Marc Andreessen On Why Bitcoin Matters (And A Critique) 332
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."
The Problem (Score:3, Insightful)
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)
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)
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.
Re: (Score:2)
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.
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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.
Re: (Score:2)
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)
Re:The Problem (Score:4, Insightful)
It would be kinda funny to see a world with only 1 bitcoin left, spread among billions of users.
Not really. A decent chunk of change would be called a Satoshi and afterthe protocol's updated, I'm sure a new name would spring up for whatever 10^-15 BTC is called. There's nothing special about 1 bitcoin.
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Presuming the capacity for additional subdivisions keeps getting built into the system as needed, I don't see how transferring 0.0000000000000000000000000000000142 bitcoins is any more difficult than transferring 142. Or for that matter how the current situation is any different than saying that there will only ever be a single "bitcoinomony" that has not yet been fully created, and that bitcoins are simply a convenient subdivision of the 1 bitcoinomy that is subdivided among all the bitcoin users.
Obviousl
Re:The Problem (Score:5, Informative)
Re: (Score:2)
Can't you use SI prefixes like the rest of the world does for large/small quantities of units?
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Re:The Problem (Score:5, Insightful)
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Re: (Score:2)
Re: (Score:3)
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.
Re: (Score:2)
The lossrate increases the effect of deflation (for those who don't lose the coins, ofc)
Re:The Problem (Score:4, Insightful)
Re:The Problem (Score:4, Insightful)
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.
Re: (Score:3)
Re: (Score:2)
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.
Wrong analogy (Score:3)
Re: (Score:2)
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.
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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)
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.,
Re: (Score:2)
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).
Re: (Score:2)
BTW, your sig: would that be "Thomas Hewitt Edward Cat"?
I loved that series...
Re: (Score:2)
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.
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So what the system really needs now is digital couch cushions?
Another problem: unpredictable deflation (Score:3)
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
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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
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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.
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The second problem is that Bitcoin is unstable. Yes, it is worth $816 right now, but if I'm going to make a
So go via some payment processor and the vendor can do the same. You'll only hold BTC for a short enough time for it not to matter.
The third is no regulation. Nothing prevents exchanges from making off with whatever they have and coins stored with them.
Just like cash. I don't see the dollar bill dying out any time soon. In fact it is exactly like cash in many regards.
BitCoins are a solution in search
Re:The Problem (Score:5, Interesting)
Oh boy, it really will be an education for some.
Yes bitcoin is unstable, it is also a very new technology. Things should stabilize as the currency matures.
No regulation is not all about disadvantages. There are many advantages as well like not being subject to the whims of a transasction processor to hold your payments or deny your business. Bitcoin fills a need but is not meant to replace every other currency out there. Crime is crime my friend. If somebody picks your pocket who do you go cry to to get your money back. Bitcoin is cash and you should be careful who you do business with.
Bitcoins being a solution in search of a problem; I disagree, they are a solution to the many problems that plague the financial industry today. You don't see it as a problem that Visa and Mastercard take a 2% to 3% cut out of every transaction? That is billions of dollars being syphoned off of people and merchants every year just because there is no other convenient way to pay somebody besides cash. Ya, our banking system works well in first world countries but tell that to an immigrant who can't get a bank account and if forced to pay Western Union a big chunk of the remittance they are sending home to support families living in poverty. Bitcoin has the potential to divert billions to people who need it in poorer countries, to feed, clothe and shelter themselves.
Also tell that to Argentinians who are seeing their life savings being eroded at a rate of 30% a year. Bitcoin is a safe haven for all those people who don't have the connections to store other currencies offshore. Tell them there are no problems that need a bitcoin solution
Frankly your view on this is a first world view.
Anonymity: Bitcoin are pseudonymous. Anonymity is not the main goal of bitcoin. They are more anonymous then paypal, visa et al. but less so then cash. But if you want to deal with Paypal and their ridiculous fees be my guest. If you like having paypal be the judge, jury and executioner of your transactions, withholding your payments, freezing your account at any whim without explanation to you then that is your right I suppose.
Investments. Bitcoin is no doubt a high risk investment. What's the problem here, you can still buy bitcoin as you need for spending without holding large amounts. Junk bonds and penny stocks are also risky, but people still buy them. Many people invest in bitcoin because they believe in the long term potential, that is their choice, as it is yours to invest in some geek which is a noble thing to do.
