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The rhetoric around explanations of the utility of cryptocurrency has changed a lot in the past few years. These days, the major emphasis is on circumventing t

by nmrm 12y ago

The rhetoric around explanations of the utility of cryptocurrency has changed a lot in the past few years. These days, the major emphasis is on circumventing the fees/processes associated with banking (as opposed to the libertarian and/or anonymity rhetoric, which dominated a couple years ago). As a witness, this landing page. And I think the rhetoric has converged to the strongest argument -- political ideology aside, the only true substantial marketplace advantage of BC over sovereign currency is the ability to side-step the banking industry. But then, this makes Bitcoin mostly a cottage industry taking advantage of technology to side-step banking regulations. I see two likely outcomes -- regulations are extended to BC and BC companies start charging as much as banks to compensate for the inherent riskiness of the business, or banks push for regulatory reform while making their services significantly cheaper and faster. I hope for the latter, because if fiat -> fiat transaction is your only goal, cryptocurrency is just an inefficient hack. If I just want to transfer some cash to someone, I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it. There's no reason to broaden the attack surface and add yet another middle-man (I mean, entrepreneur). In reality, I expect a combination of the two former scenarios will cripple BC, and that a new era of internet cash transfer services will serve this market instead.

opinologo 12y ago
Bank fees are due to the cost of fraudulent operations and chargebacks which doesn't exist in Bitcoins since transactions, once confirmed are not reversible. Instead you can use escrows while paying with Bitcoins. Secondly the Bitcoin network is much more efficient in terms of economic resources used for make transactions possible so you can expect that fees will be smaller as well.
- nmrm 12y ago
  > transactions, once confirmed are not reversible. Oh wonderful! So if I (as a customer or as a service) make a mistake I'm completely hosed. And since the service isn't insured (yay no regulation), a mistake on one customer's account can harm everyone else. My point was that this business model exposes everyone to unacceptable risk, and therefore isn't sustainable with or without regulation. > Instead you can use escrows while paying with Bitcoins. Escrow is not a competitive advantage. > Secondly the Bitcoin network is much more efficient in terms of economic resources Fiat -> BTC -> Fiat adds an unnecessary link to the Fiat -> Fiat transfer. How could this possibly be more efficient? There are two sets of reasons. The first are essential -- insurance, regulation, etc.. My claim is that BC's competitive advantage in these settings will evaporate with scale. The second set is inessential -- banks got lazy and greedy. Again, at scale BC has no advantage over lean cash transfer startups or even just banks cutting the fat when BC becomes anything close to a threat. For me, the best-case scenario is that BC startups are successful, force banks to reform, and then languish in obscurity since the extra step of indirection isn't necessary for fast/safe/cheap cash transfers.
  - opinologo 12y ago
    >> Oh wonderful! So if I (as a customer or as a service) make a mistake I'm completely hosed. And since the service isn't insured (yay no regulation), a mistake on one customer's account can harm everyone else. There is no reason why the payment processor can't implement some security in case of errors. What is more, with credit cards you are handing out your details every time you do a purchase. Have you ever heard of stolen credit card data? When you transfer BTC your don't need to send all your private details that would permit an unwanted second purchase. >>Fiat -> BTC -> Fiat adds an unnecessary link to the Fiat -> Fiat transfer. How could this possibly be more efficient? In a BTC economy there is no need to do the conversion.
    - nmrm 12y ago
      > There is no reason why the payment processor can't implement some security in case of errors. Sure, and banks already do that. A lot of it, in fact. My point wasn't that these things aren't possible with BTC. Rather, my point was that these problems don't go away just because you're not using a traditional currency. Which means the overhead associated with these problems doesn't go away, either. It's just that BTC is really small right now, and so the cost + difficulty of addressing these problems at scale isn't yet apparent. > with credit cards you are handing out your details every time you do a purchase. (1) No one makes payroll with a credit card; (2) BTC transfers -- especially at scale -- aren't as fast as CC transfers without someone assuming some risk; (3) CC companies basically exist to assume that risk and mitigate; (4) if you're going to design a new payment processing technology appropriate for POS transactions, creating a new currency is absolutely not necessary. > In a BTC economy Well.
      - baddox 12y ago
