
Bitcoin is none of the things it was supposed to be - okket
https://theoutline.com/post/2592/bitcoin-is-none-of-the-things-it-was-supposed-to-be
======
pc2g4d
The high transaction fees are forcing Bitcoin in this direction. If buying a
hamburger cost you $30 in fees on top of the $6 burger, you'd stop using
dollars for everyday purchases, too.

Seems we're stuck in this situation so long as the block size remains where it
is. That artificially reduces the supply of transactions, forcing the price
up. No matter how many miners there are competing for those transaction fees,
there can never be more transactions. The transaction market is really one
half of a market, or a market with a "supply ceiling".

It's ironic that Bitcoin's transaction count is essentially limited _by fiat_
---by fiat of the Bitcoin code that implements the block limit.

But given the relative failure of forks that increase that block limit, it
seems Bitcoin is what it is and other coins will have to pick up that slack.

~~~
pkulak
No one who owns BTC wants it used for transactions. They want it to be an
investment and go up forever, so they'll never go with a fork that allows it.
It's like home owners in a neighborhood locking out new construction so their
own homes raise in value.

~~~
dawhizkid
Of course Bitcoin is the digital crypto analogy for SF Bay Area NIMBYism :)

~~~
Balgair
Christ, that's some deep snark!

------
agorabinary
Responding to problems with this article as they appear:

1\. Coinbase buckling is a failure of a web application grappling with
unprecedented load. Not with bitcoin.

2\. The dark web mostly uses Monero, which would not exist without Bitcoin
coming along first. Also the notion of a $65 fee on a $250 tx is ridiculous,
not to mention a 24 hour wait time.

3\. The existence of exchanges and dark web websites that allow you to convert
fiat to bitcoin and facilitate trades (middlemen as the authors calls them) is
a failure of Bitcoin? Building a centralized exchange/facilitator will ALWAYS
come before a decentralized alternative because decentralized apps are hard.

4\. Applications that provide immeasurable convenience at the cost of a little
privacy and security are an inevitable step in the road towards a better
system. This is the equivalent of RMS bemoaning the existence of Ubuntu
because it uses a few propriety programs, when whatever free distro he
recommends is straight out of 1992

5\. "retains none of the exciting features"? Rapidly increasing prices does
not remove the most innovative features (smart contracts, off-chain
transactions, etc) of the crypto world. It accelerates them if anything by
providing the capital to finance their development

Feel free to attack Bitcoin for its shortcomings, but don't act like things
could have easily gone differently. Bitcoin still has tremendous potential for
privacy, security, and everyday use --- if you get past the clickbait
headlines.

~~~
goatsi
What is your source for #2? Only a single market on the darknet currently
accepts Monero (libertas). Monero currently lacks any multi-sig capabilities
so it is useless for the newer distributed DNM systems such as openbazaar. At
most Monero is used to obscure the trail of bitcoin as someone will buy some
Monero with bitcoins puchased from a site like Coinbase and then sell those
Monero back for bitcoin to avoid Coinbase banning their account for
transferring to a known DNM Bitcoin address. Bitcoin is still used for the
vast majority of DNM transactions.

------
coryl
The author seems to expect that the changes created by cryptocurrency should
be visible immediately. It is a lack of patience, and lack of understanding
that changing deeply rooted systems and behaviors takes time.

People have never managed software where if you lost your "password", your
money was gone forever. They never had to keep a 12-24 word recovery phrase.
They've never sent money to addresses that look like hash strings. Their money
value was never this volatile (in some countries anyway) and never this
complicated to use (understanding and waiting for block confirmations, looking
up transactions in the blockchain explorer).

That's why Coinbase exists, to obfuscate these complexities, to sell security
as a service. The cryptography behind cryptocurrencies allows you to basically
be your own bank vault; this is not intuitive to people.

The fundamentals for Satoshi's vision have been laid out, the rest of the
implementation details will come in time.

~~~
curuinor
What, then, exactly is the difference between your scenario and Coinbase being
the bank?

