17 ms·

Flaws in Bitcoin make a lasting revival unlikely

138 points by cromulent 8y ago

ziddoap 8y ago
Although I agree with some of this article, I find the closing paragraphs frustrating. How can they go from "Twitter's boss [...], Facebook is working on some kind of crypto [...]. Market analysts and pundits provide cheery reassurance [...]" and then close with "This one guy is sceptical" and present the two sides as completely equal? One side has, in their own words, market analysts (plural), among the top tech companies... The other side is a single computer scientist (read: non-market analyst), yet both sides have equal weight? Or, more accurately, they weigh the opinion of the single computer scientist over the above mentioned?
- freyir 8y ago
  The one guy has public perception on his side: Bitcoin has been talked about to death, but besides a few booms and busts fueled by speculators wanting to get rich quick, it feels like a failure to launch. The onus is increasingly on the Bitcoin proponents to step up and deliver real value.
  - andirk 8y ago
    I can donate to wikileaks when visa and the other credit issuers blocked them. Bitcoin isnt popular as a day to day currency but neither is gold or hairballs. But yes I agree it's time proponents to push it into mainstream.
- MusaTheRedGuard 8y ago
  At this point, I find it hard to take mainstream journalist's criticism of bitcoin seriously unless the criticizers agree on what they're criticizing. Bitcoin isn't exchanges or "crypto" or "blockchain" or ICOs or tokens.
- tptacek 8y ago
  It's not at all as if Nick Weaver is the only computer scientist skeptical about Bitcoin. Would you have felt better if they quoted several more?
  - ziddoap 8y ago
    Yes, thats the point I'm trying to make. I don't think he's the only one, obviously. But the way the wrote the article and presented it makes it seem like 1 computer scientists opinion = numerous market analysts and companies. It's unbalanced. Not to mention, why does a computer scientist have significantly more weight than market analysts, when talking about market prices and predictions. Perhaps Weaver is uniquely qualified for predicting markets in regards to Bitcoin. If so, great. Tell the reader why I should weigh his opinion more heavily than Facebook, Twitter, and (again in their words) several market analysts.
    - deleted 8y ago
      [deleted]
xiphias2 8y ago
,,The bust has been correspondingly brutal'' I don't recall having a brutal bust. 80-85% is the historical average of previous busts, but I'm not sure if statistics is needed for an economist journalist (it should be). It's too bad that I'm paying for the magazine because I haven't found anything better.
- chris_mc 8y ago
  You are saying an 80-85% loss isn't brutal? Man, bitcoin people are way tougher than I am, because losing that much value in my investments would make me want to die. I only lost like 15-20% during the 2008 crash and recovered that and way more over the last 11 years. edit: this is good for bitcoin, apparently.
  - mayamatrix 8y ago
    If you'd been in Bitcoin over the past 10 years you would have witnessed at least five 85%+ drops and still be up over 300,000%.
    - the_gastropod 8y ago
      Yea! And if you'd invented Facebook 13 years ago, you'd be worth BILLIONS! What's your point? That 85%+ drops in value are a reasonable thing for a currency? That a 300,000% increase over 10 years is a reasonable return? These are two sides of the same coin telling the glaringly obvious tale that: Bitcoin is an absolutely awful store of value.
      - not-satoshe 8y ago
        I expect adoption in waves, not linearly.
      - not-satoshe 8y ago
        +200% APY is an excellent store of value.
kristianp 8y ago
Paywalled.
- ignaloidas 8y ago
  Firefox containers go around that nicely, as Economist offers several free articles per month
neonate 8y ago
https://outline.com/AV35DA https://outline.com/AV35DA
tptacek 8y ago
Am I reading this right: Chainalysis reckons that Bitcoin accounted for around $812bn of genuine transfers of value. Of that, Ms Grauer reckons, only a fraction was used to buy things. Around $2.4bn went to merchant-service providers, which handle payments for businesses—a piffling sum compared with the $17trn of transactions such as Alipay and WeChat Pay, two Chinese payment apps, in 2017. Darknet markets, which sell stolen credit-card details, recreational drugs, cheap medicines and the like, made up $605m, and gambling sites $857m. Most of the rest was related to speculation. Is this saying that less than 1% of all "genuine transfers of value" in Bitcoin are for goods and services other than speculation?
- duiker101 8y ago
  Honestly, I wouldn't be surprised if it was even lower. With the exception of "stunt purchases" I very rarely see any real use of any sort of cryptocurrency.
  - jandrese 8y ago