        > My point wasn't that these things aren't possible with BTC. Rather, my point was that these problems don't go away just because you're not using a traditional currency. Which means the overhead associated with these problems doesn't go away, either. I think the advantage is that alternatives to the traditional banking system introduce competition in the banking and financial services industry. Obviously, overhead doesn't magically go away, but I would expect competition to result in an increase in efficiency.
adammcnamara 12y ago
Countries like Canada have done exactly this, extending anti-money laundering and terrorist financing disclosure rules to BTC. http://www.coindesk.com/federal-bitcoin-law-canada/ http://www.coindesk.com/federal-bitcoin-law-canada/ The real benefit is time of transfer. ACH is infuriatingly slow. If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior. BTC could (theoretically) make daily payroll possible. The net benefit to society could be substantial. Payday loan activity would drop considerably. Some, but not all, credit card use would drop. All of the instruments that help "time shift" money could become far less necessary, along with the substantial fees associated with it.
- nmrm 12y ago
  > ACH is infuriatingly slow. Tell me about it. > If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior. Right. It'd love to see BC companies do well and then die off, so that we get reforms in banking without the unnecessary cruft of an intermediate currency intended for nothing except standing in-between fiat transactions. OR the inherent risk to consumers which comes with lack of regulation. > The real benefit is time of transfer. To what extent does this benefit come from not being subject to regulation? (edit: not rhetorical; I've no idea) > If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior. But the check still arrives on Friday, so the benefit is really to the business rather than the employee. This negates the employee-centric benefits you mention in the next paragraph (pay day loans, credit cards, etc.) That is, unless the business is giving advances on payroll. But I think that's something companies don't do for reasons unrelated to choice of currency and transfer time. (edit: I suppose another alternative is that you could pay your employees more often because the process is cheaper and faster. That would be a big win. But I think other cash flows would in some cases prevent this from happening unless everything is done in BTC.) edit: Die off is a bit harsh? I don't want fiat->btc->fiat because it's just silly, but of course if btc causes reforms in the banking industry I sincerely hope btc companies make a huge amount of money in the process :-) edit2: Also, thanks for the link!
  - opinologo 12y ago
napoleond 12y ago
> I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it I'd rather do that too, but it's unlikely to ever happen; not for international transfers between any country. There is a tangible economic cost (trust, through all the financial institutions involved in each country, and the work required in meeting the regulatory requirements that protect that trust, and in fact the work required in creating and maintaining those regulations) to transferring cash internationally under the current paradigm which has been solved more efficiently in the Bitcoin network. I agree with you that Bitcoin is far from perfect, but I think calling it a cottage industry is extremely short-sighted. I think what's more likely to happen is that, long-term, banks will either converge around using a blockchain-based mechanism of some sort to transfer funds or the Bitcoin economy will come of age outside of the existing financial industry, at least as the transport layer for fiat exchange.
- nmrm 12y ago
  > which has been solved more efficiently in the Bitcoin network. Except bitcoin hasn't solved the problems with international transfers. Bitcoin's just ignored them. There's a huge difference, and I don't think ignorance is sustainable at scale. > There is a tangible economic cost I actually lose a couple hundred usd a month right now. So, I really do sympathize. > I think what's more likely to happen is that, long-term, banks will either converge around using a blockchain-based mechanism of some sort to transfer funds Maybe. That would be fine with me. I'm not really sure I understand why banks would do that vs. just using social processes, since those processes still need to exist in order the address the problems with international transfers and have been around a lot longer than bitcoin. > I think calling it a cottage industry is extremely short-sighted. I mean cottage industry in the most literal sense of the term, and was referring to the present and historical situation. And I think that's fair -- very few people are employed full-time doing BTC-related work, and I don't imagine the profit margins are insanely high (or even non-red in some cases).
  - napoleond 12y ago
