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Bitcoin

Marc Andreessen On Why Bitcoin Matters (And A Critique) 332

Posted by Unknown Lamer
from the hop-on-the-bandwagon dept.
New submitter Ramtek writes "Marc Andreessen writes an interesting editorial on how he how he believes Bitcoin is the first practical solution to the Byzantine Generals Problem and why that is important. He also addresses many of arguments against its future by its critics such as its current limited use by ordinary consumers, its current volatility, its potential lack of acceptance by merchants, and many other issues. While politically agnostic the piece is squarely in support of Bitcoin but presents a more mature perspective than many current Bitcoin editorials." eggboard wrote in with a rebuttal: "Marc Andreessen wrote an essay in the New York Times in which he tried to make the case for Bitcoin going mainstream for payments, if not as a currency. After comparing Bitcoin to the rise of personal computers and the Internet, he tries to explain how it eliminates fraud and will solve global money transfers and the plight of the unbanked. I wrote a critique of these and other points in his essay."
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Marc Andreessen On Why Bitcoin Matters (And A Critique)

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  • The Problem (Score:3, Insightful)

    by The Cat (19816) on Wednesday January 22, 2014 @10:55AM (#46035833)

    The problem with Bitcoin is once a Bitcoin is lost, it's gone forever and can never be replaced. There's no provision in the system to void a coin and then mine a new one.

    Therefore if bitcoins are lost at a rate > 0 the probability there will be zero bitcoins is 100% over time.

    • Re: (Score:3, Insightful)

      Therefore if bitcoins are lost at a rate > 0 the probability there will be zero bitcoins is 100% over time.

      Nope. That's not true. Limiting series can tend to any value. Let's say stuff is lost once per hour. If the first unit lost is 1/4 a coin, then 1/8, then 1/16 and so, then a total of 0.5 bitcoins will be lost once t->infinity. Thankfully there are millions of bitcoins, so losing half of one won't matter.

      • Re:The Problem (Score:4, Insightful)

        by Henrik Gullaksen (2878597) on Wednesday January 22, 2014 @11:07AM (#46035965)

        I would say "The Cat" is right.

        The more persons that uses Bitcoin the more coin's will be lost.

        The time between finding new Bitcoins is getting longer and longer. And they do not replace the lost ones they are just generated.
        So if Bitcoins becomes a every man/woman thing. Then the value of a single Bitcoin will raise to something insane before it will just die because the number of persons actually having coins will be to small to function as a currency.

        • Re:The Problem (Score:5, Insightful)

          by serviscope_minor (664417) on Wednesday January 22, 2014 @11:11AM (#46036013) Journal

          I would say "The Cat" is right.

          No, the cat is wrong. He claimed there will be zero, merely because they are being lost. That is mathematically incorrect.

          On a more practical note, as they are lost, they will slowly increase in value. However they are divisible. People will be losing small fractions of a coin rather than whole coins. The more spread out they get, the smaller fractions people will be losing.

          • by alexhs (877055)

            No, the cat is wrong. He claimed there will be zero, merely because they are being lost. That is mathematically incorrect.

            No, you're wrong.

            Your math is only correct if the considered quantity is a real number. However bitcoins are a fixed-point number (an integer number of satoshis). Therefore, at some point the last satoshi will be lost.


            • Your math is only correct if the considered quantity is a real number. However bitcoins are a fixed-point number (an integer number of satoshis). Therefore, at some point the last satoshi will be lost.

              But assuming protocol updates, bitcoin is infinitely divisible. Sure that requires infinite storage, but we're talkiing about infinite time here, so I don't see that as a problem.

              Besides, for any finite amount of time, the storage requirements need be no more than finite.

            • by TheCarp (96830)

              Sure but, just because you can expoect something to eventually happen doesn't mean it will be soon. We can expect lots of things will eventually happen. All this one means is that bitcoin will likely need to be replaced at some indeterminate point in the future too far out to really even contemplate realistically at the moment.

              That isn't really a huge problem.

