Bitcoin as a currency (an economist view/contribution)

[limopc]

1- it is still require users or adopters to be above average in IT, know what a qr code is, private and public address, the 12 word Fraser for a wallet... etc. This will be sorted out as time passes, but developers should try make things easier and simpler.

I honestly don't think you have to be above average in IT when it comes to Bitcoins. I agree these are rather technical in nature, but you don't have to know the underlying technology. For QR codes, you can simply scan with an app, you just need to know that you have to keep your private keys private, etc. A simple ELI5 should suffice for the general populace, because really, what are they going to use all the technological jargon for? They simply need to know the workflow, a general idea of what's going on, and they're free to trade. The problem is, these people who don't have a strong affinity with technology do think they need a strong technological background to start trading. Most people I've talked to who have heard about crypto has this misconception, and I often try to dispel it. I would not be opposed to a simplification of the process, as things can always be better, but I do believe things are simple enough for the general populace to embrace -- they just need to know that that technological barrier is overstated.

@jseverson

Thanks, I never said I am above average in IT, I was just having a global worldwide birds eye view.
Average IT Joe in USA, Japan, UK... is an expert for an average IT Joe in third world countries, in third world countries, an average Joe is an expert for the average Joe in more less developed.

I am saying above average taking into consideration the whole world population and their level of knowledge and experience because I assume we are talking about a “global” currency Bitcoin, it will presumably be exchanged by or with a poor guy somewhere in a village in a third world country, he might be not able even to read and write, but he still can use a mobile phone, so he should be able to easily install, send, receive Bitcoins.

I am not saying that there is a technological barrier as such for the current users who are already average at least in everything, those are just a percentage of the global world population, and I would like to see crypto available for everybody.

[limopc]

Quote:

I think it's my first time that I have seen an economist out here, welcome here. What I believe you're trying to do is a write a white paper on bitcoin, I am not a expert but this what I feel about Bitcoins, it's based on a simple formula of supply and demand. Like all currencies it gets effected by global news, however at times when the news is negative about Bitcoins it will tank and then on a matter of days be back, for other general news you will hardly see any difference. It's one of the most interesting currency to follow, and now it has many duplicates. Then there are forks which generate other duplicates. There's to much to learn you'll enjoy it.

Unquote

Hopefully any contribution I make as an economist would be of little value for Bitcoin as a “currency” even crypto is mainly about economy, economics, business and trade, not only IT and programming. In addition, maybe we need someone experienced with sociology, his inputs will be of real value, because we are talking not only about average and above people, but also the unbanked people. The subject has a social aspect as well, may I say even a psychiatrist?

I assure you, I am not up to write a white paper or a research or whatever. I stated clearly I admire the idea of crypto currencies as an economist. I see that most of the economic “evils” in the world are because of just printing fiat money, inflation, poverty, unbanked people... etc.

And yes, I mentioned somewhere that I see crypto and bitcoin as a “foreign” currency or as a gold or silver coin or bullion. Both are still for some people not for everybody yet.
I wish it becomes for everybody for every and any transaction.

This is one of the reasons of my “existence” here, the top reason is to learn and to contribute something hoping it will make life easier for humans in general, and for my kids.

[limopc]

Quote:
countries like Zimbabwe and Greece and Venezuela. In some sense, the USA are moving in that direction too, with their National debt spiralling out of control.

We need a lot more "old generation" economist to see the harm that are being done by these people and how Crypto currencies might change that. The only problem is, these governments wants to ban "Public" Blockchains and implement "Private" Blockchains. <this will be their final death blow>
Unquote

First, you are still classifying me as “old” generation!! I assure you I am so teen, even naughty some times. You are as well old generation, don’t you have some printed papepers in your pocket or wallet?

Al the evils you mentioned come mainly from one reason. Governments prepare a budget by first listing on one side what it “should” spend, what they wish to spend. Then on the other side they list their sources of income, taxes, duties, fees, revenues from public companies... etc. They don’t get surprised when they find they want to spend 100, but their real income is just 90. No oops... really, it is intentional to have a deficit and have inflation.

Two ways to cover up this 10 units difference (deficit), either print some, borrow some, or both.

Simply creating debt all the time, creating inflation all the time INTENTIONALLY

But I am not here to talk politics or criticise any government, it’s not my business.

I am here to contribute something to crypto and learn.

[plorph]

The goal is to have Bitcoin and crypto as a currency, where everybody has access to, easily cheaply transfer and transact,... etc.

