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Fiat is Effective: fiat for the crypto crowd [pdf]

163 points by rgbrgb 9y ago

KasianFranks 9y ago
This debate is dividing most of the technology space. It's a good sign, for the crypto guys. VCs, angels are experiencing their very own Uber moment.
yest 9y ago
money is like air. Fiat is like 'legal air', nothing wrong with that until it becomes illegal to breath
jph 9y ago
Summary of key points: • The case against fiat is an ethical case, much more than an effectiveness case. Crytpo advocates often misunderstand this. * The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. * The management of fiat provides state actors with incredibly powerful, ultimately discretionary, tools which significantly affect who wins and who loses and how equal or unequal a society is. (Edit 1: Based on the presentation's concluding "summary" slides. Edit 2: Removed the point about war as less germane.)
- pjc50 9y ago
  "Fiat money and associated banking systems are the technology that enables the finance of war on scales that would have been unimaginable a few centuries ago" This quote appears in the summary but isn't really supported by argument within the article, and is quite a big claim!
  - littlestymaar 9y ago
    See how every big countries got rid of the gold standard during World War 1.
  - subroutine 9y ago
    What of countries that go full crypto, then later have a war levied against them; this suggests these governments would not have effective economic means to defend themselves. Its almost like it assumes if citicens of a state switch to crypto their government would/could not tax them
    - lucozade 9y ago
      > this suggests these governments would not have effective economic means to defend themselves They'll just re-introduce a fiat currency like they did all the other times that this was a problem. Assuming they want to survive. Historically, communities that favoured philosophical consistency over self preservation tended to become, well, historical.
- iosDrone 9y ago
  I don't think this is a good summary of the article at all. It's mostly about why fiat currency is so entrenched, and why a lot of the things that cryptocurrencies advocates cite as weaknesses are actually strengths.
  - deleted 9y ago
    [deleted]
- notyourday 9y ago
  > The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. Fiat is successful because it is backed up by guys with lots of guns. The backers of the most successful ones have aircraft carriers, nuclear submarines, predator drones, etc.
littlestymaar 9y ago
For anyone interested in understanding what money is, and the downside of commodity money without a central bank, Allyn Young wrote this[1] in 1924[2]. It talks about the gold standard, bi-metalism and decentralized banking that was taking place in the US in the XIXth century. [1] https://fr.scribd.com/document/251483136/The-Mystery-of-Money-by-Allyn-Young https://fr.scribd.com/document/251483136/The-Mystery-of-Mone... [2] it's just 11 years after the creation of the Fed. He had a good understanding of what is a financial system without a central bank.
- ahakki 9y ago
  I can’t read the whole story without paying money. Is there a link to a free version?
  - littlestymaar 9y ago
    Oh really ? I just googled it up quickly and found this link. I uploaded a PDF containing the full version here https://framadrop.org/r/Awpt0Pvlax#17V8BZqBeYZgyzW5F0WOXwDopjMO9mvuACgHZRR84WU= https://framadrop.org/r/Awpt0Pvlax#17V8BZqBeYZgyzW5F0WOXwDop... (will only live for 60 days though).
- miketery 9y ago
  Curious; why XIXth century instead of 19th century?
  - littlestymaar 9y ago
    Just me mixing up and applying French conventions in English ;).
once_inc 9y ago
The author uses a slide to say: > fiat currencies issued by strong stable states capable of taxing their citizens, with banking systems effective at encouraging widespread borrowing, with large, diversified domestic economies (and so the capacity to do with fewer imports if necessary) that borrow in their own currency, and do not have sizable debts in foreign currency aren't weak. This speaks to me as if the author has a modicum of trust in the current banking industry, saying: "I trust that we can still solve the problems we've created." Call me a skeptic, but I don't. That is the fundamental problem that cryptocurrencies were created to solve; trustless money. I agree with the author on the part of currency needing to be stable, and cryptocurrencies in their current state are not stable. However, as more and more value is attributed to cryptocurrencies, and more and more people adopt it, those fluctuations will even out. I feel comparing crypto's stability with most fiat money is like comparing the gait of a toddler with that of a grown man. It takes time, effort, and entropy to gain the momentum needed to be stable, crypto is still in its early-adoption-phase. > Fiat currencies are no more “created from thin air” than... Fractional Reserve Banking would like a word.
- pjc50 9y ago
  > That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.
  - once_inc 9y ago
    Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of trust, in the same sense that buying something with a credit card requires some trust. Once you are inside the crypto bubble, that trust is no longer required.
pjc50 9y ago
Nice summary. The author has correctly observed that so much of the finance industry is really about clearing and settlement, and that what circulates are claims on money. This is present in the crypto world too. When you wire money to an exchange and use it to buy cryptocurrency, it doesn't immediately turn into a crypto transaction - you get a claim on that cryptocurrency. Sometimes exchanges are unable to meet those claims or issue claim-like tokens ("Tether"). Also correctly notes that "inflation" worries are more to do with how your future asset and liability flows match up, which have very little to do with supply of the currency itself (apart from extreme Zimbabwe moments). Hard Money == Price instability.
- neilwilson 9y ago
  Zimbabwe had little to do with supply of currency, and more to do with supply of stuff. They forgot that our economies rely upon the magic of the pin factory. Unsurprisingly if you take land from a specialist farmer and give it to a load of people who have no such specialism, then you get a collapse in production. The result of that is obvious unless you ramp up taxes to colossal levels to kill the excess money circulation.
  - roenxi 9y ago
    Are you suggesting that a government, having regulated against specific capable farmer running farms, should raise taxes to colossal levels if they observe food shortages? I suspect you want to rephrase your comment. That argument seems to have a non-sequitur in it.
    - lucozade 9y ago
      I don't believe the GP is advocating it. I believe he's implying that you'll get hyperinflation unless you do something draconian to take all the money out of the system. This may well solve the hyperinflation at the expense of not having any (legal) economy left.
    - neilwilson 9y ago
      Not food shortages, price rises. Food shortages are inevitable if you implement a policy that ignores the insight of Adam Smith. So given that you need to shrink the money supply rapidly to fit your new subsistence economy.
thisisit 9y ago
On page 4/5 this presentation says: >this might not be true of a sufficiently credible Tether-like stablecoin whose value is pegged to a fiat currency, but there the crypto is piggybacking on the effectiveness of the fiat. I was intrigued by this Tether thing and ended up on the site: https://tether.to/ https://tether.to/ It says: > Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD. > Our reserve holdings are published daily and subject to frequent professional audits. All tethers in circulation always match our reserves. A nitpick I have on the site design is that nowadays sites don't put sitemap in the footer. So I have to difficult time finding the balance page: https://wallet.tether.to/transparency https://wallet.tether.to/transparency Can someone help me make sense of this? I thought the numbers are there for the claimed 1-to-1 USD reserve but that doesn't seem to be the case. The value there is from the assets issued on blockchain and not the USD balance on company's book. Secondly, I might be wrong but can't seem to find who is conducting the audit. Is it one of the big 4 or some home office? If it is a small time office I will be even more skeptical of this whole thing.
- cryptodogemoon 9y ago
