Bitcoin is not remotely usable as a currency now. The fees are incredible, the confirmation times ridiculous. We need to move on to something more modern like Ethereum, Stellar Lumens, etc. immediately. Asking the current 1 mb blocksize version of Bitcoin to be a currency is like Goldman Sachs writing a report saying they want to run their website on Intel 486 processors.
They mention Zimbabwe moving to it as an alternative. The average Bitcoin fee is now $40 and the average weekly salary there is around $60. It is ludicrous to even think about asking someone to spend almost a week's wage for something as simple as a transaction fee. Bitcoin has failed completely at accomplishing the "banking the unbanked" goal that drew many of us to it in the first place. That story and that loss is a long, convoluted, and sad story for another time. But other cryptos with teams willing to adapt and listen to reason are moving forward with this torch.
On-chain scaling is not sustainable. If you want to handle as many transaction as for example Visa, you would need 1 GB blocks every 10 minutes, which would make the whole blockchain heavily centralized because regular users won't be able to host full nodes to validate payments.
About "adopting" and increasing block size. I think most developers agree that we would need to increase it at some point, but I believe core Bitcoin developers refusing to do it to accelerate real scalability solution (e.g. Lightning Network). After we have a working scaling solution we might see increase in block size to lower fees and increase throughput.
Not sure why you and the other person mentioning lightning have been downvoted. I’ve noticed increasingly it’s not possible to have reasonable discussion about bitcoin on hacker news. It seems the folks from /r/btc have found this place.
Please explain how the Lightning Network developers solve an unsolved NP-Hard problem in computer science regarding routing? [1]
The Lightning Network design is exactly what the first sentence of Satoshi's Bitcoin whitepaper seeks to avoid - payment processor middlemen.
"A purely peer-to-peer version of electronic cash would
allow online payments to be sent directly from one party
to another without going through a financial institution." [2]
The LN design was chosen as a solution by certain investors who want to extract fees as payment hub liquidity providers.
LN can't solve the TSP without either publishing a map of all nodes and routes, or having all nodes broadcasts to all nodes. The former significantly reduces decentralization and further removes the "electronic cash" aspect requiring payment processor hubs, while the latter will suffer from latency/scaling issues/DDoS susceptibility.
Fiestly, LN routing is actually closer to a shortest-path problem than the TSP.
Secondly, even if it was the TSP, you don't need to 100% solve it in order to have a working system. How do you think actual travelling salesmen can exist? They just pick a good enough route, nobody is checking whether they picked the perfect route, and nobody cares.
Either the Lightning Network has found a solution to the routing problem which the entire internet has relied upon since 1989 [1], or the LN marketing is disingenuous and the actual implementation will be nothing more than an excuse to extract wealth to centralized payment processor hubs, further distancing Bitcoin from the main design of electronic cash:
"A purely peer-to-peer version of electronic cash would
allow online payments to be sent directly from one party
to another without going through a financial institution."
jstanley makes a very good point, especially considering that Bitcoin itself is a probabilistic good-enough solution to the Byzantine Generals Problem, rather than a perfect deterministic one. But you didn't even address jstanley's question, you just repeated the exact same talking points you posted higher up in this thread, hoping that readers can't tell the difference. That is not an honest debate, but propaganda.
The constant repetition of talking points without actually addressing the critiques of those talking points may fool the gullible, but the technologically savvy see it, and it costs you your credibility with them. You guys are like Marco Rubio [1] constantly repeating the same talking points regardless what critiques are thrown your way.
You've provided no technical details, only an ad hominem fallacy.
Feel free to explain actual technical details of how LN does anything interesting, other than further centralize Bitcoin into centralized payment processor hubs?
As per the LN white paper:
8.4 Payment Routing
It is theoretically possible to build a route map
implicitly from observing 2-of-2 multisigs on the
blockchain to build a routing table. Note, however, this
is not feasible with pay-to-script-hash transaction
outputs, which can be resolved out-of-band from the
bitcoin protocol via a third party routing service.
Building a routing table will become necessary for large
operators (e.g. BGP, Cjdns). Eventually, with
optimizations, the network will look a lot like the
correspondent banking network, or Tier-1 ISPs.
This is why there's thousands of new crypto-currency designs improving on the flaws of Satoshi's implementation.
Not only is it easy to start fresh, but it's measurably more fair for new users to avoid BTC/ETH and other early cryptocoins which use manipulative ponzi/pyramid like work:coin production:time algorithms which exploit "late" users.
Personally I don't really mind having a few main hubs because Lightning Network allows trust-less payments. Your hub can never steal your money. It's guaranteed by math and Bitcoin network itself.
Lightning Network might not be perfect solution, but it is a solution to scaling problem. Increasing block size is certainly not a long term solution.
But it can keep coins that remain in them until the channel expires and for usable channels it will be at least a month or two. So some amount of trust is required.
Also, unless I don't know about something, wallet software needs to store additional data for LN to work that can't be just reconstructed from private key/paper wallet.
what incentive does a hub have to do that? it's easy to accuse a hub in doing that but it's trivial for a hub to prove they aren't. if it is ever proven that hub holds on to somebody's channel - the hub loses reputation and customers.
seems like you've heard the term and quickly decided that it describes something unsolvable in principle.
the truth is, that NP-hardness is only true for perfect solution in polynomial time. good-enough solutions can be found in finite time intervals just fine, there are plenty of practical implementations of that.
ever heard of this thing called "delivery companies"? well they solve TSP sub-optimally millions of times every day.
Right... except the internet is not a physical space so tell me how do you measure distance between nodes?
Latency?
Let's look at the Lightening network white paper:
8.4 Payment Routing
It is theoretically possible to build a route map
implicitly from observing 2-of-2 multisigs on the
blockchain to build a routing table. Note, however, this
is not feasible with pay-to-script-hash transaction
outputs, which can be resolved out-of-band from the
bitcoin protocol via a third party routing service.
Building a routing table will become necessary for large
operators (e.g. BGP, Cjdns). Eventually, with
optimizations, the network will look a lot like the
correspondent banking network, or Tier-1 ISPs.
So LN cites the need for large liquidity providers to act as hubs, essentially payment processor hubs.
Why not just use venmo at that point?
Why would someone want to use Bitcoin with the LN, especially if it requires them buying Bitcoin from someone else?
the internet is not a physical space so tell me how do you
measure distance between nodes?
To which you have no answer.
As stated in the OP:
LN can't solve the TSP without either publishing a map of
all nodes and routes, or having all nodes broadcasts to all nodes.
Unsurprisingly you didn't read the original post, nor contribute any response to the critique or technical implementation of routing in the LN design.
LN relies on hubs and a map. It's setup to extract wealth into centralized liquidity providers. This is antithetical to cash, and at this point why not use a faster centralized service like venmo?
Shortest path requires publishing all nodes and connections.
What if nodes go offline? How fast will the LN algorithm reroute? Does this mean everyone must connect to the Winkevoss/Bitmain/WellsFargo Nodes for payments?
Why would anyone bother dealing in Bitcoin when there's other usable alternatives, faster cryptocurrencies, or just paypal/venmo?
> Not sure why you and the other person mentioning lightning have been downvoted.
Because it's a ridiculous proposition. Just opening and closing a channel will require a transaction on-chain, with the accompanying fees.
