You can read this the way you want, but I see Nick essentially say that the only thing you can hope for bitcoin, is to become a reserve currency for inter-bank settlements for big banks, and that banking as usual is necessary ; only, they could eventually use bitcoin instead of SWIFT to settle their affairs.

My question is: why would regulated, official banks, do such a thing ?  What has bitcoin to offer that the standard systems of today can't ?    Bitcoin is a very wasteful, inefficient system, and that waste is a design error, not a genius move, although it looked like that.

However, bitcoin could serve for those "banking" systems that do not have access or cannot trust SWIFT like operations: everything of unregulated/illegal big finance.  That's the true market of crypto.  The burden of trustlessness pays off in those circumstances.  In regulated finance, it doesn't.  The burden of trustlessness makes for slow, inefficient and wasteful systems.

What crazy bank is going to put its fate in the hands of sleazy unknown whales possessing several % of the stash and able to do with them what they want ?  What crazy regulator is going to accept such a risky joke ?  (knowing tax payers are going to have to jump in whenever this bitcoin joke crashes because a few funny guys decide to hardfork because they are paid by the competition ?)

I'm a great admirerer of the Austrian school, even if I think that some of their views are outdated.  But I'm also convinced that there is nothing fundamentally wrong with fractional reserve banking.  The reason why people think it is wrong is because they don't really understand what it is about (and everything is done to confuse the issue, true).

What is fractional reserve banking ?   It is issuing a DIFFERENT ASSET that is kept on-par with a base asset through a fund that serves as a form of collateral for individual transactions.  People, however, are made to confuse the new asset with the underlying base asset, and this is where the system looks like cheating.

If you go to a bank X and have a bank account there in $, you don't hold "dollars".  You hold "bank X dollars", an asset that bank X issues.  An "alt coin".   In order for this to be CREDIBLE, bank X has to have a fund, so that it has enough reserves to settle with other banks, so that bank X dollars are also accepted in bank Y.  So what bank X has to do, is to make sure that the INBALANCE between bank X and all other banks, never becomes larger than its "collateral for inter-bank settling", its reserve of base dollars.

If, statistically, bank X dollars are about as much versed to bank Y, than bank Y dollars are versed to bank X *it doesn't matter how many X dollars bank X and Y dollars bank Y have brought in circulation* ; they can always settle with a small mutual collateral in base dollars.  But of course, for this to happen, bank X and bank Y must have about the ratio of scarcity of their X and Y dollars.  A big bank can emit more dollars than a small one, because it has more demand, more customers.
A bank that emits too much money will see more of its dollars go to the neighbours, than it will receive from the neighbours, and hence, will have to deplete its stash of base dollars in settlements.

Once the settlements are exhausted, its bank dollars will not be accepted any more by other banks, and hence, the market value of its dollars plummet.  *there is nothing wrong with that*.  Its customers were holding a coin that simply wasn't valuable !  They shouldn't complain !  They only think they have been cheated upon because they lived in the illusion to hold "real base dollars", while they only held Bank Y coins, that were kept on-par with base dollars as long as the bank had sufficient collateral to settle with neighbouring banks.

So, in as much that people realize that when they have money at a bank, they don't possess "base money",  but only "bank money", and if they can have a CLEAR VIEW ON THE EMISSION of the bank money, they take the risk, or they don't.  They buy litecoin or they buy monero.  They buy citibank dollars or they buy HSCB dollars.  Knowing that these dollars are only kept on par with US FED dollars as long as the collateral reserves last.  Which can be considered an acceptable, or unacceptable risk.

By letting go broke banks that emit too much dollars, (and letting go broke their customers too), this system auto-regulates and kills of the most greedy ones regularly.  The only problem is the gullible masses that will complain that they are broke and should starve to death because of their ignorance.... As long as people will want to be compassionate (or pretend to be so), such autoregulating systems will always end up put a burden on the reasonable, to let the greedy reap in benefits when it works, and to let the reasonable pay for their mistakes when it goes wrong.

I don't know how valid the following analogy is, but you could see fractional reserve banking as bitcoin whales making new altcoins of which they control the minting, and they pump (with their bitcoin stash) the price of their altcoin to a given level.  As long as they have enough bitcoin stash to pump the price, this alt coin lives on happily a stable price level.  This can last very long, even if the market cap of the alt coin is way way larger than the bitcoin stash of the whale.

I only wanted to point out that the illusion that 51% of the nodes are "honest" and "willing guardians of the protocol" (of course including the emission model and the 21 million coins) is, well, totally deluded, and if you give the people the *technical means* to cheat, of course they will !  So the REAL reason that they *behaved* honestly was not that they had an intimate desire to be honest, but that they were *not capable to cheat profitably*.

