"Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws)

[AnonyMint]

I don't claim to be omniscient, so everyone should proceed with what they want to experiment with. Let's see how it ends up.

They control all the fiat and credit of the world via the Central Banks. I surmise they can surely buy up a PoS system, transferring their control from existing fiat to this new fiat PoS system.

I think by the time a PoS system become big, it will be too expansive to buy it, even for the wealthiest. Therefore they will need to buy it somewhere in its ascent, and that will deter the market to use it and another PoS system will win the adoption race.

I am confident that if it reached 10% of the dollar's reach, the USA government would act to protect the dollar's hegemony well before it had destroyed the dollar.

Besides they can tax it at will, especially since there is no strong anonymity in these PoS systems. I believe they can't build in the anonymity, because the only way I could contemplate to do this was via the pool mining (and PoS doesn't have pool mining).  

Thus they can drain value from it back to dollar.

The NSA is tasked to pay attention to security threats to the hegemony. I doubt they are oblivious.

And all of that is assuming there will be only one dominant currency. Which will probably not be the case. A lot of the socialist thinking come from the false premise that free market lead to monopolies. In the same manner that there is not one corporation which address each human wish, there will be no unique money. And if the wealthiest will not be able to even capture one succesful PoS system, a fortiori they won't be able to capture all the succesful PoS system.

The current plan of the globalist elite is for a single global base currency, tentatively called "SDR", then the regional and national currencies will float against.

W.r.t. to the physical economy which government will always be able to tax and thus control, they will make sure the crypto-currencies float against this global reserve unit.

I don't propose to challenge that plan. I don't think anyone can.

Rather I propose that if we successfully make a crypto-currency strongly anonymous that can withstand the NSA, then we also have to protect the other means to controlling it, because (I assume) the government's plan is to control the cryto-currencies through taxation, giving them an unfavorable tax rate relative to the SDR. So if they are faced with a currency they can't tax in the virtual economy, I think they would attack it any other way, such as 51% attack for PoW or buying up a majority shares for PoS.

Thus I conclude PoS is unworkable as the strongly anonymous coin. If I have a failure in my logic or have stated something subjective, please point it out.

Tragedy of the Commons. These systems won't be secure. Their designers are Communists disguised in Austrian economics facade, i.e. wolves in sheepskin.

I need to do some research to see what incentives are planned fo "miners". I would be surprised if there were not.

They will try to obfuscate and confuse you (and themselves) on this issue by employing much complex discussion and design, but in the end they can't avoid this because this was the genius of the PoW invention.

A one time event, like a land rush for money. Brilliant.    

It was not a rush for money, it was a rush for a highly speculative investment.

There is no money here and now in the cryptos landscape, only speculative investments. In your reasoning you can't treat something that is only a speculative investment as if it was already the money system of the society. It's a logical fallacy.

They have no clue about the Austrian theory of how money comes to be adopted, nor any sane logic about how to make a coin that sustains adoption and security growth ongoing.

A lot of Austrian economists have no clue either. How many of them disdain Bitcoin because it doesn't fit Mises' regression theorem?

See Hayek for the competition in money. He did understand Austrian economics and his views on money are more relevant than the all of the Austrian crowd together imo.

My (and the Austrian) point is that money has to gain adoption over a period of time, so we need a system that provides continuous competitive distribution, not a one-shot affair.

The PoS IPO is the antithesis of currency distribution, because the wealthy spend a fraction of their wealth on consumption. So you won't be distributing this coin from wealthy to merchants, rather from wealthy to the greater fool investor. The mechanism isn't there to create a currency. The greater fool investor isn't buying it to spend as a currency, rather buying in frenzy, then a collapse in price. There is no mechanism to adopt the use as a currency. Whereas with cpu-only PoW, the currency gets pushed out via home-scale mining to anyone with PC. The home-scale miner is selling it to the wealthy. This is night and day in terms of currency distribution.

