
Bitcoin: The Cyberpunk Cryptocurrency - kyledrake
http://www.slideshare.net/KyleDrake/bitcoin-the-cyberpunk-cryptocurrency
======
acslater00
Bitcoin seems to be in another bubble, so I'm going to wade back into this
insane discussion.

There are two main goals of "money". To facilitate exchange, and to store
value.

Bitcoin is moderately good at the first one and atrocious at the second one.
It is not designed to be a stable store of value. It is designed to
_appreciate_ in value, but this encourages intense speculation that results in
wild, sickening swings in the exchange rate. It's at best a goofy but terrible
idea, and at worst has all the red flags of an outright pyramid scheme.

If you want to read Rothbard and convince yourself that "currency debasement"
caused the fall of the Roman empire, that modern monetary policy is going to
lead to a Zimbabwean dystopia, and that you can solve all of these problems by
dropping us into the hard-money currency policies of the 1800s [that, for the
record, didn't actually work all that well], go right ahead. There are
subreddits for this sort of thing.

But if you're going to stand here and imply that Bitcoin is a superior store
of value to the US dollar, well I cannot abide that sort of nonsense, sir. Not
one bit.

~~~
kyledrake
I'm glad you responded. My goal is exactly to dispel some of these myths:

\- It's not a pyramid scheme. It is designed to work just like other
currencies do. The idea that Bitcoin is some kind of scam comes from ignorance
on the topic of mediums of exchange. This talk was my attempt at showing how
all currencies work, so that you can compare Bitcoin to all other currencies,
and see that similarity.

\- You are correct that it is not designed to be a stable store of value. Gold
shares a similar problem. Price stability is probably not going to be one of
Bitcoin's strong suits, for sure. It's primary role might be simply as a
highly liquid store of value that cannot easily be controlled by a central
authority, which is still incredibly profound.

\- A lot of things caused the fall of the Roman empire. I don't see
devaluation of Roman currency as -the- reason, but I do see it was major
component. It's pretty hard to run a stable empire when economic exchange
breaks down.

\- Regarding Rothbard: I am not an Austrian (school of economics). I like a
lot of their older macroeconomic works, but I think that the school has (in
the last 30ish years) been hijacked by hard-core libertarians to justify
things that I would never agree with. There are some things that markets seem
to do a worse job at than governments, and as a citizen with access to clean
drinking water, I am perfectly comfortable with that compromise.

\- I think the "jury is still out" as to whether it will be a better store of
value to the US Dollar. But the store of value of the USD is simply that our
government exists, and is stable. And I don't know if you've paid attention to
the recent ineptitude (like the fiscal cliff), but it's not a strong vote of
confidence. That's the question: Do you believe more in your government, or in
a predictable, documented software algorithm? Either could fail. We'll find
out which fails first.

~~~
acslater00
"You are correct that it is not designed to be a stable store of value. Gold
shares a similar problem. Price stability is probably not going to be one of
Bitcoin's strong suits, for sure. It's primary role might be simply as a
highly liquid store of value that cannot easily be controlled by a central
authority, which is still incredibly profound."

This I think the fundamental problem with the Bitcoin movement in a nutshell.
Once you get past the grandiose claims, the fact that Bitcoin is inadequate as
a store of value reduces it to an instantaneous transfer means only. But think
through the implications of that. Its volatility makes it inappropriate for
any transactions which are not instantaneous. Your rent will not be
denominated in Bitcoin. Neither will your salary. No loans will be denominated
in Bitcoin. Equity arrangements for companies, purchasing contracts, your
savings accounts, none will use Bitcoin due to the volatility. So the Bitcoin
economy is still dependent on traditional currencies, which means all of these
purported benefits of avoiding currency debasement and the like simply don't
exist!

~~~
smokeyj
The price of a 4 year old cryptocurrency is volatile?? Must be broken, let's
throw it away.

Bitcoin will be more more stable than fiat currency on a long enough time
line. In 100 years the US dollar won't be around, but bitcoin will be. Even if
it's just us from /r/bitcoin.

Finally, fiat currency is a terrible _store_ of value, unless you like loosing
it. A quick glance at USD purchasing power will show what I mean.

~~~
srl
"In 100 years the US dollar won't be around, but bitcoin will be."

Two claims, no justification.

