Bitcoin and Thoughts from Bill Gates
benjamingilbert.netI think this is a lousy defense of Bitcoin. I cringe whenever I read "oh it's new technology of course people will be scared!" or worse yet, "you must be jealous because you didn't get in on the ground floor." I think it's a really cool technology but the economics don't make a lot of sense. There are a few major issues I see:
-What problem does it solve? Many claim that it's a more efficient way to transfer money, but after paying high spreads & fees on illiquid exchanges or a place like coinbase, it doesn't look so good. International wires are expensive but paying 30 bps each way in exchange fees plus enormous spread concessions to trade even relatively small amounts like $1mm USD are much more expensive.
-What backs it other than speculation? Scarcity itself does not imply value. I don't see a significant "bitcoin economy" out there. Yes, you can buy things with them, but most of these things are priced in dollars. Sellers are accepting bitcoins only because they can sell them for USD, EUR, etc. to speculators. They have no particular attachment to bitcoins themselves and could just as easily accept another crypto currency provided speculators were active enough in the market. How many people are paid a salary or renting an apartment for a fixed amount of BTC per month?
-Many bad actors in the market with little regulation. There have been numerous scams and untrustworthy exchanges out there. It's like taking a trip back to the depression-era bucket shops.
-Consumer unfriendly: the average "man on the street" can't secure his wallet file and even many technically sharp people have been ripped off. Non-reversible transactions aren't a positive for most users and requiring traders to use an escrow service further increases costs. Network can't handle high transaction volumes and sellers need to wait for confirmations or risk fraud, so the use case of everyone buying their morning coffee with bitcoin seems shaky.
-Extreme volatility and lack of liquidity make it a poor store of value or unit of record, two things that are extremely important in a currency. Yes most government issued currencies experience inflation, but I can keep my paycheck in the bank for months or years without its value changing wildly, and I know what a loaf of bread costs in USD within a tight range.
Some of these are fixable and I see some growth potential in micropayments or as a money transfer mechanism for people who don't have access to traditional financial institutions, but what is the general purpose use case? What can I do with bitcoin that I can't with paypal or even a bank account (many let you instantly transfer money these days for no/low fees to pay friends, landlords, etc.)?
Thanks for writing this. I agree with everything you said.
I'd also add the concern of Bitcoin lacking an inflationary mechanism. I can't see it ever becoming a currency without that. If it's lucky, it may be a transactionary vehicle before the next technology displaces it. But, like you pointed out, it doesn't have much of a utility for that purpose anyway - taking transaction fees, security and usability into account.
Emin Gün Sirer wrote [0] an excellent survey of the Mt. Gox scandal, and a measured evaluation of the problems with Bitcoin. I loved this part:
> What Nigerian scams are to your grandfather, Bitcoin exchanges are to the 20-30 semi-tech-savvy libertarian demographic.
He ends by recommending Dogecoin because the community doesn't take itself too seriously.
> If one must pick a cryptocurrency, the lowly dogecoin, of all things, is doing everything right. It's based on economic principles that provide the right incentives for a healthy economy. The community does not take itself seriously. Most importantly, no one pretends that Doge is an investment vehicle, a slayer of Wall Street, or the next Segway. No one would be stupid enough to store their life savings in Dogecoins. And people freely share the shiba goodness by tipping others with Doge. So, young people who are excited about cryptocurrencies and want to get involved: Dogecoin is where the action is at. Much community. So wow.
I just hope the hoardes of Bitcoin speculators don't ruin it for them.
> What can I do with bitcoin that I can't with paypal or even a bank account (many let you instantly transfer money these days for no/low fees to pay friends, landlords, etc.)?
For all its faults, the cryptocurrency renaissance (based off the Bitcoin protocol) is enabling the Silk Roads to flourish. You can't run those on Paypal. You can't donate to Wikileaks with Paypal either, for that matter.
[0]: http://hackingdistributed.com/2014/03/01/what-did-not-happen...
I'm not an economist or an expert on monetary policy, but I don't think a currency necessarily needs to be inflationary. Humans have used currencies such as gold which has a relatively fixed number of units in the past, which may have been less flexible but still worked. A currency does need to have some broad base of customary use and pricing, whether that be through social agreement or government fiat. People need JPY because their suppliers need JPY to pay their employees who have contracts in JPY or who need it to pay taxes to the government. They won't take any other currency outright, and if they do, they will peg their prices such that they'll be able to meet their obligations in JPY. This drives demand for the specific currency which helps set its value in the market.
