problem solving v. acceptance

By snafui on Fri, Mar 8, 2013 - 3:04pm

I think when considering alternative electronic money we must take a step back and ask ourselves what problem does the money solve, or is it just a novelty. Does the new money generate less problems, less risk, and more stability? These are issues that we on this site may find important. But I'm not so sure Average Joe will agree and be willing to jump on board, especially if it ends up being less convenient. I'll use bitcoin often but I mean any currency replacement for the purposes of this discussion and try to keep it vague. Here are some of the contrasts I'm struggling with:

  • Inflation: I'll generalize and say on the PP site, we think inflation from monetary abuse is an important issue. It would make sense that a currency with a finite quantity fixes the problem. Does inflation matter to Joe? Probably not enough for him to take action if the inflation is happening slowly enough and can always be blamed on something (that pesky weather gave us a bad crop of soybeans so prices are up [and will never go down again]).
  • Survaillence: I'll generalize again and say many folks here have something of a libertarian streak and would like to see less govt survaillence of their financial dealings (being all legal of course) and something like bitcoin's anonymity has a certain appeal. But that's us (again generalizing). What about the Average Joe, does he care about this? Probably not because Joe will say "it's OK, I have nothing to hide and neither should you. And this way the govt can catch criminals and keep us safe."
  • Exchange rates: I can see retail and service businesses being interested if it offers them lower processing rates. Without that credit card processing fee, you can offer services cheaper, right? But they need their clients to participate. And they also need to make sure the exchange rate makes sense. In a dollar dominated world you may get screwed to quote prices for your services in the midst of massive swings up and down. But that doesn't settle down without widespread acceptance. If someone offers an hour massage for 1.5 bitcoins, will the average Joe look up the exchange rate and determine if it's a good deal or not? Will the massage therapist watch the exchange rate and adjust accordingly? Isn't it just easier to only work in dollars or will the discounted processing fees be monetary incentive enough for both parties to want to work in bitcoins (or equivelant)? This may be more common in other areas of the world but Average Joe American rarely has to deal with exchange rates.
  • Two party: I like Jim H's idea from the ponzy thread of comparing bitcoin to Linux. There are so many parallels that we can intuit a lot about how bitcoin will evolve by comparing it to RedHat. Unforunately we run into a problem when we consider that Linux is a choice by a single user, department, or company. It doesn't matter if my web server runs Linux or Windows, the end-user sees my webpage all the same. Linux would have had a hell of a time being adopted if both the content creator and the end-user needed to run Linux (you can only view my Linux generated web page from a Linux laptop). In fact, it may have never made it out of the university science lab. So Linux only required adoption by one party. Bitcoin requires both parties to be on board.
  • Currency crisis: Alternative currencies, like alternative operating systems, are desired and fill a need. But I think it will not your Average Joe American that adopts it (yet). It may be your Average Greek, Italian, or Spanish person seeing their country go through harsh financial times. Let's say your Greek and you're not sure if your country is going to get kicked out of the Euro or not (I actually haven't been studying up on the Greek economy beyond headlines so let's just use it purely as an example and assume I'm ignorant about what's really going on). You certainly could determine that converting the wealth that you wish to store long term into gold makes a lot of sense. And you may also determine you'd want to store your short term disposible cash in bitcoins (if this were a future where it was more widely accepted). The bitcoins would be highly liquid and would work anywhere in the world and like gold, you could carry a lot of value in a physically small package (unlike wheelbarrow loads of fiat). Your country could start its own fledgling fiat currency which may or may not be stable but you have wealth preservation via gold and liquidity and stability with bitcoin. That's definitely an imaginary case where I can see a lot of people accepting bitcoins willingly becomes it fills a need. To Average Joe this is a fantasy that will never happen to him, though.

I guess what I'm saying is, generally speaking, we on this site are more aware of the risks in our monetary system than the Average Joe. So what will an uneducated Joe find appealing about an alternative currency? Will it take a crisis for mass adoption?

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