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In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perc

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently).

littlestymaar 9y ago
I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation, not a fact). Inflation for consumption goods was kept low, but the asset prices grew up a lot in the past decades : in the late 90s the stock market was inflated and collapsed (the internet bubble), in the mid 2000s the overpricing of real estate in the US was responsible for the financial crisis, nowadays the stock market is inflated again, how bad will it end this time ?
- subroutine 9y ago
  What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). Say we went all-in on crypto and 10-years-in for whatever reason the crypto supply generation rate we set a decade ago wasnt working (the US economy was crumbling). What then? This is an honest question: Say north korea suddenly waged total was on US, or a massive natural disaster happens, but the government didnt have huge reserves of money to pay for defense or aid? Should they suddenly issue a tax on their citizens to raise capital, and hope they pay in a timely manner?
  - littlestymaar 9y ago
    > What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). You are misinterpreting me. To be more explicit : cryptocurrencies suck for the exact reason you explained (if you look around in this discussion, that's exactly the point I'm making against any cryptocurrency fan) yet saying that current system is working properly is foolish. The recent history (since the 80s) is a good illustration that interest rate isn't a good enough tool for money supply control. And actually it should have been predicted: you have two independent things you want to control (consumer price inflation and asset price inflation) then you can't control them with only one variable. The fed's policy ignored the asset price, and it had the bad consequences I was talking about, but if you chose to control the asset price you'll probably cause deflation and kill economic growth. My take: because it's a system with 2 degrees of freedom, we should have at least two variables to adjust. If the first one is the interest rate, what should the second one be ? I don't know, but probably taxes (On savings ? On capital held maybe ?).
    - guelo 9y ago
      Economists talk about having two main tools: monetary and fiscal policies. Traditionally monetary policy is driven by the Fed and fiscal policy is driven by the government, this disconnect means that the two can work at cross-purposes, such as when the Fed is raising rates while the government is talking about boosting the economy with business tax cuts. In reality the state has basically unlimited power to affect the economy, but it chooses to limit what levers are allowed to be used in order to provide stability and confidence. And also out of morality-driven ideology of the same sort the that gave rise to Bitcoin.
  - namelost 9y ago
    There are many countries which do not have the ability to print money, either because they use another country's currency or their currency is pegged. This usually comes about in order to ease trading (e.g. Hong Kong), because the existing currency was very weak, or because that country is too small to manage its own currency.
- DeerSpotter 9y ago
  Ahhh, the Feds.... There is one Variable nobody is talking about. Where are the bitcoins that were seized from the silk road and other drug dealers, etc... As soon as the USA floods those bitcoins back into the markets prices of bitcoin will drop.
  - mijikai 9y ago
    They were already sold off 2 years ago.
    - mijikai 9y ago
      https://www.coindesk.com/four-winners-44000-bitcoins-final-silk-road-auction/ https://www.coindesk.com/four-winners-44000-bitcoins-final-s...
sp4ke 9y ago
Patrick McKenzie is fortunate enough to not be born in a country that is currently suffering from hyper-inflation neither is he living under a dictatorship that is putting capital controls and deciding how he should use his hard earned money .... yet :) In other words, "the rest of us" of Patrick's folks do not represent the people for whom crypto is a necessity and not a luxury. So if money is already working for you, keep using it and ignore this fad
- dullgiulio 9y ago
  Yeah but when that happens you probably look for weapons, not GPUs :)
  - TeMPOraL 9y ago
    Civil war of the future: everyone already having GPUs for cryptocoins, the resistance will offer "Freedom Coins" in exchange for lending compute via mesh networks for purpose of guiding DIY drones and missiles.
  - testvox 9y ago
    Sure but how do you afford the weapons? https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/ https://www.theatlantic.com/magazine/archive/2017/09/big-in-...
- _Codemonkeyism 9y ago
  How would a dictatorship allow stores to accept Bitcoin? If you order from abroad, how would a dictatorship not open and track parcels? You can use Bitcoins on a black market for illegal goods in a dictatorship, as you can use Bitcoins for illegal goods in a democracy.
