
Bitcoin Makes Even Smart People Feel Dumb - artsandsci
https://www.wired.com/story/bitcoin-makes-even-smart-people-feel-dumb
======
tuddman
Author is projecting. Replaced "me" with "people" in writing this. Considered
himself smart; tried to wrap head around Bitcoin, but lacks math/cs/finance
background, and or curiosity to dig below surface level hype or read
blockchain-y things beyond what's written by other lazy journalists ...? (now
I'm projecting).

Doesn't 'get it'.

Plenty of people understand Bitcoin. Go read the whitepaper.

~~~
puranjay
Which is what makes Bitcoin's democratic credentials so ridiculous. "It will
free us from fiat money!"

No it won't. It's just a transfer of wealth from educated elite to other
educated elite.

99% of the world's population can't understand it. 99.5% can't mine it.

It's so damn elitist that it's not even funny.

~~~
thephyber
> 99.5% can't mine it.

Not relevant. Mining is no longer profitable for any new entrants without some
incredible innovation in computing power or electricity costs. Even the miners
are unlikely to make money from mining only from holding their mining gains as
investments.

> 99% of the world's population can't understand it.

That's underselling the human population. I would posit 10-20% are probably
mentally incapable of understanding the basics of modern finance, therefore
have no chance at a new form of currency. For all of the rest, they can
understand what they need to know to use it.

BitCoin's entire proposal, including the original paper, the source code,
millions of different explanations, and millions of different opinions about
it are available for free. It's the most anti-elitist form of currency we have
come up with. The costs of fiat currencies are hidden: central banks adjusting
the money supply in real time at will, transactions aren't all visible to the
globe on a single ledger, etc.

I'm not even very bullish on BitCoin. But I don't find it remarkably elitist
-- at least no more than previous currencies.

~~~
charlesdm
I understand how Bitcoin works and I understand how the technology itself is
useful and valuable + has some interesting use cases.

However, with the exception of a few use cases e.g. countries with high and/or
hyperinflation, what I don't understand is why the currency Bitcoin has any
value at all. Frankly, if anything, it still looks more like a massive bubble
to me.

Unless you already own Bitcoin, why would I ever consider paying for something
through Bitcoin? Why would I ever transfer EUR or USD into Bitcoin?

Then again, maybe I'm missing something here, because gold also does not hold
the value it generally trades at. I don't see how it makes sense to hold
either gold or Bitcoin.

~~~
jstanley
If you don't already own USD, why would you ever consider paying for something
in USD?

Because the person you're trying to pay only wants USD. And eventually, if you
start getting paid in USD, it becomes only natural to pay others in USD.

~~~
charlesdm
Right. But fiat currency will never disappear in favour of Bitcoin, nor will
it be replaced by Bitcoin. Taxes will also have to be paid in fiat, etc.

The comparison is akin to someone in Europe exchanging EUR to USD as an
investment, because he's betting on the fx rate. But why would the average
European ever need to hold USD? Not that many situations that make sense
either.

~~~
jstanley
I hear what you're saying, but I personally think you're wrong.

I think fiat currency _will_ disappear in favour of bitcoin (or similar), and
I think it will happen within only a small number of generations.

It will happen because bitcoin (or similar) is a superior form of money.

~~~
charlesdm
Maybe. I don’t know. I can see fiat currencies ending up being completely
digital within the next 50 years or so, in a continued effort to combat tax
evasion.

But I’m pretty sure central banks (or well, the elected politicians behind
them) can’t and won’t give up control of their respective currency, because
they use it as a way to adjust and regulate the economy.

If you look at what is happening in the Eurozone with the ECB and the previous
discussions about Eurobonds, it's a one approach fits all solution, but it
doesn't work for all. What is great for Germany sucks for Greece, and that is
because goals are not aligned. If you have, say, one "global" cryptocurrency,
then I think there are some inherent flaws to that approach.

And if you go the full currency route, you essentially end up with a digital
equivalent of fiat?

Look: honestly, I want to believe, but no one has managed to convince me with
proper arguments what would drive it to that outcome. Most people that I've
met are just excited because they've turned $10k into $1M (or more) and now
think they're the best investors in the world.

So, why would it happen? You need to give me more than its a superior form of
money. I'm not saying it's not. I just don't see how we can get there from
where we are now.

~~~
jstanley
My theory is that Fiat currencies and their central banks are beneficial only
to the state, and not to individuals. And that for any system to be viable in
the long-term, it needs to benefit individuals else they won't use it.

1.) To a first approximation, central bank policy consists of creating lots
more money, all the time.

That is a bad thing for anybody holding the currency (everyone). Therefore
these people (everyone) are incentivised not to hold the currency, and instead
to hold a currency that can not be inflated away from them. For example,
bitcoin.

