5 ms·

Bitcoin is none of the things it was supposed to be

137 points by okket 9y ago

arkades 9y ago
The article repeatedly quotes statements to the effect “this was supposed to show what a truly free market looks like. Instead, it’s a shitshow.” The word “instead” doesn’t belong there. Really.
- jhiska 9y ago
  Maybe we should call it anarcho-markets?
- MBCook 9y ago
  Wasn’t that the exact point of the tweet that was mentioned in the article?
coryl 9y ago
The author seems to expect that the changes created by cryptocurrency should be visible immediately. It is a lack of patience, and lack of understanding that changing deeply rooted systems and behaviors takes time. People have never managed software where if you lost your "password", your money was gone forever. They never had to keep a 12-24 word recovery phrase. They've never sent money to addresses that look like hash strings. Their money value was never this volatile (in some countries anyway) and never this complicated to use (understanding and waiting for block confirmations, looking up transactions in the blockchain explorer). That's why Coinbase exists, to obfuscate these complexities, to sell security as a service. The cryptography behind cryptocurrencies allows you to basically be your own bank vault; this is not intuitive to people. The fundamentals for Satoshi's vision have been laid out, the rest of the implementation details will come in time.
- curuinor 9y ago
  What, then, exactly is the difference between your scenario and Coinbase being the bank?
  - eberkund 9y ago
    That is a good analogy, if you choose to you can use a bank (or Coinbase) but you also have the option of doing everything in cash or managing your own Bitcoin wallet. Prior to cryptocurrency if you wanted to quickly send money around the world without going through a bank or other financial institutions you were out of luck.
  - _red 9y ago
    Coinbase can't print money.
    - coryl 9y ago
      Technically they can try, by selling users coin in a fractional reserve model. This is probably already being done by some exchanges. But that's a problem regarding legal regulation.
    - deleted 9y ago
      [deleted]
    - colorint 9y ago
      Banks can't print money either, and this isn't some "ackshually it's the Mint" thing: banks have the power to create debt. But this isn't special, because you and I also have the power to create debt. What makes a bank special is that debt is its business (so most of its operation concerns the management of debt), and much of its debt can be called on demand, and so we call banks' debts to us demand deposits. Fractional reserve is just a particular kind of regulation placed on banks' creation of debt, and it usually isn't the most important one. The practical limit of banks is that they have to be able to extinguish their debts (which we call withdrawal), including being able to transfer them to other banks in exchange for cash (which we call clearing), at the whim of the creditors (you and me). The problems with banks are the problems with debt generally, but that's much trickier than some glib remarks about monetary policy.
      - deleted 9y ago
        [deleted]
- wott 9y ago
  > People have never managed software where if you lost your "password", your money was gone forever. They never had to keep a 12-24 word recovery phrase. They've never sent money to addresses that look like hash strings. Their money value was never this volatile (in some countries anyway) and never this complicated to use (understanding and waiting for block confirmations, looking up transactions in the blockchain explorer). Well yeah, nobody in his sane mind would have designed such an unpractical system. It took a bunch of out of touch, fresh out of school computer scientists to reach such nonsense.
  - coryl 9y ago
    I doubt that blockchain was invented by a fresh out of school computer science graduate. The breadth and depth of technical complexity (even if just the white paper) that blockchain covers requires time and experience to accumulate.
    - oculusthrift 9y ago
      more likely an out of touch phd professor (or team of them)
dawhizkid 9y ago
The fact that the majority of people only trade/hold bitcoin to exchange for centralized currency i.e. USD tells you something, no?
- mathgeek 9y ago
  Yes: that it's not universally accepted (yet?) and highly volatile.
  - dawhizkid 9y ago
    Do you mean universally accepted as payment for goods? The fact that it takes an hour+ for one transaction to be confirmed (i.e. behind ~6 blocks) seems like a huge UX problem for buyers/sellers. If I'm going to use bitcoin to buy a TV, I'm not going to wait around an hour for the merchant to say I'm good to go. And transaction fees are so high now that it makes no sense to use bitcoin for small transactions. Other issues include refunds/disputes. If you receive something in the mail from a seller that is not as described, then no equivalent of a dispute/chargeback process to get your bitcoin back.
    - Lerc 9y ago
      The problem is this perspective mixes levels of certainty that are not comparable. A trader can accept a transaction as soon as it shows up, even with zero confirmations. Doing so creates the risk of not actually receiving the payment, The circumstances under which this can happen are probably much rarer than the possibility of a credit-card transaction being reversed. You want the high certainty on large sums, For small payments you could easily just take the hit on the tiny (if any, in-reality given the minimal reward for effort of fraud) transactions that don't go through. The issue of transaction charges is a growth pain. When Bitcoin came on the scene, It was expected that the future incarnations of the protocol would handle vastly larger numbers of transactions, that view hasn't really changed. The only issue has been on the time-frame of the expansion. If anything that can be considered as being too successful. It's a little system that might be a big system one day, but people anticipating the future state of the big system is causing strain. It will be interesting to see where things stand 30 years from now.
