# BitCoin - Good Idea or Disastrous Failure?
**URL:** https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175
**Category:** Great Debates
**Created:** [December 12, 2013, 6:07pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175 "2013-12-12T18:07:01Z")
**Posts on this page:** 20
**Page:** 4
### Author:  [@Budget\_Player\_Cadet](https://boards.straightdope.com/u/Budget_Player_Cadet)
#### Post date: [December 17, 2013, 7:53am UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/61 "2013-12-17T07:53:41Z")
> [@Xema](#):
>
> But it doesn’t make the currency a reliable place to stash wealth.
It doesn’t have to be, at least not long-term. Out of the roles money fulfills, I’d say keeping commerce peppy is probably considerably more important than providing a service which you can fulfill with a reasonable investment portfolio.
---
### Author:  [@Alessan](https://boards.straightdope.com/u/Alessan)
#### Post date: [December 17, 2013, 8:43am UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/62 "2013-12-17T08:43:47Z")
Currency is called currency because it’s supposed to move. Otherwise, it would be called stagnantcy.
---
### Author:  [@Derleth](https://boards.straightdope.com/u/Derleth)
#### Post date: [December 17, 2013, 12:19pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/63 "2013-12-17T12:19:35Z")
> [@Xema](#):
>
> But it doesn’t make the currency a reliable place to stash wealth.
It is for the short term. For example, the $1.50 I have on my dresser is enough to buy a soda at a specific machine now, and I reasonably expect it will be enough to buy a soda at a specific machine six months from now. It won’t be enough ten years from now, but one year? Probably. The point is that inflation is slow enough you don’t have to get paid at noon every day to buy bread on your lunch break, as people famously had to during the worst part of Germany’s hyperinflationary period.
As I and others have said, however, currency _shouldn’t_ be a good long-term or even medium-term store of value. That encourages hoarding, which is the antithesis of a healthy, growing economy.
A _morally_ good investment gains value by _providing value to society_. It is the representation of money that’s out there, helping others do things, creating value in the form of start-up companies, new houses, new road construction and maintenance, new cars being made and old ones being fixed, and everything else a society sees fit to do. Money that encourages people to convert it into currency and stick it in a vault is, therefore, morally unsound, even if it’s never converted into a physical form. It _discourages_ the social goods a working, active, virile monetary system produces in the world.
A healthy fiat money is backed by the reasonable expectation the economy which produced it will keep working. An economy can only keep working if money continues to flow within it. A deflationary money discourages its own flow, sticking in the vaults like cholesterol sticks in an old man’s arteries. It is stagnation and it is death. Happily, Bitcoin isn’t nearly influential enough to be the death of anything more than a tiny sliver of a sector of our total economy.
---
### Author:  [@treis](https://boards.straightdope.com/u/treis)
#### Post date: [December 18, 2013, 7:23pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/64 "2013-12-18T19:23:27Z")
Looks like BitCoin has droppd 40% in value today based on a move by the Chinese government to restrict converting RMB into BitCoins.
This highlights the biggest problem with BitCoin. The three primary uses are, right now:
(1) Avoiding currency controls
(2) Buying illegal items
(3) Hoarding by fiat money is evil types
---
### Author:  [@Xema](https://boards.straightdope.com/u/Xema)
#### Post date: [December 18, 2013, 9:19pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/65 "2013-12-18T21:19:15Z")
> [@Derleth](#):
>
> A healthy fiat money is backed by the reasonable expectation the economy which produced it will keep working. An economy can only keep working if money continues to flow within it. A deflationary money discourages its own flow, sticking in the vaults like cholesterol sticks in an old man’s arteries.
You’re making a good case against a national currency that is deflationary.
But isn’t it at least somewhat important to encourage some level of savings? Inflation - or the expectation of it - tends to work against this. I know more than a few people whose attitude is that only the foolish are not taking on a decent measure of debt, in the expectation that it will be repaid with dollars that are worth substantially less.
---
### Author:  [@Jonathan\_Chance](https://boards.straightdope.com/u/Jonathan_Chance)
#### Post date: [December 18, 2013, 9:38pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/66 "2013-12-18T21:38:12Z")
Well, let’s differentiate between saving and hoarding.
With saving, whether in a brokerage account or even in a straight bank savings account, the money doesn’t vanish or remain static. Instead, if it’s invested it gets to work - providing money to firms or other investors and so forth and hopefully generating a return for the holder. If it’s placed in a CD or standard savings account, the bank will loan it out and the velocity of the money in increased - in general, there are exceptions.
