Bitcoin Makes Even Smart People Feel Dumb(wired.com)
wired.com
Bitcoin Makes Even Smart People Feel Dumb
https://www.wired.com/story/bitcoin-makes-even-smart-people-feel-dumb
107 comments
Which is what makes Bitcoin's democratic credentials so ridiculous. "It will free us from fiat money!"
No it won't. It's just a transfer of wealth from educated elite to other educated elite.
99% of the world's population can't understand it. 99.5% can't mine it.
It's so damn elitist that it's not even funny.
No it won't. It's just a transfer of wealth from educated elite to other educated elite.
99% of the world's population can't understand it. 99.5% can't mine it.
It's so damn elitist that it's not even funny.
> 99.5% can't mine it.
Not relevant. Mining is no longer profitable for any new entrants without some incredible innovation in computing power or electricity costs. Even the miners are unlikely to make money from mining only from holding their mining gains as investments.
> 99% of the world's population can't understand it.
That's underselling the human population. I would posit 10-20% are probably mentally incapable of understanding the basics of modern finance, therefore have no chance at a new form of currency. For all of the rest, they can understand what they need to know to use it.
BitCoin's entire proposal, including the original paper, the source code, millions of different explanations, and millions of different opinions about it are available for free. It's the most anti-elitist form of currency we have come up with. The costs of fiat currencies are hidden: central banks adjusting the money supply in real time at will, transactions aren't all visible to the globe on a single ledger, etc.
I'm not even very bullish on BitCoin. But I don't find it remarkably elitist -- at least no more than previous currencies.
Not relevant. Mining is no longer profitable for any new entrants without some incredible innovation in computing power or electricity costs. Even the miners are unlikely to make money from mining only from holding their mining gains as investments.
> 99% of the world's population can't understand it.
That's underselling the human population. I would posit 10-20% are probably mentally incapable of understanding the basics of modern finance, therefore have no chance at a new form of currency. For all of the rest, they can understand what they need to know to use it.
BitCoin's entire proposal, including the original paper, the source code, millions of different explanations, and millions of different opinions about it are available for free. It's the most anti-elitist form of currency we have come up with. The costs of fiat currencies are hidden: central banks adjusting the money supply in real time at will, transactions aren't all visible to the globe on a single ledger, etc.
I'm not even very bullish on BitCoin. But I don't find it remarkably elitist -- at least no more than previous currencies.
I understand how Bitcoin works and I understand how the technology itself is useful and valuable + has some interesting use cases.
However, with the exception of a few use cases e.g. countries with high and/or hyperinflation, what I don't understand is why the currency Bitcoin has any value at all. Frankly, if anything, it still looks more like a massive bubble to me.
Unless you already own Bitcoin, why would I ever consider paying for something through Bitcoin? Why would I ever transfer EUR or USD into Bitcoin?
Then again, maybe I'm missing something here, because gold also does not hold the value it generally trades at. I don't see how it makes sense to hold either gold or Bitcoin.
However, with the exception of a few use cases e.g. countries with high and/or hyperinflation, what I don't understand is why the currency Bitcoin has any value at all. Frankly, if anything, it still looks more like a massive bubble to me.
Unless you already own Bitcoin, why would I ever consider paying for something through Bitcoin? Why would I ever transfer EUR or USD into Bitcoin?
Then again, maybe I'm missing something here, because gold also does not hold the value it generally trades at. I don't see how it makes sense to hold either gold or Bitcoin.
If you don't already own USD, why would you ever consider paying for something in USD?
Because the person you're trying to pay only wants USD. And eventually, if you start getting paid in USD, it becomes only natural to pay others in USD.
Because the person you're trying to pay only wants USD. And eventually, if you start getting paid in USD, it becomes only natural to pay others in USD.
Right. But fiat currency will never disappear in favour of Bitcoin, nor will it be replaced by Bitcoin. Taxes will also have to be paid in fiat, etc.
The comparison is akin to someone in Europe exchanging EUR to USD as an investment, because he's betting on the fx rate. But why would the average European ever need to hold USD? Not that many situations that make sense either.
The comparison is akin to someone in Europe exchanging EUR to USD as an investment, because he's betting on the fx rate. But why would the average European ever need to hold USD? Not that many situations that make sense either.
I hear what you're saying, but I personally think you're wrong.
I think fiat currency will disappear in favour of bitcoin (or similar), and I think it will happen within only a small number of generations.
It will happen because bitcoin (or similar) is a superior form of money.
I think fiat currency will disappear in favour of bitcoin (or similar), and I think it will happen within only a small number of generations.
It will happen because bitcoin (or similar) is a superior form of money.
Maybe. I don’t know. I can see fiat currencies ending up being completely digital within the next 50 years or so, in a continued effort to combat tax evasion.
But I’m pretty sure central banks (or well, the elected politicians behind them) can’t and won’t give up control of their respective currency, because they use it as a way to adjust and regulate the economy.
If you look at what is happening in the Eurozone with the ECB and the previous discussions about Eurobonds, it's a one approach fits all solution, but it doesn't work for all. What is great for Germany sucks for Greece, and that is because goals are not aligned. If you have, say, one "global" cryptocurrency, then I think there are some inherent flaws to that approach.
And if you go the full currency route, you essentially end up with a digital equivalent of fiat?
Look: honestly, I want to believe, but no one has managed to convince me with proper arguments what would drive it to that outcome. Most people that I've met are just excited because they've turned $10k into $1M (or more) and now think they're the best investors in the world.
So, why would it happen? You need to give me more than its a superior form of money. I'm not saying it's not. I just don't see how we can get there from where we are now.
