Bitcoin Is Dead, Long Live Bitcoin
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The problem however is that a nation's currency is arguably the primary source of it's sovereignty. Whomever controls the currency primarily used in a nation, controls the nation. So it's safe to say that no nation is going to let bitcoin or any other currency take hold for widespread commercial use in lieu of it's sovereign currency - that's a hallmark of a failed state.
In fact that's why when regulators declared bitcoin as a commodity it was such a big deal. The US doesn't really care because we haven't had commodity money since the 1970s, but the idea that if enough people decided that they wanted commodity money, they would arguably have a medium with which to do it with that wasn't tied to any state.
So as with every product, unless a massive number of people decide to stop using their home currency and start using bitcoin, then bitcoin will "fail."
Whether it pivots to some kind of credit system or not is largely immaterial because of the potential it had.
It's like if we created Artificial General Intelligence and it decided to just write movie reviews forever.
How does Canadian Tire Money work then? :^)
Not really. Many countries do not mint their own currency, and other mint currency but peg its value to another.
https://en.wikipedia.org/wiki/Currency_substitution
What constitutes sovereignty is complex. It mostly comes down either legal recognition of sovereignty (de jure) or physical/guns on the ground control (de facto).
It usually comes down to the latter. De jure sovereignty without physical control gets overrun by de facto.
I wonder if either Japan or China would grant de jure sovereignty to a seasteading platform anchored to that sinking island both of them want so badly? Then the new nation could grant their supporter some economic rights in exchange for military support.
and yes sovereignty is of course complex, but if you can't control how your economy runs then you can't control your nation. Forcefully seizing notes or issuing new currencies is hallmark of a power transfer.
Likewise, if people can use Bitcoin or some other digital currency to achieve some measure of independence from existing states, it will have achieved something important. Perhaps something important of the scale you mention will come about, but it will take more time.
If Bitcoin could become stable, then it would offer the freedom of converting wages into a more stable form. A Venezuelan would expect the purchasing power of today's wages to be 4% lower in just one month!
At least with stocks and companies, the stock actually means something: typically a vote for the board, or access to a dividend.
It is sad to see that this side of Bitcoin is not stressed more often.
BTC on the other hand is inflationary, due to the (artificial) cap of 21 Million BTC.
In any case, inflationary vs deflationary is a moot point. Too much of either side is bad. The important part is price consistency, which everyone can agree is relatively fair. 2% to 3% inflation (loss of value) is much more consistent than anything that BTC has accomplished... with wild swings of 100% to 1000% on some years.
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I'm intrigued by DOGEcoin, explicitly because it adopts an inflationary model with infinite supply. I think that sort of model is more fair in the long term, and certainly more fun.
IE: If you actually want to make money, you have to go equities or start up a company.
Bitcoin is tiny, its measured in billions. How much did the Canadian currency just lose in the last view weeks? That amounts to hundreds of billions of vaporized wealth.
Huh, that is a really interesting question.
It's not as trivial to calculate as it is for Bitcoin, where you can multiply the moneys held by the change in exchange rate -- essentially no prices as denominated in BTC, while most prices most Canadians deal with are denominated in CAD. For most Canadians, the ratio of their income and rent or groceries will stay the same, so in some senses they haven't lost anything. But the price they pay for imports, like computers and oranges, will go up, so they have definitely lost something. I wonder what the balance comes out to.
In the long run, this can depress foreign prices and even increase manufacturing demand here due to lower labour costs. But these changes don't happen overnight.
(This assumes you are treating BTC as a currency, which appears to be the OP's intent.)
Why is active, central, management necessary?
>The biggest economic problem to me has always been an unintelligent control of the money supply.
The Bitcoin paper [0] lays down the rules of control and many have been able to follow it; In what way is that unintelligent?
If the USA suddenly adopted bitcoin as the official currency, you would see insane deflation. If people stopped using bitcoin as much, you'd see strong inflation.
Central banks manipulate money supply to keep prices steady.
That's why I can sign a loan for a house in dollars. But you would be insane to sign a loan for a house in bitcoin. The federal reserve will keep inflation from 0-2%. We can count on it. Bitcoin who knows.
Debt currencies are used for signing loans.
Anyway, there is probably a way to add an inflation metric over the blockchain based on it's length (or #transactions, or avg. transaction value, etc.), where some value equivalence can be drawn between older coins and newer coins, if it's really desired.
In fact it's the opposite I think that's its biggest strength.
If no one else sees it that way however, then it will not live up to it's potential because there is no reason for them to move over to it. Adopting bitcoin is a political decision because money is as equally political as it is economic.
It's super complex because the vast majority of people have no clue the power and complexity that sits behind the money they hold in their hands. They just see it as the next bag of groceries, or electricity payment.
how's that divide between the rich and poor going? The fed has been upwardly redistributing wealth especially dramatically for the last 40 years since when the Nixon closed the gold window. I suppose if you think creating a kleptocratic state is beneficial for the future, then your statement rings true.
Have you been hiding away for the last 7 years? There are so many objections to central banks its difficult to know where to start, but just one question, you truly believe any group is capable of making gross monetary decisions that affect billions of people didn't we go with capitalism because markets beat kings?
The reverse is also true--any significant currency creates sovereignty by elevating the power of those with the greatest influence over that currency.
In the case of Bitcoin, the "core" developers, in addition to the highest-volume miners, have been elevated to the sovereign position. Rather than a distributed stateless currency (which I would argue is impossible), what Bitcoin has become is a currency whose sovereigns are accidentally selected, poorly organized, and not responsible to its currency users in any direct way.
