As somebody who has held cryptocurrency for years and codes Solidity, never before have I seen a dumber market than this. Every time valid criticisms come forward, they're met with articles like this. The articles are usually convincing to people with limited understanding of economics or technology, so they keep quiet. "Open source money" and "blockchain is the future" sound like very convincing arguments to justify these ludicrous sums of money. What they neglect to address is that...
A) Bitcoin is congested with transactions and takes hours to process some of them
B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money. The big banks are replaced by big whales, who will do anything in their power to manipulate markets for their gain.
E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
F) Bitcoin is not actually anonymous. Data science techniques can parse the blockchain and see sending patterns between different accounts. They map these patterns to various identities. If those identities can be mapped to a real person, say, when they cash out of an exchange, then it's known exactly how much Bitcoin they have.
If someone could write an article addressing these facts, rather than throwing out slogans like 'open source money', that would be nice.
Couldn't agree more. We're using some blockchain technology to solve specific problems at my company. It's a part of our stack, but we don't mention blockchain unless someone specifically asks.
Blockchain is sensationalized beyond belief. I can't wait for the rose tinted glasses to fall off and we realize it's just a data management technology for specific use cases.
I think the biggest danger to the technology is that the community focuses on "blockchain will change the world" not "how can we make this better".
Finally, someone that speaks directly and honestly about it. I 100% agree with you, there's a problem. Unfortunately, this problem means that a lot of naive investors will jump on the crypto bandwagon only to get hurt.
>A) Bitcoin is congested with transactions and takes hours to process some of them
It regularly takes /days/ for visa transactions to go from "confirmed at the counter" to "arriving and unlocking in my bank account so I can use it to pay my rent". Over Christmas in Australia it's common for visa to just flat fail to keep up with demand, forcing shops to keep offline dockets for up to weeks after the product has left the store on the /trust/ that visa will let them redeem those pieces of thermopaper for actual spendable money.
Mere hours is, from the perspective of the merchant, amazing.
>B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
When I send money from Iceland to Australia, it takes about a week to arrive. I've had a transaction magically blink out of existence once (both banks told me it was the other banks fault), and while it is in transit approximately $70AUD is removed from it. This number is not exact and varies by up to $15 each time you send it, which means you have to send $90 more than you intend to pay in order to make sure you've paid at least as much as you intend to.
Mere hours is again amazing, and a 25% fee (that's probably not correct by the way, segwit has reduced fees from approx $5USD to approx 25c USD, check your wallet settings) is rather tolerable by comparison. In the process of paying Australian government bills and bank charges from Iceland (which are usually in the order of $20-50), I have definitely spent at least 1.5x as much on transaction fees as actual payments.
You're focused on the "coffee problem". You want to buy a coffee in person and have the transaction validated immediately so you can leave the till. Bitcoin is not great at this. However, the coffee problem is only one very narrow subset of how money is used, and you're also only considering it from a consumer-centric perspective. Bitcoin is considerably better than fiat at a lot of things, and in a lot of other areas it offers a different set of tradeoffs that might or might not work for you.
I could go down the list and agree and disagree with some of your comments, but how does that address the article? Despite being a trite statement, and despite it's flaws, bitcoin _is_ open source money.
Your reply contains several errors, but I will pick one.
> D) Bitcoin is still, objectively, centralized.
Not only you, but this whole thread is missing one critical word: incentive.
Miners are incentivised to play ball, as trying to play games will result in the rejection of their hashing work. Wherever they are, it does not matter (up to a point, ie geographical risk repartition). But in actuality, we know there are miners all over the planet, and that there are thousands of them.
Parenthesis: by the way, non-mining full nodes add precisely ZERO value to the network, and they actually slow it down. Before you guys start yelling, please see reference at the end of my comment for details. That's another urban legend purported by Bitcoin Core. Anyways, don't get me started.
OK, back to miners: yes, as time will pass, there will be mining consolidation, it's inevitable. But it will not matter. In addition to miners, there will be large service providers (thousands of them) who will be -incentivised- to run either small mining nodes (more secure) or non-mining nodes (less secure) for verification of their own transaction. That alone will be more than enough to ensure the security of the network.
From the start, Satoshi was predicting the apparition of large mining server farms, no farther than in the very FIRST email he wrote to the world!!
quote:
At first, most users would run network nodes, but as the
network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.
Bitcoin Network Topology Description (provides visual explanatino as to why non-mining nodes are totally useless, and even detrimental.
Your arguments are extremely valid but to me it is like someone arguing against a penny stock scam with a long reasoned arguments about why it is hard to beat the S&P index in the long run. The icos touted in the original post are little more than pump and dump schemes as are most of the current crop of icos. Probably only about half a dozen or so are really viable, and half of those are probably way ahead of their time
> A) Bitcoin is congested with transactions and takes hours to process some of them
Hours to process transactions sounds relatively good to me, considering international bank transfers take 3-5 business days. We're talking about a decentralized protocol performing better than a centralized one which has all the advantages on its side.
> B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
> C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
This is a misrepresentation of the issue. The lack of a solution is not due to in-fightning, but that absence of an obvious "fix". The smaller the block size, and thus transaction throughput of Bitcoin, the more decentralized it is, because the more people can download and verify the blockchain using commodity hardware. It would be simple to increase throughput, but this would occur at the cost of increased centralization. At the moment, consensus seems to favor decentralization over increased throughput.