Intrinsic value; People only value US dollars because other people value it. While dollars are backed by government, bitcoin is backed by math. You can't counterfeit it, you can't create more then 21 million of them by the year 2140. It is backed by a whole community of people that believe in it and the infrastructure being built right now around it. If you assign it 0 value then that is your choice, many people feel otherwise because they see bitcoin as uncorruptible by central banks who infuse billions of dollars monthly into the econonmy out of thin air.
I encourage you to read the whitepaper on bitcoin written by Satoshi himself (google it) , get to understand stuff before you bash it. If you think bitcoin the currency is all the rage, get to know the protocol. Wait until the protocol is used for loans and contracts. It has the potential to replace entire industries in banking and law with a 100 lines of python code.
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Ya, holding to the true definition of currency I agree with you. The term tends to get used interchangeably with money and I am guilty of that as well. Substitute "currency" for "money"
Crime is crime: you are comparing bitcoin to credit cards and bank accounts. It's more like cold hard cash. If you get your pocket picked, it's gone. Bitcoin is digital cash, not a bank account in someone else hands for safe keeping. You are responsible for it. Your money in a bank account is just trusted to the bank
Re:The Problem (Score:4, Insightful)
News flash - dollars, euros, and yuan also have no intrinsic value beyond the heat you can generate burning them. Even gold has very limited inherent value - there's not all that much it's good for except anti-corrosive coatings and decoration, and decoration is strictly a luxury good whose value is heavily dependent upon the surpluses of the surrounding economy and the alternative luxury good available.
Currency is by its very nature an arbitrary construct who's only value is what people agree to. Wampum was a common standard of exchange in parts of the US for centuries, possibly millenia - but just try to buy something with it today. Bitcoin is shaky because it's still just getting established, and thus much of its value comes from speculation. Give it a century to get established and its value will be determined primarily by the volume of the economy using it for transactions, and thus be far less volatile. Of course that presumes it doesn't collapse first, which is also an option, and is one of the factors making speculation so appealing now - risk = potential for profit.
Bitcoin, like other currencies, is an economic tool. One with strengths and weaknesses very different from most anything else that's ever seen such a level of adoption - and that imparts a certain inherent value which will scale as the value it imparts to the economy changes. Contrast that with Beanie Babies, which are amusingly shaped bags of pellets whose inherent value is limited to amusing children, or tulip bulbs before them, whose only inherent value is being able to grow a pretty flower. Doesn't stop people from speculating in them - a certain percentage of humans *love* to gamble, but if the inherent value can't possibly scale to match the price then you are in a bubble, pure and simple.
Run for the hills! (Score:5, Funny)
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!
Not quite the same thing, yo (Score:5, Insightful)
"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.
Re: (Score:3)
> 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
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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.
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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.
Pyramid schemes and such (Score:5, Funny)
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.
Byzantine Generals Problem (Score:2)
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 about... (Score:2)
Criticisms Are Largely Off The Mark (Score:5, Insightful)
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)
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.
not going to HFT them (Score:2)
Re:Verification Time (Score:5, Insightful)
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.
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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.
Time = Money (Score:3)
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.
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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
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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
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Target are willing to take the risk of chargebacks because they trust Visa not to do chargebacks without a good reason. They are not willing to trust bitcoin because they have no experience with most of the people coming through the store and believe that there is a higher likelihood of getting scammed.
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Try maxing out your spending limit for six months, then asking for chargebacks on every single purchase made. You can only scam a couple of minor chargebacks before the credit card companies catch on and side against you (and make sure you never get credit again); try and pull anything big and systematic, and you'll wind up with fraud charges against your real identity. An ephemeral pseudonymous bitcoin wallet ID doesn't carry the same assurances against large-scale repeated fraud.
"cryptocurrency sort of works" (Score:4, Insightful)
No fraud recourse for the recipients (Score:2)
But if you're the sender, you're fucked.
Bitcoin inequality (Score:4, Interesting)
Re: (Score:3)
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
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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.
single-country world ; acceptance (Score:3)
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
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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
Oh yay! Another bitcoin slashvertisment! (Score:2)
Since when did "news for nerds" become "news for shysterism"?
The Volatility Argument is Crazy Talk (Score:3)
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)
"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.
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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
Andreessen's valuation of bitcoin as a currency (Score:3, Insightful)
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.
