A debate between an infamous bitcoin detractor and one of the cryptocurrency’s most well-known entrepreneurs made sparks fly in New York City Monday.
Hosted by the Soho Forum, a monthly Manhattan debate series, the event saw Erik Voorhees, the CEO of exchange service ShapeShift, argue that government-backed monies will eventually be replaced by bitcoin and blockchain innovations. The world’s largest cryptocurrency, he said, just needs gradual adoption to eventually triumph.
However, the debate was far from a one-sided showcase. There to represent the opposition, Peter Schiff provided more than a healthy dose of skepticism. Perhaps most damningly, he argued people are not currently buying into bitcoin or other cryptocurrencies to use them; they’re here to get rich, he said.
The economist said that bitcoin is primarily seen as a speculative asset. Moreover, even people who do plan to use bitcoin cannot do so easily.
Bitcoin is not, at present, a reliable store of value, he continued. Schiff pointed out that the price of a bitcoin can change hour-to-hour, which makes it difficult for people to price goods or negotiate contracts using the cryptocurrency.
“The biggest problem with bitcoin and why it can never be used as money is because [currency] has to be a reliable store of value, not just a medium of exchange,” he said.
Voorhees did not see market fluctuations as an issue.
He told the crowd:
“I remember when it was a big deal when bitcoin moved 50 percent. Today, it’s a big deal when it moves 10 percent. I think in a few years it’ll be a big deal when it moves 2-3 percent. While bitcoin is volatile today, I think this problem is self-correcting.”
Still, the event did see both provocateurs find common ground. Schiff, for example, doesn’t believe in fiat currency.
“The fiat system that we have now is not going to work,” but “replacing fiat currency with digital currency is not an improvement,” he said.
Gold or currency?
Another subject discussed was whether bitcoin can become a store of value to rival precious metals.
Touching on a familiar topic, Schiff trotted out the argument that gold’s long tenure in the market will make it hard to replace. Further, he argued it’s already surpassed its competition over the centuries.
“What are the odds that bitcoin’s the best cryptocurrency that’s ever going to be invented? … Nobody’s come up with a better gold,” Schiff remarked.
Here, Voorhees seemed to concede a bit to the argument, if on different grounds. Notably, he noted that the asset would likely be more susceptible to government bans than its more established competitor.
“Well, the government can absolutely outlaw bitcoin. More easily [than it would be to ban gold],” Voorhees said.
Elsewhere, Voorhees also conceded that bitcoin might not succeed in meeting all of the four classic functions of money.
In response to Schiff’s argument that the “crypto bubble will pop before the fiat bubble,” Voorhees acknowledged that consumers will likely ultimately play a role in deciding what kind of currency they want to exchange with, and whether it will be with cryptocurrency.
“The biggest obstacle to adoption is most individuals want governments to manage money for them. Until that changes, bitcoin will play second fiddle.”
But Voorhees did more than simply concede ground to Schiff.
In response to Schiff’s argument that the market is solely propelled by speculation, Voorhees noted that bitcoin can be used in cross-border transactions, is censorship-resistant and has a limited supply.
People transacting in bitcoin are also free of many of the restrictions seen in traditional financial institutions, including the fact that people cannot send wire transfers outside a bank’s business hours.
And an informal poll of the audience suggests this market may have won a few converts.
Soho Forum took a poll of audience sentiment before and after the debate, asking the audience if they thought bitcoin had a chance to beat government.
Notably, the yay votes rose from 40 to 55%, while the nay votes fell from 40 to 31%
Peter Schiff, Erik Voorhees and Gene Epstein image by Nikhilesh De for CoinDesk