Bitcoin Is an Escapist Safe Haven | Hacker News Reader

Bitcoin Is an Escapist Safe Haven

bloomberg.com

95 pointspshaw121 comments

> Its decentralized nature means it's not part of any system

That... isn't true. The bitcoin blockchain is distributed, but the last two years have functionally proven that bitcoin core IS bitcoin, and that implementation (most of whoms developers are employed by Blockstream) is centralized control by a corporate entity.

They can change what they want about bitcoin, and even after they force controversial tech already in tree like RBF or proposals like Segwit there has never been even close - by an order of magnitude - close to enough consensus to transition away from bitcoin core by replacing it as the majority client, and thus the implementation that controls the blockchain - the implementation that controls the protocol.

That is where I lost faith in the bitcoin dream. It started out as a project of idealists but has turned in large part into a for profit venture to create a large exploitable fee machine for black market trading sites.

Its replacement will require the diligence of its idealists to stay in charge and to not give the keys over to those whose objectives just involve profit.

The reason no one has countermanded the changes implemented in Bitcoin Core is that none of the changes have been unreasonable.

The most recent so called "segwit" change set that core pushed out recently looks to have strong enough opposition to it that it will never activate and the Bitcoin Ultimate implementation has strong support among a vocal and growing group of users. I would be surprised if core holds the control it currently does in a year or two.

The important thing is on the ,,vocal'' part. For a lot of us Bitcoin is working wonderfully, and we trust and respect the current leadership of Bitcoin Core a lot. Still, we have other things to do in our lives, so don't have time to argue with the vocal people who have one resource that we don't: time.

Segwit requires 95% miner support to pass. It isn't a good example of Blockstream having centralized control. I don't know as much about RBF adoption.

I for one, never thought bitcoins are something to free people or so. It always was and is something for big corps and people with a lot of money and states to cut costs and taxes.

Whoever talked about freedom was delusional.

> and that implementation (most of whoms developers are employed by Blockstream) is centralized control by a corporate entity.

This is false. The majority of development, measured by commits or lines of code or people or whatever is NOT Blockstream. If anyone holds that honor, MIT does, as the release manager, wallet manager, and network protocol manager all work for MIT DCI, and they plus Chaincode Labs combined have more contributions than Blockstream, to say nothing of the other developers.

I'm afraid you've been taken in by a smear campaign.

Bitcoin is basically a way to get money out of China. 97% of the trading is in yuan, as the article points out. All other uses are down in the noise.

Also I suspect why mining equipment is seemingly always a net-loss: if your goal is to escape capital controls, you're willing to take a loss vis-a-vis someone who is just trying to make more of the same currency. (USD->BTC->USD)

Because mining is "exporting", miners get breaks on power and loans. After those, it's probably not a net loss.

Those numbers are fairly misleading.The Chinese exchanges volumes are somewhat fabricated. Check out the data on bitcoinity.org [1], which reports that 9.3 million BTC, or 98% of worldwide volume, were traded on Chinese exchanges in the past 24 hours. That would be 58% of all bitcoins currently in existence, traded on Chinese exchanges, in a single day.

Clearly, that is not what is happening. My understanding is that these numbers are the result of zero fees, enabling self-trading (same person on both sides) to create false market signals, as well as rapid fire back and forth trading strategies. There is also some speculation that some Chinese exchanges directly manipulate the volume data in one way or another.

I'm not sure exactly what the story is. And China may still very well be leading this current price wave. However, those volume numbers are very suspicious and should be taken with a large grain of salt.

[1] http://data.bitcoinity.org/markets/volume/24h?c=c&r=hour&t=b...

Update: In the past 15 minutes, while I finished writing this post, an additional 200k BTC were supposedly traded on Chinese exchanges. That would be approximately $250 million of trades at current prices, which is ridiculous.

"Trading" doesn't mean "buying". In fact every trade is a buy and a sell simultaneously. Volume doesn't tell you if the price trend is up or down.

You can buy and sell the same bitcoin back and forth a billion times and your volume will be astronomical. And this is possible on many Chinese exchanges because they don't charge trading fees. (Some apply fees on withdrawals from the exchange instead.)

So when you hear "98% of all bitcoin is traded in China," it's literally almost meaningless.

Trading volume is not the important metric here. Trading volume is free to produce, order book depth/liquidity is not. The real value of an exchange is measured by how many it has of 1) dollars bidding on bitcoins and 2) bitcoins offered for dollars.

This provides a cushion effect on the price of bitcoin, since large orders won't eat through as much of the order book and bring the price up/down.

Trading volume is just people (allegedly) making trades. Liquidity can be easily tested by executing large orders, and seeing whether they will allow you to withdraw the proceeds.

Anyone have a source for cross-country Bitcoin flows? I am curious if it is getting gentler treatment, in the U.S. and Europe, on account of it siphoning wealth from South America, China and Russia into the former's economies.

"whatever danger you fear, Bitcoin has no direct exposure to it"

Hah.

Notable is that Ethereum is experiencing a lagging, but similar, increase in value. According to Coinbase [1], it has gone from 8.30 -> 11.42 (37%) since the 1st.

1. https://www.coinbase.com/charts

Not just ETH, but most of the top alts have hit ATHs today. XMR is up over 50% this week, and DASH is up 66%.

