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Bitcoin Miners Signal Revolt Amid Sluggish Blockchain

64 points by mathieutd 10y ago

ddebernardy 10y ago
Much as I read Bitcoin articles from time to time I still don't get why on earth one would want to use a crypto currency. I'm like, I vaguely get the "not under control of a .gov" and privacy concerns and all, but the thing seems literally backed 100% on faith, in contrast with (if only theoretically) the "we the nation" backing of fiat money. Any odds an aficionado might be around to enlighten the uninitiated?
- wheelerwj 10y ago
  it is backed entirely by faith. it doesn't exist anywhere and it's not tangible. bitcoin seems to be servicing three primary interests: a hedge currency with slightly more utility than gold, remittances (specifically in the B2B space but also some personal), and shopping online without having to enter personal information such as credit cards. by far the most commonly reported on use case is investment. so if you like a roller coaster and a chance at a big upside, bitcoin or other digital assets are portfolio worthy. the privacy/anonymous thing is relatively dead at this point.
- marcell 10y ago
  A lot of the hype around "blockchain", payment network etc. is just hype. Think of bitcoin as a digital competitor to gold, and it will make a lot more sense. Why is gold worth $1200/oz? Same logic will apply to bitcoin. Incidentally, if you don't think gold should be worth $1200/oz, you probably don't think 1 BTC should be worth anything.
  - r00fus 10y ago
    You know "cryptoasset" doesn't have the same cachet as "cryptocurrency".
  - ch4ch4 10y ago
    BTC does actually have a baseline value: the cost of the electricity spent to mine it. Of course, whether that value is $1 or $1000 depends on the number of people who believe in the currency enough to pay for the power to mine it.
    - marcell 10y ago
      That's not a baseline value, that's a baseline cost. It costs money to mine a bitcoin, but that doesn't mean anyone will want to buy it. Gold is a bit different since it has some baseline value from practical uses, but the store of value use case dominates those.
      - eru 10y ago
        And the baseline cost of bitcoin even goes down, when nobody's mining.
  - eru 10y ago
    Oh, some of the hypes for traditional finance might be justified in a roundabout way: Lots of traditional banks are incompetent and set in their ways. Shaking anything up internally requires lots of (office-) political capital. Having an internal 'blockchain' project might give people just enough leeway and direct backing from above to push through lots of needed but unsettling improvements. Even though those improvements might not have anything to do with blockchains, and might even be better done without.
  - saalweachter 10y ago
    Eh, to a certain extent that's the Bubble Fallacy: just because an asset price is inflating in a bubble does not make it a bad (short-term) investment. As long as you sell before the bubble pops, you can make a lot of money buying and asset at 10x or 100x its "inherent" value. (Of course, you can also lose a helluva lot of money, but then, to the person making millions off of bubbles, both the people who sell too late and the people who never buy are idiots.)
    - ericb 10y ago
      It's hard to predict when these bubbles will end. For example, the massive bubble in green pieces of paper with pictures of presidents (people are trading houses for these things!) will end some day, but you never know when.
      - globuous 10y ago
        That being said, you can probably predict for how long the bubble will most definitely not burst. For these green pieces of paper, as long as its easiest to buy oil with them and that people depend on oil for energy, there will be people willing to buy these green papers. Because they trust they can exchange these papers for something valuable. So everyone that needs oil needs usd as of today (I think iran still sells thiers in euro and russia might start selling in rubbles. I haven't checked oil currencies in a while though, so if you're reading this, you should probably double check ;) ) I honnestly think that's why the us spends billions every year to secure the middle east. They have oil at home and they could easily massively move to renewable with the size of their territory and then export the tech. But then people wouldn't be relying on oil for energy, and the dollar would lose it guarantee of value. And therefore its value.
- alexro 10y ago
  Crypto-currency runs not on faith but on greed, which is the same motivator banksters run on, but put under control.
- epx 10y ago
  I think that it is good to have such an option. It may not catch as the #1 currency in our lifetime, but it helps to move things forward.
- lettergram 10y ago
  For one, all currency is based on faith. We have faith the government can control the currency and will back the currency. Take Venezuela, their currency is/has collapsed because the people no longer have faith that it is valuable. Typically, people just blindly trust authority, and that's why we believe green paper made from cotton to be valuable. We all agree it's valuable (except people who want a gold standard). Similarly, we all agree Bitcoin is worth X. It's no different, except no one is telling us it's worth X. The market is saying it's worth X. It's not really the first time a society agreed to use something arbitrary as valuable either. There are cultures that used salt, gold, silver, white stones, etc. as currency. The point is, once we agree something is worth X, we can trade for other goods at value X. The advantage to Bitcoin is it's not centrally controlled so it's harder to mess up (see great depression, federal reserve basically made it 100x worse), or Germany post WWI. Further, you have an auditable history, some privacy (better than credit cards), and a truly global currency (similar to gold, without the need to lug it around).
  - eru 10y ago
    Btw, The Midas Paradox is a good introduction in some background on the great depression and the Federal Reserve Bank's and federal government's role in it (http://www.themoneyillusion.com/?p=31341 http://www.themoneyillusion.com/?p=31341). I am waiting for someone to come up with a good solution for how to do fractional reserve banking with bitcoin (without relying on trust via eg government-sponsored courts to enforce human-readable contracts---because what would be the point of bitcoin then).
    - chii 10y ago
      i reckon fractional reserve cannot be done with bitcoins (unless you, as you precluded in your conditions, trust a third party). Just like fractional reserves cannot be done with gold, unless you trust a third party (and thus, receive "bank notes" for your gold deposit!).
      - eru 10y ago
        Yes, people have been doing fractional reserve with gold and reputation for a long, long time. I wonder whether bitcoin fractional reserve can live off reputation alone, or whether smart-contracts can / have to help?
- nutschig 10y ago
  Cryptographic security with end-users holding their keys isn't an available feature for modern finance.
- aianus 10y ago
