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Bitcoin Will Bite the Dust 2017-06-12 11:05:57 Post No. 2417837
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Bitcoin Will Bite the Dust 2017-06-12 11:05:57 Post No. 2417837
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If you want a laugh, read this published article in an economics journal from 2015.
Dowd (2015) "Bitcoin Will Bite the Dust"
The fact that the Bitcoin system was designed not to require
trust, but now depends on it, suggests that it is living on borrowed
time. Human nature being what it is, the temptation to abuse that
trust will prevail. The history of central banking is full of breaches
of such trust, and it would be perverse to assume that the big bitcoin players would be immune to the same human failings as
central bankers.
Our best guess is that in the short term there will continue to be
a drip-by-drip erosion of confidence as the realization grows that the
system is compromised. The current bitcoin oligopoly cannot
resolve this problem: like the Roman triumvirates, it is unstable and
the principal parties involved cannot agree on a lasting solution; they
also lack the ability to provide the necessary credible assurances anyway.
Humpty is well and truly broken and neither all the King’s
horses nor all the King’s men can put him back together again: it can
only be a matter of time before the whole unsteady edifice will
collapse.
Even in the unlikely event that it survives into the medium run, we
would still rate its longer-term chance of survival as zero. First, we
should remember that a recurring theme in the history of innovation
is that the pioneers rarely, if ever, survive. This is because early models
are always flawed and later entrants are able to learn from the
mistakes of their predecessors.
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>>2417837
There is no reason why Bitcoin should
be an exception to this historical rule. The second reason is that in the
very long run bitcoin would be uncompetitive against efficient
closed-wall systems such as PayPal or COEPTIS, the successor to
e-gold. Once the production of bitcoins becomes insignificant, then
the Bitcoin system will entirely depend on transaction fees to cover
its operational costs, and its fee levels would be higher than those of
more traditional payment systems because of the need to maintain
excess hashing and excess capacity to deter new entrants into the
transaction validation business. Put differently, Bitcoin can never
achieve the technical economic efficiency of competitors that can
operate with a very small number of servers, or even just one. In the
very long term, when there are no new bitcoins being produced to
subsidize the validation process, the Bitcoin system will no longer be able to compete.20 Last but not least, there is still the problem that
Bitcoin is not backed by anything.
Yet the undeniable achievement of Bitcoin is that it demonstrates
the practical possibility of fully decentralized monetary systems
based on the principle of distributed trust rather than central authority.
Like the Wright brothers, it shows that such systems can fly, but
it does not demonstrate that they can stay in the air for too long. We
would therefore regard Bitcoin as an instructive creative failure, but
we are hopeful that the lessons to be drawn from the experience of
Bitcoin and other crytpocurrencies will lead to superior private currencies
in the future, crypto and otherwise. Further experimentation
in the private money space is therefore to be welcomed. As is the
nature of capitalist innovation, most of these experiments will doubtless
fail, but a few will succeed—perhaps hybrids of crypto and gold.
As the old saying goes: “Make new friends, but keep the old. One is
silver and the other is gold.”
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>>2417880
Final bump then letting die.
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