
Do Cryptocurrencies Such as Bitcoin Have a Future? - mgav
http://www.wsj.com/articles/do-cryptocurrencies-such-as-bitcoin-have-a-future-1425269375?mod=WSJ_hpp_sections_tech
======
lectrick
As a stable store of value... Not for a while. (Then again, gold has been
around for awhile, and is IT a stable store of value?)

As a value exchange mechanism... Certainly. Already useful (and troublesome,
to certain establishments) for that.

As a secondary ("world"/"international") or even primary currency... Only if
your already-legitimized currency is performing worse (hmmm, Argentina,
Greece, Iceland, Russia...).

As a third-world currency exchanged via cell phones... Well, now we're
talking. Although anything that stores value can be used in the same way,
which is exactly how M-Pesa started out as phone credits (the "base" or
"backing" value) and is now used for much more than that.

I will say that anyone who travels (still a very underrated undertaking that
abysmally few Americans engage in) has been frustrated by currency exchange.
If I could default to something like Bitcoin when I travel, it would ease that
pain quite a bit.

Governments are concerned about "capital flight". Thing is, it's difficult to
destroy (as well as to create) "value," it usually just gets transformed. It
therefore stands to reason that if you don't want your country's value to
flee, stop debasing your own currency (so that people stop exchanging it for
other currencies), and make things of value (so that more representations of
value, i.e. cash, flow into your country).

~~~
pjc50
Bitcoin gives you _two_ currency exchange transactions to do where previously
there was only one. I can't really see it taking off except for transactions
that are banned from one of the other payment systems, and given that
transactions are entirely public with persistent pseudonyms, that's not great
either.

Bitcoin's transaction cost and risk is necessarily greater than any
centralised solution, so as soon as it establishes a useful market it can be
undercut. (Don't quote the minimum transaction fee in response to this, quote
the miner electricity cost per transaction, the exchange bid/offer spread, and
the escrow fees if relevant).

It's entirely trivial for value to be destroyed: this is what happened in the
leveraged property downturn as recently as 2008.

"Just fix your current account deficit" is about as useful a piece of advice
for countries as "just create jobs", ie not very.

~~~
tokenizerrr
> Bitcoin gives you two currency exchange transactions to do where previously
> there was only one

What? Only if you don't treat bitcoin as a currency. If bitcoin is used as its
own currency, and both you and the seller hold bitcoin, there is no exchange,
or at most one: When you buy in from your existing currency.

~~~
michaelt
This is why to be a value exchange mechanism, you also need to be a store-of-
value mechanism.

If the buyer and seller aren't holding bitcoin, a simple fiat transaction
turns into three transactions.

------
mootothemax
On a day-to-day basis, bitcoin takes ages to confirm that payment has been
received, supports somewhere around 3 [three] transactions per second, and
shifts risk from sellers to buyers (e.g. compare refund possibilities with
credit cards).

There are various hacks that are being proposed to increase the number of
transactions per second, and reduce confirmation time. Ultimately, they're
just that, though: hacks on a proof-of-concept.

What I'm _really_ interested in is whether it's possible to have a
cryptocurrency that _doesn 't_ rely on e.g. blockchain technology.

How you'd fix the issue of double-spending ("I can just copy-and-paste my
money - yippee!") without a blockchain or equivalent is beyond me.

I'm just really intrigued by the idea of being able to cryptographically sign
over a digital $5-equivalent -note to someone else, instantaneously, and
without relying on a third party saying "Hmm, yep, that note looks legit to
me".

Sadly, a lot of bitcoin's popularity seems to come from people who sincerely
hope and believe that it's their lottery ticket to millions in the future.
Whilst these people are vocal, it's probably a good idea to be aware of and
filter out their voices.

~~~
eblanshey
> What I'm really interested in is whether it's possible to have a
> cryptocurrency that doesn't rely on e.g. blockchain technology.

Yes, it is possible. MaidSafe is building the solution as we speak, and does
not get anywhere near the attention it deserves. Because there is such a
general lack of understanding of its underpinnings, it is usually lumped
together with other blockchain technologies or altcoins. There is no
blockchain, there are no transaction fees, and transactions are irreversible
almost immediately (no confirmation time). There is no wasteful mining.