Whereas with cpu-only PoW, we are continuously diluting the wealthy (at a small, reasonable annual debasement) to get the coin into consumer's hands.

Do the wealthy play an important role? Yes indeed. They invest after the early adopters (another reason you don't want the IPO at the very start). Balance. Balance. Balance. PoS doesn't have it.

Scams abound now.

XCP is the antithesis of a scam. It was distributed by proof of burn, even the developpers had to burn their BTC to get some. It's arguably the fairest coin distribution since Bitcoin.

Ditto logic I wrote above. Thus they are not currency distributions. It appears they are some genre of pyramid scheme (for a lack of a better term to describe greater fool selling of what can't be a currency to people who think it can be).

I thought it was a PoW coin. Are they doing a land rush sale of a pre-mine? Or do you mean invested in mining it at launch?

They are doing both. They will issue X ether via an IPO and then 0.4*X ether will be distributed each year via PoW.

Maybe they should read this post of mine.

Any way, I think there comes a time for me to stop arguing with words.

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[rpietila]

Auroracoin is an interesting approach of provably giving most of the the coins away equitably for free in a non-wasteful procedure.

Last time I checked it was trading at $40M post-airdrop marketcap.

[AnonyMint]

Auroracoin is an interesting approach of provably giving most of the the coins away equitably for free in a non-wasteful procedure.

Last time I checked it was trading at $40M post-airdrop marketcap.

I have never agreed with giving coins away for free. Jason Hommel ingrained into my mind, "you can't give away something for free which isn't free". I am writing about distribution efficiency for currency.

Perhaps you are writing this in support of my argument and not still thinking that I am proposing giving anything away for free? I don't think you are arguing Auroracoin will be a positive outcome, because you explained to me in the past how when the former Soviets distributed formerly collectively owned land back to the individuals, the recipients promptly sold it and consumed the revenues (on Vodka, etc). The poorest of the Icelanders will promptly sell the Auroracoin driving the price down or retarding its price growth! I have no qualms about home-PC miners spending their recently mined coins at a net-loss[1] if they so desire, as this increases the velocity of money and is totally different as they have recent electric bill cost to factor in.

Miners compete to earn a profit. The only socialist aspect is the perpetual coin rewards (debasement). As I have explained upthread, this is necessary (and it is why socialism exists), because otherwise the wealthy will destroy themselves (and society) because usury (backstopped by purchasing the government) eventually accumulates 100% of the wealth and then we collapse the velocity of money[2] (because wealthy consume very small % of their wealth) into another feudal (lords) Dark Age.

Those (hard-on money tin foil hats) who advocate no debasement at all will actually force socialism to create a central bank. It is unavoidable that we have to dilute the usurists. It is how we go about it that is new. Now we can do it decentralized so the usurists are not in the driver's seat of the attempts to rebalance their overconcentrated wealth. And the rate of debasement is very subtle, perhaps 2 - 5% per year which is insignificant to the fast-moving entrepreneurs who are increasing their wealth much faster.

Essentially this redistributes wealth away from usurists who (inject very little new knowledge and) are a drag on the economy to fast-moving entrepreneurs who are a boon to capitalist risk and prosperity. Usurists don't take any risk at all, they buy the government backstop[3]. Thus they don't care who they loan to.

An argument which claims we can just stop the usurists from capturing the government is unrealistic. The power vacuum of democracy can't be eliminated entirely. Thus view the perpetual coin rewards more in terms of their importance for mining security, i.e. anarchistic-leaning-contentionism (click that link!), than for the impossible dream of eliminating all centralized wealth redistribution a.k.a. socialism.

[1] I posited upthread that the home miners will be mining at a loss (electricity will cost more than the value of the coin), and that this will drive the price of the coin higher faster than Bitcoin. I pointed out this will move the value of the existing PCs into the value of Bitcoin. Unlike with ASICs, there is nothing to buy, that capital is already idle and being wasted every night when they sleep. Thus this will skyrocket past Bitcoin!