Given enough jargon, most discussions sound like sports coverage. :)

Don't forget India!

http://www.cnbc.com/2016/11/15/india-rupee-restriction-boost...

"The virtual currency's value rests, in the final analysis, on nothing but the faith of the community that supports it.

The faith can be relatively easy to undermine, of course. In 2013, bitcoin plummeted from its high because of a December move by the People's Bank of China, which banned mainland banks from dealing in the cryptocurrency."

Is this not a contradiction? Clearly it shows the value of Bitcoin responds to political events in the same way as any currency does.

It's a recursive definition, at least. They say the value rests on the faith of the community, and that this faith can be undermined by a change in value/price. But I guess this is an accurate description of the value of money: it's worth something because it's worth something.

I always considered bitcoin a social network for a certain type of nerd. That it can occasionally be used to buy things is a bonus.

Quoting from http://www.businessinsider.com/bitcoin-price-january-4-2017-...

Bitcoin's gains have been buoyed by renewed interest from China, where money is rushing out of the country as its currency, the yuan, continues to weaken...

According to a recent Business Insider Intelligence briefing, citing data from Cryptocompare: "In the first 24 hours of the new year, over 5 million bitcoins were bought in Chinese yuan, equating to $3.8 billion. In contrast, just 53,000 bitcoins were bought in US dollars."

1/3rd of the entire bitcoin supply changed hands in China in a 24 hour time period?

Come on that doesn't even make sense. Perhaps a notional value of 5 million bitcoin by volume were traded, but some phrases make more sense than others.

Which isn't surprising at all, because many of the Chinese exchanges have no trading fees. So of course you have massive volumes.

I don't see anything 'safe' about bitcoin ownership, it's quite volatile and risky, and not backed by any asset. So, not really safe in any classical sense.

Bitcoin is its own asset, just as gold, or any other commodity, are assets.

You mean unlike rupees? :)

What asset backs dollars?

"What asset backs dollars?"

USD are mostly backed by T-Bills, i.e. government bonds, i.e. the faith you have in the US government (i.e. people of the US) to pay you back. Oddly - they are priced in dollars creating a really odd circular dependency. If the US government paid off all of it's debt today, most currency would be sucked out of the market! :)

Since 2008 - some of USD is backed by crappy real-estate.

Euros are backed by 'strong assets' for the most part: real estate, high grade bonds (I think) etc..

The reason the Euro is a very strong currency is because none of the European countries trust each other to not print money willy nilly. So if a bank wants Euros, they have to put up good collateral. This is how Germans know their Euros are not going to devalued by Italians at the printing press.

RMB is backed by nothing really, just faith in the Chinese government, which is why people don't want to hold them. If China wants to become a real player they have to have transparency, which means they cant print money willy nilly, which means they lose some crazy monetary control they have today. But they think they need that super money power to 'centrally manage' the economy. You can't have both. They either need to have a currency with more integrity - which other nations will 'buy into' - or - they can keep their currency kind of a fiction, but which allows them to turn their economy on a dime if they need to. (Question is, will they turn it in the right direction?).

If Bitcoin were used broadly in some areas - say across a bunch of S. American countries that don't trust their governments, and it was widely used by the citizens, then it might actually have more integrity than say the RMB. Bitcoins cannot be arbitrarily devalued, whereas RMBs are quite often.

The big risk with Bitcoin is that people stop needing/wanting them and they become worthless. Remember that humans are susceptible to up and down 'manias'. All it takes is one rumour and selloff to wipe out Bitcoin for good. If there is a really bad report about US economy, the dollar might go down - but there is 'underlying support' for the USD - people still need them to do commerce, pay taxes. With bitcoins ... a single downturn would wipe them all out for good. They'd have no reason to come back.

The bigger problem with Bitcoin today is that it can't be used for regular transactions. Due to the 1MB blocksize cap (that people having being trying and failing to fix for 2 years), Bitcoin has been limited to ~3tps, has permanent backlogs in the mempool in the thousands (and climbing to tens of thousands during busy times) and tx fees have risen to 10-20 cents (or more) for regular transactions, making it useless for day-to-day payments. ETH has pushed up to 100tps in prod, but realistically, higher transaction rates will need to wait for Casper (sharded PoS). Monero has a flexcap blocksize, although I don't know if it's ever been stress-tested in practice.

I think that whatever alt gets a good light wallet that supports seamless transactions (contactless/touchid) for mobile devices might get some serious traction...

If by "regular" transactions you mean consumer-to-merchant transactions, then this is solved by off-chain clearing, much like VISA solves it for our current monetary system whose lowest level transfer protocol (SWIFT) is also too slow/expensive for consumer transactions.

With Bitcoin, consumers can connect to clearing intermediaries via payment channels, allowing them to be in full control of their funds while having them ready for instant transfer. If merchants are willing to accept a week of credit risk -- which, I would argue, VISA proves that they are -- then thousands of off-chain transactions can be cleared into a single Bitcoin transaction, making the performance of the underlying blockchain less important.

Payment channels, besides being alpha/never used in production, are also dependent on a transaction malleability fix. Since SegWit was rolled into this soft-fork disaster, I'm pretty confident in saying it will never reach 95% and activate (there are almost as much BU/BCl support as BCo/SW support at this point), so a non-starter honestly.