~~~
_red
Coinbase can't print money.

~~~
colorint
Banks can't print money either, and this isn't some "ackshually it's the Mint"
thing: banks have the power to create debt. But this isn't special, because
you and I also have the power to create debt. What makes a bank special is
that debt is its business (so most of its operation concerns the management of
debt), and much of its debt can be called on demand, and so we call banks'
debts to us demand deposits.

Fractional reserve is just a particular kind of regulation placed on banks'
creation of debt, and it usually isn't the most important one. The practical
limit of banks is that they have to be able to extinguish their debts (which
we call withdrawal), including being able to transfer them to other banks in
exchange for cash (which we call clearing), at the whim of the creditors (you
and me).

The problems with banks are the problems with debt generally, but that's much
trickier than some glib remarks about monetary policy.

~~~
cdancette
You can't really create debt with money that you don't have, as the banks do.

You can't make 1000$ appear on my bank account and say " you now have a debt
of 1000$ to me". You need to give me physical money. But bank can create this
money they don't have.

~~~
jcranmer
The bank isn't creating that money. When you deposit $1000 in a bank account,
you lose that $1000 and gain 1000 FunnyMonies instead. The bank can then turn
around and give that $1000 to someone else. At the end of the day, there's
only $1000 running around.

What makes it look different is that we treat 1000 FunnyMonies as if it were
$1000. So instead of saying "there's $1000 and 1000 FunnyMonies" we say
"there's $2000, oh look, the bank created money." But it hasn't, and when the
difference really matters, and the bank doesn't have the ability to give you
back $1000 for your 1000 FunnyMonies, that's when bad things happen.

~~~
cdancette
Absolutely not. The bank can lend those 1000$ to several people.

I think it can lend it up to 10 times the money it has in its vault (not sure
about the exact amount)

~~~
Dylan16807
Let's be careful about what scenario we're talking about.

> You can't make 1000$ appear on my bank account and say " you now have a debt
> of 1000$ to me". You need to give me physical money. But bank can create
> this money they don't have.

This scenario doesn't involve real money at all. It's just two IOUs in
opposite directions. You and I could make such an agreement trivially.

> I think it can lend it up to 10 times the money it has in its vault (not
> sure about the exact amount)

So this involves real money. But it's not a special bank power. You can loan a
friend some cash, which they give to you for safekeeping. Then you can loan
another friend the same physical dollars, which they also give to you for
safekeeping. Then another, and another...

Now you have $10k in cash deposits even though there's only $1k in physical
cash.

The only reason you can't do it in practice is that nobody wants to give you
their money for safekeeping. You don't lack the ability to multiply money. You
lack anyone handing over money to do it on.

------
arkades
The article repeatedly quotes statements to the effect “this was supposed to
show what a truly free market looks like. Instead, it’s a shitshow.”

The word “instead” doesn’t belong there. Really.

~~~
MBCook
Wasn’t that the exact point of the tweet that was mentioned in the article?

------
lumberjack
As we learn more about cryptocurrencies, more evolved altcoins will emerge,
with much more sophisticated economics.

As it is, none of the developers of cryptocurrencies really understand
economics and the majority of them believe in heterodox economic ideas that
are probably wrong.

But currently people are just trying to get rich. At this point in time I'm
more bullish about GNU Taler. It is not a cryptocurrency but it shares some of
the objectives.

~~~
AVTizzle
Hey Lumberjack - I’m curious to learn more about the economics most folks in
the space are ignoring.

Are there any particular economic theories or resources you would recommend as
a starting point for someone interested in studying up?

Email in bio if you feel so inclined. Appreciate it!

------
diego_moita
The best criticism I've seen on Bitcoin is, by far, Paul Krugman's "Bitcoin is
Evil" [1]. In essence: Bitcoin doesn't have "monetary policy" to regulate it's
supply. That's why it is prone to speculative bubbles and very dangerous as
money.

[1] [https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-
evil...](https://krugman.blogs.nytimes.com/2013/12/28/bitcoin-is-evil/)

~~~
lend000
Painful to read. Paul Krugman is a laughing stock in the crypto-world, which
he has been wrong about so confidently, so many times.

