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There are basically two types of cryptocurrency enthusiasts as far as I can tell. The first one believes that decentralized cryptocurrency and smart contracts

There are basically two types of cryptocurrency enthusiasts as far as I can tell. The first one believes that decentralized cryptocurrency and smart contracts will lead to a better world, free from the authoritarian rule of central banking and legal systems. And the second type, which is far more numerous, is hoping to to make a quick buck off of price fluctuations in the underlying digital assets. The NYT has a great article on this, where they suggest the bulk of Bitcoin users are Chinese citizens gambling on price fluctuations. And their stats seem to support this assertion: http://www.nytimes.com/2016/07/03/business/dealbook/bitcoin-china.html http://www.nytimes.com/2016/07/03/business/dealbook/bitcoin-...

SmurfJuggler 10y ago
There's at least one other type you're missing: people who appreciate the utility of an electronic equivalent to cash. I pay for things with cryptocurrencies fairly frequently. I don't want every company I buy things from having my name, address, date of birth and credit card info if they don't need it. If I'm buying goods or services that don't require physical shipping, all they need to know is what I want and that the money has changed hands. Crypto facilitates those kinds of transactions.
- tszming 10y ago
  Maybe you can just use ... PayPal?
  - sneak 10y ago
    PayPal is about as far from cash as one can get.
  - SmurfJuggler 10y ago
    PayPal, credit cards etc. all have their place, but for non-physical purchases from reputable parties I'm not sure how much you can improve on "pay money, receive thing." It would have to be a very compelling argument to persuade me that transacting through a middle-man (who then holds all my personal information and card details and also takes a cut) is better than just handing over cash and getting what I want.
    - lmm 10y ago
      You don't need credit-card chargebacks until you do, but then you really need them. (And actually most of the time the threat of chargebacks keeps merchants honest). Once you get to the point of using a reputable escrow system (which will have to charge a fee), that plus the bitcoin fees (either direct transfer fees or the implicit tax that is mining rewards) are unlikely to be cheaper than the credit card system (which doesn't have to burn immense amounts of processing power for business-as-usual). Having all participants be anonymous and untrusted adds a lot of overhead; in a civilized environment with a reasonable legal system you can shave that off by being willing to trust your counterparties (trust that is made possible by central clearing houses and verified identities).
      - DennisP 10y ago
        One way to do escrow is with 2-of-3 signatures. If both parties to the transaction sign, the escrow agent doesn't have to get involved. On Ethereum it's easy to implement as a smart contract that lets the escrow agent choose who gets the money, and pays the agent a fee for the service (but nothing otherwise). Participants aren't necessarily anonymous; if you're buying from a known vendor and having something shipped to your house, neither party is all that anonymous. People are working on adding verified identities, for people who want them. Ethereum hopes to do away with mining by early 2017.
        lmm 10y ago
        > One way to do escrow is with 2-of-3 signatures. If both parties to the transaction sign, the escrow agent doesn't have to get involved. On Ethereum it's easy to implement as a smart contract that lets the escrow agent choose who gets the money, and pays the agent a fee for the service (but nothing otherwise). > Participants aren't necessarily anonymous; if you're buying from a known vendor and having something shipped to your house, neither party is all that anonymous. People are working on adding verified identities, for people who want them. At which point why use this instead of a credit card? > Ethereum hopes to do away with mining by early 2017. How are they doing byzantine-fault-tolerant consensus without it?
