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Comment by fortythirteen | Hacker News Reader

More than anything, the cost to transact with Bitcoin or Etherium (which this article weirdly focuses on), stagnates mainstream adoption.

Sure, I could create my own coin to use as an in-app currency for my project, but why? A coin is only worth what you can buy with it, and nobody is going to sell anything worthwhile with some random, in-app coin.

Even Bitcoin was just abandoned by Microsoft, because it's so overpriced you'd have to be insane to trade anything for it other than high-risk investment cash.

Until this bonkers hype cycle gets to the peak of productivity, the blockchain has no real world purpose other than as a shared database.

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I don't think it's weird to focus on Ethereum as, as the article correctly states, most new currencies are not a separate chain themselves but are simply tokens on the Ethereum blockchain. Ethereum is also the only blockchain with a real developer community, and the article focuses on building applications.

Microsoft didn't abandon Bitcoin because it was overpriced, they abandoned it because it was volatile.

One could argue that a blockchain's only real world purpose is as a shared database, just as http's only real world purpose is the transfer of data between computers.

> Microsoft didn't abandon Bitcoin because it was overpriced, they abandoned it because it was volatile.

It was "volatile" when they adopted it. It's now volatile and overpriced. If MS thought that Bitcoin was a good investment, volatile or not, they would have stuck with it. "Volatile" is acting as an excuse for their real sentiment, that it's time to short Bitcoin.

You don't generally hold onto Bitcoin when you take it as payment, you sell it immediately, so no, Microsoft was not "investing" in Bitcoin by taking it as a payment for their products and they're not shorting Bitcoin either.

The volatility is what makes it untenable as payment, as you can't sell it fast enough to ensure that you get the same exchange rate you gave to the customer.

> The volatility is what makes it untenable as payment, as you can't sell it fast enough to ensure that you get the same exchange rate you gave to the customer.

Absolutely false. Speculation has driven the value of bitcoin so high that the average transaction fee, at the time of writing this, is about $31. Buying a $59.99 game for Xbox One will cost you $90 in Bitcoin. That is an individual hash, that must be consolidated into a larger wallet for MS to sell off. Consolidating that hash will cost a transaction fee, meaning that, on a $60 game, MS will lose over 50% of the gross profit in a transaction fee.

That alone makes it not worth it. The only thing that would allow them to retain a higher percentage of the transaction would be for the Bitcoin bubble to burst, making that whole $60 worthless.

Bitcoin could be wholly volatile within it's 2016 prices and MS would be just fine. It is directly because of it's exploded, overpriced value that it's untenable as an actual currency.

I have a question as a relatively uninformed spectator: where do these transaction fees go and why do they have to be so high?

A miner that successfully mines a block collects all the transaction fees for transactions in the block. They are high right now because many people want to send transactions, but blocks are capped at 1 MB, limiting the number of transactions that can fit into one block. Blocks are produced approximately once every ten minutes, so a transaction that contains a fee that’s too low will constantly get passed over in favor of higher-fee transactions.

> where do these transaction fees go and why do they have to be so high? They go to the miners who verify transactions. They're high because of the combination of the overall ridiculous price of bitcoin (since the miner gets paid in bitcoin) and the amount of computing power required to successfully mine. The latter means that miners are only willing to verify if the return over time will turn them a profit on the cost of hardware.

please tell us the real reasons. microsoft to short bitcoin. do you know gossip about VPs too?

> Microsoft didn't abandon Bitcoin because it was overpriced, they abandoned it because it was volatile.

Volatile and also large fees.

Here is Steam describing why it was a pain of using it: http://steamcommunity.com/games/593110/announcements/detail/...

> One could argue that a blockchain's only real world purpose is as a shared database, just as http's only real world purpose is the transfer of data between computers.

So far it seems like the only thing anyone actually makes based on this shared database are new mini-currencies.

Again, useful applications being crowded out by speculative ones. Why bother making anything if you can apparently trivially print money. Until the bubble ends.

Can we at least articulate a useful application, one that takes into consideration economic viability in the context of the decentralized consensus engine's extremely high resource cost and extremely poor performance?

>stagnates mainstream adoption

Bitcoin/cryptocurrency is stuff for rich and tech-savvy people.

- Folks with stressful and demanding jobs probably won't bother with full-time security measures to protect their wallets.

- The same group won't have time to watch every piece of crypto news about which service or product is possibly bad/hacked (see electrum wallets).

- Extremely high volatility means you need to be prepared to essentially lose the dollar value of your bitcoins.

Rich people can hire someone to do these things. They can also likely afford to lose whatever balance they tie up in bitcoin without affecting their standard of living.

Rich people can also manipulate the price, and mainstream and retail investors are never going to know about that (see: people who bought in at $19k during that hype cycle).

Rich people can afford astroturfing services to spread memes and good morale to pump the price. Rich people likely have significant control over hype cycles and may even be pumping other cryptocurrencies to start diversifying.

Tech-savvy people may have less-stressful jobs or jobs where they can browse the internet to keep up with cryptocurrency news. But at least they can manage the security considerations likely from previous knowledge.

Ultimately, crypto will never really be a product for poor/middle-class people. It's just a terrible idea. You're relying on a system that has virtually no accountability other than businesses dying (and how hard is it really to spin up a new crypto service if you're a rich person?)

> Rich people can afford astroturfing services to spread memes and good morale to pump the price. Rich people likely have significant control over hype cycles and may even be pumping other cryptocurrencies to start diversifying.

That's super interesting. We assumed that the decentralization of content brought on by the Internet and social media would put a stop to stuff like that, but instead, due to anonymity, simply painted a veneer of populism over the same old trick. It worked for the election, so why not apply it to manipulate speculative investments?

ICO is a way to get around the reporting requirements of an IPO and the minimum-net-worth requirements for private investments by regular folk (ostensibly to protect them from exactly this kind of asymmetric information, speculative manipulation that occurred in the roaring 20s...).

It's really easy to get into tinfoil haberdashery territory, but IMHO, the two main areas of manipulation that are worth it (these days at least) are finance and politics.

Bitcoin has the advantage that it lacks any significant regulatory oversight or penalties while being useful across borders, which regulatory agencies are usually constrained by.

In today's world I think having no foil in your hat is naive. We are living in a cyberpunk novel collaboration between William Gibson, Neal Stephenson, and Tom Clancy.

Doesn't mean you should uncritically buy into conspiracy theories without evidence, just that considering the possibility of manipulation and shenanigans is entirely reasonable.

It also doesn't add value in the first place. If you're a citizen in the USA for example, you probably have a credit card that you can use to instantly make payments either in person or online. If someone hacks your CC info, they don't get to immediately drain your bank account, and in fact usually you lose nothing after contesting it. The fees are generally avoidable, depending on the card.

The only significant benefit that cryptos offer is a scheme that allows you to make payments without handing over your credit card number in case you're not sure some sketchy site is legit. So really, the big appeal of crypto was being the new Paypal. Personally, I would like an open source or federated replacement for Paypal that makes it easy to pay everywhere online without entering a CC, but I would rather not try and create and buy into a new currency in the process of doing so.

Maybe something like GNU Taler can fix the credit card problem, but I'm not holding my breath on bitcoin.

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