    The Silk Road drove a fair bit of actual commerce (illegal though it may be) until it was shut down, judging from the amount of money Ross Ulbricht apparently made off of the transaction fees.
- xorcist 8y ago
  No, it does not. It says that less than half a percent went to well known merchant service providers. The rest did not. The statement that the rest is speculation is, in itself, pure speculation. We don't know how to separate speculation from non-speculation. One could easily argue that the payments to merchants is no less speculative than payments to exchanges (what does it matter if you sell your Bitcoin for a carpet or for dollars?). There's also the fact that most speculation probably never sees the blockchain. They are simply contracts somewhere or entries in Coinbase's database.
  - tptacek 8y ago
    Sorry, I didn't ask whether you liked what they were saying; I asked whether I was reading correctly that that was what they were saying.
Zak 8y ago
> The final problem is fraud. Transactions are irreversible NAPWAD. Fraudulent transaction reversal is a problem for other payment platforms, which has kept someone I know from using Paypal to accept tips for open source projects. That means Bitcoin may not be ideal for certain transactions, or that escrow services should be used.
- shobith 8y ago
  For the purposes of fraud prevention, payment processors can be viewed as an escrow service (along with other things, of course). This can still be programmed on top of bitcoin, someone like amazon/eBay can build this escrow system and charge a fee.
  - Zak 8y ago
    Several people have built escrow systems for Bitcoin. Whether you trust those people is another matter.
    - Macross8299 8y ago
      Using escrow systems also detracts from a core appeal of Bitcoin and other cryptocurrencies - being able to exchange money online with little trust in a third party intermediary. There are still the monetary policy trust issues that Bitcoin resolves (not having to trust a central bank) if you are particularly libertarian or whatever, but I don't think that's really a driving cause for any sort of adoption in any other countries other than Venezuela and maybe Cyprus 5 years ago?
      - aeternus 8y ago
        The Bitcoin script language allows you to create escrow systems without any trust in a third party intermediary. A working example of this is the lightning protocol which is implemented on top of Bitcoin script. It uses time-based escrow written in Bitcoin script to eliminate the need for trust or third party intermediaries. This is an important benefit that isn't very well known.
raverbashing 8y ago
Bitcoin was the victim of a group of technically centered people whose knowledge about economy was summed up as "big banks bad". But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs, about the issues related to a limited monetary base and the deflationary effects of it.
- Obi_Juan_Kenobi 8y ago
  > But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs Go to any of the dev listservs and you'll see that's basically all anyone has talked about for the past decade. The lack of progress (in implementation, not ideas) in this arena forced the wholesale split of the community.
  - not-satoshe 8y ago
    The original Bitcoin as electronic cash is now Bitcoin Cash. www.bitcoin.com/bitcoin.pdf
- HashThis 8y ago
  Bitcoin is crawl. Next comes walking. Then running. Dial-up modems weren't created to be the final goal of the internet. They were designed to start traveling that road toward fiber, etc. Same with crypto getting the simplest to get started. TCP/IP was created. It took 12 more years until HTTP. It is okay to get started simply.
  - raverbashing 8y ago
    Ah yes, this makes sense
xorcist 8y ago
Bitcoin obituaries aren't what they used to be.
- SilasX 8y ago
  For anyone who doesn't get the reference, people keep declaring bitcoin dead: https://99bitcoins.com/bitcoin-obituaries/ https://99bitcoins.com/bitcoin-obituaries/
  - Macross8299 8y ago
    Being the author of one of those super early articles (< 2012) really must sting, even if all your points were technically accurate and even if Bitcoin does completely fail one day.
apo 8y ago
Looks like the flaws are: 1. "overstatement of activity" 2. 7 transactions/second 3. constrained currency supply (21 M) 4. fraud in exchanges Odd that only one of these points (2, scaling) relates to Bitcoin the protocol itself. And that scaling issue has raged from Bitcoin's first public disclosure. This clock has been stuck at noon forever. The remaining three points have little to do with Bitcoin the technology and more to do with how Bitcoin is being used. All can be viewed as either a feature or bug, depending on your worldview. Consider the counterpoints: - Nobody knows exactly how often Bitcoin is used for payments or what it's used to buy. As such, its users can enjoy much more privacy than they can with other payment methods. - Constrained supply means protection against inflationist central banks. - A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best. The article does to mention Lightning Network, but doesn't give enough context to make anything of. It's operational now and there's been a flurry of development activity in the last year. LN has the potential to: - increase transaction throughput well beyond 7 transactions/second - increase user privacy - increase usability I don't expect journalists reporting on Bitcoin to go very deep. But it would be nice if they changed the playbook every once in awhile.
