LTB's bitcoin 2013 News Coverage: Interview w/Mike Hearn (NEW UPDATE)

[internationalaw]

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Bitcoin Conference 2013 Part 1: Interview with Eric Voorhees

• Why Satoshi Dice is Gone from the land of the free
• Why Panama?
• Bitcoin based autonomous region, and the lesson of the Honduras free zone
• Behind the man, history and hopes
• Why Join, then Leave the Free State Project?
• Why this time really is different
• What’s the scenario that keeps you up at night?
• What do you think of Ripple in its current iteration?
• Are Bitcoin Businesses Possible in the US?
• What’s Wrong with Mt Gox?
• Is Bitcoin the future, or is it just Cryptocurrencies in general?
• What do you think of Alt-Coins?

===================================================================================================================
UPDATE #1: STEPHANIE MURPHY'S INTERVIEW WITH MIKE HEARN

Bitcoin 2013 Conference Coverage!

Stephanie’s Interview with Mike Hearn

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Shownotes for Bitcoin 2013 - Mike Hearn Interview

• Decentralized Android for Bitcoin
• Smart Property
• The nature and future of money
• Trading Bitcoins with Satoshi
• and more!

[acoindr]

Okay, I just listened to the whole thing. Very nice!

I just have to comment on the very end about alt-coins. Usually it seems I agree with Erik Voorhees at a 99.999% ratio, but both he and the interviewer are far from my thinking here.

The questioning started off immediately on the wrong foot, suggesting an alt-coin needs to replace Bitcoin to be successful, and Erik went along with that premise. What they both don't seem to consider is an alt-coin working alongside Bitcoin.

Why would Litecoin need to replace Bitcoin to be successful? Why would you imagine the market must use either or, with only one reigning supreme? I understand that's how people are used to looking at products in a store, pricing shown in only one currency, but I believe that will change. I almost feel some people view alt-coins as a threat to Bitcoin, but that's not it at all. I completely agree Bitcoin will not likely be displaced by an alt-coin, but that's not the hope of alt-coin supporters.

Alt-coins actually strengthen cryptocurrency overall. I've posted various ways this is so. Last, yes, Litecoin does have network effect, which is growing. There are goods and services being developed targeted just at litecoins, far more so than the newest alt-coins, similar to how Litecoin is positioned relative to Bitcoin now.

[bitcoinstarter]

I just love this show. It gets better each and every time.  A couple of my friends were listening behind me and agree this show is really good.

[internationalaw]

I just love this show. It gets better each and every time.  A couple of my friends were listening behind me and agree this show is really good.

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[evoorhees]

Okay, I just listened to the whole thing. Very nice!

I just have to comment on the very end about alt-coins. Usually it seems I agree with Erik Voorhees at a 99.999% ratio, but both he and the interviewer are far from my thinking here.

The questioning started off immediately on the wrong foot, suggesting an alt-coin needs to replace Bitcoin to be successful, and Erik went along with that premise. What they both don't seem to consider is an alt-coin working alongside Bitcoin.

Why would Litecoin need to replace Bitcoin to be successful? Why would you imagine the market must use either or, with only one reigning supreme? I understand that's how people are used to looking at products in a store, pricing shown in only one currency, but I believe that will change. I almost feel some people view alt-coins as a threat to Bitcoin, but that's not it at all. I completely agree Bitcoin will not likely be displaced by an alt-coin, but that's not the hope of alt-coin supporters.

Alt-coins actually strengthen cryptocurrency overall. I've posted various ways this is so. Last, yes, Litecoin does have network effect, which is growing. There are goods and services being developed targeted just at litecoins, far more so than the newest alt-coins, similar to how Litecoin is positioned relative to Bitcoin now.

Short-term, yes it is very possible for alt-chains to live alongside Bitcoin. Indeed LiteCoin already is accepted in a few places alongside BTC.

But long term, money works in such a way that the most widely accepted one tends to win out over the competitors unless there is some other factor preventing this natural process from continuing. In the case of fiat currencies, each nation mandates that its currency is used. If they didn't then the dollar would likely be used worldwide right now.

Over time, the alt-coins will become worthless and one main crypto currency will dominate everything (maybe it'll be Bitcoin or something else, but one coin will rule them all). It's just a matter of network effects... this is why we all use the same email protocol.

The caveat to this is if there is a niche which Bitcoin cannot fill, then an alt-coin might live there. But this is the exception to the rule that one main coin should come to dominate. 

[acoindr]

The two money masters go at it.  

