It's one of the unexpected paradoxes that cryptocurrency is going to be the greatest threat to privacy since the cell phone and not many people see it coming.
This is the reason I agree with her -- it will further consolidate power.
On top of that, the other problem is that in a fiat fractional reserve system, there's not much stopping the big central bankers from poofing some old currency into existence so they can buy up lots of BTC et al.
That's why right now I am leaning towards Monero and similar at least semi-anonymous coins (without having to use a tumbler separate).
For example, Flickr users have been identified by their Twitter connections:
https://arstechnica.com/tech-policy/2009/03/pulling-back-the...
[0] https://www.coindesk.com/palantir-quantum-bitcoin-cloud-mini... [1] https://bravenewcoin.com/news/sabr-palantir-for-the-blockcha...
so if this comes to pass, it effectively captures the interests of the now-wealthy first-adopters, who are presumably the most ardent proponents of the societal 'benefits' as well.
and then, we are back to square one, with a monied super-class effectively imposing the will of the bankers on the general populace through the very act of holding and controlling the wealth (which is ultimately owned by the state).
the more things change...
Unless people adopt a currency like Monero which is fungible and where privacy is default. People just need to recognize that privacy is for everyone. I think everyone inherently knows that, but when it comes to technology, they don't realize they're giving their privacy up.
The difference between a cellphone and Monero (in this context), is that a cellphone can be tracked.
Let’s hope we don’t do a VHS or HTTP this time around!
Where cryptocurrencies might fit in nevertheless is that they are only as strong as the convention to use a common algorithm. And the choice of this algorithm can be influenced or controlled by law or regulations. Hence the said authorities can achieve the same thing they currently do with crypto currencies than with fiat currencies. Might have defeated the original purpose but is a more likely scenario if cryptocurrencies become mainstream.
Bitcoin could never be gold even if it wanted to. Making gold proper hard currency is easy, just merge two neutron stars and you’ll have a finite amount to drill up. That’s nothing like having to compute some hash where you simply set up the rules of creation. Gold cannot be distributed or forked via github, it’s simply a fundamentally flawed comparison.
There’s people who think it’s just fine and dandy to have multiple currencies making the rounds in the economy. The problem is that it’s just a horrible user experience in the end. It reminds me of those anarchists who believe we should all govern in free assemblies and have those dull daily meetings. Aint nobody got time for that, few months and you’ll have people paying some guy to go get into arguments with some other guy and to make their decisions for them. Sounds familiar doesn’t it.
You’re not going to get farmers, clowns and housewives to check the daily fluctuations between the dozen or so cryptocs-du-jour and decide which one to invest in, hedge against or transfer to. Well, unless you spend the majority of your time thinking about that stuff and getting paid to do so. You could make a decent buck doing just that... hmmm, if only we had something resembling it.
Keep it simple, brains like simple. Don’t make me think. If you make my computer think, at least have tractable math without a gazillion variables.
We currently have one currency for most people's everyday use (local government currency), and they don't bother to read up on what the stock market is up to, but there are plenty that will and choose to buy shares in whatever they think is worth buying.
And we'll probably even have the equivalent of retirement accounts and mutual funds for cryptocurrency, we're not even that far away from that reality today.
So yeah, there are people who aren't going to want to pay attention to all that, and they won't need to whenever we've reached that tipping point. They'll just have bitcoin (or whatever) and deal exclusively in bitcoin, and they won't care what its price is compared to everything else, just like no one bothers to peg the US dollar to any particular share.
It's because fiat currency is still so dominant that bitcoin appears to be volatile in comparison, because they're using USD as the anchor. If bitcoin becomes the dominant coin, it will appear to be just as stable, if not moreso, as you won't have quantitive easing or government manipulation to worry about.
The world functioned without those things for much longer than we've had them. In the past, the only controls were whether new precious metal or other resource deposits were found.
I think the cryptocurrency approach affirmatively rejects the notion that a central bank's controls are a net positive.
The oldest forms of scripture we’ve found are mesopotamian clay tablets depicting the debts of people relative to eachother (John still needs to pay back Don for that ox he got last year). They were stored in temples and administered by the clergy... centrally.
I think a deeper question to ask is whether the monetary
controls of which you speak are designed to serve the masses
or to maintain current power and wealth distribution?
Assuming the existing network is not made obsolete, and if there is any on-going demand then later users will need to sacrifice disproportionately excessive trade into the network as the early adopters simply horde the majority of the supply.
I'd rather have transparency and one-time benefit to a select few than a permanent, secretive benefit.
The US federal reserve system works pretty well and I don't really have a huge problem with it. My point is simply that the downsides to cryptocurrencies you rightly highlight have to be viewed in context of the current alternatives.
