Bad Arguments for the Permanence of Bitcoin
I will argue that Bitcoin has no future. I will do that by rebutting various elements of a rather poor article arguing that Bitcoin will be around forever. It appeared here:
The random banker bashing in the headline might give you an initial suspicion about who is likely to be right here.
The first rhetorical question the article asks is “Would Jamie Dimon really sack traders who netted a 1,000% return in less than two years? The bank’s shareholders wouldn’t approve”
The answer to this is definitely yes. Return alone is an inadequate assessment of trader performance. We must look at risk-adjusted return. A guaranteed 10% return is better than anything lower than a 50% chance of 20%. If the trader made his 1000% by betting on a single horse, he took an enormous risk to make his 1000%. The shareholders would certainly approve of Dimon sacking such a trader and in fact would demand it.
Bitcoin Has No Future: Standard “Fake News” Accusation
Next is a ‘fake news’ type criticism aiming to show that Dimon is biased. He writes “Although JP Morgan was by no means the most leveraged of the banks, it still took bailout money, and, as its CEO, Dimon and bitcoin will inevitably be philosophically opposed.”
These claims don’t stack up. Firstly, JP received a bail out post-crisis (fine). Secondly, Bitcoin is a response to this crisis. I doubt it, but let’s accept this. Thirdly, JP oppose all crisis responses. Conclusion: JP opposes Bitcoin forever. Premise Three is obviously false. It has no defences.
The next section of the article accuses Dimon of not understanding Bitcoin because he says it is a fraud. The author then admits that the main uses of Bitcoin are for fraudulent and criminal purposes but it is not itself a fraud. This is parallel to those arguments against gun control which say that guns don’t kill people, people do. This is another obviously stupid argument.
The Weakest Point of the Argument
I will close by criticising a remarkable paragraph which packs in a lot of errors and bad arguments.
“Dimon declares that we will use the technology – blockchain technology – but that bitcoin will be shut down. That’s like saying we will use football pitches, but football players will be banned. One comes with the other. In any case, you can’t just shut bitcoin down. It’s a decentralised, distributed network. That’s the whole point of its design. There is no central point of failure.”Frisby
Objections to the Football Analogy
This is very strange. Take the football analogy first. There are two major problems with it. As a parallel, it may or may not work. Assume it works. Let’s be generous.
There are alternative uses for football pitches. Other sports exists. They became holding centres post-Katrina. Other uses are possible. We could land helicopters on them. So even if Bitcoin ls like playing football and the blockchain is like a football pitch, we can do other things with football pitches and we could do other things with the blockchain. Strikingly in fact, this is where much of the excitement exists. There are many potential extremely useful applications of a distributed ledger technology such as property registers and shareholder transaction records. These would be interesting because they would be highly transparent and resistant to corruption and bureaucratic sloth.
Bitcoin Has No Future: You Can Have a Blockchain Without Bitcoin
The claim that you can’t have a blockchain without bitcoin is false. You do need to pay the miners. But you could pay them dollars. Moreover, that argument needs the blockchain to be useful. That is possible but the jury is still out. So that argument does not work against the claim that Bitcoin has no future.
The second argument in here is equally poor. It claims Bitcoin is impossible to shut down because it is decentralised. What this means is that you cannot shut down the servers behind Bitcoin because they are decentralised. But that isn’t what Dimon says. He says that “There will be no currency that gets around government controls.” What if governments made Bitcoin possession and use illegal and banned its use in any transactions? They could do that and then what Dimon has pointed out is true. But no-one has to go around shutting down distributed servers.
I conclude that the author has done nothing to show that Dimon is wrong. So we can be clear that Bitcoin has no future.