As an aside, the US had active monetary policy for about a century, and it has
enjoyed plenty of bubbles and crashes. Some of those were worsened by monetary
policy (e.g. easy money in the early 1920's swapped to deflationary monetary
policy in 1929 as soon as the easy money bubble popped, low interest rates
fueling real estate speculation in the early 2000's, etc.)

~~~
pseudonom-
Can you give an overview of or pointers to critiques? My prior is that Krugman
is more likely to by correct than the average crypto person, even after
adjusting for interest in and attention to crypto.

~~~
lend000
For a celebrated economist, Krugman has a poor grasp of certain facets of
economics. It's probably a subconscious way of rectifying his political views,
which many of us are guilty of.

In this case, he does not understand how Bitcoin can be a store of value,
because it is not backed by a government. How come gold or any other commodity
has value? Value it what the market decides, not the government. He obviously
did not understand the intrinsic value the technology provides, which previous
media of exchange do not provide, such as immutability and full control of
funds. He is happy to pass judgment without understanding the technology.

~~~
the_gastropod
How are immutability and “full control of funds” intrinsically valuable?

~~~
max_
That's like asking why laws firms & and security agencies exist.

~~~
the_gastropod
_Intrinsic value_ has a well-understood meaning in economics. Bitcoin, like
any currency, has no _intrinsic value_ , regardless of these neat features.

~~~
lend000
> Intrinsic value has a well-understood meaning in economics. Bitcoin, like
> any currency, has no intrinsic value, regardless of these neat features.

I don't think you understand the definition of intrinsic value -- it has
nothing to do with being physical:

[https://www.investopedia.com/terms/i/intrinsicvalue.asp](https://www.investopedia.com/terms/i/intrinsicvalue.asp)

Key quote: "The intrinsic value is the actual value of a company or an asset
_based on an underlying perception of its true value_ including all aspects of
the business, in terms of both tangible and _intangible factors_.

~~~
the_gastropod
Where did I imply intrinsic value requires physical presence? Businesses
produce cash flow, and therefore ownership stakes (stocks) have intrinsic
value. Gold is used in manufacturing and has an intrinsic value (lower than
its _traded value_ ). Bitcoin has 0 intrinsic value. This is not a slight
against Bitcoin, it's just a property of most currencies. Bitcoin is no
exception.

A good thought experiment for whether something has intrinsic value is: would
<thing> still be useful if nobody else on the planet wanted it? A share in a
business would continue paying out dividends, and would absolutely be useful.
A dollar bill would be useless (especially if it's an electronic dollar). A
bitcoin would also be absolutely useless.

------
dawhizkid
The fact that the majority of people only trade/hold bitcoin to exchange for
centralized currency i.e. USD tells you something, no?

~~~
analog31
The dollar remains the easiest rosetta stone for figuring out what you've got,
i.e., what your bitcoins and other assets are worth. It will continue to be
easier to use a more stable currency for that purpose, unless something goes
wrong with it.

~~~
starlust2
You're missing the point. Everyone just holds the currency because they treat
it as an investment. In other words, they are speculating.

People invested, in both the financial and emotional sense, tell others to
hold because that drives the price up more. The subculture's vernacular even
includes "HODL", a joking way to tell someone to keep doing their part to
drive prices up.

It's painfully obvious what people are doing.

------
gruez
>Bitcoin was designed so that users had to take care of their private
cryptographic keys for every address they used, and Nakamoto advised making a
new address for every transaction. This proved too confusing and burdensome,
so along came wallet services, which stored users’ Bitcoins like a bank
account and substituted a password for the private key

wut? if you used a online wallet, you still had to manage addresses. the only
advantage comes in the form of not having to wait hours/days for the client to
sync up (back then there weren't any thin clients), and not having to back up
a wallet file.

>Whether it was out of incompetence or an attempt to save itself from selling
at an inflated price (at one point, the price of Bitcoin was $3,000 higher on
Coinbase than on other exchanges),

that's not how exchanges work. the counterparty is another buyer, not the
exchange. coinbase is getting x% fee regardless if the price was $1000 or
$10000.

>this was exactly the kind of thing Bitcoin was supposed to prevent.

sounds like a strawman. i don't think anyone realistically thought if bitcoin
came along, all the AML/KYC laws around handling fiat will magically evaporate