            • Re:The Problem (Score:4, Informative)

              by Agent0013 (828350) on Wednesday January 22, 2014 @02:24PM (#46038369) Journal
              Yes, the last satoshi will be lost. And the sun will burn out. Which will happen first is the real question then, huh?
        • Re:The Problem (Score:5, Informative)

          by Jostein Johansen (2928005) on Wednesday January 22, 2014 @11:21AM (#46036113)
          Losing coins are not a problem as they are infinitely divisible. Currently only to 8 decimal places, but that can be increased if needed. One bitcoin or even a fraction of a bitcoin is enough to run the whole world economy.
    • Re:The Problem (Score:5, Insightful)

      by bre_dnd (686663) on Wednesday January 22, 2014 @11:07AM (#46035961)
      I'd say that that works in favour. As bitcoin get more valuable / scarce the tendency to protect them increases. So as more of them get lost the rate of them getting lost will decrease. Note that "gold" also has a finite amount available that gets progressively harder/more expensive to mine.
      • by doom (14564)
        Yes, one of the arguments against Bitcoin is that it's a deflationary currency, and a certain lossage rate might help offset that effect slightly. But I wouldn't count on it.
        • Actually this would exacerbate the problem as the loss of Bitcoins will drive up the value of those remaining
        • Yes, one of the arguments against Bitcoin is that it's a deflationary currency

          From a Macroeconomic viewpoint, deflation is bad. From an individual viewpoint, it is good. I bought 100 bitcoins when they were at $7. They are now worth enough to pay off my mortgage. That might not be good for the overall economy, but it is good for me.

        • The lossrate increases the effect of deflation (for those who don't lose the coins, ofc)

    • Re:The Problem (Score:4, Insightful)

      by Anonymous Coward on Wednesday January 22, 2014 @11:08AM (#46035977)
      I lost a $100 bill at the casino. Can you void that and issue me a new one please?
      • Re:The Problem (Score:4, Insightful)

        by GlennC (96879) on Wednesday January 22, 2014 @11:38AM (#46036325)

        I lost a $100 bill at the casino. Can you void that and issue me a new one please?

        YOU lost the $100 bill....but SOMEONE ELSE found it and used it.

        If you lose a Bitcoin, it's gone forever, and NOBODY can use it.

        Whether or not this is a problem is left as an exercise for the reader.

        • by Agent0013 (828350)
          If you dropped your $100 bill in the fire it is gone forever. How about that? Or should I have used a car for an analogy?
      • Not a good example, since the casino coincidentally gained a $100 bill. :)

        It is possible to really lose money (a $100 bill blows out of your hands into a bonfire), but even then the Fed is constantly printing more.

      • You lost a $100 bill, but another one can be printed. In fact a lot of bill can be printed. A bitcoin is lost forever, and the number of bitcoin is not infinitely extensible. A better analogy would be that you lost (dropped in maria trench) a pound of gold. There is a reason we went away from metal based currency like gold, and as long as we are in an inflationary economy, fiat currency is much more useful than gold coin, sorry i meant bitcoin. *if* we ever switched to a a stable economy in the future, some
    • As the supply of bitcoin drops, the value increases. As the value increases, the number of bitcoins any given individual holds will decrease. As the number of bitcoins in any given wallet decreases, so also decreases the number of coins lost in any given incident.

      It is inherently deflationary (which is, IMO, the real problem), but that doesn't mean the supply will eventually fall to zero.

      • by Immerman (2627577)

        Honestly I don't see any real problem with the inherently deflationary aspect, aside from the fact that governments cant invisibly tax stored wealth by manipulating inflation. Perhaps if it completely replaced all other currencies it would start having a chilling effect on economic growth as people refuse to invest in projects that are unlikely to provide better returns than the deflationary increase in value, but it seems to me that calling even that an inherently negative outcome presupposes that a very

    • Showing value (Score:5, Insightful)

      by Okian Warrior (537106) on Wednesday January 22, 2014 @11:43AM (#46036371) Homepage Journal

      The problem with Bitcoin is once a Bitcoin is lost, it's gone forever and can never be replaced. There's no provision in the system to void a coin and then mine a new one.

