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World Bank rejects El Salvador request for Bitcoin help

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Re: World Bank rejects El Salvador request for Bitcoin help

#171

Post by tsimionescu »

nathias wrote: post #161
tsimionescu wrote: post #67

Earlier quoted context omitted.

It's not a comprehensive list, but a good rule of thumb is that any computer spinning around computing a number that no one cares about the value of is pretend work.

so BTC would be real work because a lot of people care about those numbers, right?

No, no one cares about the final numbers - they are just, as the Bitcoin paper explains, Proof of Work. The only point of doing those calculations is to prove that you have spent X processor cycles in service of Bitcoin. You could entirely replace the calculation (and checkers) with a different calculation and nothing whatsoever would change about bitcoin, because no one cares about the values.

Conversely, if you found an algorithm that could compute those same values in microseconds on a calculator, bitcoin would plummet in an instant, because suddenly anyone with a calculator could run 99% attacks on the bitcoin network. The numbers aren't improtant, the busywork is.

Re: World Bank rejects El Salvador request for Bitcoin help

#172

Post by denton-scratch »

The Salvadoreans (or perhaps it's the BBC) seem to take the view that "legal tender" means any trader must accept it. That's not what the term means here in the UK; it means that once a debt is incurred, an offer to clear it with legal tender prevents the creditor subsequently suing for non-payment.

So you can't walk into a shop, ask for a pack of ciggies, and then insist the shopkeeper accepts a £50 note (or a bucketful of 1p coins, for that matter).

Re: World Bank rejects El Salvador request for Bitcoin help

#173

Post by nathias »

tsimionescu wrote: post #171
nathias wrote: post #161

Earlier quoted context omitted.

so BTC would be real work because a lot of people care about those numbers, right?

No, no one cares about the final numbers - they are just, as the Bitcoin paper explains, Proof of Work. The only point of doing those calculations is to prove that you have spent X processor cycles in service of Bitcoin. You could entirely replace the calculation (and checkers) with a different calculation and nothing whatsoever would change about bitcoin, because no one cares about the values. Conversely, if you fou…

Well yes, the values existing are important, the values semantics aren't, that's why its a proof of work.

Re: World Bank rejects El Salvador request for Bitcoin help

#174

Post by tsimionescu »

errantmind wrote: post #143
tsimionescu wrote: post #48

Earlier quoted context omitted.

The debt based system will not go away if we ever move the entire economy to bitcoin (laughable as that idea is). You'll have fractional bitcoin reserve banking with absolutely no difference compared to today. In fact, the fact that bitcoin has no on-chain notion of credit is a major limitation that relegates it to being digital gold, not a digital dollar.

The dollar was once backed by gold, so not the best comparison. Also, I don't see a way to make fractional Bitcoin reserve banking work in practice. You can't simply issue Bitcoin you don't have.

It's very simple: you have a banking app that shows you an amount in bitcoin. If you want to send someone else money, you get their own bank account number, and ask your bank to wire that person 1 bitcoin. Your bank talks to their bank and tells them that they are now owed 1 bitcoin.

At no point does this bitcoin have to live in the BTC wallet of you, your bank, your friend's bank, or your friend. In fact, this BTC can be entirely fictional. As long as your bank has enough BTC in their actual wallet that they are at no serious risk of running out if a realistic proportion of their customers wanted to withdraw their BTC, as determined by the Fed or other national entity, then all is well.

This is anyway the only realistic possible use of BTC itself, as the blockchain is far, far too slow to use for day to day transactions even in a large village/small town. I can also promise you that this is exactly what day to day use of BTC in El Salvador will look like, more or less, if they do go through with it.

Edit to add: the dollar was once based on gold. We've moved on from that after realizing that doesn't work. Today's dollar is very much not tied to gold, and it is used in ways gold is not.

Re: World Bank rejects El Salvador request for Bitcoin help

#175

Post by tsimionescu »

errantmind wrote: post #149
tsimionescu wrote: post #55

Earlier quoted context omitted.

KYC and AML are some of the biggest regulatory and legal hurdles for bitcoin. On the financial side, tying your country to a coin whose value you can't control, and is known to fluctuate wildly, is obvious financial insanity.

You could say the same thing about cash. Also, gold's value seems to fluctuate quite a bit and it was / is the basis for some currencies

Yes, cash is problematic for KYC and AML. That's why cash transactions and ownership are highly regulated in most of the world.

And gold's day-to-day value doesn't fluctuate nearly as much as bitcoin. Still, it does fluctuate too much, which is why the entire world has abandoned the idea of using it as a representation of the value of money.