[2] V in the Quantity Theory of Money

[3] Even long-term private insurance, e.g. life or bank deposit insurance (but not insuring a package delivery), is ultimately backstopped at the government because it forces capital to be managed by a central fund manager, thus the fund manager can't lose for some and gain for others and all are locked into a single outcome, i.e. no risk allowed. Thus insurance is usury, i.e. invested in bonds.

[rpietila]

You are right to point out that it was me who showed that such has never worked in the past. But now we have much improved technology, so I am interested to see what happens this time.

[AnonyMint]

You are right to point out that it was me who showed that such has never worked in the past. But now we have much improved technology, so I am interested to see what happens this time.

If the society of Iceland is homogeneous in its appreciation of the importance of crypto-currency, nationalism, and replacing their central bank, perhaps we could see a different outcome. But I am extremely skeptical that the distribution concept of Auroracoin would work where the population is not so aware, for the reason I stated in my prior post.

[AnonyMint]

The big picture. Where we are headed. Why this is important. Why only PoW is decentralized, positive-scaling, enforceable structure.

https://bitcointalk.org/index.php?topic=355212.msg5208846#msg5208846

Adios forum. I need a break.

[AnonyMint]

-   August 1st, 2014 could be the day they release a bitcoin killer altcoin, obviously by no means does any voodoo guesses I do have any effect on what the market ultimately does

[vn]

I disagree with your premise that flaws will cost investors "billions".

The bitcoins aren't going to disappear, and in order for governments (really the people behind them) to want to have them they have a vested interest in making sure they have value.

You are missing the point that the only reason governments would want bitcoin is because it has value. No value = no interest from the government.

If your argument is that some investors will lose a lot of money, then congratulations you've described just about every investment instrument that there is.

Some will lose a lot, others will gain a lot.  This isn't anything new.

[AnonyMint]

Quote from the OP:

Note the argument of an absolute network effect advantage for Bitcoin is illogical. The network effect can lead to more mass for Bitcoin but it can't entirely shut out altcoins, not in the way that for example an internet standard shuts out alternatives due to the inertia of modifying millions of servers ... Friendster followed 2002 later peaking with 100+ million, Myspace 2006, and then Facebook 2008. Last year Bitcoin was only at an estimated 350,000 users. We have a long way to go to 7 billion.

Appears the number of Bitcoin users is still below 1 million.

I disagree with your premise that flaws will cost investors "billions".

That wasn't my premise in the OP. That was the premise of Alex Daley (this thread's title quotes his article's title), and I stated his understanding is myopic and incomplete.

I suppose that was you that just voted "No" increasing the total votes from 106 to 107.

The bitcoins aren't going to disappear, and in order for governments (really the people behind them) to want to have them they have a vested interest in making sure they have value.

You are missing the point that the only reason governments would want bitcoin is because it has value. No value = no interest from the government.

No where in this thread did I assert that Bitcoin will have no value any time soon.

I have argued that if Bitcoin can't scale its transactions as fast as its price growth, then it will have a collapse in price when the investors leave and it collapses to its currency use value. But that won't happen soon and it is not certain that transactions might start scaling faster than price. I linked to a chart which shows transactions are currently growing much slower (and much of that might be SatoshiDice dust then much of the rest investment trading, coin mixers, etc).

[AnonyMint]

I am uber excited. I owe my gratitude to rpietila, for it is he who woke me up out of my slumber about Bitcoin March 2013. He had mentioned a couple of times before that going back I think to 2011, but it was early 2013 when he pounded the table to me in a private chat session. This demonstrates the value of the Supernodes.

I had noticed Bitcoin early on, like many of us I ignored it.

I had been working from 2008 onwards on trying to figure out how payment systems could work backed by gold and silver. I eventually came to the conclusion that they couldn't work because the physical gold and silver always has to be stored some where, and thus it is a centralized paradigm. I tried to think of ways to decentralize it, but the problem was always the transfer of the physical metal for transactions.

