What Bitcoin’s White Paper Got Right, Wrong and What We Still Don’t Know (2018)
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Anyone can query at any time the total amount of Bitcoin that have been issued without relying on anyone. After downloading the Bitcoin client just run gettxoutsetinfo
You can try to guess how many dollars have been printed or how many bars of gold exist.
If you view Bitcoin as a payment network like VISA then obviously there are many things the network needs to improve but if you view it as a savings technology then it's the best one that's ever been created. I never understood how "But Can I buy Starbucks with Bitcoin" became a meme, I don't expect to be able to buy Starbucks with Apple stock.
Claims that Bitcoin burns useless energy or doesn't have feature X completely miss the point. Avoiding capital controls like in Lebanon, protecting yourself from hyperinflation due to corrupt governments with a printing press like Venezuela are Bitcoin's killer features.
It's common to view hyperinflation as something unique to corrupt countries but that's only because CPI is a dishonest way to aggregate inflation data. Inflation is a vector NOT a real number, any asset that people care about has become generally unaffordable i.e: housing, education, healthcare.
BS crypto vendors are looking for the next big application of blockchain technology when inflation protection and avoiding capital controls are arguably the most impactful innovation since the internet. Bitcoin and Time are the only 2 scarce assets that exist in this world.
IMO this crown belongs to ETFs.
Putting all your eggs in the Bitcoin basket would be an extremely risky strategy. A portfolio of ETFs is a much better place for most people’s savings.
Read about Authorized Participants if you're confused as to what HFT has to do with ETFs. Overall it's a decent improvement over the very old idea of open-ended funds, given the recent digitalisation of trading and super fast market making with tiny spreads.
PS. I like ETFs, I think they're achieving exactly what are they supposed to achieve.
Bitcoin is borderless, permissionless storage of value. Game theory built in (anyone powerful enough to attack the network is better incentivized to participate in it.)
So is Bitcoin.
Otherwise it's just numbers hopping around anonymously on a ledger.
That’s tax evasion.
I know it’s chic to be callous about tax fraud in some cryptocurrency circles. But the same has been true of cash, art and bearer bonds for centuries.
This is why Bitcoin is an existential threat to government power. I personally think it's empowering and great for the individual, however if you tend towards more statist views then this would seem like anarchy.
I don't want some drug lord to pump/dump/coerce/tax-evade their way into being the richest person on my continent, and then hire an army to take my nation over. That is easier with crypto currency than it is with fiat.
The tech community dropped the ball in the '90s by being panglossian about the potential problems with the web. It would be nice if, this time, we could get ahead of the ball with crypto currencies.
The ideal case would be a hybrid system of state fiat and cryptocurrencies where liberal democracies incentivize their citizens to use fiat through better governance and services while also respecting the sovereignty of individuals to accumulate value that cannot be debased by dumb political decisions.
Why not both?
The liberal democracies are pretty open and positive on cryptocurrencies. So no, it does not seem to be threat to them.
Instead, it is more of a threat to the less liberal countries.
If large portions of the economy aren’t paying taxes, I am not paying taxes. This breaks down the social contract. Given authoritarian nations’ increased force projection, this vision of cryptocurrencies first corrodes liberal democracies, where those not paying have courts and Constitutions between them and the state.
Nope! Liberal democracies allow cryptocurrency and it very well could be the case that some of these crypto events are non taxable events.
Thats just working within what liberal democracies allow.
> have courts and Constitutions
Courts and constitutions are pretty important in liberal democracies. I support the protections that those provide, personally.
Seems more likely that they’re going to be wiped out before then by either a fraudulent/bankrupt exchange (if they never moved the funds to a Bitcoin address) or by losing the private key (if they did).
This technology is absolutely not where a Sussex nurse should park their hard-earned pennies at this point.
The same monthly payment into globally diversified ETFs is almost guaranteed to be liquid and in gains in 2050. If it’s not, the global collapse has rendered the Bitcoin thesis untenable too.
Also, there are "safer" / "more classic" way to buy such puts, gold bullion works wonders in times of severe disruption, and I don't think it's unreasonable to commit 5-10% of your capital to gold, almost regardless of personal situation and net worth levels. Of course you never know when the next "Executive Order 6102" happens, but there's kind of no good solution for that :(
(all of the above are personal opinions, feel free to disagree as much as you like)
I used to hold Bitcoin at various times in the past, and I would absolutely not recommend Bitcoin to anyone unless they truly can stomach total loss on the "investment". This means appropriate position sizing, alignment with current personal financial situation and personal plans/goals/objectives. And don't even think about leverage here.
Bitcoin is a terrible savings vehicle for the same reason cash in checking accounts or collectibles are: there is no basis for its value.
Baseless assets other than gold have been numerously proposed, usually about once every generation in every cultural sphere going back to Republican Roman times, but unvaryingly fall out of favor. This is why savvy portfolios consist of productive assets, not Beanie Babies.