And if someone sends you coins, you can only spend them if there's a route to whoever you want to pay, otherwise you have to close the channel....and again pay the damn fee.
Lastly: it's not even a network. A network implies that there are multiple connected nodes, and AFAIK the number of merchants using LN in production is exactly zero.
> If you want to handle as many transaction as for example Visa, you would need 1 GB blocks every 10 minutes, which would make the whole blockchain heavily centralized because regular users won't be able to host full nodes to validate payments.
The whole blockchain is already "centralized" in that sense - almost all mining happens in a small number of large mining pools.
1GB every 10 minutes doesn't sound so bad. Random users probably won't run full chains on their desktops, sure, but the option's available if they want to (in distinct contrast to Lightning). Third-party service providers could run full chains and sell validation against the full chain as a service, in a competitive free market - you don't need anyone's permission to run the full chain, so if prices get high or service gets bad then another provider can enter the market.
That's 52 petabytes a year, half an exabyte after 10 years. We are talking about approaching Google datacenter scale on ...every...single....bitcoin node. No matter how optimistic your future storage capacity projections are this is simply not scalable.
Actually there is a great way to scale on-chain: UTXO Set Commitment allows nodes to simply discard unnecessary blockchain data (in a way not too dissimilar to classic "pruning"). The data set maintained by nodes would basically grow linearly with the UTXO Set instead of the number of txns. Eg. right now it would cut 150GB down to 3GB.
utxo set is one issue with large number of transactions. The far bigger is the big block size you would need for visa-level transaction numbers (1GB / 10min was mentioned).
And it's not only an issue for end-users (can't run a bitcoin client on your phone, you'd burn through your data within a couple days), but also for miners. They'd be far more likely to mine on top of an old block, leading to stale blocks.
There was a talk a while ago how the bitcoin developers improved the propagation of new blocks within the network and it basically eliminated stale blocks (at least for a while).
It's not really an issue. End-users always have the possibility of running in SPV mode where they don't download full blocks.
«They'd be far more likely to mine on top of an old block»
Not really. First of all, a 1GB block today would be transmitted in typically only ~12-15MB thanks to Compact Blocks (6 bytes per txn ID). Graphene would cut this down to 3-5 MB (http://forensics.cs.umass.edu/graphene/). Secondly, with current software and current hardware, we can still bump the block size ~100× while keeping the block verification time low enough that it's still workable. Then with software optimizations and another few years of technical hardware and network bandwidth improvements, we can get another 10×.
ISP’s have to move all that bandwidth as well. Netflix has servers on ISP level where they pay for i’d imagine, I don’t think that there is a way to do that with Bitcoin’s data.
Bitcoin, over the long haul, becomes impossible without checkpointing. Eventually an eternally growing stream of data, becomes too large to transmit and store. Raising the block size just changes the rate.
>We need to move on to something more modern like Ethereum, Stellar Lumens, etc.
All other chains will face the same cost-of-scaling problem as Bitcoin as they grow. No one has yet developed a public consensus mechanism proven to provide the same security as PoW with the requisite order of magnitude higher scalability and lower costs. Unless some technological breakthroughs are made on that subject, they'll all hit the same wall as their usage grows.
While technically Ethereum's ~15tx/s is an order of magnitude more than Bitcoin's 7x max, that's not really what I had in mind, they're effectively equivalent in relation to where they need to be (hundreds or thousands/sec). And as expected Ethereum's tx cost is increasing with usage too. And Vitalik to his credit is clear that Ethereum still has significant work to do on this front:
>In a lengthy statement released to TechCrunch, Buterin explained that he plans to spend more time ensuring that Ethereum fulfills its potential as a platform.
"2017 really has been the year where hype in crypto, including financial hype and social hype in general has far exceeded the reality of what existing blockchain systems can offer. There is a lot of attention, and a lot of eager expectation, but as far as reality goes the practical usability of blockchains has in some cases even regressed due to rising transaction fees."
"I expect 2018, at least within the Ethereum space that I’m best able to speak about, will be the year of action. It will be the year where all of the ideas around scalability, Plasma, proof-of-stake, and privacy that we have painstakingly worked on and refined over the last four years are finally going to turn into real, live working code that you can play around in a highly mature form in some cases on testnets, and in some key cases even on the public mainnet. Everyone in the Ethereum space recognizes that the world is watching, and we are ready to deliver."
1 block per 10 minutes with 4000tx per block results in 7tx/s ... well, why not use blocks of 100x size for starters, that would immediately produce 700tx/s. Still not VISA, yet that would be at least something. The main reason it is not going to happen is probably that that the major Bitcoin stakeholders are completely satisfied with the current situation where they are collecting higher and higher fees (reaching 10BTC+ per block!).
The main promise of Bitcoin - the scarcity of coins - has even been much more exceeded by the scarcity of transaction slots.
> On-chain scaling is not sustainable. If you want to handle as many transaction as for example Visa, you would need 1 GB blocks every 10 minutes, which would make the whole blockchain heavily centralized because regular users won't be able to host full nodes to validate payments.
The way things are today and the way they need to be to ensure a censorship-resistant secure public ledger are not the same. Core is working toward that, security is first priority, then optimize performance after that.
Where does RaiBlocks fit in here? It moved up to top 20 in market cap due to being decentralized, instant, feeless, and scalable. However it still faces the issue of being too volatile for everyday use.
There's a big difference regarding stellar, though: allowing global and fast payments is their goal from the start (not that I presume they will succeed in this).
Although not stated as clearly, the rest of their blog shows that from the beginning, through their will of "banking the unbanked", their primary focus is to be usable as a payment system.
One can expect they will decide on roadmap being more inclined toward scalability of microtransactions than a crypto seeing itself as a store of value (is that the case for bitcoin? I hear "store of value" a lot around it, but I don't know if it's an "official" vision).
I agree BTC is unusable as a currency due to high fees - however, Bitcoin Cash has low fees and because it is dedicated to on-chain scaling, it will continue having low fees as demand for blockspace increases.
It has never been the goal of bitcoin. The original Satoshi paper rather implies the "unbank the banked" objective which is to remove corrupt middleman.
> We need to move on to something more modern like Ethereum, Stellar Lumens, etc.
Those don't fix the fundamental problem of scaling a blockchain. Raiblocks is the only big one that I'm aware of which tries to address this.
I kept seeing things about third world countries using it and thought it was simply due to old-timers (in Bitcoin time that means 3-4 years ago) not realising that the block congestion and resulting fees had snuck up on them. They are even further from reality because most of them are "holding" Bitcoin rather than trying to use it. The authors of the article are clearly looking Bitcoin as what it was, or what it was designed for, rather than what it has become.
There are many cryptocurrency exchanges that don't accept real money (because then they'd be subject to regulation), so to trade there, you need to buy some cryptocurrency elsewhere and move it there before you can trade.
Many sites recommend buying Litecoin or Ether for that rather than Bitcoin, exactly because Bitcoin is so impractical. Bitcoin is failing as a currency even in the cryptocurrency market.
Recently there was a bitcoin conference that stopped accepting bitcoin as payment because processing was too expensive.
Cryptocurrencies might become mainstream payment systems some day, but it's not going to be Bitcoin. Ether is probably the most likely candidate.
Western Union is up there I think. So at least for remittance it might make sense.
