Excuse me, but how much is it a Bitcoin problem as opposed to being a Bitcoin ecosystem problem? You can't blame Bitcoin for every problem with each exchange.
People can't use bitcoin for everything, the network can't support enough transactions per second for even a small city of people to use it for everything.
Interesting article. But none of the problems described are actually with bitcoin. I see criticisms of CoinBase, WB21, TradeZero, Bitpay. All the problems were due to issues with exchanges & intermediaries and with handling USD. It seems the actual bitcoin part worked fine.
Interesting article. But none of the problems described are actually with fiat currency. I see criticisms of the Fed, Banks, Credit Card Companies, Credit Unions. All the problems were due to issues with exchanges and intermediaries and with handling USD. It seems the actual fiat currency part worked fine.
I find it amusing that you consider the internet "on your own" like there isn't a gigantic investment being made into that infrastructure that even enables bitcoin in the first place.
Do people who are in to Bitcoin think intermediaries solely exist to extract value from transactions? There's actually a service being provided.
Well let me be the first to invite bitcoiners to rejoin us back in reality where the internet isn't. If the entire argument of the bitcoin community is "providing an alternative to fiat currency" and they can't, what's even the point?
The internet IS NOT neutral. Never has been, never will be.
Regarding the first point: To my understating, as a Ex-Bitcoiner, the whole point is a massive distrust in financial institutions + the idea that the whole hierarchy of banks and clients seems superfluous, and could be done away with. Insted of giving up your responsibilities that you get by having money, you take them into your own hand, leaving banks and the similar with nothing left to do.
Now it will obviously make no sense to use bitcoin like Dollar/Pound/Euro+bank, because it isn't made for that. Currently (as far as I know) there are some internal struggles between the "core developers" because of this fact. For-Profit companies like CoinBase and BitPay would like to expand their market at the cost of the distributed network, while others say the whole point of the network would be lost by giving in to them.
It's more or less that all value created from Bitcoin only exists because of the fiat currency systems in place today. It's not like banks hold your money for days when transferring for no reason.
Trust is a social problem and simply cannot be solved via technology because the infrastructure that technology is built on cannot be neutral... we live on a planet with limited resources. If your master plan includes chopping down the tree that holds your treehouse... sounds pretty terrible. Look at international politics to see what "neutrality" in the real world looks like. It's just power dynamics that are outside our control. Is that really what we want out of our financial system?
You see the same thing in the eth community thinking they can use "code" to solve the problem of trust. You can't. Lawyers have been trying for millenia. Bitcoiners are going to need a much more compelling reason/feature than they do now if they want any sort of widescale-adoption (and beyond that, to avoid being smashed when the illegal activities that take place on the network force someone to care)
Spoiler alert, that's why they track how it's spent and where it's sent to. Turns out that "anonymous transactions" thing opens up a whole giant can of black market worms.
The argument here is that the protocol itself is independent and can run on the internet like bittorrent, IRC, SMTP, XMPP etc. This is not about the physical laws and resources governing the internet.
The protocol cannot be separated from the physical infrastructure required to carry it out. Until Bitcoin separates from the internet itself and shows it can actually fund the infrastructure required to maintain it... don't see what the pull is.
The point being, of course, that it's gotten fairly difficult. It's all very well and good to treat the Internet as an abstraction, but those "physical laws and resources" are critically important for any service that wants to be useful in the real world -- where physical laws and resources are very important.
> It seems the actual fiat currency part worked fine.
I don't think Bitcoin is made at will out of thin air like flat currency routinely is.
You can still argue that this is not a problem with flat currency itself, but the problem is, unlike Bitcoin, the laws regarding printing and production of flat currency are not governed by hard-to-break math.
> I don't think Bitcoin is made at will out of thin air like flat currency routinely is.
This is a gross oversimplification of how the vast majority of central banks(ie: the ones that matter) handle their fiat currency. In theory, yes, they could just print money, in practice, they don't "just print money".
I kind of assumed that is enough to get the point across, but my point was that a flat currency relies too much on the moral code of a few human actors, whereas in Bitcoin, the contract agreed upon by the majority of the network is not enforced by humans, but by a cryptographic protocol.
A well designed fiat currency system would not rely on the moral code of humans, but rather on having created an incentive structure such that the actors in power are pushed towards doing the correct thing. We have not fully accomplished this, but it is a state that we can strive towards. It is important to note that fiat currency is not based on the idea that we can reliably find and promote saints to run it (at least in theory).
But it's not really based on math. A majority of miners could decide, say after the next halvening that future block rewards should be held as is. Sure, it would split the network, but a majority of miners may decide it's in their economic interest to do so.
I guess I could have phrased it better, but the point is that the majority of the network needs to decide something and the enforcement of the decided upon rules is based on math, rather than good morals.
If they fork it's effectively the same as them switching to a totally new coin with entirely different branding. NewBitcoin is no more threatening that Ethereum.
There's nothing they can do that gets rid of your bitcoin though. That's the "math" point. As long as they're on the main chain the rules (expressible as math) prevent arbitrary creation or destruction of coins.
Unfortunately for Bitcoin all of the issues 99% people have with fiat currency today have literally nothing to do with how money is created. Yes, it's a difficult problem to solve. No, Bitcoin has not solved it. Piggybacking on the electrical grid to turn "fairness" into "how much electricity you can afford"... how is that fair?
I don't trust the goodness of human nature, I trust the legal and financial system that we've collectively built over the past millennia. Which actually does (at least attempts to) enforce some level of fairness. Why should I sign up to have the future of the financial system be controlled by an "algorithm" that is built on a technology (non-quantum crypto) that could be dead in less than 50 years?
> I don't trust the goodness of human nature, I trust the legal and financial system that we've collectively built over the past millennia.
I don't like X, I love X.
Your distrust of human nature has caused you to double-down on trusting human nature. Those elaborate systems to counter human nature are built on, get this, more human nature.
> the future of the financial system be controlled by an "algorithm" that is built on a technology (non-quantum crypto) that could be dead in less than 50 years?
Well, it's only one coin, with one algorithm, and people are pricing that into its value. But show me a better system. Not even the USD has a 50-year guarantee. Not only are your dollars likely worth 10% of their current value in fifty years, but there's an even chance that something has wiped their value out completely.
