Topic: 2013-04-09 Mises Daily: Bitcoin: Money of the Future or Old-Fashioned Bubble? (Read 945 times)

Eventually, such peer-to-peer programs became more numerous, to include Kazaa Lite, eDonkey, eMule, BitTorrent, etc.

Patrik,

I already explained to you several times how the network effect works. You appear to think that if we can't understand the reasons why people do or do not switch between goods subject to the network effect, they do not exist. You arbitrarily pick some historical data regarding the network effect, show that you do not understand why the switch occurred, and provide this as "proof". But that's not how it works. There is always a reason for the switch, even if we do not understand it. Similarly, I argue that there is no reason to switch from BTC to LTC. And alas, I already wrote once that prices are irrelevant, relevant is liquidity. LTC does not have the liquidity of BTC and it's very unlikely that it will overtake BTC. And I already told you this before. Alas, the price of LTC increased and you are using it as a "proof".

Your counterargument regarding languages is weird, because you appear to use something like the labour theory of value. Merely because you invest more resources into creating new goods, it does not follow that market actually will accept them. You appear to think that merely because a market is subject to the network effect, anyone can start such one good. But that's bogus.

Last but not least, you ignore that there are media of exchange that are not money, and that competition occurs on transaction costs. Even if we accepted your conclusion that Bitcoin can never be the most salable good (which we don't know, but for the argument's sake let's assume it), it does not mean that it can't be the best payment system, for example.

The truth is, people who use Bitcoin for transactional purposes do not have anything else to switch to. Other cryptocurrencies have lower liquidity, and other media of exchange have higher transaction costs. It's like saying that the internet is not good because anyone can create a new protocol, and it can never be the most common communication protocol anyway, so people and people will use libraries or the post office instead.

Gold went parabolic toward the second half of 2011 to $1,900/oz., which did a lot of technical damage to the charts that gold is just now beginning to shake off. Like Icarus, who had soared too high and melted the wax on his wings, parabolic moves always end in a correction, and if prolonged, a crash. Ironically, the best thing that can happen for bitcoin naysayers is if bitcoin skyrockets to $300/btc within a week.