Do we really need Bitcoin?

[ghgr]

Thank you for your answers, most of which pose interesting points of view. Before answering the points I consider the most relevant, I noticed some hostility in some of the answers, stating things like I hate Bitcoin and even the reason, apparently because I was scammed to bankrupcy. Since I want to keep the discussion focused on Bitcoin, I will answer briefly your concerns.
I absolutely do not hate Bitcoin. What is more, I already made my part to the community selling some at the time. With Paypal indeed. And no, I was not scammed one single time. I stopped because it was more a proof of concept, I enjoyed building the system but not so much running it and, above all, because I discovered that in the US one can buy a prepaid SIM card withoud providing ID.   


The tone of some of the answers really shocked me. I did not expect to make people angry and that raises some concerns about how do we interpret this. I had seen this reaction with extremely religious and political people, but never in a technical field (maybe in some Windows/Linux and XBox/PS2 discussions among teenagers). In other threads I saw how some users are pushing their friends to join in, others who invest all their life savings and some who blame the victim when someone loses their wallet. Being myself passionate about Bitcoin, I am doing this exercice of scientific skepticism to try to validate my beliefs about this matter. I am educated about the technicalities of Bitcoin and I follow the current news. I would like to invite you to make this exercise of introspection with a neutral and passion-less mentality.


Now I would answer some of your most interesting points. Thank you again for your time.

Bitcoin gives me the freedom to easily and securely store and transfer value without the help of a middleman or the permission of an authority.

In a world of ever increasing capital controls, yes I need this freedom.

Does it require some responsibility on my part? Of course. Freedom isn't free.

You are right, and this is an important fact. Nevertheless, I fail to see the practical implications in the everyday life. Could you please provide an example were these controls pose a regular problem to people? It is true that it would be hard to move large capitals to another country, but people do not have regulations to pay for groceries, electronics or a house, for example.

Simple don't use an PRNG.
Here is a very powerful, unhackable and easy to use RNG

Good point. After all one cannot have both security and convenience. But careful when intutively using systems as throwing two dices. Often times the distributions are not as constant at it may seem.

May we ask why your site is down - http://www.donotcompare.com? Did you get scammed by accepting an insecure currency <paypal> in exchange for a more secure currency <Bitcoin>?

inBitweTrust, thanks for your long answer. I already explained what happened to my site and why I don't think that it is relevant. Anyway, even if I were scammed, what does it have to do with the security of the currency?

A)I agree, that might work. But at this point I don't see the difference with traditional metal coins and paper bills. And the risks of the previous point.

If someone steals my wallet full of fiat usd there is little hope of getting my cash back. If someone steals by cellphone with my bitcoin wallet that is secured than I can retrieve and use my bitcoins with my backup and the thief has almost no chance of using or stealing my bitcoins.

Good point. You solved the problem of losing/stealing the phone. But there is still the problem with malware. Sure, fiat has it too, and it happens often. But with fiat these problems are reversible, with Bitcoin unfortunately they are not.

A)  I agree that the governments (or the classes that control them) have way too much control over the currency. But this problem comes from really long ago. And the traditional way to deal with it are offshore investments.

Offshore investments are much more expensive and complicated to setup than bitcoin. They are also far less secure as governments have been successfully going after "terrorist" and money laundering individuals no matter which country they hide their wealth in.

I am talking about about offshore investments, not capital/tax evasion.

A)  National (or global) instabilities are a problem of the rich. If you have less wealth than a threshold ($100,000 I think?) your deposits are guaranteed.

Inflation actually hurts the middle class and poor most. Your deposits are not guaranteed to do anything but decrease in value. You can guarantee that you will lose 5-8% a year in the US and 25-55% in countries like Argentina. You are also making the false assumption that Fiat currencies never fail completely as history has shown otherwise.

That is a good point, fiat currencies can lose all their value.

A)   So are Paypal/Visa/MasterCard, etc.

Making the assumption that the unbanked and underbanked don't exist in the world. How provincial.

A)  Security

Bitcoin is as secure or insecure as you choose to make it. Example - selling Bitcoin for paypal fiat is just plain stupid.

I appreciate your passion and I understand that it is a sensitive subject. I'd rather keep the tone neutral and a rational discussion.

A)    If you say that Visa's fee is higher... well, that doesn't seem to be a problem for most people, considering the advantages (chargebacks and insurances).

