Great pos! The more I learn about bitcoin, the more I feel like it still has a long way to go. There are a few hurdles that can not be easily solved now: 10min transaction time; deflationary (this pretty much means it would have a hard time to act a real "currency" based on nowadays economic thinking); the resources wasted in mining and the potential consolidation of mining; the programmable aspect is very limited today. What is your take of it?
> For almost all practical applications for which bitcoin is being used, this doesn't actually come in to play very often.
Not exactly. If you have all your coins in a single transaction, you will get change - which can take 10 minutes to confirm before you can spend it again.
Yes, you can solve this by splitting up your money, but it's not something people expect.
> It's not wasted if it's being used to process bitcoin transactions.
Yes it is being wasted. Waste doesn't mean "unused", waste means "using more than necessary". Due to the hashrate arms race, tremendous amounts of power are being wasted doing nothing useful.
Bitcoin is powered by electricity, a better currency would spend something else instead.
> Due to the hashrate arms race, tremendous amounts of power are being wasted doing nothing useful.
But they are doing something useful. They're preventing someone from turning up and performing a 51% attack, thus ensuring the security of the network. You could suggest that there's better ways of doing that, but our ideas so far haven't panned out.
Interestingly, how it works at the moment is that essentially, through the mining of bitcoins, every bitcoin holder's bitcoins are devalued to pay for the security of the network. Therefore, if a significant amount of bitcoin holders decided that they could deal with less network security, they would use a coin which provided less network security (by paying miners less).
As it is, at the moment, we're not sure exactly how much security we need. Therefore, we're willing to pay for as much security as possible; nobody wants their bitcoins to be worthless tomorrow because they didn't pay enough to protect the network.
The thing I don't like about the way bitcoin mining works is that it's an arms race that leaves attacker and defender on equal footing - quite unlike a lot of crypto, where adding a bit increases the defender's work linearly but the attacker's exponentially. By its nature, then, we have to keep burning off more in value than someone could make with a 51% attack, regardless of improvements in tech efficiency.
Of course, lacking a better proposal, it could be that this is the best we can do. I don't have to like everything about every piece of technology in the world...
> You could suggest that there's better ways of doing that, but our ideas so far haven't panned out.
Can I ask, have you heard about Peercoin, which uses a combination of a proof of work and a proof of stake system rather than just a proof of work system? Do you have an opinion as to why such as system wouldn't be at least as secure as bitcoin?
My understanding is that it's currently unproven, and certain ideas we used to have about it have already been disproven. I'd love to see an actual academic paper on what it would take to break the network.
There's also the fact that wealth inequality - specific groups of people owning significant amounts of money - will break the network's assumptions. This could be a good or bad thing, depending on your point of view.
Additionally, minting a proof-of-stake block locks your stake for 520 blocks. Most reasonable people would be angry that they can't access their money for that long. There's a workaround of reserving a certain amount of coins so that it can't be used for proof-of-stake, but that doesn't actually solve the problem, and generally means that the poor will reserve all their money and never generate a proof-of-stake block.
And that leads on to another issue with proof-of-stake; the rich get richer, as a rule that's explicitly built into the system. Probably not much richer, but it's against common ideology.
The other thing that most cryptocurrency enthusiasts won't like about Peercoin is that it's eternally mildly inflationary. While some will understand that this is essentially payment for security, others will argue that those who use the network more should pay more (via transaction fees), rather than a "tax".
I suspect that it will see a mild increase in use when they prove that they can get rid of centralised checkpointing, but I think there's a very significant core group that will not be able to get past the ideological issues and lack of academic research.
> Yes it is being wasted. Waste doesn't mean "unused", waste means "using more than necessary". Due to the hashrate arms race, tremendous amounts of power are being wasted doing nothing useful.
Due to the arms race, it's only getting more and more efficient.
> nothing useful
Again with that? You are starting to sound like a troll.
> Bitcoin is powered by electricity, a better currency would spend something else instead.
Can't you say the same about everything? Why does Bitcoin's energy consumption bother you so much, while you have cars, factories, and everything else still using fossil fuels, coal, etc.? Is your computer running on dark matter energy or what?
Imagine a computation-intensive crypto-coin-mining activity somehow linked to a real-world, practical use, say, curing cancer (say, by digging through vast amounts of genetic data). Instead of paying for the computation time directly, people could work on chuncks of the problem as they wish and be rewarded with CCCs (Cancer Cure Coins) for defined partial results.
Then we could say the computing ressources are not wasted.
This is a frequent point that comes up from people who haven't really thought through all the details of how PoW based cryptocurrencies work.
A good proof of work function needs two things (among other desirable properties I will elide):
1) For some difficulty factor D, you should be able to generate an instance of the problem that takes time proportional to D to solve
2) The solution should be verifiable in time much less than D (preferably constant time)
So until you can show me a foolproof way to generate protein folding problems, genetics problems, or SETI problems, etc. that have these properties (I haven't found one myself), it seems quite difficult to make a "useful" PoW.
Now, theoretically, if you found a "useful" problem that had property 1, but not property 2, you could convert it into a viable PoW using efficient zero knowledge proof techniques [0], but at the moment that isn't really viable.
It was just an example to clarify the criticism of "cryptocurrencies waste energy". It would be up to the cryptocurrency advocates to show such a function.
On the plus side, the problem does not necessarily be "proportional to D", in fact, finding a better function would be incentivized. Since the computer cycles would produce a "real" value (curing cancer), the upper limit for these coins would be the amount of money society would spend on a cancer treatment.
> For almost all practical applications for which bitcoin is being used, this doesn't actually come in to play very often.
