The only thing that people should recognize is that it doesn't really try to explain the game theory behind it. It is a technical paper. When it all sinks in, it becomes clear that it is pure genius, but that certainly took me a while to grasp.
I read the paper about 2 years back, after reading Nathaniel Popper's book 'Digital Gold...' which presents the history of cypherpunks, leading upto Satoshi's white paper. The book was enjoyable to read. And the paper's brilliance was stunning.
That said, when I think of it deeply, it does seem to me similar to pyramid schemes. The early adopters have a unfair advantage.
Also, its better that an alternative to proof-of-work is found. Although the argument is support of that, is that, it perhaps takes more energy to sustain the present financial system, the base of which Bitcoin intends to replace.
So I find myself in a curious position of being in the Blockchain camp, and unwillingly though. Which is because people who typically are in that camp, say the tech is good, but Bitcoin is not. But I believe Bitcoin by itself is a fantastic and disruptive thing. Without that app there is no platform (blockchain) evolution.
But of course Bitcoin has flaws, and we could be in a big bubble. But no half baked Tulip bulbs analogy please+.
Another flaw which I find with Bitcoin is the ownership is very fragile, compared to real world ownership. In these days of phone cameras, all it takes is an accidental photo of my secret 12 words, for my satoshis to get compromised. Or there is no alternative, if I lose my private key. Real world banks have ample ways of addressing the identity and tend to offer more robust possession safety.
+ - I have not seen that analogy on HN, thankfully, but its there every where. Yesterday, I saw a respected VC making it on LinkedIn.
Edit: minor
That's absolutely true but consider this: early adopters always have an advantage, in fact just being born earlier than someone else gives you an advantage. Family wealth, real estate ownership, rent seeking, tenure and so on are all linked because of this.
Explain please how it would be possible to create something like bitcoin which does not in some way or other favor early adopters over later ones, I really can't see it so this is a genuine question. Not 'pre-mining' is roughly equal to simply not adopting it at all. I see it analogous to a founder not believing in their product to the point that they will not use it. Of course 'Satoshi' could have not pre-mined as much but who is to say whether those coins are even accessible today?
And anybody that joined in later than that already lost that early adopters advantage compared to those that joined earlier.
Which probably means that (wild hyperbolic assumption following) if you haven't done anything with it so far you'd look at me and my miserly number of coins as an 'early adopter' whereas I was - and still am - pretty skeptical about bitcoins long term viability.
I didn‘t say that there wouldn‘t be any favoring towards early adopters... a „better system“ will by definition always favor early adopters at least through efficiency gains accrued through the usage of the system over users who have not yet adopted. BUT bitcoin is crazy in terms of „value“ increase that is not related to any real gains in practice. People buy tokens because people invest money to find tokens because people buy tokens. And because everyone seems to be „making money“ from that things just continue... It‘s like with the rat who can control its own cocain supply...
So what I meant to say is - this specific system design is madness!
DLT in general is very interesting and I am playing around with some ideas regarding currency pegged tokens that increase in value if empirically verifiable achievments/improvements have been made. The goal is to create common-interest communities that are rewarded for realizing real-life impacts. So even people not participating profit. People who join in profit a little more. The goal is to have sustainable growth and predictable prices.
Largely from the same people who complain most loudly about inequality. You can lead the horse to water, but you can't make it drink...
With a proper 12-word phrase, each is randomly chosen from a list of 2048 words for 11 bits of entropy per word. That's 132 bits of entropy, which is not crackable. (With a 24-word phrase you subtract 8 bits for a checksum; I'm not sure about the 12-word format, but 124 bits of entropy isn't crackable either.)
Not really; it only serves to validate the beliefs of people who already agreed with the basic premise that money is something that can exist without central authority. That view was already common long before the Bitcoin paper. Plenty of libertarians believe that money is an emergent phenomenon of free markets, something which arises on its own as the market converges on a common currency as its medium of exchange.
On the other hand, if you are aligned with the mainstream of economics, the entire premise of the paper is easily dismissed. In that view, money can never be separated from banks, the paper is basically nonsense.
