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Richard Stallman: We Can Do Better Than Bitcoin (cryptosumer.com)
377 points by em-bee 15 days ago | hide | past | web | favorite | 423 comments



Sure, there are better systems in privacy terms. However, the bigger story is that the world is changing fast: a huge percentage of the world's population - in China - now lives a reality of instant mobile payment. If you accept that the general population will always gravitate toward functional, reliable, cheap, centralized payment systems unless they have specific needs such as anonymity/illegality, and that those systems are improving rapidly in features and distribution, then the real challenge to future decentralized currency is getting anyone to give a damn.


I still don't understand what problem decentralised currency is supposed to solve.

As you say, I want cheap, convenient transaction at low cost, and specifically concerning privacy I want to know who I send my money, and I want legal recourse should anything fishy happen.

The privacy proposal of crypto in my opinion is bizarre. I am supposed to lay out my entire financial history in a public wallet (which I don't want), but trade with people who I don't know (which I don't want), and have all of it supervised by 'smart contracts', which are anything but smart and make it necessary to essentially put myself under surveillance?


The problem it solves is that it enables two parties to exchange digital values automatically and without interference.

The problem manifests itself in full view in situations where citizens are asked to leave their money or possessions in a country before they are allowed to leave or in situations where the inflation rate makes surviving on a fiat currency next to impossible (ie: Venezuela).

In the western world, the problem of interference in your ability to do commerce with whoever you wish might be harder to detect but just recently SWIFT decided to enact the US government's capital controls on Iran for EU companies, despite the EU having declared they would stand by the agreement... For a EU based company or individual there is now very little chance to do legal commerce in Iran, Venezuela, Cuba, North Korea, Syria, Myanmar and a few other countries because of the US's influence on the money markets.


There are many problems cryptocurrencies solve. You can make a list just by noting where actual turnover in the real-world crypto economies goes in practice:

* How do I receive payment for illegal goods I am selling without going through traditional regulated entities that want to attach my real-world identity to the payment in their records?

* How do I provide gambling services to customers in jurisdictions that prohibit this?

* How do I profit from people willing to put their money into transparent pyramid schemes or straight-up scams, without risk of recourse from traditional police / legal systems?

* How do I launder money?

* How do I skim from the shadow economy i.e. in entities engaged in all of the above activities, without committing an obvious crime myself?

Legal oversight can be an unwanted transaction overhead that introduces risk, and laws restrict freedom.

Ask instead what problems decentralised currency is supposed to solve that are legal and moral to solve and cannot be solved more cheaply through traditional systems involving a regulated third party subject to the rule of law.


Lets list them by assuming that I want to buy a legal product or service:

* When it is cultural and social taboo.

* When the act can be pulled out of context.

* When it can become a false positive for correlation in police investigation.

* When it can be abused in order to influence and apply pressure, by example advertisers, politics or different sides in a court.

* When it can harm a third party, like a dependent.

* when it can give unfair market power to those who know more about you than competitor with better product or service.

All of those have some grey zones and illegal areas but for most it is up to the consumer to be aware. So long the legal system demand that the individual take responsibility for personal information, and the legal investigation system has false positives, and the court and political voting system depend on asymmetrical information, and influences like advertisement is legal, and we have cultural and social taboos for legal behavior, well then we have a legal and moral problem that a decentralized currency could help to solve.


While there is some truth in your argument, you are very clearly only focusing on one-side.

The problems that crypto-currencies attempt to solve are more to do with monetary policy. E.g. - you can't have things like quantitative easing / manufactured inflation if your money supply is dictated by a tightly controlled algorithm.

Whether or not that is a desirable overall policy is a wholly separate argument.


>The problems that crypto-currencies attempt to solve are more to do with monetary policy. E.g. - you can't have things like quantitative easing / manufactured inflation if your money supply is dictated by a tightly controlled algorithm.

If that's what you want... the extralegal aspect of cryptocurrencies is a big problem. I still have a few hundred bucks tied up in e-gold, which was perfectly setup to do what you want, and backed by real gold, but as a side feature was also convenient for black market transactions.


You didnt mention that governments print money. Lots of money.

Thats my number 1.


You do realise that Bitcoin is experiencing much more inflation in its supply than the USD or the EUR, don't you?


The bitcoin supply is increasing, at high, but shrinking rates, however its purchasing power is still increasing despite that inflation.

This suggests that demand for bitcoin is exceeding the supply rate.

If the demand continues, and the supply rate of bitcoin will be almost exhausted in a couple of decades, then the value of bitcoin will likely rise in response.

This is of course, ignoring that volume of bitcoin in circulation is actually shrinking with time[1], because people are hodling rather than trading it. Evidence that Gresham's Law is playing out as usual.

[1]: Age of bitcoin UTXOs is increasing over time. https://cdn-images-1.medium.com/max/1000/1*JopnHwBLMAOn-i2v4...


> You do realise that Bitcoin is experiencing much more inflation in its supply than the USD or the EUR, don't you?

So, I argue that it seems likely this would happen; someone will figure out how to fractional reserve the stuff, the gain is too great. But do you have evidence that it did happen? what was the mechanism?


> someone will figure out how to fractional reserve the stuff, the gain is too great. But do you have evidence that it did happen? what was the mechanism?

If the transaction is not on the blockchain or is not directly tied to a blockchain transaction (like with LN/payment channels), you MUST assume there's a fractional reserve going on, as you have no way of confirming otherwise.

If it is tied to the blockchain, it can't be a fractional reserve.


Fractional reserve is not about transactions, but about backing for the underlying assets these transactions are "moving".

LN/payment channels are payment methods (think checks or credit cards), while traditional "cryptocurrencies" are systems or records or ledgers (think banks).

The assets are fiat cash and cash-equivalents (electricity, hashing power) inflows. I.e. when somebody mines or buys Bitcoin - money flows into the system, when somebody sells Bitcoin - money flows out of the system. So most cryptoassets today are fractional reserve.


I agree completely.

But my impression was that actual blockchain transactions were cumbersome and slow to verify, and that most people, especially most investors, have some other party holding their coins or otherwise invest indirectly.


BTC supply is capped at 21,000,000

The US government has 20,000,000,000,000 in debt. Today USD might be better, at some point debt will need to be paid back.


that's not how debt works on a national level.... it's not like personal debt at all


I know this is true when the debt is issued by the currency issuer & denominated in that same currency, such as in the case of the United States.

Is that also true in the case of say, Italy's debt denominated in Euros or Illinois state debt denominated in USD? I have been meaning to read Steve Keen's work on this


when Italy was on the lira yes, with the Euro no. Look at how the Greek crisis unfolded.

the 20T will have to be paid back. Unlike personal debt the fed can just print the money. There is currently around 6T in existing money supply (though I havent checked recently).

The question is how will the debt translate to increased money supply over time (inflation).


> Unlike personal debt the fed can just print the money.

A part of why the Fed (and the same is generally true of independent central banks generally) exists (and why the Fed system is comprised of large private banks) is to provide a check (and, more important, confidence among lenders) against Congress simply monetizing the debt by separating the locus of decision making for monetary policy from that for fiscal policy.


Historically that often doesn't really happen with such debts. Instead the debt falls a percentage of GDP due to GDP growing, at least in nominal terms.

It is happening, though. Especially now with tax cuts and increased spending.

Inflationary economies can survive in the long term, whereas the survivability of deflationary economies is not so clear.


>Inflationary economies can survive in the long term

Is this true? I only know western history, but between Rome and every successor state, inflation is a short term fix and usually leads to the end of a government and currency(over centuries)


Why's that a bad thing?


Because a dollar is not always worth a dollar. A bitcoin is always worth a bitcoin.

The dollar doesn't have a "reference rate," as it is subject to arbitrary inflation. The dollar has had several reference rates in the past, based on weight in silver, and later, gold. The purchasing power of a dollar has declined rapidly since these reference rates were abandoned.

A bitcoin has a reference rate which is eventually 1 in 21M. There is an initial inflationary period until it reaches that, but we're already 1 in ~18M, so most of the inflation has already occurred. We will be very close to the 21M in another 13 years, and after that we will only be adding small fractions.

If you had a dollar in 1918, it would be worth only a small fraction of a dollar today. 1/16 or 1/40, depending on what estimations you use.

If past performance is anything to go off, then a dollar in 2118 will be worth 1/16th of a dollar today. If you hold onto 16 dollars today, they will have the purchasing power of 1 dollar in 2118.

On the other hand, if you hold 16 bitcoin today, you have 16 of 18M of the bitcoin supply. In 2118, you will have 16 of the ~21M total supply.

In the same 100 years, bitcoin will inflate by most 16%. The dollar will inflate by 160% in the same period, if the past century is anything to go off (it isn't, this century will be much much worse).

Or put it in to shorter timeframe. If inflation is approximately linear over the 100 years, then every 6 1/4 years, your bitcoin will lose 1% of its purchasing power. In the same timescale, your dollar will lose 10%.

Which of these are you going to save money with?

The above is based on the assumption that demand for bitcoin will not increase in relation to demand for the dollar. Given Gresham's Law, this is highly unlikely.


That only pins the value of a bitcoin in relation to other bitcoins - it does nothing to pin the value of a bitcoin to real-world goods. And the only practical value of a bitcoin, in the long run, is its value in relation to real-world goods.

It's also worth remembering that once the inflation of bitcoin stops at the 21m mark, it can only ever deflate from there as wallets (and their associated coins) are lost. As bad as inflation is, a deflating currency is not any better.

Of course, the proposed solution to bitcoin deflation was (at least at one point) just to inflate the bitcoin currency by effectively moving the decimal point to the right (one bitcoin becomes 10, etc).


> That only pins the value of a bitcoin in relation to other bitcoins - it does nothing to pin the value of a bitcoin to real-world goods.

This is true, but it's also true for dollars. No goods are inherently pinned to a dollar value. Goods are priced in dollars with the expectation that the seller will earn a profit if sold at a given rate.

But if that dollar loses its purchasing power, mostly due to it being inflated by central banks, then the price of goods in dollars will have to increase for the seller to earn the same profit. It is not sufficient for the seller to just increase their goods at the rate of inflation either, because the cost of all their expenditures increases too. To earn the same profit after inflation, they need to increase their revenue more than the rate of inflation. This has a ripple effect over all industries.

On the other hand, if the non-inflationary currency is not losing its purchasing power over the same periods, then merchants will prefer to obtain the non-inflationary currency over the inflationary one. If they obtain both, they will use the inflationary currency first to purchase new materials, and only dig in to the non-inflationary currency as and when they run out of the inflationary currency.

If eventually, businesses decide to price their goods in bitcoin, rather than the dollar amount of bitcoin at the current market exchange rate, then they might be able to expect that they will not need to keep raising prices annually for inflation, but might instead be able to lower them, or keep them at the same rate and increase their profits for as long as a cheaper competitor does not appear. However, if these goods are priced both in bitcoin and USD, then while the bitcoin value remains the same, the dollar value must continue to increase for inflation.

Since bitcoin also enables a certain level of transactional privacy too, it will also be used for grey and black market transactions, which make up 10-20% of economies. Most people interact either directly or indirectly with these markets for saving money or generating additional profit. Cash has traditionally been used in these cases, but as the effort of states to make money digital, under mass warrantless surveillance increases, the practicality of using cash decreases. Bitcoin is well suited to fill the gap being created.

> As bad as inflation is, a deflating currency is not any better.

I often hear strawmen arguments against deflation, but never any real sources or evidence of how terrible it supposedly is. I'm led to believe that people won't spend money in a deflationary economy, but peoples need to eat and drink suggests otherwise.

An example of deflation in action is in Moore's Law. If I buy a computer now, it will be half as powerful in 1.5 years. Why would I not just wait 2 years and buy a computer then? People continue to buy new machines all the time, and they don't wait 2 years for the next iteration, because they know that in another 2 years, that one is out of date. People will spend for as long as they perceive the transaction is worthwhile now for the labour effort they put in to acquire that amount in currency. In a deflationary economy, people simply make better decisions, because they're not simply comparing the amount to what they earned recently, but in any significant transaction they need to weigh the importance of the transaction against their future self.

I think the real complaints about deflation are from socialist types who worry that the rich will get richer. Too bad for them, they can't prevent this any longer. The state no longer has the capacity to steal people's bitcoin if they take the right measures to secure their keys. The rich might get richer, but anyone can get better off if they shift to a low time-preference mindset, instead of being stuck in the debt spirals that are encouraged by high time-preference economies.

> Of course, the proposed solution to bitcoin deflation was (at least at one point) just to inflate the bitcoin currency by effectively moving the decimal point to the right (one bitcoin becomes 10, etc).

The "bitcoin" denomination is really just cosmetic anyway. All of the values in the bitcoin protocol are measured in satoshis, as a 64-bit integer. It is not trivial to change this denomination as it would affect the entire UTXO set of transactions. On the other hand, moving the decimal place for the cosmetic appearance of satoshis could be trivial, but it doesn't change much.


Dollars have one major advantages over bitcoins (in the US): They are legal tender for paying all debts, private and public. Bitcoin requires the merchant to accept bitcoin - something they are not, and will never, be required to do.

Bitcoin also has a cost associated with it that the dollar does not - a transaction processing cost (yes, there are costs for the handling of money, but it's both significantly less than bitcoin transaction costs, and is relatively constant).

WRT deflation, the biggest problem (that I'm aware of) is that it disincentivizes spending, something generally considered to be a bad thing for the economy. Sure, people may buy the necessities with a currency that is deflationary, but they're disincentivized by the currency itself to do anything more than that.