But I’m pretty sure central banks (or well, the elected politicians behind them) can’t and won’t give up control of their respective currency, because they use it as a way to adjust and regulate the economy.
If you look at what is happening in the Eurozone with the ECB and the previous discussions about Eurobonds, it's a one approach fits all solution, but it doesn't work for all. What is great for Germany sucks for Greece, and that is because goals are not aligned. If you have, say, one "global" cryptocurrency, then I think there are some inherent flaws to that approach.
And if you go the full currency route, you essentially end up with a digital equivalent of fiat?
Look: honestly, I want to believe, but no one has managed to convince me with proper arguments what would drive it to that outcome. Most people that I've met are just excited because they've turned $10k into $1M (or more) and now think they're the best investors in the world.
So, why would it happen? You need to give me more than its a superior form of money. I'm not saying it's not. I just don't see how we can get there from where we are now.
My theory is that Fiat currencies and their central banks are beneficial only to the state, and not to individuals. And that for any system to be viable in the long-term, it needs to benefit individuals else they won't use it.
1.) To a first approximation, central bank policy consists of creating lots more money, all the time.
That is a bad thing for anybody holding the currency (everyone). Therefore these people (everyone) are incentivised not to hold the currency, and instead to hold a currency that can not be inflated away from them. For example, bitcoin.
2.) We're heading towards a cashless society. If the manifestation of a cashless society is one based on fiat currency, that means every single transaction and all money are subject to surveillance, censorship, and even seizure. By the state and by private companies.
Anybody who doesn't want those things to happen to them (everyone) is therefore incentivised to use a currency which is not subject to those things. For example, bitcoin.
1.) To a first approximation, central bank policy consists of creating lots more money, all the time.
That is a bad thing for anybody holding the currency (everyone). Therefore these people (everyone) are incentivised not to hold the currency, and instead to hold a currency that can not be inflated away from them. For example, bitcoin.
2.) We're heading towards a cashless society. If the manifestation of a cashless society is one based on fiat currency, that means every single transaction and all money are subject to surveillance, censorship, and even seizure. By the state and by private companies.
Anybody who doesn't want those things to happen to them (everyone) is therefore incentivised to use a currency which is not subject to those things. For example, bitcoin.
What you're saying makes sense to some extent and I don't necessarily disagree. But instead of holding currencies, why not hold assets? Any asset, for that matter. Whether it's property, one or multiple businesses, royalty generating IP rights, etc.
You describe Bitcoin as a currency. To me, while it looks like a currency, it's not actually a currency. It seems more like a pure asset class.
I mean, maybe I'm a minority here, but who holds significant cash in a checking account these days -- especially with the market booming during the last few years like it has?
If you look at what happened with QE in the last few years, asset holders (i.e. mostly the upper classes) essentially made bank, because debt got extremely cheap and the value of the currency declined. The average saver lost money, or at least yield, because it didn't make any sense to save money.
The reason why I can't see fiat disappearing is because the government is in control and makes laws as they see fit. I don't agree with all levied taxes yet will still pay them. Even if I didn't want to pay them, my only alternative is to relocate to a different country.
Useful PoV though, thanks!
You describe Bitcoin as a currency. To me, while it looks like a currency, it's not actually a currency. It seems more like a pure asset class.
I mean, maybe I'm a minority here, but who holds significant cash in a checking account these days -- especially with the market booming during the last few years like it has?
If you look at what happened with QE in the last few years, asset holders (i.e. mostly the upper classes) essentially made bank, because debt got extremely cheap and the value of the currency declined. The average saver lost money, or at least yield, because it didn't make any sense to save money.
The reason why I can't see fiat disappearing is because the government is in control and makes laws as they see fit. I don't agree with all levied taxes yet will still pay them. Even if I didn't want to pay them, my only alternative is to relocate to a different country.
Useful PoV though, thanks!
"asset holders (i.e. mostly the upper classes) essentially made bank, because debt got extremely cheap and the value of the currency declined. The average saver lost money, or at least yield, because it didn't make any sense to save money"
So if you're a saver, this is the problem that bitcoin solves. A way for savers to protect themselves from being robbed by central bankers to bail out asset speculators.
Bitcoin is also easier to take with you when you relocate. Bitcoin is a weapon is the battle of savers vs debtors.
So if you're a saver, this is the problem that bitcoin solves. A way for savers to protect themselves from being robbed by central bankers to bail out asset speculators.
Bitcoin is also easier to take with you when you relocate. Bitcoin is a weapon is the battle of savers vs debtors.
But Bitcoin is an asset as well. And savers don't generally like buying assets, especially not if they're very (very, very) volatile. The average joe could've bought stocks, in 2009, yet mostly didn't. And for those that didn't, then they probably wouldn't have bought Bitcoin either.
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Bitcoin is a store of value that will long-term net-increase as true monetary bubbles, like this: http://imgur.com/a/0ZoDu, pop and cause their base currencies to long-term net-decrease.
Aren't you just transferring from one asset (bubble) into another? Holding your wealth in shares of a company is a way to combat that, so is holding real estate and other assets (e.g. IP rights).
Something can't be a reliable store of value if it can drop (or increase) 50-100-200% in a day. That is, in the best case, a speculative instrument.
If I had $50m, why wouldn't I invest it in property rather than in Bitcoin?
Something can't be a reliable store of value if it can drop (or increase) 50-100-200% in a day. That is, in the best case, a speculative instrument.
If I had $50m, why wouldn't I invest it in property rather than in Bitcoin?
Property is subject to bubbles, and in almost any economic recession prices of real estate tend to fall (demand drops, and sellers/supply grows). Bitcoin is a far better asset hedge, as it possesses almost every property of commodities, like gold, without almost all of their negatives.
