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."
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.
Re:Bitcoin is not going to last... (Score:5, Informative)
Re:The Problem (Score:5, Informative)
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.
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).
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.
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.
Re:The Problem (Score:4, Informative)
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.