- marcosdumay 9y ago
  Do you know what we did here in Brazil during our hyperinflation? We traded in Dollars. Do you know what people are doing in Venezuela right now? They are trading in Dollars, Peruvian Pesos and Brazilian Reals. I bet Chinese people are also using Dollars to evade their capital controls.
wyager 9y ago
The USD is probably the most well-behaved fiat currency of the last century, so that’s basically the least interesting example, but: USD is inflationary. Ceteris paribus, a rational actor would generally prefer to hold something deflationary. The (epsilon-) no-arbitrage argument suggests that the frequently raised “but then no one will ever invest in things” objection doesn’t actually make any sense. USD is highly controlled (but not by you). This is a technical and legal issue, not a fundamental problem with fiat currencies in general, but it’s impossible to ignore. Bitcoin sidesteps it entirely. What actually drove me to try Bitcoin is when a paperwork error by the state comptroller led to them withdrawing several thousand dollars from my bank account with no warning. I eventually got it back when they realized they made a mistake, but Wells Fargo still charged me “legal fees” and the realization that I really didn’t have control over my money was uncomfortable. With bitcoin I can use my money however I want, whenever I want, and no one else can. No paperwork, no ACH/fed clearing, no delays, no surprise fees, no one stealing money out of my account with impunity. That’s only the tip of the iceberg for how much the legacy financial system sucks, and most of it can’t be fixed with a software upgrade. Fiat could theoretically work as well as bitcoin in terms of convenience and reliability, but it never does in practice and there’s no way to avoid governments instituting worse policies later on. I also don’t think most Bitcoin supporters want the government to get rid of USD. It’s about adding choice, not forcing everyone to do something different.
- pjc50 9y ago
  > paperwork error by the state comptroller led to them withdrawing several thousand dollars from my bank account with no warning It's a good job that the computer you store your bitcoin on never has any security issues.
  - beingmyself2 9y ago
    You can go to great lengths to secure your own Bitcoin private key, you have data sovereignty. The same cannot be said about your own bank account.
- subroutine 9y ago
  It's difficult to evaluate whether crypto would have mitigated your situation without knowing the details. Why were you charged legal fees by Wells Fargo? Do you think the state comptroller could not seize your cryptocoin assets if you refuse to pay your taxes? I'm with you, reasonable Bitcoin supporters should not want to get rid of USD. I personally think of Bitcoin like having a Paypal account, except less businesses accept it, and after dinner when we get the check none of my friends have ever said "hey do you have the bitcoin app on your phone". Maybe that will change soon.
apo 9y ago
Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working. Most knowledgeable cryto enthusiasts I know already know that fiat currencies work well enough for many people. Folks like McKenzie will see no value in Bitcoin and other cryptos because their money needs are already satisfied. Good for them, but their narrow perspective excludes many valid use cases. Consider these problems, for which Bitcoin offers a unique solution (and which folks like McKenzie may not even acknowledge as problems): - civil asset forfeiture; - capital controls; - black market trading (remember, what's illegal to a foreign government might be a fundamental human right to you); - intense privacy invasion by governments; - widespread privacy loss through corporations (Equifax, Verizon). Bitcoin doesn't need to ape the services offered by the likes of Visa, PayPal, and Chase. It needs to address those unmet needs that can't be addressed by the incumbents. That's going to be a niche audience, at least initially. But that's how all marketplace disruptions begin.
- lightbyte 9y ago
  >- civil asset forfeiture; How would cryptocurrencies prevent the police from seizing your private keys? They can already throw you in jail if you refuse to provide passwords, or the keys themselves.
  - Spivak 9y ago
    Current situation: Government takes your money and you must sue to get it back. Crypto: Government is incapable of taking your money and must prosecute in order to coerce you to turn it over. And you could still refuse and accept your jail time. Edit: People replying to me are missing the point. This is about the case where the government is wrongfully taking your money. Under the current system your money can be seized without your knowledge and you have to prove it was taken wrongfully after the fact. With crypto the burden is shifted to the government who has to prove they have the right to seize it in the first place.