Xapo and other merchants offer insurance as well. Clients can use escrow to protect themselves and businesses prefer not to deal with chargebacks.

The problem I see with escrow is that it must be trusted by both parties. These entities (trusted by many people) will be scarce and thus they can impose high fees. In addition, these trusted entities can always side with the buyer (for example) if they chose to. Is it the same as Paypal? Isn't it centralization? Theoretically you can use whatever payment gateway you can find, but the trusted ones are few (Paypal and few others).

A)    Bank accounts are NOT frozen for the most part of people. If you bank freezes your account often, I guess that you are still a niche market.

Bank accounts are temporarily frozen or permanently all the time for many people even if they are conducting 100% legal business. Ever hear of Operation Choke point or the Cypress Bail ins?

I agree. The current banking system has big flaws.

A)    Your wealth can be gone in a matter of seconds for reasons you might don't event understand

This does happen all the time with traditional payment methods. You don't think hackers attack traditional fiat too?

Crackers attack the fiat system all the time. And they succeed. And you call the bank and have your money back. With Bitcoin you call the Waaaahmbulance (I liked that picture!).

A)    Centralization problem. 

So because there is a risk of less decentralization with Bitcoin we should go straight back to using a centralized solution instead. What is your point?

My point is that I'd rather trust an established system with accountability and traceability than an anonymous mining pool without accountability to make them self-control. I think it is immensely more likely that a mining pool starts a 51% attack to take as many Bitcoin as possible and then disappear than my government to start printing money non-stop and the responsibles disappear. Of course it could happend (and happened, unfortunately, as well as in Bitcoin with MtGox, Bitcoinica et al and their hacks). I am just talking about posibilities. Nirvana fallacy if you want. Just because the current banking system is not perfect it doesn't mean that we need to go all-in in an experimental, anonymous currency.

A)  Anonymous transfers incentive thefts and blackmail.

You are ignoring all the thefts and corruption that exist within Fiat that dwarfs the corruption scam artists using bitcoin. You don't have to be anonymous to steal money from people. People can easily be manipulated into thinking that they aren't being robbed blind. one example out of many - Economists now have over 5 different ways of calculating the CPI. When they normally cite inflation they use the formula that doesn't include food or fuel. Real inflation is actually closer to 5-8 % in the US. This is theft and hurts the middle class and poor more-so. 

Yes, I see your point. But again, the fact that you can extort with fiat doesn't mean we should use a currency with which extorsion can be easier.

A)  ....price instability and deflation.

Volatility is a valid criticism but Bitcoin is provably becoming more stable so in the longterm should not be an issue. The deflationary spiral argument is unfounded and research from payment processors like Bitpay have proven that spending actually increases during rapid deflationary bubbles.

I meant that I don't find these two criticisms valid. Price volatility and deflation have nothing to do with Bitcoin itself. They are just market eventualities and, as you say, it will stabilize over time.

[slaveforanunnak1]

every couple of week we have some post like this!
do we really need bitcoin! YESSSSFFS

[DeathAndTaxes]

Good point. After all one cannot have both security and convenience. But careful when intutively using systems as throwing two dices. Often times the distributions are not as constant at it may seem.

Of course you can.  I wouldn't say taking two minutes to generate a single high entropy seed using a deck of cards gives up either security or convenience.

[ghgr]

Good point. After all one cannot have both security and convenience. But careful when intutively using systems as throwing two dices. Often times the distributions are not as constant at it may seem.

Of course you can.  I wouldn't say taking two minutes to generate a single high entropy seed using a deck of cards gives up either security or convenience.

Actually the seed is the beginning of a long algorithm you are trusting. And if you trust the algorithm, you can also trust the seed generator. If not, you need to generate for each private key 256 bits of entropy throwing a dice (for example).

[DeathAndTaxes]

Good point. After all one cannot have both security and convenience. But careful when intutively using systems as throwing two dices. Often times the distributions are not as constant at it may seem.

Of course you can.  I wouldn't say taking two minutes to generate a single high entropy seed using a deck of cards gives up either security or convenience.

Actually the seed is the beginning of a long algorithm you are trusting. And if you trust the algorithm, you can also trust the seed generator. If not, you need to generate for each private key 256 bits of entropy throwing a dice (for example).

