It's an interesting article.  I think each of his four points are true.  However, the conclusions he draws from them are mostly incorrect.


Severe Problem Number 1: Seeding Initial Wealth-

I don't think calling it severe is true, but it could have been done better.  The initial rollout was far too quick.  It should have mirrored an optimistic case of number of users on time, then converted to a predictable function (such as tan-1 shifted).  This is mainly a problem in that a lot of people are pissed that a lot of people get something for free just for being first, and also because it means that a small number of people control a lot of the wealth which makes things unstable.

Severe Problem Number 2: Built in Deflation.

This is not a problem.  Economists are of course scared of deflation, yet they cannot explain the consumer electronics industry.  Deflation is fine- it encourages savings.  If a lot of people save, it means that things that are being sold are sold for cheaper prices.  Things become less expensive.  Everyone becomes wealthier (except those pesky bankers).  When's the last time you heard an economist complain that gas prices are too cheap and they need to go up to drive the economy?  Only environmentalists have this position.

Severe Problem Number 3: Lack of Convertibility

Fairly big problem until the economy grows.  People still need fiat currency.  They need conversions.  This costs fees.  Bitcoin is not very useful if you need to go in and out of fiat, unless that process was extremely expensive before.  If the economy grows, there's no need to convert anything.  No one converts dollars for gold anymore.  This problem may not go away, but that's not that awful of a thing.  It has the potential to go away if it takes off and becomes more widely accepted.  There's no technical reason it couldn't go away.  It's more practical in nature.

Severe Problem Number 4: When Something Goes Wrong, It Will Die

Biggest concern.  While distributed, there are a ton of choke points.  The exchanges could get their funds confiscated by the government and a lot of people are out of a lot of cash.  If there is a panic, it might eliminate confidence.  If someone makes a better version, it may die.  Small economies tend to be very unstable.  Will Bitcoin have the strength?  Who knows.


So he's not that far off in his observations, but he is WAY off in his implications of these predictions.  And I'm not surprised- conventional wisdom says "moderate inflation good, deflation bad!", "I need dollars!", "I don't like other people getting rich for free!".  So that's why he thinks that way.

The deflation argument needs to be attacked.  It's so widespread, people are so scared of it.  The really question we need to ask is "so?"  And see why people actually think its bad.  The problem is most people think of wealth as currency.  Wealth is not currency.  Wealth is goods and services that people value.  Currency is only something that people redeem for such things.  If people are not buying something, then they are leaving it available to be purchased by someone else for cheaper.  Or they are investing which means that they are delaying their redeeming it for a later time when more should be available (after the investment actually increases the economy).  Investment is a great thing and should be encouraged.  A deflationary currency will encourage sound investments.

The Tea Party was originally formed as an anti-government group, but was quickly corrupted by mainstream politicians to advance anti-Democrat position.  It went from a "small government" group to a "we hate Barack Obama" group very quickly.  A huge number of Tea Party supporters now also think George W. Bush was a good president.  They like the wars in Iraq and Afghanistan, love Social Security and Medicare, and want the government to make sure people live upstanding lifestyles.  That is far from what it's original principles were.



That quiz is biased to get a lot of people identified as libertarians.  It's by design that it's high.  That doesn't mean they are actually libertarian.

#3 happens, but people often need to file for bankruptcy, and their assets get cleaned out for it.  It's not a trivial process.  There is the arm of the government legal system that they have that they can use as well.

I think the shame/good name system could work, although proving yourself initially is going to be quite costly.  No one will loan to you without really high interest rates (credit cards have quite high interest rates).  But you won't want a high interest loan unless you are very profitable, trying to prove yourself and will pay the cost, or are a scammer.  It's also easy to create a new identity from scratch, so you could just go through that process a lot.  Someone will be creative and find a way to make this work if it's a good idea, though.

That's not terribly different than 90% Americans today.

It's much different than the current system.  If I default on my car loan, they take my car.  If I default on my mortgage, they take my house.  If I default on my credit card, they come after me for it and can win a judgment against me.

Price should rise a little due to decreased supply.  Right now there are 10 blocks mined per hour, rather than the 6 that should be.  That's a big supply difference.

As for difficulty not going up any more, we still have a much lower difficulty than the price has historically dictated.  Rigs that are already set up are profitable vs. their variable costs, so it's not like they are going anywhere.  The increase in new rigs may decrease, but someone who already has hardware might find out about Bitcoin and start mining.

