paper

The False Premises and Promises of Bitcoin

arXiv:1312.2048

Abstract

Designed to compete with fiat currencies, bitcoin proposes it is a crypto-currency alternative. Bitcoin makes a number of false claims, including: solving the double-spending problem is a good thing; bitcoin can be a reserve currency for banking; hoarding equals saving, and that we should believe bitcoin can expand by deflation to become a global transactional currency supply. Bitcoin's developers combine technical implementation proficiency with ignorance of currency and banking fundamentals. This has resulted in a failed attempt to change finance. A set of recommendations to change finance are provided in the Afterword: Investment/venture banking for the masses; Venture banking to bring back what investment banks once were; Open-outcry exchange for all CDS contracts; Attempting to develop CDS type contracts on investments in startup and existing enterprises; and Improving the connection between startup tech/ideas, business organization and investment.

28 pages, 6 figures. JEL: E21, E22, E42, E51, G21, G29, G28 Section 2.6 has been broken out into a separate paper, and that unwieldy section is replaced by a short bit referencing that new paper titled, "A zero-sum monetary system, interest rates, and implications."

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