I've been a huge skeptic myself until a friend almost forced me into going down the rabbit hole.
I have since been wondering why we tech people are so unbelievably critical. "There is no use-case." and "It's a technology looking for a problem" are common phrases.
I have no answer.
Just a thought: for someone living in the 90s, wouldn't something like Facebook have been also very difficult to conceive? "What's the value of having friends I see daily online?". I think it's very difficult to imagine value of technology that is not mainstream yet.
> "There is no use-case." and "It's a technology looking for a problem" are common phrases.
> I have no answer.
The answer is: ten years into it, there isn't a use case except crime.
And I was working in the field writing code, code that's still in use in XRP, in 2014. I'm not ignorant.
Doesn't it make you stop and think that you weren't able to come up with a use case?
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> Just a thought: for someone living in the 90s, wouldn't something like Facebook have been also very difficult to conceive?
Oh, I can answer this question because I've been using computers since the 1970s!
The first time I saw email I was so blown away I couldn't believe it. Sending messages to people anywhere in the world, in an instant, for free?
The web, same thing.
YouTube, same thing.
Friendster, MySpace - same thing. I can hang with my friends, and maybe get laid!
Skype - free video conferencing? I was blown awawy!
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But if you had told me in 2001 that in 2021, I could buy one of 7400 different currencies, issued by anonymous individuals, with absolutely no legal guarantees or safeguards, relying on computer code that even experts have trouble validating, with no market makers, no assets, no cash flows, no liquidation value, I would have asked, "Why would anyone do this?"
Crime. The only application for cryptocurrency is crime - tax evasion, money laundering, drugs, weapons, bribery.
Not everyone got the web, chat, or social networks, but loads of people did and people from all backgrounds. Things like Geocities, AIM, MySpace, early Facebook, early search engines, etc. had millions of users very rapidly. They penetrated beyond the tech-savvy early adopters within years. Cryptocurrency is more than 10 years old and hasn't seen anything like this.
The vast majority of what I see in cryptocurrency is just speculation. It all seems like a giant very complex over-engineered online casino app.
Yes there are use cases outside of that but they seem much more niche. The people saying "there is no use case" are over-arguing their position, but I think the actual non-gambling use case is small.
I strongly suggest doing a comparison of O(log n)-style adoption curves between Bitcoin, and say- cell phones, computer networking, or really any innovation that became ubiquitous and for which we have the data... I think you'd be surprised at the similarities.
If I look at the adoption curves of cell phones or computer networking, I see a steady increase.
If I look at the adoption curve of Bitcoin as means for payment, the peak was multiple years ago when many companies in my area experimented with accepting it as payment - I could order a pizza with Bitcoin, I could buy an airline ticket, etc; but now those companies have stopped accepting them. There are multiple niches of business which do accept Bitcoin, but overall there has been a significant decrease at least in practical use - there has been some upsurge in digital asset related transactions, but in any case the adoption is certainly not growing exponentially like for other growing technologies, if we look at transaction rates at e.g. https://blockchair.com/bitcoin/charts/transactions-per-secon... then we're at the same level as of 2017, and below the peak.
There are huge regulatory and societal roadblocks for crypto to be used as envisioned not as present during those other cases of wide technological adoption.
For crypto to be valuable, merchants need to use it. Transactions need to be cheaper. A stable decentralized financial system needs to emerge.
The use case is a world without central banks and central currency manipulation.
People who don’t see the use case don’t understand the scope of what direct exchange of currency without central management entails.
There are arguments against that world and in favor of central currencies. The roadblocks are enormous, maybe insurmountable. And perhaps that world would be worse or lead to more authoritarian control rather than less. But I don’t think anyone who believes in the potential denies crypto will take time to have a lot of mainstream use simply because the main use case is so large.
Credit and hard crypto currencies are not incompatible. The main difference is crypto sets hard limits on underlying denominator of value and distinguishes it from credit.
There are potential liquidity problems and endless debates about whether having everything backed by crypto like bitcoin would be a net positive. I don’t have the background to get into all the economic implications and I’m not entirely sold on this alternative crypto based future I’m presenting being a good thing, even if possible. Rather than dismiss these types of arguments, though, I’d like to see more central bank advocates explain why creditors which accumulate bitcoin would not be able to act similarly to current issuers of credit, but more checked and decentralized because none would have control over the production of the underlying value representation that’s borrowed against.
