Bitcoin Is Screwed
capocasa.netAre people just upvoting this because they don’t like Bitcoin? I don’t like Bitcoin either but none of these are original arguments and this looks like an ad for a different cryptocurrency I’ve never heard of.
> this looks like an ad for a different cryptocurrency I’ve never heard of.
I think Taler is this: https://taler.net/en/. It's a GNU project, and I don't think it's a cryptocurrency.
Recently discussed: https://news.ycombinator.com/item?id=26261314
Ah, my apologies to the author if they were not trying to pump their own portfolio. I guess I’m a bit jaded by this type of post.
It's a crappy article, so there's that.
No it's not. It's a really good article. It's just different from the kind of stuff you usually consume.
I also don't have a strong opinion on Bitcoin, but the author's argument seems flawed.
Yes, running power stations and manufacturing chips requires the protection of a government; yes, Bitcoin mining depends on the existence of power and chips, and therefore indirectly on a functional government. But I don't see how you get from "Bitcoin mining stops if the government doesn't exist" to "So the government might as well be the arbiter of all transactions."
Exactly. Especially since there is more than one government.
Now, if they wanted to make the argument that after 3-5 more halvings the competitiveness of mining will drop to a level where any G7 nation could run a 51% attack and barely notice, I’d be captivated :)
This might be a framing issue? Bitcoin itself might not be beholden to any government. But I don't really care about Bitcoin itself. It's just a protocol. It doesn't have feelings or financial interests.
Individuals who use Bitcoin, though, are, in some absolute sense, no less beholden to their government simply by using Bitcoin. An economy can always be built on top of exchange of physical goods, including but not necessarily limited to banknotes, without the government's consent. But any transaction that needs to go over the Internet can more-or-less only happen at the pleasure of whoever controls the Internet in your area. Which, if you're living somewhere where authoritarianism is a serious concern, is probably the government.
Good point.
I expect transaction fees will dominate the block reward within 4 halvings, as they are already within an order of magnitude of the block subsidy...
Yes, they’ll dominate, but will they stay high enough to maintain the current level of security? Average transaction fees would have to go up ~8x in real dollar terms to do so, meanwhile if Layer 2 solutions take off there could be downward pressure from existing levels.
> the author's argument seems flawed
Author here.
> So the government might as well be the arbiter of all transactions
Take a narrow view of what it means to be arbiter of all transactions. You can't freeze or modify balances, and you certainly can't intervene and pretend you didn't. You can merely decree, power of your authority, that transaction A arrived at your server before transaction B did, and you can certify that transaction A complies with the software protocol accepted by law, and you can reject transaction C because it doesn't. That's your mandate, that's it. Everyone can look at the public log and make a fuss if you didn't follow the law to the letter.
In practice, how is this different than relying on mining to avoid double spends?
Sure, in this scenario, government is capable of chosing a more invasive policy, or becoming corrupt, but choses not to. But government could just as well ban electricity use for mining, or accept bribes to permit use of specialized mining equipment, but choses not to. Bitcoin is already completely dependant on arbitrary political decisions- negligably less so than taking the job of implementing narrow arbitration.
Agree that this argument is flawed. But given most miners are in China, that does give it an implicit control over the blockchain. So...
I personally don't agree with the author, but I upvoted anyway, purely because I want to see what comes out of the ensuing conversation.
Cryptocurrency discussions pop up multiple times a week. We really don't need to upvote garbage articles just so we can have another one.
Mostly it's just an argument over whether it's a rocket to the moon or a ponzi scheme. This seemed like it could foster a more interesting discussion than the usual stuff.
Maybe even some interesting comments on Taler? A kid can hope...
>Maybe even some interesting comments on Taler?
gotta be interesting to begin with the have interesting commentary
no worries: it's not yet another currency that wants to find people investing in it
> I just came across a digital currency system called Taler that solves the double spending problem by having a central authority
This misses the entire point. Anyone can solve the double spend problem with MySQL, the innovation of bitcoin is that it is decentralized with no central authority.
It is an innovation, yes, but it being an innovation is not the same as it being useful, or good.
Being decentralised with no central authority is not actually something most people want. Most people are absolutely fine with a central authority. They quite like having one if it protects them from crime and mistakes.
