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The value of anything as a medium of exchange and store of value always depends entirely on whether or not a critical mass of people want to use it as such. Onc

The value of anything as a medium of exchange and store of value always depends entirely on whether or not a critical mass of people want to use it as such. Once you establish that a thing satisfies all the properties of money, or close enough, then the only question is network effect. Even if minor theoretical improvements could be made, it has to be 10-100x better to overcome runaway network effect. Sea shells and bags of salt were drastically better money than mentally keeping track of favors owed in a small tribe, because we could expand our exchange of favors beyond dunbar's number to cooperate with people we don't intimately know. Gold was much better than sea shells and salt because it's globally scarce and durable. Paper backed by gold was much better than raw gold, namely because it is drastically easier to trade, transport, and fractionalized. The technical nature of bitcoin isn't special and it can be trivially forked, modified, and a new network started for near zero cost. That's exactly what coins like litecoin and dogecoin did. Copy paste bitcoin code, change the name and some constants, and boom, new money. What makes bitcoin special, and why there can only be one dominant cryptocurrency long term, is network effect. I don't care about litecoin and dogecoin, because barely anyone uses them relative bitcoin. Barely anyone is developing and building on them as a foundational layer. The only reason anyone cares about dogecoin these days is because one eccentric billionaire has a hard on for it, and that's way too small of a bus number to store a significant amount of my wealth in. The same holds true for any network protocol. I can copy paste libraries for TCP and make modifications that I think will make it far superior to the current form and release it to the world! And nobody except hobbyists will use it because standard TCP has an unassailable network effect. You have to have an extraordinarily compelling reason to change, and even then it will take decades (see IPv4 to v6 transition for example). The thing about bitcoin, is that it is the first truly digital money. Fiat currencies like the USD have been trying for decades to pretend to be digital, and they'll probably try harder to use blockchains to make it better, but ultimately it's still fundamentally stuck with an analog foundation defended by guns and tight cliques of trusted human gangs, which makes it globally weak relative to bitcoin. That's why bitcoin has a 10-100x advantage over dollars long term. It's natively digital, open, and permissionless from day one.

shadowgovt 5y ago
> an analog foundation defended by guns and tight cliques of trusted human gangs Question: when one exchanges Bitcoin for a real-world good or service, what enforces the good or service be provided? And on the flip-side of that question: if one provides a good or service before Bitcoin payment clears, what guarantees payment?
- anonporridge 5y ago
  Look to dark net markets for answers. They have to solve this problem in one of the most adversarial and dangerous environments possible, with zero legal recourses to mediate disputes. The key thing they do is include a third party in the transaction, usually the market itself, who mediates disputes along with a reputation system for sellers. They mostly do it in a centralized way, where the market holds your payment until the buyer confirms or the seller can prove they held up their end. This is a problem because the market can and often does exit scam, so some do this in a decentralized way with 2 of 3 multisig transactions, where if the buyer and seller have no dispute, they can release the money, but if they do, a third party arbitrator can come in and mediate. Also, higher layer payment protocols like the lightning network effectively clear instantly and trustlessly, with no need to wait for any block to be mined, and are great for minor value transactions. Finally, replace bitcoin with gold in your question, and ask why that worked for thousands of years.
  - shadowgovt 5y ago
    > replace bitcoin with gold in your question, and ask why that worked for thousands of years Guns (well, swords and truncheons before that) and tight cliques of trusted human gangs, mostly. And I think I'd argue the dark net markets work the same way: holding reputation as currency, they provide an incentive for the users not to cheat, but if they cheat, there's no recourse except "Well, guess I'd better find another market." And that's if we discount the few but notable instances of them using actual violence to enforce their norms... Ulbricht of Silk Road got arrested for attempting to put an actual bounty on someone's head. The blockchain system provides a simple way to very publicly and reliably declare the exchange of meaningful numbers between two pseudonymous identities. Everything else about the market that blockchain exists in is the same grabasstical process that humans have used for exchange of resources throughout all of history.

shadowgovt 5y ago

> an analog foundation defended by guns and tight cliques of trusted human gangs Question: when one exchanges Bitcoin for a real-world good or service, what enforces the good or service be provided? And on the flip-side of that question: if one provides a good or service before Bitcoin payment clears, what guarantees payment?

anonporridge 5y ago
Look to dark net markets for answers. They have to solve this problem in one of the most adversarial and dangerous environments possible, with zero legal recourses to mediate disputes. The key thing they do is include a third party in the transaction, usually the market itself, who mediates disputes along with a reputation system for sellers. They mostly do it in a centralized way, where the market holds your payment until the buyer confirms or the seller can prove they held up their end. This is a problem because the market can and often does exit scam, so some do this in a decentralized way with 2 of 3 multisig transactions, where if the buyer and seller have no dispute, they can release the money, but if they do, a third party arbitrator can come in and mediate. Also, higher layer payment protocols like the lightning network effectively clear instantly and trustlessly, with no need to wait for any block to be mined, and are great for minor value transactions. Finally, replace bitcoin with gold in your question, and ask why that worked for thousands of years.
- shadowgovt 5y ago
  > replace bitcoin with gold in your question, and ask why that worked for thousands of years Guns (well, swords and truncheons before that) and tight cliques of trusted human gangs, mostly. And I think I'd argue the dark net markets work the same way: holding reputation as currency, they provide an incentive for the users not to cheat, but if they cheat, there's no recourse except "Well, guess I'd better find another market." And that's if we discount the few but notable instances of them using actual violence to enforce their norms... Ulbricht of Silk Road got arrested for attempting to put an actual bounty on someone's head. The blockchain system provides a simple way to very publicly and reliably declare the exchange of meaningful numbers between two pseudonymous identities. Everything else about the market that blockchain exists in is the same grabasstical process that humans have used for exchange of resources throughout all of history.