~~~
PeterisP
"i don't think anyone realistically thought if bitcoin came along, all the
AML/KYC laws around handling fiat will magically evaporate"

I disagree - I've seen and debated far too many people claiming essentially
that viewpoint; IMHO it's a naive and unrealistic expectation, but a lot of
people did think that.

------
emerged
Is anyone else getting the same sense with Bitcoin as with Trump leading up to
the election? Everywhere I go everyone has negative things to say, everyone is
going on about how it's going to crash. They all seem like sensible arguments.

But here we are, Bitcoin keeps following an exponential curve and Trump is
president. The one thing I know for sure is there's an awfully noisy signal
out there.

~~~
MBCook
People also predicted that Iraq and Afghanistan would be quagmires. Those
predictions came true.

------
poopsmithe
_Remember how Coinbase, the San Francisco-based startup which raised more than
$200 million in venture capital, put a freeze on my money? Whether it was out
of incompetence or an attempt to save itself from selling at an inflated price
(at one point, the price of Bitcoin was $3,000 higher on Coinbase than on
other exchanges), this was exactly the kind of thing Bitcoin was supposed to
prevent._

Um no, I don't think so.

Coinbase.com is not the Bitcoin experience, just like Facebook is not the
internet experience. Nothing in the Bitcoin whitepaper mentions Bitcoin
solving problems inherent with a central currency Exchange or hosted,
custodial wallets.

Use localbitcoins.com and a non-custodial wallet if you want to experience
Bitcoin per it's original specification.

Exchanges != Bitcoin.

~~~
icedchai
Coinbase, and similar sites, may as well be Bitcoin for the average ("retail")
investor. It's far too complicated, not to mention resource intensive, for the
average Joe to set up and run his own node.

My uncle wants to "invest" in Bitcoin. He wants to trade it like a stock. You
seriously think he's going to mess around with private keys and wallet pass
phrases? Many technical people can barely handle that.

And, yes, for a lot of today's youth, Facebook _is_ the internet experience.
The Internet experience, for me, was telnet, gopher, and Usenet news. We're
along way from those days.

------
AlexandrB
Bitcoin seems like just another medium of exchange. Almost all the properties
of bitcoin - decentralization, anonymity, worldwide acceptance - apply equally
well to gold bullion. The one additional property bitcoin _had_ was
convenience. But as transaction costs increase this is becoming less true.

Given the above, why would anyone expect bitcoin to behave differently than
physical gold in the real world? The world of gold is chock full of middlemen,
dubious financial instruments, and companies taking advantage of those that
don't know better. Bitcoin is just following the same well-tread path.

~~~
acchow
You can't send $50M of gold halfway around the world for $3.

~~~
Rebelgecko
You can't send $50 million of bitcoin with only $3 in transaction fees either

~~~
acchow
Why not? The cost you pay is proportional with your transaction size in bytes,
not the amount of bitcoins you're sending. So it depends on how many inputs
and outputs you're using, not the quantity you're moving.

~~~
Rebelgecko
The cost you pay isn't just dependent on how many bytes you want to send. Each
block maxes out at 1MB and there's only 144 blocks a day. If you want your
transaction to be confirmed, you have to outbid everyone else who wants their
transaction to happen (as long as there's more than 7 transactions / sec). I
don't think it is doable to try to do a transaction with a $3 fee, you need
something like $20 worth of BTC to get it done within the next block or two,
and maybe $10 if you're willing to wait a while[1]