There is a famous concept called the "tyranny of structurelessness," which says that there are always political structures when groups of humans interact, the question is just whether they are defined or hidden. A "structureless" organization, rather than egalitarian, is governed by a small secret clique that assembles for unknown or possibly trivial reasons. There are no clearly defined procedures for removing or adding sovereigns, or for adjudicating disagreements.
Does this sound like Bitcoin? Based on the articles I've read this week, it does to me.
Edit:
https://en.wikipedia.org/wiki/The_Tyranny_of_Structurelessne...
But how about cats?
Also, just to compound things - this gets even worse and more magnified with investments from VC's etc... which already have outsized power. Now they become the de-facto power holders in a sovereign currency.
Talk about disruptive technology.
VC's are part of the larger global equity market, taking funds from LP's such as pension funds in the same way that Goldman and the rest do. The fact that they are smaller in total dollars doesn't mean they have structurally different goals.
At the end of the day a VC has to show returns to the LP in the same way that Wall street does with their private equity departments.
In the case of public companies, the company itself has the power over pricing as long as they are doing well (see: Amazon) when they aren't it's private equity that makes the difference and you are back to where you started.
One may frame this whole "failed versus not failed" as a power struggle between two camps:
a. Those who own a large stake in the original BitCoin - such as the developers, miners, venture capitalists, the Winklevoss Twins, etc.
and
b. Those who don't own a large stake in BitCoin currently, but wish to own a large stake in the dominant cryptocurrency. Wall Street...
When you attack BitCoin on any grounds, technological or otherwise, you are attacking those stakeholders.
Edit. Drunk and offensive. But my point still stands.
a. To create a new network for digital financial transactions? This seems to be what Fred Wilson is writing about, and I agree with him that the jury is still out.
b. To create a distributed currency free from government bureaucracy? Bitcoin seems well-separated from the U.S. federal government, but lately it also seems like Bitcoin has organically sprouted its own messy government bureaucracy.
Bitcoin, nor its tokenholders, cheerleaders, etc. do not have the violence-backed power to tax. So while it may have the nasty trappings of a bureaucracy, I don't think it sinks to the level of a government bureaucracy.
However, I wouldn't quite say that it describes Bitcoin, or rather, it only describes it up to this point. The real, ultimate strength, I think, would be a Bitcoin that has a market for governance. To wit, you'd have competing implementations, each of which would adopt some protocol changes, but perhaps not others, and each node and miner would be voting on the network (by participating, mining, etc.). Any majority would eventually create a longer fork and win out. This is what Gavin has been talking about for some time.
The real question is whether the network can withstand the constant possibility of forking, and some frequency of actual forks. I think it can, and would represent a dramatic shift of how Bitcoin operates. I see it as a bright new future and the ultimate in anti-fragile structure, while obviously others see it as a fundamental betrayal.
I'm far from being a Bitcoin expert but from understanding: In the end Bitcoin is just a piece of Open Source software. Every user (including the miners) decides which version of the software (and ultimately which version of the blockchain) they like to use. Everyone can write his or her own version of a bitcoind and publish it.
The miners ultimately decide which blocks to accept so they have some special power but only as long as people use the same blockchain. The core devs have the power to persuade and influence the community but they can't force no one to use their client.
Bitcoin is more like a democracy where currently some citizens want to leave the current system and build their own democracy with different rules.
No state or political entity will EVER support en masse a currency that it does not control and/or is NOT backed by another state with larger economy!
In Sept 16 1992 the BoE withdraw the Pound from the ERM as a precaution after the most fierce attack the BGP ever received. The cost was ~ 3-5 Billion pounds. The GBP came out wounded, but it came out in one piece because the government had a say. Millions of people in the UK lost money indirectly, but the government was able to minimize the losses. Now imagine if the UK that day had the bitcoin, what would you have them do, block ISP traffic? How would you explain what happened to the population?!
Using BTC as a state currency is not just anti-democratic, it is pure insanity.
No nation state would ever encourage it, but in theory it would flatten the world to the greatest extent ever - moreso than any transportation technology (shipping, airfreight etc...) ever.
If anything, it would vastly concentrate power further in the hands of a few--except this time, those few would be the miners and core developers.
Say "the people" wanted to vote to increase the pool to 25 million coins, instead of 21. That is a pretty basic form of political power to exercise, saying "we want to change this structure that affects our lives, let's vote on it".
How would "the people" hold that vote?
The answers I've gotten in the past, when I ask this question, have been one of:
* Just patch the software, and if 51% of the miners accept it, that's it!
* Currency shouldn't be under democratic control.
It's for that that I could never, ever endorse Bitcoin in any way. My interest is in pushing for a greater distribution of power--less concentration in the hands of a few--and doing so that actually engages with everyone, whoever they are, open source dev or not.
If power moved from governments to a handful of developers "it would completely upend the political power structures."
It is democratic is because people are voluntarily adopting BTC where alternatives exist - which is unprecedented in the history of money.
They vote by acting.
Voting is the act of expressing a preference in a framework of governance that lets people engage with the governing structures and policies, and these days we also take it to mean that each person gets a vote so long as they're a citizen--they don't need to be rich or even literate. That isn't built into Bitcoin anywhere. It's antidemocratic because there is no way for every single user to express a preference in its design or operation.
