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Comment by justAsking2017 | Hacker News Reader

justAsking2017

Wow, people still stuck on this tulip bulb thing ...

How about a little analogy? In the mid fifties a trucker conceived the idea of having his trucks' cargo loaded directly onto a ship, thus inventing the container ship, which essentially revolutionized the shipping industry. Nobody moves cargo the old way anymore, unless they are completely insane.

Moving value using distributed consensus systems based on pure mathematics is a similar revolution. However, it is likely to be at least an order of magnitude more significant.

It might be a good time to invest.

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Value already resides almost entirely in distributed consensus systems such as Visa, the international banking system, etc. That revolution has already happened.

A zero-trust distributed database is kind of cool. A distributed database that can do 6 transactions/second with a commit time of about 30 minutes and an enormous energy consumption is not very cool. The only people for whom bitcoin is valuable are people for whom the former outweighs the latter, i.e. people for whom trust is extremely costly and zero-trust extremely valuable. Basically, criminals. There's a decent population of those, but it's still a small fraction of society and shrinking every day; drug legalization and the collapse of capital controls in the few places that still have them will destroy most of bitcoin's value.

>The only people for whom bitcoin is valuable are people for whom the former outweighs the latter, i.e. people for whom trust is extremely costly and zero-trust extremely valuable. Basically, criminals. There's a decent population of those, but it's still a small fraction of society and shrinking every day; drug legalization and the collapse of capital controls in the few places that still have them will destroy most of bitcoin's value.

In the developed world, capital controls are definitely increasing. Financial regulations in general are increasing. Mass-surveillance of people's personal finances, and in particular, private transactions, is increasing as well, as cash gets replaced by identity-linked electronic accounts controlled by larger trusted third parties. There is demand for a cash-like electronic currency.

In the developing world, there are billions who are unbanked, and with one-third of children being born without a birth certificate [1], and the trend toward increasing centralisation and regulation of banking making government identity documents increasingly necessary to get a bank account, there will likely continue to be a large number of unbanked in the world for whom a permissionless and censorship resistant electronic currency is extremely valuable.

[1] http://www.independent.co.uk/news/world/politics/220-million...

Lots of flawed arguments and logic in your post.

The "commit time" (time until a transaction is considered irreversible) is 60 days for Visa, but 10-60 minutes for Bitcoin. The "notification time" (time until a transaction is announced to recipient) is < 1 second for both systems. The "processed time" (time until a received transaction is spendable) is next-business-day for Visa, and 10 minutes for Bitcoin.

Bitcoin miners consume less energy than the annual electricity consumption of decorative Christmas lights in the US, which process 0 transactions and do nothing other than looking shiny: http://blog.zorinaq.com/bitcoin-electricity-consumption/

The people for whom Bitcoin is valuable include notably (1) senders/recipients who needs to send/receive money quickly (10-60 minutes) to/from anybody around the world, and (2) recipients who want to eradicate fraudulent and eventually reversed payments. Definitely more than "just criminals."

Just because Bitcoin may not be useful to you in your life does not mean others will not need the utility it provides.

Then why is it when I use Visa in a shop I can leave with my item within seconds of presenting my contactless card to a reader; whereas with bitcoin sellers want to wait for at least one confirm - which takes 5-15 minutes even if I pony up a 360 satoshis/byte (~$1.90 per transaction) fee to get into the next block?

Because thanks to the extreme cautiousness of Bitcoin developers who have abundantly communicated the (small) risk of accepting zero-confirmation transactions to the public, people have generally heeded the advice of waiting for at least 1 confirmation.

But in reality, if it is OK for a shop to tolerate the risk of credit card chargeback fraud (which is real and is exploited every day) then it is OK to also tolerate the risk of accepting a zero-confirmation Bitcoin tx. Notice the language I use. "Tolerate" doesn't mean "annulate", but "accepting some degree of risk that can be controlled."

Of course the downside of this cautiousness around zero-confirmation transactions causes people to think Bitcoin transactions are slow, when it's not true. They are as fast as, if not faster, than CC transactions.

