I don't think I'm mainstream at all (anti-social, anti-copyright, my preferred political parties can never seem to get elected, ...) but I can't get behind Bitcoin for a few reasons... The biggest being the pyramid-scheme-like distribution of coins slanted towards early adopters. I want an un-regulatable digital currency too, but I can't get excited about trading one financial plutocracy for another when money is tantamount to voting power. Money is just an IOU; money doesn't need to be scarce (like gold), just enforceable (legal tender). If Bitcoin's enforcebility depends on it's exchange with other currencies that have the power/threat of governments and militaries behind them, what ground has been gained?
If you live in a country where the government mismanages the economy or the currency, Bitcoin is not a great choice. What most people use in that situation is just a different national currency. This is a well-known phenomenon known as dollarization or currency substitution: https://en.wikipedia.org/wiki/Currency_substitution
So bitcoin is or is not money ? cause the US gov seems to want to gives the bitcoin the disadvantages of being considered a currency, without the advantages.
I'm a bitcoin skeptic but not for this reason. If this were true than we would have never had a functioning currency until fiat money, but we did. (Since gold, ergo money, was a scare resource as well.)
The biggest hurdle to bitcoin is simply that so far it has not registered on the radar of world governments. If bitcoin ever gets to the point of being a legitimate participant in the currency wars, it will be facing the wrath of all central banks and governments. They will find a weakness.
For someone in a another country, the current 8%+ inflation of US Dollar is far from negligible, especially when the dilution drivers such as stimulus packages are mostly only to the benefit of US Citizens. Physical bearer assets like cash or gold seem to be far worse than any digital solution in that they can be seized with physical force and are not possible to conceal. Bitcoin's advantage is further that it is digital and permissionless. So just like the US Government can't prevent drug cartels from using cash, it or any other government can't prevent anyone from using bitcoin.
I wonder if Bitcoin could ever be legal tender in USA. Why would the US government allow the use of a currency it cannot control? I certainly do not understand who would any country make Bitcoin legal tender at first place, unless that country has no stable currency to begin with, and even so, why wouldn't they peg their currency on the Dollar or the Euro instead?
From a financial perspective, I see no advantage in adopting Bitcoin.
I think BitCoin could be a great answer to the global dissatisfaction with the dollar as the world reserve currency. Why not use bitcoin as a non-political global reserve currency, and as an intermediary between national currencies, rather than as an everyday currency that intends to replace anything.
If bitcoin becomes a store of value / digital gold and people increasingly hold their wealth in Bitcoin countries will lose the ability control and regulate their own economy.
1) Why would any country hand over the reins of its economy to others ? India is already thinking of banning cryptocurrencies, China has similar thoughts too, if many large countries ban it how would Bitcoin sustain ?
2) US has fought wars to retain dollar as the global reserve currency. Why would the US give up this advantage ?
3) Presently, economic sanctions are used to push interests and disincentivize bad behavior. How would this play out in a world of Bitcoin ?
4) If bitcoin exists with fiat and exchange points can be controlled and blocked by governments, what's the point of Bitcoin ?
Bitcoin would make a horrible official currency for a country (inability to control the money supply, enforced deflation which discourages investment, easy for capital to flee). However, as a 'second currency' it has a lot going for it, security, fast, cheap, easy transfers between people across the world. I could see it becoming the worlds international 'second' currency.
Bitcoin is not a threat to centralized currencies, there is room in the financial world for both. A government controlled currency has some clear advantages, relative stability being one of them. I wouldn't accept paychecks in bitcoin for the same reason I wouldn't accept paychecks in gold bullion, although both have a demonstrable value, government issued currency provides a stable way for the average person to store wealth at scale. Although everyone sneers at the federal reserve, their financial engineering plays a real role in perpetuating western affluence (though it clearly has serious problems; a topic for another day).
The significance of bitcoin is that it's an unrestricted option for anyone at any time. Just because you won't accept your paychecks in bitcoin doesn't mean you won't want to use them from time to time, if only for the freedom to bypass the astonishingly ubiquitous banking institution. I'm not even talking about anything illegal (though illegal doesn't always mean wrong), I'm talking about the minefield of wealth draining fees and bullshit (frozen accounts, chargebacks, spending limits, really slow transfer times) that bitcoin lets you avoid when you want to.
In principle, I can understand Bitcoin's appeal as a reserve asset to central banks, especially those seeking to reduce their reliance on currencies issued by the central banks of other countries. Like gold, which historically has been used as a reserve asset, Bitcoin does not depend on the "full faith and credit" of any government. It depends only a distributed network executing a consensus algorithm.
A big part of the issue with Bitcoin is that our global economic system is, and for the foreseeable future will continue to be based on fiat currencies issued and controlled by central banks.
I see Bitcoin's role in all this as a way to exploit arbitrage in currency exchange rates for restricted currencies. This is exactly why it's popular in China. It is a currency whose supply is algorithmically limited and theoretically should track global inflation. The world has always had nominal exchange rates and de-facto exchange rates for restricted currencies; but until something like Bitcoin emerged there was no legal way to perform exchanges at the de-facto rates at scale.
My big worry with Bitcoin is that the supply is too limited. Currency is subject to manipulation by many forces; much of the job of a central bank in control of money supply is to counteract any intentional manipulation. With unstable prices and a limited circulation value (the total value of all BTC in circulation is only ~$12 billion) it is very open to manipulation by investment banks and hedge funds. Until BTC reaches economic scale, it's going to be subject to all sorts of shenanigans; and with no central authority to counteract the manipulative influences, I don't know that there will ever be enough trust in it for it to reach that scale.
It seems utterly reasonable to me. What could be more reasonable than wanting your medium of exchange to be out of the control of incompetent, corruptible governments? What could be more reasonable than wanting your medium of exchange to be based upon open-source, community-edited code, that anyone can review, contribute to, and build on top of? What could be more reasonable than wanting your medium of exchange to be available to anyone, anywhere, anytime, regardless of political orientation, without asking anyone's permission?
Sorry but fiat currencies possess no advantages other than incumbent localised network effects. The world needs a true global currency and Bitcoin is it.
I don't think that's quite a fair comparison. The US Dollar and Gold coexist just fine. A new store of wealth doesn't threaten the US's economic dominance. Though this is colored by my own opinion that Bitcoin is not and will never be broadly adopted as a means of exchange, but rather only as a store of wealth.
As others have probably already mentioned, Bitcoin's transaction costs are very high and transaction time is quite slow compared to most other transactions. One major exception to this is international transfer of small amounts, though I don't think that's enough to threaten government backed currencies.
No country wants its currency tied to some restricted quantity. The entire idea of owning a currency by the government is be able to manipulate it. If Bitcoin can be currency, why not gold or something else?
I am skeptical of bitcoin, mainly because it has limited convertability to sovereign currencies backed by military power. I surely see the value of digital currencies, however sovereign backing and convertability is necessary to expand beyond a niche.
I don't think Bitcoin will ever be a viable currency, at least not on the scale of national currencies. Despite all the flaws fiat currency has, it is actually backed by something - the power of the country's government to tax. Thus, any buyer of sovereign debt has a calculable probability of return. Despite America's printing of dollars, inflation has actually been mild so far.
Bitcoin has nothing backing it but an artificial supply limitation. That in itself is not a solution because its monetary base cannot possibly grow at the rate overall goods do, and thus have a stable price point.
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