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Started By
Message
Bitcoin improvement thread
Posted on 4/3/13 at 11:39 pm
Posted on 4/3/13 at 11:39 pm
a.k.a. How will bitcoin 2.0 be different?
I figure I'd pile on the mound of bitcoin threads with my own.
The idea of a P2P global anonymous cryptographic currency intrigues the hell out of me, but the more I examine and study bitcoins the more clearly I see that it is doomed to fail. It has lots of wonderful aspects, primarily that the encryption framework appears to be rock solid. But while it may be technologically sound, it seems to be economically half-baked (unless, of course, the primary intent was solely enrichment and wealth storage).
The fixed growth rate and predetermined 21MM BTC cap are not characteristics of successful exchanged-based currencies.... more like a value-based commodity or wealth storage mechanism. That is, imho bitcoins are little more than Gold 2.0 and will always suffer from over-speculation and not enough exchange. As pointed out by others, deflation is a massive problem for a currency intended to be used for daily exchanges. Bitcoin 2.0 will need to encourage exchange way moreso than the current implementation in order to have any realistic staying power. Also, it will need to dynamically adapt to the marketplace to foster sustainable and mild inflation rather than be artificially scarce and monotonically deflated. The current bitcoin seems to provide little incentive for exchanges, except to circumvent other well-established exchange methods.
My question for the experts is how should bitcoin 2.0 be designed to achieve what the current bitcoin will never: a viable crytpo-currency that encourages exchanges.
KNOWN PROBLEMS
Technological
1. Slow Transaction Verification. It takes 10+ minutes to verify a transaction, which isn't conductive to POS transactions.
2. Not User-Friendly. Only tech-geeks understand bitcoins and bitcoin interfaces thus far.
3. Wallets and transactions vulnerable to hacks. If your private key is intercepted or stolen, you have no recourse. Your bitcoins vanish into the cyber black hole of anonymity.
Economic
1. Artificially scarce supply equates to perpetual deflation. It is disputed whether deflation is a "good" or "bad" thing. I'm not an expert on macroeconomics, but on it's face, constant deflation caused by increasing numbers of bitcoin adopters would not promote use of bitcoin for commerce as a currency. Rather, it would promote hoarding and speculating as a commodity.
2. Extreme Volatility. Bitcoin value must stabilize in order to instill the public's confidence. It sorta gets a pass for still being very new, but steady progress must be made on this front. Market manipulation of the bitcoin is ridiculously OOC.
3. Risk of Government Intervention. What happens when America decides to regulate bitcoins, or pull the plug on bitcoins altogether? What if the EU, Japan, China, and Russia all joined in this effort?
4. Bitcoin "banks" are unregulated and uninsured. If you trust a 3rd party to safeguard your bitcoins, you have no recourse when your bitcoins are stolen from the 3rd party.
I figure I'd pile on the mound of bitcoin threads with my own.
The idea of a P2P global anonymous cryptographic currency intrigues the hell out of me, but the more I examine and study bitcoins the more clearly I see that it is doomed to fail. It has lots of wonderful aspects, primarily that the encryption framework appears to be rock solid. But while it may be technologically sound, it seems to be economically half-baked (unless, of course, the primary intent was solely enrichment and wealth storage).
The fixed growth rate and predetermined 21MM BTC cap are not characteristics of successful exchanged-based currencies.... more like a value-based commodity or wealth storage mechanism. That is, imho bitcoins are little more than Gold 2.0 and will always suffer from over-speculation and not enough exchange. As pointed out by others, deflation is a massive problem for a currency intended to be used for daily exchanges. Bitcoin 2.0 will need to encourage exchange way moreso than the current implementation in order to have any realistic staying power. Also, it will need to dynamically adapt to the marketplace to foster sustainable and mild inflation rather than be artificially scarce and monotonically deflated. The current bitcoin seems to provide little incentive for exchanges, except to circumvent other well-established exchange methods.
My question for the experts is how should bitcoin 2.0 be designed to achieve what the current bitcoin will never: a viable crytpo-currency that encourages exchanges.
KNOWN PROBLEMS
Technological
1. Slow Transaction Verification. It takes 10+ minutes to verify a transaction, which isn't conductive to POS transactions.
2. Not User-Friendly. Only tech-geeks understand bitcoins and bitcoin interfaces thus far.
3. Wallets and transactions vulnerable to hacks. If your private key is intercepted or stolen, you have no recourse. Your bitcoins vanish into the cyber black hole of anonymity.
Economic
1. Artificially scarce supply equates to perpetual deflation. It is disputed whether deflation is a "good" or "bad" thing. I'm not an expert on macroeconomics, but on it's face, constant deflation caused by increasing numbers of bitcoin adopters would not promote use of bitcoin for commerce as a currency. Rather, it would promote hoarding and speculating as a commodity.
2. Extreme Volatility. Bitcoin value must stabilize in order to instill the public's confidence. It sorta gets a pass for still being very new, but steady progress must be made on this front. Market manipulation of the bitcoin is ridiculously OOC.
