Simple critique of Bitcoin

For all its technotarian groovyness, Bitcoin suffers from classic private currency flaws that make it a scam.

Bitcoin MIGHT work if only it was able to be unique. But there is nothing to stop a proliferation of identical networked coinage systems. Even if it were patented, the patent would expire. With no intellectual property protection, we would see an unlimited set of identical citcoin, ditcoin, etceteracoin.

With no limit on the amount of identically created coinages, what could stop the precipitous decline in value? Trust in the original? What reason would anyone have to trust one more than another? The basic problem is that bitcoins are ENTIRELY speculative in value: there is no intrinsic value (such as a real-world use) to them at all except perhaps the value as a medium for exchange: but there is no scarcity of mediums for exchange, so no intrinsic value.

We've seen this in the past when private currencies were attempted. Without trust in the currency because of a backing in something with intrinsic value, it rapidly can become worthless. Bitcoin has no backing. Even if it had backing, insiders may remove the backing and leave the currency worthless.

Bitcoin relies on some computational artificial scarcity to claim that it won't explode in volume and thus inflate away to valueless. I'd have to see a clear explanation before I believed it, but even so the prospect of innumerable competing identical currencies would create the same problem.

Bitcoin looks like fool's gold to me. A classic scam of selling something that will eventually leave somebody holding a worthless currency.

[Added 6/3/11] Here is Adam Cohen's criticism of Bitcoin. The punchline:

"But Bitcoin is not designed to be a functioning currency, it's designed to enrich early adopters. Again, that is why it is a scam. Period."

[Added 6/19/11] There’s a Virus that Will Steal all Your Bitcoins The first of many, no doubt. The features of bitcoins that make them private will also make them difficult to recover when stolen. Who will be the first to cash in by offering bitcoin insurance against theft? One reason why public assets are valued is because their theft is obvious.

[Added 6/20/11] Bitcoin Prices Plummet on Hacked Exchange At the very least, there's a whole new world of flaws to shake out of the system. Note also that they have "rewound" the transactions to solve the problem: do you want your transactions subject to somebody else's "rewinding"? Note also that the user database was stolen and circulated publicly. So much for privacy.

[Added 12/6/13] So this is how fiat currency dies, with thunderous CPUs?
As predicted, Litecoin has arisen.  And it can make 4 times as many coins!  It is open source, and thus can be reimplemented over and over by anybody who wants to open yet another bubble.  But worse, "In fact, Cryptocoincharts shows something in the region of 164 different virtual currency-based cross rates in the market..."  which means a minimum of 13 competing currencies.

[Added 12/31/13] How and why Bitcoin will plummet in price
Tyler Cowen uses my "citcoin, ditcoin, etceteracoin" argument (though with much more economics sophistication) to make a strong marginalist argument for why values of crypto currencies will plummet. Prices of currencies will be limited by marketing costs of potential competitors. "In short, we are still in a situation where supply-side arbitrage has not worked its way through the value of Bitcoin. And that is one reason -- among others -- why I expect the value of Bitcoin to fall -- a lot."  

[Added 1/6/14] Coingen
"Think you can market an altcoin better than Dogecoin, Catcoin, or even Litecoin? Want to create your own coin and get in on this gravy train? Follow this simple form to get started with your very own alt coin!"  Can you say proliferation?

Robots Evolve Altruism, Just as Biology Predicts

Robots Evolve Altruism, Just as Biology Predicts

Ayn Rand denied altruism, and used examples of robots in her "philosophy". How fitting this is as another stake in the heart of that bizarre pseudophilosophy objectivism.

Open Thread.

The last open thread has worked out pretty well, with some interesting questions still popping up.

So here's a new one! It would be good to keep them fairly fresh.

Question about the Libertarian Party

The LP has always been a creation of the Koch's, and has periodically been purged when attempts have been made to stray from Koch-approved dogmas.

Since the success of the Kochs of swaying the Republican Party with their Tea Party insurrection, have they ignored the LP? Is it possible that the reform caucus has a chance of freeing the LP from the tyrannical hand of the Kochs?

See the Libertarian Reform Caucus for a colorful display of pseudoscientific diagrams illustrating their general approach.

I Pencil: A product of the mixed economy

I Pencil: A product of the mixed economy

The excellent John Quiggan puts up a response to Leonard Read’s I, Pencil.

I, Pencil is an extensive piece of invisible hand propaganda that by directing you only to the vastly complex network of market resources mobilized in creating pencils, misdirects you away from the equally complex network of government resources that enable those market resources.

Rand Justice For All

Rand Justice For All

A Slowpoke cartoon lampooning the limited definition of freedom preferred by Rand Paul and other libertarians.

Beingism response to economic conservatisms such as libertarianism.

Myths about Economic Conservatism

Beingism is a new, liberalish philosophy that describes itself as wanting changes that would be "consistent with some form of Libertarian Socialism".

The title strikes me as misleading: it would be more accurate to describe it as "44 Myths Spread By Economic Conservatives". It's long, and many of the points are compatible with my own criticisms in Critiques Of Libertarianism and those of the late Steve Kangas in Liberalism Resurgent.

Most of the myths are also discussed as inline YouTube videos.

Rand Paul humor

Rand Paul to Demonstrate Commitment to Ayn Rand Philosophy By Removing Under-Performing Parts of His Own Body

The title says it all. Hat tip to an email contributor. (I have to be careful about naming some contributors because they are concerned about conservative bosses. If you would like to be creditied, please let me know: I want to err on the side of caution.)

Non-Libertarian FAQ: the Belorussian translation!

Every now and then I get a request if somebody may translate my FAQ into another language. There should be a Chinese version out there somewhere, though nobody has told me where.

Bohdan Zograf has now translated The Non-Libertarian FAQ into Belorussian. Do alert all your Belorussian-speaking friends.

According to wikipedia, the Belorussian language is spoken by 4 to 9 million people.

Update 9/26: it's a scam, using Google Translate to fake human translation.  I've removed the links that were the apparent objective of the scam.

Open thread.

A large number of other blogs use open threads, so perhaps I should try one.

Bring up your own points, ask questions, propose discussion threads, lurkers make yourselves known, etc.

Good economics from India

Good economics from India

From Angus Sibley at www.equilibrium-economicum.net.

Sibley provides a brief summation of why Amartya Sen rejects market fundamentalism in favor of his Capabilities Approach. Market fundamentalism might be good if all we wanted to do is maximize total wealth. Instead, he proposes maximizing human wellbeing, a radically different goal that takes into account positive freedoms.

The Capabilities Approach can in some ways be viewed a an extended reformulation of modern liberalism, and it is perhaps the most important political/philosophical development of the 20th century. Martha Nussbaum has a new book out describing it, Creating Capabilities: The Human Development Approach. Capabilities is a good way to make sure that everybody benefits from society. The book is not the best read you'll encounter, but the ideas are great.

Encyclopedia Dramatica on libertarianism

http://encyclopediadramatica.com/Libertarian

A lengthy, humorous take on libertarianism from many angles, and well worth chortling over.