What's the use for Bitcoin?
scottyli.com
scottyli.com
>Bitcoin enthusiasts disagree, claiming illicit activity is practically non-existent. Instead, they preach decentralization, trustlessness and smart contracts - none of which are benefits but merely features.
Bitcoin enthusiasts preach an awful lot of things, particularly preaching about how others should adopt Bitcoin as a currency while they themselves sit on their stacks of it hoping to see its price rise and cash in.
Indeed, it is these Bitcoin "enthusiasts", or more accurately lay speculators, that are likely one of Bitcoin's largest issue. They've turned what was designed to be a currency into an investment/speculation instrument and it's not transcending beyond that because of it, with the exception of people using it for illegal purposes.
So you've two sides to Bitcoin in reality - speculators praying other people adopt it as a currency and those using it for nefarious purposes - both of which are off-putting to any normal person who'd consider using Bitcoin for purchases.
I see no real future for Bitcoin personally. Gambling, perhaps, but even Bitcoin poker at the moment is mainly already skilled, dedicated players using Bitcoin Poker to play since they can't in the US, and that's not going to attract many casual players in itself to create a sustainable ecosystem, nevermind the Bitcoin barriers to getting on to the site in the first place.
However, the features it has should be a huge source of inspiration for the banking system imo.
Don't forget the anarchists.
> Tax evasion and escaping capital controls are also possible with Bitcoin
Bitcoin is about as useful as lucky sunglasses for illegal transactions. Just ask Ross William Ulbricht.
I don't engage in illegal transactions. But if I did, I wouldn't use a mechanism that leaves a permanent, publicly available record just waiting to be de-anonymized.
> Bitcoin is powerful because it allows people to circumvent regulations, as it does not rely on the traditional banking system.
False. Regulations do not limit themselves to the traditional banking system. Bitcoin is about as useful as lucky sunglasses for avoiding regulation. Sure you can get away with it a few times,....
Ross William Ulbricht wasn't caught because of Bitcoin. I read the FBI report and there was absolutely no mention of the blockchain if I recall correctly.
All the people who transacted on Silk Road, do you think they should sleep well at night? Or do they all nervously await the statute of limitations expiration?
You don't think the FBI has the blockchain loaded into Palantir where they can map all those transactions against all the other data they have? The more traces you leave behind the greater the chance for that one slip up that links it all together.
Maybe the seller slips up and orders a pizza from the wrong wallet. Now they have him, and using the post office scan data they got you. Add as much complexity as you like, there's a way to unravel it. And you can't go back and take it out of the blockchain.
No, why do you think that'd be the case?
> All the people who transacted on Silk Road, do you think they should sleep well at night?
Probably not. But certainly not because the FBI will track them through the blockchain, that's just ridiculous. There's absolutely no way to prove someone owns Bitcoins unless you get access to their wallet.
https://bitcointalk.org/index.php?topic=279249.0
Also, regulation is about as useful as enforcement. If you ain't in the US, enforcement is pretty weak and therefore you can get away with it MANY times.
For one thing, the government doesn't control the inflation of bitcoin like it does with dollars. The fed aims for ~2.5-3% "inflation" every year, however this is inflation beyond the massive deflation that occurs year over year due to technology and efficiency increases... The supercomputer that cost millions in 1970 dollars cost you a couple hundred (and fits in your pocket to boot.) The inflated 1970's million USD is gigantic in today's dollars, but only because of the inflation created by the fed because they believe it is the only way to keep the fiat money system working. If people realized the deflationary power by simply not spending, the consumer driven economy would crash and burn quickly.
What bitcoin offers is an escape from that inflationary cycle. If it's use spreads, it will allow people to protect their money in banks (although, they will be more like safety deposit boxes.) Banks can still offer loans, but it will be at a real rate in the market place. Fractional reserve banking will be a thing of the past. Federal (debt-backed) subsidies will no longer apply.
The inflationary spiral that keeps reducing wealth for anyone who wants to save without participating in the inflated stock market will end.
I see bitcoin as the cure to the woes of today. We have a real problem with the environment, and I believe much of it would be better if the money supply were not manipulated to support the consumer-driven economy. We would still have smart phones, but we probably wouldn't have throw away cases that we changed out with every outfit..
This is exactly the thing about Bitcoin that concerns me most; it has economic implications baked into its design and operation, but We, the People, have no voice in deciding those implications.
What if We, the People, want to change the inflationary/deflationary properties of the money? If we're on bitcoin, someone else made that choice for you, and you have no recourse.
I'm not at all comfortable giving away that kind of agency; after such a long arc toward greater democracy, it's hard to see bitcoin as anything but a substantial step away from democratic governance.
If Ee, the People, are on bitcoin, we have already made the decision to use a gold-like limited resource as a currency that will absolutely become deflationary at some point.
You have no agency in government; no matter how great your use of punctuation.
You do vote, don't you? You go and meet your politicians, right? You talk to your fellow citizens and organize among them, right?
I, as an individual, have put policy bugs in local politicians' ears just by showing up, shaking hands, making a persuasive case.
And that's just from a few years off-and-on involvement, no money changing hands, no campaign funding, etc.
I guess if you stay home and do nothing, then yeah, you have no agency.
I also voted for the guy who's been pushing, feebly, for better conditions for workers, rather than the guy who joked, "I like to be able to fire people. Hey, nice ponchos, you garbage-bag-wearing peasants!"
Did I get everything I wanted? No, of course not. Is any politician perfect? No, of course not. Is there a difference between the two major US parties? Oh yes.
Anyway, the real answer to electoral issues is Score voting (see http://rangevoting.org/ ).
Also, since you're interested in economic democracy, have you seen the in-progress stuff at Snowdrift.coop ?
If you want to change bitcoin's economics properties, you can. You just have to get all the nodes to agree with it. That is obviously very very difficult.
Bitcoin runs on a decentralized consensus system and uses this consensus as the truth. You can change that truth if everyone agrees with you.
In that sense, this is actually the true democracy.