I think the major roadblock is the fact that bitcoin was conceived as anarcho-capitalist money, and for it to succeed anarcho-capitalism would have to succeed. And that's not going to happen, because anarcho-capitalism is not viable way of organising a society. It should be obvious to anyone who has delved into the literature.
Gold was the world reserve currency for millennia and acted similarly to bitcoin and other crypto currencies. You can still have emergent government structures many of the bitcoin people would hate on top of a base store of value which is not centrally produced by governments.
I agree. But the promises that bitcoin makes can only become reality if anarcho-capitalism itself becomes a reality. Otherwise, if the government continues to tax you, and banks continue to hold fractional reserves, what is the point of using something so anti-economical and impractical as bitcoin, when you can just use a more convenient currency?
If the supply of money is distributed it becomes more difficult to manipulate.
Fractional reserves in a world backed by bitcoin can’t be bailed out if banks screw up. If people want to exchange whatever government backed medium might sit on top of it to actual bitcoin the banks wouldn’t be able to if they spread themselves too thin.
That's not what I meant. The majority of money in circulation is not issued by central banks, but instead is money that is created out of thin air by commercial banks that operate under fractional reserve banking. In other words, fractional reserve banking expands the money supply. This means that if bitcoin became money, the supply of bitcoins would not be fixed at all, contrary to what many of its advocates believe, because fractional reserve banking would create a colossal amount of new bitcoins, just like now it creates colossal amounts of new dollars. So the promise of a fixed supply of money cannot happen, unless a world-wide ban on fractional reserve banking occurs first, somehow.
Bitcoin and fractional reserve banking are compatible. And a fractional reserve system based on bitcoin would be different than what we have now. It’d be similar to what we had before nixon took us off the gold standard.
Banks depend on reserves and rules issued by the fed, and those reserves and rules are subject to arbitrary supply changes.
It is impossible for a non sanctioned bank to get reserve notes or have authorization to create notes banks lend out representative of that (dollars).
In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one would be creating new bitcoin apart from miners.
The faith in a “bitcoin note” would be tied to it’s ability to be exchanged for actual bitcoin in a wallet address.
The benefit (or downside, depending on your perspective) is that a central government would not have complete and total control over the supply of reserves that the banks get, and if banks lent poorly, they couldn’t get new emergency reserves from thin air. They’d have to get bitcoin from someone or go under.
There would be a fixed supply of the underlying reserve that people pass around iou’s for.
> In a world where fractional reserve banking still exists, but is backed by bitcoin, you’d have lots of “bitcoin notes” being created, NOT bitcoin. No one would be creating new bitcoin apart from miners.
No, this is a misunderstanding of how fractional reserve banking works. Bank deposits are money, despite the fact that they might be only partially backed with reserves. Bank deposits are not IOUs. And the same is true of bitcoin deposits held by the public at crypto-exchanges. Theses bitcoin balances are bitcoins, despite the fact that they might be only partially backed with reserves. These are not a "bitcoin notes", but actual bitcoins. And therefore more bitcoins can be created by exchanges simply by lowering their reserve ratio.
> the same is true of bitcoin deposits held by the public at crypto-exchanges. These bitcoin balances are bitcoin
No, those balances are not bitcoin.
If it is not a balance assigned in the distributed ledger, it is not bitcoin.
I understand that the ious in the dollar system are the money. You are misunderstanding the difference in how the reserves would be generated in a world backed by bitcoin. Saying bitcoin is the same as an iou not on chain is an egregious misrepresentation.
Bitcoin in a world with “bitcoin notes” backed by fractional reserve banking would be very similar to gold when dollars used to be exchangeable for a set amount of gold. It is not the dollar in that comparison, it is the gold. But it has the added property that it is easily transportable and could also act as a direct form of payment.
It is not practical to buy a sandwich with the equivalent dollar amount of gold, even when there was a static exchange rate between the two when we were on the gold standard.
It would, however, be practical to ALSO directly exchange bitcoin, in addition to exchanging “bitcoin notes”. Direct exchange is the original vision of crypto, but a world where people primarily exchange “bitcoin notes” instead of bitcoin still benefits from the fixed supply of what the note can be exchanged for.
We tech people see a lot of ideas. Most of them are superficially exciting. For example, a way of detecting when counterfeit parts with substandard specs are used in farming equipment. Maybe a music-centered social network for users of a particular music player.
Many of them go on to be either wastes of time or much, much worse. Suddenly detecting substandard parts is DRM for John Deere tractors and the social network is iTunes Ping.