For some reason I didn't connect this problem to the solution of Satoshi's proof-of-work. (I think the reason was primarily emotional) I didn't have the epiphany until mid-2013 when I realized the key insight that only PoW had this expansive entropy which I have explained upthread.

When I started to look at Bitcoin in March, I realized immediately that the declining coin rewards was a fundamental weakness, that had been marketed as a strength.

As I dug deeper, I realized all the issues which culminated in the OP.

So now, it is time to sign off.

[MoonShadow]

Appears the number of Bitcoin users is still below 1 million.

Funny how no one metions that you referenced your own opinions about the numbers of users.  Coinbase alone has almost 1 million accounts, not addresses.  Truthfully, we can't know how many users there are, which is kinda the point.

[tromp]

You just try to find one finite bound of anything in the universe. You won't be able to find it. Even if you count the number of a certain species, you can't guarantee with 100% certainty it will remain less than some bound

This quote is attributed to Einstein:

"“Two things are infinite, the universe and human stupidity, and I am not yet completely sure about the universe.”"

[AnonyMint]

Appears the number of Bitcoin users is still below 1 million.

Funny how no one metions that you referenced your own opinions about the numbers of users.  Coinbase alone has almost 1 million accounts, not addresses.  Truthfully, we can't know how many users there are, which is kinda the point.

No I referenced and clarified the logic and data of others from the thread and clarified that there is less basis for concluding with great confidence that the number of users is greater than 1 million (an account is not a user for the reasons I stated in the linked post).

The likely number of users was 1 million or below based on the data I quoted in the linked post. The original figure used was 488,000 Coinbase accounts. I have posted your claim and some analysis to that thread.

[MoonShadow]

Appears the number of Bitcoin users is still below 1 million.

Funny how no one metions that you referenced your own opinions about the numbers of users.  Coinbase alone has almost 1 million accounts, not addresses.  Truthfully, we can't know how many users there are, which is kinda the point.

No I referenced and clarified the logic and data of others from the thread and clarified that there is less basis for concluding with great confidence that the number of users is greater than 1 million (an account is not a user for the reasons I stated in the linked post).

The likely number of users was 1 million or below based on the data I quoted in the linked post. The original figure used was 488,000 Coinbase accounts. I have posted your claim and some analysis to that thread.

Unlike yourself, I didn't claim to know of any relationship between any particular claims and the real number of bitcoin users.  I honestly don't know if there are more or less than 1 Million users.  I mentioned it to highlight your lack of evidence.  Referencing the logic and "data" of others, who don't have any evidience of their own, doesn't constitute evidence either.  You do this a lot, make grand arguments that you cannot support.  I'm surprised you're not either a lawyer, a politician or a preacher.

[AnonyMint]

I have sent a post to Ethereum (not Etherium the game) summarizing my concerns with their technical design, and praising their vision.

MoonShadow, precisely my point is we don't know if there are 2 million "Bitcoin users"[1] and so we shouldn't cite that as a certain fact. Note your claim about a doubling in Coinbase accounts has been added to that thread so that could alter the speculation.

[1] What is a Bitcoin user? A Facebook user is someone who creates an account and returns to use it 1x per day, per month, per year, or never?

[rpietila]

Unlike yourself, I didn't claim to know of any relationship between any particular claims and the real number of bitcoin users.  I honestly don't know if there are more or less than 1 Million users.  I mentioned it to highlight your lack of evidence.  Referencing the logic and "data" of others, who don't have any evidience of their own, doesn't constitute evidence either.  You do this a lot, make grand arguments that you cannot support.  I'm surprised you're not either a lawyer, a politician or a preacher.

The thread which I started in October, includes most of the data and reasoning behind the 2.0 million number. As perhaps the person who has put the most energy and talent to finding this out (over the last 4 months anyway), I am open to answer your questions for example if you want to define "user" in a different way, how it would affect the total.