No that isn't correct.   A hardware device can act as a black box however if the outputs are deterministic then the outputs can be validated.   If a block box provides you a random key how do you know it is actually random?  The reality is you don't and thus you need to TRUST the results are truly random.  However if you provide a black box which implements BIP32 (HD Wallets) a seed you can VERIFY the keys match the expected outputs.  Single random seed -> a lifetime of verifiable results.

[ghgr]

No that isn't correct.   A hardware device can act as a black box however if the outputs are deterministic then the outputs can be validated.   If a block box provides you a key how do you know it is random?  The reality is you don't and thus you need to TRUST the results are truly random.  However if you provide a black box which implements BIP32 (HD Wallets) a seed you can VERIFY the keys match the expected outputs.  Single random seed -> a lifetime of verifiable results.

Of course! Verification of the results after applying a deterministic algorithm! You just recovered my interest in hardware wallets!

I remember a couple of projects in the Project Development subforum. One of then is/was Trezor. What is its current status? And, why is it so difficult (honest question)? I would naively think that with a Raspberry Pi, a LED screen and a cheap webcam (to send the transaction to sign) it could be done. What am I missing?

[dadugan]

Bitcoin makes internet transaction more convenient and cheaper. But we can live without it.

[franky1]

"do we really need bitcoin?" = "do we really need toilet paper?"


in some cultures no, but i know what i want and need
end of

[jonald_fyookball]

Some proposed solutions involve hardware wallets, but this solves no problem. How can we be sure that the RNG is not backdoored?

Simple don't use an PRNG.

Here is a very powerful, unhackable and easy to use RNG
 

You'd have to be a REALLY good hacker. 

[zhinkk]

I like posts like these. Not every post should be pro bitcoin, good arguments need to made. In my opinion, my biggest reason for using bitcoin is that I want to hold my OWN money. Yes, I "own" the money in the bank. But they are holding it and I am at the mercy of them. When I hold my own bitcoins, I can do what I want, when I want, with no restrictions.

[jonald_fyookball]

M) Bitcoin protects you from inflation, currency manipulation, global economic disaster, etc.
A) I agree, too. But this is exactly the 'non sequitur' fallacy. I agree that the governments (or the classes that control them) have way too much control over the currency. But this problem comes from really long ago.  

Non sequitur comes from Latin, meaning "does not follow".

An assertion that Bitcoin protects from inflation follows
clearly from the fact that the Bitcoin supply is limited.

An assertion that Bitcoin protects from currency manipulation
follows clearly from the fact that there is a protocol in
place that every needs to follow.

YOU are the one committing a non-sequitor when you say
the problem of government manipulation comes from
long ago.  THAT does not follow or have anything
to do directly with the initial statement.

[Kayex]

I don't really use bitcoin that often until now.
I'm noticing some people can't take paypal so i switched over to the BTC side.
Also, sometimes when the price fluctuates, I get happy or sad.

To me, BTC is like stocks except, usable everywhere. (Nearly)

[inBitweTrust]

But there is still the problem with malware. Sure, fiat has it too, and it happens often. But with fiat these problems are reversible, with Bitcoin unfortunately they are not.

The non reversibility of Bitcoin also prevents theft as well.

What about con artists stealing from small businesses by requesting charge backs?
What about banks freezing your assets while they investigate?
What about governments seizing your assets for legal reasons or under asset seizures ?
Isn't one of the reasons why traditional bank fees much higher than bitcoin because theft is merely socialized and recouped across all participants and all theft indirectly affects all users?

I appreciate your passion and I understand that it is a sensitive subject. I'd rather keep the tone neutral and a rational discussion.  

I apologize for coming off rash but my reaction was prompted after reviewing some of your post history and seeing multiple negative posts criticizing bitcoin. I take it that you are just cynical and extremely skeptical which is fine but some of us get tired of hearing the same myths propagate repeatedly. It is sometimes difficult to identify the detractors with an agenda from those offering healthy criticism.

The problem I see with escrow is that it must be trusted by both parties. These entities (trusted by many people) will be scarce and thus they can impose high fees. In addition, these trusted entities can always side with the buyer (for example) if they chose to. Is it the same as Paypal? Isn't it centralization? Theoretically you can use whatever payment gateway you can find, but the trusted ones are few (Paypal and few others).