gruez 9y ago
>Bitcoin was designed so that users had to take care of their private cryptographic keys for every address they used, and Nakamoto advised making a new address for every transaction. This proved too confusing and burdensome, so along came wallet services, which stored users’ Bitcoins like a bank account and substituted a password for the private key wut? if you used a online wallet, you still had to manage addresses. the only advantage comes in the form of not having to wait hours/days for the client to sync up (back then there weren't any thin clients), and not having to back up a wallet file. >Whether it was out of incompetence or an attempt to save itself from selling at an inflated price (at one point, the price of Bitcoin was $3,000 higher on Coinbase than on other exchanges), that's not how exchanges work. the counterparty is another buyer, not the exchange. coinbase is getting x% fee regardless if the price was $1000 or $10000. >this was exactly the kind of thing Bitcoin was supposed to prevent. sounds like a strawman. i don't think anyone realistically thought if bitcoin came along, all the AML/KYC laws around handling fiat will magically evaporate
- PeterisP 9y ago
  "i don't think anyone realistically thought if bitcoin came along, all the AML/KYC laws around handling fiat will magically evaporate" I disagree - I've seen and debated far too many people claiming essentially that viewpoint; IMHO it's a naive and unrealistic expectation, but a lot of people did think that.
poopsmithe 9y ago
Remember how Coinbase, the San Francisco-based startup which raised more than $200 million in venture capital, put a freeze on my money? Whether it was out of incompetence or an attempt to save itself from selling at an inflated price (at one point, the price of Bitcoin was $3,000 higher on Coinbase than on other exchanges), this was exactly the kind of thing Bitcoin was supposed to prevent. Um no, I don't think so. Coinbase.com is not the Bitcoin experience, just like Facebook is not the internet experience. Nothing in the Bitcoin whitepaper mentions Bitcoin solving problems inherent with a central currency Exchange or hosted, custodial wallets. Use localbitcoins.com and a non-custodial wallet if you want to experience Bitcoin per it's original specification. Exchanges != Bitcoin.
- SilverCurve 9y ago
  That is the point of the article though. If most of transactions are going through exchanges, Bitcoin is not being used as it's supposed to.
- icedchai 9y ago
  Coinbase, and similar sites, may as well be Bitcoin for the average ("retail") investor. It's far too complicated, not to mention resource intensive, for the average Joe to set up and run his own node. My uncle wants to "invest" in Bitcoin. He wants to trade it like a stock. You seriously think he's going to mess around with private keys and wallet pass phrases? Many technical people can barely handle that. And, yes, for a lot of today's youth, Facebook is the internet experience. The Internet experience, for me, was telnet, gopher, and Usenet news. We're along way from those days.
mattmcegg 9y ago
Then don't buy any.
jhiska 9y ago
It's not Wall Street's fault or whatever boogie man's fault that the Bitcoin tech doesn't actually work as some idealistic libertarian creator imagined it would; the fault is in Bitcoin's design itself. Even if the price wasn't fluctuating like crazy it simply doesn't work well as a currency due to technical limitations (eg, the time and cost it takes to process a transaction in the real world has always been impractical), but it shows promise as something that holds value (like gold). The Outline creates articles with pureed facts written in a carefully standardized "no-nonsense", language-as-spoken-today linguistic style for mass consumption that are often deceptive, political or just technically wrong. Don't trust it.
- ng12 9y ago
  I feel like it's a parable about lofty libertarian ideals -- everything's peachy until there's large sums of money involved. Bitcoin is fixable but now there's a financial incentive for never fixing it.
  - jhiska 9y ago
    You're probably right about Bitcoin not being fixable as a currency, and I say probably because I almost never speak in absolute terms. There are alternative cryptocurrencies that stand a chance of working out; the idea is mainstream now. To me, it's a parable about the danger of following a pseudo-philosopher with no academic credibility and whose relevant oeuvre is fictional literature and not reading what Adam "Greed Is Good" Smith actually wrote about free markets AKA unregulated capitalism, which was that an economical system of people acting in their self-interest ends up promoting a greater economical and moral good for everyone but only as long as there are significant safeguards against abuse, but that's just my opinion.
  - netsharc 9y ago
    I should google it but I'll just wonder out loud, how would libertarians use money anyway? Doesn't money need something to back it up, i.e. a central bank?
    - 9y ago
pc2g4d 9y ago
The high transaction fees are forcing Bitcoin in this direction. If buying a hamburger cost you $30 in fees on top of the $6 burger, you'd stop using dollars for everyday purchases, too. Seems we're stuck in this situation so long as the block size remains where it is. That artificially reduces the supply of transactions, forcing the price up. No matter how many miners there are competing for those transaction fees, there can never be more transactions. The transaction market is really one half of a market, or a market with a "supply ceiling". It's ironic that Bitcoin's transaction count is essentially limited _by fiat_---by fiat of the Bitcoin code that implements the block limit. But given the relative failure of forks that increase that block limit, it seems Bitcoin is what it is and other coins will have to pick up that slack.
