Decentralised virtual currencies like Bitcoin Could replace traditional forms of money! + Could a patent lawsuit take down Bitcoin exchanges?

City A.M.:

YES

Max Keiser

There is definitely a place for currencies like Bitcoin. And it is likely that, over the next ten years, we will see more currencies – operating independent of central banks – competing with traditional money. Bitcoin is an example of Thiers’s Law: good money pushing out bad. And by bad money, I mean currencies like the yen, euro, dollar and sterling. There seems to be no limit to the amount of these currencies that central banks will print. As a result, purchasing power has been collapsing – wages aren’t keeping up with the inflation caused by monetary easing. Bitcoin’s rise simply shows that people want a currency that preserves purchasing power. And as far as I can see, gold, silver and Bitcoins are the only viable means available that can promise to do exactly that. It was Aristotle that said money should be durable, portable, fungible, and have intrinsic value. Bitcoin ticks all of these boxes. Max Keiser is the host of the Keiser Report. 

No

Charles Cohen

Digital currencies like Bitcoin are a fad. Some have said Bitcoin is like mining gold – but they aren’t making gold any more.
“Mining” Bitcoins simply requires a vast amount of computational power. Moore’s law states that computational power doubles every two years, and this implies that there is an inherent deflationary problem in Bitcoins. It could go one of two ways: it will either remain difficult to mine Bitcoins. This constrains supply, and you get a speculative bubble – which is what you have at the moment. The alternative is that, in the long term, mining Bitcoins become so cheap that they will have no value. It is inevitable that the internet will challenge governments’ monopoly over currencies. But for any currency to be credible, it needs a monetary authority. By definition, Bitcoin is an anarchic concept that lacks this authority. Therefore, it is more like a digital commodity than a currency. Charles Cohen was founder of the Beenz e-currency.

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banzai7

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By Max Keiser: In a free market capitalist system ‘price signals’ are everything. Prices are determined by buyers and sellers, and these prices are broadcast from exchanges and then on to all corners of the economy - where they are used to transact business.

In a centrally-planned economy, prices are set by fiat and implemented in a ‘top down’ approach organized by a committee; rather than by bottoms-up, animal-spirits-driven, self-interested individuals.
Where free market capitalism has failed over the past few decades is in maintaining fair and equitable ‘price discovery’ on various exchanges to complement those animal spirits.
Instead of buyers and sellers coming together and letting the ‘invisible hand’ of self-interest determine prices, more and more we see the dead hand of a Wall St. monopolist market-rigging determine prices.
Evidence of how badly the situation has become can clearly be seen in how the price of the petro-dollar, the post-Bretton Woods, post-Nixon’s closing of the ‘gold window’ in 1971 price of oil has not been allowed to trade - NOT according to free market principles - but rather the dead-market interference of Wall St. and Washington insiders who profit mightily from this rent-seeking corruption.
Iraq, Iran and Libya all wanted to trade oil outside of the Saudi-American petro-dollar fixed pricing scheme and all paid dearly for it.

On a more personal note, in the 1990s I developed a technology and market for creating price-discovery for future box office results for movies. The entrenched monopoly in Hollywood made sure that never succeeded; breaking up the company and selling the technology to Wall St. where it is warehoused out of reach of any good it might have done establishing freer markets benefiting the public's interest.
The industry’s lobbyist, the MPAA, is known for aggressive tactics. At Aaron Swarz's funeral (the copyright freedom activist) his father pointed to Chris Dodd, the MPAA head, as the killer of his son - who hanged himself rather than face 30 years in prison (the term the MPAA was looking for) to ‘send a message.'
Note that when box-office futures were attempted again a few years back it was Chris Dodd, while in Congress (remember he now heads up the MPAA) who shot this initiative down in the Dodd-Frank bill.
InTrade in Ireland was looking to do something similar for politics with their 'prediction market’. It sent out ‘price signals’ about which candidates were actually winning and losing market share ahead of elections and this infuriated Washington’s corrupt insiders. When InTrade and other 'quants' sunk Mitt Romney’s chances to win the last presidential election, the powers that be had had enough. InTrade has been taken off line without much by way of explanation.
This brings me to Bitcoin and the exchanges that broadcast current prices for Bitcoin such as MtGox.
Success of Bitcoin would mean the demise of central banks, Wall St. and the Washington insiders who trade on inside information and market manipulation. So will we see these insiders try to do to the Bitcoin exchanges (the price discovery mechanism) what they did to similar challenges to the oil price fixing, Hollywood propaganda, and political market making? One would tend to think so.
My thought is that as Bitcoin and the exchanges become more prevalent we’ll see Wall St. and the central banks challenge the exchanges on intellectual property grounds. They will argue the technology for trading in virtual securities with a virtual currency is a patented technology owned by Wall St. and that virtual market making is violating this patent (US pat. no. 5950176).
So far the collateral damage has been high for anyone trying to combat the enemies of free markets in oil, entertainment and politics, but perhaps the sheer size of Bitcoin's global distributed network will prevail.
Let’s hope so. Let's hope Bitcoin does not become an intellectual property farce the way Monsanto claims to hold the patent rights on seeds or the way the drug industry claims to have the patent rights on various DNA.

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