These kinds of episodes are making me increasingly depressed.
On one hand, I'm incredibly disappointed in the ethics and morality of some of the people who have latched on to Bitcoin. And sadly, I'd have to include tip4commit in that group, particularly since they are "opt-out" and yet have been spamming people after each commit [ubernostrum points out below that they aren't even "opt-out", since they're not honoring opt out requests]. At best, it's poorly thought out. They may have good intentions, but they've implemented their intentions in a very sketchy manner. Completely unacceptable, and I understand people's anger. Bitcoin has attracted more than it's fair share of assholes, and I understand the frustration people have toward such people and companies.
On the other hand, I'm even more saddened by the irrational hatred so many developers have for Bitcoin, who refuse to acknowledge that not everyone who is interested in Bitcoin is a scammer or lunatic. I have met some incredibly honest, generous, and kind individuals in the Bitcoin community. And the Bitcoin project holds such promise for the financial world, if it's not first destroyed by scammers, regulators, and close-minded developers.
As just one example of what drew me to Bitcoin, Bitcoin holds (or used to hold) such tremendous promise for the developing world, and to people who are shut out of traditional banking. It's bitterly disappointing to me that so many people are intent on destroying Bitcoin because its implications are perceived to threaten their political beliefs, or because of some kind of jealousy toward the imagined wealth of earlier adopters. The contempt around here is palpable, and it's directed toward anyone associated with Bitcoin.
The emotions here are so intense that we have HNers pulling out the DMCA, which is so hypocritical coming from certain people that I am left speechless.
Can we please bear in mind that Bitcoin has many, many ethical, kind, honest developers and users, and that not everyone should be painted with this brush of contempt that some of you wield so recklessly. Bitcoin has the misfortune to have experienced an huge gain in price last winter, which drew in an inordinate number of scammers, opportunists, and speculators. We, the developers and users of Bitcoin, are not to blame for these types of dishonest people. Very often, we are their victims.
If Bitcoin does fail, a large part of the blame will be one the shoulders of so many software and IT people who make a flash decision that Bitcoin was "tulips" or a "ponzi scheme", and who refused to change their minds in the face of evidence otherwise (like scores of established corporations choosing to accept Bitcoin).
I actually worry now that some of my Bitcoin open source contributions in my real name will be held against me now. All my hard work building a great Github repo is going to be discounted because people see contributions to one or two Bitcoin projects in my "contributed to" Github section.
The only reason HNers are pulling out the DMCA is because another project is (unethically or not) using their names to raise funds in a way that they do not permit. That has nothing to do with bitcoin.
Like it or not, the pseudonymous (not anonymous) nature of bitcoin will always attract a high level of illegal and unethical activity. Many people will then use those activities, stories, and experiences to paint bitcoin as a whole. The same holds true for Tor, 4chan, reddit, the internet itself, etc.
> The only reason HNers are pulling out the DMCA is because another project is (unethically or not) using their names to raise funds in a way that they do not permit.
And what does that have to do with the digital millenium copyright act? Using a name without permission in a way that can confuse consumers is a trademark violation, not a copyright violation.
It's horrible that the DMCA has turned into a generic weapon in legal online warfare.
Some open source licenses prohibit the use of the names of contributors to promote a derived product (e.g. 3-clause BSD). Violating that clause could terminate the license to distribute, then the DMCA could be used to stop the unauthorized distribution. Not a lawyer.
It's not about the name thing. It's about the usage of parts of the licensed material without following the license. For example, commit messages, the subtitle, etc.
Theoretically:
* tip4commit violates the license the code is published under (for example if it has a NonCommercial clause).
* The original author is now the only one who has copyright.
* tip4commit is using safe harbor protections (a user chooses to create a page for a project).
* DMCA is now applicable to protect the copyright of the original author.
It doesn't. It would likely fall under trademark law. Could possibly also fall under fraud. But people have come to using 'use the DMCA' for everything involving copyrights, trademarks, and licensing agreements for some reason.
Clarification: they aren't "opt-out". They aren't "opt", period. Once someone types a project name into their search box, it appears that project and its contributors are in their listing, and that's that. Which is sort of the point of the linked issue, and several other issues asking for removal on behalf of individuals and organizations, none of which have been acted on so far as I'm aware, and several of which have in fact been simply denied.
"If Bitcoin does fail, a large part of the blame will be one the shoulders of so many software and IT people who make a flash decision that Bitcoin was "tulips" or a "ponzi scheme", and who refused to change their minds in the face of evidence otherwise "
The same can be said for Bitcoin believers who, in the face tremendous of evidence otherwise (BTC volatility, pleas from respectable folks who study currency and economics, the types of shady characters BTC has attracted), believe it is anything but a flawed implementation of an interesting but possibly bad idea (the blockchain).
Could you explain what you think is flawed about the implementation?