Andreesen's arguments are absurd (Score:5, Informative)
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.
I don't think so, Marc... (Score:4, Insightful)
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.
Quantum Computing (Score:3)
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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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Hello, I'm a nerd, and thoughtful analysis of bitcoin (cryptocurrencies being inherently nerdy) matters to me.
Re:Slashdot obsession (Score:4, Informative)
Please, stfu already. What I'm tired of is reading these complaints. Bitcoin is an interesting technology, with huge potential (regardless of the drawbacks). If you don't like it, just skip over, you don't have to spend the time complaining.
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>you don't have to spend the time complaining.
I'm sorry, could you rephrase that? I understand the individual words, but as a sentence they make absolutely no sense!
Re:Bitcoin is not going to last... (Score:4, Insightful)
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Try taking more than a couple of thousand $ through an airport or across a border sometime without declaring it and see what happens.
Re:Bitcoin is not going to last... (Score:5, Informative)
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True, but there's really no telling when money truly changes hands. Okay, so we have account A buying Bitcoins and account Z cashing it and a chain of transactions A->B, B->C, C->D and so on, where M->N is known to be a drug transaction. Is A = M and N = Z or are they ten steps removed? A bought something from B, who spend them on hosting at C, which hired some freelance work D, who gave them to friend E for a bottle of scotch.... you get the general idea. The less old currencies is involved the
Re:Bitcoin is not going to last... (Score:4, Insightful)
Sadly, Glenn Fleishman suggests to resort to the use of violence (recourse in a court system, based on government theft and coercion) in order to seek a "remedy" to these problems, whereas many would rather see people be more careful with their transactions and keeping the government out of them (wherever possible).
You are naive. Without government "violence" , "theft" and "coercion", there is nothing stopping someone bigger and stronger using violence, theft and coercion to take all of your stuff. And no, you cannot defend yourself, since you're not the most powerful person. There will always be someone bigger and stronger.
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You support monopolies on violence and I do not. I'd like competition on price for whoever would be needed to defend me, and not have to pay twice (or more times) for the same level of service.
You can already pay plenty to have a private security firm defend you.
The government is there to stop you employing your firm to steal stuff from me merely because I can't afford to spend as much on security.
The thing is you ultra-libertarians suffer exactly the same flaws as really staunch communists. Both of you bel
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Oh no, I believe in the worst in people, which we already have.
The why do you fail to understand that you are not rich enough to stop other people stealing your stuff?
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Honestly I think it's an advantage for a first-gen digital currency - if the transaction were truly anonymous and untraceable then governments would be *far* more interested in shutting them down and they'd never get established outside of the black market. As it is they can afford to be hands-off, every transaction is permanently recorded, and their data-mining systems are no doubt retroactively making the network of obfuscated transactions ever more transparent. In fact I imagine prohibition and tax age
Beware of "We" (Score:3, Insightful)
The wealthy elite don't need another currency.
Those of us living paycheck-to-paycheck need a currency whose value doesn't decay while stored in cash/checking (or the modern equivalent).
Those of us in the middle class need something that won't fall victim to another anti-Wikileaks financial blockade.
So when you say "we", it goes to show which group you identify most with, and how unaware you are of people's needs outside that space.
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If you're living paycheck-to-paycheck, you don't have any currency stored!
If you're claiming that your money is getting significantly devalued in the two weeks it sits in your checking account, in the current low inflation economic environment, then please, start taking your meds again.
Bitcoin not vs USD/EUR but vs. PayPal/WU and such (Score:5, Informative)
We don't need another currency.
The target after which bitcoin system is going, aren't the other *currencies*.
The point is not to replace USD or EUR with BTC.
Bitcoin is going after system which transfer money. They point of the bitcoin system is to displace/replace PayPal or Western Union.
The closest thing which ressembles to what bitcoin brings to the table are SEPA payment.
Bitcoin (like SEPA) brings :
- Direct end-to-end payment without any intermediate (as long as both banks support SEPA you can send money accors. As long as both end-points support bitcoin protocol, you can send BTC accross). No need to get anyone else involved (you don't need MasterCard to come in do some shit).
