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After reading so many essays about all the benefits of cryptocurrencies like bitcoin, I've come to believe the proponents have an incomplete view of how any dig

by jasode 12y ago

After reading so many essays about all the benefits of cryptocurrencies like bitcoin, I've come to believe the proponents have an incomplete view of how any digital currency with mainstream success would ultimately interact with the real world. For example, proponents argue that bitcoin frees ordinary people from the tyrannies of the governments' central banks. Their reasoning: the governments can't control/inflate/dilute bitcoin -- therefore, it is an honest currency. The flaw in that reasoning is that governments can control bitcoin or any digital currency and they don't need the NSA to take over 51% of computing hashes to do it. Here's an example... the United States of America sees that bitcoin transaction volume is a threat and therefore, they pass new law that renders all contracts using bitcoin as consideration to not be enforceable in the U.S. court system. That's the problem with bitcoin. Bitcoin doesn't come with its own court system or its own police force. Basically, it doesn't come with its own government. Government is its own government. This blind spot in so many bitcoin essays is like idealistic pirates thinking they can buy some abandoned offshore oil rig, declare sovereignty, and then run copyright infringing web servers from it. Well, the fiber optic cables from that platform have to ultimately connect to USA, Europe, etc. You can expect that governments (there's that inconvenient govt again) can prevent it from connecting. I do think a digital currency will be the eventual dominant payment system. It's inevitable. It may be bitcoin, it may not. I contend that whatever it ends up being, it will be allowed to exist at the pleasure and approval of the government. To me, the interesting thing about bitcoin is the technology of a "worldwide digital public ledger." There are lots of legitimate progress and offshoots of the technology that can be made from that. On the other hand, the dreams about bitcoin being a mechanism to subvert the governments is nonsense.

Brakenshire 12y ago
In any case, there seems to be little consideration about what the consequences would be for a currency without a central bank. If you could eliminate inflation, that may well be great for some individuals, but that doesn't mean the economy will function. People who are arguing for a cryptocurrency without inflation are relying on the same economic arguments as those who want to return to the gold standard. I'm glad decisions like that are made through democratic processes for the good of the whole society and economy, not just one-dollar-one-vote by capital holders.
deleted 12y ago
[deleted]
vectorpush 12y ago
> I do think a digital currency will be the eventual dominant payment system. Government issued money already falls under the category of "digital currency" as far as most people are concerned. I doubt that blockchain based currencies will ever see mainstream adoption because the only thing they bring to the table is decentralization; a feature that the overwhelming majority of people will never need. I'll concede that decentralization is probably a desirable trait, and if decentralization came free with the switch to bitcoin, I think there would be a compelling reason to expect that bitcoin would eventually see wide adoption, but decentralization is not free, it's extremely expensive, and once miner subsidies disappear and the true price of securing the network becomes an upfront cost to general users, nobody will even consider using bitcoin except in situations where decentralization provides tangible benefits (i.e. for incognito transactions). There will always be individuals who want to perform digital transactions outside of the traditional system, so cryptomoney will probably always be with us, but barring the unforeseeable, there just isn't any reason for its usage to grow much beyond the current niche.
- aminok 12y ago
  >but decentralization is not free, it's extremely expensive, and once miner subsidies disappear and the true price of securing the network becomes an upfront cost to general users, nobody will even consider using bitcoin except in situations where decentralization provides tangible benefits (i.e. for incognito transactions). The cost of securing the network fluctuates to match mining revenue, which in turn is determined by the market price of bitcoin and the number of bitcoins being rewarded to miners for each block they generate. In other words, when the block subsidy decreases, the security of the network will decrease, the average transaction fee will not increase. Now, increases in total transaction fees could potentially compensate the loss of mining revenues from the subsidy declining, if transaction volumes increase, but the average fee per transaction will always trend toward the very minimal cost for a miner to process it.

by jasode 12y ago

Brakenshire 12y ago

In any case, there seems to be little consideration about what the consequences would be for a currency without a central bank. If you could eliminate inflation, that may well be great for some individuals, but that doesn't mean the economy will function. People who are arguing for a cryptocurrency without inflation are relying on the same economic arguments as those who want to return to the gold standard. I'm glad decisions like that are made through democratic processes for the good of the whole society and economy, not just one-dollar-one-vote by capital holders.

deleted 12y ago

[deleted]

vectorpush 12y ago

> I do think a digital currency will be the eventual dominant payment system. Government issued money already falls under the category of "digital currency" as far as most people are concerned. I doubt that blockchain based currencies will ever see mainstream adoption because the only thing they bring to the table is decentralization; a feature that the overwhelming majority of people will never need. I'll concede that decentralization is probably a desirable trait, and if decentralization came free with the switch to bitcoin, I think there would be a compelling reason to expect that bitcoin would eventually see wide adoption, but decentralization is not free, it's extremely expensive, and once miner subsidies disappear and the true price of securing the network becomes an upfront cost to general users, nobody will even consider using bitcoin except in situations where decentralization provides tangible benefits (i.e. for incognito transactions). There will always be individuals who want to perform digital transactions outside of the traditional system, so cryptomoney will probably always be with us, but barring the unforeseeable, there just isn't any reason for its usage to grow much beyond the current niche.

aminok 12y ago
>but decentralization is not free, it's extremely expensive, and once miner subsidies disappear and the true price of securing the network becomes an upfront cost to general users, nobody will even consider using bitcoin except in situations where decentralization provides tangible benefits (i.e. for incognito transactions). The cost of securing the network fluctuates to match mining revenue, which in turn is determined by the market price of bitcoin and the number of bitcoins being rewarded to miners for each block they generate. In other words, when the block subsidy decreases, the security of the network will decrease, the average transaction fee will not increase. Now, increases in total transaction fees could potentially compensate the loss of mining revenues from the subsidy declining, if transaction volumes increase, but the average fee per transaction will always trend toward the very minimal cost for a miner to process it.