In other words, why would anyone (not just the rich) spend more than the bare minimum when not spending means their net value increases?

Any form of investment that can't accrete value faster than the currency itself becomes a wasteful product. Stocks, bonds, houses, cars, bicycles, startups, family businesses, education - all have the potential of losing all their value when compared to hording currency.



> Dollars have one major advantages over bitcoins (in the US): They are legal tender for paying all debts, private and public.

This is true, but the practice is such because the government has previously granted a monopoly on the issuance of money to certain private entities which have little accountability to anyone. Previously, it was not possible to compete with this monopoly, because the state enforced it through the threat or use of violence.

The money issuers now have competition, and the government has no way of "shutting down" the competition due to the way it was designed. Merchants now have alternative options in terms of what currency they're willing to accept and how they can save money, rather than simply spending.

If it happens that the new competition is more desirable to possess than the previous money (due to lack of inflation, meaning it is more likely to retain its purchasing power in the long term), then people will save in bitcoin, and spend in dollars.

The result is that a large amount of wealth will essentially "disappear" from circulation which the state thugs can levy taxes on via use of violence. Economies will take a hit as a result, but the people saving in bitcoin won't be impacted as heavily as those who don't. In fact, it could have the effect where each hit taken by a national economy drives more people to bitcoin, pushing up the demand and value, making those who were smart enough to accumulate it earlier even more wealthy than before the economy took the hit.

As long as there are liquid enough markets (whether those are AML/KYC compliant, or black-market) for people to trade some of their bitcoin back into USD for the purpose of paying taxes, then the dollar is not going to retain its advantage.

> Bitcoin also has a cost associated with it that the dollar does not - a transaction processing cost (yes, there are costs for the handling of money, but it's both significantly less than bitcoin transaction costs, and is relatively constant).

Transaction fees in bitcoin are not consistently high. Some fees were high last year due to the sudden increase in speculation, poor fee estimation in software, and services which were not making efficient use of block-space, at their own cost, or the cost of their clients. Much of this has improved, although we have a long way to go.

The main developments are in the more scalable technologies pinned to bitcoin, which aren't competing entirely for a share of the limited block space. Fees on the lightning network, for example, have a base rate in satoshis (per transaction), and a proportional fee of 1 millionth the value transacted. The fees total fractions of cents. Bitcoin transaction fees are only paid in the creation and destruction of payment channels, which may be very infrequent.

> WRT deflation, the biggest problem (that I'm aware of) is that it disincentivizes spending, something generally considered to be a bad thing for the economy. Sure, people may buy the necessities with a currency that is deflationary, but they're disincentivized by the currency itself to do anything more than that.

The reason that reduced spending is seen as a "problem," is because governments can't cover the interest on their debts unless people are actively spending and paying taxes on those transactions. Governments are not really paying their debts off - they're paying off the interest, and kicking the can down the road even further. The debt will never actually be paid. It is impossible to pay off. At some point, who knows when, your government is going to default. This is inevitable.

> In other words, why would anyone (not just the rich) spend more than the bare minimum when not spending means their net value increases?

People spend because they want something, and they're willing to let go of something else which they value in exchange. For some that might be the bare minimum. For others, they might want to continue wealth-signalling with expensive cars and watches.

Think about that one. The value of that car depreciates by about 20% immediately upon purchase, and then by a further X% every year. It has a lifetime of around 10-15 years before it is basically worth the value of its scrap metal. Yet people are still buying cars frequently. Could it be that people still spend money on products and services which provide them value now, and not just save everything like the deflationary scaremongers suggest?

> Any form of investment that can't accrete value faster than the currency itself becomes a wasteful product. Stocks, bonds, houses, cars, bicycles, startups, family businesses, education - all have the potential of losing all their value when compared to hording currency.

Some of the examples you pick, like cars, bicycles, houses (sometimes), actually depreciate in value over time, which throws away the argument that people won't spend money if they don't see a monetary ROI.

Consider renting a home as another prime example. People will continue to put money into an "investment" which will eventually net them zero return when they move home or get evicted. Yet people still rent.

Many "investments" are simply full of rent-seekers who do not provide any real value to society. If people stop throwing money at these, it won't be missed.

Education is an example of something we can't even measure the ROI on. We just know from observation that the better educated a society is, the higher its productive capacity appears to be a few generations down the line. We also know that some academies do a better job than others, and that some people are willing to pay more to have their children educated at those academies, with no guarantee that they will see a ROI. (The child could turn out rebellious, or just not smart anyway). People still invest in education despite there being no obvious profit motive - their child's future is more important than the value of the money.

The real difference in investment when it comes to deflation is that people simply make better decisions. The incentive is skewed more towards saving than spending, but this is not absolute. People will spend, but think twice about buying that useless gadget that they didn't really need, but they bought on impulse because they had $1000 burning a hole in their pocket.

The argument against deflation is essentially the same as saying "people won't save money if there is inflation," because money is depreciating over time. The incentive is towards spending, but people still save money. The only time they don't save is during hyperinflation, when the value of the money depreciates more rapidly than they earn and spend it. The reverse is true for a deflationary economy. As long as deflation is low, people will still spend, but with more preference to save. It is only if hyperdeflation occurs that people will "hodl" and only spend the bare minimum to survive. Hyperdeflation will occur as bitcoin gains adoption, but it is not the eventual state. Once peak adoption has occurred, the rate of deflation will begin to decrease, with the eventual state that it will be relatively stable. In the even longer term, bitcoin could become inflationary by accident, if the human population as a whole begins to decrease rather than increase - because demand will be reduced.


You’ve explained why dollars are inflationary, which I already knew. You haven’t, however, explained why an inflationary currency is bad.

> Which of these are you going to save money with?

Neither. Most of my savings is in productive assets (i.e. stocks). Some is in gold.


The inflationary money is bad in comparison to the non-inflationary money, because the inflationary money sees people's purchasing power lose value from the labour they underwent to acquire the currency, over short terms (a few years). The non-inflationary money however, sees people's purchasing power remain the same as their productive effort to acquire it, if not, increased from when they obtained it due to deflation.

When two forms of money exist and one is better than the other, people will save the better money and spend the worse money.

People do save with currency, usually in limited amounts or limited times, in large part due to its inflationary nature. Inflation forces a high time-preference on labour because the non-spender loses value over time. Putting money into stocks is not the same as saving, but it is investment, with varying degrees of risk. None are guaranteed to even preserve value, let alone profit. At present, Bitcoin behaves like a stock because its value wrt USD is so volatile.

Gold is only valuable because of it's perceived scarcity and historical use as a store of value. It is not priced so highly due to its intrinsic properties as a metal (it is neither that useful nor that scarce), unlike some other commodity metals.

Bitcoin is the digital equivalent of gold. Its value is based on scarcity and perception of value due to the ability to find someone who will trade it at an expected market rate for other currencies or for goods.


So far your argument seems to be:

(1) Saving is not the same thing as investment.

(2) Inflationary currencies encourage investment whereas non-inflationary ones encourage saving.

(3) It is better to encourage saving than to encourage spending.

(4) Bitcoin is a better non-inflationary currency than gold.

1 and 2 -- sure, agreed.

3 -- This is the most important part of your argument yet you have not explicitly stated it, nor argued in favor of it, anywhere. It is unclear to me why it's good policy not to encourage investment.

4 -- You are right that neither bitcoin nor gold has intrinsic value (not counting the value that gold would naturally have as an industrial material). Both are only valuable because other people perceive them as value.

However, people have perceived gold as valuable for thousand s of years. The fact that gold has value is deeply rooted in human culture and therefore not likely to change in our lifetime.

None of that is true for bitcoin.

So, what are we left with? The only advantage of bitcoin that I can discern in all of this is that it can be transferred via the internet in a censorship-resistant way. I do not think that advantage is important enough for most people to outweigh the disadvantages.


I would modify (3) to say: It is better to encourage saving than to encourage spending on useless shit that won't last.

The problem with today's "investment" is that it is almost entirely on shit that won't last, and is for the purpose of short-term monetary gain than for investment into infrastructure which will last generations. An "investment" today is concerned with the next quarter, 6-months or perhaps even a year. Most companies do not concern themselves with anything longer than 3 years, or anything to do with the well-being of the societies in which they operate. Most companies simply can't operate on the time-scales needed to build and eventually profit from creating infrastructure. Instead of building something with the intent of breaking-even in 10 years, one will instead still be paying back interest accumulated on loans taken out 10 years ago.

The end result is that the role of building infrastructure in developed nations is now almost entirely assumed by governments, or contracted by government, which ends up creating virtual monopolies propped-up or subsidised by the state. Private companies which are profiting hugely from public money, but do not operate like regular companies because they don't have to compete with anybody and have little accountability. It's the worst elements of socialism and capitalism combined into one package.

In the academies, research projects which span 3+ years are now almost unheard of. It's more important to get 3+ publications per year, now matter how garbage they are, else the funding won't come around next year. We're seeing stagnation in many areas of science because research which is not short-term profitable is ignored.

For most of the working and middle classes, the high time preference results in them buying useless gadgets, largely for the purpose of wealth-signalling, eating junk food, getting wasted, anything to fill the requirement to spend the money one has earned, because it is not worth saving the money. For many, paying rent is preferred to buying property, because the latter requires saving to achieve, which is hard when people see their stored value decaying in their bank accounts.

The shift from inflationary money to non-inflationary money will fundamentally affect people's decision making in their purchases. It isn't going to happen overnight, but as people realize they can accumulate wealth without risky investments, they will come to value saving over spending. The companies producing cheap junk for short-term profit will have to change the way they operate to fit the changes in spending habits.

On (4), gold is still inflationary as new sources can be uncovered. It is better than fiat currencies which can be arbitrarily inflated, but it is still worse than zero inflation for anyone who wants to save money.

Gold is not too scarce. It can be more difficult to acquire than Bitcoin in some cases due to red-tape. Gold is not very fungible because it is difficult to separate. It's also difficult to verify that it is real gold. Even under gold monetary systems, a major source of inflation has been to dilute the amount of gold transacted by alloying it with small amounts of other metals. Over time the gold in the coinage has shrunk to fractions of its original amount. This can't be done with Bitcoin.

And the value of transmitting remotely, without censorship or interference should not be underestimated, particularly as governments and technology companies are increasingly pushing towards dystopias in order to attempt to save themselves from their own poor decision making.

Bitcoin also enables a kind of economy that was not previously possible, which is a micro-payment economy for online services. With some of the technology being built on bitcoin, you will soon be able to make instant payments worth fractions of a cent, with transaction fees being negligible. (This can already be done, just not yet at scale).

Since many people are invested both financially, and technologically in this space, it certainly isn't going to go away any time soon. If people happen to have their savings appreciate over that time by holding them in Bitcoin, it will only further cement Bitcoin's future as the next monetary standard.


Precious metals already solved this problem, and already have widespread acceptance.


Good luck sending gold through copper wires. Good luck transporting it without getting mugged. Good luck hiding it when the socialist state comes knocking for it.


Or even conveniently dividing it to pay for goods and services.

That's a solved problem. Precious metals are what you are looking for.


Chem engineer here.

I dont think precious metals will survive our lifetime.

Nuclear chemistry might be around the corner with either tech advancements or energy advancements. Only 1 needs to come true and it would kill the price of gold.


I'm still waiting for the hyperinflation Ron Paul and his adherents have been promising for....decades now.

If the best they can do is point to Zimbabwe or one or two other developing nations, then I think the concerns about governments printing money are either overblown or entirely off the mark.


Decades are not very long for debt. People usually hold bonds for decades.

The issue will come in when the cost to pay interest exceeds revenue. We would need debt to pay back debt, it will be THEN that we have hyper inflation.

If you have historical examples where this was avoided without printing money or invading a country, I'm interested.


The current debt is 20T, the current money supply is about 6T. The inflation is guaranteed to happen.

One reason why it has not is that we are the reserve currency so other countries have to have large US dollar reserves to buy oil.

As the world is weaned off oil, demand for US dollars will drop. At the same time we will have to print money to pay off the debt.


Look up Weimar Republic


Someone totally needs to write some fan-fiction where bitcoin running on mechanical computers prevents the rise of fascism.


Nice example of the grasping at straws. Can you actually answer parent's question with an example that is not almost 100years old?


Germany only finished the Versailles Treaty reparations in 2010.

http://www.spiegel.de/international/germany/legacy-of-versai...


Are you taking the position that hyperinflation hasn’t happened in the last century, or simply that it only happens in banana republics?


In last half century, I would say yes. When you get close to 100y ago you get the always-mentioned Weimar, but I don't know about other cases. I would actually like to know more examples other than Weimar/Zimbabwe/Venezuela.


It’s true that well-run countries generally don’t run into hyperinflation, but it’s also true that well-run countries turn into poorly-run countries very quickly (e.g., https://drive.google.com/file/d/0B9_mR_M2zOc4Y2VhNzZkMDQtMDd... , feel free to ignore the first page; I’m only focusing on Gödel’s statements about countries turning into dictatorships).

The first relatively recent, nonobvious, example of hyperinflation that comes to my mind is Brazil during military dictatorship (which, yes, qualifies as a banana republic). According to Greenspan’s “Age of Turbulence,” Brazil paid for 90% of its budget with taxes and bonds like a well-run country, and printed money to cover the gap. Middle class and upper class workers got contracts with automatic inflation pay raises, but lower class workers did not. Those automatic pay raises created a feedback loop and hyperinflation ( http://www.sjsu.edu/faculty/watkins/brazilinfl.htm ). When prices got too crazy, they lopped off a few zeros and renamed the currency (e.g., cruzeiro, cruzado, novo cruzeiro).