Bear in mind, that if hardware capabilities continue to increase at historic rates over the next 30 years, 1GB blocks will probably be doable, which will be roughly sufficient to support the world's population (with the addition of consumer-to-merchant clearing protocols). Some people think this is too slow, but I think the world needs at least 30 years to get used to a new monetary system anyway, so it can't happen any faster than this.
> D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money.
The Bitcoin protocol is decentralized, because it does not define a central party. Saying Bitcoin is centralized because large mining firms exist is equivalent to saying that Git is centralized because of GitHub, or email is centralized because of GMail. Each individual miner (and exchange) is centralized, but on the whole they comprise a decentralized network of miners -- just like Gmail, Yahoo and Hotmail (together with all other email servers and providers) comprise a global, decentralized network.
That being said, Bitcoin is vulnerable to a constant 51% attack. It cannot withstand this (unless something fundamental changes about the protocol). So far, no one has bothered to carry out such an attack, but Bitcoin is vulnerable to this type of attack.
> E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
This is not fact, but opinion of Keynesian economists. The entire basis of Keynesian economics is this sentence.
For people interested in a much more meaningful explanation than Keynes' story of "things suddenly broke in 1929, and we had to ban gold to fix this", I recommend the following series of essays[1], which explain how the gold standard failed because it depended on a clearing market that was closed down at the start of WWI (in 1914) and kept closed at the end of the war (in 1918). This market cleared the "bill of exchange", which was a financial instrument that acted as a means of payment between retail merchants and producers of semi-finished goods, allowing the gold standard to scale as production became increasingly specialized. When bill of exchange clearing market in London was closed, producers were no longer able to pay each other using the bill of exchange, which caused demand for gold to surge (since it became the only means of payment between producers), causing deflation (an increase in the value of money is equivalent to a decrease in the price of goods).
Bitcoin is not centralized in any meaningful definition of the term.
It is one of a select few, if not the only one, cryptocurrencies that are multi stakeholder open source projects. Releases are regular, all the necessary maintenance takes place and there is healthy discussion on the mailing list. Despite what some people would like to tell you, it is not unheard of that a newcomer starts working on something or comes with a proposal that gathers interest.
(Which is also the reason you don't see scaling improvements in big bangs, just like Linux doesn't magically scale better in one release. Such improvements are slow and steady, and the latest release of Bitcoin scales better than the previous, which scales better than the one before that.)
A coin where a single stakeholder could, by paychecks or otherwise, change the rules of the network would not be remotely as interesting. It could still be _useful_, especially for payments, but that's not necessarily something that blockchains does best. Cue the usual discussion about store of value versus currency, everybody has heard that already and Bitcoin can be both or neither. That's not the interesting axis to measure, trustless consensus and permissionless innovation is.
> A) Bitcoin is congested with transactions and takes hours to process some of them
> B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
1- Average fees are not as high as people claim. See https://p2sh.info/dashboard/db/fee-estimation?orgId=1&from=n...
2- Adoption of SegWit, which allows more transactions per block, will help lower fees
3- No one is forced to use Bitcoin. It is trivial to buy Litecoin instead and use that. However, users choosing to pay high fees shows how much more they value Bitcoin transactions.
> C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
Your definition of an "upgrade" conflicts with the Bitcoin project's definition, that's all. The core developers are not against a block size increase. However, they have decided to try scaling in ways that do not harm security or decentralization first. It's a matter of priorities. Bitcoin Cash may prioritize low fees over everything else, but Bitcoin prioritizes decentralization and security first.
> D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money. The big banks are replaced by big whales, who will do anything in their power to manipulate markets for their gain.
Mining is centralized, but Bitcoin nodes are not. This is evident when you look at the success of deploying SegWit by a UASF or the success of fighting off a corporate takeover such as the NYA.
> E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
Bitcoin does not need to be a currency. Most people still invested in it view it as a "digital gold". I think it'll more be a reference point for fiat money, something that forces fiat moneys to have more sane monetary policies, not as a day-to-day currency itself.
> F) Bitcoin is not actually anonymous. Data science techniques can parse the blockchain and see sending patterns between different accounts. They map these patterns to various identities. If those identities can be mapped to a real person, say, when they cash out of an exchange, then it's known exactly how much Bitcoin they have.
Today, tumblers exist and are fairly easy to use. So yes, Bitcoin can be totally anonymous if you choose to use it that way. For the future, features like Confidential Transactions, MimbleWimble, MAST, Tumble Bit, and so on are in the works.
I agree. These are good questions to ask, which everyone should at least consider.
Some quick comments on some of your points:
A + B) Bitcoin is currently congested because the Core development team refuses to raise the block size which forces up the fees. They instead want scaling to happen systems (like the Lightning Network) which are far from ready, if they work at all. They even state that Bitcoin doesn't work without full blocks because they are worried about hypothetical scenarios decades into the futures.
They want Bitcoin to only become a "store of value" instead of money. Completely disregarding that something that is only a store of value only becomes a ponzi like scheme where everything hinges on greater fools pumping in more money to the system.
This is of course insane and other cryptocurrencies tries to solve this. Bitcoin Cash is a direct result of this behavior which I believe is either incompetence, maliciousness or both.
C) Yes scaling isn't "solved" and likely cannot be completely solved. The only way forward is small steps at the time until an acceptable level is reached or the system fails. The limits of on-chain scaling for Bitcoin has never been tested (or even sufficiently researched) and then there's off-chain scaling which may help.
D) As with all things "decentralization" is an elusive term. It is in my opinion sufficiently decentralized because not one single actor can dictate the network.