Saying "write code and persuade everyone to replace the current code with your new code" does not refute my original point that bitcoin is undemocratic.
Democracy isn't based on "build a new system and then persuade 100% of the populace to adopt it".
When I try to come up with analogous situations to what you're describing, I can't think of anything else, either, that would at all resemble a democratic process.
I can't think of a single example of the political process where you could replace a voting citizenry with a "build a new system and persuade 100% of the populace to accept it" model, and still have that resemble, in any way, the original one of a voting citizenry.
I also don't know why anyone in this day and age would be comfortable with promoting such obviously undemocratic functions of society. What next, calling for kings to make a comeback?
Maybe go bone up on your basic economics?
The reason the prices go up are because the fed absorbs all of the technology-powered reductions in price in order to maintain an artificial level of inflation.
You are a baboon.
The only real use for Bitcoin is for anonymous, difficult to trace transactions (ie. black markets), and speculation.
With my regular bank account and credit card, I can buy products from China to NA to Europe and just about anywhere, can change my funds into a myriad of currencies, and since I have an investment account, can also invest in 19(? have to check with my broker) different countries' stock markets.
The problems Bitcoin claims to be trying to solve were already solved by the banks a while back. Plus banks will insure a fairly large amount of cash (more than most of us will have at any given time).
Bitcoin (according to its website) claims to provide instant P2P transactions and very low processing fees. International bank transactions take days or weeks and have very high fees.
But even more importantly, bitcoins do not require a bank account. All it requires is internet or text messaging access. This is very important for the developing world where many people do not have bank accounts.
Not really. I mean, I'm sure they can if you're moving millions, but small transactions are pretty much instant, even internationally, at least between modern banks in 2 countries. And the fees (if there even are any) are negligible.
Anyhow, that's my experience with my bank. I do know that American banks can be behind the times a bit...
Fees are not negligible at all: Sending 200 pounds from the UK to US costs an average of 20 pounds or 10% according to https://transferwise.com/transfer-money-to-the-usa.
> If someone only has a phone, they need to store their bitcoin somewhere, and its unlikely to be their phone.
Why? Bitcoins do not exist somewhere, bitcoin transactions do, and they are stored in the blockchain. Bitcoins that you own are essentially unspent transactions to your address which is only a few bytes long.
A bitcoin wallet/address is not a bank account by any sense of the world.
I would sure hate to loose all my money because it rained hard while walking home. And all the other dangers that haunt phones.
A counter here of they should be backing up is unacceptable. Many people who are otherwise very knowledgeable don't make backups.
Sure, if they have all their money under a mattress then they are venerable to house fire, theft, and the like. But storing all their money on a cheaply made but affordable electronic device has the same problems, while opening up a ton more possibilities of chronic money loss.
What you need is to hold your private key. You could, for example, holds your private key somewhere else, and inject that private key to your phone when you need to use it.
All the bitcoin stores/processors I have used require 3 or more "confirmations" with each confirmation taking an average of 8 minutes which means each purchase takes at least 24 minutes and sometimes even several hours.
When I tried to sell things with bitcoin, customers told me it was a hassle when a Paypal or credit card transaction completes in seconds. This is the main unfixable problem with bitcoin and that is why I believe it will not take off.
Bitcoin allows for anyone with internet or even text-messaging access to hold, receive and send money. To me, this seems revolutionary. I don't know how the author can ignore this.
Bringing internet or text messaging to the third world has the net effect of expanding bank coverage.
http://en.wikipedia.org/wiki/M-Pesa
(I don't know how many others there are, that's one of the big ones)
http://data.worldbank.org/indicator/IT.CEL.SETS.P2?order=wba...
Coinbase and other companies allow you to send bitcoins via SMS: https://www.coinbase.com/sms_service
Speaking from a technical perspective only, there is no way that Bitcoin can process transactions at a lower cost then a centralized method. A distributed log backed by proof of work is necessarily more expensive than a trusted, central server. Most claims of cost reduction come from the elimination of features, such as chargebacks, which will then be implemented by third party, resulting in unbalanced comparisons.
Supporters also point to smart contracts as cost-reducer, but the surface area where smart contracts can be made to work without human intervention is low, and I doubt many of these hypothetical cost reductions will be realized.
What's a bigger shame is that they've both written articles disparaging Bitcoin technology now that they've decided to move on to other challenges.
We have a brand new data storage technology that allows for equal access read and write privileges on data that is permanent and shared equally across all nodes. It acts as a decentralized single point-of-truth. There has never been anything like this.
A simple ledger that operates as a type of currency is most basic thing that can be built.
Blockchain tech will disrupt almost every part of our industry. We won't need centralized identity providers like Facebook. We can start to treat digital media as property and build up a viable economic system. We can actually account for people's data use and the value of their contributions instead of this blind air gap between advertising and operation costs. We can create and transfer digital assets that represent all sorts of things.
Writers, photographers, musicians and anyone else who makes the content that fuels the advertising engines of Silicon Valley are becoming increasingly dissatisfied with how they publish work on the Internet. Putting something on a web page isn't publishing. Posting something on Facebook or Twitter isn't publishing. The act of publishing needs to be public and it needs to be permanent. Can you reliably quote from a blog or a tweet? No, you can't, because the content could change. You can reliably quote from the second printing of a physical text because it would be almost impossible for someone to go through and change every copy.
All of this on a unified platform that isn't controlled by anyone meaning there's no danger of a private entity limiting access to APIs and destroying the hard work of developers, which Twitter has been doing for years.
I really hate to call them out because they've been very nice and incredibly helpful over the last year, but guys, come on, there's no need to burn bridges. Just because you can't see the possibilities doesn't mean that they aren't there.
As long as multiple people can run a program on a set of computers that can connect to each other, Bitcoin can exist. If you want to receive it anonymously, you can perform services anonymously and take payment in Bitcoin. After that, yes your transactions are on the blockchain, but if nobody knows you provided the services to receive the original Bitcoin, then they cannot trace your subsequent transactions back to you without relying on outside variables.