  Tether and it's sister company, Bitfinex have had a long history of extremely suspicious and opaque behavior. The CEO has been quoted as sympathetic towards a known ponzi scheme after it vanished with everyone's deposits. https://steemit.com/bitfinex/@gaitan/bitfinex-ceo-suspected-of-a-ponzi-scheme https://steemit.com/bitfinex/@gaitan/bitfinex-ceo-suspected-... Raphaelle Nicole, the CEO of Bitfinex invested in the past years in a number of ponzi schemes and also supported Trendon Shavers, who was found guilty recently for "a classic ponzi scheme" and was sentenced to 18 months in prison. In 2012, Raphaelle tried his own ponzi scheme: “When I need more coins than I have to fill an order, I will ask everyone that previously “registered” with me to lend me some btc. After 7 days, I will return all of it, principal + 2% interests [per week]…. Now the questions you might have: What could you do to make so much profit? Let just say that I do “arbitrage”: I buy low and sell high.” Here is the summary of Tether: https://www.reddit.com/r/btc/comments/6xpddt/as_20m_more_tether_are_issued_today_i_think_its/ https://www.reddit.com/r/btc/comments/6xpddt/as_20m_more_tet... https://medium.com/@bitfinexed/latest https://medium.com/@bitfinexed/latest https://twitter.com/Bitfinexed https://twitter.com/Bitfinexed https://www.reddit.com/r/btc/comments/7059hr/more_25_million_tethers_generated_today/ https://www.reddit.com/r/btc/comments/7059hr/more_25_million...
nadam 9y ago
Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small latency, small transaction fees, high throughput.) Should scalability become a really big issue, I am sure it will be solved by some projects. (There are already projects working on extreme high throughput like EOS.)
- once_inc 9y ago
  The lightning network is one of the proposed solutions for scaling bitcoin further.
- littlestymaar 9y ago
  > Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. This sentence sounds like preaching. Do you have any evidence of this ? IMO this is really unlikely because you can't dynamically adapt the supply of money. See my other comment in this thread[1]. [1] https://news.ycombinator.com/item?id=15481953 https://news.ycombinator.com/item?id=15481953
  - nadam 9y ago
    "This sentence sounds like preaching." Yes, you are right, I was wondering whether to edit that sentence to sound less confident. :) I have no evidence, and I am not an expert on this. I just think that if a currency is a utility currency, actually used by merchants and everyday users globally across a wide range of industries, countries and people, it has a huge market cap (it is the dominant currency of the world): I just don't see what could cause big fluctuations in its 'price'. (When you start to be the dominant currency 'price' becomes an interesting concept, because the 'relative to what?' aspect starts to be very significant.)
    - 9y ago
onion-soup 9y ago
> unit of value Nope, it's a unit of human work. Value is a subjective measure.
- subroutine 9y ago
  What is a "unit of human work", and how much is it worth? Why are people paid differently for the same work?
  - onion-soup 9y ago
    >What is a "unit of human work" Money, obviously? > Why are people paid differently for the same work? Do you want me to do a crash course on history of economics in a HN comment?
    - AronTrask 9y ago
      I think the issue is that there's nothing obvious about the labour theory of value: https://en.wikipedia.org/wiki/Criticisms_of_the_labour_theory_of_value https://en.wikipedia.org/wiki/Criticisms_of_the_labour_theor...
    - subroutine 9y ago
      I was hoping you would say that. Do you not realize the circular logic you're using to define "money"? Q. What is money? A. It's a unit of human work. Q. What is a unit of human work? A. Money. If you cannot provide a concrete definition of either 'money' or 'a unit of human work', I have no idea how valuable 1 of your 'moneys' are. Let's call your money 'CRYPTOS'. One may assume 'a unit of human work' is like a person doing some defined task for 1 hour; and the value of 1 CRYPTO is established as number of CRYPTOS (1) you would be willing to give someone for doing that task for 1 hour. Naturally, for this to work, there would also need to be someone willing to perform this task for exactly 1 CRYPTO per hour; and nobody willing to do it for less. Is that basically what you are talking about when you say 'money' is 'a unit of human work'? Above you scoff at the idea of money representing a unit of 'value', and say that value is subjective. So let me again point out the obvious - people paid different amounts of money for the same work. If you pay people different amounts for the same 1 hour of human work, then a unit of human work isn't always worth same number of CRYPTOS. So explain to me precisely how you are defining 'a unit of human work' and how it equals X amount of 'money', without introducing some subjective concept of value or worth.
urza 9y ago
So the argument basically comes down to that crypto is too volatile and not usable as unit of account? 1. Crypto is still in its initial stage, where capital is flowing into it. Once it is there, it will be less volatile. You can already see this in Bitcoin[1], where relative volatility is dropping every year. 2. There are projects coming that will enable decentralized trustless peg of fiat currencies into blockchians[2][3]. So you will have usd/eur in blockchians. Similar like Thether, but without central issuer. This will be very convenient for pricing (unit of account), but with all the benefits of blockchains. And as author admits fiat is terrible as "store of value" - so with this combination - fiat pegs in blockchain for accounting and native crypto as store of value (keep bitcoin for your grandchildern instead of dolar that looses 95% value over century), it might be the best combination of both worlds. 1: http://woobull.com/bitcoin-volatility-will-match-major-fiat-currencies-by-2019/ http://woobull.com/bitcoin-volatility-will-match-major-fiat-... 2: http://cryptopeg.org/ http://cryptopeg.org/ 3: http://www.getbasecoin.com/basecoin_whitepaper_0_99.pdf http://www.getbasecoin.com/basecoin_whitepaper_0_99.pdf
- paulgb 9y ago
  I don't think that's an accurate summary. The author's own summary (last three slides) doesn't mention volatility. Volatility isn't the problem so much as a symptom of the problem, which is a lack of central control. Crypto enthusiasts like the lack of centralization on supposed ethical grounds, but the author draws a separation between ethical considerations and considerations of effectiveness. The author makes the point that fiat is effective.
- thisisit 9y ago
  > You can already see this in Bitcoin[1], where relative volatility is dropping every year. Curious - Is that really due to bitcoin stabilizing or is it because of the deflationary nature of bitcoin? I mean if bitcoin does have some promise, then holding is better than trying to trade in and out of it. I also went through the quoted link on volatility: http://woobull.com/bitcoin-volatility-will-match-major-fiat-currencies-by-2019/ http://woobull.com/bitcoin-volatility-will-match-major-fiat-... One of the things holding cryptocurrencies back is that there is lot of misinformation. Specially in form of articles written without understanding financial fundamentals. It excites the crowd but the takeaways are mostly nonsense. This article is also along the same lines. There is no concept called "peak volatility" as highlighted in the conclusion. There is only volatility. Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. (from: http://www.investopedia.com/terms/v/volatility.asp http://www.investopedia.com/terms/v/volatility.asp) There is average volatility which is a measure of volatility across a >particular period<. In most cases, if I have a data point for say July 2016, the data point will actually be "average volatility" of all July price movements. And that makes the 2nd graph even more confusing. What is the average volatility is being talked about here? Is it the rolling average of the average of data points or something else? This is so confusing.
monort 9y ago
Even the most stable currencies of developed world can be influenced by a black swan. For example, see Swiss Franc or British Pound. If some cryptocurrency is adopted for mainstream use (big if), it won't have this risk, inherent to a centrally controlled currency.
- pjc50 9y ago
  This kind of exchange risk is nothing to do with central control, but to do with which economy the currency is associated with?
  - monort 9y ago
    The Black Swans I'm talking about are about failed attempts to control the exchange rate by central bank. Fiat currencies are stable until they aren't. https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Swiss_franc#End_of_capping https://en.wikipedia.org/wiki/Swiss_franc#End_of_capping
    - yxhuvud 9y ago
      Attaching the value of a fiat currency to something is very unstable in the long run. This is independent of if what it is attached to, be it gold or another fiat currency. Imbalances will simply pile up over time and doom it to fail. This can be exemplified by your examples, but also by the currencies going off the gold standard during the Great Depression.
- deleted 9y ago
  [deleted]
unlmtd1 9y ago
I see a lot of misunderstandings here. First off, a dollar/franc/krone/baht is a quantity of money, that is gold - previously silver (pre-19th c. Gold rushes). This means that a bank whose banknotes trade below their face value is considered insolvent by the markets. So why do all those currencies still circulate!? Because of fiat - said otherwise declaration (by ie a state) of a monopoly on emitting fiduciary media (banknotes). Now some may say "But sometimes those banknotes rise in value vis-a-vis gold!" ... Sure! But they never rise beyond their face value! Please, for the love of rationality, read some real lessons on economics. (L.W.Mises, H.H.Hoppe, M.Rothbard).
