Speculation About The Eventual Death Of Bitcoin
tonyarcieri.com
tonyarcieri.com
The fact that the fair distribution of the coin is dead means that the entire blockchain will die imho. Bitcoin's price really exploded when the mining scene was lucrative for everybody interested in the coin. It tapered off rather quickly once mining became impossible for all but the few.
Why would anybody buy into Bitcoin now that one of it's original pomises of decentralized mining has been broken?
Why would anybdoy buy into Bitcoin when it means only fattening the pockets of a few (already rich) mining syndicates?
I certainly wouldn't, and I was a massive Bitcoin proponent for most of it's life.
Many ideas that Bitcoin brought with it will live on, but the Bitcoin blockchain in it's current implementation will "die" sooner rather than later imho.
The fact that one can transfer value from point A to point B for next to nothing and without government oversight is amazing. The fact that the majority of Bitcoins that will ever exist are held by a few individuals (and always will be while mining for the layman is dead) is not.
Why go through the trouble of running a mining rig instead of just buying the coins sold by miners in the market?
It is true that the majority of Bitcoins are held by a few early adopters (NB: not today's miners!). They will diversify out as time goes on. Wealth can come from skill, hard work, luck, politicking, etc... Rejecting Bitcoin because it enriches a few people in a manner that you find objectionable is... myopic.
Look around you, almost everything you do enriches one capitalist or another. Many intelligent people have tried finding a way around that, with limited to no success. Good luck.
That's not why I think Bitcoin is dead.
It's primarily the fact that nobody can mine it anymore, thus nobody will be interested in it. All of my friends who I introduced to Bitcoin (and were fanatics while they were mining) don't even talk about it anymore. They're all just steadily hoarding their coins, not using them for anything, in the hopes of cashing out millions of dollars once all of the later "suckers" come along and buy into the blockchain.
It was the "free money" aspect that really sold the idea to most people. Nobody cares about the "exchange money for Bitcoin just because Bitcoin is so much more fluid" aspect.
"Why would anybdoy buy into Bitcoin when it means only fattening the pockets of a few (already rich) mining syndicates?"
Replace Bitcoin with USD in above sentence and "mining syndicates" with "banks"
Namely, one where the majority of "little people" can mine the coin. Or one with a fair and equal distribution to at least hundreds of millions of people (preferably billions) before the coin is launched.
Those were some of the founders original ideas, that anybody with a CPU could mine the coin. And technology slowly took over...
This isn't to say that Bitcoin hasn't succeeded in a lot of fronts. Just that one of the key fronts - one of equal ownership of the money supply - hasn't been quite as successful as others.
Because otherwise there is excessive deflation and instability.
Who knows whether or not Bitcoin is past that threshold - time will tell. But I have to wonder: is it really worse than the financial system we use right now? Any argument against the use of Bitcoin is also indirectly arguing that something else is better. What is better in this case? An altcoin? If so, I haven't seen it yet - at least not in a way that puts Bitcoin in inadequate-without-a-doubt territory.
Could you really write a bullet-proof case for using our current financial system instead, especially if the roles were switched and we were coming from something Bitcoin-like to a proposal for using fiat currency?
[0] https://www.stellar.org/papers/stellar-consensus-protocol.pd...
[1] https://ripple.com/files/ripple_consensus_whitepaper.pdf
Having read the paper and discussed with others, the claim also seems untrue.
Stellar's new protocol, Stellar Consensus Protocol (SCP), like Bitcoin, allows forks.
Unlike Bitcoin, however, it has no way of resolving them. Further, it seems easier for a fork to occur in SCP than it is in Bitcoin.
What this means is that in Bitcoin everyone agrees to what your balance is, but in SCP they will not once a fork occurs. There will, in effect, be multiple Stellars, with no limit to how many.
In attempting to make it easier for others to join the verification process, Stellar has actually made their entire protocol less secure than Ripple (which restricts membership and therefore can better prevent such forks).
See also Gregory Maxwell's criticisms: https://news.ycombinator.com/item?id=9342348
Yes, in every way. There is literally no practical use case for Bitcoin compared to the present financial system. It is not anonymous, it is not untraceable, its transaction limit is ludicrous, it has no reversibility (that's an absolute killer objection for so many cases), it doesn't actually work out as effective for any real-world remittance case (the bit you pay WU for turns out to be that last mile), the Bitcoin space is saturated with crooks and scams, etc., etc., etc. You know this list at least as well as I do.
It's had six years to find itself a niche. Satoshi himself abandoned it five years ago.
> Could you really write a bullet-proof case for using our current financial system instead, especially if the roles were switched and we were coming from something Bitcoin-like to a proposal for using fiat currency?