Short-term, yes it is very possible for alt-chains to live alongside Bitcoin. Indeed LiteCoin already is accepted in a few places alongside BTC.

But long term, money works in such a way that the most widely accepted one tends to win out over the competitors unless there is some other factor preventing this natural process from continuing. In the case of fiat currencies, each nation mandates that its currency is used. If they didn't then the dollar would likely be used worldwide right now.

True, true. But there is something you're missing.

Money network effects are prompted by market access. It's all about market access, and traditionally that has been limited to the physical and the local. You go to the store you need to have what the shopkeeper will value. You travel to a foreign land you need to have what they value.

As you point out dollars would be used worldwide if countries didn't mandate their own currencies, due to the network effect of more and more people accepting dollars. However... dollars have been advancing their worldwide acceptance. Why? It's because it has become easier for someone, anywhere in the world, to meet with someone that can change dollars into something valuable to them, if dollars are not, and that's thanks to technology. As dollars have become digital it has become easier to transfer them (much harder with physical dollars). The only thing gumming up the works is regulation and an industry not exactly known for leading technical innovation.

Cryptocurrencies are digital by nature, and the Internet is ubiquitous.

That means market access is uniform for users of cryptocurrency. Network effects, normally amplified by geographic practicality, are restructured.
  

Over time, the alt-coins will become worthless and one main crypto currency will dominate everything (maybe it'll be Bitcoin or something else, but one coin will rule them all).

I disagree.

It's just a matter of network effects... this is why we all use the same email protocol.

It's not the same thing. Email servers are set up to interact and behave a certain way, the email protocol. If you don't follow the protocol you can't access the system. But what is the money protocol? There is no inflexible rule. As long as someone else values something you have the thing can serve as money. The Internet allows for finding others that value what you have to be at a maximum. The digital nature of cryptocurrencies mean moving that value the easiest way possible is also at a maximum. Taken together these factors impact the old paradigm of physical money network effects.

The caveat to this is if there is a niche which Bitcoin cannot fill, then an alt-coin might live there. But this is the exception to the rule that one main coin should come to dominate.  

There is a niche that Bitcoin can't fill. It's what led me to start promoting alt-coins in the first place. That niche is that they are not Bitcoin.

That's something the cryptocurrency market needs for many reasons. The first one I realized was potential market domination of Bitcoin Foundation. That fear is embodied in recent forum posts even on this day. Another one is the block size issue. If there were only Bitcoin I think there would be far more pressure to "get it right" whatever that means, because there are varied (irreconcilable) opinions. Another is hard fork risk should Bitcoin become so large the voices pulling in different directions must split. Still another is technical risk, for example, if some problem arises with Bitcoin's hashing algorithms (or ASIC hardware monopolizing it) where others like Litecoin use something different, or where Gavin goofed with the version 0.8.0 fork; imagine the economic carnage if Bitcoin were 10 times the acceptance it has now.

Bitcon's future isn't certain. Having alternates exist economically beside it I believe definitely strengthens cryptocurrency overall, and is why they will have co-existing value.

[justusranvier]

I'll believe that competing cryptocurrencies are viable in the long term once somebody convinces me that average people would prefer to work with multiple competing Internets on a daily basis instead of one Internet that has everything.

[acoindr]

I'll believe that competing cryptocurrencies are viable in the long term once somebody convinces me that average people would prefer to work with multiple competing Internets on a daily basis instead of one Internet that has everything.

That's similar to Erik's one email protocol example, which as I said isn't the same applicably.

The truth is markets do prefer choice -- coke, pepsi, chevy, toyota. I actually think things will wind up being pegged to gold. That fits with Erik's one dominant currency belief, which I actually do agree with, but people will hold a portfolio of currencies just as more savvy money managers (read as the rich) hold money in different forms.

Money is complex. Gold is the most widely valued thing among the largest number of people. However, it's not transacted as money often, and can't achieve good network effect, because it's not convenient to transact. So things, like fiat currency, compete with gold and are used far more dominantly. That doesn't mean gold has lost all its monetary value, though.

I think we will see prices listed relative to gold, e.g. .0001 oz, for something, but merchants will accept a variety of things to equal that value, cryptocurrencies topping the list. Just as you can go to many sites and buy services with dollars or Liberty Reserve and increasingly bitcoins, all relative to USD, in the future we will see similar payment options but relative to gold. People will store the majority of their wealth in gold, but also hold a portfolio of whichever cryptocurrencies work for their situation. There may even be fund managers offering professional services.

