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[flagged] Satoshi was wrong (medium.com)
30 points by qznc 9 months ago | hide | past | web | favorite | 36 comments

Sure, he was wrong. So was Newton. Einstein fixed some of it, and then a lot of others fixed some of the remaining parts, etc. Writing "Satoshi was wrong" as a headline, is misleading at best. Why would someone talk about Satoshi with such disrespect? I don't get it. Can somone explain?

I think the simple answer is that it's clickbait. A while back there was a relatively well-known pop science magazine with a cover story "Darwin Was Wrong". I'm having trouble finding the actual article now since the title is such a common phrase. It turned out to be something like him being wrong about the "tree of life" because genetic studies proved that horizontal gene transfer was extremely common in the earliest generations, hence there's no single common ancestor or "trunk". Not, as any reasonable person might conjecture from that headline, a debunking of the overall theory of evolution by natural selection.

I don't see how crypto-currency dogma is on the same level with evolution. It seems to me a lot of the criticisms have been borne out. Bitcoins are worth a lot to speculators but they remain infrequently used as an actual currency.

> I don't see how crypto-currency dogma is on the same level with evolution.

That's not a claim I have any interest in. I'm just drawing the parallel of an article "debunking" someone while actually agreeing with their central thesis.

National Geographic, fwiw: https://i.imgur.com/GGKLx.jpg

I was thinking of a different one, an article in New Scientist. The full title of the article is apparently "Darwin was Wrong About the Tree of Life", but the cover much more prominently featured "Darwin was Wrong". [1] [2]

[1] https://www.newscientist.com/article/mg20126921-600-why-darw...

[2] https://www.newscientist.com/issue/2692%20/

I remember that. And creationists the world around started using that cover as proof they were right.

The article's title seems click-bait. It makes good points identifying some of the already known weaknesses in bitcoin's design, but he is basically complaining that Satoshi didn't predict how his creation would evolve over time which seems unfair.

He's complaining that Satoshi did predict how his creation would evolve, he just guessed wrong in a lot of the particulars. Because of course he was. Predicting the future is hard.

But predicting the past is much easier. We have a privileged position to see that, as implemented, Bitcoin is a pretty shitty currency (and a decent high risk investment vehicle). It's way too volatile, transactions are very high friction, and both of those problems look like they'll continue to get worse as Bitcoin continues to mature. More over, it's looking like none of this will actually avoid state capture now that a state actor (China) has decided they care.

No piece of software in human history has been perfect on day one. The real world always has a few surprises. But Bitcoin doesn't have a viable mechanism for change. No central authority and no privileged user means all but the most glaring bugs are unfixable.

Frankly, the article compares him to the Wright Brothers, so I think it already agrees with you. But beyond that, I'm not really sure I personally would be even that charitable.

That's exactly the point being made in this post. Have you read it to the end?

> 1. A cap at 21M. It made the currency deflationary by nature. Ask an economist, no one thinks it’s a good idea long term http://www.investopedia.com/articles/personal-finance/030915...

Most economists, not all economists. And most of those economists are the ones destroying economies, in my opinion.

If you're interested in reading a counter-viewpoint on why deflation is actually good – it's the policies aimed at countering it that are really what's bad – here you go: https://mises.org/blog/deflation-always-good-economy

That article is pretty bad. Even at this point in the article it is clear he does not understand why a small amount of inflation is good. For example he says:

"According to popular thinking, in response to a high rate of inflation, consumers will speed up their expenditure on goods at present, which should boost economic growth.

So why then is a rate of inflation of 10% or higher regarded by experts as a bad thing?"

According to this line of thinking if a little bit of something is good, then more of it should be good, right? I think we can all see the faultiness in this logic. What he doesn't get is after inflation reaches a certain point, people start expecting their money to be not worth as much in the very short term, leading to increase in buying, leading to higher inflation, and so on. This spiral is how economies like Zimbabwe end up with crazy inflation. However at a low rate, around 2% and a little higher, people do not immediately expect their money to be worth less in the short term, and therefore the economy does not enter this spiral.

The rest of the article goes into some decently complex economics. Suffice to say his core argument - that inflation hurts wealth creators because it decreases the value of said wealth- does not hold water unless said wealth creators are putting all their money in places with interest rates less than inflation. This means no investment in their or a business, but just parking the money in a bank. Anybody with that kind of money will know to put large amounts of money in inflation-protecting assets. Because risk of an investment is generally the amount of interest you get above and beyond inflation, parking money in assets growing at the rate of inflation is generally very safe.

> https://mises.org/blog/deflation-always-good-economy

That article is just bad. It spends a lot of time talking about reduction in prices, but the real problem with currency deflation is that it results in a reduction in wages.