I'm not against PCs in principle, I just don't understand why the block size wasn't increased and then a fully tested version of LN being rolled out afterwards - instead we've 2 years where the blocksize cap has been looming, a year where Bitcoin functionality has actually been crippled (Bitcoin is the only "successful" technology I know of where it's getting more expensive and performing worse as time has been going on), and of course there's been a combination community and developer civil war/purge (and subsequent deadlock) that could have easily been avoided. This whole mess has been extremely counterproductive.

Note, even in Poon and Dryja's original paper, they outline that LN still requires bigger blocks:

"If we presume that a decentralized payment network exists and one person will make 3 blockchain transactions per year on average, Bitcoin will be able to support over 35 million users with 1MB blocks in ideal circumstances (assuming 2000 transactions per MB). This is quite limited, and an increase of the block size may be necessary to support everyone in the world using Bitcoin."

It's worth pointing out that Bitcoin currently has just under 52K unconfirmed transactions in the backlog (this will take hours if not days to clear) and that PCs still have risks/failure modes from that as well (failure of breach remedy transactions can actually break down the counterparty trust system from my understanding, making rollbacks and even double spends possible).

CHECKLOCKTIMEVERIFY/BIP65 fixes payment channels without fixing transaction ID malleability, so non-malleability is only a requirement for payment channels to work when we want to free received channel value while keeping the same channel ready for new payments.

Technically, this could be solved by the client sending funds to two different outputs, and switching to output #2 while the settling transaction redeeming output #1 is being confirmed, and vice versa. It's a horrible hack, I know, but it works right now. Of course, the client app should take care of all of this, making it transparent to the user.

I agree with Poon and Dryja that 1MB won't be enough forever, but payment channels is a bit like fiber, the capacity is basically unlimited. If you keep a payment channel open for a week, and then close it, it's completely irrelevant whether you made a single payment or 1 trillion payments over that channel, since nothing touches the Blockchain. In other words: if we are able to clear efficiently enough, it's also technically possible to get by with the 1MB limit, simply because payment channels have unlimited capacity, as they don't touch the Blockchain.

> I'm not against PCs in principle, I just don't understand why the block size wasn't increased and then a fully tested version of LN being rolled out afterwards [..]

Because a fully tested version of the Lightning Network doesn't exist. When it does, this plan will make sense, but that's not yet.

Personally, I'm focusing my attention on something that I know is possible right now: consumer-to-merchant transactions using digital promissory notes issued in exchange for payment channel payments. It's not the most elegant solution, but unlike all other proposed solutions it actually can work right now.

Much like is the case with Bitcoin, by the way. When Bitcoin was released, cryptographers/mathematicians weren't really pleased with it because of its "inelegance". But, in the end, it works better than anything else and it works right now.

The tax-collecting power of the US federal government, backed by the world's largest military.

Russian ruble was backed by a tax-collecting power and a large military too, but they still had a hyperinflation period during 90s. It's easy to mismanage a currency for the precise reason, that it is not backed by anything.

That's not an asset.

That was the most optimistic article ever. I don't think Richard Simmons is as excited about exercising as this guy is about bitcoin.

cant believe its over 1k again

Contrast that with this utterly terrible FT article (login required, but you can search for the title on Google and bypass it):

https://www.ft.com/content/b5d66ed8-d1b3-11e6-b06b-680c49b4b...

Bitcoin fails to satisfactorily answer von Mises' regression theorem. It also has no scarcity since it can face competition by an infinite number of similar conceivable algorithms / block-chains / virtual currencies that offer much the same features, regardless of how hard its own mining gets. Not to mention that once it is perceived as more than just a nuisance by some major government it will be shut down in a heartbeat. Future generations will laugh at our incredulity just like we make fun of the Tulip mania (which had more substance to boot). There is real, almost insatiable global demand for a currency with intrinsic value and scarcity that cannot be inflated by fiat. But given that such a currency will antagonize major governments it will likely not be a crypto-currency but rather a currency backed by some sufficiently powerful country. I am actually expecting the Russians or Chinese to launch a 100% gold-backed currency within the next 5 years. Failing that, when the EU breaks up the new Deutsche mark will be a good alternative. Any of these developments will pop Bitcoin's bubble.

> once it is perceived as more than just a nuisance by some major government it will be shut down in a heartbeat

Actually, the unique feature that makes Bitcoin special is specifically its censorship-resistance. That's why people value it -- because it cannot be shut down.

If it becomes enough of a hassle it probably could be shut down. It would have to cost the government so much that it's worth the political hit to them to alter the Internet. So, best that it remain not too high a nuisance for now.

It can be pretty effectively shut down by devaluing it to the point of uselessness.

Governments could make it illegal to conduct trade using bit coins, and they could make it very difficult to convert by going after people doing the conversion. I think that would pretty effectively tank the value.

They could also buy or confiscate a large percentage of all existing bitcoin pretty easily, and then use that to manipulate the market.

It is resistant to confiscation, but the IRS can still make you a fugitive in most of the developed world.

Not if they don't know that you own an account.

The IRS got Switzerland to open up previously-confidential banking records.

You think they're not going to find a way to identify Bitcoin users? "It's on the internet, that makes it untraceable" is magical thinking that does not survive contact with sufficiently dedicated real-world agencies.

The IRS got people to give up the identities of other people.