Although it would certainly be a useful exercise, no-one actually has to do this to assert my point above, and you don't get to assert them not bothering to do so as evidence for your claim. We have a system that observably more or less works, and isn't in need of a replacement with such a wide range of deficiencies. I have plenty of issues with the economic arrangements of the present day, but Bitcoin solves none of them.
In the case of replacing proof of work with something else, how will the coins be distributed? Who will trust the distributors enough to adopt it? POW has been effective in distributing new coins, although it has been too friendly to early adopters. I like the hybrid POW/POS (proof of stake) altcoins for increasing the energy efficiency of the network while still fairly distributing coins to miners.
There are too many alternative coins, no one stands out enough to look like overtaking Bitcoin's popularity.
I like the idea from the article of modifying the block time down from 10 minutes. Gradually moving to a 1-minute block time should be possible, but it is too radical to be considered. How will future improvements to Bitcoin be voted on? Increasing the blocksize has only been done because (I'm guessing) there is little alternative, or other alternatives would change things too much. Of course making more changes to Bitcoin adds 'political risk' that deter potential adopters.
One problem with bitcoin and alternatives is that the main venue for discussion is such a "ghetto". Bitcointalk.org is the defacto official bitcoin site, but the quality of the discussion on there varies wildly and there is little protection from scams. This is just the nature of it, being a simple forum.
By the way, someone on Reddit answered this challenge. http://www.reddit.com/r/Buttcoin/comments/36p1eq/hacker_news...
"Fiat is like Bitcoin, but with a few new features.
"Rather than using a traditional decentralized system, the currency supply is managed by a semi-independent ruling body, which stabilizes the currency against hyperinflation, deflation (a major problem of the Bitcoin economy), speculation (ditto), and financial attacks. They also provide insurance on bank deposits in case of theft!
"While Bitcoin has long transaction times, this new "fiat" currency has quick transactions through credit and debit cards. These even allow chargebacks, providing you with protection against scams. Fiat is also revolutionizing the world of remittance and money orders, with fees much lower than Bitcoin's through the use of internal ledgers.
"While the Bitcoin network uses massive amounts of power, the new fiat network is environmentally sound and does away with the need to develop specialized ASIC hardware to mine Bitcoin and to maintain a lengthy record of the blockchain. Fiat even has solved Bitcoin's transaction rate problem!
"But one of the most exciting features of fiat is "cash," a physical representation f previously-digital money. It's anonymous (unlike Bitcoin, which records all transactions forever). Because it is a physical item, it cannot be stolen by computer criminals, one major risk of Bitcoin. Best of all, it's accepted by everyone, everywhere- no need for computers, addresses, or block confirmation wait.
"Fiat- it's the currency of the future!"
1. Transactions model with multiple inputs/outputs & scripts attached to both sides is heavy(& scripting language had some critical bugs, see Bitcoins' CVE)
2. Bitcoin's proof-of-work is far away from ideal Sybil-resistant anonymous Byzantine Agreement solution as well.
3. Bitcoin is centralized in all aspects. You need to trust ~10 mining parties to join the network, centralization of holding also takes place(early birds/central exchanges), development is highly centralized as well.
So eventually it will be replaced with successor(s). After all, even Satoshi thought Bitcoin is experiment, not the final solution to 1000s problems.
Is it possible that the current Bitcoin clients will be replaced by better Bitcoin clients using the same ledger? sure. But would that mean that Bitcoin has "died"?
Is it possible that the consensus algo for Bitcoin is replaced by a better one? Conceivably, but would that actually mean Bitcoin has "died"?
Is it possible the monetary value currently on the Bitcoin blockchain is shifted to other blockchains? Sure, but if most of the monetary value is preserved, does it really mean anything has "died"?
All since then has been decline as people lose interest. Literally everyone who's bought in the last year is underwater. The fundamentals don't exist; there is no reason for the price to go up and no floor below which it can't go.
Can you also supply a concrete estimate? Without a concrete estimate, your skepticism is too vague to be meaningful.
The slope over the past year has been a downward decay, with the individual drops being sudden and unexpected, with Bitcoin advocates insisting every time that this must be the bottom; they've been consistently wrong over the past year. (Admittedly, I'm mostly looking at /r/bitcoin, which is unusually euphoric even for Bitcoin advocates.) The drop from $500 to $400 to $300 was sudden and unexpected, the drop to $177 was sudden and unexpected. The price recovered (the $177 coincided with the Bitstamp theft, selling those off may have depressed the price), but I don't see how $150 is in any way implausible.