- pkulak 9y ago
  No one who owns BTC wants it used for transactions. They want it to be an investment and go up forever, so they'll never go with a fork that allows it. It's like home owners in a neighborhood locking out new construction so their own homes raise in value.
  - tylersmith 9y ago
    That's a pretty broad generalization. Many of us work very hard to make Bitcoin usable for day-to-day transactions.
    - zaphar 9y ago
      Sometimes a broad generalization is generally applicable even if not always specifically applicable.
  - zbentley 9y ago
    You know, that's quite insightful. HOAs (Home Owners' Associations) are also responsible for some pretty egregious local/municipal legislative blockage as well.
  - mikeash 9y ago
    Seems like the miners have a strong incentive to keep the "supply" of transactions artificially limited too, since it results in sky-high transaction fees for them.
caycep 9y ago
I am by no means an expert in any of these things - but philosophically was bitcoin written w/ the expectation that an individual is inherently good, and running smack into the reality that individuals are inherently focused on their own self interest?
- pat2man 9y ago
  Bitcoin was actually built under the assumption that you couldn't trust anyone else. You store your own money with your own private key.
rossdavidh 9y ago
Allow me to make a farfetched analogy: Bitcoin is like Obamacare. Obamacare wasn't made perfect the first time; this is normal. The way you fix issues with complex legislation, is you have it passed by significant members of both parties, so that you can revisit it the next year and fix things. But, with no trust between parties, the Dems had to get everything right in one go, when they had both houses and the White House, and guess what, there were problems. Which we can't fix. Bitcoin wasn't made perfect the first time. No problem, all software that becomes popular does, and all new financial arrangements (money, credit, credit cards, etc.) had unforeseen problems that had to get worked out. But, with no government involved, there is no mechanism for working things out. It's not surprising that everything wasn't perfect, or that things need fixing later; the issue is that no one has the mandate to do it.
- MBCook 9y ago
  The problem I see with that analogy is that Obamacare has been actively undermined at every step by the Tepublican party. Nothing like that is happening to Bitcoin. I think this was all inevitable. How could you make a new currency and not expect all the people who take advantage of monetary systems to move in? I’m not sure it’s preventable.
  - zbentley 9y ago
    I think the undermining of Bitcoin's original promise by speculators is just as inevitable as Obamacare's undermining by conservatives. Both are driven by hype. Both are primarily driven by greed ("temporarily embarrassed millionaire" greed, in many cases). Both are aspirational. Both run counter to the cynical "humans will always subvert" narratives of their times. That's not a judgement on either one. Just an observation of similarities. They're very different in many ways, too.
    - MBCook 9y ago
      What I meant about undermining is that I don’t think the speculators are out to sabotage bitcoin, it’s a side effect of what they’re doing. When it comes to Obamacare it’s very clear that the sabotage is intentional. The more I think about it the more I wonder if bitcoin could have ever worked. The way my name works pretty much guarantees a individual or small group would end up with the majority of the hash power if bitcoin was ever actually valuable. And that immediately undermines the peer-to-peer decentralized no one in charge of it aspect. Without something that disincentiveses people with significantly more cpu power people are just going to run away with it. That kind of seems like a flaw in all of these crypto currencies, even if it’s not CPU power that you use.
lumberjack 9y ago
As we learn more about cryptocurrencies, more evolved altcoins will emerge, with much more sophisticated economics. As it is, none of the developers of cryptocurrencies really understand economics and the majority of them believe in heterodox economic ideas that are probably wrong. But currently people are just trying to get rich. At this point in time I'm more bullish about GNU Taler. It is not a cryptocurrency but it shares some of the objectives.
- AVTizzle 9y ago
  Hey Lumberjack - I’m curious to learn more about the economics most folks in the space are ignoring. Are there any particular economic theories or resources you would recommend as a starting point for someone interested in studying up? Email in bio if you feel so inclined. Appreciate it!
agorabinary 9y ago
Responding to problems with this article as they appear: 1. Coinbase buckling is a failure of a web application grappling with unprecedented load. Not with bitcoin. 2. The dark web mostly uses Monero, which would not exist without Bitcoin coming along first. Also the notion of a $65 fee on a $250 tx is ridiculous, not to mention a 24 hour wait time. 3. The existence of exchanges and dark web websites that allow you to convert fiat to bitcoin and facilitate trades (middlemen as the authors calls them) is a failure of Bitcoin? Building a centralized exchange/facilitator will ALWAYS come before a decentralized alternative because decentralized apps are hard. 4. Applications that provide immeasurable convenience at the cost of a little privacy and security are an inevitable step in the road towards a better system. This is the equivalent of RMS bemoaning the existence of Ubuntu because it uses a few propriety programs, when whatever free distro he recommends is straight out of 1992 5. "retains none of the exciting features"? Rapidly increasing prices does not remove the most innovative features (smart contracts, off-chain transactions, etc) of the crypto world. It accelerates them if anything by providing the capital to finance their development Feel free to attack Bitcoin for its shortcomings, but don't act like things could have easily gone differently. Bitcoin still has tremendous potential for privacy, security, and everyday use --- if you get past the clickbait headlines.
