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Probably that the Bitcoin ledger itself will be more akin to a ledger of inter-bank transfers than to VisaNet. Visa processes 5,000 transactions per second, but

Probably that the Bitcoin ledger itself will be more akin to a ledger of inter-bank transfers than to VisaNet. Visa processes 5,000 transactions per second, but they only actually move money between banks to settle those transactions once a day, 5 days a week. Visa-like products can be built on top of Bitcoin or other digital currencies rather than people exchanging the coins directly.

TheSoftwareGuy 8y ago
But don't you lose the whole decentralized thing at that point?
- sparkie 8y ago
  The decentralization is that anyone can participate, and anyone can be the bank. There is no authority and you do not need to ask permission. You do not require any large investment because the resources require to run the node are minimal, and you can even do it with some level of anonymity through the Tor network.
bobthepanda 8y ago
That destroys the point of the whole "decentralized systems" thing. Crypto has always kind of looked like a solution in search of a problem, IMO. What is it solving that isn't some sort of political science question?
- sparkie 8y ago
  It's solving the problem that currency, up until now, has never had a finite supply, and that even currencies with limited supply could be forged, seized or inflated until they became worthless. Bitcoin is the first money ever, which nobody can create beyond the very predictable initial distribution programmed into the system. Gresham's law roughly states that when two kinds of money exist, people will stash the good money, and will trade with the bad money until it becomes useless. It's been proven time over throughout history. You only need to look at the gold rush that happened during the last financial crisis. Given that Bitcoin is the best money that has ever existed, then anyone who is paying attention is stashing it while they're trading with anything else. The next recession won't be a rush for gold.
  - pjc50 8y ago
    This isn't even true for bitcoin; anyone can fork it, there has been at least one fork already, and the miners can easily decide to hardfork across to keep the block rewards going when they run out. It doesn't help that the miners are increasingly cartelised.
    - beaner 8y ago
      Hard forking Bitcoin doesn't increase Bitcoin's supply.
    - sparkie 8y ago
      If miners attempted to hard-fork in inflation, do you think users would follow their chain? It was already attempted on the first halving from 50BTC to 25BTC. Guess which one won? Miners don't make the rules. They enforce them. The network of economic users decide the rules that they are willing to validate in their software client.
      - bduerst 8y ago
        This fact makes bitcoin even more dangerous. Miners are only going to fork the network in a direction that benefits them, sometimes at the expense of everyone else and the network. This is called tragedy of the commons, and the block-size debacle is an example of that.
        sparkie 8y ago
        The only direction that benefits miners is the direction where they have the maximum potential for profit by selling the coins they earn through transaction fees. This will inevitably be the network which most people are transacting on. The actual incentives are a bit skewed currently because transaction fees are dwarfed by the block subsidy.
        bduerst 8y ago
        Riiiight, and fisherman only fish the species that are most prevalent in the sea. You don't know how tragedy of the commons works, do you?
- beaner 8y ago
