For starters, tell us why this is inherently bad. This statement also assumes that the BTC economy will grow forever.
> Bitcoin is designed to be verifiable [...] but pretty much untraceable
What would be bad about this if it were true? Paper bills work just fine, even though they are pretty much untraceable. By the way, this opinion is pretty much wrong, bitcoin is very far from being untraceable (IPs, exchanging BTC, etc.)
> Libertarians love it because it pushes the same buttons as their gold fetish
Ok, article is clearly emotional. How did this end up on the front page?
> For starters, tell us why this is inherently bad.
Deflation, by providing a risk free return for sitting on currency, leads to a slowdown in the real economy by reducing both output (reduced consumption) and productivity (reduced investment).
> Deflation... leads to a slowdown in the real economy
A fundamental, but slightly tangential question: is that a bad thing?
What if modern societies are running too hot and need to cool down? 'Reduction', 'slowdown', 'productivity loss' -- these are negative in a purely economic context. But economics is a means to an end, not an end in itself. The end, I believe, (to borrow an American term) is the 'pursuit of happiness'. I don't think modern, developed societies are doing very well in that particular pursuit. It feels as if we're on a treadmill -- try to run faster and it turns faster, and you need to keep running faster just to stay on it.
This may not apply to developing societies, who are still grappling with the lower layers of Marslow's hierarchy like food, health and education, but doesn't it seem like we have overshot? When we can afford to obsess over the number of cores or dots per inch on a handheld device, I think we can afford to slow down a bit. Perhaps a deflationary economy is just what we need.
People shouldn't feel pressured to keep producing despite having ample savings just to keep up with the wealth erosion caused by inflation. /opinion
Also: if the Bitcoin unit had been redefined so that the maximum number was 21 quadrillion, we might not have this debate. Nothing's changed fundamentally, but it is a number that for a laymen is a lot closer to infinity than 21 million.
A growing economy increases standards of living. The fact that a t-shirt costs $10 now that used to cost $20 10 years ago means that people now have more options.
Some people will choose to buy 2x as many t-shirts, making them (roughly) 2x happier. Or some people will buy the same number of t-shirts and have extra money to do other things they want. And most importantly, some people who couldn't afford t-shirts now can. But nobody is forced to chase material goods, they buy what they choose to.
The fact that this process is replicated across virtually all products in the economy is what lifts people out of poverty. We still have plenty of people struggling to make ends meet in the USA, something like half of all people live paycheck-to-paycheck.
The only people who benefit from deflation are those with large amounts of capital and no debt, which is an incredibly small portion of the population that isn't struggling under the current system of low inflation.
We consume too much and we work too hard to fill our lives with vacuous material goods. Look around you, it's pure madness. It's out of control, everybody is permanently dissatisfied and we continue to rape the planet to fill a hole in our lives that can never be filled.
I used to worry about this aspect of bitcoin but now I just think, let it happen. Maybe a world in which we aren't forced to consume just to keep our net worth wouldn't be so bad. Maybe we don't need investment in yet another company selling more useless crap we don't need. Maybe we don't need to work five days a week to be happy.
> Some people will choose to buy 2x as many t-shirts, making them (roughly) 2x happier
More choice has been proven to lead to greater dissatisfaction. Aside from better healthcare I don't think our modern world makes us any more happy and fulfilled.
It's easy to be nostalgic about past times, but the fact is that quality of life, by many measures (including but not limited to healthcare) has been improved.
Intentionally slowing economic growth is a cruel sentence for those less fortunate than yourself so that you can be "happy".
I think the above was referring to dollar amounts in real terms, not inflation or deflation-adjusted -- i.e. deflation will result in both less nominal and less real growth.
It's nothing that complex. a_c_s has just suggested that inflation (the rising price of goods relative to the dollar) is good because it allows one to buy more with the same money (the falling price of goods relative to the dollar, not to be confused with deflation, which would of course only benefit the rich).
I mean you might be right but we have no clue whatsoever. In our great lab that is the world, we know that deflation leads to Bad Things (TM). I'm no economist, but I don't know of a time in modern history where people were saying, "Thank Christ we're experiencing deflation!"
The problem is that most people in developed countries still owe some kind of rent/mortgage payment at the end of the month, national insurance payments for pension and healthcare, and then they have to actually buy food, clothing, and other actual material goods. They need a consistent income, and often a large one because it's the rentier-capitalist class to whom they owe all the money, and the rentier-capitalist class who are pushing up the price of necessities through asset bubbles in the first place.
Capitalism depends on the flow of capital. Incentivizing not moving the money (so money increases in value simply by stuffing it in a mattress) wrecks the risk/reward curve. Deflation is a terrible, terrible thing. Every investment has to be weighed against the increasing value of doing nothing, rather than the decreasing value of doing nothing.
I'm not disagreeing, but is there empirical evidence backing that? My only sources are heavily biased, but they point out that the periods of mild, predictable deflation (like Bitcoin would cause) such as The Great Deflation[1] actually experienced decent growth in real incomes and such.
The deflation in the late 19th century wasn't caused by contraction in money supply, though. It was caused by a huge increase in productivity. It's hard to compare that with contractionary monetary policy.
Plus the price of computation has been dropping in half 18 months for the last 60 years, but people still seem to be buying rather than waiting it out.
> Deflation, by providing a risk free return for sitting on currency, leads to a slowdown in the real economy by reducing both output (reduced consumption) and productivity (reduced investment).
1. Money does not have to be fiat money to be inflationary. The government could achieve the same end in a fairer, more controlled manner without deceit simply by issuing a wealth tax, or a currency tax. However this would reveal the robbery too plainly and thus be unpopular. Inflation is an easier way that relies on deceit, sophistry, and obfuscation.
2. The people who benefit the most from inflation are people in government (who can fund themselves without taxing the populace) and banks/borrowers (who can create money to lend without the explicit cooperation of savers.) Neither group engenders sympathy.
3. Saving is a good thing and we need more of it. Many of society's problems can be directly traced to a lack of savings: pensions for the aged need to be provided because people do not save enough during their working years; health care must be provided because people do not save enough to be able to pay for it themselves; and investments must be funded by government because the savings are not available privately. Inflation discourages savings.
4. The wording "risk-free return for sitting on currency" is deceptive, implying that people who can have a risk free return won't work. This is not true and is best illustrated by computer technology which has been undergoing deflation since its inception decades ago. One can simply wait five years and likely be able to obtain today's hot, expensive technology for very little, likely for free. Yet despite this risk-free return for sitting on currency, people still choose to spend on technology they know is depreciating.
5. Contrary to the deception promulgated by those who profit from inflation and by the people who are deceived by them, a deflationary currency would encourage saving and sound investment while discouraging speculation and irresponsibility. For example, rather than allowing venture capitalists to fund risky new ventures with their own money, our inflation-funded government officials use public money to fund politically-connected companies like Solyndra. In a hard-money world, government would be a lot smaller, more focused on providing the services the public actually agrees to pay for, while the general populace would be more responsible and future-oriented, knowing that their savings now will determine their retirement.
Isn't the buyer's incentive to hoard balanced exactly by the seller's incentive to acquire? If the currency acquires value at a stable rate (a big if), it seems to me that buyers and sellers would meet in the middle. After all, people buy things all the time (cars, computers) that rapidly depreciate compared to leaving cash in a savings account.
Bitcoin is only deflationary if the supply of everything else grows forever. If you look at prices throughout the ages you'll find things haven't always been like they are now[1]. We created the current global monetary system to deal with war debt, globalisation and mind-boggling growth in western prosperity, but there's no reason to believe what we use in 100-200 years will be based on the same principles at all.
And no, I'm not saying Bitcoin or a return to the Gold Standard is the future, just that it's foolish to think a currency of limited supply "just doesn't work". At one point, it was completely natural and obvious to everyone that the supply of money was and should be limited.
>Deflation, by providing a risk free return for sitting on currency
In the case of Bitcoin, the return would not be risk free. In the long run bitcoins would gain in value at roughly the rate of increase in gross world product. Bitcoins value would fluctuate at least as much as that of a global stock index fund. There would be added volatility due to changes in demand for money.
Spending energy on creating and securing a free monetary system is hardly a waste. Also, services necessary for the operation of currently widespread monetary systems, such as banks and credit card companies, also spend energy, arguably more than Bitcoin would.*
i.e., nothing really. Not even a back-of-the-envelope estimate of the power densities (either per putative stored value unit, or per transaction volume) of BTC v. fiat currencies. Just a flat assertions like "...is hardly a waste", or "...arguably..."
> At today’s value of roughly $1,000 per bitcoin, the electricity consumed by the bitcoin mining ecosystem has an estimated carbon footprint [...] [of] 0.03 percent of the world’s total greenhouse gas output [...] If bitcoin’s value reaches $100,000, that impact will reach 3 percent of the world’s total [...].
The value of bitcoin is not at all related to the network's energy consumption. It's not even related to the network's hashrate, and even if it was, mining is becoming more and more energy-efficient. It's hard to take the article seriously after this.
The link to BTC value comes from the author's speculation that miners will be willing to pay 90% of that value to mine it. So at $1000 USD, a miner will be willing to use $900 USD in energy. (Unless I missed something he completely ignores the cost of hardware.)
>> Spending energy on creating and securing a free monetary system is hardly a waste.
Depends on your definition of waste. If you don't value BTC or agree with its crazy libertarian ideals at all then it's a waste by definition. If you can imagine secure crypto-currencies with different characteristics (centralised, controlled supply) then you can make them in a way that doesn't require all this constant make-work, and what's more you can make them support offline transactions and all sorts of other cool stuff.
But that's only if you don't subscribe to libertarian ideals, which I don't.
You probably could have helped your cause further had you not spelled the word "delfation." Have you actually proved me wrong? I'll leave that as an exercise for the reader.
>At today’s value of roughly $1,000 per bitcoin, the electricity consumed by the bitcoin mining ecosystem has an estimated carbon footprint – or total greenhouse gas emissions – of 8.25 megatonnes (8,250,000 tonnes) of CO2 per year, according to research by Bitcarbon.org. That’s 0.03 percent of the world’s total greenhouse gas output, or equivalent to that of the nation of Cyprus. If bitcoin’s value reaches $100,000, that impact will reach 3 percent of the world’s total, or that of Germany. At $1 million – which seems farcical but which may not be out of the realm of possibility given the artificially limited bitcoin supply – this impact rises to 8.25 gigatonnes, or 30 percent of today’s global output, and equivalent to that of China and Japan combined.
Can someone explain to me the validity of simply multiplying the value of Bitcoin against its current percentage of world's total greenhouse gas output? How is the carbon footprint of Bitcoin attached to the price of Bitcoin? I don't expect that the recent halving in price caused everyone to pack up their mining rigs and returned carbon emissions to 0.015% of global emissions.
Not to mention this author somehow manages to keep a straight face when arguing that Bitcoin could possibly account for more emissions than China and Japan.
>Can someone explain to me the validity of simply multiplying the value of Bitcoin against its current percentage of world's total greenhouse gas output?
The logic is very simple. If electricity costs X dollars per joule, and freshly-mined bitcoins cost 1.1X or 2X or 5X dollars per joule, there will be vast numbers of people taking advantage of this opportunity for arbitrage and making a huge profit. The exact number depends on the price of mining rigs and how risk-averse people are, but a small multiplier doesn't change the underlying logic.
>I don't expect that the recent halving in price caused everyone to pack up their mining rigs and returned carbon emissions to 0.015% of global emissions.
Most people with marginally profitable equipment would shut it down if the price of bitcoin dropped below the price of electricity. But since mining equipment is expensive and risky and has a large lead time, I'll guess that almost all of them were mining at well over double the cost of electricity, and even after the drop they're still making a profit.
Drop bitcoin to $100 and you'll see only the most efficient chips left running at a trickle of income, with the production of mining rigs roughly as efficient as burning dollar bills for warmth.
Drop it to $20 and everything shuts down, except for people deliberately losing money in an effort to pop up the network.
I agree with most of the post but as participation drops so does the energy requirement, so it's a bit of a feedback loop.
I suspect that hash rate will usually keep the electricity needed for mining just slightly over the price of the electricity, with the price differential made up by enthusiasm and expectation of future increased value of mined coins.
>I agree with most of the post but as participation drops so does the energy requirement, so it's a bit of a feedback loop.
Yeah, there are more details in how participation affects the network and how there will probably not be total abandonment, but it's largely irrelevant to the issue of total electrical consumption so I ignored it. And it's more fun to talk about a super-rapid price change capable of destroying bitcoin entirely than a boring slow drop in network capacity.
>future increased value
I did think about mentioning the enthusiastic fools that spend $10 today mining bitcoins they expect to be worth $50 some day, instead of spending $4 just buying the same number of bitcoins. But the bigger the price gets, the more marginal I would expect those people to be. And the more I can pretend the majority of bitcointalk doesn't exist, the better.
> Can someone explain to me the validity of simply multiplying the value of Bitcoin against its current percentage of world's total greenhouse gas output?
> The Bitcarbon Methodology says that the carbon footprint of the Bitcoin mining network will be proportional to the exchange rate of Bitcoin assuming that 90% of the dollar value of Bitcoin is spent on electricity.
i.e. you're saying that money laundering is already difficult to trace. If I understand bitcoin correctly, it will make that almost impossible. I'm not clear why this is an argument in favour of the currency.
Yes, it is traceable. That's why when you buy bitcoin at an exchange the government requires that you prove your identity. Then it's just a matter of following the money through bitcoin's permanent public ledger.
It's probably the most traceable currency ever. Even amateurs can follow the money trail.
The transactions won't get hidden. There will still be a record of you transferring to a mixer and the mixer transferring money to outside.
Mixer will just mean that there is no certain way of knowing who's input to the mixer goes to what output. However that can be a bad thing to you, as you can be accused of money laundering especially if you receive money from mixer that also handles something that has been linked to drug money etc.
"Now tell me why didn't you use direct transaction but transferred your flower purchase into a mixer address well known for tax evasion/drug trafficking?"
