Why Bitcoin is over-ambitious

[Dunbar]

This is an x-post from a post I made on Reddit a few days ago. It got little traction there and I am curious what this forum thinks of it.



First of all, I am not a hater. I see opportunities for Bitcoin and I think it can fill a very valuable niche on the internet. However, Bitcoin as a full-blown currency is something that I think will never happen. I'll start out with some criticism but explain my positive view later on. Please bear with me.

Bitcoin is being described as a decentralized currency waiting to take over the world, but at this very moment it is neither a currency nor is it decentralized.

It isn't a currency because at this moment people are treating it as an asset. People are hoarding and speculating with it and trade in goods is quite rare. Cool story that someone bought a Porsche with bitcoin but if one look at the Bitcoincharts tells us that the 30-day volume has been 164 million USD, this should be a daily occurrence. It is not.

Buying goods for Bitcoin actually has zero added value. I can buy goods for local currency just as well. The only reason to buy goods for BTC is the idea that it is 'free' because I mined for it, and the only reason to sell goods for BTC is because it is a cost effective way to acquire BTC. With the current boom it is actually really hard to build a business around BTC since you probably still have to pay suppliers in USD or something.

The only real benefit of BTC is that it is fast and anonymous and I really think BTC should capitalize on that niche. Later more on that.

Also it isn't decentralized. Bitcoin should have died off last month when the fork in the block chain occurred. Once again, it did not. Some people took quick action and were able to correct it within hours. Although this saved Bitcoin, it proves that only a few people have an immense amount of power on Bitcoin. The devs, Mt-gox, and the mining pool operators are the bare-bone of Bitcoin and can make or break your fortune overnight. You can complain about the power of bankers, but please realize that the Bitcoin elite is a much smaller group.

Then there are the scams. Ow god, the scams. If it looks like a scam, it is a bad scam, if it doesn't look like a scam, it is a good scam. If it isn't a scam, it is an excellent scam. Lots of Bitcoin ventures were started for shits and giggles years ago and the kids who started ewallets back then suddenly realize they are sitting on millions. Only now Bitcoin attracts some real business entrepreneurs. Being longer in business doesn't mean more trustworthy in the Bitcoin environment.

So where is BTC useful? That is actually quite easy, just capitalize on the anonymity of BTC. People tend to ignore that because it is linked to porn, gambling and drugs, but in fact it can provide a real service to the internet economy in the form of micro-transactions. Lots of online games, mobile apps and websites revolve around micro transactions, and lots of people are being put off by it because it forces them to provide credit card or paypal details to random third parties. In fact, this community is already a good example of that with the use of Bitcoinbot, rewarding content.

Forget the Porches, it is all about the micro transactions for virtual goods.

If Bitcoin was adopted on a large scale by mobile applications, that would be huge!

And it should, because in that it lies its biggest strength. If anyone right now is thinking of starting a Bitcoin business, dont start reselling consumer goods, but start developing apps, games, content that can be sold for BTC.

TL:DR Forget consumer goods and replacing currencies, the future of Bitcoin is in microtransactions on the internet.

[wopwop]

I'm afraid you are wrong

Try again next time

[Littleshop]

The only real benefit of BTC is that it is fast and anonymous and I really think BTC should capitalize on that niche. Later more on that.

TL:DR Forget consumer goods and replacing currencies, the future of Bitcoin is in microtransactions on the internet.

Bitcoin has no set future.  I sell consumer goods (shirts, batteries, stickers) and I am doing fine.  I pay less for processing then paypal and what I do pay goes back to the community not paypal.  I like that. 

[Dunbar]

I'm afraid you are wrong

Try again next time

Please explain.

I dont see BTC taking over as main stream currency. There are basically two scenario's:

1: BTC will try to take over as currency to do regular shopping. This will not happen as there are already excellent infrastructures in place to facilitate money transfer. BTC has nothing to add here. Transactions take a while to confirm, money can be very easily lost with hard disc crashes, malware etc and simple stuff like account numbers are impossible to remember. In that aspect BTC is a solution to a non-existing problem.

2 BTC will grow because ppl dont trust their own local currency anymore. The 'fear train'. But if established currencies fail on a large scale, why adopt BTC? New crypto-currencies here are set to fail here if they are pre-mined. People consider it unfair. Why would this by any different with BTC. 'So you dont trust your local currency anymore, here buy my bitcoins. I have been mining and collecting them for years.'

BTC has to find its niche and stick with it.