(And of course, if I can pay my taxes and mortgage, how can anyone claim to have removed the central authority from money? Just like the gold standard, nothing would prevent a government from changing its mind about whether or not to accept Bitcoin for tax payments.)
Like I said, if you already believe that money can exist without a central authority, Bitcoin simply serves as validation. Otherwise it does not really change anything, because if you accept mainstream views of money, then the premise of Bitcoin makes no sense at all.
You think Bitcoin is a decentralized store of value? Tell that to all those people whining about the Mtgox bankruptcy proceeding, which is being resolved by paying for the lost BTC according to the price in Yen at the time Mtgox declared bankruptcy which is a tiny fraction of the current prices. When push comes to shove the "value" being stored is measured in fiat currency, with all its associated central authorities.
That belief structure is being challenged as we speak.
> Tell that to all those people whining about the Mtgox bankruptcy proceeding
The only thing that proved, is that you can't trust a bank.
Not sure what your point is, dollars(cash) can be stolen as well.
In other words, even if you think Bitcoin acts as a "store of value," that still does not make it "money" according to the law. You can have 1BTC or 100BTC, but the law is only concerned with the monetary (i.e. fiat currency) value at some particular time (not necessarily right now).
That is a gross misrepresentation and a misunderstanding of the point of a decentralized store of value. "All those people whining about the Mtgox bankruptcy proceeding" were not using a decentralized store of value. They were using a centralized broker that handled things for them. If they kept their own private keys and managed their coins directly, in a decentralized way, they would be still whole today.
In itself, that always existed: it's called gold and gems. It's the most primitive store of value ever- modern economies were born when we went past it.
Name-calling cryptocurrencies "primitive" when they're clearly not doesn't lend a lot of weight to your argument.
> Name-calling cryptocurrencies "primitive"
I called gold primitive as a currency. And made an argument for bitcoin (specifically) being similar to gold.
Edit: btw, gold 500 years ago had the same exact property of bitcoin today: it was immediately transferable to anybody you were in contact with and could buy goods from. That didn't make it better.
Reading history is fun and can help one understand the present. I'd highly recommend it. "Debt: The first 5000 years" is a great book and a good start at trying to understand what money is/has been.
You can use this "nonsense" money right now. And nothing that any economist says about it can stop you.
Not sure there's any response possible for that one. "I don't know how it works, but I think it's dumb."
> Now the transaction fees are exorbitant.
Every standard sized bitcoin transaction bar the past three days (and those will too), that people paid over 5c for has been committed to the blockchain.
Replace by fee is a thing, as long as the tx is unconfirmed it could be replaced. You're effectively saying the wait time is now 3 days unless you want to pay a fee of several dollars. So that rules out most transactions.
How do you pay for anything given those restrictions?
Then you don't understand how bitcoin works, so it's probably best you refrain from commenting on bitcoin architecture.
Lightning network hasn't been rolled out yet. It has nothing to do with our conversation.
All the remarks about the skyrocketing fees can be cut short by pointing out that Bitcoin Cash (which is much closer to the Bitcoin described in the white paper than Bitcoin Segwit [BTC]) doesn't have this problem. Just like Satoshi Nakamoto said that the block size limit could be raised once blocks started to get full, the developers of the Bitcoin Cash software also say the current max. block size of 8 MB can be raised if the blocks get full.
Look at the price. Going bananas.
Converting BTC to fiat currency on the spot is not really the same thing as using Bitcoin to pay your bills, any more than selling some shares of stock and using the money to buy a house is the same thing as buying a house using shares of stock.
People think that banks hold their money: they don't. The bank simply owes you your money but they don't hold it for you. What you get in return for your money is a statement from the bank what debt they owe you and a device to convert that debt into goods whenever you feel like it. That device is not the same as the underlying money, it is merely a proxy for your debt.
Which you'd find out about in a hurry if your bank ever went under and your card stopped to work.
All the cards I've seen when I looked into it a bit ago converted into fiat at the time of charging the card with BTC (ie, you send BTC, that got converted into fiat immediately (at pretty mediocre rates), and then you could use that fiat to purchase stuff or withdraw cash (at pretty mediocre rates, again)).
