Bitcoins: The future of money?

Summary:The FBI's shutdown of Silk Road rekindles discussion about the prospects for that site's preferred currency.

Robin Harris

Robin Harris

Yes

or

No

Michael Krigsman

Michael Krigsman

Best Argument: Yes

77%
23%

Audience Favored: Yes (77%)

The moderator has delivered a final verdict.

Opening Statements

Freedom-loving people will embrace it

Robin Harris: The US banking system has become an extension of the NSA and the surveillance state. We need a currency that allows citizens to keep their private affairs private. Bitcoin is such a currency and freedom loving people should and will embrace it.

But Bitcoins - or something like it - are the future because it is already the present. Most transactions in America are already bits moved around a network, not physical currency.

These bits are denominated in dollars but there is no reason they have to be. America has a national currency because laws made it so. And any law can be changed.

Even if we keep the dollar, individuals and businesses can agree to acccept other currencies, as many already accept Bitcoin. Internet-based disintermediation has hit virtually every industry. Money is next.

Will become a niche financial services product

Michael Krigsman: Bitcoin’s appeal lies in being anonymous, untraceable, and unregulated. These attributes give the virtual currency appeal to a broad spectrum to constituents – speculators and investors, entrepreneurs, and the criminal underworld including drug traffickers, terrorists, and anyone wanting to circumvent currency or tax regulations.

Recent events such as the shutdown of Bitcoin marketplace Silk Road, where anyone could purchase drugs, guns, and even hire a contract killer, demonstrate the government’s serious position on regulating Bitcoin. At the same time, financial regulators have taken steps to pull Bitcoin toward compliance with currency laws.

Once speculation subsides and financial laws are in place, Bitcoin will survive as a niche source of barter, purchase, and exchange. Just as credit card transactions are tracked and reported, without anonymity, Bitcoin will eventually be brought into the mainstream.

Bitcoin’s long-term future is being a regulated financial instrument that serves certain purposes; in other words, once the dust settles, Bitcoin will become a niche financial services product. Is Bitcoin the future of money? Not a chance.

The Rebuttal

  • Great Debate Moderator

    Are you ready?

    Welcome to this week's debate between Robin Harris and Michael Krigsman over the future of Bitcoins. Good luck gentlement, may the best man win.

    Posted by Andrew Nusca

    I'm all set

    Let the debate begin.

    Robin Harris

    I am for Yes

    All set

    Robin, prepare to lose.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    What's in your wallet?

    Why are people gravitating toward Bitcoin? Is it just a post-recession fad? (Are we in a Bitcoin bubble?)

    Posted by Andrew Nusca

    Worldwide currency

    There are real economic reasons for people to use Bitcoins on the web. Chief among them is the fact that there are no credit card fees and, for merchants, no chargebacks. All sales are final with Bitcoins.

    But there are other reasons too. Anonymity. Freedom from transactional surveillance. Ease of transnational sales. The web has reduced transactional friction across dozens of industries. If we are going to have a World Wide Web, shouldn't we have a worldwide currency?

    Robin Harris

    I am for Yes

    Blank stares

    Although the number of Bitcoins has grown, it is an exaggeration to say that many people have gravitated toward this virtual currency. Ask the average person on the street about Bitcoin and you will be see lots of blank stares because it is not a mainstream phenomenon.

    Still, for the geeks and techies who know about Bitcoin, there is an allure for several reasons:

    •    The coins can be “mined,” or discovered, for free using computers and math. There is nothing like the allure of free money to attract interest.
    •    As Bitcoins gain popularity, volatility and spikes in value mean that some speculators may earn quick returns. Of course, the nature of transactions means that others may lose just as much.
    •    Because Bitcoin does not rely on centralized authorities for administration, it appeals, philosophically, to a certain segment of society.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Disruptive technology

    Bitcoin is considered a disruptive innovation. Do monetary systems really need to be disrupted?

    Posted by Andrew Nusca

    Only one possible answer - Yes

    After the great recession, where trillions of dollars of asset value were vaporized by greedy self-serving bankers - and none have gone to prison for it - what other than yes can any thinking person answer? Bitcoin is not a perfect answer to this problem, but it does provide another answer for people whose governments, elites or economies are hell-bent on wealth destruction rather than wealth creation.