    - pja 9y ago
      And you could still refuse and accept your jail time. In most jurisdictions (including the US) the sanction for contempt of court is potentially unlimited: the convicted individual may find that they are only freed when they comply with the court’s requirements. IOW, good luck with that.
Jdam 9y ago
> What problem do you think this would solve? Exactly. I know a few local shops & bars that accept bitcoin. Although it sounds cool, I‘m always asking myself „why should I?“. It’s way more convenient to just throw some coins or put the Credit card on the reader for about 1 second to pay for my beer, instead of initiating a transaction on the distributed ledger.
moduspol 9y ago
Well, whether or not it's a problem depends on who you're asking, but: Remember in the first Captain America movie when his first role in the military was on a tour raising money for the war? That was actually a thing at that point in time. You had to actually convince people to invest or give money to fund a war. The USD was tied to gold in the real world and they couldn't just create more. Nowadays, we don't have that. A President might have to ask Congress for funding, possibly. And even then, that money might simply be borrowed (adding systemic risk) or printed (devaluing the rest of our money). As a result, the amount of public support required for waging a war (or any huge expenditure) is much lower. That's a good thing if the people in power are correct despite popular opinion. That's not always the case, though.
- nwah1 9y ago
  But you are asking a sovereign authority, with few restrictions in terms of monetary policy, to voluntarily restrict itself for no benefit.
  - moduspol 9y ago
    The benefit is a more free society and less systemic risk. It doesn't benefit the sovereign authority directly, but neither does freedom of speech, religion, etc.
    - nwah1 9y ago
      The gold standard, in the same way, formerly removed much of the ability to conduct monetary policy, and it was supplanted because it turned out that counter-cyclical policy was very useful. Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing. The government, of course, retains unlimited power to tax, so the ability to fund whatever it wants is retained in all cases.
      - mcguire 9y ago
        "Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing." Out of curiosity, what's the carbon footprint of bitcoin mining as compared to gold mining (and then parking the gold in a depository vault)?
jezclaremurugan 9y ago
Its more of a global currency than a US specific one. Speaking from my experience - moving large amounts of money as a student or as someone who wants to send money back home across international borders when one starts earning becomes a pain when it comes to transaction charges, and international payment charges on credit cards etc. Cryptocurrencies can replace USD as a global currency when it gains enough users across the globe.
- subroutine 9y ago
  Can you not avoid fees by using paypal or venmo for example? I transfer money to my friends and family all the time with no fee using these existing services.
  - jezclaremurugan 9y ago
    Paypal has a fee for international transfer - and they also don't cover India. Same for venmo.
ThirdEye 9y ago
It solves the problem of having the US gov print money out of thin air for example.
andrewla 9y ago
> Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently). I don't think the second condition "assuming the US gov ..." is compatible with the first. My objections to fiat and my fondness for cryptocurrencies is much more in line with what the slide's authors seem to be saying -- specifically, I feel that it gains in ethics, rather than effectiveness. The problem that would be solved is that the US government would no longer be able to continue operations in exactly the same manner. Bailouts for failed companies are no longer a given -- the money has to come from somewhere, and if the government comes to your door and says "give me 10 bitcoins so that I can give them to these idiots who lost billions of bitcoins making bets on the real estate market, but they also get to keep the billions they made while those bets were winning", you're going to do your best to vote those people out on their ear. Similarly when it comes to financing a state of perma-war against the very concept of being afraid.
- emiliobumachar 9y ago
  Printing money would indeed no longer be an option for governments. But their main source of income are taxes. And why would taxes change? >and if the government comes to your door and says "give me 10 bitcoins [...]", you're going to do your best to vote those people out Why would that be different with 10 bitcoins than with 10 thousand dollars?
  - andrewla 9y ago