The solution to the problem was much more straightforward than I would have expected: (1) stop printing money to cover the deficit, (2) convince people that inflation would go away, and (3) get IMF loans to straighten out the government budget ( https://en.wikipedia.org/wiki/Plano_Real , the loans were quickly paid off).

I was convinced we would have high inflation when the Fed increased the money supply during the financial crisis ( https://fred.stlouisfed.org/series/BASE ). The fact that we haven’t shows that the Fed correctly predicted that people would want more currency on hand because of economic uncertainty, and in fact did a good job predicting the size of the change. I’m impressed that they did such a good job, but I’m not convinced they always will.

I wouldn’t get rid of the Fed, and I don’t have any money in gold or any other inflation hedge. But I don’t expect our current low inflation to last forever (since the Fed has been targeting a higher inflation rate than we’ve seen, I don’t think the low inflation rate is proof that the Fed has complete control of things; it is arguably proof of the Fed’s limits to get what it wants).


Thanks for reminding me of that Brazil crisis, that was definitely too-much-money-printing. But as you point out, it did get handled. Which brings me to my main point why I don't believe the hyperinflation scare:

> I was convinced we would have high inflation when the Fed increased the money supply during the financial crisis

MANY people were. But the "mainstream economist" camp of Krugman, Summers, etc. was clearly proven right in this scenario. Adding to that the Euro crisis in 2012 (which disappeared the moment ECB commited for real to saving the euro) and I became sceptical to supply side economics ... And the doubt never disappeared - once you stop to implicitly believe in "sound money", "gov't intervention is bad" or "inflation is bad" their theories fall apart completely.

And central banks & their actions suddenly start to make so much sense. BTC & other crypto loses it. And I've seen no arguments to convince me otherwise.

So I _do_ believe our current low inflation to last for a really long time. If EU falls apart and there will be another war in mid.east and trade war between China & USA erupts we will get it higher, but that's the only way I can see it getting there. Because we keep appointing way too sensible economists to central banks :)


It's trying to solve the problem of having to involve a 3rd party in on-line transactions. Chargebacks are expensive to deal with. Jurisdictions are expensive to deal with. Standing up a multinational e-commerce site requires a lot of lawyers and accountants.

Will the risk presented by crypto always be greater than the risk of involving trusted third parties? Maybe. Maybe not.


Counterpoint: There's a lot of people who will stop buying stuff online with such a system, once they have been bitten by a system that has truly irrevocable payments. Part of the reason why I trust buying random $25 used video games from eBay (using Paypal) is that I know I'm about 99% certain to get my money back if it never arrives, or arrives in poor condition. I can buy a used Cisco 48-port 1000BaseT/PoE switch on eBay and know that I have some degree of buyer protection. Or I can go to Newegg and buy a new $700 monitor and trust that if something goes terribly wrong with the transaction, Visa's buyer protection/chargeback system can be engaged.

Moving to irrevocable online payments is basically the equivalent of handing a wad of cash to some stranger in a parking lot selling "new, sealed!" ipads out of the trunk of a car.


I totally agree with you in practical terms, but what you're really saying is that you prefer the governance offered by Paypal and the credit card networks to the governance provided by the government: IOW, it wouldn't even occur to you (or most sane people) to file a claim in court over a $25 Atari cart you tried to buy online. In the society these courts are designed to serve (peasant agricultural economies), the courts were where these issues were hashed out, and a fair bit of the "state-iness" of the state derived from its ability to solve these kinds of problems for people. Increasingly, this kind of justice is inaccessible to ordinary people except through "customer support" mechanisms at institutions like Amazon or Paypal or by tweeting at their CEOs.

One of the very real problems that cryptocurrency enthusiasts are concerned about (but IMO totally failing to actually solve) is that it seems like a really bad idea to leave such basic functions of state in the hands of difficult-or-impossible-to-regulate transnational enterprises. When will these players realize that they've got more "state-iness" than most actual states, and how will they use it?


> When will these players realize that they've got more "state-iness" than most actual states, and how will they use it?

In the brave new decentralized "free market" crypto world you are even more fucked if you have a problem. Who do you appeal to? Who decides if your edge case is worthy of rolling back the all mighty blockchain. The DAO folk got the "hack" stuff rolled back so the "thief" no longer had their money. But what about you and your Atari that never arrived? You think the top of the crypto pyramid is gonna roll back the blockchain for you? It can literally become mob rule!

And sure, you can say "build a better smart contract", but I would say that is impossible because then you have to encode every edge case you can imagine and all the ones you can't imagine. And worse, you still need that smart contract to interface with things outside the "trusted" sandbox the smart contract lives in (i.e. meatspace)--which means you need to trust not only whatever is providing that interface but everything beyond it.

Governments exist for a reason. One of those reasons is to be where the buck stops. A society that scales to billions of people needs somebody to say "this is right / this is wrong". It needs a final authority on conflict resolution.

Smart contracts are seriously one of the stupidest things to come out of the crypto space. It really highlights how some engineers think "I am good with computer stuff, so therefore I am also good at economics, government, politics, finance, monetary policy, contract law, etc". The whole idea is really arrogant.


> In the brave new decentralized "free market" crypto world you are even more fucked if you have a problem. Who do you appeal to?

Simple, if you need the extra safety you pay for the service of an intermediary, like PayPal or eBay or (in cryptoland) Purse.io.

If you don't need the extra safety, you don't.

Escrows can be even better with Bitcoin because of multi-signature transactions, the escrow can hold the payment without holding your money, so all they can do is approve the payment or not, they can't change the destination.

Rolling back the blockchain is like going to the government to reverse your $50 transaction, it doesn't make sense.


You won't need a claim either. Chargeback is easy. So in CryptoWorld, people should go to court and try get their money back from anonymous seller? That'd be a field day for scammers.


Right, this is why its totally unworkable as a solution to the problem of transnational corporations wielding too much power, and a totally crypto-ized global economy would probably just make that worse. It solves other problems fairly well (paying ransoms to anonymous cybercriminals, as an example), but also doesn't even try to solve the problem that ordinary people can't afford (or figure out how) to have small commercial disputes adjudicated by actual courts anymore, which is (IMO) the one of the reasons these corporations hold so much power.

In the neoliberal world order, government exists to ease the flow of international capital ("These regulations make it hard for us to scale our sales beyond the {US,China,Germany}. Please Mr. President, we need common-sense solutions!"). It has jettisoned its role of solving real problems for ordinary people ("Lord Fontleroy, Biff's dog killed two of my pigs.") as it once did.


If you need the extra safety you pay for the service of an intermediary, like PayPal or eBay or (in cryptoland) Purse.io.

If you don't need the extra safety, you don't.


Many people take extra safety for granted though. Wether it's chargeback or at least knowing who you pay to pursue further legal actions.

Let me rephrase consumer safety in crypto. Food safety regulations is kinda cool and we feel safe eating out. Now crypto food comes. It's cheaper, but seller now follows it's own understanding of food safety. Or not.


> I can buy a used Cisco 48-port 1000BaseT/PoE switch on eBay and know that I have some degree of buyer protection.

This is a basic insurance market. You can still buy the insurance separately if you want it -- sites like eBay would undoubtedly offer it with nothing more than a checkbox for about the same fee as the credit card companies currently charge for implicitly the same thing.

The problem with the existing system is that it requires you to buy that insurance, even when it isn't necessary. If you order something from Newegg, they're ultimately going to send it or give you a refund, because they're a stable business and it's cheaper for them to make good to begin with than have a small claims court order them to. So you lose 3% in processing fees for nothing -- Newegg is no more likely to not make good than the payment processor is to not reverse the transaction.

The existing system also basically makes micropayments impossible because the transaction costs are too high, but it's not actually all that serious of a problem if you get ripped off to the tune of $0.10 from time to time. The amount is small enough that it doesn't need to be insured, and that allows you to get a good feel for what kind of purchases are scams without actually losing any significant amount of money. It also creates an opportunity for curation services to vouch for verified sellers at a lower cost than insurance would have to be to cover the losses from less savvy individual buyers not knowing who to trust (or not caring when the insurance is mandatory).


> This is a basic insurance market. You can still buy the insurance separately if you want it -- sites like eBay would undoubtedly offer it with nothing more than a checkbox for about the same fee as the credit card companies currently charge for implicitly the same thing.

It's not the same thing. With chargebacks, in the case of fraud the payment processor almost always extracts the money from the seller, acting both as a deterrent and reducing the cost of the protection. If it was just insurance, it would be more expensive (because there would be less deterrent to (seller-side) fraud and it would cost more to recoup the costs).


> It's not the same thing. With chargebacks, in the case of fraud the payment processor almost always extracts the money from the seller, acting both as a deterrent and reducing the cost of the protection. If it was just insurance, it would be more expensive (because there would be less deterrent to (seller-side) fraud and it would cost more to recoup the costs).

It's still possible to do that by having the insurer escrow the payment in cases where you want the insurance, if that's actually more efficient.

But sometimes it isn't. Doing it that way subjects you to buyer fraud where the buyer actually receives the item, claims not to have and has their money refunded. The cost of that has to be paid by honest sellers, which then have to charge higher prices to honest buyers.

And an insurer who can't recover their costs from the seller has more incentive to vet the sellers (and buyers) so that they aren't insuring fraudulent transactions to begin with, which could plausibly have lower overhead than sellers eating the entire cost of buyer fraud.

Different choices may be more efficient for different transactions. A transaction between a reputable buyer and a reputable seller will have low insurance costs even without escrow. A seller with less reputation would have higher insurance costs, but can mitigate the cost by offering to accept escrowed payments but only from more reputable buyers. A buyer with less reputation could do the opposite, buying from a more reputable seller at low insurance cost by waiving the ability to easily reverse the transaction.

Forcing everyone into the same box only creates inefficiency.


Counter to your counterpoint: the people selling you those games on eBay also know that you might be able to revoke your payment either fraudulently or because of events outside the seller’s control, thus the selling price is almost certainly higher than it would otherwise be. In other words, both buyer and seller are incurring a cost due to the existence of chargebacks. Whether that cost is worth it depends on the actual probability of fraud or problems occurring, and at the very least, it seems reasonable to have an option for both buyer and seller to agree to not support chargebacks.


> In other words, both buyer and seller are incurring a cost due to the existence of chargebacks

The cost isn't due to chargebacks. It is due to the risk of fraud. Criminal behaviour like fraud extracts a toll on society at large and we all get to pay. The overhead added from chargebacks make both the buyer and seller internalize the potential risk of fraud. Without chargebacks, yeah prices might be slightly lower but society at large would get to foot the bill for fraud.


It could still be optional for parties who trust each other. Chargebacks is not the only way to establish trust in a transaction.


Loyalty programs fill that role.


Loyalty programs, reputation systems, escrow, etc. Nothing will ever be perfect, but the status quo of chargebacks is also not perfect.


That's like saying "many people won't meet someone in the desert and sell drugs for cash after being burned by a shady deal." That is very true, but how is that relevant? Some people will still want to meet in the desert to sell drugs for cash, away from prying eyes and ears, despite the risk. The fact that many people still want all the conveniences of modern transactions doesn't change the fact that some people don't.

I'm not even really sure what all these posts are arguing for. Someone asked what problem cryptocurrency is supposed to solve, and the GP answered it with a good and succinct answer:

>It's trying to solve the problem of having to involve a 3rd party in on-line transactions.


Of course you shouldn't be forced to use certain payment methods. ut that is irrelevant to the choices of other people.

If other people want other payment methods, that is their choice.


It works the other way as well, there are some products businesses can't sell and communities they can't service because the risk of fraudulent chargebacks is so high.


Can you elaborate with some examples?


This is what smart contracts are for. Make the contract valid only when the other party verified receipt.


Chargebacks from the business side. Rip-off protection from the consumer side. I personally will not be quick to give up the ability to dispute charges. That is a feature that just isn't possible in bitcoin without involving a third party.


There is no way of having charges "deducted from your account" with Bitcoin so there's no need for dispute or chargebacks.

The way cyrptocurrencies work, in order for there to be an interface that allows third parties from charging your account, you would need a smart-contract for counterfactual transactions instatiation.

Right now, I can't think of a "problem" that would require chargeback or dispute resolution and couldn't be solved this way.


You buy a good online from a seller, seller doesn't ship the item and refuses to pay back. What then? With credit cards you can go to the bank and demand chargeback or whatever.


Do you buy the good directly from the seller?

If so, and if you believe the seller isn't trustworthy, I'd recommend the use of a smart-contract that only releases the coins if both parties sign a message.


But how would you protect the seller from the "evil buyer"? The one who receives the goods, but never releases the lock? Sure, he is not getting his money back, but the seller is not getting that money also.


The buyer has to pay to make the order, that's usually the case in most e-commerce transactions I can think of.

If the evil buyer convinces the naive seller to ship products without a payment being executed or a smart-contract based bond, then the situation is exactly the same with or without cryptocurrencies.... the seller must report the buyer to the police and either hire a collection agency or take some other action to recover the goods.

edit: on a second look, I think I misread your comment... are you asking about the mechanics of conterfactual transactions?

If so, the idea is that the contract is entered with the buyer signing a transaction with some form of conditional operation. One the seller ships the product, the shipping code could very well be the condition that allows releasing the funds.