So you do have access to everything, because it's so easy to trade for anything you need at any time. That's what you both seem to miss. As I point out richer people already hold and trade portfolios of different currencies. They don't have it backwards. Technology is simply expanding that access to a larger group of people.

[justusranvier]

That's similar to Erik's one email protocol example, which as I said isn't the same applicably.

The truth is markets do prefer choice -- coke, pepsi, chevy, toyota.

Quite true. You're just as incorrect now as you were then. All of the examples you listed are consumable goods. None of them gain value over time at all, much less via a network effect.

[internationalaw]

I'll believe that competing cryptocurrencies are viable in the long term once somebody convinces me that average people would prefer to work with multiple competing Internets on a daily basis instead of one Internet that has everything.

That's similar to Erik's one email protocol example, which as I said isn't the same applicably.

The truth is markets do prefer choice -- coke, pepsi, chevy, toyota. I actually think things will wind up being pegged to gold. That fits with Erik's one dominant currency belief, which I actually do agree with, but people will hold a portfolio of currencies just as more savvy money managers (read as the rich) hold money in different forms.

Money is complex. Gold is the most widely valued thing among the largest number of people. However, it's not transacted as money often, and can't achieve good network effect, because it's not convenient to transact. So things, like fiat currency, compete with gold and are used far more dominantly. That doesn't mean gold has lost all its monetary value, though.

I think we will see prices listed relative to gold, e.g. .0001 oz, for something, but merchants will accept a variety of things to equal that value, cryptocurrencies topping the list. Just as you can go to many sites and buy services with dollars or Liberty Reserve and increasingly bitcoins, all relative to USD, in the future we will see similar payment options but relative to gold. People will store the majority of their wealth in gold, but also hold a portfolio of whichever cryptocurrencies work for their situation. There may even be fund managers offering professional services.

So you do have access to everything, because it's so easy to trade for anything you need at any time. That's what you both seem to miss. As I point out richer people already hold and trade portfolios of different currencies. They don't have it backwards. Technology is simply expanding that access to a larger group of people.

Those fall more on the commodity side of the spectrum in my opinion, along with being CONSUMABLE GOODS. People want different flavors because there's no difficulty when switching between them, but do people want to use multiple alt/crypto currencies? I doubt it, it's an inconvenience and we all know how humans dislike changes and things that bring inconvenience. Just like there is one fiat currency for most nations, there will be one dominate crypto currency IMO. Now that's not to say that a few alternative currencies may find a niche in a specific market somewhere, but they just won't be used by the masses.

[acoindr]

Those fall more on the commodity side of the spectrum in my opinion, along with being CONSUMABLE GOODS. People want different flavors because there's no difficulty when switching between them, but do people want to use multiple alt/crypto currencies? I doubt it, it's an inconvenience and we all know how humans dislike changes and things that bring inconvenience. Just like there is one fiat currency for most nations, there will be one dominate crypto currency IMO. Now that's not to say that a few alternative currencies may find a niche in a specific market somewhere, but they just won't be used by the masses.

What I'm saying is markets prefer choice. Some people are die hard Pepsi drinkers, others Coke. As long as there are enough people that prefer a certain brand, for whatever reason, that brand has value.

I don't know if you've visited BTC-e which has the famous chat box, but there are some pretty die hard Litecoin fans, ones that are just as set about Litecoin as others are about Bitcoin. The fact that there can be irreconcilable opinions is what led me to realize alt-coins had a crucial role to play. This dawned on me because I was involved in the opposition and uproar over the announcement of a power consolidating Bitcoin Foudation, a topic that to this day is a problem issue to some.

What I realized was that as things progressed there would be individuals with differing views on large enough issues as to be problematic. Keeping everyone happily under one tent seemed implausible.

Yes there will be many people that only hold one main cryptocurrency or another, but there will also be those that hold multiple ones. Technology allows for instant and easy exchange and transfer of any cryptocurrency, so the inconvenience of having more than one is practically non-existent. Remember, conversions can happen within seconds and behind the scenes.

[ShireSilver]

 

The caveat to this is if there is a niche which Bitcoin cannot fill, then an alt-coin might live there. But this is the exception to the rule that one main coin should come to dominate.  

There is a niche that Bitcoin can't fill. It's what led me to start promoting alt-coins in the first place. That niche is that they are not Bitcoin.

That niche is in-person non-electronic anonymous transactions, which Shire Silver fills nicely 

So far I haven't seen any alt coins that make significant improvements over bitcoin. A few have tweaks that seem like small improvements, but certainly not enough.

