What problem does Bitcoin solve?

[rjcesq]

Please don't take this question wrong.  I'm a big proponent of digital and cryptographic currency.  One of the problems for years and why efforts such as DigiCash failed has been the lack of a clear problem that digital currency was solving.* I'm just trying to see what people on this board think,  what problem is Bitcoin solving, in your eyes?  And, as a followup, is there sufficient demand for the solution that is Bitcoin?


*Digicash failed for many reasons, such as the bad business decisions of David Chaum but even if he had done things right, there is no guaranteed that it would have succeeded. 

[1713563544]

1713563544

[schnell]

Decentralized, so governments cannot print more.
Little or no transaction fees.
Secure with military grade encryption.
Easily divisible.
Many other points exist, but those are the main ones for me.

[rjcesq]

Konichua,

Thanks for your reply.  Let me break them down:

"Decentralized, so governments cannot print more."
What you're talking about here is inflation resistance. Hayek's currency competition. The question is whether there is demand.  Certainly looking at the price of gold recently suggest that there is though it may be more people seeing gold as a good investment and not necessary running from the dollar.  Generally people are stupid.  Especially when it comes to math.  http://www.economis[Suspicious link removed]m/node/21557801?fsrc=scn%2Ftw_ec%2Fsomething_doesn_t_add_up  Most people don't view the dollar as decreasing in value so much as the price of gas going up.  If they don't know what the problem is, can the really be thought to seek a solution?

"Little or no transaction fees."
USD has no transaction fees, though it requires we be in person. I think what you really mean is low transaction costs. While the future may hold this, at present, for the vast majority of consumers, the transaction costs are in the conceptualization of Bitcoin, the difficulty in conversion and the transaction costs associated with exchanging fiat currency for Bitcoin. Certainly low transaction cost are good for small payments, but the mental transaction cost usually have been the impediment to adoption of micropayments.

"Secure with military grade encryption."
Obviously a feature but is insecurity really a feature?  My credit card is fraud protected for anything over $50.  I generally don't worry about money being stolen out of my bank account without some means of recovery.  I don't think most people will view this as a problem needing to be solved.  Reasonable security is ...well ...reasonable.

"Easily divisible."
Is this really a problem? If I have $1000 in my bank account, I can write checks for $700, $200, $118.27, etc....It's a feature of digital cash that physical cash doesn't have (I have to get someone to exchange it) but it doesn't seem to be a problem online.

I'm not trying to shoot down your suggestion, just get a conversation going.

Thanks,

Jason

[schnell]

"Easily divisible."
Is this really a problem? If I have $1000 in my bank account, I can write checks for $700, $200, $118.27, etc....It's a feature of digital cash that physical cash doesn't have (I have to get someone to exchange it) but it doesn't seem to be a problem online.

I have 10BTC in my wallet.
I can spend 1.45743878, but you would just be able to spend 1.45.
Also, I never said it was a problem with the dollar. It is just a feature of Bitcoin which is benificial, and better than the dollar's division.

"Decentralized, so governments cannot print more."
What you're talking about here is inflation resistance. Hayek's currency competition. The question is whether there is demand.  Certainly looking at the price of gold recently suggest that there is though it may be more people seeing gold as a good investment and not necessary running from the dollar.  Generally people are stupid.  Especially when it comes to math.  http://www.economis[Suspicious link removed]m/node/21557801?fsrc=scn%2Ftw_ec%2Fsomething_doesn_t_add_up  Most people don't view the dollar as decreasing in value so much as the price of gas going up.  If they don't know what the problem is, can the really be thought to seek a solution?

http://www.time.com/time/world/article/0,8599,2023140,00.html

"Little or no transaction fees."
USD has no transaction fees, though it requires we be in person. I think what you really mean is low transaction costs. While the future may hold this, at present, for the vast majority of consumers, the transaction costs are in the conceptualization of Bitcoin, the difficulty in conversion and the transaction costs associated with exchanging fiat currency for Bitcoin. Certainly low transaction cost are good for small payments, but the mental transaction cost usually have been the impediment to adoption of micropayments.

Well, there are fees for buying Bitcoin. But fees are low for transferring Bitcoin, and need not be in person.

"Secure with military grade encryption."
Obviously a feature but is insecurity really a feature?  My credit card is fraud protected for anything over $50.  I generally don't worry about money being stolen out of my bank account without some means of recovery.  I don't think most people will view this as a problem needing to be solved.  Reasonable security is ...well ...reasonable.

What if your notes are stolen? Bank details taken off your computer? Transaction reversed? Given, Bitcoin has security issues with malware too, but I personally think Bitcoin is the safest of the two.

[justusranvier]

The biggest problem it solves is prior restraint. With Bitcoin it's not possible for any authority to arbitrarily forbid a transaction.

[hamdi]

coin is king

[DannyHamilton]

I would suggest that the biggest problem solved is one experienced by merchants rather than private individuals.  In particular the ability to receive electronic payments with much smaller transaction fees in comparison to the current common solutions (Visa, Mastercard, Discover, American Express, Paypal, etc).  As well as protection from fraud perpetrated by individuals who would take advantage of the "charge-back" feature of most of the common solutions.

[casascius]

A few of the benefits are sinister.

With Bitcoin, I can gamble or OD on drugs or donate to politically incorrect causes if that's what freedom means to me, without someone minding my business.

If the porn industry would grow up, it would mean I could consume porn (assuming that was my desire) without a paper trail or giving my address for "verification" to a porn site, which might result in unwanted snail mail or e-mail or credit card charges that my SO might see.

With Bitcoin, international remittances and payments for imported goods are just as easy as with a bank, but without the hefty bank fees.

