Bitcoin Isn’t Tulips, It’s Open Source Money
blog.evercoin.com
blog.evercoin.com
A) Bitcoin is congested with transactions and takes hours to process some of them
B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money. The big banks are replaced by big whales, who will do anything in their power to manipulate markets for their gain.
E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
F) Bitcoin is not actually anonymous. Data science techniques can parse the blockchain and see sending patterns between different accounts. They map these patterns to various identities. If those identities can be mapped to a real person, say, when they cash out of an exchange, then it's known exactly how much Bitcoin they have.
If someone could write an article addressing these facts, rather than throwing out slogans like 'open source money', that would be nice.
Perhaps part of my frustration is that this is the latest in a long series of articles that beats around the bushes and fails to address any kind of meaty argument. They attack the weakest arguments, and lie or misdirect the stronger ones. Yes, we all know Warren Buffett and Jamie Dimon aaren't so great with computers, so why does that make Bitcoin any less of a speculative bubble?
But they are not currency. Currency is what you settle your tax bills in. And ultimately you need to get hold of some at some point.
Blockchain is sensationalized beyond belief. I can't wait for the rose tinted glasses to fall off and we realize it's just a data management technology for specific use cases.
I think the biggest danger to the technology is that the community focuses on "blockchain will change the world" not "how can we make this better".
https://people.csail.mit.edu/nickolai/papers/gilad-algorand-...
It has some novel approaches to node / data agreement.
Also take a look at the many projects Hyperledger projects. Hyperledger is incubated by The Linux Foundation. Their attitude towards open source development is that of purely technical curiosity and experimentation. Brian Behlendorf is directing the project so it's in good hands. He speaks about this attitude here:
1. s/Merkle tree/blockchain/
2. there is no step 2
We're using it for compliant sharing of and collaboration on private information records between non trusting organizations and businesses. You could do this with something like a highly distributed Cassandra cluster. But some of the inherent rules to a blockchain allow us to provide higher security, higher data persistence and availability between nodes, auditable records, and accountable participants / contributors.
And it's not centralized, it's completely distributed - just not publicly available to anyone who can download a mobile app.
>B) Bitcoin fees are through the roof
actually that pretty much fizzled out. https://jochen-hoenicke.de/queue/#30d
>it sometimes costs as much as 25% of the value of a transaction to send
it sometimes even cost 99% of the value you're sending (if you were sending 1000 satoshis 2 weeks ago).
>F) Bitcoin is not actually anonymous
strawman. bitcoin is pesduo-anonymous. anyone who did 5 mins of research would know this.
Hours to process transactions sounds relatively good to me, considering international bank transfers take 3-5 business days. We're talking about a decentralized protocol performing better than a centralized one which has all the advantages on its side.
> B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
Bitcoin is definitely not suitable for small-value transactions (the fee does not depend on the amount sent). Here's a graph of median Bitcoin fees for the past year: https://bitinfocharts.com/comparison/bitcoin-median_transact...
> C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
This is a misrepresentation of the issue. The lack of a solution is not due to in-fightning, but that absence of an obvious "fix". The smaller the block size, and thus transaction throughput of Bitcoin, the more decentralized it is, because the more people can download and verify the blockchain using commodity hardware. It would be simple to increase throughput, but this would occur at the cost of increased centralization. At the moment, consensus seems to favor decentralization over increased throughput.
Bear in mind, that if hardware capabilities continue to increase at historic rates over the next 30 years, 1GB blocks will probably be doable, which will be roughly sufficient to support the world's population (with the addition of consumer-to-merchant clearing protocols). Some people think this is too slow, but I think the world needs at least 30 years to get used to a new monetary system anyway, so it can't happen any faster than this.
> D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money.
The Bitcoin protocol is decentralized, because it does not define a central party. Saying Bitcoin is centralized because large mining firms exist is equivalent to saying that Git is centralized because of GitHub, or email is centralized because of GMail. Each individual miner (and exchange) is centralized, but on the whole they comprise a decentralized network of miners -- just like Gmail, Yahoo and Hotmail (together with all other email servers and providers) comprise a global, decentralized network.