For Silk Road type uses, people need a cryptocurrency or other pseudonymous way to transfer value, but do not need BTC specifically. Any sufficiently liquid crypto currency would work as a short-term transient store of value. I think that is an interesting use case and something neat about these protocols, but it doesn't explain why BTC is worth more than LTC, for example.
> Humans have used currencies such as gold which has a relatively fixed number of units in the past, which may have been less flexible but still worked
It worked, horribly. Europe didn't industrialize until it embraced fiat money. They had a few false starts because they didn't fully understand how to handle it - "The Moneymaker" [0], a short biography of John Law, is an enjoyable read and survey of the history of this economic development.
[0]: http://www.amazon.co.uk/The-Moneymaker-Janet-Gleeson/dp/0857...
A currency should have an inflationary mechanism, because trade is the basis of wealth. In general, inflation encourages trade, and deflation discourages trade.
Anyway, that's just the belief of the field of economics.
> it doesn't explain why BTC is worth more than LTC
Momentum and confidence.
>more efficient way to transfer money
In addition to your stated issues (which actually are probably fixable), there's the computational power requirement. That cannot be fixed. Bitcoin requires thousands of times (or more) more computational power to do a single transaction than any centralized currency system I can think of.
I remember before bitcoin people would say "Oh, I have a couple spare computers... I just threw folding@home on them for now". Now, people are going out of their way to throw cycles at this currency instead of problems that help scientific progress, and thus humanity.
Bitcoin is a cool idea and well implemented for what it is, but I think attention should be drawn to its exceedingly inefficient use of computational resources.
"Bitcoin requires thousands of times (or more) more computational power to do a single transaction than any centralized currency system I can think of."
Is that really the case? I'm quite sympathetic to the view that it might be, either presently or in the long run (an arms race where attackers and defenders are on the same footing can't get cheaper due to improved technology), but there are expenses in the current system that bitcoin avoids (and a lot that it doesn't, for sure). I've seen various analyses making various claims, and I'm really not sure what the answer is.
there are expenses in the current system that bitcoin avoids
Which expenses would that be that are genuinely avoided while maintaining feature parity, rather than merely avoiding the feature that is bought by those expenses in the traditional system?
For example: Of course not having to worry about chargebacks and related fraud makes Bitcoin potentially cheaper than the existing credit card system. On the other hand, fraud protection is a useful feature, and adding it on top of Bitcoin removes any cost advantage that Bitcoin might have started out with.
This example provides a template that, as far as I can see, applies to every so-called cost saving aspect of Bitcoin (except possibly the fact that Bitcoin might make the whole banking system more competitive; that would undoubtedly be a good thing).
Customers will have the choice to buy fraud insurance and might save by deciding against it when dealing with a reputable sellers. Also fraud insurance can be cheaper thanks to the protocol's escrow capabilities that are unavailable with traditional payment systems.
These are only the advantages compared to national transfers, when looking at fees and regulations in the world of international transactions, the advantages are even greater.
If you wish to actually move reserves in the current system (be they in the form of stacks of USD, gold, T-bills, &c), you need to secure them in transit. Securing BTC in transit may cost more than billing a credit card, but it costs substantially less than hiring a Brinks truck.
> That cannot be fixed. Bitcoin requires thousands of times (or more) more computational power to do a single transaction than any centralized currency system I can think of.
Bitcoin's goal is not to allow financial transactions, it's goal is to allow financial transactions without having to trust a third party.
This is impossible in a centralized system, this is why Bitcoin is the most efficient system of making secure digital transactions without relying on a trusted third party.
>What can I do with bitcoin that I can't with paypal or even a bank account (many let you instantly transfer money these days for no/low fees to pay friends, landlords, etc.)?
With bitcoin, you don't have to have a third party such as Paypal or your bank to transfer money over the internet. You don't have to trust a third party. It's very close to a face-to-face cash transfer, albeit with possibility of being traced by various methods, so not perfectly anonymous. Still far more anonymous than almost any other method.
but if you want to transfer coins you have to have them first. how easy is it for the average person to get bitcoins? not very.
with coinbase you have to link a bank account. so they essentially have a blank check from you. if you trust them, great. if not...
you can wire money (bank) to bitstamp but they also want scans of verifying documents like a passport or drivers license. is the average person off the street going to jump through these hoops?
buying through localbitcoins is even more confusing.
