5 ms·

Bitcoin isn't just a currency, it is also a protocol and payment system.

gojomo 14y ago
Bitcoin is also founders' shares in a potential new future, a future where crypto and loose internetworked coordination replaces many old habits and institutions.
- tptacek 14y ago
  In other words, it's not just a payments system, it's also a speculative commodity that subverts that payment system.
  - gojomo 14y ago
    It's definitely not just a 'payments system'. It's also not well fit to the traditional idea of a 'commodity'. I was emphasizing that it has some aspects of shareholder equity. Indeed, the keys which hold balances can be used to do things like weighted stakeholder votes: see the ideas for bitcoin-related [proof-of-stake] systems, or [bitcoin colored coins] for stockholder-of-record mechanisms embedded in the blockchain. Whether this 'speculative equity' aspect actually subverts bitcoin's potential use as a payment system, or instead complements it by creating a community-spirit and aligned-incentives for growth, is something that time will tell. But trying to shoehorn Bitcoin into any of the traditional categories -- currency, commodity, payment system, cash, unit of account, equity, etc -- risks overlooking how strange and capable it might be. Bitcoin laughs at the old definitions, and extends out orthogonally into utility dimensions that were previously hard to even see.
    - tptacek 14y ago
      No, you can see it subverting the payment system right now. In the lifetime of a good-for-10-minutes Bitpay quote, the spot price for Bitcoin can and has swung by tens of dollars. Your argument is basically a flight to abstraction. Everything can be made to sound good in the abstract. In reality, Bitcoin is first and foremost a speculative bubble.
      - gojomo 14y ago
        No one day, week, month or year determines the essential qualities of something. Fiat currencies have also faced unpredictable discontinuities of value: bank holidays, confiscations, hyperinflation. After decades, some of these were partially ameliorated in well-run countries... but still flare up as risks in times of crisis. What you call a 'flight to abstraction' I call an interest in the enduring essence of this new thing. Yes, the froth that's in today's headlines is a speculative bubble. So what? Everything grabbing headlines is a speculative bubble of attention. And, there are a lots of speculative financial bubbles. Sometime they precede real, but slower, explosions of value. That's the interesting topic, and calling a 'bubble' has no probative value on that longer-term question. Pick any particular day in 2014. I'll bet you $100 that the value of 1BTC in USD on that day will be higher than today's pre-freeze MtGox traded price ($124)... which is itself almost double the value on some currently-operating exchanges. If we're on, just let me know your chosen date in 2014.
        tptacek 14y ago
        In the last 50 years, at what point has the US dollar swung so wildly that you couldn't safely use it to denominate the cost of a $99 (2013 dollar) good or service? Because for BTC those points included "all of today and yesterday". You can see how your reasoning is broken with your 2014 comparison, when you say "pick a day in 2014 and BTC will probably be higher". You don't seem to grasp that upswings are just as disruptive to a currency as downswings.
        gojomo 14y ago
        I have no interest in, and don't think Bitcoin's success depends on, using it as a unit to advertise the purchase price of a good or service. Even so, Bitcoin can still work as a cheap payment mechanism -- via intermediaries which insulate buyers/sellers from exchange-rate risk, using Bitcoin simply for the fast irreversible software-controlled transfer of value. The cost of such hedging may be less than the cost of traditional fees and chargebacks. But maybe Bitcoin's not even best understood as a 'currency'. That's just a word, whose broad semantic boundaries were fixed in the early 20th century, before anything like Bitcoin, or even the Internet and general-purpose computers, existed. So arguing over whether Bitcoin is a good 'traditional currency' is boring. What's interesting is whether Bitcoin is valuable, on its own terms as something new, and whether it will be more valuable in the future. A bubble this day/week/month/year doesn't tell us much about that question. Volatility only affects some uses -- like your example of publishing prices of other things in Bitcoin. Other potential users are, or could be, indifferent to volatility, as long as the trend is up. Some will even like volatility, if that volatility is usefully uncorrelated with other assets. And if your pronouncement isn't that it's an overvalued, speculative bubble, but simply that it's going to have upswings and downswings, but is just as likely to be more valuable at any future point as less, then so what? Often ultimately-valuable equity shares in some new project go through wild value swings, because long-term success is so hard to predict and sensitive to so many unknowns. I'm not a fan of the limited 'payments system' framing of "what Bitcoin is", but maybe you can think of a way to pick a date in the future where we can objectively assess whether Bitcoin is growing as a payment mechanism or not. At that point we'll know whether the volatility has destroyed Bitcoin's value as a payments system, or whether Bitcoin's use in payments has thrived despite (or maybe even aided in non-intuitive ways by) the headline-grabbing volatility. Offer a testable prediction generated by your insight, and we'll test it! The test of my insight, that Bitcoin is something valuable whether it's a currency or not, is: is Bitcoin worth more in 2014 than 2013? And further out, are all balances controlled by Bitcoin principals (keys), on the Bitcoin chain or future 'baby Bitcoins', more valuable at future dates than their cost-to-acquire today?