Yes, the regulatory environment and legal status of Bitcoin will affect its adoption as a mainstream currency. If large online merchants begin accepting it, and the price stabilizes to encourage spending, we will naturally see Bitcoin emerge as a useful payment platform. However, neither regulation nor legal status has any impact on the resiliency of the Bitcoin network. Bitcoin is decentralized and mathematical. It cannot be stopped or regulated with any real promise of enforcement.
Bitcoin, by its very nature, is here to stay. Either we can adopt it into the mainstream and build tooling around it to make criminal activity inadvisable, or we can regulate it, discourage innovation, and let the criminals take over the network. Either way, the network remains. Bitcoin is decentralized! It only requires software and network connections.
It's just as decentralized as tulip bulbs (http://en.wikipedia.org/wiki/Tulip_mania), and Bitcoin will be "stopped" when a) it is illegal to transmit or receive a blockchain (unlikely), or b) when people realize the only value Bitcoin has is in the belief that Bitcoin has value.
All it takes for Bitcoin to be worthless is the belief that Bitcoin is worthless. Therefore, if you hold any Bitcoin, you are incentivized to be a Bitcoin evangelist. Bitcoin isn't a currency, it's a religion; you need to create "converts" to make your investment of time and belief worthwhile.
Isn't this true for every currency that isn't literally a physically scarce and useful resource (gold, grain, uranium, gold-pressed latinum?)
For the record, people said the same thing about paper currency. And again when paper currency stopped being backed by gold.
And this periodically actually happens to real government-backed currencies in the world, especially during times of hyperinflation (e.g. Germany in the 1920s, Zimbabwe in 2008, etc)
Right, but that happens sometimes, and never with proper governance. (but what is "proper governance" you ask? It's a tautology that says that governments that never allow hyperinflation never suffer from hyperinflation)
ALL asset bubbles collapse. The magnitude of the collapse is determined by the non-monetary value of the asset. (e.g. tulip bulbs collapse harder than real-estate). Because the non-monetary value of Bitcoin is negative (you need to burn electricity to use Bitcoin), this implies the eventual collapse of Bitcoin will be absolute.
But that's true for almost any modern currency. If everyone believed that the US dollar is worthless it would become near worthless. There will always be some demand because US citizens have to pay their taxes in US dollars but that wouldn't be enough to keep the dollar at anywhere near it's current value.
The economic power and military are already calculated into that. It makes it very unlikely that people will think the US dollar will become worthless. But he wasn't talking about whether that belief is likely, but simply stating the true fact that IF everyone starts believing that, then demand crashes and supply skyrockets accordingly and it'll become worthless.
In other words, no different from any currency or any good on the market for that matter, including bitcoin.
We aren't on the gold standard anymore, that's how all currency works now.
Dollars, Euros, Yen, aren't backed by anything other than the belief that it is money.
However, I do acknowledge that states invest a lot of resources into indoctrination, so the belief in fiat currency might be stronger than the belief in cryptocurrency.
However, I do acknowledge that states invest a lot of resources into indoctrination, so the belief in fiat currency might be stronger than the belief in cryptocurrency.
I'm not sure how you think this will help anyone take you seriously?
All it takes for Bitcoin to be worth something is the belief that Bitcoin is worth something.
We are arguing two sides of the same coin. [0]
The difference is how we define "worthless" and "worth something." Step back into reality for a second. Realize that most economic transactions take place between two entities. Generally two entities exist within the same social structure or community groups. e.g. I transact with my good friends (see your venmo newsfeed for example), accountants transact with local clients, etc. Payment networks and social networks are inextricably linked. Realizing this, "worthless" and "worth something" become only relative terms. Bitcoin does not need to be "worth something" to every person in existence in order to be viable. It simply needs to be "worth something" within confined payment networks, which tend to correlate with social networks. As long as a single comminity agrees to transact with Bitcoin, it becomes acceptable as a currency, within that community. Similarly, Bitcoin could be worthless to an entire community, and they could avoid it altogether.
The viability of the Bitcoin is moot, within a network of a community that sees it as worthless. But outside that community, other communities might see it as worth something. As long as transactions occur within clusters, it therefore holds true that Bitcoin is worth something, somewhere.
Do you see the difference in our arguments? We are both saying the viability of Bitcoin depends on either people seeing it as viable, or nobody seeing it as viable. But my argument is that as long as one community sees Bitcoin as viable, they can transact in it. Your argument is that Bitcoin is worthless to everybody, if everybody belives Bitcoin is worthless. This is true by default -- nobody was using Bitcoin before it existed. However you must consider that as long as some communities are using Bitcoin, it exists by definition, and therefore is also valuable, by definition.
> Therefore, if you hold any Bitcoin, you are incentivized to be a Bitcoin evangelist.
If you have a [myspace/friendster/facebook], you are incentivized to tell your friends to get a [myspace/friendster/facebook]. Community based programs, the ones that depend on "network effects," are obviously useless if you are the only one using them. I fail to see how this is a weak point for Bitcoin. It seems like a strength. As people buy Bitcoin, they invest in the ecosystem and join the community. As the community grows, it becomes the single community that supports Bitcoin, and the network is viable because of its momentum alone.
> It's just as decentralized as tulip bulbs (http://en.wikipedia.org/wiki/Tulip_mania)
This is a fair economic comparison, but completely ignores the fact that Bitcoin is a decentralized, digital currency, and Tulips are flowers. One is specifically designed for transacting in the age of the internet. The other grows in the ground and people went crazy over it 350 years ago. Therefore we must take the tulip mania comparison to Bitcoin only within the context of Bitoin's economic repercussions. The lesson is that humans are irrational creatures living in a world of scarcity. As a species we need methods of transacting with each other, and we use whatever happens to be en vogue at the time. Ultimately all currencies will be flawed, so long as they are created and used by humans, directly or indirectly.
[0] That seriously was not a pun. I didn't even notice it for a couple minutes.
A currency.
And a way to reliably account for who owns what, with no central authority.