2.) We're heading towards a cashless society. If the manifestation of a
cashless society is one based on fiat currency, that means _every single
transaction_ and _all money_ are subject to surveillance, censorship, and even
seizure. By the state and by private companies.

Anybody who doesn't want those things to happen to them (everyone) is
therefore incentivised to use a currency which is not subject to those things.
For example, bitcoin.

~~~
charlesdm
What you're saying makes sense to some extent and I don't necessarily
disagree. But instead of holding currencies, why not hold assets? Any asset,
for that matter. Whether it's property, one or multiple businesses, royalty
generating IP rights, etc.

You describe Bitcoin as a currency. To me, while it looks like a currency,
it's not actually a currency. It seems more like a pure asset class.

I mean, maybe I'm a minority here, but who holds significant cash in a
checking account these days -- especially with the market booming during the
last few years like it has?

If you look at what happened with QE in the last few years, asset holders
(i.e. mostly the upper classes) essentially made bank, because debt got
extremely cheap and the value of the currency declined. The average saver lost
money, or at least yield, because it didn't make any sense to save money.

The reason why I can't see fiat disappearing is because the government is in
control and makes laws as they see fit. I don't agree with all levied taxes
yet will still pay them. Even if I didn't want to pay them, my only
alternative is to relocate to a different country.

Useful PoV though, thanks!

~~~
codingmyway
"asset holders (i.e. mostly the upper classes) essentially made bank, because
debt got extremely cheap and the value of the currency declined. The average
saver lost money, or at least yield, because it didn't make any sense to save
money"

So if you're a saver, this is the problem that bitcoin solves. A way for
savers to protect themselves from being robbed by central bankers to bail out
asset speculators.

Bitcoin is also easier to take with you when you relocate. Bitcoin is a weapon
is the battle of savers vs debtors.

~~~
charlesdm
But Bitcoin is an asset as well. And savers don't generally like buying
assets, especially not if they're very (very, very) volatile. The average joe
could've bought stocks, in 2009, yet mostly didn't. And for those that didn't,
then they probably wouldn't have bought Bitcoin either.

------
albertgoeswoof
When we say we "understand money" we mean we know how to spend it, aquire it
and store it.

When someone says they "understand bitcoin" it means grappling with
cryptography, mining, ledgers, economics, game theory, fiat currencies,
deflation, dapps, etc. etc.

Very few people need to really understand all of that to "get" bitcoin, mainly
because most of the use cases aren't figured out. Most people are overthinking
at this point and not attacking it from a "how is this useful to me and what
do I need to know" perspective, but trying to grok it all, which is pretty
hard.

~~~
placeybordeaux
> Very few people need to really understand all of that to "get" bitcoin

Except when a fork comes, or why control of 51% of the hashing power is bad.

~~~
albertgoeswoof
Only miners and investors should care about this. Normal people should be able
to use Btc without worrying about it.

~~~
SadWebDeveloper
Until transaction fees start to rise due those people pushing their own agenda
on the network.

~~~
oxide
Cost me a couple dollars last night to send 70 dollars in btc to a friend.

Last month it was 3 dollars and change. I'm thankful it was slightly more
reasonable.

I might use an alt coin for awhile to save on fees.

~~~
pbhjpbhj
That seems very expensive, I was expecting it to be practically free as I'd
heard it was transforming the money-sending space??

How much does Paypal charge to send $70 to a friend, isn't it free?

~~~
albertgoeswoof
It is super expensive, but this is more of an issue with bitcoin's design than
the actual concept. Bitcoin is the first blockchain tech created, there are
many others that have a much closer to zero cost of transaction, and will
continue to do so.

It's kind of like saying the web in 1991 was expensive to use.

------
phailhaus
I've noticed this about Bitcoin. It's not hard to understand at all, but
everyone attempts to dive into the technical details right from the start and
this loses most people.

The core conceit that people gloss over is the fact there is no such thing as
a "wallet" that "stores" bitcoins. The only thing that exists is a public
record of numbers saying they're giving bitcoins to other numbers.

When you create a "wallet", you're choosing a private number that nobody knows
and nobody has already picked. You use this private number to create another
number, the public number, the "wallet address".

Since this number doesn't exist anywhere in the public record, we say you have
"zero bitcoins."

Then, you get someone to claim "I am giving x bitcoins to your number". If you
can get this claim (a transaction) into the public record (the blockchain), we
all decide to agree "This happened." And now we say you have x bitcoins. Why?
Because now you're allowed to make a transaction saying you're giving those
bitcoins to another number!

It's all made up. This is what currency is, it only exists because of
collective trust.

