
Bitcoin Is a High-Tech Dinosaur Soon to Be Extinct - secretasiandan
http://www.bloomberg.com/news/2013-12-31/bitcoin-is-a-high-tech-dinosaur-soon-to-be-extinct.html
======
Aqueous
"In fact, if you strip away its technological trappings -- the encryption, the
peer-to-peer networks -- and Bitcoin closely resembles these earlier private
efforts."

In other words if you strip away everything that makes BitCoin different and
unique from its predecessors, BitCoin looks the same as its predecessors.

~~~
fragsworth
Hardly anyone gets Bitcoin, yet. But I am pretty sure that they will,
eventually. It takes a long time, even for smart people, to really figure it
out.

~~~
tlrobinson
Agreed. I've seen very few Bitcoin skeptics who have demonstrated deep
technical understanding of Bitcoin and it's potential beyond a simple
currency. If they exist I'd love to hear about them.

~~~
hbags
I'm such a person. I've been active with BTC, I've mined and traded (both to a
nice personal profit), but I think BTC is a loser. I invested in BTC the same
way I invested in one-hit wonders like Zynga: very temporarily.

Perhaps we can ask each other some questions:

My first question: BTC is designed with very limited bandwidth for
transactions (right now it can only do 7 transactions per second). Is there an
actual solution in place to deal with this? All I ever see is hand-waving
about how the limits could be raised or eliminated, though that appears that
it would create a problem with block chain size and bandwidth.

Is there a proposal someplace that actually addresses BTC's current lack of
capacity that doesn't just create a rather massive bandwidth and storage
problem?

~~~
fsiefken
If I read the pertaining article correctly then the tps issue is solvable
within the practical bounds of the internet, bitcoin development, home
connections and bitcoin use cases. For proposals to solve this read:
[https://en.bitcoin.it/wiki/Scalability](https://en.bitcoin.it/wiki/Scalability)
\- I personally wouldn't consider this a show stopper. Are there specific
reasons why you think it might?

~~~
hbags
If I'm understanding that correctly, every node would experience peak traffic
of around 50mbps, and constant traffic of at least 10mpbs. It's not clear to
me what happens when you have nodes that lag (and that would certainly be a
common occurrence at those levels of traffic).

Beyond that, I found their choice of reference level of traffic oddly low
given the stated ambitions of most serious BTC proponents.

------
orthecreedence
Here's a tip I've picked up from the stock market. If everyone is talking doom
and gloom, buy in. If everybody is talking about how bitcoin is the _greatest
thing ever_ and people are starting bitcoin investing clubs and "the price is
going to keep skyrocketing!!!!1"...it's time to sell.

So, it's going to be slightly more regulated. Big deal. People say it has no
value, but it does. A bitcoin, at this very moment, is worth ~732USD. That
sounds like value to me. On top of the value people give it, it has value in
that nobody owns the network, nobody can regulate transactions used with it,
and anybody with access to a computer can trade it for goods or "real"
currency.

I think people who don't like it a) are uninterested and sick of hearing about
it b) lost all their money by buying on peaks (or just never bought in when it
was $0.20 and are pissy about it) or c) don't have a _clue_ what they're
talking about.

At this point, it has to be treated like a volatile stock. Does it have value?
As much value as someone is willing to buy it off of you for. Will the price
go up or down? Impossible to tell. Is it going anywhere? Doubt it.

I predict that as more people adopt it and as it becomes more mainstream, the
value will increase logarithmically and stabilize.

~~~
MichaelDickens
> If everyone is talking doom and gloom, buy in. If everybody is talking about
> how bitcoin is the greatest thing ever and people are starting bitcoin
> investing clubs and "the price is going to keep skyrocketing!!!!1"...it's
> time to sell.