The current situation and problems in my opinion:
1- it is still require users or adopters to be above average in IT, know what a qr code is, private and public address, the 12 word Fraser for a wallet... etc. This will be sorted out as time passes, but developers should try make things easier and simpler.
2- transaction cost, sending a crypto from someone to another, it is relatively high, so not still convenient to buy a bottle of water or a pizza and it costs the same amount to pay the seller. This simply means the buyer would pay double the price. So, still not convenient as a currency compared to FIAT.

I wonder if this can be sorted out as follows:
All wallets should have a feature like “Ok, this public address is sending to this public address 0.05 USD, let me send with it a private key for this transaction for this amount in particular. Sending through whatever communication, Bluetooth, WiFi, nfc, Sms, whatever. No need for blockchain and mining fees.

Maybe (and here I expect some miners to try to shoot me), maybe we can use wallets already running on thousands of individual mobile phones to do the job of verification. Everybody in the individual users wins. Almost instant, no transaction cost, so it will be convenient to buy a bottle of water with bitcoins.

The receivers wallet may take the senders public address and check it on the blockchain, if it really exists, if it really has the amount transferred. If true, it makes one entry with one single confirmation.

3- till now, Bitcoins and other cryptos appears to me not as currency but as a bullion of gold, a bullion of silver, a bullion of platinum, an ingot of aluminium. It costs money to buy and keep, and it costs money to spend.

4- There should be a way that different blockchains and crypto can “talk” together seamlessly, as in point 2 above, someone having bitcoin in his wallet should be able to send to the receiver directly another crypto, no need for any of them to convert from one crypto to the other. Direct wallet to wallet.

Transfer costs should be minimised to be almost zero, transaction speed should be instant. These two are considered a must to have crypto as currency, not as a bullion.

Hopefully I did not offend anybody, especially miners. Miners should think, what profit would be if the world is actually transacting in crypto.

I know many will see the above as nonsense, a few might see an idea, some might agree some might not.

But constructive discussion will always give the fruits.

1 - I agree, I think it will happen. It's inevitable that users must learn new concepts and terminology regardless.
2 - There are higher layer scaling methods which I believe will enable micropayments (currently best contenter is "Lightning Network"), will make bitcoin and other crypto fast & cheap, more importantly opens the gates for the "data economy" (access to live streaming data from sensors, video, server output data, A.I. output w/o AML and charge either by the second or by the byte).
3 - true and i think this is because of the volatility, uncertain future and cost for transactions, all of which will get solved
4 - YES, there are the beginnings of "atomic swaps" and not to mention this same mechanism can be utilized by various coins' lightning-like network, there can be a network system which enables what you describe, extremely cheap, fast, not only transactions but coin-coin trades, there are a number of examples done right over twitter as of recent between bitcoin, litecoin, decred, and some other coins.

From my (not thorough) knowledge of secondary payment networks like Lightning Network, I'm confident that scaling is solvable. However something I'm more worried about is fungibility and unless bitcoin is easily fungible I don't think it will have the success many of us would like. Crypto w/o fungibility is way worse that fiat.

[limopc]

@plorph

Thank you for your comment.
Let me discuss a bit more, and hope someone gives me some extra clues.

1- you almost pinpointed a phrased what I was not able to clarify. A user is just a user, even if he is a developer of blockchain and BTC, when it comes to using the “money” I am sure he would prefer using it as easy as cash, not more “complicated “ than using an ATM, this is of course a must for the public.
2- Honestly I can’t tell what is the difference, advantages, disadvantages of lightning, Segwit, larger block sizes.. or even a fork, or a new different crypto.
What I care about is to have:
a) almost zero transaction fee
b) instant transfer
c) maximum “difficulty” less than using an ATM

But still, I can say, a, b, and c can be a bit higher than fiat, to a certain extent, it can be considered a price average Joe, or illiterate and very poor Joe pays because he is getting a currency that is increasing in value and for convenience.
People are already accepting bank fees for keeping the money in the bank, for convenience, for safety... etc. So it can be accepted to pay a fee for a crypto transaction, but within a limit. What would happen do you think if banks said they will charge you for example 100 USD annually for maintaining your accounts, if my balance is 10000, it might be ok, if my balance is only 1000 I will keep my money at home.

So, again, I am not saying mining or managing the transaction must be free, but rather saying, the lower fees, the faster, the easier, the more it goes mainstream, it should be economic for donating a tip, or buying just a small bottle of water.
3- it is just a matter of time as more users and traders come in, the less volatile it gets.
4- I don’t know what atomic swaps are, but what I care about to boost crypto and simplify its use is the possibility to send directly from my wallet which has bitcoins only, an amount in any fiat currency to be received by someone who has a wallet only in ETH, or send crypto to crypto, or crypto to fiat or opposite.
Just a new idea, maybe a crypto wallet will have as well fiat currencies, it is a currency anyway, BTC, ETH, LTC, USD, EUR, JPY.. all are just currencies. Maybe include my bank account(s), my debit or credit card(s).. pay with NFC, Sms, etc... oh.. I am dreaming again while awake and typing!