From a technological standpoint the incentives of mining and maintaining full network nodes have led to the first implementation of a public shared data store. Neither Bittorrent, Freenet, nor DHTs of any sort satisfy the conditions of being public, having equal access read and write privileges and data that is always available.
You can't have the benefits of the blockchain without the incentives that the units can operate as a currency and be traded for other things of value. That's what keeps everyone validating and making the data publicly available.
The politics are a completely different beast. The anarcho-capitalists and other anti-government proponents who have claimed Bitcoin as their own are living out a fantasy.
I don't think that Bitcoin is going to be the downfall of the nation-state. I think it's going to allow for some very interesting types of software to be made.
Please don't conflate Bitcoin as a technology with the mad ramblings of a bunch of basement dwellers.
IIRC, most of the flaws of bitcoin are in it's architecture as a Currency. A well designer currency is an efficient medium for the exchange of good and services. Ideally, a currency's utility is how easily and fluidly it can be spent. BitCoin does OK on these metrics.
But where Bitcoin falls down is in the long term model of currencies. Currencies should only be a medium of exchange, not a long term investment vehicle. We want people to spend or invest money in useful things rather than hoard money. Bitcoins deflationary model encourages hoarding, which in turn diminishes the amount of currency in active circulation, resulting in a sub-optimal medium of exchange.
I agree that Bitcoin does not have the ability to replace the day-to-day currencies that most of us use for food and shelter.
I think the general currency or commodity aspects are of less importance than the public ledger.
It's a kind of currency that's main use is in being able to write to a public data store. The most basic data that is stored is value transactions but anything could be stored.
You should really think about it in terms of the kinds of incentives that drive our information economy.
Take a look at Twitter. It operates as a sort of public broadcast medium yet the way that it stores and retrieves leads to vast information asymmetries. Information asymmetries lead to economic asymmetries. Such infrastructure is very costly to operate and leads to perverse incentives to monetize. The information economic model is flawed.
Bitcoin was developed from the ground up with a functional information economic model, regardless of the political expectations of the developers.
First, you have to admit that there is a lot more news about Bitcoin scams and theft than news any good that Bitcoin does.
Second, Bitcoin has not proven its stability and use the way other currencies have. It doesn't have history behind it yet. There are those of us, myself included, who want nothing to do with it until it is proven absolutely-and without-question legal for use in our countries. Just as some raise the question of whether the US dollar is legal, we have the right to question currencies of unknown and unproven provenance.
Third, association with Bitcoin, for me, considering it's questionable provenance, in any way, shape or form is a hassle I do not want. I don't have the time or the resources to invest in exploring that association, and given that uncertainty, I certainly don't want the possibility of potentially having to defend myself to the tax authorities. There's plenty of tripwires there already to catch me unawares and unlawyered and adding another would just make that situation worse. This is not a risk I would want to take.
You obviously feel differently about the situation and that's your risk to take. But it's not your risk to take on my behalf, without my approval.
Which brings us to tip4commit - they've engineered the whole thing to place themselves at risk (their option) and to place the people they want to support at risk as well (not their choice). Whether or not those potential issues are real or not is not the question yet. The point is that tip4commit has zero right to do or say anything that might place me at risk, whether or not that is real.
The US Internal Revenue Service has published guidance on the treatment of bitcoin for tax purposes, and New York has passed bitcoin regulation.
Like these rules or not, in most countries bitcoin's legality is completely clear. There are some that consider it illegal, but most _explicitly_ do not.
I personally purchase almost everything with bitcoin including groceries (Amazon Fresh). I do nothing illegal with bitcoin, and I report my income and capital gains. There is no question as to my bitcoin's provenance, I purchase bitcoin from a public exchange, and keep records of these transactions as I would for stock or a large amount currency exchanges.
I do this because I like bitcoin, because it's very convenient to do these types of online transactions, and because there are essentially no transaction fees. I do not hold funds in bitcoin long for these uses (basically cash transactions), but separately I occasionally hold bitcoin for investment speculation (full disclosure I am not currently holding any bitcoin for investment). However that is unrelated to how I typically use bitcoin on a day to day basis, and I do not recommend bitcoin investment to anyone without a very high volatility tolerance (Although unlike stocks it is easy to hold very small amounts of bitcoin for the learning experience).
In other words it is a completely normal monetary/investment instrument, albeit a new and interesting technology. As for scams I have yet to hear of any bitcoin scams that are not simply cash based scams already common in existing currencies, and I see far more news these days about startups, government review, legitimate ideas for new uses and novel innovations enabled by bitcoin's technology than regarding scams.
Technology that relates to money concerns people, and rightly so. Every bitcoin user I've ever met started as a sceptic, both in terms of the technology and the concepts of money. However, these people then learned how the technology works and become more literate about how economics and monitory theory work, and only then did they start to see and accept the innovation.