- betterunix 14y ago
  "a future where crypto and loose internetworked coordination replaces many old habits and institutions." Except that Bitcoin is not crypto, it just uses a couple of cryptographic primitives. Cryptographic payment systems have security definitions that do not allow for polynomial time double spending attacks (Bitcoin does not even have a rigorous definition of "double spending").
  - gojomo 14y ago
    Bitcoin relies on a bunch of crypto for it to work, far moreso than traditional currencies, commodities, or shares. It also relies on ubiquitous computing and internetworking, and the styles of thought that accompany those things. Yes, it's underdefined and underproven from a professional or academic crypto perspective. But worries about such perfection slowed or discouraged others from building something similar or better before now. In that way, Bitcoin's a bit like Linux or the Web: an ad-hoc success where more professional approaches had stalled, in development or adoption. It likely has some success-bringing aspects that even its designers and current maintainer don't fully understand, but lucked-into. Sometimes these things are only fully appreciated in retropect. Also like Linux or the Web, a lot of formalization and hardening can be bolted on later, now that the essential utility is proven and the potential rewards for fixes are clear. Even if giant parts of the existing system collapse -- the SHA256-based mining, the P2P transaction broadcasts, the bloated global blockchain -- if the ledger of keys & balances survives, multiple teams will then try to reboot a next-gen system that allows those balances to keep trading. (I conjecture that crypto control of 1 BTC today might wind up, a decade or two hence, spawning usable balances in a number of official and unofficial offshoot projects... vaguely like how 100 shares in the original AT&T eventually wound up becoming shares in both AT&T and the 7 'baby bells'. We will see 'baby Bitcoins' in the future, which attempt to accelerate their adoption by endowing everyone wiht a Bitcoin balance a balance in the new system as well.)

Bitcoin is also founders' shares in a potential new future, a future where crypto and loose internetworked coordination replaces many old habits and institutions.

tptacek 14y ago
In other words, it's not just a payments system, it's also a speculative commodity that subverts that payment system.
- gojomo 14y ago
  It's definitely not just a 'payments system'. It's also not well fit to the traditional idea of a 'commodity'. I was emphasizing that it has some aspects of shareholder equity. Indeed, the keys which hold balances can be used to do things like weighted stakeholder votes: see the ideas for bitcoin-related [proof-of-stake] systems, or [bitcoin colored coins] for stockholder-of-record mechanisms embedded in the blockchain. Whether this 'speculative equity' aspect actually subverts bitcoin's potential use as a payment system, or instead complements it by creating a community-spirit and aligned-incentives for growth, is something that time will tell. But trying to shoehorn Bitcoin into any of the traditional categories -- currency, commodity, payment system, cash, unit of account, equity, etc -- risks overlooking how strange and capable it might be. Bitcoin laughs at the old definitions, and extends out orthogonally into utility dimensions that were previously hard to even see.
  - tptacek 14y ago
    No, you can see it subverting the payment system right now. In the lifetime of a good-for-10-minutes Bitpay quote, the spot price for Bitcoin can and has swung by tens of dollars. Your argument is basically a flight to abstraction. Everything can be made to sound good in the abstract. In reality, Bitcoin is first and foremost a speculative bubble.
    - gojomo 14y ago
      No one day, week, month or year determines the essential qualities of something. Fiat currencies have also faced unpredictable discontinuities of value: bank holidays, confiscations, hyperinflation. After decades, some of these were partially ameliorated in well-run countries... but still flare up as risks in times of crisis. What you call a 'flight to abstraction' I call an interest in the enduring essence of this new thing. Yes, the froth that's in today's headlines is a speculative bubble. So what? Everything grabbing headlines is a speculative bubble of attention. And, there are a lots of speculative financial bubbles. Sometime they precede real, but slower, explosions of value. That's the interesting topic, and calling a 'bubble' has no probative value on that longer-term question. Pick any particular day in 2014. I'll bet you $100 that the value of 1BTC in USD on that day will be higher than today's pre-freeze MtGox traded price ($124)... which is itself almost double the value on some currently-operating exchanges. If we're on, just let me know your chosen date in 2014.
