What did you think of the REBUTTAL to Marc Andreessen's New York Times Article?

[barryblogs]

What did you think of the rebuttal to Marc Andreessen's New York Times Article?

"Why Marc Andreessen Is All Wrong About Bitcoin... And It Could Cost Investors Billions"
http://www.talkmarkets.com/content/technology/why-marc-andreessen-is-all-wrong-about-bitcoin?post=40321

I was really impressed with Andreesen's piece, but the man does have $50 million invested in Bitcoin related ventures, so he's obviously biased.  This new article gave me some pause and I thought he made some really great points.  But I'm too new to bitcoin to be an expert on these issues.  Wanted to hear some thoughts before I invested...

Thanks.

[bitcool]

OTOH, you can also argue Alex Daley is biased because Casey Research has been a big proponent of gold and gold stocks.
   http://www.caseyresearch.com/our-staff/alex-daley

Frankly I'm a little confused by the article, the author declare several times that he thinks bitcoin is a great achievement

Bitcoin is a monumental technical achievement in its simplicity and effectiveness.

Yet he think currently bitcoin is a big bubble mostly because:
  a)  Lower level of "conusmer protection".
  b) Criminals use it.
  c) Governments and establishment don't like it because they'll lose monopoly.

The world Andreessen would like to see is apparently one where his payment system is held to a lower standard of consumer protection, combating of criminal activity, and support of monetary policy—providing an unfair cost advantage over the status quo...

In short, it all about government, government, government.

I used to think Casey research as a independent thinker and libertarian minded organization, when did they become  government's think tank?  

Disappointed.

BTW. The title format is incorrect.

2014-02-06 Casey Research: Failure to Understand Bitcoin Could Cost Investors Billions

http://www.caseyresearch.com/cdd/failure-to-understand-bitcoin-could-cost-investors-billions

[barryblogs]

So if both authors are biased, who is to be believed?  Either way, I found both articles to be extremely interesting.

I'm still new to bitcoin but there are a number of things I've been wondering about:

1.  Is the author accurate when he describes what would have happened at Target had its customers used bitcoins instead of credit cards?

2.  I had read about that guy who accidentally threw away the wrong hard drive, and he lost $7 or $8 million dollars worth of bitcoins.  If it's digital, why can't it be reinstated.

3.  With everyone from Google, to Twitter to Target being hacked these days, what's to protect Bitcoin from being hacked?  If it's gone, it's gone.

Still new to bitcoin but I'm trying to get my head around all this.

[bitcool]

So if both authors are biased, who is to be believed? 

Of course Marc Andreesssen is correct, and of course I am biased 

1.  Is the author accurate when he describes what would have happened at Target had its customers used bitcoins instead of credit cards?

If Target uses Bitcoin, they use a single wallet, and it gets hacked, it would take a monumental amount of stupidity for this to happen and they deserve any devastation it brings.

2.  I had read about that guy who accidentally threw away the wrong hard drive, and he lost $7 or $8 million dollars worth of bitcoins.  If it's digital, why can't it be reinstated.

Think bitcoin as a global depository of gold with many locked boxes, he just lost the only key to his deposit box, it just can't be reinstated.

3.  With everyone from Google, to Twitter to Target being hacked these days, what's to protect Bitcoin from being hacked?  If it's gone, it's gone.

This is not easy to explain in a few sentences. In short, Google, Twitter, and Target have centralized, complex systems, they are big targets and security flaw can pop up in many places; bitcoin network is a distributed system, its security model is very different from the common ones you heard on the news.

[Carlton Banks]

So if both authors are biased, who is to be believed?  Either way, I found both articles to be extremely interesting.

I'm biased about this too, but it's fair to say that the answer is "neither". It's a question of preference to be honest. You'll get a different kind of commerce and a different kind society out of each approach if you apply them wholesale. It's not so hard to imagine the Casey scenario: we're living it right now, it's all that most people know. The Andreesen scenario is part pre-19th century, and part unknown Blade Runner futuristic. The bitcoin advocates are saying that the futuristic scenario is more appealing. I'm more than open to trying it out, at least.

I'm still new to bitcoin but there are a number of things I've been wondering about:

1.  Is the author accurate when he describes what would have happened at Target had its customers used bitcoins instead of credit cards?

2.  I had read about that guy who accidentally threw away the wrong hard drive, and he lost $7 or $8 million dollars worth of bitcoins.  If it's digital, why can't it be reinstated.

3.  With everyone from Google, to Twitter to Target being hacked these days, what's to protect Bitcoin from being hacked?  If it's gone, it's gone.

Still new to bitcoin but I'm trying to get my head around all this.

Basically, the technology bitcoin is based on changes a lot of pre-conceptions about digital technology.

The hack at Target wouldn't have been possible, that's true, but the newer card based technology could do a good enough job at stopping that too.

With the hard drive thing, that guy threw away the only copy of his wallet, which has the key to spend the bitcoin on the network. So if you've got another copy of the wallet, then yep, it is digital so it can be reinstated. But don't throw away your only copy like that guy, this is money, and the only person with the key to unlock spending it should be yourself.

Hacking bitcoin? It's the strongest security model out there, and it uses the strongest building blocks available to achieve that strong security model. This is particularly effective, as if one of the separate building blocks gets hacked, then if a system that relied solely on that one part for it's security would be hacked altogether. But bitcoin has multiple levels to it's security, arranged in a really innovative way. That's part of why it's getting so much wide-eyed attention, because the people that understand how innovative the security model is are pretty overwhelmed by how smart it is. I think it's probably fair to say that there's nothing more difficult to hack. And if it can be done, banking and the standard payments services, and possibly the security of the internet as a whole would also be in major trouble.