There's plenty to talk about here around game theory and mechanism design, but if you are interested in the topic I can recommend some cool state-channel and plasma contracts we can go over and discuss.


>The buyer has to pay to make the order

You mean like another lock? But what is stopping the seller from holding buyer's money hostage and force him to release the lock just to get some money back even when he did not receive the goods?

An example of evil buyer would be something like: 1. The buyer buys goods from seller with smart-contract

2. The money in buyer's wallet gets locked.

3. The seller ships the goods.

4. The buyer receives the goods, but never signs the smart-contract.

That way the buyer gets what he paid for, but the seller never receives the money.

No matter how i think about it, smart-contract idea looks abusable.


How about this:

1) the contract is initiated by the seller (sets amount, payable accounts, etc)

2) the contract is signed by the buyer, moving (or locking) an amount of money in the contract pending one of two situations:

2.1) the seller signs a message that the product has been shipped and the buyer signs a message the product has been received

2.2) the seller signs a message that the product has been shipped and after 30 days of no further message from the buyer's side the contract releases the funds

In this case, the solution is to have a commitment from the buyer that unless they take action (sign a special message to denounce the transaction / pull out of the contract) the seller gets paid. To address the scenario where the seller is malicious, the buyer can use the on-chain commitments from both parties as evidence of malpractice and report the situation.

(edit: formatting)


You're adding pointless layers of complexity without acknowledging the core problem: there's no way for a smart contract to know the true state of the real world without having to trust someone to give it accurate information.


Also known as the oracle problem. Some platforms find solutions to this in a decentralized way, see Augur. The solutions to real world data being inputted into a blockchain is an economic one.


Not all transactions require the smart-contract to know about the off-chain world!

The "oracle problem" is what I think you are referring to but I have a strong view that the problem of low quality data can be solved with existing mechanisms and tools.

My favourite method to dealing with information quality is by providing incentives to good quality sources and having a method that allows a third-party (anyone with an account...) to submit a fraud proof.


The evil seller doesn't ship the item but signs the product shipped message anyway. Who's gonna stop them, it's not like the blockchain knows if they actually shipped it or not. Or maybe they shipped a fake or non working item. Then what?


The evil seller has a reputation to protect and the victim has an undeletable evidence of the "crime" on-chain for anyone to verify.


How could you tell who is the culprit in this event?


PKI.

Your caveat still renders the system vulnerable to malicious buyers. What if the buyer receives the product but "takes action" by denouncing the transaction or exiting the contract?


That is a good point.

On-chain, the solution is to have an oracle provide a third vote somehow. Off-chain, the solution is for the seller to report the buyer and its address to the authorities.


Both solutions rely on trusted 3rd parties then.


Not "trusted" ones per se.

I can make a contract that relies on one single third party and in that case you are correct that there is some existing trust relationship. However, the protocols are designed such that the trust you need to have on the service provider is minimised with trusted computing systems and the contract's mechanism design.

Conversely, I can also write a contract that trusts a pool of oracles, or a prediction market (here the trust would be in the prediction market protocol and not on its operator), or a token curated registry where individuals are paid to give accurate information.


Isn't this very similar to what Escrow does?


Banks are not really necessary. Even by basic game theory, scamming your customers has long term negative value. Reputation is worth much more than money.

We just have to design systems around it.


No you just change your name and try again. And do you want to tell some one who has lost 100k+ to bank fraud when buying a house - a common and increasing type of fraud in the UK


But someone has to take the gamble. Or everybody uses only established reputable sellers. And newcomers can't break into the market.

Customer protection is great to give small businesses a chance.


Basic solution would be for seller with low reputation to lower the price. Even if not a lot of buyers take the risk, lower price should eventually attract enough people to allow a legitimate seller to build the reputation.


People already don't trust too low prices, because that's a sign of a scammer. And margins are already rather low. Would you take a gamble save €10 or loose €1000? Even with all the customers' protection in place, I already rather pay 1-2% more if that means buying for a more reputable seller. Without the protection, they'd have to be in scammers' price range to be considered...

In many cases the entrenched players in the market already have good prices. Upstarts who can't use economy-of-scale try to make their way by providing superb customer service or providing a better service in another way. But it's hard to give it a try when you don't have the protection of chargeback.


Well, it's hard to compete in the already established markets. But you have to, one way or another, usually by providing better value. Be it lower price, faster delivery or higher quality products. Otherwise, if there is no initiative for people to use your services, are you really necessary?


I'd argue that competition is mandatory in market economy. Having an easy way to get a basic level of customer trust lowers the entry barrier. Which is good to prevent monopolies and ensure market is functioning properly.

One of the most important values one can provide is trust. A known bad option is many times better than the unknown nothing. An upstart would have to provide much much more value to make up for that.


Pretty sure the near-zero cost of creating a new "identity" to a scammer means they can remain competitive at any price...


If reputation were worth more than money, why is fraud still so prevalent after millennia of money-based transactions?


Unfortunately, a lot of people are too short-sighted to avoid acts that are only negative in the long term.


It's not your name that takes the reputation hit because you use a stolen identity.


Yes and there is a converse problem, the seller ships the item but the customer having received the item fraudulently requests chargeback - this is common, sadly.

I lose the item, the money and a fee - bitcoin, like cash solves the fraudulent chargeback problem - but the buyer is unprotected.

Trusted Escrow solves both problems.

The chargeback system isn't good for small retailers. The banks have no incentive to check the system or secure the card as the onus is on the merchant.


The chargeback system is the only reason I’m willing to patronize small retailers at all in many circumstances. If it were really a net negative for them, they wouldn’t accept cards at all.


You don't need bitcoin to operate an escrow service.


Blockchain based reputation system. Buy only from reputable sellers. First time seller, you just have to test your luck with those.


> That is a feature that just isn't possible in bitcoin without involving a third party.

It's also not possible in fiat currency without a third-party. But Bitcoin not only gives you the option but also provides better solutions on how to involve the third-party. A Bitcoin escrow doesn't need to control your funds, only the permission to approve or deny a transaction, using multi-signature.


How many times in your life have you had to use a charge back? I never have.


Three that I can remember.

1) When a budget airline went bankrupt, leaving me stranded in a country most people can't place on the map (i.e. limited flights out of it.) The full ticket price was refunded.

2) When a music festival I had a ticket for went bankrupt. Full ticket price refunded.

3) When a concert was cancelled, and I'd bought the ticket on a dodgy reselling website which refused to refund (ViaGoGo), saying they'd not been informed of the cancellation. It was widely reported in the music press, and there was an apology on the band's homepage. The bank refunded the money.


Chargebacks are like seatbelts: ideally only a tiny percentage of users ever need to actually use them, but their presence increases the safety of the system for all users.


If you've ever had your credit card number stolen and used by a criminal for fraudulent purchases which you later disputed, you've used chargebacks.


Right, you need a remedy for the inherent insecurity of credit cards. Is it always a charge back though? In other words, are merchants eating all the costs of fraudulent credit card transactions? I guess either way the cost really gets passed on to us consumers in the end.


> you need a remedy for the inherent insecurity of credit cards

Fraud and theft are fairly general problems. I would direct your attention to /r/sorryforyourloss

> In other words, are merchants eating all the costs of fraudulent credit card transactions?

If the goods cannot be recovered, then yes, the merchant eats the costs.

> I guess either way the cost really gets passed on to us consumers in the end.

Someone will always be left holding the short end of the stick when fraud occurs. The alternative to shifting the liability to the merchant is the consumer being directly accountable (rather than vicariously as you're suggesting).


Remember that you don't need to use it often precisely because every party knows that you have that option. So people don't try to scam you because they know it won't work. They know it is a solved problem, a means of security they can't breach. They know that if they misbehave, the other party won't be harmed (they'll get their money back, if harming them was their intention) and they themselves will be punished instead.


Just because you've never had to use it doesn't mean it's useless.


I personally feel crypto users will goto any lengths to glorify the shitty db blockchain is.

If (!Supported by blockchain):

    Print("Useless tech and I dont use it")
Else

    Print("HODL")


Both of those are what escrow is for. A trusted and publicly audited thing where a payment is held until the services are rendered.


Escrow is far more expensive than chargebacks. And if we're involving a third party either way, I'd rather have the regulated, battle-tested, already existing banking system.


Chargebacks essentially are escrow. The merchant can't stop them from happening because the money is taken from the merchant account reserve, i.e. a minimum balance that the merchant can't withdraw. Sounds similar to money held by an escrow agent doesn't it?

And credit card transactions are also expensive, between 1.5% and 3% and even higher[1]. It's just that the cost is hidden from the consumer by accounting for it in a higher product price. (Some merchants like gas stations may offer a cash discount, which can be used as a rough estimate of that hidden cost.)

On top of this, merchants get charged a hefty fee (on the order of $50) for each chargeback that they receive.

[1] https://www.creditdonkey.com/credit-card-processing-fees.htm...


The EU proposed limiting transaction fees to 0.2%. I don't know whether that is law already or not.


0.2% for debit cards, 0.3% for credit cards.

Only applies to consumer cards and only the interchange (ie. the part that the bank of your card gets). MasterCard and Visa fees are still quite substantial.

A regular merchant would now pay < 1%, so quite a bit cheaper than before.


Looks like it was 0.3%

https://www.europeanpaymentscouncil.eu/news-insights/insight...

The outcome was that they cut back on lots of loyalty programs, and not many businesses passed on the cost savings to the consumers.

So sounds like limiting the fees had an adverse effect on the consumer.


That system that you use, while international, is only available to a small fraction of internet users. Entire countries, and billions of potential customers, are cut off from transacting with you under that model.


There's the possibility to have escrow without a third party using smart-contracts.


Smart contracts are a bet on our ability to write code that is free from flaws. History suggests that the odds of that are not good. I'd rather trust a bank and the legal system.


> History suggests that the odds of that are not good. I'd rather trust a bank and the legal system

Which is the silly part about "smart contracts" in the first place. Any smart contract dispute will just "devolve" back into the meatspace legal system. Anything that isn't a dispute because it is just "routine execution" (eg: moving money from account A to account B automatically) can simply be called "business automation" that consist of a bunch of "business rules"--basic terminology that has existed since the dawn of computers.

Smart contracts do nothing but add overhead to any transaction.


The code that runs on your bank and "legal system" was written by people who make mistakes as well.

Writing smart-contracts isn't easy (and I author and audit them for a living...) but it's doable.

Your trust on a new technology grows as you get used to it. Anecdotally, I remember how hard it was to get OS virtualisation accepted in corporate environments just a decade ago and my last enterprise customers where already using all form of virtualisation (net, storage, os, etc)..


> The code that runs on your bank and "legal system" was written by people who make mistakes as well.

And the results the code produces is constantly audited, both internally and externally.


That is true of many cryptocurrency companies, platforms and libraries.

There are live businesses using them today, and I'm not just talking of UNICEF and Axa...


The problem is that there is no way for a smart contract to actually know if goods have been received or not, so it is still subject to abuse.


That's true but it can be made to work with oracles or a third-party arbitration (eg: check out Kleros, Truebit and Plasma) system.


But now you’re no longer “without a third party.”


There are nuances to the type of third parties we are talking about here.

The type I'm discussing, something like the Lightning Channel and Plasma operators, these are roles that have cryptoeconomic properties that don't allow them to take over your wallet or refuse your service.

edit: The base premise of having a smart-contract being itself the escrow is perfectly achievable. This doesn't mean that such a setup is the best solution to every use case and I believe that we'll see plenty of developments in this area in the coming years.

For now the best approaches use game theory and computer science to reduce the amount of "trust" the parties must have in each other and the system itself but they are very much under active research & development.


That isn't "trustless" anymore! You gotta trust a bunch of unknown crypto startups now.

Are these guys really add more value to the economy than chargebacks? I very much doubt it.


That's not correct. You can have a third party that is trustless, ie that cannot perform any action on its own that would favour or harm you.

Take for instance the role of Plasma operator or Lightning Channel operator; The role allows for a third party to have the costs of setting up infrastructure for you to use, but at no point are your funds held by the operator and you are always able to exit a contract if you submit on-chain evidence of fraud.


They could easily collude with the party you are making a contract with, and rule against you however.


That's not the case in many (most?) of the cases I mentioned.

In plasma for instance, the operator and seller could collude against the buyer but any "illegal" operation they do on-chain is enough for anyone to trigger a mass-exit and cause financial and reputational loss to the operator.

A common theme in all the on-chain payment technologies I mentioned is that they do not put any one party in "charge" but the volunteers who run staking channels of any sort (plasma, lightning, etc) can and will suffer financial damages (loss of deposit, etc) if proven to act maliciously.


The problem there is, nobody likes using escrow for everyday things.

Example: Renting a car. The rental companies want a way to recoup costs from any damage you do by, e.g., smoking in the car. They give you two options for how this can work: You can either pay with a credit card, which has a way for htem to do that built-in. Or, if you don't want to pay with a credit card, you can give them a bunch of extra money to hold in escrow.

Guess which option people basically never choose, when both options are available to them.

I would assume that merchants feel similarly about chargebacks vs escrow, and for similar reasons.


Chargebacks are also insanely useful. If my card is stolen I can get my money back, if my merchant tries to defraud me I have a recourse. I will never use bitcoin for consumer transactions for this exact reason.


On the other hand they are mostly related to the limitation of cards: you give the merchant a number with which he can draw an arbitrary amount, any time, and pass it on (or leak) to someone else. An authorization token for a single transaction to a specific party for a specific amount could probably work without chargebacks.


> An authorization token for a single transaction to a specific party for a specific amount could probably work without chargebacks.