We must never forget why decentralization is so important for a system like Bitcoin. It is to allow secure peer to peer permissionless transactions which cannot be censored. Bitcoin still fulfills this. Decentralization for decentralization's sake is inane.
Bitcoin's security also relies on a single miner (or a gang of miners) control >50% of the hashrate as they can then attack the network by starting to rewind transactions or block newer transactions.
E) Agreed.
For the uninitiated there are cryptocurrencies who tries to alter the coin emission schedule controlling how many coins are created over time. For example Monero has a tail emission which makes sure there will always be some amount of new coins, although it may not completely avoid the deflationary side.
F) Agreed.
You must be very careful if you want to truly stay anonymous on Bitcoin. A single misstep will leave a permanent trace on the blockchain allowing someone all the time in the world to analyze all breadcrumbs which may lead to you de-anonymization.
Bitcoin isn't fungible either as you can tell two coins apart. This can potentially completely undermine Bitcoin as a currency if some coins become tainted and significantly less valuable. Say for example after a hack. Fungibility is a fundamental property of money and cash is actually made fungible by law.
at no point in this article is a value proposition actually defined. "Open Source Money" is a nice soundbite, but unless you can define what that actually means and how it will benefit mankind, it's as useful as "facebook for cats". I'm in the anti-cryptocurrency camp (despite having read the satoshi paper and comfortably understanding the algorithms behind bitcoin) because I've seen it morph into the exact thing it was meant to oppose - financial speculation and paper-shuffling by rich investors purely for the sake of profit. It's somewhat ironically hilarious that ICOs are now a thing given the anti-corporate/anti-banking message of the bitcoin genesis block.
Right now I see no value to cryptocurrencies besides black market transactions and hacking around with financial instruments in a very closed system. I'm open to the idea that I'm missing the whole point, but I've not yet seen a compelling argument for that.
> I see no value to cryptocurrencies besides black market transactions and hacking around with financial instruments
It costs a small fortune to send money internationally not to mention the friction of needing to have a bank account - almost 40% of the people on the planet do not have one[1]. Something like Bitcoin et al (not necessarily BTC itself!), where you can get an address immediately that can send and receive a balance from anywhere & anyone in the world without impediment has the potential to be huge. I appreciate I am being a bit starry-eyed here but I can see a real value to it globally if such a vision can continue.
That's not to condone what might now be happening with institutional investors and Wall St getting in on the action in a big way, or the state of the tech
(transaction fees at present, verification delays, snake oil ICOs). The core concept of a currency like this is valuable societally IMO. It might not be bitcoin in the end but the idea, like the internet and publishing, is a powerful one.
Being open source is a basic need for people to trust a cryptocurrency. Whole stack needs to be open source: nodes, miners, clients, documentation, release plan, organization structure, etc.
And being created that way brings to the table all the benefits of classic open source projects. Anybody can download Ethereum and fork it. You may chose for a different approach to solve scaling and I could write code to improve my smart contract execution. On the long run the best project wins, or even both can coexist like thousands of other open source implementations.
>"Open Source Money" is a nice soundbite, but unless you can define what that actually means and how it will benefit mankind
New technology increases economic activity at least partly because of the reduction in the cost of transactions. Steam engines, cars, highways, the internet, etc all reduced the costs of transactions and were accompanied by economic growth. "Open source money" is the next stage in this trend.
> It's somewhat ironically hilarious that ICOs are now a thing given the anti-corporate/anti-banking message of the bitcoin genesis block
It takes longer to build anti-corporate infrastructure than it takes to run a token sale. I don't think you can really say much of anything about the longterm impact of blockchain by looking at this year's class of ICOs, give it another twenty or thirty years.
Look past the ICOs and drug sales -- you only notice these because they are salacious and thus reported on. What you aren't noticing are the people who are eliminating financial intermediaries in pretty much every industry that matters, from international shipping to remittances to supply-chain management.
Let me give you one example that might make you reconsider what is coming. In the future, you won't go to the bank to get a mortgage. One reason for this is because banks won't have the capital to lend you anymore because people won't deposit their money there: why accept a 0.5% interest rate on savings when you could be holding a mildly-deflationary token or staking a proof-of-stake security scheme? Or investing in solar power farms....
So what will people do when they want to buy a house? Instead of going to a bank, they will talk to the real estate company that showcases the property, and that company will take a 20% downpayment and then issue a token to collect funds for the rest. You will pay off your mortgage directly to the broker in cash or crypto (and all payments are recorded on the blockchain, along with the purchase contract -- a transparent template so you will know your rights in full) and the funds will be automatically transferred to token holders, who are splitting the savings with you: they get higher interest payments and you get a cheaper mortgage. Win-win. And if people need cash they can sell those tokens on any number of 24/7 decentralized peer-to-peer token exchanges, because who won't buy a token like that at a slightly discount?
The real estate agency will probably also be plugged into a decentralized AirBNB operation and have various other ways to monetize real estate. So if you ever fail to make a payment, they will take responsibility for monetizing the property such that token holders are paid-off in full. Systemic risk is thus split between the real estate company (that issues the tokens and guarantees the ROI) and the token purchasers (who take on the risk of the property company getting liquidated before they redeem the tokens in the event of a foreclosure -- not a big risk since their financials are mostly visible directly on the blockchain and your token is legally backed by the property in any case).
Where are the banks in this? Good question. We don't need them anymore. And this is just one small part of the financial system.
"If anyone is dissatisfied with Bitcoin, it’s possible to fork it and add value. If a developer made Bitcoin 100x faster and just as secure, you can be sure that everyone would use the faster one."