    > Except bitcoin hasn't solved the problems with international transfers. Bitcoin's just ignored them. Very odd statement. Bitcoin (and related cryptocurrencies) is the only way any two peers on the planet can transfer funds electronically without a trusted third party. That's a fundamental shift from what was possible before. It solves the biggest part of the problem; what's left is reputation systems to facilitate transactions between people who don't know each other personally and enabling technologies that make the whole thing more accessible to "normal" people. (Nobody is ignoring those problems, either, FWIW, but they aren't Bitcoin's to solve.) > I'm not really sure I understand why banks would do that vs. just using social processes, since those processes still need to exist Maybe that's where we're talking past each other. Those processes don't need to exist with Bitcoin anymore. With Bitcoin, Bob's tiny credit union in Albuquerque can transfer $100 to Alice's credit union in Thailand for free. The credit unions don't need to negotiate with anyone or depend on anyone except for each other. In fact, the credit unions don't even need to factor into the equation at all; they just provide a convenient interface for consumers to access the system (and potentially a hedge for fraud, etc). It is enormously more economically efficient than the current model. It's the difference between express post and email. (Right, leaky analogy, I get it. It's a paradigm shift, is what I'm trying to say.)
api 12y ago
I remember thinking this a few years ago... that cryptocurrency would be to banking what Napster was to records. This is particularly going to be true on the international scale.
- nmrm 12y ago
  Thanks, that's a perfect analogy.
zanny 12y ago
I'm a believer that fiat state controlled currency is fundamentally flawed and destructive for societies and economies. And bitcoin is a global phenomenon - China can do all it wants to block it, and the market rebounds just fine. It can work without the US as well, albeit there will always be black markets. But bitcoin is a step towards approaching the ultimate forms of value exchange. It eclipses its predecessors in every regard, especially considering anything one might find "lacking" in btc can be solved by businesses built on top of it (chargebacks and instant confirms at coinbase, etc). But centralized currency will always have the implicit inefficiencies of central planning. I don't think bitcoin is necessarily the right algorithm for a money meant to replace the day to day currency of an economy (peercoin or doge are much better equipped to do so, with either reduced blockchain maintenance / size, or increased monetary base expansion without a finite limit) but the concept, money backed by cryptography, is the best solution we have to provide universal exchange semantics between human beings. Nothing else even comes close, and like others have said, that is no more apparent than trying to buy or sell goods or transfer funds outside your fenced in economy running in some local state currency.
- nmrm 12y ago
  It's uninformative to conflate monetary policy with the underlying material/technology used for currency. The two are totally and entirely unrelated. It's like claiming that changing from paper to (still fiat) coins is good because this would cause a fundamental shift in the nation's purportedly destructive monetary policy and also paper rips which is a bummer. So coins > paper, clearly. Which is to say, you are really making two totally independent claims. One is at least plausible and the other isn't. The first is that bitcoin provides a viable alternative to current methods for exchanging fiat currency. This is probably the most sensible argument for cryptographic currency, and I think is worth discussing. The discussion below delves into some specific arguments on this issue. Your second claim is that decentralized cryptographic currency will or ever could/should replace state-backed fiat currency. I don't think this is a particularly useful point to discuss, since informed prediction is impossible and the prescription mostly amounts to political persuasion. edit: but also, the US could switch to a cryptographic currency with all of the practical benefits of bitcoin, and still retain basically the same amount of control over its currency. Technology can never solve big political problems.
beaner 12y ago
It seems to me less that the "rhetoric" has changed, than that the set of people who use bitcoin has simply greatly expanded to individuals with increasingly less revolutionary ways of interpreting the currency. The people in it from 3 years ago still have the same beliefs. The people in it from 3 months ago are digging it because it's more popular among their colleagues, and they have to justify it somehow. "Lower fees" is the only thing they can come up with.
- nmrm 12y ago
  That's an interesting hypothesis about why the dominant rhetoric has changed. I think another one is that people are starting to use bitcoin for real-world use cases, and finding and addressing specific pain-points is far more likely to generate revenue than trying to convince others of your take on monetary policy.
blake8086 12y ago
Something else that can change is fiat -> fiat transactions become progressively less useful if everything supports BC transactions.
baddox 12y ago
> the only true substantial marketplace advantage of BC over sovereign currency is the ability to side-step the banking industry. I see that as pretty much synonymous with the traditional libertarian rhetoric, considering that the banking industry is considered (at least by libertarians, and probably a lot of other people too) as essentially one with government.