Illustrating the thesis that what keeps "honesty in place" is the impossibility or the lack of advantage to cheat, not the "will to be honest".  Honest behaviour is hence an emergent property from the rules of the system that makes that individually one wouldn't know how to be dishonest in an efficient way, not because "people are honest".
I think this is the case at large, in society, too, with honesty and "moral behaviour".  It is the fact of not knowing how to be dishonest and immoral in a profitable way for most, that keeps them honest and morally correct.  Not because of some intimate desire, but by the intelligent realisation that dishonest or immoral behaviour is most of the time, not profitable in the web of relationships.  Government being about the only place (with its monopoly) where you have not these properties, and hence the place to be if you want to be immoral and dishonest.

BTW, the system would keep on working perfectly, because this is just like "bitcoin with somewhat larger block reward and tail emission".   If one single click in the mem pool is accepted randomly in every block (you'd need a protection so that miners don't systematically take THEIR click), then you just get higher block rewards, that's all.  But of course, the monetary belief in bitcoin would crumble, because the ILLUSION that it was a fair distribution to "honest people" (Miners) and now an *arbitrary* distribution to "cheaters" would break down.  While as a system, nothing really changed. 

Uh.  Government has only one reason of existence, and that IS selfishness.  Since the first kings.  What has evolved, is the way in which government convinces people that they are useful.  The social lie is its cornerstone.  There's no reason to be in government if it is not to be selfish.  It is the violence monopolist that maximizes the profit it can take from that monopoly.  Sometimes, however, you have idiots in power that don't estimate correctly the maximal burden a government can put on its people, and then you get revolutions or invasions.
Ideally, a government squeezes out maximally its population without destroying the illusion of its necessity or its unavoidability, which is what keeps it in place.
The ideal government is like the capable farmer that maximizes the profit he can take from his cattle (the governed people).  And yes, for that, you don't have to be too mean with your cattle before slaughter, on the contrary, you have to "care" about it.

I take it your definition of communism is then "that what lets land and life die"

Communism is normally defined as: "all production of value has to be done by a central authority" ; well, normally, it is limited to "all means of production (capital and land), and all income obtained by that means of production, have to belong to a central authority, who will remunerate labour in an egalitarian way so that labourers can buy said production".

I'm talking about something entirely different.  There is no central authority, but if you want a clean street, you should start cleaning in front of your house *because we're not going to outsource cleaning*.  The only thing that is needed is that stake holders run a node on an old PC.  If you're not willing to put in *that* effort in order to save the system, well you can take the risk that your neighbour will do it for you ; but you shouldn't complain that your system dies.

There's nothing wrong with such a system dying, that's my whole point.  A token doesn't have to keep value.  It needs to have sufficient value between the moment I obtain it against a sale of goods/services and the moment of spending to obtain goods/services.   Then the token helped me create economic value by exchanging goods and services.  If a week after that, the token has no value any more, I don't care.  Token systems are ideally like Kleenex.  While you use them, they are valuable ; afterwards, you throw them away.  Of course, it would be useful that the Kleenex lasts a while, because it takes time for it to acquire some acquaintance in the circles where it can/will be used as intermediate asset.  And a good token system will last long.

Of course it works.  Because as a greedy bastard not finding enough others to collude, you end up behaving honestly, by lack of choice.  Anything you try to do to be dishonest, is only in your disadvantage.  So your "most egoist choice" is behaving honestly.

In as much as that works, you have a truly decentralized system. It is almost the definition of a decentralized trustless system.

I can easily prove in a Gedanken experiment that not 51% of the nodes are honest by intention but by lack of alternative.  Suppose that there is a button on the bitcoin wallet that allows you to create extra coins for yourself, but you are not supposed to click on it.  Suppose that it really works, that all wallets accept a specific extra coinbase transaction to your address if you click on that button, by a change in the protocol, and miners and most nodes have downloaded core to the latest versions including that protocol change.
But the button says that if you are honest, you shouldn't click on the button and not get 200 BTC.
How many people do you think are NOT going to click on the button ?  Do you think that more than 50% of the nodes are not going to click ?

The point is that most of the time, an altruist well intentioned and competent person doesn't exist, and if he exists, once he has created sufficient structure to be at an interesting place for an egoist, he will be replaced by a compentent egoist who masters the art of communication in building an image of a well-intentioned altruist.

In fact, for me, anybody who claims that he is not a greedy bastard, is a dangerous greedy bastard mimicking as an altruist which is a far more dangerous greedy bastard than the greedy bastard being proud of being a normal greedy bastard.

BTW, a great example of such dangerous person is someone like Mother Theresa.  A horror of a woman.