> The "commit time" (time until a transaction is considered irreversible) is 60 days for Visa, but 10-60 minutes for Bitcoin. The "notification time" (time until a transaction is announced to recipient) is < 1 second for both systems. The "processed time" (time until a received transaction is spendable) is next-business-day for Visa, and 10 minutes for Bitcoin.

You can draw all sorts of gerrymandered lines to make different things sound equivalent. The question that matters for a merchant is how long do they have to wait to confirm a transaction in order to not end up losing massive amounts of money to fraud, and that number is <1 second for visa and 10-60 minutes for Bitcoin.

> Bitcoin miners consume less energy than the annual electricity consumption of decorative Christmas lights in the US, which process 0 transactions and do nothing other than looking shiny: http://blog.zorinaq.com/bitcoin-electricity-consumption/

Only because Christmas lights are used by more people, more often. How much energy does bitcoin consume per transaction, hmm?

> (1) senders/recipients who needs to send/receive money quickly (10-60 minutes) to/from anybody around the world

Obviously no-one wants to wait any longer than they have to, but what's the realistic use case where the participants are far enough apart that this matters and 10-60 minutes is so much better than a couple of days? And again this is a case where bitcoin could very easily be undercut in the near future by trustful systems that have fundamentally much lower costs - within-country those systems are already single-digit minutes (2 hours is advertised but that's an upper limit, bitcoin has a very high upper limit on how long a transaction might take).

> (2) recipients who want to eradicate fraudulent and eventually reversed payments

Irreversible payment is too easy to exploit in the other direction, by selling faulty goods. Non-criminal consumers like the option of chargebacks, and non-criminal merchants accept that.

"You can draw all sorts of gerrymandered lines to make different things sound equivalent"

They are equivalent. I note that you failed to make a detailed rebuttal, and that is because the factual data I mentioned is true.

"Only because Christmas lights are used by more people, more often. How much energy does bitcoin consume per transaction, hmm?"

It's neither about the number of users, nor about the energy per tx. My point was that people are OK to spend energy on things that are seemingly useless (shiny colorful lights, or SHA256 computation.) And in both cases, Xmas lights or Bitcoin mining, it's fine to spend the energy doing so. Because what we get in return (comfort of life, economic product) is worth the energy spent on it. So if people are OK spending 7 TWh/year on technically useless decorative lights, it is obviously OK to spend a similar amount of energy on powering a revolutionary distributed trustless financial network. Every kWh spent on Bitcoin mining not only enables transactions, but also: creates jobs, creates wealth, reduces trade friction, improves economic output, and on and on.

"what's the realistic use case where the participants are far enough apart that this matters and 10-60 minutes is so much better than a couple of days?"

Seriously? If you can't answer this question, you have never run a company (even a small company) who engages in international trade.

"Non-criminal consumers like the option of chargebacks, and non-criminal merchants accept that."

And yet reversibility hampers trade. Some business is never done with reversible CC transactions precisely because merchants can't accept the risk. Bitcoin enables them to pursue ventures that would otherwise not be doable.

> I note that you failed to make a detailed rebuttal, and that is because the factual data I mentioned is true.

I note that you failed to respond to my high-level point that makes all your technical minutiae irrelevant.

> My point was that people are OK to spend energy on things that are seemingly useless (shiny colorful lights, or SHA256 computation.)

Not the same thing at all. People enjoy looking at colourful lights, and so choose to pay to display them.

> Every kWh spent on Bitcoin mining not only enables transactions, but also: creates jobs, creates wealth, reduces trade friction, improves economic output, and on and on.

In a hypothetical large-scale Bitcoin economy, how many transactions would happen that wouldn't have happened without bitcoin, what proportion of those would be transactions that were positive rather than negative for society, and what would be the energy cost per such transaction?

> And yet reversibility hampers trade. Some business is never done with reversible CC transactions precisely because merchants can't accept the risk. Bitcoin enables them to pursue ventures that would otherwise not be doable.

We have techniques for doing irreversible transactions in the existing financial system. They're used for a tiny proportion of transactions, and an even tinier proportion of legitimate transactions, because the overwhelming majority of the time reversibility is what you want.

