Despite Bitcoin being called a currency, what gets lost about Bitcoin is that it’s a commodity–like gold or tulips), whereas a sovereign currency, such as the dollar, is what you use to pay your debt to the government (also known as taxes). The Treasury won’t accept bitcoins as payment (though they may confiscate property holdings, including bitcoins, and then auction them for currency). This doesn’t mean bitcoin can’t be used for trading.
At some Boston colleges, there is “Fenway Cash“, which allows you to buy currency that can only be used on campus or at stores in the Fenway area. One could, in theory, set up a complex economic system based on Fenway dollars. But when tax time rolls around, somehow these Fenway dollars must be converted to U.S. dollars. In other words, both Fenway dollars and Bitcoin are bartering mechanisms among individuals.
So it’s dollars or punishment, though I have no idea what would happen if tens of millions of Americans went on a tax strike (certainly, you couldn’t arrest or punish all of them).
mikethemadbiologist
Now you’re an expert on finance and economics? Amazing!
Maybe we should all go on a tax strike. Then we would realize how much we depend on all the tax supported things in life, and would perhaps be a little more appreciative.
BitCoin is not a currency and will not become a currency because it is algorithmically guaranteed to have a (sharply) limited quantity issued; that means that the money supply is inflexible and cannot be rapidly expanded to blunt a recession or avert a depression. That is, it is like gold. Its enthusiastic supporters are all techno-goldbugs, gamblers, and (my pet theory) in it from the very start to scam techno goldbugs out of a whole crapload of their money. At the national level, only an idiot would use it.
It’s a corollary of the sharply-limited-supply that it is also unstable — if it is destined to be a currency then its value will rise astronomically, which means that a rational person would not spend it, which means it makes no progress towards becoming a currency. Where it is presently most popular as a currency is in the underground economy, used to evade currency restrictions, etc — and its status there in any exchange is transient — dollars-to-Bitcoin, send Bitcoin, Bitcoin-to-dollars. It does nonetheless require a number of Bitcoins in circulation to cover these transactions, so as the size of the underground economy (and the velocity of the end-to-end transactions) changes, so does the value of BitCoin.
Not all of these algorithmically-constructed exchange mechanisms suffer the same problems; Dogecoin is (as I understand it) not quantity-limited in the same way — and is not as attractive to the goldbugs.
Brian, you don’t have to be an expert to know that Bitcoin isn’t a currency. (Even Canadian Tire Money is closer to being a currency.) In fact, the extra value it did have was as a commodity which could increase in value, in what can now be easily seen to be basically a Ponzi scheme. That and its usefulness as an easily distributed payment for criminal activities.
@Brian
Never underestimate the power of Mad Biology
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You don’t have to hate it because it’s being marketed and used by (some) people you find unsavory. I don’t think you can make an honest argument that it is not a revolutionary idea.
Currency definition: Something that is in circulation as a medium of exchange (http://www.merriam-webster.com/dictionary/currency). Yes, Bitcoin is a currency. Yes, it’s also a speculative vehicle. So what?
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