Odd that only one of these points (2, scaling) relates to Bitcoin the protocol itself. And that scaling issue has raged from Bitcoin's first public disclosure. This clock has been stuck at noon forever.
The remaining three points have little to do with Bitcoin the technology and more to do with how Bitcoin is being used. All can be viewed as either a feature or bug, depending on your worldview. Consider the counterpoints:
- Nobody knows exactly how often Bitcoin is used for payments or what it's used to buy. As such, its users can enjoy much more privacy than they can with other payment methods.
- Constrained supply means protection against inflationist central banks.
- A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best.
The article does to mention Lightning Network, but doesn't give enough context to make anything of. It's operational now and there's been a flurry of development activity in the last year. LN has the potential to:
- increase transaction throughput well beyond 7 transactions/second
- increase user privacy
- increase usability
I don't expect journalists reporting on Bitcoin to go very deep. But it would be nice if they changed the playbook every once in awhile.
> - Constrained supply means protection against inflationist central banks.
This keeps being touted as a feature, but unless you are Zimbabwe it is a bug. "Supply-constrained" means "demand-driven price" which means "volatile." A useful currency is one that measures wealth consistency, like a meter stick. You don't want your money to mis-count your wealth. Hoping that it will mis-count your wealth in your favor is speculation, which is a bad, dangerous role for currency. You want to know that you can afford rent/bread next month (to say nothing of being able to pay your workers or business partners).
These are more fatal, fundamental design problems than low transaction rates or questionable usage-- they are built into the very philosophy of cryptocurrency. Explained in more detail here: https://www.bzarg.com/p/what-bitcoin-shows-us-about-how-mone...
> A useful currency is one that measures wealth consistency, like a meter stick
Currency doesn't measure wealth consistently, and makes a terrible measuring stick. That is a great analogy to take literally - most of the developed world cuts 2% off our monetary measuring stick per annum as a matter of policy. or people who aren't unusually interested in maths and finance (ie, most people) that is highly confusing, because they set their expectations then think that somehow they are getting ahead if they get a 1-2% pay raise.
That is yet another feature which is mistaken by crypto advocates for a bug. The 2% per annum is deliberate and useful; it means you have economic incentive to put your wealth to work on creating things-- new businesses, technology, public infrastructure-- by investing it, rather than passively sitting on it.
Imagine the reverse: a deflationary currency, which becomes more valuable over time. You would have little choice but to hold on to your wealth to avoid missing out on the gains. Why would you spend your money building a business or hiring workers? That would be a losing proposition compared to keeping a bank account which grows if it just sits there. Deflationary circumstances were, in fact, what precipitated the great depression.
2% is a gentle nudge to participate in the economy.
This is addressed and elucidated in the linked article.
Far from people holding on to their wealth to avoid missing out on the gains, they invested it heavily to avoid missing out on even bigger gains from being part of the technological revolution happening around them. Deflation was then a consequence (rather than a cause) of the economic growth that followed: with a constant money supply but more goods available for purchase, the price per good steadily fell.
So if you have an economy which is naturally growing very rapidly for independent reasons (e.g. because there is an industrial revolution happening) then it can outpace the deflation.
But you still have some people hoarding currency because some people have different levels of risk tolerance. One person is willing to build a factory at great risk because there is even greater reward. Another person says give me the steady returns from hoarding deflationary currency.
Getting rid of those returns pushes that person back into the market, requiring them to do something productive with their money instead of just sitting on it. Which is all the more important when there are many productive things to do with it. So the deflation caused growth to be less than it would have, e.g. 15% instead of 20% (in real terms), even if it wasn't enough to turn negative. But it was still a reduction.
And what happens when the economy is only growing at a normal pace and you introduce a deflationary currency?
In practice what tends to happen is that debtors are incentivized to start using alternative currencies because their debt load becomes unbearable otherwise, and then the inflationary currencies drive the deflationary ones out of circulation through Gresham's Law [1]. Hoarders end up holding useless tokens that are eventually demonetized entirely.
The gold-backed dollars of 1873 suffered this attack in two waves. The first was the Free Silver movement of 1892 [2], which sought to allow free coinage of silver currency as a way to create inflation and lower debt burdens for poor farmers who were being exploited by the Northeast's industrial-financial establishment (sound familiar?). This ultimately failed, although it did manage to inspire The Wizard of Oz [3].
The second was the steady inflation of Federal Reserve Notes (i.e. the dollar) from 1914 onwards. This culminated in EO 6102 [4], which made it a crime to privately own significant quantities of gold. Someone who faithfully hoarded gold coins from 1873 onwards would've done great until 1900, okay until WW1 ended, found themselves in the odd position of having money that was worth more on the black market than as legal tender (much like American Eagle gold coins have a face value of $50 today but a market value of about $1200), and then been forced to turn in their gold coins for their face value (effectively confiscating their assets at a loss) in 1933.
I don't have a dog in this race, I just want to add the historical perspective.
I think that Bitcoin already has failed as a currency, outside of black markets. However, that won't stop it from having value: gold failed as a currency in 1933, but is currently worth $1300/oz. I think we'll see another 1-2 Bitcoin bubbles, each with peaks significantly higher than the rest as Bitcoin are taken out of circulation, until it finally falls to Gresham's Law.
I also think that conditions are extremely ripe for a currency crisis in the U.S. dollar within the next 5-10 years. There is a market now for a new currency, as evidenced by the ~3700 contenders (just in crypto alone, not counting in-game currencies for video games or mobile payment networks) launched within the last 2 years. I suspect the eventual winner will be an inflationary cryptocurrency that solves the scaling issues and has a pretty (and fast) UI. Could be Ethereum if they get their act together with Casper, or could be something yet-to-be-invented.
> gold failed as a currency in 1933, but is currently worth $1300/oz
Yes, because gold is a commodity, not a currency.
In fact, if you treat gold as a metal with utility similar to copper, but scale the price of copper proportionally to gold's scarcity, you get a price that is very in line with the actual current price of gold. Since copper's value comes almost entirely from its utility as a metal, this suggests that something similar is true of gold.
That aside, comparing bitcoin to gold makes bitcoin look bad in multiple ways: The analogy is not good, and even if it were good, that would still be a bad thing. The linked article talks about this.
> I suspect the eventual winner will be an inflationary cryptocurrency
Almost certainly impossible. Proper active currency management requires anticipating the public's reaction to the management. Even if an algorithm could do that (in other words, a strong AI which is at least as good as people at understanding human psychology), if the algorithm were public, the public could/would use the algorithm to anticipate changes in currency policy, and that knowledge of the future would change what they do with their money, specifically in the direction of instability. So an open algorithm (a fundamental philosophy of crypto) is fundamentally at odds with the very notion of an actively managed money supply. The linked article talks about this too.