      Therefore if bitcoins are lost at a rate > 0 the probability there will be zero bitcoins is 100% over time.

      Is that the problem?

      I thought it was volatility. No, wait... it was a pyramid scheme. Or rather, because the US won't accept it for taxes. Or was it because it's deflationary? Heck, I just don't know any more.

      Economists will demonstrate something by telling stories, let's demonstrate something by showing value.

      1) BitCoin has very small per-transaction fees. There are a whopping-big number of credit card transactions each day, each with fees of about 5%. Bitcoin will eliminate most of these, for a whopping-big cost savings.

      2) BitCoin increases the market to people who don't have a bank account. That essentially doubles the potential customer base.

      3) BitCoin allows for micro-payments. This increases the number and type of sales possible.

      4) BitCoin almost eliminates counter-party risk [investopedia.com]. No authority in the financial chain (PayPal, payment clearing center, credit card company, bank, US government) can affect the transfer. No one can be "banned" (like Wikileaks), no one can be threatened with bad credit.

      Assign value to each of these points and total them up (there's some subjectivity), then compare that value with the negative utility from losing coins over time.

      Which is worth more?

      All the other potential problems are just that - potential problems, and appeals to these problems are merely guesswork and rhetoric.

      BitCoin will bring enormous cost savings, and that's why people will use it.,

      • All the other potential problems are just that - potential problems, and appeals to these problems are merely guesswork and rhetoric.

        Setting aside the fact that there are very real problems (current and long term), what you say about the problems is also also of the advantages. Most of the potential advantages you posit are just that - potential. Mere guesswork and rhetoric. That is, of those of that are unique to Bitcoin (which isn't many).

    • BTW, your sig: would that be "Thomas Hewitt Edward Cat"?

      I loved that series...

    • by hodet (620484)

      This is where theory and real life collide. While technically correct, the amount of time it will take to lose 21 million bitcoin will far surpass the need for bitcoin. Also the ones that are left are infinitely divisible. A bitcoin is just a whole unit.

    • by lazlo (15906)

      So what the system really needs now is digital couch cushions?

    • Even if no bitcoins are lost, there are still problems. Whenever you have a fixed quantity of something, there's a real danger of deflation; if more and more people start using bitcoin, the demand for bitcoins will go up and up, the price of bitcoins will go up and up, and this provides a strong incentive for current bitcoin holders to simply hoard their bitcoins rather than use them -- further reducing supply and jacking up the price. This is all econ 101 stuff.

      Deflation isn't a problem per se, as long as

      • if more and more people start using bitcoin, the demand for bitcoins will go up and up, the price of bitcoins will go up and up, and this provides a strong incentive for current bitcoin holders to simply hoard their bit coins

        Once you have a million dollars (in "real" money) worth of bitcoins why would you hoard all of it? Most people would spend quite a bit of it after the value had increased beyond some large threshold.

        This is all econ 101 stuff.

        The problem is that basic scone 101 stuff is worthless in un

        • You guys can cite Econ and Psych all you want, the real world has records of what really happened in the past so it behooves one to pay attention to history.

          In situations where the currency was deflationary (money steadily gaining value over time, commodities steadily falling in price), people didn't stop all purchases. (you still need to buy food to live) But purchases dropped significantly and economic activity tanked. Most recent example is Japan during the Lost Decade of 90's - 00's.

  • by wonkey_monkey (2592601) on Wednesday January 22, 2014 @10:57AM (#46035853) Homepage

    Bitcoin is the first practical solution to the Byzantine Generals Problem

    Why is this the first we're hearing about this? These Byzantine Generals must be stopped at all costs! Inform the TSA! Harvest the metadata! And will someone please get me a burger!

  • by Anonymous Coward on Wednesday January 22, 2014 @11:08AM (#46035981)

    "Critics of Bitcoin point to limited usage by ordinary consumers and merchants, but that same criticism was leveled against PCs and the Internet at the same stage."