neilwilson 9y ago
Steve has missed the main point. The value of a currency is determined by the effort required to obtain it.
- paulgb 9y ago
  That's not its value, just an upper bound on its value. If you disagree, boy do I have some currency to sell you. I worked very hard on it, I swear! :)
  - neilwilson 9y ago
    And the lower bound is the tax I have to pay in it. I need 100 of your currency, here's a small caraway seed for it. Now shall we negotiate?
bjarneh 9y ago
> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?
- ahakki 9y ago
  No, but if there is an increase in productivity and you don’t print money there will be deflation.
  - ttoinou 9y ago
    Is deflation an awful situation ?
    - sek 9y ago
      It is believed to be the primary reason for the great depression. https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression Deflation or Hyperinflation on the other side is nothing compared to the crises we have today. They are both a path for disaster, this is the primary fear of economists. Good explanation: https://www.quora.com/Why-is-2-the-ideal-inflation-rate https://www.quora.com/Why-is-2-the-ideal-inflation-rate
      - icebraining 9y ago
        "Our main finding is that the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929—34). We find virtually no evidence of such a link in any other period." -- Federal Reserve Bank of Minneapolis (Research Department) https://www.minneapolisfed.org/research/sr/sr331.pdf https://www.minneapolisfed.org/research/sr/sr331.pdf
      - ttoinou 9y ago
        I hoped for a logic rationale, not an interpretation of an historic fact :(
soniman 9y ago
Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into baghodlers if they don't sell pretty soon.
- sp4ke 9y ago
  1- Bitcoin is not stock so comparing with stock has no weight in your argument 2- It has already been on a very long bear market (2013-2015) where everyone said pretty much the same thing (fad, tulip, the experiment failed .... ). So yeah the new holders will go through rough times but your argument that it reached the peak of the hype cycle has no logical facts to support it since you could have said the same in the peak of 2013. If anyone knew when the peak is(was or will) would not be here commenting on HN or talking about it but rather selling this knowledge ... and this holds true for any investment.
  - soniman 9y ago
    You're right, I have no idea when the top is going to be. My point is that bear markets have a very different feel and can be emotionally devastating if you're in the middle of one and bitcoin has not been through that and made it to the other side. Are the bitcoin boys ready for that? Because it's coming, sooner or later.
    - namelost 9y ago
      The exact sequence of events you are describing happened between 2013-2016 when Bitcoin fell from a hype induced >$1000 to (at its lowest) $200, and didn't rise above $1000 until this year. It clearly did not kill Bitcoin, and Bitcoin won't die if the same thing happens again.
      - DennisP 9y ago
subroutine 9y ago
In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently).
- littlestymaar 9y ago
  I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation, not a fact). Inflation for consumption goods was kept low, but the asset prices grew up a lot in the past decades : in the late 90s the stock market was inflated and collapsed (the internet bubble), in the mid 2000s the overpricing of real estate in the US was responsible for the financial crisis, nowadays the stock market is inflated again, how bad will it end this time ?
  - subroutine 9y ago
    What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). Say we went all-in on crypto and 10-years-in for whatever reason the crypto supply generation rate we set a decade ago wasnt working (the US economy was crumbling). What then? This is an honest question: Say north korea suddenly waged total was on US, or a massive natural disaster happens, but the government didnt have huge reserves of money to pay for defense or aid? Should they suddenly issue a tax on their citizens to raise capital, and hope they pay in a timely manner?
    - 9y ago
S410520 9y ago
IS it not deflationary? 2015: Block reward: 25 btc * 6 blocks per hour * 24 hrs* ~250 euro = 900.000 euro worth of daily mined supply 2017: 12.5 btc * 6 blocks * 24 * ~2000 euro = 3.6 Million
- Laforet 9y ago
  Indeed, prior to 2015 it had double digit inflation, thought this has declined to just under 3% per year and will continue to fall. Morever, some estimates suggest up to 1/3 of all BTC are unspendable (lost keys, malformed txns, minute dust UTXOs, etc) so the deflationary spiral could have already been under way.
DennisP 9y ago
Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems that work by giving vendors the ability to withdraw as much as they want. It's a fundamentally insecure system, made sort of workable by layers of hacky mitigations. In theory, fiat payment could use a hardware wallet that gives vendors the ability to withdraw only as much as specified in a signed transaction. I doubt that'll happen unless crypto is successful enough to drag fiat providers kicking and screaming; in the meantime we could use fiat-backed tokens on a blockchain if governments didn't make that near-impossible with AML/KYC laws. Reversibility could also be implemented in a token smart contract, if the market really does value that enough to put a central admin in control. So far that doesn't appear to be the case, but maybe just because that market segment hasn't been reached yet.
- emiliobumachar 9y ago
  I think that feature could be summed up as: With criptocurrencies, if your software and opsec are good, you're a lot less vulnerable to identity theft and overcharges.
  - DennisP 9y ago
    Yes, and with a hardware wallet, opsec is trivial. In my ideal world everyone has one in their leather wallet or on a keychain, and also uses it for secure 2FA on websites.
    - notyourday 9y ago
      This is laughable. An investment of $700 (http://www.gunbroker.com/item/696279983 http://www.gunbroker.com/item/696279983) makes content of one's hardware wallet non-recoverable. Right of redress does not help as the transaction is not reversible.
dzonga 9y ago
If you read/watch Debt the First 5000 years. A lot of this makes sense. The first form of money was credit. Which is Fiat.
rothbardrand 9y ago
These arguments against bitcoin have been the same since 2010. They seem to ignore the point of bitcoin (it is impossible to counterfeit, unlike fiat which is counterfeited as a matter of course by the central bank to pay the federal government so it can buy bombs).... and all the features of bitcoin which are increased privacy, better control over your funds, better security, etc. At any rate, the past 7 years has shown the market accepting bitcoin and the price being driven up. People don't want to accept this fact so they call it a bubble. It bubbles a bit, sure, and there will be a bitcoin bubble-- but we're not there yet. Bitcoin is the internet of money. This isn't just a slogan. Bitcoin is a platform that provides many improvements to the existing system. But as a technology platform it is going thru the technology adoption life cycle, so was more and more people hold some, the price goes up. It will be "volatile" until it's fully distributed. So "speculating" is not bad-- it's how bitcoin gets its wide distribution. Over time as applications are built on top of the platform, the utility will come more into play. This is ok. This is the early years. Bitcoin isn't meant to replace the entire system right out of the gate.
- strgrd 9y ago
  Bitcoin isn't the internet of money, it is an internet for money. With this distinction in mind, it would be foolish to think that the first cryptocurrency would be the last. It took many implementations and iterations of wide area networks to arrive at the Internet Protocol we have today. While Bitcoin doesn't share the same set of problems as fiat currency, it has its own burdens, and has proven completely ineffective as a functional money system outside of speculation and fraud. The novelty of Bitcoin is supposedly its 'immutable ledger', a phrase used so frequently in defending Bitcoin, that it has become divorced from its meaning, and divorced from the reality that solutions to distributed logging existed long before Bitcoin, and many more solutions to this problem will be developed with no regard to the blockchain. Bitcoin itself will never replace anything -- cryptocurrencies will remain monolithic in purpose and function for a very long time. The underlying ideas to the Bitcoin protocol will be iterated on, and we'll see these ideas implemented in distributed software, but to incessantly hype Bitcoin as the singular platform for cryptocurrency is to live in a bubble. pls buy litecoin
xiphias 9y ago
There's one huge problem with fiat currencies that Bitcoin improves on: Trusted Third Parties Are Security Holes http://nakamotoinstitute.org/trusted-third-parties/ http://nakamotoinstitute.org/trusted-third-parties/
deleted 9y ago
[deleted]

