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Author Topic: Skeptical of the skeptics...  (Read 8613 times)
evoorhees
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July 07, 2011, 05:10:55 PM
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Skepticism is a healthy attribute. And to be brutally honest, of course Bitcoin is likely to fail - all new things are likely to fail. We're all engaged in a wildly speculative and risky venture, here. Even conservative ventures usually fail, and this is anything but conservative.

However, skeptics seem to be fixated on Bitcoin as it exists in the immediate present and this is severely damaging their objective analysis. They see that Bitcoin is hard to carry in one's pocket. They see that PC-based wallets are vulnerable. They see that one cannot yet buy gasoline and bread with Bitcoins.  And seeing these problems, they then assume such issues will always remain and thus are hesitant to believe in the Bitcoin idea.

And so I don't mean to be rude, or draw silly comparisons, but it seems this is a bit like observing the Wright brothers, and their floppy, ridiculous plane, and then dismissing air travel because of all the problems. "Well, only one person can fly on that craft," "Well, it can't go much faster than a car," "Well, there is a high danger of crashing and dying," "Well, it is much too expensive to build something so useless." "Well, these are way less convenient and reliable than a horse." "Well, this is nothing but a dangerous toy," "Well, man was not meant to fly," etc. As I've mentioned elsewhere on this forum, my great-grandmother's college science textbook assured her that man would never be able to go to space, because there was no air.

Friends, allow the free market to observe these problems and it will tend to solve them. Can't easily reimburse your friends for drinks using Bitcoin? BAM - Brain Armstrong's Android app is released yesterday and looks brilliant. Tired of using only one vulnerable exchange? BAM - a half dozen more have sprung up in the past month. No easy way to accept Bitcoin payments on your website? BAM - Bit-pay.com appears.

A good skeptic should ask, "is the underlying technology/protocol of Bitcoin sound?" If it is, then all those tertiary issues will be solved over time because the marketplace wants to profit from the efficiency of frictionless-money.

There is too much profit to be made from a Bitcoin world for entrepreneurs to ignore such a revolutionary technology merely because they cannot yet purchase gasoline down the street.

As Wayne Gretzky said, "look where the puck is going, not where it is."
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July 07, 2011, 05:29:48 PM
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A good skeptic should ask, "is the underlying technology/protocol of Bitcoin sound?" If it is, then all those tertiary issues will be solved over time because the marketplace wants to profit from the efficiency of frictionless-money.


I completely agree with your analysis.  Forget all the immediate issues, a good skeptic *should* ask ""is the underlying technology/protocol of Bitcoin sound?"  However, I think an even better skeptic would ask the question "are the people around Bitcoin sound?"  The best technology in the world can fail if it's surrounded and promoted by the wrong people, and the worst technology can succeed if an organizational and marketing genius is behind it (viz., Microsoft).  Well, the devs seem very sound, although sometimes it's not clear to me if they realize they enormity of their task.  I am concerned that many of the businesses emerging around Bitcoin right now seem scam-ridden and/or amateurish, but I try to remind myself that we're in the gold rush days.  My hope is that right now, dozens of competent individuals are building the next wave of Bitcoin businesses, and that more reputable merchants are looking into accepting Bitcoin.  When I see things like the Android app, I am heartened.  But in the end, it will be the people that make or break Bitcoin, not the technology.

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July 07, 2011, 05:30:15 PM
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July 07, 2011, 05:34:13 PM
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It is one of the few ideas that has ever excited me in the same way as learning about the internet. Just the far-reaching implications, sprawling out to the future. Whatever iteration survives, I know the world won't be the same. (Though I am biased in thinking that the current implementation is solid enough, just needs peripheral enhancements.)

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July 07, 2011, 05:39:14 PM
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But in the end, it will be the people that make or break Bitcoin, not the technology.

