
Ben Laurie on Bitcoin - davidw
http://www.links.org/?p=1164
======
patio11
Speaking only with regards to engineering marketing outcomes: allowing people
to trivially conjure Bitcoins out of the ether early in the lifecycle, then
making them increasingly dear, is a good way to engineer having a base of
committed evangelists. It's kind of like genes, right? Genes don't have good
features or bad features. Genes only _spread_. The gene for sickle cell anemia
wasn't designed to kill people and doesn't care that it does: it just causes
chemical reactions which have a tendency, on average, to create more copies of
itself in an efficient fashion. The successful currency/social
network/software/etc won't be the best currency/social network/software/etc
judged by any standard of quality engineering, it will be the spreadiest
currency/social network/software/etc.

I am being very value neutral in describing this feature of Bitcoin. This is
about all I can say without being very unneutral in a fashion that would
transgress HN's norms about politeness.

~~~
evgen
The problem with this assumption of early virality being important is that the
value of this property drops significantly over time. There is a critical
inflection point where this pseudo-currency needs to provide value outside of
the core group of true believers and if it fails to do so the bubble will pop
as true believers eventually fade away and the circle of people who are
willing to accept your confederate money becomes smaller and smaller. I see no
reason yet to believe that bitcoin will make this transition and a lot of
hints that it will in fact fail to make this transition (e.g. the currency is
getting too much publicity too early -- it is making itself a target before it
has any real social defenses.)

~~~
thorax
> it is making itself a target before it has any real social defenses

The system doesn't exactly have control over who notices it.

Some people are (rightly or not) excited about it and building services,
sites, and the like around it. That aspect of its virality certainly isn't a
bad thing if the community wants to live past that coming critical inflection
point you suspect will happen.

------
cube13
Bitcoins are a great consumer currency at this point, considering that it's
possible to generate them out of thin air makes it attractive to get. It's
like getting an allowance as a kid-you do some(relatively) trivial work, and
get some money from it. The problem is that it won't always be this way,
especially when the mining stops.

Normal currencies have a cyclical economy. A consumer gets money from their
job, then spends it somewhere. The money goes up the supply chain, eventually
getting to a bank, which loans it out to a business, who then pays employees.
Bitcoins currently are only used in the first transaction, then exchanged for
USD or other currency. They are acquired by consumers in two ways: mining
them, or buying them from a Bitcoin exchange. After the mining phase ends(or
becomes prohibitively expensive), you won't be able to conjure up BTC from
thin air. The only way for a consumer to get BTC is to buy them from an
exchange, since the overwhelming majority of people aren't going to actually
be paid by their job in BTC. Also, since it's doubtful that ISPs or hosting
providers will accept BTC, the sellers need to exchange their BTC for USD to
pay their bills. So, in the end, this means that the only ones that really win
in this economy are the BTC-USD exchanges.

~~~
rmc
bitcoin is not longer practically generatable without specialized hardware and
specialised software. i.e. If you download the bitcoin client and start mining
bitcoins, it'll take years before you get your first set.

------
pixelsort
This guy completely misses the point. The excitement over Bitcoin is due part
to the fact that it operates over a decentralized P2P network that exists
independently from the creators.

Perhaps if one of the earlier forms of digital currency had been as altruistic
in their engineering they would have seen as much enthusiasm from the public.

In other words, nobody is going to get excited about propping up the next big
evil empire like PayPal. Bitcoin puts the powers of paying and being paid
right where it belongs; directly with the people.

~~~
hugh3
_Perhaps if one of the earlier forms of digital currency had been as
altruistic in their engineering they would have seen as much enthusiasm from
the public._

Really? It was an altruistic project? The creators of bitcoin aren't sitting
on stashes of bitcoins in the (forlorn) hope that if bitcoins ever _actually_
take off they'll be insanely wealthy?

~~~
jakehow
Original paper is here if you want to judge motivations:
<http://www.bitcoin.org/bitcoin.pdf>

At the current value, they are already rich and probably not forlorn.

~~~
jerf
It is important to remember exchange rates are not static. The exchange rate
is determined by the supply and demand of the two currencies for exchange. If
you suddenly liquidate a lot of BitCoins all at once, you will raise the
supply on the BitCoin side and thus drop the BitCoin-to-dollar exchange rate.
It is not valid to take the exchange rate, multiply by the number of extant
BitCoins, and declare that to be the size of the BitCoin economy in dollars;
that will _grossly_ overestimate it.

(This has nothing to do with BitCoin _qua_ BitCoin, it's the nature of
currency exchange. Because most currencies that people deal with have such
enormous economic bases, people tend to reason about them such that they
neglect certain terms that they don't have to worry about in practice because
of sheer size. If I exchange $100 to Euros, I won't personally budge the
exchange rate noticeably. But in a much smaller economy, you can't neglect
such things.)