You're just irrationally afraid of crypto risk and irrationally accepting of human risk.
> Why should I sign up
Oh, I see your issue... Don't worry, nobody wants your permission any more than they do with USD. You don't need to, and can't, do anything.
Regarding the trustworthiness of social institutions, there are mechanisms for creating more trustworthy systems on top of less trustworthy parts. A simple example is TCP. It is a leaky abstraction at times, yes, but it is more trustworthy in the face of adversity than UDP is.
This is not to say that our current batch of social institutions are even as trustworthy as TCP, just that it is possible to build institutions that are, and that we have a lot more experience as a civilization with debugging social institutions than we do debugging software. Thus, I do not think it is paradoxical to lean on social institutions to reign in raw human nature.
> the issues 99% people have with fiat currency today have literally nothing to do with how money is created
Not even remotely. Everyone is China is acutely aware that the government can print their money into oblivion. That's why they're rushing to dump it into anything. Hundreds of millions have been through this in other countries in recent years.
> Piggybacking on the electrical grid to turn "fairness" into "how much electricity you can afford"
Piggybacking doesn't mean what you think it does.
> How is that fair?
Fair doesn't apply in the world. It's hard to cheat and thus predictable and that's all it needs to be.
fwiw, fiat isn't fair either. Nobody came by to give me my share...
Bitcoin is made at will out of thin air. It's just an arbitrary amount created every day. The creation rate was just picked by whoever created it. I think it can actually be changed by concensus.
I see no reason why an arbitrary rate is better than a rate chosen to minimize inflation and deflation.
Bitcoin basically is a fiat currency, except no government forces people to use it.
No, the difficulty would rise but the number of "coins" created would be constant and they'd cost the same because the same dollar-value of electricity was spent generating them.
> I see no reason why an arbitrary rate is better than a rate chosen to minimize inflation and deflation.
It's not about the rate, but about the EXACT rules being agreed upon up front by the MAJORITY of the network and actually enforced by a proven algorithm, rather than people's conscience alone.
I can't tell if you trying arguing that a deflationary currency like Bitcoin is somehow better, or if you're just using this an excuse to gripe about a government organization.
> The last transaction I sent using BTC cost me $.09.
And you denominated that in $$ instead of BTC why?
Because the value of BTC fluctuates so much that its worthless to denominate goods in terms of BTC. Only USD is stable enough to actually denominate the value of goods with.
And its not like USD is rock solid: we've got an inflation-based government pushing the value of USD down ~2% each year. But that's a lot more stable than BTC.
As long as BTC remains more volatile than my freaking stock portfolio, it is worthless to trade goods with it directly. Everything will need to be converted to and from USD if I'm actually to run a business. BTC could double in price (or half in price) in the next year and no one would be surprised.
Another plausible reason why he used the USD amount instead of 0.15 mBits, is because the Hacker News readership has had years to associate an internal "feeling" for what $0.09 is worth.
The Swiss Franc is also very stable and has similar qualities to USD. Would you not have complained if he cited the figure in Swiss Francs?
Banks are an excellent piece of infrastructure, as it stands. If you don't need to use Bitcoin, or you actually care about what happens to your money, just use a bank.
Hands up everyone here with a memory longer than that of a goldfish who remembers the Bitcoin promise "no fees!" The one they don't seem to make any more.
While I agree that those fees are extravagant and the underlying process should have been much easier, it probably would have been prudent to investigate the process first, before starting it. I can't imagine being unaware of fees associated with using Coinbase before perusing their services.
Specifically in the context of the usage (that is, transferring USD), the fees were about 6 times what they would have been if he were to use a bank account. In the big picture I do agree with you, though. 1% fees on individual services are not a lot, even when they stack across different services.
I don't think USD -> Bitcoin -> USD is really the way to go on this. If you are trading in USD, why would you move it into bitcoin and back again? You already had it in USD.
If you need to buy some groceries in the US, you wouldn't trade your USD for CAD (Canada money), then bring CAD to a grocery store that also accepts USD. You would only bring CAD if you already had CAD.
But bitcoin needs to be transformed back into a currency at some point to use it. There is no point in a wire transfer if the person at the other end isn't going to use it.
Usually you need something other than USD on the other side of an international border. In which case, USD to BTC to XYZ is very likely to be cheaper than a wire transfer.
I've been doing it myself for years. You have to use limit orders on cheap exchanges (not brokers!) and sometimes wait for the spread to close but you can usually get it within 25 basis points of spot.
The point of the article is really that using bitcoin means using a lot of wildly dysfunctional intermediaries. USD to bitcoin and back again is, almost certainly, the most liquid market there is. It's a scalding indictment of bitcoin when part of the promise of bitcoin was that it would be quick, easy and cheap to perform these kind of transactions
to be fair to bitcoin, the primary point of bitcoin is that it's a decentralized ledger not under the control of a government or bank. Ease-of-use was an afterthought.
(but then again, it ended up not being very decentralized, either)
USD to EUR and back again is the most liquid market there is but if you do it in the stupidest way possible (like at the kiosk at the airport) you'll also lose way more than 4%.
OP is either an idiot who thinks he can day trade but can't plan ahead and calculate fees or (more likely) he has an agenda against Bitcoin.
It does in his use case, which seems to be a relatively dodgy day trading firm, they are the ones who instigate the fees not the bitcoin network. Funding this by using localbitcoins would have cut down his wait time and his fees on the buy side, however for funding his account that firm would charge those fees whether it was bitcoin or bank transfer. Sure he would have paid small transaction fees on his bitcoin transactions but they would still be a fraction of the $35 international transfer fee from the bank.
If I really was converting from USD to CAD and back, would the experience be better? Would the fees be lower? I suspect they would. Would it take as long?
totally agree. the author of that article completely doesn't even mention the fact that his bank wire is already in the proper currency and doesn't require a currency conversion. currency conversion from your bank will definitely cost you money - min is 1% fee for the bank, usually a bit more. So while the banking wire is a flat fee, a currency conversion would have cost him a fair amount.
if he already owned BTC he would have avoided the first two steps and saved himself $180.
There seems to be a trend in articles claiming some technology is bad/a disaster/dead when really it's just someone uneducated in the platform trying to use it incorrectly or with misinformed assumptions.
