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The pros and cons of Bitcoin

https://archive.is/vsZQ0

 

A now deleted reddit post (hence the webpage archive site, which might be flagged as dodgy, but this is defo worth a read!). The post and savage take-down of the top response tell you all you need to know!!

Quoted here:

“Hello, fellow Bitcoiners.

I’m an economist and I’ve been been following Bitcoin for quite some time now. What I’ve always found the most entertaining property of cryptocurrency is how it exposes the massive economic illiteracy among the so-called financial journalists and, indeed, a large portion of the financial elite and even quite a few prominent economists (Joseph Stiglitz, to name one).
Having said that, I want to arm my fellow Bitcoin users with a small amount of knowledge that should be enough to knock out the most widely held objection to cryptocurrency’s value that you would encounter from your families, friends and acquaintances: the idea that money needs to be ‘backed’ by something, whether it’s a financial institution, an army or just plain belief in it. The simple fact is that this isn’t true now, has never been true, and will never be true.
Money is valuable because it is the simplest, most efficient and most effective way of signalling economic data across large groups of people. A currency, the manifestation of money, is valuable when it does a good job of transferring the aforementioned data by being:
  • 1) easy to use and understand by everyone
  • 2) tamperproof such that it resists corruption of the original signal
  • 3) neglegible in overhead costs
Cryptocurrency is a happy marriage of information technology improving n°1 and distributed cryptology improving n°2, while SegWit and Lightning continue to improve on n°3. Put simply, in terms most educated people can understand: Bitcoin has value because it is better at acting as an information carrier for economic data than any traditional currency. It protects signal integrity to a degree that no other currency type can. This is why cryptocurrency is so valuable, and why it will continue to soar until all fiat currency has collapsed around it.
Good money, in short, is all about reliably transferring economic preferences. It has sod all to with ‘backing’, ‘trust’, government ‘protection’, ‘sound’ fiscal policy or any of the other racketeering schemes that powerful groups have been using to take the data signalled by ordinary people and corrupt it into something that benefits only the elites.
Any time a journalist or so-called expert objects to cryptocurrency because it’s not ‘backed’ by any of the above, they betray their ignorance, their illiteracy and their complete blindness to the revolution that’s happening right under their feet and which will, in time, bring down the corrupt power structures of our world to create a freer, fairer society for all of us.
Arm yourselves with this knowledge, educate your peers, and steel your hearts with the understanding that our foes are defending a dying paradigm while their world crumbles around them.
Vires in Numeris!
EDIT:I want to thank everyone who has commented. I’m trying to reply as much I can, but I’m frankly overwhelmed and amazed by the amount and the speed of comments coming in. So I have resolved to take the most salient critiques and points of contention and address them in a future thread. Thank you for understanding, and thank you for your patience. – Dietsman”

Response here:

”