  > That destroys the point of the whole "decentralized systems" thing. Why? > What is it solving that isn't some sort of political science question? - Why can't you send money between PayPal and Venmo, even though they're products owned by the same company? It's because existing money is a system that you are permitted to use, under specific restrictions applied by government. Cryptocurrencies are open protocols. One thing they solve is getting around these restrictions. One day, all of our payment apps will be interoperable, and they will be enabled by crypto. - You do not have to worry about your money being stolen by means like Civil Asset Forfeiture, which is literally legalized highway robbery. Crypto has similar properties to cash, while not being as susceptible to physical theft. - Inflation is controlled by algorithm, not arbitrary policy. (Depending on your economic views, you may think this is a fault. I don't, but that's me. At the very least, it enables us to see what will happen to such a currency.) - You can remit small amounts of money instantly at low-to-no cost. This will be huge for the developing world. (Scaling is not solved, but I also don't think that bringing it up is an interesting counterargument. Computer scientists have been scaling systems for the last 60 years. We're pretty good at it, and it's happening now with the Lightning network. There is no conceptual blocker to scaling cryptocurrency. The hard problem was digital scarcity, which has been solved, which is why crypto is now a thing at all.) - Many people in many parts of the world do not have the ability to interact with traditional finance. They do not have the means to open bank accounts or connect to the global economy. They cannot invest, they cannot lend, earn interest, etc. If they have cash, it is in the form of money under their mattress or in their pocket. They are left out. Many of these parts of the world leapfrogged PCs entirely, and went straight to smartphones. They will make a similar leapfrog in finance, bypassing traditional banks entirely. Before Wells Fargo opens in sudan, providing farmers with loans and a way to save, they will have it on their phones in the form of crypto wallets. This will unleash unprecedented economic velocity, helping to raise the half of the world that is left out into a higher quality of life. - Low-to-no inflation saves common people from the hidden tax. A system designed by bankers for their own profit. The Federal Reserve is literally a feedback system that makes banks richer and average people poorer, like inflating air into a balloon and watching points on the top and bottom separate. I think, actually, that the whole balloon is rising, so it could be worse. Generally, quality of life has gotten better everywhere over time. But the people on the bottom still lack power and equality in a large part due to the distance between them and the richest increasing over time, caused by this mechanism. There are many things that crypto solves.
badge 8y ago
Why bother using Bitcoin's blockchain when banks could easily implement their own version of a DLT. It's basic accounting with computer software. https://en.wikipedia.org/wiki/Double-entry_bookkeeping_system https://en.wikipedia.org/wiki/Double-entry_bookkeeping_syste... Satoshi's PoW is unsustainable and designed to waste insane amounts of energy making it unreliable in long term markets.
PeterisP 8y ago
For the needs you describe (ledger of inter-bank transfers) we already have established solutions (all the large RTGS, real time gross settlement systems around the world) and it's not clear what advantages, if any, Bitcoin has over them. Cryptocurrencies have certain advantages in certain (niche?) use cases of end-users; however, if anyone is building a Visa-like product on top of something, it won't be any advantage for your users if it's on top of Bitcoin and you might as well go with the other RTGS systems that (among other things) make you less exposed to various risks.