I'd be surprised if Europeans didn't have more trust in their governments even 60 years ago.

Part of it is cultural - if you have a pretty consistent culture over a long period of time with not a lot of mixing, conformist tendencies tend to be greater.

The type of person who came to the US as an immigrant (from anywhere) is someone who is not content with their lifestyle and is willing to actually do something about it.  People who moved west to a new area where there was uncertainty took a lot of risk and only is going to be popular among certain personality traits.

Or wait 5 years and sell them for $1 TRILLION.

I had this before my computer crashed   I wrote a script that looked at Block Explorer.  If you really want to, you can use block explorer and go every 2016 blocks.

I read somewhere that 90% or more of Economics professors get significant funding from the Fed.  So of course they are in favor of centralized banking.

How are you able to do it?  What is the fee you pay?

How did you do it before?

And the banks could do business with each other based on reputation.

The fees you are paying are much more insignificant than other countries.  I expect some fee to be eaten up on overhead.  The banks will pay a fee when they exchange on the market, and they will want some money for their trouble as well.  You are paying a 7% fee.  Sure, that's high, but perhaps it's not too crazy.  Obviously Bitcoin would help (but perhaps not for only 7% fee).  For the huge fees mentioned earlier, I'm trying to figure out why they are so high.  If you wanted to recreate the same experience for the USD to EUR wire, the 7% seems in line.  You go somewhere physically and hand them cash.  They wire the money, then your friend picks it up somewhere.  This could be linked direct to bank accounts, but let's focus on this case.

You buy your bitcoins in a store, perhaps using a BitBill or some other service.  Say that's a 3.5% fee (no idea what BitBill charges).  Then you cash out using a local trader who charges a 3.5% fee.  There's your 7%.

If you never have to convert currency then you don't get bit, but same could be said if your friend just sent you $100 and you never needed to convert it.


The 25% fees, that's where i want to know where they are coming from.  That will be the place where Bitcoin could be superior.

Oh noes, a currency that increases by 25% per year is deflationary!

What is the reason why the fees are so high in some places?  Are there expensive regulations to adhere to?  Taxes?

It probably won't, but it might.  If there was a lack of confidence in the system, or perhaps a panic where people thought "this is the absolute peak, it's going down to 0, better get what I can", you'll see a massive dump.  That would only happen if the actual value of the coin was much higher than the perceived value by the hoarders, and they believed that everyone else was figuring it out as well.

This problem is somewhat magnified by the fact that a very few number of people have a significant amount of hoarded coins.  This means that there are less decision points on when to sell, and it's easier to get a panic when you only need a few people involved.  On the other hand, it means those few people are fairly dedicated and unlikely to panic where a lot of people in a crowd may.  It does create a more volatile market since smaller number of individuals act with bigger forces than a lot of little ones, but it just means things might be rockier than normal.

There's no reason to think this couldn't be done with the existing legal system.  Reputation is also collateral in some respect (or could be).  If you don't pay your debt, your reputation is smeared and no one will do business with you.

Hoarding is only a problem if the hoarded value is ever dumped at the same time.  If it's gradual, things will adjust fairly well.  Or if they just hoard forever and never spend it, it's like the coins never existed and that's fine.

Eventually we will hit a point that each hoarder will realize he has a lot of wealth and wants to enjoy it.  Just hope it's not all at the same time.

Even if you are a wise investor, you get hurt.  Just not as much.  Unless you are a wise and connected investor.

You are wrong for several reasons.

1)  You invest in something that holds value with inflation.  You get taxed on capital gains on this.  If you invest in something that gains value above inflation,  you are taxed far more than the actual gains.

2)  Inflation benefits the first people who get new money at the expense of people who already have money.  The earlier you are to receive the money, the more you benefit than those at the bottom of the chain.  The top of the chain is the politically connected (not you).  Think about the BTC economy.  Suppose no one is trading in and out and there is a constant set of people in it all producing a certain amount that's constant year to year.  Each time someone mines a block of 50, they get the spending power of 50 BTC immediately.  Everyone else is 50/total number of coins * their coins poorer.  The economy has not grown, but the money supply has.  We accept this with Bitcoins because it will not happen forever, mining the 50 coins was not cheap and not really done for free, and it is useful in tracking transactions.  When a politician can create money from thin air, or a bank can, it is those who are connected who benefit and it is done without cost.

You are being screwed no matter what you do, it's just a matter of how badly.  Unless you are politically connected, then counterfeiting is the greatest thing ever for you.