Bitcoin is still an emerging technology. You can do things with it you can do with _anything_ else. You can create 100 wallets right now and start receiving bitcoin to them. Please show me how to do that without interacting with anyone with traditional bank accounts.
Bitcoin is here to stay and we're going to continue to discover interesting use cases for it. Sorry this guy is bailing before he learns what it's all about.
The article illustrates a number of issues with services on bitcoin. One issue with doing things with any cryptocurrency is that it takes awhile for a transaction to occur. I had the preconcieved notion it would be as fast as sending an email but it really takes 30-40 minutes sometimes. Also, it seems the author is treating bitcoin as cash when its really more like you buying gold with cash and then transferring it back into cash to the other account that you want to transfer.
I used TransferWise last time I had to move some money internationally, and had a good experience. Significantly faster and cheaper than wiring the money.
What an ignorant article. It's unrealistic to expect cryptocurrencies to behave as flawlessly as wire transfers. The technologies need to mature. But for those with patience, they're pretty awesome.
Bitcoin transactions are not easy enough for general consumption.
I think in the Bitcoin lifecycle a number of these early services exist at the pleasure of serving pioneering Bitcoin users / miners who have a lot of digital currency already.
> Look, it’s the whole ecosystem that is fucked. All these fees, complicated steps — it just doesn’t work for the normal Joe.
Yeah, cooperative/reversible financial fund transfer systems that interoperate with bitcoin are at enormous risk during these transactions, so they charge large fees and create red tape to avoid/mitigate fraud. It's probably been bitcoin's biggest stumbling point since forever. I don't think that it's a disaster though.
> The Bitpay invoice has a 15 minute timer. So I wait and wait ... last few minutes on that timer so I start to get a bit nervous.
This problem could've actually been one to blame on bitcoin. It might be due to bitcoin's low transaction throughput. I haven't followed the blocksize debate but IIRC there have been lots of talk about slow transactions.
Transferring bitcoin when all relevant parties are using bitcoin is more efficient than transferring USD when all relevant parties are using USD. If people are presenting bitcoin as a good alternative to wire transfers then they are being misleading.
If bitcoins can't compete with wire transfers, then how will bitcoin ever become mainstream? The world isn't going to switch to bitcoin overnight, so there will be a period of time in which bitcoin will need to be converted to other currency at one or both ends.
I doubt it ever will become mainstream, but one path to "mainstream" is when merchants, banks, companies, and payment providers just accept Bitcoin rather than:
1) Pretend to accept bitcoin
2) Pay a sub-par service with high fees to convert any received BTC into USD immediately
3) Encourage customers that don't already hold BTC to pay in BTC, adding another conversion step from USD -> BTC
If 90% of the people I give money to just accept Bitcoin as payment, then it makes sense for me to have a "Bitcoin account", as payment fees could be lower.
Incidentally, if you're like me, and know nothing about stocks, but still want to get rich off companies you believe will succeed, I highly recommend Robinhood. It's like stock trading for chimpanzees. Install an app, fill out a brief profile, click a big shiny button to deposit money, select your stock, and click another big shiny button to buy.
I don't have any affiliation with them. I just always thought trading stocks was schleppily difficult, and was delighted to discover it was not so. I believe some company will do well; I'm not interested in understanding spreadsheets or hiring anyone; here's my money; how do I buy shares? What is the Uber-like, magic-button product here? Robinhood, it turns out.
I would love to use it. Unfortunately it's only available in the US (and Australia?). If there are any alternatives that work in the UK and/or Switzerland then please let me know.
By simplicity I was talking about the fact that I don't need to fill out paperwork. Filling out paperwork is unrelated to the forecasting which companies will succeed. The point is, if it were 2005 and I wanted to buy Apple stock, without Robinhood I probably wouldn't have bothered.
> If you don't know enough to stock pick, buy the index.
While I am in general agreement with your position, I see statements like this frequently when stock trading comes up. References to the market or the index. There isn't one, monolithic tradable "market". Rather there are dozens of different index views of the broader market, some of which are better than others. If you know so little about stock trading that you think a service like Robinhood is a good idea you probably don't know enough to choose a good index either.
Yes, that was an oversimplification. I had typed it as 'buy indices' but decided that would require explaining which indices, and I didn't want to get into that rabbit hole. And I didn't want to look like a shill for some particular vendor's fund. In any case, some concrete examples are VTI, VXUS, and BND/VTEB.
You can't separate the currency from the ecosystem for anything but academic purposes. The ecosystem is a mess. A commonly cited benefit of crypto-currencies is that they'll eliminate friction and fees in the system, and I think this is only because the systems don't exist. People want security, verifiability, and reversibility when dealing with money. There has to exist companies to do this whether they are Citibank or Coinbase, and they're going to charge money.
So you can take the Gov't control out of the equation, but I still have yet to hear a scenario that crypto-currrency itself makes better than fiat - it's always about the cost, complexity, and regulation of the services on top. Eventually, those will reappear because people and business want them.
It's a big world out there, most of which has no easy way of integrating with modern systems of credit, lending and other financial instruments. I see blockchain technology as a promising way for distributed groups to organize, create operating agreements, and execute contracts for market rate on a global setting.
Tell me: would you be surprised if BTC changed in price by 50% by the end of this month? I wouldn't be, I simply don't trust BTC to retain its value in any way. BTC goes up or down, and that's bad for "currencies"
Is currency ever a good store of value? If you're a billionaire you're certainly not storing it in fiat.
Bitcoin being a globally distributed ledger has the ability to represent shares of commodities and equities. It's why Delaware is considering incorporating blockchain tech.
You could imagine merchants pricing in shares of Apple - and customers paying in shares of oil and Google - to be settled at PoS. Check out shapeshift.io to see how fluid crypto-to-crypto trades can be.
> Is currency ever a good store of value? If you're a billionaire you're certainly not storing it in fiat.
What? Do you change all of your savings into stocks or bonds each month?
Currency is the best short-term store of value. And "short term" means anything I plan to use in the next 6 months (My emergency fund will last 6 months without me being forced to touch my bonds or stocks, giving me breathing room for when to liquidate my long-term savings.)
I trust cash to be stable in the short term, even if it loses value long-term. I can't trust BTC as either long-term or even short-term storage.
BTC utterly fails at "6-month" storage due to its volatility. BTC has no history for growing (stocks are based on company profits. So as long as companies are profitable, they'll grow). Bonds are strong guarantees for growing: only bankruptcy can prevent me from getting me money promised through a bond.
