A lot of what I have discussed thus far is use-cases in niche markets and the developing countries of the earth. However, bitcoin has value for citizens of the modern developed nations too, especially if some of the challenges that bitcoin faces today can be overcome.
Card payment transaction fees are hidden to buyers, but merchants can pay on average between 2-4% fees on common transactions, and flat fees are usually built into this pricing scheme which prevents micro-payments from being viable. Transaction fees on cryptocurrencies are zero, negligible, or they will be as scaling solutions develop. Micro-payments have never been a real option but they open up a plethora of market possibilities for art, music, entertainment, patreon-like fan-supported funding, and more.
Crypto-currencies are programmable, making them far more flexible than traditional payments. For example, crowdfunding and in many cases escrow no longer require a middle-man. New paradigms like streaming money, micro-loans, public charity wallets or public political wallets (where all transactions can be monitored by everyone), and so much more are made possible through bitcoin. I could speculate further, but it’s pretty difficult to see the future.
It’s simply too early to know what the next killer-app will be.
One of the aspects of crypto-currencies is absolute control over one’s money, meaning it can be stored in a number of ways and transferred anywhere to anyone at anytime. While you may think you control your money through online banking, you’d be wrong. Banks have the final say over what actually happens with your money.
Some banks have daily spending limits, even if you have the money they won’t let you use it. Your bank might have this policy and you may not even know until you go to make a large purchase. Banks and card companies have in many circumstances prevented purchases for completely legal items and services like medical marijuana, crypto-currencies, gambling, pornography, international purchases, or even donations to certain non-profit organizations. I can understand a company restricting its customers from gambling with the bank’s money using a credit card but we’ve seen all of this happen with debit cards; I don’t believe banks should tell me what I can legally purchase or where I can send my own money.
If you are a criminal the government can tell the banks to freeze your accounts, and few would argue that a negative. But, per the above, banks decide what payments to allow without a government order. If they disagree morally or politically with your transaction they can prevent it. This is terrible for people that live in corrupt political environments; attend the wrong protest or support the wrong political party and your money can disappear in the blink of an eye at the whim of a privately-held bank or by government decree. This isn’t the case in a country like the US, and I certainly hope it won’t be the case in the future. However, it’s an unfortunate reality elsewhere in the world, and I again warn against saying “it could never happen here”.
Services like paypal have even less oversight than banks. They’re famously known for freezing the funding of Wikileaks. While one might criticize their practice of exposing secrets of “national security”, I argue it’s an important “check” on our governments.
Money is a system of Surveillance.
Yes, criminals use bitcoin for it’s properties that obfuscate identity for the same reason they also use cash. We don’t outlaw or abandon cash simply because criminals use it. Criminals use all sorts of tools to commit crimes that we don’t ban. For example, they use cars to get away from police. These things also benefit the rest of society far more than a few criminals. Simply because a criminal uses something doesn’t make it inherently bad.
And for the rest of us, I think we have enough surveillance already. PRISM, CCTV, LPRs, etc. Why must every digital transaction be monitored? Cash is anonymous and that’s not an issue for anyone. For-profit institutions should not monitor and oversee every transaction we make digitally.
If you think “I’ve got nothing to fear so I have nothing to hide” is an argument you probably haven’t read Orwell’s 1984. I’ll outline some of the many reasons why the “nothing to hide” idea is misguided and why universal blanket surveillance is actually worse for innocent people than it is for any criminals. As an American who respects the ideals that this country was founded on, the Fourth Amendment to the Constitution grants that:
“The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause”
There is a balance between security and liberty, and the constitution dictates that we should be allowed privacy unless under suspicion through some manner of probable cause. But we now know this is not the case, the revelation that PRISM has been secretly spying on everyone for years without probable cause shows that the government doesn’t care about our fundamental right to privacy and they violate every citizen’s right without due process.