The politics and morals of people associated with bitcoin are an entirely tangential discussion, and as with any group it is probably not a good idea to generalize.
Bitcoin is a scheme designed to create a deflationary store of value by wasting electrical energy, co-opted by a vast amount of people who really did look at it like "tulips" and who continue to operate today as if it's a pump-and-dump. You are certainly right to point out that there are a lot of Bitcoin developers and users who are not assholes and have good intentions, but Bitcoin is not the vehicle that's going to work for things like banking in undeveloped countries.
I'm honestly a bit surprised you brought that up, as even with the mining fees needed to pay off the Bitcoin network being subsidized by inflation of the money supply (which is apparently good when it's happening now in accordance with an algorithm that was certainly not determined by a centrali party, but won't be good in 20 years because ???), Bitcoin currently requires about $18 per transaction (https://blockchain.info/charts/cost-per-transaction). And the price is only that low because the value of Bitcoin in USD has been dropping steadily for months. If Bitcoin ever became as popular as its proponents hope then the per/tranx price will go up as well (until the entire network is burning through so much electrical power that more miners can't be brought online to compete in the Mine-a-Block lottery at the new, higher Bitcoin price).
Increasing the number of transactions will help, sure, but it's currently limited to ~7 per second, and although there are technical means of increasing that someday, the Bitcoin lead developer has indicated they probably wouldn't do that anyways (https://bitcoinfoundation.org/2014/10/blocksize-economics/) since then how will the poor miners make money?
And in a future where people actually have to bid their transaction fee high enough to be accepted by benevolent miners just to make it in the blockchain, how are the poor of Africa supposed to compete at all? I'm glad you're worried about them, but don't tie their fate to a network which is designed to be horribly inefficient just so people can say that no trusted third parties were ever utilized in a monetary transaction! Especially in this era of increasing centralization in Bitcoin itself; I don't see how those in Africa were their most-capable computing device is a mobile are supposed to compete with the mining pools and ASIC manufacturer/miners, all you'll have done is traded centralized protocols regulated by the public sector with centralized Bitcoin overseen by the profit-seeking private sector.
I'm not an expert on the wide field of crypto-currency but surely there must be something better out there.
I do love Bitcoin criticism from people who've done their homework. Thanks.
I don't think Bitcoin is meant to be your direct mean of payment for coffee. Centralized solutions are cheaper than decentralized ones. In case of Africa for example, you can have many different competing centralized payment systems. But you can fund them with bitcoin, not depending on government printed money. In developed countries, we have CCs and some wanna-be payment systems, but there's very little competition, mostly because it's very expensive to create such company. You cannot start a new VISA in your garage. That's because of how banking system is constructed. But you can start payment system backed by bitcoin in your garage. More competition = lower transaction fees.
And given your background I'm assuming you already know counterarguments to "deflationary store of value by wasting electrical energy" and just used it to make your point.
Saying that you can fund centralized payment systems with Bitcoin isn't an argument for Bitcoin, it's a solution in search of a problem. Even if you think fiat is completely unacceptable you can fund those centralized payment schemes in Africa with gold, or silver, or cowrie shells, or human urea (not making it up; https://twitter.com/UroFoundation), or any of a million other things that don't require billion-dollar foundries to make the mining hardware you need.
You're right that you can't start a new Visa in your garage, but as it turns out even they have competition, and more than "very little". In any case "garage bootstrap ability" is not a value metric that I hear as a serious talking point that often. Normally we bootstrap things in garages and quickly try to scale them up out of garages (Visa itself was probably started in nothing larger than a Bank of America conference room, after all). And good luck fitting the datacenters behind Chinese-based Bitcoin mining operations in a single garage.
As far as competition alone driving fees down, that only works up to a point (which is why no efficient market has managed zero fees, even in high-competition markets where the profit margins are squeezed very low). For Bitcoin as long as miners can turn a profit for the price of electricity they use, they'll continue to come online to buy tickets in the lottery with KW-hr, so the transaction fees will be based on the delta between the price of electricity and the price of Bitcoin itself, and mining itself will migrate to increasingly more efficient (and centralized) operations with plentiful cheap electricity and cooling as less efficient miners are driven out of business. But at 7 tranx/sec even the most efficient miners won't easily be able to pay for that on pennies/transaction.
And since individual miners collaborating in mining pools will probably never go away (since it's not that expensive to "play the lottery" with only a couple of ASICs on your personal power bill), the efficient mining firms will have to eke out a profit on something less than 100% of the blocks out there, causing them to charge even more per transaction.
At the end of the day the "fundamentals" is that Bitcoin in steady-state will convert electrical power into a distributed ledger without trusted third parties (except, of course, for the centralized miners themselves...), and that electrical power has to be paid for by the users of the Bitcoin network itself.
Doing the same thing that Bitcoin does today with distributed networks that are orders of magnitude more power-efficient (even if they did utilize trusted third parties) would result in a much, much cheaper financial network, which would be even that much better for the poor of Africa (and that much easier to drive to near-zero fees by competition).