Cash or collectibles don't have the same monetary properties as bitcoin or gold. Most importantly, they can be created from thin air.
It is fiat tied to used value not means to gain value.
On the other hand, you can manufacture useful things from metals, including precious metals. Heck, even old school non-precious metal coins have some of that value.
You can assess approximate purity of the metal with very low-level technology (https://en.wikipedia.org/wiki/Touchstone_(assaying_tool)). Transactions thus have a lowered barrier of trust. Before gold and money, you could only transact in debt to labor (see debt: 5000 years) or socialized obligations, and to be sure the person would conduct that labor, you had to trust them, or trust society to honor the obligation.
More interestingly in particular, once gold came into being, two people could reliable transact over a very long social distances, (without necessarily knowing each other's reputation). You just had to trust an intermediary party to transport the gold. Nonetheless, that opened markets up considerably.
And especially items made with the use of gold can get really worthwhile - such as semiconductor chips...
So in a funny indirect way, Bitcoin is tied to gold. Both of which are tied to specific costs of labour. Bitcoin however requires a lot of expensive infrastructure to run to be worth anything. (Esp. networking, required to ensure no fake mined bitcoins are in circulation.)
Even printed cash is better at this.
What am I missing?
Basis links the asset to other assets. That makes it less likely your asset will singularly get discounted relative to the broader economy, i.e. lose purchasing power. It is still exposed to systemic risk, but so is everything.
Baseless assets, like diamonds and paintings and Bitcoin, derive their value solely from perceptions. That can be somewhat stable over the short term (up to 20 to 30 years). But it tends to fall apart between generations or through culture-changing crises.
Put another way, investment assets are tied to productive uses in some way. Baseless assets are not.
Bitcoin has been a very good savings vehicle over the past 12 years in terms of long term moving average. Like social networks such as facebook, gold, etc, it has network value and these tend to be hard to break when at scale (there are many forks and all are worth nothing). Bitcoin is now (aside from ETF's and 401k's) the single most held liquid tradable asset on earth. More people own it than stock in Apple (not in ETF or 401k form).
You think the gold MC is based on utility? There is not a 9 trillion electronic plating and jewelry market. Jewelry is also by extension speculation on the metal. 95% of golds market cap is through the same value social network that gives bitcoin value. Except I've owned physical gold and its a pain in the ass for so many reasons. Bitcoin is a better store of wealth. Its something that is useful and limited to many including myself and has reached the beginnings of mass adoption. It has value.
So you can continue to call it a beanie baby but that old phrase has been said since 2011. How long can you shake the cane at the sky? Even JP Morgan and Goldman Sachs have come around in addition to Paypal and the others. The entire legacy financial system is adopting at this point.
10 years is a long time to hold an erroneous belief based on a misunderstanding of what money and assets are. I had the same wrong beliefs as you do now for a long time and misallocated capital at a crucial moment. Parker Lewis explains[0]:
> [Bitcoin] is backed by the only thing that backs any form of money: the credibility of its monetary properties. Money is not a collective hallucination nor merely a belief system.
An interpretation:
Money is an emergent property of human cooperation to allocate capital, labour, and limited resources. (i.e. economics). Productivity is the use of time and energy in the satisfaction of human preferences.
What are the properties a money, be it gold, cowrie shells, baseball cards, nudes, exploits, fiat currency (legal tender), must strive to meet for humans to recognise it as "a money": durability, portability, divisibility, uniformity, limited supply (scarcity), and acceptability. [1]
Incidentally, if you pick up a US dollar bill, you'll see the inscription: "this note is legal tender, for all debts public and private." Therefore, that note derives its value from the implicit debt underlying it. That debt is based on some person's labour in the creation of a product or delivery of a service.
[0] https://unchained-capital.com/blog/bitcoin-is-not-backed-by-... [1]: https://www.stlouisfed.org/education/economic-lowdown-podcas...
That is not what legal tender and “for all debts public and private” mean [1]. That language refers to dollars being currency “courts of law are required to recognize as satisfactory payment for any monetary debt”.
On the Parker Lewis article, it’s cute but contrived. A straw man. Bitcoin is backed by nothing. U.S. dollars are, similarly, backed by nothing. Saying they’re suspended by shared perceptions is technically true, but implicitly re-defines backing to a meaningless word.
That's exactly what I said: that physical note has value only in so far as there is a debt with which to pay it. That debt is the value someone else's productivity created. If your dollars are backed by nothing, please send them all to me so I can keep them for you.
There's no such thing. That it can be used to pay debts doesn't mean there are debts underlying it, implicit or explicit. It means that if you incur a debt, and you have one, you can use it to resolve the debt.
This is a misunderstanding that guides the idea that we can print money arbitrarily. I'm not saying I am right but I am saying that there's a distortion in our understanding of fiat currency that we need to keep thinking about by examining our base assumptions.