That being said, Bitcoin is vulnerable to a constant 51% attack. It cannot withstand this (unless something fundamental changes about the protocol). So far, no one has bothered to carry out such an attack, but Bitcoin is vulnerable to this type of attack.
> E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
This is not fact, but opinion of Keynesian economists. The entire basis of Keynesian economics is this sentence.
For people interested in a much more meaningful explanation than Keynes' story of "things suddenly broke in 1929, and we had to ban gold to fix this", I recommend the following series of essays[1], which explain how the gold standard failed because it depended on a clearing market that was closed down at the start of WWI (in 1914) and kept closed at the end of the war (in 1918). This market cleared the "bill of exchange", which was a financial instrument that acted as a means of payment between retail merchants and producers of semi-finished goods, allowing the gold standard to scale as production became increasingly specialized. When bill of exchange clearing market in London was closed, producers were no longer able to pay each other using the bill of exchange, which caused demand for gold to surge (since it became the only means of payment between producers), causing deflation (an increase in the value of money is equivalent to a decrease in the price of goods).
Additionally, your point in D means nothing. Banking and economics is also "decentralized" by your definition. There is no absolute central authority of banking, but rather a small conglomerate of strong authorities with different powers. Fed controls the money outflow - mining pools control the money outflow. Big banks control the market movements - whales control the market movements (with much greater influence). Government controls the money policy - Bitcoin core controls the Bitcoin policy. It's the same system with a different name.
I get the feeling that you fall under the camp of Bitcoin holders who believe in it as a settlement layer, or a digital gold. Your points are correct. Although I believe settlements over a smart contract make far more sense than settlements through a cryptocurency with extreme market inefficiency.
However, my points are less about addressing the small minority of holders who understand the currency, and more to address the vast, overwhelming majority who hold false beliefs. I've had to explain to too many people that Bitcoin cannot be used to pay for takeout. I've had to explain that it isn't a gold standard for money laundering. I've had to explain that deflationary does not provably mean good.
Regardless of what your vision for the currency is, its price (and the price of cryptocurrencies in general) relfect a lot of delusional market thinking, and an extreme case of market inefficiencies.
Doesnt inflation cause asset bubbles? If the money supply remains constant, we would only devote money to stuff we truly really value. So any bubble talk would be nonexistent (because who would waste money investing in Pets.com stock when money is scarce? we need to use it for food, shelter and THEN use the rest for stuff we truly value)
The problem with deflation is that it prevents the thing from doing it's job as a currency. People have an incentive not to conduct transactions with it. And insofar as that prevents people from making transactions, that harms the economy.
Wouldn't they just wait until the price of something matches what they deem is fair value? And if it never goes down to a fair value, then they wouldn't buy it (that might include things like cryptocurrencies, huge TVs, Pets.com stock, and lots of nice-to-haves that waste a lot of resources but props up that vanity GDP metric and "boosts" the economy)
In your example, the problem is that it is harder to take a bitcoin-denominated loan to purchase a house because your bitcoin-denominated wages go down every year and eventually you can't pay off the interest anymore.
Continuing the example of buying homes... wouldn't that be a good (or neutral) thing since it means we wouldn't have so many people speculating on real estate, and taking out easy loans to buy homes, leading to unhealthy increases in home prices?
I agree that the housing market is not the ideal example but we need to look at debt in general when talking about deflation. In a deflationary setting, reduced lending reduces the speed that money moves around and depresses the economy. Business have trouble closing the book because falling prices of goods sold today are not enough to cover the cost of supplies from when they were manufactured a month ago. Periods of deflation have tended to go hand in hand with major economic busts, which is why modern monetary policy tries to avoid even the mildest form of deflation.
When FunBux are deflating, people who have FunBux (or are owed FunBux) tend to avoid spending if when they can, because its predicted future value is greater. In essence, it gradually stops behaving like a currency and is more like a commodity that they are holding for speculative purposes.
So how would that support your theory?
Perhaps you've somehow gotten the idea that deflation means a currency is absolutely not spent in any amount under any circumstances, because the incentive is so strong that it overrides all other things that human may need or want? Because that's not at all what I said.