1) This is precisely what you get from EMV transactions. A cryptogram covering these details, signed by your hardware token (card). Online transactions don't do this, it's true, but that's why we have the verified-by-visa type stuff. It's imperfect, I agree.

2) Chargebacks are still necessary, because it's not just about merchant overcharging or unauthorised transactions, it's about what happens when someone fails to ship, or sends you broken goods etc


1 was true, but is increasingly less true. You can purchase things on the web using Apple Pay, at least on some sites, which also produces one time use tokens.

A significant number of sites also use stripe, which produces merchant specific revocable tokens. This doesn’t eliminate merchant fraud risk, but it does vastly reduce the risk of your CC details being leaked.


on 2), the token must be for a specific amount, a merchant shouldn't be allowed to double dip or charge more unless he specifically asks authorization to do so.

On the merchant not delivering, I think this is really wrong. If you have a conflict with a merchant, I appreciate that reversing the payment is a convenient way to apply pressure but I think is not the fair way to do it. It should be legal process really (if it ever gets that far).


> token must be for a specific amount

With EMV transactions this is the case. I'd like to see the system of home card-readers spread, though it would add friction to online purchases.

> On the merchant not delivering, I think this is really wrong.

It's not only a perfectly fair way of doing it (if the merchant wishes to dispute it they can go to the courts), it's often the only way to do it, as merchants often disappear or make themselves uncontactable, or may feel no need to comply with legal process in the purchaser's country of origin.

We have thousands of years of history of merchants ripping off consumers - "Caveat Emptor" for example. This is a measure to prevent the worst of it, and it creates a much safer market. Without it many people would just not transact with new entrants to the market, if at all.


Would you if you got a big discount? There's a games site that offers 30% off when you use BTC, and I frequently take them up on it.

Which website is it? Seems useful to me!

Your card being stolen has nothing to do with chargebacks.

Your mobile could be stolen with your cryptowallet inside and you could do a remote wipe of the device. You can also use multi-signature protections for large transactions, etc.


> Your mobile could be stolen with your cryptowallet inside and you could do a remote wipe of the device

So long as the cryptocurrency hasn't gone already. If it has.. well whoops, bye bye money.


Of course.

Likewise, if you hold some bank notes in your wallet next to your credit card, an attack will deprive you or your money. The bank might cover any charges made on the card pending some admin and police work. For that service you pay a fee to the bank.


I carry two digits worth of cash in my wallet. Losing that would be more of a frustration than an actual financial setback. Honestly I'd be more pissed about losing various IDs than the actual money.

Losing all the cash deposits I have would be so much worse, which is why I do business with a FDIC insured bank that will protect me against some contingencies, including account takeovers. Bitcoin offers me significantly less protection than my current setup, and would require far more mental effort to maintain my security.


Except we weren't talking about cash, we were talking about cards.

Nice diversionary tactic there.


"So long as the cryptocurrency hasn't gone already. If it has.. well whoops, bye bye money."

This was the comment I replied to. It says money and I'm talking about money.

Bank cards represent account holdership, not money. Losing a card entitles you to get a new one for a small charge. Your bank held funds are protected by law, and you can expect somewhere between 75% and 100% of your assets being covered from fraud.


In response to your stuff about chargebacks and lost phones. Let me retread the steps -

You said - "Your card being stolen has nothing to do with chargebacks. Your mobile could be stolen with your cryptowallet inside and you could do a remote wipe of the device."

You do this in order to try to establish cryptocurrency as being as secure in that situation as a credit card, i.e. theft resilient. I pointed out that if the cryptocurrency was already used, unlike with a credit card, you're unlikely ever to be able to recover the money. Then you started handwaving about cash. This appears to me to be a disingenuous move of the goalposts.


I see your point but I disagree..

I'm comfortable with what I wrote though. Bank cards don't represent money and the management framework that allows for chargebacks is unrelated to the card itself, it's law.

I've clarified what I think is a consistent view, and no goalposts are being moved when I point out that cryptocurrencies == money but bank cards != money.


That's all good and well, but you've lost sight of the consumer's motivations. Consumers want to know that they will be made whole if something really bad happens. They're not really interested in the fine distinctions between possession of the currency and possession of the account that contains the currency. They want their money back if someone hacks their account, if their card is stolen, if the bank goes under, or if the merchant doesn't ship the right product as promised.

If bitcoin does not offer these features, I cannot imagine it ever taking off as a currency (as compared to a speculative instrument, which is what it is now).


I partially agree with you here.

The thing is, Bitcoin or Ethereum are technologies and the protections and guarantees the "masses" will look for are not provided at protocol level, this is where entrepreneurs step up and offer services based off these technologies.


You're just moving the problem. Why would a bank built on top of bitcoin be better or more valuable to a bank built on top of the existing system?


Well for starters it would have protocol level access to the biggest digital market currently in existence. The tokens launched by blockchain native companies will form a token-economy of their own.

Also importantly, there are functions a bank can provide that you don't need however there's no way of you avoiding paying for it somehow. A crypto based bank could very well be a legal custodian for key material, an identity provider and a lender... it could also be a mashup of several services/protocols that do each of those functions.


The financial aspect is frankly insane. Banks have no problem transferring money today, none. Adding in a wildly unstable asset to “improve” a working system is a classic case of technologists thinking of tech first, real world second.

Backing banks in a different currency than you actually purchase goods in is like declaring that all transfers must be accomplished in Yen. Why should I expose my rent payment to an exchange rate?

One might argue that we’d just use bitcoin as our currency, but that’s just begging the question. Why should consumers want to switch away from their regular currency?

There’s also no compelling reason why identity providing should:

1. Be done by your bank.

2. Use the same technology as your currency.

Long story short: listing a bunch of things you can technically accomplish with bitcoin is emphatically not the same as providing reasons why bitcoin should take over. It’s a bit like hand stand walking; it’s an impressive trick, but just because you can do it doesn’t mean it should become your regular mode of locomotion.


Banks don't have problems transferring money today... are you sure about that? Because I've worked in fintech for 20 years now and I'm convinced that is not the case.

The role of banks as identity providers exists today, you need a bank account to access certain services. Banks actually make for great KYC providers. I don't understand how you don't know this but still want to have a discussion on this topic...


My bank verifies my government issued ID. The government is the provider of ID, the bank just verifies that. Some other services might leverage the banks for this too, but in no way does this mean that the bank is providing the ID.

I also have never seen anyone else verify my ID with my bank. I have seen them verify income, but that’s not surprising since that’s where I store my money. When someone demands to know who I am, they usually require my drivers license, passport, or SSN, none of which are bank issued.

And again, consumers send money all the time, using banks and other regular financial institutions. If they couldn’t send money, the economy would have ground to a halt.

So again: why should I want to switch to bitcoin, or have my bank built on bitcoin? It’s perfectly reasonable to say that banks are going to make protocol changes under the hood to make things smoother, that happens all the time. But to say we’re going to use a whole new currency needs justification to the end users who will notice the change.


Have you ever presented a bank statement as proof of address? How about using a bank card to make a security deposit?

What really gets to me is how uninformed you are and how strongly you manifest your opinions..

https://www.google.com/search?q=banks+as+identity+providers&...


Those aren't free, they drive up prices by a few percent and frankly fraud only matters for large transactions and/or untrusted merchants. Bitcoin is cash, not credit, and avoiding 2-3% of fees tacked on by credit card companies is more than enough reason to want internet cash for purchases where you're not concerned with fraud.


The baseline price for payment processing is well below 2-3%. In the EU, credit card processing fees are capped at 0.3%, and these companies are still able to make a decent profit despite.

What those high fees really come from is the need to cover the cost of all those rewards programs that are so ubiquitous in some countries such as the USA. Those would probably disappear pretty quickly in the presence of a law allowing merchants to add any processing fees (perhaps above some nominal baseline cost) on to the bill. 1% cash back doesn't seem like nearly so great a deal when you have to reckon with the fact that what's really going on is that you pay 2% more, and then the issuing bank gives half of it back to you, along with a generous dose of smoke up the ass, and then pockets the other half.


> a law allowing merchants to add any processing fees (perhaps above some nominal baseline cost) on to the bill

This!! So much. The status quo amounts to price manipulation that harms the market and is utter B.S.

Item 8 from http://donellameadows.org/archives/leverage-points-places-to...


Actually most states do permit credit card surcharges by the merchant. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas are the ones that ban it. Some of those states have pending litigation against those laws. Some of them also allow discounts for paying cash (as if it's any different than a surcharge for processing)

There was a time from 2013 to 2017 that merchants were permitted by processing agreement to do it, but Visa and Mastercard convinced an appeals court to throw it out. A few places in my state still do surcharges, but it's pretty rare.


Thanks for the insight. I would like to see surcharges mandated for credit cards (but not for debit cards).


In practice, I don’t know of anyone offering 0.3% card processing fees. Most POS systems and online payment processors are more like ~2% e.g. Stripe is 1.4% + ~€0.30 to take online payments from within the EU. And chargebacks are passed on to the merchant with an additional fee tacked on.

Can you point me to any cheaper solutions?

I like the idea of having the processing fees displayed prominently on the receipt though (like VAT). If people had to actually pay more to use Amex (rather than the merchant absorbing the blow, or distributing the costs across their other customers), then they might quickly go out of business (and rightly so).


>In practice, I don’t know of anyone offering 0.3% card processing fees

Obviously. They need to pay 0.2%-0.3% to the issuer (ie. the bank that gives you your card), but VISA/MasterCard and the processor want their cut as well.

> Can you point me to any cheaper solutions?

At least in Germany there are quite some cheap POS solutions:

0.69% for Visa/MasterCard:

https://translate.google.de/translate?hl=de&sl=de&tl=en&u=ht...

0.98% for Visa/MasterCard:

https://translate.google.de/translate?hl=de&sl=de&tl=en&u=ht...


The actual problem here is that rewards programs and universally applied CC fees represent a transfer of wealth from those who use cash to those who use credit.


>What those high fees really come from is the need to cover the cost of all those rewards programs

You've swapped cause and effect here. It's the other way around.

High fees lead to rewards programs.


No, it is the way GP described it. Both transaction fees and reward programs are governed by the same entity: payment processing company. Reward programs were a trick to make people accept high transaction fees, because people fall for the illusion of "getting something in return". In practice, transaction fee is paid by everyone, but many people do not bother to claim their rewards, so it is a net win for payment processors. Also, even people who do claim their rewards usually do not do excesive calculaitons and do not realize that for 3% payment fee they get 0.5-1.5% worth of reward.


Last time I worked at a place that could swipe credit cards, we would get charged one fee for regular cards, and another, much higher fee if it was a rewards card.

(This was back when non-rewards cards were the regular variety, so I'm assuming things have changed since then.)


Solid point, thanks for the additional context.


I know they’re not free, and I’m happy to pay for the service. I can name a large number of smallish purchases I would not have done online if I didn’t know that Visa would make it right should the unknown vendor stiff me.

Bitcoin is piss poor cash, given the wild exchange rate swings and the ability for it to be stolen online. It literally has no property that I desire.


> Bitcoin is piss poor cash

Agree, but I'm not promoting Bitcoin, I think it's poorly designed by someone who doesn't understand the properties of good money. Another crytpo with better properties will supersede it. It's the idea of crypto that's great, not the particular implementation of that idea called Bitcoin.

Once you know an trust a vendor, paying with cash will eventually be a few percent cheaper just as it often is as brick and mortar places sometimes when they offer cash discounts because they too don't like the fees the cards companies force on them.

It's not an either or scenario, it's a both scenario; you should have the option of cash or credit online, just like you do in the real world.


>frankly fraud only matters for large transactions.

Maybe in the world of the wealthy.


frankly fraud only matters for large transactions

Largeness is relative. The counter to your argument is that widespread use of existing payment methods means the market prefers them.


> The counter to your argument is that widespread use of existing payment methods means the market prefers them.

That's not a valid argument. The market always prefers what "is" until a critical mass understands benefits of a new technology. The existing credit system was not designed for today's world, is pull based, and is rife with fraud on both the merchant and the consumer side. Merchants absolutely despise credit cards, we can't wait for something better to be invented.

The market preferred horses when cars were first invented; it takes time for new technology to penetrate. Internet cash will be a thing, Bitcoin might not be the successful implementation of that thing, but that thing's time will come.

Credit card companies are despised by merchants.


Market dominance is absolutely a fair argument for something being preferred by consumers, unless if you’re going to allege fraud or assert that everyone is dumb.

It of course doesn’t mean that things will remain this way forever. Credit cards have risen to prominence within living memory, there’s no reason why this has to remain. But it also means that if you expect something to replace credit cards, it must overcome both consumer preference and comfort, as well as all the advantages that the incumbents have.

As an aside, we have internet money. They’re called credit cards and debit cards, and we all use them daily to purchase ludicrous amounts of goods and services online and offline. What I have yet to see is an actual explanation for how any proposed “internet money” is superior to my Visa without relying on any ideological claims.


> Market dominance is absolutely a fair argument for something being preferred by consumers,

It absolutely is not when you're discussing a new technology most consumers don't understand yet or have never used.

> unless if you’re going to allege fraud or assert that everyone is dumb.

False dichotomy, it's a new technology, most people simply haven't had the chance to use it yet and don't understand it yet.

> As an aside, we have internet money. They’re called credit cards and debit cards

Those aren't the money I'm referring to, those are 3rd party verified trust you'll get paid systems, money is cash, and doesn't require a 3rd party to be trusted to pay you.