Property is indeed subject to bubbles, but why wouldn't / couldn't Bitcoin be?
Gold is prone to bubbles as well. Personally I'm not a gold bug and I don't really see why (in the current day and age) it still acts as a safe haven asset.
Ultimately, it has little economic use, meaning most of its value is just derived from it "being gold". Land, that I get, that makes total sense. You can't make more, and you definitely can't make more land in good locations. But gold -- that seems very artificial to me as well.
But you're right, if I had to a pick, Bitcoin probably makes more sense over gold.
Gold is prone to bubbles as well. Personally I'm not a gold bug and I don't really see why (in the current day and age) it still acts as a safe haven asset.
Ultimately, it has little economic use, meaning most of its value is just derived from it "being gold". Land, that I get, that makes total sense. You can't make more, and you definitely can't make more land in good locations. But gold -- that seems very artificial to me as well.
But you're right, if I had to a pick, Bitcoin probably makes more sense over gold.
Not to be a pedantic, but I guess I will be. From bitcoin.org
"Bitcoin - with capitalization, is used when describing the concept of Bitcoin, or the entire network itself. e.g. "I was learning about the Bitcoin protocol today." bitcoin - without capitalization, is used to describe bitcoins as a unit of account. e.g. "I sent ten bitcoins today."; it is also often abbreviated BTC or XBT."
"Bitcoin - with capitalization, is used when describing the concept of Bitcoin, or the entire network itself. e.g. "I was learning about the Bitcoin protocol today." bitcoin - without capitalization, is used to describe bitcoins as a unit of account. e.g. "I sent ten bitcoins today."; it is also often abbreviated BTC or XBT."
>> Even the miners are unlikely to make money from mining only from holding their mining gains as investments.
And that's why I've been calling it a Ponzi scheme lately. Once mining become unprofitable, or even impossible (asymptotically) people will stop mining, but the blockchain only works if people keep mining. At some point it's got to fail doesn't it?
And that's why I've been calling it a Ponzi scheme lately. Once mining become unprofitable, or even impossible (asymptotically) people will stop mining, but the blockchain only works if people keep mining. At some point it's got to fail doesn't it?
> Once mining become unprofitable, or even impossible (asymptotically) people will stop mining
It's self-correcting; fewer miners means higher profitability for remaining miners...
It's self-correcting; fewer miners means higher profitability for remaining miners...
False - mining in Bitcoin (which is really just transaction processing) is based on a math/crypto difficulty algo, and the system automatically adjusts itself every ~two weeks to fit the load/prevalence of miners and their block-finding success rates.
If nothing else, it requires a computer and a network connection. Yes that may be just a smartphone of some type, but that's something that paper currencies do not require to use. If nothing else, that leaves what, a billionish people* out of Bitcoin?
It certainly is much more elitist than typical currencies if it requires a certain level of capital and knowledge to use.
*Scientific Wild Ass Guess on amount of people in the world lacking a device capable of dealing with bitcoins.
It certainly is much more elitist than typical currencies if it requires a certain level of capital and knowledge to use.
*Scientific Wild Ass Guess on amount of people in the world lacking a device capable of dealing with bitcoins.
Mining is plenty profitable if you've got access to cheap electricity. I think 7 cents per kWh is low enough to run a decent operation right now, and there are places with 2 cent electricity.
I disagree with that statement.
I have seen the excitement for Bitcoin come about here in Pakistan, mainly from the lower class, to the middle class, I know the founders of one of the Bitcoin exchanges in Pakistan(Urdubit), and the number of people that come from the rural areas to trade or buy bitcoins, would surprise you.
Yes, most people won't read the whitepaper, and many more will read it and won't understand it, but you don't need to understand the inner workings of it fully to take advantage of it.
Yes, right now, creating a paper wallet, or storing your coins in cold storage can be a little bit difficult for most people, and till these things are simplified enough, my mum won't be using it to pay for groceries at the supermarket. But that's with any technology!
I have seen the excitement for Bitcoin come about here in Pakistan, mainly from the lower class, to the middle class, I know the founders of one of the Bitcoin exchanges in Pakistan(Urdubit), and the number of people that come from the rural areas to trade or buy bitcoins, would surprise you.
Yes, most people won't read the whitepaper, and many more will read it and won't understand it, but you don't need to understand the inner workings of it fully to take advantage of it.
Yes, right now, creating a paper wallet, or storing your coins in cold storage can be a little bit difficult for most people, and till these things are simplified enough, my mum won't be using it to pay for groceries at the supermarket. But that's with any technology!
The key difference is that you can _learn_ what Bitcoin is. And you can do it on your own, without prestigious colleges and country clubs.
Many people in Venezuela have turned to Bitcoin mining in a desperate attempt to fend off starvation and keep their families alive.
http://bitcoinist.com/starving-venezuelans-turn-to-bitcoin-m...
http://bitcoinist.com/starving-venezuelans-turn-to-bitcoin-m...
Into this awful situation comes an unlikely savior in the form of Bitcoin. The Atlantic is reporting that many desperate Venezuelans have turned to mining bitcoins in order to feed their families. This unlikely scenario has come about due to one mitigating factor: electricity in this impoverished nation is essentially free as a result of the central government massively subsidizing it.
Cheap power has allowed people to operate Bitcoin miners without the usual accompanying cost. Reports have stated that successful Bitcoin miners can earn up to $500 a month, which is enough to fully feed and supply a family of four. As the country’s cash currency is essentially worthless, many businesses and people are now using bitcoins to exchange goods and services.