People who can "afford" not to decrease their cache of DeflationBux will tend to avoid doing so, unless they're getting something they believe has a better future value. They are more likely to delay non-critical purchases or arrange deals that avoid that currency.
And when that happens, the currency isn't really doing its job. You can have plenty of blood in your body, but it's a bad thing when a lot of it stops moving.
You say it isnt doing "its job"? but thats not a real reason. cigarettes arent doing its job if its stashed away and not smoked.
When this trend becomes widespread enough, it can eventually cause global production capacity to drop. That's right, when enough people do it, token hoarding displaces investment in businesses and factories and lowers global production capacity. This means token hoarding causes a future drop in things available to buy with these very tokens.
Eventually there will be people who want to buy real things with their stock of tokens. The tokens will be chasing fewer goods which will mean prices for stuff will rise (tokens will lose value). This may happen suddenly when people with large stockpiles of tokens notice that value is dropping and that there are tons of other tokens waiting on the sideline ready to make it drop even further.
Hoarders might rush to get rid of their stockpile all at the same time before they're worthless which will cause their fall to worthlessness. This drop brings the tokens closer to their natural intrinsic value of zero. The cycle can then start again, such is aggregate economics.
The 1920s and 1930s suffered from this type of production drop but with gold tied currencies instead of cryptocoins. It happened to a lesser extent in 2007 when western world central banks failed to keep inflation rates high enough.
It's important for the world's sake to not let deflationary currencies become too popular. When savings or financial promises are insufficiently tied to future production or to accumulation of real goods, there will be disappointment when many people try to exchange them for real stuff. That is true for crypto currencies as well as government currencies (that is why the system is designed to make banks invest people's money in real businesses and minimize the proportion of money that is stockpiled idly).
It's true that crypto currencies are currently not widely held enough to significantly affect the aggregate economy but speculation already keeps them volatile and the knowledge that as they get more popular, there will be more macroeconomic pressures towards volatility will keep the speculation wild and cryptocoins unstable.
Currencies that are not designed to lose value over time can not be stable. Intrinsically worthless tokens engineered to have better than market risk adjusted, liquidity adjusted, real returns compared to real productive investment will always fluctuate increasingly wildly as they get more popular.
I know we are commenting on cryptos but what about money?
wouldnt people put their money into savings accounts (which is also investing not hoarding as banks loan their money out) or into a business if they were going to get a higher return than deflationary rate? Of course i M not going to invest in you if you offer a pitiful 1% interest rate and the deflation rate is 1.5%.
With money, building stashes and hoarding would literally be hoarding it under your bed, no? Putting it into your savings account is technically investing it as it allows banks to loan more to businesses. Where is the flaw in my thinking?
Ultimately price change has to be neutral in the medium/long run.
Simply, interest rates would become higher because of deflation.
If I lend you 1 Bitcoin today and value will be 1.1 tomorrow, I need to factor that in the interest rate I ask you, on top of the prevailing real return to investing.
In my view, the problem it’s a matter of transaction costs induced by continuosly changing prices.
Email is indeed controlled by a few actors which have way too much power over it.
Don't get me wrong, Blockchain is valuable - but I feel like it's in the same delusional market state as the internet was in the late 90's.
> A) Bitcoin is congested with transactions and takes hours to process some of them > B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
1- Average fees are not as high as people claim. See https://p2sh.info/dashboard/db/fee-estimation?orgId=1&from=n... 2- Adoption of SegWit, which allows more transactions per block, will help lower fees 3- No one is forced to use Bitcoin. It is trivial to buy Litecoin instead and use that. However, users choosing to pay high fees shows how much more they value Bitcoin transactions.
> C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
Your definition of an "upgrade" conflicts with the Bitcoin project's definition, that's all. The core developers are not against a block size increase. However, they have decided to try scaling in ways that do not harm security or decentralization first. It's a matter of priorities. Bitcoin Cash may prioritize low fees over everything else, but Bitcoin prioritizes decentralization and security first.
> D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money. The big banks are replaced by big whales, who will do anything in their power to manipulate markets for their gain.