However, hording money - whether bitcoins or dollars - takes the currency out of circulation entirely. That’s not a good thing and should be avoided.
So it’s possible to both save and see that money moving around the larger economy.
---
### Author:  [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)
#### Post date: [December 19, 2013, 1:19am UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/67 "2013-12-19T01:19:16Z")
> [@Xema](#):
>
> It doesn’t have to be runaway inflation.
>
> This [inflation calculator](http://www.bls.gov/data/inflation_calculator.htm) says the US dollar has lost 49% of its value in the past 25 years, and 87% over 50 years.
>
> What govt-backed currencies have lost less than, say, 25% of their value over the past 20 years? (Googling suggest that Japan might qualify.)
The pound (Sterling, UK) has lost [94% of its value since 1963, and 56% since 1988](http://www.thisismoney.co.uk/money/bills/article-1633409/Historic-inflation-calculator-value-money-changed-1900.html). I’m not sure the calculations are directly comparable, but it’s at least in the same ballpark and probably worse.
---
### Author:  [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)
#### Post date: [March 7, 2014, 6:55pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/68 "2014-03-07T18:55:15Z")
[From Salon:](http://www.salon.com/2014/03/07/sorry_libertarians_your_dream_of_a_bitcoin_paradise_is_officially_dead_and_gone/)
> [@](#):
>
> If the last two weeks have taught us anything, it’s that there is nothing magically transformative at all about Bitcoin. Mt. Gox’s woes impelled Japan’s financial authorities to announce that they will now start regulating Bitcoin. The founder of the online drug emporium Silk Road, once cited as proof that Bitcoin enabled resistance to the powers that be, is now in jail. The geeks and dreamers who founded the first Bitcoin institutions are being replaced by Silicon Valley start-ups. There is no room for libertarian utopia in this scenario.
>
> The irony here, though, is that a good argument can be made that doomsayers are overstepping when they write Bitcoin off as a complete failure. Good programmers and successful start-ups learn from their mistakes — they iterate, to borrow a popular piece of Silicon Valley jargon. Serious investment is now at play in the Bitcoin world, and there is every reason to believe that the institutions that store and transfer and exchange Bitcoin will become more secure. Bitcoin’s true value may turn out not to rest in its potential to liberate mankind from central bankers and government autocrats, but in its ability to achieve the much more prosaic task of moving money around the world more cheaply than it is currently practical to do so. Think of Bitcoin as the 21st century version of a Western Union money order and you might not be far off. The model train importers of the future may end up revering Satoshi Nakamoto as their savior. No more big fees for international transfers.
>
> But governments and bankers and Wall Street money men will still be around. Neither Satoshi Nakamoto nor Bitcoin ever stood any chance of operating outside the bounds of conventional society. There will be regulation, there will be consumer protection, there will be rules and taxes, and criminal prosecutions for those who break the law. Bitcoin isn’t cyberpunk fantasy and it isn’t a Thomas Pynchon novel. It’s dull. The thrill is gone. And that’s why people are so mad.
---
### Author:  [@MOIDALIZE](https://boards.straightdope.com/u/MOIDALIZE)
#### Post date: [March 7, 2014, 7:07pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/69 "2014-03-07T19:07:25Z")
> [@BrainGlutton](#):
>
> But governments and bankers and Wall Street money men will still be around. Neither Satoshi Nakamoto nor Bitcoin ever stood any chance of operating outside the bounds of conventional society. There will be regulation, there will be consumer protection, there will be rules and taxes, and criminal prosecutions for those who break the law.
And the reason for this isn’t because of some Wall Street/Government/Illuminati conspiracy, it’s because the BitCoinists are stubbornly (re)learning the hard way all the common problems involved in banking systems, like undercapitalization and the incentives for insiders to cheat. We figured this stuff out 80 years ago. The technology changes, but the human problems remain.
---
### Author:  [@gazpacho](https://boards.straightdope.com/u/gazpacho)
#### Post date: [March 7, 2014, 7:59pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/70 "2014-03-07T19:59:39Z")
> [@MOIDALIZE](#):
>
> And the reason for this isn’t because of some Wall Street/Government/Illuminati conspiracy, it’s because the BitCoinists are stubbornly (re)learning the hard way all the common problems involved in banking systems, like undercapitalization and the incentives for insiders to cheat. We figured this stuff out 80 years ago. The technology changes, but the human problems remain.