- goatsi 9y ago
  What is your source for #2? Only a single market on the darknet currently accepts Monero (libertas). Monero currently lacks any multi-sig capabilities so it is useless for the newer distributed DNM systems such as openbazaar. At most Monero is used to obscure the trail of bitcoin as someone will buy some Monero with bitcoins puchased from a site like Coinbase and then sell those Monero back for bitcoin to avoid Coinbase banning their account for transferring to a known DNM Bitcoin address. Bitcoin is still used for the vast majority of DNM transactions.
fckurpropaganda 9y ago
This is misleading. Bitcoin was never about cheap coffee purchases. Its about avoiding theft by governments who bail out poorly run companies or banks. Most people have a credit card and access to cash... No inovation needed there.... Misleading title.
AlexandrB 9y ago
Bitcoin seems like just another medium of exchange. Almost all the properties of bitcoin - decentralization, anonymity, worldwide acceptance - apply equally well to gold bullion. The one additional property bitcoin had was convenience. But as transaction costs increase this is becoming less true. Given the above, why would anyone expect bitcoin to behave differently than physical gold in the real world? The world of gold is chock full of middlemen, dubious financial instruments, and companies taking advantage of those that don't know better. Bitcoin is just following the same well-tread path.
- acchow 9y ago
  You can't send $50M of gold halfway around the world for $3.
  - oscilloscope 9y ago
    Right now, you probably can't send $50M of Bitcoin around for the world for $3 either.
  - Rebelgecko 9y ago
    You can't send $50 million of bitcoin with only $3 in transaction fees either
    - acchow 9y ago
      Why not? The cost you pay is proportional with your transaction size in bytes, not the amount of bitcoins you're sending. So it depends on how many inputs and outputs you're using, not the quantity you're moving.
      - Rebelgecko 9y ago
        The cost you pay isn't just dependent on how many bytes you want to send. Each block maxes out at 1MB and there's only 144 blocks a day. If you want your transaction to be confirmed, you have to outbid everyone else who wants their transaction to happen (as long as there's more than 7 transactions / sec). I don't think it is doable to try to do a transaction with a $3 fee, you need something like $20 worth of BTC to get it done within the next block or two, and maybe $10 if you're willing to wait a while[1] [1] assuming https://estimatefee.com/ https://estimatefee.com/ is correct. Based on the transactions of some of my friends it seems pretty accureate though
kelvin747 9y ago
What about quantum computers
diego_moita 9y ago
The best criticism I've seen on Bitcoin is, by far, Paul Krugman's "Bitcoin is Evil" [1]. In essence: Bitcoin doesn't have "monetary policy" to regulate it's supply. That's why it is prone to speculative bubbles and very dangerous as money. [1] https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/ https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil...
- lend000 9y ago
  Painful to read. Paul Krugman is a laughing stock in the crypto-world, which he has been wrong about so confidently, so many times. As an aside, the US had active monetary policy for about a century, and it has enjoyed plenty of bubbles and crashes. Some of those were worsened by monetary policy (e.g. easy money in the early 1920's swapped to deflationary monetary policy in 1929 as soon as the easy money bubble popped, low interest rates fueling real estate speculation in the early 2000's, etc.)
  - pseudonom- 9y ago
    Can you give an overview of or pointers to critiques? My prior is that Krugman is more likely to by correct than the average crypto person, even after adjusting for interest in and attention to crypto.
    - lend000 9y ago
      For a celebrated economist, Krugman has a poor grasp of certain facets of economics. It's probably a subconscious way of rectifying his political views, which many of us are guilty of. In this case, he does not understand how Bitcoin can be a store of value, because it is not backed by a government. How come gold or any other commodity has value? Value it what the market decides, not the government. He obviously did not understand the intrinsic value the technology provides, which previous media of exchange do not provide, such as immutability and full control of funds. He is happy to pass judgment without understanding the technology.
      - 9y ago
emerged 9y ago
Is anyone else getting the same sense with Bitcoin as with Trump leading up to the election? Everywhere I go everyone has negative things to say, everyone is going on about how it's going to crash. They all seem like sensible arguments. But here we are, Bitcoin keeps following an exponential curve and Trump is president. The one thing I know for sure is there's an awfully noisy signal out there.
- jhiska 9y ago
  Correlation is not causation.
- MBCook 9y ago
  People also predicted that Iraq and Afghanistan would be quagmires. Those predictions came true.
- zeep 9y ago
  I voted for Trump and I bought some Bitcoins... hopefully I am right again.
blueprint 9y ago
I wonder what percentage of the individuals who are opining here know about Monero.
zeep 9y ago
Bitcoin is trying to move transactions off the blockchain to fix this issue... bitcoin cash is what bitcoin was supposed to be (increased block size)...

