For me at least, "Imagine the possibilities!" is not an answer to the question, "What's it good for?" Indeed, my experience is that it's almost an anti-answer.
For example, in the mid-aughts I was talking with the CEO of a well-funded "semantic web" company about joining. I liked the people and the tech was cool, but I just couldn't figure out how it would turn a profit. His answer was similar to yours, a "what couldn't they do?" answer. Turns out they never found an answer, and got acquired for their technology without ever turning into a real business.
As somebody who used to write software for financial traders, it's not clear to me that removing clearing houses is a step forward. They provide important services. And I'm even more skeptical that allowing randos to trade in opaque, unregulated assets is a good idea. Music industry actors, for example, have decades of experience in creative accounting and screwing people over. Real estate has a strong caveat emptor tradition, and property management companies are not exactly a watchword for fair dealing. So from you description, I'm mainly imagining people all over the world getting fleeced with no practical legal recourse.
As best I can tell, the cryptocurrency space seems hell-bent on rediscovering why strong markets and government oversight exist in the first place. The only demonstrated market advantage Bitcoin has in a decade of operation is in light financial crime like money laundering, capital control evasion, ponzi schemes, ransom payments, and outright theft.
I do hope these technologies turn out to be useful for something. But the "imagine the possibilities" routine worked much better when there was less of a track record. Now I'd rather examine the actualities.
You touched on the core problem with cryptocurrency, and it is not a technology problem.
The problem is that cryptocurrency and the community around it is absolutely crawling with scams to the point that it's hard to find things that are not scams. Bad drives out good. Even if the tech works perfectly and can be made to scale, if the ecosystem is full of scams it will never be used for anything but scams and black/grey market applications. Anyone not looking to scam will run away.
Contrast with the stock market. There are scams, sure, but the majority of stocks are not scams. If you bought stocks at random you have at least >50% odds of buying stock in a real and honest business of some kind. If you participate in cryptocurrency stuff at random I'd say you have a >90% chance of being scammed... probably closer to 99%.
All the ad-hoc regulations and institutions around conventional finance are the outcome of a multiple century long Red Queen's race between productive economic activity and noise. Noise includes scams, frauds, bubbles, and other forms of undesirable action or emergent behaviors in markets that get in the way of productive economic activity. That hodge-podge of adaptations is almost certainly sub-optimal, but you're not going to do better by just ignoring the problem domain and offloading everything onto individual market participants. That means every market participant has to operate their own SEC and investigative journalist outfit to have any chance of not being scammed. Not going to happen.
A recurrent fallacy of techno-libertarians and techno-utopians is to vastly underestimate human avarice and opportunism. The people designing these systems are usually fairly honest, so they have a hard time imagining what sociopaths and con artists will do with the things they create. If you create anything that offers even the tiniest chance at making money or obtaining some form of status or power, it will be DDOSed with fraud and con artistry of every kind.
Edit: I am not totally bearish on this stuff and I see valid uses for it, but I don't think it's as broadly world changing as its evangelists do.
Exactly. It's the same vicious circle you see with bad neighborhoods, or with community sites that take freedom of expression as their north star. 4chan, for example, was once a noble attempt at a free speech zone, but it has long been known as a wretched hive of scum and villainy. As you say, bad drives out good.
Excellent point. The coinmarketcap.com site lists 3882 cryptocurrencies. That makes the "Bitcoin's limited supply means permanent value" talking point ridiculous. They list 91 things with "Bitcoin" in the title, 6 of which are in the top 100 by monetary supply, and all 6 notionally have at least $100m in circulation.
So long as everybody knows what the "real" Bitcoin is, it doesn't present a problem, anymore so than existence of the Liberian dollar renders USD unusable.
Not at all. From a market perspective, Bitcoin is not scarce in the same sense that gold or diamonds are scarce. If people want to buy into cryptocurrency, Bitcoin is far from their only option. As this whole discussion around Ethereum makes clear, other cryptocurrencies are viable. As I mentioned earlier, other Bitcoins are clearly viable.
Yes, the number of Bitcoins in a given fork has a limit, assuming whoever controls that for keeps it that way. But that doesn't matter much if market demand is such that other forks or entirely new coins become viable.
it's like saying gold isn't scarce because there are other metal compounds. you're not making sense at all. if you want to interpret scarcity this way - feel free, but be informed that pretty much everyone else will look at you weird.
No, it's like saying gold isn't scarce because anybody with a bee in their bonnet can launch "Gold 2.0" and create their own supply. Which is definitely not true for gold, but is demonstrably true for cryptocurrencies.