With bitcoin, if you take the right precautions, it is impossible for anyone to know which account is yours.

It is a TECHNICAL solution. It doesn't matter how many people the IRS threaten.

Can the US government tell everyone in the world to think of a random number, then these citizens don't tell anybody what number they chose, and then can the government arrest everyone who chooses the number 10? No, it cannot do this.

And if it can't do that, then it can't arrest all the bitcoin owners.

OK. So buy something with Bitcoin without:

* Ever appearing at a retail establishment with security cameras

* Ever scheduling a product for delivery to any address, period

* Ever scheduling a service to be provided at any location, period

* Ever communicating with the other party via any means whatsoever, including placing an order online, not even via Tor behind seven proxies

And tell me how it goes. Because all of those things above are vectors for identifying you that big random numbers won't solve.

Ultimately, all of this assumes that the IRS are willing to prove that they will risk their lives and die for what they believe in. They will not, because they expect the police force to do that, who in turn will not, because they expect the army to do that. And that is how it all went wrong so often in the past.

>all of this assumes that the IRS are willing to prove that they will risk their lives and die for what they believe in.

Please, they'll just use another branch of the government to disappear some people. It's not like they have any scruples doing that already.

Why would the IRS need to risk their lives to conduct a legal investigation? If you're caught on a CCTV camera somewhere, they're going to be able to find out about it without getting killed.

And if somebody plans to kill IRS agents, well, that is going to bring out the heavy forces, and will not end well for the tax evader.

The thing is, unless you use bitcoin to buy goods similarly obscured digital goods (essentially things that exist themselves only as records on a blockhain), the other side of the transaction is traceable.

If you buy a bitcoin without using cash or cash out your bitcoin then they can trace your bitcoin wallet to you. It's not really anonymous unless you keep all the transactions inside of bitcoin and never leave it. Which isn't really at all practical right now and has a high likelihood of not being practical in the near to medium term either.

> It also has no scarcity since it can face competition by an infinite number of similar conceivable algorithms / block-chains / virtual currencies that offer much the same features, regardless of how hard its own mining gets.

I don't get this argument. Competing cryptocurrencies won't be spendable on the Bitcoin block chain and vice versa, so Bitcoin's scarcity isn't compromised. It's true that Bitcoin could face competition from other cryptocurrencies, but that's not exactly an inherent deal breaker. People need to use a cryptocurrency for it to be of much use.

They're referring to any unique characteristics that give Bitcoin value in competing with other cryptocurrencies, which is mostly true.

There are already a number of newer cryptocurrencies that are better than bitcoin (e.g. no block size issue, computational waste, etc.) but with bitcoin it will take more than that to dethrone Bitcoin's brand as "Internet Drug Money".

All existing cryptocurrencies have a block size issue because blockchains have terrible scalability; removing a safety limit doesn't make the underlying problem go away.

I'm referring to the famed blocksize debate [1] that's happened with Bitcoin, in which several miners have gained control of the blockchain through economies of scale and are preventing forks for block size increase [2]. This size increase would allow for more than 7 tx/s but it would also increase costs for miners, so the miners are ignoring it, effectively making it tragedy of the commons.

Note: This isn't a blockchain issue, it's a Bitcoin issue. Other blockchains have implemented different measures to deal with transaction saturation and block size caps.

[1] https://en.bitcoin.it/wiki/Block_size_limit_controversy

[1] https://blog.plan99.net/the-resolution-of-the-bitcoin-experi...

Look, I am a pro big blocker myself (I think that the network would be perfectly fine with a 4-8x capacity increase). But Peter Todd has a point. (I would hope so. He is literally one of the experts)

Imagine if blocks were x Gigabytes. Thats X GigaBytes that have to be sent to every single miner in the world every 10 minutes!

There is a fundamental N squared problem in blockchains that you can't get around without using some very clever tricks that haven't been implemented yet.

Litecoin has the same blocksize as Bitcoin, but resolves blocks every 2.5 minutes instead of 10, giving it more 4x capacity. ZCash just forces block size increases as hard forks.

Like I said, different blockchains solves the blocksize differently, and Bitcoin has demonstrated that it's not capable of addressing it's blocksize issue and can't scale.

You can scoff and say, "That's a non-issue.", but even at the start of an NPR Planet Money podcast episode about Bitcoins, where they do a Bitcoin transfer, it hits the cap and gets lost.

Litecoin's capacity is still nothing compared to VISA or Mastercard.

The question is not whether a crytocurrency can do 4X. The question is whether it can do 1,000X or more.

Right, but Litecoin hasn't repeatedly hit it's transaction cap yet. Litecoin is still unproven as to whether or not it will fail to scale, which Bitcoin has already proven to fail at.

You're splitting hairs and ignoring ZCash. The point is that other cryptocurrencies are better implementations of a blockchain than Bitcoin, even with regards to the block size.

The market will, and has decided that what you're claiming is wrong. The point that other cryptocurrencies are better implementations is moot, bitcoin is 8 years old and still working very well.

I'm not saying Bitcoin is perfect and complete, it does need to scale, but to claim it has failed is ridiculous. Bitcoin development (or developers) will not implement something that isn't vigorously tested and could jeopardize the network. It isn't as simple as change 1mb to 8mb. If you can provide a technical case for why its so simple or that its safe to do so please post below! I'd be happy to review.

