9 ms·

Except that so far it remains to be seen if that can work at scale. Bitcoin is moving towards the lightning network which changes things quite a bit, in particu

by simias 9y ago

Except that so far it remains to be seen if that can work at scale. Bitcoin is moving towards the lightning network which changes things quite a bit, in particular potentially adding some centralization and giving some nodes advantages over others (well connected nodes with large open channels will have an advantage over a newcomer without connections for instance). Bitcoin cash is trying an other route with bigger blocks but it remains to be seen if it scales well enough to real-world currency usage. And of course there's the big problem of cryptocurrencies being useless as currencies because they're not stable enough. Which itself can be largely blamed on their limited supply and inflationary nature which is necessary to bootstrap them (there's an incentive to get in early) but seems to turn against them in the long run since nobody wants to spend something that's by design supposed to become scarcer and scarcer. It might be theoretically free but it doesn't work great so far. And of course we could discuss whether a completely free market is a good or a bad thing, but that's a whole different debate.

spmurrayzzz 9y ago
>Bitcoin is moving towards the lightning network which changes things quite a bit, in particular potentially adding some centralization and giving some nodes advantages over others (well connected nodes with large open channels will have an advantage over a newcomer without connections for instance). The centralization narrative involving LN is somewhat mischaracterized IMHO. Given that source-routing puts control of payments into the the payer, you can choose to mitigate the custodial risk of a single hop holding up your funds in their payment channel a number of ways. For instance, there is no reason one payment from person A to person B needs to involve only one route. Intelligent wallet software, on the order of tens of milliseconds, could break up one payment of $10 into 100 different routes across numerous payment channels. In addition to giving you custodial risk mitigation, its also beneficial for privacy as well.
- simias 9y ago
  I think the average human being values convenience and low fees much more than privacy (otherwise Facebook and credit cards wouldn't be quite as popular). That means that I expect that wallets and stores that offer the smallest fee will be the ones people use most. A well connected node will be cheaper to transact with by virtue of not having to open a new channel. That gives well connected "bank" nodes a lot of power because they can decide who they connect with (you could imagine paying a "bank" node to connect with you to enable cheaper transactions for your customers) and as a user you have an incentive to host your coins in one of these bank nodes so that it remains easily and cheaply available for purchases. Meanwhile a small indie shop (or some guy selling socks on ebay) won't have any channel so transacting with them will end up more expensive than buying from a popular store. Basically you've reinvented Visa without the insurance, regulations and customer protection. At least that's how it looks like to me. I guess we'll know soon enough which one of us is right. Maybe the truth is somewhere in between.
  - bunderbunder 9y ago
    > I think the average human being values convenience and low fees much more than privacy I think it ends up being more nuanced than that, with plenty of gradations of all of those factors. If it means, "Literally nobody can know whether I prefer pads or tampons, and where I get them, not even the person I buy pads or tampons from", then I'm going to lean toward paying cash at some random drug store. A brick and mortar because getting things shipped to me requires giving them identifying information, and cash because it has literally zero fees and leaves no paper trail. If I have to buy something online, then I already have to give them my name and address so I can get it shipped to me. At that point I may not care if my bank and the credit card processing agency also have a record of the transaction, because the info's already out there. At that point it's just a question of whether there are privacy laws that prevent parties from selling too much information or not - either way, I'm guessing 1 and 3 parties will ultimately fall in roughly the same equivalence class, on the privacy front. Personally, I don't see a middle path where blockchain is preferable to either of those options. If I want complete privacy, then I don't want that transaction appearing on the blockchain, either. If I don't, well, might as well get some consumer protection.
    - TheSpiceIsLife 9y ago
      In reality, the average person is going to buy pads or tampons in a way that is most convenient to them. Only the subset of privacy concerned consumers who don't want anyone to know whether they prefer pads or tampons will go out of their way to visit a random drug store.
stale2002 9y ago
I take issue with your criticism of deflationary currencies. Deflationary currencies worked well for literally thousands of years, when people used precious metals for their currency. Inflationary monotary policy is a fairly recent invention of the 20th century.
- saalweachter 9y ago
  The gold supply increases at a rate of about 2% per year.
- saas_co_de 9y ago
  If you compare the thousands of years where deflationary currencies were working well to the modern Era I think most would prefer an inflationary currency.
  - stale2002 9y ago
    Many would, sure. It has advantages and disadvantages. But the point is to give people choices. Some people do indeed prefer deflationary currencies, and that's OK.
    - nosuchthing 9y ago
      Oligarchs and old money would love to maintain ownership of capital economies and deflationary currency exaggerates and encourages that. The point of a small limited inflation is to encourage a healthy flow of capital into services, workers, and development of activities. http://econfaculty.gmu.edu/bcaplan/whyaust.htm http://econfaculty.gmu.edu/bcaplan/whyaust.htm
      - stale2002 9y ago
        OK, but the point is that the people who want to use inflationary currencies already have lots of options. Good for them. They are free to use those. And those of us who prefer deflationary ones should be free to use those as well. I don't get why the mere existence of alternatives pisses off economists and the like so much. If inflationary currencies are so great, then that's fine, feel free to go use those, and those of us that disagree will choose something else.
cachvico 9y ago
> nobody wants to spend something that's by design supposed to become scarcer and scarcer. Except that Bitcoin is (with consensual upgrade) infinitely divisible. (E.g. the network can [vote to] move to 16 decimal places, and so on).
- nosuchthing 9y ago
  Except that Bitcoin was mostly minted by a small group of users who simply horde it, hoping to sell it to other users who due to the software will not be able to generate it for as low cost as the early users. It's zero sum (minus the cost wasted in maintaining the network), and the game theory Satoshi designed will inevitably disincentive new users from adopting it as the barrier to entry increases and alternative options will likely obsolete BTC.
- fbonetti 9y ago
  Bitcoin is still deflationary, which makes it unusable as money. Inflationary currencies like USD incentivize people to spend and invest. Deflationary currencies incentivize people to hoard.
  - astrange 9y ago
    Bitcoin is inflationary until the mining period ends, which it hasn’t. You could then still increase the virtual money supply through fractional reserve banking; also “investing” is a lot more like hoarding than it is spending…
    - simias 9y ago
      So far I don't really know if you can call it inflationary or deflationary because while it's true that the supply keeps increasing the main source of variation for the currency's value is speculation. BTC barely qualifies as a currency today so I don't think we can think in these terms, it's more about what it could end up being if it manages to turn into a proper currency. >You could then still increase the virtual money supply through fractional reserve banking You can't do fractional reserve banking on-chain as far as I know so that would mean having your money managed by 3rd party banks who would take ownership of your coins, pool them with other people's coins and manage them for you. So... Back to the start? Furthermore I don't think it solves the problem of deflation, even with a fractional reserve the bank has no incentive to invest the money if the expected return are less than what it would end up with by not doing anything at all (and therefore not taking any risks either). If you have inflation of, say, 2% then any investment expected to create value or even lose less than 2% is a good one. If you have deflation of 2% then an investment that managed to generate 1% of additional value over your investment actually made you lose money because you'd have been better off not doing anything. Therefore deflation will make it a lot harder to loan money, fractional reserve or not. Interest rates will be a lot higher to make up for it. The poor will pay the price for being poor, the rich will reap the reward for being rich. >“investing” is a lot more like hoarding than it is spending… Depends what you invest into I suppose, if you "invest" in gold bullions then you're right, if you're investing in a startup or loaning money to people buying houses then you're powering the economy.

