Topic: 2013-04-17 Peter Surda: The Mises Institute is clueless about Bitcoin (Read 2086 times)

I appreciate the praise, but please do not feel any hesitance to criticise. I actually rushed this post so it's not as smooth as I'd like it to be. I attempt to (sometimes) approach the topic in a scholarly fashion and value constructive criticism highly.

Gertchev's article was actually the best out of those, and he did the most research. But it's still lacking, because he missed two things: Bitcoin is form-invariant and can exist in almost any imaginable and unimaginable form, and electronic form of money is by far the most dominant one already. Even in Kenya, 31% of GDP is now facilitated via mobile phones (M-PESA), and this flies in the face of Gertchev's position.

Gertchev's article was actually the best out of those, and he did the most research. But it's still lacking, because he missed two things: Bitcoin is form-invariant and can exist in almost any imaginable and unimaginable form, and electronic form of money is by far the most dominant one already. Even in Kenya, 31% of GDP is now facilitated via mobile phones (M-PESA), and this flies in the face of Gertchev's position.

You know, I read that first article linked from the post, http://mises.org/daily/6399/The-Moneyness-of-Bitcoins and they basically say what I've been saying all along: Bitcoin is perfect internet money, but not so great for face-to-face transactions.

Bitcoins as Money

Prima facie, bitcoins possess all the qualities required from a money (a generally-used medium of exchange). They are perfectly homogeneous, easily cognizable, conveniently divisible, storable at practically no cost, and imperishable. Also, they seem to be fully shielded from counterfeiting. In addition, because they exist as a consumption and investment good, they are appraised on their own, thereby satisfying the Misesian regression criterion for the free-market inception of a medium of exchange. However, in order to become a viable alternative to existing monies, bitcoins must generate a sufficiently large demand so that their usage becomes generalized. Without the certainty that they can be transacted for any other good in the economy, a demand to hold them as money could not develop. It is with respect to their capacity to become and remain commonly used that bitcoins suffer from a relative disadvantage.

Indeed, bitcoins are embodied in a specific and highly capital-intensive technology. They can become convenient enough for standard personalized transactions only if both parties of the exchange possess the necessary technology that gives access to bitcoins. Bitcoins can do the job already for internet-based impersonalized purchases, because the marginal cost of the exchange technology they go along with is already almost zero for those who possess it. However, the transposition of that technology in the physical world of common face-to-face shopping (getting a haircut, buying a sandwich, or purchasing vegetables at the local grocery shop) would imply extra costs. True, these costs would decrease progressively as portable smartphones with permanent internet access become more widely used, not only by buyers, but also by sellers. The key point, however, is that bitcoins could become a generalized medium of exchange only through the accessory use of other, specific and physical, goods in an economy that has reached a very high level of technological development.

This refrain is really irritating. It is not an age thing. It is an "invested in a particular mindset" thing, which happens at any and all ages.

Those who push back against BTC tend to have a perceived stake in the status quo, which correlates with age but is not caused by age.

As you can probably tell, my ox is being gored here. My grandchildren are almost old enough to vote but they are totally oblivious to BTC.
I've been mining BTC for a couple of years.

Age issues will take care of themselves through human mortality. It is more useful to focus on why people (of any age) adopt or resist a BTC mentality.

It is not an age thing. It is an "invested in a particular mindset" thing, which happens at any and all ages.

Those who push back against BTC tend to have a perceived stake in the status quo, which correlates with age but is not caused by age.

Unless a teenager is a programmer, he won't give a shit about bitcoin.

THERE I SAY IT!

old people...

old people...

old people...

But Bitcoin can do much more than become money. With algorithmic contracts, it can make large parts of the financial sector obsolete. With its ultra low transaction costs, it can make money substitutes redundant (and, obviously, without money substitutes there is no credit expansion and without credit expansion there is no business cycle). Again with its transaction costs and abstract base, anyone can make a payment to anyone, anytime, anyplace. Nothing that has existed so far in the history can do that. And even if we disregard it as a hypothetical, we just need to remember that gold already failed, because it was reduced from money to a secondary medium of exchange. This was only possible because money substitutes emerged. If nothing else, Bitcoin shows that money substitutes are is merely an empirical quirk and not an inherent feature of monetary systems, and for that alone is it should change the landscape of the Austrian literature forever, and open a wide spectrum of possibilities for research and our understanding of money.