No, there doesn't have to be. CoinJoin is a technique for mixing on the block chain that can also be used for payments. If widely deployed, mixes look like regular bitcoin activity.
That technique saves you from the bad reputation of the mixer server. However you lose the ability to lose temporal information and the amount of payments made together with yours is probably quite a lot lower than what is achieved with popular mixer server. And it does not save you from bad reputation of your mixing partner.
Someone mixes with you to pay drugs to a silk road advertised wallet -> you could get interrogated and you'd have to reveal as much info as you have on the persons you mixed that particular transaction with.
Or you mix with someone who has not kept their wallet untainted -> they can get interrogated and thus reveal who you are.
Don't get me wrong here. I don't dislike bitcoin. People just tend to give it features that it doesn't have.
What bitcoin is: Awesome solution to the byzantine generals problem. It allows parties that do not trust eachother to verify that someone has exactly the amount of coins he claim to has. Basically it solves the digital equivalent of forged money. A bookkeeping service for parties that do not trust eachother.
What bitcoin is not: Anonymous in any way. Pseudonymous at maximum. Maybe safe to your spouse using techniques like that. Not a way to evade taxes, nor a way to easily facilitate any illegal fund transfers etc. It might be that way now but only because IRS has not put up an unit to analyze it yet. It is not anonymous against adversary with actual resources.
Mixers are not a new concept - they're just the Bitcoin equivalent of a money-laundering parking garage or car wash. Using them will eventually be a risky move since as soon as law enforcement discovers one, everyone who transacted with it can be charged with money laundering.
It's interesting how gold is getting compared to BTC, since really it's nothing like BTC. If gold goes up in relative value, then that creates a strong incentive for creating more gold mines, which then drives the price down. In principle nothing prevents us from creating technology to efficiently mine asteroids if that's what we want to do. So, the supply of gold is very much not fixed.
This is of course very much unlike BTC, which has a fixed number of coins at around 21 million.
I can't predict the future any more than you do, but the creators of BTC have thought of this, it seems.
> If gold goes up in relative value, then that creates a strong incentive for creating more gold mines, which then drives the price down.
Currently it's the same with BTC (higher price creates an incentive for more mining).
> This is of course very much unlike BTC, which has a fixed number of coins at around 21 million.
The idea is that mining rigs should still be useful after the 21 million BTC mark. Unless all BTC markets freeze, the rigs will earn their upkeep in transaction fees. The size of fees is regularly adjusted to make it worth their while.
>> Currently it's the same with BTC (higher price creates an incentive for more mining).
It's not quite the same, the act of bringing more miners on board does not feed back into the supply chain, it just increases competition for BTC that were going to be mined anyway. There's a missing link there.
>> The size of fees is regularly adjusted to make it worth their while.
The size of the fees is voluntary for the person sending the transaction. We have already seen situations where some pools started leaving some transactions out of their calculations because it wasn't worth their while processing them. As rewards for block discovery drop this will get more common and fees may have to become more generous, or somehow formalised.
But some clients (electrum, for example) refuse to send the transaction if you don't include a fee? There's also this:
A transaction may be safely sent without fees if these conditions are met:
It is smaller than 10,000 bytes.
All outputs are 0.01 BTC or larger.
Its priority is large enough (see the Technical Info section below)
Otherwise, the reference implementation will round up the transaction size to the next thousand bytes and add a fee of 0.1 mBTC (0.0001 BTC) per thousand byte.
Sure, those are some client implementations, not all, people are free to interact with the network in all sorts of ways. Servers are also free to not include transactions that don't have enough fee for them.
I'm sure when the time comes something will be worked out, but it is most definitely voluntary rather than an enforced feature. Hell, do a quick google search for "Bitcoin no fees" and you'll find thousands of BTC supporters shouting about how it's so awesome as a payment method because there are no fees!
It's obviously not the same thing. The volume of gold we can mine is virtually unlimited. And then there's the fact that in principle we can synthesize gold, who knows how good we may be come at it:
Charlie Stross writes in the article kindly submitted here: "Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)" I try to follow most of the Bitcoin threads here on HN, but I've missed that argument before. It makes sense that mining-by-theft will eventually displace mining-by-buying-hardware, and that is indeed not a behavior to encourage by the incentives of Bitcoin.
"Moreover, The Gini coefficient of the Bitcoin economy is ghastly, and getting worse, to an extent that makes a sub-Saharan African kleptocracy look like a socialist utopia" is an argument that tests people's commitment to neutral principles. If you don't like badly skewed differences in wealth, I suppose you wouldn't like badly skewed ownership of Bitcoin. Or do you like that anyway, as long as you have more Bitcoin than the other guy?
I don't know why so many people are in love with the idea of deflationary nature of bitcoin.
Consider one important asset in the world that shares the key feature with Bitcoin that there is a fixed amount of it: land.
If you look out at the world, land possession is not just unequal, but also exhibits extremely low turnover. In Britain, 0.6% of the population owns 69% of all the inhabited land in the country, and they come mostly from the same families that owned the country in 1872 (the last time a major survey of land ownership was performed): http://www.independent.co.uk/voices/commentators/johann-hari....
If you look at say Manhattan, you see the same phenomenon. All the land is owned by old people and established families. It's a place where kids have to be much more successful than their parents to be able to afford to buy property in the same place.
Who can take a look at the deflationary nature of land, and think "gee, I'd like everything to be like this!"
Interesting point on deflation... the 2008 economic collapse was marked by a brief moment of deflation. Just little deflation nearly destroyed the world economy.
A preference for deflationary models is one of the reasons I don't take libertarian economics seriously.
> Something else caused the deflation (basically the collapse of CDOs). But the deflation caused the damage.
You talk about that deflation as if it just appeared out of thin air, but it was the market's natural reaction against over 25 years of Fed policy of papering over asset price corrections with massive credit injections. 1987, the Latin American debt crisis, LTCM, the tech bubble bust ... every single time, the Fed's solution to the "problem" of falling asset prices is to bail out the speculators with easy credit.
It will be much harder for similar credit bubbles to form in Bitcoin in the absence of a central bank (or even, as far as I can tell, a means of fractional reserve banking). Of course, we are witnessing periodic non-credit driven bubbles right now, but I think these will become fewer and far between if the BTC market becomes more liquid, and particularly if a means of shorting BTC comes into existence.
> Of course, we are witnessing periodic non-credit driven bubbles right now, but I think these will become fewer and far between if the BTC market becomes more liquid, and particularly if a means of shorting BTC comes into existence.
I don't understand this logic at all. BTC is primed for speculation, bubbles, and deflation, because it has a fixed or slow-growing supply and no automated procedure for fighting deflation by printing money. In other words, it has no central bank. There's no way it can prevent deflation and speculative bubbles. And yet as the BTC population grows, you think that speculation bubbles will reduce? That's a pretty out-there argument.
> ... and no automated procedure for fighting deflation by printing money.
Depending on how you measure it, the share of credit which comprises the USD money supply dwarfs the amount of actual cash by something like 100:1. The cause of the deflation in the 2008 crisis was a sharp contraction in the amount of that credit, and the crisis only ended when that contraction stopped, not because of the Fed's relatively much less significant cash injections.
The sorts of sharp, catastrophic deflations that took hold in 2008 (or 1929 for that matter) are always caused by the bursting of a preceding credit bubble, usually created by central bank policy. I don't see how that kind of bubble can happen in Bitcoin. So the argument that "Bitcoin is deflationary" is true as far as it goes, but that doesn't mean that a Bitcoin-based economy would necessarily look exactly like, say, the Depression-era U.S. They're two very different kinds of deflation.
In the absence of major inflows & outflows of credit, the addition of liquidity to a market usually reduces the severity and frequency of big price swings. The very difficulty of issuing credit in BTC may very well prevent it from becoming a viable currency, but I think it's also an important brake on speculation.
> The sorts of sharp, catastrophic deflations that took hold in 2008 (or 1929 for that matter) are always caused by the bursting of a preceding credit bubble, usually created by central bank policy. I don't see how that kind of bubble can happen in Bitcoin. So the argument that "Bitcoin is deflationary" is true as far as it goes, but that doesn't mean that a Bitcoin-based economy would necessarily look exactly like, say, the Depression-era U.S.
Bitcoin has already had catastrophic deflations: factors of two in less than a week and factors of three in less than a month. And equally spectacular speculative crashes. The reason for this is really very simple: there's no one at the tiller, printing money to tamp down the speculation.
The kind of deflation I'm talking about -- and I think everyone on HN is talking about -- is the kind associated with speculation. If Bitcoin can't discourage speculation, and it appears by design it cannot, it is dead in the water.
Gold isn't different. Bitcoin is actually behaving a whole lot like gold.
But, here's the thing: few people have ever suggested that we actually do our regular, day-to-day finances in market-value bullion gold. Instead, it's just considered a good way to back or hedge against actual, managed currencies.
Bitcoin stands a chance, IMHO, if people get off their ridiculous Austrian Economics shtick and start treating it similarly to gold: Bitcoins as hedge against financial shenanigans in other currencies rather than Bitcoins as a way of paying your bar tab.
I don't disagree with your interpretation of the central banks using easy credit to patch over popping bubbles, but I don't think your logic on bitcoins is right at all.
Basically, as bad as central bank meddling is, the alternatives are far, far worse - look at the boom/bust cycles of the 19th century. For the most part, competent central banks prevent both hyperinflation and deflation through controlled expansion of the money supply.
I disagree with your reading of history in terms of the boom/bust cycles of the 19th century allegedly being "far, far worse" than central bank (mis)management of the money supply. As bad as the volatility of that period was, economic growth was still quite robust. And our system is now so dependent on massive levels of credit -- which could not exist without Fed backstops -- that when a panic hits there are legitimate fears of a total seizure in the economy and widespread social disorder (Hank Paulson's "tanks in the streets"). Maybe my reading of the history is flawed, but it seems to me that the panics of the 19th Century were at least faced with a bit more composure than that.
But more to the point, even the 19th century cycles were intimately tied to the credit cycle. It was just created by private banks operating on fractional reserves, as opposed to a central bank. There is no fractional reserve banking in Bitcoin. (Which, again, may be a reason it will never take off as a currency, I'm not sure.)
Bitcoin, if it takes off at all as something more significant than Dutch tulips, will probably be relegated to commodity rather than currency, much as gold and silver are (with a little black market currency behavior on the side, just like gold).
As you point out, there's no obvious way to do fractional reserves, so it can't be used for debt-based capitalism unless someone comes up with a clever mechanism for that, something deeper than commodity-as-collateral. Avoiding the currency hazards of modern capitalism by not being able to perform the underlying operations of modern capitalism is kind of cheating. And if you can do lending on fractional reserves, how do you know the hazards of reserve currencies aren't a function of fractional reserves rather than a scalable money supply?
>And our system is now so dependent on massive levels of credit -- which could not exist without Fed backstops -- that when a panic hits there are legitimate fears of a total seizure in the economy and widespread social disorder (Hank Paulson's "tanks in the streets"). Maybe my reading of the history is flawed, but it seems to me that the panics of the 19th Century were at least faced with a bit more composure than that.
I would argue that while the dependence on credit is real, it's not due solely to banking. The real dependence on credit is simply because wage levels are so low that most people cannot afford to pay for their lifestyle in cash, and are not even expected to do so.
When you configure the economy such that buying cars, houses, health-care, education, weddings, births, and burials almost always requires credit, then that economy will become intimately dependent on the credit cycle. If you don't like it, then you need to raise wages, reduce inequalities, and oftentimes even nationalize certain vital services, until ordinary citizens can go through life maximizing the amount of goods they pay for in cash and minimize the amount of loans they need to take out.
Otherwise, expect your society to be enslaved to the creditor class.
In simpler English it wasn't the deflation that nearly destroyed the world economy, it was the near-destruction of the world economy that triggered the deflation.
Deflation and Depression: Is There and Empirical Link?
Are deflation and depression empirically linked? No,
concludes a broad historical study of inflation and real
output growth rates. Deflation and depression do seem to
have been linked during the 1930s. But in the rest of
the data for 17 countries and more than 100 years, there
is virtually no evidence of such a link.
> In Britain, 0.6% of the population owns 69% of all the inhabited land in the country
> look at say Manhattan
Cherry-picking examples like this undermines your point. The value of land is non-uniform. Of course looking at the largest urban metropolises or extremely powerful island countries, land will be valuable. In the north central US for example, away from urban areas, land is much cheaper (provided it isn't sitting on large deposits of fossil fuels, of course) and I'd guess it also changes hands a lot more often.
First, "land in the U.K." or "land in Manhattan" is an asset class you can study by itself. Land isn't a wholly fungible asset.
Second, the example you give actually undermines the point you're trying to make. Bitcoin, if adopted in a major way as a currency, would be even more "like land" than land is generally. More specifically, it's would be like "land below 96th street in Manhattan" or "land in London" as a result of uniformly high, ever-increasing value on a per unit basis, driven by ever-increasing demand for a fixed quantity of good.
I'm using the same foggy crystal ball as everybody else, but my sense of it is that holding a reserve of bitcoin is more like holding a reserve of dollar bills. You could have all the dollar bills and not still have all the wealth, because wealth is stored in a lot of kinds of assets.
That'd make BC holders more like banks which convert between BC and other currencies on a per-transaction basis, which is how we use cash now. In that case, the value shifts would not be significant for most users of BC, nor would inequitable balances result in inequitable cultures. Having BC just means you don't have to pay a conversion/transaction fee.
But again, I'm just guessing.
EDIT: elaborating after some thought. I think bitcoin makes no sense if the UX is acquire,hold,spend; but works well if it's withdraw,transact,deposit. The deflation problem only matters if you see the general use-case as wealth storage.
Well, there are other ways of protecting one's wealth from inflation tax, like real estate and gold. BitCoin, if successful, would just be more stable and liquid.
