Home
/
RELIGION & LIBERTY ONLINE
/
What Christians Should Know About Bitcoin (Part 3 of 3)
What Christians Should Know About Bitcoin (Part 3 of 3)
Apr 2, 2025 9:45 PM

[Note: This is the third entry in a three part series. You can read the introductory posthereand part two here.]

The Disadvantages of Bitcoin

For people who are not obsessed with anonymity and are not waiting for the U.S. to return to the gold standard, the reasons for avoiding entering the Bitcoin market are numerous:

1. Convertibility – Whereas other currencies are convertible into other financial instruments (dollars to checks to certificates of deposit, etc.) and through numerous third-party services (e.g., Visa, PayPal, modity currencies like Bitcoin can only be exchanged for fiat currencies—and then only through an online exchange. Indeed, unless puter is working overtime on Bitcoin mining, the only way to acquire the currency is to buy it from one of the 30 online exchanges.

These exchanges pletely unregulated and are subject to problems that do not affect other financial markets. For instance, in 2011 the largest Bitcoin exchange, MTGox, had a security breach that resulted in the theft of nearly $9 million worth of Bitcoins. The theft caused the value of Bitcoins to crash from $17.50 to one cent before the market was able to recover.

2. Instability – The MTGox breach—and the subsequent market crash—taught Bitcoin owners a harsh lesson modity currencies: they can be wildly unstable. Over the 8 month span from October 1 2010 to June 9 2011, the market value of Bitcoins skyrocketed 9667-fold from a value of $0.06 to $29.

The rate had dropped in 2012 and at the end of last year a Bitcoin was worth only $13.51. Last week, though, Bitcoins were trading as high as $266 before plummeting to less than $100. Anyone who had bought $1,000 worth of currency in October 2010 would theoretically have $4.4 million worth of Bitcoins. However, the convertibility problem would make it nearly impossible to extract that money without crashing the market and devaluing the entire currency. A gradual sell-off over an extended period of time would be necessary to take advantage of increase in valuation.

Still, being the seller of the overvalued currency is preferable to being the buyer. The Winklevoss twins, millionaires famous for their legal battle with Facebook, claim to own around one percent of all Bitcoins currently in existence (around 108,000). They began buying the currency in 2012, making some early Bitcoin holders very rich.

Indeed, the only way to ensure that you make a profit (or at least not lose money) is to have bought Bitcoins in 2009: Three million Bitcoins—13 percent of the total number of Bitcoins that will ever be created—were minted that year. Few people, mainly readers of cryptography mailing lists, were even aware of Bitcoins then and so were able to acquire a disproportionate share of the currency. Somewhere on the planet, economically savvy hackers (including, perhaps, Satoshi Nakamoto) are making a fortune by slowly selling off their digital currency.

3. Limited protection against fraud – Satoshi Nakamoto made it a point to make Bitcoins transactions non-reversible. But this is one of the primary features that encourage people to trust ecommerce systems. If you know that your money is lost and can’t be returned if you are scammed, you are less likely to trust buyers online. This has the effect of dampening trust in all merchants, not just the fraudulent ones, and reducing the desire to exchange money in a virtual setting.

4. Limited sources for goods and services – Once you acquire Bitcoins, what can you spend them on? Mostly online services, such as software, tech support, and webhosting—services that can easily be paid for using current ecommerce systems like PayPal. Few offline merchants currently accept the virtual currency. Although it may change in the future, the lack of places to buy goods and services limits the usefulness of the currency as a medium of exchange.

5. Waste of capital and resources in creating the currency — As Jordan Ballor recently asked,

[W]hat does a Bitcoin block represent in terms of actual human utility? I worry too that this is a system that relies parasitically on real-world resources, e.g. coal which provides a large part of the electricity, which is used to puters so that they can then in turn “mine” something entirely virtual.

This is similar to Adam Smith’s concern about the fundamental foolishness of relying on gold and silver currency:

The gold and silver money which circulates in any country, and by means of which, the produce of its land and labour is annually circulated and distributed to the proper consumers, is, in the same manner as the ready money of the dealer, all dead stock. It is a very valuable part of the capital of the country, which produces nothing to the country. The judicious operations of banking, by substituting paper in the room of a great part of this gold and silver, enable the country to convert a great part of this dead stock into active and productive stock; into stock which produces something to the country. The gold and silver money which circulates in any country may very properly pared to a highway, which, while it circulates and carries to market all the grass and corn of the country, produces itself not a single pile of either. The judicious operations of banking, by providing, if I may be allowed so violent a metaphor, a sort of waggon-way through the air, enable the country to convert, as it were, a great part of its highways into good pastures, and corn fields, and thereby to increase, very considerably, the annual produce of its land and labour.