[1] assuming [https://estimatefee.com/](https://estimatefee.com/) is correct.
Based on the transactions of some of my friends it seems pretty accureate
though

~~~
acchow
It only started skyrocketing this week. Last week average tx fee was about
$6-7. You can see the historical averages at

[https://bitinfocharts.com/comparison/bitcoin-
transactionfees...](https://bitinfocharts.com/comparison/bitcoin-
transactionfees.html)

------
zeep
Bitcoin is trying to move transactions off the blockchain to fix this issue...
bitcoin cash is what bitcoin was supposed to be (increased block size)...

------
jhiska
It's not Wall Street's fault or whatever boogie man's fault that the Bitcoin
tech doesn't actually work as some idealistic libertarian creator imagined it
would; the fault is in Bitcoin's design itself. Even if the price wasn't
fluctuating like crazy it simply doesn't work well as a currency due to
technical limitations (eg, the time and cost it takes to process a transaction
in the real world has always been impractical), but it shows promise as
something that holds value (like gold).

The Outline creates articles with pureed facts written in a carefully
standardized "no-nonsense", language-as-spoken-today linguistic style for mass
consumption that are often deceptive, political or just technically wrong.
Don't trust it.

~~~
ng12
I feel like it's a parable about lofty libertarian ideals -- everything's
peachy until there's large sums of money involved. Bitcoin is fixable but now
there's a financial incentive for never fixing it.

~~~
netsharc
I should google it but I'll just wonder out loud, how would libertarians use
money anyway? Doesn't money need something to back it up, i.e. a central bank?

~~~
MBCook
Libertarians still believe in government, I believe the normal solution to
this they propose is to move the money back to the gold standard with the gold
held by the government issuing the money.

------
caycep
I am by no means an expert in any of these things - but philosophically was
bitcoin written w/ the expectation that an individual is inherently good, and
running smack into the reality that individuals are inherently focused on
their own self interest?

~~~
pat2man
Bitcoin was actually built under the assumption that you couldn't trust anyone
else. You store your own money with your own private key.

------
blueprint
I wonder what percentage of the individuals who are opining here know about
Monero.

------
rossdavidh
Allow me to make a farfetched analogy: Bitcoin is like Obamacare. Obamacare
wasn't made perfect the first time; this is normal. The way you fix issues
with complex legislation, is you have it passed by significant members of both
parties, so that you can revisit it the next year and fix things. But, with no
trust between parties, the Dems had to get everything right in one go, when
they had both houses and the White House, and guess what, there were problems.
Which we can't fix.

Bitcoin wasn't made perfect the first time. No problem, all software that
becomes popular does, and all new financial arrangements (money, credit,
credit cards, etc.) had unforeseen problems that had to get worked out. But,
with no government involved, there is no mechanism for working things out.
It's not surprising that everything wasn't perfect, or that things need fixing
later; the issue is that no one has the mandate to do it.

~~~
MBCook
The problem I see with that analogy is that Obamacare has been actively
undermined at every step by the Tepublican party.

Nothing like that is happening to Bitcoin.

I think this was all inevitable. How could you make a new currency and not
expect all the people who take advantage of monetary systems to move in? I’m
not sure it’s preventable.

~~~
zbentley
I think the undermining of Bitcoin's original promise by speculators is just
as inevitable as Obamacare's undermining by conservatives. Both are driven by
hype. Both are primarily driven by greed ("temporarily embarrassed
millionaire" greed, in many cases). Both are aspirational. Both run counter to
the cynical "humans will always subvert" narratives of their times.

That's not a judgement on either one. Just an observation of similarities.
They're very different in many ways, too.

~~~
MBCook
What I meant about undermining is that I don’t think the speculators are out
to sabotage bitcoin, it’s a side effect of what they’re doing. When it comes
to Obamacare it’s very clear that the sabotage is intentional.

The more I think about it the more I wonder if bitcoin could have ever worked.
The way my name works pretty much guarantees a individual or small group would
end up with the majority of the hash power if bitcoin was ever actually
valuable. And that immediately undermines the peer-to-peer decentralized no
one in charge of it aspect.

Without something that disincentiveses people with significantly more cpu
power people are just going to run away with it. That kind of seems like a
flaw in all of these crypto currencies, even if it’s not CPU power that you
use.