163 points by rgbrgb 9y ago

This debate is dividing most of the technology space. It's a good sign, for the crypto guys. VCs, angels are experiencing their very own Uber moment.

yest 9y ago

money is like air. Fiat is like 'legal air', nothing wrong with that until it becomes illegal to breath

jph 9y ago

Summary of key points: • The case against fiat is an ethical case, much more than an effectiveness case. Crytpo advocates often misunderstand this. * The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. * The management of fiat provides state actors with incredibly powerful, ultimately discretionary, tools which significantly affect who wins and who loses and how equal or unequal a society is. (Edit 1: Based on the presentation's concluding "summary" slides. Edit 2: Removed the point about war as less germane.)

pjc50 9y ago
"Fiat money and associated banking systems are the technology that enables the finance of war on scales that would have been unimaginable a few centuries ago" This quote appears in the summary but isn't really supported by argument within the article, and is quite a big claim!
- littlestymaar 9y ago
  See how every big countries got rid of the gold standard during World War 1.
- subroutine 9y ago
  What of countries that go full crypto, then later have a war levied against them; this suggests these governments would not have effective economic means to defend themselves. Its almost like it assumes if citicens of a state switch to crypto their government would/could not tax them
  - lucozade 9y ago
    > this suggests these governments would not have effective economic means to defend themselves They'll just re-introduce a fiat currency like they did all the other times that this was a problem. Assuming they want to survive. Historically, communities that favoured philosophical consistency over self preservation tended to become, well, historical.
iosDrone 9y ago
I don't think this is a good summary of the article at all. It's mostly about why fiat currency is so entrenched, and why a lot of the things that cryptocurrencies advocates cite as weaknesses are actually strengths.
- deleted 9y ago
  [deleted]
notyourday 9y ago
> The primary reason fiat succeeds is it offers price stability. But stability is often purchased at the expense of workers and the unemployed. Fiat is successful because it is backed up by guys with lots of guns. The backers of the most successful ones have aircraft carriers, nuclear submarines, predator drones, etc.