However, there is a fly in the ointment. President Maduro has begun cracking down on Bitcoin miners, calling them “capitalist parasites.” Yet trading bitcoins is still allowed. This has led to a number of miners being arrested on flimsy charges, which can occur as there are currently no cryptocurrency laws in Venezuela.
Cheap power has allowed people to operate Bitcoin miners without the usual accompanying cost. Reports have stated that successful Bitcoin miners can earn up to $500 a month, which is enough to fully feed and supply a family of four. As the country’s cash currency is essentially worthless, many businesses and people are now using bitcoins to exchange goods and services.
However, there is a fly in the ointment. President Maduro has begun cracking down on Bitcoin miners, calling them “capitalist parasites.” Yet trading bitcoins is still allowed. This has led to a number of miners being arrested on flimsy charges, which can occur as there are currently no cryptocurrency laws in Venezuela.
I've been paying venezuelan contractors in bitcoin - it works amazingly well for them.
I agree the ideological arguments for Bitcoin are silly (as are all arguments that substitute ideology for substance), but there probably are a lot more people who can understand Bitcoin than modern-day monetary policy and banking.
Most people can understand it from the perspective of an end user, just as you and I can swipe a credit card without necessarily understanding all the underlying Chip & PIN and anti-fraud and bank processing technologies and processes.
Very true. Even more so, fiat money is democratic as long as the government controlling it is. With something like bitcoin, it cements the establishment and removes fiscal policy options.
> removes fiscal policy options
The results of the goverment fiscal policy are debatable.
https://news.ycombinator.com/item?id=14959790
The results of the goverment fiscal policy are debatable.
https://news.ycombinator.com/item?id=14959790
Well, I'm guessing you've never used bitcoin before. Any idiot can understand how to use something like coinbase or an online wallet.
You don't need to know how bitcoin works internally to be able to use it, just as you don't have to read the minix book to be able to use an Operating System.
You don't need to know how bitcoin works internally to be able to use it, just as you don't have to read the minix book to be able to use an Operating System.
How is this elitist? Do most people understand the current financial system in any meaningful way?
Do most people understand how their computers work? How their air conditioner works? How about the pressure dynamics that make their toilets flush?
Saying everyone can't mine it is inaccurate, everyone can mine it even with a smartphone. Is it profitable? No, but neither is mining iron ore with a shovel. Those with the knowledge and capital to fully utilize any system will always have an edge over those who don't, in what reality is this not the case?
Do most people understand how their computers work? How their air conditioner works? How about the pressure dynamics that make their toilets flush?
Saying everyone can't mine it is inaccurate, everyone can mine it even with a smartphone. Is it profitable? No, but neither is mining iron ore with a shovel. Those with the knowledge and capital to fully utilize any system will always have an edge over those who don't, in what reality is this not the case?
Because our financial system isn't portrayed as a technology that will bring the power to the people and free us from the shackles of elite organizations. Bitcoin is presented this way.
Bitcoin won't free people who won't lift a finger to learn it just like the US constitution won't protect people unwilling to defend it. I've yet to meet someone who is unable to understand the basic use of bitcoin (sending and receiving) and if we are trying to cater to the lowest common denominator we have already lost. It is worrying that we have resorted to scrapping a new technology just because lazy or incompetent people are unable to completely master it.
dsego(1)
Reading the whitepaper isn't really enough since there are non-obvious emergent effects that it doesn't mention.
>Plenty of people understand Bitcoin. Go read the whitepaper.
Plenty of people on HN. Maybe. And that's about it.
Mainstream acceptance is far, far away, and having a condescending attitudes towards those who struggle with the concept is not going to help.
Plenty of people on HN. Maybe. And that's about it.
Mainstream acceptance is far, far away, and having a condescending attitudes towards those who struggle with the concept is not going to help.
Plenty of people understand the basics of BitCoin, that it is a currency and how to transact with an exchange that supports it.
You don't need to know the knitty-gritty of SHA256, blockchains, or the game theory associated with Proof of Work to "understand" BitCoin.
If you apply the same standards for "knowledge" of the US Dollar, you also have to require that people understand the intricacies of the US Treasury, the Mint, The Federal Reserve (and it's 12 constituent regional Central Banks), concepts of fiat currency, etc.
You don't need to know the knitty-gritty of SHA256, blockchains, or the game theory associated with Proof of Work to "understand" BitCoin.
If you apply the same standards for "knowledge" of the US Dollar, you also have to require that people understand the intricacies of the US Treasury, the Mint, The Federal Reserve (and it's 12 constituent regional Central Banks), concepts of fiat currency, etc.
Most people don't understand central banking, yet they use the existing monetary system just fine. Mainstream acceptance doesn't require universal knowledge - merely trust.
> Author is projecting. Replaced "me" with "people" in writing this. Considered himself smart; tried to wrap head around Bitcoin, but lacks math/cs/finance background, and or curiosity to dig below surface level hype... Doesn't 'get it'.
Yes, exactly my thoughts.
It's IMPOSSIBLE to understand HOW and WHY Bitcoin works without a baseline understanding of public-key cryptography, cryptographic hashing functions, key ideas of computational complexity, and algorithmic processes in distributed systems, particularly peer-to-peer networks.
In other words, to understand how and why Bitcoin works, one must first understand the key concepts underpinning Satoshi Nakamoto's groundbreaking paper: https://bitcoin.org/bitcoin.pdf
The general public, lacking the necessary education and knowledge to understand these things, has no choice but to use Bitcoin based on faith and experience.
Note that the general public doesn't understand government-issued money either, but they happily use it every day based on faith and experience. The same thing is happening with Bitcoin.
Yes, exactly my thoughts.