"you failed to respond to my high-level point"

My response would have been redundant with what I already told michaelt: your point is wrong, waiting <1 second for a visa transaction does not protect the merchant from potential massive losses, because of credit card chargeback fraud which is very real, exploited every day, and can be conducted up to 60 days after the purchase. Example: https://www.reddit.com/r/legaladvice/comments/5r9nqi/credit_...

"Not the same thing at all. People enjoy looking at colourful lights, and so choose to pay to display them"

And people enjoy making money, and so choose to pay the electricity to mine bitcoins. Same thing. People pay for things they enjoy.

"In a hypothetical large-scale Bitcoin economy, how many transactions [...], what proportion [...], and what would be [...]?"

I estimate that if Bitcoin's market capitalization reaches $1 trillion, then miners will still not account for more than 0.74% of the energy consumed by the world ($1.25 billion per TWh), which is more energy-efficient than, say, Canada (whose economy produces $450 million per TWh.) See http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/

"We have techniques for doing irreversible transactions in the existing financial system. They're used for a tiny proportion of transactions..."

Yes and this is a physical exchange of cash/commodities. Bitcoin/cryptocurrencies make irreversible transactions possible digitally and have no other equivalent in the digital world. This is one of the biggest innovations they bring to the table.

"the overwhelming majority of the time reversibility is what you want."

No. Litterally 1 in 2 persons conducting transactions would prefer irreversibility. Recipients want it. Senders don't.

> waiting <1 second for a visa transaction does not protect the merchant from potential massive losses, because of credit card chargeback fraud which is very real, exploited every day, and can be conducted up to 60 days after the purchase.

And yet it remains economically viable for merchants to operate waiting <1 second for payment, because the trust-based visa system and the broader legal system have countermeasures against chargeback fraud. With bitcoin that's impossible by design; merchants don't accept bitcoin in <1 second and never will, because there is no way to deal with the fraud that would lead to.

> And people enjoy making money, and so choose to pay the electricity to mine bitcoins. Same thing. People pay for things they enjoy.

Not the same thing. Bitcoin isn't decorative, it's a means to an end - paying for things. And there are much cheaper ways to pay for things, unless you're a criminal.

> I estimate that if Bitcoin's market capitalization reaches $1 trillion, then miners will still not account for more than 0.74% of the energy consumed by the world ($1.25 billion per TWh), which is more energy-efficient than, say, Canada (whose economy produces $450 million per TWh.) See http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/

That calculation is using an artificially low energy price and an artificially high profit margin for "miner"s, and it's completely disregarding how transaction fees are intended to displace mining fees as a source of mining profits. But even using that number, world GDP is $80t; at a conservative P/E of 20 that makes the world economy's market cap around $1.6q. So bitcoin would be 0.06% of the world's market cap, but consuming 0.74% of the world's energy.

> Yes and this is a physical exchange of cash/commodities. Bitcoin/cryptocurrencies make irreversible transactions possible digitally and have no other equivalent in the digital world.

There are irreversible digital settlement systems (those that currently exist are even slower than bitcoin, but there's no reason they have to be - it's just that at the scale of the financial entities that can make use of such systems, waiting a couple of days for settlement is a non-issue), and we could easily make more if there were demand for it. Credit card chargebacks are a design decision, not a fundamental limitation.

"the broader legal system have countermeasures against chargeback fraud"

The same legal system will be used to sue thieves, regardless if they chargeback a credit card, or revert a 0-confirmation bitcoin transaction. Do you live in a fantasy world where judges tolerate theft of bitcoins?

"merchants don't accept bitcoin in <1 second and never will, because there is no way to deal with the fraud that would lead to."

You seem to have never heard of Gemini (second biggest US exchange) who does accept 0-confirmation transactions meeting certain criteria. Or greenaddress.it. Or services like gap600.com.

"Not the same thing. Bitcoin isn't decorative"

You are right, Bitcoin is not a useless decorative thing. Bitcoin is a revolutionary distributed trustless financial network. Again, it is your 3rd message, and you still failed to explain why it is ok to spend energy on useless (on a technical level) decorative Christmas lights, but not on Bitcoin.