Right now there are plenty of people in both camps. What do we do then? If
we're just talking about predicting Bitcoin's price, I don't see that we have
much reason to believe we can do better than chance.

~~~
orthecreedence
That's probably why the multi-hundred-dollar fluctuations lately. There's also
not really enough chart data (or volume) to facilitate technical trading.

You're right. If you have your money in bitcoin right now, you are taking a
pretty big risk. However, I personally think that if the past year is any
indication, there's not really a cap to the value it has at this point. It
could add another few 0s to it's value by next year (subsequently taking other
altcoins with it).

At the _very worst_ I think it could drop down to ~100USD, but to go past
there would be really difficult as it spent a lot of time building that base
between 100-150. Still, that's about 80-90% loss if you were to buy today.

You'd be stupid to put in your life savings, but if you like high-risk, high-
reward investments, it might be worth it to throw a few grand in.

~~~
mkramlich
Agreed that in the long term Bitcoin will either add a few 0's, in terms of
say USD/BTC price (and equiv gov fiat), or, it will go towards 0. But I think
the 0 scenario will only happen if a massive exploitable flaw is found, or, if
a clearly better replacement/successor (most likely another digital/crypto-
currency) to Bitcoin comes along, and everybody clearly and can easily
switchover to it.

I'm not sure if Bitcoin is perfect. But I do think it's like the Internet was
to a lot of older tech, but with respect to money. That says a lot about its
potential and its niches. I know that as an engineer it's been frustrating for
years, if not decades, being aware that money is essentially just a score,
just bits of information, a number, and that moving money around is just like
incrementing/decrementing two money fields in a database, but somehow the
government banking and paper monetary systems seemed to make it so much more
complex and slower and bureaucratic that in needed to be. (Also taxation has
been made ridiculously over-complex, partly by malicious intent, I think, and
partly and innocently by the momentum of the less tech available in an earlier
age, the age before electronics, computers and the Internet.)

In short, Bitcoin is one particular way of letting money be as simple as a
shared distributed scoreboard, as just bits in a database. It's not perfect.
But it's much closer to what money fundamentally _is_ at its heart.

~~~
MichaelDickens
> But I think the 0 scenario will only happen if a massive exploitable flaw is
> found, or, if a clearly better replacement/successor (most likely another
> digital/crypto-currency) to Bitcoin comes along

What about something like this:

* A sufficiently large group of people decide for whatever reason to sell their Bitcoin.

* Prices drop.

* In response, tons of people start selling their Bitcoin.

* Positive feedback loop. Bitcoin loses almost all its value.

Since Bitcoin has no fundamental value, there's nothing to stop its price from
plummeting. I think the above scenario is fairly probable.

~~~
orthecreedence
This happens in the stock market all the time. Generally what happens is
buyers start challenging the sellers once the price drops enough.

I'm not saying a crash is impossible, but it's going to take a lot more than a
lot of people selling to bring the perceived value down to 0. I think
something like an exploitable flaw is a much more likely reason.

------
nhaehnle
Everybody who wants to comment on this story should be aware that there is a
mismatch between title and content.

The content - the interesting part that should be taken seriously - is about
whether basing our economy on Bitcoin is a good idea or not. That is a serious
_economic_ question that has nothing to do whatsoever with the _technology_ of
Bitcoin.

The content concludes that Bitcoin is a bad idea economically and,
unfortunately, the title then highlights the (possibly erroneous) conclusion
that this means Bitcoin is necessarily doomed.

