This article is very misleading in several ways:
(1) we do not work for the Finnish Central Bank in any way nor does the content of the paper reflect any views of the Finnish Central Bank (so far as I'm aware), the paper was merely included in their working paper series
(2) the main content of the paper is to contrast the economic model of bitcoin that of a monopolist service provider, from the abstract:
"A simplified economic model that captures the system's properties answers these questions. Transaction fees and infrastructure level are determined in an equilibrium of a congestion queueing game derived from the system's limited throughput. The system eliminates dead-weight loss from monopoly, but introduces other inefficiencies and requires congestion to raise revenue and fund infrastructure. We explore the future potential of such systems and provide design suggestions."
> The opinions expressed in this paper are those of the authors and do not necessarily reflect the views of the Bank of Finland.
@admins, can we have the title properly attribute the source?
I would very much like to see everyone move away from speculation and into actual use, but it's not looking good...
And why would you think that Bitcoin's use is not looking good? The transaction rate, the best indicator of actual use, is sharply increasing: https://blockchain.info/charts/n-transactions?timespan=all&d... (this indicator is not typically impacted by mere speculators: buying coins and leaving them on an exchange does not create a transaction)
Blockchain seems like overkill here. Hardest parts are converting cash into bits and back on both ends, transmitting bits from one account to another is easy with, say, a MySQL db
> store of value
volatility makes bitcoin an interesting speculative investment. But without any backing or federal insurance, seems like a poor store of value compared to a bank account (though many currencies no longer have backing...)
> b2b, peer to peer payments
Again, solutions to these (ie. Venmo, Square Cash, Facebook Cash for p2p) do not require blockchain. How does blockchain tech help in these use cases?
There is a powerful network effect taking place: the more people accept Bitcoin, the smaller the need to convert to cash, causing Bitcoin's convenience to increase bit by bit, causing more people to use it, etc. That is what we have been seeing over the last 7 years. And Bitcoin ATMs are becoming the most convenient way to convert to cash. They are popping up around the world at an impressive rate: https://coinatmradar.com/charts/#growth
> poor store of value compared to a bank account
On the contrary, savings accounts are a terrible store of value as they lose value over time: a 1% interest rate is eaten by a 3% inflation rate.
> bitcoin ATMs
cool concept, unclear when there will be enough of these outside of USA to make a dent in the remittance market
> savings accounts are terrible
agreed, losing 2% annually sucks. however, BTC literally dropped 14.88% today 0_0 unclear if it will continue to grow or drop, only volatility seems inevitable
Bitcoin is the only decentralized one. I don't think it means everyone needs to use it, but I think the role it fills is a very important one.
I feel like this criticism is like criticizing torrents or personal NAS media devices when fileplanet.com and dropbox already exist, or criticizing email when Facebook Messenger exists.
> criticizing torrents
p2p file sharing fills a real need: quickly download large files for free, even when no single entity wants to pony up enough free bandwidth to make this happen
> criticizing email when fb messenger exists
email is useful too. it is more formal and already part of the protocol of business communication. fb messenger is great for casual chats with friends, with a heavier focus on GIFs, games, etc. they fulfill different, but real, needs
Payment systems already work fine with minimal cost. Store of value: yes you cannot overissue but the speculation tide could go out removing the store of value. Gold was/is volatile.
Did you read what I wrote? "this indicator is not typically impacted by mere speculators: buying coins and leaving them on an exchange does not create a transaction"
«Payment systems already work fine»
It took me 7 days to move $300k from one bank account to another, because of closures on weekends & ACH limits. This is not "working well". With Bitcoin I can move $100k+ in ~10 minutes.
I have had many instances of credit card payments being declined while travelling internationally due to false positives from anti-fraud systems. This is not "working well".
In 2013 I couldn't even pay my rent using my bank's electronic payment system, even though my landlord and I had the same bank, because of arbitrary policy limit of $2k/mo for personal payments. This is not "working well".
I have had paypal steal ~2% through forex fees for a transfer to my family overseas. This is not "working well".
I have had fraudulent merchants stealing my CC info and created a bunch of hassle that took me time to sort out. This is not "working well".
And so on. Bitcoin may not be perfect, but it solves all these scenarios incredibly well.
Regardless, the problem of cryptocurrency theft has been largely solved by hardware wallets and multisig wallets: there hasn't been a single documented case of bitcoins stolen from such a device. Also phone wallets, as long as running on a stock iPhone or Nexus/Pixel with recent security updates, are decently secure. And you can back up the seed of hw & phone wallets, so there is no risk of losing the coins if the device gets destroyed/misplaced.
You can move the bitcoin equivalent of $100k+ in 10 minutes. It'll take you longer than a week to convert to cash (not to mention the cost you'll be paying in fees). Plus you still have to deal with all the regulatory checks (unless you think you can get away with laundering money)
Incorrect. I trade at Gemini where I can sell BTC and wire the USD in less than 24 hours to a bank account.
I'd argue the opposite: this is working well.
Imagine travelling overseas, you go to pay for a coffee only to discover you've had all your cryptocurrency stolen. Who you gonna call?
Cryptocurrency theft has been solved: https://news.ycombinator.com/item?id=15229869
Cryptocurrency theft has been solved by hardware wallets?
What happens when you lose your hardware wallet? Now you have to restore from backups, if you have them, but they're in cold storage 4000 miles away.
Yes the systems are nice. In theory. But when they cause more problems than they solve, that's not "working well". Bitcoin's systems to prevent loss are hardware wallets, and multisig addresses (eg. requiring 2-of-3 wallets/persons/automated systems to approve a transaction).