The cost of mining 1 BTC is circling 1 BTC (hence the volatility of hashpower of late, with fewer and fewer mining operations able to get cheap enough electricity). It'll be interesting when the mining reward halves in 2016. Just because it will cost more than 1 BTC to mine 1 BTC doesn't hold the price up - look at any altcoin.
I don't have a figure for the bottom over 2015-2017, but given the above I find $100 entirely plausible. Everything that applies to altcoins (some of which are worthless or all-but-untraded, which is functionally worthless) also applies to bitcoins, so I don't see why near-zero is inherently implausible.
(cheers for getting me to quantify my thoughts :-)
Here's a falsifiable prediction: Bitcoin will not rise above $400 by the end of 2017, nor above $300 for more than 48 hours. (I generally look at http://www.coindesk.com/price/ , but won't fuss about +/- a few dollars on any reasonably respected price chart.)
If only HN had a "remind me" :-)
In the five months since that time, the price has bounced around in the 200-300 range, mostly 220 to about 250 or so.
It's no longer accurate to say the Bitcoin price has been sloping downward for the past year. That viewpoint is now five months out of date. Five months, after all, is nearly half the period of the claimed year.
The previous downtrend has clearly ended, we're in a sideways range phase now. There may be another subsequent downtrend, but it will be a different one from the previous trend.
I sometimes watch the various exchanges pretty closely, and there's a point somewhere around $220 where a lot of buying kicks in. For whatever reason, people are comfortable accumulating there. Then it becomes self-reinforcing. People won't sell below because they know they can wait it out and sell above it in a few days.
It would be possible to trigger another downtrend, but it would take either some seriously bad news (some US regulation maybe) or a very large amount of bitcoins dumped on the market at once.
At this exact moment, I think the market is in a stalemate zone. It's been extraordinarily stable the last few weeks. People don't want to sell here, but they're still afraid to buy at this price (~$235).
It's not a technical problem. It's that the use cases for Bitcoin turned out to be drug dealing and evading China's exchange controls. After Bitcoin stopped working for both of those, the bottom fell out of the price.
It doesn't help that Bitcoin is a scam magnet. Anonymous, irrevocable money transfer is the con man's dream. Now you can con people who can't get back at you. That feature of Bitcoin has been very popular.
Right now, Bitcoin is in "meh" mode. For 2015, so far the price is flat, and volume is flat.[2] The "altcoin" world is in even worse shape. About 2200 different altcoins were created. About 8 of them still have enough market cap that you might be able to sell a reasonable sized block of them.
It was amusing while it lasted.
[1] http://www.newegg.com/bitcoin [2] https://blockchain.info/charts/n-transactions-excluding-chai...
I do see that use case (buy electricity in yuan, sell bitcoins for dollars), and I strongly suspect it's a thing that happened, but I don't have any data on to what degree this was a thing that happened. Would you have any? Cheers :-)
For those of you who don't know, China has currency controls - it's difficult to convert yuan to dollars from within mainland China. There are ways around that, such as physically carrying yuan notes to Hong Kong, which is allowed up to some limit. But Chinese can't just do a wire transfer to a bank outside China. Going through Bitcoin, for a brief period, allowed such moves.
After the PBC clamped down, it took a while for the Bitcoin community to get over its delusion that the PBC couldn't do that. Then Bitcoin crashed.
Bitcoin mining in China may be an extension of that currency movement. From the standpoint of China's financial system, Bitcoin mining looks like an export manufacturing business. That's encouraged. It's OK to make stuff in China, sell it outside China, and keep the currency used to pay for it. Bitcoin mining is inherently limited; only US$800K a day is generated, which is far too little to affect China's exchange rate. So there's been no effort to crack down on that.
I thought that was the Willybot.
That's EXACTLY what he was going for, and he knows it. Saying you weren't doing something you were doing is just confirmation you were doing it.
This is already the case with credit/debit transactions, which can often take upwards of 24 hours to finalize.
The 10 minutes required for a Bitcoin transaction to complete mostly deal with peer verification. The actual publication of that to peers is much quicker, and said publication is usually when a retailer would interpret a payment as having been "received".
The only way to speed this up further - with either fiat or cryptographic currency - is to distribute it physically. In the case of fiat, this would be cash. In the case of cryptographic, this would be a paper wallet with a verifiable balance and totally-secret private key, not known to even the person who's paying with it (which is feasible, hypothetically, by using a machine that could print paper wallets with the private key obscured by "scratcher" film like what lottery tickets use; said machine, however, would need to be entirely disconnected from any form of telecommunications, generate truly-(pseudo)random (i.e. not pregenerated) keys, and have no means of storing keys on non-volatile memory in order to be trustworthy, however, but all three of these things are possible with today's technology by not including a NIC, using a PNRG (in software or hardware), and using ROM and a RAMdisk exclusively, respectively). Upon receipt, the recipient can either hang onto it as physical currency or "cash it in" by scratching off the concealing film and extracting the funds.
