This was discussed at length in the "Bitcoin is Evil" thread yesterday, but the general idea is that Bitcoin can still be used to make "pretty things" even if you aren't using it as a medium of exchange. Namecoin is one particularly interesting example - fully decentralized DNS. The ability to conduct authenticated P2P transactions of any nature, not just financial, is what makes Bitcoin and its ilk interesting, IMO.
nonono. namecoin is not bitcoin. you are explaining why proof-of-work-schemes are useful. that is not the question.
the article (quoting Krugman) says that there are good reasons why bitcoin might be a wonderful medium of exchange, but there is no good reason why it is a good store of value.
That specific premise is false. An alternate use case does not provide a -meaningful- floor for any store of value. Tulips still have an alternate use case.
I'd claim Krugman is arguing against cryptocurrency in general rather than Bitcoin specifically.
The affordances provided cryptocurrency are new. It's a fair bet that will provide value.
How many factors currently contributing to the value of the US dollar were in place within the first decade of its existence?
I'd also claim the libertarian hopes for cryptocurrency are overblown, though they are definitely contributing to its current level interest.
I am the answer. I place a floor on the value of bitcoin. So do all other believers. To be clear, for all those out there confused, bitcoin is not just money, it is not just a way to make money, it is a movement to change the meaning of money. Only upon grasping that will the perplexed begin to understand.
The problem with your statement is that there may be a new digital currency that displaces Bitcoin ... namecoin, anycoin, litecoin, dogecoin. Maybe not one of those, but a 2.0 of some sort that attracts the miners.
If a NEW Bitcoin equivalent takes the spotlight and Bitcoin miners retrofit their rigs to mine for the new network, then someone that had put all of their money into Bitcoin could lose it all.
Nothing guarantees the continued use of Bitcoin. It is a decentralized fiat currency.
Nothing guarantees that a new currency will displace Bitcoin rather than complement it. A second or third or fourth crypto-currency with broad adoption like Bitcoin would help Bitcoin more than hurt it since they would suggest that crypto-currencies are here to stay forever.
It's entirely conceivable that in the future there are half a dozen or more crypto-currencies out there that provide different qualities that make them more or less fit for use by different groups of people.
Good questions, but I think the answer for gold is pretty weak as well:
>Underpinning the value of gold is that if all else fails you can use it to make pretty things.
That's true, but where would the price of gold be if there was only jewelry demand left in the market? I think gold as a store of value depends on psychology, not on jewelry. But it is a kind of psychology that is impossible to replicate for anything newly invented.
And the investment already poured into it. A lot of people now have a vested financial interest in making it succeed. There are enough of those people to make it self-sustaining while the kinks are worked out.
A new blockchain, alt-coin, or ripple-type system can and do pop up all the time, but bitcoin has a significant network.
If someone invested in building out a new digital payment network they could overtake bitcoin. But its not getting easier every day as bitcoin adoption grows.
IIRC, Paper money used in the colonies had the exact same problem as Bitcoin, but many different forms of them worked prior to the establishment of the United States and the US Mint. Not everything pre-United States was traded in gold, furs and wigwam. They were a fiat currency that could not be used to pay taxes.
What Krugman fails to consider time and time again is the notion of "fitness for use". For international transfers, bitcoin has greater fitness for use than any international currency or other medium of exchange out there. What's missing is fitness for use for day to day transactions, usability, security for the average person and volatility. The former three are being worked on by many people and being solved little by little, and those three are contributing to reduce volatility relative to it's moving average price relative to other currencies.
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[ 2.7 ms ] story [ 36.7 ms ] threadthe article (quoting Krugman) says that there are good reasons why bitcoin might be a wonderful medium of exchange, but there is no good reason why it is a good store of value.
I'd claim Krugman is arguing against cryptocurrency in general rather than Bitcoin specifically.
The affordances provided cryptocurrency are new. It's a fair bet that will provide value.
How many factors currently contributing to the value of the US dollar were in place within the first decade of its existence?
I'd also claim the libertarian hopes for cryptocurrency are overblown, though they are definitely contributing to its current level interest.
The problem with your statement is that there may be a new digital currency that displaces Bitcoin ... namecoin, anycoin, litecoin, dogecoin. Maybe not one of those, but a 2.0 of some sort that attracts the miners.
If a NEW Bitcoin equivalent takes the spotlight and Bitcoin miners retrofit their rigs to mine for the new network, then someone that had put all of their money into Bitcoin could lose it all.
Nothing guarantees the continued use of Bitcoin. It is a decentralized fiat currency.
It's entirely conceivable that in the future there are half a dozen or more crypto-currencies out there that provide different qualities that make them more or less fit for use by different groups of people.
>Underpinning the value of gold is that if all else fails you can use it to make pretty things.
That's true, but where would the price of gold be if there was only jewelry demand left in the market? I think gold as a store of value depends on psychology, not on jewelry. But it is a kind of psychology that is impossible to replicate for anything newly invented.
Nothing but the trust of those involved. Plain and simple.
A new blockchain, alt-coin, or ripple-type system can and do pop up all the time, but bitcoin has a significant network.
If someone invested in building out a new digital payment network they could overtake bitcoin. But its not getting easier every day as bitcoin adoption grows.
What Krugman fails to consider time and time again is the notion of "fitness for use". For international transfers, bitcoin has greater fitness for use than any international currency or other medium of exchange out there. What's missing is fitness for use for day to day transactions, usability, security for the average person and volatility. The former three are being worked on by many people and being solved little by little, and those three are contributing to reduce volatility relative to it's moving average price relative to other currencies.