The main benefit of bitcoin was to not need banks. You could store your bit coins securely yourself and easily send and receive bitcoins to others. If bitcoins cannot do these things then it fails as digital cash.
---
### Author:  [@CJJ](https://boards.straightdope.com/u/CJJ)
#### Post date: [March 25, 2014, 8:40pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/71 "2014-03-25T20:40:28Z")
More headaches for Bitcoin supporters…the IRS has ruled [Bitcoin should be treated as property, not as currency, for tax purposes](http://www.businessinsider.com/irs-bitcoin-is-property-not-currency-full-release-2014-3?op=1):
> [@](#):
>
> According to Bitcoin tax expert Tyson Cross, this will create a significant burden on Bitcoin users, as every transaction they ever make using the digital currency will have to be reported in some way.
>
> That would not be the case if it had been ruled a digital currency.
>
> “Users will have to track their transactions and determine the amount of their taxable gain each time,” he told BI in an email. “It’s quite a burden. The rules on taxing foreign currency provide an exception for ‘personal transactions’ for that very reason. It would be great to have that exception (or something similar) apply to bitcoins as well.”
---
### Author:  [@iamthewalrus\_3](https://boards.straightdope.com/u/iamthewalrus_3)
#### Post date: [March 26, 2014, 6:46pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/72 "2014-03-26T18:46:25Z")
> [@CJJ](#):
>
> More headaches for Bitcoin supporters…the IRS has ruled [Bitcoin should be treated as property, not as currency, for tax purposes](http://www.businessinsider.com/irs-bitcoin-is-property-not-currency-full-release-2014-3?op=1):
I don’t know that that’s really a headache. At least they’ve issued _some_ guidance.
And if you hold them for at least a year, the capital gains tax rate is going to be lower than the forex gains rate, so this means lower taxes for most people.
---
### Author:  [@CJJ](https://boards.straightdope.com/u/CJJ)
#### Post date: [March 26, 2014, 10:28pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/73 "2014-03-26T22:28:21Z")
An interesting follow-up to the IRS ruling on [url=]Salon. Jeremy Liew, managing director at the Silicon Valley venture capital firm Lightspeed Venture Partners, gave what I consider a pretty good review of where Bitcoin has been and where it is going:
> [@](#):
>
> Liew explained that the first wave of Bitcoin users were radical libertarians and cryptography enthusiasts who liked the idea that Bitcoin doesn’t have a central authority with the ability to run the printing presses whenever it wanted, thereby theoretically devaluing the funds sitting in their bank accounts. This initial support got Bitcoin to a total market cap of about $50 million U.S. The second wave of adopters, who helped push Bitcoin over $5 billion mark, are people who largely appreciated Bitcoin for its pseudonymous nature. They could use Bitcoin to make online transactions without having to reveal their true identities, which made it an ideal vehicle for individuals engaged in illegal activities.
>
> The third wave, Liew predicted, will be merchants sick and tired of giving Visa a 3 percent cut of every sale they make.
It’s this last phase where BitCoin has potential: As a secure means of making one-shot on-line payments. That is squarely at odds with what some libertarians initially hoped for the currency:
> [@](#):
>
> In a conversation with Ehrsam, Wall Street Journal technology reporter Rolfe Winkler told a story that deftly illustrates how this new conception of how Bitcoin could be used can put it at odds with its original core of supporters.
>
> While hanging around Austin a few days prior to the start of the (SXSW) festival, Winkler attended a meetup of Texas libertarians. He recounted being a little shocked when a handful of people walked in carrying semi-automatic rifles—Austin may be a liberal oasis, but it’s still in Texas after all. Winkler mentioned chatting with a group of middle-aged women who called themselves ‟Moms for Bitcoin.”
>
> ‟They saw Bitcoin as a tool to escape from the authority of the government. … [The other benefits of Bitcoin] were almost an afterthought to them,” Winkler said. ‟[They want to] transact without being monitored. They use it as a way to get off the grid.”
---
### Author:  [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)
#### Post date: [March 26, 2014, 10:38pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/74 "2014-03-26T22:38:07Z")
The real problem with bitcoins as others have pointed out elsewhere is that early adopters hold a vast majority of the currency. Imagine if after the first 50 years of the US that all the currency that was ever going to be used were printed and after that just redistributed. And of that currency, the distribution was heavily weighted to those in the US since the beginning?
