There are reasons why you'd choose bitcoin over your example, ethereum. For one, supply of ethereum is not deterministically predictable. As money, that makes it less compelling. Some other technical details are very short block time means network splits, orphaned blocks, reorgs are very common. In the short term, ethereum finality is not as reliable.
Generally I agree with your point though. Money over IP can takeany forms, and the likelihood that the first form it took is the best it could possibly be is miniscule.
Study bitcoin long enough and you'll realise it is the best it could possibly be (allowing for small tweaks, additions that don't change the underlying fundamentals)
It's not what it first appears and catches everyone out to start with.
Give me any number of negatives and I'll explain with clear reasoning why you're wrong and why they're a strength.
I've studied bitcoin for over a decade. Deeply. I can talk about ECDSA and the emergent consensus behavior that emerges from the architecture. I can talk about the economics and monetary policy in detail. I like to think I've got a pretty good handle on it.
I know it's not the first attempt at internet money, but it is the first form that didn't require a central intermediary for all transactions. That's what sets all this apart.
I can give you a number of shortcomings and I promise you I've heard what you have to say, and thought about it too. I'm hoping you have something new for me, I enjoy changing my mind.
To start, let's commit blasphemy: the hard cap. It's a bad idea. So is a percentage debasement rate, as is the supposed target of central banks. I'm partial to continuous, linear debasement, which translates to a geometrically decreasing debasement as a percentage of supply. For one, holders free ride the network. Two, no other asset anywhere ever behaves this way. Bitcoin is the most scarce thing in the universe, and that's a good thing until it's not. Something that's always predictably scarce temporally but, taken to infinity, has no hard limit, is superior IMO as long as there's no feedback loops in the supply change.
Bitcoin cannot handle enough transactions. Lightning is just fractional banking with extra steps. Again, you're not here to sell layer 2, you're here to convince me (or at least make the case) that this is a strength.
All monetary exchange for all of history is public to anyone.
For the strongest security guarantee, all history must be stored forever by everyone participating in consensus. Note, if this were solved, block size would be a non issue. It is solved actually, believe it or not, just not in bitcoin.
That's what I've got off the top of my head. Bitcoin isn't the best it could be, it could be the best if everyone's commerce was private and historical data was not needed to ensure security. My other point, hard cap, is more contentious and we could argue that one for days and make no progress.
Note that I did not mention PoW, ASICs, fees, block size (although one of my points alludes to the possibility of getting rid of that entirely) or any of the usual surface level talking points because I don't think they're worth going over again. I tend to like PoW and think trying to prevent ASICs is counterproductivr, as far as fees go, they're a symptom of a couple of the problems I laid out above.
Cool. This is what I've been looking for finally - a reasoned debate with someone who understands bitcoin.
Okay, so the hard cap.
>To start, let's commit blasphemy: the hard cap. It's a bad idea. So is a percentage debasement rate, as is the supposed target of central banks. I'm partial to continuous, linear debasement, which translates to a geometrically decreasing debasement as a percentage of supply. For one, holders free ride the network. Two, no other asset anywhere ever behaves this way. Bitcoin is the most scarce thing in the universe, and that's a good thing until it's not. Something that's always predictably scarce temporally but, taken to infinity, has no hard limit, is superior IMO as long as there's no feedback loops in the supply change.
Now yes, that is blasphemy.
1) Personally I don't see holders as freeriding. They are simply storing their wealth until they need to buy something. They can also lend it out to receive interest which most will likely do, once there's safe methods of doing this.
Far better this than storing their wealth in real estate, pushing up prices for people that actually want a home to live in and are forced to be rent slaves for the rest of their lives.
2) That no asset behaves this way is a pro for me. I'm interested to hear why you think an ever increasing supply is superior? As you say, we could deliberate on whether a constant sat rate of issuance is preferable for an economy for days on end, but ultimately, the scarcer asset will always be more attractive to large amounts of wealth that need to be stored and so will go up forever when priced in a less scarce asset. Dare I say "honey badger don't care"?
Next, transaction rate.
> Bitcoin cannot handle enough transactions. Lightning is just fractional banking with extra steps. Again, you're not here to sell layer 2, you're here to convince me (or at least make the case) that this is a strength.