3. Risk of Government Intervention. What happens when America decides to regulate bitcoins, or pull the plug on bitcoins altogether? What if the EU, Japan, China, and Russia all joined in this effort?
4. Bitcoin "banks" are unregulated and uninsured. If you trust a 3rd party to safeguard your bitcoins, you have no recourse when your bitcoins are stolen from the 3rd party.
This post was edited on 4/4/13 at 12:06 pm
4
Posted on 4/4/13 at 1:26 am to gizmoflak
Bitcoin will work as a fiat currency because it is capped.
BitPay just reached their highest sales point ever with $5.2M in March. This is the same month that saw the value of Bitcoin triple.
quote:
That is, imho bitcoins are little more than Gold 2.0 and will always suffer from over-speculation and not enough exchange.
BitPay just reached their highest sales point ever with $5.2M in March. This is the same month that saw the value of Bitcoin triple.
This post was edited on 4/4/13 at 1:30 am
Posted on 4/4/13 at 5:55 am to joshnorris14
So the value stored in bit coins tripled and transaction values are at an all time high... You don't say!
Posted on 4/4/13 at 7:32 am to gizmoflak
I like this thread. Will participate when I get to the office in a bit.
Posted on 4/4/13 at 7:43 am to WikiTiger
quote:Sure, you certainly don't want to post on a message board on your own time. Have your employer pay you to do it.....
Will participate when I get to the office in a bit.
Posted on 4/4/13 at 7:44 am to joshnorris14
quote:
the value of Bitcoin triple
quote:
just reached their highest sales point ever
joshie, do you ever think about what you're posting before you click on 'submit'?
Posted on 4/4/13 at 7:47 am to LSURussian
(no message)
This post was edited on 12/21/21 at 9:41 am
Posted on 4/4/13 at 7:53 am to XanderCrews
Do you see the "Request Admin" button?
Use it if you don't like what I post.
This post was edited on 4/4/13 at 7:54 am
Posted on 4/4/13 at 8:07 am to gizmoflak
quote:
Bitcoin 2.0 will need to encourage exchange way moreso than the current implementation in order to have any realistic staying power. Also, it will need to dynamically adapt to the marketplace to foster sustainable and mild inflation rather than be artificially scarce and monotonically deflated. The current bitcoin seems to provide little inventive (incentive, right?) for exchanges, except to circumvent other well-established exchange methods.
These attributes are exactly what I would say is needed for a virtual currency to be durable and effective. Well put.
Posted on 4/4/13 at 8:15 am to LSURussian
right, should have been "incentive"
The bitcoin conundrum is that the more popular they get, the less they will be exchanged.
And by "exchange" I mean "used for purchasing goods & services, paying debts, etc." (which is the point of currency), and not simply exchanging existing currency in and out of bitcoins.
The bitcoin conundrum is that the more popular they get, the less they will be exchanged.
And by "exchange" I mean "used for purchasing goods & services, paying debts, etc." (which is the point of currency), and not simply exchanging existing currency in and out of bitcoins.
This post was edited on 4/4/13 at 8:17 am
Posted on 4/4/13 at 8:26 am to gizmoflak
quote:Exactly.
The bitcoin conundrum is that the more popular they get, the less they will be exchanged.
BC is being used as a temporary store of value or as a speculative investment rather than as a medium of exchange, which is the universal definition of money. So as a "virtual currency" it is a failure already.
I have tried repeatedly to find how much BC's have been used to actually purchase goods or services and I just can't find it anywhere.
Posted on 4/4/13 at 8:30 am to gizmoflak
quote:
And by "exchange" I mean "used for purchasing goods & services, paying debts, etc." (which is the point of currency), and not simply exchanging existing currency in and out of bitcoins.
I think that ironically, it's the technology that will keep it from being used widely as a medium of exchange. People aren't going to trust what they don't understand, or worse, if the only thing they hear about is attacks on the network, which have to be coming soon.
This post was edited on 4/4/13 at 8:31 am
Posted on 4/4/13 at 8:47 am to gizmoflak
quote:
How will bitcoin 2.0 be different?
Great thread idea! Let's hope it stays on track.
quote:
But while it may be technologically sound, it seems to be economically half-baked
I'm glad you have taken to debate the aspects of it that are actually worthy of debate. Far too many of these threads focus on people who don't understand the technology thinking they've found some weakness. It distracts from the real topics.
quote:
The fixed growth rate and predetermined 21MM BTC cap are not characteristics of successful exchanged-based currencies.... more like a value-based commodity or wealth storage mechanism. That is, imho bitcoins are little more than Gold 2.0 and will always suffer from over-speculation and not enough exchange. As pointed out by others, deflation is a massive problem for a currency intended to be used for daily exchanges. Bitcoin 2.0 will need to encourage exchange way moreso than the current implementation in order to have any realistic staying power. Also, it will need to dynamically adapt to the marketplace to foster sustainable and mild inflation rather than be artificially scarce and monotonically deflated. The current bitcoin seems to provide little inventive for exchanges, except to circumvent other well-established exchange methods.