Anyway I agree that Bitcoin probably won't be used as a currency but more like gold. Perhaps it will be used to back some way cheaper transaction method.
Why are we so certain it does? It has certain properties that give it some value. Maybe that value is much much less than the current price and maybe there will be competition that is better in every way, but is there not some small intrinsic value in owning something electronic that I can transfer which has scarcity enforced by algorithms instead of a centralized system?
Then again, if the intrinsic value is worth less than the effort to use it, is there a difference from having no intrinsic value at all?
> There is no intrinsic value in gold. Or any other thing. The only value things have are the exchange and use values humans imbue them with.
Your definition of “intrinsic value” does not match that of standard economic terminology.
Gold has intrinsic value beyond speculation because it can be used for industrial supplies and because it’s a well-liked jewelry item. Extrinsic value contributed by speculation can drive this price away from those anchors, but the anchors exist.
Your definition seems vaguely philosophical, but in any case your argument, as posed, is incoherent. Either you’re using the same definition as what others are, in which case your argument is simply incorrect, or you’re using an alternate definition, and your argument ceases to be relevant.
> Your definition of “intrinsic value” does not match that of standard economic terminology.
I am well aware of that—because using standard economic terminology in this case, that of ascribing the property of intrinsic value to gold, is dead wrong. It’s both a misuse of language and a confusion of terms. Value is a thing agents ascribe to objects; in economic theory, it is a measured result of social relations. It is not a property of the objects themselves. The physical properties of gold are intrinsic to gold itself. The use and exchange value is created by humanity.
If everyone decides gold has no value tomorrow, it has no value. There’s nothing intrinsic about it.
> Gold has intrinsic value beyond speculation because it can be used for industrial supplies and because it’s a well-liked jewelry item. Extrinsic value contributed by speculation can drive this price away from those anchors, but the anchors exist.
You are describing use values, and each of them are further describing exactly my point. The intrinsic physical properties of gold are found to have use value by acting agents. The value found, discovered, or created on the basis of an object’s properties is not intrinsic to the object itself. It comes from outside.
> Your definition seems vaguely philosophical, but in any case your argument, as posed, is incoherent. Either you’re using the same definition as what others are, in which case your argument is simply incorrect, or you’re using an alternate definition, and your argument ceases to be relevant.
I find the argument that use and exchange values are intrinsic to any object to be far more incoherent. All of economics is rooted in philosophical positions on value, markets, commodities, exchange, and so on. The notion that value is intrinsic to an object is one of the most incoherent foundations to most people’s understanding of economics and value. I am using the same definition—but directly disputing its coherence. It’s fine if we can’t agree that the notion of intrinsic value is a confusion of terms itself, but that doesn’t render incoherent those who point this out.
This whole “gold has intrinsic value” notion is, in my opinion, a sad confusion of the intrinsic theory of value as it has over time trickled into common parlance. When most people go about saying, “Gold has the nifty property of intrinsic value”, that statement far too often suggests or implies value as a property, rather than a measured result (of socioeconomic activity among actors in a market).
The economic value of a commodity is both use and exchange values. You’re talking of use values here. They are included when talking of the value of an object.
You’re also, like other commenters, unnecessarily stuck on the example of gold. See past that. Gold is no different from any other object—anything can lose its value, because that value is the product of human activity, ideas, and relations in a market. When I say If everyone decides gold has no value tomorrow, it has no value, I was talking all value. Your scheme won’t work when everyone decides gold has no value, because gold is nothing more than an object in the market whose value is constructed by human relations and activity.
You are overestimating the value of gold as a utility.
Think about diamonds. They have utility to and they have value as jewelry, they used to be of almost no value as jewelry.
It's not impossible that we will be able to create to find another metal that corrosion resistant. The value as a jewelry is exactly like bitcoin. It's speculative.
I think intrinsic means in this context "valuable for something other than bartering with".
Gold has intrinsic value in electronics. It is used for electrical connectors due to its corrosion resistance and conductivity. Tiny golden wires are used in packaging integrated circuits (connecting the ICs to the pins of the chip).
Bitcoins have no such intrinsic value. They can only be bartered for something else.
Even fiat has intrinsic value: you can burn bills for warm.
You are describing use values that are found in the intrinsic physical properties of gold by human agents. Their societies then assent to recognizing those use values. That value is not intrinsic to gold itself—it is not one of gold’s properties.
Thinking “gold is valuable” is a shorthand for this recognition of use and exchange values on the basis of gold’s intrinsic physical properties. But the value found in those properties is not a property of gold itself.
But that's consistent with what people mean when they say 'gold has intrinsic value.' All they are saying is it 'has some value that is not one of the three functions of money.'
Does anyone know what the above logical fallacy would be named? I see this kind of argumentation a lot: where one refutes an argument which has not been made.
That it is consistent does not mean it is equivalent. Humans are pretty poor at avoiding conflating their terms and categories into messes of confusion. This fiction that gold (or any other thing) possesses intrinsic value is one of best examples of such confusion in economics. Things have value because people decide they do—and as soon as they decide otherwise, that value steadily declines to zero, despite how many people ardently believed that value was intrinsic to the thing itself, as if it was one of the physical properties of the thing, an indivisible part of the object. This is nonsense.
Moreover, there is no logical fallacy here on my part. I was not refuting an argument that was not made—I was directly disputing the coherence of an economic adage the average person has been taught is actually rational and sensible when it was brought into the discussion.
Value is never intrinsic, but always created by economic actors—the logical fallacy is arguing otherwise.
Gold, like silver, various other precious metals, and a number of other things—like land, for example—have long histories of value. The historic value of gold among human societies can not be disputed. But that long history has not infused value as a physical property upon gold—or any other thing—itself.
My original statement was neither outrageous nor illogical. Bitcoin is in this case a rather perfect example that highlights exactly what I’m pointing out—the value of bitcoin is in no way intrinsic to bitcoin itself. Bitcoin possesses a number of properties which, analogous to similar properties in a physical object like gold, are found to have both use and exchange value among economic agents. But that value is not actually a core property of bitcoin anymore than value is a core property of gold. Agents identify properties in bitcoin and assign them value. This is always where value comes from—use values from the things one can do with the commodity, and exchange values from the things one can buy with the commodity.
Sure, you can argue that a house, a hamburger, and a car have no intrinsic value per se, but only in relation to humans and/or because we give them value.
But again, with that you're departing from the modern economic notion of intrinsic value in discussions of money.
Do you mean the numismatic notion of intrinsic value? Because that is a very different thing from saying economic intrinsic value. I’m not departing at all on the economic part, I am directly talking to that notion.
It’s an abuse of definitional scope. The commenter is not arguing against a point that has not been made (that would be a strawman); instead, they’re arguing against the applicability of terminology in an argument that was made, but by using an incorrect or alternate definition for the terminology.
In this specific instance, the commenter is using a non-standard definition of “intrinsic value” to argue that gold has no such value. I like to call this “Wittgensteinian chaos” - you see it happen whenever two or more parties fail to explicitly define terms before arguing. It’s usually accidental, not deceptive. In particular, this is likely to happen with technical terminology that does not look enough like jargon to prompt people to look it up, because it also has a coherent, non-technical meaning.
