[Cryptography] Krugman blockchain currency skepticism

[Christian Huitema]

On 8/1/2018 4:05 AM, Patrick Chkoreff wrote:

> grarpamp wrote on 07/31/2018 05:33 PM:
>
>> Freedom isn't derp.
> And to those for whom freedom IS derp, consider the case of an "activist
> group" whose payment processor is suddenly shut down.  A "peer-to-peer
> electronic cash system" as Satoshi calls it might be just the thing.
>
> Krugman asks "What problem does it solve?  I have yet to see a clear
> answer to that question."  That's because he hasn't read this email yet.

Krugman develops two arguments. The first one is that the transaction
cost of crypto-currencies is much higher than the transaction cost of
credit cards or cash. He believes that rules out daily use for paying
bills. From there, he deduces that if the crypto-currencies are not used
to pay bills, the main usage left is to stash cash, much like people
stash $50 or $100 bills, and move them occasionally while hiding them
from the Feds or other police forces.

Krugman then goes on to say that even for the "stash of cash" markets,
crypto-currencies are inferior to alternative like wads of $100 bills or
ingots of gold, because they are not "tethered" to something tangible,
like paying US taxes with $100 bills or selling shiny jewelry.
Basically, there is no intrinsic value for a Bitcoin. It is purely what
people want to pay for it, and if too few people wanted to buy it the
value could drop to zero, because it is not tethered to anything.

These two arguments are not tied to policy desires, such as enabling or
not people to exchange money with activist groups or drug lords. It
takes more than just "reading this e-mail" to refute them.

-- Christian Huitema