Just look at the exponentially rising number of bitcoin ATMs which are currently deplyed around the world. So your argument somehow shows that the comparisons with the early internet actually makes sense. Because at these early times people argued exactly by assuming that there is no network growth. So in the early 90th most people had the opinion that the internet is useless because there are only a few connected computers. Don't underestimate network effects and exponential growth.
Of course nobody knows at the current point where this is going. But you also cannot make arguments ibn which you are assuming there is no growth. Of course the price could go up or down but it is really hard to imagine that it would go to zero.
I have no statistics about it, but I personally think that most people who are once in possesion of some bitcoins will not sell them all, but will always keep a few of them. So the growth measured in number of users seems to only increase. I would consider a net decrease in the number of users as very unlikely as long as there is not a better technologically advanced replacement for it.
There isn't a lot of reality to the idea that bitcoin is "hard". There is such lack of clear one page explanations to get started that people who don't feel like figuring it out are left in the dark thinking bitcoin is wizardry. It's not, that's why we're all exited about how SIMPLE it is. You have 2 numbers associated with your wallet. You send with one number, you receive with another. You protect those numbers like you would your actual cash filled wallet. That's it. If you can understand the grand system of calling someone on your cell phone, you can grasp Bitcoin.
It's safer to buy Bitcoin on coinbase and use those to make online payments than buying online by submitting your credit card information.
I just tried making an order on Tiger Direct which came to $137.94 and they want 0.2208 BTC. You can buy BTC on Coinbase at $628.41, so it would cost me $138.75 or a 58 bps surcharge over paying with my credit card, where I get 1% cash back, so really more like a 158 bps surcharge, plus I have to pay Coinbase immediately through my bank vs. having 30 days to float the balance on Amex interest-free.
How is it safer? I'm not giving the seller my CC info, but paying through Paypal has the same effect, and I'm not liable for CC fraud anyway. In the event that I have an issue with my purchase it's a hell of a lot easier to call Amex and do a chargeback vs. getting Coinbase to convince the merchant to reverse the transaction, or attempting to get my bank to fight Coinbase. I can also do the transaction at a set price in one step on my CC vs. buying bitcoin and incurring currency risk.
What's the upside for the consumer here?
In this example there is no upside for somebody who doesn't already have Bitcoin. But there are other instances where Paypal or other payment providers are not available or charge high fees.
It's interested to disagree exactly with what you agree and otherwise:
- "What problem does it solve?" It gives you freedom, true freedom! You send to whomever you wish and freely receive from anyone anytime from everywhere! No red tape involved, no fiscal infrastructure needed, no political settings getting in your way, no many other bigger-than-you problems. Freedom!
-"What backs it other than speculation?" (I'm sorry that I have to sound redundant, but...) Freedom! Anyone wishing to use a free currency will opt for it or something similar.
- "Many bad actors in the market with little regulation." Well, I admit that the other side of the coin named "freedom" is anarchy. It scares you and you seek shelter from the wild west land of virtual currencies, but other see opportunities in there and are willing to take necessary risks.
-"Consumer unfriendly: the average «man on the street» can't secure his wallet file and even many technically sharp people have been ripped off." The friendliness is an engineering problem, and the perception is a psychological one. Both can be addressed just like so many other like it. The average Joe just doesn't think now that the inflation or other aspects of fiat-currency is ripping him off, because the work in this regard was done.
-"Extreme volatility and lack of liquidity make it a poor store of value or unit of record, two things that are extremely important in a currency." After the MtGox exit the market is actually unusually stable! And the depth of the market only gets deeper and with it - the stability of it's price relative to other currencies.
You say you see potential with micropayments, but in the current setting, the "dust" transactions are penalized with transfer fees. According to http://bitcoinfees.com/ if the amount is lower than 0.01 Bitcoin an amount of 0.0001 Bitcoin is perceived. At the current price (~630 USD/Bitcoin) the penalty limit is $6,3 and if Bitcoin's price will go up so will this limit. If the Bitcoin will rise 10 times, that 0.0001 Bitcoin fee will be 63 USD cents which means that even if a Bitcoin is fungible up to eight subunit decimals, it will count only for fine-division of large numbers, not micro-payments.
So you may be skeptical regarding the Bitcoin, but IMHO - for the wrong reasons.
