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Many comparisons have been made between fiat currency and Bitcoins, but to my mind that's wholly missing the point. The Bitcoin protocol represents a way of di

Many comparisons have been made between fiat currency and Bitcoins, but to my mind that's wholly missing the point. The Bitcoin protocol represents a way of digitally transferring a scarce resource without the need for a central authority. I suspect this is going to be a big deal eventually, because when we created a protocol for digitally transferring information without the need for a central authority, we wound up with the Internet. Comparing Bitcoin to a fiat currency like the dollar is a little like comparing TCP/IP to the English language.

mpyne 14y ago
I think this is actually a great way of looking at it.
zeteo 14y ago
>The Bitcoin protocol represents a way of digitally transferring a scarce resource without the need for a central authority. Sure, but what you need is a way to exchange things without recourse to central authority. You can transfer bitcoins to the local bar, there's no way to ensure they transfer you back a drink. This is precisely why exchanges like Mt. Gox have become prominent - how else can you make sure the buyer transfers dollars to your bank account? So all you have are donations without recourse to central authority - which sounds a lot less revolutionary.
- weavejester 14y ago
  When dealing with physical objects, sure, you have the same problem as regular currency. You need to rely on the weight of the law and the reputation of the seller to give you the material item you requested. However, (a) that's not a deal-breaker, otherwise fiat currency wouldn't work, and (b) you can programmatically enforce rules on the transfer of intangible assets. For instance, Namecoin adapts the Bitcoin protocol for the purchase of domain names, which are a limited but intangible commodity. If I buy a domain name with namecoins, the network itself enforces the sale. Even when dealing with something that requires a central authority, like regular currency, Bitcoins have worth. For instance, if I want to transfer money between service A and service B, Bitcoins can act as a common intermediate protocol. Although the two endpoints are still required, we can replace a lot of the inbetween mechanism, and reduce the dependencies between the two services.
  - zeteo 14y ago
    Of course it's not a deal breaker. All I'm saying is that Bitcoin doesn't enforce exchange. There's nothing in the Bitcoin protocol that forces Namecoin to give you a domain name.
    - weavejester 14y ago
      Actually there is. You can entwine a pair of transactions such that if the bitcoins are claimed by the seller, the corresponding namecoins can be claimed by the buyer.
hazov 14y ago
I'm not a network engineer but I believe Tier 1 and Tier 2 networks are needed for the Internet to exist. They do not act as a central authority, but the Internet itself needs them to work like it do now. I simply do not understood what you wanted to say by your last paragraph. EDIT: To clarify my point is that I believe the internet is poorly decentralized, it simply means some guys has too much power to shutdown traffic from entire networks to even reach the Internet if they wish or when it's convenient to them, if we ever have another large scale global war I believe this will happen.
- weavejester 14y ago
  My understanding is that's more an artefact of how the Internet is physically laid out, rather than as something inherent to the TCP protocol itself. If we took all the machines on the net and put them in one huge building, we could construct a far more decentralised network architecture. Regarding my last paragraph, both the English language and TCP/IP could be broadly said to be protocols for distributing information, but are also obviously so completely different it makes little sense to draw any parallels between them.
Ingaz 14y ago
>>Comparing Bitcoin to a fiat currency like the dollar is a little like comparing the English language to TCP/IP. Bitcoin could not be compared to currency. It's comparable to gold, oil, diamonds, etc.
- weavejester 14y ago
  Well, again, not exactly, because a bitcoin-like network can potentially enforce rules in a way that a physical commodity cannot do.

mpyne 14y ago

I think this is actually a great way of looking at it.

zeteo 14y ago

>The Bitcoin protocol represents a way of digitally transferring a scarce resource without the need for a central authority. Sure, but what you need is a way to exchange things without recourse to central authority. You can transfer bitcoins to the local bar, there's no way to ensure they transfer you back a drink. This is precisely why exchanges like Mt. Gox have become prominent - how else can you make sure the buyer transfers dollars to your bank account? So all you have are donations without recourse to central authority - which sounds a lot less revolutionary.

weavejester 14y ago
When dealing with physical objects, sure, you have the same problem as regular currency. You need to rely on the weight of the law and the reputation of the seller to give you the material item you requested. However, (a) that's not a deal-breaker, otherwise fiat currency wouldn't work, and (b) you can programmatically enforce rules on the transfer of intangible assets. For instance, Namecoin adapts the Bitcoin protocol for the purchase of domain names, which are a limited but intangible commodity. If I buy a domain name with namecoins, the network itself enforces the sale. Even when dealing with something that requires a central authority, like regular currency, Bitcoins have worth. For instance, if I want to transfer money between service A and service B, Bitcoins can act as a common intermediate protocol. Although the two endpoints are still required, we can replace a lot of the inbetween mechanism, and reduce the dependencies between the two services.
- zeteo 14y ago
  Of course it's not a deal breaker. All I'm saying is that Bitcoin doesn't enforce exchange. There's nothing in the Bitcoin protocol that forces Namecoin to give you a domain name.
  - weavejester 14y ago
    Actually there is. You can entwine a pair of transactions such that if the bitcoins are claimed by the seller, the corresponding namecoins can be claimed by the buyer.

hazov 14y ago

I'm not a network engineer but I believe Tier 1 and Tier 2 networks are needed for the Internet to exist. They do not act as a central authority, but the Internet itself needs them to work like it do now. I simply do not understood what you wanted to say by your last paragraph. EDIT: To clarify my point is that I believe the internet is poorly decentralized, it simply means some guys has too much power to shutdown traffic from entire networks to even reach the Internet if they wish or when it's convenient to them, if we ever have another large scale global war I believe this will happen.

weavejester 14y ago
My understanding is that's more an artefact of how the Internet is physically laid out, rather than as something inherent to the TCP protocol itself. If we took all the machines on the net and put them in one huge building, we could construct a far more decentralised network architecture. Regarding my last paragraph, both the English language and TCP/IP could be broadly said to be protocols for distributing information, but are also obviously so completely different it makes little sense to draw any parallels between them.

Ingaz 14y ago

>>Comparing Bitcoin to a fiat currency like the dollar is a little like comparing the English language to TCP/IP. Bitcoin could not be compared to currency. It's comparable to gold, oil, diamonds, etc.

weavejester 14y ago
Well, again, not exactly, because a bitcoin-like network can potentially enforce rules in a way that a physical commodity cannot do.