"And there are much cheaper ways to pay for things"

No. Again I can send $5000 or $50 million across the world and pay a flat tx fee of $2. No system other than cryptocurrencies accomplishes this.

"That calculation is using an artificially low energy price"

Why do you complain? The low energy price of $0.01/kWh benefits your argument, not mine, as it allows miner to spend even more electricity in this model.

"So bitcoin would be 0.06% of the world's market cap, but consuming 0.74% of the world's energy"

You are missing the point. It is not market caps that need to be compared, but the GDP increase caused by Bitcoin that needs to be compared with its energy use. The market cap of Bitcoin is in itself irrelevant. The point http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/ is making is that if Bitcoin's market cap is that high, then it probably will have helped increase the world's GDP by at least 0.74%, therefore it will be worthwhile to spend 0.74% of the energy on it.

"There are irreversible digital settlement systems"

False. You cannot name them because they do not exist. Only cryptocurrencies accomplish this.

> you still failed to explain why it is ok to spend energy on useless (on a technical level) decorative Christmas lights, but not on Bitcoin.

Christmas lights produce value and there isn't a less wasteful way to provide the same value (because the value is a subjective notion of prettiness, we can't say that other forms of decoration are acceptable substitutes). Whereas bitcoin does have a cheaper substitute (because bitcoin is functional, so any other system that does the same thing is just as good).

> The point http://blog.zorinaq.com/bitcoin-mining-is-not-wasteful/ is making is that if Bitcoin's market cap is that high, then it probably will have helped increase the world's GDP by at least 0.74%

There is no logical basis for that inference - I suspect that article is just trying to trick people by making them compare a large-sounding number ($1 trillion) with a small-sounding number (0.74%), because people don't have a good intuition for how big the world's GDP is. Compare market cap with market cap or compare production with production.

> False. You cannot name them because they do not exist. Only cryptocurrencies accomplish this.

https://en.wikipedia.org/wiki/Real-time_gross_settlement

You haven't replied to the majority of what I wrote. I take it you agree with it.

"there isn't a less wasteful way to provide the same value"

Yes there are many ways: migrate from incandescent to LED, run LEDs at lower PWM duty cycle, reduce number of lights, etc.

"Compare market cap with market cap or compare production with production"

Comparing production to production is exactly what the article is doing.

RTGS transactions are reversible. Eg. when fraud is detected, banks simply agree to perform a reverse transfer.

> Yes there are many ways: migrate from incandescent to LED, run LEDs at lower PWM duty cycle, reduce number of lights, etc.

All of which affect the subjective beauty of them.

> Comparing production to production is exactly what the article is doing.

It's not - comparing market cap (a total value measure) to GDP (a per-year measure) is dishonest.

> RTGS transactions are reversible. Eg. when fraud is detected, banks simply agree to perform a reverse transfer.

Agreeing to perform a reverse transfer will be possible in any system you could meaningfully call a currency. It's certainly possible with bitcoin.

I said "You haven't replied to the majority of what I wrote." You still haven't, but instead are nitpicking on whether LEDs affect the subjective beauty of Xmas lights (which I disagree with but whatever.) This further shows your argumentation in this thread is baseless and going nowhere.

"It's not - comparing market cap (a total value measure) to GDP (a per-year measure) is dishonest"

Yes it is. It says "it would have probably directly or indirectly increased the world's GDP by at least 0.74%" This is a percentage that relatively compares Bitcoin's production (0.74%) to the world production (100%). Bitcoin's market cap is mentioned in passing, but not part of the core argument.

RTGS: of course the 2 banks part of a transaction can agree to any transaction. What I meant is the central bank or other authority (not part of the initial transaction) can reverse it at will. Most RTGS systems are operated by central banks. If a fraudulent transfer from bank A to B is made, then of course the central bank would step in and reverse it. As I said, again, irreversible digital transactions outside of cryptocurrencies don't exist.

> instead are nitpicking on whether LEDs affect the subjective beauty of Xmas lights (which I disagree with but whatever.) This further shows your argumentation in this thread is baseless and going nowhere.

