Flaws in Bitcoin make a lasting revival unlikely
economist.com
economist.com
1. "overstatement of activity"
2. 7 transactions/second
3. constrained currency supply (21 M)
4. fraud in exchanges
Odd that only one of these points (2, scaling) relates to Bitcoin the protocol itself. And that scaling issue has raged from Bitcoin's first public disclosure. This clock has been stuck at noon forever.
The remaining three points have little to do with Bitcoin the technology and more to do with how Bitcoin is being used. All can be viewed as either a feature or bug, depending on your worldview. Consider the counterpoints:
- Nobody knows exactly how often Bitcoin is used for payments or what it's used to buy. As such, its users can enjoy much more privacy than they can with other payment methods.
- Constrained supply means protection against inflationist central banks.
- A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best.
The article does to mention Lightning Network, but doesn't give enough context to make anything of. It's operational now and there's been a flurry of development activity in the last year. LN has the potential to:
- increase transaction throughput well beyond 7 transactions/second
- increase user privacy
- increase usability
I don't expect journalists reporting on Bitcoin to go very deep. But it would be nice if they changed the playbook every once in awhile.
Worst case, a client or protocol flaw is found, and everyone in the world is expected to close their channels (settle) at 7 transactions per second?
Please. Bitcoin Cash is the large block scaling we've needed all along.
Furthermore, 2-3% of all transactions on many of these systems are fraudulent, but the payment systems ACCEPT This as an acceptable level of fraud and cover the expenses, in order for faster transactions.
Square knows for example it won't be used in coffee shops over another competitor if Square on average takes 20 seconds longer to process metadata in conjunction with the transaction itself to see if its an attempt/fraudulent charge, so they consciously cut corners here and accept this liability so we can all get coffee 8x a day.
This is why bitcoin has industry standard confirmation blocks so the network can address and blacklist attempts at doubles spends and keep a master chain.
This is basic blockchain 101 compared to standard knowledge of onboarding to every en masse payment system we all anecdotally have experience with layered digital transaction technology and the losses associated with that.
The lightening network is as mentioned above with links, rapidly evolving to expediate this while still maintaining the underlying benefits of transaction consensus that avoids fraud.
You may deal with fraudulent exchanges as you will do with fraud around any new technology (heard of the internet before? there were lots of sites for fraud, and much worse when it came out, and still are, we just all get smarter about what we click, and hopefully in this case, who we throw our money at, which you should be doing anyways for any new technology...) but the fraud here is associated with like top ranked comment said, not the protocol but the flurry of business activity around it, and is really null and void to the technical conversation itself, which is really what evolves communities like this past these handwavy statements...
I really don't mind constructive criticism of blockchain based technologies, but the issue is the conversation rarely evolved because of cargo culting statements like this that ignorethe very benefits of moving to a blockchain based payment system.
Regardless, your point only further proves that the bottleneck for onboarding users to lightening en masse is, if a problem at all, not one unique to that network, or any other payment system we currently use.
You are forgetting concurrency. A bank doesn't stop processing transactions for 7 days while opening 1 account. Thousands, millions, or more accounts can be opened concurrently. If account demand skyrockets more branches can be added, more tellers hired, banks can compete on efficiency of service.
Bitcoin's 7 TPS rate limit is global and immutable (without a fork). You cannot add more nodes to satisfy demand. You cannot add more hash power to satisfy demand. You get 7 TPS or you try to get consensus on upgrading (which almost always means a fork, which ironically is an extreme form of fiscal stimulus as it doubles monetary supply).
Even if crypto were were to gain mass adoption it weight not be btc in it's current form that wins that lottery.
Big blockers are new flat earthers.
Btc’s current limits are far from optimal but layer2 itself is working great especially on other chains.
Bitcoin has value because this just isn't possible, in practice.
It's absolutely possible. Who runs nodes? There's no way to know that the majority of hash power doesn't already control a majority of nodes.
Have you read the paper?
Your own personal node is free to implement different logic, but it will be unlikely to interact in a functional way with the rest of the network.
Node control has worked in both theory and practice
Or a lot less. People lose their keys all the time, die mispay.
I wouldn't go that far. This is much more related to Bitcoin's relative "newness" and lack of mature AML tools than anything inherent in the protocol. There are a number of startups that offer blockchain tracking and forensic analysis capable of tracking the kind of money flows you describe. Your statement seems much more applicable to something like Monero or other obfuscated ledger intentionally designed for privacy.
It is an open ledger, after all.
There are some issues with capital lockup costs, so other level-2 scaling solutions are also required. There's been more discussion of a Bitcoin bridge for Cosmos, as well as Ethereum. Tendermint sidechains is what crypto needs. Tezos recently announced plans Tendermint adoption, as well as Binance w/ the Cosmos SDK.
