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Marc Andreessen On Why Bitcoin Matters (And A Critique)
New submitter Ramtek writes "Marc Andreessen writes an interesting editorial on how he how he believes Bitcoin is the first practical solution to the Byzantine Generals Problem and why that is important. He also addresses many of arguments against its future by its critics such as its current limited use by ordinary consumers, its current volatility, its potential lack of acceptance by merchants, and many other issues. While politically agnostic the piece is squarely in support of Bitcoin but presents a more mature perspective than many current Bitcoin editorials."
eggboard wrote in with a rebuttal: "Marc Andreessen wrote an essay in the New York Times in which he tried to make the case for Bitcoin going mainstream for payments, if not as a currency. After comparing Bitcoin to the rise of personal computers and the Internet, he tries to explain how it eliminates fraud and will solve global money transfers and the plight of the unbanked. I wrote a critique of these and other points in his essay."
The problem with Bitcoin is once a Bitcoin is lost, it's gone forever and can never be replaced. There's no provision in the system to void a coin and then mine a new one.
Therefore if bitcoins are lost at a rate > 0 the probability there will be zero bitcoins is 100% over time.
"Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage."
Sure, but "at this stage" people who owned PCs weren't mostly buying them to hoard them for their future value.
The "criticisms" leveled by OP are largely moot:
A) "Fees" are generally not charged... most transactions have essentially zero cost.
B) The criticism that development of the Internet was "open" but Bitcoin was not is also moot: Bitcoin is open-source, and anybody can examine the code for secrets or flaws.
There are other subtleties as well which I will not get into.
You're conveniently forgetting all the untraceable cash transactions that happen daily, by the billion, worldwide. By your logic, that means every single currency in circulation needs to be shut down.
No colour or religion ever stopped the bullet from a gun
I'm still concerned with the verification time required to show that double spending hasn't happened. It's simple to double spend bitcoins, though within 20 minutes or so the blockchain will show which transaction went through. This means bitcoins can be used for online orders (as long as the seller is trusted because no chargebacks), but waiting around at the Target checkout for 20 minutes can't happen, at least with only direct bitcoin transfers. You could have a processor guarantee with more information to save time, but that's more like an already existing debit account and less like the bitcoin transfers people are excited about.
//TODO: signature
Bitcoin shows it can. But bitcoin itself is probably not the best implementation of this concept due to its flaws like currency lost and glacial trading times.
The problem with Bitcoin is once a Bitcoin is lost, it's gone forever and can never be replaced. There's no provision in the system to void a coin and then mine a new one.
Therefore if bitcoins are lost at a rate > 0 the probability there will be zero bitcoins is 100% over time.
Is that the problem?
I thought it was volatility. No, wait... it was a pyramid scheme. Or rather, because the US won't accept it for taxes. Or was it because it's deflationary? Heck, I just don't know any more.
Economists will demonstrate something by telling stories, let's demonstrate something by showing value.
1) BitCoin has very small per-transaction fees. There are a whopping-big number of credit card transactions each day, each with fees of about 5%. Bitcoin will eliminate most of these, for a whopping-big cost savings.
2) BitCoin increases the market to people who don't have a bank account. That essentially doubles the potential customer base.
3) BitCoin allows for micro-payments. This increases the number and type of sales possible.
4) BitCoin almost eliminates counter-party risk. No authority in the financial chain (PayPal, payment clearing center, credit card company, bank, US government) can affect the transfer. No one can be "banned" (like Wikileaks), no one can be threatened with bad credit.
Assign value to each of these points and total them up (there's some subjectivity), then compare that value with the negative utility from losing coins over time.
Which is worth more?
All the other potential problems are just that - potential problems, and appeals to these problems are merely guesswork and rhetoric.
BitCoin will bring enormous cost savings, and that's why people will use it.,
The wealthy elite don't need another currency.
Those of us living paycheck-to-paycheck need a currency whose value doesn't decay while stored in cash/checking (or the modern equivalent).
Those of us in the middle class need something that won't fall victim to another anti-Wikileaks financial blockade.
So when you say "we", it goes to show which group you identify most with, and how unaware you are of people's needs outside that space.
Okay, I'll admit regional political constraints may end up affecting Bitcoin - Glenda may ban the usage of Bitcoin in Oz for example.
However, it is pretty universal - anyone, anywhere who has access to the internet can get in on the game, local laws aside. And there's lots of places in the world where Bitcoin, even with all its problems, is considerably superior to any other non-cash alternatives. Just try sending money internationally to your dirt-poor relative in an unstable African nation any other way.
--- Most topics have many sides worth arguing, allow me to take one opposite you.