I'll leave the bitcoin issue to the side, since while I don't believe bitcoin
itself will be around in a century, I have no trouble with the idea that
/some/ crypto-currency will. Claiming the US dollar won't be around is kind of
weak, though. It's too easy and too popular to predict doomsday, with little
to no evidence, for these sorts of claims to be taken seriously.

~~~
smokeyj
Just look up the typical lifespan of fiat currency. It's more of a stretch to
say the USD will be here.

~~~
gamblor956
US dollars have been around for more than 200 years. The British Pound, more
than 500. The Chinese renmibi/yuan is over _2000 years old._ Based on this,
I'm going to say that the safe money is on the US dollar being around in 100
years.

Pardon my spelling, I'm mobile.

~~~
smokeyj
A country issuing different currencies is not the same currency. The US has
not had it's current fiat system for 200 years, more like 30 -- with a
smattering of different systems in between. Same with the Yuan.

------
bcoates
This is a nice summary of what you might call the Bitcoin economic party line,
but it's not particularly insightful or rigorous for something so long. I'm by
no means an expert on monetary policy, but I can recognize a lot of common
errors in this presentation.

It opens with a story about how currency came from barter, but barter is a way
of exchanging goods with outsiders, which is not the main way of trading in a
functioning society. Money didn't arise as a way of making barter systems
practical, it arose as a way of memorializing debt obligations that eventually
got securitized into something you could exchange for stuff directly.

The parts about how the USD works and the suggestion that Demurrage would do
anything at all to fix the deflation issue are also particularly weak.

It also doesn't do any favors to Bitcoin by suggesting Freicoin alongside it;
It's possible to imagine a world where the advantages of Bitcoin economics
outweigh the disadvantages, but Freicoin is outright kookery.

~~~
temphn
The presentation has plenty of historical data going back to Roman times,
including links to sites with debased currency, so I'd humbly suggest that you
enumerate the "common errors" in the presentation. Moreover, experts in
"monetary policy" have not exactly covered themselves with glory over the last
few years (decades?).

As for Freicoin, it might be silly, but it just puts the Bernanke-ist
inflation into the protocol and makes its purpose explicit: namely to break up
long-term holdings of wealth, force spending, and discourage saving. The part
that isn't silly about it is that said destruction of long-term wealth is
distributed rather than centralized, and the wealth redistribution essentially
provides increased transaction fees and thereby a reason for more people to
validate transactions.

Bernanke-nomics or "monetary policy" constitutes the redistribution of wealth
via inflation from the people to the banks. Hard to say that's crazier than
Freicoin.

~~~
cynicalkane
Inflation redistributes wealth from the people to the banks? You understand
that inflation _reduces_ the value of bank debt, which is almost always
nominal. And surely you must know that tight money has the objectively
observed effect of rewarding capitalists and punishing earners (viz. the
wealthy parts of the Eurozone, right now).

What are you trying to say that I'm missing?

~~~
temphn
The bailouts represent money printed and deposited in the accounts of banks.
Kind of a fusion of the worst of right and left ideology: devalue everyone
else so that the richest get richer. The full magnitude of the money printing
is actually much greater than the public has been led to believe, and came out
quietly in late 2010.

[http://money.cnn.com/2010/12/01/news/economy/fed_reserve_dat...](http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm)

    
    
      The Federal Reserve made $9 trillion in overnight loans 
      to major banks and Wall Street firms during the financial 
      crisis, according to newly revealed data released 
      Wednesday. ...
    
      The amount of cash being pumped out to the financial 
      giants was not previously disclosed. All the loans were 
      backed by collateral and all were paid back with a very 
      low interest rate to the Fed -- an annual rate of between 
      0.5% to 3.5%. ...
    
      Sen. Bernie Sanders, the Vermont independent who had 
      authored the provision of the financial reform law that 
      required Wednesday's disclosure, called the data that was 
      released incredible and jaw-dropping.
    
      "The $700 billion Wall Street bailout turned out to be 
      pocket change compared to trillions and trillions of 
      dollars in near zero interest loans and other financial 
      arrangements that the Federal Reserve doled out to every 
      major financial institution," Sanders said.

~~~
argonaut
Your arguments seriously ignore and misstate what the Federal Reserve actually
does.

1\. The Fed/govt does not simply deposit money "in the accounts of banks."
Under TARP and quantitative easing, the Treasury _purchased_ securities or
shares from the banks. Under quantitative easing, the Fed _purchased_ Treasury
securities and mortgage-backed securities from the banks. Yes, the Fed printed
the money to buy those securities, but it't not like they just printed the
money and gave the banks free money.

2\. Overnight loans are almost irrelevant to your point because they're
_overnight_. They have to be paid back within 24 hours. The $9 trillion dollar
figure sounds impressive but that's just the value of all the overnight loans
added up. If you make $8.2 billion in loans every day for 3 years (with the
8.2 billion paid back the next day and then another 8.2 billion loaned out
again), you get $9 trillion.