It is rather ironic that the author should say this at a time when the Bitcoin community has recently been at war with itself, and is still divided and without a solution, over a proposal to adopt a fix for the urgent problem of transaction rate -- so ironic, that I checked the dateline, and it is current.
Never quite explains what is meant by open source money. And cryptocurrency evangelists in this vein alwayd seen to assume money can be decoupled from the underlying economies it flows through and the individuas and institutions that make use of it.
Here's a hint though. The statement "if Bitcoin can’t deliver those things, another cryptocurrency will do that" isn't something anyone wants to hear about their money. No one wants a massive or sudden devaluation because a rival currency supports a shinier newer feature. When that happens people don't just get upset. When that happens, social contracts get broken and we rediscover why Hobbes wrote his book, and why the hardest currencies usually belong to countries able to back up their fiat with more than words or market forces.
So take note, this should be axiomatic to anyone thinking about currencies "at scale": the demand for a currency will be inversely correlated with its volatility.
Research the historic role of clipped coins, and consider the impact of receiving coins that can be clipped after receipt. And dont stop there, thats the beginning.
Thank you for raising this point. Do we really want to make people insanely rich just because they were stupid enough to convert their money to BTC? It's frustrating to watch people getting rich making the wrong move. Why do we think their next move will be anymore brilliant than luckily holding BTC?
I fully subscribe to the subjective theory of value. There are other theories which might be good approximations in specific scenarios, but fundamentally, value is subjective. But following that reasoning I believe that if enough people agree on a new means of value storage or value exchange, critical mass can be achieved where the new medium is fully adopted while the old one is abandoned. I think the same thing happened when we transitioned from gold to fiat, and it happened largely under the direction governments around the world. As long as we all agree on it, a new medium can be adopted.
Now, will Bitcoin replace fiat? That would be difficult, and I think people have different perspectives and motives for adopting Bitcoin. I suppose that is why there are so many heated debates where people don’t agree on the valuation. Actually, if you look at the world, people have opposing views on many topics, including on how our economies are run and on how we do monetary policy. Just accounting for that chunk of people that want a hedge or alternative to the mainstream system can explain at least a part of the valuation.
I think these arguments are coming from wishful thinking. In my view block chain as technology is useful and most of the institution will copy it to roll out their own version soon.
And bitcoin is nowhere near being considered "open source money" because if it was then we should not be measuring it with respect to USD.
Most of these articles comes from folks who think technology can fix the social and political issues.
OK, let's accept, for the sake of argument, that Bitcoin-as-open-source-money is a valid analogy. How does the history of open-source things disabuse the notion that what is happening now is a speculative bubble? Where else can you find an example where the benefits of open source have led to this sort of explosive growth in valuations?
Until a material percentage of non-speculative transactions are done via bitcoin, it's not money. Who in their right mind would spend a bitcoin today when it could jump in value by 25% in a week? It's purely a speculative vehicle right now, and won't stop until it stabilizes in price where people can trust it.
Bitcoin isn't tulips, because tulips can decorate your property. Bitcoins are absolutely devoid of any value, thus with the limit being zero on the Bitcoin equation, the ultimate market cap for all Bitcoins will be zero.
Money for the past 10,000 years has just been commodities. Commodities with a useful value. The commodities which became money were ones which made good currencies. They were portable, uniform, durable and divisible. Gold is a commodity which fits these attributes. Eventually people began trading promissory notes redeemable for gold.
This was the situation until 1971. Then Nixon closed the exchange window and said the Treasury Department was not exchanging the dollars for the 8000 tons of gold it stores in Fort Knox and elsewhere. Almost nothing happened to the dollar in the days after - the dollar price of bread and the like stayed stable. Did some great transformation happen? No. If the market had paniced, the gold window would have been opened again. No magic spell was cast in 1971. The 8000 tons of gold in Fort Knox etc. still back the dollar implicitly.
If not - why does the government spend so much money guarding Fort Knox etc.? Why is it hoarding all this gold, if it does not back the dollar?
Bitcoin does not have 8000 tons of gold implicitly backing it. It has nothing backing it.
There is a little question mark that exists. Obviously Fort Knox's gold backs the dollar implicitly. But for some politicians and such, it is beneficial if they wave their hands and say some magic spell has made the dollar valuable without that gold. As if they had a magic printing press that could just run off sheets of hundred dollar bills 24/7 that had value. This is not the case, and is untrue, but creates a question mark from this little fib. This question mark is where Bitcoin draws its suckers in. If the government has a magic hundred dollar bill machine, maybe they can make one as well. The problem is the government has no such machine, they just have some politicians and such who claim they do. What the government does have, among other things, is 8000 tons of gold which it would exchange for dollars in 1971, and could easily do again. Bitcoin has no such backing. In fact, we don't even know who started Bitcoin. At least with Charles Ponzi's international reply coupons, you knew the name of who was behind the scam. With Bitcoin, the scammers are anonymous.
I just read a Times article about the probable insolvency of Bitfinex, the umpteenth Bitcoin company with such problems. Charlie Munger says Bitcoins are rat poison, and he has surely seen many such scams in his 93 years.
Also, reading this blog post with its railing against the government and the establishment reminds me of the pitches for some MLM scams I have been dragged to. When someone tells you they're giving a run for its money the "government's fiat monopoly on money", watch your wallet.
Yeah, those silly, silly dutch, still selling millions of tulips since 1637, employing more than 250.000 people in the flower market and exporting plants for a value of around 10 billion euro each year...
