Why Bitcoin changed the world... and its price will crash

[CryptoPhilanthropist]

All of us are tired of hearing the same weak arguments made against Bitcoin by reporters and mainstream economists who don't understand the fundamentals of cryptocurrency. Two weeks ago, I began my own exhaustive research into BTC valuations, because I was trying to determine whether to make a significant investment after the China-induced price dip. Unfortunately, I have come to believe that Bitcoin is significantly overvalued.

In order to understand why, we need to recognize that Bitcoin challenges two distinct aspects of the existing financial order: (1) the issuance of banknotes and (2) the use of centralized clearinghouses to transfer funds electronically. The vast majority of public attention has been focused on the first factor. The perception of Bitcoin as a deflationary alternative to fiat currencies has contributed to its ideological popularity and caused many people to drive the price up by hording it like gold.

But what is actually revolutionary about Bitcoin is the second factor: the creation of an alternative electronic network for authenticating transactions. That network has been extremely secure and reliable, while offering two giant advantages over legacy competitors like PayPal: transparency and irreversibility. For the first time ever, there is a form of online payment that is as reliable as cash. Clearly, that was an unmet need in the marketplace, and it is the most thrilling and satisfying part of conducting transactions with Bitcoin.

The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.

The primary argument in Bitcoin's favor is the network effect — i.e., that it will obtain an insurmountable advantage by being the first cryptocurrency accepted by most merchants. But once merchants understand how to integrate cryptocurrencies into their businesses, they won't have any incentive to remain loyal to BTC instead of also accepting the 2nd or 3rd most popular cryptocurrencies. That will only require a Bitpay clone to make it easy and remove most of the risk.

Worse, Bitcoin's design actually creates a sort of 'reverse network effect' in which its success makes it impossible for most miners to participate in authenticating transactions. The use of alternative proof-of-work algorithms to allow CPU mining of alternative coins will allow them to claim a potential security advantage by building diverse networks full of competing nodes. It also remains to be seen whether the absence of any proof-of-stake algorithms will come to be viewed as a significant flaw in Bitcoin. Even if Peercoin's divided block structure proves suboptimal, there may be other ways to implement proof-of-stake that increase security while also decreasing future transaction costs by limiting energy expenditures.

Some believe that the dominance of ASIC rigs in BTC mining is advantageous because it increases the expense of interfering with the BTC network. But competing currencies can make themselves attractive to the same ASIC miners simply by adopting the hashcash proof-of-work standard.

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies. Those will not be ideologically appealing to most people who post here, but the business model makes perfect sense. The fear that the public and media have about BTC is that it is an attempt to create wealth out of thin air. Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine. These bank-backed cryptocurrencies would look to many like the 'best of both worlds': the guaranteed value of a traditional bank note with the transparency and irreversibility of distributed block-chain logs.

The nature of all attempts to disrupt existing power structures in society is that the elites first resist and then join and co-opt. Bitcoin will go down in history as the first proof-of-concept for distributed financial authentication, which is going to emerge as a serious competitor to PayPal and its ilk. But the financial establishment is not going to sit back and accept the idea that a bunch of anarcho-libertarian first adopters are entitled to be millionaires. The very things that attract most people on this forum to BTC, like its edginess and anti-authoritarian image, will be its downfall when it has to compete for mass market support against bank-issued cryptocurrencies that will pay miners/stakeholders handsomely for their authentication services.

These are realities that people on Wall Street know and believe. But they aren't being priced into BTC right now because there is no real way to short the currency's value, at least not with the scale and reliability that hedge funds demand. If there were, I guarantee there would be a significant amount of money willing to take the opposite side of bets against the BTC community's true believers.

Ultimately, the entire Bitcoin story will reinforce the truest aphorism of all: "Nothing is ever as good or as bad as it seems."

[1714238919]

1714238919

[1714238919]

1714238919

[1714238919]

1714238919

[MikeH]

there have been many technologies that have won out against competitors not because they are the best but simply because everyone else used it.. as long as bitcoin adapts to changing requirements I don't see a huge move to alternatives.

oh and the main reason bitcoin is so popular is because there is no trust for financial institutes so that prediction is way off.

[Peter R]

Well written post, CryptoPhilanthropist.

Some questions, though:  You mentioned that the bank's crypto-currency would be backed by gold or fiat currencies.  How exactly would they be backed?  Would the banks maintain a peg, such that I could exchange 10 of my JPMorgan coins for $10 USD?

Secondly, you mentioned that the coin would still use decentralized mining (you mentioned CPU mining).  Does this coin still have a block reward to entice miners to mine?  Now, if the coins are backed like you said by fiat currency, where does the fiat currency come from to back the newly mined coins?  Or does the bank just adjust the peg in order to revalue the coin as needed?

Thirdly, do you think if banks were in control of such systems, then they may be required by law to add AML/KYC features such that irreversibility and world-wide transfers are difficult/impossible?  For some reason, I just have this gut feel that any "controlled coin" would not be nearly as free as bitcoin, because there is a central point that governments could regulate in order to extract fees/taxes and reverse "bad" transactions.  

[MikeH]

Some questions, though:  You mentioned that the bank's crypto-currency would be backed by gold or fiat currencies.  How exactly would they be backed?  Would the banks maintain a peg, such that I could exchange 10 of my JPMorgan coins for $10 USD?

they would say it's backed by gold but will refuse to be audited - it'll never happen, there'd be no support because most bitcoin holders know these pricks should be in jail.

[ak84]

The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.

This is a specious argument. There are other cryptocurrencies that COULD offer the same functionality, but without bitcoin's marketing, brand name, momentum, and established infrastructure in its miners and its holders. So then they don't really offer the same advantage after all. A currency 's value is not solely determined by its technology and features.

[BTCisthefuture]

Only read the first couple sentences but   1) I would agree that right now bitcoin is overvalued in comparssion to how much adoption and usage it currently  has .... however......  2) Bitcoin has a ton of potential in the future and it's still in such it's early stages that I don't think it's unreasonable to think in coming years bitcoin could be more properly   valued and still be quite a bit higher than it is currently.

So even if it is overvalued currently, a lot of people would argue they don't care because they are investing based on it's valued 5-20 years down the road.

[BTCisthefuture]

The problem is that in the future there will be no intrinsic reason for Bitcoin to be the unit of currency used to conduct financial transactions using distributed blockchains. Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits. This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.

This is a specious argument. There are other cryptocurrencies that COULD offer the same functionality, but without bitcoin's marketing, brand name, momentum, and established infrastructure in its miners and its holders. So then they don't really offer the same advantage after all. A currency 's value is not solely determined by its technology and features.

Very well said.... when bitcoin already has the brand name,  literally hundreds of millions are being invested into startups and building out infrastructure and adoption.  It's doesn't seem all that likely bitcoin would suddenly dissappear and everyone takes all that time and effort spent growing out bitcoin only to do it a second time around for something that isn't that much different.

On the flipside of things one could argue that if a large company like say a Google was to step in and create their own world cryptocurrency it could still have the potential of over shadowing bitcoin if it was done soon enough that bitcoin is still so small. Based on the same reasons you mentioned, the brand name and in the case of google actually having the finincally and technical and business support to actually make adoption happen much quicker than the more grass roots bitcoin community.  Of course something like tht would probably have to happen sooner than later. Once bitcoin adoption grows to a certain level it would be very hard to switch to something else.

[jonanon]

Very interesting read although I would have to disagree with some of the main fundamentals of the arguments you have put forward.

However only time will tell.

 

[epcritmo]

I agree strongly with the arguments about infrastructure. Just to add in another analogy and comparison; currently, facebook has such a large userbase and guaranteed infrastructure that even the internet giant Google is finding it very hard to implement its Google+ to compete. I'm sure I'm like many more; I'm on facebook, everyone I know uses it, it does the job I need it to do, why would I choose to move to google+. Mybe the same will be true for bitcoin.

[ISAWHIM]

The value of the coin is irrelevant, as long as everyone agrees it has value and can be exchanged. (Agrees to "a value", for an exchange.)

But I agree, for me, that the current value people are asking for is too high. If you believe that too, feel free to give me your coins for half the price they say it is worth. I will take all you have to offer, up to $30,000,000 worth.

Money is nothing more than credit, backed by nothing more than a promise from a bank, that promise is, "I will be happy to take this from you, and give you less than you gave me, after I tell your government that you are in possession of these funds."

