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The current design of Bitcoin is obviously not correct for the long term, and I am sure it will be supplanted by more evolved crypto-currency systems. There is

The current design of Bitcoin is obviously not correct for the long term, and I am sure it will be supplanted by more evolved crypto-currency systems. There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model. Given the rewards that have already accrued to Bitcoin early adopters, I am surprised other competing cryptocurrency networks have not yet already been created. Lots of people who wish they had started mining coins back in the days before GPU mining would be eager to get in on the ground floor of an alternative. Most problems with the critiques of Bitcoin like those in the linked Quora post is that they are debunking a straw man - the idea that Bitcoin is intended as a universal replacement for all other currency systems. By those standards of course it will fail. Looked at in another way, think of Bitcoin as something more like MMORPG loot. If people are willing to spend vast amounts of "real money" on items for their WoW character, spending that money on Bitcoins instead makes it seem like a sane investment rather than just flushing it away. I've mentioned before that I think governmental action to criminalize Bitcoin and analogous technology is an even more serious threat to long-term value. If there is one thing that really might make the world's governments team up to completely ban strong encryption, it is a potential threat to governmental control over taxation and currencies.

jasonkolb 15y ago
Agree 100% with your last paragraph. The bank lobby, effectively an arm of the Federal Reserve system, is not going to stand by and watch any alternative currency gain traction. My guess is that they'll try to paint any legitimate alternative--Bitcoin or some successor--as a tool for terrorism and try to get it banished from the face of the earth that way.
coderrr 15y ago
I think the most interesting aspect of this whole thing is, like you mention, how new bitcoin-like currencies are perceived, valued, and participated in. Will everyone start jumping into new bitcoin-like currencies in hope of massive bitcoin-style investment gains? Will massive bitcoin miners attack new currencies networks with their computing power to protect their or others' investments in bitcoin? Will new bitcoin currencies be like social networks where only one dominates at a time for many years? What would happen if a new gold-like element was discovered? "Red Gold" that had almost all the attributes of gold but it had a somewhat redish color and was actually a different element and it was proven to be of about the same scarcity worldwide. Would that halve the price of gold and would everyone jump onto red gold immediately or would it be shunned as not the real thing and be mostly worthless? I'd be interested to know others' insights on this.
- mike_esspe 15y ago
  There is such "gold" - Ruthenium. It's not valued above industrial value.
- barrkel 15y ago
  "Red gold" would be exactly as valuable as gold is in the same way that gold is; that is, if everybody agreed that red gold was valuable, then it would be valuable. If they didn't, then it wouldn't. Scarcity doesn't give rise to value. You also need demand. In so far as red gold acted in the same way as gold for jewellery and industrial uses, it would probably decrease the value of gold to some proportion, and set a base level on this red gold production. But this is like asking why diamonds are valuable, or designer clothes, or expensive watches. In many cases, it's a combination of marketing, status display effects (ostentatious useless consumption), artificial restriction on supply, and market fixing (e.g. arranging to buy watches on secondary markets at headline prices for PR purposes). They too are confidence games, and if the confidence goes due to a bad association with the brand, the price will fall through the floor. All that is left is productive uses like industry.
  - shubble 15y ago
    I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years. The reason for the scarcity of gold, and it's value, is that this gold is not for sale. One gold owning organization could make a great deal in other currencies by attacking the gold market, much as quantum fund used it's sterling holdings to attack the British currency with great success. Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same. Am I missing something important here?
    - hugh3 15y ago
      I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults Quite possible. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years Say what? A few large organizations, who are not governments, hold the vast majority of the world's gold? Are we into conspiracy-theory talk here? Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same "Safe" depends on what you mean. For instance, you could say "US dollars have a 99% chance of retaining at least 80% of their value in five years, and a 99.9% chance of retaining at least 10% of their value in five years. Gold has only a 80% chance of retaining at least 80% of its value in five years, but a much higher 99.999% chance of retaining at least 10% of its value in five years". Gold gives you much more volatility in the short term, but acts as a hedge against the collapse of any particular currency. I wouldn't buy it though. I'd buy land (with houses on it), which acts as a hedge and pays you income.
jerf 15y ago