    Sure, but "at this stage" people who owned PCs weren't mostly buying them to hoard them for their future value.

    • > limited usage by ordinary consumers and merchants

      There lies the crux of the problem:
      "Here is your bread, gimme money"
      "Sure, would you rather take state-guaranteed bills and coins, bank-backed electronic card with semi-instant verification (but a fee), or a stream of bits that some network will later process for validity (while its value fluctuates)?"
      "I'll take bitcoins, but you only get your bread once the transaction clears"
      "Have some cash, instead"

      If you're Amazon, you can go after the people whose p

      • If you're Amazon, you can go after the people whose payments get denied. If your are a small merchant, you've got better things to do.

        Why would amazon do that? They can just wait the 20 minutes. It's not like the thing is boxed up and out the door within the bitcoin verification time.

        • Actually, it is, but the drones have a recall function.
          One the other hand, we all know that the recall function does not work for missiles, so don't go ordering explosives from Amazon using fake bitcoins; the risk of bad movie is too steep.

  • by TWiTfan (2887093) on Wednesday January 22, 2014 @11:11AM (#46036015)

    I just hope enough people keep this potential scam in perspective enough not to overextend themselves to the point that they're jumping out of windows when it collapses. I have to get to work and I don't need too many dead bodies in the street blocking traffic.

  • I haven't yet read the Belisarius series (By Eric Flint and David Drake)
    I take it this is something to do with those stories.

  • But what does Leonard di Caprio say about it? And how about Justin Beiber?
  • by Jane Q. Public (1010737) on Wednesday January 22, 2014 @11:14AM (#46036035)
    The "criticisms" leveled by OP are largely moot:

    A) "Fees" are generally not charged... most transactions have essentially zero cost.

    B) The criticism that development of the Internet was "open" but Bitcoin was not is also moot: Bitcoin is open-source, and anybody can examine the code for secrets or flaws.

    There are other subtleties as well which I will not get into.
  • Verification Time (Score:5, Insightful)

    by Talennor (612270) on Wednesday January 22, 2014 @11:17AM (#46036085) Journal

    I'm still concerned with the verification time required to show that double spending hasn't happened. It's simple to double spend bitcoins, though within 20 minutes or so the blockchain will show which transaction went through. This means bitcoins can be used for online orders (as long as the seller is trusted because no chargebacks), but waiting around at the Target checkout for 20 minutes can't happen, at least with only direct bitcoin transfers. You could have a processor guarantee with more information to save time, but that's more like an already existing debit account and less like the bitcoin transfers people are excited about.

    • In fact any sort of arbitrage or derivatives could be a problem with long trade times and different values on different exchanges.
    • by bondsbw (888959) on Wednesday January 22, 2014 @11:46AM (#46036431)

      If I swipe my debit card today, the payment processor doesn't transmit actual dollar bills and coins on the spot. Over simplifying, the transaction is logged and my bank will guarantee to pay the seller at some point in the future.

      For many transactions, I expect that Bitcoin will be used the same way. You deposit Bitcoins at your bank. When you use a debit card, you aren't transmitting actual Bitcoins, but rather setting up a transaction that will be settled later by the bank and the seller... just like cash today.

      When you deposit your Bitcoin, that will be a true Bitcoin transaction in which your bank will probably merge that value in with other Bitcoins it has obtained. Your account will contain a record of the deposit so the bank can keep track of how much of its total Bitcoin allotment is yours. When you withdraw or debit your account, the bank will perform the Bitcoin transaction and record it on your account. In all of the above, substitute "Bitcoin" for "cash" and it is, for most practical purposes, the same as it is today.

      • by femtobyte (710429)

        To the extent that BTC, in this scenario, is identical to cash in the bank, there is little reason to bother with BTC at all. If your BTC purchases are tied to a verified real identity and a major bank, you may as well use dollars anyway --- you've given up the pseudonymity and independence from centralized financial authorities that motivated BTC in the first place.

