This person has an adolescent understanding of blockchains. Blockchains are for regulatory arbitrage, as for permissioned ledgers, these are merely the newest round of altcoins.
This is a very poorly written and poorly argued article from an author that at least admits in the first paragraph to not have very much experience with this technology.
Balnaphone, why did you post this article? What is special about it?
His dismissal of being able to use the Bitcoin blockchain in a 100% secure manner for digital assets is completely unfounded and the network remains incredibly resilient and secure. No one would continue to be using the currency unless it retained these properties. Without any hard evidence to the contrary, this authors opinions are unworthy of discussion.
I need to take exception with your first three characterizations, which imply that btc is used for these activities because it is anonymous and untraceable--it is neither.
The characteristics of anonymous and untraceable do not have a monopoly on being the only characteristics that can help a tool perform those first three characterised tasks.
Bitcoin is 'anonymous enough' given the current regulatory environment. As the regulation catches up, Bitcoin will evolve to be precisely as fungible as is required to support its users. You see that happening now with Gregory Maxwell's research. The protocal can and does evolve. Fungibility has opportunity costs, and Bitcoin simply hasn't needed to add these features in yet.
I don't understand your point here. Bitcoin has changed consensus multiple times. All that was demonstrated by the Bitcoin XT proposition was that there is some support(though not much) for a change of project maintainership. If you're concerned about whether bitcoin could support changes, that's fair, it may not. Thus far it has.
The opinions of the teenagers on r/bitcoin don't matter much, as very few of them are either: coders, miners, or even users.
There are services to launder and mix your bitcoins. There are also people that don't care about privacy but are more concerned of the bank ability to freeze their account.
Is bitcoin really huge to those industries? Or are those the biggest industries using bitcoin? A quick search pulls a stat that worldwide gambling revenue is ~350b - is bitcoin really even 1% of that? The US illegal drug market is $151b/year - bitcoin is what percentage of that?
I'm not weighing in on whether bitcoin is flawed or what will happen to it, but the idea that bitcoin is having a meaningful impact on these massive industries at this stage is a little silly.
Relative to the drug industry, it represents nearly 100% of online sales. Gambling is significantly less so, though that market is already being serviced to some degree online (unlike drugs). It is likely that gambling will grow if and as the user interfaces and liquidity improves in Bitcoin.
Obviously very few. The technical literacy of drug purchasers is fairly low, and the tools are very difficult to use. If your point is that "no one goes online to buy drugs" then you must not understand how adoption curves work, or you must believe that the growth in this market is shrinking.
No it's not. But it can be. The infrastructure can be developed on top of bitcoin (see Silkroad). And failure (silkroad, mtgox...) doesn't mean the end. It actually spawned better services on these domains.
It just takes time until people (or criminals) learn and adopt the technology.
You just completely misrepresented the signifigance of bitcoin.
Bitcoin is money without the middleman or bank, which is a huge advance in the fight against centralization and elitism which is arguably one of humanity's biggest challenges.
So you painted it in an immoral light, when in fact it is a great moral cause.
I don't agree with most/all of ilaksh's points. But it is worth noting that miners are 100% fungible, which reduces their ability to extract economic rent in the process. In effect "being a middleman" has been rendered a substitutable commodity.
I'm pointing to Bitcoin utility and possible applications. Sure you can have a great idea, or philosophy but that doesn't mean people will adopt it or it'll be successful.
Bitcoin is also huge to any industry that is having problems with trust and transparency related to recording asset ownership, settlement and clearance.
In the United States, the Depository Trust Clearing Corporation, which settles the vast majority of security transfers, could be completely replaced with technologies like Bitcoin.
The DTCC has always had issues with naked short selling and very few financiers will shed a tear when it is dead and gone.
Tracking ownership and settling transfers in an open and transparent manner is also something that is sorely lacking in the realm of copyright. The music industry has taken notice of Bitcoin's technology and publishers and authors alike are excited about the possibilities of using what works out to be an equal-access public datastore to track ownership and payments. The money has never been in running the regulated machinery of ASCAP, Harry Fox or SoundExchange, rather in investing, owning and capitalizing from the profits of authored works.