6. Bitcoin is a prone to deflation and speculative bubbles — Deflation, a decline in the general price level, occurs when the price of goods and services decline relative to a specific measure. The value of the goods and services themselves do not have to decline for deflation to occur; all that is required is for the value of the currency itself to increase. This is exactly what has occurred for the entire existence of Bitcoin.

Imagine if you used Bitcoin to buy a cup of coffee for 99 cents in October 2011. Had you held onto those 16.5 Bitcoins, you could have used them last week to buy 4,389 cups of coffee. Such ridiculous deflationary effects are the reason sensible Bitcoin holders (at least those that bought them when the exchange rate was low) are hoarding them, rather than spending them at their local tech-savvy coffee shop. Bitcoin is currently a speculative bubble, with people holding on to their e-wallets waiting for the “greater fools” to bid up the price of the currency. When there are no more fools left, they bubble will pop—and thousands of people will have lost real money.

This is probably the primary reason Christians should avoid acquiring and holding the currency: At best they are gambling with God’s money; at worse, they are hoping to sell an object with no intrinsic value to someone more greedy or gullible in the hopes of getting out before the bubble pops.

The Future of Bitcoin

Assuming it survives once the speculation bubble pops, the future of this digital currency can take one of two paths: Bitcoin will either fail to e a legitimate currency—and thus fail to live up to the vision of its users—or it will succeed in ing a legitimate currency—and thus fail to live up to the vision of its users. Both failure and success would change the nature of the online social experiment in ways that would disappoint its most ardent supporters.

To fail, Bitcoin merely has to prove its critics right—to show that it is, at best, an unworkable monetary system or, at worst, plete sham set up to sucker late adopters. If it succeeds, though, it will have to e a currency that can be trusted by more mainstream consumers. That will require adding such features as regulatory oversight and a centralized monetary authority—the very features of other currencies that Bitcoin was created to avoid.

But supporters of Bitcoin who are building their business models around the currency are more ing of such changes. “Having a legal status for Bitcoin and a regulatory framework would mean that merchant sites, including exchanges, would be accountable and liable,” said Amir Taaki, co-founder of the London-based Bitcoin Consultancy and operator of an emerging Bitcoin exchange, Britcoin.co.uk. Such professionalization might also lead to what Bitcoin’s libertarian users most despise—a central bank. As the libertarian scholar and tech writer Timothy B. Lee explains:

Bitcoin supporters are quick to point out that their system wouldn’t require ordinary consumers to run their own Bitcoin nodes. They predict that as the network grew and the resources required to run a node increased, that nodes would increasingly be run mercialized entities who made money by providing “eWallet” services to ordinary Bitcoin users.

We might call organizations that are in the business of running Bitcoin nodes and processing Bitcoin transactions “banks.” And we could imagine these banks forming a membership organization whose primary function is to control the size of the Bitcoin money supply. It would announce changes to the Bitcoin protocol that expand the supply of Bitcoins at the desired rate. Member banks would agree to change their software accordingly. We could call this entity a “central bank.”

So one of Bitcoin’s key selling points—a permanently fixed supply—is basically illusory.

In the end, the currency faces a catch-22: For Bitcoin to succeed it has to adopt mainstream monetary policies—which would negate the very reason for Bitcoin’s existence.

Conclusion: Why Does Bitcoin Matter?

If the experiment is unlikely to succeed, then why should anyone bother paying attention to Bitcoin? The reason can be found in another, more pletely pernicious, online venture: porn.

“The Internet pletely funded by porn,” said Greg Fitzsimmons at the twenty-third annual adult entertainment industry awards. He was only half-joking. The pornography industry drove or boosted many of the web’s most useful innovations—live chat, streaming video, online payment systems—as well as the popularity of fast connections. As Christians we should recognize that the moral and social destruction of online pornography has been incalculable. But it is hard to deny that the genre has been a driver of innovation in many areas of information technology.

Similarly, the types of people that are interested in the Bitcoin experiment—highly motivated, tech-savvy—are likely to spark new cutting edge methods, technologies, or policies that will change ecommerce, security, and online privacy. For example, I recently noted a story about how the African diaspora—nearly 140 million Africans live abroad—has e such a major source of foreign e that it now outstrips foreign aid sent by Western donors. Unfortunately, about $7 billion a year never makes it into the relatives’ accounts because of high bank fees. Bitcoin may pave the way for future transfer methods that circumvent the current system of exorbitant transaction costs, allowing more money to be transferred directly to needy family members.

As a currency, the story of Bitcoin is likely to e nothing more than a footnote in obscure economic journals, but its legacy on information technology and peer-to-peer based trust systems may be as significant. The question we Christians must ask is whether we should encourage the growth of a system in which thousands of people will eventually lose real, significant wealth in the hope that it might lead to such innovations that last as long as the stones of Yap.

[Note: Since a couple of readers have asked for the full-version of this series, I’ve formatted it into PDFwith endnotes.]

