Slashdot Mirror
Ask Slashdot: Time To Get Into Crypto-currency? If So, Which?
Qbertino writes: With the ever-looming cyberpunk future in close proximity, I'm starting to wonder if it isn't time to get myself familiar with crypto currency as a means of trade. Bitcoin is all the hype, but the blockchain has flaws, in that it isn't as anonymous as one would hope for — you can track past transactions. Rumors of Bitcoin showing cracks are popping up and also there are quite a few alternatives out there. So I have some questions: Is getting into dealing with crypto currency worthwhile already? Is Bitcoin the way to go, or will it falter under wide use / become easily trackable once NSA and the likes adapt their systems to doing exactly that? What digital currency has the technical and mind-share potential to supersede bitcoin? Are there feasible cryptocurrencies that have the upsides of Bitcoin (such as a mathematical limit to their amount) but are fully anonymous in transactions? What do the economists and digi-currency nerds here have to contribute on that? What are your experiences with handling and holding cryptocurrency? And does Bitcoin own the market or is it still flexible enough for an technology upgrade?
Gonna go out on a limb and say maybe that boat left port sometime around March 2014.
With the ever-looming cyberpunk future in close proximity
This is what happens when slashdot is your only source of news and you frequent it too often.
Collect real currency. Coins. Polish them. Rub them against your manhood. Push them up your back passage. Love money. It's more rewarding.
Now I know why my mother used to say "wash your hands after touching money, you don't know where it's been".
For the short/medium-term future Bitcoin is really the only option if you want a cryptocurrency that you have any hope of using like a currency, to you know, exchange value with other people. The others, aka "altcoins", are mostly still at the stage of tech demos or niche experiments. Which can be fine if you find investigating that scene to be interesting as a hobby.
10 PRINT CHR$(205.5+RND(1)); : GOTO 10
I've been into Bitcoin and cryptocurrencies since early 2011 after I saw one of the first Bitcoin slashdottings in late 2010. I went mostly "all-in" around 2012 after some trouble with my bank, never looked back, and have happily lived 90%+ crypto ever since. If I was a betting man I'd say look at Monero: http://getmonero.org/ It's definitely not "ready for primetime" just yet, but the foundation is there and is moving in the right direction. Reminds me of Bitcoin in 2011. Good luck.
Money is for economic transactions. Do you want to buy stuff overseas or online without using a credit card? Then consider Bitcoin. If you don't need Bitcoin for any transactions, don't bother.
> Bitcoin is all the hype, but the blockchain has flaws, in that it isn't as anonymous as one would hope for — you can track past transactions.
Bitcoin transactions record sending and receiving addresses, and the amount sent, and that's it. Privacy depends on how careful you are outside the transaction itself. For example, if you buy something physical online, and give a delivery name and address, the store knows who those bitcoins came from. But compared to a credit card or paper check, which have your name printed on them, bitcoin transactions have the *possibility* of privacy. Cash is no longer anonymous, by the way. Banks and ATMs can scan serial numbers when cash goes out and comes in. Depending how many hand-to-hand transactions happen in between, they can figure out what you were doing.
> Rumors of Bitcoin showing cracks are popping up and also there are quite a few alternatives out there.
The Bitcoin Network is still running fine. They are getting close to a limit in the code originally intended to stop spam transactions. That limits the size of "blocks" of transactions to 1 MB. The current arguments are over how and when to raise that cap. A majority of the network has to upgrade to raise the limit. Yes, there are lots of alternatives, because all it takes is to fork the code and slap a new name on it (it's open source). But as this table ( http://coinmarketcap.com/ ) shows, Bitcoin is 7/8 of the market, and only three others have significant market capitalization and trading volume. Building a network of users, apps, etc. for an ecosystem is a lot harder than releasing a new cryptocoin.
> Is getting into dealing with crypto currency worthwhile already?
It was for me, but I started in mid-2011 (from an article on Slashdot, in fact). If it is worthwhile for *you* depends on a lot of things. If you send money to family in another country, or international wire transfers, it may be very worthwhile, because of the very high fees from the other methods. If you are an average US consumer with credit and debit cards and want to shop on Amazon, not so much.
> become easily trackable once NSA and the likes adapt their systems to doing exactly that?
The NSA can download a copy of the blockchain, just like everyone else. What they have, that the rest of us don't, is all the other data collection that can correlate a Bitcoin transaction to a person or place. Like if you are using a smartphone app to send bitcoins, they know who owns the phone and where you were at the time
> What digital currency has the technical and mind-share potential to supersede bitcoin?
What social network is going to replace MySpace? :-). What OS is going to replace Windows? Predicting the future is hard, especially before it happens
> Are there feasible cryptocurrencies that have the upsides of Bitcoin (such as a mathematical limit to their amount) but are fully anonymous in transactions?
Bitcoin can be anonymous, but you have to use it properly for that to happen. As I said above, data leakage *around* a transaction is how you de-anonymize it. The same would be true of alt-coins (the general name for cryptocurrencies besides Bitcoin). If you use them to buy something, the seller may leak your info.
> What do the economists and digi-currency nerds here have to contribute on that?
Economists in general don't have the software chops to understand how cryptocurrencies work, and have religious beliefs on how economies and money *should* work. Not all of them, but a lot of them. My own opinion is bitcoin is the most developed cryptocurrency, with the most users, apps, mining hardware, etc. The direction in the future won't be replacing bitcoin with another coin, but building layers on top of Bitcoin. It's a communication protocol for scriptable transaction messages, and people have barely figured out how to make use of that. As such, it is similar to the IP protocol stack.