They will also happily give your money to some stranger, in the hope that the stranger gives them back more than the bank let them borrow. Thus, extending the promise of, "I will be happy to take more of this from you, then what we had originally given you." (Slightly modified, but it is still the same promise.)

The future of BTC is also over-rated, since BTC is not the only digital-coin with the same "limited" individual attributes. So, the illusion that digital-coins are limited in quantity, is just that. Only the specific coins are limited, but just like a bank, endless coins can be created by just making another coin to split the value or hide the value. So in that aspect, BTC is a failure. (That was one of the many issues/flaws with the coin from the beginning.)

Will it replace money? No, just as credit-cards and ATM cards have not replaced money. Because you can easily launder money, and hide it, and keep its transactions anonymous. BTC transactions are not anonymous, only the individuals identity of ownership is anonymous. It is not the same thing. You can actually send physical money anonymously, and no-one would ever know you sent it to anyone, or who sent it, other than you. Well, the person who gets it, would know they got it, and might record it, but they would not know who it came from. As opposed to sending a BTC, which records the send and the receive.

Loved reading what you wrote, all of you. Great perceptions.

BTC (digital-coins), with limited production, have a purpose in society. To that, BTC is a 100% winner. Even with all the short-falls. Every currency has a short-fall. So it is right up on par with the rest.

[BittBurger]

Alternative cryptocurrencies like Litecoin and Peercoin offer the same advantages over traditional means of transferring funds electronically. The fact that these currencies trade like pennies compared to Bitcoin indicates that the current BTC price has more to do with the perception that BTC is a store of value than it does with its actual technological merits.

Disagree.  BTC's current value relates to the accurate prediction that it was first on the scene, is currently the most widely adopted, and is slated to have hundreds of millions more poured into it, in the future.  The mere existence of copycats doesn't mean the first version is automatically the same value as the copycat.  That logic doesn't resonate with me at all.  

That would be like saying a Led Zeppelin cover band could sell the same number of albums as Led Zeppelin.  

This value disparity can only be justified if BTC is essentially preordained to remain the world's dominant cryptocurrency.

That's exactly why its justified.  Not sure what predordained has to do with it.  What really matters is moreso adoption.

-Burger-

[jaked]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies.

What do you mean by "backed"?
Backing a virtual currency by a physical commodity implicitly means that the "backer" has the power to generate coins as he wishes.
Cryptocurrencies don't need any tangible backing, as they're backed by mathematics.

Sure, financial & political institution will try to ride Bitcoin's success, and create their own versions of "crypto" "currencies", but it won't be nor "crypto" nor "currencies".
As soon as people understand the difference between trust and proof, they'll say goodbye to the fiat schemes.

[marcus_of_augustus]

OP ... wants to buy in cheaper?

[Michael Robinson]

Blah blah blah, Bitcoin is finished, blah blah blah, Bitcoin is inevitably going to fail, blah blah blah...

Why do so many random people suddenly have an "epiphany" and post crap like this over and over and over and over and over again, it got tiresome 4 years ago.  

[marcus_of_augustus]

Blah blah blah, Bitcoin is finished, blah blah blah, Bitcoin is inevitably going to fail, blah blah blah...

Why do so many random people suddenly have an "epiphany" and post crap like this over and over and over and over and over again, it got tiresome 4 years ago.  

... economic incentives are strong ... we get a fresh wave of them after every "bubble crash", i.e new 10-folding adoption spike.

Sometimes the variations on the theme can be entertaining, depending on the personalities involved, the latest batch seem quite banal (might be the banksters, accountants and lawyers showing up?)

[pening]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies.

What do you mean by "backed"?
Backing a virtual currency by a physical commodity implicitly means that the "backer" has the power to generate coins as he wishes.
Cryptocurrencies don't need any tangible backing, as they're backed by mathematics.

Sure, financial & political institution will try to ride Bitcoin's success, and create their own versions of "crypto" "currencies", but it won't be nor "crypto" nor "currencies".
As soon as people understand the difference between trust and proof, they'll say goodbye to the fiat schemes.

If institution X created a cryptographically secured proxy for gold, $, wheat futures or whatever, and its widely available and accepted, its a cryptocurrency.  Thats the OP's premise, that the primary advantage of Bitcoin is the secure, trusted, transfer of funds.  Now, many would not agree this is the only purpose and say there are alot of other reasons, but its a fair point it is one of the major advantages.  Take that advantage and replicate it in to some thing that is trusted and easy to access/obtain/reimburse etc and you have something which will possibly have larger mainstream acceptance than Bitcoin.  A large amount of the value is based on speculation that Bitcoin is destined to become common use and therefore highly valuable (due to limited supply) and you lose that speculative value if a common replacement is in use.  

[waxwing]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies.

I'm afraid you still don't quite get it (you're not alone!) You cannot back a cryptocurrency with gold or fiat. You can create an electronic form of money backed by gold or fiat. We already have that. Just open your internet banking software to see it.

The whole reason a cryptocurrency is attractive is because it has no third party. That is what brings its cost down to near zero and, more importantly, makes it essentially impossible to control or regulate.

If you try to create an asset-backed digital instrument, you need someone or something to keep that backing stable and ensure/enforce it. You need a third party. We've already seen such systems, and they are entirely different to Bitcoin.

[marcus_of_augustus]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies.

What do you mean by "backed"?
Backing a virtual currency by a physical commodity implicitly means that the "backer" has the power to generate coins as he wishes.
Cryptocurrencies don't need any tangible backing, as they're backed by mathematics.

Sure, financial & political institution will try to ride Bitcoin's success, and create their own versions of "crypto" "currencies", but it won't be nor "crypto" nor "currencies".
As soon as people understand the difference between trust and proof, they'll say goodbye to the fiat schemes.

If institution X created a cryptographically secured proxy for gold, $, wheat futures or whatever, and its widely available and accepted, its a cryptocurrency.  Thats the OP's premise, that the primary advantage of Bitcoin is the secure, trusted, transfer of funds.  Now, many would not agree this is the only purpose and say there are alot of other reasons, but its a fair point it is one of the major advantages.  Take that advantage and replicate it in to some thing that is trusted and easy to access/obtain/reimburse etc and you have something which will possibly have larger mainstream acceptance than Bitcoin.  A large amount of the value is based on speculation that Bitcoin is destined to become common use and therefore highly valuable (due to limited supply) and you lose that speculative value if a common replacement is in use.  

Want to quantify such speculative prognostications?

There are 12e10^6 in existence, at least 25% which are not in circulation, somewhere between 1-10 million users seems an OK approximation ... =>the average bitcoin holder has ~ $1000 in bitcoin ...

ummm doesn't sound all that speculative to me, more like pocket change found down the back of the sofa, maybe the cookie jar cash kitty has gone into bitcoin.

[jaked]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies.

What do you mean by "backed"?
Backing a virtual currency by a physical commodity implicitly means that the "backer" has the power to generate coins as he wishes.
Cryptocurrencies don't need any tangible backing, as they're backed by mathematics.

Sure, financial & political institution will try to ride Bitcoin's success, and create their own versions of "crypto" "currencies", but it won't be nor "crypto" nor "currencies".
As soon as people understand the difference between trust and proof, they'll say goodbye to the fiat schemes.

If institution X created a cryptographically secured proxy for gold, $, wheat futures or whatever, and its widely available and accepted, its a cryptocurrency.  Thats the OP's premise, that the primary advantage of Bitcoin is the secure, trusted, transfer of funds.  Now, many would not agree this is the only purpose and say there are alot of other reasons, but its a fair point it is one of the major advantages.  Take that advantage and replicate it in to some thing that is trusted and easy to access/obtain/reimburse etc and you have something which will possibly have larger mainstream acceptance than Bitcoin.  A large amount of the value is based on speculation that Bitcoin is destined to become common use and therefore highly valuable (due to limited supply) and you lose that speculative value if a common replacement is in use.  

How can an algorithmic artifact be a proxy for physical gold?
Someone has to update the network manually on the amount of gold in existence, since the digital network can't figure it itself.

This means: trust.

Trust & cryptocurrencies don't mix.

[TTBit]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

[marcus_of_augustus]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

This ... I think most people have been undervaluing bitcoin since day one mostly because they are innumerate, particularly when using large numbers and dimensional analysis for calculations assessing relative significance. The amount of uses already out there for bitcoin, in black, gray and white markets is quite staggering considering the relatively small amount of total users (even a latent bitcoin holder is a user).