As a currency, it has the problem that there's no natural demand for it. Nobody needs it to pay their taxes, and it's not widespread enough to be worth having for the common person. Naturally this could change, but until then you've got a game theory problem.
The protocol side is what makes it interesting. The protocol is basically a way for us to collectively scribble on a giant wall that grows every 10 minutes. And that wall cannot be changed, thanks to the clever incentive system that makes the primary use to account for who owns which bitcoins. The technology would still work if you used it to scribble love letters, but nobody would have an interest in keeping the system going.
So is this protocol useful? It very well could be. For instance, any number of currency-like things could be (and are) accounted for. You could put the whole land registry on the blockchain, and then you'd always be able to verify some person owned a parcel. You can put documents (or hashes of documents) in it and prove it existed at some time. The list goes on.
The big question is whether this protocol is economical and convenient enough to actually displace what's there already. We already have a land registry. We already have notaries.
There also needs to be some thought put in about how the infrastructure will be paid for. If the currency is useless, why do miners want to keep mining? Sure, there's the potential it won't be useless in the future, but how long can you string along an operation like that for? How do you plan if the price is so volatile it might be zero or a million in five years? Each price implies a very different level of investment.
One strategy might be a slightly different altcoin system (many, many altcoins have been invented) that tries to share the cost evenly, so no one economic actor has a special position. Another thing you could do is pass real money instead of BTCs.
But I think the protocol core is here to stay.
Bitcoin/Cryptocurrency might very well be a way to get around the issue we currently have where technology is moving faster than legislation. And so by using cryptotechnology we will be able to circumvent the political process but still maintain accountability.
We are still some way from that but to be critical about it's future at this point is not just unwarranted IMHO it's also counterproductive.
Just from the top of my heads here are a couple of ideas I had with regards to bitcoin/crypto:
Digital Pokemón Cards. Basically the ability to create digital collectors items.
E-books and other digital assets that could gain value. You could sell ebooks at a premium and allow people to re-sell them. Because the history of their ownership is recorded you could even see them gaining value if they had been owned by a celebrity.
Private but public healthcare records. For research and usage. Store the health-records publicly as personas but allow individuals people to link it with their identity. This would help with research in completely new ways.
Voting made public but anonymous Make it impossible to fake voting results by making the results available for everyone.
Artificial Intelligence Using the protocol to create automated consensus models for how prioritize.
Companies without owners Build a company with a political purpose without any owner.
It doesn't need to be 100% fool proof it just needs to be good enough for a majority of people just like everything else and I don't see anything that stands in the way of it being good enough.
What is the protocol? Basically it allows you to trust a network in which you don't have to trust any participants. Think about that for a minute - THIS IS A PHENOMENAL ACHIEVEMENT.
Use cases for bitcoin? Who cares. Use cases for the protocol? Countless. Just give it time. Its existed only for ~6 years people!
If you aren't gonna at least address this there is no way I'm respecting your critique sorry.
This guy has obviously thought about it and listed it in the "Internet of things protocol" using the blockchain. I don't agree necessarily though because IEEE already working on something.
On the face of it, this seems like the one legal use of Bitcoin, to circumvent situations where the government uses influence to block certain economic activity through words (a request to payment processors) instead of the threat of force (new laws).
However, the only reason that Bitcoin has any value to Wikileaks is because it can be exchanged for dollars to fund Wikileaks activity, and the only reason Bitcoin can be exchanged for dollars is because it is a medium of exchange for drugs. Without the drug market, Bitcoin would have little value, making it pointless to donate to Wikileaks.
There are TONS of websites that accept Bitcoin, and a growing number of brick and mortar stores accept it also.
You assert that black markets are the only factor that drive value in Cryptocurrencies, how about you back up that assertion with some evidence.
Close. You can pay for your motherboard in bitcoin, which is then converted to dollars and remitted to Newegg. Newegg eats the conversion costs as a transaction fee, and handles the transaction like any other dollar-denominated sale.
However, you aren't going to pay for your next motherboard with bitcoin. You're going to pay for web hosting for your drug sales or copyright infringement site with bitcoin, which is then sold for dollars by the shady web hosting company to people who want to buy drugs.
Just because Coinbase paid Newegg a marketing fee to run a bunch of promotions doesn't mean people execute everyday transactions in bitcoin. Bitcoin is still (statistically) only for criminal activity and speculation.
Applications: identification / existence, copyright, trademark, notary, escrow and proof of service.
My (very legal) business accepts Bitcoin. I don't have many customers using that form of payment, but chances are I may not have them if I didn't accept it.
I don't really care what form of payment you want to use.
Then again, maybe I'm crazy.
Play out the end of an asset bubble in your head. Lots of people sell their assets, and now have dollars. The job of our policy makers is to make sure dollars don't increase in value at all, and don't decrease in value too quickly. But if lots of people are exchanging assets for dollars, the demand for dollars makes the value go up. Our policy makers will take a variety of actions to make their value go down by up to 2% a year. If we're lucky, they'll be able to stave off deflation.
So if you've sold your assets and want to store your value, you really want some sort of ledger with a predictable supply so your value can go up, not stay the same or decrease by 2%. Gold is traditional the ledger that people seek when these sorts of things happen. But enough people will choose Bitcoin to raise the price significantly, which will make others choose it as well.
Gold might be the right bet, but Bitcoin is a more functional ledger (easy to store, easy to transfer, etc.), and the upside is higher. But again, maybe I'm crazy.
In particular: the effectiveness of a store of value is based on its ability to retain its value over time. The effectiveness of a speculative asset is based on its users ability to transact based on predictions (up or down) of its future value, regardless of its true value.
Being as how a transaction requires two parties, this is not possible for everyone.
Volatility isn't just up and down. It can be just up.
Now generally I'd agree you don't want massive volatility, but that's a function of its age. A market of 50 thousand users is easy to manipulate by one rich guy. A market by of 1m users is still easy but harder. A large 100m user market is really hard to manipulate. This means volatility should keep dropping as bitcoin grows.
Second, a market where most users are speculators is more volatile than one where most are users. As bitcoin becomes larger it'll only do so on the back of genuine consumer adoption. That, too, causes volatility to drop.