Sadly, Glenn Fleishman suggests to resort to the use of violence (recourse in a court system, based on government theft and coercion) in order to seek a "remedy" to these problems, whereas many would rather see people be more careful with their transactions and keeping the government out of them (wherever possible).
You are naive. Without government "violence" , "theft" and "coercion", there is nothing stopping someone bigger and stronger using violence, theft and coercion to take all of your stuff. And no, you cannot defend yourself, since you're not the most powerful person. There will always be someone bigger and stronger.
SJW n. One who posts facts.
Andreessen's valuation of bitcoin doesn't rest solely on bitcoin's value as a currency. From the DealB%k article:
"...Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user...What kinds of digital property might be transferred in this way? Think about digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds and digital money."
So it looks to me like he believes the technology underlying bitcoin as a currency can be leveraged to enable all kinds of transactions - not just purchases of goods and services.
While I tend to agree with the points made by Glenn Fleishman where he challenges bitcoin's utility as a currency, I think Andreessen's broader vision of the utility of bitcoin still stands.
So Marc's article is basically cheerleading Bitcoin. I understand that; he's decided it is the future and has tens of millions invested in making it so. Glenn's critique takes issue with Marc's analogies of Bitcoin to the PC and Internet -- whether those analogies are correct or not seems irrelevant to the main issue: is Bitcoin "the answer".
After reading these, two things make me think Bitcoin won't ever be huge:
1. The assertions about no charge or low charges for transactions. Glenn's seems correct when he says this can't continue. Right now, people justify their computing expenses "keeping the books" by mining, but that will end as we approach the end of bitcoins in the mine. For them to continue providing their service, they have to get some value, and that will come from fees. (Did you see what people are paying to set up powerful enough computers these days? http://dealbook.nytimes.com/20... ) So the nirvana of incredibly low transactions fees vanishes (sale ends soon so act fast -- supplies are limited!)
2. The assertion that the network is safe from attack or manipulation. Right now, bitcoin is too small so no one cares. But when governments start caring, does anyone really believe that the NSA will not throw its resources at this problem if needed? Most stories (including these) quote how it's virtually impossible to have enough computing power to destabilize the network. I've heard these claims before -- in the 1980s, the US government would allow us to export software with a 40 bit salt on our pathetic 32 bit encryption because it was "too secure and endangered national security". Yeah, right. Every single claim has been true for a while -- until it wasn't. Everything is eventually cracked. I'm not sure I'm willing to turn over all my assets to the cloud, and I don't think most people will, either. So bitcoin may be a bit player, but I don't expect it to rise to the levels Marc projects.
Because it can't be used universally.
Nor will it ever be free from regional or political constraint.
The same is true of drugs, which is why it's so hard to buy drugs except for the few countries that legalize them.
Oh wait.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
1) BitCoin has very small per-transaction fees. There are a whopping-big number of credit card transactions each day, each with fees of about 5%. Bitcoin will eliminate most of these, for a whopping-big cost savings.
Bitcoin has small transaction fees because it has very low transaction volume, little infrastructure and most transactions are directly between parties who are relatively technically sophisticated. All of that will have to change and will cost more if bitcoin becomes popular. Furthermore EVERY other cost to using bitcoin is higher than with widely traded fiat currencies. It is riskier, more volatile, less liquid and if you think those things don't have costs you need to study your accounting. Bitcoin transaction fees are low because they have to be, not because bitcoin has a cost advantage.
2) BitCoin increases the market to people who don't have a bank account. That essentially doubles the potential customer base.
Exactly how is a currency that virtually no one accepts going to help someone who is struggling to the point the can't get a bank account?
3) BitCoin allows for micro-payments. This increases the number and type of sales possible.
Bitcoin may help with micro-payments but it is far from clear that it has a cost advantage in doing so. Micropayments are a problem because of the cost of transactional overhead which isn't simply a fee from the bank. Bitcoin does not make this overhead go away.
4) BitCoin almost eliminates counter-party risk.
Bullshit it does. It merely transfers much of the risk to the buyer who has less recourse in the event of a dispute. Not having a neutral authority in the transaction is a two edged sword. It might reduce transaction costs but it increases the risk and thus the costs.
BitCoin will bring enormous cost savings, and that's why people will use it.,
No it will not. I'm an accountant and I assure you that you are not accounting for all the costs of using bitcoin. You have not addressed exchange rate volatility, middle man fees, transactional infrastructure overhead, liquidity, security costs, and several others besides. If you want to make an argument that bitcoin has a cost advantage you have to address ALL the costs, not just transaction fees.