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Author Topic: The Future of Bitcoin reminder: new Bitcoin system needed someday (perhaps)  (Read 738 times)
RogerR
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April 12, 2013, 02:48:54 PM
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This may not be a very popular question around here, especially with all the BOOM/DOOM posts of late, but perhaps a very necessary one for all of us to ask at one point in time.

What would happen if the Bitcoin system (as is) was so fundamentally/socially flawed that it would simply make more sense to start anew?

Introducion:

Bitcoin itself is nothing but a protocol - people trading Bitcoin as a currency/commodity often forget that the price they are willing to pay is just for the few Bitcoin (or fractions thereof) they are purchasing at that time. Once that transaction is done, the inherent value of those purchased Bitcoin is again 0 until someone else is willing to then AGAIN pay some Fiat X for it.

The willingness to pay any amount X however is directly correlating with the degree of trust users of the system are willing to put into the trading system as a whole. That does not only mean trust to the technical aspects, but also to the underlying (utilizing) society in general.

One could say that the success of any crypto-currency is directly correlated to the amount of acceptance and adaptation amongst its peers (this could mean hundreds of thousands of micro-traders, or perhaps only a few reputable big-name market participants). If, due to trust issues, that acceptance was to falter, the system as a whole may be prone to fail.

Problem:

The main point of concern of non-Bitcoin users to the Bitcoin system (apart from technical issues that may or may not occur at one point in time), is that that the distribution of Bitcoin unfairly favours early adaptors to the point that they could wait indefinitely to then dump their share and cause ridiculous amounts of price drops (either directly or indirectly by initiation). We all hear the term PONZI-scheme floating around frequently - and maybe not unjustifiably so.

I would be willing to wager that high levels of price fluctuations do not contribute to a more steady/widespread distribution, meaning a system of high volatility favours an outcome of even more volatility. Some people say this is a good thing, and that "those with a steady hand ought to profit from stupid/short-term oriented 'speculators'" - but I think they are failing to grasp that every time we see high levels of price fluctuation, we have a lot of people either already involved or on the sideline questioning the validity of the price attached to a Bitcoin in general. So in short: when if comes to social adaptation (and ultimately the success of a P2P crypto-currency system) high volatility is neither good nor healthy, and for the sake of system credibility, "early adaptors" should in fact not be rewarded to the degree that they may or may not think they should be (for possibly doing little more to the system but to sit on their coins indefinitely). Hoarding is not good when it comes to the PONZI-scheme debate, which in return inflicts heavy damages to the reputation and therefore level of social acceptance of Bitcoin in general. The system grows with people utilizing coins, creating businesses around coins in circulation, not just piggyback-riding on a wave of speculation for a golden future to come.

So, assuming that we are able to overcome all the other technical and social/economical problems that may come at one point in time (e.g. at the time and level of mass adaptation), here is my question:

Would you be willing to accept the fact that Bitcoin in its present state may perhaps be nothing more but an early experiment (doomed to fail or not); however one that may eventually lead to a more advanced decentralized crypto-currency, one which were to enjoy maybe higher levels of trust?


Conclusion

I think Bitcoin did a lot in terms of raising awareness for the fundamental necessity of an inexpensive, decentralized P2P wealth transfer system, and we should be more than thankful for it, but to treat it as the holy grail that ought not to be questioned may not contribute to our cause. In the eye of the public, the damage already inflicted to the name Bitcoin (mainly due to heavy price swings, but also frequent technical failures, and a certain amount of un-intuitiveness) may be too large for it to regain enough trust in time.

Considering that we now have a more wide-spread user-base fighting for our cause than ever, it could be easier than ever before to quickly reach a critical mass of acceptance without the disadvantages of having to deal with some of our present issues (e.g. the whole early adaptors/PONZI-scheme debate).

Perhaps we could redesign some parts of the current Bitcoin system and come up with a new one, where the amount of coins grow more closely correlated with the total amounts of users in the system, effectively eliminating most of the hoarding and perhaps also work on other present issues along the lines of de-centralization, technical/transfer efficiency, public trust into the system in general).

The time may come where we may have to role out with Bitcoin 2.0 instead of just patch Bitcoin 1.xxxxx to overcome some of the apparent issues of our time (soon to be past). Due to social mistrust, we may even have to end up renaming the new Bitcoin in general. That time may very well not be now, but I would just like to remind everyone here that the Bitcoin system is still nothing but a social experiment and technical infant at best. It is not a guaranteed-to-succeed investment vehicle, and it would (IMHO) be extremely unwise to put more assets (life savings, cars, houses, etc) into it than you can bear to lose.

I know this may be a shock to some who went all in, but hopefully we can learn from past mistakes and make the most of it.

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Thank you very much for reading and your consideration - may we all live long and prosper!
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