Isn't the bitcoin block reward a form of inflation? Of course the block reward shrinks over time and eventually only transaction fees will be used to pay miners but there is no reason this has to happen. If the block reward instead increased by 2% every year inflation could last forever.
Changing the reward/transaction price/whatever by a certain fraction every year doesn't imply that the price will move by the same amount, due to the original problem mentioned above: If the supply is rigid (i.e. not responding to market forces), then the price will be demand-driven, and demand can/will change arbitrarily, which means high volatility.
To maintain fixed inflation, the supply would have to be actively managed (and I assumed that's what was meant).
> I also think that conditions are extremely ripe for a currency crisis in the U.S. dollar within the next 5-10 years.
Why?
> There is a market now for a new currency, as evidenced by the ~3700 contenders (just in crypto alone, not counting in-game currencies for video games or mobile payment networks) launched within the last 2 years.
That is a stretch. Almost none of these currencies are legal tender, anywhere. There is a lot of scams, pump 'n dump, in this world.
I do agree there are valid purposes. Though those are not necessarily legal.
The black market and international market for example. Something like Monero can be used for sketchy business. It can be used to avoid taxes, to pay for drugs, and to get rid of a weak currency.
For me, a European utilizing EUR and staying in legal waters, no it isn't interesting...
1. Rising indebtedness, both private and public, and concentrated asset ownership. Debtors have an incentive to favor money creation and inflation because it reduces the value of their debt in real terms; creditors have an incentive to favor the opposite. When a small number of creditors hold the loans of a large number of debtors, or when the government itself is a major debtor, there are significant democratic pressures toward monetizing the debt. (Berkshire Hathaway annual reports talked extensively about this in the late 90s and early 2000s and still sometimes do, though Buffett believes this will happen through gradual inflation rather than a crisis.) We've already seen some of this with the political pressures on Janet Yellen and Jerome Powell this tightening cycle.
2. A large injection of money through QE that has so far stayed in capital markets and not made its way to every-day transactions. One of the great mysteries of the 2010s is why the large increase in the money supply did not cause inflation. My explanation for that is that it did - but only in asset markets, like stocks, unicorn startups, CA real estate, Bitcoin, etc, because that is what the people who had money chose to buy with it. This is viewed as wealth inequality rather than inflation. If you fix the wealth inequality - either by government redistribution or by rich people finally choosing to consume rather than invest - you will get the inflation, and may get it very rapidly.
3. Historical perspective: once inflation pressures start, they are very difficult to control, and usually result in a feedback cycle where expectations of future inflation cause people to get rid of their cash more quickly, which makes the velocity of money rise, which makes inflation even worse.
4. General loss of trust in institutions, particularly the financial industry, the government, and the Federal Reserve. Obama's actions in 2009 basically saved us from a total financial meltdown. It did so at the cost of trust - there's now a widespread (and not entirely unjustified) belief that the system is rigged against the common person, because when they make dumb financial decisions they're on the hook for it but when Wall Street makes dumb financial decisions the government bails them out.
5. Greater information awareness - thanks to the Internet - and also the rise of filter bubbles, again thanks to the Internet. The former exacerbates the loss of trust in institutions. The latter allows people who have lost trust in existing institutions to start forming their own, and to recruit other people towards their point of view. Together, they create competition where hegemony previously reigned.
6. The rise of potential technological alternatives. Bitcoin sucks as a currency - it takes 11 minutes to confirm a transaction, the UI is bad, fraudsters and scammers abound, and the network is limited to ~7 TPS. However, all of the elements of a functioning currency are there. People do trust it to maintain its value - 10 years in and people have lost individual Bitcoins through failing to secure their private key or entrusting them to the wrong exchange, but the network itself has never been compromised or rewritten. It's possible (though clunky) to transfer value with it. It's possible to maintain stable identities and records of ownership. Efficiency and ease-of-use can be fixed, and the fundamentals are there.
7. The potential need, in the near future, for computers to act as economic agents on their own behalf without human intervention. Services like Ethereum, Iota, Golem, and Filecoin are fascinating here. It may be that cryptocurrencies end up being foremost for machines to transact in and only incidentally for humans.
Which is to say, the US economy at the start of the industrial revolution is an outrageous outlier and not something you want to cite in a discussion of the baseline effects of deflation.
The present day economy from 1995-present is also an outrageous outlier and one that shares many features in common with the period from 1870-1890. Hence its relevance.
If you want to look at the total timespan of human economic history, the only economic systems that have proven stable over millenia are feudalism and slavery. Democratic capitalism (and particularly post-WW2 democratic capitalism in America, which is even more of an outlier) is a comparative blip on the timeline. We don't live in the 1300s, though; we live in 2019, and so it's worth considering how our present time differs from previous epochs and how it might share similarities with some.
Which ones? The only ones I can think of that were a major problem was Japan's deflation from 1990-present, and the Great Depression.
Incidences of short-term (1-2 year) periods of deflation have been common, and strongly associated with recessions either concurrently or within roughly 18 months. That link is uncontroversial. Over the long term (10+ years) the connection seems a lot more tenuous, though. The monetary contraction and subsequent recession of 1921 was followed by the Roaring Twenties. Volcker's recession in 81-82 was followed by robust growth throughout the 80s and 90s.
Ireland's deflationary episode in 2009 was followed by a return to growth. The U.S. periodically had deflationary episodes and sharp recessions throughout the 1800s, but economic growth was quite strong over the century as a whole.
Actually, looking at those incidents is a strong argument for dynamism and technological determinism. Deflation was a large problem in periods where there was no up-and-coming growth industry to absorb surplus labor and liquidated capital. It was a non-event when there were growth opportunities where these factors could be re-deployed. The lack of growth wasn't caused by deflation, it was caused by overly rigid mature industries and an inability to find new ways of doing things that are worth investing in.
>That is yet another feature which is mistaken by crypto advocates for a bug.
Whether it is a bug or a feature depends on whether it favours you or not. Anyone who owns assets and pays wages would think it is Christmas every day of the year. If nothing changes, they draw ahead without needing to do anything.
> Imagine the reverse: a deflationary currency, which becomes more valuable over time. You would have little choice but ...
No, I'd do exactly what I do now and invest the money in things that grow faster than the value of the currency. Nobody would care that the currency is deflating at 2% p.a. if there is 5% to make in the stock market.
The value of having a consistent measuring stick to figure out what is going on without constantly having to twiddle numbers for inflation would be a remarkable boon.
> Why would you spend your money building a business or hiring workers?
