What's the use for Bitcoin? • Hacker News Board

Re: What's the use for Bitcoin?

#131

Post by natrius » Thu, Apr 02, 2015, 7:57 PM UTC

tptacek wrote: post #99

natrius wrote: post #63

Earlier quoted context omitted.

Buy low, sell high. For now, at least. Play out the end of an asset bubble in your head. Lots of people sell their assets, and now have dollars. The job of our policy makers is to make sure dollars don't increase in value at all, and don't decrease in value too quickly. But if lots of people are exchanging assets for dollars, the demand for dollars makes the value go up. Our policy makers will take a variety of actio…

That's a description of a speculative asset, which is a concept that's orthogonal to a store of value. For instance, a speculative asset that plummets in value can be valuable (to short sellers and put option holders). In particular: the effectiveness of a store of value is based on its ability to retain its value over time. The effectiveness of a speculative asset is based on its users ability to transact based on p…

That's a good point; perhaps I was a bit loose with words. Its killer app is that it's a great speculative asset.

Re: What's the use for Bitcoin?

#132

Post by tptacek » Thu, Apr 02, 2015, 7:58 PM UTC

natrius wrote: post #131

tptacek wrote: post #99

Earlier quoted context omitted.

That's a description of a speculative asset, which is a concept that's orthogonal to a store of value. For instance, a speculative asset that plummets in value can be valuable (to short sellers and put option holders). In particular: the effectiveness of a store of value is based on its ability to retain its value over time. The effectiveness of a speculative asset is based on its users ability to transact based on p…

That's a good point; perhaps I was a bit loose with words. Its killer app is that it's a great speculative asset.

Okay, but that is also (not being snarky) the killer app of a deck of cards.

Re: What's the use for Bitcoin?

#133

Post by random28345 » Thu, Apr 02, 2015, 7:59 PM UTC

smokeyj wrote: post #90

quinnchr wrote: post #25

Earlier quoted context omitted.

Except the unbanked have been transmitting money across the world outside of banks for a few centuries now: http://en.wikipedia.org/wiki/Hawala I'm not so sure Bitcoin is a ground breaking change for the unbanked in developing countries, especially when the hawala market is substantially bigger and already widely used.

You describe the Western Union of bitcoin. The game changer will be the Nasdaq of bitcoin. The frictionless issuance of stocks bonds and dividends will change everything. Operating agreements will be codified in software and organizations can operate entirely transparently with a degree of accountability never before seen. Why would this be cool? Communities can come together and finance join ventures that were previ…

> The frictionless issuance of stocks bonds and dividends will change everything.

Right now, I can issue all the stock I want for a minimal filing fee. In spite of this, companies regularly pay investment banks billions of dollars to file an IPO. If you think that Bitcoin is somehow going to change that, I have a blockchain to sell you.

Re: What's the use for Bitcoin?

#134

Post by walterbell » Thu, Apr 02, 2015, 8:05 PM UTC

smokeyj wrote: post #90

quinnchr wrote: post #25

Earlier quoted context omitted.

Except the unbanked have been transmitting money across the world outside of banks for a few centuries now: http://en.wikipedia.org/wiki/Hawala I'm not so sure Bitcoin is a ground breaking change for the unbanked in developing countries, especially when the hawala market is substantially bigger and already widely used.

You describe the Western Union of bitcoin. The game changer will be the Nasdaq of bitcoin. The frictionless issuance of stocks bonds and dividends will change everything. Operating agreements will be codified in software and organizations can operate entirely transparently with a degree of accountability never before seen. Why would this be cool? Communities can come together and finance join ventures that were previ…

> Operating agreements will be codified in software and organizations can operate entirely transparently with a degree of accountability never before seen.

Are there any articles or papers which explain why Bitcoin is better than alternative implementations of transparent accounting? E.g. existing access control can be used to make accounts available to any subset (all the way up to public) of interested parties. Techniques are available for append-only data stores. What does Bitcoin uniquely bring to the table?

Re: What's the use for Bitcoin?