No blockchain will be able to both accommodate retail transactions of 50,000 tx/s like VISA and also be decentralised. The equipment needed will simply be too expensive. The slow transaction rate is a strength for a number of reasons:
- almost anyone on earth can afford to run a node
- the network can run on very low bandwidth networks such as ham radio
- it increases security and is optimal (through decentralisation and robustness) for the transactions that count - large amounts of value. It's the large amounts of value, stored for long periods of time that are going to take bitcoin to $100M+, even without any higher layer payment rails.
> All monetary exchange for all of history is public to anyone. For the strongest security guarantee, all history must be stored forever by everyone participating in consensus. Note, if this were solved, block size would be a non issue. It is solved actually, believe it or not, just not in bitcoin.
Yes, monetary exchange is public to everyone. But the source/destination of the exchange are as anonymous as we need them to be. I see it as flexibility. Coinjoining or moving the value temporarily through an anonymous network like Monero or Lightning helps maintain privacy if required and the public transactions mean we can hold governments and public bodies to account who can voluntarily remove the pseudo-anonymity. More importantly means that everyone is able to confirm that the bitcoin issuance is not being violated - I'm interested in knowing how this has been solved elsewhere - this is obviously very significant if it truly has. My assumption is that the solution is very complex - and this is why being able to validate the supply by looking at all the transactions is important - it's very simple and robust.
I don't think fees are really an issue at all. Ultimately, the network will be used for very large sums of money and to pay even $100 to store $1B losslessly for 50 years sounds like a bargain to me. To the point that the fee is insignificant.
I'm glad we can agree on PoW. After all, what is money if it's not proof of work?
Just to add, I don't think we'll ever stop fractional reserve banking. But as Satoshi's message in the genesis block implies, bitcoin's job is to prevent zero-reserve banking - that is the real cancer on the world. If banks can't print infinite money then they can't be bailed out and so will need to have a hard lower limit on their reserve %age, or else risk going out of business, just like before central banking. Although there will be fractional reserve banking, the total supply will still be hard capped. It will at least be a big improvement on gold - Bitcoin is far more auditable - custodians can easily supply the bitcoin owners with the public keys to the owner's wallet to prove they have not rehypothecated it.
The network has ongoing costs and only people that spend money contribute to, unless there's a tail emission. In that case, in addition, everyone holding contributes to maintenance of the network to the degree they benefit from it's maintenance in the form of debasement of their savings, which go directly to the miners keeping the network alive. Holders are free riders in bitcoin, game theory wise this is a fact.
> No blockchain will be able to both accommodate retail transactions of 50,000 tx/s like VISA and also be decentralised
This is a statement of fact but has not been thoroughly demonstrated. The 2 bottlenecks to throughput are 1) block size, and 2) network latency between nodes. Block size is only an issue for decentralization if you have to store all historical data forever to get theaximum security guarantee possible. Mimblewimble eliminates this requirement, and therefore enables the same decentralization regardless of block size. At that point, block size is only limited by how fast transactions propagate across the network, that is, latency, and verification of them, which is trivial, within the block time. You can have 1GB blocks in mimblewimble and have the block chain shrink one block to the next with no sacrifice in security guarantees.
All transactions count.
> Yes, monetary exchange is public to everyone. But the source/destination of the exchange are as anonymous as we need them to be.
You don't really believe that do you? This is a system built on cryptography and we just accept that our finances are open to anyone, to be blacklisted, to make a single mistake and our entire transaction history can be tied to us, and even, other peoples history can be erroneously tied to us, weust behave with the most rigorous sterile technique or anyone anywhere can know everything we have and everything we have ever bought. You believe this is all we need?
You can voluntarily remove anonymity for example in Monero with viewkeys, and selectively remove it with transaction keys for individual transactions. You can confirm issuance is not being violated with range proofs. Greg Maxwell's bulletproofs are formally proven, and implementation has been thoroughly audited.
Fees are an issue. If I have a not insignificant sum in bitcoin and I can't move it, bitcoin is broken. I've saved nothing, I've thrown it down a well. I don't like to talk about this because my above points are the cause of it and the solutions I talk about that exist already resolve it, so it's not something that we need to go into depth on. But, I did an analysis about this a while ago that I published on nostr and I think that bitcoin fees will rise asymptotically to reach the median transaction value, which is a positive feedback loop. It's not a problem until it is, and it is already a problem for a lot of people.