Maybe not a very good example of an economic failure
[+] [-] aitrean|8 years ago|reply
A) Bitcoin is congested with transactions and takes hours to process some of them
B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money. The big banks are replaced by big whales, who will do anything in their power to manipulate markets for their gain.
E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
F) Bitcoin is not actually anonymous. Data science techniques can parse the blockchain and see sending patterns between different accounts. They map these patterns to various identities. If those identities can be mapped to a real person, say, when they cash out of an exchange, then it's known exactly how much Bitcoin they have.
If someone could write an article addressing these facts, rather than throwing out slogans like 'open source money', that would be nice.
[+] [-] merrickread|8 years ago|reply
Blockchain is sensationalized beyond belief. I can't wait for the rose tinted glasses to fall off and we realize it's just a data management technology for specific use cases.
I think the biggest danger to the technology is that the community focuses on "blockchain will change the world" not "how can we make this better".
[+] [-] simonebrunozzi|8 years ago|reply
[+] [-] Sir_Substance|8 years ago|reply
It regularly takes /days/ for visa transactions to go from "confirmed at the counter" to "arriving and unlocking in my bank account so I can use it to pay my rent". Over Christmas in Australia it's common for visa to just flat fail to keep up with demand, forcing shops to keep offline dockets for up to weeks after the product has left the store on the /trust/ that visa will let them redeem those pieces of thermopaper for actual spendable money.
Mere hours is, from the perspective of the merchant, amazing.
>B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
When I send money from Iceland to Australia, it takes about a week to arrive. I've had a transaction magically blink out of existence once (both banks told me it was the other banks fault), and while it is in transit approximately $70AUD is removed from it. This number is not exact and varies by up to $15 each time you send it, which means you have to send $90 more than you intend to pay in order to make sure you've paid at least as much as you intend to.
Mere hours is again amazing, and a 25% fee (that's probably not correct by the way, segwit has reduced fees from approx $5USD to approx 25c USD, check your wallet settings) is rather tolerable by comparison. In the process of paying Australian government bills and bank charges from Iceland (which are usually in the order of $20-50), I have definitely spent at least 1.5x as much on transaction fees as actual payments.
You're focused on the "coffee problem". You want to buy a coffee in person and have the transaction validated immediately so you can leave the till. Bitcoin is not great at this. However, the coffee problem is only one very narrow subset of how money is used, and you're also only considering it from a consumer-centric perspective. Bitcoin is considerably better than fiat at a lot of things, and in a lot of other areas it offers a different set of tradeoffs that might or might not work for you.
[+] [-] gruez|8 years ago|reply
>B) Bitcoin fees are through the roof
actually that pretty much fizzled out. https://jochen-hoenicke.de/queue/#30d
>it sometimes costs as much as 25% of the value of a transaction to send
it sometimes even cost 99% of the value you're sending (if you were sending 1000 satoshis 2 weeks ago).
>F) Bitcoin is not actually anonymous
strawman. bitcoin is pesduo-anonymous. anyone who did 5 mins of research would know this.
[+] [-] colordrops|8 years ago|reply
[+] [-] not_a_terrorist|8 years ago|reply
> D) Bitcoin is still, objectively, centralized.
Not only you, but this whole thread is missing one critical word: incentive.
Miners are incentivised to play ball, as trying to play games will result in the rejection of their hashing work. Wherever they are, it does not matter (up to a point, ie geographical risk repartition). But in actuality, we know there are miners all over the planet, and that there are thousands of them.
Parenthesis: by the way, non-mining full nodes add precisely ZERO value to the network, and they actually slow it down. Before you guys start yelling, please see reference at the end of my comment for details. That's another urban legend purported by Bitcoin Core. Anyways, don't get me started.
OK, back to miners: yes, as time will pass, there will be mining consolidation, it's inevitable. But it will not matter. In addition to miners, there will be large service providers (thousands of them) who will be -incentivised- to run either small mining nodes (more secure) or non-mining nodes (less secure) for verification of their own transaction. That alone will be more than enough to ensure the security of the network.
From the start, Satoshi was predicting the apparition of large mining server farms, no farther than in the very FIRST email he wrote to the world!!
http://satoshi.nakamotoinstitute.org/emails/cryptography/2/#...
quote: At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.
Bitcoin Network Topology Description (provides visual explanatino as to why non-mining nodes are totally useless, and even detrimental.
https://fr.scribd.com/document/359522859/Bitcoin-Network-Top...
[+] [-] pfftcst|8 years ago|reply
[+] [-] frandroid|8 years ago|reply
> B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
It's going to be fun to watch when a market crash happens and everyone tries to sell off at once.
[+] [-] runeks|8 years ago|reply
Hours to process transactions sounds relatively good to me, considering international bank transfers take 3-5 business days. We're talking about a decentralized protocol performing better than a centralized one which has all the advantages on its side.
> B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
Bitcoin is definitely not suitable for small-value transactions (the fee does not depend on the amount sent). Here's a graph of median Bitcoin fees for the past year: https://bitinfocharts.com/comparison/bitcoin-median_transact...
> C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
This is a misrepresentation of the issue. The lack of a solution is not due to in-fightning, but that absence of an obvious "fix". The smaller the block size, and thus transaction throughput of Bitcoin, the more decentralized it is, because the more people can download and verify the blockchain using commodity hardware. It would be simple to increase throughput, but this would occur at the cost of increased centralization. At the moment, consensus seems to favor decentralization over increased throughput.