- not-satoshi 8y ago
  The root problem with Lightning Network is that it is not settlement. Money must be settled to be useful. Worst case, a client or protocol flaw is found, and everyone in the world is expected to close their channels (settle) at 7 transactions per second? Please. Bitcoin Cash is the large block scaling we've needed all along.
  - dane-pgp 8y ago
    Not only is the worst case a disaster, but even the best case is: Imagine the usability of trying to onboard another 7 billion Lightning Network users at 7 transactions per second.
    - stdcli 8y ago
      Compared to what kind of payment onboarding system? Outside of free cash, anything related to setting up a bank account, or a credit card can take up to 7-10 business days if not more, post an application to do so. Do you know of any onboarding system of payment that is faster? It seems like this is just a random statement by itself that is not in the context of all the other onboarding mechanisms of every payment system currently used. Care to calibrate Lightening onboarding with any other mass payment system? Even if you use square, paypal, venmo etc, they need to be linked to real checking accounts, credit card, other verified (with long onbaording) payment systems etc. Furthermore, 2-3% of all transactions on many of these systems are fraudulent, but the payment systems ACCEPT This as an acceptable level of fraud and cover the expenses, in order for faster transactions. Square knows for example it won't be used in coffee shops over another competitor if Square on average takes 20 seconds longer to process metadata in conjunction with the transaction itself to see if its an attempt/fraudulent charge, so they consciously cut corners here and accept this liability so we can all get coffee 8x a day. This is why bitcoin has industry standard confirmation blocks so the network can address and blacklist attempts at doubles spends and keep a master chain. This is basic blockchain 101 compared to standard knowledge of onboarding to every en masse payment system we all anecdotally have experience with layered digital transaction technology and the losses associated with that. The lightening network is as mentioned above with links, rapidly evolving to expediate this while still maintaining the underlying benefits of transaction consensus that avoids fraud. You may deal with fraudulent exchanges as you will do with fraud around any new technology (heard of the internet before? there were lots of sites for fraud, and much worse when it came out, and still are, we just all get smarter about what we click, and hopefully in this case, who we throw our money at, which you should be doing anyways for any new technology...) but the fraud here is associated with like top ranked comment said, not the protocol but the flurry of business activity around it, and is really null and void to the technical conversation itself, which is really what evolves communities like this past these handwavy statements... I really don't mind constructive criticism of blockchain based technologies, but the issue is the conversation rarely evolved because of cargo culting statements like this that ignorethe very benefits of moving to a blockchain based payment system.
Tsubasachan 8y ago
Revival? Even at the height of the bubble nobody actually used it in real world transactions. Meanwhile the evil banks are bringing us ever closer to the cashless society of instant electronic payments we all dreamed of.
- zanny 8y ago
  Instant electronic payments with upwards of 5% transaction fees for technology that costs them what rounds to nothing. I feel like at least the payment processing part of finance today is something ripe to be nationalized if you had a democratic representative government you would trust to do so. It feels exactly like infrastructure, the same way fiber to the home should be a public works project, but instead its possessed by global corporations using rent seeking and crowding out effects to make gross amounts of money off of it.
mcnichol 8y ago