Mining is centralized, but Bitcoin nodes are not. This is evident when you look at the success of deploying SegWit by a UASF or the success of fighting off a corporate takeover such as the NYA.
> E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
Bitcoin does not need to be a currency. Most people still invested in it view it as a "digital gold". I think it'll more be a reference point for fiat money, something that forces fiat moneys to have more sane monetary policies, not as a day-to-day currency itself.
> F) Bitcoin is not actually anonymous. Data science techniques can parse the blockchain and see sending patterns between different accounts. They map these patterns to various identities. If those identities can be mapped to a real person, say, when they cash out of an exchange, then it's known exactly how much Bitcoin they have.
Today, tumblers exist and are fairly easy to use. So yes, Bitcoin can be totally anonymous if you choose to use it that way. For the future, features like Confidential Transactions, MimbleWimble, MAST, Tumble Bit, and so on are in the works.
> D) Bitcoin is still, objectively, centralized.
Not only you, but this whole thread is missing one critical word: incentive.
Miners are incentivised to play ball, as trying to play games will result in the rejection of their hashing work. Wherever they are, it does not matter (up to a point, ie geographical risk repartition). But in actuality, we know there are miners all over the planet, and that there are thousands of them.
Parenthesis: by the way, non-mining full nodes add precisely ZERO value to the network, and they actually slow it down. Before you guys start yelling, please see reference at the end of my comment for details. That's another urban legend purported by Bitcoin Core. Anyways, don't get me started.
OK, back to miners: yes, as time will pass, there will be mining consolidation, it's inevitable. But it will not matter. In addition to miners, there will be large service providers (thousands of them) who will be -incentivised- to run either small mining nodes (more secure) or non-mining nodes (less secure) for verification of their own transaction. That alone will be more than enough to ensure the security of the network.
From the start, Satoshi was predicting the apparition of large mining server farms, no farther than in the very FIRST email he wrote to the world!!
http://satoshi.nakamotoinstitute.org/emails/cryptography/2/#...
quote: At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.
Bitcoin Network Topology Description (provides visual explanatino as to why non-mining nodes are totally useless, and even detrimental.
https://fr.scribd.com/document/359522859/Bitcoin-Network-Top...
Every packet in and out of that country is monitored. The state can and will impose any arbitrary regulation on any corporation at any time. People literally disappear if they start making too much noise.
And now, entities within the country are amassing a substantial and effectively unassailable combined position in a major new asset class and possible alternative monetary system, and you think the Chinese government WON’T one day manipulate that to their own advantage?
I would have thought the point of bitcoin is to be a currency and not just a way to fund wasting electricity.
Miners add zero value by design. Mining only exchanges physical resources like energy into equivalent bitcoin. If people are willing to buy bitcoin for $7000 then that means miners are willing to spend up to $7000 worth of energy to obtain a single bitcoin. It's the buyers and sellers of bitcoin that have added the value.
It regularly takes /days/ for visa transactions to go from "confirmed at the counter" to "arriving and unlocking in my bank account so I can use it to pay my rent". Over Christmas in Australia it's common for visa to just flat fail to keep up with demand, forcing shops to keep offline dockets for up to weeks after the product has left the store on the /trust/ that visa will let them redeem those pieces of thermopaper for actual spendable money.
Mere hours is, from the perspective of the merchant, amazing.
>B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
When I send money from Iceland to Australia, it takes about a week to arrive. I've had a transaction magically blink out of existence once (both banks told me it was the other banks fault), and while it is in transit approximately $70AUD is removed from it. This number is not exact and varies by up to $15 each time you send it, which means you have to send $90 more than you intend to pay in order to make sure you've paid at least as much as you intend to.
Mere hours is again amazing, and a 25% fee (that's probably not correct by the way, segwit has reduced fees from approx $5USD to approx 25c USD, check your wallet settings) is rather tolerable by comparison. In the process of paying Australian government bills and bank charges from Iceland (which are usually in the order of $20-50), I have definitely spent at least 1.5x as much on transaction fees as actual payments.