      • For many transactions, I expect that Bitcoin will be used the same way. You deposit Bitcoins at your bank. When you use a debit card, you aren't transmitting actual Bitcoins, but rather setting up a transaction that will be settled later by the bank and the seller... just like cash today.

        Then what is the advantage for bitcoin? You are involving a middle man with the attendant fees AND you are incurring all kinds of other costs and risks as well as transaction infrastructure that I assure you is not free of charge.

        When you deposit your Bitcoin, that will be a true Bitcoin transaction in which your bank will probably merge that value in with other Bitcoins it has obtained.

        Then the bank has exchange rate risks and transaction infrastructure that they will have to charge for. Any time you maintain assets in a separate currency you are exposed to exchange rate volatility which is significant even for stable currencies.

    • by plover (150551)

      And double spending is going to be a huge problem. A year ago (around New Years) there was a large gang of thieves who used fraudulent cards in hundreds of ATMs in a coordinated attack, where a hacker had removed the withdrawal limits from the bank's computers. The collective of smurfs withdrew millions of dollars in a few hours.

      Now place a hundred of those thieves into physical world stores, tell them all to use the time according to their cell phone, and have them put 10 BTC worth of stuff in their cart

    • Checking for double spending happens with each node in the bitcoin network as it relays the transaction. This takes seconds. Each node compares a given transaction as it arrives to the past transactions for that sending address. If there is not enough balance, it dumps the transaction. Nodes can do that because they have a complete history of past transactions (the Block Chain) and a memory pool of recently arrived transactions not yet in a block. Since transactions typically go through ~5 nodes from s

  • by peter303 (12292) on Wednesday January 22, 2014 @11:27AM (#46036161)
    Bitcoin shows it can. But bitcoin itself is probably not the best implementation of this concept due to its flaws like currency lost and glacial trading times.
  • But if you're the sender, you're fucked.

  • Bitcoin inequality (Score:4, Interesting)

    by bhlowe (1803290) on Wednesday January 22, 2014 @11:33AM (#46036241)
    With BitCoin, the wealth of the entire system has already been largely distributed to a handful of early adopters. For a global currency, BitCoin is hoarded by a large, mostly geek community. The government doesn't have any, which is why the government will do its best to take it down.. and its easy to "take it down" by auditing any company that advertises on the web that they accept bitcoin. (Accepting BitCoin for merchandise has pretty much meant that the transaction(s) will go unreported, including taxes.)
    • The government doesn't have any, which is why the government will do its best to take it down.. and its easy to "take it down" by auditing any company that advertises on the web that they accept bitcoin.

      People keep claiming this - but don't seem to have any reason for the government to do so other than "protected by my tinfoil hat, only I can see the truth".

      And even so, it's pretty easy to survive such an audit as there are widespread best practices and procedures, acceptable to the IRS, for dealing

    • by Krneki (1192201)

      Because prohibition has worked so well in the past, right?

      It does NOT matter for the cryptocurrency if it is legal or not. If you can buy drugs and porn with it, it has already has a bilion market. Actually if it becomes legal another cryptocurrency will take over the black market.

    • The government doesn't have any, which is why the government will do its best to take it down...

      The thing is, there is no single government on this planet, because we're not a single wolrd-wide country.
      Whereas some government could go on an anti-BTC cursade (as thailand has done) other government could embrace the opportunities to developing businesses.
      There will always be places where crypto currencies can develop.

      "take it down" by auditing any company that advertises on the web that they accept bitcoin. (Accepting BitCoin for merchandise has pretty much meant that the transaction(s) will go unreported, including taxes.)

      Currently, bitcoin aren't useful for anything more than exchanging value between parties (between merchant and customers, or between donators and foundations).
      So at some point of time it ne

    • About half a million people hold a significant amount of bitcoins, where "significant" means > US $80, an amount of cash a person might keep in a physical wallet:

      http://bitcoinrichlist.com/cha... [bitcoinrichlist.com]

      Over time the early adopters will spend some of their coins, otherwise what's the point? You can't eat bitcoins. So the distribution will tend to approach that of any other asset in the world. The exact same thing happens to the founders of any successful tech company - the early employees end up with a big sh

  • Since when did "news for nerds" become "news for shysterism"?

