In an article for Fox News, senior economist Francois Velde of the Federal Reserve Bank of Chicago describes Bitcoin. “Although some of the enthusiasm for Bitcoin is driven by a distrust of state-issued currency, it is hard to imagine a world where the main currency is based on an extremely complex code understood by only a few and controlled by even fewer, without accountability, arbitration or recourse,” Velde wrote.
In his attempt to criticize Bitcoin, Federal Reserve banker Velde actually summed up fairly well everything that’s wrong with his own employer, and in doing so outlines the threat Bitcoin poses to it.
To address Velde’s first criticism, Bitcoin’s underlying code, like all programs, does require some knowledge of programming to understand and manipulate. But the charge that it’s understood by only a few and controlled by even fewer is patently absurd. First, the code underlying Bitcoin is completely open-source. What that means is that every developer has access to the code, and can manipulate it to create new currencies, or entirely new solutions, at will.
In fact, the developers are currently modifying the Bitcoin protocol to create new platforms which do everything from fight censorship through a new TOR-like encrypted internet to rebuilding Twitter to evade the NSA.
As for the claim that Bitcoin is “controlled by even fewer” people, I suppose it’s difficult to get fewer people in control of Bitcoin than zero. No one controls Bitcoin, because it’s a protocol. Its operations are decentralized over thousands of computers, with no one computer or group of computers having any control whatsoever.
It’s true that there’s no central authority users can present with Bitcoin transaction disagreements. It’s certainly possible to get screwed and have to eat the cost. But this is an issue which can easily be solved. For example, online drug marketplace Silk Road holds Bitcoins internally until goods arrive. In this manner, Silk Road replaced the broken kneecaps endemic to the meatspace drug trade with bad user reviews and quick refunds.
But if anyone wants the money they’ve lost through currency inflation back due to the fact that the Fed has in no way, shape or form delivered on the promise of low unemployment or avoiding economic crises, there is literally zero, to quote, “accountability, arbitration or recourse.”
The value, availability and stability of the US dollar is in the hands of unaccountable private bankers, and there’s nothing we can do about it. Of course, “some of the enthusiasm for Bitcoin is driven by a distrust of state-issued currency.”
But in no way is it it “hard to imagine a world where the main currency is based on an extremely complex code understood by only a few and controlled by even fewer, without accountability, arbitration or recourse.” That’s exactly the world we live in under the US dollar. And it’s exactly the world Bitcoin has the potential to improve.