Does practice confirm the theory? Yes. Every single year bitcoin volatility has dropped since inception. It's always trending down. All the talk about volatility isn't so interesting to me as it's a function of its youth.
tl;dr with bitcoin anyone in the world can create a digital product with nearly zero replication or distribution costs and sell it to anyone else in the world basically instantly. That infrastructure exists today but is underutilized.
* Bitcoin is excellent as a charity funding mechanism. Often I may wish to give to a charity, but don't want to give out my credit card number. I give up my tax credit, but for small handouts that's quite alright.
* Micropayments. There is simply no other infrastructure that does this as well as Bitcoin does, because processing fees dominate.
You mean aside from currency conversion fees, the transaction fees (https://blockchain.info/charts/transaction-fees) and the massive $6,000 to $25,000 block reward?
If you do the math, bitcoin is easily the most expensive currency to transact in, and least economically efficient currency relative to legitimate economic activity generated.
Answer to your question btw, is $0 if you give less than $10 to everyone. You can easily send $5 to 5000 different people in Dwolla, since it takes advantage of the ACH system already in place in the US.
I think he has a very strong point about micropayments. Afterall, DOGE outcompeted BTC due to those transaction fees and carved out a niche within the alt-coins explicitly because BTC's fees are a bit high IIRC.
They pertain to money supply, a necessary force to get a currency out into the world. That causes inflation, which is not a direct price people pay (the transaction fees are a direct price, and those are a few pennies). Inflation is an indirect price. But if you look at bitcoin's history, its price is thousands of percent higher than just a few years ago, meaning that the cost is not actually incurred by those who use and transact or receive bitcoin.
In the long-run, this inflation will stop, and part of the fees will be covered by a larger amount of transactions that each cost pennies. If 50 million people used bitcoin in a decade, you can still pay pennies per transaction but cut block rewards without a drop in security.
If you do the math, bitcoin is easily the cheapest currency to transact in, which is why companies like Bitpesa exist undercutting remittance, and why Bitpay offers a 0% Saas payment processing fee, and why other merchant processors like Coinbase all undercut any creditcard, or Stripe, or Square, or Paypal, and why Paypal, Stripe and Square all have implemented bitcoin options into their services, and why companies like Microsoft accept bitcoin and keep more profits than they otherwise would if they had accepted the payment through e.g. a CC or Paypal.
Bitpesa takes 3%, significantly more than a credit card transaction, and much more than many established low-risk remittance corridors (e.g. Arabian Peninsula -> India/Pakistan, Europe -> Central America, are all under 1%). True, many remittance flows can be 9% or more, but that's because they have significant levels of fraud, and the overhead of KYC regulation. Ignoring fraud and regulations means you can reduce fees, obviously.
> merchant processors like Coinbase all undercut any creditcard
Coinbase charges 1% to buy, and another 1% to sell, and users are responsible for all bitcoin transaction fees. This revenue means that it can charge nothing for coinbase -> coinbase transfers; however nearly all financial institutions charge nothing for intra-bank transfers.
> companies like Microsoft accept bitcoin and keep more profits
About 0% of Microsoft's revenues are in Bitcoin, this increases Microsoft profits by about 0%. Accepting Bitcoin is a marketing expense, not about increasing profits.
Here's an example of remitting money to Kenya between various services:
http://remittanceprices.worldbank.org/en/corridor/Canada/Ken...
Bitpesa is a Kenyan remittance company after all.
> Coinbase charges 1% to buy, and another 1% to sell
Coinbase costs 1% to process, period. It's cheaper for a merchant than the 3% of a CC, Stripe, Paypal, Square etc.
If you want to look at the consumer side, that's a different story. You tend to conflate things in your arguments. It's not required to buy from Coinbase to spend at a Coinbase merchant. I've been paid in bitcoin at 0% fees, and I've bought bitcoin at Circle at 0% fees.
> About 0% of Microsoft's revenues are in Bitcoin, this increases Microsoft profits by about 0%. Accepting Bitcoin is a marketing expense, not about increasing profits.
Stupid. First of all, quote my entire sentence. Secondly, it's easy to show you a ton of examples that were once small, but became significant. The internet was 0% of revenue for many companies once, where it's now extremely significant. It's not an argument to say something is small, therefore lacking any potential to be or become meaningful. One of its core characteristics is that it's cheaper. If you can cut costs as a merchant by 3% by using Bitpay (0% Saas) versus say Stripe (3% ish), that's massive when you have 3% profit margins like most supermarkets, airlines, a lot of retail etc. You can double profits on any sale. Does that mean bitcoin is a massive game changer today? Of course not, but again to ridicule it is as silly as to say the Internet is shit in 1995 because barely any calls, mail, ecommerce, education etc ran on it. Fact is, any sale Microsoft makes with Bitcoin is more profitable than otherwise, and that's not an insignificant fact despite the small scale of bitcoin sales.
It's relevant when talking about e.g. bitcoin as a store of value, but that topic wasn't raised. On that topic you could say that accepting bitcoin and buying a derivative to hedge, a bit like Bitreserve or Coinapult locks, would allow you to transact and store bitcoin, immune to bitcoin's volatility, yet cheaper than your average 3% Paypal, Stripe, Square or Creditcard transaction.
Beyond that, it's merely semantics.
Right now you could travel around Thailand and bring only your phone and passport. There is a service that allows you to give btc and get a code that can be used at any ATM of a major bank and get cash. You can cut down the 8% spread of changing money at the airport to 1/3rd of that at least. That is something you can do right this second.
Not only that but paying for something online is fantastic. No excessive information, no transactions cancelled because of a companies' opaque fraud protection system, no chance of your card number being stolen, no need to generate a temporary card number, no need to worry about your bank's opaque fraud protection...
Seriously, if you think bitcoin isn't useful, try using it.
And yeah, fraud is still a huge problem for e-commerce, but how does Bitcoin solve that? As stated in the article, it just pushes more responsibility to the user. Multi-sig doesn't solve that either, you still need a 3rd party escrow provider, who will charge a fee.
