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Why the practical applications of Bitcoin will be limited

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Re: Why the practical applications of Bitcoin will be limited

#71

Post by JoeAltmaier »

frozenport wrote: post #69

Is anybody worried about the terrible consequences if Bitcoin does succeed? It will be a like putting the world back on the gold standard, except with even less inflation! Is anger at online transaction fees worth destroying the world economy?

I'm worried as you are. That silicon valley snobs will ignore a thousand years of learning, just to spite 'the man'. We've seen abominable cheating, lying and abuses in virtual currency systems - that surpass anything physical currency systems have experienced, in that they happen at the speed of the internet if nothing else.

Re: Why the practical applications of Bitcoin will be limited

#72

Post by sickpig »

jedunnigan wrote: post #55
DennisP wrote: post #28

Earlier quoted context omitted.

The Bitcoin devs are working right now on something that could increase the block size more than that. The main thing that limits the size is latency in propagating large blocks. But most miners already have most of the transactions in each block. All you really need to send is a small data structure that lets the miner reconstruct the full block, from the transactions he already has. An invertible bloom lookup table…

Transactions not having to propagate across the network a second time in blocks is certainly nice, but that doesn't solve all the problems of large blocks. As you said, that proposal is focused on maintaining an incentive for miners to create large blocks without having to worry about orphan races. All full nodes still need to process everyone else's transactions, so bandwidth requirements are still hefty, just not s…

Yes you're right when talking about the steady dicrease in terms of full nodes. I think that introducing economic incentives for stimulate full node operators are badly needed.

I've recently read a proposal for such a scheme written by Justus Ranvier, you can find it here:

https://bitcoinism.liberty.me/2015/02/09/economic-fallacies-...

tl;dr Bitcoin peer-to-peer (P2P) network needs price discovery built directly into it through micropayment channels (https://bitcoinj.github.io/working-with-micropayments)

Re: Why the practical applications of Bitcoin will be limited

#73

Post by DennisP »

darkmighty wrote: post #64
DennisP wrote: post #63

Earlier quoted context omitted.

VISA is typically around 2000 tx/sec, so it'd only saturate at peak. And anyone with gigabit fiber won't be bothered even at peak. If we reach that traffic level, gigabit will probably be fairly widespread by then. I don't see how those nefarious miners could succeed, unless they were powerful enough to carry out a 51% attack anyway. Otherwise their secret chain will soon fall behind the public chain.

Are there plans/other networks which distribute blockchain storage and mining somehow?

The Ethereum project has some ideas for making it so each node only has to see a subset of transactions, instead of all of them. It's not an easy problem.

They and a few other projects also hope to pull off a "proof-of-stake" system that mostly does away with mining. Done naively that can be attacked, but there appear to be ways to mitigate the problem. Initially, Ethereum is settling for a proof-of-work algorithm that's more resistant to specialized hardware, so big central miners can't get such an advantage.

Re: Why the practical applications of Bitcoin will be limited

#74

Post by inoop »

clavalle wrote: post #16

I think this essay is top heavy: the conclusions can't hold given the assumptions. Take the first argument: for transactions to remain cheap one of three things has to happen, then those three things are painted as almost impossible. But the second one; "At the same fee level, transaction count must increase 250 folds." Seems completely possible. If transactions remain relatively cheap then bitcoin can be very useful…

> But the second one; "At the same fee level, transaction count must increase 250 folds." Seems completely possible.

Possible, sure, but likely? Bitcoin has been around since 2009 and has so far failed to gain any real amount of mainstream adoption. I don't see any compelling reasons why this should change any time soon.

To me, Bitcoin is not the internet of money, it's more like the Linux desktop of money. Sure you can argue it has certain benefits over the status quo, such as lower cost and freedom from certain 'evil' corporations, but the general public arguably doesn't care enough about these things to be bothered to make the switch, especially given the relatively high barrier of entry and low amount of third-party support.

edit: anyone care to explain why I am being downvoted?

Re: Why the practical applications of Bitcoin will be limited

#75

Post by vanzard »

sharpneli wrote: post #66
vanzard wrote: post #61

Earlier quoted context omitted.

> Because they have already stopped No, tx/block certainly NEVER stopped increasing: https://blockchain.info/charts/n-transactions?showDataPoints... And price is cyclical. After the bubble of June 2011, it took 21 months to surpass its previous high of $30. What makes you think this bubble and price correction is different? In fact, Bitcoin is on the rise since its $150 bottom on January 14th so it would indicate the…

tx/block did not stop increasing. But the transaction volume in USD has been flat recently due to the falling price: https://blockchain.info/charts/estimated-transaction-volume-... The amount of value transferred in bitcoin network has seen no growth at all lately. On the other hand it has not diminished either. I simply wanted to point out that you cannot cherry pick the time periods. Right now on a 6-12 month times…

> But the transaction volume in USD

This is again irrelevant to the point the OP and blog post author were making. If the number of tx/block continues to increase, then the current level of network security will increase, all else being equal (eg. USD price of Bitcoin staying flat).

> on a 6-12 month timescale bitcoin has been absolutely terrible investment

Absolutely, but long price downtrends have happened multiple times in the past. That's why I asked "what makes you think this bubble, as opposed to the last N bubbles, is clearly different and clearly marks the end of Bitcoin?".