Hey man, christmas lights and LEDs are your example, not mine; I'm just answering your questions.

> This is a percentage that relatively compares Bitcoin's production (0.74%) to the world production (100%).

No, because it doesn't give any reasoning to connect up Bitcoin production with that 0.74% figure. The only number it gives for Bitcoin is the $1T market cap number, and fundamentally it's completely implausible for something with a $1T market cap to be responsible for 0.74% of world productivity. As I said a few posts back, a $1T market cap in a mature industry corresponds to being responsible for about 0.06% of world productivity (and a $1T market cap in a growing industry corresponds to less productivity than that, as the market cap is including the growth potential).

> What I meant is the central bank or other authority (not part of the initial transaction) can reverse it at will. Most RTGS systems are operated by central banks. If a fraudulent transfer from bank A to B is made, then of course the central bank would step in and reverse it. As I said, again, irreversible digital transactions outside of cryptocurrencies don't exist.

Cryptocurrency transactions can be reversed by those operating the cryptocurrency - look at the Ethereum DAO fork.

"Hey man, christmas lights and LEDs are your example, not mine; I'm just answering your questions."

You are not answering. You still (3rd time I point this out) haven't replied to the majority of what I wrote in https://news.ycombinator.com/item?id=14442878 where I explain the utility of Bitcoin, legal protections, and 0-confirmation transactions. Should I take your silence as tacit acknowlegement?

"No, because it doesn't give any reasoning to connect up Bitcoin production with that 0.74% figure."

It doesn't give the reasoning, but I also don't think your estimate is correct, especially your choice of P/E 20, which is not conservative at all. Remember the world's market cap is comprised of very average companies, including companies that are so terrible they are not worth taking public: for example a small corner store, which I am sure you will agree should not be valued at a P/E of 20. In fact we can estimate a more accurate world P/E by looking at the global market cap of listed companies: $60T (http://data.worldbank.org/indicator/CM.MKT.LCAP.CD) If 1/4th of the world GDP is produced by public/listed companies and 3/4th by private/unlisted ones, then the "world's market cap" is $240T, which means the world's P/E is 3. Bitcoin being valued at $1T would be 0.42% of a $240T world market cap, so it would be reasonable and very average for it to use 0.74% of the world's energy. In fact after doing this math I am surprised how close these 2 figures are. This means Bitcoin would be even more efficient compared to other industries (eg. aluminum smelting) that use disproportionately even larger amounts of energy compared to their contribution to the world's economy/GDP.

"Cryptocurrency transactions can be reversed by those operating the cryptocurrency - look at the Ethereum DAO fork."

Replace "cryptocurrency" with "Bitcoin" in my sentence. Bitcoin has a 8+ year history of never reversing transactions despite many massive thefts. So, as I said, Bitcoin's irreversible property has no equivalent in other financial systems. And you were wrong that RTGS systems provide irreversibility.

> You are not answering. You still (3rd time I point this out) haven't replied to the majority of what I wrote in https://news.ycombinator.com/item?id=14442878 where I explain the utility of Bitcoin, legal protections, and 0-confirmation transactions. Should I take your silence as tacit acknowlegement?

You're link goes to some random comment in an unrelated thread, so I've no idea what you're talking about. The legal system is great when you can identify a thief, but that's difficult enough for in-person theft; it's virtually impossible when operating pseudonymously over the Internet. As for 0-confirmation transactions, the bottom line that no amount of sophistry will get away from is that 0% of the shops I've been to in the real world that take bitcoin allow payment in seconds, whereas 100% of the visa-accepting ones do.

> for example a small corner store, which I am sure you will agree should not be valued at a P/E of 20.

Huh? It absolutely should be; that's exactly what a P/E of 20 being normal for mature businesses means.

> Bitcoin has a 8+ year history of never reversing transactions despite many massive thefts. So, as I said, Bitcoin's irreversible property has no equivalent in other financial systems. And you were wrong that RTGS systems provide irreversibility.

I'm sure there'll be examples of RTGS systems that have gone just as long with no reversed transactions, especially if you measure by transaction volume rather than clock time.