It is unfortunate that these different questions surrounding Bitcoin tend to
be conflated. Let's try to avoid that here.

~~~
azakai
I don't see where the issue of whether it is economically a good idea is
brought up?

The article focuses on the history of money, specifically how governments have
increasingly monopolized it. And the conclusion is summarized here:

> Anyone who thinks that Bitcoin will triumph has to believe that it will
> succeed where earlier generations of private currencies failed -- that
> Bitcoin will, improbably, manage to overthrow more than century’s worth of
> accumulated state power, jealously guarded and ruthlessly enforced.

In other words, the argument here is that governments will kill bitcoin (if it
becomes big enough).

The basis for the argument is that, while bitcoin is new and unique and in no
way similar to those old types of money that existed in the past, it is still
money, and it is still being used by people within the reach of national
governments. And the argument is that those national governments will keep
their monopolies on currency by fighting bitcoin.

That leaves open the question of whether they will succeed. Certainly
governments have not succeeded at killing another bit* thing, bittorrent.

However, the story is not quite a parallel, as bitcoin will be used in
different ways, and likely require far more of a connection to "normal"
monetary markets - people will want to exchange bitcoin for standard currency.
Governments might be capable of fighting that very effectively, even though
they have proven mostly powerless against bittorrent.

~~~
anonymousab
Not necessarily kill, but co-opt or take over entirely. Or even beat it into
the ground competitively with a similar digital currency that they control and
can promote more vigorously.

------
jotux
Private currencies were local to small areas and national currencies were
created to consolidate control and distribution to citizens -- making
transactions easier between states, controlling inflation, etc. Why not look
at bitcoin as the next step: a means to globalize currency and facilitate
international economic growth.

~~~
crazy1van
Interesting point. Seems like a single currency would make transactions more
efficient. That's why the EU did it, right? The problem becomes who controls
it. You'll have some nations who want to inflate it. Others who won't.
Eventually the system breaks down. That's where I see bitcoin as having an
advantage. Everyone knows from the beginning the currency's inflation
trajectory.

~~~
asfapifb
This sounds like a good idea but it isn't (for now). Look up "Currency Areas".
There are several economic factors that are essential to make a single
currency successful. One of the downsides of a global currency is that if
someone is indebted to someone else, they can't print money until the debt is
paid. Not only that, but it creates issues when labor forces aren't liquid
geographically and trade isn't free between places. The value of the currency
will start to benefit some economies at the expense of others, leading to
inescapable stagnation (this is one of Greece's problems).

FWIW many economists were skeptical of the Euro zone because it failed to
satisfy some of the criteria of a currency area. This resulted in problems for
some of its members following the 2008 crisis.

------
Havoc
The author has managed to miss the point of bitcoins with impressive
thoroughness. Crypto-currencies are both new and structured fundamentally
differently, so don't tell me about 18th century shopkeepers.

* I've <5 USD in bitcoins, so not heavily biased.

------
fatca
The G4 (USD,EUR,JPY,GBP) may last for somewhat longer than the other fiat
currencies, but that does not detract from the fact that currency crises in
the smaller fiat currencies are very common (think Argentina).

People who live in a G4 country are apparently incapable of imagining that the
situation elsewhere is seriously different than in their own country.

There are lots of Mickey Mouse fiat currencies around issued by the banana
republics that keep debasing them until they collapse. Even the Russian ruble
is a joke that became entirely worthless, three times, in the span of two
decades.

Instead of dollarizing during a monetary crisis, as these smaller/weaker fiat
currency areas used to do in the past, they may elect to bitcoinize.

If that happens, you could end up with an entire country using bitcoin. As
soon as this happens, nobody will ever manage to eliminate bitcoin in that
country.

History does not repeat itself. Collapsing currencies now face a prospect of
hysteresis. Reintroducing fiat currency will not work if people have already
moved over to bitcoin.

With smaller fiat currencies collapsing one by one -- as they always do --
bitcoin will keep growing stronger and stronger.

~~~
MichaelDickens
> Reintroducing fiat currency will not work if people have already moved over
> to bitcoin.

Why not?

> With smaller fiat currencies collapsing one by one -- as they always do --
> bitcoin will keep growing stronger and stronger.

Why would Bitcoin be immune from the factors that cause fiat currencies to
collapse? If strong fiat currencies can suddenly lose value, it seems likely
that Bitcoin could suffer the same fate. Do you have reason to believe that
Bitcoin is different?