We've been seeing longer and longer transaction times of late, into the hours.
> with either fiat
This Bitcoin misuse of the term "fiat" is irritating. It means any currency without a physical backing. This includes Bitcoin. In practice, conventional currencies are considerably better-backed than Bitcoin.
(This misuse of "fiat" originates in early goldbug pamphlets and was cut'n'pasted into the Bitcoin memetic sphere.)
The longest I've seen so far was maybe two hours. That's still 12 times faster than most credit/debit transactions.
Now granted, if confirmation time keeps growing like it has been, then yes, the Bitcoin folks will need to figure out some kind of solution (it's not like other cryptocurrencies haven't already found such solutions). Keeping it under 24 hours, however, means it's still on par with expectations for credit/debit transactions, which was my point.
> It means any currency without a physical backing.
Wikipedia [0] disagrees with you on the definition of fiat:
"Fiat money is currency which derives its value from government regulation or law."
I'm too lazy right now to go corroborate that with a dictionary.
Bitcoin - unlike fiat currencies - isn't based on a government declaring its value. It's much closer to commodity or representative money (the defitions of neither requiring the "commodity" in question to be a physical commodity - just one that's difficult to reproduce, a trait which blockchain entries possess).
Interestingly, this may become incorrect, [1].
[1] http://en.wikipedia.org/wiki/High-voltage_direct_current
It's hard to pay for your child porn if you can't ever bid up your transaction high enough to be accepted into a mined block, and it wouldn't be expensive at all to accomplish this feat for even a small national government, let alone the U.S.
Bitcoin is forever.
Imagine a coin that's tied to how many push-ups you make each day? That's still scarce, but the side effects are positive, not negative - you get healthier instead of burning more coal.
But it does until there's a better alternative. Currently there is no algorithm or technique that can't be gamed or corrupted other than proof of work.
- 20 million
- eight decimals
- blockchain size
- cryptic account ids
- QR codes
- price instability
- latency
- privacy
- reach
"that's a feature not a bug"
"you'll get used to decimals"
"qr codes are not that hard"
"in a decade everybody will have a petabyte in their phones"
"ten minutes is not that long"
"who needs privacy if they're not doing anything wrong"
"to the moon!"
Blindness.
- Incentivized Hording, Speculation
As I've said before, I'm optimistic about cryptocurrencies in general, but Bitcoin is just the awkward start, not the ideal. There are too many problems without obvious solutions.
Now look at the angst over changing the block size, and never mind all its other deficiencies.
(I'm slightly surprised altcoins have been so uninventive.)
It is impossible on a practical basis to secure any significant amount of cryptocurrency. Even the most secure known methods of storage have been compromised [1], and computer security has reached a state which means everything is hackable. Every Bitcoin exchange I can think of has lost some significant amount of coins to hacks. I see no reasonable solution for this problem.
[1] http://leaprate.com/2015/02/is-bitcoin-safe-yet-bter-exchang...
EDIT: I have always liked your posts on bitcointalk.org
This is a problem for Bitcoin, but not a problem of Bitcoin.
The major fallout that I see from those hackings isn't so much that they occurred, but that unlike an attack on accounts held by, say, Bank of America or Citibank, there's no recourse once the funds have been siphoned out of the Bitcoin exchange -- they are just gone.
Is that the problem that you're describing when you talk about there being no "reasonable solution"?
Is the current global financial system backed by many trustworthy people?
Who qualifies as "trustworthy" in this case? Central Banks, commercial banks, corporate executives?
I'm not attempting to be snarky, though it probably could be read like I am. I'm really curious if it's true that digital currencies lack a "trust" factor (perception, no trust-less ledgers) or if it is that many people are turning a blind eye to the horrible things that go on in our legacy banking and financial systems.
I'm a fan of cryptocurrency for a variety of reasons, but most of the problems that cryptocurrencies solve are not widely perceived as problems by most people.
It's not that it's absolutely safe, it's that bitcoin has no advantage on that front.
I can imagine such situations, but they're the kind where you're more worried about your stockpiles of ammunition and canned goods, not bitcoins. Short of total economic failure, banks are "safe" in well-defined ways.
(On the other hand, erosion of wealth in traditional currencies due to inflation is just as real as fluctuation of wealth in cryptocurrencies.)
