At the moment Bitcoin is not better than other currencies because it is a layer on top of existing currencies and their related infrastructure. Because almost nobody accepts Bitcoins there is a constant need to convert back and forth between Bitcoins and other currencies. While I really liked the idea of Bitcoin when it came into existence I now tend to believe that Bitcoin will die slowly because it does not solve any important problem for the average person. Anonymity is not important for almost all transactions. Relying on banks is not an issue for most people. Transaction are executed fast enough and are cheap enough in most cases. There is just not enough incentive to adopt Bitcoin.
This is especially true for online purchases. Right now the entire ecosystem of Amazon / Paypal with banking services directly linked or through credit / debit cards, works pretty flawlessly. You can buy anything on the internet immediately with real money linked to FDIC insured banks running through two huge easily trusted middlemen, with little to no setup other than having bank account.
You are clearly an American :) Also, Amazon would approximately double its profit if it were not forced to pay the 2% markup on credit card charges. And before you criticize coinbase for their 1% conversion fee circle is here with 0% :)
Amazon will accept your credit card payment and won't accept your Bitcoins, which is a pretty good indication of which payment method they feel is more hassle than it's worth.
Fortunately Overstock does accept Bitcoin already[0], so it's a pretty good indicator that there are other considerations too. Also, you can use Gyft[1] to spend bitcoin on Amazon and even get a discount - if there's enough business that another company can support itself on users you are not catering for, then there's definitely a business case...
I feel like bitcoin supporters, in talking about things like the convenience and simplicity of transactions, while not incorrect, are missing the critical issues that are going to determine bitcoin's fate.
If we look at bitcoin vs. US banknotes, a paypal balance, a pile of gold bars in a bunker, whatever, if we're looking at how bitcoin performs vs. all these things at the moment in time when we're transferring them to someone else, bitcoin is superior in every case. The problem is this window is brief. Non-transactional moments in the life of bitcoin is where the problem lies.
Looking at historic pricing of bitcoin, and seeing a peak at a little over $1k, what does the future price need to be for people to feel comfortable receiving bitcoins and just holding onto and forgetting about them, in the same way they could with, say, 100 bucks in their wallet? Being divisible down to 8 decimal places might rationally address the issue of how to spend something where the base unit costs as much as an Xbox. But even if bitcoin could somehow split at something like 300 or 500:1, to make a bitcoin roughly equal to a US dollar or a Euro, does that really solve the problem of perception? The historical chart, with the accelerated volume and insane swings in both directions, might never recede from the mind of the public.
I just have a hard time understanding what a path to acceptance as a legitimate currency looks like. Years of price stability would be a great start. But the beginning of that period hasn't even begun. In the past month alone, the price has moved by 30%, and daily volatility regularly sees the price change by 5%. I can sort of squint my eyes and imagine scenarios where bitcoin, the currency, wins. What I can't see is how bitcoin, the speculative investment, also does well. That these two things are at odds leads to other issues, too, but this is already unnecessarily long.
> I can sort of squint my eyes and imagine scenarios where bitcoin, the currency, wins. What I can't see is how bitcoin, the speculative investment, also does well. That these two things are at odds leads to other issues, too, but this is already unnecessarily long.
I don't think those two things are are necessarily at odds. Many people trade well-established currencies for investment purposes. Forex is bigger than futures or equities markets with USD as the most popular currency.
The speculation and trading of bitcoin, if it succeeds as a currency is a given, I think. But right now, some of its most vocal/visible supporters view it as a long term, buy and hold investment, and not just as a hedge.
With equities, no matter how far a stock price declines, profit is still there to be returned to shareholders. Other currencies don't provide the same kind of guarantees, but the backing of governments and inertia might be more valuable. Once people grow concerned that the only thing propping up the long term value of bitcoin is the person next to them believing in it, a quick reversal of sentiment, with ugly consequences, seems likely.
“Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”
Yes, bitcoin has some specific traits that are superior to carrying wads of cash. Much like many other forms of digital exchange. This is not really news.
Yes, this is a horribly misleading title (from the article itself). "x is better than y [at a subset of things]" could be misused in so many ways.
It's tempting to completely ignore the article after seeing such a blatant distortion. However, there is some interesting stuff here.
> "Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient."
So the first feature is already covered by any bank, or Paypal, or numerous other services. I don't understand the second, though...at what point does it become cost prohibitive to make large transactions? Gates is dealing with a totally different level of money than anyone here, so he must have some insight.
> “The customers we’re talking about aren’t trying to be anonymous,” he told Schatzker. “They’re willing to be known, so Bitcoin technology is key and you can add to it or you could build a similar technology where there’s enough attribution where people feel comfortable that this is nothing to do with terrorism or any type of money laundering.”
It sounds like Gates is talking about a system either used as the protocol between financial institutions or something akin to Paypal, without any anonymity. At this point I'm not sure what Bitcoin is doing better than a number of existing services, and if the ledger is public, then privacy is completely out the window (due to Gates suggesting that even the pseudoanonymity in Bitcoin is undesirable). At least with bank transactions I know only my bank and maybe the government can know my purchases. I don't want the whole world having access to that data.
> So the first feature is already covered by any bank, or Paypal, or numerous other services
The point being that the power is in the hands of individuals, you needn't rely on services (though reality is most will rely on services like Circle or Coinbase)
And since bitcoin is mostly unregulated, we get to deal with fun things like exchanges manipulating the market in order to inflate the price of bitcoin, as Mt. Gox did. Worse, every honest exchange will be manipulated too, because a fluctuation at one exchange will always affect every other. The net effect is that we have transferred power from regulated markets whose regulation is enforced by governments to private businesses that manipulate the market.
