
A dark knight is better than no knight: Why we need Bitcoin despite its flaws - edward
http://suitpossum.blogspot.com/2015/03/bitcoin-power-dynamics.html
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jasode
After reading so many essays about all the benefits of cryptocurrencies like
bitcoin, I've come to believe the proponents have an _incomplete_ view of how
_any digital currency_ with mainstream success would ultimately interact with
the real world.

For example, proponents argue that bitcoin frees ordinary people from the
tyrannies of the governments' central banks. Their reasoning: the governments
can't control/inflate/dilute bitcoin -- therefore, it is an honest currency.
The flaw in that reasoning is that _governments can control bitcoin_ or any
digital currency and they don't need the NSA to take over 51% of computing
hashes to do it.

Here's an example... the United States of America sees that bitcoin
transaction volume is a threat and therefore, they pass new law that renders
all contracts using bitcoin as consideration to not be enforceable in the U.S.
court system.

That's the problem with bitcoin. Bitcoin doesn't come with its own court
system or its own police force. Basically, it doesn't come with its own
government. Government is its own government.

This blind spot in so many bitcoin essays is like idealistic pirates thinking
they can buy some abandoned offshore oil rig, declare sovereignty, and then
run copyright infringing web servers from it. Well, the fiber optic cables
from that platform have to ultimately connect to USA, Europe, etc. You can
expect that governments (there's that inconvenient govt again) can prevent it
from connecting.

I do think a digital currency will be the eventual dominant payment system.
It's inevitable. It may be bitcoin, it may not. I contend that whatever it
ends up being, it will be allowed to exist at the pleasure and approval of the
government.

To me, the interesting thing about bitcoin is the technology of a "worldwide
digital public ledger." There are lots of legitimate progress and offshoots of
the technology that can be made from that. On the other hand, the dreams about
bitcoin being a mechanism to subvert the governments is nonsense.

~~~
vectorpush
_> I do think a digital currency will be the eventual dominant payment
system._

Government issued money already falls under the category of "digital currency"
as far as most people are concerned. I doubt that blockchain based currencies
will ever see mainstream adoption because the only thing they bring to the
table is decentralization; a feature that the overwhelming majority of people
will never need.

I'll concede that decentralization is probably a desirable trait, and if
decentralization came free with the switch to bitcoin, I think there would be
a compelling reason to expect that bitcoin would eventually see wide adoption,
but decentralization is _not_ free, it's extremely expensive, and once miner
subsidies disappear and the true price of securing the network becomes an
upfront cost to general users, nobody will even consider using bitcoin except
in situations where decentralization provides tangible benefits (i.e. for
incognito transactions).

There will always be individuals who want to perform digital transactions
outside of the traditional system, so cryptomoney will probably always be with
us, but barring the unforeseeable, there just isn't any reason for its usage
to grow _much_ beyond the current niche.

~~~
aminok
> _but decentralization is not free, it 's extremely expensive, and once miner
> subsidies disappear and the true price of securing the network becomes an
> upfront cost to general users, nobody will even consider using bitcoin
> except in situations where decentralization provides tangible benefits (i.e.
> for incognito transactions)._

The cost of securing the network fluctuates to match mining revenue, which in
turn is determined by the market price of bitcoin and the number of bitcoins
being rewarded to miners for each block they generate.

In other words, when the block subsidy decreases, the security of the network
will decrease, the average transaction fee will not increase. Now, increases
in total transaction fees could potentially compensate the loss of mining
revenues from the subsidy declining, if transaction volumes increase, but the
average fee per transaction will always trend toward the very minimal cost for
a miner to process it.

------
m3rc
I don't think very many people (if any) are arguing that Bitcoin should go
away, or that it's inherently bad. People are just saying that the likelihood
of Bitcoin actually gaining large scale adoption as a currency is incredibly
low, because of its nature.

~~~
romseb
I met a lot of people who say it is a "Ponzi scheme" and bad for the
environment because of the required energy.

~~~
m3rc
I can't imagine people calling Bitcoin a Ponzi scheme are worse for its image
than all of the Ponzi schemes

------
nosuchthing
The potential of cryptocurriences seems pretty amazing, but the killer to me
is the incentive to horde as an "investment" rather then spend.

Also the ease and unfairness of early adopters accumulating a mass of the
imaginary bitpoints that they can later sell for dramatically inflated "value"
once it becomes harder to mine is absurd.

~~~
m3rc
Not to mention how delusional it is to talk about how amazing a new
crytpocurrency will be under wide adoption, but then think that they'll make a
ton of money.

It is impossible for something to be simultaneously a good currency, AND a
good investment. A good currency won't fluctuate in value, and a good
investment will do precisely that. If you purchase and hoard bitcoin, you're
basically ensuring that it doesn't become widely adopted.

~~~
zzalpha
_It is impossible for something to be simultaneously a good currency, AND a
good investment._

If that were true the forex market wouldn't exist.

~~~
TylerE
Forex is generally not a good investment. Sure, some people get lucky and have
hot streaks, but it's very very tough, even with high frequency trading.

~~~
zzalpha
And yet forex is literally the highest liquidity market on the planet, plenty
of which is speculative trading... go figure.

~~~
ufmace
I'm not a finance expert or anything, but I don't think the forex market is
really meant for long-term investment with continual profits. From what I've
heard, it's more for stuff like making it possible for companies that deal
with multiple currencies to manage and put a specific price on the risk of
relative value fluctuations.

------
tomglindmeier
Somthing like bitcoin is definitely necessary but with its flaws Bitcoin will
either get replaced by something better or it will stay in its niche.