Disclaimer, I'm a longtime lurker & cofounder of Tendermint/Cosmos. Cosmos is coming.
what bitcoin is as a technology isn't as relevant compared to what it is as a means of exchange. people don't care about the protocol, they care about the value bitcoin provides to them. To make technology the most important sales pitch of a currency is an ideological choice on part of the people pushing for bitcoin adoption, not some sort of obvious or intuitive insight.
> Constrained supply means protection against inflationist central banks.
This again, is a non-issue for consumers and everyone who isn't ideologically invested in crypto-technology. As long as you don't park your money under the mattress for a hundred years but actually spend it the stability that existing currencies provide is sufficient (and much preferable to the volatility of bitcoin.)
> A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best.
That's obviously not the point. What is worrisome about bitcoin isn't that it's used for fraud at all, it's that fraudulent activity and weird con-like schemes constitute a significant, if not majority of activity. Which isn't surprising if the two points above are taken into account, it simply is not particularly useful for anything else.
However, I think you are trying to compare Bitcoin to the US Dollar. US Dollar inflation has been reasonable if you live paycheck to paycheck. But, remember Bitcoin is not just for people living in the Bay Area. It’s also for Venezuelans, Zimbabweans, etc...
Sorry but it's not 2015 anymore. I mean yes it does happen but not nearly as much as people think, probably not even much more than with regular currencies. It's true though that people fall for crypto cons more easily since a lot jumped in hoping for miracle money without even understand what they're doing. Thankfully this isn't the case anymore since hopefully enough people have learned about it and will pass that knowledge to others.
A Bitcoin bug happened a few weeks ago allowing any attacker to generate infinite free BTC, but the network survived only because an honest researcher chose not to exploit it. [1]
Constrained supply means protection against inflationist
central banks.
The current inflation rate for the United States is 1.9%
for the 12 months ended December 2018, as published on
January 11, 2019 by the U.S. Labor Department.
Bitcoin inflation rate per annum: 3.83% [2]
4. fraud in exchanges
[1] https://hackernoon.com/bitcoin-core-bug-cve-2018-17144-an-an...
https://en.bitcoin.it/wiki/Common_Vulnerabilities_and_Exposu...
[2] https://www.bitcoinblockhalf.com/
[3] https://medium.com/@bitfinexed/latest
https://hackernoon.com/the-curious-tale-of-tethers-6b0031eea...
https://medium.com/@bitfinexed/bitfinex-never-repaid-their-t...
https://medium.com/@bitfinexed/the-mystery-of-the-bitfinex-t...
People have been predicting the collapse of Tether for several years now, and yet, it still trades nearly 1:1 with USD. Funny that the people who actually have skin in the game seem to disagree.
The inflation of the cost to produce bitcoin? Maybe, but I doubt anyone can calculate that precisely.
I really really hope its not a measure of price increase of bitcoin.
Increase of the available supply of Bitcoin, which is occurring through mining activity. Every day, every hour (usually) more Bitcoin exists. For a while still, anyway. The rate is cut in half every few years until all 21 million have been mined, then inflation is 0 (negative in reality as some Bitcoin become inaccessible, e.g. when users lose their keys).
Some other definitions of inflation could be "the loss of value of a currency(in front of other goods)", which is not what BTC suffers.
This keeps being touted as a feature, but unless you are Zimbabwe it is a bug. "Supply-constrained" means "demand-driven price" which means "volatile." A useful currency is one that measures wealth consistency, like a meter stick. You don't want your money to mis-count your wealth. Hoping that it will mis-count your wealth in your favor is speculation, which is a bad, dangerous role for currency. You want to know that you can afford rent/bread next month (to say nothing of being able to pay your workers or business partners).
These are more fatal, fundamental design problems than low transaction rates or questionable usage-- they are built into the very philosophy of cryptocurrency. Explained in more detail here: https://www.bzarg.com/p/what-bitcoin-shows-us-about-how-mone...
Currency doesn't measure wealth consistently, and makes a terrible measuring stick. That is a great analogy to take literally - most of the developed world cuts 2% off our monetary measuring stick per annum as a matter of policy. or people who aren't unusually interested in maths and finance (ie, most people) that is highly confusing, because they set their expectations then think that somehow they are getting ahead if they get a 1-2% pay raise.
Imagine the reverse: a deflationary currency, which becomes more valuable over time. You would have little choice but to hold on to your wealth to avoid missing out on the gains. Why would you spend your money building a business or hiring workers? That would be a losing proposition compared to keeping a bank account which grows if it just sits there. Deflationary circumstances were, in fact, what precipitated the great depression.
2% is a gentle nudge to participate in the economy.
This is addressed and elucidated in the linked article.
I think that's what the child poster meant by bug. It's artificial and still: Why?
Mankind came to what it is 99.9% of time without artificial devaluation.
Mankind came to what it is 99.999% of time without antibiotics too.
