The Future of Cryptographic Currencies

[Perdix]

Disclosure: My first business dealt solely with the sale and trade of cryptographic currencies, my opinion is very biased in terms of their longterm outcome.

I think crypto-currencies are an innovation that will last decades, individual currencies may come and go until a candidate is selected for universal usage, or a company may form which makes the actual type of crypto-currency arbitrary (It would be like paying for food in Italy with your debit card linked to a bank holding USD).

One of the reasons why I think they will last is because most banks are corrupt, unethical, discriminatory, and regulations are becoming evermore stringent. I would much rather toss all my USD/EUR for crypto's if they were accepted everywhere, because I would have complete control over where my money is at the moment, I could transfer any amount within minutes (NXT not BTC) to a person across the globe, and finally there is no third party which could freeze my account or reverse a transaction for an arbitrary and unsubstantiated reason. I know you think I'm paranoid about banks, but half a year ago Chase "seized" around 30k and closed my account without any notice, I actually found out by going in to my local branch for a routine withdrawal and my personal banker informed me that my assets were frozen. It took me two months to get a check for my account balance, minus the 30k. My lawyer said taking them to court would cost more than 30k and I should just shake off the loss, which I did .

Secondly; crypto-currencies may be possessed and transferred by any individual with a computer and internet access, this is especially advantageous to those in developing countries without access to international banks. Of course getting them computers and internet may be difficult, but much less so than establishing a connection to the international banking system in every area with the aforementioned technological resources. As technology becomes more and more prevalent in developing countries I see the adoption of CC's as inevitable....

Thirdly; the value of CC's are determined by a global market, unlike the EUR or the USD. Assuming market capitalization reaches the trillion dollar mark I think their value(s) would be more stable than currencies issued by governments. Of course at the present time we are in the early adoption phase where their value(s) are volatile, and keeping a significant portion of your assets in CC's is risky.

Fourthly; the quantity of all sound CC's is mathematically predictable -- no "central bank" (think Zimbabwe) can print out trillions and depreciate your holdings.

There are significant hurdles which us proponents of CC's must jump; education/adoption, government regulation, and transparency. Many people that I talk to haven't heard of Bitcoin, which saddens me to some extent.

What are your thoughts on the longterm viability of cryptographic currencies in general?

[Dynamic]

Disclosure: My first business dealt solely with the sale and trade of cryptographic currencies, my opinion is very biased in terms of their longterm outcome.

I think crypto-currencies are an innovation that will last decades, individual currencies may come and go until a candidate is selected for universal usage, or a company may form which makes the actual type of crypto-currency arbitrary (It would be like paying for food in Italy with your debit card linked to a bank holding USD).

One of the reasons why I think they will last is because most banks are corrupt, unethical, discriminatory, and regulations are becoming evermore stringent. I would much rather toss all my USD/EUR for crypto's if they were accepted everywhere, because I would have complete control over where my money is at the moment, I could transfer any amount within minutes (NXT not BTC) to a person across the globe, and finally there is no third party which could freeze my account or reverse a transaction for an arbitrary and unsubstantiated reason. I know you think I'm paranoid about banks, but half a year ago Chase "seized" around 30k and closed my account without any notice, I actually found out by going in to my local branch for a routine withdrawal and my personal banker informed me that my assets were frozen. It took me two months to get a check for my account balance, minus the 30k. My lawyer said taking them to court would cost more than 30k and I should just shake off the loss, which I did .

Secondly; crypto-currencies may be possessed and transferred by any individual with a computer and internet access, this is especially advantageous to those in developing countries without access to international banks. Of course getting them computers and internet may be difficult, but much less so than establishing a connection to the international banking system in every area with the aforementioned technological resources. As technology becomes more and more prevalent in developing countries I see the adoption of CC's as inevitable....

Thirdly; the value of CC's are determined by a global market, unlike the EUR or the USD. Assuming market capitalization reaches the trillion dollar mark I think their value(s) would be more stable than currencies issued by governments. Of course at the present time we are in the early adoption phase where their value(s) are volatile, and keeping a significant portion of your assets in CC's is risky.

Fourthly; the quantity of all sound CC's is mathematically predictable -- no "central bank" (think Zimbabwe) can print out trillions and depreciate your holdings.

