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Bitcoin solved a major technical problem, but not an economic one

krugman.blogs.nytimes.com

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Re: Bitcoin solved a major technical problem, but not an economic one

#51

Post by hackinthebochs »

panarky wrote: post #47
apw wrote: post #25

Bitcoin is far more than "just" a solution to the Byzantine Generals problem. Inside every Bitcoin transaction is a small program that contains no loops. If that program when executed returns true, the transaction is valid. The simplest, most boring kind of transaction--but the one that most people assume " is Bitcoin"--is a transfer from address P to address Q. Where things get more interesting is in using those lit…

> their parents operated in a world based on centralized authority subject to rent-seeking corruption Krugman is surely correct that it's silly to waste resources digging gold out of the ground only to re-bury it in a bank's vault. And if Bitcoin was just another currency, it would be equally silly to waste compute resources mining it. But if crypto-currencies could disrupt even a small part of the centralized, rent-…

>It's about freeing that process from the gatekeepers who control it and extract rents from the labor of others.

And do you think these gatekeepers are going to relinquish their power quietly? There are many ways that the entrenched powers can stall or even kill bitcoin. One declaration by China saw a loss of 50% of bitcoins value in a day or so. The claim that bitcoin is disruptive to the system is vastly overblown. Guns still rule in meatspace as well as cyberspace.

Re: Bitcoin solved a major technical problem, but not an economic one

#52

Post by codex »

Bitcoin does solve an economic problem: it sidesteps the usurious interchange fees of Visa and MasterCard, allowing low friction micro payments to become a reality on the web. One doesn't even need to hold any Bitcoins to make use of this feature; just convert on demand.

Re: Bitcoin solved a major technical problem, but not an economic one

#53

Post by heurist »

fragsworth wrote: post #29

The success of bitcoin, in large part, relies on faith that people will support it as a currency . If its market cap and/or trade volume isn't high enough, then a secure mining network cannot be supported, and the entire system, including all of its extra features touted by techies, will collapse. Bitcoin will succeed if enough people believe that it will succeed, and bitcoin will fail if enough people believe it wil…

I don't think it will be viewed as a currency (I agree with Krugman), but I do think it could viably be viewed as an asset backing a currency. Here's my idea: There's nothing stopping cryptocurrencies from eventually becoming centralized. Successful alternative cryptocurrencies will pop up and will be backed by governments or businesses, giving them real value. There will be a market between all cryptocurrencies and centralized currencies will be built on top of that market. Inflation will happen whenever anyone creates a new currency and people want to buy it. So crypto-assets will serve as a base for viable (inflationary) currencies. It wouldn't matter if bitcoin or any other individual cryptocurrency succeeds or fails as long as that market remains, and it will due to all of the benefits of cryptocurrencies in general. I'd be happy to hear any flaws in this idea, I haven't talked about it with anyone yet.

Re: Bitcoin solved a major technical problem, but not an economic one

#54

Post by codex »

Estragon wrote: post #49
jostmey wrote: post #21

Krugman has said over and over again that bitcoin is bubble. He is right. But Krugman has failed to understand a crucial aspect about bitcoin - it is truly an international currency. Here is why this is so important. Krugman argues that someday news about bitcoin will come out that is so bad it will scare people away from bitcoin. This will certainly happen, as it has happened already. But bad news is localized. Just…

A key foundation of a modern nation's power over its citizens is the ability to arbitrarily create and destroy the national currency, to legitimately demand that taxes be paid in that currency, and to thus be able to use it to purchase arbitrary goods and services. It seems quite likely that major national governments will band together to ban transfers between bitcoin and their national currencies once they realize…

To any given government, Bitcoin looks like just another foreign currency. In many foreign countries, you can get dollar denominated bank accounts. How is Bitcoin any different than this status quo?

Re: Bitcoin solved a major technical problem, but not an economic one

#55

Post by trentmb »

nawitus wrote: post #26
trentmb wrote: post #18

Earlier quoted context omitted.

What's the overlap between people with access to stable or reliable banking and stable or reliable power and stable or reliable internet access?

Majority of Africans own a cell phone, and they already use it for payments.

Man, you weren't kidding: http://en.wikipedia.org/wiki/Mobile_telephony_in_Africa#Curr...

Just need to work on that blockchain size given GSM speed limits.

EDIT: Apparently there are clients that don't need the full blockchain now?