After all, those transaction fees for Bitcoin don't pay for anything than keeping the ledger up to date, and don't include insurance fees for things such as fraud, scams by the counterparty, and a host of other things that are accounted for in the fees that Visa and its many competitors charges.
Transaction fees aren't relevant for average Joe. Most payments would be happening off chain within those centralized systems. You only need transaction for something like bank-to-bank transfer. With the only difference that you are also your bank and you keep full control of those funds that you didn't put in the centralized service.
I would be perfectly fine with digital currency system backed by gold. Only that there's no way to make it work. People tried. You need some 3rd party that you need to trust and you are never really in control of your funds.
CPU, storage and network capabilities are keep growing which should be making transacting those 0s and 1s cheaper and cheaper. And regarding cost of the network, it's really low based on what does it accomplish. It's just that you can estimate this total cost, while not being able to do that for say total cost of inside parties at Chase.
This is all just my opinion, but as I said, I see bitcoin mostly as a decentralized storage of value. From that, you can fund your account of 3rd party payment system (without giving them your personal info or ability to spend the rest of your funds), and then you spend your money within that system. It can offer fraud protection, insurance and whatever you want. There can be also those that don't provide it, but offer even lower transaction fees. But since it's centralized system and it's just moving data I would assume they will be able to make it happen for below 2% of payment value.
"scores of established corporations choosing to accept Bitcoin"
What percentage of these established corporations "accept" bitcoin through VC-funded startups (which are gambling on the possibility of rising bitcoin value), receiving dollars and never actually holding a bitcoin?
> What percentage of these established corporations "accept" bitcoin through VC-funded startups, receiving dollars and never actually holding a bitcoin?
Basically all of them. No established company wants the associated risk to actually hold bitcoin.
Overstock uses Coinbase for checkout and converts the majority of it to dollars immediately. They have recently begun to hold about 10% of sales made in Bitcoin as Bitcoin and have disclosed this as a risk in their latest 10-Q to investors. Bitcoin accounts for 0.25% of sales, so they're keeping 0.025% of revenue as Bitcoin.
While many may argue the prudence of such a decision (and subsequent disclosure), it's important they disclose this as their Bitcoin holdings lost about 1/2 their value in the last quarter. Any major company keeping any significant percentage of their sales revenue or cash holdings as Bitcoin would be exceedingly irresponsible.
Are you going to disclose too that Bitcoin went up 300% since last year? Or you prefer to cherry-pick a shorter time period to make it fit your narrative?
Yes, they are. But only recently, and only a small relative about. I'd forgotten that they'd started doing it a couple months back. That's why I said 'basically all of them', because every other major site I'm aware of that accepts bitcoin doesn't hold any bitcoin. It's immediately converted to dollars at sale time because holding bitcoin for even part of a day is a huge and completely unnecessary risk for a retailer.
The timeframe I mentioned is relevant to Overstock because they were not holding any bitcoin last year. They only began accepting it this year and only began holding it more recently. So only its recent (poor) performance is relevant to Overstock and its investors. As such, it would appear to have been a bad decision in the short term.
I'm not the one in this back and forth who is cherry-picking. Bitcoin up over a different timeframe (a year, since inception, etc) is irrelevant to Overstock, just as its drop to 1/2 of its value over the last few months may be less relevant to your Bitcoin holdings.
Full disclosure: I hold .24826531 Bitcoin personally and in conjunction with my open source project and run Bitcoin Core 0.9.3 64-bit on Windows.
They weren't accepting bitcoin when it was 1/3rd the current price so that figure is irrelevant(also over the past year it is now only up 50% and will be down in less than 2 weeks without some major upwards movement). They started accepting it in January when it was ~300% higher than it is now.
Who cares? It's no different to accepting Euros but getting dollars in your bank account. The point is that they allow users to spend bitcoins (or Euros).
Widespread use of the Argentine peso isn't critical for its success (a strong economy and good monetary policy is). Widespread use is, however, critical for Bitcoin's success, since it relies on a network effect of merchants and consumers.
It certainly isn't bad news.. not to say ARS isn't likely doomed; but there are currencies not on that admittedly-long list of amazon accepted currencies.
OK? I agree with you. I never claimed they were holding it. Lots of Bitcoin-accepting businesses don't hold Bitcoin, and instead use it as a payment processor.
I don't see the problem with it. They still accept Bitcoin, no scare quotes needed.
The point is that a corporation "accepting" Bitcoin is not an endorsement by the corporation for Bitcoin. And even if it were, corporations are hardly the pinnacles of ethics and legality.
Who said anything about ethics? Corporations accepting Bitcoin is evidence of its usefulness.
And by the logic you guys are espousing, then e-commerces don't accept any currency that isn't the one their government forces them to use either, because they do it through intermediaries like Visa.