It's just that everyone is used to credit cards being the primary way to pay for things on the internet, and they think the model is the same, when it's radically different.
What happens when you give cash to someone for something and it turns out they scammed you? Your cash is gone. Involve the authorities or just eat it.
What happens when you lose your wallet in real life? The cash inside is gone, you don't get it back.
What happens when someone steals your wallet? The cash is gone.
Etc, etc, etc.
Those who witnessed the Great Depression (or similar events involving bank runs and financial crashes) probably could.
I'll leave alone for now the fact that it was the government boogeyman that implemented the changes that make things like bank crashes wiping out a family's meager savings a historical artifact.
That insurance has limits, though; not only is the amount limited, but the U.S. government - like all non-fictional things - has finite budget/capital (no matter how much Congress likes to pretend otherwise).
You've got me on the third point, however. The Winklevoss brothers do have an EFT in the works[3], but I don't think it's fair to use them as a symbol of financial malfeasance.
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[1] http://www.npr.org/sections/parallels/2014/03/20/291934724/a...
[2] http://www.chicagotribune.com/business/breaking/chi-hackers-...
(At least, I hope)
But just like the Joker said, as far as Bitcoin inflation goes, everything is going according to plan. So what's there to worry about? Obviously a ship with no helmsman is objectively better than a ship being piloted by untrustworthy people (ick!).
Honestly, I don't follow your logic at all. Clearly governments can't be trusted with money. They prove it over and over. All fractional reserve systems fail eventually. It's baked in.
Currencies are legal instruments of Governments, seem rather inextricable to me.
"By 2005 or so, it will become clear that the Internet's impact on the economy has been no greater than the fax machine's." - Paul Krugman
I remember the days when people said email wasn't better than a fax, that websites are not better than paper catalogues for shopping and that only nurds use computers to socialise...
Cryptocurrencies are a great invention and have a great future, they will change the world in unimaginable ways. But there are shortcomings right now that need to be addressed.
Ignoring them is like netscape or altavista ignoring the elephant in the room.
And there were (and still are, decades later) shortcomings of the Internet and the World Wide Web that need to be addressed.
Whether Bitcoin ends up being the HTTP or the Gopher of this metaphor is yet to be seen, but seeing the overwhelming benefits of cryptographic blockchains in general for a lot of different uses, cryptocurrency is most likely here to stay.
Is that supposed to mean something? You're posting on HN, surely you're smart enough to understand the difference between correlation and causation.
For instance if someone had been pointing out flaws in bubble sort with a similar analogy they'd have been right: bubble sort is crap and outclassed by a host of superior sorting algorithms.
Bitcoin was born outclassed in many important ways. People put up with it because of other perceived advantages, but now seem unwilling to drop their support once those advantages were destroyed.
Instead people keep trying to pile hacks upon hacks onto the Platonic epicycles of the Bitcoin blockchain, when what people need to be doing is to quit thinking that the blockchain is the center of the universe.
How are the amounts/divisibility an issue? It divides down to tiny levels and there's enough.
Is it basically the idea that 1 bitcoin is large and we should have used a different base unit?
This is a killer for widespread takeup.
It is, in fact, strictly worse than cash - because it's more irreversible (I'm unlikely to be able to pluck cash out of your pocket from halfway around the world), yet more traceable. (The blockchain as "prosecution futures".)
In other news, water is wet, the sun rises in the morning, and the "death of bitcoin" has been greatly exaggerated.
To assuage your curiosity, though, the subtleties have to do with trying to make sure the design is consistent with itself and with other parts of HN. There is more than one way to generalize flagging, and some of the ways we tried led either to unwanted behaviors or unwanted complexity. For example: if you vouch (that's the word we're using for anti-flagging, i.e. you vouch for a post if you think it shouldn't have been flagged) for an item and then un-vouch for it, it should go back to its previous state. Posts that were killed by software vs. by user flags have slightly different properties, and the vouch feature needs to preserve those. The way that flagging affects story rank is different from how it affects the life cycle (dead-or-aliveness) of a story, and vouching needs to be consistent with both.
When we release this, we'll have a thread about it and can discuss it more if people want to.
As soon as the market notices a cryptocoin protocol which makes the bitcoin network obsolete, than BTC will evaporate as everyone jumps ship to the next cryptocoin protocol/algorithm/network.
"Bitcoin is limited, 21 million only!"
"Altcoins."
"You don't need altcoins, we have sidechains! They let you do all that stuff inside Bitcoin!"
"Except sidechains don't exist yet."
"They will, it'll be fantastic! Sidechains!"
(This is leaving aside that altcoins have somehow managed the amazing feat of being even scammier than bitcoins.)
Crap title.