[wumpus]

People need to get the idea out of their head that "bitcoin" is a singular entity. It's like saying "anonymous" is overambitious. Some people in the community are overambitious, others are keeping their head level and just doing their thing. The hype machine the is currently going is the result of MSM exposure, not claims by, for example, the developers.

You are right in that this is just the beginning, not the end, there's a lot to be improved. But everyone with the appropriate skills can help in that, there is not a closed elite like the banksters.

[Bitcoinpro]

dunbar your saying its neither a currency nor decentralized, its as close to both of those things as any reasonable observer could assume

[Bitcoinpro]

People need to get the idea out of their head that "bitcoin" is a singular entity. It's like saying "anonymous" is overambitious. Some people in the community are overambitious, others are keeping their head level and just doing their thing. The hype machine the is currently going is the result of MSM exposure, not claims by, for example, the developers.

the recent price rises or hype as you describe it are due to the hard work of the bitcoin community especially this forum

bitcoin should be experiencing this kind of price rise due to is required replacement as an economic monetary commodity

houses for example should be going down in price because they are needed as homes for families the housing bubbles are

whats wrong not bitcoin i don't see bitcoin putting people on the streets its doing the exact opposite

[bb113]

Cool story that someone bought a Porsche with bitcoin but if one look at the Bitcoincharts tells us that the 30-day volume has been 164 million USD, this should be a daily occurrence. It is not.

Can you explain the logic behind this? My understanding is that multiples of "world gdp" are traded on forex markets every month.

I agree on the microtransactions. That is my favorite part, there is a huge untapped source of economic activity in that. You have various other claims ("zero added value" for buying goods, etc) that seem extreme to me, but just suffice to say I think the bitcoin network should be viewed as a tool. People are still figuring out how to use it.

[Come-from-Beyond]

I'm afraid you are wrong

Try again next time

Please explain.

Don't waste ur time for trolls like him.

[wumpus]

I think the bitcoin network should be viewed as a tool. People are still figuring out how to use it.

+1

the recent price rises or hype as you describe it are due to the hard work of the bitcoin community especially this forum

Yes, the hard work of people working on BTC denominated services, shops or maintaining the software. Hopefully not the "hard work" of people just hyping BTC because they hope it will raise in value

[coretechs]

Bitcoin should have died off last month when the fork in the block chain occurred.

I stopped reading right here.

[unk]

Also it isn't decentralized. ... Once again, it did not. Some people took quick action and were able to correct it within hours. Although this saved Bitcoin, it proves that only a few people have an immense amount of power on Bitcoin. The devs, Mt-gox, and the mining pool operators are the bare-bone of Bitcoin and can make or break your fortune overnight. You can complain about the power of bankers, but please realize that the Bitcoin elite is a much smaller group.

this analysis is correct; ignore the children who call you a 'troll'. note that your analysis doesn't imply that people shouldn't use bitcoin; it just points out that the 'decentralised' label is pure marketing, not a rational or factual statement. i have pointed this out many times before in this forum, and security expert ben laurie has done so on his blog and in an academic paper (based on some of my comments on his blog post). a more definite example of centralisation is blockchain checkpointing, written into the clients that most people use.

bitcoin gives you another option about which 'central' entities to trust. it does not eliminate trust. people who say otherwise don't understand either the protocol or the notion of centralisation.

[bb113]

Also it isn't decentralized. ... Once again, it did not. Some people took quick action and were able to correct it within hours. Although this saved Bitcoin, it proves that only a few people have an immense amount of power on Bitcoin. The devs, Mt-gox, and the mining pool operators are the bare-bone of Bitcoin and can make or break your fortune overnight. You can complain about the power of bankers, but please realize that the Bitcoin elite is a much smaller group.

this analysis is correct; ignore the children who call you a 'troll'. note that your analysis doesn't imply that people shouldn't use bitcoin; it just points out that the 'decentralised' label is pure marketing, not a rational or factual statement. i have pointed this out many times before in this forum, and security expert ben laurie has done so on his blog and in an academic paper (based on some of my comments on his blog post). a more definite example of centralisation is blockchain checkpointing, written into the clients that most people use.

bitcoin gives you another option about which 'central' entities to trust. it does not eliminate trust. people who say otherwise don't understand either the protocol or the notion of centralisation.

which looks more like the bitcoin system? :

[unk]

which looks more like the bitcoin system? :

as it happens, i'm an expert in network theory. if you're trying to ask 'which is more decentralised, bitcoins or the united states dollar?', you would need to specify the question better.

regardless, in many respects, the answer probably isn't what you think it is. there is probably, practically speaking, less centralised control over the united states dollar than bitcoin. but that is a thick claim that depends on many propositions (including, for example, the notion that the united states government is not a single entity - something the political crazies here probably won't understand or accept). i think the following claim is true: it would take fewer people acting independently to destroy bitcoin's value than to destroy the value in the united states dollar.