>>Who said anything about ethics? Corporations accepting Bitcoin is evidence of its usefulness.
I don't buy that either. The only thing it is an evidence of is that said corporations want to attract customers of a specific demographic. Overstock.com CEO himself is a libertarian, for example. If it wasn't for him I strongly doubt they would have implemented Bitcoin payments on their site.
I mean, if Bitcoin is so useful, why have sites that have implemented it have done a miniscule if not virtually negligible amount of sales through it?
From Bitcoin's own FAQ [1]: "One could argue that gold isn't backed by anything either. Bitcoins have properties resulting from the system's design that allows them to be subjectively valued by individuals. This valuation is demonstrated when individuals freely exchange for or with bitcoins. Please refer to the Subjective Theory of Value."
Like it or not, Bitcoin has a PR problem. It needs be liked and trusted in addition to "extremely useful, in principle." For all of the grumbling about central banks, most of us enjoy the benefits of them and trust them at some gut level, even if we don't realize we're doing it.
> If Bitcoin does fail, a large part of the blame will be one the shoulders of so many software and IT people who make a flash decision that Bitcoin was "tulips" or a "ponzi scheme", and who refused to change their minds in the face of evidence otherwise
It might also fail, in part, because the community failed to realize that a quasi-fiat currency like Bitcoin has to solve the social problems at least as much as it needs to solve the technological ones.
Bitcoins are worthless precisely because the Subjective Theory of Value is wrong. Benjamin Franklin, Adam Smith and all the early economists thought the Subjective Theory of Value was wrong. Because it is wrong.
Bitcoin is a little scam which justifies itself against the backdrop of a much bigger scam.
Gold is valuable because it takes effort to find, mine and refine. People want to exchange other valuable things for it because it is useful - dentists use it to fill teeth, it is used as an electronics coating since it conducts electricity well, and so forth. People have used gold as a currency for thousands of years, but that is only because it has traits that make it a good commodity, such as durability, portability, uniformity and divisibility.
Bitcoins have no value of this type. Which is why it has fallen from $1160 to $326, and will fall to $0.
> Gold is valuable because it takes effort to find, mine and refine.
Other way around, people spend effort to find, mine and refine gold precisely because it's subjectively valuable.
That's always been the ironic thing to me about Bitcoin, is that by establishing that people can attach subjective value to things (like computer bits), it proves that fiat currencies can work too precisely because subjective value exists.
Likewise I doubt Bitcoin would ever fall all the way to $0, simply because there will always been enough believers "holding the bag" and trying to loop people into the "Internet funbux" club to maintain the value at some low (but non-zero) level.
Precious metals are a commodity like any other commodity. They are valuable because people had to spend effort finding and mining them, and because people find them useful enough to exchange other valuable commodities for them. Their price, measured across decades going thousands of years back, is tied to their use value.
It is true the prices can be manipulated over the short term - in 1979, the Hunt brothers made silver go from $6 an ounce to $48 an ounce before it crashed back down. Over the long term though, the value of commodities are tied to their value - how hard it is to find and mine gold, and whether people find it useful enough to exchange other valuable things for it.
In other words, their subjective value? Gold has no value to me at all, as I don't have any use for it. If you tried to sell me gold, the only reason I'd buy it is if I could immediately resell it for a profit. My subjective value of gold is, therefore, $0.
The price of gold is not really determined by it's subjective value. It's determined by the cost to mine the stuff. The reason 5 lbs of potatoes cost like $5 and 5 lbs of gold costs like $90,000 is because that's what it costs to dig them up even if you prefer the potatoes.
If you were starving on a desert island I'm willing to bet you'd pay significantly more than $5 for 5lbs of potatoes if need be, because of their subjective value.
Likewise, people spend $$$ to mine gold because it's (subjectively) worth $90,000 for 5 lbs. If gold was as effectively rare as it is today, but easier to 'harvest' when you did find it, it would likely be worth about as much as long as all the other subjective factors still held.
Even today Saudi Arabia can pump oil for obscenely low prices (single digit USD per barrel), but it still sells near the market rate.
Congrats, you just decided that gold miners are the most altruistic people in the world, charging people only what it costs to mine the gold, not what the market would bear. I wish other companies could be so generous!
Also, I would recommend "Making Money" by Terry Prachet. Good book that actually explores a lot of the same ideas behind gold as the basis of a currency. In essence, the main character eventually realizes that the gold doesn't actually mean much, the true value of currency is that the society says x money gives you y goods.