The part about stolen electricity is not actually true, though, at least the way it's justified there. The paper argues that botnets will drive out honest mining, but at this point they can't can't because custom-made hardware is so much faster at mining than general PCs. The current global hashrate is currently about 10 petahashes/sec and your average computer can manage around 10 megahashes/sec. Doing the maths, in order to achieve that through a botnet and drive out all honest mining you'd need a billion computers - that's roughly every PC in the world, running 24/7!
(Computers with high-end AMD cards can do better - up to 1.2 gigahashes/sec on AMD's top-of-the-range card but they're also a lot rarer so shouldn't drive up the average much.)
You don't need to drive out all honest mining. All you need is not to have to pay for any costs.
The issue he's pointing out is that the rational, amoral actor will have to decide between a saturated market of ASICs with extremely long time to ROI, and a quick buck off of grandma's draining laptop battery.
This is correct. Last friday one of our LAMP servers was running a litecoin miner via a security vulernability. Everyone laughed at how inefficient that would be for the hacker. Well, the hacker wrote a script and probably got tens of thousands of high powered VMs to do his bidding. Free mining for him. Even if its crazy inefficient, 10k inefficient machines are better than spending $5,000 on a single mining rig. Whatever he makes via this approach is pure profit.
Note: if you run Pydio, update to the newest version. Everything below 5.04 has a serious security vulnerability. That's how they got into our machine.
Litecoin != Bitcoin. My argument doesn't apply to Litecoin, because by design it doesn't have the same vast disparity between the performance of the best available mining hardware and your average PC. In fact, if anything Litecoin is another reason why botnet miners are unlikely to drive out professional Bitcoin mining - it's much more profitable to mine Litecoin.
They're both nearly identical cryptocurrencies with a lot of the very same problems.
> it's much more profitable to mine Litecoin.
Only because its younger than bitcoin. Making bitcoins was trivial a couple years ago. Considering both have a maximum number of coins, this dicussion is academic. Once that max is hit then its just traded as any ugly market commodity.
Litecoin uses scrypt, a memory-intensive hashing function, whereas BtC uses SHA, which is merely computationally expensive. It was specifically designed to be difficult to mine with ASICs, so as to lessen the advantages of professional ASIC mining farms and give relative power back to all the guys who built GPU mining rigs back when that was cutting-edge.
The unfortunate side-effect of this is that LtC botnets are far more viable relative to the total network hashrate than BtC botnets, as the difference in power between commodity computers and ASICs as far as hashing is concerned is far less for LtC than BtC.
Shows how little this site knows about how normal users perceive currency.
Keep your butts, keep your LTC, and your peer cons. You guys missed the moonboat and now real users are going to dictate the future of currency.
Doge coin has arrived to crash the alt coin market and rise above to save the people from all the greed and scum that has overtaken the bitcoin inindustry. Yes I'm looking at you hacker news. Why do you all just care about money so much?
The problem is that the difficult rate increases based on the hashing power put into the network, and the reward for mining is cut in half as more coins are mined until there are none left.
You'd need a LOT of regular PCs to match even one simple asic. A butterfly lab's jalapeno does ~5 gigahash/sec. You'd have to infest 500 decent PCs to achieve that, and then wait about a month for about a tenth of a bitcoin.
So to get 1 btc in a month, you'd need to infect 5k PCs without them noticing that "damn, my machine is really pegged" and "golly, this laptop is awfully hot and my battery dies really fast...".
They were able to get ~240 machines, at a time when CPU mining was making them ~$350/day. Decent, but worth all the time to write the software and distribute it? Eh, probably not.
> The issue he's pointing out is that the rational, amoral actor will have to decide between a saturated market of ASICs with extremely long time to ROI, and a quick buck off of grandma's draining laptop battery.
The rational, amoral actor with access to a botnet of general-purpose machines will have to decide between using them to mine for BTC and using them for another profitable, illegal purpose, such as relaying spam, performing DDOS attacks etc.
As the difficulty of mining increases, the profitability of mining on a botnet decreases relative to the other potential uses for the botnet.
Currently, I would be surprised if mining for BTC on home computers would yield enough coin to pay even for the cost of building the botnet in the first place.
Why is this a prediction for the future, or in other words, why does this appear not to be happening now? We've seen three generations of Bitcoin mining (CPU, GPU, and ASIC), and at all times it appears that parasitic mining has been an extremely small portion of the mining network. And ASICs, capital intense though they may be, have been developed and purchased en masse by your "rational, amoral actors."
A pegged CPU or GPU is pretty noticeable. Illicit mining has to be the best use of the access (instead of say, stealing $0.01 from an ad network or whatever).
Is this a thing? I mean, there are all sorts of fungible assets floating around the world, but I've never heard anyone talk about e.g. "the molybdenum economy" or "the Gini coefficient of the hard red winter wheat economy". Aren't economies usually located in actual places?
If bitcoin becomes a currency and not a commodity, it will matter to a lot of people. Wheat and molybdenum are not currencies or used as currencies (certainly not at any large scale) so speaking of their "economies" is a nonsensical statement.
> Aren't economies usually located in actual places?
We have a global economy, and bitcoin advocates seem (or used to) interested in establishing BTC as a global currency with its own markets for buying and selling a variety of goods.
The reason it sounds strange to talk about 'the Gini coefficient of the Bitcoin economy' is that the Gini coefficient is usually used as a measure of income (or sometimes wealth) distribution among a _population_.
As your comment suggests, those populations are usually defined by being located 'in actual places'. However, they could equally be defined by some demographic factor. You could look at the Gini coefficient of income for people with blue eyes.
However, I don't see the sense in singling out just a single asset or asset class, and looking at its distribution among the whole human population of the earth UNLESS the total value of that asset is some large %%% of the total assets in the world.
You could imagine it's a thing, but it'd be nigh-impossible to measure for Bitcoin, because addresses!=people. When BTC-E consolidated 97k btc onto a single address, how many peoples' claims did that represent? Heck if we know, but if you naively assume '1 person has 97k btc!' you're going to get a pretty distorted Gini...
Gini coefficient is applicable because bitcoin is a currency (or aspires to be one anyway). Sometimes commodities become money-ish, for a short time period, but they don't generally aspire to permanent status as currency.
Yes, it is theoretically possible to calculate a Gini coefficient for Bitcoin (it's actually a simple calculation). However, we have no actual idea what the Gini coefficient is, or if it's getting worse, or better. Ask anyone who is saying different for a source.
"It makes sense that mining-by-theft will eventually displace mining-by-buying-hardware"
I don't really understand why - if something is legal, and there are legal reasons to invest in it, then generally legal investment has been higher than illegal investment. Sure, some people will use malware to mine, but they won't be doing so with ASICs, so it won't bring in much money. So we're talking about people doing it with _actually_ stolen electricity, and you'd hope that the electricity companies were good at spotting that nowadays...
There was the case of a network admin who installed, without authorisation, some piece of distributed computing software on all the machines at his place of work.
This significantly raised the electricity bills, so he was caught and prosecuted for it.
Ridiculous maximum sentences for computer misuse are not a new thing. :-(
> A college computer technician who offered his school's unused computer processing power for an encryption research project will be tried next month in Georgia for computer theft and trespassing charges that carry a potential total of 120 years in jail.
> David McOwen was working as a PC specialist at the state-run DeKalb Technical Institute in 1998, when he learned about a project by the non-profit organization distributed.net that allowed computer users to donate their unused processing power to test the RC5 encryption algorithm. Noticing that many of the machines he maintained on the seven DeKalb campuses sat idle for long periods, McOwen installed distributed.net clients at several of those locations while performing a Y2K upgrade on the machines in 1999.
Well most illegally grown marijuana uses large amounts of stolen electricity (absolute control of temperature and lighting is a must to get the highest yield). I'm guessing it would not be profitable to grow it otherwise (or not as profitable).
Similar issues will affect Bitcoin mining in the long run however I expect this to be more something that is achieved through mining bots and not through setting up server farms in houses with diverted electrical trunking.
As to electricity companies finding out, the issue here is that the 'noise' from loss of electricity in the network masks a specific house consuming huge amounts of electricity. I'm guessing there must be some sort of profiling going on to determine if an occupied house is using too little electricity.
It's not exactly my area of expertise. In the UK, infra-red cameras on helicopters are used to identify houses with 'hot' roofs. It would seem nonsensical to do this if electricity companies could easily identify theft.
As part of reading a meter I'm guessing an inspection of the meter box can be made. I'm guessing the modern digital electricity meters are able to report usage stats back to the company.
People can use a lot of electricity without generating a lot of heat in a room that looks like it would make a nice grow room. In other words, a very small percentage of people using a lot of electricity are growing pot. The percentage of people with a hot room and hydroponics garbage in the back dumpster that are growing pot is a lot higher.
I don't believe that helicopters are specifically sent out to look for hot roofs in the UK without a reasonable suspicion.
I believe that the power companies are more likely to be of use in detecting cannabis growers. I am sure that in some areas a mini arms race has gone on for decades with cannabis growers taking electricity from the 'other side' of the meter, so that nothing shows up on the bill. I am sure that electricity companies have also worked out how to compare electricity supplied versus electricity charged for in order to detect this, at least to street level, and, after that, the infra-red camera can come into play to detect the hot-roof, either by themselves or by the police.
Given a choice of stealing electricity for cannabis or bitcoins I would be surprised if the latter was more profitable. That said, bitcoin miners probably do arouse the suspicions of the authorities. Therefore it would be quite convenient to have a 'server farm' downstairs with a 'cannabis farm' in the loft. Therefore, when the authorities come round there is a plausible reason for the electricity usage.
Growers steal electricity to avoid detection by the power companies auditing their usage. Considering that a grow-op can produce hundreds of thousands of dollars, the power bill's just a blip on the radar.
It's the other way around. If you try to run a grow-op while normally connected to the grid, the electric utility will report your well-above-average usage to the police immediately, who will come and visit immediately.
Thus grow-ops are basically forced to find a way to connect to the grid in an unmetered, illegal fashion to avoid being reported.
pretty much any report of a cannabis farm getting busted and ofgem (the Uk electricity regulator) estimated that a third of the stolen electricity is used for this purpose
reasoning: you're using indentured trafficked workers trapped in homes (and possibly also fraudulently claiming housing benefits) to grow an illegal product. Electricity will be a significant cost (in the UK, at least) and so stealing it makes more sense.
Certainly in the UK this is the case - people are smuggled into the UK, and have to repay the cost of being smuggled by growing cannabis (or sex work, or similar). Passports are removed, fear is created about going to police, people are locked into houses, etc.
Part of the reason for that is that people who use non-stolen electricity to grow get busted; the electricity companies monitor usage and the police have access to that information.
>> So we're talking about people doing it with _actually_ stolen electricity, and you'd hope that the electricity companies were good at spotting that nowadays
Unless you simply use a ton of machines, that alone will generate some extra electricity, but nothing noticeable, versus using a huge botnet to do it for you:
"The ZeroAccess botnet is one of the largest known botnets in existence today with a population upwards of 1.9 million computers, on any given day, as observed by Symantec in August 2013."
and
"These figures give some indications of the additional power requirements of bitcoin mining on a single computer infected by ZeroAccess. We can now extrapolate these figures out to 1.9 million bots and see what the total cost/impact is likely to be for the whole botnet.
If each KWh of electricity costs $0.162 then it would cost $0.29 to mine on a single bot for 24 hours. But multiply this figure by 1.9 million for the whole botnet and we are now looking at energy usage of 3,458,000 KWh (3,458 MWh, enough to power over 111,000 homes each day.) This amount of energy is considerably greater than the output of the largest power station in Moss Landing, California, which could produce 2,484 MW and would come with a corresponding electricity bill of $560,887 a day. Despite the costs, all this energy will create just $2165 worth of bitcoins a day! With these sorts of sums it would not be economic to undertake bitcoin mining with this setup if you had to pay for it yourself. But if the bitcoins are being mined at someone else’s expense, then that changes the picture completely and it becomes a highly attractive proposition."
Once you make it attractive for someone to do this, they're going to do it, point blank. Add in no oversight or regulation and you have a recipe for criminals to come in and take over.
With 1.9 million bots, I suspect that they can do better than hugely inefficient CPU bitcoin mining. And if that's not true, it will be eventually, as the cost (in CPU cycles) of mining gets higher.
Bitcoin mining has to be the most profitable (or at least close to it) use of a botnet for this to happen, and since the value of mining keeps decreasing this will by definition not be the case at some point (if it even is now).
> Charlie Stross writes in the article kindly submitted here: "Bitcoin violates Gresham's law: Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)" I try to follow most of the Bitcoin threads here on HN, but I've missed that argument before.
You've missed this argument because it's an awful argument. It's a misunderstanding and misapplication of Gresham's law. It seems like the author simply wanted to use the phrase "bad X drives out good X" without bothering to understand what Gresham's law actually applies to.
Even if the greatest benefits of mining accrue to botnet operators, that doesn't affect the incentives faced by other individuals or groups weighing whether or not to invest in mining rigs. The incentives are: are the fixed cost of hardware and variable costs of power and labor outweighed by the value of the bitcoins mined. Does not matter what other miners are doing. Because of the fixed supply of bitcoins and the increasing difficulty, botnets may have an advantage. However, because bitcoin is deflationary, the rising price of an increasingly supply-constrained asset might offset the diminishing returns. That's a risk investors are going to have to weigh.
Technology doesn't move backwards in time. Or in other words: As long as there isn't (from a technical point of view) a better thing than Bitcoin (for all of its current use cases) Bitcoin won't die.
Actual money is "a better thing than Bitcoin for all of its current uses" other than speculation (for which we have tulips) and crypto-anarchist fetishism (for which no better solution is available).
Bitcoin may someday be better than existing currencies for some of the tasks we use them for, but it isn't yet.
That's factually incorrect. For example, several months ago I was owed some money (around 500 USD) by a friend, and we decided to exchange the funds via Bitcoin, not for speculation or your delightfully pejorative "crypto-anarchist fetishism," but because it was by far the easiest and fastest way for us to do so.
Cue your reply, justifying your original universal quantification by retroactively redefining it with new exceptions.
