad currency (bitcoin) would be used and good currency (US Dollar) would be hoarded, creating greater economic instability.
This is not a risk, it is a benefit. At last, the power to create money is taken away from the central banks and the men who lie on their behalf.
Once again, if the economics of Bitcoin are wrong (Austrianism, limited money supply) then by all means let it die. The real fear Mr. Bitcorn has is that Keynesianism will be permanently destroyed by Bitcoin, as it spreads globally, increasing prosperity and removing the cancer of Keynes from everyone's lives.
As for Greshams law, Mr. Bitcoin has a big problem invoking it here.
If Bitcoin is the BAD money, first of all he is conceding that its money. Secondly, if it is the BAD money, then the dollar is the good money. Bitcoin will circulate, driving out the good money; but WAIT, Bitcoin cant circulate, because…[INSERT FUD].
If Bitcoin is GOOD money, then people will hoard it and not spend it. Lo and behold, the people in Mr. Bitcorn’s anti Bitcoin camp claim that Bitcoin cannot work because it is being hoarded by Bitcoiners!
They cannot simultaneously claim that Bitcoin is money and is not money, does work but cannot work, is good money but also bad money all at the same time.
Clearly these people have a big problem, and its not with Bitcoin; is a psychological problem.
Professor Mark Thomas Williams concludes that:
1. While bitcoin is an example of new technology that has clear promise, it also poses a multitude of risks to consumers, companies and sovereigns.
2. Bitcoin and its delivery system can not be separated. The strength or weakness of the system is linked to bitcoin the currency (engine) and Bitcoin the delivery platform (rails). No matter how sturdy the rails, if the engine is not sound due to extreme market volatility, or artificial scarcity, the system can not function at reliable and safe levels.
3. Bitcoin is not an experiment conducted in a controlled environment. Currency creation and management is the lifeblood of the global economy. The payment system is the financial plumbing.
4. Pumping a pseudo currency into the veins of the economy and adopting a new payment system without regorous testing would be risky and highly imprudent.
5. To counteract the panoply of risk associated with virtual currencies such as bitcoin, there needs to be greater regulation, international oversight, sovereign control and stronger consumer protection rules put firmly in place.
6. Bitcoin as a payment platform could be beneficial as long as there is regulation, central banker oversight and ownership is made transparent.
Clearly, this foolish fallacy fuelled man is insane.
Number six is the real killer. He is conceding that Bitcoin works, but its only going to be useful and beneficial if it is regulated and ownership made transparent.
What?
We know that regulation is not needed in Bitcoin, because the network is self regulating. All the existing laws for fraud apply to Bitcoin, and so there is no need for more legislation specific to it.
Anyone who things that central bankers should have oversight in Bitcoin doesn't understand why Bitcoin was written, what the central bankers have done to our money and why they should never be trusted with being a counterparty to all transactions.
As for transparency of ownership, this is a pure call for the violent State to be able to tax everyone’s Bitcoin. Once again, if Bitcoin cannot survive, this call doesn't make any sense.
We are seeing the same attacks, verbatim, from the same demographic again and again. If you were a suspicious man, you would be forgiven for thinking this is a coordinated attack by some vested interest. But of course, we know that is not possible.
You should know by now that Mr. Bitcorn isn't making any sense.
At all.