You're focused on the "coffee problem". You want to buy a coffee in person and have the transaction validated immediately so you can leave the till. Bitcoin is not great at this. However, the coffee problem is only one very narrow subset of how money is used, and you're also only considering it from a consumer-centric perspective. Bitcoin is considerably better than fiat at a lot of things, and in a lot of other areas it offers a different set of tradeoffs that might or might not work for you.
It's pretty common to accept small payments with zero confirmations. Maybe there's some fraud, but overall that's minor.
First transaction takes about an hour while the entire transaction is fully verified, card checked, whole nine yards.
Subsequent transactions, you get the benefit of the doubt and it clears with only the checks that can be done in a few seconds. I guess maybe the credit card company has insurance to cover the fraud or something.
There might even be a business model in rapid address check + fraud insurance for sub-$25 zero confirmation bitcoin transactions.
I've sent money internationally like twice in my entire life. Where is this demand for international money transfers coming from? Is this really a sufficiently killer feature to drive the price of BTC?
Some quick comments on some of your points:
A + B) Bitcoin is currently congested because the Core development team refuses to raise the block size which forces up the fees. They instead want scaling to happen systems (like the Lightning Network) which are far from ready, if they work at all. They even state that Bitcoin doesn't work without full blocks because they are worried about hypothetical scenarios decades into the futures.
They want Bitcoin to only become a "store of value" instead of money. Completely disregarding that something that is only a store of value only becomes a ponzi like scheme where everything hinges on greater fools pumping in more money to the system.
This is of course insane and other cryptocurrencies tries to solve this. Bitcoin Cash is a direct result of this behavior which I believe is either incompetence, maliciousness or both.
C) Yes scaling isn't "solved" and likely cannot be completely solved. The only way forward is small steps at the time until an acceptable level is reached or the system fails. The limits of on-chain scaling for Bitcoin has never been tested (or even sufficiently researched) and then there's off-chain scaling which may help.
D) As with all things "decentralization" is an elusive term. It is in my opinion sufficiently decentralized because not one single actor can dictate the network.
We must never forget why decentralization is so important for a system like Bitcoin. It is to allow secure peer to peer permissionless transactions which cannot be censored. Bitcoin still fulfills this. Decentralization for decentralization's sake is inane.
Bitcoin's security also relies on a single miner (or a gang of miners) control >50% of the hashrate as they can then attack the network by starting to rewind transactions or block newer transactions.
E) Agreed.
For the uninitiated there are cryptocurrencies who tries to alter the coin emission schedule controlling how many coins are created over time. For example Monero has a tail emission which makes sure there will always be some amount of new coins, although it may not completely avoid the deflationary side.
F) Agreed.
You must be very careful if you want to truly stay anonymous on Bitcoin. A single misstep will leave a permanent trace on the blockchain allowing someone all the time in the world to analyze all breadcrumbs which may lead to you de-anonymization.
Bitcoin isn't fungible either as you can tell two coins apart. This can potentially completely undermine Bitcoin as a currency if some coins become tainted and significantly less valuable. Say for example after a hack. Fungibility is a fundamental property of money and cash is actually made fungible by law.
It is one of a select few, if not the only one, cryptocurrencies that are multi stakeholder open source projects. Releases are regular, all the necessary maintenance takes place and there is healthy discussion on the mailing list. Despite what some people would like to tell you, it is not unheard of that a newcomer starts working on something or comes with a proposal that gathers interest.
(Which is also the reason you don't see scaling improvements in big bangs, just like Linux doesn't magically scale better in one release. Such improvements are slow and steady, and the latest release of Bitcoin scales better than the previous, which scales better than the one before that.)
A coin where a single stakeholder could, by paychecks or otherwise, change the rules of the network would not be remotely as interesting. It could still be _useful_, especially for payments, but that's not necessarily something that blockchains does best. Cue the usual discussion about store of value versus currency, everybody has heard that already and Bitcoin can be both or neither. That's not the interesting axis to measure, trustless consensus and permissionless innovation is.
> B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
It's going to be fun to watch when a market crash happens and everyone tries to sell off at once.