- Complete freedom of choice regarding what you use (The choice of the SEPA-compatible bank that the merchant use, doesn't force me to use a specific bank. The merchant might be using some banks in Germany, and I might be at Raiffeisen in Switzerland. Similarily the bitcoin merchant can be using bitpay for seamless BTC-to-EUR payment processing and conversion, whereas I might be sending my coins from my localbitcoin account). (Compare the situation when paying USD online: both end of the transaction are required to by client at PayPal, for exemple). It goes even further in that SEPA can't directly send EUR from the wallet in your pocket, you need to have an account in a bank. Whereas you can send bitcoins from your own copy of bitcoin-qt client, from an offline armory, etc.
- High speed (SEPA payment take a couple of days, a week in worst case scenario) (bitcoin are even faster payments take minutes, a couple of hours in worst case)
- Low fee (SEPA payment between two compliant bank is a couple of EUR, bitcoin payment are the equivalent of a fraction of cents).
- No charge back. SEPA transfers, money hand exchanges, and bitcoin transfers: when it's done, it's done.
- No payment or account freezing. (All the complains against paypal are gone !)
In addition bitcoin goes a bit further:
- As mentionned above: bit faster, cheaper, than SEPA and you can even be your own bank account.
- bitcoin aren't geographically restricted (SEPA is Europe only. Bitcoins are internet-wide and even a bit more).
- bitcoin aren't fixed to a specific currency like EUR (you could have obtain your bitcoin using CHF, and the merchant you're buying goods from could be converting them to USD).
- a bank account could still be seized by government or law enforcement, whereas, depending on how you setup your stuff, you can be 100% in charge of your account. (possibility for 0% risk of seizing/freezing). That's negligible in the (somewhat) stable environment where SEPA is used, but that a very useful property for people living in unstable regions.
- possible implementation of security at the payment procotol-level. using 2-out-of-3 signature scheme you can implement trusted escrow-like system, except that the escrow CAN'T run away with the money by design.
(The security model is rather different than charge-backs, where the credit-card company or paypal function as jury/judge/executionner at the same time. The model is that in case of dispute, a trusted 3rd party can be asked to arbitrate how should get the money. That trusted party by design has nothing to do with the payment processor or wallet used by the merchant and client, and is agreed upon before hand. With credit cards, the merchant just has to accept that charge-back will happen).
bitcoin has some peculiar quircks:
- banking is about trust (your bank should be trusty) and secrecy (some countries like Switzerland are very paranoid about banking secrecy).
- bitcoin is about handling payment between untrusted partners, and the security comes by the fact that anybody can check the transaction, meaning that absolutely everything is broadcast to everyone else for verification purpose. Bye-bye secrecy and privacy, only pseudonymity is possible. (you can follow all transaction by account numbers, but you won't necessarily be able to stick an exact identity to each number).
Re:Here is why it doesn't (Score:4, Interesting)
Oblig: http://xkcd.com/927/ [xkcd.com]
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Because it can't be used universally.
Nor will it ever be free from regional or political constraint.
Anyone who thinks this is living in Fantasy Land.
Re:Here is why it doesn't (Score:4, Insightful)
Okay, I'll admit regional political constraints may end up affecting Bitcoin - Glenda may ban the usage of Bitcoin in Oz for example.
However, it is pretty universal - anyone, anywhere who has access to the internet can get in on the game, local laws aside. And there's lots of places in the world where Bitcoin, even with all its problems, is considerably superior to any other non-cash alternatives. Just try sending money internationally to your dirt-poor relative in an unstable African nation any other way.
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bitcoin internals. (Score:4, Informative)
2 key points, 1st regarding internet availability, 2nd regarding connectivity requirement.
1.
Web access is surprisingly better than banking in some countries.
It doesn't require that much. Internet in these countries isn't necessarily running on a backend of copper telephone network set up by the government (which requires a big infrastructure working perfectly).
In developing countries you see lots of small companies jumping in and deploying cell phone towers (GSM) - they are much cheaper than a copper network, less likely to be stolen (you can't steal microwaves between tower. but you can steal copper lines between switches and try selling it for the metal's worth), can rely on batteries when power is reliable all the time, are way much more easy to deploy in remote rural areas, etc.
(That's why cellphone are much more popular than landlines in developing countries).
In worse environment, where Telco aren't interested in yet, or haven't invested already, there are people building networks on a shoesting budget with Wifi, mesh networking, etc.
You can actually be online, while at very lost and remote places.
Meanwhile, banking requires an established bank, with good trust, that foreign banks will accept doing business with, and that locals will accept having accounts.