Arguments like this are rarely constructive.
Because productivity was practically constant for this 99.9% of human history. Therefore the monetary base could be practically constant, too. With the industrial revolution, growth became obviously exponential.
Have a look at the following graph (nominal GDP):
http://3.bp.blogspot.com/_VO-2HbQsbSU/S9BbLF6MxBI/AAAAAAAAAR...
Or this one (real gdp):
https://ourworldindata.org/uploads/2013/11/GDP-per-capita-in...
Inflation means the value of money stays coupled to the changes in GDP, just as in the millenia you apparently value for exactly this constant money <> gdp relationship.
It makes sense, really. Why should finding a old penny under the floorboards, nearly worthless when it was minted, make you rich?
This describes the U.S. dollar from 1870-1890, but this was hardly a time of economic and technological stagnation:
https://en.wikipedia.org/wiki/The_Great_Deflation
https://en.wikipedia.org/wiki/Second_Industrial_Revolution
Far from people holding on to their wealth to avoid missing out on the gains, they invested it heavily to avoid missing out on even bigger gains from being part of the technological revolution happening around them. Deflation was then a consequence (rather than a cause) of the economic growth that followed: with a constant money supply but more goods available for purchase, the price per good steadily fell.
But you still have some people hoarding currency because some people have different levels of risk tolerance. One person is willing to build a factory at great risk because there is even greater reward. Another person says give me the steady returns from hoarding deflationary currency.
Getting rid of those returns pushes that person back into the market, requiring them to do something productive with their money instead of just sitting on it. Which is all the more important when there are many productive things to do with it. So the deflation caused growth to be less than it would have, e.g. 15% instead of 20% (in real terms), even if it wasn't enough to turn negative. But it was still a reduction.
And what happens when the economy is only growing at a normal pace and you introduce a deflationary currency?
The gold-backed dollars of 1873 suffered this attack in two waves. The first was the Free Silver movement of 1892 [2], which sought to allow free coinage of silver currency as a way to create inflation and lower debt burdens for poor farmers who were being exploited by the Northeast's industrial-financial establishment (sound familiar?). This ultimately failed, although it did manage to inspire The Wizard of Oz [3].
The second was the steady inflation of Federal Reserve Notes (i.e. the dollar) from 1914 onwards. This culminated in EO 6102 [4], which made it a crime to privately own significant quantities of gold. Someone who faithfully hoarded gold coins from 1873 onwards would've done great until 1900, okay until WW1 ended, found themselves in the odd position of having money that was worth more on the black market than as legal tender (much like American Eagle gold coins have a face value of $50 today but a market value of about $1200), and then been forced to turn in their gold coins for their face value (effectively confiscating their assets at a loss) in 1933.
[1] https://en.wikipedia.org/wiki/Gresham%27s_law
[2] https://en.wikipedia.org/wiki/Free_silver
[3] https://en.wikipedia.org/wiki/Political_interpretations_of_T...
(This, too, is addressed in the linked article).
I think that Bitcoin already has failed as a currency, outside of black markets. However, that won't stop it from having value: gold failed as a currency in 1933, but is currently worth $1300/oz. I think we'll see another 1-2 Bitcoin bubbles, each with peaks significantly higher than the rest as Bitcoin are taken out of circulation, until it finally falls to Gresham's Law.
I also think that conditions are extremely ripe for a currency crisis in the U.S. dollar within the next 5-10 years. There is a market now for a new currency, as evidenced by the ~3700 contenders (just in crypto alone, not counting in-game currencies for video games or mobile payment networks) launched within the last 2 years. I suspect the eventual winner will be an inflationary cryptocurrency that solves the scaling issues and has a pretty (and fast) UI. Could be Ethereum if they get their act together with Casper, or could be something yet-to-be-invented.
Yes, because gold is a commodity, not a currency.
In fact, if you treat gold as a metal with utility similar to copper, but scale the price of copper proportionally to gold's scarcity, you get a price that is very in line with the actual current price of gold. Since copper's value comes almost entirely from its utility as a metal, this suggests that something similar is true of gold.
That aside, comparing bitcoin to gold makes bitcoin look bad in multiple ways: The analogy is not good, and even if it were good, that would still be a bad thing. The linked article talks about this.
> I suspect the eventual winner will be an inflationary cryptocurrency
Almost certainly impossible. Proper active currency management requires anticipating the public's reaction to the management. Even if an algorithm could do that (in other words, a strong AI which is at least as good as people at understanding human psychology), if the algorithm were public, the public could/would use the algorithm to anticipate changes in currency policy, and that knowledge of the future would change what they do with their money, specifically in the direction of instability. So an open algorithm (a fundamental philosophy of crypto) is fundamentally at odds with the very notion of an actively managed money supply. The linked article talks about this too.