  - xorcist 10y ago
    Paypal takes 3% fee and then an extra 2-3% on the currency exchange. I would absolutely prefer the $.05 Bitcoin fees given the chance.
vegabook 10y ago
actually "gambling", aka "speculation", is the crucial ingredient in the building of credibility of any tradable financial contract. It increases liquidity, and contrary to popular belief, it usually dampens volatility like a shock absorber. This is because non-speculative supply and demand tends to be much less normally distributed (herd behaviour) than speculative transaction direction, leading to large price spikes (see: bitcoin and Cyprus). I welcome with open arms the "gamblers" because they provide the "other side", in return for a skewed future price distribution towards profit, when such "one way" stampedes occur.
- omegaham 10y ago
  You're completely right when it comes to regular currencies, stocks, and so on - speculation is how prices stay accurate. If the price goes too far out of whack, speculators can make large amounts of money off of everyone else. With cryptocurrencies, however, there isn't enough "legitimate activity" (i.e. people actually conducting business with Bitcoin) to allow a stable price to emerge. This makes them vulnerable to manipulation because there is no function for the form to follow. At least with regular currencies, speculation has to follow reality. With cryptocurrencies, reality follows speculation! This leads to a negative feedback loop; people are reluctant to use cryptocurrencies for business because the price is unstable, and the price is unstable because not enough people are using them for business.
  - TheOtherHobbes 10y ago
    >If the price goes too far out of whack, speculators can make large amounts of money off of everyone else. That's a wholly circular argument, and a counterfactual one. If speculation influences prices then it's in the interest of speculators to create pricing mechanisms that are perpetually "out of whack" so they can profit from them. There is no such thing as an accurate commodity or currency price, and there never can be. There's only market sentiment, and that's largely based on optimism or pessimism about the future - which is unknown. Markets are just entrail reading, with very expensive and complicated entrails. DOA was more like a meta-entrail system with an extra layer or two of obfuscation. But it was no more stable than any other market, and fell prey to exactly the same problem - manipulation of mechanisms creating a dishonest illusion of objectivity for profit.
crispyambulance 10y ago
And the gambling is what makes me skeptical of figures like "the DAO is worth $150 Million" or whatever. I would like to know how much REAL MONEY went into this thing rather than its "value" as a result of funny-money speculation. I expect that any adult that put money or compute cycles into ethereum understands that the value could literally vaporize at any time, so it seems disingenuous to throw around dollar figures inflated by speculation. Is anyone _really_ losing their shirt at this point?
- shiven 10y ago
  Is anyone _really_ losing their shirt at this point? This. This is what I'd like to know before I can give a crap about crytocurrencies. Otherwise, it is all tulip bulbs in a land far, far away.
  - analognoise 10y ago
    Excellent reference to Tulip Mania (https://en.m.wikipedia.org/wiki/Tulip_mania https://en.m.wikipedia.org/wiki/Tulip_mania) for those of you following along at home!