Bitcoin does not, and that makes it less advantageous for most people.
You are making choices on behalf of other people. Because you don't need it, doesn't mean that everone else doesn't need it. It's everyone's personal choice to use bitcoin. Everyone on this planet can use bitcoin. It's completely open system. You can also choose to not use it.
Why does Bitcoin have to be something most people want or need to be successful?
Bit of a revealing question, that one.
How so? I’m genuinely curious.
The way I see it, Bitcoin is a revolutionary in a lot of ways.
From a technical standpoint it proved a novel solution to the Byzantine Generals problem. Cool.
From a political standpoint, it allows people to own and transfer capital largely outside the control of the state. Also cool.
From an economics standpoint, it allows rigid, non-repudiatable contracts between entities. It allows moderately complex multi-party control of capital. It enables some fundamental contract logic. All very cool.
Now, is it suitable for everyone on Earth as a means of transacting their daily business, thereby potentially replacing all other forms of money? In its current form, no. Early on, it wasn’t clear what niche it would end up filling, so it was entirely possible that the protocol would grow to support the transaction volume necessary for that to happen and the ecosystem would grow around it to make it happen. That obviously hasn’t happened and I don’t see any reason to believe it will in the future.
If Bitcoin continues to serve in the roles that it serves today - as a store of value outside state control, as a means of transacting, as a vehicle for speculation, etc. - then I would call it a success.
> This misses the entire point
No, it doesn't- it rejects, on purpose, the idea that bitcoin is decentralized with no central authority, except in a hazy theoretical way that is irrelevant for day-to-day consideration. Because Bitcoin is dependant on copious resources only available under a system with central authority, whatever authority that exists has copious leverage to shut Bitcoin down, if it chose to do so. Therefore, a system such as the one Taler proposes where a central authority is intentionally legally and technically limited to the narrowest role possible- solving the double spending problem- can be assumed to be feasible, bringing most of the benefits and none of the downsides of Bitcoin.
Taler might repeat the atrocities of others before them who manipulate the supply of "money". Author glazed over the point of separating state and money is a return to sound money. Authorities have never stayed trustworthy and always give in to political pressures to expand monetary supply, until BTC emerged as money.
I didn't go into the idea of "sound money" because I don't consider it a valid concept. If you use gold, you favor the miners, if you use shells, you favor the fisherman. If you use the wax tablet, you favor the accountants, and if you use cryptography, you favor the nerds. But most people just don't care that there were people who profited from the segnorage, or who those people are. With money, what you are interested in is buying goods and services, because then you can eat, shelter and move around. As long as you can do those things with reasonable predictability, empirically, that's what people will accept as money. Everything else is just arbitrary complication.
Turns out there is more to money than serving as a reliable medium of exchange
>Just use the darn government to solve the double spending problem.
Yes, we tried that, but they kept creating new coins out of thin air.
> Yes, we tried that, but they kept creating new coins out of thin air.
At a rate that is targeting low inflation and is geared to maximize employment. Right now it's de-facto paying for a lot of people not getting evicted who can't work through no fault of their own. Where is the problem?
We can argue all day that monetary policy could be improved- I think money creation should on a constitutional level be guaranteed to take the form of universal basic income- but the form of monetary policy that needed to be baked into Bitcoin for it to grow properly is just insane. Give half the wealth to the early adopters, and let the rest of the world serve them- That's not a vision that you can defend on ethics grounds.
Isn't "having a central authority" the very problem that Bitcoin solves? You can't just say Taler is better than BTC because it has a central authority. Central authority IS the problem. All central authorities are doomed to fail sooner or later BECAUSE they are centralized. Has a distributed authority ever failed? What am I not understanding?
> Isn't "having a central authority" the very problem that Bitcoin solves? You can't just say Taler is better than BTC because it has a central authority. Central authority IS the problem. All central authorities are doomed to fail sooner or later BECAUSE they are centralized. Has a distributed authority ever failed? What am I not understanding?
I think the idea is that Bitcoin didn't actually solve that "problem" because its "solution" is still dependent on things controlled by central authorities (e.g. telecommunications and lots of electricity), but managed to misdirect many people's attention away from that failure.