  • by medv4380 (1604309) on Wednesday January 22, 2014 @11:36AM (#46036275)

    The criticism that merchants will not accept Bitcoin because of its volatility is also incorrect. Bitcoin can be used entirely as a payment system; merchants do not need to hold any Bitcoin currency or be exposed to Bitcoin volatility at any time. Any consumer or merchant can trade in and out of Bitcoin and other currencies any time they want.

    So merchants will accept bitcoin by not accepting any bitcoin. Sounds like a circular, contradictory, argument.

    How is said company supposed to pay it's employees in bitcoin if it doesn't hold any bitcoin? If said company doesn't pay it's employees in bitcoin, why does it expect common people to be able to pay in bitcoin? Ether you have to be naive enough to think that the Volatility will go away and will be viable to hold, or you have to be stupid enough to think that you can do business in a currency and never "hold" it. Daily stability is what makes currencies work, and volatility has always made them worthless. Why is Bitcoin different then any other currency that the price of the same good Hour to Hour changes in. A deliberate deflationary spiral, a la the Great Depression, doesn't make it any better than the hyperinflation of Brazil in the 90's. Constantly changing prices make it not worth using outside of fanatics.

  • Bias (Score:5, Informative)

    by bradgoodman (964302) on Wednesday January 22, 2014 @12:03PM (#46036625) Homepage
    FWIW, the article starts with:

    "Marc Andreessen’s venture capital firm, Andreessen Horowitz, has invested just under $50 million in Bitcoin-related start-ups."

    i.e. Even if he doesn't believe a damn word he's saying - he's heavily invested enough to need to make it work.

    • by dkleinsc (563838)

      I guessed that from the summary:

      While politically agnostic the piece is squarely in support of Bitcoin ...

      In other words, he has an opinion, and as you pointed out his personal income is directly affected by whether he's right, but he's pretending to be an independent observer to try to make his argument more believable.

      Here's the real story of Bitcoins (or any other cryptocurrency): It will fall victim to all the problems that plagued the US dollar from about 1790 through 1920 or so. That kind of massive volatility made any economic bad spot about 3 times worse than they had to

  • by SpankiMonki (3493987) on Wednesday January 22, 2014 @01:03PM (#46037341)

    Andreessen's valuation of bitcoin doesn't rest solely on bitcoin's value as a currency. From the DealB%k article:

    "...Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user...What kinds of digital property might be transferred in this way? Think about digital signatures, digital contracts, digital keys (to physical locks, or to online lockers), digital ownership of physical assets such as cars and houses, digital stocks and bonds and digital money."

    So it looks to me like he believes the technology underlying bitcoin as a currency can be leveraged to enable all kinds of transactions - not just purchases of goods and services.

    While I tend to agree with the points made by Glenn Fleishman where he challenges bitcoin's utility as a currency, I think Andreessen's broader vision of the utility of bitcoin still stands.

  • by sjbe (173966) on Wednesday January 22, 2014 @01:08PM (#46037413)

    From TFA

    "Bitcoin is the first Internetwide payment system where transactions either happen with no fees or very low fees (down to fractions of pennies)."

    There may not be large third party fees but that does not mean the transactions are low cost. There are opportunity costs, exchange rate costs, liquidity costs, accounting costs, and more. I keep seeing people fixate on transaction costs as if those are the only costs in play. They are not. Any sane merchant is going to charge for the added cost of handling bitcoins. Even if you can eliminate any middle men from the transaction (unlikely with any meaningful transaction volume), you have plenty of costs to account for.