  It's an excellent way to circumvent capital controls. For example if you're a millionaire in China you can set up a mining operation in RMB and get BTC/USD out the other end. It's also the cheapest method to exchange and/or remit small amounts of money internationally. I frequently made a profit doing so vs paying 1.4% to 8% for traditional fiat to fiat methods. I wrote bots that did it for me, but even doing it manually is cheaper and faster than traditional methods. Oh, and of course, it's great for buying drugs and gambling and whatnot.
  - elastic_church 10y ago
    and raising capital, and returning capital, and being an infallible datastore for arbitrary data
  - ddebernardy 10y ago
    Ok, you spelling out that capital control thing made my day. It now makes a lot more sense why the thing is going through the roof, in light of all the RMB wanting to go out of China. Or for that matter why a lot of mining goes on in China itself. Thank you.
- elastic_church 10y ago
  protip: the -currency and -coin suffixes are skeuomorphs. this is a new asset class that retains qualities of several asset classes (currencies, commodities, and securities), while dropping all of those asset's limitations, and introducing its own unique limitations where people are positive they can all be fixed.
- curiousgal 10y ago
  I live in a Third World country with ridiculous monetary restrictions (no PayPal for instance) Bitcoin has been the only way I can pay for books and services. It might not seem like much to you but it has literally been life-changing to me.
  - JoshTriplett 10y ago
    Interesting! Which country?
    - crayon765 10y ago
      Canada.
      - wjn0 10y ago
        Are PayPal/other payment services restricted in Canada somehow?
    - curiousgal 10y ago
      Lovely Tunisia.
- RoboPlumber 10y ago
  The confusion is probably from your internal semantics of the phrase "backing". When you say > the "we the nation" backing of fiat money. what do you think that means? First, I'll tell you what it doesn't mean: It doesn't mean that people are forced to accept it in the general case. It doesn't mean that the government guarantees it to have some value. (It's not even clear what that would entail.) It doesn't mean that if you undervalue a dollar, the army is going to come in and shoot you. Here's what it does mean: First, the court can compel you to repay debts or settlements in that currency. That's the "legal tender" part. Second, you have to pay taxes in it (usually). So what, exactly, do you think the advantage of "government backing" is? It's really not tremendously useful. It's also completely orthogonal from the value of the currency, which (along with its time derivatives) is a much more relevant property. Here are a few reasons I think Bitcoin is better than USD for many applications: * It's more private than anything but cash/barter, especially with mixing * It's not subject to arbitrary freezes or confiscations (which has happened to me, without warning, after a paperwork error by the state comptroller) * It's not subject to arbitrary export controls, so it's more convenient for international payments * It's cheaper than most existing money transfer systems (Western Union, Paypal, etc.), even with the currently elevated transaction fees * It's deflationary. You can argue all you want about whether this is good or bad for "the economy", however you define it, but all I know is that it's good for me, a person who wants a store of value. In this respect, it emulates a physical commodity like gold (although with gold, you have the substantial risk of asteroid mining saturating the market many years from now). * Cash and gold has some of the advantages listed above. Advantages of bitcoin over cash and gold: Easier to move long distances, easier to carry large amounts without attracting notice, harder to steal. Advantages over cash alone: Harder to forge (or inflate). Advantages over gold alone: More fungible.
  - wjn0 10y ago
    So, then a primary argument for the current/recent instability (is presumably?) is its relative widespread lack of adoption? Does economic theory tell us n = number of people using currency such that we can begin to expect more stability? (Presumably, as some function of average transaction size?) Forgive the assumptions and less-relevant questions, but I appreciated your points and you seem to have a good knowledge of the topic. Edited quickly for clarity.
- mbrock 10y ago
  Do you think the value of BTC tomorrow will probably be nonzero? If so, you are participating in the faith, right? Monetary value may be an illusion, but if offer you some bitcoin at half the market price, you'd be quite irrational to abstain, no? I personally like how cryptocurrencies are open protocols, so that I can manage money with open source or self-made tools. It annoys me on a deep level being forced to use banks and their payment systems when I can't even get my account balance from a shell script.
  - ddebernardy 10y ago
    > Do you think the value of BTC tomorrow will probably be nonzero? Actually, I don't, which is why I asked the question. I'm like... what on Earth are these miners thinking? Or more appropriately, those who store a Bitcoin balance. There were insightful answers, mind you, but none (thus far reading) that give a compelling reason to think otherwise, at least to me.
    - cableshaft 10y ago
      You seriously believe that there's a good chance that Bitcoin's price will drop to 0 tomorrow? The price suddenly taking a massive tumble I'd at least understand, you never know if some crazy news will tank the price, but 0? Let me just say, if the price dropped tomorrow to 0.0000001 I'd buy hundreds of thousands of them happily, so the price isn't going to drop to zero tomorrow. My actual price where I'd buy more than I already do right now is probably ~$200 (not terribly liquid right now), but I'm far from the only person who is still willing to buy these things at this moment, so there's pretty much zero chance that tomorrow bitcoin will drop down to zero in price. So do you still think the value of BTC tomorrow will be zero? If you still try to assert that you think it will be zero, I can only assume that you are willfully an irrationally blinding yourself to reason, just so you can pretend that Bitcoin is worthless.
- jcslzr 10y ago
  Only Gold and silver are money, because they have intrinsic value. Everything else its currency (Dollar, Yen, Euro), in the history of mankind there has been hundreds of currencies, and at the end, all of them were worth nothing.That will happen sooner or later to the Dollar, and its going to be a big crisis. Blockchain solves the currency problem of manipulation of volume (which is what causes at the end that currencies end up worth zero), it will be the currency of the future, but it does not look like Bitcoin will be the blockchain currency that will dominate.
  - clarkcox3 10y ago
    But gold and silver only have "intrinsic" value because we have faith that they do. Even the gold standard is based on faith.
- ChemicalWarfare 10y ago
  The thing with bitcoin is with the exception of a couple of very valid use cases - the big one being international money transfer (super-easy and super-cheap with bitcoin compared to other options) - most of the benefits of bitcoin payment processing are on the merchant side - cheaper processing, no chargebacks, no PCI etc. Unfortunately, at least for now, bitcoin isn't a popular enough method of payment for the vast majority of merchants to worry about, let alone pass the savings they get from accepting bitcoin on to the consumers.