The thing is, the average consumer DOES NOT have access to with 30bps currency exchange fees. They don't have the access you do as an HFT guy does. For retail currency exchange and international transfers, especially for international remittances, the fees, paperwork, delays and bullshit are very high.
To do an international wire transfer from the US to Canada for example, costs $25-$50 and has a %3 currency exchange fee. Western Union is probably worse to some place like Brazil or the Philippines.
With Bitcoin exchanges, I can buy BTC at a total of %0.5-1 currency exchange fee, wait 10 minutes and pay pretty much no fees outside of that. We can both use our free and relatively bullshit free domestic transfer services to transfer money in and out of the exchanges. Because of the speed of transacting, the spread from delays are minimal.
The average consumer can do far better than 30 bps on currency trades, even on something like an Interactive Brokers account. Retail guys probably see tighter prices than HFTs do, to be honest, since FX is an OTC market and generally speaking, broker-dealers will give tighter pricing to uninformed traders than informed speculators.
Anyway, let's say we're at a dollar amount where fees and rates really add up to something substantial. To move $100k from USD -> BTC -> CAD we have to pay:
-Bitstamp exchange fee of 24 bps
-Walk Bitstamp ask book to do $100k USD worth is ~$629 vs. a mid-market price of $627.93: 17 bps
-Walk VirtEx bid book to do $111k CAD worth nets $645 vs. a mid-market price of $672.5: 95 bps
-Pay VirtEx exchange fee: 150 bps
That puts you at 2.86%, plus any slippage on execution due to price moves in BTC while you transfer it, fees to take money out, and risk that one of these exchanges steals your money. You also have risk that the rates between the two markets don't track the exchange rate precisely, since high fees create an impediment to arbitrage that would drive prices to be more efficient. Why take that risk vs. using a regulated bank? For small transfers you might be able to eek out some savings, but your time is probably more valuable than saving 10s of dollars.
And yes, you could work orders on both exchanges or trade in slices to try to avoid paying up the full spread, but that's extra work and incurs more risk. The average guy sending money from the US to Canada doesn't want to play execution trader all day.
I'm talking about the average person who wont get an IB account with it's reams of paperwork, professionals only attitude, and $10+/month minimum fees to maybe do a bunch of currency exchange for a one time or occasional thing. Also using IB as an actual currency exchanger where I get cash from US account A to CAD account B is actually pretty hard to do, they charge fees to do it, and there are long delays in the process. They basically only want you to use their FX platform to try to make money exchanging currencies, but once you want to cash out, you have to convert everything back to you home currency and take it back as a domestic transfer.
I've researched this extensively, since I had to pay my Canadian student loan while working in the US. The easiest and cheapest way to do it ended up being a schwab debit card with it's %0 currency exchange fee and ATM refunds. A close second would be BTC. Then it's Paypal, then it's the retail bank (think a chase checking account) international wire transfer service with $50 fees. Only schwab and & BTC would be relatively instant.
The actual currency exchange is also not transparent at all whenever I use any of these services except Paypal and BTC. I charge $XXX CAD, and some time later I'll see a charge for $XXX USD on my bank statement. I have a large time-span where they could of transferred at any time. I have no idea if they did profit maximizing shenanigans like BoA arranged withdrawals and deposits to maximize overdraft fees. I just know it's about %1-2 off what I saw as the mid market price on my phone when I did the transaction even with no 'currency exchange fee'.
When going from Canada to USA is even worse, since there is no such thing as a zero currency exchange fee card or account like you can get in the USA.
The amount of risk I would be taking is about 1-10 minutes with Bitcoin, and 'regulated bank' isn't much solace when things like Cyprus, Argentina and others happen. Then there is the domestic transfer out time, which can be fairly quick or up to a day or two. But when your at that stage, all of the currency exchange risk is gone.
The uneven international exchange rates are a double edge sword that will go away as the market gets bigger. The sell/buy spread between kraken and bitstamp for example is less compared to cavirtex.
In practice sending money from US to Canada with BTC is about as much work as using paypal. You just have to compare the two before you do the transfer. Sometimes it really in your favor to do BTC, sometimes it's better to do paypal.
XETrade seems to work quite well for transfers from US to CA banks. Certainly much better spreads than paypal, and in practice much quicker and cheaper than BTC.
