My take: Yes, gold has value, but only as gold. You can’t really go buy $2 worth of gold. You can’t carry it around in large quantities. You can’t get it through a metal detector. You can’t travel well with it. If you lived in an unstable political area, would you sleep better at night knowing that you had you life savings under your bed in gold?
Bryne: “Bitcoin has all the advantages of gold, which I’m happy to hear that you admire, has all the advantages of gold plus one. You can beam it across the universe.”
Tett: “I started off as a war reporter. If you are in a war zone, if you are in that kind of stress situation, you don’t want to start fiddling around with a computer. If the computers collapse and suddenly you’re left high and dry, you want to get a bag of gold or emeralds and sew them into your clothes, and run, O.K.?
So, my key point is this: I hear what you’re saying about the shortcomings of fiat government-backed currency. Guess what? It ain’t perfect, but it’s probably the least bad system there is today.”
Posner said that the top reason to doubt bitcoin is that the miners aren’t people you can trust. “Who are they? We don’t know. Probably a lot of foreigners, possibly foreign governments.”
Posner tried to argue that anyone who could control 51 percent of the bitcoin networks could commit an unending amount of fraud by putting false transactions onto the blockchain.
My take: this problem, known as “Gambler’s ruin,” is addressed in the original bitcoin whitepaper. It’s also known as the “Selfish Miners” problem and has been disproven for a number of mathematical reasons (it’s hard to cheat and play the game at the same time). But a bigger and unaddressed reason is that if anyone found fraud on the blockchain, it wouldn’t matter how many coins you were able to steal because all bitcoin would become worthless.
For all the spirited back and forth, though, the debate came down to one thing: who can predict the future?
“Is there any technology in the world—any big technological advance we’ve had where the first mover advantage ensured that that stayed dominant all the way through?” Tett asked just before the end. “I mean, remember a time we all thought that Sony Walkmans were the coolest thing out?”
Of all the technological issues brought up during the debate, that one was the hardest to argue with. The audience liked the pro bitcoin team better but people left thinking that bitcoin isn’t the one.
Draper made the best point about bitcoin today and in the immediate future: bitcoin is winning by having the most number of users. “The value of bitcoin is tied to the network and how big that network is.” He cited Metcalfe’s Law, which states that the value of a network is equal to the square of the sum of its users.
“You said there are a whole bunch of problems with bitcoin and you said there are fewer with dollars,” Draper said. “There are. But all the best engineers in the world are working on bitcoin, not on dollars.”
Pro-Free Marketers Lost Faith in Bitcoin
While no one can predict the future, it is a little bit of fun to look back on the past and see what the previous experts got right and what they got wrong. Thus Draper ended on a lighter note, reading various business and popular media reports about nascent technologies.
“‘The world potential for copying machines is 5,000 at most.’ That’s IBM avoiding buying Xerox,” Draper noted. :‘The wireless music box has no imaginable commercial value. Who would pay for a message sent to no one in particular?’ That’s the associates of David Sarnoff responding to the latter’s call for investment in the radio in 1921.”
Nonetheless, Draper made his own about bitcoin, something he famously did (correctly) correctly in 2014. when the price of bitcoin was $413. That the time, he accurately forecasted that the price would reach $10,000 by 2017. He now has a new prediction of $250,000 by 2022. Draper upped the ante just a little bit more on stage: “In five years, you are going to try to go buy coffee with fiat currency and they are going to laugh at you because you’re not using crypto.”
“We have a bet,” Tett smiled as the audience applauded. “In five years’ time. You’re buying the coffee.”
“We’re going to have you all back in five years,” Donvan the moderator said. “And somebody’s going to be laughing at somebody.”
This article has been republished with permission from Modern Consensus.