If computers cost half as much as they did ten years ago meanwhile everyone is making the same amount of money, that's great. But if people are also making half as much money then it's useless, or worse than useless because then people are making less money but still have the same mortgage they took out ten years ago. Which is what happens with currency-generated deflation (as opposed to efficiency-generated consumer price deflation).

> The economic effect of money that was created out of thin air is exactly the same as that of counterfeit money — it impoverishes wealth generators.

Except that the created money can go to the government which it can spend in lieu of collecting more taxes, which would otherwise have come from "wealth generators" regardless.

Nope, its good. It may reduce wages, but prices will be much lower, so who cares?

It's not about the stuff that just cancels out, it's about everything that doesn't.

Money you already owe becomes more expensive to pay back.

It turns the currency into an investment vehicle that competes with economically productive activity for investment. If cash in a mattress predictably appreciates by 4% a year then nobody will be willing to invest in anything that produces less than that in real returns, so all of that productive activity disappears out of the economy to be replaced by currency speculation. Or is forced to pay the higher returns to investors by paying lower wages to employees or charging higher prices to customers, and is able to because less available investment means less competition when your would-be competitors don't get funded.

When most of the currency is held by speculators it causes high volatility in the currency value, which interferes with normal businesses using it as a currency because the value can fluctuate wildly even for those who only hold the currency temporarily. Which leads to economic inefficiency and less competition again.

Everything about it causes unearned wealth to go to people who uselessly hoard currency at the expense of everyone else.

Widespread deflation would drive the economy to a halt because it would be crazy to take out large loans (imagine paying down your mortgage without ever getting any equity) and it would discourage business investment in favor of the safer option of just sitting on huge piles of cash. Even your Mises institute guy seems to want zero inflation more than rapid deflation.

Very poorly written article. Throwing a lot of shit at someone and discrediting them for some mistakes.

If we can finally accept that Bitcoin was made by the CIA it doesn't feel too bad ;)

I would classify this article as typical FUD that consistent observers of the Bitcoin/cryptocurrency space see quite often.

The post seems at least decent but the title is terrible I think.

> 1. A cap at 21M. It made the currency deflationary by nature. Ask an economist, no one thinks it’s a good idea long term http://www.investopedia.com/articles/personal-finance/030915...

Most economists thought that "Chancellor on brink of second bailout for banks" The Times 03/Jan/2009 was a good thing, but many, including Satoshi, disagree on this.

As for Bitcoin being deflationary, that's a more subtle point. Nobody (to a reasonable approximation) thinks that there is a direct link between monetary base and inflation/deflation. There is a relationship, but total money supply is generally considered more important, and that includes liquid monetary instruments (like demand deposits, etc.) that are not reflected in the monetary base.

The notion that Bitcoin is worthless because it is deflationary is self-contradictory -- if it increases in value it cannot decrease in value. The contradiction here is that the price of Bitcoin will fluctuate with market forces just like everything else, but if supply chains begin to materialize denominated in Bitcoin, then by necessity the output and intermediate products of that supply chain will be stable in value relative to Bitcoin itself.

> 2. He offered a system where the inputs/outputs blockchain is the state itself, and in order to prune your chain you need to store UTXO set.

Agreed here; this was definitely a design flaw. I'm not totally sold on the ETH solution, which depends strongly on transactions being ordered properly, and has some odd race conditions that are a pain to deal with (that is, a transaction which is not currently valid may "become" valid, either by advancing the nonce or increasing the momentary balance at an address). One problem with the UTXO solution is that offline (air-gapped) signing solutions are very complex, because you need to locate UTXOs, rather than just signing "send X bitcoins from this address to this address".

> 3. He didn’t oversee the idea of Root of Trust

Eh; this seems like an independent problem to me. If you want to trust someone, by all means trust them, and use whatever web of trust primitives you want to expand that trust into trusting their software. But putting it in the blockchain means that the chain of custody becomes suspect; what if an individual (or their key) is compromised? That extends the surface area of any attack significantly. That's not to say that it wouldn't be nice to have some notion of trust, but so far I haven't seen any ideas that seem even a little attractive for solving this problem. Satoshi didn't cure cancer either.

> 4. He offered “new payment — new address” as a rule

This rule still makes sense for a lot of situations just because there's no "receipt" mechanism. I sell widgets, and a customer buys a widget -- did they send the money or not? If I have a single payment address, all I see are hundreds of payments for .01 BTC.

On an individual level, using a new address for the change from a transaction doesn't seem to add a lot of value, but since Bitcoin tracks UTXO, not address balances, there's relatively little bloat associated with this.

> 5. He never defined clearly threat model of Bitcoin. Who’s the attacker? ... The one and only real attacker ... is ... governments.

The threat model, on the contrary, was extremely well defined. The only threat that Satoshi took seriously is the threat of double spend attacks.

The nation-state threat model is more subtle -- currency controls and police actions against users and miners. That's a little out of scope of a software project.