How does Bitcoin solve fraud? It is devoid of fraud. It doesn't 'just push responsibility to the user' it avoids the broken concept of giving someone all the information necessary to charge money to you at will. The fraud you are describing would be fraud from a business not delivering which isn't on the same level as credit card fraud that is happening on a massive scale.
1. More people have Applepay than have a Bitcoin wallet 2. More stores and restaurants accept Applepay than Bitcoin
12.2M people had used Applepay at least once between launch and the end of February -- Some significant portion more than once. There were only 12.263M bitcoin transactions in the same time period -- many of which were basically dust / micro-transactions of a few pennies worth of BTC.
There are only 1.5M bitcoin addresses with more than $2.50 in them.. 97% of addresses have less than .001 bitcoin.
Use case for consumers: discounts on Amazon.
Use case for earners (mostly unbanked): earn Amazon gift cards as payment and convert to fiat through bitcoin.
Blog showcasing counterargument: https://medium.com/@PurseIO/10-use-cases-for-bitcoin-c6b7182...
Bitcoin is a digital version of a secure ledger (with long term zero monetary inflation) but solves gold's transport, secure storage, divisibility, verifiability, etc issues.
That's a bullshit statement. Prove it, or shut up.
Hard to get gambling numbers now because it's all private and offchain.
As others have said; Bitcoin is more than just a currency.
What if you think it this way?
I also want to point out that bitcoin might have a shot at being a global currency.
Remittance not useful because of currency exchange spreads? Well then no currencies are useful for remittance.
As for the illegal part, are US dollars not useful for Drugs, Gambling, Tax Evasion and Escaping capital controls anymore? So then, when was the last time some one used US Dollars for any of the illegal activities above? The news didn't reach me.
But as for illegal uses, the US dollar is useful for drugs, gambling, etc. specifically because it's very useful in legal transactions as well. There's a chicken and egg problem: most people don't engage in illegal activity, but right now if you use BTC it's a red flag that something illegal is going on. If you want BTC to be really useful for illegal transactions, it needs to be useful for legal ones and gain wider adoption.
That was my reading of it, anyway.
BTC would be a great intermediary currency if there wasn't one already in the form of USD. I just don't see any advantage that BTC would offer over USD, even in the presence of high levels of BTC liquidity (assuming nothing catastrophic happens to the USD, of course).
2. No, not remittances. The expensive bit of Western Union is in fact that last mile. http://www.reddit.com/r/Buttcoin/comments/2ne03g/the_buttcoi...
3. It will remain difficult to turn your Bitcoins into conventional currency (which is the only reason there's such a spread between exchanges). http://www.thebtcindex.com/
4. It will get even harder to turn your conventional currency into Bitcoins, as any exchange not being run by blatant crooks puts you through the anti-money-laundering mill.
5. The protocol problems will continue not to be fixed, unless most of the hashing power and Mircea Popescu can be convinced to go along with the Bitcoin Foundation. No 20-meg blocks for you!
6. 99% of current hashing power came online in 2014; this will be very price-sensitive http://www.coindesk.com/bitcoin-mining-firm-cointerra-files-... and much will go offline as the price drops, maybe coming back next hash adjustment.
7. Miners will continue to sell their coins immediately to cover costs: we are circling equilibrium, where the cost of mining 1 BTC is about 1 BTC. The pool of money to pay for them comes from new Greater Fools.
8. Transaction irreversibility will remain Bitcoin's sticking point, as speculators who are insufficiently computer-savvy keep getting burnt. "No chargebacks" will continue to repel customers and not attract businesses.
9. More exchanges will get hacked and/or just take everyone's money. (e.g. just in January: BitStamp, 796, LocalBitcoins, EgoPay.)
10. Everyone who bought in the last year and held is a bagholder. Their claims and speculation will get increasingly frenzied. Ask for non-Bitcoinsphere numbers supporting all claims.
11. The bagholders and gambling addicts will continue to be taken by obvious scams, e.g. the two Ponzi scheme sites in just January.
12. Sidechains will continue to be vaporware and not in fact a thing that exists, let alone solves any problems. Bitcoiners will still talk about them as if they exist in the present, therefore you should ignore that altcoins are possible. (OTOH, pettycoin might get finished this year.)
13. Altcoins will continue to be even scammier than the Bitcoin ecosphere, boggled as I was to realise this.
14. The price is presently being held up by speculation and wishful thinking. No new reason will come along. The "fundamentals" are a castle in the air.
15. Nobody actually wants smart contracts. They know that the plot of Dr. Strangelove is literally an unstoppable smart contract going wrong. Real customers want problems to be fixable when circumstances change, real companies want to retain the option of lawyering out of a stupid deal. The only people who would want smart contracts are businesses looking to screw over their customers even more than "mandatory arbitration" clauses do. This is about as appealing to customers as no chargebacks, for the same reason.
16. Blockchains, even if by some remarkable wrinkle they turn out useful for something, will not lug Bitcoiners' 33 GB of SatoshiDice penny shavings with them. Bitcoiners will continue to bring up "blockchain technologies" as a reason to bother with Bitcoin regardless, because that's literally all they have.
(Bitcoiners misunderstand that when a techie calls something "interesting" they don't necessarily mean "useful", "feasible" or "practical" — often they mean "what the hell even is that" or "I ain't even mad, that's amazing". The blockchain, particularly as implemented in Bitcoin, is very much the last.)
Bitcoin allows people who are unbanked, especially in developing countries, to hold and transmit money across the world at practically zero cost. Since bitcoin is decentralized, there are no middlemen like banks to take a cut or freeze your account.
Besides, there are a lot more crimes being perpetrated with fiat and credit cards by financial institutions and governments. And with new allegations that it was the US Feds that stole the money from Mt. GOX users (and not Mark Karpeles), I wonder if there isn't a nasty propaganda campaign against bitcoin going on.
This article is close to clueless. But then, for a time so was I.