Bear in mind, that if hardware capabilities continue to increase at historic rates over the next 30 years, 1GB blocks will probably be doable, which will be roughly sufficient to support the world's population (with the addition of consumer-to-merchant clearing protocols). Some people think this is too slow, but I think the world needs at least 30 years to get used to a new monetary system anyway, so it can't happen any faster than this.
> D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money.
The Bitcoin protocol is decentralized, because it does not define a central party. Saying Bitcoin is centralized because large mining firms exist is equivalent to saying that Git is centralized because of GitHub, or email is centralized because of GMail. Each individual miner (and exchange) is centralized, but on the whole they comprise a decentralized network of miners -- just like Gmail, Yahoo and Hotmail (together with all other email servers and providers) comprise a global, decentralized network.
That being said, Bitcoin is vulnerable to a constant 51% attack. It cannot withstand this (unless something fundamental changes about the protocol). So far, no one has bothered to carry out such an attack, but Bitcoin is vulnerable to this type of attack.
> E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
This is not fact, but opinion of Keynesian economists. The entire basis of Keynesian economics is this sentence.
For people interested in a much more meaningful explanation than Keynes' story of "things suddenly broke in 1929, and we had to ban gold to fix this", I recommend the following series of essays[1], which explain how the gold standard failed because it depended on a clearing market that was closed down at the start of WWI (in 1914) and kept closed at the end of the war (in 1918). This market cleared the "bill of exchange", which was a financial instrument that acted as a means of payment between retail merchants and producers of semi-finished goods, allowing the gold standard to scale as production became increasingly specialized. When bill of exchange clearing market in London was closed, producers were no longer able to pay each other using the bill of exchange, which caused demand for gold to surge (since it became the only means of payment between producers), causing deflation (an increase in the value of money is equivalent to a decrease in the price of goods).
[1] http://professorfekete.com/moneycredit.asp
[+] [-] xorcist|8 years ago|reply
It is one of a select few, if not the only one, cryptocurrencies that are multi stakeholder open source projects. Releases are regular, all the necessary maintenance takes place and there is healthy discussion on the mailing list. Despite what some people would like to tell you, it is not unheard of that a newcomer starts working on something or comes with a proposal that gathers interest.
(Which is also the reason you don't see scaling improvements in big bangs, just like Linux doesn't magically scale better in one release. Such improvements are slow and steady, and the latest release of Bitcoin scales better than the previous, which scales better than the one before that.)
A coin where a single stakeholder could, by paychecks or otherwise, change the rules of the network would not be remotely as interesting. It could still be _useful_, especially for payments, but that's not necessarily something that blockchains does best. Cue the usual discussion about store of value versus currency, everybody has heard that already and Bitcoin can be both or neither. That's not the interesting axis to measure, trustless consensus and permissionless innovation is.
[+] [-] gchokov|8 years ago|reply
[+] [-] hudon|8 years ago|reply
> A) Bitcoin is congested with transactions and takes hours to process some of them > B) Bitcoin fees are through the roof, it sometimes costs as much as 25% of the value of a transaction to send it
1- Average fees are not as high as people claim. See https://p2sh.info/dashboard/db/fee-estimation?orgId=1&from=n... 2- Adoption of SegWit, which allows more transactions per block, will help lower fees 3- No one is forced to use Bitcoin. It is trivial to buy Litecoin instead and use that. However, users choosing to pay high fees shows how much more they value Bitcoin transactions.
> C) The upgrades to fix these problems are extremely slow - scaling hasn't been solved for years, because different parties keep fighting for control over the currency codebase and shooting down each others' attempts to upgrade it
Your definition of an "upgrade" conflicts with the Bitcoin project's definition, that's all. The core developers are not against a block size increase. However, they have decided to try scaling in ways that do not harm security or decentralization first. It's a matter of priorities. Bitcoin Cash may prioritize low fees over everything else, but Bitcoin prioritizes decentralization and security first.
> D) Bitcoin is still, objectively, centralized. Almost all of the miners are based in industrial regions like China, and belong to a small monopoly of mining pools. All of the exchanges are centralized, and are well-known for losing clients' money. The big banks are replaced by big whales, who will do anything in their power to manipulate markets for their gain.
Mining is centralized, but Bitcoin nodes are not. This is evident when you look at the success of deploying SegWit by a UASF or the success of fighting off a corporate takeover such as the NYA.
> E) Bitcoin addresses the technology perspective of sending money, but doesn't address any of the macroeconomic problems that arise from a deflationary, uncontrolled currency.
Bitcoin does not need to be a currency. Most people still invested in it view it as a "digital gold". I think it'll more be a reference point for fiat money, something that forces fiat moneys to have more sane monetary policies, not as a day-to-day currency itself.
> F) Bitcoin is not actually anonymous. Data science techniques can parse the blockchain and see sending patterns between different accounts. They map these patterns to various identities. If those identities can be mapped to a real person, say, when they cash out of an exchange, then it's known exactly how much Bitcoin they have.
Today, tumblers exist and are fairly easy to use. So yes, Bitcoin can be totally anonymous if you choose to use it that way. For the future, features like Confidential Transactions, MimbleWimble, MAST, Tumble Bit, and so on are in the works.
[+] [-] nuncanada|8 years ago|reply
[+] [-] lawn|8 years ago|reply
Some quick comments on some of your points:
A + B) Bitcoin is currently congested because the Core development team refuses to raise the block size which forces up the fees. They instead want scaling to happen systems (like the Lightning Network) which are far from ready, if they work at all. They even state that Bitcoin doesn't work without full blocks because they are worried about hypothetical scenarios decades into the futures.