  - joosters 10y ago
    Bitcoin is fundamentally worse for international money transfers - you can't do much with the currency itself, so you end up having to make two currency exchanges instead of one. That's not a way to make FX cheaper.
    - ChemicalWarfare 10y ago
      compared to western union fees and timelines - much cheaper and faster (well, assuming a "normal" ~10 min cycle for 1 confirmation) even with having to buy/sell bitcoin on both ends of the tx.
- EthanHeilman 10y ago
  Current financial systems have an enormous amount of reversibility and their security rests on a vast web of relationships (political, institutional, social, economic). Understanding your risks in such systems can be hard and high cost for businesses (ask kickstarter about chargebacks). In Bitcoin the risks are much easier to understand since they are technical rather than social: if someone steals your secret key they steal all the bitcoins under the control of that key. This is clearly not great for every use case, but it has some real advantages in certain verticals: 1. automated/machine payments and/or smart contracts, 2. non-reversible payments (preventing investors from backing out of a bad trade at a stockexchange), 3. countries in which the gov currency is not dependable (e.g. Venezuela), 4. paying for services across borders (e.g. Greek internet businesses paying for AWS when they can't wire money outside the country), 5. refugees who can't trust the government not to seize their savings after they leave the country.
- saurik 10y ago
  > privacy concerns As you are using this phrase in a context where I feel like you are bringing up reasons for Bitcoin, I feel the need to clarify: cash is private (only two people can see any transaction: the two people transacting), classic banks and credit cards are less private (three people can see your transaction: the two people transacting, and the bank), while Bitcoin is the opposite of private (literally everyone is required to see your transaction, whether or not they particularly care ;P). You can try to hide your transaction by handing it to a mixer, but then the mixer is serving the purpose of a bank and is "fighting the current" by trying to pretend to offer a private service when their actions are also recorded in a public ledger, which means both that mathematicians might later find mistakes in timing that allow them to deanonymize your mixed transaction but also that small mixers are worse at this while larger more centralized mixers are more useful... the exact opposite property for what you want if you really didn't like the concept of a bank managing transactions. And no matter what solution you come up with, fundamentally the transaction requires at least one other person to know that you are sending money as you need to use a public network to try to communicate with someone to tell them to tell others to eventually move the money by adding it to a mined block. The only way Bitcoin can even try to simulate the real and true privacy of cash is if you meet someone in person and hand them directly a slip of paper with the private key of some money on it... but then they have no way to know you don't have a copy, at which point they have to announce to the world they received the money in order to re-secure it with their own key.
- uncletammy 10y ago
  With no disrespect intended, I'd like to point you to absolutely any thread on here that has the word Bitcoin in the title for a thorough discussion of the various use cases. A wise woman once said "If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry."
- lukifer 10y ago
  Downsides: volatility, still new-ish, non-trivial to secure for regular folk, zero recourse if hacked/stolen Upsides: Money/valuestore that is infinitely divisible, scriptable (m-of-n, "smart contracts"), reliably and inexpensively transmissible world-wide, offers financial services to third world and unbanked, potentially less volatile than some fiat currencies, potentially resistant (not immune) to manipulation by governments, potentially usable as backbone for "internet of value" applications (side chains, colored coins).
- Lazare 10y ago
  Money is, in a very real sense, a confidence trick. USD, bitcoins, a gold doubloon: You're willing to exchange goods and services for it not because you want it, but because you hope that someone else will exchange goods and services you actually want later. So ultimately, all money is back 100% on faith. The only advantage fiat money gets is that you can pay taxes in it, and you're assuming that at some point in the future you can pay your taxes in it, or trade it to someone who wants it to pay their taxes. Which isn't a bad thing to have faith in, but it's hardly a guarantee. > Any odds an aficionado might be around to enlighten the uninitiated? In principle, the big advantage of fiat money is that it's deeply enmeshed in a social and legal system, and you have a lot of protections with regard to loss, refunds, consumer guarantees, bank deposit protections, etc. If you deposit your USD into a US bank account, and the bank goes under, you'll be protected. It's all just numbers in the central bank, and as a society, we'll change those numbers to ensure a fair and equitable outcome (...in theory; actual results may vary). If that means zeroing out the account of someone we think shouldn't have some money, or just incrementing the account of someone who think should have it, creating currency out of thin air, then so be it. In principle, the big advantage of crypto currency is that it's not enmeshed in those systems. There are no protections, there's no refunds. Nobody controls the system; nobody can decide that the numbers are unfair and change them. The downside is that, if your bitcoins are stolen, nobody can step in and return them. The upside is that, unless they're stolen, nobody can step in and take them. Even the concept of "theft" is kind of fuzzy. Instead of laws, we have code; if the code allows currency to be transferred between accounts, then that's what the code allows. If you think it's great that credit card companies can reverse payments, you'll probably like the idea of fiat currencies. If you think it's horrible, you'll like the idea of crypto currencies. As a practical matter, however, actual crypto currencies still exist in the real world. If I buy a coffee using bitcoin, and I get food poisoning, I can still ask you for a refund, and if you refuse I can sue you. The fact that a credit card company can't just reverse the transaction and move the money back into my account is merely an inconvenience; if a court rules you owe me a refund, you can protest all you like about the irreversibility of the blockchain, but you'll still end up jailed for contempt of court if you don't cough up the cash. Plus, the people who actually run cryptocurrencies keep stepping in and retroactively changing the rules to prevent "bad" outcomes. When a bug in Ethereum allowed a huge amount of crypto currency to be "stolen" (scare quotes because, again, what does that even mean in the context of Ethereum?), the entire system was rolled back and forked to undo that result. Again, that's a lot less convenient than how a fiat currency would deal with it, but it's not a difference in kind. TL;DR: In principle, crypto currencies are fascinating, amazing artifacts of a world of pure logic and reason. In practice they don't really work very well, because we live in a world of fuzzy laws and emotions.