I've thought that Bitcoin (or more likely, a future crypto currency) might be better served as a transaction backbone for payment processors, banks, and the like. It could still be used for transactions between two individuals, but the bulk of transactions would be for routine inter-bank processing.
This would have an effect of stabilizing the exchange rate, and could replace Fedwire/ACH for a large portion of transactions. However, I'm not convinced the current mining structure is optimal, and would certainly not be suitable for this usage.
I'm sure many Bitcoin advocates would disagree with me, but I believe that there should be some mechanism a la the federal reserve to stabilize the market and allow for reasonable inflation. I have no idea how this would be implemented from a technical standpoint, but I believe with some refinements, cryptocurrencies can serve a place in the economy, but I do not see them replacing the "fiat" by any means.
The USD is already a digital currency. The Fed keeps a ledger of how much USD every bank has and transactions between banks, which enables banks to go back and forth between hard cash and digital currency. Note the Fed does not know how much each account has but that's the banks job.
From a banks perspective there is no reason to change things. They can trust checks from random people as long as the Fed clears the transaction between them and Bank X at the end of the day there in the clear.
It's partly digitized. There's still quite a bit of shipping dollars around.
There are also physical Bitcoin's: https://www.casascius.com/
You could argue that the physical bitcoins simply represent digital ones but the same can be said for USD as they are numbered. Coins are not currently numbered but represent a small fraction of the overall money supply.
You don't ever need to ship physical bitcoins, though. You can just digitize and transfer them. Which is preferred can be decided on the fly, which is quite a different situation than USD.
Personally, I'm not very convinced that physical bitcoins will really be meaningful: 1) cost of production is probably large compared to transaction fees, 2) counterfeiting issues. But I could easily be wrong there.
Ahh, this is the important point USD start as digital currency. When the fed 'makes money' they are not talking about physical objects. (There are other views of the money supply that include IOU's as money but that's something of a side issue and can also apply to bit-coins or stocks when someone shorts it.)
More importantly the physical dollars only go into circulation after removing a digital dollar that already exists.
None of that changes the fact that there is substantially more need to ship around physical stores of value with USD than with BTC. It's not just banks, it's every merchant accepting cash.
The inability for cryptocurrencies to do a transaction without an internet connection is a bug not a feature. Still, plenty of people go years without touching physical cash which makes up around 7% of the actual cash in the US. So it's not like Amazon.com or IBM have to use forklifts to move pallets of cash around. Better yet they can write a check for 100 million and the only transaction fee is the wait until the check clears.
PS: Sweden is down to 3% but we have a much larger underground economy which thrives on cash. Even more interesting MintChip is an example of a government backed anonymous digital currency system which supports USD. http://en.wikipedia.org/wiki/MintChip Which suggests cryptocurrencies may not actually make it.
"The inability for cryptocurrencies to do a transaction without an internet connection is a bug not a feature."
I agree, and never claimed otherwise. But the ability to complete any transfer electronically (even if you were given something physical) is a feature. I've never claimed that cryptocurrencies have no disadvantages - nor would I, that's crazy.
Bitcoin works great as a system where you cannot trust anyone, with a proportional resource cost. In a closed system like that the extra cost would not outweigh the benefits.
Two benefits that makes it all worthwhile: 1) you can transfer it to someone else (e.g. an heir) cost free, tax free, paperwork free, without the gov't even knowing you did it. Illegal, but you can do it and probably get away with it. 2) It can't be devalued by gov't action.
1. You could do the same thing with cash or gold in many domestic cases. Transferring a substantial amount of cash in/out of a BTC exchange is going to require AML paperwork and the blockchain/exchange has enough information for a regulator to back out where the money went. You might be able to trade locally for cash to avoid this, but for serious amounts of money that could get you robbed or arrested.
2. BTC can be devalued by the actions (or inaction) of other participants in the market and their value changes wildly compared to major currencies. Yes there will never be hyperinflation in BTC terms, but your BTC could easily end up worthless in other ways. Furthermore, I don't think this is a real risk for actual wealthy people. Their wealth is primarily concentrated in ownership interest in businesses, equipment, land, etc., not in currency.
1. Good points. I'm thinking in terms of giving, not trading, as in heirs. Currently leaving money for heirs is messy with probate and paperwork and taxes. There are solutions like living trusts and so forth but again that's paperwork and management. Not so much with bitcoin. It's like digital gold, and less like cash, which loses value even if demand remains constant.