They want Bitcoin to only become a "store of value" instead of money. Completely disregarding that something that is only a store of value only becomes a ponzi like scheme where everything hinges on greater fools pumping in more money to the system.
This is of course insane and other cryptocurrencies tries to solve this. Bitcoin Cash is a direct result of this behavior which I believe is either incompetence, maliciousness or both.
C) Yes scaling isn't "solved" and likely cannot be completely solved. The only way forward is small steps at the time until an acceptable level is reached or the system fails. The limits of on-chain scaling for Bitcoin has never been tested (or even sufficiently researched) and then there's off-chain scaling which may help.
D) As with all things "decentralization" is an elusive term. It is in my opinion sufficiently decentralized because not one single actor can dictate the network.
We must never forget why decentralization is so important for a system like Bitcoin. It is to allow secure peer to peer permissionless transactions which cannot be censored. Bitcoin still fulfills this. Decentralization for decentralization's sake is inane.
Bitcoin's security also relies on a single miner (or a gang of miners) control >50% of the hashrate as they can then attack the network by starting to rewind transactions or block newer transactions.
E) Agreed.
For the uninitiated there are cryptocurrencies who tries to alter the coin emission schedule controlling how many coins are created over time. For example Monero has a tail emission which makes sure there will always be some amount of new coins, although it may not completely avoid the deflationary side.
F) Agreed.
You must be very careful if you want to truly stay anonymous on Bitcoin. A single misstep will leave a permanent trace on the blockchain allowing someone all the time in the world to analyze all breadcrumbs which may lead to you de-anonymization.
Bitcoin isn't fungible either as you can tell two coins apart. This can potentially completely undermine Bitcoin as a currency if some coins become tainted and significantly less valuable. Say for example after a hack. Fungibility is a fundamental property of money and cash is actually made fungible by law.
[+] [-] onecooldev24|8 years ago|reply
[+] [-] unknown|8 years ago|reply
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[+] [-] beaconstudios|8 years ago|reply
Right now I see no value to cryptocurrencies besides black market transactions and hacking around with financial instruments in a very closed system. I'm open to the idea that I'm missing the whole point, but I've not yet seen a compelling argument for that.
[+] [-] jaymzcampbell|8 years ago|reply
It costs a small fortune to send money internationally not to mention the friction of needing to have a bank account - almost 40% of the people on the planet do not have one[1]. Something like Bitcoin et al (not necessarily BTC itself!), where you can get an address immediately that can send and receive a balance from anywhere & anyone in the world without impediment has the potential to be huge. I appreciate I am being a bit starry-eyed here but I can see a real value to it globally if such a vision can continue.
That's not to condone what might now be happening with institutional investors and Wall St getting in on the action in a big way, or the state of the tech (transaction fees at present, verification delays, snake oil ICOs). The core concept of a currency like this is valuable societally IMO. It might not be bitcoin in the end but the idea, like the internet and publishing, is a powerful one.
[1] http://www.worldbank.org/en/programs/globalfindex
[+] [-] diegocerdan|8 years ago|reply
And being created that way brings to the table all the benefits of classic open source projects. Anybody can download Ethereum and fork it. You may chose for a different approach to solve scaling and I could write code to improve my smart contract execution. On the long run the best project wins, or even both can coexist like thousands of other open source implementations.
[+] [-] hackinthebochs|8 years ago|reply
New technology increases economic activity at least partly because of the reduction in the cost of transactions. Steam engines, cars, highways, the internet, etc all reduced the costs of transactions and were accompanied by economic growth. "Open source money" is the next stage in this trend.
[+] [-] Alex3917|8 years ago|reply
It takes longer to build anti-corporate infrastructure than it takes to run a token sale. I don't think you can really say much of anything about the longterm impact of blockchain by looking at this year's class of ICOs, give it another twenty or thirty years.
[+] [-] blusterXY|8 years ago|reply
Let me give you one example that might make you reconsider what is coming. In the future, you won't go to the bank to get a mortgage. One reason for this is because banks won't have the capital to lend you anymore because people won't deposit their money there: why accept a 0.5% interest rate on savings when you could be holding a mildly-deflationary token or staking a proof-of-stake security scheme? Or investing in solar power farms....
So what will people do when they want to buy a house? Instead of going to a bank, they will talk to the real estate company that showcases the property, and that company will take a 20% downpayment and then issue a token to collect funds for the rest. You will pay off your mortgage directly to the broker in cash or crypto (and all payments are recorded on the blockchain, along with the purchase contract -- a transparent template so you will know your rights in full) and the funds will be automatically transferred to token holders, who are splitting the savings with you: they get higher interest payments and you get a cheaper mortgage. Win-win. And if people need cash they can sell those tokens on any number of 24/7 decentralized peer-to-peer token exchanges, because who won't buy a token like that at a slightly discount?
The real estate agency will probably also be plugged into a decentralized AirBNB operation and have various other ways to monetize real estate. So if you ever fail to make a payment, they will take responsibility for monetizing the property such that token holders are paid-off in full. Systemic risk is thus split between the real estate company (that issues the tokens and guarantees the ROI) and the token purchasers (who take on the risk of the property company getting liquidated before they redeem the tokens in the event of a foreclosure -- not a big risk since their financials are mostly visible directly on the blockchain and your token is legally backed by the property in any case).