~~~
albertgoeswoof
What's really hard is to get your head around is the random number- what are
the chances someone will have the same number as me? For anyone that asks, the
answer is basically 0, because maths

For a trustless currency there's a lot of trust going on there!

~~~
runeks
It’s not really hard to explain: the probability of two people generating the
same random 256 bit number is roughly equal to buying four tickets to the
national lottery four weeks in a row, and winning the jackpot on all four of
them.

No one has ever won the jackpot even _two_ times in a row, so do we really
need to worry about someone doing it four times in a row?

(Two people generating the same 256 bit number is a collision, which means the
probability is 1/sqrt(2^256))

------
sowbug
Bitcoin is simple the same way Git is simple. Appreciating it is less about
understanding the technology and more about caring why the solution matters.

Git is just a way to deal with objects in a DAG (insert standard joke about
homeomorphic endofunctors mapping submanifolds of a Hilbert space). Not super
difficult. But unless you have worked in a horrible version-control system,
you probably just don't care about having that capability, so when someone
starts excitedly jumping up and down while showing you how easy it is to draw
a line connecting two circles, you might figure you just aren't smart enough
to get it.

Likewise, Bitcoin is a combination of recognizing a certain problem and
exploiting a certain technology to solve it. If you understand that
distributed, trustless consensus is a hard problem, and that digital
signatures and proof-of-work algorithms combine in this exciting way to solve
it, then Bitcoin makes perfect sense. But otherwise your inner voice keeps
asking "why are we even discussing this?" and making you feel dumb.

------
Animats
The cryptosystem part is hard, but the rest is not all that complicated. The
economics, though, are very strange. Valuing a cryptocoin is really hard. It's
like valuing a penny stock with no business activity.

~~~
conistonwater
But isn't valuing a penny stock with no business activity really easy?

~~~
wmf
Oh BTW there are people manipulating this stock behind the scenes. Is it still
easy to predict the price?

~~~
logfromblammo
Predicting the price is only an intermediate step to answering the question
"How much should I invest in this stock?" In the case of the penny stock with
no business activity, you can usually just skip the valuation step and go
straight to "invest nothing".

There are exceptions, of course, but all of them involve you having some
information not generally available to the public.

~~~
wmf
Which leads to a conclusion of "never invest in crypto-anything" which works
fine for me but is not what many people want to hear.

~~~
logfromblammo
Exactly. Even if I were a gambler, I would prefer by far Blackjack or Roulette
to Poker. I'd rather play against the randomization of the equipment than
directly pit my skill against a bunch of people that I _know_ are all far
better at playing that game than I am.

I'll just continue to invest in robot-managed index funds, thanks.

If you can't use the cryptocurrency effectively without buying in early, there
is a fundamental problem with it, and the people who bought in early probably
should not have done so. So the obvious conclusion is to not buy in early.
Those stories I keep hearing about people who made fortunes off of Bitcoin are
fun and inspiring, but there is no way I would have been any of those people,
because I didn't have the extra disposable cash to invest in Bitcoin at the
times when it would have been most advantageous to do so, and it has never
matched my risk profile since 2009. If it had been invented in 2000, yeah, I
could have been a Bitcoin millionaire. But that's not how it worked out. Those
grapes aren't sour; I just couldn't reach them.

And right now, this very instant, the next big thing could be staring me right
in the face, and I would still choose not to invest in it, because I don't
have enough investment money left after the sure things, boring but prudent
choices, and dubious but exciting possibilities to put a single penny into
moon-jumping unicorns that fart nuclear-powered rainbows. I'd rather have 98%
confidence of retiring at 65 than make a gamble between between retiring two
years from now and never retiring at all.

So cryptocoins can be the playground of the young and foolish, the old and
treacherous, and the financial geniuses.

------
exelius
The hard part here is market making. Market making is almost pure game theory,
and unless you worked at a big market making trading house (i.e. Goldman, JP
Morgan, etc) the learning curve can be really expensive.

In this type of work, it's not that bitcoin is making people feel dumb, it's
that the smartest people playing in Bitcoin are making money at the expense of
everyone else. There are a lot of really smart people playing in Bitcoin who
are comparatively dumb.

Bitcoin is just the stock market 2.0: the big guys manipulate the market with
impunity, except there aren't any laws to stop them (nevermind the government
ignores the rules in the stock market if you're "too big to fail"...)

~~~
atemerev
So are other currencies. FX market is strange, to say the least.

~~~
exelius
Yeah, the whole FX market operates largely outside international law unless
you're talking about a handful of currencies. And even there the conversion
path for almost everything runs through USD or EUR (with some regional
exceptions).

------
TazeTSchnitzel
Bitcoin is a distributed economic cryptosystem designed by someone with at
least a rudimentary understanding of these topics.

A lot of Bitcoin enthusiasts understand neither cryptography, nor distributed
systems, nor economics.