I use scare quotes for "problem" because Bitcoin defining something as a problem doesn't make it one. For example, I could define seatbelts as a "problem" and "solve" that problem by making a car that omits them, but outside my idiosyncratic perspective I actually created more problems and didn't solve anything.
> Isn't "having a central authority" the very problem that Bitcoin solves?
“Central authority” more accurately seems to be the putative source of some not-well-specified problem that Bitcoin solves (often phrased as “trust”, but in any normal understanding of the word Bitcoin doesn't solve that, it just shifts it from a small known group of actors to a large and opaque group.)
> All central authorities are doomed to fail sooner or later BECAUSE they are centralized.
No, all centralized authorities are doomed to fail sooner or later because they are things that exist in a universe in which all things are impermanent.
But this is true of decentralized networks, as well.
The real concern of failure is the likelihood of sudden catastrophic failure without warning and opportunity for an orderly exit, and I have not seen the case made that Bitcoin is better than major fiat issuers in that regard.
>It came as close as is humanely possible by all means, but quite simply by needing electricity and advanced silicon, it's doomed. In other words, Bitcoin never was what claimed to be. It's main virtue is that it's pretty good at obfuscating that.
and what's that? Based on the prceeding paragraphs it seems to be some sort of payment system that can operate without the influence of an "authority" (whatever that means). But if he took the time to read the whitepaper, he would discover it says:
>Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.
Seems like it's doing that just fine.
I thought the whole article was a joke. For real, are there others who honestly thought it was humorous?
I thought that's what Libra was then I realized it was being taken seriously. If it was posted on the theonion.com or equivalent, that nuance wouldn't have to be questioned. Could just be trolling.
Embrace the diversity of perspectives :)
About Decentralized Systems. What are some those that you know about that are being used and can be considered a mature and proven decentralized system? (However you want to defineature and proven)
Is the collection of governments around the world an example of a decentralized system?
none of them. decentralization (like centralization) is a tendency to an asymptotic pole, not a category a given system can either be in or out of. to put it another way, decentralization exists, but decentralized does not, except as an abstract ideal.
it may be that decentralization doesn't exist at all in its own right, but is best understood as a temporary phase between centralizing regimes.
The internet.
The Internet has some decentralization. But it’s not decentralized. At all.
Most of the services you use on the internet are centralized, but the internet itself isn't. Anyone can host a server anyone else can theoretically access so long as there is a path along which to connect and the user knows the address. Portions of the internet's infrastructure can be cut off from the rest by a sufficiently powerful entity, and most people use the same few DNS servers, but no one controls the whole thing. Internet 1.0 is still running under the surface.
what again is the central authority of the internet?
It’s not a dichotomy, there are a few authorities.
touché. Right on my face.
So that helps answer what I was thinking. There can definitely be a way to have a decentralized system to which it's actors have their actions regulated by a judicial system.
Thanks!
>What are some those that you know about that are being used and can be considered a mature and proven decentralized system?
bittorrent
{Thing} is {negative adjective}.
Excellent. Good to know.
More like {thing} is {negative adjective}, but check out my totally new and improved {thing 2} that fixes all the problems!
take all my upvotes.
The best argument I heard against Bitcoin is the need for miners to continuously sell coins to pay their electricity bills, putting continuous downwards sell side pressure on prices. With a normal asset, buy & sell demand is roughly equivalent and prices are roughly stable. But with bitcoin if buy & sell demand by consumers are roughly equal the miners additional sell pressure will result in lowering prices.
There's 3,531 tons of gold mined in 2019 alone, yet gold prices seem to be doing just fine.
And 4200 tons were used for jewelry and industry.
Mining Bitcoin can be done with pencil, paper and the ability to communicate with others also interested in Bitcoin.
Let's see the argument.
Bitcoin: I wanna be decentralized and transparent!
Taler: I wanna be centralized and anonymous!
Author: bitcoin is screwed!
Conclusion: author can't be a programmer.
This is a very bad-faith argument. It basically comes down to "Bitcoin doesn't replace civilization in a single stroke. So, there."
"There are no power stations without a central authority." is a clever twist of words. It's a false statement that sounds true. There are lots of power stations. They are not under A central authority. They are under huge number of centralized authorities locked in a symbiotic/adversarial relationship. The USA can't stop North Korea from powering Bitcoin miners. That's not a happy example. But, it's a strong one.