    Main source of income is taxes, but it got close there -- in 2009 the federal deficit got up to 1.413 trillion, which made debt a larger source of income for the government than income taxes and corporate taxes combined. Even without emergency spending like that, the gradual deficit increases are going to mean that soon receipts will not be sufficient to cover interest on the debt. My point about "coming to your door" was not bitcoins vs. dollars, but taxes vs. FOMC. If the government really wants to give away the value equivalent of trillions of dollars, they have to get the money from increasing receipts, rather than just monetizing debt. They can take on debt, but they have to pay for it, rather than use accounting tricks to borrow at zero interest to support zero interest "loans". That said, you're probably right; no effective political action is going to be taken in opposition to tax levies, especially if they're aimed at the "1%" -- by the time the 1% becomes the 30% (vis a vis AMT) people will have forgotten why they cared.
baursak 9y ago
I think that understanding Modern Monetary Theory (MMT) and viewing bitcoin through that lens helps a lot. Here's a good article from the MMT perspective: http://neweconomicperspectives.org/2013/12/fair-price-bitcoin-zero.html http://neweconomicperspectives.org/2013/12/fair-price-bitcoi... It also helps to understand the history of money and how it came to be in the first place, and how fundamentally currencies and states go hand in hand. David Graeber's "Debt" is good in that sense. And in case that's not enough, here's JPM's Jamie Dimon's take on it: https://www.bloomberg.com/news/articles/2017-10-13/jamie-dimon-lasts-one-day-on-his-vow-to-not-talk-about-bitcoin https://www.bloomberg.com/news/articles/2017-10-13/jamie-dim... It's also weird how bankers, anarchists, and MMT economists come to agree on this.
ThomPete 9y ago
This is the wrong way to look at it. All functioning currencies are about trust. Both Bitcoin and fiat currency has trust. Bitcoin has more trust than some governments fiat currencies and less than others. Bitcoin is the first truly international wire transfer system all others are based on contracts between banks in an international network. It's an international currency with no country or bank owning it. That alone makes it extremely valuable.
- mcguire 9y ago
  "That alone makes it extremely valuable." More or less valuable than the electrical generating capacity dedicated to creating bitcoins?
  - ThomPete 9y ago
    More/hard to say
AgentME 9y ago
Why do many people (including bitcoin fans) assume that bitcoin must replace the world's currencies to be successful? Does anyone judge PayPal on that metric? I just think bitcoin can fill PayPal's niche in a more open decentralized way.
- subroutine 9y ago
  100% agree! How would this work in practice? Naturally you would need a free/open/secure mobile app (maybe such an app exists already?). Is there a way to hold and transfer fractions of bitcoin without using exchanges? Can I purchase fractions of coin from exchanges and transfer those fractions into my personal wallet?
  - AgentME 9y ago
    >Naturally you would need a free/open/secure mobile app (maybe such an app exists already?). There are free open source mobile apps for holding and transferring Bitcoin. ("Mycelium Bitcoin Wallet" is one, but I'm not terribly familiar with it or any other mobile apps.) >Is there a way to hold and transfer fractions of bitcoin without using exchanges? Yes and yes. You don't have to have an integer amount of bitcoin, and you can hold bitcoin directly. (In fact the main big point of bitcoin was that people can hold it directly instead of only being able to have 3rd parties manage it for them.) >Can I purchase fractions of coin from exchanges and transfer those fractions into my personal wallet? Yeah. (All US exchanges do require you to identify yourself pretty rigorously, so it is hard to transfer between USD and BTC without a paper trail. So yes, it makes it hard if your goal for using BTC was to go 100% off-grid, but otherwise I don't think it's a show-stopping issue except for anyone engaged in illegal activity, earning a lot from it, and wanting to get it into USD easily.)
runeks 9y ago
> Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently). In such a scenario, the US government cannot continue all other operations as it does currently, as its activities are financed by issuing practically risk-free USD bonds (if the US government defaults on its bonds, the USD is gone). In a market with decentralized money, the US government would have to issue bonds on equal footing with profitable, private enterprises, and would consequently have to pay market interest rates. No market would lend out to a government in a decentralized currency when that government is unwilling or unable to pay back, thus removing the option of issuing more bonds to pay dividends on current bond issue. It just wouldn’t work as it does now. No wonder the US can be the world super power when it can start a war and have the rest of the world finance it by buying the bonds the US government issued to pay for it.