[Almat]

3- till now, Bitcoins and other cryptos appears to me not as currency but as a bullion of gold, a bullion of silver, a bullion of platinum, an ingot of aluminium. It costs money to buy and keep, and it costs money to spend.

This is true, and it will remain true until Bitcoin value plateaus. Why spend it when it could be worth twice tomorrow right? But I think all this means is that Bitcoin is still immature. Once the volatility is sorted out, its primary purpose will be that of a currency. That's my opinion at least.

[limopc]

Based on my previous post, my be there should be a thread specifically discussing wallets, features, standards, how to include ALL crypto and  fiat, banks, cards... all should be directly convertible instantly.

Maybe I can make a silly suggestions, let people keep their wallets running, wallets will contribute to mining or blockchaining.. or whatever you call it. As much as I contribute to the network, I get from the network, something like torrents p2p sharing, you keep seeding after downloading to have better torrent speed.. etc.
This should go perhaps to another thread if someone is interested.

[Lieldoryn]

3- till now, Bitcoins and other cryptos appears to me not as currency but as a bullion of gold, a bullion of silver, a bullion of platinum, an ingot of aluminium. It costs money to buy and keep, and it costs money to spend.

This is true, and it will remain true until Bitcoin value plateaus. Why spend it when it could be worth twice tomorrow right? But I think all this means is that Bitcoin is still immature. Once the volatility is sorted out, its primary purpose will be that of a currency. That's my opinion at least.

The problem is not in bitcoin volatility. The problem is that the developers of bitcoin in the pursuit of privacy is not foreseen that the currency management is necessary for its development. No one now can create the conditions to organize the circulation of bitcoin in trade and it makes it difficult to become a full-fledged currency.

[limopc]

3- till now, Bitcoins and other cryptos appears to me not as currency but as a bullion of gold, a bullion of silver, a bullion of platinum, an ingot of aluminium. It costs money to buy and keep, and it costs money to spend.

This is true, and it will remain true until Bitcoin value plateaus. Why spend it when it could be worth twice tomorrow right? But I think all this means is that Bitcoin is still immature. Once the volatility is sorted out, its primary purpose will be that of a currency. That's my opinion at least.

You just pinpointed and gave a reason to something I mentioned earlier about budget deficits and inflation intentionally. You are right.

Governments and many economist believe there must be inflation, money value (the value of your savings) should be always going down, so, people will spend the money. If value of money is going up people will not spend their money, so, factories will not be selling their products.. recession, unemployment... etc. So, to keep the economy and employment going and growing there should be inflation, that is we should punish you if you saved money.

To a certain extent, they are right, but with all my respect, even to my professors who taught me even this, this is right, but, not absolutely right, not fare, not justice.
Why, because no matter how much the currency appreciates, people are organically created to consume, they need to eat, drink, home, leisure, clothes,... etc, and they always look to get more and get better. So they will be spending anyway, no matter what. They will be always looking for better food, better clothes, better car, better homes, people “save” money to spend it later and usually for something better than they can get now.
So, there will be at anytime people spending money even it appreciates.

He will not stay living in the street if he can afford to buy an apartment, no matter how he expects his savings to appreciate.

Bitcoin for now is a hedge, and an investment. A great one.

[limopc]

The problem is not in bitcoin volatility. The problem is that the developers of bitcoin in the pursuit of privacy is not foreseen that the currency management is necessary for its development. No one now can create the conditions to organize the circulation of bitcoin in trade and it makes it difficult to become a full-fledged currency.

Wow.. you just raised an important issue about focusing on privacy.
Though I am a very very very pro of privacy, I was thinking, what privacy people really have if they have to trade on an exchange, with KYC and AML, even on localbitcoins, the seller got my name because I transferred fiat to him from my bank to his.
There is no privacy as such.

May be developers can find a way to create a voting thing online in different places, if a bitcoin user minds to sacrifice part of his privacy for more speed of transaction or for lower cost.

I believe acceptable privacy is something like “privacy” with bank accounts, just a few people can see and know that you transferred money or got money from Mr. Xyz, but they don’t really care about you.