    Robin Harris

    I am for Yes

    No: It's uncontrollable

    The global economy is a mess, so perhaps it is time for the monetary system to face innovation, disruption, and change. However, does anyone seriously think Bitcoin is the solution to our economic difficulties?

    Bitcoin is a currency, or medium of exchange, that lets buyers and sellers exchange goods and services without using cash issued by the government. By sidestepping government controls the currency is suited to those who seeks anonymity whether to avoid taxes, engage in illegal activities, or avoid being tracked for any reason.

    Although Bitcoin may be innovative and disruptive, central banks will not simply relinquish control over money and monetary policy. That just ain’t gonna happen.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Benefits

    What has Bitcoin brought to the table that's beneficial to the overall monetary system? (What are the "features"?)

    Posted by Andrew Nusca

    Free markets

    Reduced transaction costs. Global acceptance. Free markets.

    Robin Harris

    I am for Yes

    No regulations

    Bitcoin has appeal as an efficient and private means of exchange that is completely unregulated by any government. Value is set purely in relation to supply and demand without third-party knowledge, fees, or external interference. As a peer-to-peer currency, Bitcoin is a great leveler of pure value and speculation.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Bugs

    What has Bitcoin brought to the table that's detrimental to the overall monetary system? (What are the "bugs"?)

    Posted by Andrew Nusca

    Invisibility

    That depends on where you sit. If you are a government the fact that your citizens can move money invisibly and without regulation can be scary. But if you are a citizen that's a feature not a bug.

    Law-enforcement professionals also don't like the freedom that Bitcoin provides individuals to operate globally and anonymously. But again, if you are not in law-enforcement, this is a feature not a bug.

    Robin Harris

    I am for Yes

    It's perfect for criminals

    Bitcoin represents the spirit of libertarianism – free, unfettered, and uncontrolled. However, the same attributes that make Bitcoin attractive to those with anti-government philosophies also make it a perfect currency for illegal transactions. Untraceable, untrackable, and without physical existence, Bitcoin is the ideal means to buy drugs, move illegal cash across borders, fund terrorism, and stash ill-gotten gains without government interference.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    FBI's SilkRoad route

    Bitcoin has been positioned as an alternative to conventional currency because it doesn't rely on trust in banks or the government to succeed. How does the U.S. FBI's shutdown of the Silk Road website impact that mission?

    Posted by Andrew Nusca

    Bitcoin drug dealers

    Bitcoin is a medium of exchange. Silk Road was a marketplace. The relationship of Silk Road to Bitcoin is like the relationship of Lehman Brothers to the US dollar. The collapse of Lehman Brothers has almost nothing to do with the value of US currency as a medium of exchange or a store of value.

    This is really two questions. Does it make sense to have a nongovernmental currency? Was Silk Road a good thing or a bad thing?

    A well-managed and widely accepted national currency has some real advantages. Stable value. Easy convertibility.

    But many currencies are poorly managed. Hyper inflation in Zimbabwe. Currency revaluation in Argentina. The Euro crisis. National currencies are subject to all kinds of pressures both economic and political. Even the US dollar has sustained wide swings in value over the years.

    Bitcoin has had even wider swings in value and is still in its adolescent stage. But the teething pains of the nongovernmental currency should not blind us to the benefits it would give us.

    As for the demise of the Silk Road marketplace, do we really believe our cities are better off when people buy their drugs from heavily armed teenage gangsters on the streets - or through the mail? Give me the mailman any day.

    Robin Harris

    I am for Yes

    There's a new sheriff in town

    Conventional currency works precisely because we trust that it is reliable, ubiquitous, and relatively stable. Without government backing, Bitcoin is subject is to wild swings in valuation based on speculation and greed. A quick look at the Bitcoin valuation chart shows this volatility.

    The shutdown of Silk Road, combined with recent regulations from the Financial Crimes Enforcement Network ("FinCEN") make the government’s intent clear: the days of Bitcoin as an unregulated source of exchange are over. Although Bitcoin will retain utility as an efficient currency transfer mechanism, the days of Wild West freedom operating outside the law are over.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    No controls

    Though the Internet is, conceptually, independent, much of it relies on infrastructure controlled by governments, telecom companies and other organizations. Can Bitcoin really succeed if the Internet is governed like it is?