Another property of the network effect is that the more users that use the network the more unit value it has to the users already connected .... 2 fax machines are better than 1, 3 is better than 2, 5 million is better than 1 million, etc, i.e. bitcoin becomes more valuable per user the more users that exist, the price will eventually reflect that when we go through the super-exponential valuation/growth phase (vertical) before approaching the saturation plateau.

No doubt we will hear anguished screams of "bubble!" and "Crash to zero!" warnings the whole way up by those who are outside looking in.

[Aki4real]

Will it replace money? No, just as credit-cards and ATM cards have not replaced money. Because you can easily launder money, and hide it, and keep its transactions anonymous. BTC transactions are not anonymous, only the individuals identity of ownership is anonymous. It is not the same thing. You can actually send physical money anonymously, and no-one would ever know you sent it to anyone, or who sent it, other than you. Well, the person who gets it, would know they got it, and might record it, but they would not know who it came from. As opposed to sending a BTC, which records the send and the receive.

+1

[BigJohn]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

[pening]

How can an algorithmic artifact be a proxy for physical gold?
Someone has to update the network manually on the amount of gold in existence, since the digital network can't figure it itself.

This means: trust.

Trust & cryptocurrencies don't mix.

institution X assigns $1bn gold or other asset to BullionCoin. They premine 10million coins and sell those coins. you now have a cryptocurrency based on gold.  advantage?  you can trade those coins over the internet and have them redeemed the other end for the asset.  (yes, i'm aware this is exactly the same as the foundation of early banking)

Trust?  yep, but one needs to understand that 99% of the population will more likely trust this proposition tomorrow than Bitcoin.  I predict we will see this, and not even backed by gold but simply cash.  If there's a market to deliver this type of secured money transfer ability (which no one advocating Bitcoin is going to disagree with, shirley?), then we have to expect sooner or later an organisation will deliver it without all that messing about with a uncontrolled, decentralised network, in their view.

[marcus_of_augustus]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

[BlueNote]

Cryptocurrency is not designed to be backed by anything. I don't know how a bank would do that, or deal with a distributed network. This whole design is about cutting out the banks and trusted third parties. The software becomes the issuer and trust in the accounting is created through proof-of-work and cryptography.

The banks could issue their own cryto-cash, but they'd have to get regulatory approval. You would withdraw cash under their proprietary system from their centralized server, and it could then be traded anonymously just like cash. Anyone who wants to cash out of the token would take it back to the issuing bank for redemption.

This would actually be a great innovation. This is different from a Paypal-like arrangement where people all have accounts at one bank and the service just moves money between them. This would be actual electronic dollars which are allowed to trade outside the dollar system and then come back like cash would. Banks would not know the path it traveled, so it would be great for privacy like cash but more useful. That kind of product could compete with Bitcoin.

I do agree that the establishment may co-opt Bitcoin in some ways. Wall Street will probably want to trade the heck out of it, short it, etc. The fed has UNLIMITED funds with which to play in markets, and Bitcoin is a very small market with great potential for manipulation every which way. They may not co-opt it in such dark ways, however. They may just find a way to integrate it into their services and charge fees. That seems like the logical thing to do. They don't have to fight it. They can just tame it and make it work for them rather than against them. Bringing it into the fold would help the government to collect taxes on it as well. Many people would want to have Bitcoin seamlessly integrate with their bank accounts, so there's a lot of leverage the establishment has just from their economic power. They may not have to get nasty at all in order to keep Bitcoin under their wing.

[BigJohn]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

Can you be more specific? Cause otherwise it sounds like you're talking shit. Don't get me wrong, I'd love to be proven wrong.

Yeah, I am saying someone will come along with something so similar to Bitcoin, and it will be banks and governments, and it will make Bitcoin obsolete. I said in my example that "Even though the fundamental technology hasn't changed all that much since the 80s", which it seems you've missed, the internet of today isn't the internet of the yesteryears. The tech is very similar, or even the same, but the final product isn't.

In the cryptocurrency world, things like Litecoin and Peercoin prove this point. It's easy enough to take the basic tech and build something extra on top of it. And the final product is Bitcoin-based, but it is not Bitcoin itself. Much like how the server that runs this forum is running the same technology as the first linked-up computers back in the day, but it is not those exact computers.

The leap from an Altcoin to a government/bank-backed coin really doesn't take that much imagination.

[marcus_of_augustus]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

Can you be more specific? Cause otherwise it sounds like you're talking shit. Don't get me wrong, I'd love to be proven wrong.

Yeah, I am saying someone will come along with something so similar to Bitcoin, and it will be banks and governments, and it will make Bitcoin obsolete. I said in my example that "Even though the fundamental technology hasn't changed all that much since the 80s", which it seems you've missed, the internet of today isn't the internet of the yesteryears. The tech is very similar, or even the same, but the final product isn't.

In the cryptocurrency world, things like Litecoin and Peercoin prove this point. It's easy enough to take the basic tech and build something extra on top of it. And the final product is Bitcoin-based, but it is not Bitcoin itself. Much like how the server that runs this forum is running the same technology as the first linked-up computers back in the day, but it is not those exact computers.

The leap from an Altcoin to a government/bank-backed coin really doesn't take that much imagination.

No, it is you who is talking shit.

Learn something, just a little would be a start, about technical networking protocols. Nuff said.

[BigJohn]

Ok so I'm wrong because... I just am?

Good argument old chap.

[marcus_of_augustus]

Ok so I'm wrong because... I just am?

Good argument old chap.

No, you are wrong because you don't have a clue 

That much is obvious, chap.

[BittBurger]

It's funny how *everyone* talking trash, is a new registrant here.  Fewer than 100 posts.

My estimation:  They "discovered" bitcoin a few months ago, googled for "Bitcoin Forums".  

Found this one, signed up, and felt motivated to share their pearls of wisdom with this community.

So here they are, all with 11 posts, 38 posts, 85 posts ... telling us why Bitcoin will fail.

My guess is its a bunch of self proclaimed economic experts, stock guys, and others in the old school obsolete finance world.

Just something I've noticed.  Obviously there are exceptions.

-Burger-

[frito]

All of us are tired of hearing the same weak arguments made against Bitcoin by reporters and mainstream economists who don't understand the fundamentals of cryptocurrency. Two weeks ago, I beg.......
.....yadaya...
These are realities that people on Wall Street know and believe. But they aren't being priced into BTC right now because there is no real way to short the currency's value, at least not with the scale and reliability that hedge funds demand. If there were, I guarantee there would be a significant amount of money willing to take the opposite side of bets against the BTC community's true believers.

Ultimately, the entire Bitcoin story will reinforce the truest aphorism of all: "Nothing is ever as good or as bad as it seems."

Mining fiat or gold based crypro currency?! really?!

[leeo]

If the argument against Bitcoin is that there is no physical backing to the rare numbers, consider the following:

I can envision a Distributed Autonomous Corporation [ ref www.letstalkbitcoin.com/bitcoin-and-the-three-laws-of-robotics ] that permits holders of slabbed gold or silver coins [ ref http://coins.about.com/od/coinsglossary/g/slabbeddefined.htm ] to sell covered calls on these assets, denominated in BTC.

One of the arguments against holding gold coins is that the money in this form, though it has no counterparty risk, has no associated income other than capital gains.  This would provide the holder of the gold or silver asset an interest income that is genuinely market set.

To the argument that there is no physical backing to BTC, simply purchase a few covered calls to guard against a BTC crash.  A critical mass of BTC to Au or Ag coins in the form of enforceable options would serve as a ballast, the way a genuine gold backing has to United States Dollars before the Federal Reserve Act.  --LeeO

[justusranvier]

Ok so I'm wrong because... I just am?

Good argument old chap.

Try having a discussion with experienced neurosurgeons about the pros and cons of different techniques without even having gone through medical school and I bet you'd get the same response.

[BigJohn]

Are you seriously comparing neurosurgery to TCP/IP? Really?

And how do you know what I do and do not know?

It's amazing how humans are always certain that if the person they're talking to disagrees with them, then surely that person must be stupid. It's unimaginable that you may just be slightly wrong.

The funny thing is that the point of disagreement is actually a relatively minor one. I wasn't even saying someone is fundamentally wrong about some major thing. Just a minor point that I happen to disagree with. But it's so unimaginable to you that you could be wrong on even the slightest point, that surely you must be talking to a complete retard. So much so that I'm asking for him to just try and explain to my feeble mind why I'm wrong, but that's too much of a bother to such an intelligence that can grasp BOTH neurosurgery and TCP/IP. Two of the most complicated notions humanity has ever come up with.

[proton]

Any institution can create a form of cryptocurrency.  It does not have to be a large financial institution.  Amazoncoin is one example.  All of these new currencies would require trust in that institution.  These might work with their customers, but it is hard to see they would develop a universal appeal.  For example, why would you go and buy, say AliBaba's Alicoins, JP Morgan's JPcoins or Sumimoto's Sumicoins, which you can't use elsewhere? If they are backed by something like gold, it is still a claim, you would not know if they are actually backed or not.  You are still taking the counterparty risk in financial lingo.

The real threat to universal adoption of a decentralized cryptocurrency comes from the States.  Each State might develop its own currency, may rule it as fungible with their paper currency.  Such as ChinaCoin, Ruscoin, USAcoin....They have the power to enforce the use of these while ruling Bitcoin etc. illegal. 

[undeadbitcoiner]

Only read the first couple sentences but   1) I would agree that right now bitcoin is overvalued in comparssion to how much adoption and usage it currently  has .... however......  2) Bitcoin has a ton of potential in the future and it's still in such it's early stages that I don't think it's unreasonable to think in coming years bitcoin could be more properly   valued and still be quite a bit higher than it is currently.

So even if it is overvalued currently, a lot of people would argue they don't care because they are investing based on it's valued 5-20 years down the road.

+1

The More Demand in Current Future and the Less Supply Capacity will raise price much more.

[Peter R]

When people were connecting computers together in the 1980's, they didn't have the goal of the internet as we know it now, much less websites such as Facebook or Twitter. It was clear that the value of two computers connected together was greater than two computers not connected, so it was done. Protocols were written which are still in use today. Today, there appears to be a value in a public ledger, otherwise it wouldn't be done. The early adopters of the internet failed to see Facebook.com and Twitter.com, but that doesn't mean they didn't see value at the time.

But this is exactly the point the OP was making.

Essentially the internet we have today is not the internet of two computers connected together back in the 1980s. Remember a few years ago when they started calling it Web2.0? That was when sites came up where the users themselves were the content. Youtube and whatnot. Even though the fundamental technology hasn't changed all that much since the 80s, the nature of the internet itself changed significantly, to the point where it's really not the same thing anymore.

All the OP is saying, and I've been saying the same thing, is that the tech itself is amazing, but Bitcoin itself will probably not be the currency of the future. Much like connecting two computers together in the 80s is awesome, but those two specific computers connected together aren't the internet of today per-se.

Some other public ledger will likely come up, either an Alt-coin, or something backed by the 1% through a bank, that will do what Bitcoin itself is trying to do. Essentially Bitcoin is just a proof-of-concept. The examples of Litecoin and Peercoin aren't to say that those two specific ones will dethrone Bitcoin. Just that they manage to offer something similar, yet different enough, that it seems likely that something of the sort will come up in the future.

People who are not that technically aware often make this mistake that the Internet now is somehow different than it was 'back then' ... it isn't, some of the the layers above, the facade that the users know is different, underneath it is still TCP/IP (or UDP) and packet technology. Bitcoin, the network is the TCP/IP for internet money.

You are saying that someone will come along with something so different to bitcoin, the network protocol, and it will be banks and governments and it will make bitcoin obsolete? That's just simply ignorant of how network technology works and how it is developed. Frankly, it sounds like wishful thinking or stupidity masquerading as informed commentary.

+1

Thanks marcus_of_augustus for writing the post I was about to write.  I guess unless you are involved/interested in the technical details, it's hard to understand that the backbone protocol of the internet is the same as it was in the 80s and 90s.  A quick Wikipedia search reveals that "TCP is a complex protocol...its most basic operation has not changed significantly since its first specification RFC 675 in 1974."  This shows how low-level flexible protocols (like bitcoin) have much longer lifespans than things like software GUIs, iPhones, or website designs.  

But bitcoin is largely mathematical too.  Mathematical results have even longer lifespans.  The math still used to infer 3-D structures in X-ray computed tomography was actually invented in 1917 by an Austrian mathematician Johann Radon.  The physics (still used to this very day) that describe all electrical and magnetic phenomenon is unchanged since James Clerk Maxwell put the finishing touches on the four equations of electrodyanmics in 1862!

[BigJohn]

I'm starting to think you guys may just be trolling

[toknormal]

Good points, up til this paragraph which is way off in my opinion...

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies. Those will not be ideologically appealing to most people who post here, but the business model makes perfect sense. The fear that the public and media have about BTC is that it is an attempt to create wealth out of thin air. Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine. These bank-backed cryptocurrencies would look to many like the 'best of both worlds': the guaranteed value of a traditional bank note with the transparency and irreversibility of distributed block-chain logs.

Bitcoin has a value at the moment because it is "base money". That's to say, it is at the end of a chain of trust (i.e. not 'backed' by anything).

Money which has to be 'backed' by something, by definition, is not base money and so has no intrinsic value of its own. Bitcoin has intrinsic value because it works as a unique token of value with a high resistance to counterfeiting. Cryptocurrencies which have to be "backed" by something are by definition of far less value than ones that are not and so I think its unlikelt that banks will start to do this.

[johnyj]

The alt-coins will never become big, because they don't have the corresponding infrastructure. You can copy the source code, but you can never copy the hardware infrastructure and the operating cost

If not because of the large scale ASIC mining equipment roll out and raised level of investment in infrastructure, the bitcoin's value would still stay at $10 range, because the cost of each coin was roughly that level

Now, if you want to mine 1 bitcoin, at least you should invest $1000 in latest generation mining rigs, that's the reason the price will never go much below that level

Of course J.P. Morgan can start a special cryptocurrency with large amount of infrastructure investment, but currently most of the IT talents were attracted by bitcoin and without them not so many people left will support a new coin

[Valerian77]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies.

That is the single point which @CryptoPhilanthropist has not catched - there is no intrinsic value. And the senseless try to back a currency by gold or anything else is just a naive imagination of gold having an intrinsic value which is even not true - it is the coherent believe of the owners into yellow metal. As we see in Bitcoin no bounding to gold is needed to create a coherent believe in the value of Bitcoin. The creation of BTC is genius in an emergent way which is without precedence but comparable to gold, internet, email etc

The speculation that some bank will create its own cryptocurrency may become true but will not affect Bitcoin. That will just be another altcoin like all the other 60 or so ones. If the bank keeps the control over this currency it will be no more than any other fiat just as electronic currency.

[HeliKopterBen]

A gold-backed money will not work without centralization and a money sponsored by a bank or other large business will not work unless it is completely decentralized and open-source.  Sure a business or government could create a completely decentralized, open-source money but then you are left with just another alt-coin. 

[BigJohn]

But why would it have to be decentralized? The USD is very much centralized, and it's also the most widely adopted currency in the world.

I don't think that The Powers That Be really care if their currency "works" in the long run. As long as it gets adopted, it works well enough for them. If Bitcoin proves to be something the public wants, so much so that it endangers other currencies, then what's stopping them from making a centralized (and backed) crypto-coin of their own?

The point is that if they make such a coin, it will likely get adopted much easier than Bitcoin has.

[theecoinomist]

I foresee a collapse of BTC value when the first large financial institutions release cryptocurrencies of their own, which are actually backed by tangible assets like gold or by fiat currencies. Those will not be ideologically appealing to most people who post here, but the business model makes perfect sense. The fear that the public and media have about BTC is that it is an attempt to create wealth out of thin air. Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine. These bank-backed cryptocurrencies would look to many like the 'best of both worlds': the guaranteed value of a traditional bank note with the transparency and irreversibility of distributed block-chain logs.

The question is whether they'd name it Debtcoin or Derivativecoin?

[Valerian77]

Having a trusted bank issue individual coins representing actual assets will allow them to be more valuable than BTC is today, making them more attractive to mine.[/b]

The question is whether they'd name it Debtcoin or Derivativecoin?

lol     

[pening]

...Bitcoin has intrinsic value because it works as a unique token of value with a high resistance to counterfeiting. Cryptocurrencies which have to be "backed" by something are by definition of far less value than ones that are not ...

The resistance to counterfeiting as you put it well is a property of all cryptocurrencies.  If one is "backed" by something else, that is an additional property, it does not by definition reduce the value.

[marcus_of_augustus]

But why would it have to be decentralized?

Now we know you are just trolling.

[BigJohn]

But why would it have to be decentralized?

Now we know you are just trolling.

Oh okay, I was saying that for wide adoption a coin doesn't have to be decentralized. Obviously I'm wrong, so for a coin to have wide adoption it must be decentralized. Explains why the USD is so widely in use. [/sarcasm]

[d'aniel]

But why would it have to be decentralized?

Now we know you are just trolling.

Oh okay, I was saying that for wide adoption a coin doesn't have to be decentralized. Obviously I'm wrong, so for a coin to have wide adoption it must be decentralized. Explains why the USD is so widely in use. [/sarcasm]

Gold has a comparable market share to USD's M1, but people hold it for very different reasons than they hold USD.  If USG suddenly figured out a way to cheaply create new gold, but could keep the technique secret, and promised not to create "too much", would gold remain valuable?

[Peter R]

Reading the OP and the thoughtful comments greatly reduced my concern that a bank, government, or tech company could create a crypto-currency that is a credible threat to bitcoin.  If JPMorgan, China, or Google tried, they must either build a (1) centralized coin, or a (2) decentralized coin.  Here are the outcomes as I see them:

CENTRALIZED COIN:
=============

- The coin supply *will* be inflated beyond what was originally promised.  History has shown that *all* humans with the ability to inflate the money supply eventually take advantage of this power.  If there is a "backing," it will eventually become meaningless, as history has also shown.  

- Transactions will be reversible and balances will be confiscatable.  Even if the protocol starts out as "digital cash" the political pressure to "do something" when something "bad" happens will be unstoppable.  This will set a precedent and eventually we'll end up with the same rules for reversible transactions as the present banking system has (and the expensive AML/KYC regulations to go along with it).  

- It will *not* be possible to send coins to certain countries and regions.  Again, even if this is not the case initially, after the first false-flag terrorist funding escapade, we'll soon return to the same capital controls / international sanctions we presently have.  


What I realized is that even if a company *genuinely wants* to create a centralized-version of Bitcoin's electronic cash, they won't be able to.  The reason is simply that any centralized organization would eventually succumb to the pressure to "do something."

My conclusion is that the end game for any centralized coin is something very similar to the banking system we already have.  


DECENTRALIZED COIN:
===============

- Then it's just another bitcoin-wannabee alt-coin and it has to compete on its own merit and lack of a head start.  They may as well co-opt bitcoin.  

 

[Rez]

Look, here's new ChaseCoin!

It's just like Bitcoin ... only it can be confiscated from you.

[justusranvier]

What I realized is that even if a company *genuinely wants* to create a centralized-version of Bitcoin's electronic cash, they won't be able to.  The reason is simply that any centralized organization would eventually succumb to the pressure to "do something."

My conclusion is that the end game for any centralized coin is something very similar to the banking system we already have.  

Exactly.

Bitcoin is successful not because it uses cryptography nor because it's more convenient than a bank wire.

Bitcoin is successful because it lacks prior restraint, remote confiscation, and arbitrary inflation.

It doesn't matter what banks or governments try to do to compete with Bitcoin. Those are three features they will always in their currencies no matter what technology they build upon.

[marcus_of_augustus]

But why would it have to be decentralized?

Now we know you are just trolling.

Oh okay, I was saying that for wide adoption a coin doesn't have to be decentralized. Obviously I'm wrong, so for a coin to have wide adoption it must be decentralized. Explains why the USD is so widely in use. [/sarcasm]

You have much to learn, I just hope it does not come at the expense of your financial well-being ... on the other hand, hmmmm?, maybe?, nah, I wouldn't wish that on anybody.

[Cryddit]

For those who are saying "no newer and different cryptocoin could replace Bitcoin, cos Bitcoin was first!!!11"  

I'm noticing that a lot of Rock & Roll artists sold a hell of a lot more records than Chuck Berry.  

Inventing Rock & Roll (arguable, but he was definitely the "firstest with the mostest") did not get him to the all-time record for most number-one Rock & Roll albums and greatest number of Rock & Roll fans.  Those honors went to Elvis Presley and the Beatles (at least so far... ).  Largely because they had slicker promotion and weren't working against long-established racism.  

We need to remember that slicker promotion is *OWNED* by major commercial enterprises like banks and search giants, and that commercially speaking prejudices against the anarchic, decentralized, and anonymous are just as strong as prejudices in the US in the late 50s against racism.

[marcus_of_augustus]

For those who are saying "no newer and different cryptocoin could replace Bitcoin, cos Bitcoin was first!!!11"  

I'm noticing that a lot of Rock & Roll artists sold a hell of a lot more records than Chuck Berry.  

You have just argued that Chuck Berry is analogous to TCP/IP in that it was the first to market .... therefore TCP/IP should have been superseded by now by infinitely better protocols? wtf?

Did you already read the prior posts about needing to have a technical understanding about networking protocols before making informed commentary? (I'm supposing not)

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

[pening]

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

Funny, because that's exactly what i thought when you started comparing Bitcoin to TCP/IP, and the OP didn't compare Chuck Berry to TCP/IP, you have.  Your analogy to TCP/IP is flawed as its too technically specific a protocol, Bitcoin is a broader concept built upon components.  A better comparison would be with the Ethernet standard which too builds upon a range of protocols and other standards.  That once had competitors and alternatives, it won through.   There analogies should end, because you cannot use the adoption (or otherwise) of technology 30-40 years ago to predict what will happen with a technology today.  What i see here is some trying to attack a perfectly sensible point with distractions and sniping.  The premise that cryptocurrencies might be picked up by institutions would signal mainstream acceptance and adoption of the technology, i dont see why it creates this fear.

[johnyj]

The essential of bitcoin is a consensus that never inflate the money supply of a unique type of money, thus that money can be used to register value long term wise. Anything that inflate the money supply (alt-coins for example) will directly against this promise and will be discarded when people eventually reach this consensus

[marcus_of_augustus]

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

Funny, because that's exactly what i thought when you started comparing Bitcoin to TCP/IP, and the OP didn't compare Chuck Berry to TCP/IP, you have.  Your analogy to TCP/IP is flawed as its too technically specific a protocol, Bitcoin is a broader concept built upon components.  A better comparison would be with the Ethernet standard which too builds upon a range of protocols and other standards.  That once had competitors and alternatives, it won through.   There analogies should end, because you cannot use the adoption (or otherwise) of technology 30-40 years ago to predict what will happen with a technology today.  What i see here is some trying to attack a perfectly sensible point with distractions and sniping.  The premise that cryptocurrencies might be picked up by institutions would signal mainstream acceptance and adoption of the technology, i dont see why it creates this fear.

all analogies are flawed, they are analogies ... but bitcoin is closer to Chuck Berry than it is to TCP/IP? lol, good try, but you get another post to your tally for your efforts i spose ... at least you understand somewhat about the network effect and adoption curves, it isn't necessarily who's tech is best but who's is first to market ...

[AnonyMint]

A backed coin will never gain the global economies-of-scale for at least two reasons:

1. Why would I pay a price higher than the value of the backing? Thus it can't scale globally as an asset.

2. Backing requires a centralized authority, and there is no such global authority at this time which can subjugate all authorities in all jurisdictions.


The OP is correct that there is a reverse networking effect, because as I pointed in the Problem With Altcoin thread, to pay using an altcoin is simple as having a Bitpay which does real-time market price conversion. There is no great barrier to entry, as there is with TCP/IP where one would have to change every server on the internet. This hasn't been done yet, because the market cap of Litecoin was too small. But as the market caps of all grow, someone will create this.

And the OP is correct that there will be a CPU-only (botnet resistant) altcoin with stronger anonymity that will challenge Bitcoin effectively.

[BigJohn]

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

See, I respect the shit out of the people in this community, I really do, but comments like these just simply don't help.

You're basically saying I'm wrong because I'm stupid.

And I'm a big boy, I can handle being called stupid, but you gotta tell me why. Or else it honestly just looks like you're reading the first line of my posts and commenting just on that out of context. I can't explain it any other way. You're coming up with objections to things I've never said. The only way you could believe I said those things, is if you read just one line out of the entire post and took it out of context.