#135

Post by chatmasta » Thu, Apr 02, 2015, 8:16 PM UTC

random28345 wrote: post #45

chatmasta wrote: post #35

I don't understand why we even need to discuss the usefulness of Bitcoin beyond the fact that it's decentralized. Its decentralized nature, alone, is its most important attribute. Bitcoin cannot be stopped. Period. As long as multiple people can run a program on a set of computers that can connect to each other, Bitcoin can exist. If you want to receive it anonymously, you can perform services anonymously and take pa…

> Its decentralized nature, alone, is its most important attribute. Bitcoin cannot be stopped. Period. It's just as decentralized as tulip bulbs ( http://en.wikipedia.org/wiki/Tulip_mania ), and Bitcoin will be "stopped" when a) it is illegal to transmit or receive a blockchain (unlikely), or b) when people realize the only value Bitcoin has is in the belief that Bitcoin has value. All it takes for Bitcoin to be wort…

> All it takes for Bitcoin to be worthless is the belief that Bitcoin is worthless.

All it takes for Bitcoin to be worth something is the belief that Bitcoin is worth something.

We are arguing two sides of the same coin. [0]

The difference is how we define "worthless" and "worth something." Step back into reality for a second. Realize that most economic transactions take place between two entities. Generally two entities exist within the same social structure or community groups. e.g. I transact with my good friends (see your venmo newsfeed for example), accountants transact with local clients, etc. Payment networks and social networks are inextricably linked. Realizing this, "worthless" and "worth something" become only relative terms. Bitcoin does not need to be "worth something" to every person in existence in order to be viable. It simply needs to be "worth something" within confined payment networks, which tend to correlate with social networks. As long as a single comminity agrees to transact with Bitcoin, it becomes acceptable as a currency, within that community. Similarly, Bitcoin could be worthless to an entire community, and they could avoid it altogether.

The viability of the Bitcoin is moot, within a network of a community that sees it as worthless. But outside that community, other communities might see it as worth something. As long as transactions occur within clusters, it therefore holds true that Bitcoin is worth something, somewhere.

Do you see the difference in our arguments? We are both saying the viability of Bitcoin depends on either people seeing it as viable, or nobody seeing it as viable. But my argument is that as long as one community sees Bitcoin as viable, they can transact in it. Your argument is that Bitcoin is worthless to everybody, if everybody belives Bitcoin is worthless. This is true by default -- nobody was using Bitcoin before it existed. However you must consider that as long as some communities are using Bitcoin, it exists by definition, and therefore is also valuable, by definition.

> Therefore, if you hold any Bitcoin, you are incentivized to be a Bitcoin evangelist.

If you have a [myspace/friendster/facebook], you are incentivized to tell your friends to get a [myspace/friendster/facebook]. Community based programs, the ones that depend on "network effects," are obviously useless if you are the only one using them. I fail to see how this is a weak point for Bitcoin. It seems like a strength. As people buy Bitcoin, they invest in the ecosystem and join the community. As the community grows, it becomes the single community that supports Bitcoin, and the network is viable because of its momentum alone.

> It's just as decentralized as tulip bulbs (http://en.wikipedia.org/wiki/Tulip_mania)

This is a fair economic comparison, but completely ignores the fact that Bitcoin is a decentralized, digital currency, and Tulips are flowers. One is specifically designed for transacting in the age of the internet. The other grows in the ground and people went crazy over it 350 years ago. Therefore we must take the tulip mania comparison to Bitcoin only within the context of Bitoin's economic repercussions. The lesson is that humans are irrational creatures living in a world of scarcity. As a species we need methods of transacting with each other, and we use whatever happens to be en vogue at the time. Ultimately all currencies will be flawed, so long as they are created and used by humans, directly or indirectly.

[0] That seriously was not a pun. I didn't even notice it for a couple minutes.

Re: What's the use for Bitcoin?

#136

Post by georgyo » Thu, Apr 02, 2015, 8:19 PM UTC

cporios wrote: post #18

georgyo wrote: post #15

Earlier quoted context omitted.

It still requires a bank account, just a difference sense of the word. If someone only has a phone, they need to store their bitcoin somewhere, and its unlikely to be their phone. So whoever is holding their bitcoin is acting as their bank.

I don't think that's true. > If someone only has a phone, they need to store their bitcoin somewhere, and its unlikely to be their phone. Why? Bitcoins do not exist somewhere, bitcoin transactions do, and they are stored in the blockchain. Bitcoins that you own are essentially unspent transactions to your address which is only a few bytes long. A bitcoin wallet/address is not a bank account by any sense of the world.

You are right, they could store their actual wallet addresses on their phone. But would that actually be a good idea?

I would sure hate to loose all my money because it rained hard while walking home. And all the other dangers that haunt phones.

A counter here of they should be backing up is unacceptable. Many people who are otherwise very knowledgeable don't make backups.

Sure, if they have all their money under a mattress then they are venerable to house fire, theft, and the like. But storing all their money on a cheaply made but affordable electronic device has the same problems, while opening up a ton more possibilities of chronic money loss.