Consider: The only reason to receive a dollar is because I've provided you with a service or product. You need to pay for that, therefore you have incurred a debt (we might agree that you pay in 30 days, but even if you pay in 16ms, you had a debt for that amount of time). That dollar, then, is the value of that debt, which is the value of my labour. When it's not the value of my labour, you have either underpaid or overpaid. That dollar is just a paper. The only reason you or I think it's valuable is because we can use it to pay such debts that actually exist in reality. A dollar is an abstract unit of such a debt.
It's legal tender because a government promises to enforce debt repayments using fiat. The government creates the currency, the enforces its ability to pay individuals using that currency, and requires individuals to pay the government, through taxes, in that currency.
It should then be easy to measure the productivity of a nation by "looking" at the total money supply. If we print money, then prior valuations of productivity in such transactions are debased: I gave you a dollar for your algorithm yesterday, but today there are twice as many dollars. You would have charged me 2 dollars, had you known more would be printed!
That's the hypothesis: a dollar is a measure of value of the debt incurred during transactions between productive humans/machines. Holding that dollar implies a debt to me was paid. The dollar stores the value of that productivity for me and allows me to pay a future debt I will incur.
dollar <- debt <- transaction <- productivity.
I personally know someone whose Lebanese family had food on the table for awhile in large part because of Bitcoin. They aren't even particularly interested in Bitcoin. It just happened to be the thing that worked best for their situation.
I live in a Canadian neighboorhood with lots of immigrants from poorer countries. There's a Bitcoin ATM near me that seems to get a decent amount of usage, mostly by people who look like they might have family in other countries. It might get even more usage, if not for the fact that buying Bitcoin in Canada is pretty easy via exchanges like Kraken and Bull Bitcoin.
Do you exchange the Bitcoin for local currency first (and if so, how) or do you pay the mill or butcher directly in Bitcoin (and what do they do with it at that point)?
I'm specifically not asking about preserving wealth in the abstract - I'm curious about the mechanics of how it's used to put food on the table.
I guess maybe the question I should be asking is, who are the people who run the exchanges and how do they work? Why are they interested in accepting Bitcoin in exchange for more liquid currency, and where did they get that liquid currency in the first place? How do they determine the conversion rate? (Are they wealthy locals who already have lots of cash holdings who want to be wealthier and are willing to sell that cash for Bitcoin at a premium because they intend to hold the Bitcoin long-term / after major political changes?)
I have lived before the internet, and asked myself the question if I would choose that world without internet, or go back to inflating my money, and for me it's obvious: I would rather give back internet than Bitcoin if I had to choose. Of course as Bitcoin sits mostly on top of internet, something like this is technically almost impossible :)
Inflation protection? Bitcoin lost one third of its value in the past three years. How is that inflation protection? You would have done better to hold most commodities or most currencies in that time period to protect from inflation, other than Bitcoin.
No-one in their day-to-day usage of dollars (or gold) directly cares how many currency units exist. What they care about - and what is very easy to know, is what the purchasing power of their currency is.
This is an artefact of economic policy and education that has brainwashed us into believing in the time value of money, that is "money now is worth more than the same amount of money in the future." This directly implies a preference for debt and consumption over saving. But the fact is that the purchasing power of a currency is a function of its supply relative to the productivity of the workers in the economy, not the discretionary consumption of individuals in the economy. That is, a currency is only useful to the extent that it allows us to value productivity accurately.
Productivity increases over time, therefore goods and services should become cheaper relative to dollars, that is, a constant amount of money I hold should be worth more — able to buy me more stuff — in the future than it is now.
If you don't care how many actual dollars exist, then fundamentally, you and all the other market actors have no way of discovering the true price of anything. It's all just guesswork, with someone else (the government) putting a thumb on the scale to increase asset prices. The price of what you just bought is whatever you were convinced to pay for it with varying relation to its actual value.
Consider: we don't actually know the value of houses. A couple goes to buy a house and immediately takes out a mortgage to pay >40% of the quoted price. So house owners are incentivised to quote higher prices because of mortgage availability. Contractors and developers similarly inflate prices of their services. Similarly with materials suppliers and landholders. The entire market is distorted because we don't know and don't care and are encouraged not to care how many dollars there are in existence relative to the productivity of humans.
It's not entirely an evil conspiracy in which most of us participate but it is a terrible accident humanity has found itself in.
So, think from first principles and ask yourself: what is the true value of the thing I just bought. It's a helpful exercise in day to day life.
I do. Because it affects its value. Why do you think USD is falling against the EUR?
Look at Venezuelan Bolivar or Zimbabwean dollar if you want to see how bad inflation can be.
I am sorry but this is just silly and reckless. Although bitcoin is somewhat less noisy than it used to be, it is still a volatile and extremely high-risk investment. Whatever merit bitcoin might have on the long-term economic fundamentals, right now bitcoin is mostly a speculative instrument, or an investment on computing technology.