by simias 9y ago

spmurrayzzz 9y ago

>Bitcoin is moving towards the lightning network which changes things quite a bit, in particular potentially adding some centralization and giving some nodes advantages over others (well connected nodes with large open channels will have an advantage over a newcomer without connections for instance). The centralization narrative involving LN is somewhat mischaracterized IMHO. Given that source-routing puts control of payments into the the payer, you can choose to mitigate the custodial risk of a single hop holding up your funds in their payment channel a number of ways. For instance, there is no reason one payment from person A to person B needs to involve only one route. Intelligent wallet software, on the order of tens of milliseconds, could break up one payment of $10 into 100 different routes across numerous payment channels. In addition to giving you custodial risk mitigation, its also beneficial for privacy as well.

simias 9y ago
I think the average human being values convenience and low fees much more than privacy (otherwise Facebook and credit cards wouldn't be quite as popular). That means that I expect that wallets and stores that offer the smallest fee will be the ones people use most. A well connected node will be cheaper to transact with by virtue of not having to open a new channel. That gives well connected "bank" nodes a lot of power because they can decide who they connect with (you could imagine paying a "bank" node to connect with you to enable cheaper transactions for your customers) and as a user you have an incentive to host your coins in one of these bank nodes so that it remains easily and cheaply available for purchases. Meanwhile a small indie shop (or some guy selling socks on ebay) won't have any channel so transacting with them will end up more expensive than buying from a popular store. Basically you've reinvented Visa without the insurance, regulations and customer protection. At least that's how it looks like to me. I guess we'll know soon enough which one of us is right. Maybe the truth is somewhere in between.
- bunderbunder 9y ago
  > I think the average human being values convenience and low fees much more than privacy I think it ends up being more nuanced than that, with plenty of gradations of all of those factors. If it means, "Literally nobody can know whether I prefer pads or tampons, and where I get them, not even the person I buy pads or tampons from", then I'm going to lean toward paying cash at some random drug store. A brick and mortar because getting things shipped to me requires giving them identifying information, and cash because it has literally zero fees and leaves no paper trail. If I have to buy something online, then I already have to give them my name and address so I can get it shipped to me. At that point I may not care if my bank and the credit card processing agency also have a record of the transaction, because the info's already out there. At that point it's just a question of whether there are privacy laws that prevent parties from selling too much information or not - either way, I'm guessing 1 and 3 parties will ultimately fall in roughly the same equivalence class, on the privacy front. Personally, I don't see a middle path where blockchain is preferable to either of those options. If I want complete privacy, then I don't want that transaction appearing on the blockchain, either. If I don't, well, might as well get some consumer protection.
  - TheSpiceIsLife 9y ago
    In reality, the average person is going to buy pads or tampons in a way that is most convenient to them. Only the subset of privacy concerned consumers who don't want anyone to know whether they prefer pads or tampons will go out of their way to visit a random drug store.

