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Author Topic: 2013-04-24 The Mysterious World of Bitcoin (Knowledge@Wharton)  (Read 1105 times)
Gavin Andresen (OP)
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April 25, 2013, 04:58:05 PM
 #1

http://knowledge.wharton.upenn.edu/article.cfm?articleid=3232

How often do you get the chance to work on a potentially world-changing project?
"Bitcoin: the cutting edge of begging technology." -- Giraffe.BTC
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Gavin Andresen (OP)
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April 25, 2013, 05:00:10 PM
 #2

Thought it might be interesting for y'all to see the 'raw interview':

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1) What do you see as the primary strengths or advantages of Bitcoin; why is it needed? Put another way, for an individual or a business just coming across it, why would they chose to use it?
Bitcoin is an open, international payment network. More and more businesses are choosing to accept bitcoins because it is an easy way to allow anybody, anywhere in the world, to pay for products or services-- even people from countries where credit cards and bank accounts might not be common.

It is also very low-cost, because it was designed for the Internet.

Individuals use it for a few different reasons.

The earliest adopters started using bitcoins either because they like the idea (for political or personal reasons) of using a currency that isn't controlled by a government or corporation or just because it was "new and cool."

Some people use it because they have no other choice; for example, more and more legal, online gaming sites use bitcoins to make it possible for players in countries that try to restrict onling gaming (like the US) to play.

We're just starting to see individuals using bitcoin because it saves them money; merchants are starting to pass on some of the savings (much lower transaction fees, no "chargebacks") to customers who pay using bitcoin.
 

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2)  Bitcoin isn't the first or the only digital currency, but it has rapidly become the most prominent. What accounts for that?
People trust that it isn't going to disappear, because there is no central organization that can either go bankrupt or be forced to shut down by a government. Currencies are all about trust, and more people are beginning to trust this decentralized currency that is supported by everybody who uses it.

 
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3) A number of people I have spoken with dismiss it as little more than a speculative fad, akin to the Dutch tulip mania or a dot com stock, and cite the recent run-up and collapse as evidence. What is your reaction to that argument?
I still tell people "only invest time or money into Bitcoin that you can afford to lose." I expect more drama and chaos and price fluctuations in the short-term.  The current price bubble was driven by lots of attention in the press here in the US and in Europe, and all of the attention was self-reinforcing: stories about Bitcoin's dramatic price rise got people interested, which drove the price higher, which triggered even more stories.

I expect that will happen again in the next few years, perhaps in a different area of the world (maybe there will be a China-driven bitcoin bubble in a few years that will pop when the Chinese government decides to try to restrict bitcoin transaction across their Great Firewall).

But in the long-term, I expect that to settle down, and the value of a bitcoin to become much more stable.
 
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4) Would Bitcoin need to have a more stable valuation for it to become a more widely accepted alternate currency? What else might be needed for it to grow beyond a niche?
Actually, the valuation isn't a big barrier to adoption. There are already services that help companies manage the currency exchange risk (you can peg your prices to dollars, your customers can pay the equivalent amount in bitcoins, and you get dollars deposited to your bank account), and as the financial service infrastructure for Bitcoin get more mature that will just get easier.

Any important new technology grows by starting with successes in some niches where its advantages are overwhelming; ubiquitous technologies then manage to slowly grow out of those niches to take over markets where they have a marginal advantage (either in convenience or price).

That is the pattern we're already seeing with Bitcoin, starting with niches where the advantages are too large to ignore (e.g. online gaming, international payments). It remains to be seen whether or not Bitcoin can grow out of those niches to become a ubiquitous form of payment. In theory, the value of a currency increases as more people use it. Since the potential market for Bitcoin is every person connected to the Internet, it could become more valuable than any national currency that is tied to one specific geographic region of the planet.

How often do you get the chance to work on a potentially world-changing project?
Minor Miner
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April 25, 2013, 05:01:43 PM
 #3

Great answers.   Good job.   Thanks for posting.