But could this be a self-fulfilling prophecy? Perhaps this property of Bitcoin is hurting its adoption, by relegating it only to uses where this is not a hurdle.
In the short term, I think it will have a hard time gaining use as a currency. A few currency scenarios might pop up, for example countries with unstable government or corrupt governments could see people store $ in BTC instead. However, I do think it could be very valuable as an application. Like if you layered it on top of the existing payment system to provide better security/anti-fraud.
If you look to the top of the page, next to your username, there's a number in brackets. Wouldn't it be nice to take that number and buy something real with it? You could, if it was a fun cryptocurrency that had at least a little traction.
I'd imagine certain people could use their Stackoverflow Coins to buy a house!
So what property does Dogecoin have that Bitcoin doesn't, that enables us to do this? The answer is nothing, and Dogecoin is redundant. Might as well use Infinitecoin or any other copycoin before Dogecoin, they are all the same copy/pasted code, with no technical added value and the only effort they put goes to marketing.
> deflationary (this pretty much means it would have a hard time to act a real "currency" based on nowadays economic thinking)
This argument makes no sense to me. If Bitcoin's deflationary nature prevented it from acting as a currency, it would also prevent USD/CAD/dogecoin/etc. from acting as currencies because people would chose to buy Bitcoin instead of spending their inflationary currency on anything else.
Every time you spend USD on something, you can instead buy an equivalent amount in Bitcoin. Not buying bitcoins can effectively be thought of as buying them and spending them.
In fact, the truth is that no one knows if Bitcoin will be inflationary or deflationary within the next year due to its current small market cap and risky nature. But in an hypothetical world where Bitcoin does become a stable and deflationary currency, why would any selfish actor chose to hold an inflationary currency?
> If Bitcoin's deflationary nature prevented it from acting as a currency, it would also prevent USD/CAD/dogecoin/etc. from acting as currencies because people would chose to buy Bitcoin instead of spending their inflationary currency on anything else.
This is exactly what happens. No one holds currency.
People don't generally have their assets as cash, just what they need to be liquid. They hold their assets as a mix of stock (incl. funds, bonds, options), real estate, etc.
In fact, the majority of people have practically no cash at all because they lend it to a bank (i.e. putting it in a checking or savings account) who invests it or lends it for a return! The bank only holds a small portion of what they say is in the account.
Not sure if you are disagreeing with me but in case you are: suppose those assets (stocks, bonds, real estate) could be transferred as easily as a currency (instant transfer/fungible/divisible/liquid/etc.), would people use cash at all? What would be the use case for cash? My point was that Bitcoin would be such an asset.
Perhaps a deflationary currency would have a negative overall impact on the economy, but that's not what I'm arguing about.
I was disagreeing, but I don't think you are wrong: just misinterpreting.
I think that a good currency really has couple properties: fungible, no inherent value (i.e. not a good value store).
(This could be viewed as a weakness but I think is actually a strength in this circumstance).
If the currency is a value store, it changes the dynamics of spending it. I feel this is the reason that salt (going back in time) is not a particularly good currency either. Imagine it this way -- if all of a sudden salt was more useful (perhaps it's a hot summer, and meat is spoiling), then all of a sudden there's an extra inertia on all transactions, i.e. the cost of all goods changes.
The point of a currency is to facilitate transactions. If there's any sort of speculation around the inherit value of the currency (as per bitcoin -- the knowledge that demand will increase and supply will be lost) then it increases friction in spending.
I would certainly have to think a lot harder all the time if I were spending stocks or tiny pieces of land.
> I would certainly have to think a lot harder all the time if I were spending stocks or tiny pieces of land.
You said it yourself: people don't hold cash. They sell their assets before buying something with cash. And it doesn't seem to prevent them from spending. With Bitcoin, it would be the same thing except the whole "sell your assets before you buy" process could be skipped.
Of course I oversimplified a lot here. People don't literally sell their stocks/real estate before they buy something. But I'm sure they would if those assets allowed them to.
> 10min transaction time, resources wasted in mining, programmable aspect is very limited, deflationary, nowadays economic thinking
Getting really tired of these arguments. Transactions take 0-2 seconds. The resources are not wasted, they are used to secure the network and are way lower than what VISA or any other big company use. And It's deflationary because people like me are suffering from this form of theft called inflation, and we desperately needed something like Bitcoin. Besides, without an economic incentive why would people risk money? Nowadays economic thinking is pretty much a pseudoscience, just like Psychology.
A crypto currency network that requires constant hash thrashing is not one I'd call well designed. It appears to be a trade-off for the decentralisation of initial currency issuing, not something everyone considers important.
"It appears to be a trade-off for the decentralisation of initial currency issuing, not something everyone considers important."
Mining isn't (primarily) for currency issuance - it's decentralization of secure transaction processing. Which still isn't something everyone considers important, of course.
Well sure, it does both. There are (theoretical) systems that allow cryptographically secure transactions to take place without so much thrashing though. Even verifiable offline transactions.
Of course bitcoin's major advantage is that it's already here and working.
Certainly. Using it to distribute the currency, before there's the critical mass of people wanting to make transactions enough to pay your miners seems a perfectly good fit once you're already needing to mine, though.
"There are (theoretical) systems that allow cryptographically secure transactions to take place without so much thrashing though. Even verifiable offline transactions."
Verifiable offline transactions with no centralization? Can you link to some?
And no, not everyone values decentralisation, sorry. I ddon't consider it an important aspect of a currency or payment scheme. Good for you if you do. Personally I value consumer protections and ease of use way more.