TheSoftwareGuy 8y ago

But don't you lose the whole decentralized thing at that point?

sparkie 8y ago
The decentralization is that anyone can participate, and anyone can be the bank. There is no authority and you do not need to ask permission. You do not require any large investment because the resources require to run the node are minimal, and you can even do it with some level of anonymity through the Tor network.

bobthepanda 8y ago

That destroys the point of the whole "decentralized systems" thing. Crypto has always kind of looked like a solution in search of a problem, IMO. What is it solving that isn't some sort of political science question?

sparkie 8y ago
It's solving the problem that currency, up until now, has never had a finite supply, and that even currencies with limited supply could be forged, seized or inflated until they became worthless. Bitcoin is the first money ever, which nobody can create beyond the very predictable initial distribution programmed into the system. Gresham's law roughly states that when two kinds of money exist, people will stash the good money, and will trade with the bad money until it becomes useless. It's been proven time over throughout history. You only need to look at the gold rush that happened during the last financial crisis. Given that Bitcoin is the best money that has ever existed, then anyone who is paying attention is stashing it while they're trading with anything else. The next recession won't be a rush for gold.
- pjc50 8y ago
  This isn't even true for bitcoin; anyone can fork it, there has been at least one fork already, and the miners can easily decide to hardfork across to keep the block rewards going when they run out. It doesn't help that the miners are increasingly cartelised.
  - beaner 8y ago
    Hard forking Bitcoin doesn't increase Bitcoin's supply.
  - sparkie 8y ago
    If miners attempted to hard-fork in inflation, do you think users would follow their chain? It was already attempted on the first halving from 50BTC to 25BTC. Guess which one won? Miners don't make the rules. They enforce them. The network of economic users decide the rules that they are willing to validate in their software client.
    - bduerst 8y ago
      This fact makes bitcoin even more dangerous. Miners are only going to fork the network in a direction that benefits them, sometimes at the expense of everyone else and the network. This is called tragedy of the commons, and the block-size debacle is an example of that.
      - sparkie 8y ago
        The only direction that benefits miners is the direction where they have the maximum potential for profit by selling the coins they earn through transaction fees. This will inevitably be the network which most people are transacting on. The actual incentives are a bit skewed currently because transaction fees are dwarfed by the block subsidy.
        bduerst 8y ago
        Riiiight, and fisherman only fish the species that are most prevalent in the sea. You don't know how tragedy of the commons works, do you?
beaner 8y ago
> That destroys the point of the whole "decentralized systems" thing. Why? > What is it solving that isn't some sort of political science question? - Why can't you send money between PayPal and Venmo, even though they're products owned by the same company? It's because existing money is a system that you are permitted to use, under specific restrictions applied by government. Cryptocurrencies are open protocols. One thing they solve is getting around these restrictions. One day, all of our payment apps will be interoperable, and they will be enabled by crypto. - You do not have to worry about your money being stolen by means like Civil Asset Forfeiture, which is literally legalized highway robbery. Crypto has similar properties to cash, while not being as susceptible to physical theft. - Inflation is controlled by algorithm, not arbitrary policy. (Depending on your economic views, you may think this is a fault. I don't, but that's me. At the very least, it enables us to see what will happen to such a currency.) - You can remit small amounts of money instantly at low-to-no cost. This will be huge for the developing world. (Scaling is not solved, but I also don't think that bringing it up is an interesting counterargument. Computer scientists have been scaling systems for the last 60 years. We're pretty good at it, and it's happening now with the Lightning network. There is no conceptual blocker to scaling cryptocurrency. The hard problem was digital scarcity, which has been solved, which is why crypto is now a thing at all.) - Many people in many parts of the world do not have the ability to interact with traditional finance. They do not have the means to open bank accounts or connect to the global economy. They cannot invest, they cannot lend, earn interest, etc. If they have cash, it is in the form of money under their mattress or in their pocket. They are left out. Many of these parts of the world leapfrogged PCs entirely, and went straight to smartphones. They will make a similar leapfrog in finance, bypassing traditional banks entirely. Before Wells Fargo opens in sudan, providing farmers with loans and a way to save, they will have it on their phones in the form of crypto wallets. This will unleash unprecedented economic velocity, helping to raise the half of the world that is left out into a higher quality of life. - Low-to-no inflation saves common people from the hidden tax. A system designed by bankers for their own profit. The Federal Reserve is literally a feedback system that makes banks richer and average people poorer, like inflating air into a balloon and watching points on the top and bottom separate. I think, actually, that the whole balloon is rising, so it could be worse. Generally, quality of life has gotten better everywhere over time. But the people on the bottom still lack power and equality in a large part due to the distance between them and the richest increasing over time, caused by this mechanism. There are many things that crypto solves.

badge 8y ago

Why bother using Bitcoin's blockchain when banks could easily implement their own version of a DLT. It's basic accounting with computer software. https://en.wikipedia.org/wiki/Double-entry_bookkeeping_system https://en.wikipedia.org/wiki/Double-entry_bookkeeping_syste... Satoshi's PoW is unsustainable and designed to waste insane amounts of energy making it unreliable in long term markets.

PeterisP 8y ago

For the needs you describe (ledger of inter-bank transfers) we already have established solutions (all the large RTGS, real time gross settlement systems around the world) and it's not clear what advantages, if any, Bitcoin has over them. Cryptocurrencies have certain advantages in certain (niche?) use cases of end-users; however, if anyone is building a Visa-like product on top of something, it won't be any advantage for your users if it's on top of Bitcoin and you might as well go with the other RTGS systems that (among other things) make you less exposed to various risks.