You do not want to put your savings into something where the price has repeatedly dropped > 60% in a single week. It can be part of a larger strategy: I could see x treasury bonds, (1 - x) bitcoin as a sensible high-risk tactic. But putting all your savings in bitcoin is dangerous.
This is true but a) there's no reason to think this will be true for another 10 years, and b) if you had invested in November 2013, you wouldn't have seen a profit until 2017. 4 years of being in the red is a hard pill to swallow if you're not diversified.
Things that might look really bad for months, but work out in the end are better investments than savings. I think it's just silly to pretend Bitcoin is anything but
a) an interesting technology that enables a lot of cool internet finance tech and helps people who live in countries with profoundly unstable economies
b) a risky speculative investment on something that's correlated with the price of CPUs, graphics cards, and electricity, and is prone to major supply shocks
Cherry picking the singularly worst point.
> 4 years of being in the red is a hard pill to swallow
For which you would've been rewarded with nearly all of the months since 2017 with 500%+ gain, and as of now and also for quite a number of months since 2017, 1000%+ gain.
> there's no reason to think this will be true for another 10 years
Just one more bull run like those previous is going to put Nov '13 buyers at 10,000% gains, and if history comes close to repeating itself that will occur within 2 years.
> if you're not diversified
then you disregarded the single most repeated quip of investing advice in the bitcoin community - no more than you can afford to lose.
History didn't come close to repeating itself with Tulips, Beanie Babies, or Pokemon Cards.
You're exposing an understandable lack of familiarity with recent history when you make such statements. Bitcoin mining hasn't been dependent on CPUs or gpus for a very long time. ASICs (Application Specific Integrated Circuits) dominate bitcoin mining to the extent that it's long been unprofitable to bother using a GPU.[0]
But even if we assume that bitcoin's price is correlated with the price of CPUs and electricity, what is the nature of the correlation?
Naively assuming an ill-defined correlation, we would nonetheless expect bitcoin's value proposition to be deflationary, as all technology is, that is bitcoin makes cost of securely holding and transferring value cheaper as technology continues to improve, which would increase the value of bitcoin, not reduce it. That is, while fiat currency is subject to debasement (money printing makes you lose money the longer you hold it), bitcoin is not. So the value and utility of bitcoin increases, yet the supply of bitcoin is constant. Supply and demand easily implies price increase.
Right now, holding cash is a very costly activity, which is why everyone is constantly looking for investment opportunities. Bitcoin fixes that and becomes even better at, and more suited to, fixing that as technology improves.
> and electricity
Bitcoin dominance as money actually improves the security, efficiency, and competitiveness of energy production. Recall that once upon a time, countries that could produce energy cheaply couldn't export it because transporting energy long distances is expensive and in some cases impossible. Instead, they used their surplus energy to process aluminium[2]. They then exported the processed aluminium. Aluminium served as a means of exporting energy!
It's the same with Bitcoin. Reliance on a bitcoin standard forces energy producers to compete for efficiency and reliability of energy supply in order to secure the bitcoin network and guarantee their own profitability.(Goodbye to blackouts due to incompetence?[3][4])
In places where energy that is produced can't be stored or exported it has to be burned (e.g. in oil fields through flaring) Bitcoin mining can make use of the otherwise wasted energy and thus improve the efficiency of energy production.[1] This will also plausibly lead to profitable energy production/extraction with new technologies in places that might otherwise be too remote to be useful but that can connect to the bitcoin network via satellite. (undersea hydrothermal vents? volcanoes? the sahara?) Hypothetical, but the potential is massive and exciting. Bitcoin gives us reason to be optimistic about humanity's energy production and consumption.
[0]: https://download.wpsoftware.net/bitcoin/asic-faq.pdf
[1]: https://newmoneyreview.com/index.php/2019/10/18/peter-thiels...
[2]: https://cordis.europa.eu/article/id/19086-ambitious-plans-fo...
[3]: https://www.latimes.com/environment/story/2020-10-06/califor...
[4]: https://www.bloomberg.com/news/articles/2020-09-02/eskom-ext...
The question then is whether 7 tx/sec really is sufficient to support broad global adoption, even if it's just for savings. Dollars and physical gold have no such limits. Other blockchains are vastly expanding scalability, as well as eliminating the energy usage.
Another issue is whether Bitcoin can maintain its monetary policy for the long term. Here's a paper from Princeton saying that if miner rewards are dominated by transaction fees rather than block rewards, the chain destabilizes, suffering frequent long rollbacks.
https://www.cs.princeton.edu/~arvindn/publications/mining_CC...
If they're right, some future generation of bitcoiners will have to choose between keeping the issuance schedule, and having a blockchain that functions reliably. There's no way for us to know which they will pick.