stale2002 9y ago

I take issue with your criticism of deflationary currencies. Deflationary currencies worked well for literally thousands of years, when people used precious metals for their currency. Inflationary monotary policy is a fairly recent invention of the 20th century.

saalweachter 9y ago
The gold supply increases at a rate of about 2% per year.
saas_co_de 9y ago
If you compare the thousands of years where deflationary currencies were working well to the modern Era I think most would prefer an inflationary currency.
- stale2002 9y ago
  Many would, sure. It has advantages and disadvantages. But the point is to give people choices. Some people do indeed prefer deflationary currencies, and that's OK.
  - nosuchthing 9y ago
    Oligarchs and old money would love to maintain ownership of capital economies and deflationary currency exaggerates and encourages that. The point of a small limited inflation is to encourage a healthy flow of capital into services, workers, and development of activities. http://econfaculty.gmu.edu/bcaplan/whyaust.htm http://econfaculty.gmu.edu/bcaplan/whyaust.htm
    - stale2002 9y ago
      OK, but the point is that the people who want to use inflationary currencies already have lots of options. Good for them. They are free to use those. And those of us who prefer deflationary ones should be free to use those as well. I don't get why the mere existence of alternatives pisses off economists and the like so much. If inflationary currencies are so great, then that's fine, feel free to go use those, and those of us that disagree will choose something else.

cachvico 9y ago

> nobody wants to spend something that's by design supposed to become scarcer and scarcer. Except that Bitcoin is (with consensual upgrade) infinitely divisible. (E.g. the network can [vote to] move to 16 decimal places, and so on).

nosuchthing 9y ago
Except that Bitcoin was mostly minted by a small group of users who simply horde it, hoping to sell it to other users who due to the software will not be able to generate it for as low cost as the early users. It's zero sum (minus the cost wasted in maintaining the network), and the game theory Satoshi designed will inevitably disincentive new users from adopting it as the barrier to entry increases and alternative options will likely obsolete BTC.
fbonetti 9y ago
Bitcoin is still deflationary, which makes it unusable as money. Inflationary currencies like USD incentivize people to spend and invest. Deflationary currencies incentivize people to hoard.
- astrange 9y ago
  Bitcoin is inflationary until the mining period ends, which it hasn’t. You could then still increase the virtual money supply through fractional reserve banking; also “investing” is a lot more like hoarding than it is spending…
  - simias 9y ago
    So far I don't really know if you can call it inflationary or deflationary because while it's true that the supply keeps increasing the main source of variation for the currency's value is speculation. BTC barely qualifies as a currency today so I don't think we can think in these terms, it's more about what it could end up being if it manages to turn into a proper currency. >You could then still increase the virtual money supply through fractional reserve banking You can't do fractional reserve banking on-chain as far as I know so that would mean having your money managed by 3rd party banks who would take ownership of your coins, pool them with other people's coins and manage them for you. So... Back to the start? Furthermore I don't think it solves the problem of deflation, even with a fractional reserve the bank has no incentive to invest the money if the expected return are less than what it would end up with by not doing anything at all (and therefore not taking any risks either). If you have inflation of, say, 2% then any investment expected to create value or even lose less than 2% is a good one. If you have deflation of 2% then an investment that managed to generate 1% of additional value over your investment actually made you lose money because you'd have been better off not doing anything. Therefore deflation will make it a lot harder to loan money, fractional reserve or not. Interest rates will be a lot higher to make up for it. The poor will pay the price for being poor, the rich will reap the reward for being rich. >“investing” is a lot more like hoarding than it is spending… Depends what you invest into I suppose, if you "invest" in gold bullions then you're right, if you're investing in a startup or loaning money to people buying houses then you're powering the economy.