Those who have followed me may think I see no value or place for bitcoin, but I actually do. So I’ll lay out my thoughts about how to rescue it and turn it into a currency that is stable and changes things.
I don’t think it is possible to invent an electronic unit of exchange and store of value that won’t have bitcoin’s serious problems without bringing the state’s power to create money into the picture. It can’t support reserve banking, it can’t be created as needed to support a serious economy, it is subject to hoarding, and it is vulnerable to attack. In addition, bitcoins inevitably suffer attrition due to various loss accidents. I think the average loss rate for bitcoins already equals or surpasses the rate of creation.
There is no possibility that the anarcho-libertarian anti-gummint fantasy of a currency outside of the state can ever become a widespread reality. I agree with this anonymous Harvard blogger about that. (I have problems with some technicalities, but the article overall right.) My favorite quote about bitcoin’s ability to take over the world as a non-government backed currency is from Rohan Grey: