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Bitcoin was supposed to change the world. What happened? (vox.com)
24 points by kgwgk on Nov 22, 2016 | hide | past | web | favorite | 22 comments

Well, at a guess, and I stand to be corrected on every point..

1. Only benefits early adopters (and money launderers of course)

2. Far too volatile. Nothing too back it up eg a country or a standard to underpin it, average Joe would be daft to convert real money to it.

3. The mining methodology sucks. Seriously all those CPU cycles wasted solving pointless algorithms, from every standpoint its just wrong. You want to mine, go and get a fucking pick and shovel and get something real!

4. Big government and financial businesses will move on it sometime but in the meantime just holding bitcoins is a red flag for the wrong people to keep an eye on you

5. [Insert whatever worry you have about putting your money into a `un-breakable` technology here]

6. zero benefit over any other currency or standard (except Zimbabwean dollars or see point 1)

7. Nobody really understands it (including me), I just asked by wife she thought it was like an itunes card top up and she is fairly clued.

God I could go on forever from my position of no authority :-)

Seriously the financial system is flawed as fuck, but its a hell of a lot better than this, until bitcoins or any crypto currency/icoin are managed by an AI from a network of space stations with a few billion of real assets to back it up I will keep my savings where they are thank you

> 6. zero benefit over any other currency or standard (except Zimbabwean dollars or see point 1)

Zero benefit is being generous -- BC has negative benefit. The fact that there is a limited pool of coins means that the value of a bitcoin varies as a function of dollar inflows/outflows for each day. In other words, it's a poor store of value because it fluctuates in value the more it's used.

It would have zero benefit if you could sell back bitcoins at the same value you bought them at on a previous day, like you can with dollars (i.e., you can get nearly the same amount of value from a dollar today as you can tomorrow).

> 3. The mining methodology sucks. Seriously all those CPU cycles wasted solving pointless algorithms, from every standpoint its just wrong. You want to mine, go and get a fucking pick and shovel and get something real!

It's not like commodity money was inherently useful. You could just as easily say, "all that time spent underground, people dying in mines, environmental degradation just for a shiny rock, just get a computer and have it do some pointless task instead!"

It turns out that the issues that Bitcoin supporters/investors thought were major problems, aren't. The entire economy trusts the government, banks, and the Federal Reserve. It has to because entire economy ceases to function without this trust. People aren't going to own land if they don't trust government to back the deeds, they aren't going to engage in business if they can't trust the government to predictably uphold their contracts, etc. So even when people swear they don't trust them, the actions suggest implicitly, they do.

The technology behind bitcoin is really interesting, but it was applied to the wrong field. You don't need a fancy distributed, verifiable, eventually consistent database to handle financial transactions. People in developed countries use banks, and people with limited access to banks for whatever reason (prisoners, refugees, etc) use cigarettes, coffee packets, bottle caps. All you really need to facilitate transactions is a general consensus on what to use, the network effect will do the rest.

IMHO, the only thing that prevented a total takeover by Bitcoin was the block size limit. Many, including myself, simply stopped promoting Bitcoin to businesses, due to the limit, and all of the momentum ran out. I spoke personally to a start-up that had been working on a major service that would have boosted the Bitcoin ecosystem, that said the block size limit was the reason they were pivoting away from it, and at the time I was confident the community would push through a hard fork to raise the limit and told them so. When it became clear that wouldn't happen, it was a hugely demoralizing development.

Major Bitcoin VC Roger Ver has experienced this as well:


>I know of multiple large companies who specifically have decided NOT to integrate bitcoin at this time because their user base would overwhelm the the current Blockchain capacity.

This has been termed the Fidelity Effect, after the decision by Fidelity to postpone a Bitcoin project due to the block size limit:


Not strictly related to why it didn't change the world - but the large amount of Bitcoin mining has resulted in the negative externality of significant greenhouse gas emissions.

So much money, energy, and CO2 spent solving pointless math problems.

This is a common misconception.

> No more so than the wastefulness of mining gold out of the ground, melting it down and shaping it into bars, and then putting it back underground again. Not to mention the building of big fancy buildings, the waste of energy printing and minting all the various fiat currencies, the transportation thereof in armored cars by no less than two security guards for each who could probably be doing something more productive, etc.

> As far as mediums of exchange go, Bitcoin is actually quite economical of resources, compared to others.

This is completely false in terms of what you get per transaction.

*Bitcoin companies were supposed to change the world.

What happened? Nearly all of those companies failed to understand that Bitcoin, at its core, is a bearer instrument with two goals: censorship resistance and bootstrapping to fulfill as many properties of ideal money as possible. Bitcoin has already changed the world and you don't really need to look any farther than Wikileaks and darknet markets. Bitcoin doesn't care if you agree them either.

Well, it's obvious:

1- lack of anonymity.

2- the size limitations make it better suited for a inter-bank compensation system than to an actual universal electronic wallet system.

3- banks are happy with their current system.

4- and foremost, it's not a free money system. See: http://en.trm.creationmonetaire.info/

Bitcoin was struck the fatal blow when the bubble popped and Mt. Gox died. Everything since has been nostalgia for its past dreams.

The main problem is that it was built on crank economic assumptions. It is literally an implementation of Federal Reserve/gold bug conspiracist economic theories and weird Bircher ideas of where inflation comes from - that's actually its point. The white paper alludes to this, the Bitcoin 0.1 release notes are clear about it:

> The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.

Bitcoin failed at every one of the aspirations here. The price is ridiculously volatile and has had multiple bubbles (this should be impossible with a fixed supply if Bitcoin economic theories were true); the unregulated exchanges (with no central bank backing) front-run their customers, paint the tape to manipulate the price, and are hacked or just steal their users' funds; and transaction fees and the unreliability of transactions make micropayments completely unfeasible. Because all of this is based in crank ideas that don't work in practice.

Ethereum is hipper, but has similar problems with ever working properly. (Remember the Skype chat where the devs admitted sorting out its problems would take several years?) Its basic problem is that smart contracts require humans to program perfectly, and even the best and brightest of Ethereum coders came up with The DAO, a $150 million clustercuddle.

If you follow the "Venezuelans are turning to Bitcoin" link, you'll see the actual number is ... 370 BTC traded a week. This may not rock the central banksters to their foundations.

Almost all Bitcoin use is speculation on Chinese exchanges; day trader gambling, basically. I need to find the figures, but it's something like 95-97%. Next is the drug trade, next is ransomware. Western Bitcoin advocates are a sideshow, except the actual core developers.

(I am literally writing a book on this, God help me. I have read more and worse PDF white papers than any human should have to suffer. Currently 30k words and six weeks into writing a 15k short I was supposed to take 2 days on. http://davidgerard.co.uk/blockchain/ )

> The main problem is that it was built on crank economic assumptions. It is literally an implementation of Federal Reserve/gold bug conspiracist economic theories and weird Bircher ideas of where inflation comes from - that's actually its point.

Speaking as one of those western developers - and as someone with a standard economics education - what makes you think those economic assumptions hurt Bitcoin itself?

Sure deflation is a terrible thing for economies, but that has no bearing on the success and value of the currency itself. What matters for a currency that people aren't forced to use is that it maintains its value, which is exactly what the eventual deflation in Bitcoin does. Equally, _currently_ Bitcoin's monetary supply is highly inflationary, about 8%/year right now iirc, and will remain high for years to come.

Let's not let our economic education prejudice us; Bitcoin is a good example of how good monetary policy is often similar to taxes in general in terms of the conflict between what's good for individuals and what's good for society as a whole.

They do seem to supply the inherently contradictory element seen at the heart of a lot of viral ideologies.

Bitcoin ideology propagated through two things:

* if you want to get rich for free, take on this weird ideology that goes with it.

* don't worry if you don't understand the ideology yet, just keep doing the things and you'll get rich for free!

Since the ideology doesn't actually make coherent sense - and is literally straight out of John Birch Society and Eustace Mullins - this means the second condition is reinforced.

(Not making coherent sense is why you will observe advocates claiming that everything and its opposite is actually good for Bitcoin.)

So being made of fractally wrong ideas that don't work did indeed help it along a whole lot during the bubble! That and the insatiable urge to gamble of Chinese day traders. And the drug market. It was less convincing when it turned out it wasn't going to go up forever, but was a completely standard asset bubble.

> Bitcoin ideology

Yes, a subset of the Bitcoin community is a mixture of crazy and money driven; that happens a lot in all sorts of communities.

But you've completely missed the reason I and most other developers I know work on Bitcoin: it's censorship resistant money. For me personally, I first got interested in digital currency years ago when I started getting interested in the decentralized censorship-resistance publishing network Freenet; adding censorship-resistant money to censorship-resistant publishing was an obvious extension.

Is that always pretty? No. But neither is freedom of speech protecting technology - witness how Tor is used for lots of unsavory things too.

>a subset of the Bitcoin community is a mixture of crazy and money driven

The lunatic economic theories were literally a part of Bitcoin from day one. David Golumbia's book is highly recommended here (I cribbed from it heavily), even if he is a huge commie.

I must admit the censorship-resistant money aspect is a positive for me too. Wikileaks having its funding cut off at the whim of three companies threw that into stark relief.

I'll also note that the actual Bitcoin devs are generally way saner than the ideologues ...

> What matters for a currency that people aren't forced to use is that it maintains its value,

No, what matters for a currency (vs. speculative asset) is relatively stable value over short terms. For a speculative asset, appreciation over a longer term is more important than stability.

> maintains its value

But it doesn't maintain a steady purchasing power, because the price fluctuates around all over the place!

Inflation has very little to do with money supply, especially M0, and everything to do with the availability of goods.

Yep. The John Birch Society literally tries to redefine "inflation" as "the central bank makes more cash available" (more M0, though they don't use such highfalutin terms), because ridiculous bollocks is much easier to prove if you assume your conclusion.

Bitcoin ideology assumes that inflation is a purely monetary phenomenon, and that Bitcoin is immune due to its strictly limited supply. This was demonstrated stupendously false when the price of a bitcoin dropped from $1000 in late 2013 to $200 in early 2015 - 400% inflation - while supply only went up 10%.

The conventional view is that inflation is a phenomenon of consumer prices, consumer confidence, productivity, commodity and asset prices, etc., which a central bank then responds to with monetary policy. The conspiracist view is that it's the central bank intervention causing it.

Even people who've suffered bitcoiners' strident blaring ideological lunacy frequently don't realise the depths of economic delusion that goes into the ideology. I suppose we can be grateful that they adopted only Eustace Mullins' central bank conspiracy theories and not his antisemitism. Mostly, anyway.

Bitcoin is a decentralized system; it has no option but to have a floating exchange rate, because all known forms of peg and other stability measures require centralized third parties.

It isn't going to maintain it's value better by having a higher inflation rate than it does.

>The price is ridiculously volatile and has had multiple bubbles

I have an armchair's knowledge of economics and economic history, but wasn't this precisely the case before the Fed switched off Gold?

That would be entirely correct! It turns out that even though rich first-world countries used the gold standard for a long time, they suffered manic booms and devastating busts, over and over; countries recovered from the Great Depression precisely as early as they got off the Gold Standard and went to central bank money supply management, because it actually works better.

It's a common mode of pseudoscience to fervently adopt a discarded idea, and economics is no exception. Gold bugs and Federal Reserve conspiracists (and the acceptable face of this, Austrian Economics) is precisely this variety of bad idea.

I too am an amateur enthusiast, but boy I had to sharpen up arguing with bitcoiners ...

I've found the cite I was thinking of: 95% of blockchain activity is on Chinese exchanges in yuan. It doesn't say it's all speculation, perhaps they're all buying drugs and paying ransomware with it ... but I wouldn't bet that way. http://www.coindesk.com/state-of-bitcoin-blockchain-2016/

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