Recently, there have been many articles that are down on Bitcoin. Since there are far more non-criminals than criminals, one can easily argue that the frictionless nature of Bitcoin can offer benefits to society at large that outweighs this downside. However, if you’re using cash within the normal constructs of society (ie shops) it will be passed through various systems (such as cash registers) that will log transactions. FUD: Bitcoin will devalue or collapse due to criminals using Botnets to mine for coins with free electricity. There is absolutely nothing stopping Bitcoin miners from using machines that are solar or wind powered. It should be noted that our government and law enforcement agencies are not completely useless. Yes, it is very possible to use cash for tax evasion by passing it under the table and not declaring it to the government. After recent NSA revelations it seems foolhardy to trust the government with something as powerful as a fully regulated digital currency where they would be able to seize 100% of anyones wealth with a click of a button.
Even then, gold was never a truly frictionless modern currency until paper represented gold in the gold standard monetary system. Given the modern pace of technology, one way or another, a purely digital currency is within our future. People make this argument because they are comparing Bitcoin in it’s current state to a modern currency. In fact, one of the biggest arguments against Bitcoin becoming a stable currency is that users mostly hoard Bitcoins for long term gains. For example the FBI were perfectly capable of closing down Silk Road, the webs biggest drug black market. With enough users this argument becomes weak since the usage of Bitcoins by criminal networks would represent only a fraction of the market. There is also a counter argument that by making it easier for criminals to connect and transact via centralized marketplace websites, it makes it easier for law enforcement agencies to track down criminal communities, who would otherwise be acting in a far more more dispersed and untraceable manner.
The other consideration is that true liquidity will not happen at the full BtC level, it is much more likely that consumers will be trading fractions of Bitcoins rather than entire Bitcoins. Once these devices have been deployed into the consumer marketplace it stands to reason that Bitcoin liquidity would increase. Now cast your mind five years into the future and consider all the other software and hardware devices that could make Bitcoin much easier to use. Furthermore, I would argue that it’s hard for educated economists to predict the outcome of Bitcoin, since Bitcoin came in to being through a totally different specialization (ie software and cryptography). If your computer is susceptible to malware that can mine Bitcoin, then your computer is also susceptible to malware that can steal your credit card information, hijack your video camera, etc. In other words you should secure your computer. Hopefully this article can help some folks re-examine their assumptions about Bitcoin.
If Bitcoin moves towards mass consumer adoption this outcome becomes less of a probability. There have been plenty of attempts at virtual currencies that resulted with no adoption and early investors loosing 100%. Bitcoin might just as easily have gone this way. The truth is, many times “experts” simply don’t know what will happen one way or another. I’m not saying I like it, I just don’t understand how this argument has any weight regarding Bitcoin. Keep in mind this is just my opinion, please don’t spend any money based on my musings below! Bitcoin deals with this issue by having 8 decimal places. Even so, I would personally like to see this issue addressed by the Bitcoin foundation. Just like with any business related venture the first involved are the ones that take all the social and financial risk. Yes, but it also makes it easier for non-criminals to do business with each other. Bitcoin is arguably one of the lesser evil representations of digital currency due to being de-centralized. FUD: Bitcoin can’t become a currency because people hoard Bitcoins and transaction volume is too low. FUD: Bitcoin is inherently deflationary. However, I would argue that Bitcoin has not evolved beyond the point when gold became a value store.