Right now I see no value to cryptocurrencies besides black market transactions and hacking around with financial instruments in a very closed system. I'm open to the idea that I'm missing the whole point, but I've not yet seen a compelling argument for that.
It takes longer to build anti-corporate infrastructure than it takes to run a token sale. I don't think you can really say much of anything about the longterm impact of blockchain by looking at this year's class of ICOs, give it another twenty or thirty years.
And being created that way brings to the table all the benefits of classic open source projects. Anybody can download Ethereum and fork it. You may chose for a different approach to solve scaling and I could write code to improve my smart contract execution. On the long run the best project wins, or even both can coexist like thousands of other open source implementations.
Once you have "so many customers" it makes it easier for the rest of the world to join the revolution. Buying an asset with similar characteristics as gold but safely stored anywhere you can write a number (even your brain) and being able to transact with extremely low fees (making micro-transactions possible) without third parties in matter of milliseconds.
Crytocurrencies and blockchain technologies will change the world as we know it right now, enabling a new Internet layer to transact value and not only information. The single big question that arises is if current implementations are the "MySpace or Facebook" of blockchain. Will they succeed or do we need a second generation of tech? Only time can answer that question. My gut feeling is that the better open source implementation will evolve and take the lead.
Your premise to dismiss cryptocurrencies is that you don't believe I'm gonna be able to keep using these three functions in the future. We had cryptocurrencies close to 10 years and the next 10 years just look brighter than the last.
It costs a small fortune to send money internationally not to mention the friction of needing to have a bank account - almost 40% of the people on the planet do not have one[1]. Something like Bitcoin et al (not necessarily BTC itself!), where you can get an address immediately that can send and receive a balance from anywhere & anyone in the world without impediment has the potential to be huge. I appreciate I am being a bit starry-eyed here but I can see a real value to it globally if such a vision can continue.
That's not to condone what might now be happening with institutional investors and Wall St getting in on the action in a big way, or the state of the tech (transaction fees at present, verification delays, snake oil ICOs). The core concept of a currency like this is valuable societally IMO. It might not be bitcoin in the end but the idea, like the internet and publishing, is a powerful one.
How does one acquire bitcoin without a bank account? Meeting up with a random person to do a real life exchange is an absurd necessity for a digital currency, it's also risky, comes with a huge markup, is constrained to regional availability and takes time to schedule and actually do the exchange.
Huh? I mean this is obviously not what I'm talking about, I don't think I have to elaborate further.
> If merchants in your area accepted bitcoin you could then use that to pay for goods & services
A prohibitively impractical "if" for the vast majority of wants and needs. That's just an undeniable reality.
> Ok, I bought some of my bitcoin using my bank account but I could've also mined it at some stage (unrealistic now but besides the point) - no bank needed.
Not beside the point at all, that is exactly point: the "no bank account needed" is only true in theory. It's like saying "if you get into a serious car accident just pay for the medical costs out of pocket: see, no insurance needed!"
Sorry, I don't follow then. You asked how you get it without a bank account and I believe I answered that. Why does it matter if I have happened to purchase my coins via an exchange using Euros? Why would you think we would have to meet up personally?
As for your other comments, well I was not suggesting that Bitcoin, or crypto, is ready for this right now. The original point I was replying to was that there is no use for it at all when I think (it was an opinion) - that there is potential in the technology. I am imagining the "if", in the spirit of the original comment, not the current reality.
No bank account needed is true in reality - you could do a remote job and be paid in bitcoin if you really wanted. Or sell goods/services via Open Bazaar [1] and receive bitcoin. None of this might be "good enough" for you but it does exist. We are also far, far on the left of the adoption curve, so yes, I agree there's a ton of stuff to make it more practical than it is.
Because it reinforces the fact that access to bitcoin generally requires a bank account. Everyone knows it is possible to transfer bitcoin over the internet, the key part is that nobody will do that for free, so an exchange must be facilitated and facilitation of exchange over the internet nearly always requires a bank account.
