Bitcoin is fascinating cryptography, but bad economics. It's structured to produce a deflationary currency. Yuck. It eliminates the banks and all that, but banks do a whole pile of stuff actually quite well, with quite an advanced structure. Bitcoin is stone-age, comparatively.
Bitcoin makes promises it can't keep. Your transactions are super-secret, except actually they're just there in the log, and they're only secret if no-one knows who owns the account. Cryptography keeps your money secure, except everyone and their dog involved with Bitcoin gets hacked. Bitcoin is a useable method of payment, except the exchange rate swings wildly all over the place, making it more appropriate just for speculation. Bitcoin will make you rich, but, well, actually it's made some people rich, but there have been nice, big crashes, and late-comers aren't going to get rich.
Bitcoin has a depressing world-view. You can't trust anyone, so heavy crypto is needed. Yes, I know that's a pretty standard view for crypto projects, but in this case it's pretty much right. It seems everyone is out to scam you, and the government won't help you this time. Bitcoin "makes the government scared" because they won't be able to steal your money in taxes. Government clearly being an evil arm-twisting force, rather than a mechanism by which we get schools, healthcare, social security, law and order, and all that non-libertarian stuff. And more practically, Bitcoin is used to order assassinations and arrange drug deals. Yeah, I know that the same could be said for cash. Doesn't make it a good thing for a new invention to do.
Bitcoin is a waste. The zero-sum nature of Bitcoin mining drives it towards the price of a Bitcoin being the marginal cost of mining it in terms of hardware, power, etc. Bitcoin generation is proof-of-pointless-work. We're wasting CPU time and using electricity up, pushing climate change along for the sake of the algorithm. If you think the high-frequency trading arms race is bad, it's nothing on this deliberate, brazen burning of compute power.
Bitcoin is Arnold Rimmer's ideal currency. Dressed up in the politics of crypto-libertarianism, of freedom from the banks and government, of progressive cleverness, is the underlying hope to get rich quick. Ideally, in a way that the government can't tax. For that, it's structured really well. The deflationary structure allows those that get in early to get their Bitcoins more easily. Then it's just a matter of getting the price up. To get the price up, those early adopters shout loudly and get the next round of people in, driving up prices in full bubble style.
Underlying it all, there's no concrete value. That's just like fiat currency, you might say. Well, yes, except fiat currency is backed by governments and centuries of experience. They mostly don't gyrate wildly within a day. And sometimes, those currencies do collapse. Aha, you may say, Bitcoin is immune to inflation by design, so it can't collapse into hyperinflation. Sure, the number of coins in circulation is controlled, but if confidence collapses, no-one's going to pay for them.
None of this means that Bitcoin won't be succesful. It just means that I don't like it.
Posted 2013-03-08.