I don't know how the stock market has dealt with these issues. What if someone were to set up a stock exchange in a country without laws that prohibit market manipulation? Would manipulation at that exchange affect every other exchange, as a bitcoin exchange would? How would traders in America or Europe detect and respond to that manipulation? Surely this is a problem that has already been addressed for the stock market, so maybe bitcoin could use the same solution. (That seems difficult without regulation, but maybe whatever solution the stock market uses could work for bitcoin too.)
Totally! I hate queuing in the bank to manage my account (and of course only open at the time when I'm working too). I hate that Paypal only lets me withdraw to single bank (out of like 50...) here in Taiwan because they misinterpret and misrepresent Taiwanese law (so I have to go and open an account). I hate that it takes days to handle a transfer because of the trust and verification involved. I hate that for some of the places you need particular OS or particular software to do banking (Windows and ActiveX for most banks here if they even have an online banking system, and I'm on Linux), so most often I have to actually walk to an ATM and do my business there (when they are working...).
There are a lot of bitcoin haters out there. I personally could not ever go back exclusively to the old ways. I love that finance is in my own hand!
By the way, this makes me much more generous as well! (I've donated much more via bitcoin directly to people I wanted to support than I'd ever done via fiat: too much hustle, too big cut by others, and they also have their independence and choices of cashing the coins out if they need, or use whatever they want to manage it).
It's more that there is no required middleman. Bitcoin supports having n of x sorts of payment schemes where a third party(ies) have to agree to the transfer before it is released.
I mean, anyone who ever used bitcoin will see how it's clearly superior than going to a bank office, getting an account, waiting days for it all to work out. And then transactions take a night (at least in the countries I've lived in).
Bitcoin transactions show up instantly. There's no need to a trusted middle man. Anyone I show it to is swooned, because it's simply really really cool.
I have to assume this is satire, given alternatives like Square cash.
- Bitcoin wallets are under constant cyberattack and there is nobody to compensate you if the money is stolen.
- There is no good way to evaluate the integrity of bitcoins software for end users
- Even the most user friendly hosted wallets (e.g. Coinbase) are not faster or simpler than a well designed bank (e.g. Simple)
- Almost no ordinary merchants accept Bitcoin
- The Bitcoin exchange rate is like the Zimbabwe Dollar
I think all these problems can be solved, and I personally hold Bitcoins, but let's not be delusional about the current state of affairs.
>> "I mean, anyone who ever used bitcoin will see how it's clearly superior than going to a bank office, getting an account, waiting days for it all to work out."
I've been interested enough to try cryptocurrencies. I have never been able to buy a BitCoin. Why? Because the blockchain is so big I've never been able to download it. I leave my client open for a couple of weeks and then give up. I managed to get some Doge a year or so ago but that's because the blockchain was much smaller and it only took a couple of days to download. And when I did get Doge working I had to give out a very long address (what is this? can people steal from my account with it?) and I had to place trust in the stranger I was buying the coins from that they would deliver.
Banks suck but they offer convenience and a level of trust I don't see how BitCoin is going to be able to match. Transactions and transfers where I live through a bank are now instant. They offer useful mobile apps that are quite decent and online banking has gotten good enough that I believe more than half of my banks branches (one of the most popular banks in the country) have closed.
I'm not saying there is no use for BitCoin but for most people I don't see how it will replace banks.
Signing up for Coinbase isn't instant. Yes, you could find someone locally to exchange cash for Bitcoin, but that's hoping for a lot in terms of security, and isn't exactly convenient, either.
When I said signing up, I meant the whole process of getting to where you can actually exchange USD for Bitcoin. On Coinbase they ask for bank account information, and that can take several days to verify.
There is no process of identity verification on Circle before you can actually buy Bitcoin from them?
No there isn't. I have no idea how they pulled it off, but it really is instant. In less than 5 minutes, I went from not having a Circle account to having a Bitcoin transaction on the blockchain transferring BTC I bought with a credit card to my own private wallet.
The issue with this (as you probably know) has always been the danger of chargebacks.
I ran across a reddit post [1] discussing it. I dunno if they've completely dealt with the issue, but it is pretty fascinating to see they are even trying.
Of course it's not. But the argument of the parent poster was that you require a bank account. Also, most experienced traders on https://localbitcoins.com/ will prefer to meet in a very public place or in a police station, instead of an alleyway.
The parent's argument that a bank account is needed was a retort to the idea that Bitcoin is easier than banking.
Conducting financial transactions in a police station is not easier than using a bank, so whilst a bank account isn't strictly necessary it doesn't change the argument that Bitcoin is harder to use than regular banking.
I tend to shudder when people talk about bitcoin being "cheap". There's a massive amount of energy wasted to maintain the public ledger. It became much more clear to me how this impacts the cost of transacting bitcoins after reading this article: http://letstalkbitcoin.com/blog/post/how-many-bitcoins-does-...
I'm more excited about proof-of-stake, as there isn't this arms race to throw more and more computing power to generate bitcoins. I'm not sure why it hasn't seen more adoption, but I will admit that I don't pay a lot of attention to the cryptocurrency space...
Interesting, thanks. I see the problem, but this paper takes as a given that individuals can introduce transactions that tilt the system in their favor. I can't immediately see a solution to this, but I don't think it's necessarily impossible.
An additional problem I just thought of, however, is that there will be some number of stakeholders that leave the network, lose their keys, etc., and there is a chance that they are the only ones chosen to sign a given history extension. So there has to be some way to recover from this, while still being resistant to denial-of-service attacks.