- deleted 10y ago
  [deleted]
- kordless 10y ago
  With a cryptocurrency in place on today's APIs, we would have a means to implement a lightweight type of federation across services. Your Facebook data could live at your house. Bulk downloads of your tweets from a friend's server would be possible without being rate limited in GET fetches. Market futures could be created on revenue passing through an AI API. And more.
ktta 10y ago
This is actually one of the most important standoffs ever in Bitcoin and will rival the well know Ethereum Hard Fork after the DAO fiasco. To give an idea of what is happening, I'll try to explain what I know, which isn't lot. Since last year, there's been an increase in fees that every transaction has to pay to get confirmation within a reasonable timeframe (the point at which your transaction is deemed a valid one). The reason for this is that, the Blocksize is capped at 1MB. Now, the problem is that people are disagreeing with the direct solution to this problem, which is increase the blocksize. What that means is that only 1MB worth of transactions (I don't exactly know how many that is) will fit in a particular block, which is generated once every 10 minutes (the difficulty of 'mining' is actually adjusted to ensure this). So since there's been a lot of activity with bitcoin, a lot of people are having to wait longer to get their transactions confirmed because they usually have to wait for the second or third block after the transaction is sent out by the client. This makes confirmations slower.[1] Now, to make confirmations faster, people have to pay more for the 'transaction fee' which directly goes into the pockets of the miner who includes the transaction in their block. So transactions which pay lower fees are pushed out of the block the miner is currently mining because, they obviously want more money. So the transaction usually occurs in the next block, if they're lucky. The way I see it, the blocksize has to be increased, because it is ridiculous that I have to pay more in fees for sending bitcoin than using paypal. But, the party opposing it has some interesting arguments too. (The full pro-con list can be found here[2]) The strongest argument in my opinion is that making the blocksize larger would lower the transaction fees the client has to pay. Now, that is good for the client, because they pay less fees. But, bad for the miner because they get less money for all the work that they put in. So there was talk about increasing the blocksize to 2MB. That never went through, because of some other problems with SegWit, which frankly I have not much knowledge of. But then came the idea of Bitcoin Unlimited. Now the people behind this say that the blocksize should be WHATEVER the miner chooses and they want autonomy over the blocksize. What can happen in this scenario is that the big players can make a loss temporarily while the smaller players lose money. Eventually the smaller players (miners) close shop which would make bitcoin more centralized. Very interesting arguments on both sides, and this will be much more interesting to watch than anything in recent history. I'm actually surprised not many people are talking about this, and that there's more interest in whether Bitcoin is accepted as an ETF, which was a terrible idea in the first place. [1]:https://blockchain.info/charts/avg-confirmation-time https://blockchain.info/charts/avg-confirmation-time [2]:https://en.bitcoin.it/wiki/Block_size_limit_controversy https://en.bitcoin.it/wiki/Block_size_limit_controversy
anigbrowl 10y ago
As expected. Turns out seizing the means of production won't necessarily result in equitable outcomes.
- lumberjack 10y ago
  Only because, you're are grossly misinterpreting the phrase. The whole idea behind socialism is that the means of production are controlled and owned in some democratic manner where everyone has almost equal ownership and control. Bitcoin is more akin to Rothbard's capitalist utopia, with private ownership of property but no state.
  - eru 10y ago
    About a hundred years ago, some Germans (the `Freiwirtschaftler', a bit similar to the American Georgists) had an interesting alternative interpretation of socialism: socialism is when approximately all GDP goes to labour, and only negligible fractions to capital and land. (And they wanted to get there in a market based economy.)
- colordrops 10y ago
  What is not equitable about this?
postscapes1 10y ago
Seems like it is playing a part in Ethereum and ether blowing up this week (hit $30 today...)
ChemicalWarfare 10y ago
The irony here is that "decentralized p2p-based currency" is very much centralized with 60-70% of the mining power concentrated in 2-3 mining pools who get to impose their will on the system.
- hudon 10y ago
  Sorry but you've been misinformed... If you take a look, it takes at least 5 mining pools today to get over 50% of mining power [1]. Some have argued that this is more than enough decentralization that the network needs to stay secure [2]. The beauty of it is how easy it is to switch mining pools. Miners come and go [3] so the large mining pools need to make sure they're keeping both the miners happy and the network users happy. [1] https://blockchain.info/pools https://blockchain.info/pools [2] https://bitcoinmagazine.com/articles/problems-associated-with-bitcoin-mining-centralization-may-be-overstated-1474917259/ https://bitcoinmagazine.com/articles/problems-associated-wit... [3] https://news.bitcoin.com/pools-diversifying-bitcoin-mining/ https://news.bitcoin.com/pools-diversifying-bitcoin-mining/
  - ChemicalWarfare 10y ago
    These numbers go up and down - because yes it's easy to switch pools - but even if 5 pools is the "magic 51% number" today, this centralization is borderline extreme. This is not about security mind you - this is about imposing the will where it takes 5-6 individuals or maybe one subpoena order from one government considering the physical location of these pools to force the rest of the blockchain to comply with you.
    - hudon 10y ago
      You're never forced to comply with the status quo, you can fork. This is what people in Ethereum realized and this is what the Bitcoin Unlimited movement is about.
      - ChemicalWarfare 10y ago
        Fork and then what? Unless you have formidable percentage of the total hashing power you're dead in the water. But if you do have it and with this bitcoin centralization it's not physically hard to control then you can threaten the rest to fork if they don't comply with your "direction".
tromp 10y ago
Roger Ver's quote “Say you haven’t had any water to drink for a day and a half, and you also need a haircut. Do you drink some water or go to the barber shop? SegWit is like going to the barber shop.” fails to notice that this barber also provides free drinks...