«Now you have to restore from backups»
The backup is simply a list of 12 words. Write it somewhere safe. Split the list. Memorize it. Hide it. Store it via steganography in an image in your email account. Whatever. It's easy to hide and have it accessible 24/7.
I'm willing to bet traditional payment card anti-fraud and consumer protection systems are solving more problems than they cause.
So you have been inconvenienced by them on occasion. That says nothing for the frequency these systems work as intended.
> The backup is simply a list of 12 words.
I wasn't aware of that, thanks for clarifying.
Other cryptocurrencies (eg. Litecoin) will pop up to fill this niche.
While this might change, the rest of the world isn't staying put either. In EU/US now you can have almost realtime bank transfers, which was one major pain point in the past.
Litecoin adopted "segwit" or "Segmented Witnesses" so the blockchain size isn't what it used to be. Some were pushing for this with Bitcoin, others were pushing another direction, hence Bitcoin Cash.
Disclaimer: I am not a complete and total expert in the crypto world, just still picking up things here and there. There's definitely way too much to digest in my free time, and I was mining some BTC for fun back in 2010...
One of Litecoin's claims to fame is that it has a smaller block confirmation time. It's not some technological break-through but just the tweaking of a constant with trade-offs. Adjusting the block time down means network latency and bandwidth are a bigger deal to miners and can increase the block orphan rate, possibly resulting in a small push toward miner centralization compared to a higher block time.
Though as the Lightning Network comes to Bitcoin (and Litecoin), users will be able to make transactions without waiting for block confirmations (while still getting the same guarantees against counterparty risk and doublespends), decreasing the benefit of shorter block times.
Tiny blocks means higher fees, which is a disincentive to use bitcoin as currency (it still works as a store of value). Bitcoin core is trying to solve this with a centralized layer 2 lightening network, which sort of defeats the point of a decentralized currency.
Bitcoin cash, however, is a fork that is planning on scaling on layer 1 with bigger blocks and smaller fees. I would keep an eye on how adoption goes for bitcoin cash in the next year or so. I would also watch Monero usage in actual cash transactions, as it is the most fungible.
Monero is even worse than Bitcoin when it comes to scaling issues. Quite a few projects are working on strong privacy/fungability coins without the scaling problems but it's hard. Zencash is the one I'm watching.
True, and fees are higher because of it, but they are working on that. I should have explained why I mentioned it. I list it mainly because it wins on fungibility, so I can see where it might follow a similar adoption pattern to bitcoin, where it becomes the darknet currency of choice, then expands outward. I think this is more likely if either the traceability of bitcoin becomes an issue, or if bitcoins with "tainted history" become harder to spend.
There's tech in bitcoin, which is neat and will lead to interesting things, and then there's speculation in bitcoin, which is just that and will lead nowhere.
Just a globally decentralized currency that can't be devaluated by central bankers. No big deal.
Bitcoin is a political statement. And HN is a political echo chamber. No one here is going to change their mind about central banking and monetary theory. So if you think $4k/BTC is insane, that's totally reasonable. But you're also not seeing the vision and motivation that the early adopters hold - and from that perspective, $4k/BTC isn't that impressive.
Plus it's not like you have to play their game: if you think there's a bubble just cash out and buy back in when you need the coins for a transaction.
Admittedly, for now at least, you still need to on-ramp/off-ramp BTC in to fiat in a lot of cases but as bitcoin adoption increases this will become less and less of an issue (you can see the beginnings of this already with a lot of employees working for companies that have done an ICO opting to be paid in BTC/crypto-currency rather than fiat).
Venmo or even Paypal is arugueably more easy to send money than anything. Type my checking account details and send to a friend.
Bitcoin needs time but I don't think it's unreasonable to imagine it will one day meet and then surpass the current ubiquity of Paypal (and similar) as a payment method (especially for cross-border purchases/transfers). It already wins on utility and transparency. It just needs wider adoption (and less volatility, which wider adoption will help with).
The technical solution to Sybil-resistant distributed systems was insightful, and I'm sure we'll continue to make use of it, but the Bitcoin community hasn't really carried that forward.
In no particular order:
- They disabled a bunch of OP codes, which gimped their network.
- They attracted the kind of people who make toxic communities.
- They haven't really provided a usecase for the network, partly because of the first point.
- They haven't proved they can implement technical solutions, partly because of the second point.
So while the underlying idea is interesting, I have very little faith in the technical stewardship or the vision of the Bitcoin community, and thus expect another project to disrupt it before Bitcoin ever accomplishes its initial (and long since forgotten) goals.
One thing is for sure- it's never going to disappear and all those people saying it would go to zero deserve to eat their humble pie.
"Facebook has been around for seven years. It has 500 million users. If you can’t figure out how to make money off half a billion people in seven years, I’m going to go out on a limb and say you’re unlikely to ever do."
«Bitcoin is an elegant
implementation of a digital
currency, but can it truly rival
or replace existing currencies?»
«it represents a remarkable conceptual and
technical achievement, which may well
be used by existing financial institutions
(which could issue their own bitcoins)
or even by governments themselves.»
«At the time of this writing,
the average worth of a bitcoin over the
previous six months had been a little
over $100» (up 42× since then: $4,200)
«Bitcoin solves two challenges of digital money—controlling
its creation and avoiding its duplication—at once.»
Isn't this false and the reason why bitcoin cash exists?