Very true. While the decentralized, typically "amateur" nature of the btc marketplace will yield some worthless offerings, it's also open to ANYONE from anywhere in the world. An impoverished Sri Lankan 17 yr old with $200 netbook could write the next killer app for Bitcoin. And the marketplace's hyper competitive nature, with almost no barriers to entry, will tend to produce brilliant products and services but these may be months away.

I also think the core dev team (Gavin et al) is the minority of the development. They're making a better core client, but such gains are marginal compared to the peripheral businesses being developed elsewhere.
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July 07, 2011, 06:14:52 PM
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But in the end, it will be the people that make or break Bitcoin, not the technology.

Very true. While the decentralized, typically "amateur" nature of the btc marketplace will yield some worthless offerings, it's also open to ANYONE from anywhere in the world. An impoverished Sri Lankan 17 yr old with $200 netbook could write the next killer app for Bitcoin. And the marketplace's hyper competitive nature, with almost no barriers to entry, will tend to produce brilliant products and services but these may be months away.

You know, you're right.  I forgot about this.  And the low barriers to entry are yet another great asset of Bitcoin.  In fact, Bitcoin lowers barriers for *all* trade, but just those interested in Bitcoin-related business.  An all-around win.  And yes, some 18-year-old Bangladeshi with a $150 netbook could kick all of our asses on this and become the next Bill Gates.  Unlikely, but entirely doable.  It will be an interesting year, that's for sure.

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July 07, 2011, 06:34:44 PM
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Exactly. What the skeptics miss is that the fundamental problem has been solved: decentralized digital money. All of the other problems (hard to use, pseudonymity instead of real anonymity, etc.) are not fundamental; they are opportunities in disguise.
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July 07, 2011, 06:44:06 PM
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I'm pretty skeptical of Bitcoin's chances at this point.  Not because the underlying technology isn't sound, but because it's been completely co-opted by speculators and "the USD is just, like, paper man!" doomsday nutballs.  I think the problem lies with the mining algorithm:  it's a great idea to use mining to incentivize peer to peer participation in the payment processing network, but the model of exponentially-increasing difficulty is just foolish.  A model where participants earn a share of transaction fees based on the number of actual transactions they help process would be far less wasteful of electricity and CPU cycles and could potentially encourage far broader adoption of the Bitcoin software, thus paving the way for it to be used as an electronic currency by more than a handful of enthusiasts.  There wouldn't be large windfalls for mining, but that's a good thing.  The windfalls and speculation are what are going to kill it as a currency -- right now it's basically a mix between a commodity and a penny stock, which creates a large barrier to entry from anyone not trying to make a fast buck off it before it collapses. 

I still think it's an interesting project that will be used as a model by future economists, but I'd be very uneasy if I had a large amount of money tied up in them at this point. 


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July 07, 2011, 07:09:34 PM
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I'm pretty skeptical of Bitcoin's chances at this point.  Not because the underlying technology isn't sound, but because it's been completely co-opted by speculators and "the USD is just, like, paper man!" doomsday nutballs.  I think the problem lies with the mining algorithm:  it's a great idea to use mining to incentivize peer to peer participation in the payment processing network, but the model of exponentially-increasing difficulty is just foolish.  A model where participants earn a share of transaction fees based on the number of actual transactions they help process would be far less wasteful of electricity and CPU cycles and could potentially encourage far broader adoption of the Bitcoin software, thus paving the way for it to be used as an electronic currency by more than a handful of enthusiasts.  There wouldn't be large windfalls for mining, but that's a good thing.  The windfalls and speculation are what are going to kill it as a currency -- right now it's basically a mix between a commodity and a penny stock, which creates a large barrier to entry from anyone not trying to make a fast buck off it before it collapses. 

I still think it's an interesting project that will be used as a model by future economists, but I'd be very uneasy if I had a large amount of money tied up in them at this point. 



