Review: BitCon: The Naked Truth About Bitcoin by Jeffrey Robinson

Since I read so much, I thought that maybe I can start posting reviews. I have already been asked by publishers to review other peoples' writings about Bitcoin, and I think I'm getting the hang of it. I take it seriously and I fully read everything that I review, and make highlights and comments. So let's start. Today I'll review BitCon: The Naked Truth About Bitcoin by Jeffrey Robinson.

Introduction

While the author obviously did a lot of research, my main problem with this books is the author’s bias. The proponents of Bitcoin are, with a handful of exceptions, presented as anonymous, hysterical and associated with ad-hominems, for example: “pretend-currency” or “the Faithful”. Their arguments are ridiculed and derided, for example “I’d been hearing this made-up baloney for months, over and over again, thrown out like absolute fact with nothing to back it up”. The sources of proponents he uses are mainly comments and forum posts. Personally, what I found most outrageous was that instead of calling Jon Matonis (Executive Director of the Bitcoin Foundation, who has been researching money for 30 years and held senior positions in banks and at Visa) by his name, he refers to him as “the Bitcoin Foundation Fountain type” [fixed] and “the same chap”.
The opponents, on the other hand are presented as rational, calm, they are named including their credentials and positions, for example “Yermack's explanation is a reasoned and rational one”. Their arguments are taken as unquestionable truth. He sources them from, among other things, personal interviews and blog posts.

Bias continues

The bias is all over the place. On one hand, he argues that “... all suspects are innocent until proven guilty …”, yet that does not prevent him from claiming that Ross Ulbricht is, as alleged by the US prosecutors, indeed Dread Pirate Roberts, prior to his sentencing. When addressing Bitcoin from the perspective of Austrian school of economics, he quotes three negative opinions, and ignores many others who are either neutral or positive about it, and instead of referencing research publications, he references blog posts.
When describing the position of the Federal Election Commission towards using Bitcoin in political donations, he writes that their decisions “... speak volumes about the confidence the FEC lacks in bitcoin”. I listened to recordings of both of the FEC meetings which resulted in this decision. The debate was mainly regarding applications of internal regulations and how to technically implement them and had nothing to do with confidence.
He says that he is “... skeptical of explanations where money is involved that are too complicated for an 8-year old to understand.”, yet I doubt anyone of that age can understand how the current financial system works. It probably takes at least a 12-year old, like Victoria Grant. Many if not most adults don’t understand it either.
The economic analysis is a mixed bag. On one hand, he describes the omnipresent hype, fraud, bubbles, pump and dump schemes, and so on, and how they are present a problem. I have no issue here and even agree to a large extent, just in one occasion, he describes a pump and dump scheme and incorrectly labels it as a ponzi scheme. Another thing that I agree with him is that Bitcoin is not suitable for money laundering (for similar reasons as he presents).
On the other hand, he lacks understanding of largely uncontroversial concepts like the liquidity premium and transaction costs. Mainly he ignores the hidden costs of a trusted third party and the property rights enforcement of media of exchange. An example would be the costs associated with identity theft, which he does not mention at all. Without these, a lot of economic phenomena cannot be understood, not merely Bitcoin.
He lacks a theory of evolution of media of exchange, and appears to think that one day he wakes up and something that didn’t exist before is now a “currency”. Again, without such a theory, a lot of economic phenomena cannot be understood.
He complains in multiple places that merchants tend to use bitcoin only as a payment mechanism rather than a currency, and does not understand the relevance of this (he writes for buyers, “There is no monetary benefit … [n]or is there any benefit of convenience”). He misses that, among other things, merchant acceptance increases liquidity. When in Can Bitcoin Become a Major Currency? Lawrence White and William Luther explained the economic relevance of the usage as a payment mechanism, I thought they were joking for writing something this obvious, but apparently it’s not as obvious as I thought.
Jeffrey Robinson portrays, M-Pesa or Amazon Payments as potential competitors to Bitcoin, but misses, among other things, that they do not work internationally. Amazon Payments only works in the US, the Kenyan M-Pesa only works in Kenya. International trade is a non-negligible proportion of global trade.
The more controversial economic topics, such as deflation, velocity, intrinsic value are portrayed in a one-sided way and again the statements of the sources are taken as undeniable.
I would also complain about Jeffrey’s statist bias, but I think it probably would be unfair, because this is widely present everywhere and I don’t want to single him out.

Conclusion

In summary, don’t buy this book. There are better explanations of Bitcoin, and better critiques of it as well (indeed, it’s probably better if you read the original critiques he references). If you want to read more about bubbles, I recommend Boombustology, and if you want to read more about taxation and Bitcoin, read Jason Tyra’s blog.

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