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This is my favourite article about Bitcoin to date, and properly describes one of the main ideas I wish Bitcoin detractors would come around to. Bitcoin has a l

This is my favourite article about Bitcoin to date, and properly describes one of the main ideas I wish Bitcoin detractors would come around to. Bitcoin has a lot of problems as a unit of account and as a store of value, but that is not primarily what Satoshi was building (https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf). Bitcoin is, and has always been, a medium of exchange first and foremost. It still has some shortcomings in that regard, but it is the closest thing we have to solving the trust issues of peer-to-peer exchange in a purely technical fashion. Comparing Bitcoin addresses to the IP layer of the internet is brilliant. Something that the Bitcoin community has been a bit slow to accept is the idea that "peer-to-peer exchange" may be occurring at the corporate level rather than at the individual level for most people--it's hard to imagine a world where that isn't true due to the points outlined in the "Comparison to the card networks" part of this article. However as long as the corporate implementation is done in such a way that anyone could jump in as an individual if they wanted to bear their own risk, then we are still miles ahead of how the traditional financial system currently works ("net neutrality" for money).

IgorPartola 12y ago
Agreed. The more I think about BTC, the more I understand that the exchange protocol is the most useful part of it. Storing value in an encrypted wallet on your computer is inconvenient to say the least. Not that I want local storage of value to go away, but as a consumer I want a very different payment experience than "here, have my CC number" or "let me pay with PayPal".
- Cyther606 12y ago
  Satoshi wrote in the genesis block: The Times 03/Jan/ 2009 Chancellor on brink of second bailout for banks Bitcoin was released in staunch opposition to the banking system. > Storing value in an encrypted wallet on your computer is inconvenient to say the least It's possible to store Bitcoin on sheets of paper, or entirely in your brain, safely and securely. I get the distinct feeling you've never used Bitcoin before. Please, sign up for an account at Coinbase and buy $1000+ of BTC or otherwise put yourself in the shoes of someone who wants to buy a serious amount of coin before making these sorts of statements. Bitcoin isn't about being a PayPal competitor. It's money outside the State, always has been, always will be. Unless of course it is corrupted from the inside out, probably by whitewashed companies who are too afraid to embrace a great thing in spite of what regulators would like them to do.
  - sanswork 12y ago
    >It's possible to store Bitcoin on sheets of paper The process for making a secure paper wallet is far from convenient and brain wallets are about the worst possible way to store bitcoin and are far from safe and secure. If you're going to get some please do not use a brain wallet.
    - Cyther606 12y ago
      Numerous wallets make it dead simple to create a paper wallet. With Electrum, you just open the program and it automatically generates 12 words which you can write down on paper or learn by heart. It doesn't get much easier than that, and it's perfectly safe and secure to do.
      - sanswork 12y ago
        Dead simple but no more secure than just storing the file encrypted on your computer. Electrum is great and if you write down the words thats fine. If you try to memorize them without a backup there are a lot of events that can happen in your life that will lead to the total loss of your coins.
        bdamm 12y ago
        Agreed. I'm looking for a LiveCD style paper-waller generator, do you know of one?
        sanswork 12y ago
        I don't use paper wallets myself but any barebones linux bootcd/usb with https://github.com/pointbiz/bitaddress.org https://github.com/pointbiz/bitaddress.org and BIP38 selected is the route I see most recommended.
        bdamm 12y ago
        Very convenient!
- diegocg 12y ago