"There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model." Broadly speaking, the more desirable properties you try to obtain at once, the more you constrain the design, and it is absolutely possible to constrain the design to the point where there are zero solutions. Arrow's theorem shows an example of that in a voting context. You can not have all of the five desirable properties laid out in the theorem, and it isn't a matter of finding a clever algorithmic solution; they are actually contradictory. You have to loosen the requirements somehow. There is no guarantee that any given set of desirable properties has a solution. There is no guarantee that BitCoin is even close to having a solution, there's no guarantee that it is merely one requirement over the line, it may well contain multiple contradictions. There's no guarantee that there is anything more optimal than government fiat money. I'm in favor of experimentation to find out, in general. But it should be pointed out that there is not necessarily going to be a solution at all, and I certainly would say it's not going to be easy to just "take BitCoin and fix the problems" or any variant thereof. There is something stopping people from just "creating an alternative", it's going to be freaking hard, and again, I don't just mean hard in the way that creating an open source operating system from the efforts of thousands of not-centrally managed programmers is, I mean, potentially hard in the way that proving P != NP is, really, actually, hard. Starting from BitCoin isn't necessarily even starting from a useful base.
achompas 15y ago
Looked at in another way, think of Bitcoin as something more like MMORPG loot. If people are willing to spend vast amounts of "real money" on items for their WoW character, spending that money on Bitcoins instead makes it seem like a sane investment rather than just flushing it away. What is the intrinsic value of Bitcoins, then? That people are willing to spend money on Bitcoins? As an investment vehicle these are terrible. Commodities (diamonds, zinc, gold, wheat, oil, etc.) will always be demanded as factors of industrial production or farming. Equities generate real-world wealth for investors in the form of dividends. Both are demanded because they generate real value for investors. Bitcoins have no intrinsic value. If you're in to make a quick buck, that's fine--this is a big arbitrage opportunity. But for any decently-sized time T, Bitcoins --> $0 as t --> T.
- mcantelon 15y ago
  >Bitcoins have no intrinsic value. Part of the value is in their utility as an anonymous currency: try taxing the guy that's paid in Bitcoins. Another part is the integrity of the currency: the currency is backed by math, rather than men, and not subject to hyperinflation resulting from corruption (i.e. the US Fed can create money out of thin air, but there is no authority that can create Bitcoins out of thin air: they must be mined).
  - achompas 15y ago
    I didn't downvote you, (I don't think I'm allowed to!) but the "US Fed" (the Federal Reserve) does not simply add $X million to the money supply--it actually purchases Treasury bills on the open market. The net transaction is $0 (an exchange of currency for T-bills of equal value), but the market now contains more paper money. Meanwhile, I've already discussed Bitcoin's potential as an alternative currency (or lack thereof) in other comments. If people demand Bitcoins as a "tax haven" from the government, then Bitcoins aren't long for this world.
    - mcantelon 15y ago
      >The net transaction is $0 (an exchange of currency for T-bills of equal value), but the market now contains more paper money. Whatever the mechanism, fiat currencies are subject to inflation through the pressure of an ever-increasing money supply. >If people demand Bitcoins as a "tax haven" from the government, then Bitcoins aren't long for this world. It'll be interesting to see how the state tackles this. It'll be easy to drive it underground, but preventing its use will be another matter. Bitcoin transactions through a VPN seem hard to prevent.
cheez 15y ago
> There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model. Yes there is. The protocol is not documented at all. That's one of the reason I'm a little hesitant to touch it.
- espes 15y ago
  What? There are already multiple independent implementations...
  - cheez 15y ago
    There are, but they are derived from the official client if I understand correctly.
- weavejester 15y ago
  What's wrong with the protocol documentation on the wiki? https://en.bitcoin.it/wiki/Protocol_specification https://en.bitcoin.it/wiki/Protocol_specification
  - cheez 15y ago
    Try implementing that!
    - weavejester 15y ago
      Is there anything in the specification that's you think is ambiguous or hard to understand? There's also the source code to bitcoinj, which is a very well-commented implementation of the protocol.
      - cheez 15y ago
        Ok, my question was really as to how they even discover each other but some more perusing of that site shows that they connect to a IRC channel. I thought there was no centralized point-of-failure?
cube13 15y ago
>Most problems with the critiques of Bitcoin like those in the linked Quora post is that they are debunking a straw man - the idea that Bitcoin is intended as a universal replacement for all other currency systems. By those standards of course it will fail. Bitcoin is supposed to be a currency. That means that it's supposed to be effectively the same thing as USD or the Euro. It's not supposed to replace any other currency, it just needs to be able to do everything that any other currency can(except pay taxes). The problem is that it doesn't do that right now, and I don't see any way of making it actually work. To actually be a useful currency, people need to be able use it on everything, otherwise it's just a proxy for a "real" currency with an added gambling element. Right now, it's basically the same thing as paypal or Google Checkout-something that people use to buy things online. By that standard, it's not even decentralized anymore, because everyone gets their BTC from MtGox, and they have to keep logs of all their transactions.