> What I have yet to see is an actual explanation for how any proposed “internet money” is superior to my Visa without relying on any ideological claims.

It's pretty simple, the same reasons you might want to use cash in the real world rather than credit. When you pay for something with cash, you're not at risk of that vendor taking more than you give him, you don't have to trust him. When you give a vendor a credit card, you're always at risk of fraud, a debit card... you might lose all your cash and you can't dispute those charges, it's not a credit card. Both of those also require the 3rd party to profit, so they charge extra fees. Cash typically has no extra fees (internet cash will, but they should be way lower than cc fees).

Beyond that, you need to step outside yourself a bit and be aware of your privilege, much of the world doesn't have access to credit cards and debit cards or even banks. Internet cash is a way for them to join the online world. If you can't get past your first world privilege, you'll never understand.

There's no ideology here, I don't think Bitcoin is the right mix of features for a good Internet cash, but Internet cash will come.


Well, some people prefer it. Many countries have alternative systems that are more used than CCs, and which they consider superior. Having a single system that maintains those advantages but is usable worldwide would be nice.


Sure, local preferences and regulations do vary, and they matter. I'm sure a lot of countries are hesitant to use American CC networks too, given how American/everyone-else interactions sometimes go.

But, that doesn't really solve the problem, it merely pushes things around a bit. It's insufficient to say "credit cards aren't universally loved", because that does not imply that Bitcoin is the correct choice anywhere. It's perfectly possible that the local alternatives to CCs in other nations would still be preferred to Bitcoin. If one wants to sell the idea that BTC is a better choice than X, one must produce compelling reasons why this is so, preferably without relying on ideological statements that don't have universal appeal; I'm sure the goldbugs love BTCs anti-inflation nature, but that argument only carries the day with a very small group of people.


Where “the market” is a small number of firms with tremendous market power. “Market power” essentially means “power to do something other than what a competitive market would want.”


Your assuming a 3rd party is bad - commodity trade would not work without third party's validating that that ship load of Copper really is the xxxx tons of copper you paid for.


Miners are your 3rd party.


If so, they're nicely decoupled from the transaction.


It seems like there are different messages for different audiences.

The appeal of a trustless network is stronger in places with a history of surprise currency and banking-industry failures-- no one person can crash the system by fiat. OTOH, the use window is small-- situations where the currency is being undermined but electric/networking is reliable enough to do a large scale backup Bitcoin economy are pretty narrow. Venezuela might be the poster child for this.

For another audience, the thought of "geographic independence" was appealing. It would cost the same and take basically the same time to pay someone in St. Petersberg, Russia or St. Petersberg, Florida. Really, this is still a space that conventional banking has been troublesome with. Things like the SEPA network help, but there are still loads of cases where it's cheapest to put cash in an envelope. Unfortunately, Bitcoin as-is is still pretty slow and expensive for that.


I'm not sure why it wasn't the first thing that was said, but let me say it.

It's to give freedom. Freedom to make and distribute your own currency without borders, rules or monopoly.

An outcome of this would be elimination of an artificial recession. There's a reason why Bitcoin paper was published in 2008.

Another outcome would be reduction in the authority of banks and governments. There's a reason why all the banking institutions and governments are quick to call it evil. Reason is that control of money grants banks and governments great control over citizenry.

There's no denying that it's far from perfect and has to be updated to solve all the bugs, many resembling to fiats.


About those "artificial recessions":

The historical experience with a gold standard without central banking is the closest we have to what an economy built on only Bitcoin would look like. If you look at the 19th century, it had far worse cycles of strong recessions than we've ever seen in the 20th or 21st century since central banking was established, and then later we got rid of the gold standard.

So... were those frequent 19th century recessions somehow preferable because they were "natural"?


Banking was regulated by states. There was no free market. "Free banking" laws passed by various states prevented banks from branching. These "unit banks" lacked the financial diversity that comes from having multiple branches and thus were more subject to collapse in the event of monetary shocks.

After the civil war, the federal government required banks to hold federal bonds as reserves on their deposits at an ordained ratio. Changes in the supply of federal bonds translated to fluctuations of the money supply, which is what caused the national booms and busts.

There were other places in the world that tried free banking, like Canada before it created a central bank, and Scotland during its free banking era, and their financial systems were famously stable.


Gold standard might be the "closest" example, but is it a reasonable one? cyber-currency differs in significant ways - You don't need to bite a bitcoin.

Also, without knowing why the difference (wrt recession cycle) exists, there's no reason to think it has anything to do with the gold standard, which could just be coincidental (ala "spurious correlation").


[flagged]


I do understand. It's not an outcome of specifically cryptocurrency but distributed nature of it. The losses that we see are because of the uncertainty surrounding it. It's a form of currency and should be used as one. In the current market it's being used as more like trading stocks than currency.

Currently it's not completely distributed, from the people hoarding it to the ICOs to the whales and to centralized exchanges, it all needs to be taken into account, those would be bugs. I would like the idea of limiting amount of money one can hold and spend in a limited period to avoid such disasters. This would limit the freedom too. But we will have to talk about how much freedom does one person/entity need, (yours ends where mine begins).

It's not perfect yet, but it's a nice idea. If perfected it would a lot harder to artificially manipulate than the current system. At the very least, a lot many people would be responsible for any disaster instead of a few.


> I would like the idea of limiting amount of money one can hold and spend in a limited period to avoid such disasters. This would limit the freedom too. But we will have to talk about how much freedom does one person/entity need, (yours ends where mine begins).

And yet, two posts up you complained about control of people's freedom:

>>> Reason is that control of money grants banks and governments great control over citizenry.

Do you no see the irony in that contradiction?

> If perfected [...]

Hah! What a huge "if" you're smuggling into your hypothesis right there.


> And yet, two posts up you complained about control of people's freedom

I'm a supporter of reasonable freedoms not unlimited freedoms. I would like checks and balances on power and it's accumulation whether it's a person or group of persons. Just like voting rights, we at least try to achieve equal voting share for each person. Money is power it needs reasonable checks and balances so that wishes of few do not affect many. No one needs $100 million to survive or live a reasonably good life. If you need more for an endeavor you're free to appeal to others to invest into your effort. Point is, large changes needs to be made by proportionate amount of wills.

> Do you no see the irony in that contradiction?

There's no contradiction. It's just a suggestion to avoid a few of such problems, but if you have a better suggestions, I welcome it.

>Hah! What a huge "if"

Yes that's a big 'if', just like for any other idea. Only fools are certain of things, those without power have only hope.


Cryptocurrencies cannot prevent accumulation of extreme wealth in the hands of a few. The reason is simple, yet important: Money is not wealth. Money represents wealth. If you restrict the amount of money per person, wealth will be represented by a different metric – camels, for example.

> Yes that's a big 'if', just like for any other idea.

No. Any idea that requires such an "if" (i.e., the implementation has to be perfect for the idea to succeed) is doomed to fail.


The inventor said it well:

"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."

Most agree that Bitcoin privacy is currently unsatisfactory. If it is not improved it should not be adopted generally. Legal recourse and low-cost transactions are layered onto the base protocol.


The inventor was trivially wrong, though. This was all born out of looking at a complex system, failing to understand it, declaring you've got a better idea, then learning over the course of a decade why the current system exists and that in fact you did not have a better idea.

(1) Trust is not a problem, it's a huge optimization. The sheer power consumption of cryptocurrencies is hard, demonstrable proof that trust is an efficiency.

(2) Debasing money (aka inflation) is a feature. It's a regular haircut for unproductive capital, and is, as designed, completely irrelevant to people who invest their capital. Even in most people's biggest investment, their own homes.

(3) Banks are trusted and regulated. Exchanges are totally unrelated fly-by-night banks set up because being your own bank sucks. This is not an improvement.

(4) Fractional reserve lending is fine because the FDIC guarantees the funds in the event of a run. This is a further efficiency, allowing the economy to move faster with freer access to capital.

(5) Identity thieves draining your account at a traditional bank has recourse. As we've seen in crypto, that's where this is a real risk - you've got nobody to hold accountable.

(6) Micropayments aren't something people want as it turns out.


> (1) Trust is not a problem, it's a huge optimization. The sheer power consumption of cryptocurrencies is hard, demonstrable proof that trust is an efficiency.

This is a conflation. Trust can certainly be a problem, and the demonstrable proof is the 2008 bubble and any other historical bubble with similar features.

> (3) Banks are trusted and regulated.

Again, until they're not or they collude. This isn't slippery slope stuff, this has actually happened in the recent past.

> (4) Fractional reserve lending is fine because the FDIC guarantees the funds in the event of a run.

It's difficult to judge whether this is true because as far as I know it's never been put to the test. Historically, banks aren't great at guaranteeing funds during a run no matter what they say (Great Depression).

The majority of your arguments centre around efficiency over trust (i.e. you trust in the system enough that efficiency has become your only concern when it comes to transacting with value). For most day-to-day operations you're probably in the right here. The problem is when you're wrong (and there are always these events in economic history where the "system" fails) then you're really wrong.


> The problem is when you're wrong (and there are always these events in economic history where the "system" fails) then you're really wrong.

And that is not a problem cryptocurrencies solve. These systems can also fail.


Well cryptocurrencies do solve those specific issues, i.e. the ones inherent to centralised, government-backed financial systems. Of course, as you say, they introduce a raft of their own issues to deal with, but this would be a separate set that I imagine (in a reasonable economic system) would be hedged against by using our pre-existing financial system, and vice versa.


Good points, but I would argue that micropayments would be great if they required micro effort and no overhead. They would transform the ability of non profits to fundraise.

Not that bitcoin offers that iirc, just saying.


If you look at a country like Sweden, which is pretty much cashless, we can see that electronic micropayments are indeed transforming a society, but it can also be shown that this is actually not an ideal situation. There was an article on this very site a few days ago discussing this.


Link?


It's a tempting premise, though my counterargument is decision paralysis. Making any decision has some amount of fixed overhead in the human mind and eventually you just don't want to deal with making a decision - period - no matter how small. This is why Netflix/Spotify/Apple Music is so popular; you may well save money buying/renting via iTunes but you just don't want to deal with it.

Micropayments can exist, as simple ledger entries. You pre-load a, for instance, PayPal account then PayPal can allocate pennies or fractions of pennies on your behalf. There's no technical mystery. It feels like this hasn't been done due to lack of desire for it rather than any inability to execute.


  It feels like this hasn't been done due
  to lack of desire for it rather than
  any inability to execute.
I always assumed it was three reasons:

1. A chicken-and-egg problem, where users don't join micropayment platforms because they don't have major content producers, and content producers don't join platforms because they don't have users.

2. There are actually a bunch of different visions for micropayments (articles costing $0.50 vs $0.05 vs $0.005 vs $0.0005; voluntary vs paywalls; drm-free vs drm; ad-free vs ads vs ad-blockers; articles vs music vs video; automatic vs manual payment vs automatic-with-refunds; quality professional journalism vs anyone can take part; free speech vs not funding hate groups....) and as your product vision becomes clearer, more and more stakeholders notice your vision isn't quite their vision.

3. If you're making a stored-value account in my country there's a bunch of regulation due to a history of scams. Presumably you would have to comply with regulations in every country you operate in, which would be nontrivial.


The problem with micropayments is microfraud, which can be scaled up to large amounts. It's bad enough with ad click fraud already, and that's a semi-closed system.


> (1) Trust is not a problem, it's a huge optimization.

This feels like a response to a straw man, or at the very least an uncharitable interpretation of pro-cryptocurrency views. The problem cryptocurrencies intend to solve isn’t that trust is bad, but rather that in the real world you are effectively forced to trust a single entity or a small group of entities. I don’t think any cryptocurrency advocate claims that cryptocurrency is great because there’s no need to trust the parties on the other end of your transactions.


"Forcing" a trusted party into the exchange is the optimization, and it only works because everyone does it. This is like pre-existing conditions. You only get coverage for them if everyone agrees to be covered all the time in the first place. As soon as one entity opts out and you have to build a system to accommodate it, the efficiency is rendered void/unworkable.

Your optional-trust model is effectively what we have now, with bitcoin + exchanges. You can opt to trust an exchange, and yes, that does reduce load on the network, however the network is still wildly inefficient because it needs to also support the use case of zero-trust transactions. Traditional banking is an exchanges-mandatory system, which is why it's so much more efficient.

NOTE: This is not an equivocation of the wild-west unregulated crazy-town exchanges of the crypto space and real banks, just the roles they play in their respective systems.


I don’t see how it is comparable to preexisting conditions. Two people using one payment system does not prevent two other people from using some other payment system.

We already have limited options with different features regarding fraud/chargebacks, like paying for something with cash versus with a credit card. Clearly both cash and credit cards can exist together.


I was attempting to make the analogy that a system designed to support both untrusted peer to peer payments and exchanges must support the lowest common denominator, the peer to peer untrusted payment which forces huge inefficiency into the system.

Similarly a health care system designed to support people with and without preexisting conditions must be designed to support the lowest common denominator, those without cover, which forces huge inefficiency into the system.

Maybe a poor analogy.

Cash and credit aren’t really analogous to exchange and peer-to-peer as in crypto the former is built on top of the latter. Credit isn’t built on top of cash in the same way, as a trusted intermediary abstracts the two concepts. To some extent they’re both eventually built on top of ACH.


>>"Forcing" a trusted party into the exchange is the optimization, and it only works because everyone does it.

The point you're skipping over is that there are network effects in the role of trusted third party, leading to monopolies/oligopolies, which can extract artificially high fees.

