You cannot fault the writer of the MIT article for being an "idiot" because it is a total 180 degree shift in paradigm. I learned about Bitcoin roughly 10 days ago and it took me all weekend to understand it. Is it money? Is it the new Paypal? Is it a stock?
These are the points he addresses;
1. medium of exchange - Yes, overstock.com, tigerdirect, Las Vegas hotels, and a growing list of merchants accept it.
2. unit of account - wild price fluctuations prevent it from being a unit of account. This is true but only because bitcoin is so thinly traded due to it being new and most shares of BTC are held by just a few miners. This will change as these large holders of BTC spend their BTC as the dollar price of BTC goes up and as more merchants accept BTC. I suspect that these miners were lacking places to spend their BTC. As more people adopt BTC, these miners could finally unload their BTC without dropping the price too much. A lot of these people who own BTC are privacy freaks and registering under KYC regulations to use an exchange with large quantities of BTC would probably freak these people out. Their only recourse is to spend it, but until recently, there's only so many pizzas you could order online with your BTC millions because nobody accepted BTC until recently. Also, these large holders of BTC would find it impractical to do local bitcoins to cash out. For example, if you were to use localbitcoins and cash out of 1 BTC a day, it would take you 10,000 days to cash out of 10,000 BTC. You generally don't want to do a FTF transaction with more than 1 BTC because that would leave you open to too much robbery risk. Even if you live in certain parts of America where it is legal to carry a gun and bullet proof vest, you could cash out of 10 BTC a day, but that would still take you 1000 days to cash out of 10,000 BTC, so this is impractical if you own a large holding of BTC. However, now that you could buy a car or house with BTC, then it is much easier to cash out of BTC by spending it. As more miners spend their BTC and more people get into it, the wild fluctuations in price would disappear.
3. store of value - BTC cannot be stored in a bank and digital wallets are less secure than a bank. I think the ctiizens of Cypress would beg to differ. Again, this is a change in paradigm. Keylogger viruses are a very real threat to BTC. I've seen others on this very forum lose lots of dough this way. Cybercriminals are very real and very difficult to catch as they're usually in another country not under your law enforcement's jurisdiction. BTC is the wild west. But does this make it inferior to fiat? Maybe, maybe not. This is a matter of opinion.
As a closing knockout blow, the author states that an economy that is deflationary would require workers to take a pay cut every year. Again, this is a change in paradigm that the author fails to understand. With fiat, inflation FORCES you to take a pay cut every year. With BTC, deflation FORCES you to take a pay raise every year. This means with fiat, the employer has to keep giving you empty pay raises to keep up. With BTC, your employer has to keep giving you empty pay cuts to keep up. Neither system is better, but it is a total 180 degree paradigm shift.
Nothing like this has ever been done before on such a grand scale. It's gonna be real interesting where this bitcoin roller coaster takes us. Hang on, it's gonna git rough!
These are the points he addresses;
1. medium of exchange - Yes, overstock.com, tigerdirect, Las Vegas hotels, and a growing list of merchants accept it.
2. unit of account - wild price fluctuations prevent it from being a unit of account. This is true but only because bitcoin is so thinly traded due to it being new and most shares of BTC are held by just a few miners. This will change as these large holders of BTC spend their BTC as the dollar price of BTC goes up and as more merchants accept BTC. I suspect that these miners were lacking places to spend their BTC. As more people adopt BTC, these miners could finally unload their BTC without dropping the price too much. A lot of these people who own BTC are privacy freaks and registering under KYC regulations to use an exchange with large quantities of BTC would probably freak these people out. Their only recourse is to spend it, but until recently, there's only so many pizzas you could order online with your BTC millions because nobody accepted BTC until recently. Also, these large holders of BTC would find it impractical to do local bitcoins to cash out. For example, if you were to use localbitcoins and cash out of 1 BTC a day, it would take you 10,000 days to cash out of 10,000 BTC. You generally don't want to do a FTF transaction with more than 1 BTC because that would leave you open to too much robbery risk. Even if you live in certain parts of America where it is legal to carry a gun and bullet proof vest, you could cash out of 10 BTC a day, but that would still take you 1000 days to cash out of 10,000 BTC, so this is impractical if you own a large holding of BTC. However, now that you could buy a car or house with BTC, then it is much easier to cash out of BTC by spending it. As more miners spend their BTC and more people get into it, the wild fluctuations in price would disappear.
3. store of value - BTC cannot be stored in a bank and digital wallets are less secure than a bank. I think the ctiizens of Cypress would beg to differ. Again, this is a change in paradigm. Keylogger viruses are a very real threat to BTC. I've seen others on this very forum lose lots of dough this way. Cybercriminals are very real and very difficult to catch as they're usually in another country not under your law enforcement's jurisdiction. BTC is the wild west. But does this make it inferior to fiat? Maybe, maybe not. This is a matter of opinion.
As a closing knockout blow, the author states that an economy that is deflationary would require workers to take a pay cut every year. Again, this is a change in paradigm that the author fails to understand. With fiat, inflation FORCES you to take a pay cut every year. With BTC, deflation FORCES you to take a pay raise every year. This means with fiat, the employer has to keep giving you empty pay raises to keep up. With BTC, your employer has to keep giving you empty pay cuts to keep up. Neither system is better, but it is a total 180 degree paradigm shift.
Nothing like this has ever been done before on such a grand scale. It's gonna be real interesting where this bitcoin roller coaster takes us. Hang on, it's gonna git rough!