Re: What's the use for Bitcoin?

#137

Post by smokeyj » Thu, Apr 02, 2015, 8:22 PM UTC

tptacek wrote: post #102

aboutus wrote: post #6

I derided Bitcoin and cryptocurrencies in general until I seriously looked into it, and then I could hardly sleep for days because of the huge implications of it. Bitcoin allows people who are unbanked, especially in developing countries, to hold and transmit money across the world at practically zero cost. Since bitcoin is decentralized, there are no middlemen like banks to take a cut or freeze your account. Besides…

The article we're discussing might be wrong, but it's fairly level-headed. Responses like this, with breathless invocations of the world-changing implications of Bitcoin and heroes-and-villains narratives about governments and banks, sap credibility from Bitcoin. They suggest that very simple arguments with Bitcoin critics can't be addressed without stipulating that Bitcoin is going to rewrite all of commerce and per…

If the IRS is going to work out in the long run, it will need arguments that work even if the blockchain retains its ability to maintain a globally distributed ledger.

Are you surprised bitcoin still exists considering the white paper unapologetically spoke heresy against government and bank collusion? That must be frustrating. Seeing the NYSE invest in a bitcoin company must have been a poke in the eye for you!

Re: What's the use for Bitcoin?

#138

Post by jbooth » Thu, Apr 02, 2015, 8:23 PM UTC

smokeyj wrote: post #137

tptacek wrote: post #102

Earlier quoted context omitted.

The article we're discussing might be wrong, but it's fairly level-headed. Responses like this, with breathless invocations of the world-changing implications of Bitcoin and heroes-and-villains narratives about governments and banks, sap credibility from Bitcoin. They suggest that very simple arguments with Bitcoin critics can't be addressed without stipulating that Bitcoin is going to rewrite all of commerce and per…

If the IRS is going to work out in the long run, it will need arguments that work even if the blockchain retains its ability to maintain a globally distributed ledger. Are you surprised bitcoin still exists considering the white paper unapologetically spoke heresy against government and bank collusion? That must be frustrating. Seeing the NYSE invest in a bitcoin company must have been a poke in the eye for you!

This kind of comment is probably why Mr. Ptacek chose the word "believer" downthread.

Re: What's the use for Bitcoin?

#139

Post by stevenh » Thu, Apr 02, 2015, 8:26 PM UTC

random28345 wrote: post #129

tptacek wrote: post #124

Earlier quoted context omitted.

Like virtually everyone in the world, I pick #1.

> Like virtually everyone in the world, I pick #1. Then why Bitcoin? If you add regulation compliance, replace the block reward with higher transaction fees (which is built into the protocol as an inevitable end-goal), and remove (pseudo-)anonymity, what good is it? If you take away the ability to use it for illegal activity, why waste millions of dollars of electricity to sustain it?

I don't care about the Bitcoin argument either way, but I'm annoyed by how you keep bringing up its use of electricity. There are over 877,500 bank branches in the world, each consuming a nontrivial amount of electricity every day.

Re: What's the use for Bitcoin?

#140

Post by srdev » Thu, Apr 02, 2015, 8:27 PM UTC

cporios wrote: post #43

rthomas6 wrote: post #24

Earlier quoted context omitted.

There are things that the third world already uses for this purpose, such as M-Pesa. Money through SMS is already in wide use, for millions, right now. How can I send someone bitcoin through text messaging? http://en.wikipedia.org/wiki/M-Pesa

I wasn't aware of M-Pesa. Bitcoin transaction fees are still lower though. Coinbase and other companies allow you to send bitcoins via SMS: https://www.coinbase.com/sms_service

Bitcoin transaction fees are lower currently because they inflate the money supply to reward transaction processors. This puts downward pressure on the price. Once the inflation is cut off, its not clear what will happen with the fees. If the hashing power stays constants or decreases while the user-base increases, then low fees might still be feasible, but its unlikely to pan out this way.

Speaking from a technical perspective only, there is no way that Bitcoin can process transactions at a lower cost then a centralized method. A distributed log backed by proof of work is necessarily more expensive than a trusted, central server. Most claims of cost reduction come from the elimination of features, such as chargebacks, which will then be implemented by third party, resulting in unbalanced comparisons.

Supporters also point to smart contracts as cost-reducer, but the surface area where smart contracts can be made to work without human intervention is low, and I doubt many of these hypothetical cost reductions will be realized.