The same applies to Wall St. There's a rotten core at the center of modern finance and using decentralized consensus mechanisms like Bitcoin is in everyone's best interest. This is why so many established financial institutions are making such a fuss about this technology.
> The only thing that can kill bitcoin is a technological advancement that makes its security weak or vulnerable
If by "bitcoin" you mean "cryptocurrencies" then yeah, security is the only real killer. But the thing that's most likely to kill Bitcoin is a better cryptocurrency.
The article's laundry list includes some real issues. Mining really is horrendously inefficient. Confirmation time really does make BTC infeasible for many kinds of transactions. And deflation really will cause problems, if it's not doing so already.
I found confirmation time to be very fast. For small transactions (less than $100), it'd make less sense to confirm. For bigger transactions, it'd make sense to wait for 30 or 50 minutes.
Mining is always 100% efficient. If you don't understand that, then you don't understand how a blockchain works. The purpose of mining is specifically to waste something of value. Without destroying value, there is nothing to keep the network anchored to 'truth'.
How much energy is needed to be burned? Precisely as much as is needed to combat 'spam' (both in the form of speculation and block-space consumption).
The only 'alternative' that has been pitched is the ironically named Proof of Stake. PoS has many, many problems (Andrew Poelstra itemizes many of them) not least of which is that they will degenerate into Work-based attacks/mining-strategies.
Thus far, miners have been reluctant to switch to an alternate chain. It is probably a very tall claim that this will ever happen at this point. SMTP was/is a terrible protocol, but the advantages of the network effect sustained its success. This effect is particularly pronounced in Bitcoin, mostly due to the way that blockchains work. The longest chain will almost always secure the most 'faith'.
Confirmation times are a feature, not a bug. 10 minutes secures a lot of energy in block, and drastically reduces forking. If you believe it is a bug, there are many solutions on the horizon, most of which create a market for settlement latency. Lightning network is the most promising.
Bitcoin's entire raison d'etre is that its transaction clearing mechanism is decentralized among untrusted parties. The best known way to enforce honest participation in this mechanism is by requiring workers (miners) to prove that they've expended resources (incurred a cost) in order to to be eligible to publish the next block and claim the block reward + transactions fees.
When a miner Finds a valid hash for a block, they prove that they've consumed a certain amount of electricity in a way they everyone can easily verify. In order for someone to perform a 51% attack, they have to use more electricity than everyone else, which is probably more expensive than just participating honestly. The security of the network is proportional to the amount of money it costs to attack it.
Mining is therefore neither wasteful nor inefficient, if it is understood that the goal is to have a decentralized, censorship-free currency that disincentivizes attacks.
Bitcoin has issues. So? What real thing is there around that does not have issues? If everything that has issues is supposed to be "dead", none of us could still be around today ...
Just want to counter some of the negativity here to say I enjoyed the article and agree with many of the points. Bitcoin is a difficult subject for a lot of hackers to get right because when you're deeply embedded in the tech stack it can be difficult to remember humans are part of the software. Our emotions are part of the network.
The purest metric for Bitcoins decline can be found in the hundreds of spiteful, insulting, censoring, excluding conversations that are replacing the hope and optimistic tinkering that started it all.
Toxic work environments scare away smart people. Cynicism trumps innovation. Noise obscures signal. So, yes, meanies have a measurable impact on the health of a community. If every post on HN was toxic vitriol, would you be here? This isn't a thesis. I'm not suggesting this is Bitcoins only problem but that it's a very serious problem hackers tend to overlook.
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[ 2.7 ms ] story [ 57.8 ms ] threadBalnaphone, why did you post this article? What is special about it?
His dismissal of being able to use the Bitcoin blockchain in a 100% secure manner for digital assets is completely unfounded and the network remains incredibly resilient and secure. No one would continue to be using the currency unless it retained these properties. Without any hard evidence to the contrary, this authors opinions are unworthy of discussion.
He then goes to find anything that is, or seems to be an issue about it.
He then makes a list of them. He then claims it's dead.
So, what can kill bitcoin? The only thing that can kill bitcoin is a technological advancement that makes its security weak or vulnerable.