I think the argument against your anecdote is that it was the best solution for you--no doubt a technologically literate person who has confidence in their mental model of what bitcoin is. For the general populace, it's a distant novelty still which reduces its general practicality greatly.
So then, the real statement is that Bitcoin is useless, except for the people who are savvy enough to use it? I can accept that, but it's a very weak statement. You could have said the same thing about PayPal (which is now quite popular in the general populace) or even credit cards before they became mainstream.
I don't entirely disagree, but even still people understood both of those things conceptually before they existed. Credit, arguably, predates state-backed currencies and PayPal provides the same functionality as a bank for online transactions. Bitcoin is a traded commodity represented by long hashes stored on disk. It's very abstract and coupled with its current volatility it makes it hard to pull people in if they aren't already convinced that its massive deflation will make them rich.
That said I have mined and sold bitcoin (luckily a few weeks ago) I just remain skeptical about its viability to go mainstream considering these and many other barriers. I was personally frustrated by it when making a recent purchase due to the fact that my buying power fluctuated by 10% while proceeding from shopping cart to checkout.
I think that it does, to some degree, in order to fulfill some of the promises that proponents claim will be delivered in the near future. There are ceaseless calls by BTC advocates for retailers of all kinds to accept bitcoin payments. For this to happen on a large enough scale there needs to be distributed demand by a great number of consumers, not frequent demands by a few edge cases.
I say that's the minority of the BTC users claiming that widespread adoption will happen.
But Bitcoin is already useful as it is, it doesn't need any more use cases, they just may emerge naturally.
Instead of acknowledging that you don't know what you are talking about, you act like you know it all, and doing so makes you look like a fool for anyone that knows a little about the topic.
I had sent-received money from South American or African countries in Bitcoins, and they are super useful.
Countries like Venezuela, Argentina, or Colombia or countries from Africa will tax you more than 50% of everything that is sent via official channels, if they let you do this in the first place, which they wont. All the money goes to corrupt governments.
Or in other words: As long as there isn't (from a technical point of view) a better thing than Bitcoin (for all of its current use cases) Bitcoin won't die.
I've studied the history of technology formally as part of my undergraduate education, and there is no such general principle of how technologies are adopted in a society. Bitcoin could quite readily die. Whether it will or not remains to be seen, but people betting real money that Bitcoin will not die are best advised to diversify their investments.
Of course it does; or it can, at least. We invented SSTs but still plod about on sub-sonic airliners, for instance. The key isn't whether a particular technology is the latest and greatest, it's whether it's the latest and greatest that can economically be used.
In my opinion, the whole principle of bit-coin is like a manifesto for financial sovereignty - i.e. it says that money should be above government, and above democracy. Personally, I do actually want the government to be able to levy taxes to pay for public services, to be able to trace corrupt payments, to be able to seize the assets of fraudsters who have convicted under a fair judicial process, to be able to nudge the value of a currency to pursue wider macro-economic aims, and so on. Ultimately, living in a society means being subject to its laws. To accept Bitcoin at face value is to accept a future where every country operates by default with a financial system like Switzerland, and I don't believe that the vast majority of the population want that to happen.
I also don't really object to currency manipulation by central banks because they are a stabilising influence and (in theory) are there to stop the money supply from becoming a negative economic factor in times of recession etc.
I quite like the article, and I've made many of those arguments myself. I don't know that bitcoin will fail. It may be that there are enough people to keep it going indefinitely, people who buy in to the politics, who don't care about the politics, or don't know about the details. But I'd not be sad to see it go.
Crypto-currency is really cool. Next time I'd quite like one that isn't inherently deflationary and doesn't require burning millions of dollars worth of electricity to keep the system safe from attack. There has to be a more elegant way. But then I don't give a crap about decentralisation so there are multiple good schemes IMHO.
Peercoin, for one, has a 1% annual growth rate forever, and is designed to be more energy-efficient over the long term because it relies partly on "proof-of-stake" instead of just proof of work. There are a couple other proof-of-stake currencies too, and some unimplemented ideas like proof-of-burn. Another interesting currency is Freicoin, which uses proof-of-work but has demurrage.
Proof-of is just a waste. Currency is a means of exchange rather than a store of value or an actual representation of value. Proving that you've burn't so much electricity is a fun idea for some stuff (spam prevention is the best one I've heard) but when it comes to currency, who cares?
All I really care is that someone else values it about the same as I do, so it can be exchanged freely.
> Personally, I do actually want the government to be able to [...]
You will be able to do help the government to do so, even with Bitcoin.
Other user might get a choice to whether they want to participate, and you might not like that, but it is a little dishonest to qualify that statement with "Personally"
> Other user might get a choice to whether they want to participate, and you might not like that
Well, you can hardly ask the corrupt official whether he wants his payments to be traceable, or the fraudster whether he wants his assets to be seizable. Like any other law which does not impede a human right, these things are decided through democratic processes, and applied to everyone.
We also can't ask the corrupt official whether he wants his communication to be traceable and seizable, yet cryptography enables him.
There were very smart people trying to limit the use cryptography in the 1990s and they failed, and recently there were governments trying to sabotage the development of cryptographic standards, and they also failed, probably because they know what happens when individuals can communicate securely.
The cat is out of the bag. Bitcoin is just another application of cryptography.
> We also can't ask the corrupt official whether he wants his communication to be traceable and seizable, yet cryptography enables him.
I take the point, but communications privacy is much more of a cultural norm than an individual choosing whether or not to pay tax. We could live in a world of communications privacy far more easily than a world without government.
Also, from a technical point of view, communications are pure data (with an origin and a destination), a currency is much, much more. The ability to hide data is not enough to make a currency functional.
People having more power over their wealth does not necessarily mean the end of government. It increases the incentive for government to convince people to pay voluntarily.
I also agree that cryptography alone is not enough to eliminate the distinction between data and currency, but the consensus mechanism of Bitcoin could have been the missing piece of the puzzle.
The author's complains are a sober reminder that society is not yet ready, and has not yet evolved all the infrastructure it will need to cope with rising global Bitcoin adoption.[1] Regardless, if the number of people using Bitcoin continues to grow, our institutions and infrastructure will have to evolve to address the problems mentioned by the author.
Among other things, society will need more secure (truly malware-resistant) personal computing systems, more secure (from snooping) communications systems, substantially better authentication mechanisms, more secure energy generation and transmission equipment and facilities, more secure financial institutions, and more technologically-savvy regulatory and policing institutions.
Those are all really good things.
--
[1] Compare, for example, how society works with paper cash and gold bars versus Bitcoin:
* Paper cash or gold in substantial amounts is always stored in private or bank safes, or in high-security underground vaults that most people have only seen in movies. In contrast, Bitcoin private keys are often stored in general-purpose personal computers running a wide variety of applications, managed by people who don't know how to secure a computer.
* Transporting any substantial amount of paper cash or gold is often done via armored trucks operated by highly-trained security personnel. In contrast, Bitcoin private keys are transported via all sorts of highly insecure methods by people who don't know better.
* No sane person holding a substantial amount of cash or gold at home would ever let complete strangers come and go into their house as they please, while giving them keys to all doors, cabinets, drawers, and safes. In contrast, people regularly give complete access to their computers to complete strangers by willingly or unwillingly installing software created by such strangers.
* Our regulatory and policing institutions know how to identify, prosecute, and even prevent illegal gold and cash transactions, successfully keeping them to a tiny percentage of overall economic activity in most advanced economies. In contrast, those same institutions do not yet know how to cope with the use of Bitcoin for illegal activities.
--
Edits: moved comparison of Bitcoin to gold and cash to footnote; also, made minor changes to several sentences so they more accurately reflect what I intended to write in the first place.
I love how it's not a problem with Bitcoin, it's a problem with the rest of the world not adapting to use Bitcoin fast enough!
So basically, to be able to use Bitcoin, we need to develop a utopian society where the regulators are as smart as the people they're trying to regulate, the average person on the street is able to secure their computer against a financially motivated hacker, the global energy problems are solved and total privacy is achieved. We'll get right on that.
Bitcoin is useful for some purposes, but its lack of traceability is MOST useful for criminal enterprises (aka money laundering). It's also not at all risky to attempt to steal Bitcoin; robbing an armored car involves a significant amount of risk. A failed armored car robbery ends with you dead or in jail; a failed attempt to steal Bitcoin ends with you just not having any Bitcoin.
Bitcoins are the most traceable currency ever, this is true.
However the value behind bitcoins is the most untraceable thing ever.
If you send 10 BTC from ADE to 143 and I send 10 BTC from 5FC to 057 you can probably trace that we both still have 10 BTC. Now take advantage of how much data you can shove into a single 10 minute transaction and do 100 transfers with a group of 10 other people turning a total of 10 original addresses into 20, and it becomes tricky to trace. Make that 100 new addresses and it becomes nearly impossible with current technology.
Even if you could trace it, all people have to do is not worry about getting all their money back, say by donating 0.1 BTC to a central coordinator overall, and it becomes really hard to figure out that someone put in 99 BTC and got out 98.9 BTC.
You don't have to trace all the money. You can mark all wallets that receive money from mixers as suspect, and disincentivize accepting suspect bitcoins.
Imagine someone's wallet gets compromised, and all the funds are transferred elsewhere. The theft is reported to the police. Some arbiter of trust will indicate that all wallets that have received funds that flowed from the stolen wallet after the theft are suspect, and communicate to participating merchants and consumers that accepting funds from suspect wallets will put them on a blacklist. People will stop accepting funds from tainted wallets, and the incentive for future theft will go down.
Bitcoin is not a permanent haven for crime. It is more traceable than any widely accepted currency, and that traceability will be used to deter financial crimes.
Too easy to game. I just send you 0.001 bitcoins and you are screwed. Add a limit and I will just go under it.
Ultimately though there is an even more effective method. New coins are always clean, trading pristine coins for tainted coins at a discount is damned effective, even if it requires a lot of computing power to pull off. The trick is you have infinite wallets, so avoiding any way of figuring out which is which is not difficult, especially since distributing pristine coins is standard practice.
>Too easy to game. I just send you 0.001 bitcoins and you are screwed
You seem to assume that a regulator must mark all the BTC in a wallet as tainted just because 0.001 of tainted BTC was sent to it, which seems to me a false assumption.
It is so easy to send transactions that you have a problem, do you ignore transactions under a certain amount (leading to a potential group going under the limit for mixing) or do you introduce these problems.
If you don't mind false positives it will be easy enough, but I don't know how you would develop a system that would work.
Well I would say someone brought forward the concept of the US or other entity marking bitcoins, that could definitely work, but I don't know if that would solve the problem of laundering non-marked bitcoins.
Great, so as long as we solve six of the major technical hurdles of the day, we can avoid the societal and technical dangers that BitCoin poses. What a pleasant ultimatum.
As you pose it, it's now a race between the darker aspects of BitCoin and our ability as a world society to check off the items on your wishlist. I don't disagree that those are all good things to have, but I don't see how holding a gun to everyone's head and demanding short-term solutions to long-term problems is going to accomplish anything. I don't see a world where we get there in time.
These are not technical dangers that Bitcoin possesses, they are dangers that exist with or without Bitcoin when dealing with money online. Computer security didn't all of a sudden become important because BTC came into existence: most of OP's same arguments could be made against having online banking:
* Online banking credentials are often stored in general-purpose personal computers running a wide variety of applications, managed by people who don't know how to secure a computer.
* In contrast, people regularly give complete access to their computers (where they manage their online banking, etrade, etc) to complete strangers by willingly or unwillingly installing software created by such strangers.
People have been being ripped off before BTC existed. The main difference with BTC is simply that a large amount of capital appeared very quickly in the hands of people that may not have been previously used to having a lot of money. If you imagine a hypothetical analogous scenario where .1% of online banking users suddenly saw their funds increase by 100x, and they didn't move those funds anywhere but instead continued treating them the same way, you could imagine them becoming fresh targets for malware or key loggers or phishing or what have you.
Yeah but that's not some fundamental property of fiat, there can be bitcoin banks that offer protection in exchange for fees/longer waits as well, USD cash doesn't magically have these properties, its a function of the services built on top of it. This is the point where most people would come in and say "How hypocritical! I thought the WHOLE point of bitcoin was instant transfer etc etc and now you've just reduced it to the same as USD". No, that is not the whole point of bitcoin. That's the whole point of bitcoin for some people. The real power of bitcoin is choice.
Today if I want to do an instant transfer it is flat out impossible at certain times. I've been in situations where I needed to desperately get money to an individual past 8PM for an emergency and the feeling was absolutely debilitating having him on the phone and literally having no options because he had no Western Union next to him. I am happy to have tradeoffs, and sometimes choose less security.
To me what is important is the experiment. Just like I wouldn't want to try to make ONE company by trying to pontificate what the perfect P/E ratio should be, but instead am happy to have lots of companies and allowing experimentation and evolution with different monetization strategies, so to I feel that a world of many different freely available currencies would be far more useful in determining good monetary theory than writing tons of papers and then committing our ONE currency to it for decades.
Right. But this comes with the cost of having to wait several days to be able to transfer money, or having your account locked for triggering fraud detection, or extremely low interest payments on the profits the bank makes from loaning your money out.
Bitcoin has none of those costs, but you have to take on all the risk of getting defrauded. For some, especially people who understand security, bitcoin seems like the better deal.
>The world wasn't ready for computers, the internet and cryptographically secure communication either, but we still managed. For a forum that supposedly loves "disruption" everybody seems to be really frightened when it actually happens.*
Amen, brother. I've also been preaching cold fusion and perpetual motion machines like forever, and nobody's listening to me either. They are not ready for it.
I don't see it as a significant problem. Those hurdles only need to be crossed for folks using Bitcoin to do so safely. If they are not crossed, it's only Bitcoin users that are harmed. Since there is nothing to force anyone to use it, all possible harm arising from weaknesses in the underlying infrastructure is opt-in.
Consider a slightly different version:
"As you pose it, it's not a race between the darker aspects of The Internet and our ability as a world society to check off the items on your wishlist."