What guarantees do I have for long-term BTC storage? Nothing. Absolutely nothing.
Short term? Well, again, stability is more important than gains in the short term (which is why my short-term is cash... not stocks).
I never suggested storing your savings in bitcoin. I'm saying the future of storing value is in commodities and equities represented on a blockchain - along with a real time settlement layer allowing people to charge and pay in any denomination of their hearts desire. Heck, you could even pay in certificates of USD represented on the Blockchain if you like.
Hey smokey, you seem to have a good grasp of practical blockchain applications. Was wondering if you think it is feasible to use Blockchain for organic agricultural commodities? The idea being that the transparency blockchain can bring could help more accurately price organic ag commodities, which still are undervalued at that level (no transparency in this market, still getting lumped in with regular ag commodities). Just curious, like a organic commodities exchange using blockchain for significantly faster settlement and ability to audit the identity of a commodity (quantity, quality, location/logistics). Wondering if you think blockchain could have a use in something like that?
One problem with organic produce is the shelf-life making speculation potentially tricky. I could see a role for futures and prediction markets to hedge risk and better find the market rate. Check out Augur for example https://www.augur.net/
Without the value aspect of it, what would incentivize people to perform proof of work?
Work costs money: like electricity isn't free at the scale of the BTC Network. It costs thousands of dollars of electricity to run those BTC mining rigs to verify the ledger.
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If you're saying the future of "blockchains" is just a cryptographically signed ledger, without any proof of work or BTCs being assigned, I think I can agree with you on that.
But at the moment, "blockchain" is the new cloud. No one really knows what a "blockchain" is anymore, aside from a new electronic ledger of some kind. BTC is clearly a blockchain, but a lot of the "blockchain-based technologies" are nothing like BTC at all.
A lot of these "blockchains" are just centralized banks electronically verifying transactions. Like a notarized bill of sale, except the 'notarized' portion is electronic. Proof of work and all that stuff just don't exist in a lot of the "blockchain" solutions coming out.
In theory users could pay a transaction fee denominated in a commodity. Once mined the miner can convert to another asset type. But say you're saving in terms of kegs of beer and can't pay a fraction of a keg - you could keep an energy fund so you can pay a highly granular transaction fee. Now, if the miner doesn't think the certificate is valid or reputable it won't be included.
For billionaires or even mere millionaires, currency isn't some fungible thing anymore. Remember that bank deposit insurance is capped at a few hundred thousand.
Stable currencies are a good short to medium term store of value. If I withdraw $100 from the ATM, I can spend it a week or a month later and be fairly confident that it'll be worth essentially the same. I'm not rushing to the stores on payday to buy all of my supplies before fluctuations wreck my money.
This is not the case for BTC or AAPL. If I get 1BTC today, some new MtGox story might wreck its value before I buy groceries with it tomorrow. AAPL is unlikely to move as much, but it moves around by several percent on a fairly regular basis, and some huge negative news could send it plunging.
I could imagine your scenario of pricing in AAPL and paying in oil and GOOG in a technological sense, but I have a hard time imagining anyone actually doing it.
> I could imagine your scenario of pricing in AAPL and paying in oil and GOOG in a technological sense, but I have a hard time imagining anyone actually doing it.
In Kenya people trade in cell phone minutes (MPESA). It's not a huge stretch to imagine trading in units of energy or other commodities.
It seems to me that having an instant settlement layer challenges the need for currency as an intermediary.
Each bitcoin is divisible up to 8 digits and can be used to represent certificates - potentially representing cell phone minutes, or certificates to equity or commodities - for the cost of .000000001 satoshi.
Now the kicker is, the bitcoin transaction fee is increasing rapidly due to (self-induced, political and totally fixable) bottlenecks in the network. I foresee an alternative taking over bitcoin if this isn't resolved soon.
The other kicker is that if 0.00001 (whatever the actual number would be) buys one cell phone minute today, it might buy two tomorrow, or one half. Short-term volatility makes it difficult to use as currency.
You're missing my point. You don't ever have to use bitcoin as a currency. Instead of holding say - 1 bitcoin - you could own a certificate for oil (or a diversified basket) - represented on the blockchain (still .000000001 satoshi).
So when you want to buy cell phone minutes, you simply convert your oil certificate to cell minute certificates through a settlement layer. This means merchants can denominate prices in whatever they'd like - and buyers can pay in whatever currency/asset they'd like.
I think we do understand your point, and it reduces to "blockchain blockchain blockchain blockchain because blockchain blockchain".
But then fails to be better or even different to what we have now:
This means merchants can denominate prices in whatever they'd like - and buyers can pay in whatever currency/asset they'd like.
Indeed! We have that now. Where I live we use the Australian Dollar because that's what buyers and pays like. When I want to convert stock to cell phone minutes I do that through a settlement layer: log on to stock trading platform, sell shares, wait two days, buy cell phone minutes - it's sufficiently instant for my needs, and appears to be meeting everyone else's needs as evidenced by the continual churn of economic activity.
One issue I see with your proposal is I'm not convinced I know how to rationally price an oil certificate vis-à-vis a cell phone minute. That's why we need markets, I guess.
Blockchain is a solution looking for a problem. The problem of converting stock certificates to cell phone minutes is largely solved for most people who own stock. The problem of purchasing cell phone minutes is largely solved, and for those places where it isn't slapping a blockchain on it won't help any more than slapping whatever database is popular this week on it.
I understand that perfectly. You seem to be missing my point that using volatile assets as currency makes things really complicated because you can't easily plan based on their value.
It doesn't matter if I hold a bitcoin or an oil certificate or a share of AAPL or a futures contract for polar bear fur, I don't want to use stuff as currency where I don't know how much groceries it'll buy next week.
It might be difficult to imagine but there's countries where the official government issued currency leads to the exact situation you're describing. Unpredictable buying power and economic uncertainty. That was the whole point of my comment - check the original.
There's places in this world where the idea of an apolitical central bank is unimaginable. If you don't have an imagination I can't help you there. Or maybe you don't car about humans from non-western countries. Either way, this innovation clearly isn't for you.
Very astute points wrt the demand for banking services. Banking will always be with us.