Ah - that was a simplification. If it costs $1000 to mine and sells for $2000 then short term the miners will make a profit but long term people will build more mines. This is a slow process - 10 or 20 years but eventually supply exceeds demand, the price drops to $700 or some such, the miners go bust and the cycle repeats. But generally the price stays within a factor of two or so of the production cost.
so you talk about supply and demand, yet think cost is set purely by suppliers? What do you think would happen to the cost of potatoes if only 10% of last years harvest was harvested this year. It would go up, but only to the point where the supply vs. demand equalized, i.e. 90% of people wouldn't be buying potatoes cause they cost way too much, but there would be 10% of the people(like my wife) who would still be willing to buy them at $50 for 5 pounds, cause she values potatoes that much(she's got a serious fixation on potato soup). I.e. the value of a good depends on the person doing the valuing, i.e. subjective value.
It is also very difficult and expensive to dig into the ground with your bare hands and fish out worms, but if you did so you wouldn't be able to charge huge amounts of money for your hand-fished worms. Why? Because worms have almost no subjective value.
My wife's dentist didn't use gold for her teeth, Copper and silver are better conductors. Gold's only useful quality is that it doesn't tarnish. Ask yourself this, on a desert island, what's more valuable, 5 pounds of potatoes or 5 pounds of gold? I'd pick the potatoes, myself. Sounds like the value is subjective to me...
sure, but I think the point was that if suddenly everyone stopped trading gold it could still be useful to someone. Whereas if everyone stopped trading bitcoin it would not be useful to anyone.
everyone stopping trading gold would only happen if everyone stopped using gold, so how is it still useful. Imagine, if you would, a machine that can make as much of something as you want, replicating it from nothing. Put gold through it. Is there anything about the gold that would prop it's value up above the pure value of the effort required to push the button? If gold is valued because of both scarcity and subjective value, what makes bitcoin any different? It has scarcity, and people subjectively value it.
>[gold has] durability, portability, uniformity and divisibility.
You could argue bitcoin effectively has those qualities too. It also has a cost to mine which may peg its cost in the same way that the cost to mine gold does its.
The thing that worries me about bitcoin as an investment is it can be replaced easily by dogecoin or whatever-coin with basically the same properties whereas there is nothing else quite like gold.
>As just one example of what drew me to Bitcoin, Bitcoin holds (or used to hold) such tremendous promise for the developing world, and to people who are shut out of traditional banking.
First 20 minutes goes into detail on how useful Bitcoin really is in the developing world.
In short, if you've got access to a data plan and a smartphone you're not going to be unbanked. And if you are unbanked, you're not going to have access to a smartphone and a data plan.
Bitcoin is only actually useful in countries with the infrastructure to support it.
As someone who lives in Argentina, Bitcoin is extremely useful. I have a smartphone, but banks don't really want me. Not that I could benefit much from them anyway, since I'm not even allowed to make international wires, and I can't legally buy US dollars either to escape the 30% inflation we suffer here.
It's crazy to see how much time you, a UK citizen who finds Bitcoin only useful for buying illegal drugs (by your own words), invest in attacking Bitcoin. I thought your limit was Reddit, but now I see you are also spending time on other sites like HN under the same name doing the same thing almost as a full-time job. No wonder some people think there is a paid smear campaign going on against Bitcoin.
As someone who has lived in a "developing" country, I disagree. I'm talking about potential here, not the current situation.
And a lot of the early failures of Bitcoin in developing countries were the result of overzealous Bitcoin supporters rushing into a developing country with no prior experience, and then running into some of the inevitable problems (e.g., no reliable electricity).
If it's going to work in these situations, it's going to have to happen from within, not imported by outsiders.
In what developing country besides Kenya is there widespread mobile banking?
One advantage Bitcoin already has over m-pesa is that Bitcoin is an international currency, whereas m-pesa is confined to East Africa. This means that people in developing countries that sell their goods or services for Bitcoin have access to a currency limited, yet fully international market.
Here in Uganda where I currently live mobile banking is used by pretty much everyone. Mobile solutions like m-pesa and airtel money is used by most of my Ugandan friends.
From what I have seen some of the main advantages of mobile banking are: 1. You can manage your account with any phone. Most people here just use gsm phones.
2. Opening an actual bank account is expensive. Not expensive from my western point of view. But from the perspective of local people it is.
3. It is easy. Mobile carriers are everywhere. And since cash is still the way of handling most money transfers it is very convenient to be able to, even when you are in a village in the middle of nowhere. Go to a place with the "airtel money" sign and get cash so that you can buy that roasted cassava.
As someone who lives in Mexico, I beg to disagree. Many unbanked have access to smartphones and data plans, unlike your country most don't buy into multi year contracts with carriers and don't require banking for cellular service, which many use as their primary number instead of a landline (which also doesn't require a bank account).
> If Bitcoin does fail, a large part of the blame will be one the shoulders of so many software and IT people who make a flash decision that Bitcoin was "tulips" or a "ponzi scheme"
Bitcoin is a ponzi scheme. That people think they have any value shows they have a fundamental misunderstanding of value. This group might include a lot of people, but the number of people who owned over-priced houses in 2008, or dot-com stock in 2000 was large as well.