What a nonsense. About 70% of the world's population have their cash in a pocket and living from a wage to a wage or by some craft or sales business without any bank deposits.
Currencies do work because anyone in the local environment will accept it instantly and tomorrow its purchase power will not deviate more than 1%. Otherwise alternative currency will be adopted by black market, like USD in Cambodia or in Russia in 90th or Indian Rupee in Nepal. It is all about liquidity and money velocity, as they call it.
Bitcoin is not a currency, it is a technology, a service and now a commodity for speculators which is crashing right now.
>Bitcoin is not a currency, it is a technology, a service and now a commodity for speculators which is crashing right now.
Agree on that it is not a currency (the word "currency" doesn't even appear on the Bitcoin client's website). However, please explain why you say it is "crashing"? 3 months ago the price was $130 on average. It's around $500 today. How is that a crash?
> if the number of people using Bitcoin continues to grow, our institutions and infrastructure will have to evolve to address the problems mentioned by the author
So basically Bitcoin will be successful if Bitcoin will be successful.
>society will need [...] substantially better authentication mechanisms, [...] more secure financial institutions, and more technologically-savvy regulatory and policing institutions.
This is describing how to improve online banking. Isn't Bitcoin supposed to present an alternative to that?
>In contrast, those same institutions do not yet know how to cope with the use of Bitcoin for illegal activities.
There was just recently a (Senate?) hearing about regulatory institutions and law enforcement dealing with Bitcoin and cryptocurrency in general. Also, Silk Road used Bitcoins and still managed to get busted (and the bitcoins seized). Whatever other transformational aspects Bitcoin may or may not have, it doesn't appear to be so alien that the government doesn't know at least in principle how to cope with it.
Some dotcoms could have succeeded if computing and bandwidth was 10x cheaper. Others could have succeeded if the Internet had 10x more users. That's why some successful Web 2.0 startups are very similar to failed Web 1.0 startups. Starting a company five years too early could be considered a form of business stupidity. Of course, free shipping for pet food is still a bad idea.
The "10x more users" thing sounds suspiciously like social network sites, but the expert opinions I've heard on those have suggested that the failure wasn't a lack of traction but bad policy.
And that's before the complete lack of monetization, a business model that didn't seem to really take off until Google figured out how to do it well.
I better preface this with that despite being a libertarian, I don't back, believe in, or own BitCoin. (For that matter, despite also disagreeing somewhat with cstross here, I've also upvoted the article for being interesting; they are valid concerns.)
In a way, BitCoin is a mathematical fact of the universe rather than an "idea for what society could choose to do". Not BitCoin specifically, but the general ideas it embodies. If BitCoin is long-term viable (which I personally doubt), or if anything like BitCoin is viable (which I consider somewhat likely, but not proved), it's going to be created. You're going to have to deal with the existence of it, and society is going to have to learn how to live in a universe in which it exists, just as you have to learn how to live in a universe with crime. It's too simple to just suppress out of existence. You don't really get a vote over BitCoin any more than you get a vote over murder.
(You may choose to suppress it, but you're going to have to deal with the non-100% effectiveness of that choice somehow.)
On what, the universe's part? True, it doesn't particularly care what you think, but you don't have much choice but to deal with it. Math simply is. If a cryptocurrency can be made to work, it will be made to work. Contrariwise, if it can't be made to work, it will collapse, no matter how vigorously BitCoin advocates yell the contrary.
Again, I'm not the one making it this way. I still think collapse is the more likely outcome. I'm not lifting a finger to help or putting a single shiny penny into BitCoin or anything like it. I assume you're trying to reassure yourself that you can dismiss my statement as arrogance on my part, but I have nothing to be arrogant about here.
Positing extremely radical, society destabilizing measures like "unplugging the internet" does not lend much credence to the idea that Bitcoin can be controlled.
There may be other less drastic ways, of course, like leaning on ISPs to choke off blockchain traffic or something. I'm sure the bigger, scummier ones like Verizon and Comcast would even jump at the opportunity to curry more favor with the government in exchange for rent-seeking opportunities down the road. But it seems to me that these half-measures would just accelerate the rush to develop alternatives and detours around such roadblocks.
Honestly I didn't even realize I was trolling until I slowed down and gauged the responses from everyone.
I'm honestly just worked in to a bit of a stressed out frenzy here in San Francisco...
...and I'm taking a break from this bullshit. No more HackerNews for me... it is driving me, and I think a bunch of other people, batshit insane...
I'm also looking forward to getting out of SF for a couple of weeks and hopefully not hearing anyone talk about fucking Bitcoins or Google busses or Seasteading...
Interesting. I feel like the only person around here who isn't in the thick of it in Silicon Valley. Hacker News is it for me, as far as that is concerned.
Take a breath. Look around. Maybe you're doing great things down there, maybe you aren't, but chances are that nothing is as big of a deal as you're making it.
I know that I'm really nobody in any position to say this, but I will do it anyway. Relax.
Get out of SV. Get out of SFCA. There is more to life than greed. Hacker News is a refuge of scoundrels seeking to enrich themselves and/or corroborate their lack of humanity.
Bitcoin is a "mathematical fact" just like what we currently believe are unbreakable cryptography systems. The two are strongly related. Can't have one without the other, and can't avoid having cryptocurrencies if you have strong encryption.
So Stross's argument quickly moves from economics to freedom of speech: The only way to really eradicate cryptocurrencies is to make use of strong encryption outside of government-supervised uses a crime.
Non sequitur. The parent comment simply takes uncontroversial facts and follows them to conclusion. Solutions to the problems raised by Bitcoin are good solutions to other problems as well.
every comment you have made in this conversation has been insult and dull sarcasm. no insight has been provided. I am no supporter of hellbanning, but I cannot fathom how, given this site's heavy use of moderation, you are still allowed to comment.
I know I have made no friend from you with this, but I hope you reevaluate the content of future posts.
Dude, how can you even begin to argue when people just refuse to budge from this position of 'this is beyond our control now, you will just have to learn to live with it'?
You're right. I'm being incredibly impatient. I'm being very disrespectful to the people on this forum who aren't Bitcoin zealots. I'm sorry for that and I owe you guys an apology.
I've lost almost all respect for the industry and the members of this forum, but even that doesn't warrant my actions.
But this Bitcoin madness is driving me fucking insane... and I'm letting fears of sedition and anarchistic revolution get to me.
I should heed my own real life advice and just channel all of this energy in to storytelling... I'll get you bastards with a song and a smile!
Again, I'm not going to apologize for my explicit rudeness when I'm faced with the implicit rudeness of the extreme arrogance of most BitCoin supporters.
You people think you have it aaaaaall figured out and that no one has a right to interfere with 'the due process of nature'...
> "You people think you have it aaaaaall figured out and that no one has a right to interfere with 'the due process of nature'..."
I realize you've already tapped out of this conversation, but I think the root of this whole misunderstanding is right here. The other people you are talking to here are not saying that nobody has the right to stop bitcoin (or whatever crypto-currency may follow it). They are saying that nobody has the ability.
That should be about as uncontroversial as stating that a democratic, non-draconian, society has no ability to eliminate the sale of cocaine. Pointing that out isn't saying that cocaine is a good thing or something that society should tolerate; it is just saying that society lacks the ability to prevent it.
There's a big difference here, and that's that there isn't a bunch of pro-cocaine conferences or cocaine start-ups getting funded by venture capital firms...
But much like the coke heads I've known through out the years, you all have an overblown sense of self and can't seem to shut the fuck up and listen for a second... so maybe that's where you're coming from?
If you read the other comments I have made today, you'll see that I am not particularly "bullish" on bitcoin...
Anyway, I don't think you have understood the comment you just responded to. My point is that you have crossed your "morality/right" and "capability" wires. Stating that "you cannot stop the cocaine trade" is not making a statement about the virtue of cocaine, or stating that pro-cocaine conferences or startups are a good idea. These are entirely orthogonal concepts. You can be very anti-cocaine while still recognizing that cocaine cannot be eliminated.
In other words, if there were lots of pro-cocaine conferences and cocaine peddling startups, the statement "cocaine cannot be eliminated" would not be any less true. That statement is a statement about the nature of law enforcement in a free society; not a statement on the morality or virtues of cocaine.
Bitcoin in traceable. Much more traceable than something like cash or gold.
It can be taxed. In fact, it lends itself very well to taxation since each transaction is indelibly recorded. Just because no one's implemented taxation doesn't mean it can't be done.
If it can be taxed it can be regulated.
It does cut out the banks. That is a strength. The serpentine bank transfer system that skims transaction fees on a huge number of transactions can be avoided. This has some obvious benefits (as most things that reduce transactional friction do -- I mean, most of us on HN are probably in the friction reducing business in one form or another).
Government does not have to issue it. The jury is still out on whether this is a net positive or not. I think it is a worthy experiment since government control of the money supply seems like more of an accident of history than anything. It /could/ be a fundamental strut in the framework of effective government but I think that might be overselling it. Bitcoin gives us a vehicle to test that theory.
In short, Charles Stross is confusing the way things are with the way things must be and that is a mistake. Most of these problems, if they are truly problems, are solvable. And, at the very least, their impact will not be catastrophic so it is worth the risk to see where this experiment leads.
> Bitcoin in traceable. Much more traceable than something like cash or gold.
This is something that is often forgotten in these discussions. Everything is public with bitcoins. The only open issue is binding the transactions to an ip and via that to a person. And considering how widely the internet is monitored these days that should not pose a problem.
After that analyzing connections between wallets is a similar problem as analyzing friendships in a massive social network. Transactions form a graph from wallet to wallet.
If massive drug rings would use Bitcoin instead of cash it would actually be easier to track them down than it is right now.
In addition bitcoin is trivially forkable. It has only as much value as people want to give it. It is in essence as imaginary as any fiat currency is.
>> binding the transactions to an ip and via that to a person
Naive question: since IP's don't map 1:1 to people (proxies, the tendency of people to use lots of devices in lots of places), how does this work in practice? Does it really work in practice?
It doesn't have to work 1:1 all the time for every IP a person may use to make transactions. Unlike in torrents where one download cannot be tied to another and you have plausible deniability that you yourself might've not used that, with bitcoin the history stays.
As an example if you issue transactions from your home and from your place of work you are immediately nailed (e.g brought to questioning) even if there are 1000 transactions in your walled made behind 7 proxies. Open WiFi argument doesn't hold water in that case.
And even a single access from a place that maps to someone will taint the wallet permanently, as an example: Busting a drug ring. Set of wallets are suspected to be a part of a massive drug and money laundering operation (few of the wallet addresses are advertised on silk road and are getting a lot of transactions in, and a bunch of laundering addresses are recognized as a dense cluster in the graph).Then some not so smart subordinate accidentally uses a wallet app from his normal cellphone. That will instantly cause the cops to go after him and investigations will start.
Basically if you have ever used your wallet from places where you can be recognized the wallet is tainted. You will be investigated if the said wallet is ever used for anything shady ever.
The key here is that even if a single access does not automatically link it to you, multiple accesses will. The only way to keep clean is always route every transaction always trough weird proxies. And hope that everyone you transfer to/from will do the same. Get a gift from your mom who doesn't do it? That's it. She may be interrogated and you're bust.
In an investigation, they'd eventually get a warrant for your electronics. They'd comb through them, and probably find your bitcoin wallet. In the event where it's relevant to the case that they see the contents of your bitcoin wallet, you'd be compelled to decrypt it.
So they wouldn't ever have to tie your IP address to a transaction - the feds or local police would just get your wallet and trace backwards from there.
You may notice he called those open issues. In other words, for at least the two reasons you cited, they are not solved problems.
It's also not an unsolved problem, since communication using IP protocol means that someone must assign you an IP, and those assignments can be logged... similarly operating a proxy server means that you are a target for government and court subpoenas, and in some jurisdictions it may be mandatory to maintain these logs and produce them on request, regardless of the sometimes in-feasibility of that.
Most of your points are valid, and I also found the article to be rather weak. With that said...
The serpentine bank transfer system that skims transaction fees on a huge number of transactions can be avoided.
... and is replaced by a different transfer system that skims transaction fees.
Actually, this is the main reason for why I believe Bitcoin will not "conquer the world": It has the potential to put downwards pressure on transaction fees, but it is inherently inefficient (the "carbon footprint" mentioned in the article), which means that it can be undercut by a competing system.
Government does not have to issue it. The jury is still out on whether this is a net positive or not.
This really depends on your reading of history. It seems Bitcoin is well on the way to reinvent the gold-backed free-banking system of ca. the 18th and 19th century.
It's true that there are people who believe such a system to be superior to what we have today, in the same way that it's true that there are people who believe humans play no role in global warming (that is, the vast majority of scientists studying the issue are on one side of it, but there's a loud, politically motivated minority of the population who disagrees).
You don't have to have the power and influence of JP Morgan to launder bitcoins. I'm not an expert but it seems much more easy and untraceable to launder bitcoin vs. dollars or other currencies. I may be mistaken though.
If everyone is doing it then it becomes much easier to run a mixing service, and to the extent that a mixing service polices its own membership, the more unsavory characters could be weeded out...
But as for traceability, if you're not mixing your coins with other peoples' coins, there's not much you can do at the point of sale to obfuscate the origin of those coins.
Everything is absolutely traceable. You can identify every transaction that a bitcoin (or fragment) was involved in since it was minted. With a "taint analyzer" (not kidding, this is what it's called) you can see what percent of the bitcoins stored at an address were ever stored at another given address, to see how many of these coins are "tainted" by those coins' history.
That being said, simple mixing services likely do still exist, and if you are willing to pay a small trade fee at most any online exchange, you can (probably) be rid of your existing bitcoins and quickly having new bitcoins with the stroke of a keyboard. If those exchanges are following KYC and AML, you still haven't broken the trail.
I, too, am suffering Bitcoin-headline-fatigue, to the point where I was glad to see machined QR bitcoins b/c I could finally tell people to kindly shove them where the sun don't shine.