That doesn't seem to bother the bitcoin advocates I've talked with, either. The sense I get, and I realize this is not so charitable, is that they look at it as a way to be the guys in power in this new system, and aren't so keen to bake in some sort of voting because it'd just take that away again.
Forbid businesses from accepting BTC. It's that simple.
The actual game of business is played out in the provision of goods & services that people want. Currency is the score. You need a means of keeping score in order to play the game, and when one doesn't exist, it will be created. And it helps if more people agree on the means of keeping score; it makes it easier for them to play together. But it doesn't really matter whether that's dollars or euros or pounds or drachmas or cigarettes. People use the currency that the people they want to play with use; the dollar is popular because many people want to play with the U.S. They don't adopt a new currency unless there is no alternative way of keeping score.
The problem with Bitcoin is that most mainstream goods & services providers didn't really want to play with the people who used it. When they did, they went through intermediaries like Coinbase who immediately exchanged it for dollars. Bitcoin caught on because there was a vacuum in the currency space for people that wanted to trade illegal drugs or move money out of China. It fails because this vacuum doesn't extend to the majority of the population.
It's worth remembering this when evaluating other emerging technologies. Look for what people want, places where there's a current lack of available solutions, and ignore the ones that theoretically could change everything if only large groups of people did things that aren't really in their personal interest.
Not to mention the inconvenience/logistical inefficiency of having to have a good that interests the seller of your desire, or finding a trading chain. I guess you could create a virtual trading chain that automatically resolves those conflicts (if I recall correctly that's more or less the idea of Ripple), but if the chain fails in the middle the transaction is compromised, and you now depend on a high level of network activity for a viable chain to allow you to trade.
[1] https://en.wikipedia.org/wiki/Bohnanza
[2] http://www.amazon.com/Z-Man-Games-71220-Chinatown-Board/dp/B...
Bitcoin never had that potential. Regardless of it's theoretical capabilities, the general public would not have been able to use it effectively. It requires a computer, knowledge of digital security, the idea of 'backing up' your money and keeping that safe, and all-in-all, a new approach to handling money altogether (which also requires electronics on the user's part).
The average member of the public could handle all this, sure, but half of people are below average. Bitcoin is also more difficult to understand than cash; there's a lot more mental overhead. Alternatively you can let a financial institution handle your bitcoin for you, but then there's no real difference between btc and dollars - at this point, they're just numbers on a ledger.
Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, and Spain might disagree.
Those invested financially have very good reasons to believe in solutions that will retain their investment, and dismiss solutions that put them at risk.
For a currency, the US Federal Reserve works the same way; there's only limited speculation (based on public data) until they make an announcement about monetary policy, and the discussions leading up to that announcement are also kept very secret to avoid disruption to the market.
A decentralized currency where the development, mining and discussion is controlled by less than a dozen people which is a joke
For instance, an employer has the right to fire under-performing employees, and the right to make the decision about that on their own (as long as their decision does not conflict with other fundamental rights, such as equal protection, that society has recognized). They are explicitly permitted to make bad decisions. A society that only gave you the right to make good decisions would not be a free one; a society that prohibited discussion about whether it was a good decision would also not be a free one.
Basically, relatively few people have a problem with the idea of censorship; a certain amount of moderation is necessary on an Internet forum to prevent shitposting. What people are decrying is misguided, stupid, and / or malicious censorship - either due to juvenile power games on the part of the moderators, or due to an external agenda that said moderators are pushing.
Again: why does anyone think you can get a decentralized structure out of a property-norm design (commodity money, held privately as capital) designed to create centralization and hierarchy?
https://www.reddit.com/r/Bitcoin/comments/411bqw/cryptsy_clo...
Bitcoin is a never ending drama rollercoaster but I still use it and I hope eventually some sort of solution is reached
Well, if they had no idea that they were missing all those bitcoins, then the reason is plain ignorance on the depositors' part, and criminality on Cryptsy's part.
Banks are fractional reserve because at any given time they don't have enough cash to pay demand deposits but that's because they've lent that money out. So while banks don't have cash they do have _assets_ that could be sold or borrowed against to fulfill deposits.
If I have an uninsured, full reserve bank and somebody steals half the deposits I don't become fractional reserve, I become _insolvent_. Just like a fractional reserve bank whose assets drop significantly in value is insolvent.
That can cause huge problems but short of the government collapsing it does serve to limit the volatility of a currency. In contrast, Bitcoin has absolutely no value beyond the social consensus. It's very easy to imagine scenarios where the value of any stored Bitcoin you have craters overnight: major miners run out of VC cash & shut down, you're on the wrong side of a fork, a major competitor launches, etc. In every case, the floor price is zero and there's no recourse if you fail to convince someone else to accept it at the price you think is fair.
This is a tautology. What you say is true of all investments (which bitcoin does not claim to be, but obviously is in practice), because that's what an investment is: an asset whose value is expected to change over time.
To the extent that bitcoin sees this effect "worse" has nothing to do with its status as an investment and far more to do with its total lack of regulation. An investment run by community consensus works well when there is consensus, and falls apart when there is none.
Which is why the US Government forces public companies to release earning statements. Because discussion is more important than burying your head in the sand and pretending that everything is a-okay.
Until the BTC community can see beyond extremely short-term profit-driven thinking, I think it is fair to call the community as a whole a failure. US Public Companies, and the commercial banking system even, have evolved beyond that.
