Better title for this article: I don't like bitcoin
First negative point:
In other words, Bitcoin isn’t just a currency, it’s a massive experiment in group trust. It’s also a hint of the financial system to come and, ultimately, a scam.
Bitcoin is a medium of exchange. I hope that decentralization, zero transaction fees and a capacity of anonymity is a "hint of the financial system to come". How precisely this leads to the conclusion of "scam" is quite the logical leap.
You probably heard of the digital cash after it was rocked by sudden changes in value. A few weeks ago the value of the bitcoin briefly plunged to negative eight cents to the dollar as hackers crashed exchanges and digitally ransacked electronic wallets to the tune of $9 million. A single victim claims that hackers absconded with some 25,000 of his bitcoins, worth, absurdly, approximately $375,000 at present dollar-to-bitcoin exchange rates.
Bitcoin value didn't plummet. The ticker on a single exchange plummeted, and it has since recovered quite well. This is not a reflection of market forces, but of anomalous activity. The old guard financial system certainly has had its share of problems, not that this is an excuse. The problem with mtgox is not a problem with bitcoin. The hackers did not get away with $9 million USD as far as I can tell. mtgox daily withdraw restrictions only allowed them to get away with $1000.
As for the alleged theft of 25,000 BTC, even if we suppose that it really did happen, how is the lack of application of basic security by end users the fault of bitcoin? It's not. Would you leave a box of 250 ounces of gold in your car and be upset at "gold" if it vanished? Nonsense. The fact that a hacker is willing to devote time to acquiring bitcoins demonstrates further that these things do have value.
And that’s just the beginning of what’s happening in the world of Bitcoin,
Just the beginning? Presumably this statement is supposed to have some meaning... if only everything was "just the beginning."
which combines enough hackers, monetary policy cranks, and mysterious Japanese corporations to populate a Neal Stephenson novel.
So if we don't endorse the established financial system and monetary policy, we're cranks? Questioning the motives of institutions that have demonstrated a direct apathy to human life is crankish? What does it matter if there is a Japanese corporation involved somewhere? Do you not use any electronics at all? Is the word Japanese supposed to engender fear?
If by "crank" we mean someone willing to question the morality of giving a small group of individuals the capacity to influence the global financial system, then crank I am!
So far, you can’t buy anything with bitcoins that you couldn’t purchase more easily with cash or a credit card.
Bitcoin is new. It's not an argument to suggest that if the entire world fails to start accepting bitcoins overnight that they are a failure. How many stores accept gold coins as payment? "Cash" here is used to lump all paper currencies together, but the problem is obvious, each country has its own which trades at a particular value. Bitcoin doesn't care what country you are in.
Despite rumors that Bitcoin was creating an online Hamsterdam where anonymous users could sell drugs and lord knows what else
Ah yes, the good old 'bad people doing bad things' argument. If the transactions are voluntary, who cares? But even then, what percentage of transactions in cash are of questionable legality? Bad people do bad things with whatever is available. They use cell phones and cars too, run for the hills!
Bitcoin isn’t truly anonymous unless you’re already taking some relatively advanced anonymity steps. Even then, Internet forensics could likely track you down.
Doesn't require "advanced steps." Just an awareness of how transactions are published.
More problematically, the economics don’t quite work. Currencies are most valuable when lots of people trust and use them frequently. But PayPal has refused to convert bitcoins to cash, and major exchanges like MtGox have fallen to hackers. A currency that you can’t convert into anything else isn’t worth, well, anything.
The fact that MtGox was attacked is a big problem, but not a fatal one. There are hundreds of years of bank robberies and bank runs. This is a failure of an institution, not the medium. The fact that paypal has thus far rejected bitcoin is a good indicator we are on the right track. Bitcoin, after all, is a direct competitor to paypal. What incentive would paypal have at all to start accepting it this early? They'll only start doing it once it becomes obvious that they will lose money otherwise.
I'll just start rambling off general statements about things that don't apply to specifically to bitcoin, and leave the implication open that they do. The economics don't work, but I wont give any reasons why this is the case.
But the biggest problem is that, despite its anarchic design, the system presents a huge opportunity for big fish to take advantage of the Internet everyman.
