In my earlier post, I had written about history of internationally accepted currency and history of seigniorage.
Currencies were amongst the oldest form of tax and were issued so that states/countries could sell copper (of worthless metals) at the price of silver (unlike popular perception gold was rarely a medium of exchange). Today with Fiat money, the government is able to sell sheets of paper for whatever denomination they choose. Understandably, many people are questioning the carte blanche of US government to print more money. Hence they propose that bitcoin is the solution. However I believe otherwise. Let me analyze it through 2 aspects… economics & marketing.
Economists believe that the power of a currency comes from its ability to address 3 needs:
- Universally acceptable medium of exchange
- Unit of account
- Storage of value.
Clearly a currency that appreciated 100 folds in a year is a bubble. Its volatility will not make it a prudent place to store. What if the current rather than appreciating debases itself by a hundred, what happens to the bitcoin denominated loans/investments?
It is also not a good unit of account. I was surprised to see the home page of Bitcoin Bangalore conference. They were charging $150 to the participants. Which is humorous and self-defeating for multiple reasons. It is valued neither in the local currency Rupee, nor in the target currency BTC. If the organizers & geeks who promote bitcoins cannot price their events in Bitcoins, why on earth will anybody else?
I have read endless articles about the gaining acceptance of bitcoin. But I am yet to see any merchant/website/store to price its goods in bitcoin. Without a stable pricing, the bitcoin price is established by the exchange rate and I see no reason of this phenomenon changing in the near future.
Some might agree that this currency is nascent and things might change. Hence I am bringing in the marketing aspect.
Bitcoin = Dodgy online transactions = drugs trafficking + laundering = illegal, crime, fraud…
Experience -> attitude ->behavior. Do you think Bitcoin can clean its act soon?
The only glorious example of bitcoin is Silkroad. Naturally if you write reams and reams on how bitcoin can help you evade authorities, how you can perform illegal/drugs/hitman/firearms/smuggling transactions, you are going to attract the wrong kind of crowd. Today any bitcoin wallet holder immediately gets tagged as a potential terrorist or outlaw.
I would say that cryptographic currency are there to stay, but it’s time that bitcoin should dissolve itself and take a rebirth. The message should be, the global village needs no boundaries.. esp. not the artificial ones erected by governments & banks for their own vested interest. We use the New Bitcoin not because we are outlaws, but we believe that order has to be restored and USD’s debasing has frustrated us.