I suppose what I meant was mainly regarding the current issues going on in the bitcoin community- as you say, with any investment discussion of problems can lower the value. And it just so happens that we are in a situation today where the people most heavily invested in it financially have the power to censor any discussion of problems with bitcoins.
Bitcoin's first killer app was drugs. Then Silk Road I and Silk Road II were taken down. That put a dent in the price.
Currently, Bitcoin is a way to get yuan out of China and convert it to dollars or euros, despite China's exchange controls. Most of the mining and the exchange volume are in China. Buying Bitcoin with yuan and selling it outside China is technically prohibited by the People's Bank of China, but they haven't cracked down hard on it. Yet. Mining is also a way to convert yuan to dollars. Miners in China can also qualify for the loans and subsidies the government of China gives businesses.
Bitcoin as a general currency for transactions just isn't happening. The real transaction costs are too high. There's volatility risk. There are exchange costs getting in, and exchange costs getting out. (At the retail level, those are high; Robocoin ATMs have a buy/sell spread of about 15%) There's also the substantial risk that the exchange will fail or steal your money. (This got better in 2015, but until then, more than half of Bitcoin exchanges went bust. It wasn't just Mt. Gox.) Paying 1% - 3% to Visa looks good compared to that, especially since buyers get protection against merchant fraud.
Bitcoin as a speculation looks good some years, and bad in others. It's like a penny stock, except that Bitcoin is zero-sum. There's no intrinsic value, and no fundamentals. It's all greater-fool speculation.
The impressive thing about Bitcoin is that the system is well behaved in the presence of a very high level of criminality. Few, if any, other distributed computer based systems can make that claim. It would be nice if DNS or BGP or SS7 worked that well.
1. a 32 MB block, when filled with simple P2PKH transactions, can hold approximately 167,000 transactions, which, assuming a block is mined every 10 minutes, translates to approximately 270 tps
2. a single machine acting as a full node takes approximately 10 minutes to verify and process a 32 MB block, meaning that a 32 MB block size is near the maximum one could expect to handle with 1 machine acting as a full node
3. a CPU profile of the time spent processing a 32 MB block by a full node is dominated by ECDSA signature verification, meaning that with the current infrastructure and computer hardware, scaling above 300 tps would require a clustered full node where ECDSA signature checking is load balanced across multiple machines.
For context, a meager 300 tps is less than 10% of what VISA does - hence this solves no long standing problems in Bitcoin, yet it condemns all the nodes to run in compute clusters in datacenters. Naturally, "small blockists" as we're called, point out that this isn't how Bitcoin works today at all. Forcing nodes into compute clusters in remote datacenters is a major, sweeping departure from nodes running on home networks with consequences both forseeable and unforseeable.
[1]: https://blog.conformal.com/btcsim-simulating-the-rise-of-bit...
Pieter Wuille's work in libsecp256k1 promises to improve verification speeds on 64-bit CPUs by as much as 700%, and it's set to be deployed on the network as early as February.
This will hopefully be enough of a boost to reasonably process 2MB blocks on a desktop PC. This desktop processing goes very underappreciated by most onlookers. Imagine if you couldn't run a BitTorrent client on a home PC? To put it mildly, I would have an issue calling BitTorrent "peer-to-peer" in that case. For example, it would be absurd to out-and-out need a remote compute cluster to seed or leech torrents.
> And what year would 32MB blocks be needed in and what processors would be available in that year?
The "big blockist" proponents actually contended Bitcoin dies without 20MB blocks starting this month, January 2016, and doubling every two years. Going by their original propositions, we would have >32MB block capacity by around this time in 2018. How much do you think desktop PC performance will have improved by then? And this is to say nothing of the bandwidth costs [1].
And I don't remember seeing anyone call for 20MB blocks. The debate looks more like 1MB vs. 2MB vs. 8MB etc.
What you will surely find is that maxing out your CPU at 100% for hours on end isn't very fun and isn't necessarily conducive to getting other work done at the same time. This is again to say nothing of the bandwidth requirements, streaming videos or playing games for example may become out of the question depending on the quality of your network connection.
This is to say, at 1MB blocks, full nodes on the desktop are already becoming problematic for some users. The warning signs are as clear as day. What's more, to even get the performance of full nodes on desktop to this level has been a monumental feat and one largely spearheaded by the so called "small blockists" - th efforts of Dr. Adam Back, Gregory Maxwell and Dr. Pieter Wuille have been absolutely essential to making Bitcoin full nodes at least runnable on consumer hardware. For example, Greg Maxwell claims testing an original version 0.1 full node would take upwards of _20 weeks_ to sync fully.
Second, Gavin Andresen originally proposed 20MB blocks starting January 2016, and doubling every two years [1]:
> CPU and storage are cheap these days; one moderately fast CPU can easily keep up with 20 megabytes worth of transactions every ten minutes. > > Twenty megabytes downloaded plus twenty megabytes uploaded every ten minutes is about 170 gigabytes bandwidth usage per month – well within the 4 terabytes/month limit of even the least expensive ChunkHost plan. > > Disk space shouldn’t be an issue very soon– now that blockchain pruning has been implemented, you don’t have to dedicate 30+ gigabytes to store the entire blockchain. > > So it looks to me like the actual out-of-pocket cost of running a full node in a datacenter won’t change with a 20 megabyte maximum block size; it will be on the order of $5 or $10 per month. > > I chose 20MB as a reasonable block size to target because 170 gigabytes per month comfortably fits into the typical 250-300 gigabytes per month data cap– so you can run a full node from home on a “pretty good” broadband plan.