  That's the only thing about bitcoin that actually interests me, how easy is to make payments cutting and pasting some text. But everything else surrounding bitcoin, I don't find it useful at all. I just want/need something like bitcoin, but connected to my €-denominated bank account. I don't want or need an alternative "digital currency" and I find the mere idea of one stupid, I just want to make exchanges with current currencies (which are already "digital", something that for some reason is missed all the time, maybe because it's much easier to get attention on the internet using buzzwords). Because bitcoin wants to be a currency, and a decentralized one at that, it needs to do the cool, but weird shit that the blockchain is. All the cryptography behind it, i find it a massively complex waste of time that only gets justified because of the absurd fetish of decentralization. The world just needs to safely and easily exchange money through internet, nothing else. An overengineered solution that tries to workaround the current financial system for no good reason is not a great solution for that need IMO. I'm hoping that at some point someone (banks, credit card companies, paypal) will end up doing what bitcoin doesn't wants to do.
  - Natanael_L 12y ago
    So you want Ripple, essentially. You should be aware that anything dependent on a small set of entities can fail spectacularly. You never know if they get hacked, bankrupt, sued, raided, etc ...
    - Alex-Galapagos 12y ago
      Ripple is a rip-off. You buy a gift card and the money stays there..
      - wcummings 12y ago
        Ripple allows people to issue cryptographically secured debt securities, not sure what you think it is
edpichler 12y ago
Very good comment.
sassypants 12y ago
What exactly is the problem with a store of value with 500% annual returns? I read people talking about the supposedly awful volatility, but they fail to mention that the volatility has a very distinct trajectory. Bitcoin is volatile as it increased in value by orders of magnitude year after year. The article repeats this fear of volatility in the context of one's live savings. How frequently do people tap their life savings to pay for grocery runs? Isn't it the case that Bitcoin is by far the best possible store of value one could have adopted for their life savings over the past five years?
- lxmorj 12y ago
  Dude, go look up tulips on wikipedia.
  - sassypants 12y ago
    Bitcoin has shown predictable, steady growth sustained over a many year period. https://i.imgur.com/kV2IRT5.png https://i.imgur.com/kV2IRT5.png Tulips experienced exponential an order of magnitude shift in price during the course of one year in 1637. Unlike tulips, Bitcoin is widely appreciated for its utility. I don't think the comparison is as meaningful as critics would make it out to be. Steady logarithmic growth in valuations is a normal phenomenon among tech startups -- yet it seems to me that many otherwise smart people are flustered by this growth when applied to Bitcoin, thinking it must be too good to be true.
    - teraflop 12y ago
      > Tulips experienced exponential an order of magnitude shift in price during the course of one year in 1637. Did you fail to notice that your Bitcoin graph shows several occurrences of order-of-magnitude change over less than one year? Anything can be made to look "steady" if you plot it on a log scale.
- boucher 12y ago
  Unless of course they invested when bitcoin was over $1000. Ever heard the phrase "past performance is not an guarantee of future returns?"
FatalLogic 12y ago
>Bitcoin has a lot of problems as a unit of account and as a store of value, but that is not primarily what Satoshi was building Yes, if you see bitcoin as a meme (in the traditional Dawkins sense of the word), then the unit of account aspect makes it a self-financing meme. The speculative frenzy may be unpleasant, but it is necessary bootstrapping mechanism, and not accidental.
- SilasX 12y ago
  Exactly. This is the point that's under-appreciated. People talk about the economic optimality of a currency that has an intelligent issuer who can adapt the supply as needed, and how Bitcoin locks you into a specific (and depreciating, yikes!) supply path -- but that's just the nature of bootstrapping a currency, let alone one without huge guarantors! If someone had said, "Hey, I'm starting a very thinly-traded currency and we're going to appoint an elite circle to have arbitrary authority to issue more whenever" ... eh, it's a much weaker sell, to put it mildly -- even if some ideal currency does have that property.
mbesto 12y ago