I wrote a pretty comprehensive article[0] on how it works from a technological
standpoint if anyone is interested. Perhaps someone will find it useful.

[0] [http://blanshey.com/introduction-to-maidsafe-what-it-is-
how-...](http://blanshey.com/introduction-to-maidsafe-what-it-is-how-it-works-
and-how-it-compares-to-bitcoin/)

~~~
mootothemax
_MaidSafe is building the solution as we speak_

Doing an admittedly very brief search, it seems there's a lot of scepticism
about MaidSafe, ranging from it's "objectively a scam," through to a highly
questionable IPO, and doubt over the core technology itself:

[https://news.ycombinator.com/item?id=8081247](https://news.ycombinator.com/item?id=8081247)

[https://news.ycombinator.com/item?id=7641149](https://news.ycombinator.com/item?id=7641149)

[http://www.reddit.com/r/crypto/comments/24zext/what_does_rcr...](http://www.reddit.com/r/crypto/comments/24zext/what_does_rcrypto_think_of_maidsafes_self/)

Clarifying on my original point about not relying on blockchain technology, I
think imagining a purely offline system would get closer to the question in my
head.

How much can be done without relying on a network / database / blockchain etc?

~~~
eblanshey
There is a lot of scepticism indeed, mainly because what they're doing is so
new. (The IPO was not questionable at all IMO, that's just FUD.)

In any case, the objections and scepticism is healthy and would only serve to
improve the project.

I'm not really sure what you're implying though--how can you have a
cryptocurrency without communication (e.g. a network)?

~~~
mootothemax
_mainly because what they 're doing is so new_

I (possibly obviously) haven't done enough research in the area, but it seems
like there are potentially showstopper questions about how to stop people
gaming the system.

The reddit link also questioned how much of MaidSafe is, in effect, security
through obscurity.

One thing that can be said - it's definitely interesting!

 _How can you have a cryptocurrency without communication?_

Exactly - that's kinda what I'm asking! :)

Another rephrasing: is it possible to have some bitcoin-equivalent token sat
on your computer which you can exchange for goods and services _without
consulting anyone else_?

As far as I can tell, it's the double-spending problem that's the killer.

------
dagw
Even as a Bitcoin skeptic I'm absolutely convinced that in 20-30 years time
something that can directly trace its intellectual roots to the Satoshi white
paper will play a significant role in several aspects of financial
transactions. The underlying mathematics is just too useful to be ignored.

Actual Bitcoin as we know it today will probably be an interesting historical
anecdote.

------
swalsh
I bought several bitcoins in early 2010, and when the price peaked to $1000, I
sold what I had left. To me I was interested in the technology piece, but
thought the economics of it was utterly crazy. Having a fixed supply of some
arbitrary number with a fixed release seems so "old worldly". It ignores the
fact that we have this huge computer network that has built into it access to
near perfect information about the economy.

I thought something better would come along, which is why I sold it. However
the one thing that really rang with me was this. When I transferred the
bitcoins to my account (bitstamp) I didn't even remember the fee. I'm not
certain there even was a fee. However when I transferred the dollars, there
definitely was a fee, Which seemed like a lot of money.

The cost of using bitcoin is a really big game changer. If it was stable, I
think adoption would be bigger.

~~~
Torgo
I personally have seen interest wane because of several high-profile scams and
hacks. I originally knew quite a few people really interested, and I'm pretty
much the only one left.

------
AlexMuir
I used to joke that I had more bitcoins than I could spend in my lifetime. Not
because I had a lot, but because there was fuck all to spend them on.

I just paid for my lunch in Bitcoin. Not as some evangelical, cryptanarchistic
statement, but because I have bitcoins and I needed lunch. The mechanism for
paying is on a par with credit cards, if not slightly above. I've watched the
monetary value of my bitcoins plunge in the last year, but I've seen their
practical value _to me_ increase massively. A year ago I could buy precisely
zero lunches for 1 BTC, now I'd get at least 50.

~~~
rhizome31
Where can we buy tangible stuff with bitcoins? Is it only in the USA?