Bitcoin has the advantage over fiat of having been designed with incentives of participants aligned so as to make the likelyhood of inflation extremely small over the long term. So the scenario that Bitcoin makes better is the one in which money printing would have occurred, but now can't because of recourse to Bitcoin.
good points. something else to consider - money derives its value from 2 sources: 1) the actual goods and services (GDP) that it represents and 2) the fact that government demands taxes be paid in it. BTC fills neither of these because no government does business with it and no one knows what it represents because it's not linked to a specific country or region of people. that alone should disqualify it from being considered "real money". until that changes, that should be everyone's view of it.
one other thing - with regards to fiat, BTC does have one theoretical advantage - the ability to limit government spending because it cannot be created out of thin air to be created as credit and spent as debt. and that is why no government will ever use it. but we wouldn't want this anyway because we actually DO want government to be able to create money as needed. the reason is that because the stated goal of the fed is "stable prices and full employment" stable prices are simple - your monetary supply expands AND CONTRACTS with GDP, pure and simple. 100 bushels of wheat in your economy and $200 in money? that's $2 per bushel. if your economy doubles due to additional population or technological/productivity improvements and starts producing 150 bushels, you need to have $300 in your economy for stable prices. the issue is that our government increases its spending at a rate that far exceeds the growth of GDP.
> money derives its value from 2 sources: 1) the actual goods and services (GDP) that it represents and 2) the fact that government demands taxes be paid in it.
This is historically and factually inaccurate. Currencies typically originated as highly marketable commodities that are naturally scarce and fungible - salt, gold, silver, cigarettes in jail, etc.
sorry, i should have qualified that i was referring to FIAT money. otherwise, it would have no intrinsic value. The examples you give are all physical items that have intrinsic value because they can be used for something other than being money. what i said was directed at fiat only since that is what all modern economies use. without the 2 factors i described, fiat is nothing but useless paper with weird stuff printed on it.
> The examples you give are all physical items that have intrinsic value because they can be used for something other than being money
One could argue that's the definition of real money - but to say Bitcoin isn't real money is to move the goal post when what you mean is Bitcoin isn't a traditional fiat currency. There's no debate there.
I think the implication is that BTC has very little intrinsic value. Well, the BTC itself actually has zero intrinsic value, the only intrinsic value in the ecosystem is the blockchain (although the value of the blockchain itself is dependent upon the perceived value of BTC, as its ability to prove data existed at a point in time only works if a sufficient number of people are actually mining blocks, and people mine blocks in order to get BTC).
This reminds me of Uber and Ryanair. They scrape out of sight properties and claim lower prices when it's just playing on words. Later when people realize they quite wanted the full thing, the magic disappear. A decade of memory loss disguised as innovation. Not even a new error.
"Much like how cryptocurrency is a high-speed re-enactment of how and why we developed modern financial institutions and regulations, Airbnb is a high-speed re-enactment of how and why we developed regulations on and protections for transient lodging establishments." (sorry, no attribution)
I get what you're saying with Ryanair (a sub-standard product sold cheaply), but I don't see the link with Uber. It's cheaper than taxis, and is a much much much better product. I consider Uber/Lyft "the full thing" these days, and taxis are archaic. Unclear if Uber's pricing is long-term sustainable, but even at higher prices I'd choose it every time over a taxi.
Uber is selling unorganized, uninsured, unchecked drivers. I believe no legal taxi company can do that since they're liable would anything happen to you. If Uber had to form, insure, optimize, thus manage, they'd require additional workforce, time, costs, and wouldn't give it to you for free.
The customer interface is (was? I don't know if taxi companies competes on the app side) way above and that's the value here. Better information and information model, almost no idle time.
In Montreal there has recently been a giant upheaval of the taxi system as a result of Uber. The taxi industry here was incredibly broken and dysfunctional. They were n unchallenged monopoly, with not enough taxis to go around as the the population began growing again.
Uber came in and was very clearly illegal here, but they offered significantly better service and had more drivers available. A couple years on after fighting the government for a long time, Uber finally came to an agreement with the government and new regulation was passed. Rides sharing vehicles will now require nearly all the same regulations as a taxi, but the larger affect is more competition to traditional all taxis.
People do enjoy complaining but I quite like being able to fly cheap without paying for stuff I don't need. Admittedly it was more appalling when you couldn't even pay for your ticket without paying a fee (unless you had one particular laser card) but the most onerous ones have been phased out.
Your analogy between Citibank and Coinbase is telling.
Citibank is, well, a bank. Coinbase is a currency exchange, and more analogous to those Forex booths you see in airports.
There are Bitcoin banks, but putting your Bitcoin into a bank loses the decentralization benefits. Admittedly holding onto your own BTC requires more security than many people are capable of implementing, but better and better solutions are being created to solve this problem.
You don't use bitcoin because you want to. You use it because you have to. In my country, the government requires that you use bitcoin if you order some things online. Such as heroin, gambling, and software randsoms. I'd rather pay in credit card for these services if I could.
Or rather "The Disaster That Is Bitcoin Services Around Bitcoin". I'm wondering if there would be the same kind of article that dollars is very bad, because bank wants some money for wireing them e.g. to Europe, and the exchange rate between dollar and euro could change overnight.
The things that will determine whether Bitcoin "wins" or not will not be the use cases where Bitcoin is supplementing existing infrastructure, but rather whether or not it can sustain and grow use cases where it replaces it. Even if those are fringe or even sketchy, that is what matters.
"Blockchain" initiatives at banks are just about implementing cryptography as part of solving larger technical challenges they have. Using Bitcoin as "rails" isn't there yet. Using Bitcoin in places where only Bitcoin makes sense will make it a cockroach, and open protocols that survive tend to become important.
Sounds like someone hasn't tried to buy a pound of meth with a bank wire!
No seriously, though. Who knew that the libertarian cyberpunk dystopian future would be full of people trying to scam a nickel off you every couple of seconds...oh wait, everyone ever. That's the market, man. Don't taunt the market. Don't even look at it funny. It's sentient and can hear your insults.
I found this article after the author argued against my post How to Pay Freelancers in Upwork with Bitcoin, Ethereum, or any other Altcoin [1]. The problem with his argument is that it is based on his very tiny vision of the world based on the country where he lives. This is not the "user experience" the rest of the world currently have and that's why cryptocurrencies offer an alternative, even with a lot of limitations.