> Bitcoin has a lot of problems as a unit of account and as a store of value, but that is not primarily what Satoshi was building (https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf). Bitcoin is, and has always been, a medium of exchange first and foremost. Which is consistent with the primary function and origin of money: because there is a division of labor it means a common medium of exchange must exist. The secondary functions of money - store of value and unit of account - are precisely that...secondary. You can't have the secondaries without the primary (see: gold). I sort of wish the OP wouldn't have made the characteristic of money as being a medium of exchange out to be a "oh well money is also this". The problem is that the press got a hold of Bitcoin for it's secondary reasons and drove the eyeballs to that without defining the problem to begin with: our medium of exchange, globally, is broken. IMHO, Bitcoin adoption curve is taking exactly the course it should be: the exchanges that are at most threatened by poor inefficiencies ("third world") are seeing the most benefit. The first world doesn't have a problem moving money because there are solutions...they just cost money. Third world doesn't have solutions. Once they all see benefit the "first world" will adopt. It won't happen overnight and it shouldn't.
- seliopou 12y ago
  You have the supervenience[0] of "medium of exchange" and "store of value" reversed. If something is valuable then there will be demand for it. In fact value and demand in the domain of economics, according to Aristotle, are equivalent. (Aristotle also wrote over two thousand years ago that money is not "real" but that's another story.) When there is demand for something it can become a medium of exchange. Asserting that something is a medium of exchange does not make it so unless there is underlying demand for that something. Primary and secondary is the wrong way to think about. "Medium of Exchange" is a high-level property that depends on the lower-level property "In Demand". And that is why the value of, or the demand for, bitcoin is critical to its success as a payments platform. [0]: http://en.wikipedia.org/wiki/Supervenience http://en.wikipedia.org/wiki/Supervenience
maaku 12y ago
Bitcoin (the currency) is a terrible medium of exchange. It may make for a decent store of value. Are you sure you're using those terms correctly? Bitcoin (the protocol) is awesome for payments. But that is a separate issue from the monetary policy underlying bitcoin (the currency), which is stacked against being a medium of exchange.
pnathan 12y ago
Agreed. I've generally come around to this idea. I'm not even sure "bitcoin" as the blockchain of today needs to exist. But the distributed blockchain of transactions for financial transfers seems to be a really great idea.
rsp1984 12y ago
Let me ask a dumb question: If money exchange is the main problem that Bitcoin solves, then why isn't the problem of money exchange attacked directly instead, i.e. through some other less volatile classical stores of value like gold or stock? Why is money exchange a problem anyway and why couldn't a classical wire transfer solve the problem? The article doesn't say anything about these things and the underlying principles other than that it's "suprisingly difficult". Instead it goes right into proposing a solution based on Bitcoin and making big picture comparisons with network protocols that probably sound very smart to the right audience. Given the amount of agreement and hype that the article has received so far, I feel a bit like an outsider right now questioning what is proposed. I think I just don't get it. Is everybody just a lot smarter than me or does the community miss to address some basic questions here?
- pmorici 12y ago
  The answer for why Bitcoin instead of Gold or stocks or whatever comes down to trust and logistics. Take Gold for example you have to have to either ship the gold around which is expensive and slow or have a trusted third party store the gold and handle netting out the transactions between entities or accept delayed payment and trust that the counter party will deliver the underlying asset. Bitcoin does not require trust in anything except the math underlying the system.
  - Vik1ng 12y ago
    You are completely ignoring that you still have to trust your own security and 3rd party apps and services.
    - XorNot 12y ago
      Also that BTC has no chargebanks, fraud detection etc. Once its gone from your account its gone.
      - Natanael_L 12y ago
        Multisignature services enable escrow and fraud detection, etc.
samstave 12y ago
Has/Is someone building a payload VPN transaction system based on the bitcoin protocol?
- chatmasta 12y ago
  Working on it. (Also was researcher for TorCoin). Get in touch if you're interested -- email in profile.
patcon 12y ago
I think it's a shame that Balanced Payments didn't wind up their PR machine when their CEO was talking about this same stuff last January: https://soundcloud.com/aroundthecoin/podcast_01_18_14 https://soundcloud.com/aroundthecoin/podcast_01_18_14 They're not doing the best job at demonstrating it, but I think they've been looking at Bitcoin in a clever way for much longer than Stripe :/