I've heard of great strides towards decentralized power generation and distribution in Europe. Particularly Germany. But, I don't know the details. I do know that one thing crypto is exceptionally good at is recording, publishing and paying for attribution down to micro details. I would be amazed if someone hasn't started some DistributedPowerCoin. It won't be a Bitcoin script. But, it might be backed by Proof of Staking Bitcoin.
"Can't produce chips and have a computer supply chain without a working legal system." Bitcoin doesn't attempt to replace the legal system. Arguing that it fails to accomplish something it does not attempt to do is bad form. Ethereum hopes to eat a large slice of the legal system's pie. But, that's another topic.
But, in general Bitcoin does not set out to replace central governments entirely. It seeks to reduce their power over individual finances. Arguing that failing to achieve crypto anarchy means failing entirely is not convincing.
I think you're being overliteral on the power stations. It doesn't mean that all power stations are owned by the Government, but that the existence of a power grid relies on the rule of law and the authority to set and enforce laws that is held by the state.
That authority of the state is the central authority he refers to. No matter how your market is actually structured.
Everyone can generate electricity with solar panels or wind turbines, etc. Even if there wasn't a central government at all, bitcoin miners would still have resources to defend their operations.
> Everyone can generate electricity with solar panels or wind turbines, etc. Even if there wasn't a central government at all, bitcoin miners would still have resources to defend their operations.
If things deteriorate to the point where people were forced to self-sufficiently generate their own electricity, one of the last things they'd waste that power on is bitcoin mining.
Furthermore, you need semiconductors to run a bitcoin miner, which are so complicated to manufacture that, in the absence of a government, either manufacturing would stop or the manufacturer would become a government.
Sure. They can. Assuming that they're not reliant on the power grid to back them up when their solar or wind isn't generating so well.
But, even assuming ideal self-sufficient power generation, their Bitcoin are useless unless the rest of the blockchain participants confirm them.
Which requires an interconnected system of networks. An Internet, one could say.
And guess what? the infrastructure to run a national computer network, never mind an international one, also relies on the rule of law and the authority of nation states to provide continuous service.
No no it's not bad faith, it's good faith. I'm not trolling, and I'm not invested in this idea- if you can make this whole house of cards collapse, more power to you.
Power stations are a special case of the more general weakness of Bitcoin- that it depends on resources only readily available under governmentally administered civilization- power, chips, software, maker culture. That gives determined government endless leverage to crush Bitcoin if it so choses.
If something about Bitcoin, say, energy use, turns enough heads to register high enough on political opinion surveys to give the impression that, say, an environmental angle at a Bitcoin ban could win an election or four, then, my friend- Bitcoin is gone. Off the top of my head:
- Cut Internet off of "rogue regimes" willing to continue mining - Ban or highly tax specialized mining hardware - Ban the use of electricity for mining - Ban the use of the currency - Ban the markets - Heavily sanction programmers involved in cryptocurrency - Lean on hardware vendors - Direct sabotage
Or, better yet- just, as one single government, hint at considering any of the above measures, and watch the price tumble everywhere.
Of course, none of these things are done, because harming Bitcoin does not currently win elections.
However, if a centralized digital currency like Taler where edicted to exist- destroying that wouldn't win any elections, either. So, if you take the perspective of hard Realpolitik, Bitcoin's decentralized aspects simply are not the ones that really matter. The aspects that do matter- and which were copied by Taler- is that the one with the power should be heavily restricted by protocol.
If the USA were to ban all things Bitcoin, the price would fall hard, but the machine would keep rolling. If, say, 5 of the top 10 GDP nations followed suit, then not only would the price crash, but the threat of some government sponsoring malicious mining would be strong enough to kill it off (even if it never actually happened).
Bitcoin is not invulnerable. It was bootstrapped from nothing and is still fledgling. Thankfully, it becomes harder to kill as it becomes more of a threat. Right now there is a trillion USD worth of distributed motivation to keep it running. Politically killing Bitcoin would be easier than politically killing Google. But, not that much... First major nation to do so could score some short-term political points. But, all nations are balancing concern about missing out vs. the threat to their own power.
I think this is less about Bitcoin being screwed, and more a criticism of the neo-libertarian escapist approach to economics.