    Posted by Andrew Nusca

    Out of pocket

    Succeed at what? Enabling every form of illicit commerce in the world? Or help average citizens with a private and easily transportable currency that is not under government control or surveillance? Money is a tool not a marketplace. How marketplaces evolve in relation to a nongovernmental web-based currency remains to be seen.

    Robin Harris

    I am for Yes

    Contols are inevitable

    The government has not yet cracked Bitcoin encryption, so for now transactions details are safe from prying eyes. Although we suspect the government has access to all Internet traffic, Bitcoin encryption remains uncracked to date.

    However, whether the government, or anyone else, cracks the Bitcoin encryption is beside the point. Bitcoin requires government support to become anything more than niche plaything for geeks and a means for criminals to avoid detection. Eventually, the government will regulate Bitcoin – that is inevitable and will happen sooner than later.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Learning curve

    What have we learned from other virtual currency experiments, such as Facebook's credits, Tencent's QQ "Q coins," etc?

    Posted by Andrew Nusca

    Trusting souls

    Currencies are hard. Fiat currencies – the most common kind today – are simply social constructs based on trust. They have no inherent value. And trust can be ephemeral.
    Creating a currency that can have reasonably stable value, is hard to counterfeit, is trusted enough to be widely accepted, and is not subject to global surveillance by the NSA, is difficult. The surprise is not that it has taken this long, the surprise is that Bitcoin has done this so well.

    Robin Harris

    I am for Yes

    Narrow roads

    Private currencies, from S&H Green Stamps to Facebook credits, typically serve a narrow purpose that supports a particular commercial endeavor. Bitcoin is different because it is globally distributed and its value lies outside the control of any specific person or entity. For this reason, it is difficult to compare Facebook credits to Bitcoin, except to say that anyone trying to fight centralized government control over currency is wasting their time.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    On the edge

    Bitcoin is, by design, built entirely on speculation, and its huge fluctuations have demonstrated that. Liquidity is also not guaranteed. What ramifications does this dynamic have for the global economy?

    Posted by Andrew Nusca

    Brings more stability

    Bitcoin is not based on speculation. Bitcoins are created through a compute and energy intensive process known as mining. This emulates, perhaps unwisely, aspects of commodity-based currencies such as gold and silver coins.

    The swings in value are due to changes in demand and probably manipulation. But any commodity market - and money is a commodity - is subject to manipulation, as the recent energy trading and LIBOR scandals remind us.

    Bottom line: Bitcoin presents a lower risk profile than currencies subject to political meddling.

    Right now, the trading volume of Bitcoin is nearly imperceptible compared to the overall global currency market. If millions of people join the fray, the value of Bitcoin would soar. Is Bitcoin scalable?

    Robin Harris

    I am for Yes

    The price is not right

    How popular can a currency become when the price is wildly volatile and liquidity is not guaranteed? Imagine going to the store with prices changing by the minute. Then, you go to the ATM for cash but there is none available because the banks have all run out of money. Even worse, the banks have no idea when they can again issue cash, despite their promises to the contrary.

    That scenario describes what would happen if Bitcoin were our currency today. Not very appealing, is it?

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Growth potential

    Right now, the trading volume of Bitcoin is nearly imperceptible compared to the overall global currency market. If millions of people join the fray, the value of Bitcoin would soar. Is Bitcoin scalable?

    Posted by Andrew Nusca

    Flexible demand

    Scale changes everything. It isn't clear that the finite supply of Bitcoins is the long term best model. As the US Fed has demonstrated by tripling the money supply in the last 5 years - without inflation - sometimes rapid growth in the money supply is helpful. But Bitcoin is a long way from having that particular problem.

    In any case Bitcoins can be split into very small pieces. So if demand and value rise, people will buy smaller pieces - of which there will be many billions.

    Robin Harris

    I am for Yes

    Do the math

    Bitcoin as a mathematical concept is scalable but the infrastructure is not currently in place to make that scale possible. However, although Bitcoin exchange platforms today are not built to the robust standards required for mass adoption, with continued investment and infrastructure development they will become scalable. However, the issue of software platform robustness is completely beside the point, because scalability is purely a function of investment and time.