It's IMPOSSIBLE to understand HOW and WHY Bitcoin works without a baseline understanding of public-key cryptography, cryptographic hashing functions, key ideas of computational complexity, and algorithmic processes in distributed systems, particularly peer-to-peer networks.
In other words, to understand how and why Bitcoin works, one must first understand the key concepts underpinning Satoshi Nakamoto's groundbreaking paper: https://bitcoin.org/bitcoin.pdf
The general public, lacking the necessary education and knowledge to understand these things, has no choice but to use Bitcoin based on faith and experience.
Note that the general public doesn't understand government-issued money either, but they happily use it every day based on faith and experience. The same thing is happening with Bitcoin.
I think the point being conveyed is that, the internet or www was easily accessible to people who could go on to modify things to suit their own end. Yes, you can use bitcoin as is, thanks to a number of available software choices. But it is difficult to do anything else with it.
However, at this point I can only see it as a currency. So I can't say if the second point is even applicable here.
Maybe the reference is to the underlying blockchain, the effort required to understand it, and consequently customize it like people did with the older web technologies.
However, at this point I can only see it as a currency. So I can't say if the second point is even applicable here.
Maybe the reference is to the underlying blockchain, the effort required to understand it, and consequently customize it like people did with the older web technologies.
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That's how people think...Creating models and theories via abstraction from personal experience and thoughts. All original ideas are projections in some way, requiring courage to put through into the world.
When we say we "understand money" we mean we know how to spend it, aquire it and store it.
When someone says they "understand bitcoin" it means grappling with cryptography, mining, ledgers, economics, game theory, fiat currencies, deflation, dapps, etc. etc.
Very few people need to really understand all of that to "get" bitcoin, mainly because most of the use cases aren't figured out. Most people are overthinking at this point and not attacking it from a "how is this useful to me and what do I need to know" perspective, but trying to grok it all, which is pretty hard.
When someone says they "understand bitcoin" it means grappling with cryptography, mining, ledgers, economics, game theory, fiat currencies, deflation, dapps, etc. etc.
Very few people need to really understand all of that to "get" bitcoin, mainly because most of the use cases aren't figured out. Most people are overthinking at this point and not attacking it from a "how is this useful to me and what do I need to know" perspective, but trying to grok it all, which is pretty hard.
> Very few people need to really understand all of that to "get" bitcoin
Except when a fork comes, or why control of 51% of the hashing power is bad.
Except when a fork comes, or why control of 51% of the hashing power is bad.
The two examples you provided can be understood at a lay level which is sufficient in most situations that you'd find yourself in. Now, if you were attempting to build a product or service that interacts with the Bitcoin protocol, of course you'd have to have a much wider and deeper set of knowledge of how the protocol selects the best chain and the different attack surfaces that exist.
I don't understand the systemic nuances of the SWIFT payment system but I was able to conceptually understand how it works without too much trouble.
I don't understand the systemic nuances of the SWIFT payment system but I was able to conceptually understand how it works without too much trouble.
Yes, that is complicated.
But equally messy was the origination of the Euro. Equally messy (maybe even more so) was the introduction of "legal tender" in the US in the 1860s-1890s. Equally messy was the abolition of "National Bank Notes" and the brief period where we had bank notes, Federal Reserve notes, United States notes, and Silver Certificates all existing and only mostly compatible. Or the Indian demonetization of the 500 Rs note. Or the Cypriot bank seizures. Less messy, but still complicated for those affected by it, was the seizure of gold bullion or the closing of the redemption window in the US.
Money is complicated, and Bitcoin has less history than any of these currencies.
But equally messy was the origination of the Euro. Equally messy (maybe even more so) was the introduction of "legal tender" in the US in the 1860s-1890s. Equally messy was the abolition of "National Bank Notes" and the brief period where we had bank notes, Federal Reserve notes, United States notes, and Silver Certificates all existing and only mostly compatible. Or the Indian demonetization of the 500 Rs note. Or the Cypriot bank seizures. Less messy, but still complicated for those affected by it, was the seizure of gold bullion or the closing of the redemption window in the US.
Money is complicated, and Bitcoin has less history than any of these currencies.
Only miners and investors should care about this. Normal people should be able to use Btc without worrying about it.
Until transaction fees start to rise due those people pushing their own agenda on the network.
Cost me a couple dollars last night to send 70 dollars in btc to a friend.
Last month it was 3 dollars and change. I'm thankful it was slightly more reasonable.
I might use an alt coin for awhile to save on fees.
Last month it was 3 dollars and change. I'm thankful it was slightly more reasonable.
I might use an alt coin for awhile to save on fees.
3 dollars per payment seems extremely expensive - that's how much an inefficient international bank wire transfer costs, with the more reasonable bank-to-bank systems (including international e.g. in EU) costing a few cents.
That seems very expensive, I was expecting it to be practically free as I'd heard it was transforming the money-sending space??
How much does Paypal charge to send $70 to a friend, isn't it free?
How much does Paypal charge to send $70 to a friend, isn't it free?
It is super expensive, but this is more of an issue with bitcoin's design than the actual concept. Bitcoin is the first blockchain tech created, there are many others that have a much closer to zero cost of transaction, and will continue to do so.
It's kind of like saying the web in 1991 was expensive to use.
It's kind of like saying the web in 1991 was expensive to use.
I agree with this. I think hardly anyone truly understands the money creation mechanisms in play for conventional money, yet they're more than comfortable with using it... Sometimes, it would seem that even the people creating money in our standard economies don't fully understand what they're doing!
Yeah, I have a rough idea of how bitcoin works and I also have a rough idea of how the current banking system works. Enough that I am able to use them both but I certainly am not going to be giving talks on either of them. There are still times when the standard banking system is a blackbox to many people, they just know that it works and are happy to leave it at that.