[cryptoanarchist]

Dumb and full of logical fallacy. No surprise.

[nairbv]

I didn't read the whole thing... it's long and repetitive... but... of what I did read:

He's comparing bitcoin fees to ACH and debit card fees.  ACH takes about four days.  Debit cards aren't the same as credit cards, and usually aren't accepted internationally.  Would you use amazon (or overstock.com) if it only permitted ACH and debit cards?  I've paid amazon bills with foreign credit cards.

Coinbase charges 1%, but waives the fee for merchants converting bitcoin to cash below a million dollars.  Credit cards charge around 3%.  He's wrong about mtgox being the largest bitcoin exchange (maybe 3rd, or fourth if you include coinbase) and I'd avoid using them.  Regardless, he's also wrong about them charging a 3% fee, the fee is 0.6% (additional discounts for volume, bitstamp is cheaper).  Yes it's not completely free, and there's also a spread, but fees and the spread will probably come down as the legal risks involved in running a bitcoin exchange are clarified, and as the price reaches a more stable level.

He claims his Chinese/Indian coworkers wired money home for free.  He miss-understood them.  They didn't.  I lived in Asia for a long time, and sent money back and forth having plenty of access to legitimate bank accounts on both sides.  Wire transfers still cost a lot of money today.  People who say otherwise, just haven't actually tried banking internationally.  I've lost close to a hundred dollars when transferring a few thousand dollars from a Singapore bank account to a US bank account.  Even if you have the same bank in both countries, they still charge you the same fees.  Banks claiming to be "global," honestly just aren't.  In the few cases where you can find some way to transfer money without a "fee," there will be a really bad exchange rate that costs you the equivalent of the fee.  It's still a fee, they just hide it.

I have spent $25 to perform a wire transfer from inside China to buy something from a Chinese company that couldn't accept credit cards.  With this particular company, it was their *only* payment mechanism; all of their customers bought this way.

He seems to think that people who don't have access to banking don't have access to computers or smart phones.  I've met plenty of people in Asia who lived in homes with dirt-floors and leaky roofs, who don't have jobs, who struggled, but who have smart-phones (sometimes shared with family members) and access to computers (often via internet cafe's).  Bitcoins can even be printed out on physical paper.

I was personally able to send a small amount of money to my parents more easily (inside the US) with bitcoin than using any other mechanism.  I had bitcoin, so on my end the transfer was immediate, and she was able to convert the coin into cash in her bank account via ACH in four days.  Western Union via ACH would have cost $5 and taken 6 days.  Western Union via cc would have taken 3 days but cost $15.  That's just local, in a single country.  International remittances are a significant % of the GDP of some countries like the Philippines.

It acts as a digital bearer-instrument.  It's like a digital-gold, a commodity that has a market price, that can be transferred over the internet peer-to-peer. There are cost savings to be had when using bitcoin as a currency, but that's not the only value of bitcoin... but there are many use cases for this sort of technology.

When Cyprus seized the bank accounts of its residents, the price of bitcoin went up, because people just needed some sort of store of value outside the traditional bank.  My understanding is that much of the actual buying pressure came from Spain, where residents feared they could be subject to a similar fate.  Sure these people could exchange their cash for gold, but there might not be enough supply of gold physically in the country at a given moment to bear the demand without having a significant local price discrepancy.  Bitcoin can easily flow into the country.  "Store of value" is a huge market.  The industrial use of gold is trivial, the $6.5T market cap of "all the gold in the world" is almost entirely for purposes of store of value or speculation, without even being (easily) usable as a mechanism for exchange.

Eventually, when we have derivatives markets and the price of bitcoin stabilizes, we'll start seeing the emergence of electronic contracts embedded in block chains.  Banks charge a lot of money to both buyers and sellers when, for example, shipping goods internationally, to ensure payment happens when and only when some physical signature from a shipping/insurance/etc agency comes through.  A block chain contract could ensure that on (and only on) digital signature of release of goods, funds get released.  Shares of a company could be represented on the blockchain, and traded peer-to-peer subject to restrictions encoded in the chain.  We're only looking at the tip of the iceberg of possibilities with bitcoin and related crypto currencies.  Ethercoin will have a whole programming language built into it.

When looking at his government arguments, just replace bitcoin with gold.  If I sold drugs for gold, and then sold the gold to a gold broker, and the gold broker sold the gold to you, can your gold now be seized?  Doesn't that sound absurd?  If the gold broker kept a ledger of every transaction made and with whom it was made, would that enable any current government under their current laws to seize your gold?  Does that actually make some legal difference?  I'm not a lawyer, but I highly doubt it would have an impact on you.  Shrem was arrested, but he was serving as the broker, not the guy showing up at the shop trying to acquire some digital-gold.  Is a gold dealer ever expected to file an SAR in the US?  If so, then I'd expect the same legal treatment of bitcoin broker/dealers (at least until regulations are clarified and we have some kind of precedent established).  If not, then maybe Shrem will get off.  Innocent until proven guilty right?

[barryblogs]

Thanks for the clear and easy to understand responses.

I will say though, that as bitcoin becomes more and more popular and valuable, it will attract more and better hackers.  Nothing is "unhackable."

Also, did you see today's news about government crackdowns in the US and abroad.  Bitcoin was just declared illegal in Russia and the value of bitcoins plummetted by 80%!!  I'm sure much of that value will be regained in the near future but doesn't any of this diminish your enthusiasm?

http://www.talkmarkets.com/content/news/bitcoin-flash-crashes-drops-by-80-in-seconds?post=40397

[moni3z]

There is no such thing as "wiring money for free". Instead what happened is his friends here in N. America wired money home to India and lost plenty dollars to the foreign exchange spread, just it's hidden instead of being tacked on as an extra fee to pay.