The automobile was more convenient than owning a horse. MP3 is more convenient than dealing with CDs. Try actually using cryptocurrency and it rapidly becomes apparent that it's far simpler just to whip out your credit/debit card, or good old cash. If you're buying something online, PayPal's more or less got your back if the seller screws you over. Ordered an iPhone and received this instead? File a claim.
The only reason anyone bothers with Bitcoin is because they believe a bigger fool will buy the Bitcoins off of them at a later date, or because they're buying things (contraband merchandise) that they don't want legitimate payment processors knowing about. Most legitimate businesses that accept Bitcoin simply use a payment processor that immediately exchanges the Bitcoins for cash, and generally you're the one eating the transaction fees on both ends (unless you get lucky and Bitcoin fluctuates up in the time since you exchanged cash for your Bitcoins).
If you really want to live in the brave new world of electronic payments, get a phone with NFC and try using that for awhile. You'll quickly discover it's still more convenient to use a form of payment that's accepted everywhere (cash, credit/debit), rather than remembering which merchants have functional NFC equipment and fumbling with your phone.
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DRM is like antifreeze, to the MPAA/RIAA it's sweet, to the consumers it's poison.
Bitcoin made a lot of progress on the technological front, but its economics is flawed because it limits the number of bitcoins which can be mined, and makes them progressively harder to mine as more are found. This is the same flaw behind using gold as your currency standard, and will cause the same problem - economic instability via repeated bouts of deflation. Basically, because the amount of gold (bitcoins) doesn't grow as quickly as the size of the economy, prices for things in that currency start to go down.
Vastly simplifying the economy into one currency and one product, today there are x bitcoins and you make y widgets. The price for a widget is thus proportional to x/y. Tomorrow, the number of bitcoins hasn't increased as quickly as your economic activity is increasing. There are 1.2x bitcoins, but you make 1.5 widgets. The price for a widget becomes proportional to 1.2x/1.5y = 0.8x/y. In other words, deflation - a widget is only worth 80% what it was yesterday.
Now apply the same principle to all goods and services, and the price of everything is going down (actually the price of bitcoins is going up). Once people start to understand what's happening, they stop buying things. They want to wait until the last possible minute, until they absolutely need an item, to buy it because the longer they wait (the longer they hold onto their bitcoins), the less it will cost. This slowdown in economic activity causes a recession, which decreases the number of widgets that are made until once again their price goes up (because not enough are being made to meet demand), which starts the same process over again. Economic instability.
That's why every major economy has abandoned the gold standard for a fiat currency. Yes a fiat currency can be abused if the people in charge of it are corrupt. But used properly with the money meted out at about the rate the economy is growing, prices remain stable and so is the economy. Just look at the list of recessions in the U.S. pre-1933 and post-1933 when the U.S. went off the gold standard. The economy has been much more stable with a fiat currency. That's what needs to happen with a cryptocurrency for the "boat to leave port." If someone can come up with a cryptocurrency which is independent of central control, yet its supply increases at roughly the same rate the economy expands, that is the boat you want to get on. It just won't be as lucrative for early adopters as bitcoin because it won't be a ponzi scheme.
Bitcoin is all the hype, but the blockchain has flaws, in that it isn't as anonymous as one would hope for — you can track past transactions. Is Bitcoin the way to go, or will it falter under wide use / become easily trackable once NSA and the likes adapt their systems to doing exactly that? Are there feasible cryptocurrencies that have the upsides of Bitcoin (such as a mathematical limit to their amount) but are fully anonymous in transactions?
There are a number of properly anonymous cryptocurrencies now. Dash (formerly Darkcoin) and Monero are current market leaders. Zerocoin is a notable new contender as it uses zero-knowledge proofs which are as good as you can get on anonymity. Bitcoin on the other hand would require dramatic changes which are very unlikely to receive support from the institutions involved with it.
So I have some questions: Is getting into dealing with crypto currency worthwhile already?
Only if you're a fan of economics and programming. It's still very much in the experimental phase of technological maturity.
Rumors of Bitcoin showing cracks are popping up and also there are quite a few alternatives out there. And does Bitcoin own the market or is it still flexible enough for an technology upgrade?
There's currently a holy war going on between different groups of Bitcoin developers on how to upgrade network protocol, which is sorely needed given Bitcoin's dinosaur status in the field. Looking at that there's definitely not much flexibility. There's also not much of a market to own yet, so despite its network effects, Bitcoin could easily be dethroned by a cryptocurrency with actual momentum in becoming useful beyond largely experimental purposes.
What digital currency has the technical and mind-share potential to supersede bitcoin? What do the economists and digi-currency nerds here have to contribute on that?
Ethereum has by far the strongest development community at the moment. It's also designed to maximize flexibility in what it can be used for, giving it abilities to adopt new features as needed without requiring agreement among those using it (pick and choose which features you want to use for all but the most fundamental).
What are your experiences with handling and holding cryptocurrency?
Dodged a couple exchange collapses, scary stuff. Keeping wallets local, encrypted, and with multiple backups is a considerably safer experience and doesn't require too much involvement. Getting holdings in the first place is also a hassle.
The best time to get into crypto-currency is six years ago. The second-best time is today.