Every time I read something about Bitcoin dying I cringe. It's another article written for the attention seeking readership. Bitcoin (and many blockchain based coins) spiked astronomically. They all came back down as well but still unbelievably higher than where they were after the Mt.Gox crash. 20k wasn't even realistic due to the fee's being insane. The entire system is a system with sliding levers on consistency and forced supply and demand. If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that. This system is like water with all of the cracks able to be found for optimal strategies. There is so much to unpack in this it needs an article which has been written a thousand times but when you pick apart FedNet, ACH, and all of the systems amidst that, you just have something that you've grown up and obliviously trust. Bitcoin networks provide you visibility into all of it....none of this is pretty, but it's a lot more obvious from Point A -> Point B.
- aeternus 8y ago
  >If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that. There's really no way to prevent ASICs. With any function you pick, it will always be possible to create a custom hardware + memory design that beats a general-purpose CPU/GPU.
  - latchkey 8y ago
    This is the big ProgPoW debate currently being waged over in Ethereum land. You are right, it isn't possible to prevent ASICs, in fact everything is technically an ASIC. So, with that in mind, the goal of ProgPoW is an attack on the economic incentive to build an ASIC, not an attack on the ability to build one. In other words, make purchasing a commodity GPU as inexpensive as a custom ASIC. If that is the case, there won't be an incentive to build ASICs. ProgPoW also has a second line of defense where a hard fork with a minimal set of changes, can brick existing ASICs.
    - trevelyan 8y ago
DINKDINK 8y ago
Same story, different halvening: "A digital commodity which is the only kind in the world whose supply function is solely governed by time had an extreme absence of ask liquidity and unrelenting demand which caused prices to increase ~15X relative to the previous supply era. Here, let us compare the third layer of the existing financial system to the first layer of a decentralized one. Maybe a corporation or other top-down institution will make something more game stable than a bottom-up group of independent agents? People were willing to pay for the service miners were providing. Let's compare P.999 to P.001 of a metric" I look forward to the 2022-2023 version of this article The minimum capital flows between supply-era one and two increased 30X, between supply-era two and three (thus far) it's increased 8X. For every global dollar of speculation, about 0.1-0.3% is flowing into bitcoin. The market's expectations of returns:probability (Kelly Criterion) right now are: 99.786% on 13% YoY returns on SPY, ~7% on 15X return on bitcoin over the next halvening.
Mengkudulangsat 8y ago
Wait a minute, cheap medicine through the dark web?! Won't that be a killer app for the desperate?
otabdeveloper1 8y ago
"Revival"? Is there something to revive?
ohhhhhs 8y ago
Current bitcoin supply is 1800 per day. @ $4k each, you need $7.2 million net inflow per day to maintain current prices. This needs to continue until May 2020 when additional supply drops to 900 per day. This is only about 3 billion USD inflows required to maintain the market until the halvening, and then supply really drops hard. Uber is looking to list with a market cap of $120 billion. Australia has $2+ trillion in pension funds alone. Vanguard has 5.3 trillion. $3 billion inflows to get to the halvening should be pretty easy. Return of Goxcoins will have some effect, but any hype at all will send bitcoin on a crazy moon mission again.
ajcodez 8y ago
Flaws in USD make a lasting outcome unlikely.
imtringued 8y ago
Right now bitcoin is something you buy once and forget about. It's not used like a currency at all. Years later maybe you're lucky and it went up enough to offset the -85% crashes which you "survived" because you forgot you had those bitcoin.
- zanny 8y ago
  The thing is this is largely by design. You don't make an absolutely finite, reducing supply commodity and expect it to do than anything than turn into a valuable and rare token. If you wanted a cryptocurrency to actually see use as a currency it would have to adopt a monetary policy analogous to at least what the naive version of how most western fiat policy behaves - you have monetary velocity / inflation / at rest targets and adjust supply to push the market in the direction you want it in. Whats interesting is that in the general case this is perfectly valid to codify, depending on how far between commodity and currency you want to take your coin. More aggressive inflation algorithms would pressure users to spend it whereas less aggressive ones would cause deflation and hoarding. Of course such a cryptocurrency is untenable because it isn't a valid pyramid scheme to attract early adopters with. If you build it to just be the ultimate currency it isn't going to see mass market appeal because its not a get rich quick scheme like every other crypto has attempted besides maybe namecoin.

