On Wednesday, March 14 Professor Gerald P. Dwyer of Clemson University visited St. John’s to give a lecture titled “Bitcoin and Blockchain: Revolution or Mania?” Dwyer earned his Ph.D. in economics from the University of Chicago in 1979, and his recent research focuses on financial crisis, implications for economic growth as well as the development of cryptocurrencies and the innovation of the blockchain.
In his lecture, he discussed the current and potential uses of Bitcoin, including the cheap to non-existent fees for international transfers of Bitcoin, the fully digital platform that most innovation seems to be heading toward and the autonomous nature of the currency that allows Bitcoin to circumvent traditional institutions like banks or governments.
When compared to stocks, Bitcoin has some advantages, including the lack of stock brokers or middle men, the ability to place limit orders and the choice of many different digital exchanges where one can trade fiat money like USD for Bitcoin.
Dwyer stated that he did not yet know if Bitcoin was a bubble, as Bitcoin is currently highly volatile, referencing the jump from hundreds to thousands of dollars in just a few months. He added that Bitcoin could become more viable if it begins to stabilize.
Dwyer also mentioned that a few startups will begin to offer futures, options and hedging for Bitcoin, and the currency is being traded on the Chicago Mercantile Exchange, as well as in the Netherlands.
Government regulation for Bitcoin is also a common topic of debate, as the decentralized currency is very difficult to track. The way that Bitcoin is built allows it to circumvent capital controls, and both state and federal governments are having difficulty taxing Bitcoin profit and keeping track of illegal activity, such as money laundering.
Bitcoin and cryptocurrency exchanges in the United States are also required to obtain licenses for money transmission. Initial coin offerings or “ICO’s” often offer monetary rewards for early adopters of new cryptocurrencies, which could be considered by law an illegal investment scheme.
Many new situations like these have given rise to a new wave of financial regulations, but the reach of governments may be limited to the secure and anonymous nature of digital currencies. China shut down Bitcoin exchanges, ICO’s and miners, claiming that the electricity needed for Bitcoin mining was too strenuous and illegal activity was too easy.
However, it is also apparent that the financial control of China’s central bank was threatened by the new cryptocurrencies.
Dr. Douglas Rasmussen, professor of philosophy at St. John’s, said, “Bitcoin is very new and, together with the blockchain technology upon which it is based, may offer a workable alternative to state sponsored money, especially if high rates of inflation should occur.”
Dwyer ended by stating that Bitcoin could work, as it all makes sense and is put together very well. He asserted that the major innovation of the blockchain is the real difference.
However, he believed that it is unlikely that United States citizens would be paying their rent with Bitcoin, as people prefer to use the same currency for everything such as purchasing and paying taxes.
Dwyer also stated that even smart phones were unfathomable not long ago, and an innovative digital technology like Bitcoin certainly has a chance.