littlestymaar 9y ago

For anyone interested in understanding what money is, and the downside of commodity money without a central bank, Allyn Young wrote this[1] in 1924[2]. It talks about the gold standard, bi-metalism and decentralized banking that was taking place in the US in the XIXth century. [1] https://fr.scribd.com/document/251483136/The-Mystery-of-Money-by-Allyn-Young https://fr.scribd.com/document/251483136/The-Mystery-of-Mone... [2] it's just 11 years after the creation of the Fed. He had a good understanding of what is a financial system without a central bank.

ahakki 9y ago
I can’t read the whole story without paying money. Is there a link to a free version?
- littlestymaar 9y ago
  Oh really ? I just googled it up quickly and found this link. I uploaded a PDF containing the full version here https://framadrop.org/r/Awpt0Pvlax#17V8BZqBeYZgyzW5F0WOXwDopjMO9mvuACgHZRR84WU= https://framadrop.org/r/Awpt0Pvlax#17V8BZqBeYZgyzW5F0WOXwDop... (will only live for 60 days though).
miketery 9y ago
Curious; why XIXth century instead of 19th century?
- littlestymaar 9y ago
  Just me mixing up and applying French conventions in English ;).

once_inc 9y ago

The author uses a slide to say: > fiat currencies issued by strong stable states capable of taxing their citizens, with banking systems effective at encouraging widespread borrowing, with large, diversified domestic economies (and so the capacity to do with fewer imports if necessary) that borrow in their own currency, and do not have sizable debts in foreign currency aren't weak. This speaks to me as if the author has a modicum of trust in the current banking industry, saying: "I trust that we can still solve the problems we've created." Call me a skeptic, but I don't. That is the fundamental problem that cryptocurrencies were created to solve; trustless money. I agree with the author on the part of currency needing to be stable, and cryptocurrencies in their current state are not stable. However, as more and more value is attributed to cryptocurrencies, and more and more people adopt it, those fluctuations will even out. I feel comparing crypto's stability with most fiat money is like comparing the gait of a toddler with that of a grown man. It takes time, effort, and entropy to gain the momentum needed to be stable, crypto is still in its early-adoption-phase. > Fiat currencies are no more “created from thin air” than... Fractional Reserve Banking would like a word.

pjc50 9y ago
> That is the fundamental problem that cryptocurrencies were created to solve; trustless money. What's the actual problem here? "Trustless money" is a philosophical objection. Cryptocurrency tends to move the trust locus to your software and hardware stack, along with a choice of crypto-to-real-money gateways, none of which seem particularly trustworthy.
- once_inc 9y ago
  Cryptocurrencies indeed move the trust from a centralized accountant to a distributed system guarded by both code and math. Instead of trusting a mostly anonymous group of people that stand to gain from abusing that trust and have done so in the past without punishment, crypto replaces that trust with user-controlled software and verifiable algorithms. Any transaction between fiat and crypto requires a modicum of trust, in the same sense that buying something with a credit card requires some trust. Once you are inside the crypto bubble, that trust is no longer required.

pjc50 9y ago

Nice summary. The author has correctly observed that so much of the finance industry is really about clearing and settlement, and that what circulates are claims on money. This is present in the crypto world too. When you wire money to an exchange and use it to buy cryptocurrency, it doesn't immediately turn into a crypto transaction - you get a claim on that cryptocurrency. Sometimes exchanges are unable to meet those claims or issue claim-like tokens ("Tether"). Also correctly notes that "inflation" worries are more to do with how your future asset and liability flows match up, which have very little to do with supply of the currency itself (apart from extreme Zimbabwe moments). Hard Money == Price instability.

neilwilson 9y ago
Zimbabwe had little to do with supply of currency, and more to do with supply of stuff. They forgot that our economies rely upon the magic of the pin factory. Unsurprisingly if you take land from a specialist farmer and give it to a load of people who have no such specialism, then you get a collapse in production. The result of that is obvious unless you ramp up taxes to colossal levels to kill the excess money circulation.
- roenxi 9y ago
  Are you suggesting that a government, having regulated against specific capable farmer running farms, should raise taxes to colossal levels if they observe food shortages? I suspect you want to rephrase your comment. That argument seems to have a non-sequitur in it.
  - lucozade 9y ago
    I don't believe the GP is advocating it. I believe he's implying that you'll get hyperinflation unless you do something draconian to take all the money out of the system. This may well solve the hyperinflation at the expense of not having any (legal) economy left.
  - neilwilson 9y ago
    Not food shortages, price rises. Food shortages are inevitable if you implement a policy that ignores the insight of Adam Smith. So given that you need to shrink the money supply rapidly to fit your new subsistence economy.

thisisit 9y ago

On page 4/5 this presentation says: >this might not be true of a sufficiently credible Tether-like stablecoin whose value is pegged to a fiat currency, but there the crypto is piggybacking on the effectiveness of the fiat. I was intrigued by this Tether thing and ended up on the site: https://tether.to/ https://tether.to/ It says: > Every tether is always backed 1-to-1, by traditional currency held in our reserves. So 1 USD₮ is always equivalent to 1 USD. > Our reserve holdings are published daily and subject to frequent professional audits. All tethers in circulation always match our reserves. A nitpick I have on the site design is that nowadays sites don't put sitemap in the footer. So I have to difficult time finding the balance page: https://wallet.tether.to/transparency https://wallet.tether.to/transparency Can someone help me make sense of this? I thought the numbers are there for the claimed 1-to-1 USD reserve but that doesn't seem to be the case. The value there is from the assets issued on blockchain and not the USD balance on company's book. Secondly, I might be wrong but can't seem to find who is conducting the audit. Is it one of the big 4 or some home office? If it is a small time office I will be even more skeptical of this whole thing.

