An Anthropologist Looks at Bitcoin

The anthropologist Alberto Sánchez-Allred writes about the digital currency Bitcoin:

People would argue that the use of Bitcoin is indeed founded on a trust in institutions. These are the exchanges, vendors, websites, and individuals that use them. However, if I go around the corner from my apartment to sell or buy some US dollars, assuming I know the exchange rate and am confident in my ability to spot counterfeit bills, do I need to trust the currency exchange office per se? Many people thought that Bitcoins would stop being used after the largest exchange, Mt. Gox, came crashing down a week ago. But would I stop believing in cash just because the currency exchange folded? The fact that Bitcoins retained their value even with the crash and fiasco at Mt. Gox demonstrates the extent to which trust in any single institution is not at stake here, not as it would be with non-cash type transactions.

Whole thing here.

Comments

[joshua corning]

I have .027 bitcoins!!!!

[NotSure]

It is only a matter of time that governments start banning bitcoin and similar online currencies. So there is no point of earning them.

[Bingo]

This is pretty much my take on it. It will be ignored up until the point it is viable as an alternative unit of exchange and then the feds will crush it. I don't think bitcoin (or any fiat currency) is robust enough to survive in a black market condition. Still, it is an interesting experiment.

[omg]

How exactly are they going to ban them? Its not like there is some central bitcoin server to go after or anything.

[NotSure]

Simply go after the big sites that allow users to purchase stuff with bitcoins. Governments will do anything to protect the idea that money is a government duty.

[Matrix]

but it's bartering. Any business can exchange or give away product or service they offer for something else. No USD exchange is necessary.

[Bingo]

Right, and the government has made it so you can only barter with the tokens they've deemed appropriate.

Unless you can buy groceries with bitcoin, it is not an alternative currency. As long as it is seen as a hobbiest's plaything it will be fine, but the moment it becomes viable it will be crushed. As easy as throwing a few store owners into prison.

[Spnge]

unlike e-gold, which screwed alot of us when the feds froze all the assets. i lost like 350 woth of ill-gotten proceeds when that went down, argh. so the gov, will shut it down and steal everyones money anyway.

[Matrix]

If the use of Bitcoin becomes extremely widespread, I would imagine it would smash income and sales taxes since Bitcoin is not legal tender, and federal, state, and local places only take USD.

[Philosoraptor]

Uh...how would that smash taxes?

You owe taxes...

what is this I don't even

[Lurker Kurt]

I wonder if anyone has asked Neal Stephenson what he thinks of bitcoins?

[robc]

Infinity - the amount of time until the first bitcoin thread without a Cryptonomicon reference.

Okay, Ive been guilty of it too.

[Lurker Kurt]

Sorry, I must have missed the Cryptonomican/Snowcrash references in previous threads.

[Warren]

I'm a believer in Bitcoins. I trade in them on Mt. Gox and have made 50% ROI in two months.

I agree that if they become more accepted, the government will go after them. But I don't know that they have the power to stop it. Bitcoins can be anonymous but it takes care and vigilance. I will be very interested in how it shakes out.

Chuck Schumer has had a public conniption fit over Bitcoins being used to buy illegal drugs on The Silk Road website, where you can buy everything from Acid to Xanax in exchange for bitcoins. As of the time of this posting, it's still open for business.

[CaptainSmartass]

I trade in them on Mt. Gox and have made 50% ROI in two months.

I smell a bubble.

[phryxian houndmaster]

I also trade there, having made just under 40% in about one month. (more than enough to cover all those magic cards I used to buy)

The price is approximately 20% lower today than during my first purchase. My point is that volatility can be utilized to make large gains even as the price falls. An uncommonly high ROI in a short timespan is not by itself an indicator of a bubble.

I'm not claiming a bubble doesn't exist. Just that the line you've used as your evidence is not really evidence of anything at all, at least not without a more thorough explanation of Warren's trading.

[Warren]

Right. I've made money on the way up and on the way back down.

I don't know if they'll succeed or not. But I believe in them as an alternative to the FED in a way I never bought Liberty Dollars.

[Franco]

A new site just opened up that allows short selling of bitcoins which should help stabilize prices.

Anyways, with such a small set amount of a bc, I'd be worried by any stretch of time where the price didn't go up. It means the experiment is failing by not attracting more people.

[Mainer]

My old man's an anthropologist...
http://www.youtube.com/watch?v=iFVrtjUmz7c

[yonemoto]

Beautifully worded. Thank you for this. I only wish I had gone in when a programmer friend, excited about bitcoins, suggested I jump in at ~.20c/btc

[Edgar Bluebottle]

Bitcoins have no value or use outside of people's acceptance of it as a currency, essentially making it something like a fiat currency. Bitcoins aren't backed by anything other than people's trust. You can't just make currency that is only good at being currency. To quote the mises.org wiki, a currency "must first have originated as a directly serviceable good before it could become an indirectly serviceable good", such as the historical example of gold. The only reason the government gets away with it is because they force us to use their dollars. USD have a use outside of being a currency and that use is paying taxes. Bitcoins have no use other than being a currency, meaning it's just a bubble waiting to pop.

I understand the excitement of a potentially viable currency that has no central banking or goverment intervention, but central banks and goverment regulations are not the only things that can make a currency bad.

http://wiki.mises.org/wiki/Bit.....ic_aspects

[Marcel Dubois]

Yeah, it's used as a currency, therefore, bubble will pop. That is so automatic. And it could not be used for projects and businesses. Nah. It's "only" a currency.

[leviramsey]

While I think the Austrians got monetary theory more right than anyone else, the insistence that a currency has to be a directly serviceable good is confusing a consistent pre-condition in the past for a requirement in the future (focusing on something becoming money based on it being a medium of exchange as opposed to a medium of storing value is a quibble I have with Menger... given the ease with which modern communication technology etc. allows for conversion between assets medium of exchange isn't really important anymore). I don't see any reason why the initial value derived from being directly serviceable can't be derived from the probability that it becomes a standard.

http://unqualified-reservation.....ation.html