EC Why Marc Andreessen Is All Wrong About Bitcoin...

The same is true of bitcoins. Anyone who has access to the computer system who stores those coins has access to steal them. For a scenario like Target, whose unfortunate hack resulted in personal information and credit card numbers being released, having used bitcoins would have been far less inconvenient for its customers, yes, but potentially devastating for the company.

With credit card processing, the damage to be done could potentially carry on for years. But, it can also be reversed. Companies can work together to change credit card numbers, alert victims, and mitigate the repercussions. When something does slip through the cracks, the credit providers take on an instrumental role in insuring customers against that fraud.

Had hackers gained access to the stash of bitcoins that Target had amassed in its payment system instead of credit card info, they'd have walked away with an unbelievable sum. And those coins could then be freely spent or transferred globally without recourse. Target's next earnings call would be rough if it had to announce that instead of losing credit card data that can be changed, the company was robbed of the $700 million in cash it had on hand.

The only way to protect against something like this would be for government to gain access to and monitor all Bitcoin block chains, so that authorities would know which transactions passed through Target. Those could then be designated as stolen property, allowing them to be forcibly clawed back and returned to the retailer, or simply seized. But if government inserted itself or the banks as central intermediaries—as would be necessary to carry out such surveillance—much or all of the advantages of Bitcoin would be lost.

Think about the implications for individuals, too. Anyone who's ever had a virus on his or her computer knows just how easily this can happen. Millions more computers around the world have Trojans and other malware, and their owners and/or users have no idea that's the case. Imagine the feeding frenzy if computers like these were used to store bitcoins.

Which is why, of course, most people would choose to store their digital coins with a storage vendor. Already, numerous online wallets for Bitcoin have been hacked, with millions in coins stolen. And that's in a time when bitcoins are hardly used. Do you think that when banks step in we'll be safer? Just pay attention to the headlines and you'll see that the world's largest payment processors, banks, governments, hospitals, retailers, and more have all been hacked.

The current payment system works because once one party discovers a breach, the world can work together to contain the damage. Start relying heavily on bitcoin as a form of cash, and that disappears. The world becomes much more akin to the Wild West, with the digital equivalent of safe crackers and train robbers, secure in the knowledge that once stolen, their spoils can be spent anywhere.

That is, of course, unless the government and banks get involved in order to funnel transactions through trusted intermediaries, who are held to account by the threat of civil and criminal prosecution.

Andreessen then moves on to paint a picture where Bitcoin saves newspapers:

"All of a sudden, with Bitcoin, there is an economically viable way to charge arbitrarily small amounts of money per article, or per section, or per hour, or per video play, or per archive access, or per news alert."

And stops spam:

"Future email systems and social networks could refuse to accept incoming messages unless they were accompanied with tiny amounts of Bitcoin—tiny enough to not matter to the sender, but large enough to deter spammers, who today can send uncounted billions of spam messages for free with impunity."

Who doesn't want those things? Part of the reason that dozens and dozens and dozens of micropayment startups have failed was not for lack of technology, but because neither consumers nor businesses like being literally nickeled and dimed.

For businesses, the subscription model works much better because they can borrow against predictable revenues. As for spam, if the amount required to send a legitimate email is inconsequential, then so is the cost to send spam. These companies continue to email—in spite of having to pay designers, developers, electricity, hosting, bandwidth, and many other not-so-nominal charges—because spam works. We continue to buy the products they hawk, and so they can't afford not to email. It's not free… not even close. But if the amount is nominal enough to not affect a legitimate mailer, it's nominal enough not to matter to a spammer.

In fact, that already exists with companies like ReturnPath, which offer advertisers guaranteed trips to the inbox for a fee and follow a few simple rules—a cost no spammer can pay, but thousands of big companies are happy to bear.

The non-solutions jump into high gear when Andreessen moves from social commerce to social revolution, painting a happy picture of societal change fomented by mass media. Not only will Bitcoins help reduce transaction fees, it will stoke social development around the world by supporting cultural movements:

"Today protesters want to get on TV so people learn about their cause. Tomorrow they'll want to get on TV because that's how they'll raise money, by literally holding up signs that let people anywhere in the world who sympathize with them send them money on the spot."

Andreessen holds that this is a real revolution waiting to happen, and uses as an example someone who held up a sign at a football game asking people to send bitcoins and made $25,000 on the novelty. This same parlor trick has been in use for years. The back pages of Popular Science have carried little "mail me a dollar" ads for decades. Someone once sold every pixel on a web page for $1 each and made much more than the football guy. But just because it's possible when it's novel and silly doesn't mean it will take off as a new form of commerce.

Plus, the protestor example is completely possible today. Has been for many years. As it is, protestors could easily hold up a sign with their PayPal email address (much easier than a QR code to deal with) and accept donations from around the world, transferred fee-free from bank accounts globally.

The problem is that no matter how much money a protestor in Jordan or Egypt gets, that money is only as good as the ability to withdraw or spend it.

A bucket full of bitcoins is as worthless to a group of protestors as a PayPal account is. Sure, for the WWF or PETA, it works fine. But when it comes to real social change—those without the infrastructure to solicit and collect—then banks will be used in that conflict… without the ability to turn those bits into shipments of posters or guns. If your local government has labeled you a terrorist, good luck getting that money out of the bank in local currency—unless you want to turn to the black market. That's the one area where Bitcoin is better than PayPal for this purpose, when you want to fund someone that a government would prefer you didn't.

What happens when that group of protestors ends up being branded a terrorist organization by the government of your home country? Many of the groups leading the riots in Egypt have since been revealed as linked to prominent terror groups. In the US at least, funding such an organization is a crime, like it or not.

For this scenario, Bitcoin does little but create a dark-alley alternative to many other options that already exist.

That's OK though, because in addition to its support of social upheaval, Bitcoin will bring untold millions into a banking system currently out of their reach:

View single page >> |
How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Lennie 3 years ago Member's comment

There is one thing you did not understand about Bitcoin and cryptocurrencies, which is that they are protocols which can be used to build other things on and much more flexible than the current systems. Bitcoin is like the Internet without the Web, still in it's infancy. It will take at least a couple of years for it to reach that next step.