[CryptoPhilanthropist]

The reactions to my opening post illustrate how easy it is for otherwise intelligent people to start sounding like an echo chamber once they have financial or ideological reasons to promote a certain worldview.

Many of the definitions that people are using are normative rather than descriptive. It is begging the question to say "cryptocurrency can't be issued by a central institution" or "cryptocurrency can't be backed by tangible assets." Obviously, most people posting here are libertarians who strongly favor decentralization. Nobody expects a centrally issued cryptocurrency to appeal to you. But it seems like some of you can't even wrap your mind around the business model.

The point is that right now: (1) all transactions performed using distributed block-chains are done in cryptocurrencies; and (2) existing cryptocurrencies are not issued like fiat currencies. But neither of those two things has to remain the same. Distributed network authentication is a new technological paradigm, just like paper money was. The fact that paper currency became the dominant means of exchange did not mean that the first form of paper money prevailed over all the later ones.

The high price of bitcoins is a giant disincentive for the network to prevail, because it raises the cost of using the network to confirm transactions. (i.e., miners are being paid huge amounts of money, because BTC are so valuable) The major financial institutions will want an opportunity to mine a large percentage of whatever cryptocurrency will take off as the dominant paradigm. Imagine how easily banks like Wells Fargo could create financial incentives for merchants to take their bank-backed crypto-currencies instead of BTC.

When people say that these currencies will be less "free" than Bitcoin, because they can be controlled and manipulated by governments, they simply make the case for why these are the currencies that will prevail in the end. Within their sovereign territory, governments can easily prevent merchants from publicly accepting certain forms of currency, like BTC. Governments use their control over the money supply as one of their primary means of retaining power, and they will not give it up without strong resistance. They will find a way to make public cryptocoin logs their newest tool of panoptic surveillance, by using the legal system to force the adoption of their favored coins. This will be easy to do under the guise of preventing money laundering, combating terrorism, etc.

Crude historical analogies are not helpful, because you can always pick an example whose facts suit your argument. I could claim that BTC is like MySpace and we haven't seen Facebook yet, but that doesn't mean that is a valid take on the facts. What matters is the technical and economic nuances.

Here, the Bitcoin protocol can and has been cloned to allow for alternative coins. It way well continue to be the dominant model for how coins should be tracked. But that doesn't mean that the original denomination will remain relevant. The barriers to entry for alternative coins are just too low. So far, those coins have mostly been weak imitations. But the launch of a GoogleCoin or BOACoin could instantly change that and create a crisis of confidence in BTC.

[BigJohn]

- The coin supply *will* be inflated beyond what was originally promised.  History has shown that *all* humans with the ability to inflate the money supply eventually take advantage of this power.  If there is a "backing," it will eventually become meaningless, as history has also shown.

This is the main point I'm in disagreement with most people over.

Because the argument isn't that a centralized coin will be awesome and amazing and will replace Bitcoin because of that. It's that a centralized coin, even though it's worse than Bitcoin in many ways, will gain widespread adoption quicker than Bitcoin, and over-take it very fast. Or at least that it has the potential to do so, depending on how its issuer plays its cards.

You're absolutely right that it will be inflated, destroyed, and taking advantage of. But that will take a very long time. The Fed was founded 100 years ago in 1913, and the Bretton Woods system has been around since 1944. Almost as soon as those systems were established, you had people opposing them on very similar grounds. That the government shouldn't have that kind of control, that it will be inflated, that it's economically irresponsible, that people will suffer in the long run, etc.

And guess what? Those people were right. And yet the USD is widely adopted. It has many "users" throughout the world. And the people who control it have great power.

So I have no doubt that if Bitcoin demonstrates demand for a crypto-currency out there, and TPTB create their own crypto-coin, that they can get widespread adoption over Bitcoin in no time.

[Cryddit]

For those who are saying "no newer and different cryptocoin could replace Bitcoin, cos Bitcoin was first!!!11"  

I'm noticing that a lot of Rock & Roll artists sold a hell of a lot more records than Chuck Berry.  

You have just argued that Chuck Berry is analogous to TCP/IP in that it was the first to market .... therefore TCP/IP should have been superseded by now by infinitely better protocols? wtf?

My point is that Chuck Berry *ISN'T* analogous to TCP/IP, and neither is Bitcoin.  You don't have to be chuck berry to play rock & roll, and you don't have to be Bitcoin to use a cryptocurrency protocol.  

Bitcoin exists at the application layer, not the network layer.  You can have a different application use the same network and even the same protocol, and you don't need to touch infrastructure to make the change.  

There is absolutely nothing that locks out new coins from competing with Bitcoin.

[dwma]

How can an algorithmic artifact be a proxy for physical gold?
Someone has to update the network manually on the amount of gold in existence, since the digital network can't figure it itself.

This means: trust.

Trust & cryptocurrencies don't mix.

Exactly.  This means there has to be a central place you trust with your gold.

Lets just assume we can trust this entity and it is a private organization for another argument of why this is bad.

The only way the e-currency/gold angle has value is if you can actually redeem your currency.  What would keep people from doing this?  Only if the exchange price was greater than the gold price.  If it isn't, then people exchange it out for their gold and what does teh entity do?  What is the business model of this "gold backed e-currency based entity" ? 

It makes little sense, except possibly to remove volatility out of the market by pegging the price to gold.  However, how does the backer of the coins make their money?  They have to keep a well guarded warehouse hosting millions of dollars in gold.  I just can't see this working out.

[Peter R]

The reactions to my opening post illustrate how easy it is for otherwise intelligent people to start sounding like an echo chamber once they have financial or ideological reasons to promote a certain worldview.

Agreed, and this is why it is important to engage thoughtful intelligent people like yourself in polite debate.  

But the launch of a GoogleCoin or BOACoin could instantly change that and create a crisis of confidence in BTC.

OK, but the devil is in the details.  Can you explain what such a coin would look like?  Does it involve mining?  Is there a block reward?  Is it centralized or decentralized?  Is it "backed" by something like dollars or gold?  Can you send it internationally?  Are transactions reversible?  Are transactions/accounts anonymous, pseudonymous, or linked to a real person?  Are balances confiscatable?  What authority decides?  Can that authority inflate the money supply?  Does it follow the same AML/KYC procedures as our current system?  Are there multiple such systems in each country/region, or is there one main system for the entire world?

My conclusion is that there are only two end-games (which end-game is chosen depends on the details above): something free and global like bitcoin, or something very similar to what we already have.  

I think we all agree that the bitcoin experiment could collapse (and that is why its value is $800 rather than $100,000+), but I see it as a better monetary system for us or for our children.  For this reason, I support it.  

[dwma]

You guys are just speculating and throwing around ridiculous analogies that have ZERO applicability in this field. Please stop making yourselves look like complete idiots, as much fun as it for the rest of us.

See, I respect the shit out of the people in this community, I really do, but comments like these just simply don't help.

You're basically saying I'm wrong because I'm stupid.

And I'm a big boy, I can handle being called stupid, but you gotta tell me why. Or else it honestly just looks like you're reading the first line of my posts and commenting just on that out of context. I can't explain it any other way. You're coming up with objections to things I've never said. The only way you could believe I said those things, is if you read just one line out of the entire post and took it out of context.

You're not stupid, you just find an analogy that sorta fits but is really nothing more than a single data point in history.  Then we had the neurobiology stuff.  It is all just a tad silly.  Analogies are good for helping people understand things.  They are not good for winning arguments.  We can come up with analogies all day for either side, but so many have zero value and end up pulling the discussion into weird tangents.

[dwma]

The only way a bank backed e-currency will work is if it is mainly in one country and it gives up the whole borderless international concept that us cryptocurrency fans embrace.

It is hard to imagine the cryptocurrency supporters ever accepting these backed currencies, or that this would take over with so much of the anti-banking sentiment in the US.  It might somehow be the solution for micropayments in the US, since it would be pegged to the dollar.  It definitely won't overtake cryptocoins.  Just too much baggage there and too many smart people pushing for cryptocoins.

[AnonyMint]

The reactions to my opening post illustrate how easy it is for otherwise intelligent people to start sounding like an echo chamber once they have financial or ideological reasons to promote a certain worldview.

yada yada yada...

You haven't address my prior post.

Within their sovereign territory, governments can easily prevent merchants from publicly accepting certain forms of currency, like BTC.

Not if anonymity is 99.9% and we are moving to an economy where we download and 3D print thus every merchant transaction can be anonymous.

