I'm pretty skeptical of Bitcoin's chances at this point. Not because the underlying technology isn't sound, but because it's been completely co-opted by speculators and "the USD is just, like, paper man!" doomsday nutballs. I think the problem lies with the mining algorithm: it's a great idea to use mining to incentivize peer to peer participation in the payment processing network, but the model of exponentially-increasing difficulty is just foolish. A model where participants earn a share of transaction fees based on the number of actual transactions they help process would be far less wasteful of electricity and CPU cycles and could potentially encourage far broader adoption of the Bitcoin software, thus paving the way for it to be used as an electronic currency by more than a handful of enthusiasts. There wouldn't be large windfalls for mining, but that's a good thing. The windfalls and speculation are what are going to kill it as a currency -- right now it's basically a mix between a commodity and a penny stock, which creates a large barrier to entry from anyone not trying to make a fast buck off it before it collapses.
I still think it's an interesting project that will be used as a model by future economists, but I'd be very uneasy if I had a large amount of money tied up in them at this point.
I still think it's an interesting project that will be used as a model by future economists, but I'd be very uneasy if I had a large amount of money tied up in them at this point.
1) There is nothing wrong with speculators (so long as they aren't defrauding anyone) - they are merely individuals who try to predict future value, by putting their own money on the line. An efficient market is made by their actions, as they bring pricing signals forward in time. It's as important in Bitcoin as it is in the oil markets. But people HATE speculators!
2) The dollar IS just paper, man. It's an important philosophical, economic, and moral issue. Expressing antagonism toward a monetary system which is inflated at whim at the expense of those who are coerced into holding it is a very reasonable position to take, IMO.
3) Regarding mining, exponentially increasing difficulty is anything but foolish. You forget that one of the primary reasons for the number crunching (which you call wasteful) is to make it difficult for any computer or network of computers to manipulate the protocol. The longer Bitcoin operates, the more secure the blockchain becomes due to this dynamic. Not foolish.
At the core of your skepticism is, I think, a disapproval toward anyone who is able to obtain wealth without "hard work." Some miners will indeed make a killing from their early discovery of Bitcoin, and that doesn't sit well with you. You think it's "unfair." The irony, of course, is that in the same breath you defend fiat paper currencies which have for centuries enabled the politically connected to obtain incredible wealth through the process of inflation. Yet, it is not wealthy bankers profiting from the printing presses for whom you seem to have disdain - but rather a small group of tech-enthusiasts who first discovered what may become a revolutionary technology, and risked their own time and capital to invest in it.