      - tptacek 14y ago
        In the last 50 years, at what point has the US dollar swung so wildly that you couldn't safely use it to denominate the cost of a $99 (2013 dollar) good or service? Because for BTC those points included "all of today and yesterday". You can see how your reasoning is broken with your 2014 comparison, when you say "pick a day in 2014 and BTC will probably be higher". You don't seem to grasp that upswings are just as disruptive to a currency as downswings.
        gojomo 14y ago
        I have no interest in, and don't think Bitcoin's success depends on, using it as a unit to advertise the purchase price of a good or service. Even so, Bitcoin can still work as a cheap payment mechanism -- via intermediaries which insulate buyers/sellers from exchange-rate risk, using Bitcoin simply for the fast irreversible software-controlled transfer of value. The cost of such hedging may be less than the cost of traditional fees and chargebacks. But maybe Bitcoin's not even best understood as a 'currency'. That's just a word, whose broad semantic boundaries were fixed in the early 20th century, before anything like Bitcoin, or even the Internet and general-purpose computers, existed. So arguing over whether Bitcoin is a good 'traditional currency' is boring. What's interesting is whether Bitcoin is valuable, on its own terms as something new, and whether it will be more valuable in the future. A bubble this day/week/month/year doesn't tell us much about that question. Volatility only affects some uses -- like your example of publishing prices of other things in Bitcoin. Other potential users are, or could be, indifferent to volatility, as long as the trend is up. Some will even like volatility, if that volatility is usefully uncorrelated with other assets. And if your pronouncement isn't that it's an overvalued, speculative bubble, but simply that it's going to have upswings and downswings, but is just as likely to be more valuable at any future point as less, then so what? Often ultimately-valuable equity shares in some new project go through wild value swings, because long-term success is so hard to predict and sensitive to so many unknowns. I'm not a fan of the limited 'payments system' framing of "what Bitcoin is", but maybe you can think of a way to pick a date in the future where we can objectively assess whether Bitcoin is growing as a payment mechanism or not. At that point we'll know whether the volatility has destroyed Bitcoin's value as a payments system, or whether Bitcoin's use in payments has thrived despite (or maybe even aided in non-intuitive ways by) the headline-grabbing volatility. Offer a testable prediction generated by your insight, and we'll test it! The test of my insight, that Bitcoin is something valuable whether it's a currency or not, is: is Bitcoin worth more in 2014 than 2013? And further out, are all balances controlled by Bitcoin principals (keys), on the Bitcoin chain or future 'baby Bitcoins', more valuable at future dates than their cost-to-acquire today?
betterunix 14y ago
"a future where crypto and loose internetworked coordination replaces many old habits and institutions." Except that Bitcoin is not crypto, it just uses a couple of cryptographic primitives. Cryptographic payment systems have security definitions that do not allow for polynomial time double spending attacks (Bitcoin does not even have a rigorous definition of "double spending").
- gojomo 14y ago
  Bitcoin relies on a bunch of crypto for it to work, far moreso than traditional currencies, commodities, or shares. It also relies on ubiquitous computing and internetworking, and the styles of thought that accompany those things. Yes, it's underdefined and underproven from a professional or academic crypto perspective. But worries about such perfection slowed or discouraged others from building something similar or better before now. In that way, Bitcoin's a bit like Linux or the Web: an ad-hoc success where more professional approaches had stalled, in development or adoption. It likely has some success-bringing aspects that even its designers and current maintainer don't fully understand, but lucked-into. Sometimes these things are only fully appreciated in retropect. Also like Linux or the Web, a lot of formalization and hardening can be bolted on later, now that the essential utility is proven and the potential rewards for fixes are clear. Even if giant parts of the existing system collapse -- the SHA256-based mining, the P2P transaction broadcasts, the bloated global blockchain -- if the ledger of keys & balances survives, multiple teams will then try to reboot a next-gen system that allows those balances to keep trading. (I conjecture that crypto control of 1 BTC today might wind up, a decade or two hence, spawning usable balances in a number of official and unofficial offshoot projects... vaguely like how 100 shares in the original AT&T eventually wound up becoming shares in both AT&T and the 7 'baby bells'. We will see 'baby Bitcoins' in the future, which attempt to accelerate their adoption by endowing everyone wiht a Bitcoin balance a balance in the new system as well.)