Read some reports and you'll find the average cost of remittance for poorer countries averages around 10%, an absurd borderline criminal rate.
You'll simultaneously find inflation rates of 10-30% not being uncommon.
The ability then to access international derivative markets, i.e. the option to easily buy and hold dollars using bitcoin providing relief from crazy inflation, and the ability to transfer it to others at the cost of moving 500 bytes of data, is hugely interesting.
Services like Bitpesa (cheaper remittance) or Bitreserve (hold money in different currencies using bitcoin) are the first such steps. In a few years I expect these things to massively undercut remittance costs and provide interesting relief from inflation. Some of the things the early Paypal founders were interested in, including Peter Thiel who spoke on the topic often in the early days.
"El Qorchi et al. (2003) state that the cost of a hawala transaction averages around 2 to 5 percent of the total amount of the funds involved, although Maimbo (2005) report that these fees averaged 1 to 2 percent in Afghanistan. Passas (1999) offers several examples where hawaladars offer free services to their compatriots, in the corridor Australia-Africa."
https://ideas.repec.org/p/una/unccee/wp0812.html
You make an interesting point about bitcoin being a potential hedge against inflation. Given the current volatility I don't see that being much use at the moment, but it certainly has potential if the volatility ever drops to a reasonable level.
Why would this be cool? Communities can come together and finance join ventures that were previously too small to be viable (incorporating, compliance, lawyers, bribes, etc). Money can now be pooled and organized in a way that mitigates the risk of theft and corruption. While the software isn't ready for this today, I think it's a short matter of time before we get there.
It's my belief that the future of Bitcoin will be analogous to something like Linux; a great deal of financial infrastructure will rely on blockchain technology, but Bitcoin itself will have little visibility or use to the average consumer outside of a small, dedicated circle of enthusiasts.
Right now, I can issue all the stock I want for a minimal filing fee. In spite of this, companies regularly pay investment banks billions of dollars to file an IPO. If you think that Bitcoin is somehow going to change that, I have a blockchain to sell you.
How the hell does Bitcoin help any of that?
If you really want to do that, you start an LLC, issue stock to your members (possibly requiring dues or whatever). That will cost you $100 to file for an organization in your state, maybe $50 for the proper LegalZoom papers.
Then you have to actually _run_ said organization. Even paying some dude minimum wage for the effort is going to grossly trump the costs of creating said organizations.
The LLC exists so that when the "company" screws over one of its members and you start getting sued, the "company" can go bankrupt without its members losing everything.
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If you're willing to take on the risk yourself, go all sole proprietorship. Take the responsibility for the solar panel yourself, convince your neighbors to chip in. Doing that is perfectly legal (but stupid).
Because as soon as one of your neighbors / shareholders gets pissed off at you, they can sue you personally.
Companies exist as a protection mechanism. Instead of _you_ getting sued for damages, the company gets sued. You are protected from legal issues.
But none of this has anything to do with Bitcoin. How the heck can Bitcoin make any of this easier? Companies are nothing more than a mechanism to prevent their owners from getting sued by the public at large.
Are there any articles or papers which explain why Bitcoin is better than alternative implementations of transparent accounting? E.g. existing access control can be used to make accounts available to any subset (all the way up to public) of interested parties. Techniques are available for append-only data stores. What does Bitcoin uniquely bring to the table?
I think the main advantage to a blockchain solution is the cryptographic verifiability. Not only is the accounting accurate, but the funds cannot be forged or hidden. Also the rules for managing funds can be programmatically encoded using a series of technologies such as multi-sig keys, pay-to-script-hashes, and HD Keys.
This isn't pie in the sky tech. It's real and accessible from your mobile browser today. Pretty exciting times I think.
I think we're largely talking about different markets, see my comment: https://news.ycombinator.com/item?id=9313044
I'm also not convinced that the low-friction transaction model is considered a good thing globally. The US and EU are the exception with respect to having low-friction transactions: in most of the rest of the world, buyers get angry if they can't haggle on price, even over the cheapest items. It's a cultural thing. Compared to the friction of negotiating price, cash or credit cards aren't that bad.
This doesn't even go in to the implications of stocks not being able to be sold in a fractional reserve style, taking out all the middle men etc.
The financial services industry is 8% of the entire GDP of the US. That is close to 8% we could get back since there is very little that can't be hugely automated.
The parts of the financial services industry that can be automated are already automated. Financial services drives the bleeding edge of the technology industry - online banking has been a thing even before the Internet (you used to get a program on floppy from your bank and dial in to their systems through a modem). BTC (or rather, the blockchain) does have the capability to reduce the cost of this automation, but it's already highly automated.
That 8% of GDP in financial services? It's all salesmanship. In order to give someone a loan, you have to be able to sell that loan to an investor. The lower the rate you can convince your investors to take, the more margin you get to keep. Why does Goldman Sachs charge more to issue an IPO than other investment banks? Is it because they're better at filing SEC paperwork? No, it's because they can sell the IPO better by convincing investors of the growth potential of the company (the majority of IPOs are funded through large direct sales to institutional investors). I never said it was fair, but I don't know that you can ever get rid of it entirely either (the US financial services industry also serves most of the rest of the world, which is why it's so much larger than in other countries).
But bottom line, most people are not educated enough in finance to handle this stuff themselves without getting completely ripped off. That fact alone will support a very large, regulated financial services industry. That also precludes the utopian vision of many Bitcoin devotees - unless Grandma Nelly who works as a greeter at Wal-Mart can understand finance, you're always going to have intermediaries. Because those intermediaries aren't to be trusted, they will need to be regulated by the government. It doesn't matter what the transaction system is, people need to be able to trust the economy without knowing a whole lot about how it works.
There aren't any now, but that's not because it's inherently impossible to have such a thing with BTC. It's just that the economy hasn't grown enough for them to exist yet. When (if) it does, they will come. I'm not going to say I know exactly how they will come, but I can think of quite a few plausible scenarios:
- Honest-to-goodness BTC accounts with banks, to solve the same problem with lost/stolen wallet keys that they solved with lost/stolen money-under-the-mattress for traditional currency.