jasonkolb 15y ago

Agree 100% with your last paragraph. The bank lobby, effectively an arm of the Federal Reserve system, is not going to stand by and watch any alternative currency gain traction. My guess is that they'll try to paint any legitimate alternative--Bitcoin or some successor--as a tool for terrorism and try to get it banished from the face of the earth that way.

coderrr 15y ago

I think the most interesting aspect of this whole thing is, like you mention, how new bitcoin-like currencies are perceived, valued, and participated in. Will everyone start jumping into new bitcoin-like currencies in hope of massive bitcoin-style investment gains? Will massive bitcoin miners attack new currencies networks with their computing power to protect their or others' investments in bitcoin? Will new bitcoin currencies be like social networks where only one dominates at a time for many years? What would happen if a new gold-like element was discovered? "Red Gold" that had almost all the attributes of gold but it had a somewhat redish color and was actually a different element and it was proven to be of about the same scarcity worldwide. Would that halve the price of gold and would everyone jump onto red gold immediately or would it be shunned as not the real thing and be mostly worthless? I'd be interested to know others' insights on this.

mike_esspe 15y ago
There is such "gold" - Ruthenium. It's not valued above industrial value.
barrkel 15y ago
"Red gold" would be exactly as valuable as gold is in the same way that gold is; that is, if everybody agreed that red gold was valuable, then it would be valuable. If they didn't, then it wouldn't. Scarcity doesn't give rise to value. You also need demand. In so far as red gold acted in the same way as gold for jewellery and industrial uses, it would probably decrease the value of gold to some proportion, and set a base level on this red gold production. But this is like asking why diamonds are valuable, or designer clothes, or expensive watches. In many cases, it's a combination of marketing, status display effects (ostentatious useless consumption), artificial restriction on supply, and market fixing (e.g. arranging to buy watches on secondary markets at headline prices for PR purposes). They too are confidence games, and if the confidence goes due to a bad association with the brand, the price will fall through the floor. All that is left is productive uses like industry.
- shubble 15y ago
  I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years. The reason for the scarcity of gold, and it's value, is that this gold is not for sale. One gold owning organization could make a great deal in other currencies by attacking the gold market, much as quantum fund used it's sterling holdings to attack the British currency with great success. Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same. Am I missing something important here?
  - hugh3 15y ago
    I've heard that unlike say steel, the majority of gold ever mined is still in circulation, and by circulation I mean locked vaults Quite possible. A few large organizations control the vast majority of it, and this is especially true since governments have not needed to hold gold for years Say what? A few large organizations, who are not governments, hold the vast majority of the world's gold? Are we into conspiracy-theory talk here? Lots of people seem to think gold is 'safer' than paper currencies, while it seems the same "Safe" depends on what you mean. For instance, you could say "US dollars have a 99% chance of retaining at least 80% of their value in five years, and a 99.9% chance of retaining at least 10% of their value in five years. Gold has only a 80% chance of retaining at least 80% of its value in five years, but a much higher 99.999% chance of retaining at least 10% of its value in five years". Gold gives you much more volatility in the short term, but acts as a hedge against the collapse of any particular currency. I wouldn't buy it though. I'd buy land (with houses on it), which acts as a hedge and pays you income.

jerf 15y ago

"There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model." Broadly speaking, the more desirable properties you try to obtain at once, the more you constrain the design, and it is absolutely possible to constrain the design to the point where there are zero solutions. Arrow's theorem shows an example of that in a voting context. You can not have all of the five desirable properties laid out in the theorem, and it isn't a matter of finding a clever algorithmic solution; they are actually contradictory. You have to loosen the requirements somehow. There is no guarantee that any given set of desirable properties has a solution. There is no guarantee that BitCoin is even close to having a solution, there's no guarantee that it is merely one requirement over the line, it may well contain multiple contradictions. There's no guarantee that there is anything more optimal than government fiat money. I'm in favor of experimentation to find out, in general. But it should be pointed out that there is not necessarily going to be a solution at all, and I certainly would say it's not going to be easy to just "take BitCoin and fix the problems" or any variant thereof. There is something stopping people from just "creating an alternative", it's going to be freaking hard, and again, I don't just mean hard in the way that creating an open source operating system from the efforts of thousands of not-centrally managed programmers is, I mean, potentially hard in the way that proving P != NP is, really, actually, hard. Starting from BitCoin isn't necessarily even starting from a useful base.