If we don’t defend our rights we risk losing them. And, under PRISM shouldn’t all crime cease? Of course, that’s not the case because criminals, especially the really bad ones, are extremely good at hiding. They use cash and secure communications; therefore, it’s only normal citizens that get spied on. In 2013 General Keith B. Alexander, the former director of the NSA, lied in testimony to Congress claiming 54 terrorist plots were prevented using data collected from PRISM, but later admitted it was only “1 or 2”.
Governments lie. And they hide a great deal from the populace. Why should the government be allowed to keep secrets while citizens are not? We know they do not always act in our best interest, and “transparency” of government is generally regarded as a good thing. If “nothing to hide” is a good argument, why did the founders of the US include this passage about privacy?
Regular people suffer because of data collection.
Innocent citizens with the same names as those on terrorist watch lists have been detained, deported or had other significant impact to their lives for doing nothing at all. Data collection helped Nazis persecute gay and Jewish people less than 100 years ago. Let’s hope the government doesn’t hear you making a joke that could be construed as a threat against your nation. My cat is named Isis (an Egyptian god), and my wife and I text about Isis all the time; I’m probably on all sorts of lists because I text about my cat. The result of a surveillance state is that people self-censor, and it decreases liberty.
This is the cost of alleged security.
Surveillance rarely catches terrorists, but it still harms everyone else. The TSA for example has a 95% failure rate to catch weapons or explosives, yet, at airports we are subjected to full “nude” body scans, blasted by either millimeter-wave or backscatter x-ray radiation, must remove our shoes and belts, we’re patted down, our belongings put on public display, etc. Some argue it’s worth it to protect against another 9/11, some say it’s “security theater”, but this is the balance between security and liberty to which I refer.
Bitcoin mitigates blanket surveillance.
While all the transactions on the blockchain are visible to everyone, owners of particular addresses are not intrinsically tied to a person’s identity like a bank account is. Furthermore, a single person can create thousands of addresses and move money between them at will, further obfuscating their spending. One might think this makes it harder to catch criminals too, but that is not the case. When law enforcement officials have probable cause and use due process to surveil a particular individual using warrants, device seizure, and deep chain analysis on particular bitcoin wallet addresses, they are extremely effective at revealing criminal activity. It’s much harder to do deep chain analysis on billions or trillions of addresses. And I argue, per the above, that this actually benefits society.
From 1984 to 1971
Fiat money, our current only-backed-by-government-reputation currency was truly created in 1971 when Richard Nixon took the US off of the gold-standard. In case your not aware, you used to be able to exchange dollars for precious metals, they were backed by gold and silver, but you can’t anymore, that is, not since 1971. This event is known as the The Nixon shock. It had some interesting effects, one being that it destroyed the Bretton-Woods system, putting an end to an era with virtually no banking crises.
GDP is still growing since 1971, but CPI-adjusted wages aren’t.
And US government debt since 1971 looks like it’s going parabolic.
I’m not an economist but looking at these three graphs together, and noting the 1971 date on all three, something doesn’t appear right. I’m not saying the US dollar is about to collapse, but who knows.
It appears to me that governments are inching towards a nanny-state, big brother, totalitarian surveillance paradigm. And the situation with governments and central banks strikes me as odd also.
As I understand it, governments “print” money by allowing central banks to create more money digitally. Banks and governments can buy their own stocks and bonds. While they do this they are inflating the currency and robbing you of purchasing power while at the same time filling their pockets. Then, banks loan money to borrowers and profit from the interest. Banks borrow YOUR money and loan it to others and profit from that interest (at 9%, 15%, or 24.99%) while they give you on average .08% in return.
I believe this situation contributes to the growing wealth disparity we are seeing in society. Banks control all digital transactions and make money off every digital transaction on the planet.
It’s an orgy of money and only those on top are getting off.
I’m not saying we should just drop the US dollar. But, maybe it’s beneficial that we also have a decentralized, neutral, and algorithmically deterministic monetary option. An option outside government and bank control. Maybe it’s time we had separation of money and state.