Isn't the bitcoin block reward a form of inflation? Of course the block reward shrinks over time and eventually only transaction fees will be used to pay miners but there is no reason this has to happen. If the block reward instead increased by 2% every year inflation could last forever.
To maintain fixed inflation, the supply would have to be actively managed (and I assumed that's what was meant).
Why?
> There is a market now for a new currency, as evidenced by the ~3700 contenders (just in crypto alone, not counting in-game currencies for video games or mobile payment networks) launched within the last 2 years.
That is a stretch. Almost none of these currencies are legal tender, anywhere. There is a lot of scams, pump 'n dump, in this world.
I do agree there are valid purposes. Though those are not necessarily legal.
The black market and international market for example. Something like Monero can be used for sketchy business. It can be used to avoid taxes, to pay for drugs, and to get rid of a weak currency.
For me, a European utilizing EUR and staying in legal waters, no it isn't interesting...
1. Rising indebtedness, both private and public, and concentrated asset ownership. Debtors have an incentive to favor money creation and inflation because it reduces the value of their debt in real terms; creditors have an incentive to favor the opposite. When a small number of creditors hold the loans of a large number of debtors, or when the government itself is a major debtor, there are significant democratic pressures toward monetizing the debt. (Berkshire Hathaway annual reports talked extensively about this in the late 90s and early 2000s and still sometimes do, though Buffett believes this will happen through gradual inflation rather than a crisis.) We've already seen some of this with the political pressures on Janet Yellen and Jerome Powell this tightening cycle.
2. A large injection of money through QE that has so far stayed in capital markets and not made its way to every-day transactions. One of the great mysteries of the 2010s is why the large increase in the money supply did not cause inflation. My explanation for that is that it did - but only in asset markets, like stocks, unicorn startups, CA real estate, Bitcoin, etc, because that is what the people who had money chose to buy with it. This is viewed as wealth inequality rather than inflation. If you fix the wealth inequality - either by government redistribution or by rich people finally choosing to consume rather than invest - you will get the inflation, and may get it very rapidly.
3. Historical perspective: once inflation pressures start, they are very difficult to control, and usually result in a feedback cycle where expectations of future inflation cause people to get rid of their cash more quickly, which makes the velocity of money rise, which makes inflation even worse.
4. General loss of trust in institutions, particularly the financial industry, the government, and the Federal Reserve. Obama's actions in 2009 basically saved us from a total financial meltdown. It did so at the cost of trust - there's now a widespread (and not entirely unjustified) belief that the system is rigged against the common person, because when they make dumb financial decisions they're on the hook for it but when Wall Street makes dumb financial decisions the government bails them out.
5. Greater information awareness - thanks to the Internet - and also the rise of filter bubbles, again thanks to the Internet. The former exacerbates the loss of trust in institutions. The latter allows people who have lost trust in existing institutions to start forming their own, and to recruit other people towards their point of view. Together, they create competition where hegemony previously reigned.
6. The rise of potential technological alternatives. Bitcoin sucks as a currency - it takes 11 minutes to confirm a transaction, the UI is bad, fraudsters and scammers abound, and the network is limited to ~7 TPS. However, all of the elements of a functioning currency are there. People do trust it to maintain its value - 10 years in and people have lost individual Bitcoins through failing to secure their private key or entrusting them to the wrong exchange, but the network itself has never been compromised or rewritten. It's possible (though clunky) to transfer value with it. It's possible to maintain stable identities and records of ownership. Efficiency and ease-of-use can be fixed, and the fundamentals are there.
7. The potential need, in the near future, for computers to act as economic agents on their own behalf without human intervention. Services like Ethereum, Iota, Golem, and Filecoin are fascinating here. It may be that cryptocurrencies end up being foremost for machines to transact in and only incidentally for humans.
If you want to look at the total timespan of human economic history, the only economic systems that have proven stable over millenia are feudalism and slavery. Democratic capitalism (and particularly post-WW2 democratic capitalism in America, which is even more of an outlier) is a comparative blip on the timeline. We don't live in the 1300s, though; we live in 2019, and so it's worth considering how our present time differs from previous epochs and how it might share similarities with some.
Incidences of short-term (1-2 year) periods of deflation have been common, and strongly associated with recessions either concurrently or within roughly 18 months. That link is uncontroversial. Over the long term (10+ years) the connection seems a lot more tenuous, though. The monetary contraction and subsequent recession of 1921 was followed by the Roaring Twenties. Volcker's recession in 81-82 was followed by robust growth throughout the 80s and 90s. Ireland's deflationary episode in 2009 was followed by a return to growth. The U.S. periodically had deflationary episodes and sharp recessions throughout the 1800s, but economic growth was quite strong over the century as a whole.
Actually, looking at those incidents is a strong argument for dynamism and technological determinism. Deflation was a large problem in periods where there was no up-and-coming growth industry to absorb surplus labor and liquidated capital. It was a non-event when there were growth opportunities where these factors could be re-deployed. The lack of growth wasn't caused by deflation, it was caused by overly rigid mature industries and an inability to find new ways of doing things that are worth investing in.