Using Bitcoin strictly as an intermediate to transfer between two US dollar accounts is not the most typical usecase. The fees and waiting times are due to the US dollar transfers and the companies involved.
There is however, valid criticism of the various middlemen that have propped up to take advantage of the hype surrounding Bitcoin.
With a title like "The Disaster that is Bitcoin" we really shouldn't feed the trolls. It's true bitcoin doesn't compete with traditional fiat for many purposes. Calling bitcoin a disaster for it is trolling people who see potential in the technology. The disaster that is clickbait.
What you are doing isn't much better. You calling them trolls (in other words asking that people completely discount their opinions and views because they weren't made "seriously") and I suspect you're largely doing because you disagree with the message.
I should be more open minded. If you enjoy articles about baseless arguments, you'll love "The Disaster that is Bitcoin" by RogomonZ. It's highly uninformative and irrelevant to just about everyone in the ecosystem. If you enjoy the refined writing style of an angsty teenager with summaries like "Fuck Bitcoin and all the fee earning services around it" - this one's for you!
"Look, it’s the whole ecosystem that is fucked."
Should have been the title. This post actually makes me replan a bit of my investment plans.
The future is now but it is expensive.
> Turning anything to cash is an expensive proposition.
It costs me $7 to change my stocks into cash and vice versa. Frankly, turning BTC -> USD -> BTC is harder than turning Apple stock -> USD -> Apple stock.
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[ 1.6 ms ] story [ 219 ms ] threadBut you can't send cash over the internet.
Do people who are in to Bitcoin think intermediaries solely exist to extract value from transactions? There's actually a service being provided.
The internet IS NOT neutral. Never has been, never will be.
Regarding the first point: To my understating, as a Ex-Bitcoiner, the whole point is a massive distrust in financial institutions + the idea that the whole hierarchy of banks and clients seems superfluous, and could be done away with. Insted of giving up your responsibilities that you get by having money, you take them into your own hand, leaving banks and the similar with nothing left to do.
Now it will obviously make no sense to use bitcoin like Dollar/Pound/Euro+bank, because it isn't made for that. Currently (as far as I know) there are some internal struggles between the "core developers" because of this fact. For-Profit companies like CoinBase and BitPay would like to expand their market at the cost of the distributed network, while others say the whole point of the network would be lost by giving in to them.
Trust is a social problem and simply cannot be solved via technology because the infrastructure that technology is built on cannot be neutral... we live on a planet with limited resources. If your master plan includes chopping down the tree that holds your treehouse... sounds pretty terrible. Look at international politics to see what "neutrality" in the real world looks like. It's just power dynamics that are outside our control. Is that really what we want out of our financial system?
You see the same thing in the eth community thinking they can use "code" to solve the problem of trust. You can't. Lawyers have been trying for millenia. Bitcoiners are going to need a much more compelling reason/feature than they do now if they want any sort of widescale-adoption (and beyond that, to avoid being smashed when the illegal activities that take place on the network force someone to care)
Though not competitively, which was the point being made in the article.
heck, you can transfer huge piles of cash with paper checks, which cost around 75¢ around here, try to beat those kind of fees...
I don't think Bitcoin is made at will out of thin air like flat currency routinely is. You can still argue that this is not a problem with flat currency itself, but the problem is, unlike Bitcoin, the laws regarding printing and production of flat currency are not governed by hard-to-break math.
This is a gross oversimplification of how the vast majority of central banks(ie: the ones that matter) handle their fiat currency. In theory, yes, they could just print money, in practice, they don't "just print money".
There's nothing they can do that gets rid of your bitcoin though. That's the "math" point. As long as they're on the main chain the rules (expressible as math) prevent arbitrary creation or destruction of coins.
I don't like X, I love X.
Your distrust of human nature has caused you to double-down on trusting human nature. Those elaborate systems to counter human nature are built on, get this, more human nature.
> the future of the financial system be controlled by an "algorithm" that is built on a technology (non-quantum crypto) that could be dead in less than 50 years?
Well, it's only one coin, with one algorithm, and people are pricing that into its value. But show me a better system. Not even the USD has a 50-year guarantee. Not only are your dollars likely worth 10% of their current value in fifty years, but there's an even chance that something has wiped their value out completely.
You're just irrationally afraid of crypto risk and irrationally accepting of human risk.
> Why should I sign up
Oh, I see your issue... Don't worry, nobody wants your permission any more than they do with USD. You don't need to, and can't, do anything.
This is not to say that our current batch of social institutions are even as trustworthy as TCP, just that it is possible to build institutions that are, and that we have a lot more experience as a civilization with debugging social institutions than we do debugging software. Thus, I do not think it is paradoxical to lean on social institutions to reign in raw human nature.
Not even remotely. Everyone is China is acutely aware that the government can print their money into oblivion. That's why they're rushing to dump it into anything. Hundreds of millions have been through this in other countries in recent years.
> Piggybacking on the electrical grid to turn "fairness" into "how much electricity you can afford"
Piggybacking doesn't mean what you think it does.
> How is that fair?
Fair doesn't apply in the world. It's hard to cheat and thus predictable and that's all it needs to be.
fwiw, fiat isn't fair either. Nobody came by to give me my share...
I see no reason why an arbitrary rate is better than a rate chosen to minimize inflation and deflation.
Bitcoin basically is a fiat currency, except no government forces people to use it.
smh
It's not about the rate, but about the EXACT rules being agreed upon up front by the MAJORITY of the network and actually enforced by a proven algorithm, rather than people's conscience alone.
In either case it's not relevant to the article.
He's also bitching about an overall 4% fee, which isn't a whole lot.
2) USD to BTC can suck depending on the company (1-2%) fees
3) Yes most of these first gen companies are expensive due to lack of large volumes and high risk
If you have to exchange BTC to USD to pay for your costs, then sure, it's going to cost more than PayPal.
And you denominated that in $$ instead of BTC why?
Because the value of BTC fluctuates so much that its worthless to denominate goods in terms of BTC. Only USD is stable enough to actually denominate the value of goods with.
And its not like USD is rock solid: we've got an inflation-based government pushing the value of USD down ~2% each year. But that's a lot more stable than BTC.
