Way back in Part IV, I addressed the question of the kind of person buying or using bitcoin now, given the existence of transaction costs for bitcoin-based economic activity: techno-libertarians, hipsters, crooks and speculators. It is time to elaborate on that with the why. Why aren't I going in a proper order? Because I'm just rambling over my morning coffee.
In rational choice theory, we distinguish between two types of benefits individuals can receive from their decisions: expressive benefits and instrumental benefits. An instrumental benefit gives you a direct, tangible payoff, like money. An expressive benefit just means that the act of doing something makes you feel good because the act of doing it... expresses something that you want to express.
The distinction is most clear in voting. Consider the choice between voting for a major party candidate whom you don't really like, but who is better than the other major party candidate, and voting for a third party candidate, whom you like, but who has no chance of winning. (Oh, and all you Jill Stein-dupes? Did'ya notice that she's being investigated? What did you expect from a "Doctor" who is also an anti-vaxxer?) The instrumental choice is to vote for the major party candidate because that promotes an outcome you want. The expressive choice is to vote for the anti-vaxxer Russian stooge like a fuckin' moron. Oops! Did I say that? Anyway, the point is that expressive benefits are those that don't give you anything tangible, unlike instrumental benefits.
As I wrote in Part III, the fact that stable governments will never let you pay your taxes in bitcoin means that bitcoin transactions will always involve transaction costs, so unless there is an instrumental benefit to counterbalance that transaction cost, bitcoin will only ever be appealing at an individual level to those who derive expressive benefits from its use (e.g. techno-libertarians and hipsters). So, can there be instrumental benefits to the use of bitcoin?
Well, there's secrecy. That's an instrumental benefit for crooks. What are you willing to do to keep your financial transactions hidden? Oh, and by the way, keep in mind that if the financial world is hidden from the government, its ability to collect tax revenue collapses, government collapses, and welcome to failed-state territory!
What else can you do with bitcoin that you can't do with dollars? Um... Well, you can buy something, and then watch as the currency changes value such that you should have waited three seconds and saved a shitload of money, but that's kind of a bad thing, but there I go with my math again...
Other than that, bitcoin can be transferred electronically faster than dollars. Has that ever mattered to you? It hasn't ever mattered to me, and it hasn't ever mattered to the vast majority of people.
There is a hidden, little secret, though. When you buy stuff on-line, you use a credit card. The credit card company gets a piece of the action. You don't see that, but the merchant pays a fee. They'd kind of like to stop paying those fees, and with something like bitcoin, they wouldn't have to because it's a direct transfer. So, hey, what if we got rid of dollars and credit card companies and all that, and you just paid merchants directly on-line with bitcoin!
Many problems here.
1) The merchants still need to offer the credit card option because plenty of people will want it, and won't buy without it.
2) In fact, given debt levels, and peoples' inability to pay cash, they need it, so whether the credit card pays the merchant in bitcoin or dollars, the credit card companies still need to be involved because of consumers' behavior.
3) The credit card companies offer plenty of other services, including consumer protection, merchant protection, loyalty rewards, and other stuff to earn that slice of the action.
If you have been screwed over by a credit card company, then you have some reason to hate them, but economically, they exist for a reason, and changing the currency in which they conduct their business doesn't do anything. They still exist for a reason, still get a piece of the action, and still keep that cut. So, the dream of merchants just taking payment in bitcoin so that the credit card companies don't skim 2% of the top in their transaction fees? No. Ain't happenin'. Consumers won't let it.
So, I'm left with the question: what is the instrumental benefit of using bitcoin rather than dollars? There isn't one, at the individual level, unless you are a crook. The benefit of using bitcoin rather than dollars, at the individual level, is entirely expressive. It is therefore limited to those who are the type to derive expressive benefits from using bitcoin.
That's kind of a problem for the future of bitcoin, as we'll see in Part IX, because bitcoin is bullshit.