~~~
orthecreedence
> Why would Bitcoin be immune from the factors that cause fiat currencies to
> collapse?

I think the argument is that the more people whouse it the stronger the
currency becomes. It has an extremely low barrier to entry because it can be
used alongside other currency, and on top of this is decentralized (no "off"
switch).

If fiat currencies are replaced by bitcoin, then yes it probably would become
"stronger" (ie, more value in relation to other currencies). That's assuming a
country who's currency/economy collapsed decides to use bitcoin as the
national currency. I don't see why they would at this point, though.

I do think it's entirely susceptible to sudden value loss, at least for the
next 5-10 years.

------
PeterWhittaker
The main failing of this and other articles - and bear in mind that I am not a
bitcoin fanboi, own none, and question whether I should - is that many, many
people fail to recognize that cryptography has in recent decades resulted in
several _sui generis_ inventions, that is, _things in themselves_ , things
entirely new that cannot be reasoned about with analogy to past things, for
there are neither analogies nor homologies.

Witness the digital signature: When properly done, bound to the signer and the
data being signed and entirely unique. A brand new thing that could never have
been done before, not even slowly with other tech.

Thousands will criticize bitcoin, etc., for how they are like past things, few
will grasp how the world is fundamentally different for their introduction.

How?

How the heck should I know? I'm not that visionary, nor that smart. None of us
will really know for a few years yet, perhaps longer.

------
chipsy
The article is advocating an incomplete picture. If we see this as a cyclical
struggle between state-backed and private currencies, then what will actually
happen is a competition between the two.

The state will prefer using force to squash bitcoin, because that's what it's
good at, but we already have the recent history of digital media piracy to
inform us of how difficult it can be; the only thing that has substantially
slowed piracy has been to make the legal market increasingly cheap and
convenient.

So regardless of who "wins," the existence of bitcoin acts to motivate a
restructuring of top-level policies; employment of the traditional
warmongering will drive it underground but not out of sight, since there isn't
a "head" or "ringleader" to attack.

------
natrius
Governments will likely try to legislate Bitcoin out of the market, but I
doubt they'll succeed. In a democracy, it's easy to make something that's used
by a small number of people illegal, but if plenty of people are already using
it, they'll vote you out of office.

If someone tries to make Bitcoin illegal in America, why wouldn't large
Bitcoin holders try to distribute bitcoins as widely as possible in an attempt
to win over the people and retain as much of the value of their Bitcoin
holdings as possible?

Here's a short story that resulted from that thought experiment:
[http://niran.org/bitcoin-fiction/the-blockchain-
letter.html](http://niran.org/bitcoin-fiction/the-blockchain-letter.html)

~~~
JamesArgo
This reads like religious fiction and makes me seriously question the
rationality of the bitcoin community.

~~~
SectioAurea
Most Bitcoin users don't believe this will happen, for what it's worth. The
'armageddon facedown with the government over Bitcoin' is just another
doomsday fantasy popular with those who enjoy doomsday fantasies.

The rational types have already seen it taxed as capital gains in several
countries. It's not even a question of if they will fight it anymore. They
were never going to.

------
codex
I don't see Bitcoin as an alternative currency. I see it more as a bank
account held in a foreign currency. These exist today.

~~~
ftwinnovations
Only if that foreign currency is absolutely never inflated by that government,
and allowed to thus increase in relative value to all the other fiat
currencies.

And also that bank account does not flow through the existing US controlled
international financial system.

And that bank account does not require an ID, residency address, or even your
name to open.

Oh, and that bank never lends your money out. They keep a 100% reserve on all
deposits.

I suppose this bank also has no bank fees, no wire transfer fees, no wire
department transfer latencies, no bank holidays etc.

I should also point out that if you are a US citizen, it's nearly impossible
to open a foreign bank account without either 1) foreign citizenship 2)
connections 3) a very large minimum balance.

Then, you are correct, it's like a foreign bank account.

