Bitcoin just crashed 50% today, on news that the Chinese government has banned local exchanges from accepting deposits in Yuan. BtC was trading over $1000 yesterday; now it's down to $500 and still falling.

Good.

I want Bitcoin to die in a fire: this is a start, but it's not sufficient. Let me give you a round-up below the cut.

Like all currency systems, Bitcoin comes with an implicit political agenda attached. Decisions we take about how to manage money, taxation, and the economy have consequences: by its consequences you may judge a finance system. Our current global system is pretty crap, but I submit that Bitcoin is worst.

For starters, BtC is inherently deflationary. There is an upper limit on the number of bitcoins that can ever be created ('mined', in the jargon: new bitcoins are created by carrying out mathematical operations which become progressively harder as the bitcoin space is explored—like calculating ever-larger prime numbers, they get further apart). This means the the cost of generating new Bitcoins rises over time, so that the value of Bitcoins rise relative to the available goods and services in the market. Less money chasing stuff; less cash for everybody to spend (as the supply of stuff out-grows the supply of money). Hint: Deflation and Inflation are two very different things; in particular, deflation is not the opposite of inflation (although you can't have both deflation and inflation simultaneously—you get one disease or the other).

Bitcoin is designed to be verifiable (forgery-resistant) but pretty much untraceable, and very easy to hide. Easier than a bunch of gold coins, anyway. And easier to ship to the opposite side of the planet at the push of a button.

Libertarians love it because it pushes the same buttons as their gold fetish and it doesn't look like a "Fiat currency". You can visualize it as some kind of scarce precious data resource, sort of a digital equivalent of gold. Nation-states don't control the supply of it, so it promises to bypass central banks.

But there are a number of huge down-sides. Here's a link-farm to the high points:

Mining BtC has a carbon footprint from hell (as they get more computationally expensive to generate, electricity consumption soars). This essay has some questionable numbers, but the underlying principle is sound.

Bitcoin mining software is now being distributed as malware because using someone else's computer to mine BitCoins is easier than buying a farm of your own mining hardware.

Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)

Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).

It's also inherently damaging to the fabric of civil society. You think our wonderful investment bankers aren't paying their fair share of taxes? Bitcoin is pretty much designed for tax evasion. Moreover, The Gini coefficient of the Bitcoin economy is ghastly, and getting worse, to an extent that makes a sub-Saharan African kleptocracy look like a socialist utopia, and the "if this goes on" linear extrapolations imply that BtC will badly damage stable governance, not to mention redistributive taxation systems and social security/pension nets if its value continues to soar (as it seems designed to do due to its deflationary properties).

To editorialize briefly, BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. Which is fine if you're a Libertarian, but I tend to take the stance that Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density (because it relies on simplifying assumptions about human behaviour which are unfortunately wrong).

TL:DR; the current banking industry and late-period capitalism may suck, but replacing it with Bitcoin would be like swapping out a hangnail for Fournier's gangrene. (NSFL danger: do not click that link) gas gangrene.