That one is an easy one, because people generally value present consumption and would give you money in exchange for goods and services. As a business owner you have a chance of ending up with more money than you started with.
> it means you have economic incentive to put your wealth to work on creating things-- new businesses, technology, public infrastructure-- by investing it, rather than passively sitting on it.
Reading between the lines, "it means your money is going to go to fund the activities of the rich". Perhaps we shouldn't be surprised that the delta between the working class's wages and productivity has been increasing since the Nixon shock.
Why not have inflation at 10% to have even better "nudge" for people to work?
You are essentially communicating the same thing that the crypto nerds are saying, just from a different angle. The individual pays the 2% "nudge", and crypto people don't prefer paying that, and that's why they use crypto. Whether it is good for society or not is irrelevant in the individuals context.
Even if you are investing your cash ‘productively’ and keeping none under your mattress you are still paying the 2% nudge as your returns are partially eaten by inflation. It just reduces investment returns in real terms, investment does not make the cost of inflation disappear.
This affects poorest members of society disproportionately because they don’t have spare capital to allocate in order to offset their loss from inflation. They just pay higher prices.
If someone invests $10 million in stocks and loses 2% of potential growth through inflation this amounts to $200,000. The poorest members of society with $10,000 or less in their bank accounts are going to lose at most $200 per year. So tell me how does this affect the poor more than the wealthy? Those price increases you mentioned don't happen in a vacuum. They are caused by higher wages.
> how does this affect the poor more than the wealthy?
Because the $10 mil in stocks also appreciated by the roughly 7% average annual S&P 500 returns, meaning the rich person's wealth still increased 5% after 2% inflation.
The $10,000 in a current account earned 0.5%, making the poor person 1.5% poorer after inflation.
It's a textbook case of 'the rich getting richer, and the poor getting poorer'.
The poor do not have the flexibility to allocate their capital to higher yield assets that allow them to 'escape' inflation.
I am not advocating a fringe position. In fact, the first three papers I found investigating this issue came to the same conclusion: inflation actually increases poverty:
The poorest members of society are disproportionately indebted and so they will disproportionately benefit from having those debts reduced by inflation.
Chile has a separate currency called UF that is inflation adjusted. The UF is used to denominate almost all loans to middle class. While they are earning generally in pesos but their debts are in UF and hence not reduced by inflation. The poorest members do not have access to loans at all.
> It's very simplistic to say that (low, predictable) inflation hurts individuals.
Hurting might be the wrong term. Analogy would be something like having some bonus card which gives you 2% off for every purchase. Some people obsess about having that kind of card, but most people wouldn't care, because it is only 2%. Obviously the 2% difference isn't "hurting" most people, more like very small tax.
Btw there are cashback credit cards which give back something like 0,5% to 1%, I wonder how popular those are...
> The 2% per annum is deliberate and useful; it means you have economic incentive to put your wealth to work on creating things-- new businesses, technology, public infrastructure-- by investing it, rather than passively sitting on it.
I think that's what the child poster meant by bug. It's artificial and still: Why?
Mankind came to what it is 99.9% of time without artificial devaluation.
> Mankind came to what it is 99.9% of time without artificial devaluation.
Because productivity was practically constant for this 99.9% of human history. Therefore the monetary base could be practically constant, too. With the industrial revolution, growth became obviously exponential.
Inflation means the value of money stays coupled to the changes in GDP, just as in the millenia you apparently value for exactly this constant money <> gdp relationship.
No, we had natural devaluation. Most resources, hoarded away, will spoil. Everything has an expiry date, even social capital - do me a favour today, and I might return the favour tomorrow. But by next year I'll have forgotten about it.
It makes sense, really. Why should finding a old penny under the floorboards, nearly worthless when it was minted, make you rich?
Inflation is a tax on wealth. Deflation is a tax on income.
With inflation those who get a 2% pay raise stay where they are and those who have wealth lose some and are incentivized to turn it into income which eventually becomes a pay raise.
With deflation people are incentivized to turn their income into wealth which means less pay raises. Meanwhile those who have wealth gain some without doing anything.
with deflation, you will only invest in good, safe investments. Taking risks gives less rewards, so you should end up with less speculation and wasted investments. I think deflation makes for a more stable financial world, as it will take away the booms and busts cycles. Economic growth only occurs when real technological and productivity improvements happen, rather than the current way of speculation and wealth redistribution via betting on boom/bust cycles.
If you get were paid $100/hr 5 years ago and are being paid $110/hr today, then you need to have a pretty reasonable idea of economic policy and being able to use enough mathematics to calculate that you are being paid exactly the same amount.
I expect most people on HN wouldn't really struggle with that, but that is because this is a forum infested with scientists, engineers, businesspersons and financiers. Most people won't be able to grasp that being paid $100/hr 5 years ago and $105/hr today means they have taken a pay cut. They would struggle to correctly calculate what the break-even rate would be.
This anti-inflationary nonsense is the antivax of the finance world. There’s a huge reason it’s done essentially universally, but nobody alive had to live through the chaos that inflationary monetary policy was borne from.
It’s fine to think that there might be other, better approaches to solving those problems. It’s fine to argue that central banks might not always act with the best interests of the economy at heart. But pretending like those problems weren’t real and that we don’t need any of it—as the financially-illiterate cryptocurrency community seems to do—is absurd.
The reason why it's done essentially universally is not necessarily because it is good for the economy in general, it needs only to be good for those who control the issuing of currency (governments).
And it is beneficial for them to do so simply because it enables them to spend more without having to take unpopular measures like raising taxes.
I have read the vast majority of the arguments for having inflation or deflation and to be perfectly honest I find most of them to be unconvincing and essentially boil down to "it's good because its good".
Both inflation, deflation and stagflation have their benefits and drawbacks and they all have a place and should all be used, because economic scenarios and circumstances differ over time and place. To state that we should all have at all times everywhere 2% inflation is dumb, dangerous and frankly if you hold that sort of view you have no business being anywhere near monetary policy because you're not an economist, you're a priest.
> but nobody alive had to live through the chaos that inflationary monetary policy was borne from.
This is a dangerous narrative. By strictly econometric measures, the 2008 crisis was not too far off of, say, the great depression. By and large, I wonder if the reason why people aren't dying on the streets (aka "chaos"), etc, is because we have reliable sources of food, access to medicine, etc.
Are the people of Venezuela not living through chaos?
Outside of the US, EU, and a handful of other countries, the rest of the world is fairly chaotic.
Give it time, and the banks&governments that create money from thin-air will actually be the ones seen as the anti-vaxxers of the finance world instead, very soon.
