Eric Posner on Bitcoin as a payment protocol

Interviewed by Goldman Sachs, he comes to much the same conclusion as I did in my previous post on the attendant fees:

Eric Posner: I think there could be some advantages of usingBitcoin over existing payment systems, but these advantages are not as obvious as they might seem. For example, probably themost compelling advantage is that Bitcoin transactions seem to becheaper. Existing payment systems are often quite expensiveeither because somebody effectively has a monopoly, there are alot of government regulations that are costly to comply with, or thecompanies that offer these services provide certain protectionsthat people want and are willing to pay for.In the case of Bitcoin as it stands now, these costs are largely avoided, at least to the extent that you can technically send bitcoins from one wallet to another wallet without incurring fees;no middlemen are required to do this. The problem is that mostpeople will end up relying on intermediaries when they use bitcoin,not in least part due to security concerns around storing bitcoin onhard drives that can crash, be hacked, or, as in one famous case,thrown away. Most people will buy bitcoins from exchanges and use bitcoin service providers like Coinbase or Bitpay to store their bitcoins and transfer money to somebody in another part of the country or the world. Then that person will maintain their bitcoinswith a service provider and/or will convert the bitcoins back into themoney they use. And perhaps the same or other intermediaries willprovide insurance or protection from exchange rate volatility. Whenyou throw in all of these things, the effective price of using bitcoinis going to be greater than zero. Is it going to be as much as itcosts right now to use your credit card or a bank wire? Maybe not, but it is too soon to tell.

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