138 points by cromulent 8y ago

Although I agree with some of this article, I find the closing paragraphs frustrating. How can they go from "Twitter's boss [...], Facebook is working on some kind of crypto [...]. Market analysts and pundits provide cheery reassurance [...]" and then close with "This one guy is sceptical" and present the two sides as completely equal? One side has, in their own words, market analysts (plural), among the top tech companies... The other side is a single computer scientist (read: non-market analyst), yet both sides have equal weight? Or, more accurately, they weigh the opinion of the single computer scientist over the above mentioned?

freyir 8y ago
The one guy has public perception on his side: Bitcoin has been talked about to death, but besides a few booms and busts fueled by speculators wanting to get rich quick, it feels like a failure to launch. The onus is increasingly on the Bitcoin proponents to step up and deliver real value.
- andirk 8y ago
  I can donate to wikileaks when visa and the other credit issuers blocked them. Bitcoin isnt popular as a day to day currency but neither is gold or hairballs. But yes I agree it's time proponents to push it into mainstream.
MusaTheRedGuard 8y ago
At this point, I find it hard to take mainstream journalist's criticism of bitcoin seriously unless the criticizers agree on what they're criticizing. Bitcoin isn't exchanges or "crypto" or "blockchain" or ICOs or tokens.
tptacek 8y ago
It's not at all as if Nick Weaver is the only computer scientist skeptical about Bitcoin. Would you have felt better if they quoted several more?
- ziddoap 8y ago
  Yes, thats the point I'm trying to make. I don't think he's the only one, obviously. But the way the wrote the article and presented it makes it seem like 1 computer scientists opinion = numerous market analysts and companies. It's unbalanced. Not to mention, why does a computer scientist have significantly more weight than market analysts, when talking about market prices and predictions. Perhaps Weaver is uniquely qualified for predicting markets in regards to Bitcoin. If so, great. Tell the reader why I should weigh his opinion more heavily than Facebook, Twitter, and (again in their words) several market analysts.
  - deleted 8y ago
    [deleted]

xiphias2 8y ago

,,The bust has been correspondingly brutal'' I don't recall having a brutal bust. 80-85% is the historical average of previous busts, but I'm not sure if statistics is needed for an economist journalist (it should be). It's too bad that I'm paying for the magazine because I haven't found anything better.

chris_mc 8y ago
You are saying an 80-85% loss isn't brutal? Man, bitcoin people are way tougher than I am, because losing that much value in my investments would make me want to die. I only lost like 15-20% during the 2008 crash and recovered that and way more over the last 11 years. edit: this is good for bitcoin, apparently.
- mayamatrix 8y ago
  If you'd been in Bitcoin over the past 10 years you would have witnessed at least five 85%+ drops and still be up over 300,000%.
  - the_gastropod 8y ago
    Yea! And if you'd invented Facebook 13 years ago, you'd be worth BILLIONS! What's your point? That 85%+ drops in value are a reasonable thing for a currency? That a 300,000% increase over 10 years is a reasonable return? These are two sides of the same coin telling the glaringly obvious tale that: Bitcoin is an absolutely awful store of value.
    - not-satoshe 8y ago
      I expect adoption in waves, not linearly.
    - not-satoshe 8y ago
      +200% APY is an excellent store of value.

kristianp 8y ago

Paywalled.

ignaloidas 8y ago
Firefox containers go around that nicely, as Economist offers several free articles per month

neonate 8y ago

https://outline.com/AV35DA https://outline.com/AV35DA

tptacek 8y ago

Am I reading this right: Chainalysis reckons that Bitcoin accounted for around $812bn of genuine transfers of value. Of that, Ms Grauer reckons, only a fraction was used to buy things. Around $2.4bn went to merchant-service providers, which handle payments for businesses—a piffling sum compared with the $17trn of transactions such as Alipay and WeChat Pay, two Chinese payment apps, in 2017. Darknet markets, which sell stolen credit-card details, recreational drugs, cheap medicines and the like, made up $605m, and gambling sites $857m. Most of the rest was related to speculation. Is this saying that less than 1% of all "genuine transfers of value" in Bitcoin are for goods and services other than speculation?

