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Bitcoin and other digital currencies

January 21, 2018

I find it hard to see breathless stories about Bitcoin and other digital currencies and not be reminded of previous investment manias, like tulip bulbs. Where at least, when the market inevitably crashed, you’d at least be able to grow tulips. Or the beanie baby craze of the late 90s, where you at least ended up with stuffed animals you could give as gifts to small children. When digital currencies also crash, what will you have? A lot more pollution. Aaaaaand that’s about it.

Normally I’d just be somewhat amused by the latest crazy investment fad and go about my day, but living in Silicon Valley it’s hard to escape the breathless hype about transforming society through inventing a new, libertarian currency, free of the control of nation-states, that also provides true anonymity. Part of me hopes that the people peddling such tripe are just blowing smoke to prop up their investments, but, Silicon Valley being what it is, I know that there are unfortunately true believers who somehow believe their hype. They manage to ignore the fact that cash is already a perfectly fine mechanism for anonymous payment. And that Bitcoin isn’t actually anonymous: if all your transactions are on the blockchain, then you’re pseudonymous, not anonymous. Oh, and if the vast majority of your currency is concentrated in the hands of the few, then you’re just trading control by a nation-state (which is governed by laws) for control by a small minority of power brokers who have pretty much no constraints at all. Yeah, that’s a big step forward.

The latter group, despite seeming to have few if any interactions with regular people, seem to think that digital currencies will usher in a new egalitarian society. At least the folks hyping the Web, which was probably the last technology that was going to bring us universal peace, prosperity, and openness, could point to it as a mechanism to provide voices to millions, nay billions, of people and to increase access to information. And how’d that turn out? Well, let’s just say that it hasn’t been all sunshine and roses. So far all that digital currencies have demonstrated is that there’s a sucker born every minute, and that people are always looking for a way to make a quick buck. You’ll forgive me if I don’t hold my breath while waiting for the new and better society that they’re going to usher in.

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