Suppose you hold a large amount of gold. Someone invents a new method of prospecting that allows them to discover new gold deposits, deploys it successfully at scale and increases the volume of gold on the market such that gold prices decline by 2% annually relative to other commodities.
Is this person a thief? Have they stolen from you?
Replace "new method of prospecting" with "new blockchain" and you have the same problem. It's hard to argue that none of the money that went into ICOs and other coins during the run-up would not have gone into Bitcoin if it were the only possible blockchain.
But Bitcoin is a cryptocurrency. Every new shitcoin competes for investment and usage and devalues all other cryptocurrencies, including Bitcoin, to the extent that it succeeds.
And nothing has dethroned Bitcoin yet, but that isn't a law of nature. One of the others could become dominant. Even if Bitcoin then continued to exist and be used, that would devalue it substantially.
> Is this person a thief? Have they stolen from you?
not directly, but they sure have redistributed that wealth you originally had. Whether it's legal or not depends on the law, and how much power you can wield.
inflation affects the poor more than the wealthy (who has means to invest at greater-than-inflation returns), while the poor at best keeps their money in a bank account and earn less-than-inflation interest.
> Hoping that it will mis-count your wealth in your favor is speculation, which is a bad, dangerous role for currency.
Speculation is rampant also with traditional currencies - I remember seeing reports where 80-90% of trades in traditional forex markets were classified as speculative.
I personally think there is a lot benefits from speculators. Speculators create pricing signals, help price things more effectively and create better liquidity. All market participants benefit from better pricing and liquidity. The more we have speculators on the market, the better priced things we have on the market and that in the long term means stability and predictability.
> Speculators create pricing signals, help price things more effectively and create better liquidity.
Care to elaborate on the liquidity part? I fully agree that forex speculators play significant role in price (exchange rate in this case) discovery. Although, the money used for speculation is essentially locked up in the price discovery mechanism and if anything that reduces liquidity available to actual economy.
One speculator enters the market = one more buyer and seller. If you go to a stock exchange, you see the bids and asks. The more there is those, the better the liquidity. Each speculator adds either bids or asks or demand for them.
The difference is that speculative traders in a normal market are making bets about an actual real underlying value. A share in a company represents some productive asset, a USD can be used to pay tax obligations, even gold has industrial applications.
No one knows, maybe some have same theory of value and that's why there is speculation? I see nothing special in bitcoin, it is just one of the numerous things that the market tries to value. If the market is only speculation the value should go to zero in the long term. If there is some value in addition to speculation, the value should be non-zero - and it is left to the markets to decide, what the actual value is.
> The difference is that speculative traders in a normal market are making bets about an actual real underlying value.
No, they are making bets about future market value. Ideas about “underlying” value are just a subset of the potential inputs to such a bet, but they are not what the bet is fundamentally on.
>the remaining three points have little to do with Bitcoin the technology
what bitcoin is as a technology isn't as relevant compared to what it is as a means of exchange. people don't care about the protocol, they care about the value bitcoin provides to them. To make technology the most important sales pitch of a currency is an ideological choice on part of the people pushing for bitcoin adoption, not some sort of obvious or intuitive insight.
> Constrained supply means protection against inflationist central banks.
This again, is a non-issue for consumers and everyone who isn't ideologically invested in crypto-technology. As long as you don't park your money under the mattress for a hundred years but actually spend it the stability that existing currencies provide is sufficient (and much preferable to the volatility of bitcoin.)
> A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best.
That's obviously not the point. What is worrisome about bitcoin isn't that it's used for fraud at all, it's that fraudulent activity and weird con-like schemes constitute a significant, if not majority of activity. Which isn't surprising if the two points above are taken into account, it simply is not particularly useful for anything else.
Constrained supply is a non-issue until it becomes an issue. But, this is a whole new currency being set up. Making inflation a non-issue from the start is a feature.
However, I think you are trying to compare Bitcoin to the US Dollar. US Dollar inflation has been reasonable if you live paycheck to paycheck. But, remember Bitcoin is not just for people living in the Bay Area. It’s also for Venezuelans, Zimbabweans, etc...
>What is worrisome about bitcoin isn't that it's used for fraud at all, it's that fraudulent activity and weird con-like schemes constitute a significant, if not majority of activity.
Sorry but it's not 2015 anymore. I mean yes it does happen but not nearly as much as people think, probably not even much more than with regular currencies. It's true though that people fall for crypto cons more easily since a lot jumped in hoping for miracle money without even understand what they're doing. Thankfully this isn't the case anymore since hopefully enough people have learned about it and will pass that knowledge to others.
>Nobody knows exactly how often Bitcoin is used for payments or what it's used to buy.
I wouldn't go that far. This is much more related to Bitcoin's relative "newness" and lack of mature AML tools than anything inherent in the protocol. There are a number of startups that offer blockchain tracking and forensic analysis capable of tracking the kind of money flows you describe. Your statement seems much more applicable to something like Monero or other obfuscated ledger intentionally designed for privacy.
1) Years ago? LN is barely a year old. You're mixing shit. And if you're referring to the fact that no pizza restaurants accept LN yet, well, that's criticising adoption, not the technology.
2) Hahahaha, KYC? I haven't found any LN payment hub that required me to show them who I am. What FUD are you spreading? This statement alone reveals you already as some kind of shill, trying to spread misinformation by deceiving.
3) The OP is already saying that it was not LN that failed, maybe something on his side (internet connection?). Anyway it could be true that UI/UX is not the best at the moment, but we all know this takes time to polish. There's no design flaw that prevents LN to have a decent UI/UX. This is just the equivalent times for when Linux OS didn't have a GUI, did that mean that Linux was useless?
The channels are too small to be viable. There is too much at risk if you can't settle your money. Only the blockchain is settlement, which is why Bitcoin Cash made throughput a priority worth forking over.
These are two claims popular with proponents of competing cryptocurrencies and contentious scaling roadmaps that have been rejected by the developer community. The claims have been refuted and generally aren't taken seriously.
Constrained currency supply is definitely a problem. It rewards the early adopters by many orders of magnitude, making Bitcoin look more like a Ponzi than a real currency.
Constant issuance for eternity would have been a much better solution. For example 1 BTC per minute, for an eternity. Rewards early adopters because low price, but still doesn't restrict the use of the technology as a form of money as it's not a constantly diminishing pool, but has reasonable tail emission, possibly reaching an equilibrium, unlike Bitcoin.
No doubt there will be a big fight about this in the future.
There are actually lot of cryptocurrencies with issuance for eternity: dogecoin, grin comes to mind at least. The inflation parameters are the easiest to change, if for Bitcoin those are a problem, some other cryptocurrency with better parameters can take over. The market will decide, as no one forces anyone to use specific cryptocurrency, there is pretty much free competition.