1) There is nothing wrong with speculators (so long as they aren't defrauding anyone) - they are merely individuals who try to predict future value, by putting their own money on the line. An efficient market is made by their actions, as they bring pricing signals forward in time. It's as important in Bitcoin as it is in the oil markets. But people HATE speculators!  Roll Eyes

2) The dollar IS just paper, man. It's an important philosophical, economic, and moral issue. Expressing antagonism toward a monetary system which is inflated at whim at the expense of those who are coerced into holding it is a very reasonable position to take, IMO.

3) Regarding mining, exponentially increasing difficulty is anything but foolish. You forget that one of the primary reasons for the number crunching (which you call wasteful) is to make it difficult for any computer or network of computers to manipulate the protocol. The longer Bitcoin operates, the more secure the blockchain becomes due to this dynamic. Not foolish.

At the core of your skepticism is, I think, a disapproval toward anyone who is able to obtain wealth without "hard work." Some miners will indeed make a killing from their early discovery of Bitcoin, and that doesn't sit well with you. You think it's "unfair." The irony, of course, is that in the same breath you defend fiat paper currencies which have for centuries enabled the politically connected to obtain incredible wealth through the process of inflation. Yet, it is not wealthy bankers profiting from the printing presses for whom you seem to have disdain - but rather a small group of tech-enthusiasts who first discovered what may become a revolutionary technology, and risked their own time and capital to invest in it.

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July 07, 2011, 07:39:33 PM
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A good skeptic should ask, "is the underlying technology/protocol of Bitcoin sound?" If it is, then all those tertiary issues will be solved over time because the marketplace wants to profit from the efficiency of frictionless-money.

There is too much profit to be made from a Bitcoin world for entrepreneurs to ignore such a revolutionary technology merely because they cannot yet purchase gasoline down the street.

I think the majority of Bitcoin skeptics who spend time on this forum are not skeptical about Bitcoin as a concept. Instead, they are skeptical about bitcoins holding their current valuations. However, these same skeptics might think future currencies based on the Bitcoin concept will be wildly successful. There is a big difference between the Bitcoin concept having long term value and bitcoins having long term value and skeptics tend to be aware of this difference. Skeptics may view the Bitcoin concept as revolutionary as search engines or social media but the skeptics are likely to think of Bitcoin as an Altavista or Myspace and imagine there will be lots of competitors that come and go with eventual leaders becoming dominant like Google and Facebook.
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July 07, 2011, 07:41:10 PM
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Exactly. What the skeptics miss is that the fundamental problem has been solved: decentralized digital money. All of the other problems (hard to use, pseudonymity instead of real anonymity, etc.) are not fundamental; they are opportunities in disguise.



Astrohacker - your last line is so true and absolutely inspiring...

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July 07, 2011, 07:44:44 PM
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Skeptics may view the Bitcoin concept as revolutionary as search engines or social media but the skeptics are likely to think of Bitcoin as an Altavista or Myspace and imagine there will be lots of competitors that come and go with eventual leaders becoming dominant like Google and Facebook.

Google, facebook, Myspace, are FREE services. People don't need to trust them. Using these services is like having a friend with benefits. Becoming a bitcoin user involves a little more commitment, a little more trust. In some cases, A LOT.

So I propose Bitcoin will not be abandoned as readily as you suggest. Bitcoin isn't a fickle adventure like some long-forgotten internet upstarts. Bitcoin's properties never change.
 
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July 07, 2011, 08:06:35 PM
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1) There is nothing wrong with speculators (so long as they aren't defrauding anyone) - they are merely individuals who try to predict future value, by putting their own money on the line. An efficient market is made by their actions, as they bring pricing signals forward in time. It's as important in Bitcoin as it is in the oil markets. But people HATE speculators!  Roll Eyes

I have no problem with speculators, but they will kill / have already killed Bitcoin as a currency.  Obviously, if there's money to be made, people are going to try to make it, so the trick is to set up the system so that speculation can't make it so unstable as to be unattractive to new adopters.  I have no idea how to do this, but whoever designs the next cryptocurrency had better be thinking about it.

