Wednesday, January 22, 2014

Marc Andreessen On the Case for Bitcoin

Marc Andreessen, co-founder of Netscape Communications Corporation, is out with an important article at NYT about Bitcoin. It is a very strong case for Bitcoin, however, he fails to address some important points.

1. What I have termed the $100 Billion problem:

Merchants pay about $48 billion in fees to banks for their customers’ payment-card use and banks pay much of that to Visa and MasterCard, according to Aite Group.[...]Remittance providers such as Western Union Co. reap about $37 billion in fees each year from people sending money home, according to the World Bank.

That's nearly $100 billion in fees, annually! The current entrenched consumer financial transaction sector is not going to give up on $100 billion in fees, easily. I expect, they will lobby congress and government agencies to make the adoption of Bitcoin transactions very difficult or impossible.

2. The ability to transfer funds via smartphone without the merchant knowing a buyer's pass key seems to me something that could be created by banks and by money transfer firms like Western Union or American Express, thus eliminating this important feature of Bitcoin.

Finally, I found humorous  this note from the NYT editor about Andreessen, the multi-millionaire promoter of Bitcoin:
He does not personally own more than a de minimis amount of Bitcoin.
The full article is here,

(ht Tom Bergerson)


  1. all the "important" features of bitcoin can be offered by banks by using (re)implemeting underlying computer algorithms, with $ as currency. But how do they implement the decentralized nature of bitcoin network ?? I dont get why libertarians scared of new currencies like bitcoin...give them a chance, and let market(s) decide. You do want that ~100$ Billion given back to customers dont you ???

    The "fees" (~60% profits of and its resultant shenanigans (churn rate of instruments and their derivatives) got quite ugly in financial sector. We need a loosening up of squid like central hold the few major banks have on all humanity (in one way or other). Only computers and software/cryptography provide that hope/solution.

    1. "Libertarians" are not afraid of BitCoin... just Bob W. and a small percentage of other curmudgeons. If its not BitCoin that emerges, then it will be ZeroCoin, or BetterCoin. There are pros and cons to digital crypto currencies. You read mostly about the cons on this venue. It's important to know the cons. Thanks Bob. Regardless, lots of folks can see the obvious benefits of using a competing currency like BitCoin, which is very exciting for the cause of liberty!

  2. How Bitcoin Plays Into the Hands of Central Bankers and Will Facilitate the Use of Negative Interest Rates

    Central bankers, after all, have had an explicit interest in introducing e-money from the moment the global financial crisis began…

    Bitcoin has helped to de-stigmatise the concept of a cashless society by generating the perception that digital cash can be as private and anonymous as good old fashioned banknotes. It’s also provided a useful test-run of a digital system that can now be adopted universally by almost any pre-existing value system.

    This is important because, in the current economic climate, the introduction of a cashless society empowers central banks greatly. A cashless society, after all, not only makes things like negative interest rates possible, it transfers absolute control of the money supply to the central bank, mostly by turning it into a universal banker that competes directly with private banks for public deposits. All digital deposits become base money.

    Consequently, anyone who believes Bitcoin is a threat to fiat currency misunderstands the economic context. Above all, they fail to understand that had central banks had the means to deploy e-money earlier on, the crisis could have been much more successfully dealt with.

  3. So after Andreesen's beautifully-articulated and inspirational NY Times piece, your two concerns are:

    1) That Bitcoin is so disruptive it may anger those it disrupts
    2) That Bitcoin is so useful that legacy companies will try to replicate it