>The market will, and has decided that what you're claiming is wrong.

Here's the podcast where the bitcoin "market" fails NPR in just the first few minutes: http://www.npr.org/sections/money/2016/06/29/484029238/episo...

I said bitcoin has failed to scale because the miners who have consensus control won't accept any of the forks to increase blocksize. Bitcoin hasn't failed once, twice, but five times now with BIP 100, 101, 102, 103, and 109.

If you think existence is proof of success, then I have some very successful beanie babies to sell you.

> Here's the podcast where the bitcoin "market" fails NPR in just the first few minutes: http://www.npr.org/sections/money/2016/06/29/484029238/episo....

The "market" didn't fail NPR, a single transaction took longer than expected due to the transaction fee being too low at the time being sent. That's how markets work, and it's OK if you don't understand markets, but don't run around claiming that something has failed because you haven't taken the time to learn.

> I said bitcoin has failed to scale because the miners who have consensus control won't accept any of the forks to increase blocksize. Bitcoin hasn't failed once, twice, but five times now with BIP 100, 101, 102, 103, and 109.

That's not "failing to scale" because you don't know the end result. If bitcoin implemented those bip's and failed as a network it also "failed to scale" but even more it now failed as entirely.

> If you think existence is proof of success, then I have some very successful beanie babies to sell you.

Show me the current market for beanie babies, and I'll show you bitcoin's CURRENT tx volume, price increase over time, and market cap. It's not existence as proof, it was to show you that one needs patience. Bitcoin's utility is increasing. These other projects have 0 utility. If you disagree please show me anytime other blockchain projects real utility, that's not speculative.

Payment systems aren't successful by failing transactions. That's definitively not working, no matter how you spin it.

The end result of not accepting BIP is failing transactions. We know this, because it even happened to NPR. Who are you really trying to convince here?

You're also confusing asset value with success for a currency, even as we're entering a Bitcoin bubble from the Yuan crash. Show me a successful developed currency that has the same volatility of bitcoin.

It's too bad the NPR didn't provide a tx id so we could see the issue, we just have to take their word for it? I think it's a terrible example with no evidence. It makes for a very weak argument.

Not accepting BIPs and failing transactions aren't mutually exclusive, you can't assert that something that hasn't happened caused something else.

I'm not trying to convice anyone of anything, just point out how wrong you are so that others don't take your FUD as fact.

And no, we were comparing markets, bitcoin and your beanie baby example. Never did i say bitcoin is a successful developed currency. Keep trying though.

I think at this point, by questioning whether or not NPR is lying about Bitcoin, you're demonstrating confirmation bias. A better question would be: How much do you personally have invested into Bitcoin that relies on it's success?

I'm not saying NPR is lying, but your argument is based on it being a fact that a TX has failed, where we don't have the details of that TX or if it exists. I also don't think you understand what confirmation bias is.

I don't mind disclosing have holdings in XBT, ETH, DASH, XRP, and others. None of my investment portfolio relies on Bitcoin increasing in value significantly, crypto is a small percentage of my overall portfolio. I've also been paid in bitcoin for over a year and won't sell for years. It's evident you're just here to get rich quick.

Do you think NPR is lying about the transaction failing? (y/n question)

So you have a year's worth of wages tied up in Bitcoin?

You can try and spin this any way you like. Is there any evidence, not hearsay, regarding this TX? (y/n question). Your whole argument is based on this one link, haha.

No, I do contract work for bitcoin. As I already stated, "crypto is a small percentage of my overall portfolio." so not sure your point there. I manage my finances just fine thanks, it seems you're upset none of your ponzi schemes have paid off.

I think the tone of your comment just demonstrated what I was getting at. Thanks.

Great! Glad this is on public record.

Just so you know, he was completely dishonest about the failed TX. https://twitter.com/nathanielpopper/status/74850972378426572... https://www.reddit.com/r/Bitcoin/comments/4qn7xr/npr_hit_pie...

You don't need to settle every transaction on the blockchain itself.

See https://lightning.network/

Sidechains are not a workaround, even ignoring that they're centralized and marketed as such.

Sidechains only solve the problem of user scalability, not volume scalability, because they still require the Bitcoin network to verify.

For example, on a side chain it would take seconds to make 10,000,000 transactions between 2 people, but making 2 transactions between 10,000,000 people would take over a month.

Sidechains and Lightning Network are not the same thing.

https://en.bitcoin.it/wiki/Lightning_Network

https://lightning.network/

https://bitcoinmagazine.com/articles/greg-maxwell-lightning-...

It's basically a network of "payment channels" you can route instantaneous off-chain payments over, which occasionally settle on the blockchain. And you don't need to trust anyone in the network with your funds.

So it's an alt-coin that still requires bitcoin?

No, you're still transacting in Bitcoin, it's just using fancy smart contracts to allow you to do it (mostly) off the blockchain in a secure way.

Exactly, that is one of the "clever solutions" that I was referencing.

The creator of Bitcoin very much disagreed with Peter Todd's view. In 1999 people thought sending video let alone HD video over the Internet was totally nuts and impossible. Then YouTube happened and now we have HD video streaming to the extent that cable companies are worried it is going to put them out of business.

Which cryptocurrencies in particular are worth watching and why?