HN'ers talk about how they are sober, logical, rational people who can see business (and engineering) opportunities that "traditional" business and finance can not. So Bitcoin is a good lesson in this regard, since the snake oil seems to have infected Silicon Valley like some west coast est cult, with lots of major VC's singing the praises of this scam they are running. Even people not interested in Bitcoins should pay attention to this aspect of Bitcoins, as familiarity with these scams is useful. You can see major VC's lying about the future of Bitcoin, the cluelessness of so many people here and so forth. Aside from understanding scams, you'll understand that there are some people, such as myself and others talking about tulips and ponzi etc., who understand the concept of value. The people hyping the Bitcoins, which will inevitably go to $0, do not understand value, but despite this, nothing will really change. The majority will still listen to the big VC and angel con artists peddling this type of scam, those of us who were prescient about it will be ignored - though inevitably proved wrong on Bitcoin, the VC scammers will still be considered "right". This will be one of the more instructive lessons, not that of Bitcoin. One of these more instructive lessons is that the VCs are fundamentally wrong about why a currency or commodity has value. We understand value, they don't, but that knowledge only helps us avoid scams like Bitcoin for now. They hold the microphone and those of us who are right will be marginalized even when proved correct. It's kind of like how Richard Dawkins, who is correct about reality, logic, Christianity and so forth, is a marginalized figure, because preachers shaking down their congregations for tithes and money are who have the microphone and the power. But in this case we're not talking about delusions infecting uneducated, rural yokels, we're talking about delusions that infect the educated, well-to-do denizens of the Bay Area. Bitcoin is down 7% today, and way down from last November, when Bitcoin was trading at $1160, and no matter how much the bagholders on HN downvote my karma, nothing will stop Bitcoin's drop from that $1160 peak last November to today's $326, to it's inevitable proper price of $0.
I've talked about WHY Bitcoin is worthless in previous posts, but to reiterate - the question is WHY is Bitcoin valuable? Ask that simple question before buying a Bitcoin, or spending thousands to get an ASIC on backorder (the major Bitcoin ASIC sellers, Butterfly Labs, were raided by the feds recently due to fraud). There is no answer. "It's valuable because people are buying it right now" is not a real answer. You could say that about new Sacramento real estate developments in 2008, or Pets.com stock in 2000. It's a tautological argument - if people are buying it for $326, according to that theory, it's worth that because people will pay that, if it drops to $2, it's worth that because people will only pay that. It's a tautological argument.
Commodities have a real value. Real, long-term currencies are just commodities with traits that make them good currencies. The traits are things like durability, portability, uniformity and divisibility. People have been trading for thousands of years, so what has been a currency for thousands of years? Gold has been one of the most popular - not because it is different than other commodities, other than those mentioned traits which make it a good currency. All of the precious metals make decent currencies.
Half a century ago US currency was paper with no inherent value, but with the promise that one could trade it for gold that was held in Fort Knox and other places. So through all these thousands of years, currency was tied to a real commodity, a precious metal. Bitcoin does not have such a link.
Of course in 1971, Nixon broke the link between Federal Reserve notes and gold. Other major currencies followed suit. Some Bitcoin advocates point to that event and say Bitcoin can float on thin air as well. Why that is not so is too much to go into in an HN comment. Suffice it to say, the US government holds over 10,000 tons of gold in Fort Knox and other places. If US currency ever began to collapse, a simple announcement that dollars were convertible to that gold at a certain price would stabilize the currency. Why does the US government spend all that money to hold 10,000 tons of gold? It's understood that that gold still backs US currency, in a more abstract, unpromised way. There are no 10,000 tons of gold backing Bitcoin.
It is valuable because it is a shared public data store with equal access read and write privileges. Data stored in it is available, partitionable and eventually consistent. It works due to the economic incentives of being rewarded for validating transactions.
Prior to Bitcoin there were no shared public data stores that satisfied these requirements. Bittorrent and Freenet are not guaranteed to have data availability. That is, you can't always get what you stored. DHTs only work when they are centralized and are susceptible to a number of different attacks when operated with general public access.
The only way to interact with this data store is by being in control of Bitcoin. That is what gives value to the units of account.
I understand what you're saying. The only problem is what data is in that decentralized, available, secure data store. The only data allowed in is self-referencing data. Most people don't care about the Bitcoin data store. If I could access, say, Gutenberg.org books in that data store, or something of that nature, I and others would find more value in it.
On the other end of that, processing, not data, there are distributed processing projects out there finding the optimal golomb rulers, looking for pulsars, how protein folds etc. There could be value in a distributed project processing these and other projects. All of Bitcoin processing is self-referential though, it does not allow for this potentially more valuable processing.
What you're describing would be valuable, but not if the only data storable is self-referencing. People don't buy 1 terabyte disk drives that already store Bitcoin blockchain history. They pay for hard drives because they will store the information they want to store and retrieve on them.
