Gavin Andresen, the lead scientist for the Bitcoin Foundation (and one of its only two staff members) sat down with a few of us at the UMass Amherst Knowledge Commons meeting on Wednesday. Having read so much hype and misinformation about Bitcoin over the past few months, I was excited to have a chance to talk to someone directly connected with this brilliant experiment in algorithmic institution-building. Bitcoin is, of course, the digital currency that has been in the news a lot recently because of its surging value among traders – and its dramatic crash.
For months the dollar value of a Bitcoin fluctuated between $20 and $50….but in mid-March the conversation rate soared to around $250 before crashing last week to $140 and then $40 yesterday. (Today it was back up to $95.) This kind of stuff is catnip to the mainstream press, which otherwise doesn’t know much or care much about Bitcoin.David Bollier's Blog

Andresen, a self-described geek in his forties with a pleasant manner and trim haircut, strolled into the small conference room in his black rugby shirt and jeans. Six of us proceeded to have a wide-ranging, fascinating chat about the functional aspects of Bitcoin, the political and social values embedded in its design, and some of the operational challenges of making Bitcoin a new kind of universal currency.
A Visit with the Bitcoin Foundation’s Top Scientist
David Bollier
8 comments:
I'm going to be on a radio show next week. In inviting me on, the host asked me, "Can you explain to our listeners what a bitcoin is?"
Boy am I looking forward to this one.
I dare you to bring up your phrase "cubical denizens dominating their virtual worlds just like the wizards in the computer games they play" or whatever that was a while back Dan....
;)
Matt, I will try to get across the fact that features of the algorithm that bitcoin enthusiasts find impressive don't make much sense from an economic point of view: for example a permanent cap on the number of bitcoins that can be mined.
"I will try to get across the fact that features of the algorithm that bitcoin enthusiasts find impressive don't make much sense from an economic point of view: for example a permanent cap on the number of bitcoins that can be mined."
Yes. The ultimate cap on Bitcoin supply seems deflationary by nature.... much more so than gold which increases in supply by about 2% per year.
Bitcoin is designed as a black market currency for LIbertarians who prefer to hold a store of value the value of which is increasing due to scarcity. Since the purpose is as a store of value, much of the base is saved at all times, reducing availability as a medium of exchange. As a medium of exchange demand is created for it due to anonymity, which has value in trading contraband and for tax avoidance.
These advantages are offset by the obvious fact that a goal of the currency is to undercut state currencies. The clear challenge is to the state. Expect the state to respond at some point by declaring users to be criminals and even enemies of the state if they do not conform to transparency requirements imposed by the state. Frankly, I would not touch this stuff.
10-4 Dan I just thought your one-liner there was pretty funny... ;)
Ed & Tom's comments here wrt the inherent deflationary characteristics are revealing also...
Good luck on the show not that you'll need it...
rsp,
"Bitcoin is designed as a black market currency for LIbertarians who prefer to hold a store of value the value of which is increasing due to scarcity."
You mean MMTrs and Keynesians in general are barred from purchasing Bitcoins? That doesn't seem fair to me. How do the Bitcoin administrators know if you're a Libertarian, a MMTr or a some garden variety monetarist? Is there some kind of litmus test one must take?
Very few people outside those with a black market need for anonymity or the desire to save in a deflationary medium to avoid monetary inflation would ordinarily be attracted to something like Bitcoin other than as a speculative vehicle. It's attraction as a unit of account is zero other than in the black market were contraband is priced in it, and it's usefulness as a medium of exchange is limited to those who need anonymity. Otherwise the transaction cost doesn't justify it other than for miners who have done the analysis and found that the investment in capital and time is worth the investment. There are also probably some geeks that pursue it as a hobby — a game that pays — even though they don't really know what the break even is.
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