I've noticed this about Bitcoin. It's not hard to understand at all, but everyone attempts to dive into the technical details right from the start and this loses most people.
The core conceit that people gloss over is the fact there is no such thing as a "wallet" that "stores" bitcoins. The only thing that exists is a public record of numbers saying they're giving bitcoins to other numbers.
When you create a "wallet", you're choosing a private number that nobody knows and nobody has already picked. You use this private number to create another number, the public number, the "wallet address".
Since this number doesn't exist anywhere in the public record, we say you have "zero bitcoins."
Then, you get someone to claim "I am giving x bitcoins to your number". If you can get this claim (a transaction) into the public record (the blockchain), we all decide to agree "This happened." And now we say you have x bitcoins. Why? Because now you're allowed to make a transaction saying you're giving those bitcoins to another number!
It's all made up. This is what currency is, it only exists because of collective trust.
The core conceit that people gloss over is the fact there is no such thing as a "wallet" that "stores" bitcoins. The only thing that exists is a public record of numbers saying they're giving bitcoins to other numbers.
When you create a "wallet", you're choosing a private number that nobody knows and nobody has already picked. You use this private number to create another number, the public number, the "wallet address".
Since this number doesn't exist anywhere in the public record, we say you have "zero bitcoins."
Then, you get someone to claim "I am giving x bitcoins to your number". If you can get this claim (a transaction) into the public record (the blockchain), we all decide to agree "This happened." And now we say you have x bitcoins. Why? Because now you're allowed to make a transaction saying you're giving those bitcoins to another number!
It's all made up. This is what currency is, it only exists because of collective trust.
Excellent comment. You should do a "Bitcoin demystified" blog post or something.
Replace that public record with a physical ledger, replace digital signatures with handwritten signatures, and replace proof of work with a requirement to write a haiku of sufficient wittiness and relevance to the lines on the page including the prior page's haiku, and you have a version of Bitcoin that doesn't even need computers.
You need something like a telephone party line, too, but that part can be skipped over; it still works if people sit close enough that they form a peer-to-peer earshot network.
You need something like a telephone party line, too, but that part can be skipped over; it still works if people sit close enough that they form a peer-to-peer earshot network.
What's really hard is to get your head around is the random number- what are the chances someone will have the same number as me? For anyone that asks, the answer is basically 0, because maths
For a trustless currency there's a lot of trust going on there!
For a trustless currency there's a lot of trust going on there!
It’s not really hard to explain: the probability of two people generating the same random 256 bit number is roughly equal to buying four tickets to the national lottery four weeks in a row, and winning the jackpot on all four of them.
No one has ever won the jackpot even two times in a row, so do we really need to worry about someone doing it four times in a row?
(Two people generating the same 256 bit number is a collision, which means the probability is 1/sqrt(2^256))
No one has ever won the jackpot even two times in a row, so do we really need to worry about someone doing it four times in a row?
(Two people generating the same 256 bit number is a collision, which means the probability is 1/sqrt(2^256))
The private key is usually a 256-bit number, which means your private key is going to be anywhere between 1 and 2^256 - 1.
2^256 - 1 is around 1.15e+77, which is ridiculously huge (to put it technically :P)
2^256 - 1 is around 1.15e+77, which is ridiculously huge (to put it technically :P)
Excellent distillation of its core concept and its free speech nature. Just as much as decss for example.
Bitcoin is simple the same way Git is simple. Appreciating it is less about understanding the technology and more about caring why the solution matters.
Git is just a way to deal with objects in a DAG (insert standard joke about homeomorphic endofunctors mapping submanifolds of a Hilbert space). Not super difficult. But unless you have worked in a horrible version-control system, you probably just don't care about having that capability, so when someone starts excitedly jumping up and down while showing you how easy it is to draw a line connecting two circles, you might figure you just aren't smart enough to get it.
Likewise, Bitcoin is a combination of recognizing a certain problem and exploiting a certain technology to solve it. If you understand that distributed, trustless consensus is a hard problem, and that digital signatures and proof-of-work algorithms combine in this exciting way to solve it, then Bitcoin makes perfect sense. But otherwise your inner voice keeps asking "why are we even discussing this?" and making you feel dumb.
Git is just a way to deal with objects in a DAG (insert standard joke about homeomorphic endofunctors mapping submanifolds of a Hilbert space). Not super difficult. But unless you have worked in a horrible version-control system, you probably just don't care about having that capability, so when someone starts excitedly jumping up and down while showing you how easy it is to draw a line connecting two circles, you might figure you just aren't smart enough to get it.
Likewise, Bitcoin is a combination of recognizing a certain problem and exploiting a certain technology to solve it. If you understand that distributed, trustless consensus is a hard problem, and that digital signatures and proof-of-work algorithms combine in this exciting way to solve it, then Bitcoin makes perfect sense. But otherwise your inner voice keeps asking "why are we even discussing this?" and making you feel dumb.
The cryptosystem part is hard, but the rest is not all that complicated. The economics, though, are very strange. Valuing a cryptocoin is really hard. It's like valuing a penny stock with no business activity.
But isn't valuing a penny stock with no business activity really easy?
Oh BTW there are people manipulating this stock behind the scenes. Is it still easy to predict the price?
Predicting the price is only an intermediate step to answering the question "How much should I invest in this stock?" In the case of the penny stock with no business activity, you can usually just skip the valuation step and go straight to "invest nothing".
There are exceptions, of course, but all of them involve you having some information not generally available to the public.
There are exceptions, of course, but all of them involve you having some information not generally available to the public.
Which leads to a conclusion of "never invest in crypto-anything" which works fine for me but is not what many people want to hear.
