In Search of a Stable Electronic Currency

http://mobile.nytimes.com/2014/03/02/business/in-search-of-a-stable-electronic-currency.html?referrer=

by ChristianMarks • 12 years ago

8 11 12 years ago

mobile.nytimes.com

panarky3• 12 years ago

I have immense respect for Shiller, but I think he got a few things wrong in this piece.

  The Bitcoin phenomenon seems to fit the basic definition of a speculative
  bubble — that is, a special kind of fad, a mania for holding an asset
  in expectation of its appreciation.

Shiller correctly identified the housing bubble long before others did, so he has a lot of credibility here. But doesn't truly disruptive innovation exhibit a similar pattern? Whether it's Google, or Tesla, or Netflix, the "mania" to hold the asset proves to be justified as entire industries are transformed.

  The central problem with Bitcoin in its present form, though,
  is that it doesn’t really solve any sensible economic problem.

The current monetary system is unfree, just like communication systems before the internet were unfree. I cannot transmit value over space and time, across borders, to anyone, for arbitrarily small or large amounts, at nearly zero cost. That seems like a "sensible economic problem" that needs a solution.

Despite its flaws, Bitcoin does a pretty good job solving these problems today, and future generations of cryptocurrency will only get better.

I don't argue that cryptocurrencies can or should replace government currencies, but they clearly accomplish something valuable.

After all, if cryptocurrencies had zero utility, why would so much talent be devoted to stealing them?

pron4• 12 years ago

I don't argue that cryptocurrencies can or should replace government currencies, but they clearly accomplish something valuable.

They might, but I wouldn't say it's "clear" just yet. The only clearly valuable thing Bitcoin accomplishes now is the facilitation of illegal trade online. Valuable – certainly, but a new technology whose crowning achievement so far is facilitating crime has a big PR problem. And that's not Bitcoin's only PR problem. Its association with wingnut (hacker-)libertarianism is another ball and chain, which gives Bitcoin the good old Glen Beck treatment.

I think Bitcoin adopters should market it as a terrific way to spend small amounts of cash online. Unfortunately, Bitcoin's volatility doesn't help to make this case, so that is probably the first thing that should be addressed. Bitcoin supporters should understand one thing: uncontrolled volatility, even when it's pointing up, perhaps especially when it's pointing up, isn't a good sign. Every currency is based on one thing – trust – and if Bitcoin is ever to become a currency, it should loudly declare that it's in the hands of responsible people; not criminals, speculators and wingnuts.

lukifer2• 12 years ago

The only clearly valuable thing Bitcoin accomplishes now is the facilitation of illegal trade online.

How do you figure? Being able to send money across the world for next to nothing (compare to credit card fees, not to mention the higher prices of Western Union or hawala) has immense value. Charitable organizations have already raised large sums using crypto-coins.

You are correct about volatility. It makes more sense right now to treat as a highly fungible asset than a currency; it will be interesting to see if it can self-stabilize without any central organization.

panarky3• 12 years ago

The only clearly valuable thing Bitcoin accomplishes now is the facilitation of illegal trade online.

Shiller argued that Bitcoin doesn't solve a "sensible economic problem". His argument had nothing to do with legality or legitimacy, which are much more slippery concepts.

Goverments have tried various ways to make information illegal, require licenses for printing presses[0], ban the dissemination of books and pamphlets, etc.

It's hard to argue today that the freedom to publish and consume information is a valuable thing, regardless of its legal status.

We see a very similar pattern with money, as governments try various ways to control who can send and receive value, to require licenses[1] for transmitting money, to ban broad classes of transactions, etc.

Cryptocurrencies liberate and democratize money in a very similar way that the internet liberated and democratized information.

Just as publishing laws have been liberalized to reflect the technological reality, financial regulation should also liberalize as it becomes clear that the cryptocurrency genie cannot be stuffed back in its bottle.

Contrary to Shiller's argument, that seems like a valuable thing, a solution to a "sensible economic problem".

[0] https://en.wikipedia.org/wiki/Licensing_of_the_Press_Act_166...

[1] http://fincen.gov/statutes_regs/guidance/html/FIN-2013-G001....

In Search of a Stable Electronic Currency

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