Bitcoin and Thoughts from Bill Gates

In addition to your stated issues (which actually are probably fixable), there's the computational power requirement. That cannot be fixed. Bitcoin requires thousands of times (or more) more computational power to do a single transaction than any centralized currency system I can think of.

I remember before bitcoin people would say "Oh, I have a couple spare computers... I just threw folding@home on them for now". Now, people are going out of their way to throw cycles at this currency instead of problems that help scientific progress, and thus humanity.

Bitcoin is a cool idea and well implemented for what it is, but I think attention should be drawn to its exceedingly inefficient use of computational resources.

I'd also add the concern of Bitcoin lacking an inflationary mechanism. I can't see it ever becoming a currency without that. If it's lucky, it may be a transactionary vehicle before the next technology displaces it. But, like you pointed out, it doesn't have much of a utility for that purpose anyway - taking transaction fees, security and usability into account.

Emin Gün Sirer wrote [0] an excellent survey of the Mt. Gox scandal, and a measured evaluation of the problems with Bitcoin. I loved this part:

> What Nigerian scams are to your grandfather, Bitcoin exchanges are to the 20-30 semi-tech-savvy libertarian demographic.

He ends by recommending Dogecoin because the community doesn't take itself too seriously.

> If one must pick a cryptocurrency, the lowly dogecoin, of all things, is doing everything right. It's based on economic principles that provide the right incentives for a healthy economy. The community does not take itself seriously. Most importantly, no one pretends that Doge is an investment vehicle, a slayer of Wall Street, or the next Segway. No one would be stupid enough to store their life savings in Dogecoins. And people freely share the shiba goodness by tipping others with Doge. So, young people who are excited about cryptocurrencies and want to get involved: Dogecoin is where the action is at. Much community. So wow.

I just hope the hoardes of Bitcoin speculators don't ruin it for them.

> What can I do with bitcoin that I can't with paypal or even a bank account (many let you instantly transfer money these days for no/low fees to pay friends, landlords, etc.)?

For all its faults, the cryptocurrency renaissance (based off the Bitcoin protocol) is enabling the Silk Roads to flourish. You can't run those on Paypal. You can't donate to Wikileaks with Paypal either, for that matter.

[0]: http://hackingdistributed.com/2014/03/01/what-did-not-happen...

You really think it can't be devalued by the government?

Its value changed when China implemented laws regulating it (and even when there was speculation of it).

If the NSA threw its resources at mining, it could become rich and then dump for cheap, thus crashing it.

The FBI already showed that they can seize some, and they managed to seize such a significant portion that it could be devalued that way.

What you should be saying is "It's not backed by a central authority we have to trust". A third party as powerful as the government can still do significant damage to it.

That being said to get back on the technical merits of bitcoin, I agree with the OP that I can't imagine every individual handling their own bitcoin wallet and risk losing everything if it gets compromised (and waiting for transactions to be validated etc...).

So even if the currency is successful we'll end up with bitcoin banks managing the risk for us and visa-like credit cards for day to day transactions. And then I fail to see any advantage over what we have now (besides making a few early adopters extremely rich, of course).

Is that really the case? I'm quite sympathetic to the view that it might be, either presently or in the long run (an arms race where attackers and defenders are on the same footing can't get cheaper due to improved technology), but there are expenses in the current system that bitcoin avoids (and a lot that it doesn't, for sure). I've seen various analyses making various claims, and I'm really not sure what the answer is.