There are significant hurdles which us proponents of CC's must jump; education/adoption, government regulation, and transparency. Many people that I talk to haven't heard of Bitcoin, which saddens me to some extent.

What are your thoughts on the longterm viability of cryptographic currencies in general?

I agree 100%! Around 90% of my funds are in digital currency. Btw, you should start calling it digital currency. Digital currency gets a better reaction from people who don't know what it is\understand it than cryptocurrency. Crypto makes the average person think hackers\cryptic, at least in my experience.

I completely agree with your first point. The current financial institutions are out of control, and have grown too large. I fully expect banks\financial institutions to continue to exist, even once the full switch to digital currency happens (and it will...eventually). However, their importance will be seriously reduced, and they will lose the ability to extort such a large percentage of the world's GDP.

Regarding the second point, even in most underdeveloped countries the people have access to cellular networks, and can use digital currencies on their phones. This is already happening today. The big issue there is ensuring that they have the ability to protect their funds. It will not be a viable solution for them if they are at risk of losing everything due to hacking or data loss. They need protection, and an automatic way to backup their private keys, in a way that only they can access.

Third point I also agree with. At the current market cap, there is an incredible amount of market manipulation occurring, and the positive\negative news can cause wild swings up or down in terms of value. This will be fixed by widespread adoption and a much higher market cap.

Fourth point, yes as well. Inflation isn't inherently bad. Some digital currencies are actually created with built in static inflation, or even variable inflation. However, the rules are clearly defined, and thus it is fair.

You point out Zimbabwe, but currency manipulation in the form of inflation is a plague without boundaries. It is theft, pure and simple. By using inflation, building actual wealth is made impossible for most in lower\lower-middle class. Only those who have access to investments that safely grow at a rate faster than inflation can truly build their wealth, or those with abilities beyond the average person (intelligence, ambition, physical ability, etc).

It is very sad. I am a very ambitious person, and I consider myself quite intelligent, so I think I can reach the level that I want to, regardless of any limitations put in my way...but that is not true of everyone. I have a very large extended family (hundreds if you go as far as 3rd cousins), and I see so many that are struggling to make ends meet. Or that have been working for years and years, and get a small raise from time to time, but can't understand why things don't get better (the raises don't beat inflation). Then I see my son, along with others in his generation, who is set to inherit incredible amounts of debt, an environment that is slowly being ruined, and an ever increasing amount of injustice.

So, my thoughts on the longterm viability of digital currency is this: They are necessary. Digital currencies are the solution to a problem that must be solved very soon, or else we are all fucked. People see a growing gap in income inequality in the US, insane taxes in much of Europe, and a huge, growing middle class in China, and other parts of Asia, that are stuck with even more blatantly manipulated currency than ours. Something is going to give eventually, unless the power to print money is taken out of the hands of the government, and the power to manipulate it is taken away from the banks. That wouldn't fix everything, but it would be a huge step in the right direction, and seriously limit their destructive abilities.

**Also, before anyone gets the wrong idea, I am not a member of the Tea Party, nor do I hate Obama. As a President, I like him a whole lot more than Bush. That being said, they are\were both horrible. So is the vast majority of Congress, and our Supreme Court. Corporatism really sucks. **

[Thevenin]

[QUOTE=Dynamic;30040]I agree 100%! Around 90% of my funds are in digital currency./QUOTE]

It's old, classic, and boring, but I suggest you diversify your investment portfolio. There is some really solid econometrics behind this advice.

[ferrus]

Thirdly; the value of CC's are determined by a global market, unlike the EUR or the USD.

Actually those are as well. Sure central banks can buy/sell to peg a currency but their value against other currencies is determined in exactly the same way bitcoins are - by the relative demands for goods in that currency, which includes intangible goods such as financial instruments. Hence why bitcoins value has bubbled - it was being treated as a proxy for investment. The fact that by buying into bitcoin you are not actually investing in any real financial market to any great extent and are thus disconnected from the vast majority of the real economy and any sort of tangible return on capital kind of hinted at the fact that the investment quality of the currency was largely based on speculation.

For it to be a sensible hedge against inflation ala oil or gold the market for BTC needs to calm the fuck down and have more serious individuals investing in it than the tin-foil hat brigade.