HOWEVER, just b/c I'm exhausted, I don't think Stross' points are valid or limited to Bitcoin in the least. He might want BC to die in a fire, but BC isn't doing anything special that cash/gold isn't/can't be doing. Here is an overview of his points:
> 1. Mining BtC has a carbon footprint from hell
> 2. Bitcoin mining software is now being distributed as malware
> 3. Stolen electricity will drive out honest mining. (So the greatest benefits accrue to the most ruthless criminals.)
> 4. Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).
>5. It's also inherently damaging to the fabric of civil society.
It's disappointing to see that cstross feels the way he does about certain things. He's one of my favourite authors, and I just hope that knowing how far apart we are on some issues doesn't diminish my ability to appreciate his fiction. At least it's nothing like Orson Scott Card, where my disagreements with some of his opinions mean that I basically have no longer have any interest in reading his works at all.
So, Charles Stross hates Bitcoin because he things a market for drugs is "hideous". sigh. I think that a market for drugs is, while not necessarily desirable, inevitable, and that free individuals should be able to choose what they do or don't put into their own bodies.
Assassination and child pornography are Bad Things to be sure, but Bitcoin doesn't cause either and both are going to exist with or without Bitcoin. I don't get arguing against a mechanism that supports basic free market exchanges, just because a few bad actors can use it to do bad things. You can't engineer your way to a perfect world, given human nature.
Tax evasion? Good. Taxation is theft. If I need to employ technological solutions to protect my money from the government, then so be it.
With such incisive and reasoned slogans as "taxation is theft", how can it be that libertarians are so widely considered a target of derision and loathing?
Taxes are your just dues for living in a society. Tax evasion is theft from the commonwealth.
With such incisive and reasoned slogans as "Tax evasion is theft from the commonwealth," how can it be that statists are so widely considered a target of derision and loathing?
He actually provides a reason for why Tax evasion is theft: Since taxes are the dues for living in a society which provides public goods such as roads, infrastructure, education, etc., refusing to pay taxes is stealing the usage of those goods without paying your dues.
I can see that in his argument, but I don't see an explanation for why taxes are theft in your argument. Unless somehow you completely avoid usage of public goods (which no, you don't).
Usually I agree with Charlie Stross, but I think he's building his case on a few false assumptions.
To mine bitcoin and make a reasonable profit, you really need dedicated mining hardware. This means that stolen electricity is not really an issue, as even very large botnets wouldn't be able to keep up with a few $1000 of custom hardware.
Similarly, while Bitcoin's future carbon footprint is something to be concerned about, I think it's too early to draw a line of exponential growth and conclude the world is doomed. There are a large number of potential bottlenecks when it comes to computing hardware.
I'd also question how useful Bitcoin is for avoiding taxes, when the exchange rate is so volatile. There are far safer ways to avoid paying taxes, many of them legal.
In my view, the most interesting part of Bitcoin is not its value, or its potential anonymity, but that it's an open protocol for distributing wealth, in the same way that TCP/IP is an open protocol for distributing data. There has already been some interesting experiments around micro-payments with Bitcoin that would never have gotten off the ground without it.
Big government socialist type doesn't like financial decentralization and a monetary system that can't be strictly controlled. Wants it to die quickly because ultimately free people might decide that it's worth keeping and using. News at 11.
I seriously doubt Charles Stross is skeptical of bitcoin because he hates and fears freedom. That kind of hyperbole only serves to feed cynicism about bitcoin and its community, particularly given the assumption that the article wasn't even worth a glance for you, because obviously "not liking bitcoin" = "globalist shill."
If someone's not going to like Bitcoin, at least give better reasons than crappy strawman ones like, it's being used for illicit markets (what currency isn't?), it's uses a lot of electricity (what bank doesn't?), criminals outsource mining to botnets (along with other illicit activities like pushing spam which existed before Bitcoin mining, your point?)...and then downright puerile remarks like tickling a gold fetish? Jesus christ. If he's not a "globalist shill", he definitely has next to no societal context on Bitcoin and has gotten his information from CNN and the like who equally don't understand it.
Meh, I have never owned a bitcoin. Never mined one. Don't intend to do so soon.
I'm pretty ambivalent about bitcoins. I view them as something people want to trade with each other. They're an interesting experiment in new ways to break free of some problems of fiat currencies and precious metal currencies. If they survive it's because people find some value in them. Good for them.
I read Stross's article because I was curious about arguments against bitcoin. All I read was a bunch of knee-jerk emotional dribble about carbon footprints, lack of taxability, and the dreaded "some people own too many".
tl;dr mixed-market capitalist says Bitcoin is problematic because it's a vapid libertarian talking point disguised as a currency. HN user replies with vapid libertarian talking points.
I agree with all of his points; I've been making them myself for the past few months. Bitcoin is bad specifically because it is unregulated.
Regulation of financial markets exists for a reason: the optimal strategy of individuals and institutions in unregulated financial markets is to lie, cheat and steal to accumulate as much wealth as possible.
Credit economies rely on a foundation of trust; and while it may seem hard to trust our financial system, you CAN trust that when you put your money in a bank, it will be there when you go to get it out (thanks, FDIC!) As much as we may not like credit, it provides market efficiency on an extraordinary scale.
The problem is that today's supposedly heavily regulated markets just aren't. Markets are regulated for the little guy, but not for the Goldman Sachs of this world.
The '08 financial crisis as clearly shown that most regulatory hurdles established in the late XX century have been lifted, and that for big sharks financial markets are an all you can eat buffet. Worse, we learned nothing. Everything is as it was. It is a matter of time before the same events unfold in an even sadder rerun.
> The problem is that today's supposedly heavily regulated markets just aren't
Yes, and Mr Stross is pointing out that Bitcoin may be different, but that doesn't make it better. In fact he lays out good reasons to believe that it is worse.
while it may seem hard to trust our financial system, you CAN trust that when you put your money in a bank, it will be there when you go to get it out
Unless your money is in Cyprus.
In any case, in Bitcoins you may not be able to trust banks, but on the other hand, you don't need to (as much), since you can store huge sums anywhere, even your own head.
Hell, print out a private key and store the paper in a safe of a regular bank, if you want to.
Yes; but that's largely irrelevant as most people don't have $250k in their bank accounts (and if they do, it's probably in stocks/bonds as opposed to a bank account with a low interest rate). It was just an example, anyway; the FDIC is only one part of a larger financial regulation framework. But the core point remains: lack of regulation around financial instruments is often a bad thing.
"Our main finding is that the only episode in which we find evidence of a link between deflation and depression is the Great Depression (1929—34). We find virtually no evidence of such a link in any other period."
From the post:
The current banking industry and late-period capitalism may suck, but replacing it with Bitcoin would be like swapping out a hangnail for gas gangrene.
Not proven.
A bitcoin economy would be worse than unlimited bailouts and money printing? Not even close to proven, or, at this point, particularly plausible.
> The idea that deflation is necessarily harmful to an economy is a fallacy.
Well, it is undeniable that this is subject to very heated debate. Some people are monetarist, some people are not, and central bank policies shift from country to country and from generation to generation. For instance, Spain and the UK had very similar debt and deficit figures at the outset of the recession, but Spain does not control the value of its currency. The Euro is controlled by the European Central Bank, and is run primarily by German central bankers, who are strongly opposed to inflation as a lever of policy. The UK controls its own currency, and has deliberately pursued an inflationary monetary policy, and even more so with the newly appointed head of the Bank of England, Mark Carney. It is a very common opinion, in the US and the UK as well as in parts of Europe, that this is a key reason why the UK economy is doing ok, with 7.5% unemployment, while the Spanish economy remains in freefall, with 25% unemployment. Certainly, one academic study plucked off the internet, written before the current financial crisis, is unlikely to settle the issue for all time.
Bitcoin effectively allows individuals to bypass this debate, and put their money where they think is appropriate. But, of course, the individual who is saving money always wants to avoid inflation, so will put their money where it will maintain its value. Whether this is positive, or indeed sustainable for the rest of the economy, is, as I say, a matter for debate.
Percival pretty much all property owners use leveraged debt aka a mortgage unless you happen to be a trust fund kid - it also has a bad knock on effect on the banks who lent the money.
Wow, this is perhaps the single most ignorant article I have ever read about bitcoin, ever. There goes my respect for Charles Stross.
Not a single point is actually true.
1) Compare the carbon footprint of bitcoin mining to the carbon footprint of all the industries it displaces.
2) and 3) are actually the same item, and both wrong because ASIC miners are absolutely dominating in the mining stakes now and for the foreseeable future, hacked bitcoin miners are ridiculously minor by comparison with almost zero returns.
4) There are already markets in drugs, assassination and child pornography. The currency most frequently used in crime is the USD. Quick, someone stop the printing presses and we'll bring crime to a screeching halt overnight.
5) If Bitcoin actually does manage to destroy the state, and that's a very big if, that is by far the absolute best thing that could ever happen in the entire world without a doubt. And it would imply it happened without bloodshed and because people chose it as a simply superior option, which if the negative scaremongering aspects of the disintegration of the state actually started to manifest, would not happen by definition. So even if you don't take it for granted the state is a shambling monstrosity that deserves a quick and merciful death, the very fact that Bitcoin ever gets to the necessary fraction of the global markets to kill it implies that people accept that and don't worry about it.
I find people who have a negative opinion on BTC funny. I honestly just do not care about it, it is an interesting experiment, and one that I'm not going to trust my money to. More power to ya if you're going to. If it crashes, alright. If it doesn't, then sweet. Seriously, I'll never understand articles like these...
Oh, and his point about BTC "creating" drug markets -- are you for real? Seriously? People have been buying and selling drugs on the internet since... well, I'd wager since it's inception, but at least for the past decade. BTC may make it easier, or "safer", but those markets have existed for a very long time, you just needed to know where to look...
Bitcoin halves the latency and error rate of drug transactions over the Internet. Instead of mailing cash to someone and waiting for them to mail you drugs back, the cash transfer is instantaneous.
For in-person transactions, Bitcoin doesn't seem to have a large advantage over the traditional briefcase full of cash.
> Oh, and his point about BTC "creating" drug markets -- are you for real? Seriously? ... but those markets have existed for a very long time
You're splitting hairs between "creating" and "massively expanding".
How seriously would you take a statement like "Amazon.com is unimportant, they didn't create a market to buy books and stuff. They may make it easier, or safer, but those markets have existed for a very long time"
Depends. Before Operation WebTryp, the online market for grey-market research chemicals was, well, huge. Things are still huge, and that entire market has nothing to do with Bitcoin. There's more to online drugs than the SilkRoad (and indeed, there was more stuff going on in the dark-web prior to BTC as well, but yes, not at the same volumes).
And more to the point: who cares -- the real-world market absolutely dwarfs (by at least an order of magnitude, maybe two) the "online drug trade", so his fear-mongering there seems short-sighted to me. There are plenty of legit issues with Bitcoin (some of which the OP even brought up), this one is just playing to people's fear of drugs.
> And more to the point: who cares -- the real-world market absolutely dwarfs (by at least an order of magnitude, maybe two) the "online drug trade", so his fear-mongering there seems short-sighted to me.
The authors concern is that if Bitcoin were to take off become globally popular, the resulting online market would be much bigger than the existing real-world markets, because of lower barrier to entry and increased globalisation.
Take the current state of online drug/murder/cp trade and mutliply by however many times larger you expect the total bitcoin user population to be in the future than it is now.
Okay, though if that is his point, then he is truly underestimating how large the real drug market is? I don't know I just feel like buying drugs online with cryptocurrency is an inherently limited market. The people involved in the real world drug trade (in large volumes, not your corner dealer here) steer well clear of technology, for good reason.
Source: once upon a time I was a heroin addict involved in some nasty stuff.
> To editorialize briefly, BitCoin looks like it was designed as a weapon intended to damage central banking and money issuing banks, with a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions. Which is fine if you're a Libertarian, but I tend to take the stance that Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density (because it relies on simplifying assumptions about human behaviour which are unfortunately wrong).
Is Stross speaking specifically of a libertarian political party, like the U.S. Libertarian Party? His capitalization of the word would seem to indicate that, or that Stross is woefully ignorant of even the most basic fundamentals of the extremely broad category of political philosophy called "libertarianism." I tend to think it's the latter, based on his ludicrous summary of his perception of libertarianism. I am curious what assumptions about human behavior he thinks are at the heart of libertarianism.
Everyone forgets that 'libertarian' originally meant 'anarchist,' generally 'big L' Libertarianism refers to the party, while 'little l' libertarianism refers to consequentialist or propertarian libertarianism.
This guy doesn't seem to get what bitcoin is or it's purpose. As far as I'm concerned, bitcoin will just be another alternative currency forever. It will likely never replace fiat, and that's fine. It's awesome for international trade, fast transfer, low-fee, and a safe way to store your money (if you're okay with the value of btc fluctuating wildly; if it ever settles then it will be "safe").
I disagree with all of his points. His carbon footprint/malware/Gresham's law points can all be countered with "incentive to mine leaves as the reward goes down, difficulty goes up, and total remaining coins decreases" which means less people will mine. For hideous markets and tax evasion, yeah, you can do both of those with fiat too. It's not a concept exclusive to bitcoins.
Bitcoin is a fiat currency, in several senses of the term. A Bitcoin has no intrinsic value, it is unbacked and its value is not defined in reference to any other asset or quantity.
Fiat currency does not have to be issued by a government, and does not have to be legal tender. And Bitcoin certainly meets one of the "various" definitions given in the Wikipedia article. There are plenty of other definitions of the term it meets -- at root, a fiat currency is simply a currency whose value exists because someone said so, rather than because it's tied to something else. And... well, Bitcoin has value because people say it does, not because it's tied to something else.