[mindtomatter]

Those fall more on the commodity side of the spectrum in my opinion, along with being CONSUMABLE GOODS. People want different flavors because there's no difficulty when switching between them, but do people want to use multiple alt/crypto currencies? I doubt it, it's an inconvenience and we all know how humans dislike changes and things that bring inconvenience. Just like there is one fiat currency for most nations, there will be one dominate crypto currency IMO. Now that's not to say that a few alternative currencies may find a niche in a specific market somewhere, but they just won't be used by the masses.

What I'm saying is markets prefer choice. Some people are die hard Pepsi drinkers, others Coke. As long as there are enough people that prefer a certain brand, for whatever reason, that brand has value.

I don't know if you've visited BTC-e which has the famous chat box, but there are some pretty die hard Litecoin fans, ones that are just as set about Litecoin as others are about Bitcoin. The fact that there can be irreconcilable opinions is what led me to realize alt-coins had a crucial role to play. This dawned on me because I was involved in the opposition and uproar over the announcement of a power consolidating Bitcoin Foudation, a topic that to this day is a problem issue to some.

What I realized was that as things progressed there would be individuals with differing views on large enough issues as to be problematic. Keeping everyone happily under one tent seemed implausible.

Yes there will be many people that only hold one main cryptocurrency or another, but there will also be those that hold multiple ones. Technology allows for instant and easy exchange and transfer of any cryptocurrency, so the inconvenience of having more than one is practically non-existent. Remember, conversions can happen within seconds and behind the scenes.

But it's a speculative play.  When you only drink coke, it's because you prefer it.  When you invest in an alt-coin, it's because you think it will increase in value.   It doesn't matter to you how many people drink coke, because whether they drink it or not does not impact your experience with the product.  With a subjectively valued alt-coin, your experience is ENTIRELY dependent on how other people use or prefer the coin.

Do you see why your logic just doesn't work here?

[acoindr]

But it's a speculative play.  

It's interesting you put it that way.

Actually all money is a speculative play. That's why it's problematic historically.

When you accept something not generally used or consumed, but instead for the purpose of later exchange for something you value, i.e. money, you speculate it will hold near a certain measure of value. You don't know that it will, but you can have reason to believe it will.

This is what makes fiat money dangerous. Unless it's backed by something with a long history of holding value, like gold, then the only reason for believing it will hold value rests with the government decreeing it has value. Unfortunately due to government tendencies this has been disastrous historically resulting in hyperinflation, rapid loss of fiat value, and people becoming poor overnight.

When you only drink coke, it's because you prefer it.  When you invest in an alt-coin, it's because you think it will increase in value.

I find this also funny. For what reason do you think the majority of people who buy bitcoins do so?

I get the feeling you think the only people that would seek any crypto-coin other than bitcoin are people desperately trying to be an early enough adopter to get rich.

I'm sure there are some like that, just as there are with bitcoins. However, I didn't start supporting Litecoin for that reason. Indeed, I pretty much ignored alt-coins until the uproar over the announcement of Bitcoin Foundation. What I witnessed and realized was that there could be strongly irreconcilable opinions about things affecting Bitcoin, even to the point of threatening the project entirely. Bitcoin relies on the free market, and I believe is actually a product of it. What dawned on me was there was and could in the future be severe market pressures bottled up within Bitcoin. A market without choice is dysfunctional because dissatisfaction goes unanswered. I believed Litecoin, which had the most traction of alts at the time, could provide an adequate pressure release valve, so to speak.

It doesn't matter to you how many people drink coke, because whether they drink it or not does not impact your experience with the product.  

Yes it does. If you suddenly become the sole Coke drinker it will cease being profitable and cease to be made available.

With a subjectively valued alt-coin...

Bitcoin's value is subjective. As I said above people speculate about the value of all forms of money.

..., your experience is ENTIRELY dependent on how other people use or prefer the coin.

That's true of all money as well.

The truth is as long as at least one other person values a thing, the thing can serve as money. Litecoin, or any other alt-coin, doesn't have to have a market size equal to Bitcoin to be considered a success; the market can be larger, smaller, or commensurate. The point is I discovered a reason for such a market to exist. Until that time I didn't see why anyone might prefer an alternative to Bitcoin.

Do you see why your logic just doesn't work here?

No.

[LiteCoinGuy]

Okay, I just listened to the whole thing. Very nice!

