A Rebuttal To Charles Stross About Bitcoin

New submitter buddha379 writes "Over the holidays we discussed a story from SF author Charles Stross called 'Why I Want Bitcoin to Die in a Fire,' just as Bitcoin's price collapsed on news of the Chinese government's cautious approach to the fledgling internet currency. Well known economist Paul Krugman quoted the piece in a NY Times blog post called 'Bitcoin is Evil'. Now, with U.S. regulators reaffirming their hands off approach, U.S. companies embracing it and prices surging again, Bitcoin Magazine returns with a rebuttal called 'Why Charles Stross Doesn't Know a Thing about Bitcoin.' The article notes that like many other popular pieces, Stross' story seems to 'completely miss the point on why Bitcoin is a revolutionary concept.'"

Comments

ENOUGH. OF. THE. BITCOIN.

[ElementOfDestruction]

http://slashdot.org/index2.pl?fhfilter=bitcoin

Over the last few months, we've been averaging a little more than 1 Bitcoin story every 2 days. Please - please, stop accepting every submission that has the word Bitcoin in it. At this point, I'd almost like them to start covering the 2016 Presidential Election. Enough.

Re:ENOUGH. OF. THE. BITCOIN.

[CitizenCain]

I don't understand the bitcoin hate.

Really?

It's not that hard to understand... then again, I'm a bitcoin hater, so maybe that's why I see it as easy to understand... let me try to fill you in.

1) Enough already. I hear so much hype about it, it's almost as bad as the never-ending election coverage I have to suffer through for 18 months before the elections. I know about it, am not interested, and would rather not see reminders about it every-fucking time I blink.

2) It over-promises and under-delivers (at least as reported on in every story I read, and implemented in the real world). A world changing innovation that will revolutionize currency and break our dependence on evil national governments and usher in a new era.... except that it won't because it's so fundamentally broken on so many levels.

3) I would love to see a viable cryptocurrency take off and break or loosen the hold that evil leviathan government has over the world today. The reality of Bitcoin, however, is that it is a bubble/ponzi scheme/lottery that enriches the lucky few early adopters at the expense of public trust in cryptocurrency, and once the Bitcoin bubble has come and gone, the odds of a fair, viable cryptocurrency being widely accepted by the public go way down. The fact that such a badly broken system is what's going to be equated with all cryptocurrency by the public and the media shatters any hopes I have of actually seeing a meaningful adoption of purely digital, non-government backed currency transactions for the foreseeable future.

We are literally on the verge of an era where the technology exists to break governments of their iron grasp on currency (and therefore the world's economies), but instead of seeing that happen, I get to read a bunch of stories about this technologically brilliant ponzi scheme that's going to poison public opinion against that happening.

And all so some lucky fucks (who aren't me) can get rich on the Bitcoin bubble. What's not to hate?

Re:Bitcoin is vulernable to government manipulatio

[DiSKiLLeR]

So what? Why does the price of bitcoin even matter? Bitcoins strength lies in its ability to be used as a payment processing network - and at a fraction of the cost of traditional payment networks (visa, mastercard, paypal, SWIFT, etc).

Everyone is obsessed with the price of bitcoin (and therefore comparing it to a ponzi scheme because of its price) and treating it as a speculative investment scheme or get rich quick scheme. This is actually very detrimental to bitcoin.

But no. Bitcoins power lies in using it as a payment processing network not its price. It does need some more price stability, however, so this crazy speculation needs to stop.

Deflation

[American AC in Paris]

From TFA:

Bitcoin is more of a hybrid system than a true deflationary system. The gold standard is considered deflationary and Bitcoin is often seen as the digital equivalent of gold. Gold has a limited supply, so it is scarce, just like a digital currency. But real gold can only be subdivided so far. It can only be chopped up so far before it’s nothing but dust. Bitcoin has no such limitations. Theoretically, it can be subdivided into fractions of a coin almost indefinitely, growing as needed with people’s demands. Its current limitation is eight decimal places. Even with only 21 million Bitcoins, that’s still 2000 trillion of the smallest unit. The protocol is designed to be upgradeable, so if we ever need to divide it further we can.