duiker101 8y ago
Honestly, I wouldn't be surprised if it was even lower. With the exception of "stunt purchases" I very rarely see any real use of any sort of cryptocurrency.
- jandrese 8y ago
  The Silk Road drove a fair bit of actual commerce (illegal though it may be) until it was shut down, judging from the amount of money Ross Ulbricht apparently made off of the transaction fees.
xorcist 8y ago
No, it does not. It says that less than half a percent went to well known merchant service providers. The rest did not. The statement that the rest is speculation is, in itself, pure speculation. We don't know how to separate speculation from non-speculation. One could easily argue that the payments to merchants is no less speculative than payments to exchanges (what does it matter if you sell your Bitcoin for a carpet or for dollars?). There's also the fact that most speculation probably never sees the blockchain. They are simply contracts somewhere or entries in Coinbase's database.
- tptacek 8y ago
  Sorry, I didn't ask whether you liked what they were saying; I asked whether I was reading correctly that that was what they were saying.

Zak 8y ago

> The final problem is fraud. Transactions are irreversible NAPWAD. Fraudulent transaction reversal is a problem for other payment platforms, which has kept someone I know from using Paypal to accept tips for open source projects. That means Bitcoin may not be ideal for certain transactions, or that escrow services should be used.

shobith 8y ago
For the purposes of fraud prevention, payment processors can be viewed as an escrow service (along with other things, of course). This can still be programmed on top of bitcoin, someone like amazon/eBay can build this escrow system and charge a fee.
- Zak 8y ago
  Several people have built escrow systems for Bitcoin. Whether you trust those people is another matter.
  - Macross8299 8y ago
    Using escrow systems also detracts from a core appeal of Bitcoin and other cryptocurrencies - being able to exchange money online with little trust in a third party intermediary. There are still the monetary policy trust issues that Bitcoin resolves (not having to trust a central bank) if you are particularly libertarian or whatever, but I don't think that's really a driving cause for any sort of adoption in any other countries other than Venezuela and maybe Cyprus 5 years ago?
    - aeternus 8y ago
      The Bitcoin script language allows you to create escrow systems without any trust in a third party intermediary. A working example of this is the lightning protocol which is implemented on top of Bitcoin script. It uses time-based escrow written in Bitcoin script to eliminate the need for trust or third party intermediaries. This is an important benefit that isn't very well known.

raverbashing 8y ago

Bitcoin was the victim of a group of technically centered people whose knowledge about economy was summed up as "big banks bad". But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs, about the issues related to a limited monetary base and the deflationary effects of it.

Obi_Juan_Kenobi 8y ago
> But they didn't worry about liquidity, about speed of transactions, about the energy/processing costs Go to any of the dev listservs and you'll see that's basically all anyone has talked about for the past decade. The lack of progress (in implementation, not ideas) in this arena forced the wholesale split of the community.
- not-satoshe 8y ago
  The original Bitcoin as electronic cash is now Bitcoin Cash. www.bitcoin.com/bitcoin.pdf
HashThis 8y ago
Bitcoin is crawl. Next comes walking. Then running. Dial-up modems weren't created to be the final goal of the internet. They were designed to start traveling that road toward fiber, etc. Same with crypto getting the simplest to get started. TCP/IP was created. It took 12 more years until HTTP. It is okay to get started simply.
- raverbashing 8y ago
  Ah yes, this makes sense

xorcist 8y ago

Bitcoin obituaries aren't what they used to be.

SilasX 8y ago
For anyone who doesn't get the reference, people keep declaring bitcoin dead: https://99bitcoins.com/bitcoin-obituaries/ https://99bitcoins.com/bitcoin-obituaries/
- Macross8299 8y ago
  Being the author of one of those super early articles (< 2012) really must sting, even if all your points were technically accurate and even if Bitcoin does completely fail one day.