If the person from Europe comes to US, goes to McDonald's, buys a meal whose price is denominated in USD with his European credit card and tells me he made the purchase with Euro, I would consider that a false statement. To me, he made the purchase in USD, his credit card company just will make the FX conversion for him and accept EUR from him when he pays his credit card bill.
https://d3fy651gv2fhd3.cloudfront.net/charts/united-states-m...
PS. Every standard sized bitcoin transaction bar the past three days (and those will too), that people paid over 5c for has been committed to the blockchain.
Oh wait, no it didn't.
How's education costing these days, anyway? Healthcare?
https://monoskop.org/images/3/36/Graeber_David_Toward_an_Ant...
let me fix that for you: "Money is an emergent phenomenon of markets, markets are a fundamental feature of libertarianism, therefore money has everything to do with libertarianism."
So, did banks invent gold? Or did gold give rise to banks?
How can banks even exist in the first place unless we already have a common medium of exchange (gold), which can deposited into said banks?
The problem arises when depositors can’t redeem their medium of exchange for the commodities they originally deposited, or something of equivalent value.
By the way, I’m convinced Bitcoin will not function without credit instruments, just like was the case with gold. I’d argue there’s a huge difference between redeemable and irredeemable credit instruments, though. The latter being an artifact of government regulation.
Sort of; at that time it the boundaries were less clearly defined between what was governmental and what was private. The basic economic structure was for a large temple to store the various goods people produced, and to give the goods out to people as necessary. For example, a farmer would deposit grain, and the grain would be redistributed throughout the city-state; the farmer would receive other things from the temple, like clothes and tools. The record-keeping served two purposes: to keep track of what was available for distribution, and to keep track of who was contributing what. This was the "palace economy:"
https://en.wikipedia.org/wiki/Palace_economy
The bible makes reference to such a system in the story of Joseph (which is ancient enough that palace economies still existed when the story was first written), who was the administrator of such a system in Egypt:
http://www.mechon-mamre.org/p/pt/pt0141.htm#47
"I assume people voluntarily deposited commodities in exchange for a common medium of exchange."
Not originally and not universally. It was more like a system of 100% taxation in some of the early palace economies, where everyone deposited everything they produced with the temple, and then received things as they were needed. You were basically not allowed to live in the city without contributing something (he who does not work shall not eat), though a person could always work for the temple itself e.g. as a sacred prostitute. Of course the specific laws and economic organization varied from city to city, and plenty of people lived far outside the cities and had their own ways to manage goods; the specific details varied with different places and periods of time.
What you received for your deposit was often just an update to the temple's ledgers clearing a debt you owed the temple (i.e. indicating you paid your taxes; often referred to as "offerings" in the biblical legal code) and possibly offset future taxes. If you were unable to make good on that obligation, your land could be seized and you could become a slave until the king declared a general amnesty (not uncommon in the ancient world; the biblical legal code requires slaves to be given amnesty after 7 years of service, and a similar amnesty provision is in the code of Hammurabi). The story of Joseph also indicates that this exact scenario had played out under Joseph's administration in Egypt: the farmers were forced to turn their lands over to the government during a famine (I am not suggesting that the bible is historical; rather, in ancient Israel at the time that story was written, people were familiar with the situation).
As the economies became better developed and the scale increased, money (i.e. a single unit of account that serves as a common medium of exchange) and markets (i.e. trade between inhabitants of the same city) began to replace the temple economy system, at which point private banking enterprises became more clearly defined. For example:
not necessarily related to this thread.
for you own good. this is straight from satoshi. I know you hate him. I don't care.
https://fr.scribd.com/document/359522859/Bitcoin-Network-Top...
If there is something Satoshi Nakamoto didn't seem to understand, is money. He designed a system that, being capped to a max amount of units, is intrinsically deflationary, and thus cannot serve as money. You don't transact with something that was worth x last year and 2x this year (not to mention 10k last week and 17k this week), it's just dumb.
It is hard getting out of the inflationary currency mind-set, I recognize that.