- Wireless providers leveraging their position as most people's only constant/regular access to the Internet to exert control over how BTC is transferred over their networks.
- Online wallets becoming necessary to help deal with scalability problems (not entirely dissimilar to how electronic transaction processing networks have superseded paper checks) and then leveraging that privileged position.
The important difference is that Bitcoin makes it much easier not to use a middlemen. You can't have a credit card without a middlemen, and the choice of middlemen is limited. Bitcoin abstracts your choice of middlemen away and the person you are buying from or paying to doesn't even notice whether you have chosen to use a middlemen or not.
My prediction is that using middlemen like banks (or should we call them central wallets?) will stay the norm, but they will have entirely new market pressures because not using them at all is suddenly a viable option.
Transaction costs on the order of $10 per transaction are only practically zero if you transfer $1000 or more. Not sure if this is such a common scenario for unbanked people in developing countries.
Maybe I'm just lacking imagination but it seems that bitcoin's uses are 90% speculation and 10% illegal. What's the killer app that's actually going to make it a useful currency rather than an asset resembling a dutch tulip?
-> flavored money (only spendable in certain ways)
-> contingent funds (if home_inspector_signs_off then pay electrical_contractor)
-> trustless escrow
-> complex securities (if dow is down but nasdaq is up pay 10% of difference)
Are you saying that being debatably marginally better at those corner-cases will propel it into usurping the dollar and euro? I'm having trouble reconciling these use-cases with world-changing rhetoric.
I'm saying bitcoin can do things money cannot. I listed some use cases that demonstrate the kinds of things it is suited for. When the PC first came out, the life-changing uses seemed theoretical and vague, and for about the first 5 years it was mainly a more expensive substitute for a typewriter.
Uber is marginally better than cabs, but that's more than enough to cause disruption.
edit: You know what, I didn't argue about it usurping anything, but I would put this out there as a point in that direction. There are enough use-cases like what I list to get bitcoin to a critical mass of fungibility. Products supporting new valuable use cases don't usually disappear. So if bitcoin supports these use-cases, it is entirely possible that they will propel it to a scale where peer-to-peer transactions make sense because it is prevalent enough. At that point, it could become the lingua-franca of currency.
Responses like this, with breathless invocations of the world-changing implications of Bitcoin and heroes-and-villains narratives about governments and banks, sap credibility from Bitcoin.
They suggest that very simple arguments with Bitcoin critics can't be addressed without stipulating that Bitcoin is going to rewrite all of commerce and perhaps even all of regulation. Virtually nobody in the real world is willing to stipulate that.
If Bitcoin is going to work out in the long run, it will need arguments that work even if the IRS retains its ability to enforce tax laws and the DOJ retains its ability to regulate casinos.
2. Decentralized, anonymous cryptocurrency based economy
Pick one.
Then why Bitcoin? If you add regulation compliance, replace the block reward with higher transaction fees (which is built into the protocol as an inevitable end-goal), and remove (pseudo-)anonymity, what good is it? If you take away the ability to use it for illegal activity, why waste millions of dollars of electricity to sustain it?
That's overthinking it, though; really, the dig about electricity simply comes from the fact that Bitcoin is essentially a competition between "miners" burning escalating amounts of cycles.
Are you surprised bitcoin still exists considering the white paper unapologetically spoke heresy against government and bank collusion? That must be frustrating. Seeing the NYSE invest in a bitcoin company must have been a poke in the eye for you!
At a glance, M-Pesa looks a lot more popular among the under-banked than bitcoin.
What Bitcoin primarily offers beyond that is bypassing rules and regulations around cross-border transfers. But that's consistent with the article's thesis.
Bitcoin only allows people who are unbanked to hold and transmit money if they can use it - a point brought up in the article. It's a chicken and egg problem: nobody is going to use Bitcoin until a lot of other people are using it. It's much like a fiat currency in that sense, except there's no central authority pushing it with the authority to mandate its use. It's currently far too volatile, and will remain so as long as speculators are the primary market participants.
Ultimately, there's not going to be a global revolution overthrowing the existing financial system. I expect BTC (or rather, the ideas/technology behind BTC) to be regulated and absorbed by the global financial system because, ironically, its best feature is that it synchronizes a single view of global transaction logs, making it MUCH easier for investigators to trace the flow of money across the globe. If laws are enacted that force payment providers to keep documentation of who owns blockchain addresses and to only transmit funds to verified blockchain addresses (similar to existing money laundering laws), the anonymity goes away and you have a record of every financial transaction that can be traced back to the individual who submitted it. Bitcoin won't be allowed to be a loophole to global financial regulation, but it may just become the mechanism of enforcement.
I'm from a developing country (Pakistan). The people you are referring to are the least likely candidates for using Bitcoin. To use Bitcoin you need to, at minimum, be able to read and write, and own a device with an internet connection. To actually use Bitcoin securely, you need to be a -lot- more technically proficient. The unbanked people are the least likely to fit this description.
Also, I think its quite unethical to consider putting the unbanked people at risk of losing 40-70% of their money by putting it in a volatile currency like Bitcoin.
For a few months in 2013, it was legal in China to buy Bitcoins with a debit card in yuan. The Bitcoins could then be sold outside China for dollars or euros. China has exchange controls. Ordinarily, it's quite difficult to convert yuan to dollars or euros from inside China. Bitcoin made it possible.
Then the People's Bank of China (roughly equivalent to the US Fed plus the US Treasury) cracked down, and in 2014 the price of Bitcoin went into a dive from $1100 down to the current $240. That's how we got here.
Bitcoin mining in China may also be a way to bypass exchange controls. China encourages exports. China's government has no problem with someone setting up a business, making something, selling it outside China, and keeping the proceeds outside China. That doesn't violate exchange controls, because no yuan have left China. A Bitcoin mine fits that model. If you have a successful business in some interior province and want to get out enough dollars for a villa on the Riviera, a share in a Bitcoin mine is a good option. This may be driving much Bitcoin mining activity.