I wouldn't say there are a lot. Among pure PoW coins I only know of Dogecoin, Monero, and Grin. Of those, Dogecoin and Monero have tail rewards at 1% and 1.7% (respectively) of initial rewards, while Grin has an eternal emission of 1 Grin per second. Kind of shocking how it took more than 10 years for the simplest possible emission to be tried...
> A currency that isn't used to commit fraud isn't very useful.
I think the mistake here is to think about currency purely in a technological way (what can I do with it?). Money is ultimately a social phenomenon. People use money to do stuff in a society, and have evolved ways to make these transactions safe and convenient enough for everyday use. If you store your salary in a bank in USD, there are multiple societal mechanisms that ensure the money are not going to disappear. Can they break down? Sure. Are they likely to break down? Not very, unless all the rest of the society already did.
Now what if you stored your salary in bitcoins instead? None of these societal mechanisms work for you anymore. I am not even talking about taxation and hassles you'd have to overcome to manage a legal business in bitcoins, but what about fraud prevention? Insurance? Safety of transactions? Knowing your money aren't going to disappear overnight? This not something Bitcoin user can have. Maybe with time the society would build such mechanisms, but until it happened, Bitcoin remains a failure as common currency (as opposed to a toy, a speculative investment or a means to transfer money in a private way between parties that are for one reason or another are reluctant to use the banking system).
Just want to point out a lot of people's money DID disappear over night during the 2008 crisis. Some banks actually went under during that time, along with anyone's money sitting in it. People lost all savings.
> Some banks actually went under during that time, along with anyone's money sitting in it
That's not true, unless it either a) wasn't money deposited in the bank (i.e. it was an investment in bank stock - an inherently risky activity) or b) were deposits over FDIC insurance limits. That's $250K per account. What's bitcoin deposit insurance limits? Ah yes, $0 per account. Is there any insurance company daring to insure bitcoin deposits? I haven't heard of any.
There are some issues with capital lockup costs, so other level-2 scaling solutions are also required. There's been more discussion of a Bitcoin bridge for Cosmos, as well as Ethereum. Tendermint sidechains is what crypto needs. Tezos recently announced plans Tendermint adoption, as well as Binance w/ the Cosmos SDK.
Disclaimer, I'm a longtime lurker & cofounder of Tendermint/Cosmos. Cosmos is coming.
Bridge downgrades your security to sidechain validator set, when a payment channel keeps it on the level of your root chain. If a sidechain is compromised their validators can double spend, and some users lose assets. Cant happen to channels by design.
Definitely a lot less if you look at it in terms of lost keys. I'm speaking specifically about the scenario where no keys are lost, the total possible supply of bitcoin will still never be 21M.
If a majority of miners (hash power) decide to mint more, there will be more. The code change is a simple one. The politics and economics are, as always, much more complex.
If a majority of full nodes (validators) reject blocks from those miners, their chain will be orphaned and the block reward will fall to the subsidy they've created for themselves (where block_reward = block_subsidy + block_fees).
Bitcoin has value because this just isn't possible, in practice.
As long as you run your own node, it doesn't really matter who runs the rest. If a peer relays an invalid block to you, disconnect from that peer and defer to the chain with the most work.
The full node operators are typically holding Bitcoin, and I just don't see anyone willingly accepting a reduction in the value of their assets. Any such block would be viewed as an attack on their sovereignty.
You don’t understand how currency works. A deflationary currency will encourage people to horde it instead of using it for commerce, so it becomes “digital gold” rather than a means of exchange so immediately it’s no longer a currency.
Your argument is that they are repeating known flaws, but so what? None of the flaws have been fixed or will be. Bitcoin is dead. I think it’s sad how people are still trying to hype it. I wonder how many people threw away life savings on this fad.
You don’t understand how currency works. A deflationary currency will encourage people to horde it instead of using it for commerce, so it becomes “digital gold” rather than a payment network.
Your argument is that they are repeating known flaws, but so what? None of the flaws have been fixed or will be. Bitcoin is dead. I think it’s sad how people are still trying to hype it. I wonder how many people threw away life savings on this fad.
Consider what happens when another software hack/bug is found in Bitcoin/Ethereum/cryptocoin client wallet software, allowing an attacker to double spend (rob exchanges/OTC trader/dark pools), or generate more BTC for free. This could be done by any of the few developers using obfuscation techniques. See how easy it is to hide malicious code even in open source projects, there's several underhanded obfuscation contests that demonstrate open source code can hide malicious backdoors even with vigilant audits.
A Bitcoin bug happened a few weeks ago allowing any attacker to generate infinite free BTC, but the network survived only because an honest researcher chose not to exploit it. [1]
Constrained supply means protection against inflationist
central banks.
Bitcoin's inflation rate is higher than USD:
The current inflation rate for the United States is 1.9%
for the 12 months ended December 2018, as published on
January 11, 2019 by the U.S. Labor Department.
Bitcoin inflation rate per annum: 3.83% [2]
4. fraud in exchanges
This is unraveling right now with Tether and Bitfinex. [3] It should be assumed any and all cryptocoin exchanges are operating as fractional reserves, and front running customers, unless they can prove otherwise.
Bitcoin has a supply inflation rate. It's inflation rate with respect to price over its history, which is what you're comparing with USD, is quite negative.
People have been predicting the collapse of Tether for several years now, and yet, it still trades nearly 1:1 with USD. Funny that the people who actually have skin in the game seem to disagree.
I wish I could upvote your first paragraph and downvote your second -- the latter is a fully general counterargument against the possibility of delusional bubbles, since, in most such cases, the people bidding up the bubble asset do have skin in the game.
Well, of course you're correct. But the market is usually rational, and to the extent that it is not so, it generally corrects itself relatively quickly. Now, it is possible that this is one of those cases where that isn't happening, but we should require fairly strong evidence to believe that. That evidence has not been provided in this case.
Increase of the available supply of Bitcoin, which is occurring through mining activity. Every day, every hour (usually) more Bitcoin exists. For a while still, anyway. The rate is cut in half every few years until all 21 million have been mined, then inflation is 0 (negative in reality as some Bitcoin become inaccessible, e.g. when users lose their keys).
Not only is the worst case a disaster, but even the best case is: Imagine the usability of trying to onboard another 7 billion Lightning Network users at 7 transactions per second.
Compared to what kind of payment onboarding system? Outside of free cash, anything related to setting up a bank account, or a credit card can take up to 7-10 business days if not more, post an application to do so. Do you know of any onboarding system of payment that is faster? It seems like this is just a random statement by itself that is not in the context of all the other onboarding mechanisms of every payment system currently used. Care to calibrate Lightening onboarding with any other mass payment system? Even if you use square, paypal, venmo etc, they need to be linked to real checking accounts, credit card, other verified (with long onbaording) payment systems etc.