More importantly there's no fundamental difference between Bitcoin and Ethereum that makes it impossible for the same thing to happen; indeed the 0.8 (I think?) hard fork demonstrates that the level of coordination that would be necessary to reverse a transaction already exists. The only difference from conventional RTGS is policy; Bitcoin's operators doesn't reverse fraud, whereas it sounds like some RTGS operators do. I'm not sure why any non-fraudulent business would prefer the former.

The correct link is https://news.ycombinator.com/item?id=14442877 Prosecuting a thief who orders online a package to be shipped is as hard/easy if he used Bitcoin or a fraudulent CC. I would like to remind you you argued there were zero legal countermeasures for Bitcoin fraud, and this is clearly untrue.

0-conf txs are a thing, see the link. Although uncommon, they are becoming a bit more used as people demand faster transactions. But the reality is in most cases waiting 10-60 min doesn't matter (eg. wouldn't prevent a package ordered online from arriving in 2 days.)

As to the P/E, I have demonstrated to you why the average P/E of the average company is probably closer to 3 than 20. On average, it's companies that are better than average that are taken public. So it makes sense that private companies have a worse P/E.

"I'm sure there'll be examples of RTGS systems that have gone just as long with no reversed transactions"

Still doesn't mean RTGS provide irreversibility, as you incorrectly claimed. I am repeating myself again, but Bitcoin's irreversibility is one of the biggest differentiator it has over non-cryptocurrencies. Seeing you refuse to acknowledge this is silly.

"I'm not sure why any non-fraudulent business would prefer the former."

I already told you: literally 1 in 2 persons involved in a transaction (the recipient) would prefer irreversibility. Is it so hard for you to understand why a legitimate non-fraudulent recipient would prefer the sender not have the ability to take the money back?

Loading the cargo onto ships was only the next logical step because it has almost not disadvantages.

Blockchains, especially Bitcoin, have multiple fundamental flaws that only wait until they are exploited. Bitcoin for example is the most inefficient way of handling payments ever invented. The whole system is based on the fact that not someone with a higher hashrate comes along. State-level actors might be not be a threat to the system right now but wait until it gets more and more popular. Most of the miners (and the hashrate) are in China and the Chinese government will not sit with their hands in their laps while a unregulated currency becomes widely adopted in the country.

Did you read the article?

1. The author starts out by relating how the standard story about the tulip crash may be a myth.

2. The author does not think that the above myth is a good analogy for cryptocurrencies. I'm going to go ahead and paste the closing paragraphs here:

The problem, of course, is that while blockchain applications make sense in theory, the road to them becoming a reality is still a long one. That is why I suspect the better analogy for blockchain-based applications and their associated cryptocurrencies is not tulips but rather the Internet itself, specifically the 1990s. Marc Andreessen is fond of observing, most recently on this excellent podcast with Barry Ritholtz, that all of the dot-com failures turned out to be viable businesses: they were just 15 years too early (the most recent example: Chewy.com, the spiritual heir of famed dot-com bust Pets.com, acquired earlier this year for $3.35 billion).

As the aphorism goes, being early (or late) is no different than being wrong, and that’s true in a financial sense. As I noted above, I would not be surprised if the ongoing run-up in cryptocurrency prices proves to be, well, a bubble. However, bubbles of irrationality and bubbles of timing are fundamentally different: one is based on something real (the latter), and one is not. That is to say, one is a myth, and one is merely a fable — and myths can lift an entire species.

Bubbles have their uses. An enormous amount of money and effort is thrown at a new technology in the hope of getting the bit that sticks.

Most will lose and go broke but a lot of infrastructure gets left behind that later, more considered, businesses build on.

True of the railways, the automobile, telecoms and the internet.

Most crypto currencies will be worthless but systems be created to allow me to buy shares from you with no broker or stock exchange, to track the ownership of patents and property publicly, to enforce government spending to prevent cronyism and uses that nobody has yet thought of.

Best investment is to learn the skills.

Maybe read the article

> However, it is likely to be at least an order of magnitude more significant.

Why?

Reply on news.ycombinator.com