No more physical stores. No more physical merchandise other than the low valued components of raw materials, which will be in abundant oversupply as the global economy implodes after 2016 from the $150 trillion debt bubble (and $1000 trillion derivatives and $1000 trillion unfunded promises from governments).

We are moving to a radically different world. The industrial age is done.

Now we enter a massive global implosion with 50% unemployment and chaos.

Anonymity will reign. Those without cunning and balls, just get out the way.

[HeliKopterBen]

For those who are saying "no newer and different cryptocoin could replace Bitcoin, cos Bitcoin was first!!!11"  

I'm noticing that a lot of Rock & Roll artists sold a hell of a lot more records than Chuck Berry.  

You have just argued that Chuck Berry is analogous to TCP/IP in that it was the first to market .... therefore TCP/IP should have been superseded by now by infinitely better protocols? wtf?

My point is that Chuck Berry *ISN'T* analogous to TCP/IP, and neither is Bitcoin.  You don't have to be chuck berry to play rock & roll, and you don't have to be Bitcoin to use a cryptocurrency protocol.  

Bitcoin exists at the application layer, not the network layer.  You can have a different application use the same network and even the same protocol, and you don't need to touch infrastructure to make the change.  

There is absolutely nothing that locks out new coins from competing with Bitcoin.

When Elvis became more popular than Chuck Berry, did the entire music industry have to change to accommodate Elvis?  The entire infrastructure of the internet would have to change for another protocol to replace TCP/IP.

In fact, IPv6 is a far superior version of IP than IPv4, but the world has yet to even modestly move to IPv6 because existing hardware and infrastructure would have to change to accomodate this, and IPv6 has been around for nearly 15 years now.  Its not just a settings change.  Newer hardware supports both IPv4 and IPv6 and are backward-compatible with legacy hardware that only supports IPv4.  The problem is, legacy hardware will only communicate with current hardware through IPv4.  Also, entire network configurations would have to be changed to move to IPv6, requiring a lot of skilled labor and working through many problems.  Eventually, IPv6 may become the dominant protocol, but it will take time.

Bitcoin is similar in the fact that the infrastructure and hardware being built around bitcoin may not be forward-compatible with a completely new protocol, not to mention the fact that the new protocol would have to be far superior to bitcoin much like IPv6 is far superior to IPv4, and I have yet to see anything of that sort. 

[aggster]

this is the greatest pyramid scheme of all time, everyone who adopts makes money, and the end game will be the end of the current monetary and banking system, perfect

[newguy05]

I stopped reading about a quarter way in, the original post is retarded.  It's like saying diamond will crash in price because you have many other quartz that look similar.

Either the entire cryptocurrency concept crash and burn or it survives and flourish - in which case bitcoin will be far and large remain as the gold in that sector.  Second most popular litecoin still has years to go before it can reach what silver is to gold.  It's not a diss on litecoin or any other, just a fact.

The real danger of bitcoin death i see is after all the coins are mined (or close to it) around 2141, the idea is the transaction fees should be significant enough to support the miners keeping their hardware running.  However if this doesnt happen (and you really need many order of magnitude transactions compare to today to keep the mining hardware running solely on transaction fees as profit alone).  If the transactions dont reach that level, then people will shutdown their miners hence weakening the network eventually to the point of no return, it's a snowball effect - as the network shrinks, transactions will become less and less as people give up on bitcoin which in turn causes more hardware getting shut etc..  That's the doomsday situation, to prevent that bitcoin needs to be as popular(similar volume) as credit card transactions by then. But i wont be around to see what happens, unfortunately.

[BigJohn]

OK, but the devil is in the details.  Can you explain what such a coin would look like?  Does it involve mining?  Is there a block reward?  Is it centralized or decentralized?  Is it "backed" by something like dollars or gold?  Can you send it internationally?  Are transactions reversible?  Are transactions/accounts anonymous, pseudonymous, or linked to a real person?  Are balances confiscatable?  What authority decides?  Can that authority inflate the money supply?  Does it follow the same AML/KYC procedures as our current system?  Are there multiple such systems in each country/region, or is there one main system for the entire world?

Well, there are significant problems with Bitcoin at the moment. Those problems could be alleviated in the future, but in the meantime it leaves the door wide open for a centralized coin.

It would solve the problem of price volatility. Say a big bank issues a cryptocurrency, they'd have a much easier time keeping its initial price stable. Keep in mind that they can toss out the 21million number, or the halving block rewards, on a whim. They could peg it to some commodity, or even a basket of currencies, and get something that's pretty stable right off the bat.

It would also solve the problem of wallets. People have to jump through all sorts of hoops to keep their Bitcoins. This is already a bank. They're already in the business of keeping people's money safe. So it would make sense to have them keep your online wallet. And with that comes things like FDIC insurance. Increased security relative to making an offline wallet.

And it would keep all the benefits of a cryptocurrency. You'd still have instant transactions. You can still send money across the glove in seconds. All that good stuff.


Now personally I think something like that would be horrible. I'd never want to use it. I'd probably stick to cash. But there's no doubt in my mind that if they pull a stunt like this off, they'd get much wider adoption, at a much higher rate, than any of the current cryptocurrencies including Bitcoin.

[justusranvier]

They could peg it to some commodity, or even a basket of currencies, and get something that's pretty stable right off the bat.

No.

[BigJohn]

Why couldn't they?

[Peter R]

OK, but the devil is in the details.  Can you explain what such a coin would look like?  Does it involve mining?  Is there a block reward?  Is it centralized or decentralized?  Is it "backed" by something like dollars or gold?  Can you send it internationally?  Are transactions reversible?  Are transactions/accounts anonymous, pseudonymous, or linked to a real person?  Are balances confiscatable?  What authority decides?  Can that authority inflate the money supply?  Does it follow the same AML/KYC procedures as our current system?  Are there multiple such systems in each country/region, or is there one main system for the entire world?

Well, there are significant problems with Bitcoin at the moment. Those problems could be alleviated in the future, but in the meantime it leaves the door wide open for a centralized coin.

It would solve the problem of price volatility. Say a big bank issues a cryptocurrency, they'd have a much easier time keeping its initial price stable. Keep in mind that they can toss out the 21million number, or the halving block rewards, on a whim. They could peg it to some commodity, or even a basket of currencies, and get something that's pretty stable right off the bat.

It would also solve the problem of wallets. People have to jump through all sorts of hoops to keep their Bitcoins. This is already a bank. They're already in the business of keeping people's money safe. So it would make sense to have them keep your online wallet. And with that comes things like FDIC insurance. Increased security relative to making an offline wallet.

And it would keep all the benefits of a cryptocurrency. You'd still have instant transactions. You can still send money across the glove in seconds. All that good stuff.


Now personally I think something like that would be horrible. I'd never want to use it. I'd probably stick to cash. But there's no doubt in my mind that if they pull a stunt like this off, they'd get much wider adoption, at a much higher rate, than any of the current cryptocurrencies including Bitcoin.

Thanks for the response BigJohn.  

I said the "devil is in the details" because I wanted someone like yourself to explain *how* such a centralized coin could be pegged to, for instance, gold.  Does your coin still involve mining that people all over the world can participate in?  If so, where do you get the gold to back the newly minted coins?  Can I walk into your bank and exchange my coins for gold at the pegged rate, or do you not allow this?  If mining is not involved, would you just have a big centralized server and process all the transactions yourself?  I guess you could acquire gold on the open market each time you sell a new coin, and then never have too much capital at risk.  But if this is your plan, it sounds a lot like eGold 2.0 and we know how the first version turned out.  In fact, I believe the original owner of eGold is trying to re-kindle his old flame, so we may get to see this experiment play out in real time....

[BigJohn]

I'd like to stress that it's not "my" coin. I'd be dead-set against such a thing, as I'm a huge fan of Bitcoin and its open nature. But I just recognize an opening for some entity to create a less than ideal coin, namely a bank, government, or a major corporation.

But what I imagine could be as simple as them buying up a certain amount of gold, and simply say that 1coin=1oz of gold. Then say they have 50,000 ounces, they'd simply set the upper limit to 50,000 (this is Bitcoin's 21million number), premine the whole thing from the get-go, and then sell it to people for fiat. In reality they could raise that 50,000 number in any way they please. They could say that 1coin is half an ounce, a quarter an ounce, or whatever. They could even run it as a fractional reserve scheme, where they only have physical gold to back-up 10% of the coins. There wouldn't be a need for decentralized mining. They could just mine it all themselves.

