The Quora post that killed Bitcoins. Please discuss if his arguments are valid. • Hacker News Board

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#71

Post by regularfry » Thu, Jun 02, 2011, 1:04 PM UTC

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

I think your reasoning about 4 is wrong. It does not look solid: in the long run, the security of all crypto goes to zero. There's a very real possibility that the current system will in time be replaced by something which is intended to be better, or to fix a to-be-found flaw, but which is itself flawed in a much worse fashion. In fact, that's quite likely: under the circumstances which such a change would need to be made, there'd be a panic and quite a pressure to get it done quickly.

That being said, I don't agree with the article's conclusion, either. If/when something goes wrong, it's a completely open question whether or not the reaction will be catastrophic.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#72

Post by regularfry » Thu, Jun 02, 2011, 1:06 PM UTC

sbierwagen wrote: post #40

dogas wrote: post #22

I think the other article ( http://apenwarr.ca/log/?m=201105 ) written about bitcoin failing is more detailed and contains potentially more plausible ways of how bitcoin can fail. The openwarr article refers to potential failures with the SHA256 backbone of bitcoins. "With bitcoin, a single failure of the cryptosystem could result in an utter collapse of the entire financial network. Unlimited inflation. Fake transac…

This is more along the lines of "SHA256 has not been proven to be secure, therefore, it may be cracked." It would require novel discoveries in mathematics to do so.

Hashing algorithms aren't generally as well understood as reversible encryption algorithms. It's entirely possible that these novel discoveries are just around the corner.

And when that happens...

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#73

Post by jcr » Thu, Jun 02, 2011, 1:09 PM UTC

> When the federal reserve "prints money", it doesn't just mail million-dollar checks to random Americans. It does one of two things. It either (a) purchases some other asset [generally US treasury bonds] on the free market, thereby injecting more cash into the system than there had been before, or (b), loans money to a bank, who will then loan it to other people who will then spend it.

The part (a) about "purchases" is not specifically incorrect, but it is misleading and shows the author may not completely understand how things work. Typically the federal reserve SELLS treasury bonds. They are sold for less than face value with a promise to pay the full value on the redemption date. The difference, of course, is the yield, or more commonly the "interest" earned by holding the bond to maturity.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#74

Post by nl » Thu, Jun 02, 2011, 1:09 PM UTC

mseebach wrote: post #61

nl wrote: post #51

Earlier quoted context omitted.

The computer argument is completely misguided. People buy a computer when the utility they will derive from it outweighs the monetary cost. They know they may get a better deal in the future, but immediate needs may outweigh potential future savings.

And why wouldn't that argument work for all other goods, too, rendering the deflation argument misguided?

Because most goods don't have the extreme pressure of Moore's law.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#75

Post by Vivtek » Thu, Jun 02, 2011, 1:10 PM UTC

It's a pyramid scheme, just dressed up in high-tech, vaguely libertarian clothing. That's why sensible governments (not the "bank lobby") are starting to ban it - it's inherently a bad idea (unless you're an early adopter - just like any pyramid scheme).

Bitcoins are no different from tulip bulbs.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#76

Post by Vivtek » Thu, Jun 02, 2011, 1:11 PM UTC

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

Dude, your #4 is exactly what Goldman-Sachs said about real estate derivatives. That wasn't that long ago.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#77

Post by Vlasta » Thu, Jun 02, 2011, 1:12 PM UTC

Deflation is the big big big problem.

The only bigger problem is that many people in the bitcoin community refuse to consider deflation a problem - some even deny it is happening.

The consequence is that bitcoins are good for investors and speculators, but bad for actual sellers and buyers. People just hoard bitcoins, and sellers are constantly lowering their prices every day while no one buys from them, because who would buy in a deflation?

Bitcoin bubble will burst unless they manage to give incentive to actual sellers and buyers.

I am a fan of digital currency and currently accept bitcoins, but I am considering to stop doing that, unless bitcoin changes from investing commodity to a real currency.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#78

Post by sbierwagen » Thu, Jun 02, 2011, 1:13 PM UTC

bad_user wrote: post #57

sbierwagen wrote: post #40

Earlier quoted context omitted.

This is more along the lines of "SHA256 has not been proven to be secure, therefore, it may be cracked." It would require novel discoveries in mathematics to do so.

Actually many cryptographic algorithms that got defeated, haven't been defeated with " new discoveries in mathematics ". Also, you can't really prove that such an algorithm is secure. You can only prove that it exhibits certain properties that make it more secure versus other algorithms. Judging by how cryptographic methods got defeated in the past, I think it's safe to assume that it's only a matter of time.

  Also, you can't really prove that such an algorithm is secure.

Incorrect. One Time Pad encryption is provably secure. (Proven by Claude Shannon, no less; as in, the guy who invented information theory.) It is impossible to decrypt if you do not have the key.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#79

Post by shazow » Thu, Jun 02, 2011, 1:14 PM UTC

regularfry wrote: post #71

cturner wrote: post #49

Trollish headline. One fair non-structural criticism, a weak, temporary criticism and two things billed as criticisms that aren't. 1) Early adopters. I couldn't find a point here. I think he's saying that it's unfair that some people get in early. But in the current system, it's unfair that government (through tax law and control of force) mandates that you use a form of money that doesn't function well as a store of…

I think your reasoning about 4 is wrong. It does not look solid: in the long run, the security of all crypto goes to zero. There's a very real possibility that the current system will in time be replaced by something which is intended to be better, or to fix a to-be-found flaw, but which is itself flawed in a much worse fashion. In fact, that's quite likely: under the circumstances which such a change would need to b…

> in the long run, the security of all crypto goes to zero.

Perhaps that's true, but then the only thing to do is prepare a viable upgrade path that could be executed as soon as it's evident that the crypto won't hold up. Bitcoin has that with its genesis block forking ability. As long as the network doesn't become too fragmented with forks, it'll be fine.

Re: The Quora post that killed Bitcoins. Please discuss if his arguments are valid.

#80

Post by coderrr » Thu, Jun 02, 2011, 1:15 PM UTC

mycroftiv wrote: post #13

The current design of Bitcoin is obviously not correct for the long term, and I am sure it will be supplanted by more evolved crypto-currency systems. There is absolutely nothing preventing people from taking the open-source code and creating an alternative "Bittoken" currency which changes problematic design elements such as the minting/issuance model. Given the rewards that have already accrued to Bitcoin early ado…

I think the most interesting aspect of this whole thing is, like you mention, how new bitcoin-like currencies are perceived, valued, and participated in. Will everyone start jumping into new bitcoin-like currencies in hope of massive bitcoin-style investment gains? Will massive bitcoin miners attack new currencies networks with their computing power to protect their or others' investments in bitcoin? Will new bitcoin currencies be like social networks where only one dominates at a time for many years?

What would happen if a new gold-like element was discovered? "Red Gold" that had almost all the attributes of gold but it had a somewhat redish color and was actually a different element and it was proven to be of about the same scarcity worldwide. Would that halve the price of gold and would everyone jump onto red gold immediately or would it be shunned as not the real thing and be mostly worthless?

I'd be interested to know others' insights on this.