~~~
AlexMuir
I'm in Budapest and there are now two bars and a restaurant that take Bitcoin.

------
rukittenme
When Bitcoin was high, it was the future. When Bitcoin is low, does it have a
future?

I wish we would make decisions about a technology's or company's or economy's
viability based on something less fickle than price.

~~~
piker
Perhaps the price reflects a collective decision about the technology's
viability.

~~~
rukittenme
Doubtful, the "wisdom of crowds" is useless for something like Bitcoin. It's
too new, too revolutionary, too complex for its applications and failures to
be apparent to even a select few. Let alone a statistically relevant
population.

------
rbfuller
Bitcoin is here to stay for at least this one reason: gambling.

I have bought and sold more bitcoin since I started sportsbooking and playing
poker with it than I ever had before.

With services like circle and bitcoin-friendly gambling sites, I am able to
instantly deposit and withdraw to my gaming site, and then within 2-3 days
have my winnings back into my bank account in my native currency.

It is really a better system than I have experienced gambling online with fiat
previously.

------
xefer
I'm always amused that every bitcoin story seems to include a stock photo of a
shiny physical coin with a big "B" on it.

~~~
lucb1e
People are always looking for a way to visualize it. Since it is a currency,
and people associate coins with currency, what better icon to use?

~~~
icebraining
A spreadsheet would be a closer representation of Bitcoin. You can make it a
paper one if you want a proper photo :)

~~~
lucb1e
But does a spreadsheet icon look like a currency to you?

------
quinndupont
Perhaps given the source (Wall Street Journal), it is no surprise that they
asked a couple of economics professors for their opinions on Bitcoin's
future... but, they could have thought a little more creatively about the
possibilities.

Dr. Harvey (on the "Yes" side), made the typical gesture, at least part right,
that the technology is the interesting part. In fact, the subheading says it
all: "Valuing Bitcoin as a Technology"\---but an edit would improve the
matter: "Valuing Technology"; or simply "Technology".

Other than those who have skin in the Bitcoin game, there's no reason for your
average person to care about Bitcoin _in particular_ , but the idea and the
technological pursuits that it embodies _are_ worth paying attention to. In
fact, I think this is the primary reason HN likes Bitcoin---nobody cares about
its economic logic or valuation or whether a new block every ten minutes
enables liquidity or not. The IDEA behind Bitcoin, and subsequent
cryptocurrencies, is what matters. The TECHNOLOGY that permits novel
arrangements of power, social interaction, and human-computer interfacing is
exciting.

Personally, I'm ambivalent on whether the technology is, on its own terms,
good or bad. But, what I don't doubt, is whether the idea is going to stay---
we won't call it "Bitcoin" in 10 years, but we may call it "Ethereum" or
"Dogecoin" or something not yet invented. In fact, we'll likely just call it
by some acronym only the geeks care about (but everyone uses): like HTTP or
USB. The technology will recede from its specular, media-driven attention and
just become how things are done. Banks will transfer funds on a blockchain
(perhaps the government forces them for transparency and verifiability), ATMs
will become decentralized, you'll establish a smart contract with your Uber
driver... and so on.[1]

[1] For anyone interested, I'll be giving a talk on cryptocurrencies at NYU
this Wednesday (March 4, 5PM), along with Bill Maurer and Finn Brunton. Free
registration here:
[http://events.nyu.edu/#event_id/30104/view/event](http://events.nyu.edu/#event_id/30104/view/event)

~~~
dontdownvote
Ok, so everybody can make a currency, keep some for them (directly or
indirectly), convince people to use it, making it scarce and making the value
of it grow. Great idea! How couldn't we think about it before! Let's start
with a small group (technical people, in case of cryptocurrencies) that are
idealists and full of goodwill. Then we'll pack the idea as the world's
salvation from stupid governments and fees. Don't be evil!