littlestymaar 9y ago

I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation, not a fact). Inflation for consumption goods was kept low, but the asset prices grew up a lot in the past decades : in the late 90s the stock market was inflated and collapsed (the internet bubble), in the mid 2000s the overpricing of real estate in the US was responsible for the financial crisis, nowadays the stock market is inflated again, how bad will it end this time ?

subroutine 9y ago
What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). Say we went all-in on crypto and 10-years-in for whatever reason the crypto supply generation rate we set a decade ago wasnt working (the US economy was crumbling). What then? This is an honest question: Say north korea suddenly waged total was on US, or a massive natural disaster happens, but the government didnt have huge reserves of money to pay for defense or aid? Should they suddenly issue a tax on their citizens to raise capital, and hope they pay in a timely manner?
- littlestymaar 9y ago
  > What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). You are misinterpreting me. To be more explicit : cryptocurrencies suck for the exact reason you explained (if you look around in this discussion, that's exactly the point I'm making against any cryptocurrency fan) yet saying that current system is working properly is foolish. The recent history (since the 80s) is a good illustration that interest rate isn't a good enough tool for money supply control. And actually it should have been predicted: you have two independent things you want to control (consumer price inflation and asset price inflation) then you can't control them with only one variable. The fed's policy ignored the asset price, and it had the bad consequences I was talking about, but if you chose to control the asset price you'll probably cause deflation and kill economic growth. My take: because it's a system with 2 degrees of freedom, we should have at least two variables to adjust. If the first one is the interest rate, what should the second one be ? I don't know, but probably taxes (On savings ? On capital held maybe ?).
  - guelo 9y ago
    Economists talk about having two main tools: monetary and fiscal policies. Traditionally monetary policy is driven by the Fed and fiscal policy is driven by the government, this disconnect means that the two can work at cross-purposes, such as when the Fed is raising rates while the government is talking about boosting the economy with business tax cuts. In reality the state has basically unlimited power to affect the economy, but it chooses to limit what levers are allowed to be used in order to provide stability and confidence. And also out of morality-driven ideology of the same sort the that gave rise to Bitcoin.
- namelost 9y ago
  There are many countries which do not have the ability to print money, either because they use another country's currency or their currency is pegged. This usually comes about in order to ease trading (e.g. Hong Kong), because the existing currency was very weak, or because that country is too small to manage its own currency.
DeerSpotter 9y ago
Ahhh, the Feds.... There is one Variable nobody is talking about. Where are the bitcoins that were seized from the silk road and other drug dealers, etc... As soon as the USA floods those bitcoins back into the markets prices of bitcoin will drop.
- mijikai 9y ago
  They were already sold off 2 years ago.
  - mijikai 9y ago
    https://www.coindesk.com/four-winners-44000-bitcoins-final-silk-road-auction/ https://www.coindesk.com/four-winners-44000-bitcoins-final-s...

sp4ke 9y ago

Patrick McKenzie is fortunate enough to not be born in a country that is currently suffering from hyper-inflation neither is he living under a dictatorship that is putting capital controls and deciding how he should use his hard earned money .... yet :) In other words, "the rest of us" of Patrick's folks do not represent the people for whom crypto is a necessity and not a luxury. So if money is already working for you, keep using it and ignore this fad

dullgiulio 9y ago
Yeah but when that happens you probably look for weapons, not GPUs :)
- TeMPOraL 9y ago
  Civil war of the future: everyone already having GPUs for cryptocoins, the resistance will offer "Freedom Coins" in exchange for lending compute via mesh networks for purpose of guiding DIY drones and missiles.
- testvox 9y ago
  Sure but how do you afford the weapons? https://www.theatlantic.com/magazine/archive/2017/09/big-in-venezuela/534177/ https://www.theatlantic.com/magazine/archive/2017/09/big-in-...
_Codemonkeyism 9y ago
How would a dictatorship allow stores to accept Bitcoin? If you order from abroad, how would a dictatorship not open and track parcels? You can use Bitcoins on a black market for illegal goods in a dictatorship, as you can use Bitcoins for illegal goods in a democracy.
marcosdumay 9y ago
Do you know what we did here in Brazil during our hyperinflation? We traded in Dollars. Do you know what people are doing in Venezuela right now? They are trading in Dollars, Peruvian Pesos and Brazilian Reals. I bet Chinese people are also using Dollars to evade their capital controls.