Escrow in Bitcoin is actually very inexpensive.. Multisig allows escrow to be free in most cases and only if there is a dispute there is a fee which is less expensive. Because Multisig removes counter party trust there is 0 risk that the arbitrator can independently steal the funds and thus allows for many arbitrators to compete driving down prices further. In fact anyone can become an arbitrator.

Here is one example of a marketplace of arbitrators for multisig escrow:  https://www.bitrated.com    

Crackers attack the fiat system all the time. And they succeed. And you call the bank and have your money back. With Bitcoin you call the Waaaahmbulance (I liked that picture!).

When someone steals my credit card, I am responsible for a 50 dollar deductible and all of the loss eventually comes back to hurt me and the rest of society. Merchant fees of 3-8% raise the prices of all goods and services. You don't get your money back, the loss is just abstracted and amortized.

In the future with hardware wallets bitcoin will become much more secure as well.

My point is that I'd rather trust an established system with accountability and traceability than an anonymous mining pool without accountability to make them self-control.

My point is the banks and governments have already betrayed the public's trust repeatedly and are not accountable.
They are corrupt and incompetent and should not be trusted.  Decentralized mining pools have a much better track record.
I would personally rather deal with a hypothetical risk than a definite bad actor.

Yes, I see your point. But again, the fact that you can extort with fiat doesn't mean we should use a currency with which extorsion can be easier.

Extortion isn't just easier with Fiat but a central part of its design. Extortion and theft is an intrinsic property of Fiat and happens continuously.

[minorman]

In order to make a steady state economy possible, we need debt-free money.  FRB money, which includes all fiat and even some gold, bears interest and thus it requires the economy to grow exponentially, forever.  If you belive exponential growth forever in a finite world then I wish you a great carrier in economics...

Bitcoin is essentially the only game in town when it comes to equity money (since physical gold is  hopelessly impractical). Everything else is debt money.  Bitcoin therefore MUST succeed. If you see problems - fix them!

Your concern about security and insurance for the average non-crypto-geek is valid, but market demand for a solution will solve it. Circle comes to mind.

[joshraban76]

For me I need bitcoin. It kills me to put money in a bank that is going to charge me a monthly fee for them to take my money and lend it out to people, collect interest on it and only give me a fraction of what they collect. Not to mention all the other upfrint and hidden fees they pile on. So do I need bitcoin?.... My answer is YES... YES I DO

[ghgr]

What about con artists stealing from small businesses by requesting charge backs?
What about banks freezing your assets while they investigate?
What about governments seizing your assets for legal reasons or under asset seizures ?
Isn't one of the reasons why traditional bank fees much higher than bitcoin because theft is merely socialized and recouped across all participants and all theft indirectly affects all users?

I see what you say, and I agree with your points. Nevertheless, when I make a payment (as a customer) I feel much more comfortable paying with Paypal than with any other payment method (unless of course the seller is well known and respected as Amazon or Dell). "Accepted by Paypal" tells me two things about a site: (a) that they wouldn't be doing business with Paypal for long if they were scammers and (b) that I can get my money back if things go bad.
Of course, with Bitcoin and escrow one could do the same thing. Maybe one day the "Using escrow with inBitweTrust" (for example) will transmit the same level of customer protection as today Paypal. Now I understand better the real practical applications of multisig transactions.   

It is sometimes difficult to identify the detractors with an agenda from those offering healthy criticism.

I completely understand that posts like that of "LET'S CRASH BITCOIN" are tiresome and sometimes outright trolling. I am glad that you don't see me now as one of them.

Escrow in Bitcoin is actually very inexpensive.[...]. In fact anyone can become an arbitrator.
Here is one example of a marketplace of arbitrators for multisig escrow:  https://www.bitrated.com    

Thanks for the URL, I didn't know it. On the other hand I don't completely agree with you about the economics of arbitrators, but well, time will say if they are cheap or expensive. Anyway, what I find a clear advantage is that the escrow is not needed in a normal scenario and, above all, it cannot steal the funds (as could theoretically Paypal do today).

When someone steals my credit card, I am responsible for a 50 dollar deductible and all of the loss eventually comes back to hurt me and the rest of society. Merchant fees of 3-8% raise the prices of all goods and services. You don't get your money back, the loss is just abstracted and amortized.

I agree that today the loss is amortized, but I don't see it necessarily a bad thing. What is true is that chargebacks and insurance come at a price (which one may or may not be willing to pay, the market will decide).

In the future with hardware wallets bitcoin will become much more secure as well.