Re: Bitcoin solved a major technical problem, but not an economic one

#56

Post by panarky »

hackinthebochs wrote: post #51
panarky wrote: post #47

Earlier quoted context omitted.

> their parents operated in a world based on centralized authority subject to rent-seeking corruption Krugman is surely correct that it's silly to waste resources digging gold out of the ground only to re-bury it in a bank's vault. And if Bitcoin was just another currency, it would be equally silly to waste compute resources mining it. But if crypto-currencies could disrupt even a small part of the centralized, rent-…

>It's about freeing that process from the gatekeepers who control it and extract rents from the labor of others. And do you think these gatekeepers are going to relinquish their power quietly? There are many ways that the entrenched powers can stall or even kill bitcoin. One declaration by China saw a loss of 50% of bitcoins value in a day or so. The claim that bitcoin is disruptive to the system is vastly overblown.…

No, the gatekeepers and rent-seekers will not fade quietly away.

Just as they fought tooth and nail against digital networks and strong cryptography, they will try to smother crypto-currencies in their crib.

But decentralization, pseudo-anonymity, and free software are powerful forces, maybe even more powerful than men with guns.

Re: Bitcoin solved a major technical problem, but not an economic one

#57

Post by fragsworth »

heurist wrote: post #53
fragsworth wrote: post #29

The success of bitcoin, in large part, relies on faith that people will support it as a currency . If its market cap and/or trade volume isn't high enough, then a secure mining network cannot be supported, and the entire system, including all of its extra features touted by techies, will collapse. Bitcoin will succeed if enough people believe that it will succeed, and bitcoin will fail if enough people believe it wil…

I don't think it will be viewed as a currency (I agree with Krugman), but I do think it could viably be viewed as an asset backing a currency. Here's my idea: There's nothing stopping cryptocurrencies from eventually becoming centralized. Successful alternative cryptocurrencies will pop up and will be backed by governments or businesses, giving them real value. There will be a market between all cryptocurrencies and…

It may be a mistake to assume that small alternative cryptocurrencies are automatically viable. 51% attacks may become a severe problem, especially for very small mining networks. We may eventually see enough 51% attacks on altcoins that most people revert to the few largest networks (Bitcoin, Litecoin, and maybe a couple more). Or maybe we won't, and each new altcoin inflates the system.

Re: Bitcoin solved a major technical problem, but not an economic one

#58

Post by joe_the_user »

fragsworth wrote: post #45
joe_the_user wrote: post #38

Earlier quoted context omitted.

Bitcoin will succeed if enough people believe that it will succeed, and bitcoin will fail if enough people believe it will fail. Uh, the problem is that this is not a one-time succeed or fail thing. If one fine day, enough people think bitcoin will fail (or just think it no longer serves their purpose, say, it no longer has a chance of significant value increase), the consequences for many people may be very painful…

> Uh, the problem is that this is not a one-time succeed or fail thing. I think you're misunderstanding the risk here. If the mining network reaches a point that it is no longer secure, because the market cap and trade volume is not high enough to support a large computational network, then a single widely publicized 51% attack can cause a near-complete loss of faith in the system. The damage to cryptocurrencies afte…

Perhaps I didn't phrase it right - definitely think that bitcoin working until it doesn't is a serious, probably insurmountable problem.

Re: Bitcoin solved a major technical problem, but not an economic one

#59

Post by Jayschwa »

trentmb wrote: post #55
nawitus wrote: post #26

Earlier quoted context omitted.

Majority of Africans own a cell phone, and they already use it for payments.

Man, you weren't kidding: http://en.wikipedia.org/wiki/Mobile_telephony_in_Africa#Curr... Just need to work on that blockchain size given GSM speed limits. EDIT: Apparently there are clients that don't need the full blockchain now?

More on (existing) thin clients: https://en.bitcoin.it/wiki/Thin_Client_Security#Header-Only_...

Re: Bitcoin solved a major technical problem, but not an economic one

#60

Post by [deleted] »

GFK_of_xmaspast wrote: post #15
praptak wrote: post #4

The scenario with a large number of people wanting to cash out already assumes Bitcoin lost as a currency, so I'd say it could be a result, not the cause of Bitcoin's failure. Bitcoin succeeds or fails on whether you can buy useful stuff with it, buying other currencies is secondary.

Personally I consider a stack of (non-counterfeit) twenty dollar bills to be 'useful.'

[deleted]
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