That we all depend on the systems that govern our world, from the clean(er) laws physics of it all the way up to the wet, nasty dynamics that emerge from collective human behaviour, and no clever use of technology will ever make that not true.
Technology can (and often does) make those systems better, though. And focusing on that instead of building a worldview around the escapist fantasy seems prudent
> the neo-libertarian escapist approach to economics.
Can you define to me what you mean by that?
I mean the thought process that goes something like
1. markets are (mostly) good
2. government intervention is (mostly) bad
Therefore:
3. anything that takes power away from government, especially if it increases the role of some kind of market, is good
Which leads to a worldview where the ultimate utopia is one free of the burdens of the government intervention, and you get things like people trying to build side-economies free of regulation (like much of crypto), or private island utopias.
I find it's a blinding ideology, and doesn't really match with my observations of the crypto world so far.
The vast majority of what I see in the crypto space is that it's a safe haven for fraud, money laundering, and the transfer of wealth from the uninformed and/or trusting to the savvy and/or untrustworthy. I see very little other purpose emerging so far. And none of those things seem like they are net positives in the world.
While the first sentence sounds like an advert, the arguments that follow are pretty compelling.
The post has no actual facts. It just an opinion without facts or deep understanding of the economic model.
>laboritory
okay buddy,
I agree with the conclusion, and to a lesser degree, the argument.
The newish book Money (Jacob Goldstein) presents a compelling argument for why Bitcoin won't succeed as a currency; in the history of humanity, not once has a fundamentally new kind of currency been created intentionally. Specific currencies (for example, the US Dollar) were created intentionally as a currency, but when we're discussing new kinds of trading liquid wealth, its never intentional. It was always something that we (as a species/community) look back on and say "oh shit, I guess that's been a currency all along".
The book doesn't present a strong argument for why this is always the case, except to say that it always has been the case.
More tangibly; I think modern money theory (MMT) has proven itself to be a startlingly powerful tool in keeping our fragile society going. Many people are discussing cryptocurrencies in the vein of "we don't trust the Fed, they've been fucking with the US Dollar for too long". I tend to think that the world would look very different today if the Fed hadn't spent the past 100 years fucking with the US Dollar. Its very likely you wouldn't be alive, and that HackerNews wouldn't exist, and society as a whole would be significantly more "wild west".
Bitcoin, and other cryptos, are interesting as an analogue to Gold. They're horribly uninteresting as an analogue to the US Dollar, for the exact reason why people mistakenly and, frankly, stupidly, believe they are interesting; they're difficult/impossible to manipulate.
Additionally, I think the Electricity and Silicon arguments are profound. If Bitcoin reaches a similar level of money velocity to the US Dollar today, the network would consume more electricity than the entire planet produces. Land area the size of US states would have to be converted into power plants and silicon manufacturing facilities. The Bitcoin community attempted to enact technical changes which would make its transaction processing more efficient; it failed the vote. Because Bitcoin Monetary Policy is a democracy (of the people who can afford mining machines, which has coalesced to a handful of rich organizations, most of which are in China), even Fundamentally Good Changes can fail, because of misguided ethics, greed, etc.
And that, at the core of the argument, is why this "down with the Fed, down with centralization, up with Bitcoin" position is so insane. Bitcoin has monetary policy. This monetary policy is implemented as a pure, technical democracy. That's fantastic, except, 99% of people don't get to vote, and will never be able to, because votes effectively come down to "hashing power", which is expensive and only going up in price. Bitcoin was designed as a democracy, but in effect, it will create the most pure, cryptographically secure, cyberpunk corporate future. Like communism; looks great on paper, but that's only because the papers always fail to account for the most basic human motivation: Greed.
Interesting about the Money argument, haven't heard anything like that before. Is there some more explanation for why the intentionality is specifically a problem? I have no trouble believing that indeed a new kind of currency has never been created from scratch, but why should that mean that it's in principle impossible to do so?
>"I think modern money theory (MMT) has proven itself to be a startlingly powerful tool in keeping our fragile society going"
Wrong, setting price floors makes society a lot more fragile. This is especially true when we can't defend the price floor by stealing other people's labor anymore a.k.a. we lose global reserve currency status.
I'm pretty certain IMF drawing rights were designed and created intentionally and work.