    Since bitcoin is not widely accepted, setting up the transaction is ordinarily going to be more time consuming (thus more expensive) and unless you think your time is worth nothing you incur significant opportunity costs. If you employ an accountant like most businesses do these costs are easily quantifiable. Bitcoin is very volatile and any use of it assumes very significant exchange rate risk. This may reduce in time but it cannot go away entirely. If you use a middle man to facilitate the transaction so that you minimize exchange rate risk, congratulations you have just introduced transaction fees to the party and thus eliminated any point in using bitcoin. The currently transaction fees for bitcoin are low because they have to be, not because of any inherent cost advantage. Literally every other cost related to bitcoin is higher than for a widely accepted fiat currency like dollars.

    there are no chargebacks – this is the part that is literally like cash – if you have the money or the asset, you can pay with it; if you don’t, you can’t. This is brand new. This has never existed in digital form before.

    There are plenty of ways to exchange money digitally with no possibility of a charge back. Good luck doing a charge back on a wire transfer. Furthermore charge backs exist because of inevitable disputes between buyers and sellers, not to enable buyers to screw sellers. Sometimes buyers misrepresent (both intentionally and unintentionally) what they are selling. Sometimes there is genuine disagreement about the terms of the sale. Sellers may hate them but the exist for a very good reason. Charge backs have a cost but it is not a cost without value. There are plenty of transactions that simply will not take place if the buyer has no independent recourse in the event of a dispute.

    people can trade with Bitcoin (anywhere, everywhere, with no fraud and no or very low fees)

    The notion that fraud can be eliminated is absurd on the face of it. Bitcoin in no way, shape or form will eliminate transaction fraud. At best it might shift around how it occurs a little. The previous argument (bitcoin is like digital cash) directly contradicts this argument. The lack of charge backs merely changes the type of fraud that can occur giving more advantage to sellers over buyers.

    And of course people cannot trade bitcoin "anywhere" because it only works if there is a computer involved on both sides of the transaction. That eliminates a HUGE portion of the global population and most transactions that currently are conducted with cash.

  • by skidisk (994551) on Wednesday January 22, 2014 @01:18PM (#46037531)

    So Marc's article is basically cheerleading Bitcoin. I understand that; he's decided it is the future and has tens of millions invested in making it so. Glenn's critique takes issue with Marc's analogies of Bitcoin to the PC and Internet -- whether those analogies are correct or not seems irrelevant to the main issue: is Bitcoin "the answer".

    After reading these, two things make me think Bitcoin won't ever be huge:
    1. The assertions about no charge or low charges for transactions. Glenn's seems correct when he says this can't continue. Right now, people justify their computing expenses "keeping the books" by mining, but that will end as we approach the end of bitcoins in the mine. For them to continue providing their service, they have to get some value, and that will come from fees. (Did you see what people are paying to set up powerful enough computers these days? http://dealbook.nytimes.com/20... [nytimes.com] ) So the nirvana of incredibly low transactions fees vanishes (sale ends soon so act fast -- supplies are limited!)

    2. The assertion that the network is safe from attack or manipulation. Right now, bitcoin is too small so no one cares. But when governments start caring, does anyone really believe that the NSA will not throw its resources at this problem if needed? Most stories (including these) quote how it's virtually impossible to have enough computing power to destabilize the network. I've heard these claims before -- in the 1980s, the US government would allow us to export software with a 40 bit salt on our pathetic 32 bit encryption because it was "too secure and endangered national security". Yeah, right. Every single claim has been true for a while -- until it wasn't. Everything is eventually cracked. I'm not sure I'm willing to turn over all my assets to the cloud, and I don't think most people will, either. So bitcoin may be a bit player, but I don't expect it to rise to the levels Marc projects.

  • by bradgoodman (964302) on Wednesday January 22, 2014 @02:10PM (#46038215) Homepage
    What happens to Bitcoin (and other/like virtual currencies based on mining difficulties) when Apple unveils their shiny new iQuantum computer, and mining power of the masses (or those of the privileged few) suddenly increase a hundred-billion fold [or whatever]?
    • by Procyon101 (61366)

      It would distribute the concentration of computational power and increase the security of bitcoin transactions. The security of the protocol is dependent upon individuals not being able to outcompute the rest of the network. A widespread distribution of computational power reduces the opportunity of individuals and bolsters the protocol security.

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