Select frequent criticisms:
– Economy can not work with a deflationary currency
– Threatening Governments & Order of Society

What’s the problem of deflation?
According to so called “Keynesians” among Economists, economies are driven by demand. That is, products and services are developed and sold to satisfy demands, that existed prior to the product development. Consequently demand is the critical factor influencing welfare measures, namely factors like GDP or more importantly, employment rates and conditions. According to this model, it is crucially important to provide people with incentives to spend their money in order to keep the economy afloat. An inflationary currency is a great means to achieve this objective, as the depreciation of each unit’s value makes it more rewarding to spend money sooner, rather than later. A deflationary currency would lead to “hoarding” of money and a bust of the economy. Additionally, with Bitcoins the economic cycles could no longer be controlled by printing money and are therefore believed to be more extreme.
Paul Krugman (Economics nobel price winner) described Bitcoin as another type electronic payment system and resembling a gold standard – promoting money-hoarding, deflation and depression.

While the Keynesian school is already questioned by many economists, there are good real-life examples that indicate problems. Take the electronics market, which can be considered deflationary for at least 20 years. Every consumer knows, that any device will be available for a significant discount just a few months later. Nevertheless there are no signs of a depression on the electronics market.

How sustainable is our economic model today?
Thinking it through, I am unsure about whether environmental factors might play a more important role than the relatively simple Keynesian model suggests. The economic activity during the last century was relatively constant in terms of almost unlimited economic growth based on cheap fossil energy and geographic expansion both inside industrialized countries (the U.S. are a good example) and spreading worldwide to emerging markets like Asia or South America.
The limits of these developments are clearly visible today, but will most likely be the root cause for economic problems in the near future, in contrast to taxes or monetary policies. As the main achievement of the western civilization was continiously lowering costs for the basics of living (mainly food and accomodation), its economy depends on this advantage to enable people to freely decide what to buy. This whole idea of consumerism is threatened, when the share of everyone’s income that is freely spendable, decreases (i.e. when you need a larger share to buy food to survive).

What does all this have to do with Bitcoin?
In my opinion it is incredibly short-sighted to dismiss Bitcoin as a concept, just because it threatens society and economy as they exist today. Even though the democracy we take for granted in Western countries has existed for more than just a few centuries as a general concept, it thrives only by continiously transforming and inovating itself.
Based on indicators like the amount of people participating in the democratic decisionmaking process or the growing inequality between different groups in society, I guess it is time for some fundamental changes. We might have reached a point, where the role of governments and states has to be changed fundamentally instead of trying to implement small reforms. If the current taxation system is not compatible with innovative forms of money, it’s a good reason to rethink this taxation system completely instead of leaving it to China to profit from macroeconomic advantages of crypto-currencies.
I can not predict, whether crypto-currencies like Bitcoin will be a temporary catalysator or a long-term solution to some of the problems we face with government-controlled fiat currencies, but judging from the attention it raises currently, I consider it to be higly impactful.
Let’s be optimistic and dream about a bright future. Maybe we will look back at fiat currencies the same way we look back to our first cell phones in a few years 🙂

P.S.: I’d love your opinions and thoughts! Even though I am pretty optimistic about Bitcoin I am not an unconditional fanboy and would love a discussion that adresses concerns and disadvantages, so please speak up no matter what you think 🙂

P.S.: Have a look at http://falkvinge.net/2011/08/21/bitcoins-deflationary-economy-not-a-problem-in-itself/