I just have to comment on the very end about alt-coins. Usually it seems I agree with Erik Voorhees at a 99.999% ratio, but both he and the interviewer are far from my thinking here.

The questioning started off immediately on the wrong foot, suggesting an alt-coin needs to replace Bitcoin to be successful, and Erik went along with that premise. What they both don't seem to consider is an alt-coin working alongside Bitcoin.

Why would Litecoin need to replace Bitcoin to be successful? Why would you imagine the market must use either or, with only one reigning supreme? I understand that's how people are used to looking at products in a store, pricing shown in only one currency, but I believe that will change. I almost feel some people view alt-coins as a threat to Bitcoin, but that's not it at all. I completely agree Bitcoin will not likely be displaced by an alt-coin, but that's not the hope of alt-coin supporters.

Alt-coins actually strengthen cryptocurrency overall. I've posted various ways this is so. Last, yes, Litecoin does have network effect, which is growing. There are goods and services being developed targeted just at litecoins, far more so than the newest alt-coins, similar to how Litecoin is positioned relative to Bitcoin now.

/sign

i see especially litecoin as a usefull backup of bitcoin and they can both exist.

[justusranvier]

This is what makes fiat money dangerous. Unless it's backed by something with a long history of holding value, like gold, then the only reason for believing it will hold value rests with the government decreeing it has value. Unfortunately due to government tendencies this has been disastrous historically resulting in hyperinflation, rapid loss of fiat value, and people becoming poor overnight.

"Holding value" is a fallacy. Value is not inherent to gold, or anything else. The primary advantage gold had compared to other commodities is that it is difficult to counterfeit or arbitrarily increase its supply.

The reason that we use money is because it solves the double coincidence of wants problem, but at the cost of making it possible for the issuer of the money to consume products and services without first creating equivalent value. The first spender of newly-issued money gets to claim a portion of everybody else's deferred consumption for themselves.

It's not easy to avoid this drawback entirely because money has to somehow transition from a state of not existing to existing, so somebody is going to get to be the first spender.

Bitcoin addresses this by making the first spender work to build the network, and distributes new currency in a manner that is transparent and not subject to arbitrarily change. It's probably the best tradeoff we'll be able to achieve any time soon.

[acoindr]

"Holding value" is a fallacy.

It is? The dollars in your pocket don't hold any value?

Value is not inherent to gold, or anything else.

I didn't say it was. I did say value is speculative and subjective.

The primary advantage gold had compared to other commodities is that it is difficult to counterfeit or arbitrarily increase its supply.

I don't disagree.

The reason that we use money is because it solves the double coincidence of wants problem, but at the cost of making it possible for the issuer of the money to consume products and services without first creating equivalent value.

This happens with centralized issuers, and I believe is a key reason people call Ripple a scam.

The first spender of newly-issued money gets to claim a portion of everybody else's deferred consumption for themselves.

It's not easy to avoid this drawback entirely because money has to somehow transition from a state of not existing to existing, so somebody is going to get to be the first spender.

Gold doesn't have this problem.

Bitcoin addresses this by making the first spender work to build the network, and distributes new currency in a manner that is transparent and not subject to arbitrarily change. It's probably the best tradeoff we'll be able to achieve any time soon.

On a large enough scale so as to challenge centrally issued fiat I believe that's true.

[hathmill]

We will never be able to get consensus onnthe ltc btc price ratio. If we did ratio volatility will be zero, it will not happen. The main driver of price has to this day been about greed and fear - as is always the case in speculation. You can expect the other side of your trade to agree with you own viewpoint. My own opinion is this: bitcoin coin concentration makes bitcoin supply super centralized. We actually have at least one party that say the own 1% of the entire supply. Good for them, but this is crazy. The only way to de-cetralize and lessen the risk is by supporting alt-chains. Well... If you are pro decentralization that is.

[mindtomatter]

Acorn, you're acting like I don't have the same skepticism about Bitcoin and Litecoin, but I do - I just believe that Bitcoin and Litecoin have achieved the network effect, at which point it's their game to lose.   Also I really think you're logic does not play out on the "coke or pepsi" is the same as "altcoin or altcoin" because one has to do with  utility, whereas the other is not a clean choice based on utility.  You extrapolate to the extremes "nobody uses it, so it's not available" but you ignore all the middle ground - The utility of a currency is not binary (available or not) whereas with a food it is (available or not).

[acoindr]

We will never be able to get consensus onnthe ltc btc price ratio. If we did ratio volatility will be zero, it will not happen.

We don't need to. Gold to silver value ratio varies too.