Whether it is a bug or a feature depends on whether it favours you or not. Anyone who owns assets and pays wages would think it is Christmas every day of the year. If nothing changes, they draw ahead without needing to do anything.
> Imagine the reverse: a deflationary currency, which becomes more valuable over time. You would have little choice but ...
No, I'd do exactly what I do now and invest the money in things that grow faster than the value of the currency. Nobody would care that the currency is deflating at 2% p.a. if there is 5% to make in the stock market.
The value of having a consistent measuring stick to figure out what is going on without constantly having to twiddle numbers for inflation would be a remarkable boon.
> Why would you spend your money building a business or hiring workers?
That one is an easy one, because people generally value present consumption and would give you money in exchange for goods and services. As a business owner you have a chance of ending up with more money than you started with.
You are essentially communicating the same thing that the crypto nerds are saying, just from a different angle. The individual pays the 2% "nudge", and crypto people don't prefer paying that, and that's why they use crypto. Whether it is good for society or not is irrelevant in the individuals context.
Only if you a) keep your money in cash under your mattress and b) aren't also benefiting from having your debts reduced by inflation.
It's very simplistic to say that (low, predictable) inflation hurts individuals.
This affects poorest members of society disproportionately because they don’t have spare capital to allocate in order to offset their loss from inflation. They just pay higher prices.
Those without without debt are also losing, less than those with debt, but still losing.
Only people winning are the people with enough spare capital to 'participate'
Because the $10 mil in stocks also appreciated by the roughly 7% average annual S&P 500 returns, meaning the rich person's wealth still increased 5% after 2% inflation.
The $10,000 in a current account earned 0.5%, making the poor person 1.5% poorer after inflation.
It's a textbook case of 'the rich getting richer, and the poor getting poorer'.
The poor do not have the flexibility to allocate their capital to higher yield assets that allow them to 'escape' inflation.
I am not advocating a fringe position. In fact, the first three papers I found investigating this issue came to the same conclusion: inflation actually increases poverty:
[1] "Inflation and the Poor" https://www.jstor.org/stable/2673879?seq=1#page_scan_tab_con...
[2] "Poverty, inflation and economic growth: empirical evidence from Pakistan" https://mpra.ub.uni-muenchen.de/34290/1/MPRA_paper_34290.pdf
[3] "Has Inflation Hurt the Poor? Regional Analysis in the Philippines" https://www.adb.org/sites/default/files/publication/28370/wp...
Hurting might be the wrong term. Analogy would be something like having some bonus card which gives you 2% off for every purchase. Some people obsess about having that kind of card, but most people wouldn't care, because it is only 2%. Obviously the 2% difference isn't "hurting" most people, more like very small tax.
Btw there are cashback credit cards which give back something like 0,5% to 1%, I wonder how popular those are...
Reading between the lines, "it means your money is going to go to fund the activities of the rich". Perhaps we shouldn't be surprised that the delta between the working class's wages and productivity has been increasing since the Nixon shock.
I expect most people on HN wouldn't really struggle with that, but that is because this is a forum infested with scientists, engineers, businesspersons and financiers. Most people won't be able to grasp that being paid $100/hr 5 years ago and $105/hr today means they have taken a pay cut. They would struggle to correctly calculate what the break-even rate would be.
With inflation those who get a 2% pay raise stay where they are and those who have wealth lose some and are incentivized to turn it into income which eventually becomes a pay raise.
With deflation people are incentivized to turn their income into wealth which means less pay raises. Meanwhile those who have wealth gain some without doing anything.
That's like saying "it's fine if you rob me 2%, but please don't surpass it". See: https://twitter.com/ErikVoorhees/status/1110030668715614208
It’s fine to think that there might be other, better approaches to solving those problems. It’s fine to argue that central banks might not always act with the best interests of the economy at heart. But pretending like those problems weren’t real and that we don’t need any of it—as the financially-illiterate cryptocurrency community seems to do—is absurd.
This is a dangerous narrative. By strictly econometric measures, the 2008 crisis was not too far off of, say, the great depression. By and large, I wonder if the reason why people aren't dying on the streets (aka "chaos"), etc, is because we have reliable sources of food, access to medicine, etc.
And it is beneficial for them to do so simply because it enables them to spend more without having to take unpopular measures like raising taxes.
I have read the vast majority of the arguments for having inflation or deflation and to be perfectly honest I find most of them to be unconvincing and essentially boil down to "it's good because its good".
Both inflation, deflation and stagflation have their benefits and drawbacks and they all have a place and should all be used, because economic scenarios and circumstances differ over time and place. To state that we should all have at all times everywhere 2% inflation is dumb, dangerous and frankly if you hold that sort of view you have no business being anywhere near monetary policy because you're not an economist, you're a priest.