Quote
2) The dollar IS just paper, man. It's an important philosophical, economic, and moral issue. Expressing antagonism toward a monetary system which is inflated at whim at the expense of those who are coerced into holding it is a very reasonable position to take, IMO.

Oh dear, I suspect you might be one of the nutter-butters I was referring to.  Here, write this down:  The USD isn't going anywhere.  It's not 1895, you don't need to trade your greenbacks for shiny metal anymore.  Controlled inflation is a good thing, not a bad thing.

It's puzzling to me that so many people involved with a cutting-edge electronic currency project are so economically primitive.

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3) Regarding mining, exponentially increasing difficulty is anything but foolish. You forget that one of the primary reasons for the number crunching (which you call wasteful) is to make it difficult for any computer or network of computers to manipulate the protocol. The longer Bitcoin operates, the more secure the blockchain becomes due to this dynamic. Not foolish.

It's completely foolish.  The actual horsepower needed to validate transactions is a tiny fraction of the horsepower currently being used to mine new blocks.  As for manipulation, the peer to peer transaction network would be far more secure if it were composed of a vast number of individuals with modest computing resources vs. a relatively small pool of dedicated mining clusters.  The choice of an exponential algorithm was arbitrary and is a huge barrier to scalability, since it requires massive hyperdeflation to scale up.  Which is a terrible expansion model for an electronic currency you expect anyone to voluntarily use.

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At the core of your skepticism is, I think, a disapproval toward anyone who is able to obtain wealth without "hard work." Some miners will indeed make a killing from their early discovery of Bitcoin, and that doesn't sit well with you. You think it's "unfair." The irony, of course, is that in the same breath you defend fiat paper currencies which have for centuries enabled the politically connected to obtain incredible wealth through the process of inflation. Yet, it is not wealthy bankers profiting from the printing presses for whom you seem to have disdain - but rather a small group of tech-enthusiasts who first discovered what may become a revolutionary technology, and risked their own time and capital to invest in it.
I couldn't care less about who made how much money on Bitcoins, I'm just giving my perspective as a casual miner who is dubious of the long-term viability of this project based on the underlying mechanics and current market conditions.  It wouldn't bother me to be proven wrong.

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July 07, 2011, 08:11:45 PM
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I have been following the electric car industry since the early 90s. There have always been people who would build an electric car in their garage or work with others to design the best electric car that they could figure out.

The skeptics always point out the whole thing of not being able to go more than 20 miles on a charge or the amount of time it takes to recharge your car or for those who were saying it was good for the environment they would be shot down by people talking about how most of the US electricity comes from coal.

All true in the early stages. And there are still the same downfalls but the potential is far beyond what it is today. The earliest cars were able to go 20 miles on a single charge. Newer cars are able to go 100 miles on a single charge. If the next generation of electric car takes the same jump you will have electric cars with a range of 500 miles, then over 2,000 miles...

We are in the stage of the 20 mile guy in a garage type of work. I can see 2 to 3 years down the road the big boys needing to start to integrate the use of Bitcoins in a few of their products just to test the waters as the percentage of use grows.

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July 07, 2011, 08:13:14 PM
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[...]
I still think it's an interesting project that will be used as a model by future economists, but I'd be very uneasy if I had a large amount of money tied up in them at this point. 

1) There is nothing wrong with speculators (so long as they aren't defrauding anyone) - they are merely individuals who try to predict future value, by putting their own money on the line. An efficient market is made by their actions, as they bring pricing signals forward in time. It's as important in Bitcoin as it is in the oil markets. But people HATE speculators!  Roll Eyes

2) The dollar IS just paper, man. It's an important philosophical, economic, and moral issue. Expressing antagonism toward a monetary system which is inflated at whim at the expense of those who are coerced into holding it is a very reasonable position to take, IMO.

3) Regarding mining, exponentially increasing difficulty is anything but foolish. You forget that one of the primary reasons for the number crunching (which you call wasteful) is to make it difficult for any computer or network of computers to manipulate the protocol. The longer Bitcoin operates, the more secure the blockchain becomes due to this dynamic. Not foolish.