apo 8y ago

Looks like the flaws are: 1. "overstatement of activity" 2. 7 transactions/second 3. constrained currency supply (21 M) 4. fraud in exchanges Odd that only one of these points (2, scaling) relates to Bitcoin the protocol itself. And that scaling issue has raged from Bitcoin's first public disclosure. This clock has been stuck at noon forever. The remaining three points have little to do with Bitcoin the technology and more to do with how Bitcoin is being used. All can be viewed as either a feature or bug, depending on your worldview. Consider the counterpoints: - Nobody knows exactly how often Bitcoin is used for payments or what it's used to buy. As such, its users can enjoy much more privacy than they can with other payment methods. - Constrained supply means protection against inflationist central banks. - A currency that isn't used to commit fraud isn't very useful. Therefore, to say that Bitcoin has failed because of fraud is dishonest at best. The article does to mention Lightning Network, but doesn't give enough context to make anything of. It's operational now and there's been a flurry of development activity in the last year. LN has the potential to: - increase transaction throughput well beyond 7 transactions/second - increase user privacy - increase usability I don't expect journalists reporting on Bitcoin to go very deep. But it would be nice if they changed the playbook every once in awhile.

not-satoshi 8y ago
The root problem with Lightning Network is that it is not settlement. Money must be settled to be useful. Worst case, a client or protocol flaw is found, and everyone in the world is expected to close their channels (settle) at 7 transactions per second? Please. Bitcoin Cash is the large block scaling we've needed all along.
- dane-pgp 8y ago
  Not only is the worst case a disaster, but even the best case is: Imagine the usability of trying to onboard another 7 billion Lightning Network users at 7 transactions per second.
  - stdcli 8y ago
    Compared to what kind of payment onboarding system? Outside of free cash, anything related to setting up a bank account, or a credit card can take up to 7-10 business days if not more, post an application to do so. Do you know of any onboarding system of payment that is faster? It seems like this is just a random statement by itself that is not in the context of all the other onboarding mechanisms of every payment system currently used. Care to calibrate Lightening onboarding with any other mass payment system? Even if you use square, paypal, venmo etc, they need to be linked to real checking accounts, credit card, other verified (with long onbaording) payment systems etc. Furthermore, 2-3% of all transactions on many of these systems are fraudulent, but the payment systems ACCEPT This as an acceptable level of fraud and cover the expenses, in order for faster transactions. Square knows for example it won't be used in coffee shops over another competitor if Square on average takes 20 seconds longer to process metadata in conjunction with the transaction itself to see if its an attempt/fraudulent charge, so they consciously cut corners here and accept this liability so we can all get coffee 8x a day. This is why bitcoin has industry standard confirmation blocks so the network can address and blacklist attempts at doubles spends and keep a master chain. This is basic blockchain 101 compared to standard knowledge of onboarding to every en masse payment system we all anecdotally have experience with layered digital transaction technology and the losses associated with that. The lightening network is as mentioned above with links, rapidly evolving to expediate this while still maintaining the underlying benefits of transaction consensus that avoids fraud. You may deal with fraudulent exchanges as you will do with fraud around any new technology (heard of the internet before? there were lots of sites for fraud, and much worse when it came out, and still are, we just all get smarter about what we click, and hopefully in this case, who we throw our money at, which you should be doing anyways for any new technology...) but the fraud here is associated with like top ranked comment said, not the protocol but the flurry of business activity around it, and is really null and void to the technical conversation itself, which is really what evolves communities like this past these handwavy statements... I really don't mind constructive criticism of blockchain based technologies, but the issue is the conversation rarely evolved because of cargo culting statements like this that ignorethe very benefits of moving to a blockchain based payment system.

Tsubasachan 8y ago

Revival? Even at the height of the bubble nobody actually used it in real world transactions. Meanwhile the evil banks are bringing us ever closer to the cashless society of instant electronic payments we all dreamed of.

zanny 8y ago
Instant electronic payments with upwards of 5% transaction fees for technology that costs them what rounds to nothing. I feel like at least the payment processing part of finance today is something ripe to be nationalized if you had a democratic representative government you would trust to do so. It feels exactly like infrastructure, the same way fiber to the home should be a public works project, but instead its possessed by global corporations using rent seeking and crowding out effects to make gross amounts of money off of it.