While it’s true that a currency needn’t necessarily be “backed” by something to be an effective means of exchange, virtually everything else you’ve said is false, or obvious pandering to the prevailing socioeconomic attitudes prevalent in this sub.
First, let’s dispel the notion that US dollars aren’t backed by anything. US Dollars have an important quality that makes them useful to an individual, regardless of whether other individuals want them: they can be used to pay down US citizens’ tax obligations. This is no trivial thing. Read about Chartalism for more information.
A currency, the manifestation of money, is valuable when it does a good job of transferring the aforementioned data by being: 1) easy to use and understand by everyone 2) tamperproof such that it resists corruption of the original signal 3) neglegible in overhead costs
You’re listing this out like it’s out of a textbook or something, but it’s just 3 random points you picked out of the air that are heavily influenced by the current subject matter of Bitcoin. The average economist, when asked about money, is not going to mention that it should be “easy to understand by everyone”, tamperproof, or low in transaction overhead. They’re going to talk about the usual trifecta: 1) A medium of exchange 2) A store of value 3) A standard of value
Hilariously, even though you’ve arbitrarily chosen the metric we’re using to measure the worth of a currency, Bitcoin still utterly fails to meet all 6 of these points. Let’s go through them, starting with yours:
  1. Easy to use and understand by everyone – Why would you even set yourself up for this? “What is Bitcoin” “how does Bitcoin work” “How do I get a bitcoin” These are some of the most asked questions on the internet because nobody can grok Bitcoin on the first try, and even when they do, it’s not clear to them how they can “buy in”.
  2. Tamperproof such that it resists corruption of the original signal – While at first bluff this is true, tamperproof is really just one element of a larger desire that malicious third parties can’t change the debt record in their favor. From a purely technical standpoint Bitcoin should be resistant to this, but in practice, the number of coins lost to negligent storage, Wallet exploits, etc. puts this point squarely against BTC. I am much, MUCH less concerned that my US bank account will disappear due to some technical trapdoor, or compromised because somebody hacked into the computer systems at my credit union.
  3. Negligible in overhead costs – Bitcoin is ludicrously expensive to transact in, and circumventing this via, e.g. the Lightning network, necessarily involves tradeoffs against other technical qualities that you will doubtless be counting for Bitcoin elsewhere.
  4. Medium of exchange – worthless. Nobody wants to buy pizzas with Bitcoin, because it is by and large considered some kind of investment. I love the irony that people don’t want to spend their bitcoin to buy things because they’re convinced that it’s so incredibly useful to buy things – so much so that it will one day net them millions of… dollars? No wait, not that!
  5. It is completely untrustworthy as a store of value – putting money into Bitcoin is not safe. This entire sub has “invest responsibly” posts slathered all over it because even the most foolhardy zealots realize that that saying you should save your life’s earnings in Bitcoin is a terrible idea. If I had $20 in a bank account in 2008, when I took it out today, it would only be worth 87% of what it was then. Inflation does hurt you over long periods of time, but this was a smooth, monotonic decay. It’s the kind of value you can quite literally bank on decades in advance. Bitcoin has no such assurances. The value of your life savings denominated in Bitcoin changes significantly every day.
  6. A standard of value – The fact that people’s biggest concern is how many dollars one can buy with their Bitcoin tells you everything you need to know. Nobody denominates values in Bitcoin – it would be completely useless. If I told you this car was worth 1 BTC, that means two different things on Monday vs. Friday. If I tell you it’s worth $15000, you understand.
It protects signal integrity to a degree that no other currency type can.
This is meaningless.
This is why cryptocurrency is so valuable, and why it will continue to soar
Oh, you mean soar up and down like a tech stock after an IPO? Making it completely untrustworthy as a store of value, and unusable as a medium of exchange? Regardless, even if it was monotonically rising in value (it’s not, not even close), why would this be a good thing? If you want to live in a world where all goods and services are completely denominated in Bitcoin, it doesn’t matter what Bitcoin is “worth” in US dollars at any point in that cycle. The measure of Bitcoin’s usefulness starts and ends with what types of things can be bought with it. It doesn’t matter if a pair of shoes costs 1 BTC or .0000001 BTC if, all other things being equal, your salary and pension and taxes are measured in BTC. It’s just a scale-factor. If you think the value of Bitcoin, denominated in US dollars, soaring into the stratosphere is a good thing, then you’ve patently revealed your true motivation, which is for the in-crowd to get rich. This is deliciously ironic given:
they betray their ignorance, their illiteracy and their complete blindness to the revolution that’s happening right under their feet and which will, in time, bring down the corrupt power structures of our world to create a freer, fairer society for all of us.
And so we see what you’d really like to see happen: destroy the riches of the current superwealthy and replace them with a different group that you like more – Bitcoin early adopters.
Bitcoin is a fascinating development, and it blazed an important first trail in the modernization of money and commerce, but from a technical standpoint it is totally inadequate to serve as the currency of the internet, or the currency of the world. Transaction fees, energy usage due to mining, validation waits, Wallet protection, and exchange with existing monetary infrastructure – all of these things are lacking in fundamental, unfixable ways. The world needs something that has a lot in common with Bitcoin, but it also needs to have a lot of things that are quite different. Sitting around and telling each other that the establishment just “Doesn’t get us, man” is fucking delusional. There are people that don’t understand cryptocurrency, but this is not the only or even the main reason that Bitcoin falls into criticism. It is being criticized because it has real, legitimate, unsustainable, deal-breaker problems. When you write this kind of BS that ‘the establishment is just trying to protect the status quo’, you sound like a lunatic conspiracy theorist who things that GM knows how to make cars run on water but won’t tell us because of the oil cartel. It just doesn’t make any fucking sense. If Bitcoin was a digital pantheon of economic exchange that was going to usher in the modern era of banking, then you know who would be all over that shit? BANKS. It’s not a cabal of evil capitalists trying to crush the revolution. It’s a few uninformed people, and a bunch of people who have genuine grievances based on their understanding of monetary policy and finance. Maybe in some cases they’re too stuck in their old ways of thinking, but anybody assuming that finance and banking professionals have no wisdom to impart here is gravely mistaken.
The shorthand for all of this is to ask yourself: if you could wake up tomorrow to a world that had replaced all existing monetary infrastructure, would you REALLY want to? Millions of truck drivers with unsecured wallets, policeman’s pensions sitting on the blockchain, Starbucks waiting 5 minutes to confirm that your $5 coffee (+ $5 settlement fee) can be handed over? 3 transactions per second for the entire world? – SirBastian“