Ben Laurie on Bitcoin | Hacker News Reader

Ben Laurie on Bitcoin

links.org

18 pointsdavidw13 comments

Speaking only with regards to engineering marketing outcomes: allowing people to trivially conjure Bitcoins out of the ether early in the lifecycle, then making them increasingly dear, is a good way to engineer having a base of committed evangelists. It's kind of like genes, right? Genes don't have good features or bad features. Genes only spread. The gene for sickle cell anemia wasn't designed to kill people and doesn't care that it does: it just causes chemical reactions which have a tendency, on average, to create more copies of itself in an efficient fashion. The successful currency/social network/software/etc won't be the best currency/social network/software/etc judged by any standard of quality engineering, it will be the spreadiest currency/social network/software/etc.

I am being very value neutral in describing this feature of Bitcoin. This is about all I can say without being very unneutral in a fashion that would transgress HN's norms about politeness.

Have you read The Selfish Gene, particularly the last chapter, which introduces the concept of a meme? It's good readin', and in exactly the same vein.

Nope, but my post was very much influenced by knowing something of how memes work, so that's a nice "comes full circle" moment.

The problem with this assumption of early virality being important is that the value of this property drops significantly over time. There is a critical inflection point where this pseudo-currency needs to provide value outside of the core group of true believers and if it fails to do so the bubble will pop as true believers eventually fade away and the circle of people who are willing to accept your confederate money becomes smaller and smaller. I see no reason yet to believe that bitcoin will make this transition and a lot of hints that it will in fact fail to make this transition (e.g. the currency is getting too much publicity too early -- it is making itself a target before it has any real social defenses.)

> it is making itself a target before it has any real social defenses

The system doesn't exactly have control over who notices it.

Some people are (rightly or not) excited about it and building services, sites, and the like around it. That aspect of its virality certainly isn't a bad thing if the community wants to live past that coming critical inflection point you suspect will happen.

Bitcoins are a great consumer currency at this point, considering that it's possible to generate them out of thin air makes it attractive to get. It's like getting an allowance as a kid-you do some(relatively) trivial work, and get some money from it. The problem is that it won't always be this way, especially when the mining stops.

Normal currencies have a cyclical economy. A consumer gets money from their job, then spends it somewhere. The money goes up the supply chain, eventually getting to a bank, which loans it out to a business, who then pays employees. Bitcoins currently are only used in the first transaction, then exchanged for USD or other currency. They are acquired by consumers in two ways: mining them, or buying them from a Bitcoin exchange. After the mining phase ends(or becomes prohibitively expensive), you won't be able to conjure up BTC from thin air. The only way for a consumer to get BTC is to buy them from an exchange, since the overwhelming majority of people aren't going to actually be paid by their job in BTC. Also, since it's doubtful that ISPs or hosting providers will accept BTC, the sellers need to exchange their BTC for USD to pay their bills. So, in the end, this means that the only ones that really win in this economy are the BTC-USD exchanges.

bitcoin is not longer practically generatable without specialized hardware and specialised software. i.e. If you download the bitcoin client and start mining bitcoins, it'll take years before you get your first set.

This guy completely misses the point. The excitement over Bitcoin is due part to the fact that it operates over a decentralized P2P network that exists independently from the creators.

Perhaps if one of the earlier forms of digital currency had been as altruistic in their engineering they would have seen as much enthusiasm from the public.

In other words, nobody is going to get excited about propping up the next big evil empire like PayPal. Bitcoin puts the powers of paying and being paid right where it belongs; directly with the people.

Perhaps if one of the earlier forms of digital currency had been as altruistic in their engineering they would have seen as much enthusiasm from the public.

Really? It was an altruistic project? The creators of bitcoin aren't sitting on stashes of bitcoins in the (forlorn) hope that if bitcoins ever actually take off they'll be insanely wealthy?

I wonder if there's a way to track the date bitcoins were mined - make those less valuable... or something like that.. you have a fair point.

Original paper is here if you want to judge motivations: http://www.bitcoin.org/bitcoin.pdf

At the current value, they are already rich and probably not forlorn.

It is important to remember exchange rates are not static. The exchange rate is determined by the supply and demand of the two currencies for exchange. If you suddenly liquidate a lot of BitCoins all at once, you will raise the supply on the BitCoin side and thus drop the BitCoin-to-dollar exchange rate. It is not valid to take the exchange rate, multiply by the number of extant BitCoins, and declare that to be the size of the BitCoin economy in dollars; that will grossly overestimate it.

(This has nothing to do with BitCoin qua BitCoin, it's the nature of currency exchange. Because most currencies that people deal with have such enormous economic bases, people tend to reason about them such that they neglect certain terms that they don't have to worry about in practice because of sheer size. If I exchange $100 to Euros, I won't personally budge the exchange rate noticeably. But in a much smaller economy, you can't neglect such things.)

http://www.pds.ewi.tudelft.nl/~victor/bitcoin.html

Canned response: Bitcoin is only "peer-to-peer" in the sense of the British Peerage system.

Early-comer-wins, that's the only advantage I see (for early comers). Bitcoin does not capitalize trust in people and institutions (like regular modern money system does, by the way). It is just a silly pyramid scheme reselling air, fed by hopes of those higher in the pyramid to sell Bitcoins to those lower.

Reply on news.ycombinator.com