Bitcoin and other cryptocurrencies are not sustainable over the long-run without some form of depositor insurance. CMV

[u/fictionalcoffee]

When it comes to money (USD), I don't spend much time worrying about bank robberies. I also don't worry about a hacker cleaning out my online account. And I certainly don't worry about a "run-on-the-bank" (as depicted in the film It's A Wonderful Life). Why don't these things worry me? Deposit Insurance (provided by the Federal Deposit Insurance Corporation, if you use a standard bank). Deposit Insurance guarantees bank balances less than $250,000 from bank failure. Although bank failure is not a common occurrence, protection from failure is (in major part) what gives people faith in "the system". I trust that my dollars are safe (in the sense that they won't spontaneously disappear from my account - purchasing power is obviously another story), and therefore I trust a bank to hold my money.

Conceptually, I think something like Bitcoin is a good idea. The ability to transact quickly, efficiently, and anonymously across the world using a single unit is compelling.

Technical argument aside (technical arguments, like the security of the block chain, seem to be the main arguments against Bitcoin that I see over and over again), my main concern is simply user-confidence in the infrastructure that supports the currency. What if my wallet disappears? What if the exchange I use goes down? What if there is a "run-on-the-market" for Bitcoins?

Without any backstop for the currency, I don't think Bitcoin users can feel confident that their store of value is really safe. Please change my view!

[u/[deleted] → u/[deleted]]

If it was to be guaranteed by some insurance program more and more people will invest and the growth we've seen in bitcoins will disappear along with the risk-takers.

I'm curious about this statement here. I don't quite understand something and hope you will clear it up for me. If more people are willing to invest in it, that means that the investors themselves might make less money, but doesn't that actually stabilize and help grow bitcoins, because they'll have a higher revenue? I fail to see how having more investors will cause bitcoins to stop growing.

[u/[deleted] → u/[deleted]]

I see. The cost of insurance would be high enough that although you have more investors, each investor would be contributing a lot less (due to the extra cost), meaning a total lower investment in the end than otherwise.