> it's just dumb.
It's great. The money put on my debit card card a few months ago means that the beers I buy today are 1/3 of the price of what they were relative to the time the money was put on the card. And you know what's better than beer? Good beer on special.
You explain the importance of monetary policy, why the gold standard is problematic, why this means Bitcoin will not replace modern currencies, yet they don't really hear. They just don't like "The System" and want to subvert it.
Bitcoin is great, but it will not change 'the system'. It is a novel and ingenious asset, nothing more.
Things do not endure merely because some social engineer has a tortured explanation for them he trots out at every opportunity to justify the construct.
Gold has existed for thousands of years, surely this commonly accepted idea is based on more than one or two heavily flawed data-points.
Bitcoin is that systems reckoning.
Edit: do we know if economies really behave like this under these conditions? Are we really using a scientific approach on this? Or are we holding these models as divine truth?
The relationship between productivity plus inflation (both measurable) and economic growth is similar. It’s the bedrock of modern macroeconomic theory, which has largely been successful in both explaining and predicting the effect macro policy has on economic growth. The history of North American and Western European economies after going off the gold standard, and asian and Eastern Europe economies more recently all show these same correlations. Outside of external influence, economies which stray outside of the ideal parameters end up either stagnating (lack of investment) or experience dramatic boom-bust cycles (excessive poor investments). I’m on mobile but there’s a fair number of reports by Fed and other central banks justifying their choice of interest rate based on historical examples, and with the purpose of achieving certain productivity (capital investment) and price inflation (money supply). You could also pick up just about any macroeconomics textbook and chase the footnotes and references or spend some time on Google scholar.
So what you're saying is that it's all based on one data point, the second world-war. Gold existed for thousands of years, why is this incredibly bizarre period of history used as a proof of anything about the gold-standard?
Even worse, the gold standard wouldn't have collapsed if it weren't for the widespread use of fractional reserves banking, along with many government policies at the time that significantly worsened the situation.
The 40's, 50's and 60's were a period of unprecedented growth for the US, which was on the gold standard during that whole period, but no one tries to claim that the gold standard was responsible for that.
For that matter, would you even buy beer now, when you could instead invest the money risk-free in US govt. bonds so you could buy more beer in future?
However, with technological items there was always another side: the new ones were so much better than our current ones, ours were actually getting old faster, and we were driven to buy. The same won't happen with the other goods on the market.
The interest of gov bonds or of any other financial instrument afaik represents (and is proportional to) a risk of not getting repaid.
But you still purchased it eventually. In that sense a deflationary currency might change the balance of consumer spending vs saving in favour of more saving, but that doesn't mean a continuous downwards spiral in spending, it could just be a new equilibrium.
>Imagine how companies loved that, and imagine extending it to just everything, from food to housing.
Personally I'd absolutely love if house prices halved every year, as at the rate they're currently increasing it'll be a long time before I could afford even a tiny apartment anywhere near where I work.
>However, with technological items there was always another side: the new ones were so much better than our current ones, ours were actually getting old faster, and we were driven to buy. The same won't happen with the other goods on the market.
Would it be bad thing if it did happen to other goods on the market? If e.g. a 2005 car was better than a 2000 car to the same degree that a 2005 computer was better than a 2000 computer.
>The interest of gov bonds or of any other financial instrument afaik represents (and is proportional to) a risk of not getting repaid.
I was referring to https://en.wikipedia.org/wiki/Risk-free_interest_rate : "In practice, to infer the risk-free interest rate in a particular situation, a risk-free bond is usually chosen—that is, one issued by a government or agency whose risks of default are so low as to be negligible."
For the reasons I explained, and that apply only to a small subset of goods.
> Would it be bad thing if it did happen to other goods on the market?
That is definitely not decided by the currency.
> risks of default are so low as to be negligible
Those have also negligible interest rates, that is, ones that only repay you of the inconvenience of not spending your money now. You know, there's also a non negligible risk that you'll die before you get your money back.
http://www.macrotrends.net/1333/historical-gold-prices-100-y...
(be sure to play around with the "inflation adjusted" checkbox)