LOL. Right? Gold has a horrible performance record. Gold concentrated wealth only in the hands of a few. Gold has been shown to cause horrible deflationary cycles and stunt economic growth. People talk about paper money being fiat, but forget that gold is the world's first fiat money.
There are only a limited number of fools in the world... People who become bitcoin millionaires beget copycats. One guy turns $1000 into $1 million. Which means 1000 others paid $1000 for 1 bitcoin. 1000 fools. each of these 1000 fools require also a 1000 fools to become a millioniare So 1 -> 1000 -> 1000000 -> exponential growth of fools! How many people are there in the world??? the only way to assume many more millionares is if people spend more than $1000, say 10.000, or 100.000 on bitcoins. But the number of people wanting to spend 100.000 on bitcoin is much more limited than the ones who want to spend 1000 on bitcoin... The fools will run out....
Indeed we agree: the fools will run out...but in a 180 degrees direction: it's the Dollar and other fiat-moneys where the problem lies. Fed's system is already named as a "legalized Ponzi scheme" which when (not if) it burst the world can be saved by decentralized crypto-currencies (and precious metals). http://www.youtube.com/watch?v=iFDe5kUUyT0 https://www.youtube.com/watch?v=6PfdQhX8_yg#t=120
If NSA created Bitcoin, it would have used the "r" version SHA256. Luckily it's the "k" version: http://bitcoinmagazine.com/7781/sat...ich-bitcoin-dodged-some-cryptographic-bullet/
This OP's "Tyler Cowen" piece is flawed in many ways. Two of them, I will try to debug below. Two flaws are pregnant: 1) he mixes Centralized and Decentralized economics. 2) he doesn't reckon the differences between SHA256 and sCrypt networks. The first point: he writes "But then the QuitCoin company comes along" and this one (central) company competes with a lower price, forcing Bitcoin (decentralized network) to lower its price. Well, this may work in a centralized economy, where the one supplier can set his price, but this isn't possible in a decentralized economy. First of all a Central-Coin cannot compete with a decentralized Coin (it misses essential features). And secondly, if QuitCoin would be a decentralized-coin then it cannot set its price (price is pure on Supply-of-many and Demand). Actually, to become a real competitor to Bitcoin, QuitCoin's supplier-profit (the miners in the decentralized network) should be much higher than Bitcoin's. The incentive for miners should be higher in order to persuade miners to switch from Bitcoin to another network. Which means an upward price pressure instead of a downward as Tyler Cowen argues. The Second point: He doesn't understand what it takes to issue a new decentralized Coin. Sure, Bitcoin is open-source, can be copied very easily, and use top class marketing to promote it. But that will not make a new Coin, let alone be a serious competitor to Bitcoin. No! a decentralized coin needs an as large as possible P2P network of miners (the larger the more secure). This means that tens of thousands, geographically separated, individuals need to invest in costly equipment and electricity to connect to each other and mine the new coins. It took Bitcoin 5 years and more than $200.000.000 (in 2013 alone) to create the network of today. It should be clear that any new coin who wants to compete with (nearly) the same copy of open-source code has a nearly impossible task to gather enough miners for its new network: professional Miners will only join if incentives and success-rate are better than Bitcoin. I see you thinking: but why do we have so many copycat-coins? To answer this you need to separate the two encryption families: The SHA256, which needs extremely expensive ASIC-hardware. And sCrypt which can be mined by common PC's with a gaming-video-card. Bitcoin is member of the SHA256 family, and because of its hardware costs ($5000 to $13000 per Miner) is run by professionals. These professionals will not easily switch their expensive hardware to a new Coin. And this is why Bitcoin doesn't have any serious competition within the SHA256-family (PPC is a runner up, but I'm not aware of any shop that accepts them). And be aware: SHA256-hardware, physically cannot be used in sCrypt-networks, the opposite is possible but not profitable at all. The major coin in the sCrypt-family is Litecoin. And yes, Litecoin is a competitor to Bitcoin (which is a good thing). Litecoin is a keeper, it was the first in the sCrypt-family and its network has grown in 2 years time to more than 40.000 Miners (a stable and secure network indeed). In contrast to the SHA256, the sCrypt-family has many copycat-coins. But they all compete with Litecoin (not Bitcoin). Many Litecoin-copycats try to lure Litecoin sCrypt-miners to their coins, but that proves to be hard (but much easier than Bitcoin, due to the fact that many kids and amateurs, switch their relative cheap sCrypt-hardware for a few days to new networks to make a quick buck). In order to succeed, new coins need to attract Miners permanently (for security and supply) and it needs demand (which doesn't exist if it hasn't any major improvement). These copycat-developers try pump & dump schemes and are in no way competitive to Bitcoin (in contrast to what Tyler Cowen suggests).
In your graph BTC should be substituted with Cryto-Currency instead and perhaps that would help some of the naysayers understand that this movement is more than just BTC. Delorean was a car it eventually went bankrupt this is not to say that Cars weren't revolutionary. I remember when the internet came out. Some could never have imagined how it would change our life...1993-94ish was when I first heard about it.
You are correct: see the attached graph with "Decentralized crypto's". I have also included its failed predecessor "Centralized crypto's". They all failed (or still will fail) by their single-point-of-failure design (think of "Liberty Reserve")