137 points by okket 9y ago

The article repeatedly quotes statements to the effect “this was supposed to show what a truly free market looks like. Instead, it’s a shitshow.” The word “instead” doesn’t belong there. Really.

jhiska 9y ago
Maybe we should call it anarcho-markets?
MBCook 9y ago
Wasn’t that the exact point of the tweet that was mentioned in the article?

coryl 9y ago

The author seems to expect that the changes created by cryptocurrency should be visible immediately. It is a lack of patience, and lack of understanding that changing deeply rooted systems and behaviors takes time. People have never managed software where if you lost your "password", your money was gone forever. They never had to keep a 12-24 word recovery phrase. They've never sent money to addresses that look like hash strings. Their money value was never this volatile (in some countries anyway) and never this complicated to use (understanding and waiting for block confirmations, looking up transactions in the blockchain explorer). That's why Coinbase exists, to obfuscate these complexities, to sell security as a service. The cryptography behind cryptocurrencies allows you to basically be your own bank vault; this is not intuitive to people. The fundamentals for Satoshi's vision have been laid out, the rest of the implementation details will come in time.

curuinor 9y ago
What, then, exactly is the difference between your scenario and Coinbase being the bank?
- eberkund 9y ago
  That is a good analogy, if you choose to you can use a bank (or Coinbase) but you also have the option of doing everything in cash or managing your own Bitcoin wallet. Prior to cryptocurrency if you wanted to quickly send money around the world without going through a bank or other financial institutions you were out of luck.
- _red 9y ago
  Coinbase can't print money.
  - coryl 9y ago
    Technically they can try, by selling users coin in a fractional reserve model. This is probably already being done by some exchanges. But that's a problem regarding legal regulation.
  - deleted 9y ago
    [deleted]
  - colorint 9y ago
    Banks can't print money either, and this isn't some "ackshually it's the Mint" thing: banks have the power to create debt. But this isn't special, because you and I also have the power to create debt. What makes a bank special is that debt is its business (so most of its operation concerns the management of debt), and much of its debt can be called on demand, and so we call banks' debts to us demand deposits. Fractional reserve is just a particular kind of regulation placed on banks' creation of debt, and it usually isn't the most important one. The practical limit of banks is that they have to be able to extinguish their debts (which we call withdrawal), including being able to transfer them to other banks in exchange for cash (which we call clearing), at the whim of the creditors (you and me). The problems with banks are the problems with debt generally, but that's much trickier than some glib remarks about monetary policy.
    - deleted 9y ago
      [deleted]
wott 9y ago
> People have never managed software where if you lost your "password", your money was gone forever. They never had to keep a 12-24 word recovery phrase. They've never sent money to addresses that look like hash strings. Their money value was never this volatile (in some countries anyway) and never this complicated to use (understanding and waiting for block confirmations, looking up transactions in the blockchain explorer). Well yeah, nobody in his sane mind would have designed such an unpractical system. It took a bunch of out of touch, fresh out of school computer scientists to reach such nonsense.
- coryl 9y ago
  I doubt that blockchain was invented by a fresh out of school computer science graduate. The breadth and depth of technical complexity (even if just the white paper) that blockchain covers requires time and experience to accumulate.
  - oculusthrift 9y ago
    more likely an out of touch phd professor (or team of them)

dawhizkid 9y ago

The fact that the majority of people only trade/hold bitcoin to exchange for centralized currency i.e. USD tells you something, no?

mathgeek 9y ago
Yes: that it's not universally accepted (yet?) and highly volatile.
- dawhizkid 9y ago
  Do you mean universally accepted as payment for goods? The fact that it takes an hour+ for one transaction to be confirmed (i.e. behind ~6 blocks) seems like a huge UX problem for buyers/sellers. If I'm going to use bitcoin to buy a TV, I'm not going to wait around an hour for the merchant to say I'm good to go. And transaction fees are so high now that it makes no sense to use bitcoin for small transactions. Other issues include refunds/disputes. If you receive something in the mail from a seller that is not as described, then no equivalent of a dispute/chargeback process to get your bitcoin back.
  - Lerc 9y ago
    The problem is this perspective mixes levels of certainty that are not comparable. A trader can accept a transaction as soon as it shows up, even with zero confirmations. Doing so creates the risk of not actually receiving the payment, The circumstances under which this can happen are probably much rarer than the possibility of a credit-card transaction being reversed. You want the high certainty on large sums, For small payments you could easily just take the hit on the tiny (if any, in-reality given the minimal reward for effort of fraud) transactions that don't go through. The issue of transaction charges is a growth pain. When Bitcoin came on the scene, It was expected that the future incarnations of the protocol would handle vastly larger numbers of transactions, that view hasn't really changed. The only issue has been on the time-frame of the expansion. If anything that can be considered as being too successful. It's a little system that might be a big system one day, but people anticipating the future state of the big system is causing strain. It will be interesting to see where things stand 30 years from now.

