"Bitcoin is a classic network effect, a positive feedback loop. The more people who use Bitcoin, the more valuable Bitcoin is for everyone who uses it, and the higher the incentive for the next user to start using the technology. "
The same is of course true of a Ponzi scheme or a lot of Internet stocks. Like Netscape, a stock which went up and up and up for ages until it suddenly started going down and down and down. Positive feedback works both ways in a bubble: It works when people rush to put their money in and it works even faster when people start running for the exits.
Having seen five rounds of crypto-currency hype, I see no reason for the outcome to be any different this time round. Just like Gold-Age, eGold and dozens more that have been forgotten, the current round of crypto currencies will either fail to take off or they will die a sudden death when the Feds move in.
The banking and RICO statues give the Feds almost unlimited power to regulate the movement of money. They don’t even need to have the law on their side either, all the feds need to do to make the bitcoin bubble burst is to cause people to stampede for the exits. They can do that with one grand jury handing down a RICO indictment for using bitcoin.
Further, there is no shortage of regulatory topics and issues that will have to be addressed, since almost no country’s regulatory framework for banking and payments anticipated a technology like Bitcoin.
Only they have done. There have been alternative currencies floating around since the start of modern banking. There has never been a time when the central banks had a monopoly on issue of currency. Ask Mickey Mouse.
This group was around over 20 years ago when I wrote a paper on digital currencies when I was at W3C.
http://www.manchesterlets.org/
Most times the payment systems get to a certain point and the tax authorities show interest and they suddenly collapse. Because avoiding the attention of the authorities is usually the whole point.
Right now the holders of bitcoins are almost exclusively speculators and drug dealers. All the drug dealers care about is that they can use the scheme to transfer money reasonably effectively with acceptably low transfer risk. Bitcoin does not need to be absolutely stable to fullfil that need. They are not going to transfer all their money in one go. Meanwhile the authorities will be looking to trace the money to the source and destination rather than shut down the infrastructure.
But no, go ahead. Libertopia is always right. Bitcoin is the future of banking and you will all have a pony.