> you could do a remote job and be paid in bitcoin if you really wanted
A luxury available only to tiny fraction of the population, and even then, it's difficult to find substantial work where one is paid in bitcoins without a lot of searching (all the cryptocurrency focused job boards are ghost-towns full of trash and scams)
> Or sell goods/services via Open Bazaar [1] and receive bitcoin
Totally impractical - Open Bazaar is a ghost-town and there are no marketplaces with more activity besides darknet markets (and I've actually tried to sell stuff on OB and seen this first-hand). Also 2-3 multisig is not a solution to the problem of fraud which has an excellent risk/reward ratio for scammers on markets like Open Bazaar.
The oft-touted benefit of BTC is not that new or appealing to the whole world. In fact a lot of the selling points I see boil down to flaws in the US banking system, and skewed views of how the rest of the world operates.
Let me give you one example that might make you reconsider what is coming. In the future, you won't go to the bank to get a mortgage. One reason for this is because banks won't have the capital to lend you anymore because people won't deposit their money there: why accept a 0.5% interest rate on savings when you could be holding a mildly-deflationary token or staking a proof-of-stake security scheme? Or investing in solar power farms....
So what will people do when they want to buy a house? Instead of going to a bank, they will talk to the real estate company that showcases the property, and that company will take a 20% downpayment and then issue a token to collect funds for the rest. You will pay off your mortgage directly to the broker in cash or crypto (and all payments are recorded on the blockchain, along with the purchase contract -- a transparent template so you will know your rights in full) and the funds will be automatically transferred to token holders, who are splitting the savings with you: they get higher interest payments and you get a cheaper mortgage. Win-win. And if people need cash they can sell those tokens on any number of 24/7 decentralized peer-to-peer token exchanges, because who won't buy a token like that at a slightly discount?
The real estate agency will probably also be plugged into a decentralized AirBNB operation and have various other ways to monetize real estate. So if you ever fail to make a payment, they will take responsibility for monetizing the property such that token holders are paid-off in full. Systemic risk is thus split between the real estate company (that issues the tokens and guarantees the ROI) and the token purchasers (who take on the risk of the property company getting liquidated before they redeem the tokens in the event of a foreclosure -- not a big risk since their financials are mostly visible directly on the blockchain and your token is legally backed by the property in any case).
Where are the banks in this? Good question. We don't need them anymore. And this is just one small part of the financial system.
That's not how banks work. Banks are factories not warehouses.
Banks create money out of thin air. The loan comes first and that causes the deposit - which is then trapped within the banking system for that denomination until it is used to discharge a bank or government liability in that denomination.
As the Bank of England explains: http://www.bankofengland.co.uk/publications/Documents/quarte...
The ability of banks to leverage deposits into fractional debt is restricted by the size of their deposit base and the need for fiat assets to earn competitive rates of return. This is not a "one way street".
Once people start shifting capital to crypto, banks will sell assets to cover withdrawals, and the cycle to which you refer starts to spin in reverse as the worsening terms-of-trade for fiat/crypto exchanges triggers a fall in the real value of assets in terms of fiat. In short, we are going to get more inflation as crypto spreads because there is less stuff being sold for fiat and more stuff being sold for crypto or held because people don't want to trade it for something likely to lose value.
At that point banks will have to raise interest rates to ensure they are not lending at a loss. Higher rates will weaken borrowing and push more borrowers into bankruptcy, at which point your expansionary cycle reverses until enough loans are written-off and the debt overhang is reduced and/or inflation eats up the implicit increase in the money supply relative to actual underlying GDP.
New technology increases economic activity at least partly because of the reduction in the cost of transactions. Steam engines, cars, highways, the internet, etc all reduced the costs of transactions and were accompanied by economic growth. "Open source money" is the next stage in this trend.
It is rather ironic that the author should say this at a time when the Bitcoin community has recently been at war with itself, and is still divided and without a solution, over a proposal to adopt a fix for the urgent problem of transaction rate -- so ironic, that I checked the dateline, and it is current.
Here's a hint though. The statement "if Bitcoin can’t deliver those things, another cryptocurrency will do that" isn't something anyone wants to hear about their money. No one wants a massive or sudden devaluation because a rival currency supports a shinier newer feature. When that happens people don't just get upset. When that happens, social contracts get broken and we rediscover why Hobbes wrote his book, and why the hardest currencies usually belong to countries able to back up their fiat with more than words or market forces.