As long as BTC remains more volatile than my freaking stock portfolio, it is worthless to trade goods with it directly. Everything will need to be converted to and from USD if I'm actually to run a business. BTC could double in price (or half in price) in the next year and no one would be surprised.
The Swiss Franc is also very stable and has similar qualities to USD. Would you not have complained if he cited the figure in Swiss Francs?
Don't like Paypal? Use Dwolla. Don't like Dwolla? Use Bank of America for direct transfers. Don't like BoA? Use Venmo.
Not very excellent if you ever need to get money to/from the States and a foreign country.
https://krebsonsecurity.com/2016/09/money-mule-gangs-turn-to...
Again, Bitcoin is a great alternative to banks where banks fail. Just, you know, I wouldn't advise using it as your first choice.
If you need to buy some groceries in the US, you wouldn't trade your USD for CAD (Canada money), then bring CAD to a grocery store that also accepts USD. You would only bring CAD if you already had CAD.
Yes, some retailers accept bitcoin, most don't.
I've been doing it myself for years. You have to use limit orders on cheap exchanges (not brokers!) and sometimes wait for the spread to close but you can usually get it within 25 basis points of spot.
(but then again, it ended up not being very decentralized, either)
Which, as we can see, costs a lot of money and doesn't add much value for legal uses.
OP is either an idiot who thinks he can day trade but can't plan ahead and calculate fees or (more likely) he has an agenda against Bitcoin.
If I really was converting from USD to CAD and back, would the experience be better? Would the fees be lower? I suspect they would. Would it take as long?
if he already owned BTC he would have avoided the first two steps and saved himself $180.
and still ended up paying $20 more as for using a wire.
Bitcoin is still an emerging technology. You can do things with it you can do with _anything_ else. You can create 100 wallets right now and start receiving bitcoin to them. Please show me how to do that without interacting with anyone with traditional bank accounts.
Bitcoin is here to stay and we're going to continue to discover interesting use cases for it. Sorry this guy is bailing before he learns what it's all about.
Wire transfers are $35.
You'd think that BTC would be able to be cheaper than that.
If you do an international wire and change currencies you'll pay much more than $35.
I'm guessing this also makes me a "Bitcoin defender."
I think in the Bitcoin lifecycle a number of these early services exist at the pleasure of serving pioneering Bitcoin users / miners who have a lot of digital currency already.
Yeah, cooperative/reversible financial fund transfer systems that interoperate with bitcoin are at enormous risk during these transactions, so they charge large fees and create red tape to avoid/mitigate fraud. It's probably been bitcoin's biggest stumbling point since forever. I don't think that it's a disaster though.
> The Bitpay invoice has a 15 minute timer. So I wait and wait ... last few minutes on that timer so I start to get a bit nervous.
This problem could've actually been one to blame on bitcoin. It might be due to bitcoin's low transaction throughput. I haven't followed the blocksize debate but IIRC there have been lots of talk about slow transactions.
I doubt it ever will become mainstream, but one path to "mainstream" is when merchants, banks, companies, and payment providers just accept Bitcoin rather than:
1) Pretend to accept bitcoin 2) Pay a sub-par service with high fees to convert any received BTC into USD immediately 3) Encourage customers that don't already hold BTC to pay in BTC, adding another conversion step from USD -> BTC
If 90% of the people I give money to just accept Bitcoin as payment, then it makes sense for me to have a "Bitcoin account", as payment fees could be lower.
That's not a path to becoming mainstream, that is mainstream.
I don't have any affiliation with them. I just always thought trading stocks was schleppily difficult, and was delighted to discover it was not so. I believe some company will do well; I'm not interested in understanding spreadsheets or hiring anyone; here's my money; how do I buy shares? What is the Uber-like, magic-button product here? Robinhood, it turns out.
https://www.robinhood.com/
If you don't know enough to stock pick, buy the index.
Fun fact: brokerage accounts were easier to open in 2005 before the recent more stringent money laundering regulation.
While I am in general agreement with your position, I see statements like this frequently when stock trading comes up. References to the market or the index. There isn't one, monolithic tradable "market". Rather there are dozens of different index views of the broader market, some of which are better than others. If you know so little about stock trading that you think a service like Robinhood is a good idea you probably don't know enough to choose a good index either.
So you can take the Gov't control out of the equation, but I still have yet to hear a scenario that crypto-currrency itself makes better than fiat - it's always about the cost, complexity, and regulation of the services on top. Eventually, those will reappear because people and business want them.
It's a big world out there, most of which has no easy way of integrating with modern systems of credit, lending and other financial instruments. I see blockchain technology as a promising way for distributed groups to organize, create operating agreements, and execute contracts for market rate on a global setting.
Erm... BTC is less stable than USD by every conceivable measure.
http://www.orchardplatform.com/wp-content/uploads/2015/05/bt...
Tell me: would you be surprised if BTC changed in price by 50% by the end of this month? I wouldn't be, I simply don't trust BTC to retain its value in any way. BTC goes up or down, and that's bad for "currencies"
Bitcoin being a globally distributed ledger has the ability to represent shares of commodities and equities. It's why Delaware is considering incorporating blockchain tech.
You could imagine merchants pricing in shares of Apple - and customers paying in shares of oil and Google - to be settled at PoS. Check out shapeshift.io to see how fluid crypto-to-crypto trades can be.
http://www.wsj.com/articles/delaware-considers-using-blockch...
What? Do you change all of your savings into stocks or bonds each month?
Currency is the best short-term store of value. And "short term" means anything I plan to use in the next 6 months (My emergency fund will last 6 months without me being forced to touch my bonds or stocks, giving me breathing room for when to liquidate my long-term savings.)
I trust cash to be stable in the short term, even if it loses value long-term. I can't trust BTC as either long-term or even short-term storage.
BTC utterly fails at "6-month" storage due to its volatility. BTC has no history for growing (stocks are based on company profits. So as long as companies are profitable, they'll grow). Bonds are strong guarantees for growing: only bankruptcy can prevent me from getting me money promised through a bond.
What guarantees do I have for long-term BTC storage? Nothing. Absolutely nothing.
Short term? Well, again, stability is more important than gains in the short term (which is why my short-term is cash... not stocks).
Work costs money: like electricity isn't free at the scale of the BTC Network. It costs thousands of dollars of electricity to run those BTC mining rigs to verify the ledger.