I'd argue that all currencies are by some definition "fiat," in that no currency has ever had nor ever will have an objective value. A dollar -- or a bitcoin or a gold nugget -- is worth what we believe it is, and in every case that belief requires some level of trust, usually in one or more institutions. Believing in the Federal Reserve or the US Government isn't intrinsically more (or less) silly than believing in private banks issuing certificates that they assure us are redeemable for fixed amounts of gold, or for that matter believing that the gold itself is valuable. (There's no reason gold is a better backing for currency than silver, shells, or salt -- all of which have been used as legal tender.) Bitcoin's novelty is in attempting to take institutions out of the equation, but it ultimately hasn't taken away the requirement of trust -- and its wild volatility at least raises questions about whether institutions trying to actively manage the value of currency are actually such horrible things.
best case scenario: the future of bitcoin is a technological oddity (curious detail) wherein 99% of people only hold it for the briefest of moments when they transfer their fiat currency from point A to point B. And the people that do hold it will almost certainly be doing so to better exploit fluctuations between currencies.
>a Libertarian political agenda in mind—to damage states ability to collect tax and monitor their citizens financial transactions.
It's kind of silly when people twist words like this. Do you support the existence of the United States government? So you support Guantánamo Bay, Abu Ghraib, and Contras killing nuns in Nicaragua? That's the basic form of this argument. It would of course be fair to call Bitcoin crypto-anarchism, or anarcho-capitalism, or crypto-anarcho-capitalism, if you're a huge fan of hyphens. To tar all libertarians (it's never capitalized, unless you mean the party) with this brush is disingenuous; it's a way of arguing against the reasonable sorts (e.g. Milton Friedman and Gary Johnson) and the next complaint "but most libertarians I see are [...]" is equally bad: you choose to look at the crazy types, similar to how Hacker News posts way more about the NSA and DEA than about the NHTSA and the CDC. How can we possibly have a reasonable discourse if we devolve so quickly to calling each other anarchists and fascists and accusing everyone you don't like of supporting child pornography? Signed, "moderate" libertarian.
To me, the greatest revelation in this article was the Gini coefficient of bitcoin, which, according to the author, " makes a sub-Saharan African kleptocracy look like a socialist utopia".
This pseudo-Gini is meaningless, since addresses!=people. It is perfectly possible for the pseudo-Gini to increase even as the real Gini decreases: simply have Bitcoin further democratize and the new users keep their coins in convenient web wallets! Since web wallet services tend to consolidate their coins onto a very few addresses for their own convenience.
>This pseudo-Gini is meaningless, since addresses!=people.
It is meaningless but not really for that reason. The estimation of Gini Coefficient that Charlie Stross links was calculated by the Bitcoinica exchange from their client list.
It's meaningless because it was calculated in 2011, when the number of Bitcoin owners and users was a tiny fraction of the current figure, and the network was less than 2 years old and practically unknown to the wider world.
He first cites that out-of-date estimate, and then claims that it is getting worse, without providing evidence for that claim.
Comparing the Gini coefficient of wealth in a country to the Gini coefficient of bitcoin is comparing apples to nonsense.
Addresses aren't people and bitcoin wealth is not wealth. I wouldn't guess that most bitcoin users store a significant amount of their wealth in bitcoins, so I wouldn't even expect significant correlation to wealth.
Libertarians are annoying, anyone who thinks technology will solve complex social problems will be dissapointed by bitcoin eventually.
The deflationary nature of bitcoin is it's hardest aspect to defend because there really hasn't been anything like it in history before. A finite asset that is easy to transfer over long distances without central interferance really is unprecedented.
I think you have bought in to the bitcoin fantasy that it will be the only currency in use. I don't think that will ever happen for a variety of reasons. If gold and fiat can coexist why not bitcoin too?.
Loaning bitcoins seems to be a crazy proposition, so I suspect inflationary currencies will stick around just for that reason. Not to mention bitcoin by itself is fairly terrible for in person transactions, if you add a service on top what is the difference for the customer between that and a credit card company?. Fiat is useful and solves problems that bitcoin doesn't.
Regarding mining, I have my own concerns, bitcoin proponents love to describe mining as “securing the network” and equate it with vaults and security guards used in banks. This comparison is at least partly flawed, mining prevents double spends and nothing else. It's certainly true that a centralized ledger could prevent double spends for tiny fraction of the cost of mining, but globally who can be trusted by all parties to adminster it?. The comparison isn't one sided however, it is much cheaper to securely store (and move) bitcoins than gold for example.
Energy use is tricky, preserving the environment should be a top a priority, but should we aspire to use less energy?. One question I have often asked but never got a good answer to, how much of the worlds energy needs to be devoted to mining to prevent a 51% attack?. If it is north of 30% of the worlds energy output then right now that would seem a huge waste. But if we had access to cheaper, cleaner renewable energy, would it still be a problem?.
Malware?, it's just a symptom of larger problem, computer security is terrible. No one is really sure who to plame, users, applications, operating systems and hardware makers all come into the firing line. If bitcoin pushes forward computer security surely that can only be a good thing?.
I'm unconvinced about whether greshams law applies to mining due to the performance disparity between ASICs and CPU/GPUs, but surely if computer security improves this problem diminishes?.
I was pretty sure that after this current "crash" (3rd already in Bitcoin history, depending on how you count them) articles like that ("Bitcoin is doomed", "I want Bitcoin to fail") will surface. And here it is. Nothing new to see here folks. Same ol' arguments, which were discussed hundreds of times already.
The incentive to create malware, also a significant problem with advertising and online banking/transactions.
Anyways I think the things the author dislikes about bitcoin is precisely what makes it so good. It's great that it can subvert government control on a small scale. It isn't going to stop taxation or anything because there is no way large corporations and rich individuals can hide that much in bitcoin transactions without getting caught. But for individuals who just want to buy something something minor it works perfectly.
Besides it really isn't any different than cash in terms of anonymity. It just can be done online.
And it isn't going to die anytime soon. Even if the price drops a lot, it can still be used to make transactions. The bitcoin protocol will keep on working 20 years from now, regardless what happens to the price.
The speculators might suffer, maybe it will make less news. Maybe mainstream adoption will suffer, so everyday people looking to use it to make transactions easily online won't be able to. But the people that are using it to do illegal things that the author fears so much will still be there and aren't going away.
> Like all currency systems, Bitcoin comes with an implicit political agenda attached. Decisions we take about how to manage money, taxation, and the economy have consequences: by its consequences you may judge a finance system.
The consequences of Bitcoin he lists are arguably bad, sure, but they don't touch the consequences of nation states that centrally control their financial and monetary systems.
I know right! Financial stability, stable systems of investment and lending, managed inflation and currency supply. Some damn terrible consequences there!
"Financial stability" in the sense that the government has the final control on literally everything, from your money to your property to your labor. "Stable systems of investment and lending" in the sense that large members of the finance industry operate with impunity (see the big bank bailouts). "Managed inflation and currency supply" doesn't really mean much without talking about how well they are managed.
And then you have the real bad consequences: runaway military spending and mass killing of people from other nations, runaway prison populations for victimless crimes, massive market interference that stifles innovation and efficiency, public schools which create the next generation of unquestioning patriots, etc.
Yes, popular one liners make for great headlines. Die in a fire! That doesn't sound juvinile at all.
These harsh words for something that you don't even HAVE to use or even be a part of.
There's a group of people with an idea, lots of people with great intentions, building a technology that you don't have to pay for. This is called Open source software, you want all of that to die in a fire?
So the article claims that more assassination, drugs and child pornography is being sold now than before?
Is there any facts supporting such claim? Sold assassination, drugs and child pornography should exist as crime statistics, proving or disproving the claim.
Sanjuro's 'Assassination Market' thus far doesn't have any correlated deaths, and it's an open question whether it's real rather than a scam. (How could you ever tell?)
The core argument that Bitcoin is deflationary is irrelevant to the fitness of Bitcoin, at least for online transactions. To me, the chief value of Bitcoin is that it enables super cheap micro (and macro) transactions online. Goodbye silly debit and credit card interchange fees! Used in this way, dollars are held in Bitcoin form for only the tiniest of moments before being converted back into dollars. Long term fluctuations in exchange rates don't matter.
I look forward to using micro payments for content online. Ad supported content and the inevitable vending of my personal data is distasteful to me.
I'd be curious to know if any of the altcoins have tried creating an inflationary currency? I guess you'd still need some kind of reward for early adaptors though?
Yea but it's long term deflationary as well, the destruction of fees alone will probably match the 1% inflation thus eliminating it and growth in popularity would push it negative.
I don't see the point of the deflation "criticism". Bitcoins are effectively infinitely divisible, and if deflation raged long and hard enough to get to the limits of BTC precision, the protocol could simply be modified to add more precision.
It is not a question of precision. It is a question of market dynamics.
For the sake of explanation, imagine a world where Bitcoin is the only currency. Let's also assume that in this world, Bitcoin gains value at 10% per year.
Now, you are an entrepreneur setting up your company. You are going for the grocery retail market, which presents a free cash flow return rate of 8%.
In this scenario, you can't get any investors. Investors are faced with two options: a) Stuff bitcoins under the mattress and get a return of 10% with zero risk; or b) Lend bitcoins to you, get a return of at most 8% (or you'll go broke) and face a non-zero risk that you'll go broke and they lose their beloved bitcoins.
For comparison, with the current economy, currency loses 2-3% per year, so investing in your business has an effective return of 10% to 11%, so if the risk is below this threshold, investment is possible.
I know that's the cananocial example, but I've always wondered, wouldn't that 10% appriciation be coming from somewhere? Presumably from the growth of the economy. And if the economy is growing at 10% per year, we probably don't need your grocery store :-)
Please correct me if I'm missing something, I took macroeconomics in college but I've forgotten a lot.
...imagine a world where Bitcoin is the only currency.
Such a world does not exist and never will. Bitcoin is not designed to be the only currency on Earth, if in fact it may be considered a currency at all. It's also not the first asset ever to appreciate in value. For instance, the price of oil rose sharply during the 1970s. Did grocery store investors all decide to pull out of the lucrative grocery sector and go all-in on oil? How did we eat?
Sooooo very many times this has been addressed. Deflation is not bad because you can't divide currency any further. It's bad because it encourages the hoarding of cash, discourages lending, investment and spending, and it rewards effort yesterday more than effort today.
Have you ever seen an actual economist say this? I have a feeling Stross got his economy degree from a cereal box. Bitcoin is not the first asset in history to appreciate. Why haven't the wild swings we've seen in gold, oil, pork bellies, etc. had the horrible results you predict?
"Deflation" doesn't even relate to assets people aren't forced by law or other circumstances to use for regular commerce. For normal, non-currency assets like that, we say "appreciation" instead of "deflation". If 6 billion people decided to "hoard" BTC tomorrow, I guarantee there would be plenty of dollars/rubles/whatever available for investment, lending, and spending.
Honestly the hoarding argument is dumber than the precision argument, so I tried to give Stross the benefit of the doubt.
I don't see the point of the inflation "criticism". We can always add more zeroes to the bills, and if inflation raged long and hard enough we can simply issue a devaluation where 1 new unit corresponds to 1 gazillion old units.
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It is not about lack of precision. It is about the change of purchasing power of a unit of money you currently posses.
Which is fine if you're a Libertarian, but I tend to take the stance that Libertarianism is like Leninism: a fascinating, internally consistent political theory with some good underlying points that, regrettably, makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density
Brilliant prose! Pragmatism always has and always will rule.
and there's the whole traceability thing. if you can't trace the transactions you can't find bad actors.
Consider the "follow the money" line in "All The President's Men" regarding the Watergate scandal. If Nixon had paid the burglars in bitcoin he'd probably still be in office.
I don't think money, or specifically dollars are any better than bitcoins. Beside I would like to point out that it's not the currency in it self the problem, but what we do out of it. Depth grow of dollars is a huge speculation buble which will blast soon or later. Get ready for it.
Criticizing the carbon footprint of bitcoin is a joke compared to the carbon footprint of depth dollars.
Regarding the future of bitcoin, my feeling is that it has the value of tracability which is very attractive for the police states we are evolving to. So I expect states might continue to tolerate it as long as it doesn't accelerated the dollar buble blast and present a threat.
Another current problem of bitcoin is that it's value is so much rising by speculation that it prevents it to start being used as a commercial currency. Illegal business activity is indeed a problem, but its tracability leaves a track. I wouldn't assume that it's free play for all illegal business. Assume hunt dogs are silently following the tracks.
I get a feeling there is some alternative motive behind the article. The arguments are some what valid:
Mining uses electricity so it leaves a "carbon footprint", but printing money and mining gold also leaves a footprint.
Unaware "zombies" are used for mining, which means criminals get them more reliably, but I don't think this is BtC's fault. People should be aware what they download to avoid infections.
I haven't heard of the stolen electricity thing, but in hind sight it's obvious, if you aren't paying for electricity you are minimizing your costs, but I'm not sure how wild spread this is, but again I don't think it's about BtC or BtC's fault.
Lack of regulations does NOT permit assassination, sales of illegal drugs or spreading of child porn anymore than our current currencies, because this shit has been happening for way longer than BtC has been a thing.
While bitcoin supporters tend to hate the idea of inflation, there are others coins that have inflation built in to encourage spending -- a kind of progressive version of bitcoin.
Here's a random example of a coin designed around a specific economic philosophy:
>Unlike Bitcoin, Freicoin has a demurrage fee that ensures its circulation and bearers of the currency pay this fee automatically. This demurrage fee was proposed by Silvio Gesell to eliminate the privileged position held by money compared with capital goods, which is the underlying cause of the boom/bust business cycle and the entrenchment of the financial elite, and has been tested several times with positive results.
I read the post and wondered if it was prepared, and he waited until the next "crash" to post it. After all, that's the best time to post anti-bitcoin posts.
Probably not, IMHO. The author has experience at writing, no reason why he can't turn out something polished-looking quickly. Especially as he has been thinking along these lines for a while. Gestating ideas is "preparing" to write even if the finished pieces is not "pre-prepared".
But scepticism about libertarian technofetishism has been a bit of a theme in his writing for... a while now. The Vile Offspring in Accelerando are a scarcely-veiled example.
yes, and the skepticism is almost certainly deserved. it drives me insane how naive most libertarians are about how things would actually play out if they got their way. it's sad but true that there probably isn't a clean, self-consistent ideology/system that will work in a messy world. but if I had to pick one, it would be socialism because the only freedom I can imagine being better than having complete control over my money (Ayn Rand) is not even having to worry about it (Star Trek).
