Is Bitcoin A Fad? Or is it Here to Stay?

An exchange crashed, the value of Bitcoin crashed and now it’s coming back up in value.  Bitcoin is like sailing a ship on an angry sea.  If you read the Reddit feed on Bitcoin, you can get a lot of good information.  But, the information is mostly positive.  Cheerleading sometimes, and it can be highly emotional.  When the Newsweek article came out about the supposed inventor of Bitcoin, there were a lot of articles posted on the Reddit feed wanting to stand with Satoshi.

That Newsweek article was informative, but the reporter should have never compromised that person’s privacy.  Techies aren’t public figures unless they want to be.  Many of them have no reason to be.

It’s harder to search for meaningful articles talking about the downsides of Bitcoin.  Friends email me some, and I search for them.  I like ti when my friends email me contrary articles.  It helps us think about it.

One of the things that I learned at the University of Chicago was the value of contrarian debate.  That sort of thing is bloodsport there on a high academic level.  I know people that have defended their dissertations and it’s nerve wracking.  Can you imagine being in a room where Fama and Thaler were going at it?  Yet, they have great affection and respect for each other.

Coase Theorem was forged out of the Chicago School, and out of Chicago School debate.  Initially, it was thought to be a meaningless math exercise. Not worth anything.  Milton Friedman kept grinding it in his mind, and eventually Coase became the bedrock theory that the entire Chicago School of Economics was built on.  Know and understand Coase Theorem.  It can be very hard to apply correctly.  There may be no more important economic theory out there.

Bitcoin is Coase on steroids.

Today I found out about the P2P Foundation.  They are going to investigate the effects of crypto currency on modern society.  Should be really interesting and I applied to join today.   I am hoping that they will encourage Chicago style intellectual debate with no hate or name calling that is persistent on other internet sites.

I found out about it through Brett Morrison.  He is a techie that is interested in Bitcoin.  He wrote a good piece on the currency which I agree with.   He says,

Bitcoin is here and it’s here to stay.  I often get asked, “Well, what if they shut it down?”.  My answer is usually something like, by “they”, I’m assuming you’re talking about the United States Government, and yes, governments can make it difficult or illegal to transact in Bitcoin in their country’s jurisdictions, but they cannot shut it down across the globe.  No one can.  It’s out there. It’s on the Internet and it will live in some form forever and it cannot be shut down.

I think there is a lot that has to happen before Bitcoin gets widespread adoption.  First, they must tame the volatility of the currency piece.  That scares people, and contributes to the “tulip bulb” attitude many have toward Bitcoin.

The internet army is an extremely strong army.  It can overpower governments, regulations, and lots of things we thought impossible.  Glenn Reynolds wrote a book, An Army of David’s: “How Markets and Technology Empower Ordinary People to Beat Big Media, Big Government, and Other Goliath’s” and that phrase sums up what the internet can do.  Harnessed correctly, it’s a positive force. Unfortunately, free markets are messy and the internet is the ultimate free market. Bad things can happen too.

Bitcoin is no different.

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