Personally, I think the right choice is a functioning chain. That last percent or two of inflation isn't a problem for maintaining value, because economies grow at the same rate. So does the supply of gold in the economy.
Yes they do, it takes even longer to move physical dollars or gold around and depending on where and who you are sending them too it might be impossible.
Sure in some mainstream cases you can send the digital derivative of gold and dollars to someone but those aren’t the actual asset just a representation issued by a centralized entity or a collection of them. Visas payment network isn’t moving dollars it’s moving digital dollars. Same with gold etfs. Let’s see them try to seize bitcoin and stop transfers it’s much harder
To get low latency on dollars/gold you have to go with centralized digital representations, but Bitcoin has to do the same to get more than 7 tx/sec.
I might still be a fan if that were the only option, but with other blockchains eliminating this restriction I have a hard time seeing the long-term value proposition of Bitcoin specifically.
It's a lesser issue if you can support a large number validating nodes using cheap hardware, they are frequently and randomly assigned to verify different portions of the history, and they always act as secure light clients of the other portions.
In fact, it might even compare favorably to the handful of major mining operations that mostly run Bitcoin, on expensive ASICs.
For comparison, "the global average download speed on fixed broadband is 85.73 Mbps as of September 2020"[1] so even if block sizes were triple their historic values it would still be possible for average global users to wait less than a day to complete the initial download.
[0] https://decrypt.co/42427/bitcoin-blockchain-grows-to-300-gig...
[1] https://worldpopulationreview.com/country-rankings/internet-...
A pruned state can be downloaded with no more trust assumptions than that required to trust the software distribution channel where you download the Bitcoin software from to actually serve Bitcoin.
Anyway, every one in the world doesn't need to run a full node. Even a few thousand geographically distributed full nodes is enough to offer resistance to network shut down, and there are more than a few million people that are capable of running a full node of a hypothetical Bitcoin with 1 GB sized blocks, which only requires downloading 1.67 MB/s of transactions to keep up with validation. That's a 1000 expansion of Bitcoin's throughput, letting Bitcoin become the world's most widely used currency.
The entire small block narrative is built on a shaky foundation that ignores the massive benefits of enabling more people to transact directly on the Bitcoin blockchain.
Nonsense. Bitcoin software releases come with widely publicized checksums and signatures from reputable sources.
More importantly, Bitcoin is ideologically opposed to the idea of checkpoints, as they run counter to the Longest Chain Rule that says the true state is whatever valid chain has the most cumulative work. Even if that chain is the result of a very deep reorg that invalidates the last checkpoint.
Greater amounts still would attract even more scrutiny due to AML and KYC regulations in most jurisdictions.
If you're dealing with capital controls, which many large economies now have, the complexity is exponentially higher. You're also assuming that telecommunications networks, physical infrastructure, particularly power, are in good working order when you want to do the transfer. That may be the case 99.99% of the time, but the edge case should also be a consideration.
the same is true of bitcoin, right? I mean gold will continue to be gold in the absence of power, but will bitcoin even exist?
The most damning critique of bitcoin is that it requires power to be free and infinite.
I worked at a retail store that turned over lots of cash — as much as $1M on a holiday weekend. The costs, risks and time associated with dealing with that amount of currency was very real.
As for the Princeton study...Ill have to look at it but I'm skeptical they consider things like more batched transaction volume per tx in the future which could be harnessed to also have a more concentrated fee structure providing stability to the chain. Also changes can be made through consensus if needed...like segwit.
The energy usage combined with proof of work is the backing. If you break that for Bitcoin als is left is trust. The energy used and consumed is like the USD tied to gold (which it is no longer since quite some time)
If you're referring to memory-hard hashing algorithms, I believe those are just resilient to ASICs/GPUs, but still require significant CPU energy. I'm not convinced those would be better for the environment, so if you're referring to those, do you also have an explanation for why they'd draw relatively less power?
They use less power simply because people are going to spend the same total amount of money in terms of compute hardware + energy, however RAM consumes less energy per per dollar spent on it than ASICs/CPU’s etc.
3W per 8GB of DDR4 is a reasonable baseline. https://www.crucial.com/support/articles-faq-memory/how-much...
Why? If OPEX is reduced (lower electricity costs), it's logical to assume that it will be replaced with CAPEX, given how competitive mining operations are. If that's the case, that will mean electricity being used to power ASICs being replaced with chemicals required to fab semiconductors (along with electricity for those fabs). It might be better in terms of GHG emissions, it would be a wash for overall environmental impact.
Did they end up solving the "nothing at stake" problem?
See https://eth.wiki/en/concepts/proof-of-stake-faqs (I can’t link to the paragraph).
That's disingenuous. It became a "meme" because for many years, bitcoin evangelists touted bitcoin as a currency replacement. You can buy pizza with bitcoins! Remember? It has and still is being sold as a virtual currency - after all you can't have cryptocurrency without currency.