Is this person a thief? Have they stolen from you?
Note I said bitcoin, not cryptocurrencies. I completely agree with you here, shitcoins will always be shitcoins.
And nothing has dethroned Bitcoin yet, but that isn't a law of nature. One of the others could become dominant. Even if Bitcoin then continued to exist and be used, that would devalue it substantially.
not directly, but they sure have redistributed that wealth you originally had. Whether it's legal or not depends on the law, and how much power you can wield.
In economics promoting such a law against competition falls into a category known as rent seeking and is considered villainous.
To see a clear example of why, replace "gold" with "housing" and "prospecting method" with "method of constructing taller buildings."
Speculation is rampant also with traditional currencies - I remember seeing reports where 80-90% of trades in traditional forex markets were classified as speculative.
I personally think there is a lot benefits from speculators. Speculators create pricing signals, help price things more effectively and create better liquidity. All market participants benefit from better pricing and liquidity. The more we have speculators on the market, the better priced things we have on the market and that in the long term means stability and predictability.
What is driving the value of a bitcoin?
No, they are making bets about future market value. Ideas about “underlying” value are just a subset of the potential inputs to such a bet, but they are not what the bet is fundamentally on.
No one knows, maybe some have same theory of value and that's why there is speculation? I see nothing special in bitcoin, it is just one of the numerous things that the market tries to value. If the market is only speculation the value should go to zero in the long term. If there is some value in addition to speculation, the value should be non-zero - and it is left to the markets to decide, what the actual value is.
Care to elaborate on the liquidity part? I fully agree that forex speculators play significant role in price (exchange rate in this case) discovery. Although, the money used for speculation is essentially locked up in the price discovery mechanism and if anything that reduces liquidity available to actual economy.
Only your main point is potentially valid for LN. And even that I'd be highly skeptical.
Years ago, LN was used to buy two pizzas. Today? Only two. Talk about scale!
Second, user privacy is utter untrue mainly due to all the hubs (of the hub/spoke network) are KYCs. That's the opposite of privacy.
Third, usability currently you need hot wallets which are a terrible UI/UX. Even the beloved LN Trust experiment is having hiccups [1].
[1] https://twitter.com/paul_ferguson/status/1111097073510699008
I'm not sure I follow your point here. Are you implying that only 2 pizzas have been purchased using LN?
1) Years ago? LN is barely a year old. You're mixing shit. And if you're referring to the fact that no pizza restaurants accept LN yet, well, that's criticising adoption, not the technology.
2) Hahahaha, KYC? I haven't found any LN payment hub that required me to show them who I am. What FUD are you spreading? This statement alone reveals you already as some kind of shill, trying to spread misinformation by deceiving.
3) The OP is already saying that it was not LN that failed, maybe something on his side (internet connection?). Anyway it could be true that UI/UX is not the best at the moment, but we all know this takes time to polish. There's no design flaw that prevents LN to have a decent UI/UX. This is just the equivalent times for when Linux OS didn't have a GUI, did that mean that Linux was useless?
https://bitcoinmagazine.com/articles/debunking-the-most-stub...
I think the mistake here is to think about currency purely in a technological way (what can I do with it?). Money is ultimately a social phenomenon. People use money to do stuff in a society, and have evolved ways to make these transactions safe and convenient enough for everyday use. If you store your salary in a bank in USD, there are multiple societal mechanisms that ensure the money are not going to disappear. Can they break down? Sure. Are they likely to break down? Not very, unless all the rest of the society already did.
Now what if you stored your salary in bitcoins instead? None of these societal mechanisms work for you anymore. I am not even talking about taxation and hassles you'd have to overcome to manage a legal business in bitcoins, but what about fraud prevention? Insurance? Safety of transactions? Knowing your money aren't going to disappear overnight? This not something Bitcoin user can have. Maybe with time the society would build such mechanisms, but until it happened, Bitcoin remains a failure as common currency (as opposed to a toy, a speculative investment or a means to transfer money in a private way between parties that are for one reason or another are reluctant to use the banking system).
That's not true, unless it either a) wasn't money deposited in the bank (i.e. it was an investment in bank stock - an inherently risky activity) or b) were deposits over FDIC insurance limits. That's $250K per account. What's bitcoin deposit insurance limits? Ah yes, $0 per account. Is there any insurance company daring to insure bitcoin deposits? I haven't heard of any.
Constant issuance for eternity would have been a much better solution. For example 1 BTC per minute, for an eternity. Rewards early adopters because low price, but still doesn't restrict the use of the technology as a form of money as it's not a constantly diminishing pool, but has reasonable tail emission, possibly reaching an equilibrium, unlike Bitcoin.
No doubt there will be a big fight about this in the future.
Actually fraud and cons in general, aided by irreversability, is the point made in the article.