~~~
temphn

      Yes, the Fed printed the money to buy those securities, 
      but it's not like they just printed the money and gave 
      the banks free money.
    

That is exactly what they did, because otherwise those securities would not
have had the same price on an open market. The Fed paid for worthless holdings
and propped up banks by printing trillions, thereby devaluing everyone else's
dollars. And they are still doing it, now printing $85B per month ($1T/year)
to buy mortgage-backed securities and reinflate the housing bubble. Printing
$100 to buy $1 of MBS toxic waste from the banks is direct depositing $99 into
their pockets (and causing commensurate dilution of all other dollar holders).

    
    
      Overnight loans are almost irrelevant to your point 
      because they're overnight. 
    

Without printing $9 trillion to "inject liquidity" the banks would have gone
bust when the capital call came. It was this overnight loan that allowed the
banks to socialize the losses while privatizing the gains.

------
ChuckMcM
This presentation confuses money and currency. That is unfortunate because
there are principles of monetary policy (like how much currency is in
circulation) which are being conflated with currency issues (like how hard it
is to counterfeit).

Bitcoin is a currency, which through a number of exchanges, can be exchanged
for money. Because it is not legal tender for any economy, its economic value
is entirely controlled by currency exchange. That will always makes it _less
stable_ than currencies that are backed by an economic entity (a nation-state,
or perhaps at some point a multi-national corporation).

This is important to consider because currencies that _are_ backed by an
economic entity are only as strong as that entity is with respect to the
global economy. That is why the Italian Lire tended to hyper-inflate but the
Euro does not. The difference is that the Eurozone economy is stronger than
the Italian economy by itself is.

I can whole heartedly recommend that people interested in Bitcoin visit the
British Museum's display of the history of currency, and to invest in
understanding the reasoning that economists go through in order to make the
statements they make. I can recommend this course by Dr. Taylor [1] from The
Great Courses catlog, I originally checked it out from the library to listen
to on my commute but bought my own copy when they went on sale.

[1]
[http://www.thegreatcourses.com/tgc/courses/course_detail.asp...](http://www.thegreatcourses.com/tgc/courses/course_detail.aspx?cid=550)
\-- "Economics, 3rd Edition" by Tim Taylor.

------
brennannovak
Really great and easy to understand slideshow about the history of currencies
and how they work all in relation to how Bitcoin fits into the worlds current
monetary systems / problems!

~~~
scarmig
Might be easy to understand, but it's horrifically wrong, which in my book
precludes "really great."

Its accounting of the origin of money is totally devoid of historical fact or
perspective. That can't be stated strongly enough: people who are interested
in empirical findings instead of ideology have looked into the origin of
money. This has been an area of research for at least a century, and there's
not a bit of evidence that money developed as the slideshow claims.

~~~
kyledrake
If money does not originate as a decentralized system, then how can we explain
the fact that Bitcoin has become so successful? If it works for Bitcoin, why
can't it work for gold? My opinions are not ideological: They are based on
events that have occurred throughout history, be it in large macroeconomic
environments or 50,000 person prison camps, or Bitcoin's rise itself.

There is a lot of both current and historical evidence to suggest that
currencies can form in a decentralized manner. The fact that there was a long-
standing decentralized gold standard in China is highly documented and written
about. We can debate about the earliest origins, but that is not my intention.
What we arrived at is the system I am describing, which is not a system that
is chosen by a government or an ideology, but the one that is chosen
organically by freely thinking individuals. There is a nature and a pattern to
it, and I am trying to understand and describe that.

~~~
djur
I don't think it's proven yet that Bitcoin is or will be successful as a
currency.

~~~
redblacktree
It's successful in that you can use it to buy (a very limited range) of
things. Certainly not as a general purpose currency. I doubt that any
individual anywhere could spend bitcoin only (i.e. no exchanges into other
currencies) and have his needs met.