Most ideas fail. This doesn't make them bad ideas or the people creating them bad people. It just means we've collectively learned that most ideas will fail and there are some fairly common reasons for this.
> Just a thought: for someone living in the 90s, wouldn't Facebook have been also very difficult to conceive?
No, it would have been obviously cool. Those of us who were online already had IRC and newsgroups, and later instant messaging, home pages on GeoCities, etc. A service which rolled all of that up together and made it easy to use would have been rad as hell.
as someone that was on IRC at the time, no it wasn't obviously cool, it was and remains worse in every aspect to irc. FB succeeded because it ignored the internet as it existed and conquered it for normies.
I think the analogy of cryptocurrency's position to the 90's internet is the wrong one to pick, because it describes an environment with some maturity and acceptance in its base technologies, primed for waves of consumer commerce to take hold. The proper example to pick is personal computing circa 1982. When you look at the envisioned uses of personal computing, the advertisements really reach: it helps your child learn. You can store recipes on it. Balance your checkbook. Write documents. And (whispers) play games.
As well, one can occasionally find reassurances in the literature that the computer is your friend, not the back-office monster that billed you incorrectly last month. Would you feel convinced? Many people saw no use for computers in their lives. And the reality of personal computing at that point was that it was mostly a nerd hobby, with a few niches where it could have immediate, direct impact(white collar information work). Professional graphic design functions, audio and video were all still years away, far out of reach on the consumer platforms. It all cost too much - the computers, accessories, the networking options.
But it's also a representative inflection point: microprocessors as a product category had only been available for a little over a decade, and it only took about a decade from there for the embrace of all things digital to kick into high gear with the onset of commodity PC clones, the Wintel monopoly, and then the Internet. Cryptocurrency is seeing a trajectory like that - we're nearing 12 years in and, like early personal computing, it's understood by few, often advertised deceptively, and seeing massive amounts of growth and capital investment. The applications are gradually appearing, and industry incumbents are hopping onto the bandwagon, but it's sneered at by experienced code jockeys: they work with much bigger and fancier hardware than these toys. Nobody is sure of the business model to use. Prices are all over the map.
> The proper example to pick is personal computing circa 1982. When you look at the envisioned uses of personal computing, the advertisements really reach: it helps your child learn. You can store recipes on it. Balance your checkbook. Write documents. And (whispers) play games.
Okay so what is the "play games" of crypto today? It seems like the only equivalent is "criminal activity." Unless you count speculation on crypto itself, but that isn't a "use." Computer users in 1982 were not buying IBM PCs, leaving them boxed in their closet, and then re-selling them for 10 or 100x the price in a year or two.
I was able to write a contract to take out a loan, distribute funds to various pools and pull the funds out. Having that sort of atomic control over financial transactions or data is simply amazing. Anyone with the knowledge can do it. Just understand the vulnerabilities and caveats with the languages/apis that interact with the various blockchains.
After you pass a certain threshold, it makes zero sense to trust your assets to code that _you, personally_ haven't 100% authoritatively verified to be bug-free. Traditional financial institutions don't work like this; if there's an obvious "bug" in bank logic that lets someone take all of your assets, it gets rolled back. Doing away with this protection is fine, but the big bucks will stay away.
All those things became mainstream in a matter of a few years from the time they became affordable and available to most people.
Crypto currencies have existed for well over a decade now, have been available to anyone who wants in for a long time, but still, all we see them being used for is market speculation. I would've loved to use digital money to buy stuff, but it simply isn't a serious option today in most online shops as far as I can see... even if it was, I currently see zero reason to use that instead of my credit card (which has almost no interest, very low fees, and the guarantee of my bank that fraud will be reverted).
Given that, why the hell people still believe it might eventually take over the world??? It just won't! It's pretty clear IMHO that it is, and will remain for probably a long time, a ponzi scheme of sorts, or to be a bit more generous, a gambling platform.
I think for me the problem is splitting people into binary camps of skeptic or supporter. Personally, I have my strongest reactions of skepticism when people seem to declare blockchains as a god, an inevitable coming of blissful revolution. I have a similar, altho less extreme reaction, when people tell me there is absolutely no value or future and that the whole space is pure bs and fraud.
I wish we didn't see the world as so us/them, for/against, good/bad. I think I mostly fight against those perspectives and this space seems to have a lot of 100% yes and 100% no attitudes.