Now circle back to “intrinsic value” - if you aren’t immediately aware that this is a specific economic term[1], you might think to yourself, “oh I get what he’s trying to say”, and proceed to try and refute it. I think economics is particularly prone to this in internet debates.
As I stated in my other reply to you, I am very well aware “intrinsic value” is a specific economic term. I was speaking exactly to that term—what it means, what it implies—and disputing the logical sense of the term itself.
You have twice now in your comments made a host of assumptions about my intentions and the coherence, relevance, and applicability of my statement. You’re ascribing an awful lot of impossible-to-possess knowledge of my mental processes here.
The notion that gold has intrinsic value—despite the longstanding place that notion has remained in social and economic thought for quite some time—is inconsistent with reality. There is no damage done to gold, its value, its physical properties, or economics itself to point out this inconsistency. We’d be better served to use terms that reflect and remain consistent with reality. And when it comes to economic value, the harsh reality we ought to always keep in mind is that no value is intrinsic—despite how frequently it feels (or even seems sensible to believe) otherwise.
The thing your argument is that no one is arguing about these philosophical ideas of intrinsic value. People are just saying: 'if people didn't use gold as money anymore because they lost faith in it, the gold would still be useful (ie as in jewlery, circuit boards, etc).'
I mean I could do you one better with this type of argumentation and say 'your idea is wrong because all ideas are social constructs, so all are equally the imagination of peoples and all are equally valid,' and we could just have nothing left to talk about and get nowhere with anything.
You could do one better but that would be missing the point.
The claim was that gold have intrinsic value and bitcoin doesn't. But to the extent of discussing intrinsic value in economical terms then bitcoin does too.
In other words you can't both have your cake and eat it.
Either both bitcoin and gold has intrinsic value in economical terms or none of them have in philosophical terms.
Bitcoin can fulfill the function of money (but just like gold it's cumbersome, try and pay for a tshirt with gold in H&M).
Bitcoin also have other uses such as store of value (just like gold) and a unique footprint which makes it useful in the digital space.
So no it's not wrong at all.
There was a time when gold wasn't useful for much other than as a store of value and as jewelry. If we are to follow your own argument then Gold had no intrinsic value because of it's limited use before the industrial revolution.
Only the market determines whether something have value. The idea of intrinsic value in anything (also when used in economic terms) is simply misleading and not representing reality but rather the illusion of a reality that doesn't exist.
Well, there is its physical essence. Cryptocurrencies are a bit like a DVD vs a movie on Netflix. Everyone is starting a new cryptocurrency nowadays, whereas opening a gold mine is an entirely different matter.
Exactly. And also, the investment in ASICs etc is not the same as opening a gold-mine. An ASIC can mine Litecoin or Bitcoin whichever is profitable, a gold-mine cannot start extracting petrol when that is more profitable. That's the intrinsic value of gold.
No I am saying that bitcoin is bitcoin with it's own unique history and that there only will be a set amount of those bitcoins. That makes it scarce. It's not just first mover advantage it's the advantage of the history and the money now put behind it that makes it valuable.
What you and many other people seem to be confusing is that Bitcoin the protocol isn't what's valuable. It's the ability to turn it into a physical like property.
The value of gold can dissapear too overnight. Same rules apply. Gold can be obsolete and just because it historically have had value does not mean it will always have that.
No, it's not all that distinguishes it from clone coins.
Bitcoin has a unique history and a unique set of backers, current and future utility and more trust than any other cryptocurrency.
None of the other coins have that.
Your argument is like saying that the only thing that distinguishes the USD from the drakmar is branding.
There is always a reason why something have a value and people trust it. The value of that trust can appear and disappear from one day to the other with anything we consider valuable, just think of Diamonds as a great example of something that is suddenly worth a lot.
Humans decide the value, the market decides the claimed "intrinsic value" the market have determined the value of bitcoin.
It has no more utility than a direct clone. None whatsoever. It's a nonsense claim to say it has more than any other - it has less uility than most! Many of the alts added many new capabilities.
The US Dollar is supported by a government that will help adjust supply, interest rates etc to keep its value roughly stable and it's utility in place. By design Bitcoin has none of this stuff.
I'm not making arguments about intrinsic value, I am saying that the value of BTC is built on sand much more than a national currency, and it's limited supply street cred is no sort of guarantee, based as it is on brand.
US dollar is supported by a government (or more precisely a central bank) just like Greece and Venezuela is. But who supports the government? A government can default. The USD can default. It is only in very recent times that currencies have been stable (at the cost of having to grow the economy to beat the inflation) historically they haven't. Just ask the Germans in the 30ies.
It's an illusion to think that just because a government is behind a currency it's exempt from loosing all it's value.
The lender of last resort is the government but governments can fail.
Just because they are stable today does not make them stable tomorrow.
Bitcoin has more utility than a clone because it has a unique history and a unique set of backers (the network) and those backers have exactly the same function as they state.
Bitcoin is better supported than some currencies and worse supported than others. But it exist in that spectrum not separate from it.
I didn't say it's exempt from losing value, however we have some fairly good means of trying to ensure that doesn't happen, which have been relatively successful of late.
With Cryptocurrencies there are none, by design.
>> Bitcoin has more utility than a clone because it has a unique history and a unique set of backers (the network) and those backers have exactly the same function as they state.
This is utter nonsense, backers have none of the power of the state to alter supply, set rates etc etc.
>> Bitcoin is better supported than some currencies and worse supported than others. But it exist in that spectrum not separate from it.
Well, given the fees, processing times, lack of support mechanisms and transaction processing limits, I'd say it's a damn poor one.
No it's not nonsense at all. A country can default no matter the intentions and attempts of it's government.
There is always a reality. That same reality plays out differently with bitcoin compared to the USD but fundamentally there is no absolute base for either currency nor bitcoin. And history is littered with examples of this.
Because the state can create more currency, change interest rates and various other things that cannot be done with Bitcoin. This is by design and is widely celebrated by the community.
The question is irrelevant, there is a clear difference between the 'backing' of a state which can manipulate the currency supply directly and the backing of entities that cannot.
You claimed that bitcoin's backers have the same power as the state. They do not. End of story.
No I claimed that they have the same function. Neither of them can secure against defaulting completely but the function is the same. There is enough inertia in the bitcoin network enough people with most of the bitcoins gotten at a very low price and holding, other words there is a base.
So no it's not irrelevant it's the very core of this discussion.
That is not what intrinsic value means. Gold has value in electronics and jewelry (people will always value gold for jewelry and other ornamental objects, have since its discovery). You cannot just pedantically re-define the economic meaning of the term; the rest of the world disagrees with you.
Before electronics gold had two types of usages. Jewelry and store of value. Before a monetary system gold had some value as jewelry, before the ability to create jewelry or ornamental objects it had no value. In other words the "intrinsic value" is contextual and not objective.
Intrinsic value means the actual value but the only way to determine the actual value is to see what people will pay for it in an exchange. In other words the market determines the value of gold based on a set of assumptions. These assumptions can change in the future. Bitcoin is also valued by the market based on a set of assumptions.
The world doesn't disagree with parent, in fact it agrees with him and bitcoin is the proof of this.
You can't both have your cake and eat it. Either gold and bitcoin have intrinsic value by the economic definition and the market determines what that is or neither of them have.
> Gold has not intrinsic value either. Nothing has to be honest.