I find hardware wallets a really promising technology and I hope the best for Trezor. I read in their thread that they are delivering.

My point is the banks and governments have already betrayed the public's trust repeatedly and are not accountable.
They are corrupt and incompetent and should not be trusted.  Decentralized mining pools have a much better track record.
I would personally rather deal with a hypothetical risk than a definite bad actor.
[...]
Extortion isn't just easier with Fiat but a central part of its design. Extortion and theft is an intrinsic property of Fiat and happens continuously.

I think I understand your general view (please correct me if I am wrong). Your vision is that Bitcoin, while having at this moment some drawbacks like yes, extortion by individual scammers is possible or funds can be lost (but coming technology is making this more unlikely than losing fiat) it solves the biggest of problems: institutionalized stealing by state agents and the economic elite. Or in other words, Bitcoin may, at this moment, make us a little bit more vulnerable to small-scale thefts (and even that is being solved) while protecting us from the biggest scammers who steal money in front of our face and modify the laws as needed to make it 'legal'.
If so, of course it would open another whole can of worms about in which situations the market should or should not be free, like in asymmetric information scenarios (car dealer-client, health insurance-client, etc), or in which scenarios could be useful to devaluate the currency and, of course, if the people who make these decisions are honest or not. But well, I am sure it would be a really interesting debate but that is not the scope of this thread.

Maybe we are in opposite sides of the world but thanks to Internet we are having this interesting discussion. If Bitcoin makes to the economy what the Internet made to the information I am sure that interesting times are coming. 

[indiguy]

I like and need bitcoin because i can hide my cash. i just need to hide maybe from banks as well. these cash doesn't come from any illegal activities but really i work hard for it. 

[inBitweTrust]

I think I understand your general view (please correct me if I am wrong). Your vision is that Bitcoin, while having at this moment some drawbacks like yes, extortion by individual scammers is possible or funds can be lost (but coming technology is making this more unlikely than losing fiat) it solves the biggest of problems: institutionalized stealing by state agents and the economic elite. Or in other words, Bitcoin may, at this moment, make us a little bit more vulnerable to small-scale thefts (and even that is being solved) while protecting us from the biggest scammers who steal money in front of our face and modify the laws as needed to make it 'legal'.
If so, of course it would open another whole can of worms about in which situations the market should or should not be free, like in asymmetric information scenarios (car dealer-client, health insurance-client, etc), or in which scenarios could be useful to devaluate the currency and, of course, if the people who make these decisions are honest or not. But well, I am sure it would be a really interesting debate but that is not the scope of this thread.

Maybe we are in opposite sides of the world but thanks to Internet we are having this interesting discussion. If Bitcoin makes to the economy what the Internet made to the information I am sure that interesting times are coming.  

You have done a great job of summarizing my argument. The beauty of the Bitcoin protocol is that it is designed in such a way that it encapsulates voluntarism and agorism at a protocol layer. Certainly, any government or person with any political ideology can use Bitcoin and benefit from its feature sets but at a design level no one can be forced into using bitcoin or upgrading to another version with features that they don't agree with(I.E... blacklisting). Bitcoin just IS, and like pandora's box cannot be removed or completely controlled by regulators. Society is going to have to adapt to this reality despite their misgivings. Mathematics is the great equalizer which allows individual people to have certain protections equal to even the most powerful organizations.

Bitcoin has its flaws and will never be perfect but right now has many qualities which make it more honest and safer if you understand it than traditional banking. There are some radical transparency and accountability features that can be used:

If you have a charity or are running a crowd-funding campaign you can accept donations where all donors or investors can clearly see the funds accountable in real time that are 99.999% verifiable. You can than use a M of N multi-sig to ensure that it is impossible for the treasurer or any individual to embezzle the funds or spend them without the agreed upon consensus within the bylaws. In the past a long drawn out legal battle would ensue with any dispute with parasitic lawyers milking both sides and with Bitcoin the protocol protects everyone.

Blockchain technology and crypto-currency is a black swan event. Many of us are unapologetically embracing the cleansing effect of its disruption. Whether its Bitcoin(most likely) or another crypto-currency doesn't matter, the effects of this technology is going to change everything just like the internet has.

[wordman267645]

The person who really interested about bitcoin he or she needs bitcoin. It's simple.

[CreamyPie]

We do need a virtual currency, people don't like hassles which paypal offers in money..