Musings On Markets

Great post simplifying what bitcoin is and does, Professor. Just a simple question: Say I am a car seller, and think if I was to simply accept 10 bitcoins for a specific automotive, would the value of these 10 bitcoins change with the change in value on the trade? 25000 dollars right this moment, but if there isn't any certainty as to what it's worth tomorrow, why in the world would this be a reputable currency? Very informative and concise rationalization of cryptocurrencies.

As far as I can tell, the main beneficiaries of cryptocurrency transactions are those who try to avoid the legislation. Possibly that isn't a bad thing if you live overseas in a tyrannical dictatorship, but here in America, why would I need to get my money intertwined in a snake pit of individuals trying to avoid the regulation (including those making an attempt to avoid taxes). That doesn't sound very secure at all. I'll stick with my US dollars, thanks.

Jay, I consider he addresses that in the price volatility paragraph.

Short reply is, you're appropriate. The "value" of the bit coins would change and that is an element to why it isn't a legitimate currency immediately. I think there's one other problem holding back the acceptance of Bitcoin (and other cryptos) as a currency: Primarily no person has BTC-denominated liabilities. For any fiat currency, essentially all people has fiat-denominated liabilities -- when their tax bill comes due, if nothing else.

Without BTC liabilities, there is no robust driver of mass crypto-currency adoption in the close to-time period. I feel that until we see a robust crypto credit market develop (even when that credit is simply "I owe my landlord 1 BTC at the tip of the month"), crypto currencies will remain a speculative instrument reasonably than a currency. This can be learn as a more bullish case for ETH as a currency, in that a small quantity of individuals do have ETH-denominated liabilities, since it costs ETH to run sensible contracts on the ETH blockchain.

Jay brings up an excellent point.

Professor, have you looked into Ripple (XRP)? Its present use case is largely in worldwide cross-currency funds. Transaction, not trading, speak: From creators and proponents of the currency, you'll hear much less talk about how a lot cash you'll make by buying and promoting the currency and extra on its efficacy in transactions. Transaction, not buying and selling, features: The design of the crypto currency will give attention to creating options that make it engaging as a currency (for transactions), not as investments.

Your argument applies to every currency then. How are you sure that those 25,000 USD can have the very same purchasing energy tomorrow? BTC is simply extraordinarily risky compared to others and that could be the reason you don't need to promote your automobile for it. Maybe you can read about Vitalik Buterin, proof of stake and Raiden to make an knowledgeable call. Cryptocurrencies--sadly--may be The ultimate solution to the money launderers.

The goal of cash launderers is to scrub up their illegal wealth so that they can freely benefit from the monetary benefits.