I disagree with you on the effects of deflation. The inflation vs. deflation debate is certainly not settled, and in fact tends to venture into the political realm more often than not. Deflation is not the boogeyman you think it is. But I understand why you think that way. I don't think this thread is where we should have that debate, though.
quote:
My question for the experts is how should bitcoin 2.0 be designed to achieve what the current bitcoin will never: a viable crytpo-currency that encourages exchanges.
You should watch this video first before you dismiss bitcoin outright: The Future of Bitcoin
The bitcoin protocol is actually capable of many things, like contract enforcement, lending, micropayments, peer-to-peer exchanges, etc. It's just going to take some time (and consumer demand) before they all get implemented.
But also, understand that currency competition is a good thing. Right now you don't really have much of a choice in which currency you choose to use. But bitcoin, and other crypto-currencies, are opening up doors. Let the market determine which type of currency people prefer. We'll see once and for certain whether people choose inflation over deflation.
Also, keep in mind that there are already other crypto-currencies out there.
Litecoin is probably the most popular. But one interesting one, and one that you should love based on your comments in the OP, is Freicoin. It's a crypto-currency with built in demurrage. FWIW, I would never use it simply for that reason.
This post was edited on 4/4/13 at 8:56 am
Posted on 4/4/13 at 8:50 am to ZereauxSum
quote:
if the only thing they hear about is attacks on the network, which have to be coming soon.
ZS, I don't know if you saw this post by joshnorris on the Poli Board. LINK
It is a long letter from MtGox (the self proclaimed largest BC exchange web site) explaining why their services have been interrupted several times recently. I especially like this line in their letter: "What can be done? Believe it or not, there is pretty much nothing that can be done."
Now THAT builds confidence!
Posted on 4/4/13 at 9:00 am to LSURussian
Joe Blow, the technologically un-savvy consumer, will never use bitcoins to buy anything even remotely pricey because the threat of being hacked and having all his BTC stolen in one instant without recourse is very real and that scares the shite out of him. And besides, what in the HELL are all those long strings of random letters and numbers???
Bitcoin desperately needs a Napster-esque "dumbing down" of the technology to make it user-friendly and accessible to the masses.
Bitcoin desperately needs a Napster-esque "dumbing down" of the technology to make it user-friendly and accessible to the masses.
Posted on 4/4/13 at 9:02 am to gizmoflak
quote:
Joe Blow, the technologically un-savvy consumer, will never use bitcoins to buy anything even remotely pricey because the threat of being hacked and having all his BTC stolen in one instant without recourse is very real and that scares the shite out of him. And besides, what in the HELL are all those long strings of random letters and numbers???
The internet was the same way in its infancy. Things grow and become easier to use. Too many of y'all expect bitcoin to be ready for prime time right now. But these things take time to grow and develop. Be patient.
quote:
Bitcoin desperately needs a Napster-esque "dumbing down" of the technology to make it user-friendly and accessible to the masses.
It's coming. Don't fret.
This post was edited on 4/4/13 at 9:03 am
Posted on 4/4/13 at 9:05 am to WikiTiger
Your Freicoin link revealed these wonderfully paranoid quotes:
"Usurious non-zero basic interest distorts the free market, incentivises poisonous greed, excess, and short-term thinking, and perpetuates a vicious cycle of boom/bust recessions."
"...the entrenchment of the financial elite."
".... to eliminate the privileged position held by money."
Just.....wow.
"Usurious non-zero basic interest distorts the free market, incentivises poisonous greed, excess, and short-term thinking, and perpetuates a vicious cycle of boom/bust recessions."
"...the entrenchment of the financial elite."
".... to eliminate the privileged position held by money."
Just.....wow.
Posted on 4/4/13 at 9:13 am to LSURussian
quote:
"What can be done? Believe it or not, there is pretty much nothing that can be done."
Wow. Well, at least he's honest about it
This was exactly what I was thinking about. An DDoS attacker inducing a sell off so he can get in cheap. I actually don't think there is a good solution for it other than for bitcoin holders to have faith that the network is sound.
So I guess it all comes back to trust anyway despite the fact that the network was designed so that trust wouldn't be necessary.
Posted on 4/4/13 at 9:15 am to WikiTiger
quote:You've said BC has been around for five years.
But these things take time to grow and develop.
You keep comparing BC to the internet as to its development. Yet the internet was used by the mass market via Compuserve, Sears (Prodigy) and AOL within a very short time of the internet being made available to non-governmental users.
How long will it take for bitcoin to be made practical and usable by the masses, in your opinion?
Posted on 4/4/13 at 9:33 am to WikiTiger
Wiki, any idea when the transaction verification time will be reduced to near real-time? I'm sure this is in the works...?
ETA: haven't had a chance to look at the video you posted above yet...
ETA: haven't had a chance to look at the video you posted above yet...
This post was edited on 4/4/13 at 9:35 am
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