SmurfJuggler 10y ago

There's at least one other type you're missing: people who appreciate the utility of an electronic equivalent to cash. I pay for things with cryptocurrencies fairly frequently. I don't want every company I buy things from having my name, address, date of birth and credit card info if they don't need it. If I'm buying goods or services that don't require physical shipping, all they need to know is what I want and that the money has changed hands. Crypto facilitates those kinds of transactions.

tszming 10y ago
Maybe you can just use ... PayPal?
- sneak 10y ago
  PayPal is about as far from cash as one can get.
- SmurfJuggler 10y ago
  PayPal, credit cards etc. all have their place, but for non-physical purchases from reputable parties I'm not sure how much you can improve on "pay money, receive thing." It would have to be a very compelling argument to persuade me that transacting through a middle-man (who then holds all my personal information and card details and also takes a cut) is better than just handing over cash and getting what I want.
  - lmm 10y ago
    You don't need credit-card chargebacks until you do, but then you really need them. (And actually most of the time the threat of chargebacks keeps merchants honest). Once you get to the point of using a reputable escrow system (which will have to charge a fee), that plus the bitcoin fees (either direct transfer fees or the implicit tax that is mining rewards) are unlikely to be cheaper than the credit card system (which doesn't have to burn immense amounts of processing power for business-as-usual). Having all participants be anonymous and untrusted adds a lot of overhead; in a civilized environment with a reasonable legal system you can shave that off by being willing to trust your counterparties (trust that is made possible by central clearing houses and verified identities).
    - DennisP 10y ago
      One way to do escrow is with 2-of-3 signatures. If both parties to the transaction sign, the escrow agent doesn't have to get involved. On Ethereum it's easy to implement as a smart contract that lets the escrow agent choose who gets the money, and pays the agent a fee for the service (but nothing otherwise). Participants aren't necessarily anonymous; if you're buying from a known vendor and having something shipped to your house, neither party is all that anonymous. People are working on adding verified identities, for people who want them. Ethereum hopes to do away with mining by early 2017.
      - lmm 10y ago
        > One way to do escrow is with 2-of-3 signatures. If both parties to the transaction sign, the escrow agent doesn't have to get involved. On Ethereum it's easy to implement as a smart contract that lets the escrow agent choose who gets the money, and pays the agent a fee for the service (but nothing otherwise). > Participants aren't necessarily anonymous; if you're buying from a known vendor and having something shipped to your house, neither party is all that anonymous. People are working on adding verified identities, for people who want them. At which point why use this instead of a credit card? > Ethereum hopes to do away with mining by early 2017. How are they doing byzantine-fault-tolerant consensus without it?
- xorcist 10y ago
  Paypal takes 3% fee and then an extra 2-3% on the currency exchange. I would absolutely prefer the $.05 Bitcoin fees given the chance.

vegabook 10y ago

actually "gambling", aka "speculation", is the crucial ingredient in the building of credibility of any tradable financial contract. It increases liquidity, and contrary to popular belief, it usually dampens volatility like a shock absorber. This is because non-speculative supply and demand tends to be much less normally distributed (herd behaviour) than speculative transaction direction, leading to large price spikes (see: bitcoin and Cyprus). I welcome with open arms the "gamblers" because they provide the "other side", in return for a skewed future price distribution towards profit, when such "one way" stampedes occur.

omegaham 10y ago
You're completely right when it comes to regular currencies, stocks, and so on - speculation is how prices stay accurate. If the price goes too far out of whack, speculators can make large amounts of money off of everyone else. With cryptocurrencies, however, there isn't enough "legitimate activity" (i.e. people actually conducting business with Bitcoin) to allow a stable price to emerge. This makes them vulnerable to manipulation because there is no function for the form to follow. At least with regular currencies, speculation has to follow reality. With cryptocurrencies, reality follows speculation! This leads to a negative feedback loop; people are reluctant to use cryptocurrencies for business because the price is unstable, and the price is unstable because not enough people are using them for business.
- TheOtherHobbes 10y ago
  >If the price goes too far out of whack, speculators can make large amounts of money off of everyone else. That's a wholly circular argument, and a counterfactual one. If speculation influences prices then it's in the interest of speculators to create pricing mechanisms that are perpetually "out of whack" so they can profit from them. There is no such thing as an accurate commodity or currency price, and there never can be. There's only market sentiment, and that's largely based on optimism or pessimism about the future - which is unknown. Markets are just entrail reading, with very expensive and complicated entrails. DOA was more like a meta-entrail system with an extra layer or two of obfuscation. But it was no more stable than any other market, and fell prey to exactly the same problem - manipulation of mechanisms creating a dishonest illusion of objectivity for profit.

crispyambulance 10y ago

And the gambling is what makes me skeptical of figures like "the DAO is worth $150 Million" or whatever. I would like to know how much REAL MONEY went into this thing rather than its "value" as a result of funny-money speculation. I expect that any adult that put money or compute cycles into ethereum understands that the value could literally vaporize at any time, so it seems disingenuous to throw around dollar figures inflated by speculation. Is anyone _really_ losing their shirt at this point?

shiven 10y ago
Is anyone _really_ losing their shirt at this point? This. This is what I'd like to know before I can give a crap about crytocurrencies. Otherwise, it is all tulip bulbs in a land far, far away.
- analognoise 10y ago
  Excellent reference to Tulip Mania (https://en.m.wikipedia.org/wiki/Tulip_mania https://en.m.wikipedia.org/wiki/Tulip_mania) for those of you following along at home!