I don't keep tabs on them all, but in terms of technical aspects I think Monero stands the most likely to be a good substitute for the Bitcoin users.

ZCash seems popular, but it's privately-run with a U.S. based company and can pull some strings to assist in de-anonymizing users. They basically claim no liability for it's users which means it may be too comfortable with authorities for Bitcoin users.

Other than that I think Ethereum has the best chance in terms of market traction to take off as a true international currency.

How can the Zcash company deanonymize users? I haven't studied their system, but that sounds completely against the design goals. (Not to mention to mention the personality of those Zcash core developers I've worked with in the past at leastauthority.com. But security engineering is about not having to rely on their probity.) I don't understand what you're saying about liability and authorities either.

In online discussions of cryptocurrencies it's clear that many people's financial positions bias their conversational positions. I'm long on all four of these currencies.

From the whitepaper:

>A powerful attacker could potentially fabricate an additional block solely for a targeted user. Spending any coins with respect to the updated Merkle tree in this “poison-pill” block will uniquely identify the targeted user.

If ZCash works with that person or organization, then they're able to deanonymize the inputs on the transaction. As a privately owned U.S. company they can be compelled to do this with authorities.

For most people this doesn't matter, but for the type of user that bitcoin attracts, I think they would care, which is why I think Monero is probably better for them.

Thanks. You're talking about section VI.c of http://zerocash-project.org/media/pdf/zerocash-oakland2014.p...

It's saying if an attacker extends the blockchain just for you, and makes only you know about its forked blockchain, they would then know that if someone creates a transaction against the unique part of that chain, it must've been you. That attack appears to have nothing to do with the Zcash company as an insider -- the software is open source and hosted from Debian, etc. Am I misunderstanding? How does Monero stop an analogous attack?

(The paper continues "To mitigate such attacks, users should check with trusted peers their view of the block chain and, for sensitive transactions, only spend coins relative to blocks further back in the ledger (since creating the illusion for multiple blocks is far harder)." I don't know whether current software does this for you -- that paper's from 2014.)

This site is good for getting an idea about what coins are actually being used. Bitcoin is extremely dominate.

https://coinmarketcap.com/

There are undoubtedly improvements that can be made to Bitcoin or adopted by its competitors. But you still have to have people using a currency. Anyway, my point is that this doesn't compromise the scarcity of Bitcoin. Scarcity of a currency does not refer to a lack of competing currencies.

> They're referring to any unique characteristics that give Bitcoin value in competing with other cryptocurrencies, which is mostly true.

The unique characteristic that makes Bitcoin more valuable than all other cryptocurrencies is liquidity. The order book depth for the USD/EUR Bitcoin market is more than an order of magnitude greater than all other cryptocurrencies combined.

The more liquid a monetary unit is, the less friction is involved in using it for exchange, since you pay the spread (which increases with order size) every time you enter and leave the Bitcoin market.

This is the only reason gold is still so valuable: it has immense liquidity/market depth, meaning you can quickly offload it on the market when needed. This is very useful, and the defining property of money.

"Competing cryptocurrencies won't be spendable on the Bitcoin block chain and vice versa, so Bitcoin's scarcity isn't compromised."

Because bitcoin is not backed by any assets, anyone could come along an invent something like bitcoin, claim it has value, and disrupt it.

So it's maybe the wrong wording for the argument, but the underlying premise - the actual underlying weakness of bitcoin as an asset, is the argument.

USD's are backed by TBills, Euros are backed by pretty good quality assets. I understand it's not like you can go and exchange your Euros for landholdings or gold, but there is integrity in that system.

Bitcoin is just an idea, worth whatever a group of random people decide it's worth, which makes it highly volatile and risky.

The USD will not go do 0 tommorow - its's needed for many things. Bitcoin could go to 0 tommorow.

Bitcoin isn't backed by any assets. Bitcoins ARE assets. They don't have value because someone just came along and claimed they do (try to start your own Bitcoin clone and see how much people will buy them for). They have value because people are willing to trade for them, and there are many potential reasons for that (some less reassuring than others).

Bitcoin is really not an asset by any stretch.

"They don't have value because someone just came along and claimed they do" - that's exactly why they have value - because a bunch of people arbitrarily believe they have value.

There are zero currencies which survive on this basis.

All major currencies exist because they are the medium of exchange in some economy - and/or they are backed by something tangible: in the US it's government debt, in Europe by other assets.

In China it's a little more fantastic, but the currency has about as much trust as one can have in their government - meaning, it's sketchy, but it's not going to 0 overnight.

Bitcoin could be worth 0 tommorow if people lose interest, vendors stop caring - which could happen - after all, what is the underlying impetus to keep pricing momentum? Is there demand on Bitcoin for people to pay taxes? Nope. To buy other products and services? Nope. As a 'store of value'. Nope.

Really - the only value might be to 'hide from paying taxes' or to 'hide from authorities' - which admittedly has value to some people, but I'm not sure if it's enough to keep it afloat.

Most of the "value" of gold is by arbitrary societal agreement--there is very low natural use-driven demand compared to the froth from people using it as a store of value. That agreement, in a game theory sense, comes from the original time when participants coalesced around gold because it had the properties that seemed most appealing (limited supply, difficult to fake, measurable, transportable) as a store of value or currency.

Whatever alternatives may arise, the one that will be "most valuable" is the one that everyone thinks everyone else will want.