mcnichol 8y ago

Every time I read something about Bitcoin dying I cringe. It's another article written for the attention seeking readership. Bitcoin (and many blockchain based coins) spiked astronomically. They all came back down as well but still unbelievably higher than where they were after the Mt.Gox crash. 20k wasn't even realistic due to the fee's being insane. The entire system is a system with sliding levers on consistency and forced supply and demand. If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that. This system is like water with all of the cracks able to be found for optimal strategies. There is so much to unpack in this it needs an article which has been written a thousand times but when you pick apart FedNet, ACH, and all of the systems amidst that, you just have something that you've grown up and obliviously trust. Bitcoin networks provide you visibility into all of it....none of this is pretty, but it's a lot more obvious from Point A -> Point B.

aeternus 8y ago
>If you want to argue about a flaw, ASIC's were the mistake. CPU hashing would have eliminated the centralization risks, GPU's could have been expected and ultimately ASIC's after that. There's really no way to prevent ASICs. With any function you pick, it will always be possible to create a custom hardware + memory design that beats a general-purpose CPU/GPU.
- latchkey 8y ago
  This is the big ProgPoW debate currently being waged over in Ethereum land. You are right, it isn't possible to prevent ASICs, in fact everything is technically an ASIC. So, with that in mind, the goal of ProgPoW is an attack on the economic incentive to build an ASIC, not an attack on the ability to build one. In other words, make purchasing a commodity GPU as inexpensive as a custom ASIC. If that is the case, there won't be an incentive to build ASICs. ProgPoW also has a second line of defense where a hard fork with a minimal set of changes, can brick existing ASICs.
  - trevelyan 8y ago

DINKDINK 8y ago

Same story, different halvening: "A digital commodity which is the only kind in the world whose supply function is solely governed by time had an extreme absence of ask liquidity and unrelenting demand which caused prices to increase ~15X relative to the previous supply era. Here, let us compare the third layer of the existing financial system to the first layer of a decentralized one. Maybe a corporation or other top-down institution will make something more game stable than a bottom-up group of independent agents? People were willing to pay for the service miners were providing. Let's compare P.999 to P.001 of a metric" I look forward to the 2022-2023 version of this article The minimum capital flows between supply-era one and two increased 30X, between supply-era two and three (thus far) it's increased 8X. For every global dollar of speculation, about 0.1-0.3% is flowing into bitcoin. The market's expectations of returns:probability (Kelly Criterion) right now are: 99.786% on 13% YoY returns on SPY, ~7% on 15X return on bitcoin over the next halvening.

Mengkudulangsat 8y ago

Wait a minute, cheap medicine through the dark web?! Won't that be a killer app for the desperate?

otabdeveloper1 8y ago

"Revival"? Is there something to revive?

ohhhhhs 8y ago

Current bitcoin supply is 1800 per day. @ $4k each, you need $7.2 million net inflow per day to maintain current prices. This needs to continue until May 2020 when additional supply drops to 900 per day. This is only about 3 billion USD inflows required to maintain the market until the halvening, and then supply really drops hard. Uber is looking to list with a market cap of $120 billion. Australia has $2+ trillion in pension funds alone. Vanguard has 5.3 trillion. $3 billion inflows to get to the halvening should be pretty easy. Return of Goxcoins will have some effect, but any hype at all will send bitcoin on a crazy moon mission again.

ajcodez 8y ago

Flaws in USD make a lasting outcome unlikely.

imtringued 8y ago

Right now bitcoin is something you buy once and forget about. It's not used like a currency at all. Years later maybe you're lucky and it went up enough to offset the -85% crashes which you "survived" because you forgot you had those bitcoin.

zanny 8y ago
The thing is this is largely by design. You don't make an absolutely finite, reducing supply commodity and expect it to do than anything than turn into a valuable and rare token. If you wanted a cryptocurrency to actually see use as a currency it would have to adopt a monetary policy analogous to at least what the naive version of how most western fiat policy behaves - you have monetary velocity / inflation / at rest targets and adjust supply to push the market in the direction you want it in. Whats interesting is that in the general case this is perfectly valid to codify, depending on how far between commodity and currency you want to take your coin. More aggressive inflation algorithms would pressure users to spend it whereas less aggressive ones would cause deflation and hoarding. Of course such a cryptocurrency is untenable because it isn't a valid pyramid scheme to attract early adopters with. If you build it to just be the ultimate currency it isn't going to see mass market appeal because its not a get rich quick scheme like every other crypto has attempted besides maybe namecoin.