Severian
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April 25, 2013, 05:06:16 PM
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Thought it might be interesting for y'all to see the 'raw interview':

You represent well, Gavin. Props!
marcus_of_augustus
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April 25, 2013, 05:21:04 PM
Last edit: April 26, 2013, 01:59:56 AM by marcus_of_augustus
 #5

10/10 for GA replies.

1/10 for Wharton academics.

Piper67
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April 25, 2013, 05:30:54 PM
 #6

The last question, and its answer, should be tattooed in gold letters on the forehead of every idiot who claims Bitcoin can't function as a currency because it's "too volatile".
kiba
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April 25, 2013, 06:22:10 PM
 #7

BOO! Inaccurate!

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Others have turned to Bitcoins for privacy reasons, according to Wharton management professor Ethan Mollick. All Bitcoin transactions are anonymous and there are no centralized records of how many Bitcoins anyone has. That, says Mollick, has made Bitcoin attractive to people -- including drug dealers, online gamblers and others engaged in illegal activities -- who don't much like government tax collectors or the idea that "Big Brother" can track their transactions.

This guy didn't do his research.

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Beyond such niche users, Wharton marketing professor Eric T. Bradlow, who is also co-director of the Wharton Customer Analytics Initiative, argues that is it unclear exactly what market need Bitcoin is fulfilling or what problem it is solving. The current electronic payments system works effectively for the most part; making payments, getting cash or transferring money is relatively easy, Bradlow points out. While many merchants complain about high fees, as a practical matter few would have reason to use Bitcoin unless it became far more widespread.

Uncensorable payment don't count? International transfer don't count?

xcsler
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April 25, 2013, 06:36:00 PM
 #8

Any layperson reading this will more likely than not come away with a negative perception of BTC. It is remarkably unbalanced.
The fact that GA's counterarguments weren't incorporated makes this article yet another "hitpiece".

PS- On a positive note, it appears that >90% of bitcointalk.org-ers understand economics better that Wharton professors!
kiba
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April 25, 2013, 06:42:48 PM
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Any layperson reading this will more likely than not come away with a negative perception of BTC. It is remarkably unbalanced.
The fact that GA's counterarguments weren't incorporated makes this article yet another "hitpiece".

PS- On a positive note, it appears that >90% of bitcointalk.org-ers understand economics better that Wharton professors!

Who care about his economics if they don't do their FUCKING RESEARCH.

xcsler
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April 25, 2013, 09:14:43 PM
 #10

Any layperson reading this will more likely than not come away with a negative perception of BTC. It is remarkably unbalanced.
The fact that GA's counterarguments weren't incorporated makes this article yet another "hitpiece".

PS- On a positive note, it appears that >90% of bitcointalk.org-ers understand economics better that Wharton professors!

Who care about his economics if they don't do their FUCKING RESEARCH.

Many other Keynesian economists, Krugman for example, have done some research and have come to the same conclusions. The fact of the matter is that BTC doesn't fit into the Keynesian paradigm and therefore, by their accounts, BTC is bound to fail.
kiba
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April 25, 2013, 09:23:32 PM
 #11

Many other Keynesian economists, Krugman for example, have done some research and have come to the same conclusions. The fact of the matter is that BTC doesn't fit into the Keynesian paradigm and therefore, by their accounts, BTC is bound to fail.

I remember reading his blog and thinking "he does not do this research".

matonis
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April 25, 2013, 10:02:01 PM
 #12

Thought it might be interesting for y'all to see the 'raw interview':

Quote
2)  Bitcoin isn't the first or the only digital currency, but it has rapidly become the most prominent. What accounts for that?
People trust that it isn't going to disappear, because there is no central organization that can either go bankrupt or be forced to shut down by a government. Currencies are all about trust, and more people are beginning to trust this decentralized currency that is supported by everybody who uses it.


Gavin's answer to #2 is why bitcoin doesn't conveniently fit into Mises' Regression Theorem, which doesn't account for digital mediums, let alone vulnerable ones. I wish more Austrians realized that too.

Founding Director, Bitcoin Foundation
I also cover the bitcoin economy for Forbes, American Banker, PaymentsSource, and CoinDesk.
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