~~~
codex
I'm considering it only from a currency regulation standpoint, as per the
article. But it's easy enough to make sure that you may deposit or withdraw
money only from a local bank account, in the local currency, which you must
have opened using valid non-anonymous credentials. Existing banks are highly
regulated, as you point out.

BTW, EverBank offers foreign currency denominated money market accounts in the
US.

~~~
ftwinnovations
And you are 100% correct that you can speculate in the forex style, however
that misses the point if what bitcoin really is. It's like someone in the past
saying "I don't view cars as an alternative transportation method. I see them
more like a horse and buggy. These exist today."

~~~
waps
I think the criticism to be read in that is that there really isn't that much
economy in bitcoin, and it needs that to survive. The value of bitcoin
currently is almost fully speculative, and all articles about it focus on the
speculative aspect.

We need a "foreign country" (or something vaguely like it) to actually use
bitcoin. Of course it has the problems of all other byzantine protocols : it's
not fast, which would be an impediment, and it requires global connectivity.
Also, I think the tracking is a mistake. It allows people to see the obvious
problems with the distribution of bitcoin.

Imho, bitcoin is a large step forward, and it's close. Very close. But it's
centralized dependencies mean it can't resist governments.

------
triplesec
This guy's argument just boils down to "they failed in the past, so these guys
will fail now, any other outcome is preposterous." This is not an argument
which can sand without consideration of factors of new technology, virtuality,
and globalism, never mind any social and political factors which are different
now from then.

Weak opinion article, with no actual coherent reasons to believe him. "It
happened before, it must happen again" is not an argument.

BTW I am not entirely bullish on Bitcoin, but it's not because of this guy's
(non-)argument.

------
Yhippa
It would be nice to know if all of the people hyping up and talking down
Bitcoin own any Bitcoin.

~~~
orthecreedence
I lurked for a long time, and recently bought in.

Perhaps the timing was bad, but I'm not a stranger to investing in the stock
market (technical trading, mainly) and the patterns I see are favorable
(although not definitive in any way).

I also just _like_ the idea of bitcoin. I see people bash it all the time for
not being a real currency, but the criteria they judge it on applies to _all_
currency besides direct commodities (I'll trade you one cow for two goats).

The USD has as much _real_ value as monopoly money. The gold which used to
back it also has no _real_ value. These currencies are a _representation_ of
value, but hold no value themselves.

I feel like bitcoin is slightly different. Although it represents value like
other currencies (albeit with much volatility) it has the unique
characteristic of being distributed and non-regulated (in the sense of
visibility into transactions). I can send anybody with an internet connection
(or hell, even a street address) bitcoin. I can store enormous amounts of it
on in multiple places, encrypted, and effectively have a safe I can access
anywhere that _only I can open_.

So it _does_ have intrinsic value in that it does what other currencies do,
but better.

Will it live or die? Live, I hope, because I've got a horse in the race now. I
would argue though that if bitcoin were to fail, something very similar would
take its place.

------
gweinberg
You know what really is a high-tech dinosaur soon to be extinct? Bloomberg
terminals. Seriously why does anyone still use these?

------
blahbl4hblahtoo
I think that all evidence points to states having far far more power to
respond to technologies than anyone here can imagine. Frankly, in light of all
the public disclosures this year I can't help but wonder where all the bitcoin
optimism comes from.

~~~
chj
I am wondering what kinds of techniques governments could use to destroy the
Bitcoin P2P network when they declare it illegal.

~~~
foley
Most of the mining is now done in large data centres packed with ASIC miners.
Ban it, seize the equipment and the government can immediately begin a 51%
attack. Shut down the exchanges leaving only peer to peer exchanges, but now
your local exchanger has the legal status of a drug dealer and all the
sketchyness that comes with it.

No doubt there will be protocol changes to blacklist the government miners, a
cat and mouse game will ensure. Bitcoin will survive, but it will be a tiny
fraction of its previous size.