Definition used there is "Person who directly or knowingly beneficially owns at least BTC0.001 at the time of census."

If Mt.Gox never pays out, there will be a dent in # of owners...

[CoinMode]

Is this guy serious? He sets up a pattern of facebook succeeding all the other social websites before it, and then blasts bitcoin with the assignment of "We have a long way to go to 7 billion." So we need to go to 7 billion? What currency is used by 7 billion people, and why do we have to exceed that number in order to be the next standard? Bitcoin will surpass a billion users within five years, and something tells me the value might go up during that time.

[AnonyMint]

Is this guy serious? He sets up a pattern of facebook succeeding all the other social websites before it, and then blasts bitcoin with the assignment of "We have a long way to go to 7 billion." So we need to go to 7 billion? What currency is used by 7 billion people, and why do we have to exceed that number in order to be the next standard? Bitcoin will surpass a billion users within five years, and something tells me the value might go up during that time.

You've attributed accusations to me which I did not state. My position is that the number of serious (i.e. frequent use or maintaining a level of balance worth remembering) Bitcoin users may still be below 1 million, i.e. 1 in 7000 people, which lends some credence to the notion that it is still (if only remotely) possible for an alternative to overtake Bitcoin or at least establish a lower but significant market share, and notwithstanding yet especially if the market bifurcates to a government-compliant coin (i.e. trending towards fiat) and an anonymous darknet coin (i.e. maintaining decentralized currency).

No where did I state that Bitcoin had to reach 7 billion users in order to succeed or go up in price. And no where have I stated—in fact I emphatically warned the opposite last year—that Bitcoin's adoption curve allows a lot of time for altcoins to catch up. I doubt altcoins even have 5 years to make their move.

I enumerated Bitcoin flaws which did not include "a lack of users".

[Pentax]

Yes:  There is a lot of improvement that needs to be done to the protocol and the ability to use it that will allow for increased use.

No:  The op-ed piece's fundamental underpinning seems to be based on the supposition that government simply won't allow it.  While I can see the logic behind that, it is a far from settled issue.  We'll see regulation, yes, but outright quashing?  I doubt it, except for a handful of places like China, Russia, where you'd kind of expect it in the first place.

[AnonyMint]

No:  The op-ed piece's fundamental underpinning seems to be based on the supposition that government simply won't allow it.  While I can see the logic behind that, it is a far from settled issue.  We'll see regulation, yes, but outright quashing?  I doubt it, except for a handful of places like China, Russia, where you'd kind of expect it in the first place.

Perhaps this OP did not make my position clear enough. I am not arguing that Bitcoin will be shut down.

Daley essentially incorrectly argues that money can't exist without top-down corporate and government control (although he admits it could in a "wild west" mad max world which I think is to some extent where we are headed after 2016), yet correctly argues that Bitcoin has insurmountable (also) flaws for consumer payment without top-down take over while he failed to enumerate many of the reasons Bitcoin is vulnerable to top-down take over. Copying the myopia of most of the Bitcoin community, Andreessen fails to understand the reasons Bitcoin is doomed to a future of top-down control analogous to the top-down global money solutions being patented recently by the major banks.
...

Bitcoin Take Over Threats

• Those who were anonymous lose it ex post facto, when tax & law enforcement attack a.k.a. "coin taint" the numerous non-anonymous [2]

The government and the financial powers-that-be (who own the government) are not going to allow any decentralized crypto-currency that they can't tax and effectively control.

The powers-that-be will allow Bitcoin because they are already taking control of it (and some of us speculate they even created it). I explained in the OP that they can take control with regulations such as AML and KYC laws, which enable them to identify all (even formerly anonymous) users and tax them. The mining is centralized in a few mining pools thus the financial powers-that-be can eventually take control of the mining.

The point of my OP is that Bitcoin will end up essentially analogous to another VISA, i.e. a fiat compatible system that is top-down controlled a.k.a. centralized.