wyager 9y ago

The USD is probably the most well-behaved fiat currency of the last century, so that’s basically the least interesting example, but: USD is inflationary. Ceteris paribus, a rational actor would generally prefer to hold something deflationary. The (epsilon-) no-arbitrage argument suggests that the frequently raised “but then no one will ever invest in things” objection doesn’t actually make any sense. USD is highly controlled (but not by you). This is a technical and legal issue, not a fundamental problem with fiat currencies in general, but it’s impossible to ignore. Bitcoin sidesteps it entirely. What actually drove me to try Bitcoin is when a paperwork error by the state comptroller led to them withdrawing several thousand dollars from my bank account with no warning. I eventually got it back when they realized they made a mistake, but Wells Fargo still charged me “legal fees” and the realization that I really didn’t have control over my money was uncomfortable. With bitcoin I can use my money however I want, whenever I want, and no one else can. No paperwork, no ACH/fed clearing, no delays, no surprise fees, no one stealing money out of my account with impunity. That’s only the tip of the iceberg for how much the legacy financial system sucks, and most of it can’t be fixed with a software upgrade. Fiat could theoretically work as well as bitcoin in terms of convenience and reliability, but it never does in practice and there’s no way to avoid governments instituting worse policies later on. I also don’t think most Bitcoin supporters want the government to get rid of USD. It’s about adding choice, not forcing everyone to do something different.

pjc50 9y ago
> paperwork error by the state comptroller led to them withdrawing several thousand dollars from my bank account with no warning It's a good job that the computer you store your bitcoin on never has any security issues.
- beingmyself2 9y ago
  You can go to great lengths to secure your own Bitcoin private key, you have data sovereignty. The same cannot be said about your own bank account.
subroutine 9y ago
It's difficult to evaluate whether crypto would have mitigated your situation without knowing the details. Why were you charged legal fees by Wells Fargo? Do you think the state comptroller could not seize your cryptocoin assets if you refuse to pay your taxes? I'm with you, reasonable Bitcoin supporters should not want to get rid of USD. I personally think of Bitcoin like having a Paypal account, except less businesses accept it, and after dinner when we get the check none of my friends have ever said "hey do you have the bitcoin app on your phone". Maybe that will change soon.

apo 9y ago

Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working. Most knowledgeable cryto enthusiasts I know already know that fiat currencies work well enough for many people. Folks like McKenzie will see no value in Bitcoin and other cryptos because their money needs are already satisfied. Good for them, but their narrow perspective excludes many valid use cases. Consider these problems, for which Bitcoin offers a unique solution (and which folks like McKenzie may not even acknowledge as problems): - civil asset forfeiture; - capital controls; - black market trading (remember, what's illegal to a foreign government might be a fundamental human right to you); - intense privacy invasion by governments; - widespread privacy loss through corporations (Equifax, Verizon). Bitcoin doesn't need to ape the services offered by the likes of Visa, PayPal, and Chase. It needs to address those unmet needs that can't be addressed by the incumbents. That's going to be a niche audience, at least initially. But that's how all marketplace disruptions begin.

lightbyte 9y ago
>- civil asset forfeiture; How would cryptocurrencies prevent the police from seizing your private keys? They can already throw you in jail if you refuse to provide passwords, or the keys themselves.
- Spivak 9y ago
  Current situation: Government takes your money and you must sue to get it back. Crypto: Government is incapable of taking your money and must prosecute in order to coerce you to turn it over. And you could still refuse and accept your jail time. Edit: People replying to me are missing the point. This is about the case where the government is wrongfully taking your money. Under the current system your money can be seized without your knowledge and you have to prove it was taken wrongfully after the fact. With crypto the burden is shifted to the government who has to prove they have the right to seize it in the first place.
  - pja 9y ago
    And you could still refuse and accept your jail time. In most jurisdictions (including the US) the sanction for contempt of court is potentially unlimited: the convicted individual may find that they are only freed when they comply with the court’s requirements. IOW, good luck with that.