You can stop fractional reserve banking. It began because moving and protecting gold was expensive. Moving and protecting cryptocurrency is cheap, people don't need custodians, but we are getting fractional reserve bitcoin because it is artificially kept expensive. The tools exist to alleviate this, you can, right now, have astronomically higher amounts of commerce on a layer 1 chain directly than bitcoin provides, and I'm not talking about some sham scamcoin like iota or whatever. The solution was developed at blockstream! It was initially a BIP!
> The network has ongoing costs and only people that spend money contribute to, unless there's a tail emission. In that case, in addition, everyone holding contributes to maintenance of the network to the degree they benefit from it's maintenance in the form of debasement of their savings, which go directly to the miners keeping the network alive. Holders are free riders in bitcoin, game theory wise this is a fact.
I see the hard cap, with 100% fees from transactions, as optimisation for storing large amounts for large periods of time, which is the use-case you want for bitcoin to become as valuable as possible. It's just Gresham's law. People will hoard the hardest money and sell any softer money supply inflation.
> This is a statement of fact but has not been thoroughly demonstrated. The 2 bottlenecks to throughput are 1) block size, and 2) network latency between nodes. Block size is only an issue for decentralization if you have to store all historical data forever to get theaximum security guarantee possible. Mimblewimble eliminates this requirement, and therefore enables the same decentralization regardless of block size. At that point, block size is only limited by how fast transactions propagate across the network, that is, latency, and verification of them, which is trivial, within the block time. You can have 1GB blocks in mimblewimble and have the block chain shrink one block to the next with no sacrifice in security guarantees. All transactions count.
I appreciate that I'm making assumptions that technology like MimbleWimble can't compete for robustness/confidence in the network with Bitcoin's straightforward approach to validating the total supply, but MimbleWimble is also certainly not thoroughly demonstrated. I'll investigate the technology though and get back to you. Are you confident that MimbleWimble will adequately protect against rogue issuance that nation states can use it as their reserve asset?
> You don't really believe that do you? This is a system built on cryptography and we just accept that our finances are open to anyone, to be blacklisted, to make a single mistake and our entire transaction history can be tied to us, and even, other peoples history can be erroneously tied to us, weust behave with the most rigorous sterile technique or anyone anywhere can know everything we have and everything we have ever bought. You believe this is all we need?
The reason I believe it's all we need is because I see the bitcoin network simply as a base layer network or savings tool. The transactions will either be limited to peoples savings, pensions, investments etc. or the transactions will be to/from higher level networks such as lightning, or even centralised payment rails like Paypal. In both cases, supply auditing and simplicity (i.e. robustness) wins over absolute privacy in my view. This is what makes sats the ultimate store of value, and any future faster, more private layer 2 network that doesn't use sats as it's native "token" won't be able to compete, just as the dollar won't.
> Fees are an issue. If I have a not insignificant sum in bitcoin and I can't move it, bitcoin is broken. I've saved nothing, I've thrown it down a well. I don't like to talk about this because my above points are the cause of it and the solutions I talk about that exist already resolve it, so it's not something that we need to go into depth on. But, I did an analysis about this a while ago that I published on nostr and I think that bitcoin fees will rise asymptotically to reach the median transaction value, which is a positive feedback loop. It's not a problem until it is, and it is already a problem for a lot of people.
Fees aren't an issue if its used for large enough values as they tend to 0. I can't see how the fees could ever end up being average transaction value because people will simply stop using the network if it gets anywhere close. As the demand for the network drops, so do the fees.
> You can stop fractional reserve banking. It began because moving and protecting gold was expensive. Moving and protecting cryptocurrency is cheap, people don't need custodians, but we are getting fractional reserve bitcoin because it is artificially kept expensive. The tools exist to alleviate this, you can, right now, have astronomically higher amounts of commerce on a layer 1 chain directly than bitcoin provides, and I'm not talking about some sham scamcoin like iota or whatever. The solution was developed at blockstream! It was initially a BIP!
I firmly believe there will always be a place for custodians. Most people simply aren't capable of keeping private keys safe - especially once it becomes more popular and scams are rife. How much rehypothication goes on depends on how much demand there is for fully auditable custodians - bitcoin provides the option if people want it.
Generally I agree with your point though. Money over IP can takeany forms, and the likelihood that the first form it took is the best it could possibly be is miniscule.