Just my opinion, when it comes to privacy someone only care about “specific” people not knowing “specific” things, it is not about absolutely no body knows nothing.
It is impractical. As said, you can cheat some people all the time, or cheat all the people for sometime, but you can’t cheat all the people all the time. Replace with privacy and...

Maybe developers need to conduct a voting.

Edit: volatility I think is scaring many people away, not everybody is risk tolerant, risk tolerance even differs between different people.

[limopc]

I would highly appreciate if a developer might enlighten me and answer this question:
Assuming that blockchain or BTC completely ignored privacy, would this make transactions faster, less costly...etc.?
Or it is technically as is?

[yugyug]

The goal is to have Bitcoin and crypto as a currency, where everybody has access to, easily cheaply transfer and transact,... etc.

The current situation and problems in my opinion:

2- transaction cost, sending a crypto from someone to another, it is relatively high, so not still convenient to buy a bottle of water or a pizza and it costs the same amount to pay the seller. This simply means the buyer would pay double the price. So, still not convenient as a currency compared to FIAT.

I wonder if this can be sorted out as follows:
All wallets should have a feature like “Ok, this public address is sending to this public address 0.05 USD, let me send with it a private key for this transaction for this amount in particular. Sending through whatever communication, Bluetooth, WiFi, nfc, Sms, whatever. No need for blockchain and mining fees.

Maybe (and here I expect some miners to try to shoot me), maybe we can use wallets already running on thousands of individual mobile phones to do the job of verification. Everybody in the individual users wins. Almost instant, no transaction cost, so it will be convenient to buy a bottle of water with bitcoins.

The receivers wallet may take the senders public address and check it on the blockchain, if it really exists, if it really has the amount transferred. If true, it makes one entry with one single confirmation.


Hopefully I did not offend anybody, especially miners. Miners should think, what profit would be if the world is actually transacting in crypto.

I know many will see the above as nonsense, a few might see an idea, some might agree some might not.

But constructive discussion will always give the fruits.

the transaction fee is a sort of service fee from the miners and the witness signer of the the ledger from the blockchain in order to secure your transaction free from hacks and tampering. adding security features of bitcoin takes a lot of cost. If you want sort it out like verification is thru phone or any devices nearby that are bitcoin users are the one who verifies your transaction without the need of miners signatures on the blockchain, that's is what we called off-chain verification. Lightning Network trying to proposed this kind of solution to reduce transaction fees and speed up transaction capacity per second,the only problem is it needs another centralized network or server that need to broadcast or sending the data back to the mining pool and acknowledges the miner that those transactions were verified from the mobile devices but it does violates the bitcoin protocol of decentralization, an off-chain verification is possible but it can be a different entity not related to bitcoin mining.

[yugyug]

I would highly appreciate if a developer might enlighten me and answer this question:
Assuming that blockchain or BTC completely ignored privacy, would this make transactions faster, less costly...etc.?
Or it is technically as is?

if we could turn back the clock where the bitcoin wasn't launch at full blast then we could ask the developer about this assumption but now it is too late to change the bitcoin protocol as it coin circulating reach to maturity level as high as 80 percent, and it is not easy to rewrote or re-implement new protocol once the infrastructure had been establish and a huge amount of money was invested to run the bitcoin industry, it is hard to take down and begin again from scratch.

[limopc]

the transaction fee is a sort of service fee from the miners and the witness signer of the the ledger from the blockchain in order to secure your transaction free from hacks and tampering. adding security features of bitcoin takes a lot of cost. If you want sort it out like verification is thru phone or any devices nearby that are bitcoin users are the one who verifies your transaction without the need of miners signatures on the blockchain, that's is what we called off-chain verification. Lightning Network trying to proposed this kind of solution to reduce transaction fees and speed up transaction capacity per second,the only problem is it needs another centralized network or server that need to broadcast or sending the data back to the mining pool and acknowledges the miner that those transactions were verified from the mobile devices but it does violates the bitcoin protocol of decentralization, an off-chain verification is possible but it can be a different entity not related to bitcoin mining.

Well, though I am not that deep in technical stuff related to bitcoin,as a principle, everything is better decentralised, well, I don’t mind keeping my wallet running all time to contribute part or idle processor power to the network, I’ll be mining very little, and I don’t mind giving the few Satoshi I mined with my mobile to the miner who have a lot of hardware, but in return, I might get a reduced transaction cost.
This will help spreading the use of altcoins.