That won't get seized by the local government or by revolutionaries. (Whereas if you telco goes bankrupt, just get a SIM for another one. If a terrorist attacks blows up the AP you usually connect to, you can find another one to use).
There are very remote place, lost small village, where you can still manage to have some form of online connection, while there are no banks in the vicinity worth doing business with.
2.
the bitcoin *network* requires that a big enough number of nodes are connected at the same time for the protocol to work correctly.
but payments don't require constant online presence.
you can actually send money to a public address which is not in a wallet that is currently connected to the network.
in fact, there are some addresses (like brain wallets, like physical coins, like brainwallet, like armory-generated address) that are by design "offline" until actually used. The paying party (the guy sending money) broadcasts the payment to the public address transaction to the whole network. But the receiving party (the guy receiving the money) keeps the private key secret and not connected to the network until needed.
in some case (armory) it's even possible to *spend* bitcoins while staying offline: the software running on the offline machine can sign a transaction and output a message, which can be stored onto a medium (usb stick, scannable QR-code, etc.) and transported via sneaker net to a point where it can be broadcast to the network.
normally, that was designed and is used most of the time for security: to provide an air gap between the web and the private key.
but the same can also be used for cases were immediate online connectivity isn't possible.
That makes bitcoin a potential candidate to help transferring value to the most remote corner of the world.
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However, it is pretty universal - anyone, anywhere who has access to the internet can get in on the game, local laws aside.
Your own words suggest you have a very loose definition of "universal."
Re:Here is why it doesn't (Score:4, Informative)
Smartphone-based internet access is penetrating even the poorest and most remote corners of the world, and at a far faster rate than credit cards or other banking infrastructure. Can you name any other economic tool besides cash that's even half as universal?
And very, very few places have laws against using bitcoin. Besides which legality has only a moderate effect on most people's behavior, nowhere close to what morality has.
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Just try sending money internationally to your dirt-poor relative in an unstable African nation any other way.
You do realize that millions of people manage to do this, and have for centuries before Bitcoin existed? See the Hawala system [wikipedia.org], for example, as a decentralized "network of trust" system for money transfers outside of centralized governmental and banking institutions. Bitcoin is not the first or only system for "independent" money transfers. Given BTC's current large value fluctuations and difficulty converting to cash/purchases (good luck buying a bag of rice with BTC in dirt-poor Africa), it's not even a p
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Yes, it's possible. But have you ever looked at the transaction fees typically associated with the Hawala system?
As for your berating of the volatility and lack of bitcoin-accepting merchants, I agree. But that's a transient phenomena - either the Bitcoin economy will expand until the speculation-based volatility and lack of merchants are reduced to manageable levels, or it will collapse and become nothing more than a historical footnote as the first digital currency to see notable adoption. If it offere
Just like drugs (Score:4, Insightful)
Because it can't be used universally.
Nor will it ever be free from regional or political constraint.
The same is true of drugs, which is why it's so hard to buy drugs except for the few countries that legalize them.
Oh wait.
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No, you're going to be modded down for reading and posting in another of these speculative bitcoin stories when it obviously disinterests you.
Assmunch.
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Probably gonna be justly modded down for offtopic, but I'm tired of these speculative bitcoin stories.
Generally speaking, I agree. However, in this case, I read both the Andressen article and the rebuttal from top to bottom and found them both interesting. More so, in fact, than the inevitable rehash of all the old Bitcoin comments above and below.
When a poster posts a comment to get a reaction from the crowd, it's called "Trolling". When Slashdot posts an article to get a reaction from the crowd, it's called "News for Nerds". Now that today's Bitcoin article has been posted, we can look forward to toda
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Weren't bitcoins worth about 10 bucks a year ago? If I had bought some then, I would have made some big profits. The question is, will they continue to go up, or will they crash and burn. If the former, one could still make big bucks.
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Did they ever? It seems like it was years after bitcoin came out before I read anything, even technical documents, that didn't mention the political implications.
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>Which means for individuals it must be able to be exchanged for basic goods and services
absolutely
> and pay taxes
This doesn't follow - businesses accepting bitcoin aren't going to care that you can't pay your taxes with them directly, and businesses not accepting bitcoin aren't going to care if you can. Accepting bitcoin will be purely based on the economics of their particular business. Much like credit cards - you can't use credit directly to pay your taxes, and yet most retailers accept credit c