No matter how big a financial crisis would occur, and no matter how, for matters of principle, I would love that (although practically, I would hate it because of all the horrors that would happen to me and my kin), I don't believe:
1) that big fiat currencies are going to "fall down"
2) that of all assets, bitcoin is going to be the preferred one.  I rather think that land, real estate, stock, and, in the end, food, is going to be preferred over some digital stuff the Chinese government can lay their hands on any minute or a few wealthy sleazy mobsters with a lot of bitcoin are possessing several percent of.
3) that TPTB will allow this to happen, if it escapes their control (and no, some high-charged maffioso with a filled bitcoin account is not part of TPTB).

However, I do think that the current crack down on everything financial that is not declared, for fiscal and "terrorist" reasons, makes bitcoin somewhat attractive for all that fiat that cannot see the daylight and has more and more difficulties hiding somewhere on planet earth in offshore banks.  However, bitcoin's transparency is maybe more of a problem than it seems at first sight.

So no, apart from some "black fiat money", I don't expect a massive exodus from fiat into bitcoin.  Especially because the way back is through more and more severely regulated exchanges.

And no, bitcoin is not very secure.  The massive PoW that goes into bitcoin is not sustainable with an upscaling (you really imagine wasting 40 billion $$ a year on mining electricity if bitcoin scales up 100 fold ?) and PoW is not cryptographically very secure.  It is just very wasteful. 

So no.  Bitcoin has a future, but not as a place to flee when people escape from fiat.  It has a future in big sleazy business that needs a non-fiat trustless settlement layer for their business.

The essence of life, in my idea.  Only, you cannot live like that, so you are forced to gamble, and place your trust in not-to-be-trusted entities, and the only thing you can hope for, is that that not-to-be-trusted entity is just as much obliged to trust you than you are obliged to trust him, and the complex interlock of threats makes that you do not dare to scam him because of the house of cards of false mutual trust relations that it could let crumble.   This has the emergent apparent effect that it seems that you really can trust people, while in fact you can't, but you are tied together in mutual fear of the consequences of scamming the other one.  If this web of mutual threats is thick enough, your only choice is to behave honestly until you have not much to lose any more, at which point you also cannot harm much any more.   This web of mutual fear is what keeps together "relations of trust" other than those inspired by true empathy (close family and friends for instance although even there nothing is sure).

The essence of social relationships consist in obtaining more of this fake trust (that is, fear of the consequences of not behaving trustworthy) from others, than you have to be submitted to having to be honest to others.  This asymmetry determines your power over others, and hence the unfairness by which you can obtain value from them.  Playing this game is the essence of life at large and the engine that brings untrustworthy entities to power and propagates their offspring.


Miners sell hash rate to pools against money.  I don't think they care what the pool does with their hashes.  They don't even need to be paid in the coin the pool makes with their hash power ; but usually the pool does this to hedge against coin value fluctuations.  But miners could rent their hash computations for fiat to pools if that suited people, too.  Miners play "amazon" for pools.  They put computing hardware at disposal against a price.


I know !  But most people are simply *not capable* technically to cheat on that system, and are also kept in this mutual fear of cheating relationship.  On the internet, nobody knowns you are a dog, but if you piss off one or other maffioso, he'll find you.  So probably technically, most people don't know how ; and those that know how, mostly don't dare ; and those that know and dare, have stuff at stake.


No.  If not 51% of nodes COLLUDE to be dishonest IN THE SAME WAY.  As there is only one way to be honest, and there are 100 ways to be dishonest, the dispersion of the dishonest systems makes that they can only settle on being honest, after all, because otherwise, they get nowhere.

This is not communism. 
You help, the system can work, you don't help, the system dies and you have nothing to complain about.  BTW, the fewer are the active minters, the higher the probability becomes that these minters can collude.  If you don't mint, your fault.  You contribute with your "civil duty" or you increase the chance for the system to break down.
That's enough motivation.

The way to game the system is to be a whale that corrupts the system with an incredible majority of nodes.  If everybody contributes according to his stake, this cannot happen.  If you don't, and you let the whale do, your fault, don't complain.  And if the whale nukes his own system, his problem.

The system is not designed to "withstand the storm".  The system is self-destructive in case people are not motivated in supporting it.  As such, it cannot become a monster.  It kills itself before.

I think there is a solution to this.  My idea would be to give all past bitcoin addresses between two given block numbers (say, after 2011 and before 2014 or so) that ever appeared in an input a single coin.  So there's no proportionality between bitcoin WHALES and the new distribution.  The reason to pick inputs is that that means that the corresponding secret key exists or has existed.
Next, each of these redeemed past addresses would have a deterministic random number of blocks before they can spend it, spreading the "dumping" over a long time.

Sure, I didn't mean to say that BTC has to be the collateral.  But I don't see how you can trade without locking in, the time of the trade, the collateral (worth more than both offers of the coins to be exchanged including fluctuations in exchange rate during that time), the time you settle on an exchange rate.

Funny because I think we agree.