Suppose the Bank of China did this. And say you did some work for a company that paid you in these coins. You could walk into one of their branches and exchange it for gold. Or if it becomes widespread, as I believe it would, like how we always say Bitcoin will become one day, you could simply use your coins to buy whatever you wanted.

Yeah, this sounds real similar to eGold. But keep in mind that I'm just using gold as an example. It could literally be anything, or even nothing. In fact if Bitcoin gets much more successful, I'd bet they'd copy Bitcoin in that sense and not even bother backing it up with anything (other than their name). To the average person a cryptopcurrency backed by the "good name" of a government is superior to Bitcoin which is backed by nothing. And also about eGold, keep in mind that the project actually did quite well. It ended up dying because of legal issues. They even threw the Patriot Act on them. It had lots of problems with hacking and whatnot. But Bitcoin suffers from those just the same. Even worse with Bitcoin, because people need to keep their own wallets safe, and that's constantly proving to be a problem.


I hate the thought that this would happen. But I think we're fooling ourselves if we think it won't. To the average person the biggest advantages of Bitcoin, like instant transfers across the world, are easily replicated by such a thing. And some of Bitcoin's downsides, like transaction fees, could even be removed.

[HeliKopterBen]

Why couldn't they?

Because they have already done that and it failed.  The USD was pegged to gold up until 1971, at which time the Nixon administration arbitrarily decided to cease USD convertibility into gold.  The USD has lost 83% of its value since that time.  This is the entire problem bitcoin solves.  

[HeliKopterBen]

I'd like to stress that it's not "my" coin. I'd be dead-set against such a thing, as I'm a huge fan of Bitcoin and its open nature. But I just recognize an opening for some entity to create a less than ideal coin, namely a bank, government, or a major corporation.

But what I imagine could be as simple as them buying up a certain amount of gold, and simply say that 1coin=1oz of gold. Then say they have 50,000 ounces, they'd simply set the upper limit to 50,000 (this is Bitcoin's 21million number), premine the whole thing from the get-go, and then sell it to people for fiat. In reality they could raise that 50,000 number in any way they please. They could say that 1coin is half an ounce, a quarter an ounce, or whatever. They could even run it as a fractional reserve scheme, where they only have physical gold to back-up 10% of the coins. There wouldn't be a need for decentralized mining. They could just mine it all themselves.

Suppose the Bank of China did this. And say you did some work for a company that paid you in these coins. You could walk into one of their branches and exchange it for gold. Or if it becomes widespread, as I believe it would, like how we always say Bitcoin will become one day, you could simply use your coins to buy whatever you wanted.

Yeah, this sounds real similar to eGold. But keep in mind that I'm just using gold as an example. It could literally be anything, or even nothing. In fact if Bitcoin gets much more successful, I'd bet they'd copy Bitcoin in that sense and not even bother backing it up with anything (other than their name). To the average person a cryptopcurrency backed by the "good name" of a government is superior to Bitcoin which is backed by nothing. And also about eGold, keep in mind that the project actually did quite well. It ended up dying because of legal issues. They even threw the Patriot Act on them. It had lots of problems with hacking and whatnot. But Bitcoin suffers from those just the same. Even worse with Bitcoin, because people need to keep their own wallets safe, and that's constantly proving to be a problem.


I hate the thought that this would happen. But I think we're fooling ourselves if we think it won't. To the average person the biggest advantages of Bitcoin, like instant transfers across the world, are easily replicated by such a thing. And some of Bitcoin's downsides, like transaction fees, could even be removed.

Egold did not die because of legal issues.  It died because there was a central point of failure.  Again, Bitcoin solves this problem.

[BigJohn]

Why couldn't they?

Because they have already done that and it failed.  The USD was pegged to gold up until 1971, at which time the Nixon administration arbitrarily decided to cease USD convertibility into gold.  The USD has lost 83% of its value since that time.  This is the entire problem bitcoin solves.  

That doesn't make any sense. You're saying the USD was pegged to gold until 1971. That's true. So that means that they can in fact peg it to gold. Just that it will fail eventually. I wasn't saying it won't fail, it will, but it will take decades to fail. Maybe even 100+ years just like how the USD is still around.

So again, why can't they?

[BitTrivia]

Sure they can create a centralized one. But for the first time in history they now have to compete with trustless cryptocurrencies. We've solved a real-world problem that's never been solved before and that changes how things will unfold in the future.

[HeliKopterBen]

Why couldn't they?

Because they have already done that and it failed.  The USD was pegged to gold up until 1971, at which time the Nixon administration arbitrarily decided to cease USD convertibility into gold.  The USD has lost 83% of its value since that time.  This is the entire problem bitcoin solves.  

That doesn't make any sense. You're saying the USD was pegged to gold until 1971. That's true. So that means that they can in fact peg it to gold. Just that it will fail eventually. I wasn't saying it won't fail, it will, but it will take decades to fail. Maybe even 100+ years just like how the USD is still around.

So again, why can't they?

Well yes, technically they could, but there is no point in trying something that has already failed when you have a far superior system.

[BigJohn]

Why couldn't they?

Because they have already done that and it failed.  The USD was pegged to gold up until 1971, at which time the Nixon administration arbitrarily decided to cease USD convertibility into gold.  The USD has lost 83% of its value since that time.  This is the entire problem bitcoin solves.  

That doesn't make any sense. You're saying the USD was pegged to gold until 1971. That's true. So that means that they can in fact peg it to gold. Just that it will fail eventually. I wasn't saying it won't fail, it will, but it will take decades to fail. Maybe even 100+ years just like how the USD is still around.

So again, why can't they?

Well yes, technically they could, but there is no point in trying something that has already failed when you have a far superior system.

Oh yeah, and I totally agree. But would the general public agree?

[HeliKopterBen]

Why couldn't they?

Because they have already done that and it failed.  The USD was pegged to gold up until 1971, at which time the Nixon administration arbitrarily decided to cease USD convertibility into gold.  The USD has lost 83% of its value since that time.  This is the entire problem bitcoin solves.  

That doesn't make any sense. You're saying the USD was pegged to gold until 1971. That's true. So that means that they can in fact peg it to gold. Just that it will fail eventually. I wasn't saying it won't fail, it will, but it will take decades to fail. Maybe even 100+ years just like how the USD is still around.

So again, why can't they?

Well yes, technically they could, but there is no point in trying something that has already failed when you have a far superior system.

Oh yeah, and I totally agree. But would the general public agree?

We will let the markets decide and so far so good for bitcoin.

[Peter R]

Why couldn't they?

Because they have already done that and it failed.  The USD was pegged to gold up until 1971, at which time the Nixon administration arbitrarily decided to cease USD convertibility into gold.  The USD has lost 83% of its value since that time.  This is the entire problem bitcoin solves.  

That doesn't make any sense. You're saying the USD was pegged to gold until 1971. That's true. So that means that they can in fact peg it to gold. Just that it will fail eventually. I wasn't saying it won't fail, it will, but it will take decades to fail. Maybe even 100+ years just like how the USD is still around.

So again, why can't they?

Well yes, technically they could, but there is no point in trying something that has already failed when you have a far superior system.

Oh yeah, and I totally agree. But would the general public agree?

I think BigJohn has many valid points: there is precedent for a gold-backed currency (original fiat currencies) and eGold actually was fairly successful for a time ($2 billion per year in velocity, $20 million monetary base).  

But I think HeliKopterBen and BitTrivia have the right idea: "We've solved a real-world problem that's never been solved before and that changes how things will unfold in the future."

Indeed, the pendulum of public perception has swung.  We now distrusts powerful banks, government bureaucracy, and centralized organization.  The future of money is a decentralized cryptocurrency like bitcoin.  

[BigJohn]

That's the thing that's keeping me hopeful that a Bank or a Government won't be able to compete with Bitcoin.

I'm hoping that people have been burned enough that if some big bank decides to make its own cryptocurrency, people would shy away from it just because it's a bank.

[Rassah]

OP fails pretty badly in understanding network effects 
Welcome, newbie 

[justusranvier]

OP fails pretty badly in understanding network effects 
Welcome, newbie 

We've seen this before: https://en.wikipedia.org/wiki/Eternal_September

[waxwing]

Why couldn't they?

I explained why they couldn't in post 19 in this thread.