I personally believe that there is intrinsic value in just the self-referential nature of Bitcoin transactions but what's important to realize is that the transactional nature of Bitcoin is what allows for the entire system to work, regardless of what is built on top of it.
A basic transaction of "A sent X to Y" might not be as valuable as a poem, but it still has some level of value.
If digital currencies focused more on this type of thing, they might actually stay around for a while longer. This is something I can see the value and usefulness of. A Bitcoin competitor focused around things like this, and perhaps allowing people to pay for non-blockchain mass processing power, might actually be viable in the long term. Because it would be actually useful and valuable.
>If digital currencies focused more on this type of thing, they might actually stay around for a while longer. This is something I can see the value and usefulness of.
There's about as much point in having a competitor to Bitcoin as there is in have a competitor to the World Wide Web.
There is an incredible amount of infrastructure built up around Bitcoin. There are currency exchanges all over the world. There are thousands of software libraries and applications. These network effects are very real.
The only way to build the types of extensions that you deem valuable are on top of the existing primitive infrastructure.
It's a shame that there is so much political rhetoric clouding the the real value. It kept me from discovering this stuff for the longest time!
Bitcoin has no value. It has a price, but not a value. Dutch tulip bulbs, 2008 Sacramento real estate devlopments, Pets.com stock all had prices at some point, but their value was always less than its price.
Saying that the value is way less than the price, is not the same as something having no value (your first sentence).
Your examples contradict your first point.
Tulips have value today, a lot less than the bubble. Sacramento real estate has lots of value today. Pets.com was worth something even when it went bankrupt, even as little as it might have been.
$4.3 billion isn't a very big bubble besides. Not even a drop in the ocean of global currencies.
Bitcoin has value because it's the best and often the only way to buy drugs (scheduled and prescription) online.
>It's understood that that gold still backs US currency, in a more abstract, unpromised way.
This has nothing to do with value. Gold is almost completely useless - its value is overwhelmingly due to speculation. Dollar is backed by enforceable debts. No better backing is possible. With gold, you're only hoping that somebody will buy it from you, for unclear reason.
A Ponzi scheme is an investment scheme in which new capitol is used to pay investor returns. Since Bitcoin is not an investment vehicle and does not promise a return, it cannot be considered a Ponzi scheme.
Your bitcoin contributions will be honored and recognized by whatever blockchain based system replaces it. Bitcoin might die, but the blockchain will never go away.
On one hand, I'm incredibly disappointed in the ethics and morality of some of the people who have latched on to Bitcoin. And sadly, I'd have to include tip4commit in that group, particularly since they are "opt-out" and yet have been spamming people after each commit [ubernostrum points out below that they aren't even "opt-out", since they're not honoring opt out requests]. At best, it's poorly thought out. They may have good intentions, but they've implemented their intentions in a very sketchy manner. Completely unacceptable, and I understand people's anger. Bitcoin has attracted more than it's fair share of assholes, and I understand the frustration people have toward such people and companies.
On the other hand, I'm even more saddened by the irrational hatred so many developers have for Bitcoin, who refuse to acknowledge that not everyone who is interested in Bitcoin is a scammer or lunatic. I have met some incredibly honest, generous, and kind individuals in the Bitcoin community. And the Bitcoin project holds such promise for the financial world, if it's not first destroyed by scammers, regulators, and close-minded developers.
As just one example of what drew me to Bitcoin, Bitcoin holds (or used to hold) such tremendous promise for the developing world, and to people who are shut out of traditional banking. It's bitterly disappointing to me that so many people are intent on destroying Bitcoin because its implications are perceived to threaten their political beliefs, or because of some kind of jealousy toward the imagined wealth of earlier adopters. The contempt around here is palpable, and it's directed toward anyone associated with Bitcoin.
The emotions here are so intense that we have HNers pulling out the DMCA, which is so hypocritical coming from certain people that I am left speechless.
Can we please bear in mind that Bitcoin has many, many ethical, kind, honest developers and users, and that not everyone should be painted with this brush of contempt that some of you wield so recklessly. Bitcoin has the misfortune to have experienced an huge gain in price last winter, which drew in an inordinate number of scammers, opportunists, and speculators. We, the developers and users of Bitcoin, are not to blame for these types of dishonest people. Very often, we are their victims.
If Bitcoin does fail, a large part of the blame will be one the shoulders of so many software and IT people who make a flash decision that Bitcoin was "tulips" or a "ponzi scheme", and who refused to change their minds in the face of evidence otherwise (like scores of established corporations choosing to accept Bitcoin).
I actually worry now that some of my Bitcoin open source contributions in my real name will be held against me now. All my hard work building a great Github repo is going to be discounted because people see contributions to one or two Bitcoin projects in my "contributed to" Github section.
The whole situation makes me sad beyond belief.