------
beachstartup
the bartering origins of trade and money (debt) is a fallacy, according to
david graeber, an anthropologist that wrote a book on the history of human
economics. it's also what they teach in every econ class so it has widespread
status as a myth:

<http://en.wikipedia.org/wiki/Debt:_The_First_5000_Years>

------
uvdiv
Almost all of the historical currency examples differ from Bitcoin in an
essential way: they are valuable commodities _independent_ of their use as
money. (Called "commodity currency"). They are either useful commodities
(sugar, cigarettes), or psychological commodities valued for aesthetics or
status (gold, silver). Bitcoin is not a commodity: aside from its monetary
use, it is absolutely worthless. The value of commodity currencies is
stabilised and supported by their commodity value. Market forces sustain the
value of cigarettes. Bitcoin has nothing like this: it's value is purely
psychological and purely speculative.

~~~
tlrobinson
Are gold's industrial uses really worth $1600/oz? I was under the impression
that were gold not used as a store of value the price would be much much
lower.

------
quasque
I don't really understand the Bitcoin hype. Yes it's interesting application
of cryptography, but it's not really that useful as a currency. It's online
only, and not really accepted anywhere very much, especially because there's
too much of a barrier to casual usage. All of the transactions are public,
making it a privacy nightmare unless you're careful to completely dissociate
your real-life identity from your Bitcoin addresses. I just don't see the
point other than as a speculative toy.

~~~
Stealth-
It isn't hard to make yourself anonymous with your spending.

Want to buy a gift for your wife? Send BTC to a coin mixer or a new eWallet,
then pull it out to a newly created separate, anonymous, address. Use that
address to purchase.

Use the reverse process for receiving money, if you want to keep your main
account private.

New addresses can be created on the fly, so it isn't much different of a
privacy nightmare than current card transactions.

~~~
gnaritas
> Send BTC to a coin mixer

You mean money launderer?

------
Apocryphon
What happens in the long run? The parts of the developing world that don't
have machines powerful enough to participate in the mining or the exchange are
going to be locked out.

~~~
betterunix
In the long run, powerful governments with an interest in disrupting the trust
in Bitcoin will amass the computing power needed to attack the system. Bitcoin
is a system for which the attacker's effort scales linearly with the work done
by honest parties. This is not the kind of security a cryptosystem should
provide.

------
quattrofan
82 slides! Has anyone read this and can post the gist?

~~~
mbijon
The first 60'ish slides are evidence supporting why inflation predicates
cultural breakdowns, why gold has become a standard, and why a crypto currency
offers advantages to gold.

For the Bitcoin-related parts of this presentation, jump to slide #66 (or #62
if you don't know the history of Bitcoin, but then why are you on HN).

~~~
djur
The slides present a few well-known cases of hyperinflation accompanying
economic and social breakdown, but doesn't demonstrate causation. It then
shifts to discussing the inflation trend of the US dollar, even though the USD
is not experiencing hyperinflation and never has since the introduction of the
Federal Reserve system.

Why historical examples of hyperinflation are relevant to the gradual
devaluation of the US dollar is never explained. That seems like a grave flaw
in the argument.

Even if Bitcoin is viable as a non-inflationary currency outside the control
of central banks and nation-states (which I don't think is proven), there's
still the question of whether either of those qualities are desirable.

~~~
vbuterin
> even though the USD is not experiencing hyperinflation and never has since
> the introduction of the Federal Reserve system.

The USD stayed long-term stable before 1913. It lost 98% of its value since
then. Say what you want about short-term economic shocks in the 19th century
or the 98% statistic being a deliberately biased framing of exponential decay,
but the idea that the USD has not seen hyperinflation "since" the Federal
Reserve is highly misleading.

> Why historical examples of hyperinflation are relevant to the gradual
> devaluation of the US dollar is never explained.

"Why historical examples of people not wearing seatbelts dying in car
accidents are relevant to my choice of not wearing a seatbelt is never
explained." Same argument.

Also, saying "this hasn't happened yet so it won't" is a highly specious
argument to make. Events that are worse than anything that ever happened
before them are actually quite common in history - namely, the 1918 Spanish
Flu outbreak, World War I, World War II, the Great Depression, Chernobyl, etc.
Given the general trend of an increasingly complex, and hence fragile, society
over the past ten thousand years, disasters of increasing and unprecedented
scale are the rational thing to expect.

------
camus

       > "Bitcoin: The Cyberpunk Cryptocurrency. Here's why it will replace gold."
    

What kind of title is this kyledrake ?

EDIT : title updated , thanks , it really sounded stupid.