That we now see Gavin entertaining a much lesser fork - to 2MB instead of his previously claimed "safe" 20MB - speaks volumes about the severity of this issue.
Now, the Bitcoin core team has proposed a similar increase to 1.6MB effective through SegWit. Hence, the divisiveness of this issue isn't just about the numbers, but it is regretably devolved into a political power struggle with one side apparently wanting to demote the other side. "Big blockists" have long seen no harm in putting full nodes datacenters, backing their logic up with such gems as "Satoshi said this was fine 8 years ago therefore it's fine now". Meanwhile the "small blockists" - who are comprised of the very people who optimized Bitcoin full nodes to the point where we can now have this very debate - believe you need desktop PC users of full nodes to have a truly P2P network.
[1]: http://gavinandresen.ninja/does-more-transactions-necessaril...
2. Nor has anyone presented me a compelling reason to get bitcoin (other than the future). Off the top of my head, if a company offered me an account that would take care of my online transactions in a secure way using Bitcoin, I might be interested. Maybe I'd put a few hundred in it each month and use it for random expenditures, and hopefully get access to some cool micro-services.
But I have zero awareness anything like that exists.
3. If it's to succeed as capital, it will be a daring bank that creates their own bitcoin equivalent... followed by one of the norwedish countries making their own national bitcoin. Then the floodgates will open.
It's miles ahead of any other payment system I know, including cash (because you don't have to be in proximity of the recipient).
Who exactly are you buying plane tickets from?
The last time I bought tickets, it took less than a minute to pay with a credit card. I spent more time searching for a flight with wifi.
Bitcoin transactions can take up to 10-15 minutes just to complete.
Funny, because the times I have used Bitcoin it has taken a solid hour, or more, for the payment to 'complete' due to the confirmations required. This for pathetic, tiny payments (like $10 or so), When using a card for airline tickets, for thousands, it takes seconds.
There are other sites that sell things for Bitcoins that are not drugs. But there aren't that many of them.
You have to get the banks to support Bitcoin so you can exchange from Bitcoin and back and that hasn't happened on a large scale yet.
When I went to buy Bitcoin I saw a lot of Russian based sites, and not sure I could trust my bank account info with them as they might be run by the Russian mafia for money laundering.
But there's always another market. And there always will be.
Next question for my adoption is: I want to shop anywhere online. Do they have a browser extension that can (1) handle payment processing anywhere and (2) convert my bitcoin to cash for vendors that don't accept bitcoin.
http://www.mensk.com/shift-card-bitcoin-visa-debit-card-that...
Paypal is a terrible organization that has been setting itself up for a huge class action lawsuit for a while. The problem with Paypal is very simple. As a seller, you have absolutely no way of verifying that the buyer is the actual buyer, but you are held financially responsible if they are not. So what happens is people are constantly using stolen paypal accounts to make transactions. Paypal then reverses those transactions 24-48 hours later. Paypal refuses to give you any information up front about the buyer (the very same information that they use to verify that it was a stolen account after the fact, the very same information they use to flag the transaction and alert the real owner [but not the seller]), or any information on the criminal after the fact without a court order. So as a seller, there is no way to protect yourself against people using stolen paypal accounts. They are protected by the walled garden of paypal. Even though they have complete control over the security of their site and are the only party with the information required to verify whether an account is stolen, Paypal avoids the cost of their negligence and forces this cost on the helpless merchant. Paypal enables criminal activity and takes no financial responsibility for criminal use of their product. They don't even have the decency to share information about the person who committed a crime against you. Meanwhile, the merchant is left helpless. They have no way of getting the information necessary to verify the customer, no way of getting information on the criminal after the crime has taken place, and no other service to turn to because of the monopoly paypal has on international transactions for Americans.
No other services offer international transactions for Americans (maybe this has changed in the last couple years but I doubt it).
So if you are an American selling goods on the internet and you want to protect yourself against criminals, the only way to do it is to use Bitcoin. If you know of another way I'd love to hear it.
BTW: Bitcoin transactions are irreversible. A monopolist, like paypal, can't come in and just reverse the transaction after you've already sent the product to the customer.
2. There really aren't any! Not for the average user, not right now. Adoption was only ever going to start with niche use cases, like international remittances, some B2B applications, darknet sites, etc. I think most people will start using Bitcoin without realizing it, as is the premise with 21inc. and many others. I think OpenBazaar will see some success, too. There's lots of time for this to work out, and speculators will drive the price for a long time.
3. A fiat blockchain is just expensive and inefficient fiat. Why do you need a public ledger when you're already placing all your trust on a bank or government? Just keep the private ledger that's cheap and trivial to implement. I think many people have this notion of thinking about Bitcoin like currency, but that's really not right. Bitcoin is a trustless network, and all of it's power and innovation stems from that. Introducing a trusted party to that just destroys all of that.
Huh? Googling "buy Bitcoin" returns Localbitcoins and Coinbase, which is exactly what other HNers have recommended here.