I realised that not so long ago in fact.


Yes, bitcoin will be (at best) a *reserve currency*.  But it will not be adopted by mainstream as THE reserve currency, however, it is practical as a reserve currency for everything unregulated, half unlawful, and dark finance.  Its transparent nature, however, is maybe not the best thing for that.

For the moment, with block chain tech, no linear block chain tech currency can ever hope to be a world currency on chain, and if you take it off chain, you have banking.  You need tree like structures and not chain structures in order to even hope to become a world currency.

That's also my opinion of the "good"  outcome of crypto, where you buy a crypto because you want to use it, and then forget about it.   The thing that is needed for that are fluid decentralized exchanges (not big things, and not with all coins, but just linking a certain number of coins together, where essentially both parties put up some collateral (in one of the coins) to do the exchange, and then agree upon exchanging two other coins at agreed-upon exchange rate.

And there's nothing wrong with that.  First of all, it wouldn't be "every few weeks", second, as the "first adopters" are essentially paid by the "last losers" of a coin, there's nothing wrong with being sometimes "first adopter" and sometimes "last loser".  After all, the idea of a currency is not to "hold your wealth", but as something you acquire to do commercial interaction with (selling and buying services and stuff). 

I don't really think that.  Well, there are maybe people really thinking that bitcoin is going to become a world currency.  In the beginning I learned about bitcoin, I was hoping that too.  But let's face it, this is not going to happen.   As such, to sustain a market cap of 20 billion dollars, and most probably a speed that is several spendings a year, you'd need a non-crypto PRODUCT flux bought with bitcoin of more than 100 billion dollars.    That is Amazon's business size.   You'd need amazon's business to pass entirely onto bitcoin in order for bitcoin to validate its CURRENT MARKET CAP.  So people spending $1000 on a bitcoin are already assuming bitcoin's currency usage of the order of Amazon's business.

However, there is a problem.  Bitcoin on chain will only be able to sustain 10 or 20 transactions per second if ever the 1 MB limit is lifted which I don't believe.  This implies that each buying (each transaction) on bitcoin must be of the order of $100 or $200, or bitcoin can't handle it.  So bitcoin couldn't even take over Amazon's business, because most stuff bought on amazon isn't $200,-.  And that is AFTER being upgraded beyond segwit.

If you allow for "banking layers" on top of bitcoin, you will create extra bitcoin IOU (fractional reserve banking), diluting the bitcoin price over on chain coins, and off-chain IOU, so yes, you can have a higher amount of transacted value, but you will not increase bitcoin's value through Fisher's formula with it.

In other words, the current market estimation of the future economic value of bitcoin already makes very bold assumptions about its use.

I think bitcoin is simply in a greater-fool game, black tulip type.

I guess you can more or less consider hash rate distribution as the same as that of fee distribution, given that all blocks are more or less equally full.  Maybe some pools are smarter than others in putting the best-paying transactions in their blocks, but I don't think so.

So, essentially, half of that amount (175 000 dollars per day) goes to 5 pools, so essentially 35 000 dollars a day per pool.  The other half goes essentially to 10 other pools.

My point is that crypto is not "to invest in", but to use.  The usage itself raises the market cap (Fisher's formula).  You can of course not stop people from "investing" in it, but it should not be the drive of the market cap.   Most stock market shares are valued for their dividend, which is the value the company delivers to the economy after deduction of all costs.  Of course, sometimes you speculate on future dividend when the company will grow etc... but essentially, a share is an estimate of the REAL FUTURE ECONOMICAL VALUE of the company.  The economic value of a currency is the trades it facilitates over other means of payments.  If by using crypto, a certain commerce happens or happens better and cheaper than without that crypto, this is economic value creation.  But, apart from dark markets, crypto has not much economic value for the moment, and not in any foreseeable future.  (no, people will not use bitcoin when the fiat monetary system crumbles ; hell, it cannot handle it at all !).

I would propose even a PoS system that is not:
- rewarding anything (you just do it to keep the system running)
- necessarily proportional to stake.  I see it more like the "masternode" scheme of DASH, where you lock a modest amount of coins (say, 1 BTC) to your node in order for you to be uniformly eligible to mint a block.  Yes, if you have 100 coins, you CAN set up 100 nodes, and lock each of the single 1 BTC addresses to one node.  Why not.  But each of these nodes are separate minters. 

Essentially, when switching to that system, the amount of bitcoin is then blocked for ever, no new coin will ever be created on that chain.  NO rewards, no fees.  Nodes mint blocks when they see they are eligible, with the transactions they feel fit to put in a block.  They don't care if their block is finally orphaned by a "higher-value" block or not, they are just making the network run.  No greed, just altruism to make the node run.

That's what I mean: bitcoin is frozen now, it is what it is (in my opinion, also with its 1MB block).