Unless you mean something very different from the established consensus of economics when you use the term, “intrinsic value”, both of those statements are false.
Gold's intrinsic value is perhaps 10% of it's current value. You are not holding gold because you want to make jewelry, you are holding because of it's perceived value and it's scarcity.
Absolutely, I agree with you. The speculation around gold pushes significantly higher extrinsic value onto it. I'm just making a point that it has a floor of intrinsic value as well, even if that's smaller than the speculative activity.
No it has no floor that can't go away (just like it have no ceiling)
The only way to determine it's value is to see if people want to pay for it. Just because they want to pay for it right now doesn't mean they want to do it tomorrow.
And thats exactly why the idea of intrinsic value should die. It doesn't exist. There isn't an absolute floor only a market determined one .... just like with bitcoin.
Well aware of the economic term that's not the problem.
The claim was that gold have intrinsic value and bitcoin doesn't. But to the extent of discussing intrinsic value in economical terms then bitcoin does too.
In other words you can't both have your cake and eat it.
Either both bitcoin and gold has intrinsic value in economical terms or none of them have in philosophical terms.
The value of them are both based on the trust that the market will accept that value which currently for bitcoin is fluctuating very rapidly and for gold more slowly.
- A real-world txn is on average 500 bytes, not 250.
- Although you can have multiple recipients/outputs in a single txn ("batch transactions"), it is not used very often. I computed not too long ago 2.6 outputs on average (https://mobile.twitter.com/zorinaq/status/934442392501063685). If batching was unused, we would expect on average 2 outputs. One reason batching is uncommon is that it is by nature doable only by services sending multiple transactions per block, eg. a hosted wallet provider. I can't batch the occasional txns sent from my local phone wallet.
>The real-world median txn fee is far from $1.50... it's $13:
The site you quote is showing the median transaction fee of each block. That's not what I stated: "The median fee for a typical transaction in the past week"
>- A real-world txn is on average 500 bytes, not 250.
What's your source? https://bitcoinfees.earn.com/ indicates 225. It seems like you're using a source that assumes two UTXO inputs, which would result in a doubling of the size.
I cant pay for anything with out it being about $40 in the last month. I sent $50 in btc from my local wallet to my bitpay debit card the other week not paying attention and it cost me $37 for max block time.
No, bitinfocharts shows the median tx fee of transactions through a day, not blocks. It's been over $13 for the last 7 days, hence over $13 for the last week.
My 338 byte, 2-input 1-output (no change) transaction, paying 88 satoshi per byte, $5 at time of sending, has been stuck in the mempool for nearly 2 weeks now. With some luck, it may get processed in the next month.
It looks like the green bars (median) are at most $50/kB to $70/kB, with a good number of dips to $30/kB and some to $12/kB.
Edit: it is a confusing chart because it has mBTC/kB on one side and USD/kB on the other. And also it assume a constant exchange rate, so it does not reflect the actual price of those transactions at the time they occurred.
>How do you get that the median is between $8/kB and $4/kB from that page? I assume you are looking at the middle chart:
The middle chart is showing the median of that block's fees. I'm referring to the median of the last week's worth of confirmed transactions. That's show in the right hand side of the first chart with the, implied, cumulative distribution function.
I am afraid neither average nor median should be used when transaction on money is involved. Most of us will not feel comfortable unless we know it upfront.
What if you end up paying on the extremely higher side? Would you feel comfortable using a system in which fees can swing wildly even for a minority of users.
Do you know how much was being transffered at $1.50?
I remember when people were debating putting "almost feeless" on a bitcoin website because transaction fees were so low as a percentage of the amount, but I don't know if that still holds.
Not sure “banking the unbanked” is really the goal of Bitcoin.
Think instead because of it’s scarcity, Bitcoin could be used to back currencies. Much like the gold standard before. Transaction fees in this scenario (even with it’s high transaction fees for us normies) would be considered negligible when moving large amounts of money.
In this scenario, we can even have other cryptos which are better for daily use be backed by bitcoin.
My understanding of gold as a currency is that it naturally occurs with about the right frequency to be used as a money supply. It's rare enough you can't just make more but its plentiful enough to be in wide circulation.
I don’t think it’s just the rarity. It’s also trustless, secure and easy to transfer. For ex, with gold, you’d have to carry blocks of it to move it around. And even then, you’d still don’t exactly trust it’s source 100% unlike bitcoin, where everything is in the ledger.
Only 2 things can back currency: hard assets/commodities, and a guarantor (like a government). Right now Bitcoin is more like a security as all its worth is speculative and based on trading, it's not backed by anything tangible.
Raiblocks has potential to be a good currency, but like any other crypto when will people stop holding and start spending. https://github.com/clemahieu/raiblocks
No offense, but could you and the other people mentioning other chains in subthreads not do that? These threads just turn into ad pages and nobody has the ability to know what advice is valuable and what is just shilling.
These claims have been made about every altcoin/feature since 2009. There's too much baseless hype. You guys want me to buy Raiblocks, Plasma, or Omise Go? Are you sure the devs know what they are doing and why?
He should have explain that raiblock have no fees and transfers are instantaneous. Even if all humans of the world use it.
That is not advertising , but show one solution to the scalability problem.
Plasma isn’t a coin it’s an open source blockchain scaling solution . The Omise Go network is an open (not owned by anyone) decentralized value exchange network.
With Lightning Network you pay fees once to create a channel and then you can use that channel to make smaller payments for very low or even no fees. Channel can stay open for a very long time (e.g. a year). So, you end up paying single Bitcoin transaction fee instead of hundreds, and it also reduces load on the Bitcoin network freeing the block space lowering fees even more.
The article makes the point that Bitcoin could be viable in many countries where people already use foreign currencies because they don't trust their domestic currency.
That's one of the few arguments for cryptocurrency that I find convincing, but I think it's a stronger argument for cryptocurrencies other than Bitcoin. The Bitcoin transaction fees are so high right now that it doesn't make sense to use it for small purchases, which really limits its usefulness for people in poor countries.
For example, right now the average Bitcoin transaction fee is more than $20, and the average annual income in the Democratic Republic of Congo, one of the countries mentioned in the article, is about $400 per year.
I am struggling to see how cryptocurrencies would have any tangible advantage over US Dollars in developing nations.
Remember that in many of these countries, most people don't have smart phones, and there's a lot of people who don't even have phones. Electricity and internet connections are intermittent at best.
Good luck convincing Cambodian street hawkers that your magic internet money is better than a good old fashioned Greenback.
And another reason that cryptocurrencies will struggle to catch on: it's hard to bribe people with magic internet money. There's no paper trail or proof if you bribe someone with cash.
Indeed. It also requires considerable levels of technical literacy to use, maintain, and properly secure blockchain tokens, and even with all that people regularly have their bitcoins stolen or irreparably lost.
I love how Fiat Money was designed to be impossible to use for illegal purposes, and there is no way to steal it. I mean really, if there were a way for it to be used in that way, surely your argument would be pointless, but luckily we know that the more middlemen we introduce between us and another party, the more affordable the transaction will become.
> I love how Fiat Money was designed to be impossible to use for illegal purposes, and there is no way to steal it.