Where are the banks in this? Good question. We don't need them anymore. And this is just one small part of the financial system.
[+] [-] mannykannot|8 years ago|reply
It is rather ironic that the author should say this at a time when the Bitcoin community has recently been at war with itself, and is still divided and without a solution, over a proposal to adopt a fix for the urgent problem of transaction rate -- so ironic, that I checked the dateline, and it is current.
[+] [-] ineedasername|8 years ago|reply
Here's a hint though. The statement "if Bitcoin can’t deliver those things, another cryptocurrency will do that" isn't something anyone wants to hear about their money. No one wants a massive or sudden devaluation because a rival currency supports a shinier newer feature. When that happens people don't just get upset. When that happens, social contracts get broken and we rediscover why Hobbes wrote his book, and why the hardest currencies usually belong to countries able to back up their fiat with more than words or market forces.
So take note, this should be axiomatic to anyone thinking about currencies "at scale": the demand for a currency will be inversely correlated with its volatility.
Research the historic role of clipped coins, and consider the impact of receiving coins that can be clipped after receipt. And dont stop there, thats the beginning.
[+] [-] eqmvii|8 years ago|reply
Wealth distribution is bad enough with the currencies we already had. A true bitcoin takeoff would be an order of magnitude worse.
[+] [-] tzakrajs|8 years ago|reply
[+] [-] KaiserPro|8 years ago|reply
The massive price rises were in _futures_ not actual prices. There is lots of academic work around this which is spectaculally interesting.
Second, to say that bitcoin has "intrinsic value" is the same rubbish thats applied to gold. Value is _always_ subjective.
The noise about competition for "fiat currency" is just that, noise. At best its equivalent to a bond, worse coffee futures.
Exchanges are perfectly able to do fractional reserve banking, so bitcoin is very much a fiat currency. Its basically what bitcoin exchanges do
[+] [-] lifty|8 years ago|reply
Now, will Bitcoin replace fiat? That would be difficult, and I think people have different perspectives and motives for adopting Bitcoin. I suppose that is why there are so many heated debates where people don’t agree on the valuation. Actually, if you look at the world, people have opposing views on many topics, including on how our economies are run and on how we do monetary policy. Just accounting for that chunk of people that want a hedge or alternative to the mainstream system can explain at least a part of the valuation.
[+] [-] mathgenius|8 years ago|reply
[+] [-] jayess|8 years ago|reply
[+] [-] neilwilson|8 years ago|reply
[+] [-] drieddust|8 years ago|reply
And bitcoin is nowhere near being considered "open source money" because if it was then we should not be measuring it with respect to USD.
Most of these articles comes from folks who think technology can fix the social and political issues.
[+] [-] JustFinishedBSG|8 years ago|reply
[+] [-] baby|8 years ago|reply
[+] [-] mannykannot|8 years ago|reply
[+] [-] pfarnsworth|8 years ago|reply
[+] [-] neil_s|8 years ago|reply
Wow. Never thought I'd see religious faith arguments on the front page of HN
[+] [-] colorincorrect|8 years ago|reply
[+] [-] jimjimjim|8 years ago|reply
[+] [-] justherefortart|8 years ago|reply
[+] [-] Ologn|8 years ago|reply
Money for the past 10,000 years has just been commodities. Commodities with a useful value. The commodities which became money were ones which made good currencies. They were portable, uniform, durable and divisible. Gold is a commodity which fits these attributes. Eventually people began trading promissory notes redeemable for gold.
This was the situation until 1971. Then Nixon closed the exchange window and said the Treasury Department was not exchanging the dollars for the 8000 tons of gold it stores in Fort Knox and elsewhere. Almost nothing happened to the dollar in the days after - the dollar price of bread and the like stayed stable. Did some great transformation happen? No. If the market had paniced, the gold window would have been opened again. No magic spell was cast in 1971. The 8000 tons of gold in Fort Knox etc. still back the dollar implicitly.
If not - why does the government spend so much money guarding Fort Knox etc.? Why is it hoarding all this gold, if it does not back the dollar?
Bitcoin does not have 8000 tons of gold implicitly backing it. It has nothing backing it.
There is a little question mark that exists. Obviously Fort Knox's gold backs the dollar implicitly. But for some politicians and such, it is beneficial if they wave their hands and say some magic spell has made the dollar valuable without that gold. As if they had a magic printing press that could just run off sheets of hundred dollar bills 24/7 that had value. This is not the case, and is untrue, but creates a question mark from this little fib. This question mark is where Bitcoin draws its suckers in. If the government has a magic hundred dollar bill machine, maybe they can make one as well. The problem is the government has no such machine, they just have some politicians and such who claim they do. What the government does have, among other things, is 8000 tons of gold which it would exchange for dollars in 1971, and could easily do again. Bitcoin has no such backing. In fact, we don't even know who started Bitcoin. At least with Charles Ponzi's international reply coupons, you knew the name of who was behind the scam. With Bitcoin, the scammers are anonymous.
I just read a Times article about the probable insolvency of Bitfinex, the umpteenth Bitcoin company with such problems. Charlie Munger says Bitcoins are rat poison, and he has surely seen many such scams in his 93 years.
Also, reading this blog post with its railing against the government and the establishment reminds me of the pitches for some MLM scams I have been dragged to. When someone tells you they're giving a run for its money the "government's fiat monopoly on money", watch your wallet.
[+] [-] pvaldes|8 years ago|reply
Maybe not a very good example of an economic failure
[+] [-] ceejayoz|8 years ago|reply