Re: World Bank rejects El Salvador request for Bitcoin help

#176

Post by xiphias2 »

erulabs wrote: post #106
remarkEon wrote: post #60

A lot of these Bitcoin threads get old. The detractors, the pumpers, the bag hodlers ... it's all so tiresome. Here's something I want answered (all three parties are invited to respond): Is there a dependency on mature internet infrastructure that exists for a country to adopt BTC as its currency? Seems like there is to me, but maybe I'm not fully appreciating how this works or am overestimating the connectivity req…

I agree strongly with the tiresome comment, and I am a bag holder and have been interested in monetary policy and economics my entire life - but not enough to read the same 10 comments over and over every day. In answer to your question, technically no, but realistically yes. Technically, BTC “transactions” can happen "on paper", the keys can be physically handed off to each other, etc (there are plenty of possible a…

> Technically, BTC “transactions” can happen "on paper", the keys can be physically handed off to each other, etc (there are plenty of possible answers here that are all fairly vague and hand-wavey). There are many problems with this that make it wildly impractical though (see replies to this comment).

For large transactions using microSD cards is the recommended way actually. There are multiple hardware wallets that support partially signed bitcoin transactions (PSBT), and using SD cards both make it easier to verify the communication between the signing device and the Bitcoin network, and make it easier to sign the transactions using multisig at multiple different locations before publishing them on the network.

Re: World Bank rejects El Salvador request for Bitcoin help

#177

Post by tsimionescu »

jhoechtl wrote: post #57
tsimionescu wrote: post #48

Earlier quoted context omitted.

The debt based system will not go away if we ever move the entire economy to bitcoin (laughable as that idea is). You'll have fractional bitcoin reserve banking with absolutely no difference compared to today. In fact, the fact that bitcoin has no on-chain notion of credit is a major limitation that relegates it to being digital gold, not a digital dollar.

> In fact, the fact that bitcoin has no on-chain notion of credit Precisely that was the OPs point why it is a good alternative to the debt-based financial system we have.

I first addressed GP's point by observing that, were the global economy to adopt bitcoin as a store of value, they would likely still continue to use fractional reserve banking and continue the debt based economy, jjust dde nominating debt in BTC instead of dollars or other currencies. They are unrelated, especially as long as the BTC block chain isn't even close to fast enough to be used as a medium of exchange for a small town, nevermind the global economy.

In this phrase I was just pointing out that, given fractional reserve banking is here to stay, with or without bitcoin, it would have been better if bitcoin had embraced it and actually made it possible to put the real transactions on chain, so that at least you could in principle have a BTC bank that is transparent about the kinds of reserves it actually holds, without being forced to hold a full reserve while competing with banks with fractional reserves.

Re: World Bank rejects El Salvador request for Bitcoin help

#178

Post by xiphias2 »

I'm not sure what the World Bank even could help, as they haven't worked with the code base and the cryptography of Bitcoin at all.

At the same time lots of core developers, lightning network developers and the best bitcoin companies already offered lots of technical help, so I'm quite skeptical about the ,,request for Bitcoin help'' part.

Re: World Bank rejects El Salvador request for Bitcoin help

#179

Post by jl2718 »

remarkEon wrote: post #60

A lot of these Bitcoin threads get old. The detractors, the pumpers, the bag hodlers ... it's all so tiresome. Here's something I want answered (all three parties are invited to respond): Is there a dependency on mature internet infrastructure that exists for a country to adopt BTC as its currency? Seems like there is to me, but maybe I'm not fully appreciating how this works or am overestimating the connectivity req…

You can always issue centralized physical bearer notes like cash.

Re: World Bank rejects El Salvador request for Bitcoin help

#180

Post by lowkey »

tsimionescu wrote: post #174
errantmind wrote: post #143

Earlier quoted context omitted.

The dollar was once backed by gold, so not the best comparison. Also, I don't see a way to make fractional Bitcoin reserve banking work in practice. You can't simply issue Bitcoin you don't have.

It's very simple: you have a banking app that shows you an amount in bitcoin. If you want to send someone else money, you get their own bank account number, and ask your bank to wire that person 1 bitcoin. Your bank talks to their bank and tells them that they are now owed 1 bitcoin. At no point does this bitcoin have to live in the BTC wallet of you, your bank, your friend's bank, or your friend. In fact, this BTC c…

El Salvador is using Lightning Network on top of Bitcoin for virtually free, instant payments without fractional reserves. Instead of using debt or fractional reserves, Lightning allows 100% reserve asset-backed exchanges.

> the dollar was once based on gold. We've moved on from that after realizing that doesn't work.

Citation needed.

My understanding is that governments moved off the gold standard because they couldn’t debase the gold-backed currency without getting caught. Moving off the gold standard was devastating for citizen’s savings and the constant debasement was used to pay for endless wars.

WWI was only made possible becauuse countries were debasing their currencies instead of raising taxes.

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