Furthermore, 2-3% of all transactions on many of these systems are fraudulent, but the payment systems ACCEPT This as an acceptable level of fraud and cover the expenses, in order for faster transactions.
Square knows for example it won't be used in coffee shops over another competitor if Square on average takes 20 seconds longer to process metadata in conjunction with the transaction itself to see if its an attempt/fraudulent charge, so they consciously cut corners here and accept this liability so we can all get coffee 8x a day.
This is why bitcoin has industry standard confirmation blocks so the network can address and blacklist attempts at doubles spends and keep a master chain.
This is basic blockchain 101 compared to standard knowledge of onboarding to every en masse payment system we all anecdotally have experience with layered digital transaction technology and the losses associated with that.
The lightening network is as mentioned above with links, rapidly evolving to expediate this while still maintaining the underlying benefits of transaction consensus that avoids fraud.
You may deal with fraudulent exchanges as you will do with fraud around any new technology (heard of the internet before? there were lots of sites for fraud, and much worse when it came out, and still are, we just all get smarter about what we click, and hopefully in this case, who we throw our money at, which you should be doing anyways for any new technology...) but the fraud here is associated with like top ranked comment said, not the protocol but the flurry of business activity around it, and is really null and void to the technical conversation itself, which is really what evolves communities like this past these handwavy statements...
I really don't mind constructive criticism of blockchain based technologies, but the issue is the conversation rarely evolved because of cargo culting statements like this that ignorethe very benefits of moving to a blockchain based payment system.
> Outside of free cash, anything related to setting up a bank account, or a credit card can take up to 7-10 business days if not more
You are forgetting concurrency. A bank doesn't stop processing transactions for 7 days while opening 1 account. Thousands, millions, or more accounts can be opened concurrently. If account demand skyrockets more branches can be added, more tellers hired, banks can compete on efficiency of service.
Bitcoin's 7 TPS rate limit is global and immutable (without a fork). You cannot add more nodes to satisfy demand. You cannot add more hash power to satisfy demand. You get 7 TPS or you try to get consensus on upgrading (which almost always means a fork, which ironically is an extreme form of fiscal stimulus as it doubles monetary supply).
you don't have to do it in the street...but yes this is true for many exchanges if you are wanting to take an existing currency and turn it into another one, or if exchanges are how you are looking to transfer money, you can also receive btc without ever having bought it, and send it to addresses and never use an exchange.
Regardless, your point only further proves that the bottleneck for onboarding users to lightening en masse is, if a problem at all, not one unique to that network, or any other payment system we currently use.
My point is that since its impractical for most people to use bitcoin without a bank or credit card it's not really a viable alternative since the system it is attempting to subvert is still necessary. If you're an enemy of the state and need to move your money covertly, bitcoin offers some limited utility, but for the vast majority of people it is a waste of time.
You forgot that this initial on boarding transaction is just a tiny step in the complex process you have listed above but this tiny step is already a significant barrier that prevents more than 200 million users to open a channel per year. This is already assuming that those channels never have to settle and no other transactions happen on the blockchain ever.
In the state bitcoin currently is it wouldn't even handle the on boarding process of those 500 million users. The blockchain would be congested for years.
Three week wait, or pay $30 to settle. That was December 2017. The channels will freeze and a lot of people will wish they had money that works when they need it. Like Cash.
With 1m tx per day you need 3 weeks to close 21m channels. Reasonable for a protocol bug. If just one hub goes down however, it will sort out in a few days. Like I said it only should cater to economic majority aka 1% so 70m wealthy users need 2 months.
Btc’s current limits are far from optimal but layer2 itself is working great especially on other chains.
Your numbers are incorrect. 1m transactions per day is almost twice as fast as the theoretical capacity of Bitcoin. (~600k transactions per day assuming 7tps)
I was citing eth's ones. Bitcoin is a poor platform for doing layer2 due to unfixable restrictions. What matters is it's about 600k~1000k (not 100m) and even with these it supports quite a lot of users. Supporting more than 1% is desirable but not mission critical.
Flaws in Bitcoin make a lasting revival unlikely. Layer2 is better deployed on new chains, while discussing poor bitcoin life choices leads us nowhere.
Once there is a critical mass, there is less need to close. Also, in fiat banking, Argentinians had their pesos devalued 4 to1 overnight. Zero chance to withdraw in that case.
Every time I read something about Bitcoin dying I cringe.
It's another article written for the attention seeking readership.
Bitcoin (and many blockchain based coins) spiked astronomically. They all came back down as well but still unbelievably higher than where they were after the Mt.Gox crash.
20k wasn't even realistic due to the fee's being insane. The entire system is a system with sliding levers on consistency and forced supply and demand.
If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that.
This system is like water with all of the cracks able to be found for optimal strategies. There is so much to unpack in this it needs an article which has been written a thousand times but when you pick apart FedNet, ACH, and all of the systems amidst that, you just have something that you've grown up and obliviously trust.
Bitcoin networks provide you visibility into all of it....none of this is pretty, but it's a lot more obvious from Point A -> Point B.
>If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that.
There's really no way to prevent ASICs. With any function you pick, it will always be possible to create a custom hardware + memory design that beats a general-purpose CPU/GPU.
This is the big ProgPoW debate currently being waged over in Ethereum land. You are right, it isn't possible to prevent ASICs, in fact everything is technically an ASIC.
So, with that in mind, the goal of ProgPoW is an attack on the economic incentive to build an ASIC, not an attack on the ability to build one.
In other words, make purchasing a commodity GPU as inexpensive as a custom ASIC. If that is the case, there won't be an incentive to build ASICs.
ProgPoW also has a second line of defense where a hard fork with a minimal set of changes, can brick existing ASICs.
After the initial ASIC "gold rush" Bitcoin mining is trending towards decentralization again. ASICs do not mean an eternal approach to centralization, it is just a temporary step along the adoption curve. See https://www.blockchain.com/pools
Also, ASICs are the most energy efficient way to perform proof-of-work.
Proof of work is oblivious to efficiency. Efficiency gains are met by equivalent increases in mining difficulty, since the network attempts to calibrate towards a constant mining rate.
Preventing ASICs doesn't prevent those with more monetary resources from consolidating in the hardware space.
The ASIC-resistant coins aren't that much more profitable to mine for a home miner, and if they were you'd just get edged out by more people with warehouses full of CPU's & GPU's in Iceland and China and what have you.