Jdam 9y ago

> What problem do you think this would solve? Exactly. I know a few local shops & bars that accept bitcoin. Although it sounds cool, I‘m always asking myself „why should I?“. It’s way more convenient to just throw some coins or put the Credit card on the reader for about 1 second to pay for my beer, instead of initiating a transaction on the distributed ledger.

moduspol 9y ago

Well, whether or not it's a problem depends on who you're asking, but: Remember in the first Captain America movie when his first role in the military was on a tour raising money for the war? That was actually a thing at that point in time. You had to actually convince people to invest or give money to fund a war. The USD was tied to gold in the real world and they couldn't just create more. Nowadays, we don't have that. A President might have to ask Congress for funding, possibly. And even then, that money might simply be borrowed (adding systemic risk) or printed (devaluing the rest of our money). As a result, the amount of public support required for waging a war (or any huge expenditure) is much lower. That's a good thing if the people in power are correct despite popular opinion. That's not always the case, though.

nwah1 9y ago
But you are asking a sovereign authority, with few restrictions in terms of monetary policy, to voluntarily restrict itself for no benefit.
- moduspol 9y ago
  The benefit is a more free society and less systemic risk. It doesn't benefit the sovereign authority directly, but neither does freedom of speech, religion, etc.
  - nwah1 9y ago
    The gold standard, in the same way, formerly removed much of the ability to conduct monetary policy, and it was supplanted because it turned out that counter-cyclical policy was very useful. Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing. The government, of course, retains unlimited power to tax, so the ability to fund whatever it wants is retained in all cases.
    - mcguire 9y ago
      "Cryptocurrency is similar except that it wastes a lot more energy to accomplish the same thing." Out of curiosity, what's the carbon footprint of bitcoin mining as compared to gold mining (and then parking the gold in a depository vault)?

jezclaremurugan 9y ago

Its more of a global currency than a US specific one. Speaking from my experience - moving large amounts of money as a student or as someone who wants to send money back home across international borders when one starts earning becomes a pain when it comes to transaction charges, and international payment charges on credit cards etc. Cryptocurrencies can replace USD as a global currency when it gains enough users across the globe.

subroutine 9y ago
Can you not avoid fees by using paypal or venmo for example? I transfer money to my friends and family all the time with no fee using these existing services.
- jezclaremurugan 9y ago
  Paypal has a fee for international transfer - and they also don't cover India. Same for venmo.

ThirdEye 9y ago

It solves the problem of having the US gov print money out of thin air for example.

andrewla 9y ago

> Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently). I don't think the second condition "assuming the US gov ..." is compatible with the first. My objections to fiat and my fondness for cryptocurrencies is much more in line with what the slide's authors seem to be saying -- specifically, I feel that it gains in ethics, rather than effectiveness. The problem that would be solved is that the US government would no longer be able to continue operations in exactly the same manner. Bailouts for failed companies are no longer a given -- the money has to come from somewhere, and if the government comes to your door and says "give me 10 bitcoins so that I can give them to these idiots who lost billions of bitcoins making bets on the real estate market, but they also get to keep the billions they made while those bets were winning", you're going to do your best to vote those people out on their ear. Similarly when it comes to financing a state of perma-war against the very concept of being afraid.

emiliobumachar 9y ago
Printing money would indeed no longer be an option for governments. But their main source of income are taxes. And why would taxes change? >and if the government comes to your door and says "give me 10 bitcoins [...]", you're going to do your best to vote those people out Why would that be different with 10 bitcoins than with 10 thousand dollars?
- andrewla 9y ago
  Main source of income is taxes, but it got close there -- in 2009 the federal deficit got up to 1.413 trillion, which made debt a larger source of income for the government than income taxes and corporate taxes combined. Even without emergency spending like that, the gradual deficit increases are going to mean that soon receipts will not be sufficient to cover interest on the debt. My point about "coming to your door" was not bitcoins vs. dollars, but taxes vs. FOMC. If the government really wants to give away the value equivalent of trillions of dollars, they have to get the money from increasing receipts, rather than just monetizing debt. They can take on debt, but they have to pay for it, rather than use accounting tricks to borrow at zero interest to support zero interest "loans". That said, you're probably right; no effective political action is going to be taken in opposition to tax levies, especially if they're aimed at the "1%" -- by the time the 1% becomes the 30% (vis a vis AMT) people will have forgotten why they cared.