If you can't undo the fraud, that's a huge boon to fraudsters.
Your argument is that they are repeating known flaws, but so what? None of the flaws have been fixed or will be. Bitcoin is dead. I think it’s sad how people are still trying to hype it. I wonder how many people threw away life savings on this fad.
Your argument is that they are repeating known flaws, but so what? None of the flaws have been fixed or will be. Bitcoin is dead. I think it’s sad how people are still trying to hype it. I wonder how many people threw away life savings on this fad.
It's another article written for the attention seeking readership.
Bitcoin (and many blockchain based coins) spiked astronomically. They all came back down as well but still unbelievably higher than where they were after the Mt.Gox crash.
20k wasn't even realistic due to the fee's being insane. The entire system is a system with sliding levers on consistency and forced supply and demand.
If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that.
This system is like water with all of the cracks able to be found for optimal strategies. There is so much to unpack in this it needs an article which has been written a thousand times but when you pick apart FedNet, ACH, and all of the systems amidst that, you just have something that you've grown up and obliviously trust.
Bitcoin networks provide you visibility into all of it....none of this is pretty, but it's a lot more obvious from Point A -> Point B.
There's really no way to prevent ASICs. With any function you pick, it will always be possible to create a custom hardware + memory design that beats a general-purpose CPU/GPU.
So, with that in mind, the goal of ProgPoW is an attack on the economic incentive to build an ASIC, not an attack on the ability to build one.
In other words, make purchasing a commodity GPU as inexpensive as a custom ASIC. If that is the case, there won't be an incentive to build ASICs.
ProgPoW also has a second line of defense where a hard fork with a minimal set of changes, can brick existing ASICs.
https://medium.com/@SaitoOfficial/eliminating-51-attacks-in-...
The problem is that the approach does not pay the peer-to-peer network. But then neither does LN, so who is counting?
Also, ASICs are the most energy efficient way to perform proof-of-work.
The ASIC-resistant coins aren't that much more profitable to mine for a home miner, and if they were you'd just get edged out by more people with warehouses full of CPU's & GPU's in Iceland and China and what have you.
Chainalysis reckons that Bitcoin accounted for around $812bn of genuine transfers of value.
Of that, Ms Grauer reckons, only a fraction was used to buy things. Around $2.4bn went to merchant-service providers, which handle payments for businesses—a piffling sum compared with the $17trn of transactions such as Alipay and WeChat Pay, two Chinese payment apps, in 2017. Darknet markets, which sell stolen credit-card details, recreational drugs, cheap medicines and the like, made up $605m, and gambling sites $857m. Most of the rest was related to speculation.
Is this saying that less than 1% of all "genuine transfers of value" in Bitcoin are for goods and services other than speculation?
The statement that the rest is speculation is, in itself, pure speculation.
We don't know how to separate speculation from non-speculation. One could easily argue that the payments to merchants is no less speculative than payments to exchanges (what does it matter if you sell your Bitcoin for a carpet or for dollars?).
There's also the fact that most speculation probably never sees the blockchain. They are simply contracts somewhere or entries in Coinbase's database.
[0] https://en.wikipedia.org/wiki/Foreign_exchange_market
[1] https://www.statista.com/statistics/268750/global-gross-dome...
They are two separate use cases, and so far not that many people are using cryptocurrencies for payments. Even if the payments use case were to grow, I believe that the trading/speculation would grow even more, so the payments use case will keep being a small percentage, at least for the short and medium term.
I look forward to the 2022-2023 version of this article
The minimum capital flows between supply-era one and two increased 30X, between supply-era two and three (thus far) it's increased 8X. For every global dollar of speculation, about 0.1-0.3% is flowing into bitcoin. The market's expectations of returns:probability (Kelly Criterion) right now are: 99.786% on 13% YoY returns on SPY, ~7% on 15X return on bitcoin over the next halvening.
How can they go from "Twitter's boss [...], Facebook is working on some kind of crypto [...]. Market analysts and pundits provide cheery reassurance [...]" and then close with "This one guy is sceptical" and present the two sides as completely equal?
One side has, in their own words, market analysts (plural), among the top tech companies... The other side is a single computer scientist (read: non-market analyst), yet both sides have equal weight? Or, more accurately, they weigh the opinion of the single computer scientist over the above mentioned?
Bitcoin isn't exchanges or "crypto" or "blockchain" or ICOs or tokens.
I don't think he's the only one, obviously. But the way the wrote the article and presented it makes it seem like 1 computer scientists opinion = numerous market analysts and companies.
It's unbalanced. Not to mention, why does a computer scientist have significantly more weight than market analysts, when talking about market prices and predictions.
Perhaps Weaver is uniquely qualified for predicting markets in regards to Bitcoin. If so, great. Tell the reader why I should weigh his opinion more heavily than Facebook, Twitter, and (again in their words) several market analysts.