2. Yep, bitcoin can be indirectly devalued by gov't. Or it could end up like beanie babies.
Both of those points can be seen as good arguments against bitcoin by many. Myself for instance, I don't consider facilitating tax evasion and impossibility to regulate by democratically elected governments a point in favour of bitcoin.
That being said to get back on the technical merits of bitcoin, I agree with the OP that I can't imagine every individual handling their own bitcoin wallet and risk losing everything if it gets compromised (and waiting for transactions to be validated etc...).
So even if the currency is successful we'll end up with bitcoin banks managing the risk for us and visa-like credit cards for day to day transactions. And then I fail to see any advantage over what we have now (besides making a few early adopters extremely rich, of course).
> Myself for instance, I don't consider facilitating tax evasion and impossibility to regulate by democratically elected governments a point in favour of bitcoin.
That makes Bitcoin immoral from your perspective, without saying anything about the feasibility.
You even restrict the morality argument yourself by saying it is good that a democratically elected government should have the ability to control financial transactions, which I completely disagree with, but even you will admit that there are a lot of unethical governments out there that hurt their population by controlling financial transactions and inflating the money supply.
I never said my view was the correct one, I just said I had a different opinion on the matter.
The parent is the one who said that it made it "all worthwhile". That sounded like a general truth to me, I felt the need to point out that it was still up for debate.
And my 2nd point was about the feasibility, I still have to hear from the bitcoin crowd what's the solution for day-to-day use of the currency that does not involve a bank-but-we-don't-call-it-a-bank-seriously-it's-not-a-bank.
> And my 2nd point was about the feasibility, I still have to hear from the bitcoin crowd what's the solution for day-to-day use of the currency that does not involve a bank-but-we-don't-call-it-a-bank-seriously-it's-not-a-bank.
Bitcoin was designed to be a peer-to-peer payment system where the owner of the private key is the owner of the funds. Unfortunately, building secure hardware and software is very difficult, that's why many people choose to not keep their private key on their device but let a service deal with the security, which is often a bad idea. One secure hardware is cheaply available on the market[1] and two-factor-authentication becomes more widespread, this becomes less of an issue.
"I never said my view was the correct one, I just said I had a different opinion on the matter."
I get what you're saying, but presumably the fact that you hold an opinion indicates that you think it's the correct one.
> Myself for instance, I don't consider facilitating tax evasion and impossibility to regulate by democratically elected governments a point in favour of bitcoin.
If we had a strong democracy I'd support your viewpoint here. But in our 2-party oligopoly gov't, the general voters' interests are typically secondary to the wealthy's. Bitcoin helps even the score.
Tax evasion helps the wealthy a whole heck of a lot more than it helps the impoverished, so I'm not sure it helps to even the score on that count. Avoiding regulation can go either way - reducing barriers to entry by circumventing regulatory capture is a plus (though the wealthy will be in a better position to enter), reducing the pricing in of externalities is a minus (and the wealthy will be best able to exploit this).
You can transfer cash to someone else cost free, tax free, and paperwork free if you don't mind breaking the law. If you transfer money by other means (e.g. the bank, bonds, etc) there are perks that make up for the additional cost generally. If nothing else, simplicity.
You really think it can't be devalued by the government?
Its value changed when China implemented laws regulating it (and even when there was speculation of it).
If the NSA threw its resources at mining, it could become rich and then dump for cheap, thus crashing it.
The FBI already showed that they can seize some, and they managed to seize such a significant portion that it could be devalued that way.
What you should be saying is "It's not backed by a central authority we have to trust". A third party as powerful as the government can still do significant damage to it.
I get your point that it can be indirectly devalued. That should be true for any store of wealth imaginable.
A transfer of cash is a transfer of a continuously devaluing currency. If I bury a barrel of cash to give to my heirs it might be worth half in today's dollars by the time they dig it up. Not so likely with bitcoin, assuming demand for it remains the same or higher than now.
The gov't could ban bitcoin transactions but that's becoming more and more unlikely as Wall Street gets into bitcoin-related services.
> If you transfer money by other means (e.g. the bank, bonds, etc) there are perks that make up for the additional cost generally. If nothing else, simplicity.
Agreed. For heirs, for example, a living trust is probably the way to go, over bitcoin inheritance.
Apart from being a rather risky investment vehicle, the only use case that seems to be unique to Bitcoin is black market transactions.