[bb113]

which looks more like the bitcoin system? :

as it happens, i'm an expert in network theory. if you're trying to ask 'which is more decentralised, bitcoins or the united states dollar?', you would need to specify the question better.

regardless, in many respects, the answer probably isn't what you think it is. there is probably, practically speaking, less centralised control over the united states dollar than bitcoin. but that is a thick claim that depends on many propositions (including, for example, the notion that the united states government is not a single entity - something the political crazies here probably won't understand or accept). i think the following claim is true: it would take fewer people acting independently to destroy bitcoin's value than to destroy the value in the united states dollar.

So basically the concept of a centralized currency is a myth? In this case the selling point should be transparency.

[kerogre256]

one thing worrying is, once they link you to one bitcoin address they can track all your transaction even when they were anonymous before

[Snowfire]

Also it isn't decentralized. ... Once again, it did not. Some people took quick action and were able to correct it within hours. Although this saved Bitcoin, it proves that only a few people have an immense amount of power on Bitcoin. The devs, Mt-gox, and the mining pool operators are the bare-bone of Bitcoin and can make or break your fortune overnight. You can complain about the power of bankers, but please realize that the Bitcoin elite is a much smaller group.

this analysis is correct; ignore the children who call you a 'troll'. note that your analysis doesn't imply that people shouldn't use bitcoin; it just points out that the 'decentralised' label is pure marketing, not a rational or factual statement. i have pointed this out many times before in this forum, and security expert ben laurie has done so on his blog and in an academic paper (based on some of my comments on his blog post). a more definite example of centralisation is blockchain checkpointing, written into the clients that most people use.

bitcoin gives you another option about which 'central' entities to trust. it does not eliminate trust. people who say otherwise don't understand either the protocol or the notion of centralisation.

which looks more like the bitcoin system? :

Actually, A and B are both hubspace topologies. They are both centralized, albeit to different degrees. Neither is a true meshspace topology, as Bitcoin is always portrayed to be (at least at the logical level.) So questions are begged here. If it is merely a question of degree, how easily can one morph into the other? Think of how airline route maps have changed in the last 50 years. A future Bitcoin wherein all block-chain management, hashing and transactions occur in a single, centralized mainframe farm is entirely in the realm of possibility, with ordinary users switching to thin-client wallets or online services from the present full-node clients. What is to prevent this from happening?

[romerun]

have you seen that video from the london btc conference mentioning several cool applications other than microtrans, escrow, contract, decentralized exchange, etc

[Matthew N. Wright]

What is to prevent this from happening?

A handful of angry nerds for the most-part. They'll post threads in a fury of protest on this centralized forum while the cultist talking heads continue to lead them into decisions that make the people at the top richer. Isn't human nature wonderful?

[unk]

So basically the concept of a centralized currency is a myth? In this case the selling point should be transparency.

i'm not sure what you're asking. 'centralised' probably isn't the right way to talk about currency in the first place. it's only people on this forum who think of the united states dollar as a 'centralised' currency. it is a currency that has a governmental issuer, subject to a particular legal process for issuance. 'centralisation' is an imprecise way to think about it. by contrast, bitcoin has an algorithmic issuer, subject to an algorithmic process for issuance; similarly, 'decentralisation' is an imprecise way to think about it. it's all 'myths' - impressionistic thinking, not rigorous thinking.

bitcoin has many selling points, but 'transparency' isn't really one either. transactions are indeed transparent, but it would be hard to argue that the bitcoin 'economy' is less oligopolistic than the traditional one or that bitcoin's value is more transparent than that of other currencies. as i have pointed out many times, people are letting mt. gox's data dictate 'value' to them even though that data could be totally fraudulent. i ultimately made half a million us dollars playing that game, but most people won't.

ignorant anger at central bankers was always a poor basis for bitcoin enthusiasm, at least in many people who have no idea what they're talking about. very few people here have any knowledge about monetary or other economic principles. what they have are strong half-baked opinions which strike most knowledgeable people as misplaced anger. why people who see themselves as self-reliant would choose to make themselves so manipulable by buying into that misplaced anger is beyond me.