Scarcity, fungibility, divisibility, durability are not societal constructs. Plus all metals have some inherent value. On top of that you have desirability which you could perhaps explain as a societal construct although I think there is something ingrained in the human psyche about valuing very smooth and shiny things (perhaps there is even an evolutionary explanation). At any rate a societal construct that has persisted for milenia across vast swathes of the globe is not your typical societal construct.

> a societal construct that has persisted for milenia across vast swathes of the globe is not your typical societal construct.

For sure, but until now, gold has not faced an alternative that beat it on a number of objective measures (portability, divisibility, scarcity, durability) so now we get to see the experimental result of what happens over time when there's an alternative that better meets the core use-cases that made it a good choice to a store of value.

Bitcoins have a base level of desirability even without currency use. They offer the ability to write (transact) on a public globally distributed time stamped, unforgeable verified data store.

The blockchain's a perfect place to store the hash of a document, for example, to prove it's existence as of a certain date.

However much that is true - gold is still a physical product, impossible to reproduce, has some utility, it's a luxury item, and it has been established as a 'currency' for the last 5000 years. Which is a long time.

So aside from some nice properties, it's like the 'original bitcoin'. We really don't need another.

> So aside from some nice properties, it's like the 'original bitcoin'.

Plus you can buy it in China and sell it in Brazil all within 30 minutes.

> We really don't need another

You are saying that you don't need another. But, among others, a million Chinese do and beg to differ here.

Gold divisibility is bad. Same for any other metal. This is one of the advantages of crypto currencies.

I've seen comments like this posted on HN for the past 3 years. Bitcoin's "bubble" has already popped many times but it has rebounded each time. Maybe the next time will be the last, but a lot of people have been wrong about that so far.

We're entering a new bubble, this one being driven as the Yuan crashes: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&...

Just because it's being repeated doesn't mean it's wrong.

What constitutes a crash for the Yuan (3% over 3 months), is way less than the volatility of bitcoin in one day...

I can't tell if you're trying to say if the Yuan didn't crash or something else. Bitcoin's 3 month volatility is 85%.

Bitcoin has to end some day, but what Black Swan will bring about its end? The end should be factored in to investors calculations, but how? It has proven to be quite reliable so far, but the block size issue and I think fee increases are a negative.

Just because there are a few buyers and sellers trading bitcoins at a specific price, does not mean there is any real validity or pricing support for the rest of the market.

Facebook could sell most of their shares for today's bidding price.

If all bitcoins went on the market today, it would probably crash and never recover.

Even in a housing crash, there are creditors, deal-seekers and people who need a place to live who will stop the bidding from getting too low. And then people will come back eventually.

If/when bitcoin crashes, it's gone for good.

Yes, Bitcoin has many competitors but it is the only cryptocurrency to have achieved 'mass' adoption. When you think of the pinnacle digital currency, it's Bitcoin -- that has value to consumers and merchants, more than other currencies regardless of their features.

"Not to mention that once it is perceived as more than just a nuisance by some major government it will be shut down in a heartbeat."

People keep saying that, and they keep being wrong. Think of all the illegal things that happen over bitcoin. There are lots of people who would want to shut it down if they could.

"Think of all the illegal things that happen over bitcoin. T"

Sure, but if the US gov makes bitcoin illegal that means most of the buyers and sellers - regular people - have to withdraw from the market.

Many of bitcoins biggest owners are big name dudes - like the twin brothers from Facebook, the Winklevoss own something like 10% of all bitcoins.

If they perceive a change in law, they'll have to sell their bitcoin before that happens, as will all legit owners ... it will flood the market and might very well crash it.

You're both under- and overestimating the worlds' government:

- You're underestimating their capability to shut down trade in bitcoin. Sure, they won't be able to stop you from running the software. But they have the ability to stop any transfer into/out of the digital world. That part is quite easy to proof: real-world usage of bitcoin requires exchange for regular currency. And bitcoin was founded on the belief that governments have too much control over the flow of currencies. (This argument hints at a common mistake in the tech community: overestimating the power of technology and underestimating the power of law).

- You're overestimating the governments' wickedness. Functioning democracies work on a default-legal basis, and it appears to me as if a to of governments have found a good balance b/w ensuring existing mechanisms are applied to bitcoin, without creating unnecessary burdens blocking its adoption.

> You're underestimating their capability to shut down trade in bitcoin.

You overestimate the willingness of the police force to prove that they are willing to risk their lives and die for what they believe in. In fact, they won't. Ultimately, they count on the army to do that, who won't either.

what?

"Bitcoin fails to satisfactorily answer von Mises' regression theorem."

Can you explain this for the non-economists here please?

Economists (notably Ludwig von Mises and Carl Menger) attempted to answer the question, "Why does money have value?" with the explanation that people have a desire for goods (including money) because of what they use them for. With money, they expect to trade it for other goods in the future. But the problem is that argument is circular when using it to explain the market origination of money: Why did people originally want to trade other goods for money before it was money? Mises' regression theorem is to answer this by using Menger's explanation for the origin of money. That is if we take time into account, people expect money to buy stuff in the future because they have memory of what it was traded for in the past, and if you keep going into the past with this logic money must have originated from having some other value. For example, people start trading things for butter because they like to eat it, and when everyone ends up with butter they start trading other things for butter solely because of what they can trade for butter in the future (Money), because many people both have and want butter.