If a nation-state chooses to take over mining, then all they do is increase the security of the network by adding hash power. If they try to use their hash power to facilitate double-spending (for some reason?) then that's easily detectable by humans. But mainly it just doesn't make sense as an attack, especially for a nation-state with a police force and a justice system, which can be used to enforce arbitrary rules much more cheaply than building a huge mining farm can.

> 6. Complete lack of governance was sold to us as a good thing. What we got now? There’s nothing Bitcoin can do that Ethereum can’t, there’s no clear strategy or way of resolution of conflicts when one side whats 2x of blocks and another wants to keep it 1 Mb.

Better to have the debate, and have the forking and contention, than just sticking with a bad policy set by a bad policy maker. This is just inefficient democracy vs. efficient totalitarianism -- your mileage may vary, but I side pretty hard with the inefficient here.

As for Ethereum, I love a lot of what it brings to the table, but in the end, it brings too much, at the cost of a huge amount of complexity that makes trust decisions, already complex, exponentially worse. Also, I don't understand what Ethereum has to do with a governance failure of Bitcoin. Ethereum has not yet taken over from Bitcoin in the space that Bitcoin was designed for, so I don't think we can count it as proof of Satoshi's mistakes.

> 7. Lack of vision what Bitcoin would do when transactions reach maximum of capacity. In fact Satoshi himself envisioned it as a constantly growing onchain without any second layers. It’s only now when people realized that increasing onchain further is ridiculously stupid idea since it’s already way too hard to be a full node. And utopian hot-patches with completely broken incentives models like Lightning Network are another proof Satoshi had no idea how to fit all people onchain.

The whitepaper says nothing about block sizes or off-chain settlement. Satoshi went away before block sizes became a contentious issue, so we'll never know if whatever he thought was right or wrong. And frankly, although I'm a "big-blocker" myself, I don't think the answer here is settled. Whether on-chain can scale as storage costs drop and light-weight payment verification becomes more common and full nodes rarer, or whether we need a formal off-chain solution like LN or an informal off-chain solution like "some company maintains a ledger", the jury is still out.

What actual real world problem does bitcoin solve other than foreign exchange transfers and black market operations?

Reading from the book of Genesis Block:

> The Times 03/Jan/2009 Chancellor on brink of second bailout for banks

A real-world problem is governments giving trillions of made-up dollars to the huge companies that lost trillions of dollars, while allowing them to keep the money they made when they started taking these risks.

A real-world problem is that governments creating trillions of dollars is not a risk-free endeavor; the value has to come from somewhere, and it comes from you.

A real-world problem is that central banks are not good at their jobs, and they enable governments to behave irresponsibly with their currencies.

Well, I think even in a zero-inflation or even deflationary world we could imagine ways a government could still take money from citizens and give it to businesses.

99% of black market operations use either dollars or euro.

It's not even that popular in black-market, unless you are living in your silicon bubble.

If we're looking at Bitcoin as a proportion of black-market transactions, I have no doubt that is correct. But the more interesting question to me is what percentage of Bitcoin transactions are black market, especially if we exclude speculation?

The Bitcoin blockchain can be used for proof of ownership, proof of existence, proof of integrity, etc. It can be used as a decentralized trusted time stamping authority [1]. Try this out for a real implementation: https://proofofexistence.com

It could be used by digital forensics to timestamp digital evidence and prove that it was not "tampered with" during the analysis phase.

The Bitcoin blockchain can be used for many things other than a "currency".

[1] http://arxiv.org/pdf/1502.04015v1

Are those even problems in modern society? Setting aside conspiracy theories and outlier cases like the OJ Simpson trial, do people really fight (with meaningful evidence) over chains of ownership for things like assets and pieces of evidence?

To expand on this, a simple cryptographic hash stored in a safe can be used to do something like proving a digital item hasn't been tampered with. The blockchain seems to me to only solve for the problem where the "system" is so corrupt that you can't trust anyone. I just don't think the "system" is that corrupt. So, I doubt blockchain has any real-world merit. Time will tell.

The blockchain is a towering achievement in theoretical computer science, but that wasn't the question. What is bitcoin, the currency, actually useful for?

With more civil asset forfeiture, bitcoin is the only easy to store value, gold can be seized

Besides the objection that government Bitcoin seizure is not impossible, consider your threat model. You arguably have less exposure to government seizure (again, questionable, to me), but you have far more exposure and less protection from more prosaic kinds of theft and fraud, which I think most of us are far more likely to encounter.

Bitcoins can and have been seized.

"They" need only seize you and beat you with a wrench to get your passphrase/convoluted security mechanism(s) protecting your private key(s).

Or just pass a law requiring you comply or else.

True but I can have a hidden bigger wallet

The size of your wallet doesn't matter when you're in prison or dead.

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