I think crypto-currencies are an innovation that will last decades, individual currencies may come and go until a candidate is selected for universal usage, or a company may form which makes the actual type of crypto-currency arbitrary (It would be like paying for food in Italy with your debit card linked to a bank holding USD)

The leading economic power of the day will always have the currency of choice. Why? Because the financial nexus of the world ends up concentrating there, so that it makes sense to have your invoices, your insurance policies, your investments concentrated at the point where economic growth is highest. This means investing in financial institutions which unfortunately whilst in some sense unpalatable are also able to gain great economies of scale on shifting capital to and from the world's intermediates, and these institutions require a system of law and business environment which is usually contingent on the grace of a particular national government. Cryptocurrencies could have a niche, but unless they are firmly incorporated into business law, taxation collection and financial markets then they will always be a cottage industry.

One of the reasons why I think they will last is because most banks are corrupt, unethical, discriminatory, and regulations are becoming evermore stringent.

I don't doubt they will last. Small-scale currency rebellions are a pretty old thing. Whether they will achieve critical mass as a global electronic payment system is a little more doubtful.

finally there is no third party which could freeze my account or reverse a transaction for an arbitrary and unsubstantiated reason

Or for any justified reason either, such as the non-payment of debts, which is why they are not likely to be incorporated into the legal system.

[Senseye]

I'm reserving judgement until the current speculative mania burns out. Assuming crypto currencies don't have their reputation totally trashed when that happens, they may fulfill some sort of valid currency role down the road. I wouldn't bet on it though.

[Starjots]

I'm convinced that I don't really understand what money is. Yes, I've got a minor in econ from way back which means I took six econ classes. Yes, I've earned, spent and invested in real estate and stocks. But what is this thing called money? And what is a currency? Seems to be two related but different concepts.

So to try to understand crypto or digital currency (the latter seems problematic as well since the most traditional currency exists as bits). The OP succinctly lays out some advantages of crypto currency, but are these advantages that align with what money really is? That's an innocent question in that I dunno. I also think it is the crux of the matter.

One specific that has made me wonder - these currencies seem to proliferate, perhaps there the amount of currency within a system is finite and predictable, but is the number of possible currencies infinite or very large since they aren't tied to a finite number of political states?

[skip]

I'm convinced that I don't really understand what money is. Yes, I've got a minor in econ from way back which means I took six econ classes. Yes, I've earned, spent and invested in real estate and stocks. But what is this thing called money? And what is a currency? Seems to be two related but different concepts.

Have you ever read this book?

http://www.amazon.com/gp/aw/d/091298...&robot_redir=1

[Dynamic]

[QUOTE=Thevenin;30042]

I agree 100%! Around 90% of my funds are in digital currency./QUOTE]

It's old, classic, and boring, but I suggest you diversify your investment portfolio. There is some really solid econometrics behind this advice.

Well, I have a bit in a few businesses as well. Just my personal funds are in digital currency.

[Dynamic]

I'm convinced that I don't really understand what money is. Yes, I've got a minor in econ from way back which means I took six econ classes. Yes, I've earned, spent and invested in real estate and stocks. But what is this thing called money? And what is a currency? Seems to be two related but different concepts.

So to try to understand crypto or digital currency (the latter seems problematic as well since the most traditional currency exists as bits). The OP succinctly lays out some advantages of crypto currency, but are these advantages that align with what money really is? That's an innocent question in that I dunno. I also think it is the crux of the matter.

One specific that has made me wonder - these currencies seem to proliferate, perhaps there the amount of currency within a system is finite and predictable, but is the number of possible currencies infinite or very large since they aren't tied to a finite number of political states?

Money is a concept. It is more akin to "worth" or "value", and a currency is a representation of it, but a currency is not actually money itself. Goods, services, labor, etc. generally have a certain, but intangible, amount of money they cost, but what that amount translates into when paying for it in a currency can vary. If I want to buy a new phone, and Bitcoin, Litecoin, USD, Euros, and CNY are all accepted by this specific vendor, then it could cost $200 in USD, 0.38 BTC, 15 LTC, 144.71 Euro, or 1244 CNY. Those amounts are values in each currency that is worth the same amount of money at the moment.

Money itself cannot be expressed in a numerical form, because it has no specific unit of measurement.