64 points by mathieutd 10y ago

Much as I read Bitcoin articles from time to time I still don't get why on earth one would want to use a crypto currency. I'm like, I vaguely get the "not under control of a .gov" and privacy concerns and all, but the thing seems literally backed 100% on faith, in contrast with (if only theoretically) the "we the nation" backing of fiat money. Any odds an aficionado might be around to enlighten the uninitiated?

wheelerwj 10y ago
it is backed entirely by faith. it doesn't exist anywhere and it's not tangible. bitcoin seems to be servicing three primary interests: a hedge currency with slightly more utility than gold, remittances (specifically in the B2B space but also some personal), and shopping online without having to enter personal information such as credit cards. by far the most commonly reported on use case is investment. so if you like a roller coaster and a chance at a big upside, bitcoin or other digital assets are portfolio worthy. the privacy/anonymous thing is relatively dead at this point.
marcell 10y ago
A lot of the hype around "blockchain", payment network etc. is just hype. Think of bitcoin as a digital competitor to gold, and it will make a lot more sense. Why is gold worth $1200/oz? Same logic will apply to bitcoin. Incidentally, if you don't think gold should be worth $1200/oz, you probably don't think 1 BTC should be worth anything.
- r00fus 10y ago
  You know "cryptoasset" doesn't have the same cachet as "cryptocurrency".
- ch4ch4 10y ago
  BTC does actually have a baseline value: the cost of the electricity spent to mine it. Of course, whether that value is $1 or $1000 depends on the number of people who believe in the currency enough to pay for the power to mine it.
  - marcell 10y ago
    That's not a baseline value, that's a baseline cost. It costs money to mine a bitcoin, but that doesn't mean anyone will want to buy it. Gold is a bit different since it has some baseline value from practical uses, but the store of value use case dominates those.
    - eru 10y ago
      And the baseline cost of bitcoin even goes down, when nobody's mining.
- eru 10y ago
  Oh, some of the hypes for traditional finance might be justified in a roundabout way: Lots of traditional banks are incompetent and set in their ways. Shaking anything up internally requires lots of (office-) political capital. Having an internal 'blockchain' project might give people just enough leeway and direct backing from above to push through lots of needed but unsettling improvements. Even though those improvements might not have anything to do with blockchains, and might even be better done without.
- saalweachter 10y ago
  Eh, to a certain extent that's the Bubble Fallacy: just because an asset price is inflating in a bubble does not make it a bad (short-term) investment. As long as you sell before the bubble pops, you can make a lot of money buying and asset at 10x or 100x its "inherent" value. (Of course, you can also lose a helluva lot of money, but then, to the person making millions off of bubbles, both the people who sell too late and the people who never buy are idiots.)
  - ericb 10y ago
    It's hard to predict when these bubbles will end. For example, the massive bubble in green pieces of paper with pictures of presidents (people are trading houses for these things!) will end some day, but you never know when.
    - globuous 10y ago
      That being said, you can probably predict for how long the bubble will most definitely not burst. For these green pieces of paper, as long as its easiest to buy oil with them and that people depend on oil for energy, there will be people willing to buy these green papers. Because they trust they can exchange these papers for something valuable. So everyone that needs oil needs usd as of today (I think iran still sells thiers in euro and russia might start selling in rubbles. I haven't checked oil currencies in a while though, so if you're reading this, you should probably double check ;) ) I honnestly think that's why the us spends billions every year to secure the middle east. They have oil at home and they could easily massively move to renewable with the size of their territory and then export the tech. But then people wouldn't be relying on oil for energy, and the dollar would lose it guarantee of value. And therefore its value.
alexro 10y ago
Crypto-currency runs not on faith but on greed, which is the same motivator banksters run on, but put under control.
epx 10y ago
I think that it is good to have such an option. It may not catch as the #1 currency in our lifetime, but it helps to move things forward.
lettergram 10y ago
For one, all currency is based on faith. We have faith the government can control the currency and will back the currency. Take Venezuela, their currency is/has collapsed because the people no longer have faith that it is valuable. Typically, people just blindly trust authority, and that's why we believe green paper made from cotton to be valuable. We all agree it's valuable (except people who want a gold standard). Similarly, we all agree Bitcoin is worth X. It's no different, except no one is telling us it's worth X. The market is saying it's worth X. It's not really the first time a society agreed to use something arbitrary as valuable either. There are cultures that used salt, gold, silver, white stones, etc. as currency. The point is, once we agree something is worth X, we can trade for other goods at value X. The advantage to Bitcoin is it's not centrally controlled so it's harder to mess up (see great depression, federal reserve basically made it 100x worse), or Germany post WWI. Further, you have an auditable history, some privacy (better than credit cards), and a truly global currency (similar to gold, without the need to lug it around).
- eru 10y ago
  Btw, The Midas Paradox is a good introduction in some background on the great depression and the Federal Reserve Bank's and federal government's role in it (http://www.themoneyillusion.com/?p=31341 http://www.themoneyillusion.com/?p=31341). I am waiting for someone to come up with a good solution for how to do fractional reserve banking with bitcoin (without relying on trust via eg government-sponsored courts to enforce human-readable contracts---because what would be the point of bitcoin then).
  - chii 10y ago
    i reckon fractional reserve cannot be done with bitcoins (unless you, as you precluded in your conditions, trust a third party). Just like fractional reserves cannot be done with gold, unless you trust a third party (and thus, receive "bank notes" for your gold deposit!).
    - eru 10y ago
      Yes, people have been doing fractional reserve with gold and reputation for a long, long time. I wonder whether bitcoin fractional reserve can live off reputation alone, or whether smart-contracts can / have to help?
nutschig 10y ago
Cryptographic security with end-users holding their keys isn't an available feature for modern finance.
aianus 10y ago
It's an excellent way to circumvent capital controls. For example if you're a millionaire in China you can set up a mining operation in RMB and get BTC/USD out the other end. It's also the cheapest method to exchange and/or remit small amounts of money internationally. I frequently made a profit doing so vs paying 1.4% to 8% for traditional fiat to fiat methods. I wrote bots that did it for me, but even doing it manually is cheaper and faster than traditional methods. Oh, and of course, it's great for buying drugs and gambling and whatnot.
