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Author Topic: 2013-11-21 The Atlantic: Bitcoin Is the Segway of Currency  (Read 646 times)
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November 21, 2013, 09:22:47 PM

Generally a negative and misinformed article.
- author is unaware of rapid adoption of Bitcoin by merchants (BitPay's 10,000 merchants...)
- author incorrectly uses term "ponzi scheme" (applies it to gold as well)
- author doesn't realize irreversible transactions are something merchants *want*
- author is unaware of many practical benefits of bitcoin (people escaping their country's inflationary currencies, sending money abroad with lower fees, etc)

Now, for those of you who aren't techno-libertarians, Bitcoin is supposed to be a virtual currency you can use to buy things online. Except it's not really a currency, and you can't really buy that much with it. It's more like a dotcom stock—circa 1999. See, in just the last month, one bitcoin has gone from closing at a then-record $192 to reaching $788 on Monday. It then opened at $502 on Tuesday, before briefly rocketing up to $900, and ultimately falling to $646. Just your average 80 percent price swing. That's totally normal for currencies ... if you multiply their biggest swings by 80.


See, the idea behind Bitcoin is to create a decentralized currency that central banks can't inflate and governments can't tax. Basically, digital gold. And like actual gold, the only way to get new bitcoins is to "mine" for them. That involves running a computationally-taxing program on your computer that mostly generates gibberish, but maybe, just maybe, some bitcoins too. The key, though, is that mining for more of the virtual currency doesn't create more of it. That's because there's a predetermined number of bitcoins. Specifically, there are around 12 million today, and there will be 21 million in 2040—and no more after that. Of course, this limited supply means Bitcoin should tend to increase in value against the dollar. But only tend to. See, its deflationary bias means Bitcoin prices will go up and down quite violently. Think about it this way. The supply of bitcoins can't increase much to meet increased demand, so increased demand will make prices soar. And soaring prices will make early adopters try to cash out their winnings—which will send prices crashing back down.

In other words, Bitcoin is a Ponzi scheme libertarians use to make money off each other—because gold wasn't enough of one for them.


There are companies trying to expand Bitcoin beyond its core constituencies of libertarians, gamblers, and people buying drugs. The startup Bitpay, for one, lets merchants immediately convert any bitcoin payments into dollars. The idea is it can charge lower fees without making companies take on the risk that Bitcoin's value falls. It's a clever idea that should make merchants more willing to accept bitcoins ... but won't make people more willing to use them. The people who have bitcoins still have no reason to spend them, and the people who don't still have no reason to get them. They don't want a currency whose value you can't predict from one hour to the next. They don't want to buy things anonymously. And they don't want transactions to be irreversible (and certainly wouldn't want that if they got hacked).

Every big idea starts out sounding crazy. But not every crazy-sounding idea ends up being big. History is littered with Segways. But for all its majestic dweebiness, at least the Segway was kind of useful. You really could zoom across sidewalks without anything resembling effort. I don't know why you'd want to, but you could. But what can you do with Bitcoin? Well, it's good for real and fake gambling. Since it doesn't have any actual fundamentals, it can be worth anything: Bitcoin 36,000 and 36 are about equally plausible. That's good for making money at the expense of people who get in the game later, but little else.

So the biggest difference between Segway and Bitcoin might be that even mall cops won't use Bitcoin.

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