

Bitcoin and Thoughts from Bill Gates - treblig
http://benjamingilbert.net/bitcoin-and-thoughts-from-bill-gates/

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hft_throwaway
I think this is a lousy defense of Bitcoin. I cringe whenever I read "oh it's
new technology of course people will be scared!" or worse yet, "you must be
jealous because you didn't get in on the ground floor." I think it's a really
cool technology but the economics don't make a lot of sense. There are a few
major issues I see:

-What problem does it solve? Many claim that it's a more efficient way to transfer money, but after paying high spreads & fees on illiquid exchanges or a place like coinbase, it doesn't look so good. International wires are expensive but paying 30 bps each way in exchange fees plus enormous spread concessions to trade even relatively small amounts like $1mm USD are much more expensive.

-What backs it other than speculation? Scarcity itself does not imply value. I don't see a significant "bitcoin economy" out there. Yes, you can buy things with them, but most of these things are priced in dollars. Sellers are accepting bitcoins only because they can sell them for USD, EUR, etc. to speculators. They have no particular attachment to bitcoins themselves and could just as easily accept another crypto currency provided speculators were active enough in the market. How many people are paid a salary or renting an apartment for a _fixed_ amount of BTC per month?

-Many bad actors in the market with little regulation. There have been numerous scams and untrustworthy exchanges out there. It's like taking a trip back to the depression-era bucket shops.

-Consumer unfriendly: the average "man on the street" can't secure his wallet file and even many technically sharp people have been ripped off. Non-reversible transactions aren't a positive for most users and requiring traders to use an escrow service further increases costs. Network can't handle high transaction volumes and sellers need to wait for confirmations or risk fraud, so the use case of everyone buying their morning coffee with bitcoin seems shaky.

-Extreme volatility and lack of liquidity make it a poor store of value or unit of record, two things that are extremely important in a currency. Yes most government issued currencies experience inflation, but I can keep my paycheck in the bank for months or years without its value changing wildly, and I know what a loaf of bread costs in USD within a tight range.

Some of these are fixable and I see some growth potential in micropayments or
as a money transfer mechanism for people who don't have access to traditional
financial institutions, but what is the general purpose use case? What can I
do with bitcoin that I can't with paypal or even a bank account (many let you
instantly transfer money these days for no/low fees to pay friends, landlords,
etc.)?

~~~
genwin
Two benefits that makes it all worthwhile: 1) you can transfer it to someone
else (e.g. an heir) cost free, tax free, paperwork free, without the gov't
even knowing you did it. Illegal, but you can do it and probably get away with
it. 2) It can't be devalued by gov't action.

~~~
simias
Both of those points can be seen as good arguments _against_ bitcoin by many.
Myself for instance, I don't consider facilitating tax evasion and
impossibility to regulate by democratically elected governments a point in
favour of bitcoin.

That being said to get back on the technical merits of bitcoin, I agree with
the OP that I can't imagine every individual handling their own bitcoin wallet
and risk losing everything if it gets compromised (and waiting for
transactions to be validated etc...).

So even if the currency is successful we'll end up with bitcoin banks managing
the risk for us and visa-like credit cards for day to day transactions. And
then I fail to see any advantage over what we have now (besides making a few
early adopters extremely rich, of course).

~~~
VMG
> Myself for instance, I don't consider facilitating tax evasion and
> impossibility to regulate by democratically elected governments a point in
> favour of bitcoin.

That makes Bitcoin immoral from your perspective, without saying anything
about the feasibility.

You even restrict the morality argument yourself by saying it is good that a
democratically elected government should have the ability to control financial
transactions, which I completely disagree with, but even you will admit that
there are a lot of unethical governments out there that hurt their population
by controlling financial transactions and inflating the money supply.

~~~
simias
I never said my view was the correct one, I just said I had a different
opinion on the matter.

The parent is the one who said that it made it "all worthwhile". That sounded
like a general truth to me, I felt the need to point out that it was still up
for debate.

And my 2nd point was about the feasibility, I still have to hear from the
bitcoin crowd what's the solution for day-to-day use of the currency that does
not involve a bank-but-we-don't-call-it-a-bank-seriously-it's-not-a-bank.

~~~
VMG
> And my 2nd point was about the feasibility, I still have to hear from the
> bitcoin crowd what's the solution for day-to-day use of the currency that
> does not involve a bank-but-we-don't-call-it-a-bank-seriously-it's-not-a-
> bank.

Bitcoin was designed to be a peer-to-peer payment system where the owner of
the private key is the owner of the funds. Unfortunately, building secure
hardware and software is very difficult, that's why many people choose to not
keep their private key on their device but let a service deal with the
security, which is often a bad idea. One secure hardware is cheaply available
on the market[1] and two-factor-authentication becomes more widespread, this
becomes less of an issue.

[http://www.bitcointrezor.com/](http://www.bitcointrezor.com/)

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harrystone
I had more optimism for Bitcoin before I saw people so aggressively evangelize
it. I think it has great potential as a digital currency but some people are
making into what's almost a totem.

~~~
officialjunk
i am not familiar with the phrase "totem." care to elaborate?

~~~
Xdes
I think 'icon' fits better.