So, I catch the meaning behind your sarcastic quip, but all you're doing here is offering up an absurd strawman. Obviously any currency can be stolen or used for illegal purposes, that's a willfully disingenuous interpretation of the argument because nobody has ever said that. This kind of reasoning would be like if someone said "the nature of dynamic typing makes the code prone to error" and you respond with "I love how strong static types were designed to make bugs impossible to produce, and there is no way it will cause the program to crash unexpectedly".
I'll outline the argument, and let you decide. (I made a lot of generalizations below regarding developing economies/countries, I'm sure I'm wrong in some cases, this is just what I know largely to be true)
>Remember that in many of these countries, most people don't have smart phones, and there's a lot of people who don't even have phones.
Depending on the country you're talking about, smartphone penetration for a lot of Africa is over 20% by population, increasing with increasing wealth or earnings. Cambodia, from your example, has about 50% smartphone penetration and 98% mobile phone penetration.
>Electricity and internet connections are intermittent at best.
Anecdotally, I can report that 3G coverage is ubiquitous in mid-size or larger population centers in Asia and Africa, even in very poor countries. In the countryside, it is hit or miss.
>Good luck convincing Cambodian street hawkers that your magic internet money is better than a good old fashioned Greenback.
I don't think small scale transactions are the use case for developing economy cryptocurrency utilization. Rather, the argument is that households may prefer an alternative to their local currency which allows them to hold liquid or semi-liquid savings. In developed economies we have bank accounts, stocks, bonds, CDs, and many other vehicles allowing for liquid store of value, and we (mostly) trust the government and banking system. In developing economies, lower and middle class households often have only cash vehicles. Some may have bank accounts, but those are subject to governmental whims (see India's disastrous surprise currency change last year) or currency volatility. When possible, many households will hold long-term savings in USD or EUR cash notes, as those are perceived as safe (wealthy households typically do the same, only by having a USD or EUR denominated bank account with a local or, preferably, international bank). Households save up local currency and then change it out for these high denomination USD/EUR cash notes with a bank or money changer. They would not go use $100 bills at the local market for groceries, they would change their currency back to local fiat if needed. Alternatively, they can sometimes transact large purchases with USD or EUR notes for things like computers, cars, property, and livestock.
Essentially, the argument for cryptocurrency as a store of wealth in developing countries is: 1)households would prefer not to hold notes, as they are more easily lost or destroyed than a backup key would be 2)there are fewer transactions to deal with in exchanging currencies 3)remittances are easier and lower cost 4)holding high value notes only works for households of a certain wealth class, cryptocurrencies will allow lower income/wealth households to do what middle-lower income/wealth households are already doing
If you think bitcoin would make a good currency, ask yourself what happens if you have any debts, lease or mortgage denominated in bitcoin.
At least hyperinflation wipes out debts, in hyperdeflation some people become millionaires and others owe millions based on whether you had positive or negative money at the start.
What I find most interesting about Bitcoin are its inherent contradictions - the tragedy hidden amongst the tensions in the inventor's world-view.
Some of the aspirations are really interesting - a currency which no-one controls, a currency without built in inflation, which is stable in value, a financial system with low fees and without government control, untaxable and ungovernable. A currency where the people own the means of production.
The implementation however expresses the contradictions hiding beneath the surface of these seemingly benign ambitions:
A stable currency cannot simultaneously be a valuable asset. A money supply which cannot be manipulated means an economy completely at the mercy of economic cycles. A system not amenable to government also means one not amenable to regulation. A fully distributed eventually consistent ledger cannot form the basis of a fast global payment system. A partially anonymous yet public ledger is open to abuse and but not redress. An immutable ledger doesn't match how we think of social transactions (which are usually reversible or revokable). A fixed money supply in practice means deflation, with all the problems even a little deflation causes.
If nothing else I hope the bitcoin and cryptocurrency experiment brings us all to question just how much inflation is good, just how well politicians manage our economy, and how much good a fractional reserve banking and arbitrary money supply manipulation really does. Are the fictions and confidence tricks we live by at present much better than the cryptocurrency systems proposed? Perhaps marginally, but they too will be replaced in time with something better, hopefully something which no one government controls.
This development though hints at a darker future, where corporations issue or control their own money supply, and force others to use it.
> If you think bitcoin would make a good currency, ask yourself what happens if you have any debts, lease or mortgage denominated in bitcoin.
They don't have to be denominated in Bitcoin for Bitcoin to be a successful currency. You could denominate your mortgage in junior cheeseburgers and still pay it off in Bitcoin.
I don't think the long term is Bitcoin. I think the long term is a diverse market of currencies, some of which are deflationary and others which are not. It's not critical that we all decide on one currency and set all the prices based on that, and even if it helps, that currency doesn't have to be Bitcoin.
Twitch, for example, already accepts unrelated gift cards as payment for subscriptions [1]. I think that is more like what we're moving toward.
What else would they denominate their mortgages in? Their respective national currencies were abolished after the introduction of the Euro.
Although it could be argued that joining the EMU may not have been their best interest in the first place, but that is the fault of their politicians, rather than the banks.
Iceland is the better example - during the boom years they were offered loans in Euro instead of their national currency. Then after the crash when their own currency was devalued in respect to the Euro, they were left with repayments they could not possibly service.
More than a little disturbing. They talk about helping developing economies, but what you can bet this means is that they'll be screwing over those people some way or another.
This is the end game of cryptocurrencies; not worldwide financial liberation but the same massive financial institutions further cementing their power. Kind of funny that they are looking at Bitcoin at a point where it's more valuable but is more poorly suited to be a currency than ever before. Says a lot.
The problem in hyperinflationary situations isn't lack of access to hard currency, it is usually readily available on the black market. The problem is the lack of affordability of hard currency. How many US dollars do I get for this piece of hyperinflating funny money? Probably not many.
Bitcoin is really no different from transacting in US dollars or any other hard currency, in fact it's arguably worse in pretty much every way. And you won't be able to get Bitcoins at affordable funny-money prices any more than you can get dollars.
So when you hear things like "Zimbabwe should switch to Bitcoin", just mentally replace that advice with "Zimbabwe should switch to USD" and imagine how that would play out. Harsh austerity measures, deregulation, and privatization to get a few measly millions of World Bank loans that will be gone in no time. Any country that finds themselves in a position where they can't issue their own currency is going to have a real hard time of it.
Umm... You do know that Zimbabwe has used the USD and South African Rand as its currencies since 2009, right? They abandoned the Zimbabwean dollar due to hyperinflation. All I've ever seen there is USD.
As time passes, Bitcoin becomes more exploitative to new users. [1]
Not to mention, the bandwidth is severely crippled and the network is basically unusable for normal transacting. Take the case study of Steam discontinuing Bitcoin payments. [2]
Can you elaborate on this? In what way is it any more of a portal than government issued fiat? Is it because the infrastructure is more robust because it has been around the block longer? Is there some other technical detail that makes it exceptionally good at being a portal?
Bitcoin and blockchain systems are nearly all designed to exploit new users and extract capital from greater fools who are too late to the game and didn't read or understand the rules and fine print.