by nmrm 12y ago

opinologo 12y ago

Bank fees are due to the cost of fraudulent operations and chargebacks which doesn't exist in Bitcoins since transactions, once confirmed are not reversible. Instead you can use escrows while paying with Bitcoins. Secondly the Bitcoin network is much more efficient in terms of economic resources used for make transactions possible so you can expect that fees will be smaller as well.

nmrm 12y ago
> transactions, once confirmed are not reversible. Oh wonderful! So if I (as a customer or as a service) make a mistake I'm completely hosed. And since the service isn't insured (yay no regulation), a mistake on one customer's account can harm everyone else. My point was that this business model exposes everyone to unacceptable risk, and therefore isn't sustainable with or without regulation. > Instead you can use escrows while paying with Bitcoins. Escrow is not a competitive advantage. > Secondly the Bitcoin network is much more efficient in terms of economic resources Fiat -> BTC -> Fiat adds an unnecessary link to the Fiat -> Fiat transfer. How could this possibly be more efficient? There are two sets of reasons. The first are essential -- insurance, regulation, etc.. My claim is that BC's competitive advantage in these settings will evaporate with scale. The second set is inessential -- banks got lazy and greedy. Again, at scale BC has no advantage over lean cash transfer startups or even just banks cutting the fat when BC becomes anything close to a threat. For me, the best-case scenario is that BC startups are successful, force banks to reform, and then languish in obscurity since the extra step of indirection isn't necessary for fast/safe/cheap cash transfers.
- opinologo 12y ago
  >> Oh wonderful! So if I (as a customer or as a service) make a mistake I'm completely hosed. And since the service isn't insured (yay no regulation), a mistake on one customer's account can harm everyone else. There is no reason why the payment processor can't implement some security in case of errors. What is more, with credit cards you are handing out your details every time you do a purchase. Have you ever heard of stolen credit card data? When you transfer BTC your don't need to send all your private details that would permit an unwanted second purchase. >>Fiat -> BTC -> Fiat adds an unnecessary link to the Fiat -> Fiat transfer. How could this possibly be more efficient? In a BTC economy there is no need to do the conversion.
  - nmrm 12y ago
    > There is no reason why the payment processor can't implement some security in case of errors. Sure, and banks already do that. A lot of it, in fact. My point wasn't that these things aren't possible with BTC. Rather, my point was that these problems don't go away just because you're not using a traditional currency. Which means the overhead associated with these problems doesn't go away, either. It's just that BTC is really small right now, and so the cost + difficulty of addressing these problems at scale isn't yet apparent. > with credit cards you are handing out your details every time you do a purchase. (1) No one makes payroll with a credit card; (2) BTC transfers -- especially at scale -- aren't as fast as CC transfers without someone assuming some risk; (3) CC companies basically exist to assume that risk and mitigate; (4) if you're going to design a new payment processing technology appropriate for POS transactions, creating a new currency is absolutely not necessary. > In a BTC economy Well.
    - baddox 12y ago
      > My point wasn't that these things aren't possible with BTC. Rather, my point was that these problems don't go away just because you're not using a traditional currency. Which means the overhead associated with these problems doesn't go away, either. I think the advantage is that alternatives to the traditional banking system introduce competition in the banking and financial services industry. Obviously, overhead doesn't magically go away, but I would expect competition to result in an increase in efficiency.