achompas 15y ago

Looked at in another way, think of Bitcoin as something more like MMORPG loot. If people are willing to spend vast amounts of "real money" on items for their WoW character, spending that money on Bitcoins instead makes it seem like a sane investment rather than just flushing it away. What is the intrinsic value of Bitcoins, then? That people are willing to spend money on Bitcoins? As an investment vehicle these are terrible. Commodities (diamonds, zinc, gold, wheat, oil, etc.) will always be demanded as factors of industrial production or farming. Equities generate real-world wealth for investors in the form of dividends. Both are demanded because they generate real value for investors. Bitcoins have no intrinsic value. If you're in to make a quick buck, that's fine--this is a big arbitrage opportunity. But for any decently-sized time T, Bitcoins --> $0 as t --> T.

mcantelon 15y ago
>Bitcoins have no intrinsic value. Part of the value is in their utility as an anonymous currency: try taxing the guy that's paid in Bitcoins. Another part is the integrity of the currency: the currency is backed by math, rather than men, and not subject to hyperinflation resulting from corruption (i.e. the US Fed can create money out of thin air, but there is no authority that can create Bitcoins out of thin air: they must be mined).
- achompas 15y ago
  I didn't downvote you, (I don't think I'm allowed to!) but the "US Fed" (the Federal Reserve) does not simply add $X million to the money supply--it actually purchases Treasury bills on the open market. The net transaction is $0 (an exchange of currency for T-bills of equal value), but the market now contains more paper money. Meanwhile, I've already discussed Bitcoin's potential as an alternative currency (or lack thereof) in other comments. If people demand Bitcoins as a "tax haven" from the government, then Bitcoins aren't long for this world.
  - mcantelon 15y ago
    >The net transaction is $0 (an exchange of currency for T-bills of equal value), but the market now contains more paper money. Whatever the mechanism, fiat currencies are subject to inflation through the pressure of an ever-increasing money supply. >If people demand Bitcoins as a "tax haven" from the government, then Bitcoins aren't long for this world. It'll be interesting to see how the state tackles this. It'll be easy to drive it underground, but preventing its use will be another matter. Bitcoin transactions through a VPN seem hard to prevent.

cheez 15y ago

> There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model. Yes there is. The protocol is not documented at all. That's one of the reason I'm a little hesitant to touch it.

espes 15y ago
What? There are already multiple independent implementations...
- cheez 15y ago
  There are, but they are derived from the official client if I understand correctly.
weavejester 15y ago
What's wrong with the protocol documentation on the wiki? https://en.bitcoin.it/wiki/Protocol_specification https://en.bitcoin.it/wiki/Protocol_specification
- cheez 15y ago
  Try implementing that!
  - weavejester 15y ago
    Is there anything in the specification that's you think is ambiguous or hard to understand? There's also the source code to bitcoinj, which is a very well-commented implementation of the protocol.
    - cheez 15y ago
      Ok, my question was really as to how they even discover each other but some more perusing of that site shows that they connect to a IRC channel. I thought there was no centralized point-of-failure?

cube13 15y ago

>Most problems with the critiques of Bitcoin like those in the linked Quora post is that they are debunking a straw man - the idea that Bitcoin is intended as a universal replacement for all other currency systems. By those standards of course it will fail. Bitcoin is supposed to be a currency. That means that it's supposed to be effectively the same thing as USD or the Euro. It's not supposed to replace any other currency, it just needs to be able to do everything that any other currency can(except pay taxes). The problem is that it doesn't do that right now, and I don't see any way of making it actually work. To actually be a useful currency, people need to be able use it on everything, otherwise it's just a proxy for a "real" currency with an added gambling element. Right now, it's basically the same thing as paypal or Google Checkout-something that people use to buy things online. By that standard, it's not even decentralized anymore, because everyone gets their BTC from MtGox, and they have to keep logs of all their transactions.