~~~
harrystone
I think you're right, icon is a better choice.

~~~
oscargrouch
Particularly, I think Totem is a better choice.. you are backed by giants like
Freud:

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

------
lingben
Benjamin, you're conflating bitcoin the protocol with bitcoin the 'currency'.

This is an all too common mistake, so please don't feel too too bad about it.
Bitcoin protocol does have some interesting things to offer us and I'm sure it
will be built upon in novel ways.

Bitcoin 'currency' on the other hand is a non-starter and as time goes on we
will see it discarded.

I hope more people would concentrate on the protocol but about 99% of what you
hear and the energy of people is set on bitcoin 'currency'.

~~~
hendzen
The protocol and the currency are actually inseparable:
[http://timothyblee.com/2014/03/01/heres-why-bitcoin-the-
netw...](http://timothyblee.com/2014/03/01/heres-why-bitcoin-the-network-
needs-bitcoin-the-currency/)

------
debacle
The problem with bitcoin is that no one is using it for its intended purpose -
to buy things. People are using it as an investment or are speculating on it,
which is not the purpose of a currency.

What you end up with is the anemic system that exists right now, where no one
is advancing the actual bitcoin cause, everyone is just setting up exchanges
to make money from transactions.

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davesque
Very misleading. Contains no actual statements made by Bill Gates about
Bitcoin. It certainly tries to grab your attention by suggesting otherwise.

------
clienthunter
The absurdity of this kind of thought is just profound. Thinking like this may
be useful as a means of encouraging hope when all hope is lost, but Bitcoin is
nowhere near there yet. Most of all this kind of talk smacks of _deep
desperation_ \- "why won't people love me?"

I understand fully why one might feel so desperate. Bitcoin may have the
potential to be truly revolutionary. Bitcoin solves the problem of
orchestrating an international currency in a manner that limits the
implementation details to the design, not banking/payment industry/political
types who historically - for one reason or another - end up building in
significant _rigidities_ to the system.

It doesn't take a PhD in Economics to see the potential benefits of
eradicating PayPal and consumer banks (although it may take one to see the
potential pitfalls). More than this though, Bitcoin opens the door to truly
free capital flow. It is possible to work in the Western world for a month or
two and move, say, far East, and live like a king on the savings for a year or
more. Why can't we just buy the stuff over there cheaply and consume it at
home? One major reason is the rigidities in capital flow - it is hard, risky
business in the current system. As a large company in a Bitcoin world you
don't have to worry about a great class of risks of international trade,
dumping money into the Cambodian economy is no longer a question of FX risk
and "can I get it back out?"

This is a great step forward on the way to homogenising international capital
stores i.e. _ceteris paribus_ , rich people buy where things are cheapest,
like in Cambodia, thereby flowing capital to, and driving up prices in,
Cambodia. Cambodians get richer and the West gets poorer. Bitcoin has the
vague potential to be the great equalizer.

We have seen some evidence of this at work in the EU with the Euro, if you
look past the troubling dynamics of transition. Imagine how very different the
US would be if every state had a different currency and payment processing
rules, the diversity in income would be profound.

An educated economist will see a great many problems with this utopian vision,
but will likely agree the aim is noble and that the basis - Bitcoin - is the
closest thing we have so far to a workable solution.

Bitcoin may be as revolutionary as the fanboys want it to be, even if they
don't understand why. My personal thought is that Bitcoin will soon be seen as
the thing that started it all, but the solution won't be Bitcoin itself. There
are too many problems - no matter how many times you read that a fixed supply
currency is the greatest thing since sliced bread, it _really_ isn't. It's
also woefully easy to steal and the mining/verification mechanism is far too
resource intensive and encouraging of looney speculation making its value at
any point in time completely impossible to reason about.

If you love BTC today, don't spout bullshit strings of meaningless words in
some grandiose display of being ahead of the times. Make it stronger and
better because if you don't history will judge this whole thing very severely
in 10 years time, when it really is just a way of buying drugs and hitmen.

~~~
hft_throwaway
I think the issue is that bitcoin fanatics assume something is deeply wrong
with our current system, or that banks are parasitic and not providing any
value. Sure there are places it can be improved, but the current system works
well for many people. Before credit cards we had to rely on informal credit.
Sure, I could open a bar tab at a local place where I'm a regular, or the man
at the corner store might let me run up a small bill. Your word was your bond,
but if you left town, wanted to make a large purchase or weren't from the
right family (or had the wrong color skin), it was a cash only world.

Right now I can travel to any corner of the globe and make transactions on
credit with someone who knows nothing about me and has never seen my face.
He's confident that he'll be paid and I'm confident that I have recourse in
the event of a bad transaction. I don't have to carry large amounts of cash or
worry about being robbed. If my card is stolen my liability is relatively
small. That costs something, but people overwhelmingly see value in it and are
willing to pay this cost.

~~~
clienthunter
You're absolutely correct.

I agree with both you and the fanboys on this point, however. Our current
system is better than the old, for sure, but at the end of the day it is true
that an insane amount of money is paid to these oligopolous firms as fees for
doing a very simple job. Payment processing really is a case of moving
database rows around, albeit in a highly available manner, yet they demand
huge percentages. My bank goes down about as often as my Gmail, and the
latter's free and deals with more information than my bank.

The present is better than the old, but very bad compared to what _could_ be.