Increasing the blocksize will increase throughput, but is it the only way? Definitely not. The very recently improvement by Dr.Peter Wuille to segregate the witness (cryptography used to validate transactions) from the data (transactions) increases the capacity by around 66%, even if block's max size is unchanged. This is already in the testing phase. There is a whole bitcoin scaling roadmap & a lot of work going on.[0]
Practically, the death scenario being painted by XT hasn't realised and transactions are still going through normally.[1]
The bitcoin developer community comprises of very capable hackers many of whom are not only PHDs but have also invented new cryptographic techniques and also are robust security coders.[2][3]
[0]https://bitcoin.org/en/bitcoin-core/capacity-increases-faq [1]http://statoshi.info/dashboard/db/transactions?panelId=4&ful... [2]https://people.xiph.org/~greg/confidential_values.txt [3]https://blockstream.com/2015/08/24/treesignatures/
Is it really true that the people who are objecting to increasing the blockchain size see Bitcoin turning into a reserve "currency" to hold wealth instead of a liquid currency used to make real time transactions?
Is that really the debate? Because I didn't get that from Mike Hearn's essay at all...
And those who do are all at odds with eachother because Bitcoin can't do everything at once.
Bitcoin obviously has value right now as demonstrated by the fact that people can go out and exchange coins for things people regard as valuable, but current value is not a perfect indicator of future value and I'd argue that the current value is at least somewhat predicated on the belief that Bitcoin will eventually become a useful replacement for today's highly-liquid real-time transactional currencies.
I am probably naive, but can't a solution be found by simply increasing the block chain size and then creating software that makes the verification of transactions more distributed by making the process more fine grained in terms of CPU and memory resources? In other words, split current "nodes" into a more fine grained distributed virtual node that low end computers can run?
The verification of transactions in bitcoin is central to its protocol. Its the whole reason its novel and relevant. You would have to change the proof of work system from sha256 hashing to something else to make it anything but optimal for computation on specialized ASIC hardware. If you do that, now you have another cryptocurrency - litecoin, peercoin, etc.
And when you use a hashing algorithm meant to be hard for general computers (cpu or gpu) to do, and can manufacture hardware that does them much more efficiently, you end up where we are now where big miners and a handful of people represent most of bitcoins mining power.
Conundrum? Regardless, it's unsolvable, and I do empathize with the people who complain or offer their own (non)solutions.
> If they were just GPU cluster datacenters, despite their scale, they still would not compete with the distributed power of millions of home users desktops to as much a ludicrous degree as modern ASIC miners are in the Bitcoin space.
Do you suggest efficiencies of scale don't apply to GPU clusters in datacenters, or CPU clusters in datacenters?
As it pertains to mining centralization, do you suggest efficiences of scale only apply to sha256 ASICs?
The idea that this can be "solved" with clever code is utterly naive. The bottom line is investors in any cryptocurrency, regardless of its hashing algo, will buy up the majority of the hashing rate with high efficiency rigs in well-connected datacenters with low priced electricity. Tell me how to fix that with code. You can't do it - although I've certainly seen more than my fair share of altcoin investors try in vain to do just that.
The only time this is economically viable is when you both have a large enough economy and when your marginal hashrate gains over the swarm are significant enough to invest in.
My point is that if your algorithm is CPU / GPU favored, of course you can make specialized hardware, but as long as the performance gap isn't the multiple orders of magnitude modern bitcoin ASICs get over generic computers it takes significantly more money - and here is the key point - in relation to the value of the economy you are taking over to do so. Where it could cost 100 million to build a bitcoin miner datacenter that can immediately seize 30% of the hashing power on the network, your 100 million datacenter on an scrypt network can probably only seize 10-15% because there is much higher normalized mining participation by end users. It means it would cost you a lot more to get a 51% hashing oligopoly, and for the people making business decisions on if they want to spend a billion dollars doing so they will look at the market cap of the economy they are trying to usurp and realize its not a profitable venture.
My point is that there is also a degree of benefit in how consumer practical the mining algorithms are and thus how much less of a dramatic leap in performance custom ASICs would be. If you have algorithms that do not see the leagues of performance difference between custom hardware and general computers, your required investment for the same effective control are much higher, potentially to the point of fiscal unviability, but even if not that your margins would be slimmer and your opportunity cost would dissuade you more from doing it.
The mining superclusters of bitcoin only emerge because of how much potential revenue there is from doing so - fab a few thousand custom ASICs and you suddenly control a huge chunk of total mining power, because nobodies personal computers can even come close to competing. If you want working distributed mining everyone needs to already have viable mining hardware from the start, ie, the computer on their desk.
The limits on transaction size have been known since the beginning of Bitcoin. VISA level transaction rates require insanely high block sizes, much larger than those proposed so far. People have come up with many, many different solutions to this problem.
One thrown around a lot is the lightning network [1], but it's not really a "reserve currency" in this case - it's a way to prevent a bunch of intermediate transactions from entering the blockchain forever, but it's based around advanced Bitcoin scripting usage, so it's using Bitcoin for much more than just a backing value.
Keep in mind that Bitcoin currently has a $6 billion USD market cap. Breaking Bitcoin would reduce that to $0. Many people have strong motivations to be conservative with changes...
That blogpost is basically describing lightning. Lightning Network has explicitly described instant cross-chain swaps privately, and publicly for many months.
No. There are many other ways to scale bitcoin.
>Lightning Network is..based around advanced Bitcoin scripting usage
Rather quite the opposite. Lightning Network does not uses the bitcoin scripting.
Honestly, the proper competition vs Visa is ACH-based transactions like Dwolla.
In contrast, Bitcoin is permissionless. Just install the software and receive payments just like anyone else. That's what something born in the Internet age looks like.
Are you the owner of Ezfile/Filecloud by any chance? If you are, I'm actually quite curious to discuss payment processors with you. Last I checked, you're using Amazon gift cards and Bitcoin. Have you had any luck getting access to credit card processors? Also, what fee per transaction would you consider to acceptable from a CC processor for your category of website (with the ability to let users pay by subscription)?