IgorPartola 12y ago

Agreed. The more I think about BTC, the more I understand that the exchange protocol is the most useful part of it. Storing value in an encrypted wallet on your computer is inconvenient to say the least. Not that I want local storage of value to go away, but as a consumer I want a very different payment experience than "here, have my CC number" or "let me pay with PayPal".

Cyther606 12y ago
Satoshi wrote in the genesis block: The Times 03/Jan/ 2009 Chancellor on brink of second bailout for banks Bitcoin was released in staunch opposition to the banking system. > Storing value in an encrypted wallet on your computer is inconvenient to say the least It's possible to store Bitcoin on sheets of paper, or entirely in your brain, safely and securely. I get the distinct feeling you've never used Bitcoin before. Please, sign up for an account at Coinbase and buy $1000+ of BTC or otherwise put yourself in the shoes of someone who wants to buy a serious amount of coin before making these sorts of statements. Bitcoin isn't about being a PayPal competitor. It's money outside the State, always has been, always will be. Unless of course it is corrupted from the inside out, probably by whitewashed companies who are too afraid to embrace a great thing in spite of what regulators would like them to do.
- sanswork 12y ago
  >It's possible to store Bitcoin on sheets of paper The process for making a secure paper wallet is far from convenient and brain wallets are about the worst possible way to store bitcoin and are far from safe and secure. If you're going to get some please do not use a brain wallet.
  - Cyther606 12y ago
    Numerous wallets make it dead simple to create a paper wallet. With Electrum, you just open the program and it automatically generates 12 words which you can write down on paper or learn by heart. It doesn't get much easier than that, and it's perfectly safe and secure to do.
    - sanswork 12y ago
      Dead simple but no more secure than just storing the file encrypted on your computer. Electrum is great and if you write down the words thats fine. If you try to memorize them without a backup there are a lot of events that can happen in your life that will lead to the total loss of your coins.
      - bdamm 12y ago
        Agreed. I'm looking for a LiveCD style paper-waller generator, do you know of one?
        sanswork 12y ago
        I don't use paper wallets myself but any barebones linux bootcd/usb with https://github.com/pointbiz/bitaddress.org https://github.com/pointbiz/bitaddress.org and BIP38 selected is the route I see most recommended.
        bdamm 12y ago
        Very convenient!
diegocg 12y ago
That's the only thing about bitcoin that actually interests me, how easy is to make payments cutting and pasting some text. But everything else surrounding bitcoin, I don't find it useful at all. I just want/need something like bitcoin, but connected to my €-denominated bank account. I don't want or need an alternative "digital currency" and I find the mere idea of one stupid, I just want to make exchanges with current currencies (which are already "digital", something that for some reason is missed all the time, maybe because it's much easier to get attention on the internet using buzzwords). Because bitcoin wants to be a currency, and a decentralized one at that, it needs to do the cool, but weird shit that the blockchain is. All the cryptography behind it, i find it a massively complex waste of time that only gets justified because of the absurd fetish of decentralization. The world just needs to safely and easily exchange money through internet, nothing else. An overengineered solution that tries to workaround the current financial system for no good reason is not a great solution for that need IMO. I'm hoping that at some point someone (banks, credit card companies, paypal) will end up doing what bitcoin doesn't wants to do.
- Natanael_L 12y ago
  So you want Ripple, essentially. You should be aware that anything dependent on a small set of entities can fail spectacularly. You never know if they get hacked, bankrupt, sued, raided, etc ...
  - Alex-Galapagos 12y ago
    Ripple is a rip-off. You buy a gift card and the money stays there..
    - wcummings 12y ago
      Ripple allows people to issue cryptographically secured debt securities, not sure what you think it is

edpichler 12y ago

Very good comment.

sassypants 12y ago

What exactly is the problem with a store of value with 500% annual returns? I read people talking about the supposedly awful volatility, but they fail to mention that the volatility has a very distinct trajectory. Bitcoin is volatile as it increased in value by orders of magnitude year after year. The article repeats this fear of volatility in the context of one's live savings. How frequently do people tap their life savings to pay for grocery runs? Isn't it the case that Bitcoin is by far the best possible store of value one could have adopted for their life savings over the past five years?

lxmorj 12y ago
Dude, go look up tulips on wikipedia.
- sassypants 12y ago
  Bitcoin has shown predictable, steady growth sustained over a many year period. https://i.imgur.com/kV2IRT5.png https://i.imgur.com/kV2IRT5.png Tulips experienced exponential an order of magnitude shift in price during the course of one year in 1637. Unlike tulips, Bitcoin is widely appreciated for its utility. I don't think the comparison is as meaningful as critics would make it out to be. Steady logarithmic growth in valuations is a normal phenomenon among tech startups -- yet it seems to me that many otherwise smart people are flustered by this growth when applied to Bitcoin, thinking it must be too good to be true.
  - teraflop 12y ago
    > Tulips experienced exponential an order of magnitude shift in price during the course of one year in 1637. Did you fail to notice that your Bitcoin graph shows several occurrences of order-of-magnitude change over less than one year? Anything can be made to look "steady" if you plot it on a log scale.
boucher 12y ago
Unless of course they invested when bitcoin was over $1000. Ever heard the phrase "past performance is not an guarantee of future returns?"

FatalLogic 12y ago

>Bitcoin has a lot of problems as a unit of account and as a store of value, but that is not primarily what Satoshi was building Yes, if you see bitcoin as a meme (in the traditional Dawkins sense of the word), then the unit of account aspect makes it a self-financing meme. The speculative frenzy may be unpleasant, but it is necessary bootstrapping mechanism, and not accidental.