> I don't expect to be able to buy Starbucks with Apple stock.
But you can actually buy goods with bitcoins...
You fall into the same trap as all evangelists, self-contradiction. I like bitcoins, I like cryptocurrencies, think the future is bright for blockchain tech. I just don't like bullshit.
[1] https://bitcointalk.org/index.php?topic=583.msg11405#msg1140...
[2] http://p2pfoundation.ning.com/forum/topics/bitcoin-open-sour...
Bitcoin was intended to be MONEY, instead it's pretty fucking useless for anything other than hoarding.
I think it will remain an asset class, but history will not be kind to it. It's going to remain relevant and valuable as an "antique", but likely there will come a cryptocurrency that realizes the original goal at some point.
It may not have been apparent how ground-breaking or important digital scarcity was at the time. Most of the time when we think of money, we think about how we use it in our everyday lives. We buy coffees, we pay for an Uber. But underneath all that, there is a deeper meaning to money. Why do we value money? It really just boils down to scarcity, liquidity, demand.
Money has all 3. However, the scarcity factor of traditional money is flawed. It relies on centralized parties, for which money is not actually scarce. They can and do alter the supply at any time. It's a tradeoff we make because fiat is so liquid / demanded / transactable.
Bitcoin is less transactable than fiat money in most regards, but it makes up for it in the transparency of its scarcity. If you were going to lock your wealth up for 25 years, would you put it in USD or BTC? More and more people would say BTC. I can tell you how many BTC will exist in the year 2050. I would have no way to do the same for any fiat currency.
The main risk to BTC is some sort of technological breakthrough which greatly improves upon the concept of cryptocurrency. It's not that cryptocurrency will suddenly disappear or lose its value. Cryptocurrency is here to stay. We have witnessed the birth of a new asset class.
But uncertainty has many types. The other digital currency tried to handle eg contract uncertainty. Bitcoin tried to solve the general one and hence it is used as an anchor. The original article pointed that out.
The gold is another possible Gov independent solution. Problem is it is too good in that. Save digging more gold or nuclear transmutation (per Newton effort?) is feasible using say solar, real scarcity is achieved. But it was opted out as it is not human manageable. Instead we have weapon based forced option of US dollars. Japan, euro now Rmb ... we are in a different regime for a reason.
The scarcity cannot be enforced like US dollars and is more like gold. Hence it is not weapon backed and it is not flexible scarcity. It might not be useful in our current environment.
You may think that is the whole point of asset not centrally controlled. But then we back to uncertainty over time which we as a human group cannot manage. How to control which to opt for a as Bitcoin is just a commodity subject to demand even if it is supply constrained.
Whilst so far another clone is not successful still it could be. If it threaten certain government it can block the cash chain. Who guarantee that.
Also, there is no issue within that is breakable by say quantum computing like cloning the whole tree say ...
The time dimension always meant there could not be one money or asset as it has to be tailored to individual human and human group.
Money is a contract with the future to handle uncertainty. Supply constrain is only one of the feature of Bitcoin. It may not be sufficient to be a good money supply. We will see or wait to the stage when mining is only for transaction and supply and demand react.
It's not mutually exclusive. It can be a store of value while still meeting these goals.
Adoption will grow as the infrastructure continues to be built out. It's still early days for Bitcoin - no one sends AT commands to their modem to get online any more.
Once it gets a few user-friendly wallet and merchant apps, I'd expect to see adoption. Especially since it's much safer for merchants as they do not need to wait for confirmations, and transactions fees are fractions of a penny so merchants actually benefit compared to creditcard interchange fees.
It's been well over five years since the Lightning white paper. By this point in Bitcoin's own timeline, the MtGox scandal was in rear view mirror; in another year, the Lightning network will be as old as Bitcoin was when Lightning was proposed.
If Lightning is going to provide the mainstream digital currency Bitcoin promised but failed to deliver, why is it taking so much longer for Lightning to be adopted than Bitcoin?
The internet itself at the backbone/isp level is a decent analog as ISP peering can be complex and often involve cost. It took awhile to get BGP right and determine the right cost metric for selecting a route.
There don't seem to be any blocking issues though and many of the large wallets have announced that they will be supporting it eventually.
The same could be said for bitcoin. The reality is bitcoin still suffers from a scaling flaw, one that appears to be unfixable. The workaround is to layer any entirely new protocol on Bitcoin, Lightning. It has been 4 years in deployment. It is couldn't be said to be successfully deployed as Lightning's creators have noticed bugs that make it unsuitable for prime time. https://medium.com/@antoine.riard/why-we-may-fail-lightning-...
I'm no expert, but they don't appear to be bugs that run as deep as bitcoin's scaling flaw, however they do require changed to both bitcoin and Lightning to fix. And implementing the fix is bogged down by the need to keep the patient alive and functional during the operation. The serious mistakes created by a "moving fast and break things" doesn't work for this style of project.