Russian carders who make their living off of selling credit card numbers probably agree with you that the system is great.
There's also chargeback and consumer protection services, which currently there is little market for. You just rely on Visa. With Bitcoin, there is opportunity for a market of escrow and resolution services.
Right now, Visa works better, full stop. As Bitcoin improves, however, that could certainly change.
Some people, including Hearn (who is more vitriolic than the average) believe that #1 is false and #2 is a necessary risk.
If you are coming at this from reading Hearn's words, you are coming at this from an extreme perspective that would be balanced by reading Gregory Maxwell's words. I recommend http://www.truthcoin.info/blog/blocksize-conversation/ for a critical, outside and rational perspective.
Most of the people I know who have issues with XT have issues that go far beyond forking.
For example, some of the code included in XT includes blacklisting code. It also would break anonymity. I don't know if the camps is quite divided along the lines put forth in this article, but it's certainly true that XT wants to become/replace Visa.
Many people have been frustrated at the XT team, because whenever these concerns are aired they are ignored. Then, arguments like Hearn's are put forward, which imply that the only thing XT does is increase scalability, and opponents just have their heads in the sand.
It doesn't help that nearly every Bitcoin discussion forum has been seized by one side of the other, and moderated to all hell.
Some are the cypherpunks that want security at all costs. They see Bitcoin as a failure unless just about anyone can operate the network. They already see mining as a failure because it's too centralized, and are staunchly opposed to anything that might increase that centralization.
Ironically, I think increasing the block size would provide advantages to miners outside of the China firewall, which may have the effect of decentralizing mining a little. That's a very simple take on it, though, and only one of many factors.
Interestingly, many who hold this view argue that changes can only be made to the network through strict consensus, ultimately relying on very centralized development.
Others see Bitcoin as a currency that should be used at the consumer level, like cash. They want a network that grows and is predictable for investors. The possibility of expensive transactions is dangerous to business models and will stall adoption.
There are some focused on the technology, and what can be built on top of bitcoin. Recognizing the network effect (more users, more value), they see using Bitcoin as a settlement layer for the various implementations on top of that. Some of these require some changes to the Bitcoin protocol, and there's much controversy in what is permissible. Lightning Network, side chains, etc. could all operate at different frequencies of Bitcoin settlement transactions. Other services would like to store information on the blockchain, using a small transaction fee to pay for immutable information storage. This could be used for contracts of all sorts. Some would see this is spam on the network, and others a huge innovation and source of value.
Some will look to the early development for guidance. Satoshi wrote a lot about how the network might evolve, and it's quite clear that he thought network capacity would improve with technology. Basically, some use the argument that the 1MB limit was a stopgap, temporary limit that has passed its usefulness. The 'Bitcoin people signed up for' is one with a growing block size.
You can add to that concerns about many of the core developers working at Blockstream, so might have perverse incentives to cripple Bitcoin to generate demand for their products.
It's ... a little complex.
If you choose to remain with the fixed blocksize, then you're betting the system will reach another equilibrium (which may be total collapse). This equilibrium will revolve a natural evolution in the pricing of transactions.
Either way, at some other point in the future another source of discontinuity will be the circulation limit. Again, which may or may not kill the system.
Bitcoin is simply evolving, as it necessarily needs to.
It's definitely interesting to watch as an outsider.
I don't see any reason to believe that his position on Bitcoin should be read in any other terms than his investment in Bitcoin companies is not appreciably worse or more risky than other companies in his fund. That his personal asset portfolio holds less Bitcoin than wine illustrates the distinction he's making.
His message is for people invested in Bitcoin companies. It is don't panic, these companies were always risky.
Can 100% understand why some people may hate that future for Bitcoin, but I think the parallels are serious and it's probably what will happen.
No, among the developers actually working on Bitcoin that is not what the debate is about at all.
Bitcoin is a decentralized ledger, and indeed it can be argued that this is the only property about Bitcoin which is interesting/useful. Why? Because all properties we care about (availability, uncensorability, unseizability, etc.) derive from decentralization[0]. And at the end of the day we can do everything Bitcoin does faster, better, and cheaper on some alternative consensus system (see: Stellar, Open-Transactions, Liquid) that does not have this decentralization property. Decentralization is expensive. It requires a dynamic membership, multi-party block signing algorithm, which at the moment means proof of work. And proof of work costs hundreds of millions of dollars per year to maintain, and throttles the available bandwidth due to the adversarial assumption and the existence of selfish mining[1].
The question is not whether Bitcoin should be a store of value or a medium of exchange. That implies we have some choice in the matter. The question is what level of on-chain utility does Bitcoin actually support under untrusted, adversarial conditions, without losing all properties derived from decentralization. This is an empirical question. The available bandwidth is something that can be determined from the performance of the code in the real world extrapolated to various adversarial simulations.
We had two Scaling Bitcoin workshops last year that gave us a data-driven answer: 3-4MB per block, tops. There are potentially ways that this number can be improved (see: weak blocks), and those are being worked on but are still some time from showing results. There are also some assumptions underlying this number, e.g. that we change the validation cost metric, which none of the existing proposals do in a smart way. But the scientific process is telling us right now that with the tools available to us we can increase the worst-case block size to 3-4MB with a better metric without the decentralization story becoming unacceptably worse off.