Bitcoin doesn't seem to have originated this way. It doesn't appear to have been originally valued for its own sake (like Gold or butter). So Mises' regression theorem seems to fall apart when applied to Bitcoin.

I've seen this point refuted as bitcoin having value because it is value able as a transfer of value medium. The same way an armored truck would have value because you can transport valuable stuff with it so does bitcoin.

That's interesting. A quick search didn't turn up any math in the first few hits, but https://mises.org/library/cryptocurrencies-and-wider-regress... discusses this application to bitcoin somewhat skeptically.

Without more detail, https://wiki.mises.org/wiki/Regression_theorem seems to be saying that non-money uses of a currency set a floor on its value. If there are no such uses, the floor is zero. If there used to be such use-value, the past floor can bootstrap an equilibrium with a nonzero value in the present. Is there more to this theorem?

Good explanation.

Twenty years from now we will know which one has passed the test of time, Mises theorem or Bitcoin intrinsic value defying it, which I postulate is a consequence of their money-like characteristics instead of the correspondence to any physical goods.

This of course also applies to other crypto-currencies. May be any cryptocurrency that's not premined and is owned by a big enough network of people has some intrinsic value > 0, and it may be more related to the network size than to the underlying crypto-algorithm.

Can't we say that originally someone bought a pizza with Bitcoin, and that the induction started from that point?

You dismiss the effect it has on real world and the markets it enables, among many other attributes/advantages.

Obviously it's not perfect, nothing is, but it's upgrade-able and you overlook the value of global decentralized trust, for some it's really valuable and its value will keep increasing the more we get connected (e.g: see R3 and all the banks that try to use the blockchain tech, even if they miss the point).

Bitcoin fails to satisfactorily answer von Mises' regression theorem. Nope It also has no scarcity since it can face competition by an infinite number of similar This is syntactically identical to the following argument; Gold has no scarcity because it can face competition from an infinite number of other physical materials. once it is perceived as more than just a nuisance by some major government it will be shut down in a heartbeat. This is syntactically identical to the following argument; Once asteroids are perceived as more than just a nuisance by dinosaurs, they will erect an asteroid defense system in a heartbeat. Future generations will laugh at our incredulity just like we make fun of the Tulip mania (which had more substance to boot). Because you don't understand the above, it's perfectly reasonable that you would think this. But given that such a currency will antagonize major governments This needs to be re-stated because you seem convinced with quite some certainty about the relevance of this. Bitcoin specifically, and modern peer to peer distributed cryptocurrencies in general, were constructed with the understanding that the infrastructure that they consist of would be an existential threat to the state, and the state may well respond accordingly. Armies employing firearms are similarly unphased by the idea that they may attract the opprobrium of armoured heavy cavalry due to their unsportsmanlike conduct and the fact that the latter precipitates the obsolescence of the former, but they were designed with that understanding in mind. The very fact that you acknowledge there is insatiable global demand for a currency should be a good indicator to you that this is just a decisive blow in an extremely long war, not as you assume, a relic of the political naivety of the designers of, and the community stewarding, Bitcoin and other peer to peer distributed cryptocurrencies. Dinosaurs were killed by asteroids because they had no model for understanding the threat with which they were faced, and no mechanism for defense against such a threat even if they did so understand it. Heavy cavalry was obsoleted by modern firearms regardless of their understanding, because when you charge a fortified cheap and low maintenance machine gun emplacement with your expensive and high maintenance heavy cavalry, it will be annihilated. The state will be obsoleted by distributed peer to peer cryptocurrencies, because regardless of their understanding, they are unable to enforce a mechanism to prohibit the performance of the mathematical equations constituting the necessary cryptography backing these peer to peer cryptocurrencies, and this exsanguinates their economic parasitism, subjecting them to the full force of free market competition as a consequence, and thus their annihilation, because everyone well knows that they cannot compete in such circumstances, and have only endured until this point by violent coercion masquerading as benevolent social stewardship. it will likely not be a crypto-currency but rather a currency backed by some sufficiently powerful country. There is simply no need for such a beast when a purely free market invulnerable infrastructure for the transmission of value between anonymous actors in a trustworthy fashion already exists. am actually expecting the Russians or Chinese to launch a 100% gold-backed currency within the next 5 years Which would actually be a final surrender, as a gold backed currency is once again something that they are unable to infinitely parasite from through central bank manipulation. I agree with your analysis on this front and see it as a positive thing. It has no bearing on the success of cryptocurrencies, nor the nature of them dealing a killer blow to any fiat currency which a state would otherwise be able to infinitely parasite from by manipulation. A world in which gold backed currencies exist alongside cryptocurrencies is perfectly reasonable. Failing that, when the EU breaks up the new Deutsche mark will be a good alternative Unless it's backed by a suitable commodity, it's not going to win, for all of the aforementioned reasons, and if it is backed by a suitable commodity, it's not a problem for cryptocurrencies.

Your fantastic comment would benefit from a few newlines.

I recommend you read some Jeff Tucker; he also started from the same position but changed his mind later on. I'm not saying he's right, to be honest I have yet to care about Bitcoin, but he is an example of an Austrian economist who favors it.

And yet it managed to get monetary value. Ergo, the regression theorem is wrong.

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