# Megan McArdle is Wrong About Bitcoin

Megan McArdle’s latest article Bitcoin Is an Implausible Currency has generated significant discussion, with over 700 comments as of 1/2/2018. At this point, there is no question that Bitcoin has entered the ‘mainstream’, and there are more people who know what Bitcoin is than don’t.

She writes:

It’s not competitive as a payment system, so maybe its value is as money. But it makes terrible money.

She writes sorta a terrible column.

But in the West, where most of the world’s money is, how many people are worried about that? Inflation is low. Moreover — and much more importantly — most of the people with serious savings no longer do that saving in banks, where their savings is vulnerable to inflation risk.

Depends on what you want to buy. As many can attest, inflation is at nosebleed levels for healthcare, insurance, rent, education, and even phone and internet plans.

But bitcoin has real disadvantages, too: A USB drive is easier to steal, or lose, than a truck full of gold bullion.

It is much easier to separate someone from their gold than from a brain wallet or a memorized 12-word mnemonic seed. As a consequence of the Russian Revolution in 1918, people were literally separated from their private property. But you cannot steal a brain wallet. Although that is an extreme example, civil forfeiture by over-aggressive law enforcement agencies is a problem. Keeping money in crypto currency ensures the greatest likelihood that you will be able to keep what is rightfully yours.

And bitcoin is a good bit more volatile than gold, which means that you could suddenly discover that your carefully smuggled savings are worth very little when you need them. Even if “when you need them” is “next week.”

So are many stocks, too.

Perhaps the biggest weakness, however, is that if bitcoin really turns out to be a good way to keep governments from controlling their economies and their citizenry, then governments will crush it.

As I wrote in 2015 when Bitcoin was only at $500, most governments would prefer to regulate and tax Bitcoin than ban it. If governments wanted to crush Bitcoin, they would have done so years ago. Bitcoin can be used for nefarious purposes–but so can anything, such as cash and gold. When I bring this up, bitcoin enthusiasts tend to insist that this can’t happen. But in fact, bitcoin has already turned out to be in some ways uniquely bad at hiding money, because the blockchain is a ledger of every transaction; if you can trace an account to a real person, you know exactly what they’ve bought (as Silk Road customers discovered to their displeasure). Moreover, governments have, over the past 30 years, proven extraordinarily adept at crushing any threat to their power to monitor and tax their populace. This is the most egregious error of her column and demonstrates that she did no research whatsoever in making this unsupported statement. The article she references is Prosecutors Trace$13.4M in Bitcoins From the Silk Road to Ulbricht’s Laptop, as evidence that Bitcoin is not anonymous, but she completely misses how Bitcoin works.

Bitcoin ledgers are agnostic to physical location. If Ross took the wallet from his laptop and put it in his pocket, then they would be ‘traceable to his pocket’ by her logic, which is laughable. The physical location of a wallet has nothing to do with the network itself. All coins are traceable to their final destination, but such a destination is the final node, not a physical location and offers no information as to who actually owns the coins or where they are. Ross was captured not by tracing the Bitcoins on his laptop, but because he carelessly leaked identifying information through his postings on forums and other activity, which allowed investigators to find him. Silk Road customers were identified through customer address database records, not Bitcoin.