At the core of your skepticism is, I think, a disapproval toward anyone who is able to obtain wealth without "hard work." Some miners will indeed make a killing from their early discovery of Bitcoin, and that doesn't sit well with you. You think it's "unfair." The irony, of course, is that in the same breath you defend fiat paper currencies which have for centuries enabled the politically connected to obtain incredible wealth through the process of inflation. Yet, it is not wealthy bankers profiting from the printing presses for whom you seem to have disdain - but rather a small group of tech-enthusiasts who first discovered what may become a revolutionary technology, and risked their own time and capital to invest in it.

Well-said.

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July 07, 2011, 08:25:00 PM
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Exactly. What the skeptics miss is that the fundamental problem has been solved: decentralized digital money. All of the other problems (hard to use, pseudonymity instead of real anonymity, etc.) are not fundamental; they are opportunities in disguise.



Astrohacker - your last line is so true and absolutely inspiring...



Skeptics don't necessarily miss the fundamental problem that has been solved. Skeptics can also see how Bitcoin's issues can be seen by people as opportunities in disguise  . . .  which includes people inspired to create a better Bitcoin-like system.
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July 07, 2011, 08:50:03 PM
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I'm Bob Dole, and I approve this message.
That made me LOL so hard. Cheesy But if I'm brutally honest with myself, I would say Bitcoin has a 35% chance of failing. That's just a wildly speculative guess though, based on my understanding of how it works, which isn't very advanced. I do believe a secure crypto-currency is completely possible. The question is, will Bitcoin be that currency. It already has quite a large sum of real dollars invested in it, so a sudden failure would be quite catastrophic.

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July 07, 2011, 09:34:04 PM
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I have no problem with speculators, but they will kill / have already killed Bitcoin as a currency.  Obviously, if there's money to be made, people are going to try to make it, so the trick is to set up the system so that speculation can't make it so unstable as to be unattractive to new adopters. 

Speculators make markets MORE stable, not less. Or perhaps I should rephrase that - they make markets more rational, because when a speculator sees a price he deems "irrational" he can take a financial position in the other direction and profit if he's correct. This incentive encourages people to critically asses the market in question. A market in which speculation was difficult would be a market I'd be less confident in.


Quote

Oh dear, I suspect you might be one of the nutter-butters I was referring to.  Here, write this down:  The USD isn't going anywhere.  It's not 1895, you don't need to trade your greenbacks for shiny metal anymore.  Controlled inflation is a good thing, not a bad thing.

It's puzzling to me that so many people involved with a cutting-edge electronic currency project are so economically primitive.

Protip: name-calling is unnecessary. I'm not going to call you a "nutter-butter" just because you believe economies should be centrally-planned.

People have this impression that the dollar has been around for hundreds of years and has proven its trustworthiness. They do not realize that it has only been a mere 35 years since it was disconnected from gold. The USD, in its current form, is only 35 years old, and given the fact that the US Gov is in debt far beyond what it can repay without printing the money (especially if interest rates rise), and that other nations are growing increasingly skeptical about its place as the world reserve currency, you will see the dollar in a long-term decline over the coming two decades. This decline could turn into a collapse very quickly as the vast sums held in reserves are sold by nations who increasingly prefer to trade without US dollars.

And let us not forget that the US is already defaulting on its debt by buying its own Treasuries with printed dollars from the Federal Reserve (euphemistically referred to as "quantitative easing"). It is paying back creditors with devalued currency - that is a default by any honest assessment.

It was not so long ago as 1895 as you jest that the Dollar was backed by gold. It was the 1970's, good sir. And so you're certainly welcome to put your trust in politicians who understand nothing about economics - for god's sake they listen to Bernanke who was unable to predict the greatest housing collapse and recession in 80 years - but I do not trust them as you do.