I grant that crypocurrency fans will look at me weird, which I'm fine with. But economists (and most others) won't, because they understand that substitutability [1] affects scarcity.
Again, from a marketing perspective, it's not clear that matters. For a great number of cryptocurrency "investors", they're just buying magic beans. A fine piece of evidence comes from CNN today that digital currencies are effectively substitutable: https://www.cnn.com/2020/12/03/investing/bitcoin-ethereum-xr...
As Bitcoin itself proved, plenty of people will buy into a commodity because it's new and hot, and not because of any fundamental analysis of its value. In that sense, Bitcoin is not in any way scarce.
How many more years of clear correlation between value and chain difficulty must pass for you to recognize that there’s something in there?
Also, bitcoin is scarce because it’s hard to get more of it, what the hell is your definition of scarcity? It seems to change from one comment to another.
Bitcoin has not proven market value beyond a speculative instrument and a vehicle for financial crime. In particular, it has failed in its original goal to be peer-to-peer electronic cash. I hope real value emerges someday, but after a decade's track record, I don't expect it.
My definition of scarcity is when the people in the market to buy cannot easily get more of the thing that they want. For people just wanting to speculate, other cryptocurrencies are substitutable. And given how easy it is to start a cryptocurrency, the supply is effectively infinite.
And just to be clear, it's not Bitcoin in specific I'm concerned about. I think the same thing about all the cryptocurrencies, although I have more hope for other ones to eventually evolve toward delivering value.
> Bitcoin has not proven market value beyond a speculative instrument and a vehicle for financial crime. In particular, it has failed in its original goal to be peer-to-peer electronic cash.
Very much has. Wild speculation moved on from bitcoin to altcoins circa 2015, from altcoins to ico in 2017 and from ico to defi in 2019. Bitcoin is old and boring.
Vehicle for financial crime - that’s just ridiculous, not even bothering to respond. Go google what fines banks paid in recent decade for financial crimes before claiming this bs.
And bitcoin is p2p cash for all intents and purposes. Ticks all the boxes for me.
> people in the market to buy cannot easily get more of the thing that they want
Yeah, you can’t get more bitcoin, it’s scarce.
> For people just wanting to speculate, other cryptocurrencies are substitutable.
Well that’s a dumb definition of scarcity, unless you also think gold isn’t scarce because there are tons of substitute metals for purposes of speculation on the market.
Nah. Bitcoin speculation is still popular, as any popular press search for "Bitcoin" will show you. People are buying in because they hope the price will go up.
I appreciate you not responding on crime, as that saves me some time.
I can believe Bitcoin "ticks the boxes" for ardent Bitcoin fans, but that doesn't say much about the rest of the world. Bitcoin did not end up being cash in the common sense of the term. E.g.: https://www.nytimes.com/2018/04/16/nyregion/new-york-today-l...
For speculation, yes, some metals are substitutable. Silver is a popular alternative to gold. To a lesser extent, platinum, palladium, and rhodium. If you don't believe me, just go look at some of the sites and vendors that cater to gold bugs. And I'll note that Bitcoin has often been called "digital gold" and has drawn plenty of interest from the same kinds of people who speculate in gold, so Bitcoin can also be a substitute.
For example, in the mid-aughts I was talking with the CEO of a well-funded "semantic web" company about joining. I liked the people and the tech was cool, but I just couldn't figure out how it would turn a profit. His answer was similar to yours, a "what couldn't they do?" answer. Turns out they never found an answer, and got acquired for their technology without ever turning into a real business.
As somebody who used to write software for financial traders, it's not clear to me that removing clearing houses is a step forward. They provide important services. And I'm even more skeptical that allowing randos to trade in opaque, unregulated assets is a good idea. Music industry actors, for example, have decades of experience in creative accounting and screwing people over. Real estate has a strong caveat emptor tradition, and property management companies are not exactly a watchword for fair dealing. So from you description, I'm mainly imagining people all over the world getting fleeced with no practical legal recourse.
As best I can tell, the cryptocurrency space seems hell-bent on rediscovering why strong markets and government oversight exist in the first place. The only demonstrated market advantage Bitcoin has in a decade of operation is in light financial crime like money laundering, capital control evasion, ponzi schemes, ransom payments, and outright theft.
I do hope these technologies turn out to be useful for something. But the "imagine the possibilities" routine worked much better when there was less of a track record. Now I'd rather examine the actualities.