It's an excellent intermediary currency for purchasing items such as illegal drugs. Or for services such as paying off ransoms, as demonstrated by the CryptoLocker trojan.
I had more optimism for Bitcoin before I saw people so aggressively evangelize it. I think it has great potential as a digital currency but some people are making into what's almost a totem.
Well it is an innovative technology/platform that ranks up there with HTTP, html, tcp/ip, usenet, bittorent
Nothing as interesting has come out since 90s, all we had since are "social networks" and "flappy bird" sigh
Yup, unfortunately libertarians and anarcho-capitalists have jumped on it like it's the solution to all bad government and a way to avoid taxation and have become religious about it. They're wrong, and completely nuts, but this isn't Bitcoin's fault.
They are wrong, the blockchain is public, it is very likely that a bitcoin like technology be used by state actors in future to create tightly controlled currencies!
Imagine a state being able to charge sales tax at the point of each transaction! Or more disturbingly know exactly who buys what for how much and when if tied together with government issued ids and wallets. Or instantly calculate taxes due on income.
Its actually quite scary :(
In fact bitcoin technology or derivative could be used unfortunately to take even more control from people and economies! Its probably a good thing that in most countries politicians would balk at this since they wont be able to get brown envelopes if everyone in the state uses coins
> instantly calculate taxes due on income
Uh, sign me up? The political complications of tax reform aside, return free filing would save millions of hours required for tax preparation, and it is estimated that between 8 and 60 million taxpayers would not need to file a return at all. And for the rest it would streamlined.
Of course, the IRS already knows 90% of your income information, without Bitcoin, because of 1099s, W-2s, etc.
Which is how state controlled bitcoin like currencies will be pushed onto people, claiming it would save time/money etc, be more safe and secure etc.
Tho' I highly doubt bureaucrats in IRS or similar would rollover so quickly and put themselves out of a job!
Giving the state (or 3rd parties) even more control over currency and every day use that could be gained by a state run bitcoin like currency is very scary proposition IMHO giving them even more power.
Given the choice between Govcoin and Bitcoin, I'd imagine most people will choose Bitcoin. I can't see the state launching a coin successfully. Lack of central authority is one of the killer features of crypto.
And smart phones, public GPS, public TOR, hybrid cars, HDMI, blu-ray, Wikipedia, widespread broadband, the Human Genome Project, etc.
To pretend that no good tech innovations have come out since the 90s is just willful ignorance.
Notice how I listed internet/network related technologies (HDMI/blueray/ HGP etc are not)
Evangelizing was basically the only path for Bitcoin-the-currency to become valuable, so that's a bit of an odd complaint ;-)
i am not familiar with the phrase "totem." care to elaborate?
By totem I mean a symbol of belonging to a group. It seems to me that a lot of the Bitcoin community shares a vaguely similar idea of what the future of money should be and the way to achieve that is via technology, not politics. I think that's very naive, or maybe it's nothing more than just a reaction to what seems like an impossible task. Either way, I see a lot of emotion wrapped up in what's supposed to be just a digital currency. It seems like a political movement that wants nothing to do with politics.
I think he means a symbol of worship. Something that is worshiped because of the desire to worship something, not because of any deep understanding of it's intrinsic worth...
"A totem is a being, object, or symbol representing an animal or plant that serves as an emblem of a group of people, such as a family, clan, group, lineage, or tribe, reminding them of their ancestry." -- Wikipedia. They may have spiritual/shamanastic uses in certain contexts.
In this context, Bitcoin has been purported to be an emblem of freedom, liberty, anarchy, libertarianism, decentralization, etc.
I think 'icon' fits better.
I think you're right, icon is a better choice.
Particularly, I think Totem is a better choice.. you are backed by giants like Freud:
Benjamin, you're conflating bitcoin the protocol with bitcoin the 'currency'.
This is an all too common mistake, so please don't feel too too bad about it. Bitcoin protocol does have some interesting things to offer us and I'm sure it will be built upon in novel ways.
Bitcoin 'currency' on the other hand is a non-starter and as time goes on we will see it discarded.
I hope more people would concentrate on the protocol but about 99% of what you hear and the energy of people is set on bitcoin 'currency'.
The protocol and the currency are actually inseparable: http://timothyblee.com/2014/03/01/heres-why-bitcoin-the-netw...
You can't use the Bitcoin protocol in any meaningful way without using the Bitcoin currency.