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If you're saying the future of "blockchains" is just a cryptographically signed ledger, without any proof of work or BTCs being assigned, I think I can agree with you on that.
But at the moment, "blockchain" is the new cloud. No one really knows what a "blockchain" is anymore, aside from a new electronic ledger of some kind. BTC is clearly a blockchain, but a lot of the "blockchain-based technologies" are nothing like BTC at all.
A lot of these "blockchains" are just centralized banks electronically verifying transactions. Like a notarized bill of sale, except the 'notarized' portion is electronic. Proof of work and all that stuff just don't exist in a lot of the "blockchain" solutions coming out.
This is not the case for BTC or AAPL. If I get 1BTC today, some new MtGox story might wreck its value before I buy groceries with it tomorrow. AAPL is unlikely to move as much, but it moves around by several percent on a fairly regular basis, and some huge negative news could send it plunging.
I could imagine your scenario of pricing in AAPL and paying in oil and GOOG in a technological sense, but I have a hard time imagining anyone actually doing it.
In Kenya people trade in cell phone minutes (MPESA). It's not a huge stretch to imagine trading in units of energy or other commodities.
It seems to me that having an instant settlement layer challenges the need for currency as an intermediary.
1 cell phone minute today is 1 cell phone minute tomorrow - it's a real thing with real utility. Not so with BTC.
Now the kicker is, the bitcoin transaction fee is increasing rapidly due to (self-induced, political and totally fixable) bottlenecks in the network. I foresee an alternative taking over bitcoin if this isn't resolved soon.
So when you want to buy cell phone minutes, you simply convert your oil certificate to cell minute certificates through a settlement layer. This means merchants can denominate prices in whatever they'd like - and buyers can pay in whatever currency/asset they'd like.
But then fails to be better or even different to what we have now:
This means merchants can denominate prices in whatever they'd like - and buyers can pay in whatever currency/asset they'd like.
Indeed! We have that now. Where I live we use the Australian Dollar because that's what buyers and pays like. When I want to convert stock to cell phone minutes I do that through a settlement layer: log on to stock trading platform, sell shares, wait two days, buy cell phone minutes - it's sufficiently instant for my needs, and appears to be meeting everyone else's needs as evidenced by the continual churn of economic activity.
One issue I see with your proposal is I'm not convinced I know how to rationally price an oil certificate vis-à-vis a cell phone minute. That's why we need markets, I guess.
Blockchain is a solution looking for a problem. The problem of converting stock certificates to cell phone minutes is largely solved for most people who own stock. The problem of purchasing cell phone minutes is largely solved, and for those places where it isn't slapping a blockchain on it won't help any more than slapping whatever database is popular this week on it.
It doesn't matter if I hold a bitcoin or an oil certificate or a share of AAPL or a futures contract for polar bear fur, I don't want to use stuff as currency where I don't know how much groceries it'll buy next week.
There's places in this world where the idea of an apolitical central bank is unimaginable. If you don't have an imagination I can't help you there. Or maybe you don't car about humans from non-western countries. Either way, this innovation clearly isn't for you.
Bitcoin has the advantage over fiat of having been designed with incentives of participants aligned so as to make the likelyhood of inflation extremely small over the long term. So the scenario that Bitcoin makes better is the one in which money printing would have occurred, but now can't because of recourse to Bitcoin.
one other thing - with regards to fiat, BTC does have one theoretical advantage - the ability to limit government spending because it cannot be created out of thin air to be created as credit and spent as debt. and that is why no government will ever use it. but we wouldn't want this anyway because we actually DO want government to be able to create money as needed. the reason is that because the stated goal of the fed is "stable prices and full employment" stable prices are simple - your monetary supply expands AND CONTRACTS with GDP, pure and simple. 100 bushels of wheat in your economy and $200 in money? that's $2 per bushel. if your economy doubles due to additional population or technological/productivity improvements and starts producing 150 bushels, you need to have $300 in your economy for stable prices. the issue is that our government increases its spending at a rate that far exceeds the growth of GDP.
want a great idea for a far superior monetary system? read this: https://market-ticker.org/akcs-www?post=209282
This is historically and factually inaccurate. Currencies typically originated as highly marketable commodities that are naturally scarce and fungible - salt, gold, silver, cigarettes in jail, etc.
One could argue that's the definition of real money - but to say Bitcoin isn't real money is to move the goal post when what you mean is Bitcoin isn't a traditional fiat currency. There's no debate there.
See also: taxis
The customer interface is (was? I don't know if taxi companies competes on the app side) way above and that's the value here. Better information and information model, almost no idle time.
Uber came in and was very clearly illegal here, but they offered significantly better service and had more drivers available. A couple years on after fighting the government for a long time, Uber finally came to an agreement with the government and new regulation was passed. Rides sharing vehicles will now require nearly all the same regulations as a taxi, but the larger affect is more competition to traditional all taxis.
People do enjoy complaining but I quite like being able to fly cheap without paying for stuff I don't need. Admittedly it was more appalling when you couldn't even pay for your ticket without paying a fee (unless you had one particular laser card) but the most onerous ones have been phased out.
Citibank is, well, a bank. Coinbase is a currency exchange, and more analogous to those Forex booths you see in airports.
There are Bitcoin banks, but putting your Bitcoin into a bank loses the decentralization benefits. Admittedly holding onto your own BTC requires more security than many people are capable of implementing, but better and better solutions are being created to solve this problem.
"Blockchain" initiatives at banks are just about implementing cryptography as part of solving larger technical challenges they have. Using Bitcoin as "rails" isn't there yet. Using Bitcoin in places where only Bitcoin makes sense will make it a cockroach, and open protocols that survive tend to become important.
No seriously, though. Who knew that the libertarian cyberpunk dystopian future would be full of people trying to scam a nickel off you every couple of seconds...oh wait, everyone ever. That's the market, man. Don't taunt the market. Don't even look at it funny. It's sentient and can hear your insults.
[1] https://medium.com/@sondre.kolaautomat/how-to-pay-freelancer...
There is however, valid criticism of the various middlemen that have propped up to take advantage of the hype surrounding Bitcoin.
Or sponsored articles. I would love the author to mention where he works, and if that article was sponsored.
It costs me $7 to change my stocks into cash and vice versa. Frankly, turning BTC -> USD -> BTC is harder than turning Apple stock -> USD -> Apple stock.