As long as people can buy ASICs, what's the risk of centralization? I'm pro-ASIC because it dissuades hackers from using my computer to mine crypto. If anything you should be against large mining guilds. That's the real centralization.
hypothetical situation.. the Russian government spins up an enormous amount of processing power and performs a 51% attack on bitcoin, and "steals" billions of worth. is there any recourse?
You can't steal bitcoin, you can just double spend and the market would detect that immidiately and the price would plummet, leaving you with billion dollar worth of worthless ASIC infrastructure. So yeah the recourse is it would directly cost you billions and you will gain nothing.
Chainalysis reckons that Bitcoin accounted for around $812bn of genuine transfers of value.
Of that, Ms Grauer reckons, only a fraction was used to buy things. Around $2.4bn went to merchant-service providers, which handle payments for businesses—a piffling sum compared with the $17trn of transactions such as Alipay and WeChat Pay, two Chinese payment apps, in 2017. Darknet markets, which sell stolen credit-card details, recreational drugs, cheap medicines and the like, made up $605m, and gambling sites $857m. Most of the rest was related to speculation.
Is this saying that less than 1% of all "genuine transfers of value" in Bitcoin are for goods and services other than speculation?
According to wikipedia, the global FX market alone accounts for $5.09 trillion dollars per day in transactions [0] in 2016. Global GDP clocked in at $75.4 trillion U.S. dollars in 2016 [1]. The FX market alone accounts for two orders of magnitude more transfers of value than global GDP...I'm sure if we started including stocks, futures, options, etc. the number would be even higher.
Honestly, I wouldn't be surprised if it was even lower. With the exception of "stunt purchases" I very rarely see any real use of any sort of cryptocurrency.
The Silk Road drove a fair bit of actual commerce (illegal though it may be) until it was shut down, judging from the amount of money Ross Ulbricht apparently made off of the transaction fees.
Most of the money is just moving for trading/speculation purposes, from one exchange to another, or from exchange to wallet and vice versa. And there is a lot of trading going on, so I don't know if looking at it in relative terms makes that much sense.
They are two separate use cases, and so far not that many people are using cryptocurrencies for payments. Even if the payments use case were to grow, I believe that the trading/speculation would grow even more, so the payments use case will keep being a small percentage, at least for the short and medium term.
No, it does not. It says that less than half a percent went to well known merchant service providers. The rest did not.
The statement that the rest is speculation is, in itself, pure speculation.
We don't know how to separate speculation from non-speculation. One could easily argue that the payments to merchants is no less speculative than payments to exchanges (what does it matter if you sell your Bitcoin for a carpet or for dollars?).
There's also the fact that most speculation probably never sees the blockchain. They are simply contracts somewhere or entries in Coinbase's database.
Could be. Although I bet it would be just as surprising (and in the same way) to find out how much activity in the "conventional" financial system is due to speculation.
Being the author of one of those super early articles (< 2012) really must sting, even if all your points were technically accurate and even if Bitcoin does completely fail one day.
Same story, different halvening:
"A digital commodity which is the only kind in the world whose supply function is solely governed by time had an extreme absence of ask liquidity and unrelenting demand which caused prices to increase ~15X relative to the previous supply era. Here, let us compare the third layer of the existing financial system to the first layer of a decentralized one. Maybe a corporation or other top-down institution will make something more game stable than a bottom-up group of independent agents? People were willing to pay for the service miners were providing. Let's compare P.999 to P.001 of a metric"
I look forward to the 2022-2023 version of this article
The minimum capital flows between supply-era one and two increased 30X, between supply-era two and three (thus far) it's increased 8X. For every global dollar of speculation, about 0.1-0.3% is flowing into bitcoin. The market's expectations of returns:probability (Kelly Criterion) right now are: 99.786% on 13% YoY returns on SPY, ~7% on 15X return on bitcoin over the next halvening.
Although I agree with some of this article, I find the closing paragraphs frustrating.
How can they go from "Twitter's boss [...], Facebook is working on some kind of crypto [...]. Market analysts and pundits provide cheery reassurance [...]" and then close with "This one guy is sceptical" and present the two sides as completely equal?
One side has, in their own words, market analysts (plural), among the top tech companies... The other side is a single computer scientist (read: non-market analyst), yet both sides have equal weight? Or, more accurately, they weigh the opinion of the single computer scientist over the above mentioned?
The one guy has public perception on his side: Bitcoin has been talked about to death, but besides a few booms and busts fueled by speculators wanting to get rich quick, it feels like a failure to launch. The onus is increasingly on the Bitcoin proponents to step up and deliver real value.
I can donate to wikileaks when visa and the other credit issuers blocked them. Bitcoin isnt popular as a day to day currency but neither is gold or hairballs. But yes I agree it's time proponents to push it into mainstream.
I don't think he's the only one, obviously. But the way the wrote the article and presented it makes it seem like 1 computer scientists opinion = numerous market analysts and companies.
It's unbalanced. Not to mention, why does a computer scientist have significantly more weight than market analysts, when talking about market prices and predictions.
Perhaps Weaver is uniquely qualified for predicting markets in regards to Bitcoin. If so, great. Tell the reader why I should weigh his opinion more heavily than Facebook, Twitter, and (again in their words) several market analysts.
> The final problem is fraud. Transactions are irreversible
NAPWAD. Fraudulent transaction reversal is a problem for other payment platforms, which has kept someone I know from using Paypal to accept tips for open source projects. That means Bitcoin may not be ideal for certain transactions, or that escrow services should be used.
For the purposes of fraud prevention, payment processors can be viewed as an escrow service (along with other things, of course). This can still be programmed on top of bitcoin, someone like amazon/eBay can build this escrow system and charge a fee.
Using escrow systems also detracts from a core appeal of Bitcoin and other cryptocurrencies - being able to exchange money online with little trust in a third party intermediary.
There are still the monetary policy trust issues that Bitcoin resolves (not having to trust a central bank) if you are particularly libertarian or whatever, but I don't think that's really a driving cause for any sort of adoption in any other countries other than Venezuela and maybe Cyprus 5 years ago?
The Bitcoin script language allows you to create escrow systems without any trust in a third party intermediary.
A working example of this is the lightning protocol which is implemented on top of Bitcoin script. It uses time-based escrow written in Bitcoin script to eliminate the need for trust or third party intermediaries.
This is an important benefit that isn't very well known.
Current bitcoin supply is 1800 per day. @ $4k each, you need $7.2 million net inflow per day to maintain current prices. This needs to continue until May 2020 when additional supply drops to 900 per day.
This is only about 3 billion USD inflows required to maintain the market until the halvening, and then supply really drops hard.