cryptodogemoon 9y ago
Tether and it's sister company, Bitfinex have had a long history of extremely suspicious and opaque behavior. The CEO has been quoted as sympathetic towards a known ponzi scheme after it vanished with everyone's deposits. https://steemit.com/bitfinex/@gaitan/bitfinex-ceo-suspected-of-a-ponzi-scheme https://steemit.com/bitfinex/@gaitan/bitfinex-ceo-suspected-... Raphaelle Nicole, the CEO of Bitfinex invested in the past years in a number of ponzi schemes and also supported Trendon Shavers, who was found guilty recently for "a classic ponzi scheme" and was sentenced to 18 months in prison. In 2012, Raphaelle tried his own ponzi scheme: “When I need more coins than I have to fill an order, I will ask everyone that previously “registered” with me to lend me some btc. After 7 days, I will return all of it, principal + 2% interests [per week]…. Now the questions you might have: What could you do to make so much profit? Let just say that I do “arbitrage”: I buy low and sell high.” Here is the summary of Tether: https://www.reddit.com/r/btc/comments/6xpddt/as_20m_more_tether_are_issued_today_i_think_its/ https://www.reddit.com/r/btc/comments/6xpddt/as_20m_more_tet... https://medium.com/@bitfinexed/latest https://medium.com/@bitfinexed/latest https://twitter.com/Bitfinexed https://twitter.com/Bitfinexed https://www.reddit.com/r/btc/comments/7059hr/more_25_million_tethers_generated_today/ https://www.reddit.com/r/btc/comments/7059hr/more_25_million...

nadam 9y ago

Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. Re effectiveness: Bitcoin itself is not really fast, scalable and transaction fees are not that small anymore, but something like Dash for example can be much more effective than Fiat even at a large scale. (I mean small latency, small transaction fees, high throughput.) Should scalability become a really big issue, I am sure it will be solved by some projects. (There are already projects working on extreme high throughput like EOS.)

once_inc 9y ago
The lightning network is one of the proposed solutions for scaling bitcoin further.
littlestymaar 9y ago
> Re price stability: A cryptocurrency adopted on a mainstream level (at tens of trillions of dollars market cap) for means of everyday payment would be very stable, more stable than any fiat today. This sentence sounds like preaching. Do you have any evidence of this ? IMO this is really unlikely because you can't dynamically adapt the supply of money. See my other comment in this thread[1]. [1] https://news.ycombinator.com/item?id=15481953 https://news.ycombinator.com/item?id=15481953
- nadam 9y ago
  "This sentence sounds like preaching." Yes, you are right, I was wondering whether to edit that sentence to sound less confident. :) I have no evidence, and I am not an expert on this. I just think that if a currency is a utility currency, actually used by merchants and everyday users globally across a wide range of industries, countries and people, it has a huge market cap (it is the dominant currency of the world): I just don't see what could cause big fluctuations in its 'price'. (When you start to be the dominant currency 'price' becomes an interesting concept, because the 'relative to what?' aspect starts to be very significant.)
  - 9y ago

onion-soup 9y ago

> unit of value Nope, it's a unit of human work. Value is a subjective measure.

subroutine 9y ago
What is a "unit of human work", and how much is it worth? Why are people paid differently for the same work?
- onion-soup 9y ago
  >What is a "unit of human work" Money, obviously? > Why are people paid differently for the same work? Do you want me to do a crash course on history of economics in a HN comment?
  - AronTrask 9y ago
    I think the issue is that there's nothing obvious about the labour theory of value: https://en.wikipedia.org/wiki/Criticisms_of_the_labour_theory_of_value https://en.wikipedia.org/wiki/Criticisms_of_the_labour_theor...
  - subroutine 9y ago
    I was hoping you would say that. Do you not realize the circular logic you're using to define "money"? Q. What is money? A. It's a unit of human work. Q. What is a unit of human work? A. Money. If you cannot provide a concrete definition of either 'money' or 'a unit of human work', I have no idea how valuable 1 of your 'moneys' are. Let's call your money 'CRYPTOS'. One may assume 'a unit of human work' is like a person doing some defined task for 1 hour; and the value of 1 CRYPTO is established as number of CRYPTOS (1) you would be willing to give someone for doing that task for 1 hour. Naturally, for this to work, there would also need to be someone willing to perform this task for exactly 1 CRYPTO per hour; and nobody willing to do it for less. Is that basically what you are talking about when you say 'money' is 'a unit of human work'? Above you scoff at the idea of money representing a unit of 'value', and say that value is subjective. So let me again point out the obvious - people paid different amounts of money for the same work. If you pay people different amounts for the same 1 hour of human work, then a unit of human work isn't always worth same number of CRYPTOS. So explain to me precisely how you are defining 'a unit of human work' and how it equals X amount of 'money', without introducing some subjective concept of value or worth.

urza 9y ago

So the argument basically comes down to that crypto is too volatile and not usable as unit of account? 1. Crypto is still in its initial stage, where capital is flowing into it. Once it is there, it will be less volatile. You can already see this in Bitcoin[1], where relative volatility is dropping every year. 2. There are projects coming that will enable decentralized trustless peg of fiat currencies into blockchians[2][3]. So you will have usd/eur in blockchians. Similar like Thether, but without central issuer. This will be very convenient for pricing (unit of account), but with all the benefits of blockchains. And as author admits fiat is terrible as "store of value" - so with this combination - fiat pegs in blockchain for accounting and native crypto as store of value (keep bitcoin for your grandchildern instead of dolar that looses 95% value over century), it might be the best combination of both worlds. 1: http://woobull.com/bitcoin-volatility-will-match-major-fiat-currencies-by-2019/ http://woobull.com/bitcoin-volatility-will-match-major-fiat-... 2: http://cryptopeg.org/ http://cryptopeg.org/ 3: http://www.getbasecoin.com/basecoin_whitepaper_0_99.pdf http://www.getbasecoin.com/basecoin_whitepaper_0_99.pdf