    The real issue is how long it takes the government to regulate the life out of Bitcoin as we know it; that time is coming soon.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Failure is an option

    If Bitcoin fails, what have we learned?

    Posted by Andrew Nusca

    The idea won't die

    Bitcoin has already succeeded in showing the world the advantages of a universal nongovernmental currency. Which is what frightens governments today.

    And what would Bitcoin failure look like? Barring the governmental takeover and destruction of the Bitcoin infrastructure, Bitcoin will most likely see slowly declining value as demand drops and the number of vendors accepting it declines.

    The real question is: can we do better than Bitcoin today? I suspect we can. But the genie is out of the bottle.  Enough savvy and affluent people see the advantages of a nongovernmental currency so this idea that will not die.

    Robin Harris

    I am for Yes

    Geeks, speculators and criminals

    Bitcoin teaches us there is no future in trying to avoid government regulation over basic societal functions like money. Although the financial status quo may evolve over time, fundamental change will not arise merely because geeks, speculators, and criminals think it is a good idea.

    Michael Krigsman

    I am for No

  • Great Debate Moderator

    Thanks

    We hope you enjoyed this week's debate and look forward to the closing arguments on Wednesday and my verdict which will be posted on Thursday. Robin and Michael did a great job and I hope have given you an idea of what Bitcoins really are. Please add your comments and don't forget to vote. See you next week.

    Posted by Andrew Nusca

Closing Statements

Web currencies won't go away

Robin Harris

Mr. Krigsman's argument comes down to the government will crush web currencies because that's what governments do. Like they've crushed prostitution and recreational drugs? Like they (haven't) regulated the shadow banking system

Money is a tool, and like any tool it can be used for good and nefarious purposes. You can buy a pizza with Bitcoin - and why not?

It would be better if Bitcoin were accepted as an alternative currency by most national governments - but it isn't necessary. Money today is a medium of exchange and, to a lesser extent, a store of value.

If citizens choose to accept Bitcoin, it's a medium of exchange. And the wider its use, the less easy it is to manipulate its value.

National currencies are recent. The US Federal Reserve Bank is only 100 years old. Dollar gold convertability ended in 1971 and we've had floating exchange rates - no fixed values - ever since.

Bitcoin – or something like it – only requires a cloud-based infrastructure and individuals who choose to use it. The globalization of the economy and the desire of citizens to put their wealth to whatever private purposes they please are driving Bitcoin. Those trends aren't going away - and neither will web currencies.

Not a viable currency

Michael Krigsman

My worthy debate opponent believes that Bitcoin is a savior of freedom and will protect the American people from snooping by Big Brother and the NSA.

Friends, this view is simply wrong.

The question we must ask is simple – is Bitcoin a practical and viable replacement for US currency? The answer to this question is a resounding NO. Our entire economic system rests on the principle of trust and faith in the shared currency we call the dollar.

Today’s vote is not a referendum on privacy nor a statement of belief that the NSA snoops on all communications. The debate only answers whether you think Bitcoin can become a national currency.

I beg you, vote NO to send a message that false arguments cannot be allowed to win this serious and reasoned debate.

Digital currency could win the day

Andrew Nusca

While both gentlemen gave truly spirited arguments, I've got to hand this one to Robin Harris. He backed his claims with a more reasoned, inclusive response and underscored the fact that while Bitcoin itself may not be the future of money, a digital currency like it could win the day. Today, Mr. Harris did just that. Well done.

Topics: Great Debate

About

Andrew Nusca is a former writer-editor for ZDNet and contributor to CNET. He is also the former editor of SmartPlanet, ZDNet's sister site about innovation. He writes about business, technology and design now but used to cover finance, fashion and culture. He was an intern at Money, Men's Vogue, Popular Mechanics and the New York Daily Ne... Full Bio

zdnet_core.socialButton.googleLabel Contact Disclosure

Kick off your day with ZDNet's daily email newsletter. It's the freshest tech news and opinion, served hot. Get it.

Related Stories

The best of ZDNet, delivered

You have been successfully signed up. To sign up for more newsletters or to manage your account, visit the Newsletter Subscription Center.
Subscription failed.