adammcnamara 12y ago

Countries like Canada have done exactly this, extending anti-money laundering and terrorist financing disclosure rules to BTC. http://www.coindesk.com/federal-bitcoin-law-canada/ http://www.coindesk.com/federal-bitcoin-law-canada/ The real benefit is time of transfer. ACH is infuriatingly slow. If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior. BTC could (theoretically) make daily payroll possible. The net benefit to society could be substantial. Payday loan activity would drop considerably. Some, but not all, credit card use would drop. All of the instruments that help "time shift" money could become far less necessary, along with the substantial fees associated with it.

nmrm 12y ago
> ACH is infuriatingly slow. Tell me about it. > If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior. Right. It'd love to see BC companies do well and then die off, so that we get reforms in banking without the unnecessary cruft of an intermediate currency intended for nothing except standing in-between fiat transactions. OR the inherent risk to consumers which comes with lack of regulation. > The real benefit is time of transfer. To what extent does this benefit come from not being subject to regulation? (edit: not rhetorical; I've no idea) > If you'd like a payroll run to arrive in employee accounts on a Friday, it must be initiated almost a week prior. But the check still arrives on Friday, so the benefit is really to the business rather than the employee. This negates the employee-centric benefits you mention in the next paragraph (pay day loans, credit cards, etc.) That is, unless the business is giving advances on payroll. But I think that's something companies don't do for reasons unrelated to choice of currency and transfer time. (edit: I suppose another alternative is that you could pay your employees more often because the process is cheaper and faster. That would be a big win. But I think other cash flows would in some cases prevent this from happening unless everything is done in BTC.) edit: Die off is a bit harsh? I don't want fiat->btc->fiat because it's just silly, but of course if btc causes reforms in the banking industry I sincerely hope btc companies make a huge amount of money in the process :-) edit2: Also, thanks for the link!
- opinologo 12y ago

napoleond 12y ago

> I'd much rather go directly through my bank (quickly and without fees) than route through another currency just for the hell of it I'd rather do that too, but it's unlikely to ever happen; not for international transfers between any country. There is a tangible economic cost (trust, through all the financial institutions involved in each country, and the work required in meeting the regulatory requirements that protect that trust, and in fact the work required in creating and maintaining those regulations) to transferring cash internationally under the current paradigm which has been solved more efficiently in the Bitcoin network. I agree with you that Bitcoin is far from perfect, but I think calling it a cottage industry is extremely short-sighted. I think what's more likely to happen is that, long-term, banks will either converge around using a blockchain-based mechanism of some sort to transfer funds or the Bitcoin economy will come of age outside of the existing financial industry, at least as the transport layer for fiat exchange.

nmrm 12y ago
> which has been solved more efficiently in the Bitcoin network. Except bitcoin hasn't solved the problems with international transfers. Bitcoin's just ignored them. There's a huge difference, and I don't think ignorance is sustainable at scale. > There is a tangible economic cost I actually lose a couple hundred usd a month right now. So, I really do sympathize. > I think what's more likely to happen is that, long-term, banks will either converge around using a blockchain-based mechanism of some sort to transfer funds Maybe. That would be fine with me. I'm not really sure I understand why banks would do that vs. just using social processes, since those processes still need to exist in order the address the problems with international transfers and have been around a lot longer than bitcoin. > I think calling it a cottage industry is extremely short-sighted. I mean cottage industry in the most literal sense of the term, and was referring to the present and historical situation. And I think that's fair -- very few people are employed full-time doing BTC-related work, and I don't imagine the profit margins are insanely high (or even non-red in some cases).
- napoleond 12y ago
  > Except bitcoin hasn't solved the problems with international transfers. Bitcoin's just ignored them. Very odd statement. Bitcoin (and related cryptocurrencies) is the only way any two peers on the planet can transfer funds electronically without a trusted third party. That's a fundamental shift from what was possible before. It solves the biggest part of the problem; what's left is reputation systems to facilitate transactions between people who don't know each other personally and enabling technologies that make the whole thing more accessible to "normal" people. (Nobody is ignoring those problems, either, FWIW, but they aren't Bitcoin's to solve.) > I'm not really sure I understand why banks would do that vs. just using social processes, since those processes still need to exist Maybe that's where we're talking past each other. Those processes don't need to exist with Bitcoin anymore. With Bitcoin, Bob's tiny credit union in Albuquerque can transfer $100 to Alice's credit union in Thailand for free. The credit unions don't need to negotiate with anyone or depend on anyone except for each other. In fact, the credit unions don't even need to factor into the equation at all; they just provide a convenient interface for consumers to access the system (and potentially a hedge for fraud, etc). It is enormously more economically efficient than the current model. It's the difference between express post and email. (Right, leaky analogy, I get it. It's a paradigm shift, is what I'm trying to say.)