paulgb 9y ago
I don't think that's an accurate summary. The author's own summary (last three slides) doesn't mention volatility. Volatility isn't the problem so much as a symptom of the problem, which is a lack of central control. Crypto enthusiasts like the lack of centralization on supposed ethical grounds, but the author draws a separation between ethical considerations and considerations of effectiveness. The author makes the point that fiat is effective.
thisisit 9y ago
> You can already see this in Bitcoin[1], where relative volatility is dropping every year. Curious - Is that really due to bitcoin stabilizing or is it because of the deflationary nature of bitcoin? I mean if bitcoin does have some promise, then holding is better than trying to trade in and out of it. I also went through the quoted link on volatility: http://woobull.com/bitcoin-volatility-will-match-major-fiat-currencies-by-2019/ http://woobull.com/bitcoin-volatility-will-match-major-fiat-... One of the things holding cryptocurrencies back is that there is lot of misinformation. Specially in form of articles written without understanding financial fundamentals. It excites the crowd but the takeaways are mostly nonsense. This article is also along the same lines. There is no concept called "peak volatility" as highlighted in the conclusion. There is only volatility. Volatility is a statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. (from: http://www.investopedia.com/terms/v/volatility.asp http://www.investopedia.com/terms/v/volatility.asp) There is average volatility which is a measure of volatility across a >particular period<. In most cases, if I have a data point for say July 2016, the data point will actually be "average volatility" of all July price movements. And that makes the 2nd graph even more confusing. What is the average volatility is being talked about here? Is it the rolling average of the average of data points or something else? This is so confusing.

monort 9y ago

Even the most stable currencies of developed world can be influenced by a black swan. For example, see Swiss Franc or British Pound. If some cryptocurrency is adopted for mainstream use (big if), it won't have this risk, inherent to a centrally controlled currency.

pjc50 9y ago
This kind of exchange risk is nothing to do with central control, but to do with which economy the currency is associated with?
- monort 9y ago
  The Black Swans I'm talking about are about failed attempts to control the exchange rate by central bank. Fiat currencies are stable until they aren't. https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Black_Wednesday https://en.wikipedia.org/wiki/Swiss_franc#End_of_capping https://en.wikipedia.org/wiki/Swiss_franc#End_of_capping
  - yxhuvud 9y ago
    Attaching the value of a fiat currency to something is very unstable in the long run. This is independent of if what it is attached to, be it gold or another fiat currency. Imbalances will simply pile up over time and doom it to fail. This can be exemplified by your examples, but also by the currencies going off the gold standard during the Great Depression.
deleted 9y ago
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unlmtd1 9y ago

I see a lot of misunderstandings here. First off, a dollar/franc/krone/baht is a quantity of money, that is gold - previously silver (pre-19th c. Gold rushes). This means that a bank whose banknotes trade below their face value is considered insolvent by the markets. So why do all those currencies still circulate!? Because of fiat - said otherwise declaration (by ie a state) of a monopoly on emitting fiduciary media (banknotes). Now some may say "But sometimes those banknotes rise in value vis-a-vis gold!" ... Sure! But they never rise beyond their face value! Please, for the love of rationality, read some real lessons on economics. (L.W.Mises, H.H.Hoppe, M.Rothbard).

neilwilson 9y ago

Steve has missed the main point. The value of a currency is determined by the effort required to obtain it.

paulgb 9y ago
That's not its value, just an upper bound on its value. If you disagree, boy do I have some currency to sell you. I worked very hard on it, I swear! :)
- neilwilson 9y ago
  And the lower bound is the tax I have to pay in it. I need 100 of your currency, here's a small caraway seed for it. Now shall we negotiate?

bjarneh 9y ago

> Fiat currencies are not “backed by nothing”. They are backed by the labor and assets of all the humans who have obligations to pay in fiat So when we "print" more money, we print more labour?

ahakki 9y ago
No, but if there is an increase in productivity and you don’t print money there will be deflation.
- ttoinou 9y ago
  Is deflation an awful situation ?
  - sek 9y ago
    It is believed to be the primary reason for the great depression. https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression https://en.wikipedia.org/wiki/Causes_of_the_Great_Depression Deflation or Hyperinflation on the other side is nothing compared to the crises we have today. They are both a path for disaster, this is the primary fear of economists. Good explanation: https://www.quora.com/Why-is-2-the-ideal-inflation-rate https://www.quora.com/Why-is-2-the-ideal-inflation-rate
    - icebraining 9y ago
      "Our main finding is that the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929—34). We find virtually no evidence of such a link in any other period." -- Federal Reserve Bank of Minneapolis (Research Department) https://www.minneapolisfed.org/research/sr/sr331.pdf https://www.minneapolisfed.org/research/sr/sr331.pdf
    - ttoinou 9y ago
      I hoped for a logic rationale, not an interpretation of an historic fact :(

soniman 9y ago

Bitcoin is now at the peak of the hype cycle. A lot of the 23 year old traders don't know anything but a bull market. When it inevitably goes through a bear market, like every other asset, when there is $50 billion of sellers higher ready to sell on every uptick, what brings bitcoin back? Stocks very rarely come back from 70-80% declines, unless the stock is Amazon or similar. All the hodlers are going to turn into baghodlers if they don't sell pretty soon.

sp4ke 9y ago
1- Bitcoin is not stock so comparing with stock has no weight in your argument 2- It has already been on a very long bear market (2013-2015) where everyone said pretty much the same thing (fad, tulip, the experiment failed .... ). So yeah the new holders will go through rough times but your argument that it reached the peak of the hype cycle has no logical facts to support it since you could have said the same in the peak of 2013. If anyone knew when the peak is(was or will) would not be here commenting on HN or talking about it but rather selling this knowledge ... and this holds true for any investment.
- soniman 9y ago
  You're right, I have no idea when the top is going to be. My point is that bear markets have a very different feel and can be emotionally devastating if you're in the middle of one and bitcoin has not been through that and made it to the other side. Are the bitcoin boys ready for that? Because it's coming, sooner or later.
  - namelost 9y ago
    The exact sequence of events you are describing happened between 2013-2016 when Bitcoin fell from a hype induced >$1000 to (at its lowest) $200, and didn't rise above $1000 until this year. It clearly did not kill Bitcoin, and Bitcoin won't die if the same thing happens again.
    - DennisP 9y ago

subroutine 9y ago

In the words of Patrick McKenzie's tweet linking to this pdf‏, "Hey look, someone took the time to explain to cryptocurrency enthusiasts why the rest of us perceive money as working". For those singing the praises of cryptocurrency I pose this question: Say the United States decides to allow decentralized cryptocurrencies to become the dominant medium of exchange in the US; say it even gets rid of the $USD. What problem do you think this would solve? (assuming the US gov desires to continue all other operations in exactly the same manner as it does currently).