NAPWAD. Fraudulent transaction reversal is a problem for other payment platforms, which has kept someone I know from using Paypal to accept tips for open source projects. That means Bitcoin may not be ideal for certain transactions, or that escrow services should be used.
There are still the monetary policy trust issues that Bitcoin resolves (not having to trust a central bank) if you are particularly libertarian or whatever, but I don't think that's really a driving cause for any sort of adoption in any other countries other than Venezuela and maybe Cyprus 5 years ago?
A working example of this is the lightning protocol which is implemented on top of Bitcoin script. It uses time-based escrow written in Bitcoin script to eliminate the need for trust or third party intermediaries.
This is an important benefit that isn't very well known.
This is only about 3 billion USD inflows required to maintain the market until the halvening, and then supply really drops hard.
Uber is looking to list with a market cap of $120 billion. Australia has $2+ trillion in pension funds alone. Vanguard has 5.3 trillion. $3 billion inflows to get to the halvening should be pretty easy. Return of Goxcoins will have some effect, but any hype at all will send bitcoin on a crazy moon mission again.
Won't that be a killer app for the desperate?
If you wanted a cryptocurrency to actually see use as a currency it would have to adopt a monetary policy analogous to at least what the naive version of how most western fiat policy behaves - you have monetary velocity / inflation / at rest targets and adjust supply to push the market in the direction you want it in.
Whats interesting is that in the general case this is perfectly valid to codify, depending on how far between commodity and currency you want to take your coin. More aggressive inflation algorithms would pressure users to spend it whereas less aggressive ones would cause deflation and hoarding.
Of course such a cryptocurrency is untenable because it isn't a valid pyramid scheme to attract early adopters with. If you build it to just be the ultimate currency it isn't going to see mass market appeal because its not a get rich quick scheme like every other crypto has attempted besides maybe namecoin.
Meanwhile the evil banks are bringing us ever closer to the cashless society of instant electronic payments we all dreamed of.
I feel like at least the payment processing part of finance today is something ripe to be nationalized if you had a democratic representative government you would trust to do so. It feels exactly like infrastructure, the same way fiber to the home should be a public works project, but instead its possessed by global corporations using rent seeking and crowding out effects to make gross amounts of money off of it.
Is there something to revive?
But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs, about the issues related to a limited monetary base and the deflationary effects of it.
Go to any of the dev listservs and you'll see that's basically all anyone has talked about for the past decade. The lack of progress (in implementation, not ideas) in this arena forced the wholesale split of the community.
Dial-up modems weren't created to be the final goal of the internet. They were designed to start traveling that road toward fiber, etc. Same with crypto getting the simplest to get started.
TCP/IP was created. It took 12 more years until HTTP. It is okay to get started simply.
I don't recall having a brutal bust. 80-85% is the historical average of previous busts, but I'm not sure if statistics is needed for an economist journalist (it should be). It's too bad that I'm paying for the magazine because I haven't found anything better.
edit: this is good for bitcoin, apparently.
What's your point? That 85%+ drops in value are a reasonable thing for a currency? That a 300,000% increase over 10 years is a reasonable return? These are two sides of the same coin telling the glaringly obvious tale that: Bitcoin is an absolutely awful store of value.
States think positive inflation is good, because it's a hidden tax that they profit from. I think 0% inflation is better for all participants.
Yes, I think growth in waves is a great start for a money. Same thing happened with salt, gold, and other commodity monies.
I help my friends buying Bitcoin and I make sure that I prepare them for the huge risk they are taking.
The most brutal things for me were about losisng/forgetting/not writing down correctly passwords, exchanges being gone with part of my money, even though I tried to be very careful. Being 80% down is nothing compares to.these kind of (not as rare as you think) events.
My reaction: "You sweet summer child..."
The BTC price early November 2017 was around the same as early Feb 2018(then it bounced up again for another two months). Losing 80% is quite significant, but to get those losses you have to buy in during the height of the bubble. People do so, in bubbles of all kinds, not just crypto, and that is a fact that I don't rightly understand.
I'm not sure what a good measurement would be. possibly some amalgam of 1 week, 1 month and 3 month averages.
This past 'crash' has been downright tame. That's not some kind of swaggering nonchalance, just a very simple assessment of the history of price action. It was suspiciously orderly until last November when some old coins moved and tanked the market.
Even if you were 'new money', you'd have to be extraordinarily unlucky to actually have lost that much. Prices were only over $15k for a brief period, and buying into a white-hot market is such an absurdly greedy play that it's difficult to sympathize with such losses.
I just bought quite a few back @ $3800.
You get used to it, this is my 3rd or 4th >80% drawdown. Still remember $30->$2 in 2011/12
Sources?
The Wall St Crash may have been worse. I can't believe the average being that bad. But it depends what you class as a 'bust'.