Alternative crypto-currencies are less secure because they have less dedicated mining power and less developer support.
why is it a nonstarter as a currency? is it because it can't scale if widely adopted? or because it's difficult to keep secure? any other reasons?
The problem with bitcoin is that no one is using it for its intended purpose - to buy things. People are using it as an investment or are speculating on it, which is not the purpose of a currency.
What you end up with is the anemic system that exists right now, where no one is advancing the actual bitcoin cause, everyone is just setting up exchanges to make money from transactions.
Very misleading. Contains no actual statements made by Bill Gates about Bitcoin. It certainly tries to grab your attention by suggesting otherwise.
The absurdity of this kind of thought is just profound. Thinking like this may be useful as a means of encouraging hope when all hope is lost, but Bitcoin is nowhere near there yet. Most of all this kind of talk smacks of deep desperation - "why won't people love me?"
I understand fully why one might feel so desperate. Bitcoin may have the potential to be truly revolutionary. Bitcoin solves the problem of orchestrating an international currency in a manner that limits the implementation details to the design, not banking/payment industry/political types who historically - for one reason or another - end up building in significant rigidities to the system.
It doesn't take a PhD in Economics to see the potential benefits of eradicating PayPal and consumer banks (although it may take one to see the potential pitfalls). More than this though, Bitcoin opens the door to truly free capital flow. It is possible to work in the Western world for a month or two and move, say, far East, and live like a king on the savings for a year or more. Why can't we just buy the stuff over there cheaply and consume it at home? One major reason is the rigidities in capital flow - it is hard, risky business in the current system. As a large company in a Bitcoin world you don't have to worry about a great class of risks of international trade, dumping money into the Cambodian economy is no longer a question of FX risk and "can I get it back out?"
This is a great step forward on the way to homogenising international capital stores i.e. ceteris paribus, rich people buy where things are cheapest, like in Cambodia, thereby flowing capital to, and driving up prices in, Cambodia. Cambodians get richer and the West gets poorer. Bitcoin has the vague potential to be the great equalizer.
We have seen some evidence of this at work in the EU with the Euro, if you look past the troubling dynamics of transition. Imagine how very different the US would be if every state had a different currency and payment processing rules, the diversity in income would be profound.
An educated economist will see a great many problems with this utopian vision, but will likely agree the aim is noble and that the basis - Bitcoin - is the closest thing we have so far to a workable solution.
Bitcoin may be as revolutionary as the fanboys want it to be, even if they don't understand why. My personal thought is that Bitcoin will soon be seen as the thing that started it all, but the solution won't be Bitcoin itself. There are too many problems - no matter how many times you read that a fixed supply currency is the greatest thing since sliced bread, it really isn't. It's also woefully easy to steal and the mining/verification mechanism is far too resource intensive and encouraging of looney speculation making its value at any point in time completely impossible to reason about.
If you love BTC today, don't spout bullshit strings of meaningless words in some grandiose display of being ahead of the times. Make it stronger and better because if you don't history will judge this whole thing very severely in 10 years time, when it really is just a way of buying drugs and hitmen.
I think the issue is that bitcoin fanatics assume something is deeply wrong with our current system, or that banks are parasitic and not providing any value. Sure there are places it can be improved, but the current system works well for many people. Before credit cards we had to rely on informal credit. Sure, I could open a bar tab at a local place where I'm a regular, or the man at the corner store might let me run up a small bill. Your word was your bond, but if you left town, wanted to make a large purchase or weren't from the right family (or had the wrong color skin), it was a cash only world.
Right now I can travel to any corner of the globe and make transactions on credit with someone who knows nothing about me and has never seen my face. He's confident that he'll be paid and I'm confident that I have recourse in the event of a bad transaction. I don't have to carry large amounts of cash or worry about being robbed. If my card is stolen my liability is relatively small. That costs something, but people overwhelmingly see value in it and are willing to pay this cost.
You're absolutely correct.
I agree with both you and the fanboys on this point, however. Our current system is better than the old, for sure, but at the end of the day it is true that an insane amount of money is paid to these oligopolous firms as fees for doing a very simple job. Payment processing really is a case of moving database rows around, albeit in a highly available manner, yet they demand huge percentages. My bank goes down about as often as my Gmail, and the latter's free and deals with more information than my bank.
The present is better than the old, but very bad compared to what could be.