Exactly. Even if I were a gambler, I would prefer by far Blackjack or Roulette to Poker. I'd rather play against the randomization of the equipment than directly pit my skill against a bunch of people that I know are all far better at playing that game than I am.
I'll just continue to invest in robot-managed index funds, thanks.
If you can't use the cryptocurrency effectively without buying in early, there is a fundamental problem with it, and the people who bought in early probably should not have done so. So the obvious conclusion is to not buy in early. Those stories I keep hearing about people who made fortunes off of Bitcoin are fun and inspiring, but there is no way I would have been any of those people, because I didn't have the extra disposable cash to invest in Bitcoin at the times when it would have been most advantageous to do so, and it has never matched my risk profile since 2009. If it had been invented in 2000, yeah, I could have been a Bitcoin millionaire. But that's not how it worked out. Those grapes aren't sour; I just couldn't reach them.
And right now, this very instant, the next big thing could be staring me right in the face, and I would still choose not to invest in it, because I don't have enough investment money left after the sure things, boring but prudent choices, and dubious but exciting possibilities to put a single penny into moon-jumping unicorns that fart nuclear-powered rainbows. I'd rather have 98% confidence of retiring at 65 than make a gamble between between retiring two years from now and never retiring at all.
So cryptocoins can be the playground of the young and foolish, the old and treacherous, and the financial geniuses.
I'll just continue to invest in robot-managed index funds, thanks.
If you can't use the cryptocurrency effectively without buying in early, there is a fundamental problem with it, and the people who bought in early probably should not have done so. So the obvious conclusion is to not buy in early. Those stories I keep hearing about people who made fortunes off of Bitcoin are fun and inspiring, but there is no way I would have been any of those people, because I didn't have the extra disposable cash to invest in Bitcoin at the times when it would have been most advantageous to do so, and it has never matched my risk profile since 2009. If it had been invented in 2000, yeah, I could have been a Bitcoin millionaire. But that's not how it worked out. Those grapes aren't sour; I just couldn't reach them.
And right now, this very instant, the next big thing could be staring me right in the face, and I would still choose not to invest in it, because I don't have enough investment money left after the sure things, boring but prudent choices, and dubious but exciting possibilities to put a single penny into moon-jumping unicorns that fart nuclear-powered rainbows. I'd rather have 98% confidence of retiring at 65 than make a gamble between between retiring two years from now and never retiring at all.
So cryptocoins can be the playground of the young and foolish, the old and treacherous, and the financial geniuses.
When any unit of trade has no activity, it's by definition worthless.
It could be argued that the opposite is also true; a unit of trade with activity (let's call it its "velocity") has value, because (also by definition) it must carry the value that it's being traded for. The precise relationship I have no idea, but I think it could follow. I feel like I read a paper about this idea back when Bitcoin was new, but it escapes me now.
EDIT: Found it, dates from 2013 which puts things into interesting perspective: https://bitcoinsurvey.wordpress.com/2013/04/08/what-is-the-r...
It could be argued that the opposite is also true; a unit of trade with activity (let's call it its "velocity") has value, because (also by definition) it must carry the value that it's being traded for. The precise relationship I have no idea, but I think it could follow. I feel like I read a paper about this idea back when Bitcoin was new, but it escapes me now.
EDIT: Found it, dates from 2013 which puts things into interesting perspective: https://bitcoinsurvey.wordpress.com/2013/04/08/what-is-the-r...
The hard part here is market making. Market making is almost pure game theory, and unless you worked at a big market making trading house (i.e. Goldman, JP Morgan, etc) the learning curve can be really expensive.
In this type of work, it's not that bitcoin is making people feel dumb, it's that the smartest people playing in Bitcoin are making money at the expense of everyone else. There are a lot of really smart people playing in Bitcoin who are comparatively dumb.
Bitcoin is just the stock market 2.0: the big guys manipulate the market with impunity, except there aren't any laws to stop them (nevermind the government ignores the rules in the stock market if you're "too big to fail"...)
In this type of work, it's not that bitcoin is making people feel dumb, it's that the smartest people playing in Bitcoin are making money at the expense of everyone else. There are a lot of really smart people playing in Bitcoin who are comparatively dumb.
Bitcoin is just the stock market 2.0: the big guys manipulate the market with impunity, except there aren't any laws to stop them (nevermind the government ignores the rules in the stock market if you're "too big to fail"...)
So are other currencies. FX market is strange, to say the least.
Yeah, the whole FX market operates largely outside international law unless you're talking about a handful of currencies. And even there the conversion path for almost everything runs through USD or EUR (with some regional exceptions).
Bitcoin is a distributed economic cryptosystem designed by someone with at least a rudimentary understanding of these topics.
A lot of Bitcoin enthusiasts understand neither cryptography, nor distributed systems, nor economics.
What could go wrong?
A lot of Bitcoin enthusiasts understand neither cryptography, nor distributed systems, nor economics.
What could go wrong?
Speculation is part of any market. It is true to understand the Mathematics, Crypto-tech and Economics part of BitCoin and CryptoCurrencies in general is very hard. But doable by intelligent people. The idea of facebook or iPhone would be hard to explain in 1990, similar is the case with Crypto, the tech is way ahead of the culture.
How many people understand the federal reserve, money supply, minting process, and quantitative easing?
How on earth do people use USD?! It's so complicated!
How on earth do people use USD?! It's so complicated!
If the USA government used BTC as default then people would probably use it without caring too. Early adopters need to understand things to be sure they're not falling for a con; people getting electric vehicles are probably much more interested in the technical and financial details than your average car buyer. Once they've established the system works then others can get in.
