The exchange rate for bitcoin is madly swinging from the absurd to the incomprehensible. It’s a classic market bubble that doesn’t do justice to the actual promise of blockchain technology.

Its price increase is solely the result of supply/demand, just as it was for skyrocketing values for tulips and South Sea stocks. I’d bet that few people truly understand the complexities of how to buy and hold bitcoin, let alone how it’s “mined,” so insiders are in the best position to profit (again, just like in bubbles of the past).

Operators like the Winklevoi have hoarded bitcoin, perhaps not as boldly as the Hunt Brothers tried to do with silver in 1980, but no less inspired by insights into the foibles of human nature, not its better angels.

Also, the price bubble violates the basic premise of cryptocrurrency, which is that it has no inherent value beyond the community that recognizes and uses it for transactions. Converting bitcoin to dollars or any other fiat currency pollutes its valuation with all of the externalities (and manipulations) it’s intended to avoid.

Bitcoin isn’t supposed to be just another currency, but rather a new tool for commerce that makes those other currencies obsolete.

Enter the blockchain…

Read the entire essay at Medium

Categories: InnovationEssays