This is where distributed consensus has an advantage: it can provide the same and even stronger guarantees on the integrity of records, while preventing any third party from using their monopolistic position to extract high fees.


(1) Not trust is bad, but how much trust and in whom and for what.

(2) Not inflation is bad, but trusting others to choose the value of your money.

(3) Cryptocurrency exchanges are not Bitcoin - just as a Stock Exchange is not a $100 dollar bill.

(4) Not fractional reserve lending is bad; but trusting good behaviour and recovering after bad behaviour has caused harm.

(5) This argument works for all private property not held by a trusted third-party.

(6) Micropayments are more likely to be used for resource management between machines.


Youve missed the most important usecase. Censorship resistant financial transactions.

If you don't find that useful, then you should consider yourself fortunate and privileged. There are literally billions of people in the world living under authoritarian regimes right now.


Bitcoin doesn't solve that problem; you still have to obtain these tokens by exchanging your authoritarian currency for bitcoin, which can be made illegal very easily.


> which can be made illegal very easily.

And yet here we are, living in a world where this isn't happening.

People are using cryptocurrencies, today, in regimes such as Venezuela, and yet your prediction of it being successfully banned, has yet to come to pass.


Really, nobody's using it anywhere, which is why governments haven't tried to stop it. The Venezuela case is the only currency less stable than BTC, but that aside, as a thought experiment consider: where did the BTC in question come from?

(1) If you can't move currency out of the country the whole thing is zero-sum. You're just buying bolivars from one guy and taking his BTC. You're leaving others within the country holding more bags of bolivars. The problem hasn't been solved at all just redistributed.

(2) If you can move money out of the country, you'd have done much better just buying USD and holding onto it, or using it there.


> You're leaving others within the country holding more bags of bolivars. The problem hasn't been solved at all just redistributed.

The success of one's investment has nothing to do with censorship resistant financial transactions. It is irrelevant.

> If you can move money out of the country

You can move crypto of the country with the clip of a button.

Also, you can move it to the other side of the same country, quickly as well.

A financial transaction is an exchange of money, for a good or service. You send money to someone, and they give you a good. Crypto makes the money half of the transaction censorship resistant.


You have to move money to someone else via an exchange locally to buy that can be shutdown on a whim, or you have to move money out of the country to buy, and if you can do that there are myriad better options. Mining is not an option due to cost, and the successful ones get nationalized. I could see the argument in a world where everyone magically got preallocated some amount of Monero but that’s definitely not the world today. Obtaining the bitcoin in the first place is the blocker, not to mention it’s awful “store of value” problem.


People are also using USD, today, in regimes such as Venezuela. Enforcement is terrible and members of the government's inner circle are facilitating USD/Bolivar exchanges outside of the law already.

Why would they care about crypto?


I'm a pretty huge bitcoin critic because I view it from the problems that I want to solve. I want fast, low fee micro transactions and it doesn't serve that need. If you look at another perspective though, of people whose economies are collapsing, or people living under authoritarian regimes, it serves a need.


have you seen Lightning network? it is a second layer on top of Bitcoin that allows near instantaneous transactions for basically zero fee. people are using it today to buy stuff although it is still in beta testing.


It's a huge failure.

It's difficult to use, it requires always-on nodes, there appear to be multiple failure modes where funds can be lost to the counterparty with no recourse, and it requires the commitment of large amounts of currency to fund its channels and make the system work.

It's basically a joke at this point.


> It's difficult to use

Not _that_ difficult. It's more complex to set-up than using Bitcoin directly but with an analogy to savings and checking accounts I think most people would be able to use it.

> it requires always-on nodes

First of all it's not always on, a phone that connects once a day or once a week is fine (the period depends on the channel parameters that your wallet software uses).

And even then that's only if you want to 100% trustlessly receive funds. To send you don't need to do it and by using watch-towers you can receive without having to periodically go online as well.

> and it requires the commitment of large amounts of currency to fund its channels and make the system work.

Only as much as you want to send.

> It's basically a joke at this point.

To people that haven't tried it or are overly critical of an in-development protocol with a small network of interested volunteers behind it.


If you look at another perspective though, of people whose economies are collapsing, or people living under authoritarian regimes, it serves a need.

Or in a broader sense: "De-regulated money transfer of any kind" -- for which the costs and risks of a cryptocurrency transaction are an acceptable tradeoff.

But for vanilla payments -- apparently they aren't (and never will be).


what about other cryptos that are low/zero fee and fast?


Central banks and government in general. It is government which guarantees the validity of fiat currency, so if you want to undermine governmental authority then attacking the monopoly on currency issuance is an obvious place to start.

I'm just describing this rather than endorsing it btw.


A lot of people are interested in it because they have a particular view of economics. In particular, they like that Bitcoin (1) has a fixed monetary supply, and (2) is difficult to regulate and tax.


Oh no, bitcoin is insanely easy to tax and regulate, they’ve just not bothered yet. A permanent ledger of all transactions is the tax man’s Dream.


I think the difficulty largely comes from not being able to associate a public key with an individual.


De-anonymization is something that we already have a lot of experience with, specifically tying a device to an individual. There’s nothing special about a public key that makes this harder.


I can't say I agree. A gov can't pry the secret key to my coins from my brain (yet). You can much more easily freeze a bank account and garnish whatever you wish.

Additionally, Satoshi himself advised to never re-use a bitcoin address. It's foolish and makes it easy to link your transactions to a single entity (you). If you use a HD wallet, which almost every bitcoin wallet software supports, and is the default in the majority of them, you will not reuse an address. This is because it becomes impossible to tell if you sent money to yourself or another person.


Correct me if I’m wrong, but I believe the following two things are true about bitcoin addresses:

1. Once I know your public key, it’s trivial to prove that an address belongs to you, since an address is nothing more than the hash of a public key. 2. If I don’t know your public key when you receive funds, figuring it out is impossible. But once you spend that money, I now know the public key that received those funds, since only the private key associated with the original address could sign a new transactions.

Those two alone should make recreating the tree of transactions a purely mechanical process, with a much lower cost than what it took to create the original chain. At this point it’s a bit like any other de-anonymizes toon attack, with the benefit of some entities being known and coercable, and some users helpfully posting addresses on their social media accounts.

On the garnishment front: this kind of depends on scope. But the one thing we’ve seen is that all monetary security goes out the window when the attacker can take possession of you. This is why using technical solutions to such scenarios have always struck me as a bit silly.


New keypairs are often created, it's not the case that a person has a single keypair that they use for all transactions.

E.g. once you fund key A, immediately send the funds to new keys B, C, and D that are not publicly associated with you.


> I am supposed to lay out my entire financial history in a public wallet

Not at all. The fact that some transactions on some cryptocurrencies function in this way is a flaw, no-one actually desires that.


> I still don't understand what problem decentralised currency is supposed to solve.

I agree with all your other points, but e.g. in China people may soon wish they still had a decentralized payment system. Especially if you have a low social credit score, and the government starts to decide in detail what you can and cannot buy.


No one except power companies and current holders of large amounts of cryptocurrency benefits by the staggering amount of energy being poured into this completely asinine model.

If cryptocurrency is supposed to bring the benefits of decentralization to the masses and usher in an era where the "little guy" is more free, it needs to solve that equation somehow.


There are many things being worked on to solve the energy usage. Proof of Stake is one, and different types of it are already in use at scale (dPoS on EOS, etc)


> e.g. in China people may soon wish they still had a decentralized payment system.

As there will be no way back from a bad social score, this is coming.

The key problem to solve is how to create an exchange that the authorities can't shut down.


-And that problem is difficult to solve even in a well-functioning democracy.

When visiting Sweden recently, I was surprised to find a number of bars, coffee shops and the like only accepting digital payments - no cash. While this makes lots of sense from the vendor's perspective - handling cash is expensive and inconvenient - a customer may feel different about it.

These vendors presumably decided that the benefits of not having to handle cash outweighed the risk of alienating a small percentage of their customers (As 'everybody' in Sweden carries debit cards and cell phones with e-payment solutions, few people rely on cash exclusively).

Now imagine what happens if the authorities also held the power to say that you WOULD not accept cash.

That would make anyone assisting someone with a low social score buy items normally not available to them an accessory to subversion of the state (or something similarly eerie-sounding).

Not good. Unless you are The State.


You mean cash?


> I am supposed to lay out my entire financial history in a public wallet (which I don't want)

Monero offers an obfuscated public ledger that prevents others from spying on the source, amount, or destination of the transaction.


The problem is a way to send censorship resistant financial transactions.

If you don't find this to be useful, then you should consider yourself fortunate and privileged.

In the same way that if you do not need TOR for your life, then you are also fortunate.

But there are literally billions of people in the world, right now, who are living under what I'd describe as authoritarian regimes.


I keep saying this but personally I see bitcoin as a good way to transfer value, nothing else. As soon as you consider it that way, it does solve every issue you got with it.

You buy bitcoin > You send bitcoin > He get bitcoin > He sell bitcoin, all that hopefully happens in less than a few hours, to avoid market fluctuation the most.

The only wallet is at the exchange, hopefully for them, it's moving quickly too.

> I am supposed to lay out my entire financial history in a public wallet

Don't hold bitcoin, you make a wallet, you buy, you send, you scrap the wallet.

> trade with people who I don't know

Cryptocurrencies doesn't solve that, HTTPS solve that, you solve that by trust. Sure the old ways to transfer money require less trust from you because you can always revert it by calling your bank, but then it's the other side that need to trust you (and he has much less to works with).


If you are going to go through an exchange anyway, how is BTC helping you? Both parties still need to trust coinbase or whatever and ultimately the transaction is identical to using venmo.


I can't use Venmo, thus I can't exchange anything between you and me.

Cryptocurrencies is this neutral third party that won't care about borders. Venmo could be your exchange, while mine would be something else. That's the beauty of it.

We are lucky, we have ways to handle money transfer relatively easily between US and Canada (my country) so that's not so much an issue, but that issue exist.


Okay. So a bank. I bank with foo and can happily send money to you if you bank with bar.

How does this function differently?


I recommend you look into privacy coins because your comment makes it clear you are not aware of them. Crypto is about immutable transactions where no single entity can deny you your freedom by simply altering your balances. Right now, your bank can click a mouse and your money is gone. You can try to prove you had it but unless you have indisputable proof you’re at the mercy of the bank.

Crypto has big challenges for sure, such as legal recourse, stability, reversible transactions and other issues but the problems it seeks to solve are real. They may not affect you personally, perhaps not now, but there is always that possibility that money could disappear and your rights denied. This already happens every day- just google PayPal freezes.


Bitcoin doesn't solve anything. Its mission has been completely subverted by external financial interests, and its leadership relies on censorship and FUD to survive.

Cryptocurrency in general, however, solves the problem of payment processors strangling businesses and individuals at the whim of CorpGov.

It allows entities who are operating within what they believe to be moral and ethical bounds to do commerce without needing the blessing of a totalitarian state like China or the US.


What leadership? BTC has no leadership. If you mean developers, you really overestimate their influence.


Sounds like you aren't very familiar with Bitcoin. I'm talking about Core, and Blockstream. If you were truly familiar with what's been going in with Bitcoin for the last couple of years, those names alone would be enough.

Considering they maintain the /r/Bitcoin subreddit and pay millions of dollars towards astroturfing campaigns and subversion tactics, considering how they have completely transformed the Bitcoin community into a mob with half a dozen talking points and bone to pick with every single other coin out there, I don't know how you could say I'm overestimating their influence.

I strongly suggest reading a few of the links in the first paragraph of this post[0] to get an idea of what has been going on.

[0] https://old.reddit.com/r/btc/comments/9lfjrb/frequently_aske...


Some people want to use digital cash and that's what crypto coins are. As far as I'm concerned they should be stable(pegged to a known currency) and fast to transact to solve this problem. Bitcoin just doesn't make sense for paymenys due its volatility.


This sounds great until an irresponsible government prints money.


Not all the goverments are irresponsible. Just use a different currency(i.e eur). It's pretty clear to me now that in practice goverments do a better work(stability wise) than the free market.

I don't think you want to know who send your money. In fact, you don't even care. All you want to know is what the money is for. Online as well as in a supermarket, you are rarely even asked for an ID (age-restricted goods aside).


> what problem decentralised currency is supposed to solve.

for example the central european bank deciding to devalue the euro, making us all 20% poorer in a few short months of 2016

not that bitcoin solves the fluctuation issue, but it's one of the issues that having a central bank gives us the people in our microeconomics when the politicians go all in on macroeconomics


So the question was: "What problem does X solve?"

And your answer is: "Well, problem Y. Except it doesn't solve it."

Or am I missing something?


Decentralized might solve problem Y. Bitcoin which is a subset of decentralized currency doesn't solve Y. Other currencies might, depending on how their value is anchored.


Debasement.


>I still don't understand what problem decentralised currency is supposed to solve.

The problem(s) that proponents hope decentralized cryptocurrency will solve have grown and evolved. So far, Bitcoin doesn't seem to fully solve them but these are some of the bullet points the idealists want:

(1) real (not nominal) "buying power" wealth protection : A currency that government couldn't inflate seemed to be the original and biggest motivation from the perspective of Satoshi Nakamoto. The genesis block[0] of Bitcoin has an embedded comment about government bailout (debasement) because of the 2008 financial crash.