gruez 9y ago

>Bitcoin was designed so that users had to take care of their private cryptographic keys for every address they used, and Nakamoto advised making a new address for every transaction. This proved too confusing and burdensome, so along came wallet services, which stored users’ Bitcoins like a bank account and substituted a password for the private key wut? if you used a online wallet, you still had to manage addresses. the only advantage comes in the form of not having to wait hours/days for the client to sync up (back then there weren't any thin clients), and not having to back up a wallet file. >Whether it was out of incompetence or an attempt to save itself from selling at an inflated price (at one point, the price of Bitcoin was $3,000 higher on Coinbase than on other exchanges), that's not how exchanges work. the counterparty is another buyer, not the exchange. coinbase is getting x% fee regardless if the price was $1000 or $10000. >this was exactly the kind of thing Bitcoin was supposed to prevent. sounds like a strawman. i don't think anyone realistically thought if bitcoin came along, all the AML/KYC laws around handling fiat will magically evaporate

PeterisP 9y ago
"i don't think anyone realistically thought if bitcoin came along, all the AML/KYC laws around handling fiat will magically evaporate" I disagree - I've seen and debated far too many people claiming essentially that viewpoint; IMHO it's a naive and unrealistic expectation, but a lot of people did think that.

poopsmithe 9y ago

Remember how Coinbase, the San Francisco-based startup which raised more than $200 million in venture capital, put a freeze on my money? Whether it was out of incompetence or an attempt to save itself from selling at an inflated price (at one point, the price of Bitcoin was $3,000 higher on Coinbase than on other exchanges), this was exactly the kind of thing Bitcoin was supposed to prevent. Um no, I don't think so. Coinbase.com is not the Bitcoin experience, just like Facebook is not the internet experience. Nothing in the Bitcoin whitepaper mentions Bitcoin solving problems inherent with a central currency Exchange or hosted, custodial wallets. Use localbitcoins.com and a non-custodial wallet if you want to experience Bitcoin per it's original specification. Exchanges != Bitcoin.

SilverCurve 9y ago
That is the point of the article though. If most of transactions are going through exchanges, Bitcoin is not being used as it's supposed to.
icedchai 9y ago
Coinbase, and similar sites, may as well be Bitcoin for the average ("retail") investor. It's far too complicated, not to mention resource intensive, for the average Joe to set up and run his own node. My uncle wants to "invest" in Bitcoin. He wants to trade it like a stock. You seriously think he's going to mess around with private keys and wallet pass phrases? Many technical people can barely handle that. And, yes, for a lot of today's youth, Facebook is the internet experience. The Internet experience, for me, was telnet, gopher, and Usenet news. We're along way from those days.

mattmcegg 9y ago

Then don't buy any.

jhiska 9y ago

It's not Wall Street's fault or whatever boogie man's fault that the Bitcoin tech doesn't actually work as some idealistic libertarian creator imagined it would; the fault is in Bitcoin's design itself. Even if the price wasn't fluctuating like crazy it simply doesn't work well as a currency due to technical limitations (eg, the time and cost it takes to process a transaction in the real world has always been impractical), but it shows promise as something that holds value (like gold). The Outline creates articles with pureed facts written in a carefully standardized "no-nonsense", language-as-spoken-today linguistic style for mass consumption that are often deceptive, political or just technically wrong. Don't trust it.

ng12 9y ago
I feel like it's a parable about lofty libertarian ideals -- everything's peachy until there's large sums of money involved. Bitcoin is fixable but now there's a financial incentive for never fixing it.
- jhiska 9y ago
  You're probably right about Bitcoin not being fixable as a currency, and I say probably because I almost never speak in absolute terms. There are alternative cryptocurrencies that stand a chance of working out; the idea is mainstream now. To me, it's a parable about the danger of following a pseudo-philosopher with no academic credibility and whose relevant oeuvre is fictional literature and not reading what Adam "Greed Is Good" Smith actually wrote about free markets AKA unregulated capitalism, which was that an economical system of people acting in their self-interest ends up promoting a greater economical and moral good for everyone but only as long as there are significant safeguards against abuse, but that's just my opinion.
- netsharc 9y ago
  I should google it but I'll just wonder out loud, how would libertarians use money anyway? Doesn't money need something to back it up, i.e. a central bank?
  - 9y ago

pc2g4d 9y ago

The high transaction fees are forcing Bitcoin in this direction. If buying a hamburger cost you $30 in fees on top of the $6 burger, you'd stop using dollars for everyday purchases, too. Seems we're stuck in this situation so long as the block size remains where it is. That artificially reduces the supply of transactions, forcing the price up. No matter how many miners there are competing for those transaction fees, there can never be more transactions. The transaction market is really one half of a market, or a market with a "supply ceiling". It's ironic that Bitcoin's transaction count is essentially limited _by fiat_---by fiat of the Bitcoin code that implements the block limit. But given the relative failure of forks that increase that block limit, it seems Bitcoin is what it is and other coins will have to pick up that slack.