SilasX 12y ago
Exactly. This is the point that's under-appreciated. People talk about the economic optimality of a currency that has an intelligent issuer who can adapt the supply as needed, and how Bitcoin locks you into a specific (and depreciating, yikes!) supply path -- but that's just the nature of bootstrapping a currency, let alone one without huge guarantors! If someone had said, "Hey, I'm starting a very thinly-traded currency and we're going to appoint an elite circle to have arbitrary authority to issue more whenever" ... eh, it's a much weaker sell, to put it mildly -- even if some ideal currency does have that property.

mbesto 12y ago

> Bitcoin has a lot of problems as a unit of account and as a store of value, but that is not primarily what Satoshi was building (https://bitcoin.org/bitcoin.pdf https://bitcoin.org/bitcoin.pdf). Bitcoin is, and has always been, a medium of exchange first and foremost. Which is consistent with the primary function and origin of money: because there is a division of labor it means a common medium of exchange must exist. The secondary functions of money - store of value and unit of account - are precisely that...secondary. You can't have the secondaries without the primary (see: gold). I sort of wish the OP wouldn't have made the characteristic of money as being a medium of exchange out to be a "oh well money is also this". The problem is that the press got a hold of Bitcoin for it's secondary reasons and drove the eyeballs to that without defining the problem to begin with: our medium of exchange, globally, is broken. IMHO, Bitcoin adoption curve is taking exactly the course it should be: the exchanges that are at most threatened by poor inefficiencies ("third world") are seeing the most benefit. The first world doesn't have a problem moving money because there are solutions...they just cost money. Third world doesn't have solutions. Once they all see benefit the "first world" will adopt. It won't happen overnight and it shouldn't.

seliopou 12y ago
You have the supervenience[0] of "medium of exchange" and "store of value" reversed. If something is valuable then there will be demand for it. In fact value and demand in the domain of economics, according to Aristotle, are equivalent. (Aristotle also wrote over two thousand years ago that money is not "real" but that's another story.) When there is demand for something it can become a medium of exchange. Asserting that something is a medium of exchange does not make it so unless there is underlying demand for that something. Primary and secondary is the wrong way to think about. "Medium of Exchange" is a high-level property that depends on the lower-level property "In Demand". And that is why the value of, or the demand for, bitcoin is critical to its success as a payments platform. [0]: http://en.wikipedia.org/wiki/Supervenience http://en.wikipedia.org/wiki/Supervenience

maaku 12y ago

Bitcoin (the currency) is a terrible medium of exchange. It may make for a decent store of value. Are you sure you're using those terms correctly? Bitcoin (the protocol) is awesome for payments. But that is a separate issue from the monetary policy underlying bitcoin (the currency), which is stacked against being a medium of exchange.

pnathan 12y ago

Agreed. I've generally come around to this idea. I'm not even sure "bitcoin" as the blockchain of today needs to exist. But the distributed blockchain of transactions for financial transfers seems to be a really great idea.

rsp1984 12y ago

Let me ask a dumb question: If money exchange is the main problem that Bitcoin solves, then why isn't the problem of money exchange attacked directly instead, i.e. through some other less volatile classical stores of value like gold or stock? Why is money exchange a problem anyway and why couldn't a classical wire transfer solve the problem? The article doesn't say anything about these things and the underlying principles other than that it's "suprisingly difficult". Instead it goes right into proposing a solution based on Bitcoin and making big picture comparisons with network protocols that probably sound very smart to the right audience. Given the amount of agreement and hype that the article has received so far, I feel a bit like an outsider right now questioning what is proposed. I think I just don't get it. Is everybody just a lot smarter than me or does the community miss to address some basic questions here?

pmorici 12y ago
The answer for why Bitcoin instead of Gold or stocks or whatever comes down to trust and logistics. Take Gold for example you have to have to either ship the gold around which is expensive and slow or have a trusted third party store the gold and handle netting out the transactions between entities or accept delayed payment and trust that the counter party will deliver the underlying asset. Bitcoin does not require trust in anything except the math underlying the system.
- Vik1ng 12y ago
  You are completely ignoring that you still have to trust your own security and 3rd party apps and services.
  - XorNot 12y ago
    Also that BTC has no chargebanks, fraud detection etc. Once its gone from your account its gone.
    - Natanael_L 12y ago
      Multisignature services enable escrow and fraud detection, etc.

samstave 12y ago

Has/Is someone building a payload VPN transaction system based on the bitcoin protocol?

chatmasta 12y ago
Working on it. (Also was researcher for TorCoin). Get in touch if you're interested -- email in profile.

patcon 12y ago

I think it's a shame that Balanced Payments didn't wind up their PR machine when their CEO was talking about this same stuff last January: https://soundcloud.com/aroundthecoin/podcast_01_18_14 https://soundcloud.com/aroundthecoin/podcast_01_18_14 They're not doing the best job at demonstrating it, but I think they've been looking at Bitcoin in a clever way for much longer than Stripe :/