Bitcoin is voluntary. No one points a gun at you to use it. If you invest money in something you don't understand, you deserve to get taken to the cleaners. This is true of bitcoin, and certainly not a failing. The big "fish" in this case are not the old guard financial czars.
Ben Laurie, a respected web security expert and cryptographer, makes a compelling case that Bitcoin won’t work because it accrues such a huge advantage to people who can bring the most computing power to bear on clearing transactions. “I mean, it’s nice for the early adopters, so long as new suckers keep coming along,” he concludes. “But in the long run it’s just a pointless waste of stuff we can never get back.”
Early adopters in any successful venture are rewarded proportional to their investment against how early they were in. This is why Bill Gates has billions, and you do not. If bitcoin succeeds, why shouldn't these individuals be rewarded with untold riches? Do you realize exactly what bitcoin represents? The benefit to society that is possible is incalculable. The fact that some things succeed and some do not is not a "pointless waste" but a precise process of refinement and equilibrium. We don't accept your one-size-fits-all solution that you try to force upon us, here's what we're doing and we won't bother forcing it on you.
Most worrisome is the opportunity for collusion: If any single person or group controlled a majority of computing power in the network, they could rewrite the transactions to take your money.
Ahh! Imperfect solution! Run! No, really. The nirvana fallacy here couldn't be any more blatant. So the only solution to the problem that a single person or group might attain a majority of the hashing power for the sole purpose of destroying the system they operate within is to grant an even smaller group of people a monopoly to control everything
Bitcoin relies on the growth of the network to outpace any single node’s ability to control the bulk of the processing power, but one mining collective, deepbit, currently clears more than a third of all transactions. Already, hackers have used botnets, online networks of computers, to increase their ability to process transactions and mine bitcoins.
He used the word botnet and hackers! Run!
... Bitcoin nodes band together to seize control of the network, becoming the equivalent of online banks as they provide transaction services to everyone else. And if those banks get together to regulate the supply of money, well, that’s where central banks come from.
False! This is not
where central banks come from. Central banks are imposed
on individuals, and backed up with force. You are not permitted to setup your own federal reserve. No one is prevented from setting up a pool or exchange. Try setting up your own federal reserve and see what happens. The bitcoin network cannot be "seized." It doesn't exist, and isn't controlled by any central authority.
most Americans trust dollars because we have some sense that the U.S. government isn’t going anywhere and is somewhat accountable to us. It’s hard to trust a monetary system concocted and managed by anonymous hackers who aren’t answerable to anyone.
False! Most Americans don't "trust" dollars any more than they trust the US government, they are forced to use them because of the tax code. If you ask an "American" if he trusts politicians, you'll be hard pressed to get a solid Yes. When you point out that the value of the dollars in their wallet are controlled by these politicians, they'll direct the same mistrust they have of politicians to the currency itself, coupled with the fact that since 1913 the currency has lost 96% of its value, it's not exactly a hard case to make.
The US government isn't going anywhere! True colors are shown. This author has no sense of reality or history whatsoever. The US government cannot be held accountable because it does not exist. The politicians are just legal thugs. They are the watchmen, what incentive to they really have to hold themselves accountable, and clearly they don't, otherwise Bush would be in jail.
Bitcoin is not a monetary system and it is not "managed" by anyone. This is a positive, not a negative, for those of us that recognize that the state is a corrupt and immoral institution.
We’ll want a decentralized peer-to-peer monetary system that combines the advantages of Bitcoin with the purchasing power of the dollar.
Assuming, of course, that the dollar has any purchasing power left by the time we want to digitize it.
Why do we want to combine the value of a centralized currency backed by violence with the decentralized medium of exchange backed by voluntary actions? There are no advantages to violence except for those committing it. Bitcoin is worth more than a dollar for a reason.
The fact that the dollar will likely be worth less is exactly why it is... worthless. This will be the failing and falling of the US government. How this author can recognize the falling value of the dollar and effectively reject bitcoin and claim (presumably with a straight face) that the US government isn't "going anywhere" is amusing.
If there are errors in my post, please let me know.