Satoshi's Bitcoin and many of the crypto-currencies that have followed create and distribute the supply that effectively creates a decentralized pyramid-ponzi scheme. Semantically, a more accurate term is needed;
Imagine an economic policy that uses a "limited" amount of pie as "currency". Bitcoin gave half of this pie away to the first few users who arrived in exchange for the least amount of work/effort possible. Any user arriving later will need to waste more hashing power (computational work) in exchange for a smaller sum of newly generation coins for a successfully mined block reward. or the user might be convinced to purchase a previously produced coin from one of the early adopters. Buying a Bitcoin is worse than zero-sum, as money from buyers is exchanged for previously generated coins, the network must increasingly waste computations and energy.
Satoshi's economic model creates a system where participation is only beneficial if you can exploit the ignorance of another new user who enters the network after you. Bitcoin effectively relies on psychological manipulation though deceptive marketing claims like
"Bitcoin is deflationary"
"Bitcoin is rare"
"Bitcoin is a store of value"
When what actually happens is you either need to enrich someone who generated the coin for far less than you're paying, or waste more electricity and computational work than other early users for significantly less share of the pie.
If you understand the computer science behind Bitcoin, you'll realize how ridiculous the false equivalency to gold is.
1. The claim of "rare" doesn't exactly hold true.
Consider the 10,000 BTC pizza - how did this happen? This was the direct result of Satoshi's economic policy, granting vast sums of BTC to mint out very quickly very early for a short duration to the very small pool of people who ran the software. Satoshi's algorithm produced BTC in plentiful quantities enabling the 10,000BTC pizza - thus it wasn't rare if you were Satoshi and the dozen other early whales hording as much as possible, until the algorithm begins cutting off the production and limiting later users from producing coins, starving the economy. Now there's a psychological game being played, where public relations and marketing must convince new users to buy in. Because the exchanges are unregulated, they can manipulate the spot price though wash trading and painting the tape [2] (where trades are falsified and you just sell the same item back and forth to your friend for a higher and higher price).
The supply was created by running a piece of software. It's not magic. Most of the supply was produced very early on and as much as 30% of all Bitcoins are owned by less than 100 people.
Best estimates are that there are about one million
holders of Bitcoin; 47 individuals hold about 30 percent,
another 900 hold a further 20 percent, the next 10,000
about 25% and another million about 20%, with 5% being
lost. So 1/10th of one percent represent about half the
holdings of Bitcoin and 1 percent close to 80 percent
(http://www.businessinsider.com/927-people-own-half-
of-the-bitcoins-2013-12). The concentration of Litecoin
ownership is similar
(http://litecoin-rich-list.blogspot.com).
Most of the big wallets have been in place from early on,
so sitting back and watching your capital grow has been a
very successful strategy.
The distribution of Bitcoin holdings looks much like the
distribution of wealth in North Korea and makes the
China’s and even the US’ wealth distribution look like
that of a workers’ paradise
3. Bitcoin network requires ASIC miners, largely centralized in China [3]. Assuming the inveitable surpassing of a more advanced cryptosytem making Bitcoin obsolete, as the market is informed there will be a decline in BTC's spot price and once this falls below the cost of OPEX for miners, the hardware goes offline and the network will cease to function. Maximalists will attempt to offer an emergency fork, in any attempt to save their "investment", just as they have developed the lightening network to create centeralized payment hubs, so "investors" can act as liquidity providors and take fees, instead of miners.
4. Electricty usage is unsustainable, GOTO 3
5. [4]
Bitcoin value is make-believe just like money. But even
though there is bitcoin-sphere governance, there are no
bitcoin-sphere assets. Taxes are not paid in bitcoin.
There is no FDIC, only hackers that lift a million here
and there. And when nation-states decide its a nuisance,
what are the guns of bitcoin? It’s anonymity? From the
same government that created PRISM and then used
mind-magic* to make everyone forget about PRISM? Please.
You may think crypto-currencies that require more power
than a small country to run can fly under the radar, but
somehow I think not indefinitely. After all, becoming the
next big thing would mean its a threat to the American
dollar, do you really think the US Gov will shrug and say
“shucks bitcoin went from a ponzi-novelty to something
that will totally usurp this hegemony we worked so hard to
make. Guess we’ll have to call it a day.” (If you think
this, sell your Bitcoin and buy an imagination.)
The day you can pay tax bills to a government in Bitcoin
is probably the day you can rest easy. Until then dear
Bitcoin holders, you do have something of value, just like
the Louisiana territory has value. But in this 1800’s
metaphor, what makes you so sure you’re America?
Monopoly money is good to have, while the game is still
running.
You seem to be confused. Bitcoin doesn't require buy-in. It doesn't give any promise of a positive return.
Simultaneously, you argue that "easy migration to more advanced e-currencies" is a deficiency, even though they use the same scarcity model.
The rest of your post is just ranty conjecture.
If you want one thought on why digital currency has value, consider this:
Currently, to send money between two people in the US, it takes 3 business days, typically costs some transaction fee, and is limited to the range of the border. It is slow, expensive, and local.
But we are in the age of information. We used to have the same restrictions for paper letters. But now I can send an email to anyone in the world in seconds for no effort. It is fast, cheap, and global.
Why shouldn't money be the same way? There is no incentive for traditional finance to improve its product, because regulation is so high that it is difficult for new entrants. Complexity and incompatibility is an advantage; it creates lock-in. There is no incentive for governments to improve, because full control of their local systems is exactly what they want.
Fast, cheap, global money is in the interest of the people, but not the incumbents. Decentralized scarcity is what enables it.
Now that it is here, why would we have 200 non-interoperable, complicated, slow local systems, when we could have one that works everywhere, according to a predictable economic model? Or a variety of economic models, that the world could choose from and watch play out against each other, not based on jurisdiction, but practicality?
Like other types of information, money will flow through the path of least resistance. As crypto becomes more accessible, all of the world's money will flow into it, because it will be better.
Parts of the world which have never had access to traditional financial services will leapfrog it and go straight to crypto, connecting directly to the rest of the world and taking advantage of the ability for people to be their own bank, instead of waiting for permission to connect to the old system.
Anything that is just information can be made digital, and anything that is digital trends towards fast, cheap, and free. Money is an example of something that is just information, like music, movies, and news.
All money will flow to digital currency in time because it is money that is built for the information age. We are at the very start of the S-curve.
> Currently, to send money between two people in the US, it takes 3 business days, typically costs some transaction fee, and is limited to the range of the border. It is slow, expensive, and local.
I received funds via Fedwire today. It took about five minutes. Both sides’ banks waived fees on account of our account balances.
It's true that some banking systems are improving in terms of speed. I don't think it's a coincidence that it's happening now that crypto has been around for 8 years, and is increasing in size.
Most immediate US-based sends and receives are virtual, based on 2nd-layer systems like Venmo and PayPal, not actually moving money but updating the numbers in your account before funds land.
Unfortunately for the Fed, speed and fees are not the whole story. There are still the problems of it not being global, not being private, inflating away, and not actually being owned by the people. (See the Cyprus banking haircut.)
These are small factors in most people's daily lives, but are important enough at a large scale to have money flow in the direction of crypto, and as a result all money will flow towards it until everyone has these advantages.
Since FPS (2009) in the UK Payments take seconds, not days. I'm not sure what you mean by virtual payments - all payments are entries in a ledger nowadays, they don't move physical money around.
Re the Cyprus banking haircut I wouldn't be so sure you are protected from this kind of action - exchanges, developers and miners all have leverage and have already used it to fork entire currencies, and force changes on users, impose currency controls, impose local laws (KYC etc) if you want to spend and exchange the currency.