[limopc]

I would highly appreciate if a developer might enlighten me and answer this question:
Assuming that blockchain or BTC completely ignored privacy, would this make transactions faster, less costly...etc.?
Or it is technically as is?

if we could turn back the clock where the bitcoin wasn't launch at full blast then we could ask the developer about this assumption but now it is too late to change the bitcoin protocol as it coin circulating reach to maturity level as high as 80 percent, and it is not easy to rewrote or re-implement new protocol once the infrastructure had been establish and a huge amount of money was invested to run the bitcoin industry, it is hard to take down and begin again from scratch.

I understand, till now nobody can travel back in time.

What I am thinking is not starting from scratch, just developing, modifying the software, the protocol or whatever to accommodate the required changes.  Software can be always and continuously modified to perform faster and faster, and cheaper, without re writing the whole application from scratch. This is the software part.

For the hardware, miners can still keep mining and solving the problems as usual using the same hardware.
They might lose some of the profits, but they might gain more if the amount and speed of transaction is increased and more people use it.
 
May be w need to think something like torrents, p2p...
What you think?

[limopc]

For privacy, a scientific research by MIT states that,
Quote

Bank-like wallets, instead, connect to traditional bank accounts and credit cards, offer a mobile app, can easily convert Bitcoin to and from government-issued money, and may provide additional privacy to their users from the public because of the way they pool transactions within their network without recording each one of them on the public ledger. At the same time, with bank-like wallets users need to be comfortable sharing all their transaction data and identity information with a commercial intermediary, and possibly the government since these intermediaries need to comply with Anti-Money Laundering (AML) and Know Your Customer (KYC) regulations like other financial institutions.
Students’ wallet choices therefore involve a trade-off in terms of who may have easier access to their financial transaction data in the future.The vast majority of participants (71%) selected a bank-like wallet and only 9% selected a wallet that is more difficult for the...

Unquote

Here is a link to the pdf http://www.nber.org/papers/w23488.pdf

I hope it helps.

[limopc]

In the conclusion of the above paper,
Quote

Moreover, whenever privacy requires additional effort or comes at the cost of a less smooth user experience, participants are quick to abandon technology that would offer them greater protection. This suggests that privacy policy and regulation has to be careful about regulations that inadvertently lead consumers to be faced with additional effort or a less smooth experience in order to make a privacy-protective choice.

Unquote

I hope this helps crypto adoption to be widespread.

It confirms what I previously mentioned about ease of use, and the average Joe above.
The research was done on MIT students, I think they are at least above average Joes, when faced with sort of difficulty or unsmoothness, they preferred ease of use though even they can overcome the complications. They are MIT students.

[jseverson]

I am saying above average taking into consideration the whole world population and their level of knowledge and experience because I assume we are talking about a “global” currency Bitcoin, it will presumably be exchanged by or with a poor guy somewhere in a village in a third world country, he might be not able even to read and write, but he still can use a mobile phone, so he should be able to easily install, send, receive Bitcoins.

Sorry, but I have to point out that if you can't read or write, then there's no way you can use a smartphone. Are you saying that a large fraction of the world don't have access to the technology that they would need to use Bitcoins? If so, you're right. I read a study that as of February 2017, only 50% of mobile connections are accounted by smartphones. I think it would be somewhat safe to assume that most people who don't have smartphones don't have computers either. That would mean as of the moment, even if everyone who could use Bitcoins did, they would only amount to roughly 50% of the world's population. That's a pretty low upper limit, with there being twice as many fiat users. That might be enough for merchants to accept Bitcoins as a payment option though.

[limopc]

You are absolutely right jseverson, you presented facts.
But to clarify what I meant by illiterate who can’t read or write, not who absolutely can’t read or write, no, there are many people I have seen and even dealt with, who hardly read and write, they can’t read a book, but they can stare at the road signs, and hardly know just the alphabets, and figure out what it says, and just figure out numbers on a banknote, something like me reading German or Italian, or like me when I was in Greece before the EURO, Though  I know nothing about the alphabet, I could figure out what is the banknote I’m holding.

These people exist in some places in the world, and they can use a smart phone. Just reading the names or numbers, just very basic to jus t use the phone as a phone. But they can’t use the browser or read a book.

The post above supports the same concept, MIT students preferred ease of use. Think about it.

I am talking about a global currency for everybody as much as possible. Everybody will benefit. Even miners,  they make a little money just by recording a transaction of an already mined BTC, if the number of transactions increased they will be making much more money.

[limopc]

Maybe someone, a developer can answer the question, after reading my above posts, does anonymity  and privacy cause increased cost and slower transaction? Assuming we gave up annonimity and privacy, would this cause transaction speed to go up and transaction cost go down?

It is a programming or technical question I don’t know.

Having an answer might help.