My problem with most of the cryptocurrencies is that they are so thinly traded (150k average) and many buyer naive that prices could be easily manipulated by professional Currency Traders or Hedge funds.
It not normal for prices to fluctuate up and down 50% so quickly.
It not normal for prices to fluctuate up and down 50% so quickly.
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What's hard to understand about the fork?
Bitcoin is an equation. A mathematical specification of how much bitcoins are there at any given moment of time, how new blocks are added to the chain, which sequence of blocks is accepted to be authoritative, etc. This is why it is a work of genius. An equation can't be hacked, unless you can challenge underlying mathematical assumptions, which is somewhat hard to do.
However, you can't run an equation on its own. You need an implementation, which actually runs calculations in the equation ("mining", verifying transactions etc). Technically, anybody can write their own implementation of the Bitcoin equation for running the blockchain, substituting their own parameters (e.g. maximum block size, how often the blocks are generated, the reward amount etc.) I can write a Bitcoin client today where new blocks will be attached to the chain the way I want it to. Giving me free money, for example. Or increasing the block size to shovel more transactions in. However, the Bitcoin network consists of many thousands of clients (A.K.A. "full node" clients). They have to accept my blocks to consider them valid, and sign the acceptance, and they won't accept anything that is not hardcoded in their implementation. tl;dr I (or anybody else) can fork Bitcoin today -- the only idea is that I will have hard time to persuade others to accept my fork. And without acceptance, anything stored or transacted in this fork will have no value.
However, some people manage to persuade others to run their fork as it has some feature some see as valid. As they are accepted by some people, they start to have value (and can be bought and sold by gamblers). However, more often than not, these forks fail to catch traction and deemed to obscurity, and as their user base diminishes, so it their value.
Bitcoin is an equation. A mathematical specification of how much bitcoins are there at any given moment of time, how new blocks are added to the chain, which sequence of blocks is accepted to be authoritative, etc. This is why it is a work of genius. An equation can't be hacked, unless you can challenge underlying mathematical assumptions, which is somewhat hard to do.
However, you can't run an equation on its own. You need an implementation, which actually runs calculations in the equation ("mining", verifying transactions etc). Technically, anybody can write their own implementation of the Bitcoin equation for running the blockchain, substituting their own parameters (e.g. maximum block size, how often the blocks are generated, the reward amount etc.) I can write a Bitcoin client today where new blocks will be attached to the chain the way I want it to. Giving me free money, for example. Or increasing the block size to shovel more transactions in. However, the Bitcoin network consists of many thousands of clients (A.K.A. "full node" clients). They have to accept my blocks to consider them valid, and sign the acceptance, and they won't accept anything that is not hardcoded in their implementation. tl;dr I (or anybody else) can fork Bitcoin today -- the only idea is that I will have hard time to persuade others to accept my fork. And without acceptance, anything stored or transacted in this fork will have no value.
However, some people manage to persuade others to run their fork as it has some feature some see as valid. As they are accepted by some people, they start to have value (and can be bought and sold by gamblers). However, more often than not, these forks fail to catch traction and deemed to obscurity, and as their user base diminishes, so it their value.
Most of what you wrote won't make sense to non-developers. Hell, it won't even make sense to all developers. I'd say that's hard to understand, then.
Like for instance GIT, it still is considered hard by a lot of developers. Try to explain it to some common people. But also nowadays most developers use Git daily anyway.
This explains nothing about the fork, what changed, and why it happened.
Well, bitcoin makes people who think that they are smart, realize that they are way less smart than they thought they were. The author understands that he could impossibly understand the underlying mechanics of bitcoin. Hence, he came to realize that there must be other people, who are substantially smarter than he is.
This happens when trying to study anything really.
The more you learn, the more you realize just how much there is to learn.
The more you learn, the more you realize just how much there is to learn.
smart or intelligence is not a scalar.
Most cryptocurrencies are complex but if you have a background in computer science/software engineering then they're not difficult to understand; it just takes time.
I would say understanding HTML is a bit harder than being able to use a smart phone for bitcoin transactions. Not very many know how to program network protocols for the internet and not very many know how to program blockchain networks either. The blind trust in Central Banks is the real mystery.
To be fair, a vast vast majority of people have no idea how central banking works or Forex etc.
It also makes dumb people feel smart...and act upon these feelings
sounds like someone's been on /r/bitcoin
"Pound Sterling Made Smart People Feel Dumb" (Black Wednesday).
"Cryptology Makes Even Smart People Feel Dumb"
Ethereum is harder than bitcoin, specially the dApps thing of ETH
I think someone hasn't read the whitepaper.
Hyperbole - it's not really that hard. But it uses maths, so maybe not everybody has the stomach to try to understand it.
It's not only the math involved in the creation of a bitcoin, there's also economics and networking and psychology involved. Granted, most people don't understand how money really works, but grasping a dollar bill in your wallet is easier than the a virtual something on some virtual place.
See? I even feel dumb trying to explain why people feel dumb.
See? I even feel dumb trying to explain why people feel dumb.
Sure - the economic dynamics and valuation are complicated (I don't understand them either), but I don't think that is what the article was talking about.
The tech is fairly simply, at least the principles. As simple as basic cryptography, anyway. And most people use that on a daily basis.
The tech is fairly simply, at least the principles. As simple as basic cryptography, anyway. And most people use that on a daily basis.
The whitepaper is mostly in layman's terms. It isn't hard, think many just refuse to start from the start.
http://nakamotoinstitute.org/bitcoin/
http://nakamotoinstitute.org/bitcoin/
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Doesn't 'get it'.
Plenty of people understand Bitcoin. Go read the whitepaper.