(2) transactions of buying and selling without intermediaries: The charitable version of this scenario would be sellers accepting payments without paying fees and rent to bank-owned networks like VISA/Mastercard. Or transfer funds between accounts without bank wire fees. Sellers can also sell controversial items without being "approved" by companies like PayPal or Stripe. (What some call "censorship" or "deplatforming" by denying access to the payments infrastructure.) The uncharitable version of this scenario is buying & selling illegal things like drugs on Silk Road.

(3) privacy of transactions: This is somewhat related to (2) because of no intermediaries. If a shopper uses Google Checkout, Amazon Payments, Apple Pay, or VISA/Mastercard to make a payment, that information can be used against them. This doesn't necessarily have to be illegal drugs. Some people are worried that buying a legitimate item such as a certain book can be unfairly used against them. The age of pervasive data collection and machine learning means buying "50 Shades of Gray" could result in insurance companies charging you higher rates or employment background checking firms lowering your "hiring" score. The Chinese "social credit" system using pervasive data about its citizens might be an example.

(4) bypass government currency controls: citizens of restrictive countries like Venezuela want to protect their savings from corruption by converting it into a cryptocurrency. This is related to (1).

(5) universal basic income : I just threw this last one in here because HN front page sometimes has a proposal to use decentralized cryptocurrency as a way to implement UBI.

I'm skeptical of cryptocurrencies promises but I wanted to try to fairly lay out its aspirations. Are there any more I missed?

In any case, different participants of cryptocurrency have different priorities as to the benefits of decentralized trustless currency. Some prioritize wealth protection more than censorship-free payments. Or vice versa.

[0] https://en.bitcoin.it/wiki/Genesis_block#Raw_block_data


One you missed: real microtransaction infrastructure. With Lightning the ability to have a constant stream of small payments becomes viable. Whereas currently if you're using VISA backed infrastructure, you'll have users buy tokens which are then used as in-app currency. Cryptocurrency makes those tokens interchangeable


Which bank is going to make the world currency?


Remove government monopoly of money.


It solves the problem of not having to rely on a central bank to maintain the value of currency. It may seem unnecessary in the US, but pretty damn useful in countries like Zimbabwe where the privilege to print money has been abused. The opposite problem of deflation (a la Japan) seems more likely to hit the US. As population declines (and with it the demand for housing), it'll become necessary to destroy money with negative interest rates to reach the target inflation, boost investment, and check unemployment. But that's damn difficult with currency notes. And there'll be political opposition to any effort to target higher inflation or fiscal policy that has the government borrowing and spending more. The behaviour of UK and EZ governments and their austerity policies (especially towards Greece) do not inspire much confidence. An alternative currency might start looking attractive when that happens. Bitcoin is even more deflationary and won't help. But some other cryptocurrency could.

It's also a matter of principle. There are some who don't like the idea of central bank monopoly. A competing currency could be beneficial even if the only thing it accomplishes is keeping central bankers more vigilant and honest.


...is hypothesized to solve. Do we know of any actual economist who endorses cryptocurrency as a soln to central banks?

I listen to macro voices. They pointed out that wealth is so sharply concentrated in bitcoin that if all the cash in the world was replaced by crypto equivalent, it would instantly mint an oligarchy of cryptokings with nationstate levels of resources and it would cause a world war. Obviously the current world order would resist that.


Nope! Most cryptocurrencies are even more deflationary and are designed to benefit the protocol designers and early investors. That doesn't mean we should stop trying! I haven't seen any good arguments for why a cryptocurrency cannot possibly work. Once the dot-com phase of crypto ends, there may be more serious efforts to make a currency that's actually useful. I'd argue that people in Greece could use one right now if there was a sane way to bootstrap the process.


I agree that innovation is good and cryptocurrency is innovative. Jack Rasmus (economist) wrote a great book "Looting Greece" of which I read the first 10%. Rasmus argues that Greece has been subjected by the EU to financial imperialism and colonial-like wealth extraction. In essence it has been conquered. I don't see how cryptocurrency is useful in preventing a group of elites from conquering another. In practice, it only changes who the elites are.

https://www.amazon.com/Looting-Greece-Financial-Imperialism-...


China / US / Europe are not good proving grounds for Bitcoin. Those are large single markets served by a single currency. Southeast Asia on the other hand, is fragmented across 10 financial systems.

What Bitcoin offers, that centralized payment systems cannot in Southeast Asia; is the prospect of having an overlay on top of the local financial systems that is open and interoperable by any startup looking to provide local solutions to the payment puzzle. A wallet app developed in Vietnam for example, can easily receive Bitcoins but cannot easily receive Rupiah.

The only requirement is to have proliferation of Bitcoin-fiat exchanges across the region so people can jump in and out of the Bitcoin ecosystem when the need arises. This part of Bitcoin development is not rocket science, just requires time and hard work.


> The only requirement is to have proliferation of Bitcoin-fiat exchanges across the region

No, that's not the only requirement. Other requirements include teaching large numbers of nontechnical people what the heck a cryptocurrency is, how to get and secure a wallet, how to get an account on an exchange, how to convert Bitcoin to and from their local currency, why they can't carry Bitcoin around in their pocket like cash, and who they should talk to if their Bitcoins get stolen or their exchange gets hacked.

Or, they could just get a WeChat or Alipay account, which are going to be available in southeast Asia pretty soon. Boom, done.


WeChat and Alipay are here already, but the market is already fragmented when they arrive.

They also pose the risk of vendor-lock, which is worrisome to local businesses and regulators due to their links to China. It's one thing to have a locally-approved payments monopoly, it's another thing if that monopoly is foreign-owned.

If Southeast Asia wants to produce a region-wide equivalent to WeChat / Alipay, then an open, neutral & interoperable platform is the best way to do it, politically speaking.


There is the arguably* more local LINE Pay as well.

* I know it's a Japanese or Korean company, but I am not sure how much the app is used there.


Why would you convert money from one currency into bitcoin before converting it into another instead of just converting it directly from one currency into the other?

- It doesn't reduce cost or forex exposure

- It adds to the infrastructure required in both countries

- It adds to the complexity to complying with regulations like KYC

> A wallet app developed in Vietnam for example, can easily receive Bitcoins but cannot easily receive Rupiah.

Yes but the sender cannot easily send bitcoins - because nobody uses them! And if the sender is using an Indonesian mobile wallet, and bitcoin is purely the intermediary network - then why wouldn't this wallet provider not just send the cash in Dong using a bank/remittance provider?


You bring up a valid point, and indeed the cost math doesn't add up at the moment.

My argument is that if you are an e-wallet provider specializing in Vietnamese Dong, then implementing a Bitcoin wallet into your existing offerings is trivial, since most of the required technology stack is open-source.

If you are an e-wallet provider specializing in Indonesian Rupiah, implementing a Bitcoin wallet into your existing offerings is also trivial.

The magic (and cost reductions) will come when users realize these silos can now talk to each other. I believe it's a question of why not? instead of why?


The sender can easily buy bitcoins, the receiver can easily sell them. Neither has to know or care what local currency the other uses.

Sending bitcoin is easy in a connected app and requires no permission or blessing from the world's financial and governmental overlords. It's essentially a native "value transfer protocol" of the internet. Wheras managing hundreds of pairs of currencies using some choice of third party intermediary companies brings in third parties, contracts, counterparty risks, regulatory issues, legal issues, risk of government seizure, censorship & interference, etc.


Still doesn't make any sense.

- You need a third party intermediary if you want to use bitcoin as an intermediary unless you want to build an exchange yourself. It's just as easy if not more so to use a remittance company.

- Why would a sender buy bitcoins to send it to her friend when she can just click "send X rupiah to Nam" and receive a message like "Nam will get Y Dong". Or even "Send Y Dong to Nam" and receive the cost in rupiah.

This scenario only works if both the sender and receiver are comfortable in using bitcoin instead of their local currency as their unit of stored value. Which we know nobody is.

>> The sender can easily buy bitcoins, the receiver can easily sell them. Neither has to know or care what local currency the other uses.

People generally tend to care how much money they will be receiving!

> Wheras managing hundreds of pairs of currencies using some choice of third party intermediary companies for remittancing brings in third parties, contracts, counterparty risks, regulatory issues, legal issues, risk of government seizure, censorship & interference, etc.

Yes if your a remittance company. Which I assume this application developer isn't.

[edited for clarity and as I missed the last part of the comment]


I get what you are saying.

Bsaically you are saying that bitcoin is useless because nobody uses bitcoin.

Unfortiunately it's true that it is yet to see big adoption outside of techies, and citizens of basket case economies such as venezuela etc.

It's like if you invented email but nobody was using it yet. People would say email is useless, because nobody uses email.

But the concept of bitcoin is not useless, just as the concept of email is not useless. Day to day usefulness requires adoption it's true.

But even now it is useful as an intermediary currency that can "tunnel through" any kind of regulatory barrier as long as an internet connection exists.


Yep we are on the same page. I actually really like cryptocurrencies, but I work in regular payments so Im a practical and cynical sob :)

> It's like if you invented email but nobody was using it yet. People would say email is useless, because nobody uses email.

For the layperson, bitcoin (the utility not speculative side) looks like P2P email in a world where there was already gmail. While there is fundamental and important differences underneath, it's not apparent to most. Though a basket case economy may make it more apparent..


But presumably you realise that you can "tunnel through" regulatory barriers precisely because hardly anyone is using it? If Bitcoin started to get big in retail, the regulators would be all over it for all the same reasons.

Also, if the intermediated FX was less expensive than the direct cross, I would expect that the e-wallet provider would just centralise the Bitcoin transaction. Why get the punters involved?

Realistically, Bitcoin would only have value as a currency if there's a substantial economy denominated in Bitcoin. Like there has been on the dark web.


Is anyone doing this kind of thing already there? If not, why not? Are the exchanges regulated out of existence or just not enough entrepreneurs with the right skills to bring them to fruition?

Any sites you recommended that are discussing this topic deeper? It's a great comment you made.


No single entity needs to take the burden of developing the whole regional infrastructure themselves, they just need to do their own thing, for their own market, and accept Bitcoins for their own wallet.

There are exchanges in almost every country in Southeast Asia already, albeit each are fighting local battles with local regulators. They barely even know each other, but each victory strengthens the ecosystem as a whole.

I believe Square's cash app is the best approximate for this phenomenon. There are Square clones in almost every country, the moment they follow its lead in accepting Bitcoins is when the interoperability of Bitcoin will be more appreciated.


Payment puzzle? I can easily send money with:

- Venmo

- PayPal

- Apple Pay

- bank transfer online

- direct deposit

- wire transfer

etc Etc ...


How much experience do you have with wire transfers? I have very little experience, but it always proved far from easy.


There was a long post-9/11 stretch during which many US banks made this somewhat annoying. Much less so now, you can do it entirely online, both domestically (although why would you) and internationally. It's just (comparatively) expensive.


Domestically is due to time cost of money, which makes wires used only for transactions that are giant or must arrive tomorrow.


In Europe, and probably many other countries, national transfers are very easy, and international ones are only more difficult because they're less common.

They are the default way that most people receive their salary, pay the rent or mortgage, pay utility bills, and in many cases make one-off transactions to small businesses, friends etc.

On top of that:

- Most countries have methods for making a regular transfer. I pay rent, water, electric, phone and broadband like this; each company can choose how much to take from my account each month. The consumer protection if a business makes a mistake is very high.

- Some colleagues use the "push" type regular payments for their children's pocket money. It's common for rent, since that's usually a fixed amount.

- There is a mobile app to make it easier to pay friends and very small businesses, since you can use a phone number rather than a bank account number as the identifier.

International transfers are less common, but in the last year I've received money from a Spanish organization I worked for, a Singapore company that owed me a refund and didn't want to refund by credit card for some reason, and some German tourists in a remote area who'd lost their wallet. They transferred €200 to me, I withdrew it from an ATM in local currency and handed it over.

There are statistics on all these methods (plus cash and cheques) for the UK: https://www.ukfinance.org.uk/wp-content/uploads/2018/01/PUK-...


Centralised payments is a massive problem, that you aren't aware of unless you're a merchant. Merchants end up subsidising the 2-3% cash back deals peddled by the Visa/AmEx of the world. They have little negotiating power against entrenched monopolies, just look up the AmEx case recently ruled on by the supreme court, or the million other online complaints of merchants unable to reduce the cost of accepting payments.

PayPals, Squares, Braintrees of the world routinely blacklist legitimate merchants, because an error in their system might just be a blip on their operations, while it bankrupts small businesses reliant on cash flow.

The more recent trend of banning businesses for appeasement of the social media lynchmobs is yet another reason for decentralisation.

We need a payments solution that is fair, reliable and free of censorship for merchants to really feel safe in a world increasingly moving online. If such a decentralised system removes the 5% milked by middlemen who add little value, and lowers prices of goods for the end user, while putting more money into merchants' accounts, I'd call it a massive win for everyone.

Bitcoin is only the first iteration, a viable proof of concept of you will. In a few years, you'll have every feature that Visa provides, including protections for the end user, without a Central monopoly keeping all the wealth actually created by merchants and consumers


There are many dangers to de-anonymized purchases. And, associating that 'specific need' with 'illegality' is non-productive.

'Money' is a very funny idea. Wrapping it in paternalism only layers on another real threat.


When govCoin says you can't leave the country or buy a home because your friend said something against the government, then you may want a decentralized currency.

China is doing this with their social credit (sesame) system.

Are you affiliated with China? Do you live there or do business there?


Didn't China gravitate towards mobile payment due to counterfeit money?

And also the centralized mobile payment system makes Chinese government to track every purchases that are made in the country.



The system Stallman approves of in this article is not decentralized.

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