Bitcoin is huge to many industries:
1. Extortion, Ponzi Schemes, Gambling, Lottery.
2. Drugs, Weapons, Terrorism, Out-lawed organisations (donations).
3. Tax Evasion, Money Laundering, Moving Capital Overseas.
Given these huge industries (or illegal fields, doesn't matter). Annexed industries can emerge
1. Bitcoin banks, exchanges, and derivative financial services.
2. Bitcoin mining.
3. Bitcoin consulting and development services.
And that assuming Bitcoin is not good for your day-to-day legal services, is unstable, and has lots of technical challenges to overcome.
Zerocoin is those things.
Bitcoin vs Bitcoin XT bull$$$$ is a major example. Will BTC actually be able to evolve this relatively minor technical challenge?
As Bitcoin vs Bitcoin XT has shown us, it is the BTC Community that needs to evolve, not BTC protocol itself.
The opinions of the teenagers on r/bitcoin don't matter much, as very few of them are either: coders, miners, or even users.
Is bitcoin really huge to those industries? Or are those the biggest industries using bitcoin? A quick search pulls a stat that worldwide gambling revenue is ~350b - is bitcoin really even 1% of that? The US illegal drug market is $151b/year - bitcoin is what percentage of that?
I'm not weighing in on whether bitcoin is flawed or what will happen to it, but the idea that bitcoin is having a meaningful impact on these massive industries at this stage is a little silly.
It just takes time until people (or criminals) learn and adopt the technology.
Bitcoin is money without the middleman or bank, which is a huge advance in the fight against centralization and elitism which is arguably one of humanity's biggest challenges.
So you painted it in an immoral light, when in fact it is a great moral cause.
BTC obscures the middlemen. It doesn't remove them.
Calling them middlemen couldn't be more wrongheaded.
Its like calling farmers "middlemen" because after all the sun / seeds ultimately grow the plant.
In the United States, the Depository Trust Clearing Corporation, which settles the vast majority of security transfers, could be completely replaced with technologies like Bitcoin.
The DTCC has always had issues with naked short selling and very few financiers will shed a tear when it is dead and gone.
Tracking ownership and settling transfers in an open and transparent manner is also something that is sorely lacking in the realm of copyright. The music industry has taken notice of Bitcoin's technology and publishers and authors alike are excited about the possibilities of using what works out to be an equal-access public datastore to track ownership and payments. The money has never been in running the regulated machinery of ASCAP, Harry Fox or SoundExchange, rather in investing, owning and capitalizing from the profits of authored works.
The same applies to Wall St. There's a rotten core at the center of modern finance and using decentralized consensus mechanisms like Bitcoin is in everyone's best interest. This is why so many established financial institutions are making such a fuss about this technology.
If by "bitcoin" you mean "cryptocurrencies" then yeah, security is the only real killer. But the thing that's most likely to kill Bitcoin is a better cryptocurrency.
The article's laundry list includes some real issues. Mining really is horrendously inefficient. Confirmation time really does make BTC infeasible for many kinds of transactions. And deflation really will cause problems, if it's not doing so already.
How much energy is needed to be burned? Precisely as much as is needed to combat 'spam' (both in the form of speculation and block-space consumption).
The only 'alternative' that has been pitched is the ironically named Proof of Stake. PoS has many, many problems (Andrew Poelstra itemizes many of them) not least of which is that they will degenerate into Work-based attacks/mining-strategies.
Thus far, miners have been reluctant to switch to an alternate chain. It is probably a very tall claim that this will ever happen at this point. SMTP was/is a terrible protocol, but the advantages of the network effect sustained its success. This effect is particularly pronounced in Bitcoin, mostly due to the way that blockchains work. The longest chain will almost always secure the most 'faith'.
When a miner Finds a valid hash for a block, they prove that they've consumed a certain amount of electricity in a way they everyone can easily verify. In order for someone to perform a 51% attack, they have to use more electricity than everyone else, which is probably more expensive than just participating honestly. The security of the network is proportional to the amount of money it costs to attack it.
Mining is therefore neither wasteful nor inefficient, if it is understood that the goal is to have a decentralized, censorship-free currency that disincentivizes attacks.
The purest metric for Bitcoins decline can be found in the hundreds of spiteful, insulting, censoring, excluding conversations that are replacing the hope and optimistic tinkering that started it all.