- elastic_church 10y ago
  and raising capital, and returning capital, and being an infallible datastore for arbitrary data
- ddebernardy 10y ago
  Ok, you spelling out that capital control thing made my day. It now makes a lot more sense why the thing is going through the roof, in light of all the RMB wanting to go out of China. Or for that matter why a lot of mining goes on in China itself. Thank you.
elastic_church 10y ago
protip: the -currency and -coin suffixes are skeuomorphs. this is a new asset class that retains qualities of several asset classes (currencies, commodities, and securities), while dropping all of those asset's limitations, and introducing its own unique limitations where people are positive they can all be fixed.
curiousgal 10y ago
I live in a Third World country with ridiculous monetary restrictions (no PayPal for instance) Bitcoin has been the only way I can pay for books and services. It might not seem like much to you but it has literally been life-changing to me.
- JoshTriplett 10y ago
  Interesting! Which country?
  - crayon765 10y ago
    Canada.
    - wjn0 10y ago
      Are PayPal/other payment services restricted in Canada somehow?
  - curiousgal 10y ago
    Lovely Tunisia.
RoboPlumber 10y ago
The confusion is probably from your internal semantics of the phrase "backing". When you say > the "we the nation" backing of fiat money. what do you think that means? First, I'll tell you what it doesn't mean: It doesn't mean that people are forced to accept it in the general case. It doesn't mean that the government guarantees it to have some value. (It's not even clear what that would entail.) It doesn't mean that if you undervalue a dollar, the army is going to come in and shoot you. Here's what it does mean: First, the court can compel you to repay debts or settlements in that currency. That's the "legal tender" part. Second, you have to pay taxes in it (usually). So what, exactly, do you think the advantage of "government backing" is? It's really not tremendously useful. It's also completely orthogonal from the value of the currency, which (along with its time derivatives) is a much more relevant property. Here are a few reasons I think Bitcoin is better than USD for many applications: * It's more private than anything but cash/barter, especially with mixing * It's not subject to arbitrary freezes or confiscations (which has happened to me, without warning, after a paperwork error by the state comptroller) * It's not subject to arbitrary export controls, so it's more convenient for international payments * It's cheaper than most existing money transfer systems (Western Union, Paypal, etc.), even with the currently elevated transaction fees * It's deflationary. You can argue all you want about whether this is good or bad for "the economy", however you define it, but all I know is that it's good for me, a person who wants a store of value. In this respect, it emulates a physical commodity like gold (although with gold, you have the substantial risk of asteroid mining saturating the market many years from now). * Cash and gold has some of the advantages listed above. Advantages of bitcoin over cash and gold: Easier to move long distances, easier to carry large amounts without attracting notice, harder to steal. Advantages over cash alone: Harder to forge (or inflate). Advantages over gold alone: More fungible.
- wjn0 10y ago
  So, then a primary argument for the current/recent instability (is presumably?) is its relative widespread lack of adoption? Does economic theory tell us n = number of people using currency such that we can begin to expect more stability? (Presumably, as some function of average transaction size?) Forgive the assumptions and less-relevant questions, but I appreciated your points and you seem to have a good knowledge of the topic. Edited quickly for clarity.
mbrock 10y ago
Do you think the value of BTC tomorrow will probably be nonzero? If so, you are participating in the faith, right? Monetary value may be an illusion, but if offer you some bitcoin at half the market price, you'd be quite irrational to abstain, no? I personally like how cryptocurrencies are open protocols, so that I can manage money with open source or self-made tools. It annoys me on a deep level being forced to use banks and their payment systems when I can't even get my account balance from a shell script.
- ddebernardy 10y ago
  > Do you think the value of BTC tomorrow will probably be nonzero? Actually, I don't, which is why I asked the question. I'm like... what on Earth are these miners thinking? Or more appropriately, those who store a Bitcoin balance. There were insightful answers, mind you, but none (thus far reading) that give a compelling reason to think otherwise, at least to me.
  - cableshaft 10y ago
    You seriously believe that there's a good chance that Bitcoin's price will drop to 0 tomorrow? The price suddenly taking a massive tumble I'd at least understand, you never know if some crazy news will tank the price, but 0? Let me just say, if the price dropped tomorrow to 0.0000001 I'd buy hundreds of thousands of them happily, so the price isn't going to drop to zero tomorrow. My actual price where I'd buy more than I already do right now is probably ~$200 (not terribly liquid right now), but I'm far from the only person who is still willing to buy these things at this moment, so there's pretty much zero chance that tomorrow bitcoin will drop down to zero in price. So do you still think the value of BTC tomorrow will be zero? If you still try to assert that you think it will be zero, I can only assume that you are willfully an irrationally blinding yourself to reason, just so you can pretend that Bitcoin is worthless.
jcslzr 10y ago
Only Gold and silver are money, because they have intrinsic value. Everything else its currency (Dollar, Yen, Euro), in the history of mankind there has been hundreds of currencies, and at the end, all of them were worth nothing.That will happen sooner or later to the Dollar, and its going to be a big crisis. Blockchain solves the currency problem of manipulation of volume (which is what causes at the end that currencies end up worth zero), it will be the currency of the future, but it does not look like Bitcoin will be the blockchain currency that will dominate.
- clarkcox3 10y ago
  But gold and silver only have "intrinsic" value because we have faith that they do. Even the gold standard is based on faith.
ChemicalWarfare 10y ago
The thing with bitcoin is with the exception of a couple of very valid use cases - the big one being international money transfer (super-easy and super-cheap with bitcoin compared to other options) - most of the benefits of bitcoin payment processing are on the merchant side - cheaper processing, no chargebacks, no PCI etc. Unfortunately, at least for now, bitcoin isn't a popular enough method of payment for the vast majority of merchants to worry about, let alone pass the savings they get from accepting bitcoin on to the consumers.
- joosters 10y ago
  Bitcoin is fundamentally worse for international money transfers - you can't do much with the currency itself, so you end up having to make two currency exchanges instead of one. That's not a way to make FX cheaper.
  - ChemicalWarfare 10y ago
    compared to western union fees and timelines - much cheaper and faster (well, assuming a "normal" ~10 min cycle for 1 confirmation) even with having to buy/sell bitcoin on both ends of the tx.