Uber is looking to list with a market cap of $120 billion. Australia has $2+ trillion in pension funds alone. Vanguard has 5.3 trillion. $3 billion inflows to get to the halvening should be pretty easy. Return of Goxcoins will have some effect, but any hype at all will send bitcoin on a crazy moon mission again.
Right now bitcoin is something you buy once and forget about. It's not used like a currency at all. Years later maybe you're lucky and it went up enough to offset the -85% crashes which you "survived" because you forgot you had those bitcoin.
The thing is this is largely by design. You don't make an absolutely finite, reducing supply commodity and expect it to do than anything than turn into a valuable and rare token.
If you wanted a cryptocurrency to actually see use as a currency it would have to adopt a monetary policy analogous to at least what the naive version of how most western fiat policy behaves - you have monetary velocity / inflation / at rest targets and adjust supply to push the market in the direction you want it in.
Whats interesting is that in the general case this is perfectly valid to codify, depending on how far between commodity and currency you want to take your coin. More aggressive inflation algorithms would pressure users to spend it whereas less aggressive ones would cause deflation and hoarding.
Of course such a cryptocurrency is untenable because it isn't a valid pyramid scheme to attract early adopters with. If you build it to just be the ultimate currency it isn't going to see mass market appeal because its not a get rich quick scheme like every other crypto has attempted besides maybe namecoin.
Instant electronic payments with upwards of 5% transaction fees for technology that costs them what rounds to nothing.
I feel like at least the payment processing part of finance today is something ripe to be nationalized if you had a democratic representative government you would trust to do so. It feels exactly like infrastructure, the same way fiber to the home should be a public works project, but instead its possessed by global corporations using rent seeking and crowding out effects to make gross amounts of money off of it.
Bitcoin was the victim of a group of technically centered people whose knowledge about economy was summed up as "big banks bad".
But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs, about the issues related to a limited monetary base and the deflationary effects of it.
Bitcoin is crawl. Next comes walking. Then running.
Dial-up modems weren't created to be the final goal of the internet. They were designed to start traveling that road toward fiber, etc. Same with crypto getting the simplest to get started.
TCP/IP was created. It took 12 more years until HTTP. It is okay to get started simply.
> But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs
Go to any of the dev listservs and you'll see that's basically all anyone has talked about for the past decade. The lack of progress (in implementation, not ideas) in this arena forced the wholesale split of the community.
I don't recall having a brutal bust. 80-85% is the historical average of previous busts, but I'm not sure if statistics is needed for an economist journalist (it should be). It's too bad that I'm paying for the magazine because I haven't found anything better.
You are saying an 80-85% loss isn't brutal? Man, bitcoin people are way tougher than I am, because losing that much value in my investments would make me want to die. I only lost like 15-20% during the 2008 crash and recovered that and way more over the last 11 years.
The 2017 bubble was a pretty steady ramp from $200 to $20,000. When your frame of reference is a 10,000% increase, then yes, 80-85% doesn't seem that terrible: you're still at +2,000%. Roughly adjusting for volume (you can never tell what's 'new money' vs. trading) about half of the people that bought into the last bubble are still in the green.
This past 'crash' has been downright tame. That's not some kind of swaggering nonchalance, just a very simple assessment of the history of price action. It was suspiciously orderly until last November when some old coins moved and tanked the market.
Even if you were 'new money', you'd have to be extraordinarily unlucky to actually have lost that much. Prices were only over $15k for a brief period, and buying into a white-hot market is such an absurdly greedy play that it's difficult to sympathize with such losses.
The percentage loss from the peak of a bubble is not a terribly useful measurement. The peak is very short lived.
The BTC price early November 2017 was around the same as early Feb 2018(then it bounced up again for another two months). Losing 80% is quite significant, but to get those losses you have to buy in during the height of the bubble. People do so, in bubbles of all kinds, not just crypto, and that is a fact that I don't rightly understand.
I'm not sure what a good measurement would be. possibly some amalgam of 1 week, 1 month and 3 month averages.
I read A Random Walk Down Wall Street recently. It says some people aren't emotionally ready to invest in the stock market: you need to be able to hang in through those 20% losses, and that's much harder, more stressful, than you may think.
Yea! And if you'd invented Facebook 13 years ago, you'd be worth BILLIONS!
What's your point? That 85%+ drops in value are a reasonable thing for a currency? That a 300,000% increase over 10 years is a reasonable return? These are two sides of the same coin telling the glaringly obvious tale that: Bitcoin is an absolutely awful store of value.
Yes, I myself have been through multiple of those, and it's important for people to expect it.
The most brutal things for me were about losisng/forgetting/not writing down correctly passwords, exchanges being gone with part of my money, even though I tried to be very careful. Being 80% down is nothing compares to.these kind of (not as rare as you think) events.
Do you think 200% annual growth is sustainable? Do you think that would make for a useful currency? Why do you think economists consider low (but positive) inflation to be desirable for currencies? Do you think such growth, mixed in with sporadic 85+% drops (aka: high volatility) is a good attribute for a currency?
No, 200% APY in waves is expected as it becomes the reserve currency. Then it grows in value at a rate equal to the growth in productivity, closer to 0%.
States think positive inflation is good, because it's a hidden tax that they profit from. I think 0% inflation is better for all participants.
Yes, I think growth in waves is a great start for a money. Same thing happened with salt, gold, and other commodity monies.
Maybe you're right, WSJ is quite bad, but I wasn't sure if FT or Economist is better. Also the long form writings are interesting with the Economist, not these short headlines.
From my head: MtGox 1000 -> 200, DDos: 230 -> 70. There was a bigger one before, which was over 90% drop , I think it was the hard fork with the database bug, but it was a long time ago, I don't remember well.
1. "overstatement of activity"
2. 7 transactions/second
3. constrained currency supply (21 M)
4. fraud in exchanges
Odd that only one of these points (2, scaling) relates to Bitcoin the protocol itself. And that scaling issue has raged from Bitcoin's first public disclosure. This clock has been stuck at noon forever.
The remaining three points have little to do with Bitcoin the technology and more to do with how Bitcoin is being used. All can be viewed as either a feature or bug, depending on your worldview. Consider the counterpoints:
- Nobody knows exactly how often Bitcoin is used for payments or what it's used to buy. As such, its users can enjoy much more privacy than they can with other payment methods.
- Constrained supply means protection against inflationist central banks.
- A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best.
The article does to mention Lightning Network, but doesn't give enough context to make anything of. It's operational now and there's been a flurry of development activity in the last year. LN has the potential to:
- increase transaction throughput well beyond 7 transactions/second
- increase user privacy
- increase usability
I don't expect journalists reporting on Bitcoin to go very deep. But it would be nice if they changed the playbook every once in awhile.