Let's clarify a common misconception about Bitcoin adoption...

Click Here To Go To This Conversation On Reddit

Bitcoin had the cover story in the LA Times US newspaper today (awesome!). While the article was well-written and indeed clearly positive about Bitcoin, there was a misconception which is quite widespread among spectators and critics of Bitcoin.

Quote:

"But over the last four years, the currency has been elbowing its way from the digital ether into popular use — simply because people, companies and organizations have decided to believe that it has value as a currency."

No no no! This is wrong.

How it should be written instead:

"But over the last four years, the currency has been elbowing its way from the digital ether into popular use — simply because people, companies and organizations have realized that it is useful as a payment system. This, in turn, gives the currency units their value."

See the difference? Bitcoin currency units are not valuable "because people just start believing in them." Because that begs the question, WHY do people start believing in Bitcoin money instead of anything else as money? You can't explain Bitcoin by stating that it's just magically receiving spontaneous faith. That doesn't explain anything.

Bitcoin is earning trust and understanding (I use those words instead of "faith," which is more appropriate for religion and fiat currencies) because the payment network itself is superior. Due to this, and due to the fact that the currency units have excellent monetary properties, the currency units are thereby valuable.

Stated differently, "belief" in Bitcoin comes not from spontaneous faith, but from the properties of the system. It is superior. Just as cars were superior to horses and thus earned adoption over time, so too is Bitcoin superior to fiat and banks, and so too shall it win.

What the LA Times is observing is not just people switching financial cathedrals, based on naive arbitrary allegiance, but in fact the process of market competition applied to money. The outcome is foreseeable (and, incidentally, this is why a bitcoin will always trade at a premium to its current "use value" today).

Submitted December 10, 2013 at 02:36PM by evoorhees