What could go wrong?

~~~
sremani
Speculation is part of any market. It is true to understand the Mathematics,
Crypto-tech and Economics part of BitCoin and CryptoCurrencies in general is
very hard. But doable by intelligent people. The idea of facebook or iPhone
would be hard to explain in 1990, similar is the case with Crypto, the tech is
way ahead of the culture.

------
Talyen42
How many people understand the federal reserve, money supply, minting process,
and quantitative easing?

How on earth do people use USD?! It's so complicated!

~~~
pbhjpbhj
If the USA government used BTC as default then people would probably use it
without caring too. Early adopters need to understand things to be sure
they're not falling for a con; people getting electric vehicles are probably
much more interested in the technical and financial details than your average
car buyer. Once they've established the system works then others can get in.

------
MrFantastic
My problem with most of the cryptocurrencies is that they are so thinly traded
(150k average) and many buyer naive that prices could be easily manipulated by
professional Currency Traders or Hedge funds.

It not normal for prices to fluctuate up and down 50% so quickly.

------
atemerev
What's hard to understand about the fork?

Bitcoin is an equation. A mathematical specification of how much bitcoins are
there at any given moment of time, how new blocks are added to the chain,
which sequence of blocks is accepted to be authoritative, etc. This is why it
is a work of genius. An equation can't be hacked, unless you can challenge
underlying mathematical assumptions, which is somewhat hard to do.

However, you can't run an equation on its own. You need an implementation,
which actually runs calculations in the equation ("mining", verifying
transactions etc). Technically, anybody can write their own implementation of
the Bitcoin equation for running the blockchain, substituting their own
parameters (e.g. maximum block size, how often the blocks are generated, the
reward amount etc.) I can write a Bitcoin client today where new blocks will
be attached to the chain the way I want it to. Giving me free money, for
example. Or increasing the block size to shovel more transactions in. However,
the Bitcoin network consists of many thousands of clients (A.K.A. "full node"
clients). They have to accept my blocks to consider them valid, and sign the
acceptance, and they won't accept anything that is not hardcoded in their
implementation. tl;dr I (or anybody else) can fork Bitcoin today -- the only
idea is that I will have hard time to persuade others to accept my fork. And
without acceptance, anything stored or transacted in this fork will have no
value.

However, some people manage to persuade others to run their fork as it has
some feature some see as valid. As they are accepted by some people, they
start to have value (and can be bought and sold by gamblers). However, more
often than not, these forks fail to catch traction and deemed to obscurity,
and as their user base diminishes, so it their value.

~~~
joemi
Most of what you wrote won't make sense to non-developers. Hell, it won't even
make sense to all developers. I'd say that's hard to understand, then.

~~~
ozim
Like for instance GIT, it still is considered hard by a lot of developers. Try
to explain it to some common people. But also nowadays most developers use Git
daily anyway.

------
nostroso
Well, bitcoin makes people who think that they are smart, realize that they
are way less smart than they thought they were. The author understands that he
could impossibly understand the underlying mechanics of bitcoin. Hence, he
came to realize that there must be other people, who are substantially smarter
than he is.

~~~
booleandilemma
This happens when trying to study anything really.

The more you learn, the more you realize just how much there is to learn.

------
jondubois
Most cryptocurrencies are complex but if you have a background in computer
science/software engineering then they're not difficult to understand; it just
takes time.

------
sebringj
I would say understanding HTML is a bit harder than being able to use a smart
phone for bitcoin transactions. Not very many know how to program network
protocols for the internet and not very many know how to program blockchain
networks either. The blind trust in Central Banks is the real mystery.

------
oculusthrift
To be fair, a vast vast majority of people have no idea how central banking
works or Forex etc.

------
amackera
Bitcoin makes arrogant developers realize they don't know everything?

~~~
SolarNet
> arrogant journalists

------
mathperson
It also makes dumb people feel smart...and act upon these feelings

~~~
oculusthrift
sounds like someone's been on /r/bitcoin

------
alde
"Pound Sterling Made Smart People Feel Dumb" (Black Wednesday).

------
bitL
"Cryptology Makes Even Smart People Feel Dumb"

------
SadWebDeveloper
Ethereum is harder than bitcoin, specially the dApps thing of ETH

------
reallynice
I think someone hasn't read the whitepaper.

------
dsfjksdf
Hyperbole - it's not really that hard. But it uses maths, so maybe not
everybody has the stomach to try to understand it.

~~~
armandososa
It's not only the math involved in the creation of a bitcoin, there's also
economics and networking and psychology involved. Granted, most people don't
understand how money really works, but grasping a dollar bill in your wallet
is easier than the a virtual something on some virtual place.

See? I even feel dumb trying to explain why people feel dumb.

~~~
dsfjksdf
Sure - the economic dynamics and valuation are complicated (I don't understand
them either), but I don't think that is what the article was talking about.

The tech is fairly simply, at least the principles. As simple as basic
cryptography, anyway. And most people use that on a daily basis.