You make fun of gold, because you do not understand why it is good money - you do not understand why it is preferable to paper fiat. You claim that "controlled inflation" is a good thing... not realizing that what you advocate amounts to "controlled theft of property" by the Federal Reserve for the benefit of the US Government and at the expense of all holders of US Dollars.  Money itself - the very core commodity of an economy - is a monopoly product and service of the US Government, and yet school children spout that we live under free-market capitalism?! How silly is this! The price of money itself (interest rate), is fixed! 

You call me "economically primitive" because I think money, like all goods and services, should be chosen and priced by the free market, instead of by politicians? That's primitive? Is someone who believes in gravity primitive, merely because such a theory is hundreds of years old? The laws of markets, like those of apple trees, do not change over time. And do you think your beloved fiat is a new invention? Governments have been inflating money supplies for thousands of years, trying to bolster the wealth of a nation by printing it. THAT, in my opinion, is not only primitive but highly immoral and profoundly destructive.

You admit to being "puzzled" that so many Bitcoin advocates are "economically primitive." It would do you well to check your premises.
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July 07, 2011, 10:19:54 PM
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Skepticism is a healthy attribute. And to be brutally honest, of course Bitcoin is likely to fail - all new things are likely to fail. We're all engaged in a wildly speculative and risky venture, here. Even conservative ventures usually fail, and this is anything but conservative.
However, skeptics seem to be fixated on Bitcoin as it exists in the immediate present and this is severely damaging their objective analysis. They see that Bitcoin is hard to carry in one's pocket. They see that PC-based wallets are vulnerable. They see that one cannot yet buy gasoline and bread with Bitcoins.  And seeing these problems, they then assume such issues will always remain and thus are hesitant to believe in the Bitcoin idea.
And so I don't mean to be rude, or draw silly comparisons, but it seems this is a bit like observing the Wright brothers, and their floppy, ridiculous plane, and then dismissing air travel because of all the problems. "Well, only one person can fly on that craft," "Well, it can't go much faster than a car," "Well, there is a high danger of crashing and dying," "Well, it is much too expensive to build something so useless." "Well, these are way less convenient and reliable than a horse." "Well, this is nothing but a dangerous toy," "Well, man was not meant to fly," etc. As I've mentioned elsewhere on this forum, my great-grandmother's college science textbook assured her that man would never be able to go to space, because there was no air.
Friends, allow the free market to observe these problems and it will tend to solve them. Can't easily reimburse your friends for drinks using Bitcoin? BAM - Brain Armstrong's Android app is released yesterday and looks brilliant. Tired of using only one vulnerable exchange? BAM - a half dozen more have sprung up in the past month. No easy way to accept Bitcoin payments on your website? BAM - Bit-pay.com appears.
A good skeptic should ask, "is the underlying technology/protocol of Bitcoin sound?" If it is, then all those tertiary issues will be solved over time because the marketplace wants to profit from the efficiency of frictionless-money.
There is too much profit to be made from a Bitcoin world for entrepreneurs to ignore such a revolutionary technology merely because they cannot yet purchase gasoline down the street.
As Wayne Gretzky said, "look where the puck is going, not where it is."

I think you summed it up quite nicely. The skeptics all focus their points on non issues. Things that will be taken care of by free market exposure, but Of-course, they don't see it that way. They are ingrained of normalcy, and different scares people. You just can't expect regular folks who lack basic economic 101 knowledge to jump on board. If we want to tap the mindless zombie market(people who buy videos games because of the box cover or commercials), we will need proof of success, and that only comes with time.
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July 07, 2011, 10:30:40 PM
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<snip] but the model of exponentially-increasing difficulty is just foolish.  A model where participants earn a share of transaction fees based on the number of actual transactions they help process would be far less wasteful of electricity and CPU cycles and could potentially encourage far broader adoption of the Bitcoin software[snip>
It is feared that this scheme you propose would lead to an exponentially fast increase in the number of bitcoins, with a sudden stop at 21 million. The current scheme is much less violent.
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