EthanHeilman 10y ago
Current financial systems have an enormous amount of reversibility and their security rests on a vast web of relationships (political, institutional, social, economic). Understanding your risks in such systems can be hard and high cost for businesses (ask kickstarter about chargebacks). In Bitcoin the risks are much easier to understand since they are technical rather than social: if someone steals your secret key they steal all the bitcoins under the control of that key. This is clearly not great for every use case, but it has some real advantages in certain verticals: 1. automated/machine payments and/or smart contracts, 2. non-reversible payments (preventing investors from backing out of a bad trade at a stockexchange), 3. countries in which the gov currency is not dependable (e.g. Venezuela), 4. paying for services across borders (e.g. Greek internet businesses paying for AWS when they can't wire money outside the country), 5. refugees who can't trust the government not to seize their savings after they leave the country.
saurik 10y ago
> privacy concerns As you are using this phrase in a context where I feel like you are bringing up reasons for Bitcoin, I feel the need to clarify: cash is private (only two people can see any transaction: the two people transacting), classic banks and credit cards are less private (three people can see your transaction: the two people transacting, and the bank), while Bitcoin is the opposite of private (literally everyone is required to see your transaction, whether or not they particularly care ;P). You can try to hide your transaction by handing it to a mixer, but then the mixer is serving the purpose of a bank and is "fighting the current" by trying to pretend to offer a private service when their actions are also recorded in a public ledger, which means both that mathematicians might later find mistakes in timing that allow them to deanonymize your mixed transaction but also that small mixers are worse at this while larger more centralized mixers are more useful... the exact opposite property for what you want if you really didn't like the concept of a bank managing transactions. And no matter what solution you come up with, fundamentally the transaction requires at least one other person to know that you are sending money as you need to use a public network to try to communicate with someone to tell them to tell others to eventually move the money by adding it to a mined block. The only way Bitcoin can even try to simulate the real and true privacy of cash is if you meet someone in person and hand them directly a slip of paper with the private key of some money on it... but then they have no way to know you don't have a copy, at which point they have to announce to the world they received the money in order to re-secure it with their own key.
uncletammy 10y ago
With no disrespect intended, I'd like to point you to absolutely any thread on here that has the word Bitcoin in the title for a thorough discussion of the various use cases. A wise woman once said "If you don’t believe me or don’t get it, I don’t have time to try to convince you, sorry."
lukifer 10y ago
Downsides: volatility, still new-ish, non-trivial to secure for regular folk, zero recourse if hacked/stolen Upsides: Money/valuestore that is infinitely divisible, scriptable (m-of-n, "smart contracts"), reliably and inexpensively transmissible world-wide, offers financial services to third world and unbanked, potentially less volatile than some fiat currencies, potentially resistant (not immune) to manipulation by governments, potentially usable as backbone for "internet of value" applications (side chains, colored coins).
Lazare 10y ago
Money is, in a very real sense, a confidence trick. USD, bitcoins, a gold doubloon: You're willing to exchange goods and services for it not because you want it, but because you hope that someone else will exchange goods and services you actually want later. So ultimately, all money is back 100% on faith. The only advantage fiat money gets is that you can pay taxes in it, and you're assuming that at some point in the future you can pay your taxes in it, or trade it to someone who wants it to pay their taxes. Which isn't a bad thing to have faith in, but it's hardly a guarantee. > Any odds an aficionado might be around to enlighten the uninitiated? In principle, the big advantage of fiat money is that it's deeply enmeshed in a social and legal system, and you have a lot of protections with regard to loss, refunds, consumer guarantees, bank deposit protections, etc. If you deposit your USD into a US bank account, and the bank goes under, you'll be protected. It's all just numbers in the central bank, and as a society, we'll change those numbers to ensure a fair and equitable outcome (...in theory; actual results may vary). If that means zeroing out the account of someone we think shouldn't have some money, or just incrementing the account of someone who think should have it, creating currency out of thin air, then so be it. In principle, the big advantage of crypto currency is that it's not enmeshed in those systems. There are no protections, there's no refunds. Nobody controls the system; nobody can decide that the numbers are unfair and change them. The downside is that, if your bitcoins are stolen, nobody can step in and return them. The upside is that, unless they're stolen, nobody can step in and take them. Even the concept of "theft" is kind of fuzzy. Instead of laws, we have code; if the code allows currency to be transferred between accounts, then that's what the code allows. If you think it's great that credit card companies can reverse payments, you'll probably like the idea of fiat currencies. If you think it's horrible, you'll like the idea of crypto currencies. As a practical matter, however, actual crypto currencies still exist in the real world. If I buy a coffee using bitcoin, and I get food poisoning, I can still ask you for a refund, and if you refuse I can sue you. The fact that a credit card company can't just reverse the transaction and move the money back into my account is merely an inconvenience; if a court rules you owe me a refund, you can protest all you like about the irreversibility of the blockchain, but you'll still end up jailed for contempt of court if you don't cough up the cash. Plus, the people who actually run cryptocurrencies keep stepping in and retroactively changing the rules to prevent "bad" outcomes. When a bug in Ethereum allowed a huge amount of crypto currency to be "stolen" (scare quotes because, again, what does that even mean in the context of Ethereum?), the entire system was rolled back and forked to undo that result. Again, that's a lot less convenient than how a fiat currency would deal with it, but it's not a difference in kind. TL;DR: In principle, crypto currencies are fascinating, amazing artifacts of a world of pure logic and reason. In practice they don't really work very well, because we live in a world of fuzzy laws and emotions.
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kordless 10y ago
With a cryptocurrency in place on today's APIs, we would have a means to implement a lightweight type of federation across services. Your Facebook data could live at your house. Bulk downloads of your tweets from a friend's server would be possible without being rate limited in GET fetches. Market futures could be created on revenue passing through an AI API. And more.