I think on balance I prefer a slightly inflationary currency with low fees, few middlemen, and trusted counterparties and agencies to hold money (i.e. banks). Happy to ditch government control and our current system of money management though for deterministic inflation.
I also prefer one which is not at the mercy of developers or miners, and does not attempt distributed anonymity, which places severe constraints on speed, energy usage and consistency, and did not have high fees. At present Bitcoin is completely unsuited to global trade and unlikely to improve soon. I think if you were a little more clear-eyed about the downsides of current cryptocurrencies, you'd make a would be more convincing case.
> I don't think it's a coincidence that it's happening now that crypto has been around for 8 years, and is increasing in size
Fedwire is run directly by the Federal Reserve [1]. It traces its history to the first electronic funds transfers, which started in 1915. It started doing automated transfers in the early 1980s. Until the 1980s, it was free; after that it costs between 3 and 80¢ for member banks. Almost every American bank will waive their mark-up (or even the whole fee) for accounts with over $15 to 50 thousand.
Internationaly, there are numerous RTGS systems including but not limited to SWIFT, CLS, et cetera.
To understand this, we have to compare two classes of systems: real-time gross settlement (RTGS) [1] and net settlement [2].
Suppose you and I are banks. At 9AM I send you ten dollars, at 10AM you send me ten dollars, at 3PM you send me another ten dollars and finally, at 4PM, I send you ten dollars. At the end of the day, we're back where we started (minus transaction costs). If we actually moved the cash between our banks, that would be RTGS. It's as fast as funds can travel. It results in a lot of paperwork and means we must have the cash for potential transfers immediately available. No exceptions.
We grab a beer and say "let's settle, on the net, at the end of the day." The same transfer instructions come in. This time, though, no cash moves intraday. At the end of the day, we tally everything up and find we're balanced. We move money around internally an call it a day. Much easier, and therefore, cheaper. Moreover, between when I deducted the funds at 9AM and may have had to settle at 4PM, I might have made a margin loan. This is net settlement.
The next day, at net settlement, I owe you ten more dollars than I have. We grab a beer and say "let's settle the day after. That way, we can sell or borrow if we come up short." This is net settlement with delayed settlement.
From top to bottom, the system gets slower and more profitable. Many of these costs, e.g. intraday liquidity and risk management, don't go away with cryptocurrencies. Net settlement will always be cheaper than real-time settlement, and delayed settlement cheaper still.
Payers prefer ACH because it gives them time to scramble, if needed. Receivers prefer to receive by wire because it produces immediately-available funds. What gets chosen depends on negotiating leverage. I struggle to see the advantage of a crypto-currency based RTGS, which is less reversible than EFTs, slower than wires, and more expensive than both for most participants.
> Most immediate US-based sends and receives are virtual, based on 2nd-layer systems like Venmo and PayPal, not actually moving money but updating the numbers in your account before funds land.
This is really only the case in the US. Most of the rest of the world can have bank transfers that are cleared in seconds, for free. The US is just way behind on this, it's a solved problem for Europeans.
Why not paypal accounts with paypal debit cards? .. paypal can credit instantly and the card pulls to cash.
How about western union?
I don't think crypto coins or their blockchains solve billion dollar problems. I'd guess VC's have bet almost a trillion and the public a few trillion ~ this means a lot of trouble for investors and also perhaps it could wind down slowly and last for 10-15 years...
> Why not paypal accounts with paypal debit cards?
That's a fair solution. I trust my bank more than PayPal, but that's a matter of preference. Both systems are cheap, real time and covered with decades of institutional protection.
There a difference between saying digital currencies will take over vs bitcoin being the currency that takes over or others with similar flaw. As the first line of OP's post points out he's not saying every single digital currency scheme will turn out to be ponzi schemes but I think he makes some very valid points about many of them.
I don't think the early digital currencies we have are going to be the right ones to fulfill the type of future you are envisioning.
I think a more likely explanation is that Bitcoin started off as a well-intentioned project that out-scaled the original creator(s)' expectations. I personally think it's one of the most innovative pieces of software written in this era.
1. Early bitcoin users shoulder more risk than later users. They are rewarded for pushing the blockchain forward. You could argue disproportionately, but the rules are set in stone from the beginning.
3. There are other coins that do not require asics or have as high of energy cost.
5. What exactly is a government going to do? They could perhaps take control of the chain? The cost would be enormous. They could attempt to crack quantum, but some quantum-resistant variants are coming out.
An alternative view is that this is just the free market expressing itself through cryptocurrency - at a higher resolution than we've seen before.
> An alternative view is that this is just the free market expressing itself through cryptocurrency
If anything, the bitcoin experiment has shown how easy it is for entities with disproportionate amounts of wealth to completely overwhelm and game a free market.
1. The Bitcoin algorithm gave early Bitcoin miners much more of the supply for measurably less work/capital costs. Satoshi designed the supply to go almost entirely to early adopters. Just as easy the algorithm could have been designed to match work input with reward output, but instead all later users must work harder to earn less.
5. Ban exchanges, make sales/purchase illegal like how localbitcoin dealers being arrested for money transmission violations.
I tried looking for it. Haven't found it yet. It was supposedly distributed by Goldman Sachs to it's Clients, so hoping some client will post the actual report / PDF.
The first few bitcoin transactions happened when the government rolled out bond notes correlating well with a reduction in US$ money supply. The black market was paying 90% on a bond note a few weeks later it was 55% on a bond note. Bitcoin is making it easy for these parties in this market to repatriate money. The important consideration is this is usually principle+profits and so the risk vs reward of using bitcoin is at a minimum over ‘getting the money out’. I don’t think there is any problem with this. Will this reduce the need to use the US$ on the black market ? Yes if more people owned bitcoin then they could swap it for goods on this market rather than deal with any fiat transactions. Most of these transactions would be US$10k+-US$150k. Compare buying a bitcoin to the cost of offshoring US$ which is usually about 10% on principle. If you look at the math bitcoin is a good proposition assuming you can sell it on the other side. Bitcoin is useable in Zimbabwe or any other country which has a black/grey market for repatriating money.
Don't think they will ever even consider using this as a currency themselves, it's but a routine paper on how people have attempted to use it as a currency in my opinion. The title is simply to drive more readers to the site.
Any Cryptocurrency used by banks or finance companies will be behind locked doors without public trading and no media will be involved if they are smart.
With that kind of volatility, it would be difficult. If I were to sell my used car today in, say, BTC, it would be tough to determine at what price I want to let it go.
This is not to mention what how the buyer would haggle (e.g. "I think BTC will go up next week, so how about BTC XXX for your 2013 Hinda Civic?").
There are these universal truths - things created by all sentient beings throughout the universe. The wheel, nuclear power, markup with angle-brackets, and bitcoin.
They mention Zimbabwe moving to it as an alternative. The average Bitcoin fee is now $40 and the average weekly salary there is around $60. It is ludicrous to even think about asking someone to spend almost a week's wage for something as simple as a transaction fee. Bitcoin has failed completely at accomplishing the "banking the unbanked" goal that drew many of us to it in the first place. That story and that loss is a long, convoluted, and sad story for another time. But other cryptos with teams willing to adapt and listen to reason are moving forward with this torch.