Meanwhile my (fat) share of myCurrency is getting value exponentially.

~~~
quinndupont
Far from being opposed to the article's articulation of cryptocurrencies, I
see your (sarcastic) response as buying into the very logic of it. Thinking
that the problem with Bitcoin and its ilk is its lack of economic stability,
liquidity, or whatever economic factor floats your boat is tantamount to
endorsing a future version that fixes the issue. You see, you've been trapped
into the short-sighted vision that the RIGHT cryptocurrency is just a patch or
version away.

The issues with cryptocurrencies are much deeper than implementation errors. I
may actually agree with your economic assessment of Bitcoin, but I think
that's quite beside the point, and we should learn to speak about the deeper
issues and debate these.

------
dontdownvote
I'm not an expert in this subject but IMHO:

 _1-Bitcoin is just an huge ponzi scheme._

The early birds to got into the system are the ones that will have HUGE
profits. So I want to create my own currency and be able to get an advantage
also.

 _2-Bitcoin is unfair._

Besides everything governments taking care of currency seems the most fair and
democratic way of dealing with it. With Bitcoin technical people have
advantage over non-technical people. It remembers me Nietzsche when he writes
something like:

"There are only 3 types of people: the rich that wants to keep being rich; the
poor that wants to be rich; the intelectual, that using his ideals
(advantages) wants to be rich."

[1] Due to the strong bias, I created another account to express this
unpopular opinion. Shouldn't be like this.

[edited]

~~~
witty_username
> The early birds to got into the system are the ones that will have HUGE
> profits. So I want to create my own currency and be able to get an advantage
> also.

That is in most part due to a bubble caused by people thinking of Bitcoin as
an investment vehicle.

> Technical people have advantage over non-technical people. It remembers me
> Nietzsche when he tells something like:

Explain?

~~~
Retric
> most part due to a bubble

Not really, Bitcoin's where front loaded. It would have been easy to have the
same fixed number of bitcoins, but set things so only 70% of possible bitcoins
where released in the first 100 years.

------
nly
Of course it has a future... just not a very interesting one. The messiah
period is over, and the technical and practical merits (what few there are)
have now been digested.

------
dmichulke
Are headlines the new way of discouraging investment in cryptocurrencies given
Betteridge's law?

------
snowwrestler
The skeptic says that currency is a security because its issuer will pay you
face value for it. What will the Federal Reserve pay me for my dollar? This
seems like an outmoded view of what a currency is.

~~~
dontdownvote
Ok, so everybody can make a currency, keep some for them (directly or
indirectly), convince people to use it, making it scarce and making the value
of it grow. Great idea! How couldn't we think about it before! Let's start
with a small group (technical people, in case of cryptocurrencies) that are
idealists and full of goodwill. Then we'll pack the idea as the world's
salvation from stupid governments and fees. Don't be evil!

Meanwhile my (fat) share of myCurrency is getting value exponentially.

------
LukeFitzpatrick
A Bitcoin bot has already been created, it predicts 90% accuracy on future
tradings.

What I'm concerned with is, if this made public, would it devalue the worth of
Bitcoin?

And, how will Bitcoin deal with quantum computing?

------
PuDDin_Face
"they have no basic underlying value" is not true. Bitcoin themselves are
value - intrinsic value. The time it took to mine the Bitcoin is what gives it
the value. I think this is a much better measure than we have of actual
currency where no one, even the reserve really understands where the value of
a dollar is.

~~~
icebraining
LTV¹ applied to Bitcoin? I had never seen that :D

I disagree with your reasoning for the same reason I disagree with LTV. That
time is just sunk cost - there's no value to it, and certainly no market
value.

¹
[http://en.wikipedia.org/wiki/Labor_theory_of_value](http://en.wikipedia.org/wiki/Labor_theory_of_value)

~~~
orbifold
I was under the impression LTV applies to human labor, so applied to bitcoin
it would imply that they should have close to no value, whereas fiat
currencies derive value from the efforts of the tax payers.

~~~
lectrick
LTV as applied to Bitcoin uses the many many kilowatts of electricity used to
verify transactions as the "labor".