In economics, the Gini coefficient is the standard measure
of how inequitable a society is. This is tricky to
determine for Bitcoin, as it's not quiet a "society" in
the Gini sense, one person may have multiple addresses and
many addresses have been used only once or a few times.
(The commonly-cited figure of 0.88 is based on one small
exchange in 2011.) However, a Citigroup analysis from
early 2014 notes: "47 individuals hold about 30 percent,
another 900 a further 20 percent, the next 10,000 about
25% and another million about 20%"; and distribution
"looks much like the distribution of wealth in North Korea
and makes China's and even the US' wealth distribution
look like that of a workers' paradise
Dorit Ron and Adi Shamir found in a 2012 study that only
22% of then-existing Bitcoins were in circulation at all,
there were a total of 75 active users or businesses with
any kind of volume, one (unidentified) user owned a
quarter of all Bitcoins in existence, and one large owner
was trying to hide their pile by moving it around in
thousands of smaller transactions. (Shamir is one of the
most renowned cryptographers in the world and the "S" in
"RSA encryption")"
That defeats the original purpose of bitcoin, but that could be their intention. The settlement of the currency could be decentralised but the supply of the currency could be controlled.
In my opinion that leaves many other challenges, some fundamental like the concept of public ledger, incompatible with the secrecy of banking (i.e. the payments you make is not public information).
But I do think it makes at least as much intuitive sense to say "we can make as much money as we need, and competition between currencies will limit inflation" as to say "we won't have enough money so the economy won't grow."
that innovation could mean replacing bitcoin with another currency through forceful governmental intervention of some kind. or it might mean modifying (i.e. distorting/destroying) bitcoin's current protocols or algos. bitcoin is in its early stages, but so are governmental efforts to regulate it.
And so are government efforts to compete with it. I think that eventually, the Treasury Dept. will see so much convenience in crypto currency(s), they will issue their own coin, the only 'legal' tender in the land.
"Why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions."
This could be read either ways. This could also mean expanding network to ensure people are able to transact online using dollars held in their accounts but not in physical form ie "virtual dollars".
Then there is the word - "virtual currency". Sure bitcoin exists online so it is "virtual" in nature. But the supply control is defined by cryptographic proof so it cannot be created, at least for now, in an unlimited supply.
This makes me wonder what is Christine Lagarde even talking about.
"For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country—such as the U.S. dollar—some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0.
...citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities. If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender."
Assume she is no smarter than a bad VC who is falling for buzzwords. I don't trust her analysis for a minute.
Her analysis is actually pretty unbiased and well balanced. I never expected such a open statement from the head of the IMF.
Of course, there's a LOT of high up finance people who have been convicted of fraud and/or corruption directly or indirectly.
This argument has become so triggering to me. When I hear this, two things become immediately clear to me about the speaker. They do not recognize the vast economies of scale of a network secured by proof-of-work. They also do not fully understand Bitcoin's value as not only as medium of exchange but also a STORE OF VALUE.
The total number of Bitcoin addresses is 2^160. Yes, the Bitcoin network is currently securing 1,461,501,637,330,902,918,203,684,832,716,283,019,655,932,542,976 payment addresses. That's enough for each person alive on this earth (~7.44 billion in 2016) to have 196,385,600,286,334,710,857,791,565,804,391,698,421.92 separate bank accounts that all fit in your pocket.
How much energy do people think it would take to build a bank (or group of banks) that could collectively account for and secure the wealth in 2^160 bank accounts? Don't even consider that it needs to be accessible from all over the world. It would take A LOT OF ENERGY! Now, how much more energy would it take to also run a payment network on top of it? It would take EVEN MORE.
What I want to know from everyone who cites this tired old argument is this. Just what is an acceptable amount of energy to secure potentially all of the wealth in the world?
As little as necessary. While Bitcoin incentivize to spend as much energy as possible, up to the (partially arbitrarily specified) mining reward as financial cap.
Also it is very dishonest to compare potential address space to actually used address space. You could easily extend the number of digits of current bank account without really increasing energy consumption. If you'd actually start to use those address spaces Bitcoin again would scale a lot worse, since nodes would actually have to spend computing power to process all wallets. Hell the current bitcoin blockchain size already makes running a node not worth it for me, thus we might should not promote its scalability. Though this has less to do with proof of work.
By the way i wonder how different POW algorithms and chains with similar ones will be able to coexist in the long term without weakening its POW.
"For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.
But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies."
"IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008."
"Why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable."
The person speaking: Christine Lagarde, Head of the International Monetary Fund.