So the step now is to look at the successes of bitcoins and weight its failures against other currency systems and figure out how to have the best of both worlds. For example, what if rather than having bitcoins harder to manufacture as time goes on, the same amount of bitcoins get made per unit time like 1000 bitcoins per week or whatever. The tradeoff is that now more people are chasing them so it is still deflationary.
---
### Author:  [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)
#### Post date: [March 26, 2014, 10:44pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/75 "2014-03-26T22:44:39Z")
> [@CJJ](#):
>
> It’s this last phase where BitCoin has potential: As a secure means of making one-shot on-line payments. That is squarely at odds with what some libertarians initially hoped for the currency:
>
> > [@](#):
> >
> > ‟They saw Bitcoin as a tool to escape from the authority of the government. … [The other benefits of Bitcoin] were almost an afterthought to them,” Winkler said. ‟[They want to] transact without being monitored. They use it as a way to get off the grid.”
Someone needs to explain to them that no one has any legal, constitutional, or moral right to be invisible to government, nor to do business out of its sight. Privacy rights do not extend to the point of conducting untaxed commercial transactions.
---
### Author:  [@BrainGlutton](https://boards.straightdope.com/u/BrainGlutton)
#### Post date: [March 26, 2014, 10:46pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/76 "2014-03-26T22:46:16Z")
> [@Saint\_Cad](#):
>
> The real problem with bitcoins as others have pointed out elsewhere is that early adopters hold a vast majority of the currency. Imagine if after the first 50 years of the US that all the currency that was ever going to be used were printed and after that just redistributed. And of that currency, the distribution was heavily weighted to those in the US since the beginning?
That would be awkward; a penny would be worth too much to spend in small transactions.
---
### Author:  [@Saint\_Cad](https://boards.straightdope.com/u/Saint_Cad)
#### Post date: [March 27, 2014, 3:46pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/77 "2014-03-27T15:46:04Z")
Plus another thing about BTC re: deflation. You cannot mine anymore without dedicated hardware and to break even we’re talking paying $1000s. Imagine needing $10000 in cash today to get a job at Walmart.
The trouble as I pointed out is that Nakamoto decided to jumpstart its popularity by heavily rewarding early miners. The question is for BTC v. 2 does there have to be such a huge front-end reward system.
Another thought, suppose I live my dream of owning Bir Tawil and I decide that as Emperor Saint Cad I that I will use cryptocurrency. What impact does that have on the one I choose? What about on the ones I don’t choose?
---
### Author:  [@Cheshire\_Human](https://boards.straightdope.com/u/Cheshire_Human)
#### Post date: [March 29, 2014, 9:42pm UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/78 "2014-03-29T21:42:06Z")
> [@BrainGlutton](#):
>
> Someone needs to explain to them that no one has any legal, constitutional, or moral right to be invisible to government, nor to do business out of its sight. Privacy rights do not extend to the point of conducting untaxed commercial transactions.
I would alter your statement a bit. While no one has a legal or constitutional right to do so, everyone has a _moral_ right to _try_ to be invisible to government. No one has the moral right to _succeed_ at it, however. And certainly has no legal or constitutional right to same. Nor a legal or constitutional right not to be punished for a failed attempt. If you can manage it, bully for you. But don’t bitch if they catch you. You had no right to succeed at it, in the first place.
---
### Author:  [@Damuri\_Ajashi](https://boards.straightdope.com/u/Damuri_Ajashi)
#### Post date: [March 30, 2014, 4:47am UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/79 "2014-03-30T04:47:22Z")
The problem with bitcoin is that it is generally not accepted as legal tender. If someone is accepting bitcoin but then turning around and selling it then it isn’t currency. If Bitcoin did not have market-makers who were willing to buy and sell from all comers, it would have virtually no value at all.
The technology is nice and maybe some outfit like paypal might sell dollar backed bitcoins that can trade anonymously but bitcoin won’t survive in its current form. Of course, you will have financial reporting requirements imposed on the market-makers of electronic currency so the anonymity will disappear but i can see the credit card company chop disappearing soon.
---
### Author:  [@Martini\_Enfield](https://boards.straightdope.com/u/Martini_Enfield)
#### Post date: [March 30, 2014, 10:19am UTC](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175/80 "2014-03-30T10:19:27Z")
A sort of tangential question which I hope no-one minds me asking here instead of starting a new thread, but I don’t get the point of the additional crypto-currencies like LiteCoin or DogeCoin - what are they intended to achieve?
[Previous page](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175.md?page=3)
[Next page](https://boards.straightdope.com/t/bitcoin-good-idea-or-disastrous-failure/676175.md?page=5)