That is the plan of Bitcoin Core. The deployment of segregated witness will allow up to 2MB blocks under typical conditions, and 3-4MB under worst-case adversarial conditions. It will exhaust the available capacity for growth in the Bitcoin network at this time. Meanwhile, work progresses on IBLT, weak blocks, Bitcoin-NG, fraud proofs and probabilistic validation, and other related technologies that might provide an answer for the next increase a year or two later. I'm hopeful we may even be able to get an order of magnitude improvement from that one, but we'll see.
No one I'm aware of is pushing for smaller blocks because Bitcoin should be a store of value and a settlement layer. If I had magic pixie dust I'd want 1GB blocks and everything on-chain too. But we live in the real world and are stuck in a situation where Bitcoin loses all of its unique properties if we scale much further than where we are at now. And so we must ask the question: what will Bitcoin become, since it can't scale on-chain? How can we live with that outcome? The idea of a settlement layer and off-chain but trustless payment networks like Lightning naturally arise from that thinking. The Lightning Network[2] is a way that we can have our cake and eat it too: Bitcoin remains small and decentralized, but everyone still has access to bitcoin payments. Lightning can potentially scale to global usage with a small-block chain as the settlement layer.
[0]: http://bluematt.bitcoin.ninja/2015/01/14/decentralization/
[1]: http://hackingdistributed.com/2013/11/04/bitcoin-is-broken/
Hearn seems to be saying that Bitcoin right now is not really decentralized - aka the Chinese firewall problem and so much power already centralized in a few peoples hands. He also seems to be saying that the motivations for Bitcoin Core developers are not based on good faith technical disagreements, but more about bad faith political disagreements.
Fred Wilson seems to be saying that he concurs with Hearn's concerns about Bitcoin already being centralized, but would characterize Bitcoin Core developers as having good faith political disagreements and advocates for "hard fork(s)" as a way to resolve these good faith political disagreements.
You seem to be saying that, in fact, BitCoin Core developers have good faith technical reasons - nay - empirically validated reasons to believe BitCoin has no real choice and that it can not ever become a visa-like transactional currency without destroying the decentralization qualities that make it so interesting. I assume you also believe that Hearn's qualms about the current centralization are wrong in some way.
So that makes for very conflicting stories about what is going on for this outsider to have any hope of judging. Very interesting though.
Can you tell me why the decentralized ledger can't just be made more granular so that increasing the block size might make kick out current under-powered nodes, but those nodes could be turned into virtual nodes where under-powered machines could pool resources to establish a virtual node and thus maintain decentralization?
This is true, and people are working to fix it on many levels. For example, separating the transaction selection from coinbase reward (what p2pool does, but with better scaling properties). Also, large chip manufacturers like BitFury selling all-in-one mining setups rather than running the miners themselves--they are presently doing mostly in-house mining, but are moving in the right direction. Also, smart property miners so that it doesn't matter if the hardware centralizes to where power is cheapest. There are also protocol-level changes along the lines of Bitcoin-NG, or non-outsourceable puzzles which remove a good deal of the mining centralization pressures.
So what you might not have gotten from the Hearn article is that this is a known problem and while scarily bad, work is progressing on this front.
> He also seems to be saying that the motivations for Bitcoin Core developers are not based on good faith technical disagreements, but more about bad faith political disagreements.
I don't know what to say to that. We had two open workshops last year for discussing the scaling problem, which Hearn did not participate in. We have a plan for increasing the capacity of the system which also references what we do genuinely believe to be the technical hurdles to scaling. I charitably hope that Hearn is simply ignorant on this matter.
> I assume you also believe that Hearn's qualms about the current centralization are wrong in some way.
No, the present state of mining centralization is concerning. But I'm not willing to throw in the towel on that just yet.
> Can you tell me why the decentralized ledger can't just be made more granular so that increasing the block size might make kick out current under-powered nodes, but those nodes could be turned into virtual nodes where under-powered machines could pool resources to establish a virtual node and thus maintain decentralization?
Decentralization in Bitcoin is about mining decentralization. Everything else barely matters. A cabal of miners can censor transactions costlessly. A cabal of miners can require extra-protocol information to de-anonymize bitcoin holders. A cabal of miners can keep anyone else from mining bitcoin, thereby closing off competitors. The threat to Bitcoin's decentralization is centralization of control over the mining hashpower -- whether from the form of pools, or external coercion on pools, or companies having exclusive or back-door access to mining hardware (e.g. 21co).
Outside of the back-doors, what causes mining centralization is a combination of validation cost, latency, and external factors like electrical power subsidies.
But, having said that, what you propose is known in the community as 'probabilistic validation' -- only checking part of the contents of a block and being able to relay small fraud proofs when such validation fails. This requires the ability to create such fraud proofs, which we will get with segregated witness (being worked on by Bitcoin Core right now), and with a lot work will eventually get us to the point where validation cost is not concern so long as there is a large, healthy network of probabilistically validating full nodes.
But we'd still have latency and real world power economies to worry about.
http://www.factsaboutherbalife.com/
I think as long as you disclose your position in the stock/security, you can say whatever you want.
This is actually one of the mechanisms that Efficient Market Theory relies upon for disseminating market information. If you could only benefit from assets increasing in value, then there would mostly be negative incentive for anyone to try to expose companies that are weaker than the market assumes them to be.
It's not enough to spin a thousand VMs in AWS and call it a day.
Would Classic have happened without XT? It seems to share some developers.
This should continue to work until block reward becomes negligible in 2035.
because some blockchain investments might be in danger