Part of the problem is that much of the cryptocurrency hype, some might even say most, actually is just a bunch of scams and pump and dump nonsense. The people who are in it for a get rich quick scheme are the enemy, and most of the people who expect to get rich quick will end up on the bottom of the pyramid.
But that isn't to say that there's nothing there. It's like saying that the internet is worthless and should be destroyed because it has pornography and copyright infringement. It's not that it doesn't; it's that there are still things it's good for even though it does.
> the internet is worthless and should be destroyed because it has pornography and copyright infringement.
Tangential to the topic, but pornography is not a crime like copyright infrigement, or even something intrinsically bad as you seem to imply, for whatever reason! There's a lot of good taste porn out there. It has a high value of entertainment to a lot of people... I would compare it to something like gaming or sports rather than copyright infrigement.
> Just a thought: for someone living in the 90s, wouldn't something like Facebook have been also very difficult to conceive? "What's the value of having friends I see daily online?".
It's probably easy to say with hindsight, but I honestly don't think so. The stereotype of teenagers (especially girls) spending too much time on the phone is older than personal computers, let alone Facebook. AIM and ICQ were quite successful in the 90s, and LiveJournal launched in 1999.
> wouldn't something like Facebook have been also very difficult to conceive?
Nah. It was obvious to me from my first encounter with text-based internet that this was going to be a social phenomenon that would link the world together. BBS, forums, myspace were all incremental improvements. Facebook just caught the wave with the right timing and did friend recommendations effectively.
> "But I can just write a check or hand someone cash, why would I need to send money over the internet?"
But today, I can just use my credit card to pay for anything instantly, anywhere in the world... who the fuck still uses checks??
Why would I want to use crypto and lose all the protections I have from my card company, while having to wait minutes for transactions to be confirmed instead of milli-seconds?? And with the risk of my "wallet" being hacked in an instant and losing everything, without a chance for appealing to anyone for the funds to be returned?? Do you seriously consider that an attractive option to anyone, in the way that the Internet or Amazon (actually, online shops in general!) were?? Seems completely delusional to me.
That quote was from the perspective of someone learning about the internet in the 90s. My point is it's hard for people to imagine the implications of a technology.
> Why would I want to use crypto and lose all the protections I have from my card company
The current system is kinda crazy if you think about it. We give out our credit card numbers all the time and don't think twice about it. These protections you speak of are mostly a bandaid on a flawed system.
Additionally, we give all the power to a central authority which is ok until it isn't. My buddy does freelance work and has gotten screwed because these "protections" were used by shitty clients to get their money back after he handed over the project.
Finally, crypto has other protections like smart wallets that implement a sort of password recovery feature. The difference is you have control over how you want to use it.
> while having to wait minutes for transactions to be confirmed instead of milli-seconds
Crypto transactions appear almost instantly. Do you really need to wait minutes to fully confirm a taco bell transaction? Besides, Ethereum Layer 2 will help out with this quite a bit by boosting performance. Blockchain scaling is still in its infancy.
> And with the risk of my "wallet" being hacked in an instant and losing everything
Then use a savings wallet and a checking wallet. Or have 100 wallets. It's up to you how you want to structure it. Also people get hacked all the time due to poor passwords. How is this any different than, say, someone finding your bank account password? Or a phishing email?
I imagine over time services will crop up from trusted providers that will smooth over the UX here. For example, walking you through setting up your wallet.
Also smart wallets like I mentioned above.
> without a chance for appealing to anyone for the funds to be returned
If that really worries you then there will be centralized services for you to use with systems in place to prevent this. Wallets are just a lego brick that you can use to build many different kinds of services and systems.
> Do you seriously consider that an attractive option to anyone, in the way that the Internet or Amazon
Yes. We are just starting to see the implications of the technology and it's inspiring IMO.
> How is this any different than, say, someone finding your bank account password? Or a phishing email?
It's different because you have recourse to your bank when someone steals your credit card/bank account info (credit card and ACH transactions can be reversed), and because banks have processes in place to protect their clients (locking accounts, additional scrutiny on large transactions, etc.)
> If that really worries you then there will be centralized services for you to use with systems in place to prevent this.
Those services are called banks, and they already exist for regular money. So why do I need or want crypto again?
I have since been wondering why we tech people are so unbelievably critical. "There is no use-case." and "It's a technology looking for a problem" are common phrases.
I have no answer.
Just a thought: for someone living in the 90s, wouldn't something like Facebook have been also very difficult to conceive? "What's the value of having friends I see daily online?". I think it's very difficult to imagine value of technology that is not mainstream yet.