The problem with a deflationary system is not one of divisibility. The problem with a deflationary system is that the value of a given amount of currency is basically guaranteed to increase over time, as the total amount of possible currency has a hard limit--by design, in Bitcoin's case. Unless human civilization starts becoming less valuable as a whole (which is BAD), this is basically inevitable.

That you can chop your Bitcoins up into Nanobitcoins doesn't change the fact that the currency will simply continue to increase in real value. That's like saying you can make a ten-ton boulder less heavy by crushing it into pebbles.

That this is advanced as a serious counterargument to deflation should tell you everything you need to know about the author(s) of this piece.

Re:Bitcoin is vulernable to government manipulatio

[PopeRatzo]

Bitcoins strength lies in its ability to be used as a payment processing network

Wrong. Bitcoins' strength lies in the starbursts in the eyes of it's biggest proponents, who will gladly and patiently explain to you how they'll reform the monetary system, end poverty and make them fabulously wealthy.

Nothing is stronger than a True Believer, especially when they are neo-libertarians on a mission from Ayn.

Re:Bitcoin is not vulnerable

[iserlohn]

In the situation you're describing, all you're getting rid of is SWIFT. Banks processing Bitcoin payments in your situation can still create Bitcoin money through fractional reserve banking. Basically same as the gold system, but Bit-gold. There is nothing really innovative if you use Bitcoin that way.

If retail transactions are actually done on the Bitcoin network however, things get a bit more interesting, but the Bitcoin network will never scale to those transaction volumes.

Re:Bitcoin is vulernable to government manipulatio

[iserlohn]

But is Bitcoin payment processing really that cheap?

Disclaimer: I started mining Bitcoins using the official client with CPUs. However, I don't really buy all of this blue-sky "to the moon" Bitcoin hype. For me it's more of a cool concept to test and mess around with.

Although the Bitcoin concept is revolutionary - if you use it as a payment network - as you can get rid of banking and payment processing industries, with such a peer-to-peer architecture, you have scalability issues that limit the amount of transactions that can be processed. Aside from the elephant-in-the-room technical limits (with the current 1MB blocksize, Bitcoin can process 10tx/s max. The VISA network can process a max of 25000tx/s) , you also have the question of why using Bitcoins is any better than current methods for the customer or merchant.

Fully decentralized peer-to-peer filesharing was hot back in the day because there was no digital content available on the net. It was also very slow on the completely decentralized systems. Now that the content industries have caught on, most people prefer to use those offerings (Youtube, Netflix, Spotify, etc.), due to the convenience and speed of those services.

With Bitcoin, it is the other way around. We have a very well developed retail financial services sector. You can pay people and businesses easily through many different means. The payment processors charges a comparatively small fee for commercial transactions - usually around 3%, and gets lower as volumes increase. Customer don't see this at all as credit card fees are paid by the merchant. From a customers point of view, why would I pay in Bitcoins, if I can much more protection by paying with a credit card? If you don't have any bitcoins, you will have to do a fiat-bitcoin conversion and then the merchant does a bitcoin-fiat conversion back for stabilty? That kills the values proposition of low rates. The spread for the two conversion will already be close to or over the 3% you pay your current payment processor. Not to mention the hassle. You can introduce a processor like Coinbase to optimize the process (and also increase transaction performance by keeping local transactions off-net), but then you've just introduced a middleman that will also charge you fees.

Wiring money overseas will cost customers a bigger fee, but this fee is usually fixed, so batch transfers are usually done. Furthermore, for people with frequent Forex needs, you can open an account with a dedicated Forex company that will give you much better rates and you can probably save on some fees with them as well as they have many local bank accounts in different countries accepting and sending money.

So all-in-all no, I don't think it's all smooth sailing for Bitcoin and once people wake up to the limitation of this particular and novel implementation or decentralized digital currency, it will be better for everybody involved. We will start asking the right questions (eg. is if possible at all to create a decentralized crypto-currency network with similar performance to commercial payment processing networks) and maybe incorporate some of the better ideas from Bitcoins to more practical applications.