Anyway, there are important implications for the point that there are few instrumental benefits to switching to bitcoin. At its core, as I keep pointing out, the argument that bitcoin-bugs use when they claim that bitcoin is the currency of the future is a combination of two factors:
1) It is secret
2) It is not controlled by any government
Point 1 is only an instrumental benefit to crooks (and hate groups!), and point 2... has nothing to do with any individual economic actor! As I have written in several posts in this series, there are economic benefits to fiat currency, and bitcoin is only slightly less stupid than the gold standard in terms of macroeconomics, but think about this: does the fact that bitcoin is not a fiat currency provide me with any additional instrumental benefit for conducting transactions in it, rather than dollars? No.
So, what are bitcoin-bugs saying when they make some variation of point 2? They are basically stating a libertarian preference. Stuff is cooler when governments are uninvolved. Intrinsically. There is more to this statement, then, than an expressive benefit that they, personally, receive from conducting transactions in a currency not controlled by their government. They are stating that society, generally, would be better off without fiat currency because government-controlled currency is just bad.
They are simply stating libertarianism as principle.
Suppose we accept that everything would be better off with a switch away from fiat currency. Clearly, I don't, but what if we did? As I have written throughout the series, the government can keep a lid on bitcoin by simply refusing to accept tax payments in bitcoin, but in the fever-dreams of bitcoin enthusiasts, if everyone used bitcoin, it would be hard for the government to adhere to that policy. So, for the sake of argument, what if bitcoin-bugs were right about down-being-up, and up-being-down? What if fiat currency really were bad?
Would that mean everyone switches to bitcoin because it is intrinsically better?
No. That's where bitcoin-bugs get into trouble confusing individual and collective incentives.
Mancur Olson, The Logic of Collective Action. Suppose there is some collective benefit, and everyone needs to contribute a little bit for it to be provided, but no individual's contribution to it is big enough to have an effect on its likelihood of being provided, or the quality of the good that will be provided. The solution? Even if you want the good provided, don't contribute. It is irrational to contribute. This is "the collective action problem." It is a variation of a standard problem in economics: everyone behaving in a way that is individually rational leads to everyone getting screwed. Everyone wants the good to be provided, but no one has any individual incentive to contribute, so it doesn't get provided because everyone "free-rides."
Let's apply this here. Suppose I give bitcoin-bugs their notion that a non-fiat currency is better. They're full of shit on this, but let's say I give them this, for the sake of argument. OK, let's pretend we'd be better off, as a society, with... fuck, I hate typing this... bitcoin than with dollars. {There isn't enough coffee in the world to wash out the foul taste of typing that. It was almost like complimenting Trump!}. Problem. Mancur Fucking Olson. Who, as individuals, has any positive incentive to switch to bitcoin? The transition doesn't happen unless individuals decide to use bitcoin rather than dollars.
There's no getting away from that. I get paid in dollars. So do you (if you are reading this in the US, and employed). Conducting any transaction in bitcoin requires switching to bitcoin. That's a messy process, even if the price of bitcoin were to stabilize. The business that accepts bitcoin then has to switch some of that bitcoin back to dollars to pay their taxes, and pay transaction costs to do so. So... what was gained by switching to bitcoin, and then back to dollars? Instrumentally? Not a single, fucking thing.
Even if we accept the premise that society would be better off with a switch away from fiat currency (and I clearly don't!), unless individuals receive instrumental benefits from non-fiat currency, that switch doesn't occur because of the collective action problem. Whatever switch bitcoin-bugs think is going to happen, on the basis of libertarian principles, can't happen because nobody has any individual incentives to approach their economic transactions that way.
Employers need to keep records in a certain way based on taxes, etc., and they will continue to have money coming in with dollars. Their preference is to keep paying you in dollars because of their incentive structure. Why, then, would you convert to bitcoin when you can maintain FDIC protection, stores are accepting dollars, and it is easier to avoid any conversions and transaction fees that go along with currency conversions? And as long as people are doing that, why would stores require bitcoin, thereby forcing you to switch away from what is now easiest?
Conducting your economic activity in bitcoin is harder than conducting your economic activity in dollars, and it is intrinsically riskier. That is partially a result of the volatility of bitcoin itself, and partially a result of not having FDIC insurance. Why would you expect individuals to make their economic transactions harder and riskier? For no reason?
I don't. That's part of why I don't see bitcoin becoming a prominent currency in consumer markets.
Understanding what continues to happen with bitcoin, then, requires understanding instrumental benefits, because as currency, {say it with me...} bitcoin is bullshit. Yes, I still have more to write, depending on what else gets in the way, as stuff tends to do.
I'm still a political scientist, I think...