baursak 9y ago

I think that understanding Modern Monetary Theory (MMT) and viewing bitcoin through that lens helps a lot. Here's a good article from the MMT perspective: http://neweconomicperspectives.org/2013/12/fair-price-bitcoin-zero.html http://neweconomicperspectives.org/2013/12/fair-price-bitcoi... It also helps to understand the history of money and how it came to be in the first place, and how fundamentally currencies and states go hand in hand. David Graeber's "Debt" is good in that sense. And in case that's not enough, here's JPM's Jamie Dimon's take on it: https://www.bloomberg.com/news/articles/2017-10-13/jamie-dimon-lasts-one-day-on-his-vow-to-not-talk-about-bitcoin https://www.bloomberg.com/news/articles/2017-10-13/jamie-dim... It's also weird how bankers, anarchists, and MMT economists come to agree on this.

ThomPete 9y ago

This is the wrong way to look at it. All functioning currencies are about trust. Both Bitcoin and fiat currency has trust. Bitcoin has more trust than some governments fiat currencies and less than others. Bitcoin is the first truly international wire transfer system all others are based on contracts between banks in an international network. It's an international currency with no country or bank owning it. That alone makes it extremely valuable.

mcguire 9y ago
"That alone makes it extremely valuable." More or less valuable than the electrical generating capacity dedicated to creating bitcoins?
- ThomPete 9y ago
  More/hard to say

AgentME 9y ago

Why do many people (including bitcoin fans) assume that bitcoin must replace the world's currencies to be successful? Does anyone judge PayPal on that metric? I just think bitcoin can fill PayPal's niche in a more open decentralized way.

subroutine 9y ago
100% agree! How would this work in practice? Naturally you would need a free/open/secure mobile app (maybe such an app exists already?). Is there a way to hold and transfer fractions of bitcoin without using exchanges? Can I purchase fractions of coin from exchanges and transfer those fractions into my personal wallet?
- AgentME 9y ago
  >Naturally you would need a free/open/secure mobile app (maybe such an app exists already?). There are free open source mobile apps for holding and transferring Bitcoin. ("Mycelium Bitcoin Wallet" is one, but I'm not terribly familiar with it or any other mobile apps.) >Is there a way to hold and transfer fractions of bitcoin without using exchanges? Yes and yes. You don't have to have an integer amount of bitcoin, and you can hold bitcoin directly. (In fact the main big point of bitcoin was that people can hold it directly instead of only being able to have 3rd parties manage it for them.) >Can I purchase fractions of coin from exchanges and transfer those fractions into my personal wallet? Yeah. (All US exchanges do require you to identify yourself pretty rigorously, so it is hard to transfer between USD and BTC without a paper trail. So yes, it makes it hard if your goal for using BTC was to go 100% off-grid, but otherwise I don't think it's a show-stopping issue except for anyone engaged in illegal activity, earning a lot from it, and wanting to get it into USD easily.)

runeks 9y ago

> Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently). In such a scenario, the US government cannot continue all other operations as it does currently, as its activities are financed by issuing practically risk-free USD bonds (if the US government defaults on its bonds, the USD is gone). In a market with decentralized money, the US government would have to issue bonds on equal footing with profitable, private enterprises, and would consequently have to pay market interest rates. No market would lend out to a government in a decentralized currency when that government is unwilling or unable to pay back, thus removing the option of issuing more bonds to pay dividends on current bond issue. It just wouldn’t work as it does now. No wonder the US can be the world super power when it can start a war and have the rest of the world finance it by buying the bonds the US government issued to pay for it.