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Comment by mapgrep | Hacker News Reader

Bitcoin went up more than tenfold in less than six months. Then if fell by more than half in less than one month. So I strongly disagree that most people would want to use that for their checking account, paycheck, etc.

I am also baffled by "they're easier to transfer" than dollars. Yes you can email BTC. But I can literally hand you dollars. No smartphone needed! And large amounts are trivially easier - I squiggle some lines on a piece of paper and hand it to you. Or if you want to stick to smartphones I can pull one out and send you dollars using one of dozens of e-payment platforms.

Interesting thesis though.

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You can hand me dollar bills, but how many dollar bills do you have? I just counted. I have $36 in bills in my possession. I should to go to the ATM today to get more in case I run out. Eventually, Bitcoin will be similar in that most of our wealth won't be stored in the actual currency, but in bank deposits. I could withdraw actual currency from a Bitcoin bank with the tap of a button and have it on my phone in 10 minutes. Getting dollars requires going to a physical place to get physical bills.

Transferring large amounts of dollars takes days. Transferring Bitcoin takes 10 minutes or so.

But why does transferring large amounts of dollars take days? There is nothing physical preventing banks from supporting fast transfers. They can do fast transfers with BTC or USD.

Transfers are slow because there is little need to transfer large amounts of money quickly, and slower transactions help address issues with fraud. If you are buying a car, or paying for a house there is little need for a fast transactions. So with BTC or USD, transferring large amounts of money will take days.

It's got nothing to do with fraud checks. Transfers take days because banks largely run on mainframes programmed in the 1970s. Because of the (by todays standards) peculiar designs those machines had, the bulk of the work is done at night in batch jobs. The vast size and complexity of the software, combined with archaic platforms, their business-critical nature, and almost total absence of competition means that banks don't upgrade to more modern systems unless forced (see the UK same day payments initiative). Then the banking network is not a perfectly connected system so sometimes payments must be routed via intermediate banks. That's why it can end up taking days.

Good point. I think the debit card replacement angle is much more attractive than this one.

> Getting dollars requires going to a physical place to get physical bills.

My debit card/square/venmo might have something to say about that...

I'm taking about cash. For cards and digital services, the Bitcoin advantage is near zero transaction fees.

Zero transaction fees? The bitcoin network costs something like $3.5 million per day to run, and optimistically handles tens of millions in transactions. That's a transaction fee of 10%.

You just don't notice it because they pay the miners by printing money. I'll be really interested to see what happens when they stop that and start relying on up front transaction fees to fund the network.

This is an excellent point. I'm curious to see how that pans out. My guess is that since Bitcoin transaction fees are supposed to be set by the market, they'll stay competitive. If mining is unprofitable at the rates credit cards are offering, fewer people will mine, which makes mining cost less energy, leaving more profit. Eventually an equilibrium will be reached.

The mining network shedding capacity is a bad thing for Bitcoin.

If 90% of the network is powered down to reduce transaction fees, that gives someone the opportunity to buy up 20% of it on the cheap and corrupt the network. Bitcoin has to use as many resources as possible to stay secure.

This is the biggest practical flaw I've understood so far, but it still seems fixable. If Bitcoin becomes uncompetitive with traditional payment systems and mining activity decreases, miners could collectively decide to alter the mining reward.

The problem with keeping mining rewards high is that Bitcoin is supposed to be deflationary.

Right now the mining rewards being minted increase the Bitcoin supply at a rate of 11% per year. If demand for Bitcoin were constant, this would amount to 11% inflation. Demand for Bitcoin is currently increasing, so it is net deflationary, but this only lasts as long as the demand for Bitcoin is growing constantly. If you kept mining rewards high after the demand for Bitcoins had stabilized, you'd have five times the inflation of the dreaded US dollar, as you paid for your infrastructure costs through inflationary taxation.

(Which Benjamin Franklin and I actually like, but that's another issue entirely.)

"But I can literally hand you dollars." You can do the same with Bitcoin, just print the keys on a piece of paper and hand it to the person. Right?

Unfortunately the squiggle trick doesn't work to send $0.20 to that friend in Angola who runs the water and sanitation project? It also doesn't convert to Mpesa in Kenya [1] (Bitcoin now does). And wiring $500k to China for that shipment on a Sunday doesn't work either with squiggles or e-payments.

[1]: http://www.economist.com/blogs/economist-explains/2013/05/ec...

On the other hand, all of your examples could easily be addressed if there was sufficient demand for it.

So Bitcoin could be valuable in disrupting payment systems:

  Step 1: Bitcoin becomes superior to traditional payment systems.
  Step 2: This becomes relevant enough in the large scheme of things
    that Bitcoin gets serious adoption outside of speculation.
  Step 3: Traditional payment providers up their game.
  Step 4: Traditional payment providers win, because their intrinsic costs are lower
    (mining is inherently costly and not needed for traditional payment systems).

So - there's a buck to be made in Bitcoin, but it's implausible that Bitcoin should remain superior to more traditional systems in the long term (except for illegal purposes).

I fully agree. It's not something traditional payment systems couldn't do (at least in principle. In practice I don't know if they can operate on such low fees). The actual success of Bitcoin over the next decade is a much more uncertain issue.

Do you know anyone in China that will accept $500k in BTC for real goods and services, or is your Bitcoin example just as hypothetical as the squiggle?

The manufacturer of goods I export from there has taken small six-figure USD transfers solely in BTC, so, yes.

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