With Bitcoin, one can do business and receive all of the benefits of having received cash, without having to be face-to-face.  The benefits of doing business in cash vary from person to person.  Admittedly, everyone knows somebody for whom "cash is king".

If I'm willing to commit to owning some Bitcoin as a currency for its usefulness as a unit of trade rather than seeing it as a way to move dollars and euros, the hassle of exchange becomes a non-issue.  I will happily accept bitcoins for payment because I know that I will probably spend the bitcoins again, the same way I'd probably hold onto some Canadian dollars on my way back from Canada if I knew I'd be back soon.

[Robosprout]

I would suggest that the biggest problem solved is one experienced by merchants rather than private individuals.  In particular the ability to receive electronic payments with much smaller transaction fees in comparison to the current common solutions (Visa, Mastercard, Discover, American Express, Paypal, etc).  As well as protection from fraud perpetrated by individuals who would take advantage of the "charge-back" feature of most of the common solutions.

This is a big thing to me and all merchants.  Paypal etc charge a percentage that is significantly greater than Bitcoin (and if it is international even more).  Then as has been pointed out if they decide to do a chargeback the seller is the one who takes the loss.  It is very difficult (nearly impossible) to get paypal to remove a chargeback without at least a 1-2 week back and forth with the customer and if you don't have proof of delivery (i.e. Brazil...if you send the package the tracking stops at the border and it will never show delivered...Paypal will not correct it without proof of delivery).  I have had these issues in the past when I was an ebay seller and it is a large part of why I do not deal with ebay anymore.

[westkybitcoins]

The biggest problem it solves is prior restraint. With Bitcoin it's not possible for any authority to arbitrarily forbid a transaction.

This.

The horror stories I hear about Paypal should be reason enough for online sellers to embrace Bitcoin.

Of course, the decentralized (read: unstoppable) alternative it provides to a debt-based monetary system should be good enough reason for everyone else to embrace it. The fact that many people don't realize it's good for them doesn't mean that it isn't.

[Stephen Gornick]

A good read:

 - http://bitcoinmedia.com/bulleted-advantages/

[madberry]

(and if it is international even more)

This is the big thing for me paypal exchanges can kill a transaction before it has ever happened.  How ever when I accept a payment in Bitcoin I don't have to worry about those crazy fees.

[payb.tc]

"Easily divisible."
Is this really a problem? If I have $1000 in my bank account, I can write checks for $700, $200, $118.27, etc....It's a feature of digital cash that physical cash doesn't have (I have to get someone to exchange it) but it doesn't seem to be a problem online.

I have 10BTC in my wallet.
I can spend 1.45743878, but you would just be able to spend 1.45.
Also, I never said it was a problem with the dollar. It is just a feature of Bitcoin which is benificial, and better than the dollar's division.

to be fair, having only 2 decimal places isn't an inherent feature of government currencies; it's simply the way banks and other institutions store amounts.

there's no reason why a pack of gum couldn't cost $0.4529839 if being paid for electronically.

i.e. the dollar's division is just as good as bitcoin's.

[MadSweeney]

What problems bitcoin solve in general terms seem pretty much well-known already. What things, services, or systems will emerge as a consequence of its adoption are also interesting and may be harder to predict. Another question that's in my head of late is this. What does it matter if bitcoin allows for a freer movement of money? Maybe it will solve the problem of a young pharmacist from Iloilo City to get funding for her research on infant formula?

[punningclan]

A few of the benefits are sinister.

..I can gamble or OD on drugs or donate..

You can also just Drugs..

[punningclan]

"Easily divisible."
Is this really a problem? If I have $1000 in my bank account, I can write checks for $700, $200, $118.27, etc....It's a feature of digital cash that physical cash doesn't have (I have to get someone to exchange it) but it doesn't seem to be a problem online.

I have 10BTC in my wallet.
I can spend 1.45743878, but you would just be able to spend 1.45.
Also, I never said it was a problem with the dollar. It is just a feature of Bitcoin which is benificial, and better than the dollar's division.

to be fair, having only 2 decimal places isn't an inherent feature of government currencies; it's simply the way banks and other institutions store amounts.

there's no reason why a pack of gum couldn't cost $0.4529839 if being paid for electronically.

i.e. the dollar's division is just as good as bitcoin's.

They'd have to rewrite every bit of banking POS and ATM software and you can't dissect a penny? If it had been possible it would probably have been done already since there are loads of things tiny payments are useful for. FIAT is all about your money becoming worthless, not more valuable so micro transactions are not something banks want or need.

[Randy]

In short? It provides anonymous trading, security and ease.

[Ragnar17]

It gets around government what more could you ask for.

Freedom finally. I thought I would never find it.

[localhost]

As well as protection from fraud perpetrated by individuals who would take advantage of the "charge-back" feature of most of the common solutions.

This. And no more exchange fees or trouble with international payments. Well, that is, after you converted fiat to BTC.

[Kazimir]

to be fair, having only 2 decimal places isn't an inherent feature of government currencies; it's simply the way banks and other institutions store amounts.

there's no reason why a pack of gum couldn't cost $0.4529839 if being paid for electronically.

In theory, yes. In practice, we are heavily dependent on tons and TONS of bank & payment infrastructures, with billions of different standards and implementations.
It's indeed the way the banks work, as you already mention, and there's no simple way around them if you want to stick with euros and dollars.

It would be virtually IMPOSSIBLE to get $ 0.000001 units actually working in practice, and would at least take many many many years of development, insane debugging / hacking / workarounds, deciphering tons of spaghetti code on crummy old systems, and disentangling a plethora of highly non-standardized finance processing programs, modules and servers. Not gonna happen.

Bitcoin, on the other hand, is very clear about this in its protocol specifications (theory) AND it's been implemented perfectly in every client (practice). So, there's one problem that Bitcoin solves.