Amazon’s new “Coins” are gimmicky, said panelists in a session on the economics of Bitcoin at the Bitcoin 2013 conference in San Jose on Saturday. And companies issue their own currency simply as a ploy to hold onto customers’ unspent value, they said.
Panelists also discussed such issues as taxation and academia’s low interest in Bitcoin.
Governments will pay more attention to Bitcoin as time goes on, predicted Yoni Assia, CEO of the social investment network eToro.
“Governments won’t give up taxation so easily,” Assia said. He expects that citizens will have to report purchases and sale of bitcoins. He added that we’ll eventually see Facebook apps that show bitcoin transactions, which will make usage of the digital currency transparent for regulators.
In addition to Assia, panelists included Tuur Demeester, who writes the financial newsletter MacroTrends; Peter Surda, a software developer who runs the blog Economics of Bitcoin; and Garrick Hileman, an academic who researches parallel and alternative currencies and is finishing his PhD at the London School of Economics.
Following are some highlights of Saturday’s panel discussion:
Q. Moderator: Is Bitcoin a currency or commodity?
A. Demeester: Both.
Surda: I would say it is a liquid commodity and … I would avoid the word currency.
Q. Moderator: Why has Bitcoin not been more interesting to the academic world?
A. Hileman: They’re starting to get more attention. (A few more Bitcoin-focused publications are coming out, Hileman noted.) A lot of academics are very skeptical of Bitcoin. I don’t know if that’s based on the blinders that economists often have to things that are outside their worldview … The Bitcoin narrative is so important to whether Bitcoin’s going to take off or not. There’s a narrative problem right now in the public eye with Bitcoin and that’s one of the big challenges.
Q. Audience member: It only takes one guy to ruin a great party. We have a great thing going with Bitcoin and I think the potential is limitless but there is a tremendous risk (of a ) nation-state attack. If you had an authoritarian nation-state with a lot of technological capacity (like China) who says, “We don’t like this,” and launch a 51 percent attack, how would that be resolved?
A. Assia: I think it’s a domino effect. The Bitcoin community is a huge community of financial hackers. They will identify very fast, an attack like this. Even if a small country comes in and starts doing mining on an institutional government level, other countries are going to say, “We”re not going to let Israel or Ireland dominate the mining … (The same thing could happen with corporations, Assia added.) Once somebody starts that, it’ll just make mining and the hashing much more difficult … If that starts, Bitcoin will fly to the thousands (in value) very fast. It will just legitimize it.
Demeester: If this is what war is like in the future, I would sign up for that immediately.
Hileman: The real question is why this hasn’t happened already.
Surda: Let’s say that this happens and it fails … That would be a huge boost … The attacker needs to be sure that they can win, and if you have more money (it) does not ensure that you will win.