Comments
Welcome to mreligion comments! Please keep conversations courteous and on-topic. To fosterproductive and respectful conversations, you may see comments from our Community Managers.
Sign up to post
Sort by
Show More Comments
RELIGION & LIBERTY ONLINE
The Great Gaetano Rebecchini: Italy’s hero succumbs to the coronavirus
Gaetano Rebecchini was a great Italian, an extraordinary witness to our traditional national values, while challenging politically correctness and representing the best of our country. Today, Italy lost a good, honest, courageous person, an example for present and future generations e. Read More… Today was the first time I learned of someone I know and respect who lost his battle to the novel coronavirus (COVID-19). He was a 95 year-old political warrior and defender of freedom: Gaetano Rebecchini. He returned...
Three core principles to evaluate the coronavirus stimulus
As epidemiologists scramble to mitigate the impact of the coronavirus pandemic on public health, economists are evaluating its impact on the global economy. Experts in both fields absorb the flurry of data, interpret it through their scientific training and the lens of similar historical events, and endeavor to mend a path forward. Yet everyone knows that ultimately we are in unchartered waters, and possible es vary widely. As an economist, I am stunned by the nearly 10 million jobless claims...
Acton Line podcast: How to talk about rights in our polarized age
Today, our most contentious controversies are about morality. We disagree about questions of efficiency and democracy, but across political aisles, we also disagree about what’s right to do and who we’re ing as a people. How can we have productive debates with people whose worldviews are very different from ours? Adam MacLeod, professor of law at Faulkner University, addresses this question in his new book titled “The Age of Selfies: Reasoning About Rights When the Stakes Are Personal.” In this...
13,000 children are being denied an education over a funding fight
Millions of schoolchildren are currently out of school under state orders intended to slow the spread of the coronavirus. However, in Oregon, at least 13,000 students are being unnecessarily denied an education to benefit traditional public schools’ monopoly over education. Earlier this month, Gov. Kate Brown ordered all Oregon’s public schools closed until the end of March. She then extended that deadline to April 28. This would be unexceptional if not for the fact that she also closed online public...
‘They want to punish the Church’: Italian priest fined for procession to fight coronavirus
The following translation is an exclusive interview that appeared in the weekend edition of the northern Italian daily La Nuova Bussola Quotidiana, which has fiercely defended Italy’s religious freedom throughout the ongoing coronavirus pandemic. Correspondent Andrea Zambrano interviewed a Roman Catholic parish priest, Rev. Domenico Cirigliano, who was slapped with a €400 fine by local police for processing with a “miraculous” crucifix. Rev. Cirigliano said he was performing essential “work” by blessing the town of Rocca Imperiale in order to...
April Fools’ Day: Italians are not joking around anymore as civil unrest builds
Culturally the first of April – April Fools’ Day – is the same in Italy as in America. It’s a day of practical jokes and laughs. Only here it’s called April Fish Day, because it is related to the ancient end of the Pisces or Fish sign in the zodiac. It also the day of jokes which Italians inherited from the ancient Roman feast of Hilaria (hilarious in English) celebrated around the spring equinox. During the Hilaria celebrations Romans would...
Creativity will kill COVID-19
It is in the most desperate of times that we must not forget our principles. Globally, we are facing desperate times. In the United States, unemployment rolls doubled in just one week, climbing to 6.6 million unemployment claims for the week ending March 28, 2020. As more Americans are asked to stay at home, many have e unemployed. Additionally, the potential death toll scares us, and we beg for scientists to expedite new tests, anti-viral drugs, and vaccines. These are...
Coronavirus shows us how work impacts civilization
Many Americans are already struggling due to the ripple effects of the COVID-19 lockdown. Just last week, more than 6.6 million Americans filed unemployment claims. Some economists predict that total job losses could reach 47 million. In turn, much of our focus is rightly set on the material devastation—lost salaries, declining assets, and so on. Yet the economic lockdown brings significant social costs as well, reminding us that our economic activity has social value to our civilization that goes well...
Service is love for our God and our clients
For the Italian Nuova Bussola Quotidiana media outlet, I am publishing a series of short reflections on economics, virtue and spirituality during Lent entitled Lentenomics(go here for the first reflection on “sacrifice”). In the second of these six essays I turned my attention to the virtue of “service.” In summary, I write that “service has a supremely essential role within the economy, and not just in the so-called ‘service industries.’ Markets simply cannot function without services. They are the fundamental...
No one knows what a return to ‘normalcy’ after COVID-19 will look like
At some point, not today but perhaps in the next few weeks, we will be having more conversations about getting people back to work and restoring the $21 trillion U.S. economy. Some signs indicate the coronavirus pandemic may turn soon in the United States. Even if the entire nation makes an all-out effort to restrict contact, coronavirus deaths will peak in the next two weeks, with patients overwhelming hospitals in most states, according to a University of Washington study. The...
Related Classification
Copyright 2023-2025 - www.mreligion.com All Rights Reserved