pkulak 9y ago
No one who owns BTC wants it used for transactions. They want it to be an investment and go up forever, so they'll never go with a fork that allows it. It's like home owners in a neighborhood locking out new construction so their own homes raise in value.
- tylersmith 9y ago
  That's a pretty broad generalization. Many of us work very hard to make Bitcoin usable for day-to-day transactions.
  - zaphar 9y ago
    Sometimes a broad generalization is generally applicable even if not always specifically applicable.
- zbentley 9y ago
  You know, that's quite insightful. HOAs (Home Owners' Associations) are also responsible for some pretty egregious local/municipal legislative blockage as well.
- mikeash 9y ago
  Seems like the miners have a strong incentive to keep the "supply" of transactions artificially limited too, since it results in sky-high transaction fees for them.

caycep 9y ago

I am by no means an expert in any of these things - but philosophically was bitcoin written w/ the expectation that an individual is inherently good, and running smack into the reality that individuals are inherently focused on their own self interest?

pat2man 9y ago
Bitcoin was actually built under the assumption that you couldn't trust anyone else. You store your own money with your own private key.

rossdavidh 9y ago

Allow me to make a farfetched analogy: Bitcoin is like Obamacare. Obamacare wasn't made perfect the first time; this is normal. The way you fix issues with complex legislation, is you have it passed by significant members of both parties, so that you can revisit it the next year and fix things. But, with no trust between parties, the Dems had to get everything right in one go, when they had both houses and the White House, and guess what, there were problems. Which we can't fix. Bitcoin wasn't made perfect the first time. No problem, all software that becomes popular does, and all new financial arrangements (money, credit, credit cards, etc.) had unforeseen problems that had to get worked out. But, with no government involved, there is no mechanism for working things out. It's not surprising that everything wasn't perfect, or that things need fixing later; the issue is that no one has the mandate to do it.

MBCook 9y ago
The problem I see with that analogy is that Obamacare has been actively undermined at every step by the Tepublican party. Nothing like that is happening to Bitcoin. I think this was all inevitable. How could you make a new currency and not expect all the people who take advantage of monetary systems to move in? I’m not sure it’s preventable.
- zbentley 9y ago
  I think the undermining of Bitcoin's original promise by speculators is just as inevitable as Obamacare's undermining by conservatives. Both are driven by hype. Both are primarily driven by greed ("temporarily embarrassed millionaire" greed, in many cases). Both are aspirational. Both run counter to the cynical "humans will always subvert" narratives of their times. That's not a judgement on either one. Just an observation of similarities. They're very different in many ways, too.
  - MBCook 9y ago
    What I meant about undermining is that I don’t think the speculators are out to sabotage bitcoin, it’s a side effect of what they’re doing. When it comes to Obamacare it’s very clear that the sabotage is intentional. The more I think about it the more I wonder if bitcoin could have ever worked. The way my name works pretty much guarantees a individual or small group would end up with the majority of the hash power if bitcoin was ever actually valuable. And that immediately undermines the peer-to-peer decentralized no one in charge of it aspect. Without something that disincentiveses people with significantly more cpu power people are just going to run away with it. That kind of seems like a flaw in all of these crypto currencies, even if it’s not CPU power that you use.

lumberjack 9y ago

As we learn more about cryptocurrencies, more evolved altcoins will emerge, with much more sophisticated economics. As it is, none of the developers of cryptocurrencies really understand economics and the majority of them believe in heterodox economic ideas that are probably wrong. But currently people are just trying to get rich. At this point in time I'm more bullish about GNU Taler. It is not a cryptocurrency but it shares some of the objectives.

AVTizzle 9y ago
Hey Lumberjack - I’m curious to learn more about the economics most folks in the space are ignoring. Are there any particular economic theories or resources you would recommend as a starting point for someone interested in studying up? Email in bio if you feel so inclined. Appreciate it!

agorabinary 9y ago

Responding to problems with this article as they appear: 1. Coinbase buckling is a failure of a web application grappling with unprecedented load. Not with bitcoin. 2. The dark web mostly uses Monero, which would not exist without Bitcoin coming along first. Also the notion of a $65 fee on a $250 tx is ridiculous, not to mention a 24 hour wait time. 3. The existence of exchanges and dark web websites that allow you to convert fiat to bitcoin and facilitate trades (middlemen as the authors calls them) is a failure of Bitcoin? Building a centralized exchange/facilitator will ALWAYS come before a decentralized alternative because decentralized apps are hard. 4. Applications that provide immeasurable convenience at the cost of a little privacy and security are an inevitable step in the road towards a better system. This is the equivalent of RMS bemoaning the existence of Ubuntu because it uses a few propriety programs, when whatever free distro he recommends is straight out of 1992 5. "retains none of the exciting features"? Rapidly increasing prices does not remove the most innovative features (smart contracts, off-chain transactions, etc) of the crypto world. It accelerates them if anything by providing the capital to finance their development Feel free to attack Bitcoin for its shortcomings, but don't act like things could have easily gone differently. Bitcoin still has tremendous potential for privacy, security, and everyday use --- if you get past the clickbait headlines.

