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The False Premises and Promises of Bitcoin

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  • Brian P. Hanley

Abstract

Designed to compete with fiat currencies, bitcoin proposes it is a crypto-currency alternative. Bitcoin makes a number of false claims, including: solving the double-spending problem is a good thing; bitcoin can be a reserve currency for banking; hoarding equals saving, and that we should believe bitcoin can expand by deflation to become a global transactional currency supply. Bitcoin's developers combine technical implementation proficiency with ignorance of currency and banking fundamentals. This has resulted in a failed attempt to change finance. A set of recommendations to change finance are provided in the Afterword: Investment/venture banking for the masses; Venture banking to bring back what investment banks once were; Open-outcry exchange for all CDS contracts; Attempting to develop CDS type contracts on investments in startup and existing enterprises; and Improving the connection between startup tech/ideas, business organization and investment.

Suggested Citation

  • Brian P. Hanley, 2013. "The False Premises and Promises of Bitcoin," Papers 1312.2048, arXiv.org, revised Jul 2018.
    • Handle: RePEc:arx:papers:1312.2048
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    References listed on IDEAS

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    1. Orphanides, Athanasios, 2004. "Monetary policy in deflation: the liquidity trap in history and practice," The North American Journal of Economics and Finance, Elsevier, vol. 15(1), pages 101-124, March.
    2. Fabio Sabatini, 2005. "Social capital as social networks. A new framework for measurement," Working Papers in Public Economics 83, Department of Economics and Law, Sapienza University of Roma.
    3. Roger Ibbotson & Peng Chen, 2001. "Stock Market Returns in the Long Run: Participating in the Real Economy," Yale School of Management Working Papers ysm206, Yale School of Management, revised 01 Apr 2002.
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    Cited by:

    1. Ahmed BenSaïda, 2023. "The linkage between Bitcoin and foreign exchanges in developed and emerging markets," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-27, December.

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