> which you did use as an example

Well I didn't, the OP did :)

> There is no mention whatsoever on how many purchases they have that is being made with bitcoin.

I was pointing to these slides because they show a multitude of metrics increasing. It seems unlikely bitcoin purchases would be declining given everything else is increasing: number of bitcoin startups, number of wallets, number of merchants, number of daily tx, etc. Individually these metrics mean little, but all combined... Heck we went from 0 to 100,000 merchants since 2009, so it is certain bitcoin purchases have increased in that time frame. Why would you doubt that?

> Do you happen to have any data about the purchases made specifically with bitcoin?

Very few merchants publish their bitcoin metrics. But 2 come to mind: Gyft and Newegg said that their 2014 Bitcoin black friday sales were the best ever: http://blog.bitpay.com/2014/12/09/bitcoin-black-friday-2014-...

Re: Why the practical applications of Bitcoin will be limited

#76

Post by SrslyJosh »

frozenport wrote: post #69

Is anybody worried about the terrible consequences if Bitcoin does succeed? It will be a like putting the world back on the gold standard, except with even less inflation! Is anger at online transaction fees worth destroying the world economy?

How about the fact that a sufficiently large adversary (e.g., Google or a powerful government) could take over the blockchain by throwing more processing power at mining than the rest of the world?

Re: Why the practical applications of Bitcoin will be limited

#77

Post by sp332 »

DennisP wrote: post #70
sp332 wrote: post #68

Earlier quoted context omitted.

The fewer miners there are, the easier it is to carry out a 51% attack. And the top miners have much more processing power than the average miner. Just a few of the top ones collaborating could carry it off.

That's definitely a problem, and it's the reason other projects are working on ASIC-resistant proof-of-work. I just don't see how the method I described would make things any worse.

I'm just pointing out that limiting active miners to people with fast internet connections means there will be fewer of them.

Re: Why the practical applications of Bitcoin will be limited

#78

Post by placeybordeaux »

The real practical application for bitcoin that I see will be machine to machine transactions, not human to human transactions.

Pre-bitcoin if you want to set up a static website that accepts donations to keep on serving it's content you absolutely have to have a human in the loop to faciliate those transactions.

If your webserver is overloaded and you need to charge browsers 0.0001 cents per connection to filter out the legitimate browsers there is a clear path to do that with bitcoin, not so with any other payment scheme. The path to do that involves everyone loading bitcoin into the browser and doing some sort of side chain, trust channel, trusted third party to enable such a cheap transaction, but the point being that there is no one stopping people from developing and pushing these technologies with bitcoin. If you wanted to do this with paypal or cash or credit cards or any other known payment system there are very real road blocks and people that can simply pull the plug.

Bitcoin enables people to try out new ways of paying without asking anyone's permission.

The quickest to market is illegal trades, because there is no one to say no and no one to pull the plug. It is really fairly similar to bittorrent in that way. Everyone will first say the technology should die because it lets people do things illegally.

Re: Why the practical applications of Bitcoin will be limited

#79

Post by logfromblammo »

GlickWick wrote: post #54
lsadam0 wrote: post #53

Earlier quoted context omitted.

Again, I would say: So? So cryptocurrency found a large push from a utility that was largely illegal. Who cares? Does it diminish the utility of the technology in any way whatsoever?

If you want eventually widespread adoption, the foundation of the currency cannot be illegal. This isn't even a case of questionable morality, there's some really obviously huge illegal transactions going through on Bitcoin. If you're really so blind that you can't see why this is very bad news for widespread adoption of Bitcoin, you need to take a step back and see things more objectively.

You're making an inference based on conditional probabilities that is not supportable by logic and mathematics.

Bitcoin has widespread adoption among criminals because they cannot reasonably make use of personal checks or card-based payments. It is their best alternative to cash for certain use cases.

For everyone else, Bitcoin has to be better than a debit card, rather than better than cash. This requires widespread adoption and financial service businesses using Bitcoin.

The foundation of the currency has little to do with the character of early adopters. I don't judge my stereo by the pretentiousness of the first audiophile to review it. Likewise, I don't care that people use Bitcoin to buy weed. There are only two problems I have with Bitcoin:

1. I can't pay all my bills with it.

2. I can't get paid for my work with it.

I can certainly jump through additional hoops to convert my dollar-denominated bank accounts into Bitcoin, but that does not actually improve my life right now. I have no compelling reason to use Bitcoin other than a vague desire to have some long-term alternative to the existing financial service businesses.

I have no reason to believe that Bitcoin will be that long-term viable alternative. I think that such an alternative will likely emerge within the next decade, but I don't think I have seen it yet. I see potential. But I don't buy potential; I buy value.

The bad news for widespread adoption of Bitcoin is really that it hasn't happened yet.

Re: Why the practical applications of Bitcoin will be limited

#80

Post by atmosx »

frozenport wrote: post #69

Is anybody worried about the terrible consequences if Bitcoin does succeed? It will be a like putting the world back on the gold standard, except with even less inflation! Is anger at online transaction fees worth destroying the world economy?

I can't believe that any serious finance minister would ever consider hanging over the power to create money to a non-controlled currency. Even Europeans who were stupid enough to create the EUR, are not that stupid.
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