goatsi 9y ago
What is your source for #2? Only a single market on the darknet currently accepts Monero (libertas). Monero currently lacks any multi-sig capabilities so it is useless for the newer distributed DNM systems such as openbazaar. At most Monero is used to obscure the trail of bitcoin as someone will buy some Monero with bitcoins puchased from a site like Coinbase and then sell those Monero back for bitcoin to avoid Coinbase banning their account for transferring to a known DNM Bitcoin address. Bitcoin is still used for the vast majority of DNM transactions.

fckurpropaganda 9y ago

This is misleading. Bitcoin was never about cheap coffee purchases. Its about avoiding theft by governments who bail out poorly run companies or banks. Most people have a credit card and access to cash... No inovation needed there.... Misleading title.

AlexandrB 9y ago

Bitcoin seems like just another medium of exchange. Almost all the properties of bitcoin - decentralization, anonymity, worldwide acceptance - apply equally well to gold bullion. The one additional property bitcoin had was convenience. But as transaction costs increase this is becoming less true. Given the above, why would anyone expect bitcoin to behave differently than physical gold in the real world? The world of gold is chock full of middlemen, dubious financial instruments, and companies taking advantage of those that don't know better. Bitcoin is just following the same well-tread path.

acchow 9y ago
You can't send $50M of gold halfway around the world for $3.
- oscilloscope 9y ago
  Right now, you probably can't send $50M of Bitcoin around for the world for $3 either.
- Rebelgecko 9y ago
  You can't send $50 million of bitcoin with only $3 in transaction fees either
  - acchow 9y ago
    Why not? The cost you pay is proportional with your transaction size in bytes, not the amount of bitcoins you're sending. So it depends on how many inputs and outputs you're using, not the quantity you're moving.
    - Rebelgecko 9y ago
      The cost you pay isn't just dependent on how many bytes you want to send. Each block maxes out at 1MB and there's only 144 blocks a day. If you want your transaction to be confirmed, you have to outbid everyone else who wants their transaction to happen (as long as there's more than 7 transactions / sec). I don't think it is doable to try to do a transaction with a $3 fee, you need something like $20 worth of BTC to get it done within the next block or two, and maybe $10 if you're willing to wait a while[1] [1] assuming https://estimatefee.com/ https://estimatefee.com/ is correct. Based on the transactions of some of my friends it seems pretty accureate though

kelvin747 9y ago

What about quantum computers

diego_moita 9y ago

The best criticism I've seen on Bitcoin is, by far, Paul Krugman's "Bitcoin is Evil" [1]. In essence: Bitcoin doesn't have "monetary policy" to regulate it's supply. That's why it is prone to speculative bubbles and very dangerous as money. [1] https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/ https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil...

lend000 9y ago
Painful to read. Paul Krugman is a laughing stock in the crypto-world, which he has been wrong about so confidently, so many times. As an aside, the US had active monetary policy for about a century, and it has enjoyed plenty of bubbles and crashes. Some of those were worsened by monetary policy (e.g. easy money in the early 1920's swapped to deflationary monetary policy in 1929 as soon as the easy money bubble popped, low interest rates fueling real estate speculation in the early 2000's, etc.)
- pseudonom- 9y ago
  Can you give an overview of or pointers to critiques? My prior is that Krugman is more likely to by correct than the average crypto person, even after adjusting for interest in and attention to crypto.
  - lend000 9y ago
    For a celebrated economist, Krugman has a poor grasp of certain facets of economics. It's probably a subconscious way of rectifying his political views, which many of us are guilty of. In this case, he does not understand how Bitcoin can be a store of value, because it is not backed by a government. How come gold or any other commodity has value? Value it what the market decides, not the government. He obviously did not understand the intrinsic value the technology provides, which previous media of exchange do not provide, such as immutability and full control of funds. He is happy to pass judgment without understanding the technology.
    - 9y ago

emerged 9y ago

Is anyone else getting the same sense with Bitcoin as with Trump leading up to the election? Everywhere I go everyone has negative things to say, everyone is going on about how it's going to crash. They all seem like sensible arguments. But here we are, Bitcoin keeps following an exponential curve and Trump is president. The one thing I know for sure is there's an awfully noisy signal out there.

jhiska 9y ago
Correlation is not causation.
MBCook 9y ago
People also predicted that Iraq and Afghanistan would be quagmires. Those predictions came true.
zeep 9y ago
I voted for Trump and I bought some Bitcoins... hopefully I am right again.

blueprint 9y ago

I wonder what percentage of the individuals who are opining here know about Monero.

zeep 9y ago

Bitcoin is trying to move transactions off the blockchain to fix this issue... bitcoin cash is what bitcoin was supposed to be (increased block size)...