I love his meta-criticism of Libertarian and Leninist (and presumably other) ideologies:
> [It] makes prescriptions about how to run human society that can only work if we replace real messy human beings with frictionless spherical humanoids of uniform density...
Too bad he doesn't explain why libertarianism only works if we are all uniform and frictionless. Perhaps because it's nonsense and libertarianism actually doesn't require that.
It's also too bad emotional rants like this carry such weight. Is the status quo really that great?
While I don't think Bitcoin is a "weapon intended to damage central banking", I'm not sure why the author has such an affinity towards central banks.
He claims Bitcoin might destroy social safety nets — but how are central banks protecting those institutions? The cash that quantitative easing produces goes right into the hands of banks / investors. Rich people get richer when QE inflates the stock market to new highs. Working class people get poorer, and will feel the subsequent crash harder.
If anything, Bitcoin is better for working class people. It means the money they earn retains value, regardless of whether they invest it in the market.
Mining BtC has a carbon footprint from hell (as they get more computationally expensive to generate, electricity consumption soars). This essay has some questionable numbers, but the underlying principle is sound.
I didn't do the math (not even back of the envelope) but my sense tells me it'll be less footprint than the current mega banks.
Bitcoin mining software is now being distributed as malware because using someone else's computer to mine BitCoins is easier than buying a farm of your own mining hardware.
Piracy, Theft and Crimes are not a new thing. They have been for a very long time.
Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).
We don't have that now? I guess regulation is better with Bitcoin because cash has much more privacy than BTC.
It's also inherently damaging to the fabric of civil society. You think our wonderful investment bankers aren't paying their fair share of taxes?
It's like there is no off-shore tax havens right now, and everyone is paying his share of taxes. Maybe we should give the tax system another look and a good reform?
> Bitcoin is pretty much designed for tax evasion.
This assumes that the government needs to know how much money you have / make in order to tax you. There is an alternative -- to instead tax physical property (in particular real estate) and/or physical goods moving across borders.
This alternative has been used for most of human history; the income tax is a fairly recent thing. (In the US, it is theoretically a "temporary" measure to pay for World War I.)
One of the things I happen to like about Bitcoin is that it will only be as successful as its adoption rate. I think of this as a literal interpretation of voting with you wallet. So if Bitcoin, against considerable odds, is successful (a small possibility, to be sure), Charles Stoss here will be outvoted, and there is nothing he or the government can do to stop it. And in that respect, Bitcoin is its own insurance policy.
I think his correct points highlight why BtC is good, not bad. Untraceability is incorrect though.
His points expressing worry over stable governance as being totally desirable is interesting. Why is the current system in play necessarily a good thing?
Deflation seems like a problem until one recognizes alternative currencies provide the same options and will grow over time. Hence the deflation isn't a problem unless one only accepts BtC.
I find the figures about bitcoins carbon footprint to be somewhat dubious. Anyone verify the calculations?
Interestingly, with Bitcoin you could do the mining with carbon neutral energy, since the electricity can be consumed where it's generated and the output is just data to be transmitted.
I'm not sure about his figures, but the idea of a crypto-currency that needs petaflops of continuous processing power to keep itself safe from attack does seem ass-backwards in the extreme.
Proof-of-x seems inelegant to me, it's unnecessary for a currency. It may be necessary for a decentralised currency like BTC, but it's not part of all schemes. I don't tend to prefer a currency that requires vast waste of resources to bootstrap and protect.
As a method of slowing things down (like the various spam-email limiting proposals) they're great, though.
IF you don't care about trying to wrest currency away from central control (and I really don't care about that at all) then you can come up with some really nice, cryptographically secure systems that don't involve heaps of processing power, have instant verification, support offline transactions etc. etc.
It's only the political aspect (we must have decentralisation and a fixed supply of coins!) that mean Bitcoin has to operate that way, an thrash away at petaflop speeds, burning electricity as fast as it can, to try and keep security.
Decentralisation is indeed one of the main points of bitcoin. It's not a necessary feature of all crypto-currencies and it's not a feature that I care about.
I have no idea if it's possible to design a decentralised crypto-currency without all this pointless thrashing, it may well be, but the currency designs I know of from the crypto-establishment (rather than the cipherpunk/crypto-anarchist community) tend to be far more featureful and elegant, and their security is based on mathematical constructs rather than brute force. They just don't cater to internet-libertarian talking points.
It would be like me saying 'Wind power is ass backward. Other power sources can achieve just as much electricity without taking up all that land.' As if it wasn't a trade--off. And then only later acknowleding that wind power is about not relying on fossil-fuels.
Anyway, what do these other crypto-currencies give you, if it's not decentralization?
>> It would be like me saying 'Wind power is ass backward. Other power sources can achieve just as much electricity without taking up all that land.'
To me it's more like saying "everyone having a turbine and blowing on it themselves is just dumb, why not put a huge one on the common land so we don't all have to spend all day blowing at our little windmills?"
As I say, I like some of the ideas of crypto-currency but I actually consider all the decentralisation and deliberate removal of central authority from the issue a net negative.
>> As if it wasn't a trade--off.
That really depends if you place any value on what's being traded.
>> Anyway, what do these other crypto-currencies give you, if it's not decentralization?
Offline transactions, computational efficiency, various other things. But if your entire worldview is anti-centralisation and anti-government then they give you nothing, just as BTC gives me nothing I care about.
You do know who Charles Stross is, right? Influential sci-fi author, early web user, old school programmer? You may not agree with him, but it's not trolling, he raises many valid points and he's not the first to do it.
>it's not trolling, he raises many valid points and he's not the first to do it.
Though he has done much fine writing before, I was really disappointed by this post by Charlie Stross. The arguments are weak and poorly supported.
* The whole power consumption debate is based on a single out-of-date estimation at a bitcoin site.
* The Gini Coefficient argument is based on a small survey from 2011 when Bitcoin was new and practially unknown with a tiny userbase of early adopters.
* The point about malware mining is also outdated, and it refers to a problem that is going away fast. 99% of Bitcoin mining is now done with custom ASIC chips, which are vastly better at it than PC CPU/GPU hardware. Using a botnet for mining is becoming more and more pointless every week.
[Botnets can still make a little money mining scrypt-based Litecoin, but that is also become less and less profitable, and ASIC chips are now on their way to that market, too.]
* Many of his opinions about the "evil" of the Bitcoin network are just laughable. The world is evil. Nations go to war and millions die for no good reason. Millions of lives and entire nations are destroyed by the drug trade and the 'war' on drugs. International banks, like HSBC, launder hundreds of billions in drug funds. That is the status quo. In that context, Bitcoin is a tiny drop in a big and toxic ocean.
His main point is along the lines of "OMG <insert_bad_actors> can/may use <technologyXYZ>"
Bitcooin like any tool from the invention of fire to tools like a hammer to "the web" can be used for good or bad, you think someone who writes sci-fi and programs would understand this.
His point is he's sick of the inherent drum-beating that BitCoin is the salve to the financial issues present in the gold backed/regulated traditional economy because it's just as broken, if not potentially more so.
There is a lot of pumping by those who want "bitcoin to go to the moon" for their own financial gain.
That still does not make bitcoin technology inherently evil.
The distributed ledger and proof of work pioneered by Bitcoin does have incredible potential to change the way people transfer "value" between themselves.
The problem is a subset of bitcoin users who want to get rich quick, that does not make this technology evil or worthy of death.
Cash can also be used by all sorts of criminals for all sorts of shit, if anything its much easier to use for nefarious purposes than bitcoin. It was anonymity provided by TOR that gave rise to silk road, pseudo-anonymity provided by bitcoin was just a bonus.
I don't remember Bitcoin nearly collapsing the world economy and leading to misery for millions worldwide as the Banking sector has done in the past few years.
Meh, and you'd think that a singer as popular as Justin Bieber actually produced good music.
Bitcooin like any tool from the invention of fire
Well, yeah... Mr. Stross doesn't trust people to make their own decisions about using something like bitcoin, but he seems to advocate trusting those same people to vote for government overlords who will create rules that all of us should live by.
... This means the the cost of generating new Bitcoins rises over time, so that the value of Bitcoins rise relative to the available goods and services in the market
False. I mean, it could go that way, but if you have a large established market to anchor the value of BTC, the mining difficulty will adjust to match (instead of the value of BTC adjusting to match). If it is not profitable to mine BTC, people will stop mining and the difficulty will drop; the cost of mining will adjust to the value of BTC.
I'm no fan of all th hype, but each link in authors link farm is idiotic. Blaming bitcoin for child pornography?
What these arm chair economics experts miss is that inflation and deflation are meaningless in things other than the currency you are getting paid your wages in. If the purchasing power of the dollar really fell apart, you get riots in the streets people can't feed their families. Bitcoin crashes it just another #1 article on hn to scroll through.
Surely there must be a kind of duality between inflation and deflation in context of the total money supply and the individual unit of money that is deeper than commonly taught?
Couldn't a a fixed-money-supply economy and a flexible-money-supply economy be unified in a single mathematical and theoretical framework? This must surely be possible, but in that regard "unit of exchange / money" would have probably discarded in favor of another thing?
Try Steve Keen and his work. He modeled both fixed money and flexible money supply in his dynamical models of finance. You can even download a computer program "Minsky" and try the models yourself.
Edit: He is also a proponent of "endogenous theory of money", which basically says that money can be easily created within the system through debt. In essence, "fiat money" is a fundamental property of monetary systems, and not something imposed by governments.
Interestingly, in the long run inflation may be problem with Bitcoin rather than deflation.
In 30-100 years (the numbers vary according to the source) the world population will start to shrink. From that point on there will be ever more money available per living person. Which, of course, mean inflation.
Central banks can counter it by burning money. It's not clear who would do such beneficial activity with Bitcoins.
I also want Bitcoin to die. For me it isn't about the politics of banking, it is about the fact that the whole system is designed in a way so as to waste maximum amounts of energy on doing nothing of real intrinsic value (which he touches on re: carbon footprint).
The same could be said about diamond mining, or production of goods that serve only decorative purposes. Video games do the same thing, wasting vast computing resources on pretty pictures to titillate humans who could be working. Is HN's carbon footprint justifiable? Does it produce intrinsic value?
> calculating ever-larger prime numbers, they get further apart
iirc that's not completely true. It may be in practice for bitcoin as a currency, but I remember reading that there's a limit to the distance between two primes, no matter how large they become.
I like how the author implicitly assumes that Bitcoin is a replacement for the current financial system. I wish it was so, but not just for Bitcoin, but the best set of the crypto-currencies, as determined by competition/user adoption.
I wonder what Bitcoin reward halving will do when it next happens (2016). It should certainly make it much less worth investing in as much electricity, and should thus bring down the carbon footprint.
When Charles Stross is talking about "carbon footprint" he ignores the not even comparable amount of resources that the current world wide banking infrastructure devours.
The banking infrastrucutre devours resources, and provides liquidity. What you should compare the carbon footprint of BTC with the carbon footprint of mints and treasuries.
If the BTC reward drops too low the fees will start going up. As long as they're able to collect sufficient fees I wouldn't expect the number of miners to decrease.
I think we had plenty of these rants about torrents and how they damage music/film/game industry. I am expecting actually many more of these articles about bitcoin vs banks in future.
Most of his complaints are FUD. He didn't even bring up legitimate concerns like how big of space you would need to have the entirety of the block chain in the future.
Why do people keep saying it crashed 50% since yetserday? That number is just plain wrong. It was NOT trading over $1000 yesterday, that was over a week ago.
And here I was, having a decent day, and now I'm extremely angry.
Why I want the author to die in a fire:
> Mining BtC has a carbon footprint from hell
This is an insanely dubious ungrounded argument. How do you know fiat doesn't have a high carbon footprint too? The linked article doesn't even mention whether this is the case.
> Bitcoin's utter lack of regulation permits really hideous markets to
WHAT the fuck? Who the fuck actually believes this? You fucking sheep.
> Bitcoin mining software is now being distributed as malware
Non-argument, fuck off. This is like saying someone can kill you and take your money, or even more obvious and ironic, install malware on your computer and steal money from your fiat bank account, which happens all the time anyway.
Please stop doing this. It won't be tolerated here, and it will become difficult to post anything about dogecoin in future if you keep spamming it. This place is far stricter than Reddit.
No. The 'flag' link is for stories that are inappropriate for the site. What you describe is a "downvote" button. Using flags to downvote is abusive. My understanding is, the mods catch people using the flag button to downvote, the mods make your flag stop counting.
Maybe they do both, but I am certain that the flag link disappears for some people after abuse. I'm not sure what the advantage of doing both would be (though I assume hellbanned users normally still see a flag link that does nothing).
I've inferred from some info I've heard that some known abusers keep abusing the flag feature -- it seems like it would be disabled for them, or disabled for submissions matching certain keywords.
> For starters, BTC is inherently deflationary.
For starters, tell us why this is inherently bad. This statement also assumes that the BTC economy will grow forever.
> Bitcoin is designed to be verifiable [...] but pretty much untraceable
What would be bad about this if it were true? Paper bills work just fine, even though they are pretty much untraceable. By the way, this opinion is pretty much wrong, bitcoin is very far from being untraceable (IPs, exchanging BTC, etc.)
> Libertarians love it because it pushes the same buttons as their gold fetish
Ok, article is clearly emotional. How did this end up on the front page?
> Mining BTC has a carbon footprint from hell
https://en.bitcoin.it/wiki/FAQ#Is_it_not_a_waste_of_energy.3...
> Bitcoin mining software is now being distributed as malware
Surprise. Thieves steal valuable things. This wouldn't happen without BTC, right?
> Bitcoin's utter lack of regulation permits really hideous markets to emerge, in commodities like assassination (and drugs and child pornography).
FINCEN would like a word with you. Also, how does it hurt the USD that it is used for assassination, drugs and child pornography?
It's ok that people hate bitcoin though, some people just let their emotions take control.