littlestymaar 9y ago
I don't think cryptocurrencies are a solution to anything, but saying that the current system is «working» is dubious to say the least: the Fed has been controlling the money supply by targeting low inflation but the money supply grew much quicker than growth nonetheless (probably linked with the decline in money velocity, probably caused by the concentration of wealth. Disclaimer, this is a personal interpretation, not a fact). Inflation for consumption goods was kept low, but the asset prices grew up a lot in the past decades : in the late 90s the stock market was inflated and collapsed (the internet bubble), in the mid 2000s the overpricing of real estate in the US was responsible for the financial crisis, nowadays the stock market is inflated again, how bad will it end this time ?
- subroutine 9y ago
  What do you think the Fed was attempting to do? Or let me put it another way - it sounds like you are advocating there be no way for an agency of a democratic government to dynamically adjust money supply (or interest rates). Say we went all-in on crypto and 10-years-in for whatever reason the crypto supply generation rate we set a decade ago wasnt working (the US economy was crumbling). What then? This is an honest question: Say north korea suddenly waged total was on US, or a massive natural disaster happens, but the government didnt have huge reserves of money to pay for defense or aid? Should they suddenly issue a tax on their citizens to raise capital, and hope they pay in a timely manner?
  - 9y ago

S410520 9y ago

IS it not deflationary? 2015: Block reward: 25 btc * 6 blocks per hour * 24 hrs* ~250 euro = 900.000 euro worth of daily mined supply 2017: 12.5 btc * 6 blocks * 24 * ~2000 euro = 3.6 Million

Laforet 9y ago
Indeed, prior to 2015 it had double digit inflation, thought this has declined to just under 3% per year and will continue to fall. Morever, some estimates suggest up to 1/3 of all BTC are unspendable (lost keys, malformed txns, minute dust UTXOs, etc) so the deflationary spiral could have already been under way.

DennisP 9y ago

Some of these arguments assume a single fixed-supply cryptocurrency, instead of the ecosystem of cryptocurrencies we actually have, which is more like Hayek's proposal for competing privately-issued currencies. He thought it would be stable without the need for active management. As a payment system I think cryptocurrency is vastly better; the more I use my hardware wallet, the more I'm horrified by legacy systems that work by giving vendors the ability to withdraw as much as they want. It's a fundamentally insecure system, made sort of workable by layers of hacky mitigations. In theory, fiat payment could use a hardware wallet that gives vendors the ability to withdraw only as much as specified in a signed transaction. I doubt that'll happen unless crypto is successful enough to drag fiat providers kicking and screaming; in the meantime we could use fiat-backed tokens on a blockchain if governments didn't make that near-impossible with AML/KYC laws. Reversibility could also be implemented in a token smart contract, if the market really does value that enough to put a central admin in control. So far that doesn't appear to be the case, but maybe just because that market segment hasn't been reached yet.

emiliobumachar 9y ago
I think that feature could be summed up as: With criptocurrencies, if your software and opsec are good, you're a lot less vulnerable to identity theft and overcharges.
- DennisP 9y ago
  Yes, and with a hardware wallet, opsec is trivial. In my ideal world everyone has one in their leather wallet or on a keychain, and also uses it for secure 2FA on websites.
  - notyourday 9y ago
    This is laughable. An investment of $700 (http://www.gunbroker.com/item/696279983 http://www.gunbroker.com/item/696279983) makes content of one's hardware wallet non-recoverable. Right of redress does not help as the transaction is not reversible.

dzonga 9y ago

If you read/watch Debt the First 5000 years. A lot of this makes sense. The first form of money was credit. Which is Fiat.

rothbardrand 9y ago

These arguments against bitcoin have been the same since 2010. They seem to ignore the point of bitcoin (it is impossible to counterfeit, unlike fiat which is counterfeited as a matter of course by the central bank to pay the federal government so it can buy bombs).... and all the features of bitcoin which are increased privacy, better control over your funds, better security, etc. At any rate, the past 7 years has shown the market accepting bitcoin and the price being driven up. People don't want to accept this fact so they call it a bubble. It bubbles a bit, sure, and there will be a bitcoin bubble-- but we're not there yet. Bitcoin is the internet of money. This isn't just a slogan. Bitcoin is a platform that provides many improvements to the existing system. But as a technology platform it is going thru the technology adoption life cycle, so was more and more people hold some, the price goes up. It will be "volatile" until it's fully distributed. So "speculating" is not bad-- it's how bitcoin gets its wide distribution. Over time as applications are built on top of the platform, the utility will come more into play. This is ok. This is the early years. Bitcoin isn't meant to replace the entire system right out of the gate.

strgrd 9y ago
Bitcoin isn't the internet of money, it is an internet for money. With this distinction in mind, it would be foolish to think that the first cryptocurrency would be the last. It took many implementations and iterations of wide area networks to arrive at the Internet Protocol we have today. While Bitcoin doesn't share the same set of problems as fiat currency, it has its own burdens, and has proven completely ineffective as a functional money system outside of speculation and fraud. The novelty of Bitcoin is supposedly its 'immutable ledger', a phrase used so frequently in defending Bitcoin, that it has become divorced from its meaning, and divorced from the reality that solutions to distributed logging existed long before Bitcoin, and many more solutions to this problem will be developed with no regard to the blockchain. Bitcoin itself will never replace anything -- cryptocurrencies will remain monolithic in purpose and function for a very long time. The underlying ideas to the Bitcoin protocol will be iterated on, and we'll see these ideas implemented in distributed software, but to incessantly hype Bitcoin as the singular platform for cryptocurrency is to live in a bubble. pls buy litecoin

xiphias 9y ago

There's one huge problem with fiat currencies that Bitcoin improves on: Trusted Third Parties Are Security Holes http://nakamotoinstitute.org/trusted-third-parties/ http://nakamotoinstitute.org/trusted-third-parties/

deleted 9y ago

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