ktta 10y ago

This is actually one of the most important standoffs ever in Bitcoin and will rival the well know Ethereum Hard Fork after the DAO fiasco. To give an idea of what is happening, I'll try to explain what I know, which isn't lot. Since last year, there's been an increase in fees that every transaction has to pay to get confirmation within a reasonable timeframe (the point at which your transaction is deemed a valid one). The reason for this is that, the Blocksize is capped at 1MB. Now, the problem is that people are disagreeing with the direct solution to this problem, which is increase the blocksize. What that means is that only 1MB worth of transactions (I don't exactly know how many that is) will fit in a particular block, which is generated once every 10 minutes (the difficulty of 'mining' is actually adjusted to ensure this). So since there's been a lot of activity with bitcoin, a lot of people are having to wait longer to get their transactions confirmed because they usually have to wait for the second or third block after the transaction is sent out by the client. This makes confirmations slower.[1] Now, to make confirmations faster, people have to pay more for the 'transaction fee' which directly goes into the pockets of the miner who includes the transaction in their block. So transactions which pay lower fees are pushed out of the block the miner is currently mining because, they obviously want more money. So the transaction usually occurs in the next block, if they're lucky. The way I see it, the blocksize has to be increased, because it is ridiculous that I have to pay more in fees for sending bitcoin than using paypal. But, the party opposing it has some interesting arguments too. (The full pro-con list can be found here[2]) The strongest argument in my opinion is that making the blocksize larger would lower the transaction fees the client has to pay. Now, that is good for the client, because they pay less fees. But, bad for the miner because they get less money for all the work that they put in. So there was talk about increasing the blocksize to 2MB. That never went through, because of some other problems with SegWit, which frankly I have not much knowledge of. But then came the idea of Bitcoin Unlimited. Now the people behind this say that the blocksize should be WHATEVER the miner chooses and they want autonomy over the blocksize. What can happen in this scenario is that the big players can make a loss temporarily while the smaller players lose money. Eventually the smaller players (miners) close shop which would make bitcoin more centralized. Very interesting arguments on both sides, and this will be much more interesting to watch than anything in recent history. I'm actually surprised not many people are talking about this, and that there's more interest in whether Bitcoin is accepted as an ETF, which was a terrible idea in the first place. [1]:https://blockchain.info/charts/avg-confirmation-time https://blockchain.info/charts/avg-confirmation-time [2]:https://en.bitcoin.it/wiki/Block_size_limit_controversy https://en.bitcoin.it/wiki/Block_size_limit_controversy

anigbrowl 10y ago

As expected. Turns out seizing the means of production won't necessarily result in equitable outcomes.

lumberjack 10y ago
Only because, you're are grossly misinterpreting the phrase. The whole idea behind socialism is that the means of production are controlled and owned in some democratic manner where everyone has almost equal ownership and control. Bitcoin is more akin to Rothbard's capitalist utopia, with private ownership of property but no state.
- eru 10y ago
  About a hundred years ago, some Germans (the `Freiwirtschaftler', a bit similar to the American Georgists) had an interesting alternative interpretation of socialism: socialism is when approximately all GDP goes to labour, and only negligible fractions to capital and land. (And they wanted to get there in a market based economy.)
colordrops 10y ago
What is not equitable about this?

postscapes1 10y ago

Seems like it is playing a part in Ethereum and ether blowing up this week (hit $30 today...)

ChemicalWarfare 10y ago

The irony here is that "decentralized p2p-based currency" is very much centralized with 60-70% of the mining power concentrated in 2-3 mining pools who get to impose their will on the system.

hudon 10y ago
Sorry but you've been misinformed... If you take a look, it takes at least 5 mining pools today to get over 50% of mining power [1]. Some have argued that this is more than enough decentralization that the network needs to stay secure [2]. The beauty of it is how easy it is to switch mining pools. Miners come and go [3] so the large mining pools need to make sure they're keeping both the miners happy and the network users happy. [1] https://blockchain.info/pools https://blockchain.info/pools [2] https://bitcoinmagazine.com/articles/problems-associated-with-bitcoin-mining-centralization-may-be-overstated-1474917259/ https://bitcoinmagazine.com/articles/problems-associated-wit... [3] https://news.bitcoin.com/pools-diversifying-bitcoin-mining/ https://news.bitcoin.com/pools-diversifying-bitcoin-mining/
- ChemicalWarfare 10y ago
  These numbers go up and down - because yes it's easy to switch pools - but even if 5 pools is the "magic 51% number" today, this centralization is borderline extreme. This is not about security mind you - this is about imposing the will where it takes 5-6 individuals or maybe one subpoena order from one government considering the physical location of these pools to force the rest of the blockchain to comply with you.
  - hudon 10y ago
    You're never forced to comply with the status quo, you can fork. This is what people in Ethereum realized and this is what the Bitcoin Unlimited movement is about.
    - ChemicalWarfare 10y ago
      Fork and then what? Unless you have formidable percentage of the total hashing power you're dead in the water. But if you do have it and with this bitcoin centralization it's not physically hard to control then you can threaten the rest to fork if they don't comply with your "direction".

tromp 10y ago

Roger Ver's quote “Say you haven’t had any water to drink for a day and a half, and you also need a haircut. Do you drink some water or go to the barber shop? SegWit is like going to the barber shop.” fails to notice that this barber also provides free drinks...