api 12y ago

I remember thinking this a few years ago... that cryptocurrency would be to banking what Napster was to records. This is particularly going to be true on the international scale.

nmrm 12y ago
Thanks, that's a perfect analogy.

zanny 12y ago

I'm a believer that fiat state controlled currency is fundamentally flawed and destructive for societies and economies. And bitcoin is a global phenomenon - China can do all it wants to block it, and the market rebounds just fine. It can work without the US as well, albeit there will always be black markets. But bitcoin is a step towards approaching the ultimate forms of value exchange. It eclipses its predecessors in every regard, especially considering anything one might find "lacking" in btc can be solved by businesses built on top of it (chargebacks and instant confirms at coinbase, etc). But centralized currency will always have the implicit inefficiencies of central planning. I don't think bitcoin is necessarily the right algorithm for a money meant to replace the day to day currency of an economy (peercoin or doge are much better equipped to do so, with either reduced blockchain maintenance / size, or increased monetary base expansion without a finite limit) but the concept, money backed by cryptography, is the best solution we have to provide universal exchange semantics between human beings. Nothing else even comes close, and like others have said, that is no more apparent than trying to buy or sell goods or transfer funds outside your fenced in economy running in some local state currency.

nmrm 12y ago
It's uninformative to conflate monetary policy with the underlying material/technology used for currency. The two are totally and entirely unrelated. It's like claiming that changing from paper to (still fiat) coins is good because this would cause a fundamental shift in the nation's purportedly destructive monetary policy and also paper rips which is a bummer. So coins > paper, clearly. Which is to say, you are really making two totally independent claims. One is at least plausible and the other isn't. The first is that bitcoin provides a viable alternative to current methods for exchanging fiat currency. This is probably the most sensible argument for cryptographic currency, and I think is worth discussing. The discussion below delves into some specific arguments on this issue. Your second claim is that decentralized cryptographic currency will or ever could/should replace state-backed fiat currency. I don't think this is a particularly useful point to discuss, since informed prediction is impossible and the prescription mostly amounts to political persuasion. edit: but also, the US could switch to a cryptographic currency with all of the practical benefits of bitcoin, and still retain basically the same amount of control over its currency. Technology can never solve big political problems.

beaner 12y ago

It seems to me less that the "rhetoric" has changed, than that the set of people who use bitcoin has simply greatly expanded to individuals with increasingly less revolutionary ways of interpreting the currency. The people in it from 3 years ago still have the same beliefs. The people in it from 3 months ago are digging it because it's more popular among their colleagues, and they have to justify it somehow. "Lower fees" is the only thing they can come up with.

nmrm 12y ago
That's an interesting hypothesis about why the dominant rhetoric has changed. I think another one is that people are starting to use bitcoin for real-world use cases, and finding and addressing specific pain-points is far more likely to generate revenue than trying to convince others of your take on monetary policy.

blake8086 12y ago

Something else that can change is fiat -> fiat transactions become progressively less useful if everything supports BC transactions.

baddox 12y ago

> the only true substantial marketplace advantage of BC over sovereign currency is the ability to side-step the banking industry. I see that as pretty much synonymous with the traditional libertarian rhetoric, considering that the banking industry is considered (at least by libertarians, and probably a lot of other people too) as essentially one with government.