So take note, this should be axiomatic to anyone thinking about currencies "at scale": the demand for a currency will be inversely correlated with its volatility.
Research the historic role of clipped coins, and consider the impact of receiving coins that can be clipped after receipt. And dont stop there, thats the beginning.
Wealth distribution is bad enough with the currencies we already had. A true bitcoin takeoff would be an order of magnitude worse.
The massive price rises were in _futures_ not actual prices. There is lots of academic work around this which is spectaculally interesting.
Second, to say that bitcoin has "intrinsic value" is the same rubbish thats applied to gold. Value is _always_ subjective.
The noise about competition for "fiat currency" is just that, noise. At best its equivalent to a bond, worse coffee futures.
Exchanges are perfectly able to do fractional reserve banking, so bitcoin is very much a fiat currency. Its basically what bitcoin exchanges do
Now, will Bitcoin replace fiat? That would be difficult, and I think people have different perspectives and motives for adopting Bitcoin. I suppose that is why there are so many heated debates where people don’t agree on the valuation. Actually, if you look at the world, people have opposing views on many topics, including on how our economies are run and on how we do monetary policy. Just accounting for that chunk of people that want a hedge or alternative to the mainstream system can explain at least a part of the valuation.
And bitcoin is nowhere near being considered "open source money" because if it was then we should not be measuring it with respect to USD.
Most of these articles comes from folks who think technology can fix the social and political issues.
Wow. Never thought I'd see religious faith arguments on the front page of HN
Money for the past 10,000 years has just been commodities. Commodities with a useful value. The commodities which became money were ones which made good currencies. They were portable, uniform, durable and divisible. Gold is a commodity which fits these attributes. Eventually people began trading promissory notes redeemable for gold.
This was the situation until 1971. Then Nixon closed the exchange window and said the Treasury Department was not exchanging the dollars for the 8000 tons of gold it stores in Fort Knox and elsewhere. Almost nothing happened to the dollar in the days after - the dollar price of bread and the like stayed stable. Did some great transformation happen? No. If the market had paniced, the gold window would have been opened again. No magic spell was cast in 1971. The 8000 tons of gold in Fort Knox etc. still back the dollar implicitly.
If not - why does the government spend so much money guarding Fort Knox etc.? Why is it hoarding all this gold, if it does not back the dollar?
Bitcoin does not have 8000 tons of gold implicitly backing it. It has nothing backing it.
There is a little question mark that exists. Obviously Fort Knox's gold backs the dollar implicitly. But for some politicians and such, it is beneficial if they wave their hands and say some magic spell has made the dollar valuable without that gold. As if they had a magic printing press that could just run off sheets of hundred dollar bills 24/7 that had value. This is not the case, and is untrue, but creates a question mark from this little fib. This question mark is where Bitcoin draws its suckers in. If the government has a magic hundred dollar bill machine, maybe they can make one as well. The problem is the government has no such machine, they just have some politicians and such who claim they do. What the government does have, among other things, is 8000 tons of gold which it would exchange for dollars in 1971, and could easily do again. Bitcoin has no such backing. In fact, we don't even know who started Bitcoin. At least with Charles Ponzi's international reply coupons, you knew the name of who was behind the scam. With Bitcoin, the scammers are anonymous.
I just read a Times article about the probable insolvency of Bitfinex, the umpteenth Bitcoin company with such problems. Charlie Munger says Bitcoins are rat poison, and he has surely seen many such scams in his 93 years.
Also, reading this blog post with its railing against the government and the establishment reminds me of the pitches for some MLM scams I have been dragged to. When someone tells you they're giving a run for its money the "government's fiat monopoly on money", watch your wallet.
Maybe not a very good example of an economic failure
European aquaculture for example has suffered several similar (aptly named) bubbles and later recovered from them. The history of tulip's trade and market is also far from being finished yet. Nobody measures aviation success anymore based on Hindenburg event.
In the long term many strange markets manage to survive even if the actors change