And for "why" bitcoin / Lightning isn't working splendidly after all this time, I think it's fair to say creating a functional digital currency that is secure and scales infinitely turned out to be far harder than anybody imagined, and I'd say far harder than anybody could have possibly predicted.
Lightning still has some rough edges (async payments) and unsolved issues (spam resistance) but it’s a lot closer to being a convincing private scalable p2p payment network than many realise.
[1]: https://breez.technology/ [2]: https://phoenix.acinq.co/
That's an extraordinary statement. The scaling aspects of Bitcoin was apparent to everyone involved in the project from the start, including Satoshi.
The limits of an architecture where everyone processes everyone else's transactions should be obvious to anyone reading the whitepaper. It is also the focus of the very first email replies. Few respondents chose to focus on what is possible instead of what is impossible.
Contemporarily, lightning is a thing that covers most of the gripes that I've seen above your comment.
https://youtu.be/agppUdX9YvI?t=65
These techniques will eventually get ported over to Bitcoin or whatever survives long-enough to need it. We'll get 20, 50 and 100-year rebroadcasting chains. Fees will be higher if the data needs to be stored longer. Spectrum of uses from investment to cash with different degrees of value-persistence.
The idea that someone discovered these in 2017 seems oblivious to what actually happened. Support for payment channels with nLockTime was likely influential for implementing transactions with smart contracts in the first place. It was there from the first Satoshi release, and payment channels was described already in 2013. It probably wasn't first on the list of things to fix as long as transactions were heavily subsidized by inflation.
I recommend this technical article on how Bitcoin (in its Cash fork) can scale to worldwide adoption (50 tx per day for each of 10 billion humans) even on today's hardware: http://blog.vermorel.com/journal/2017/12/17/terabyte-blocks-...
Computers are fast, Bitcoin payments are simple, and we can get data on roughly how common payments are. Even with the hardware of 2011 it wasn't implausible to keep up with PayPal with optimised software, and with multiple-machine nodes you could even keep up with the bigger credit card processors. That was in 2011. Since then we have things like AMD Rome and 128 core machines, NVRAM that's only 10x slower than DRAM and so on. Satoshi bet on hardware improvements and his bets were solid.
Meanwhile, there is no requirement in the architecture to never truncate the on-disk copy of the block chain. Some people should keep it for historical reasons and to preserve the low-trust nature of the system, but there's no requirement for every full node to keep it, and no requirement that everyone use a full node.
Bitcoin and scaling is unfortunately a topic that became horribly corrupted around 2015 by ideology, full blown information warfare and an overtly political manipulation of the community. As a consequence there are a lot of people who think, incorrectly, that they understand the design of Bitcoin better than Satoshi did, and who think it needed to be completely replaced with the "Lightning network". The reason this accompanied massive levels of censorship, DDoS attacks, intimidation and outright extortion is because the arguments were bad and the proposed alternatives, even worse. The original Bitcoin design was fine for what it needed and represented some pragmatic engineering that balanced complexity against scaling and decentralization. What Blockstream forced on the community was in contrast, significantly worse.
You came so close to realising it, but this is the real reason why Bitcoin can't deliver price stability long term - prices move relative to one another in the real economy. You can't preserve purchasing power by simply limiting money issuance, because exogenous economic shocks are real.
(also, Bitcoin can't prevent the Tether people from printing Tether and buying bitcoin with it ...)
Bitcoin was _absolutely_ touted as "digital cash" early on. The earliest transactions of Bitcoins were each news items in the community and the each new vendor that accepted it as payment was put forth as proof of Bitcoin's traction.
Also comparing it to Apple stock is misleading. Stock represents an ownership stake in the assets of a real-world entity. Bitcoin only has value to the extent that it is collectively agreed to have value; a trait shared with currencies (and commodities with little/no utility such as gold, cowrie shells, etc.)
Gold is used in lots of things, such as electronics and plating cowrie shells.
Because you've never read the white paper. Which is titled "Bitcoin: A Peer-to-Peer Electronic Cash System".
Unfortunately the payment aspect of bitcoin got ruined by the people who decided to lock the block size at 1MB (+segwit). Which resulted in blocks being permanently full, transaction pools clogged, and transactions fees insanely high.
Inflation is not the cause of unaffordability in those areas, the cause is limited supply. Using bitcoin as our currency wouldn’t make more houses, more medical professionals, or less administrative bloat in universities. However, it would probably mean a complete collapse of the economy during times like these when a central bank can intervene to stabilize things.
The tile suggests the article will talk about the white paper specifically. It instead talks about what Bitcoin got right/wrong in general.
The white paper says nothing about specific hash functions, signature schemes, scripting systems (not even mentioned at all), currency units, and many other things that ended up being important to Bitcoin.
And one of the things the white paper got wrong was to conflate chain "length" with "strength". The white paper appears to mix the two terms, even though it's clear that chain "length" wouldn't work at all as a security mechanism.
You can see examples right in the abstract:
> The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power.
Chain "strength" is the cumulative hash power behind a particular chain, which is not the same as the number of blocks.
The white paper later corrects itself:
> The majority decision is represented by the longest chain, which has the greatest proof-of-work effort invested in it.
Dear Satoshi! Thanks for Bitcoin. If you read my comment, please reply me your advice.
2) During the Falklands War, Argentina was prevented from buying munitions since South American banks were monitored for transactions with Europe. Like any bureaucracy, once they used a bank, they never moved to a new one after a transaction.
For example US was deep into banking system of Middle East countries[1] because they couldn't get all SWIFT transactions they wanted.
If you are to blame SWIFT blame Belgium first because they essentially decide what happens with SWIFT at the first place. After 2001 world is not the same, anti-terrorist and anti-laundering laws are pervasive but I suppose for greater good.
[1] https://www.nytimes.com/2017/04/15/us/shadow-brokers-nsa-hac...
This, and also to me the decimal point is clearly in the wrong place. I Have thought about this and I fail to see what was Satoshi thinking.
edit: missed financial speculation
Quote from article: "The anonymous whale sent 15,987 Bitcoin worth $166 million, paying a fee of $23.46"
Tell me, what bank in the world would charge only $23.46 for transferring $166 M?
Also for someone with $166M cost of a large transfer seem negligible even if it was in the 100s of thousands. Unless they need to move it all the time continuously, in which case I'd ask, why do they need that?
https://www.ledgerinsights.com/anti-money-laundering-has-les...
Also, the $10K threshold for additional AML scrutiny has been the same amount for nearly 50 years. It should be close to $50k in today's dollars due to inflation.
$10,000 (1970) = $10,000 x 1880/35 = ~$537,000 (2020)
Large transfers of hundreds of millions USD happen between institutions all the time.
I don’t think this is interesting or unique, or a convincing example of why Bitcoin is worth the enormous environmental impact.
I have never paid for a wire. I’ve also overseen multibillion-dollar wires for which there were zero transfer fees.
If you send and receive wires, get a bank account that doesn’t charge for them. (This is almost every account at e.g. Fidelity or First Republic.) Consumer accounts usually optimise for a different basket of needs than large instantaneous transfers. If that is something you care about, there are a myriad of options superior to Bitcoin.
I have sent multiple international wires over the years and money always goes missing either from the sending/receiving fees, or the intermediary bank in New York takes a small cut.
Maybe if you have an account with billions of $$$ then you get a special deal, but us normies have to pay.
Sure, when Alice pays Bob, Bob pays Charlie, and Charlie pays Alice a small amount of money a lot of it cancels out. But not all, and over millions of transactions one bank can end up owing another a lot of money. You have to cash out at some point, as banks hate trusting people with money for no interest. So banks then resort to armored vehicles full of cash and gold bars so they can square up.
When they're moving money they balance the cost of additional security against the risk of loss and that's what gets reflected in the bill for the bank wire.
Sent a few thousand dollars from my Fidelity account to a Frankfurt-based friend’s UBS account last week. Zero fees. Note that I sent, and they received U.S. dollars. I believe they incurred about a dollar of slippage in the FX conversion to Euros.
Another example is how many porn sites and filesharing sites are also accepting Bitcoin. Eg ManyVids allows you to pay with Bitcoin via Lighting, which transfers the BTC almost instantly for quite low fees. There's obvious privacy advantages to that over credit card payments.
A non-monetary use-case is my OpenTimestamps protocol, which I was able to recently use to prove a specific DKIM key was used in the past: https://twitter.com/peterktodd/status/1322270551898030082
Though that use-case really just piggy-backs on the financial use-cases - if not for them OpenTimestamps in its current form would not be secure.
Really? The market begs to differ.
Bitcoin Cash market cap of ~$4.8B is good enough for it to be used as P2P Electronic Cash System that Bitcoin was built for.
You're a few years late on the let's-hate-blockchain trend. Time to update your optics.
That's not to say your comment doesn't have some merit -- I think a lot of blockchain proponents are also of the type to believe that manual edge case dispute resolution (otherwise known as "the law") can be completely removed from blockchain use cases. And of course that is a bit farfetched. But is that a bad goal to strive for? I don't know, I think it would be kind of neat to have some sort of algorithmic countervailing force balancing against an otherwise unstoppable proliferation of bureaucracy, corruption and regulatory capture that I see almost everywhere in the world. Is that such a bad thing?
Works today, lots of great content, earn crypto while using too.
Plus there were a lot of businesses in the 2010s who decided to make some kind of centralized-bit-distributed-conensus version of some thing like supply chain. It's easy to be cynical with so many of these popping up.
Mainly they need some method to transfer from the West to Russia, and they're sophisticated about managing risk.