I did not downvote you, but I want to respond to your question instead of taking the approach of weaponizing hn votes to simply suppress perspectives I disagree with, and I'd encourage my pro-crypto friends to do the same. We have to treat dissenters and critics with the same open-minded, good-faith, respectful dialogue we want them to offer us. I don't mean to suggest I'm not a biased partisan, but I will be a good-faith and respectful biased partisan. My views follow.
Bitcoin is not fool's gold. Bitcoin is essentially a permissionless (third world citizens, political outcasts, people governments don't like are still able to use it without the government being able to cut them off), non-inflationary (inflation is everywhere and always a monetary phenomenon - the result of too many units of currency chasing too few goods and services, almost always a result of rampant currency debasement, not possible with bitcoin's hard-coded 21 million cap) universal (every country can trust it because no one country can control it) currency.
The economic implications of these properties are incredibly powerful and difficult to overstate. This enables a framework for the working class to start saving in ways government cannot steal back from them through inflation. This enables trustless international trade settlement. This can prevent rising geopolitical tensions from currency wars over FIAT (backed by absolutely nothing, takes a a few key strokes to produce more) currency. Currently, it appears impossible to forge or fake Proof of Work, the way governments can forge and fake new currency into existence with a few keystrokes, which again, is the ultimate cause of inflation.
Proof of Work is not without drawbacks, it is computationally expensive, but again, that's the point - it takes a ton of work to do all the SHA256 hashing to get hash results with dozens of leading zeroes - governments don't appear to be able to cheat at this yet. It's worth acknowledging in good faith that these computational costs have electrical load costs, which often do have carbon emitting costs, too.
It's also worth acknowledging that there are alternative proposals to Proof of Work, such as Proof of Stake. While architecturally sound, PoS greatly simplifies and enables the rich to seize control of the whole system, and that would enable them to start stealing people's money. This is not theoretically impossible with Proof of Work, but Proof of Stake essentially streamlines that process, which is why a lot of folks like me distrust it.
I'm not opposed to the idea of pondering other alternatives to proof of work, but they will be critically analyzed, and if people like me find issue with them as I do with PoS, there's a real good possibility that they'll keep preferring PoW like I do, too.
Bitcoin is a truly decentralized, voluntarist system. Even if you seize control of the Bitcoin core wallet developer accounts, and start pushing major protocol changes, the Bitcoin community will most likely refuse to use your version, and keep the main chain intact. Bitcoin makes it fundamentally and systemically difficult to exercise force against the network to shove in changes that the actual users of Bitcoin do not want. The only way the network adopts changes is when the network likes them. Sometimes vocal minorities do play the intransigence card, and that's how we get forks like Bitcoin Cash, which anyone who wants to use is free to, but it's not Bitcoin, and the vocal minority interest hasn't fundamentally changed Bitcoin at all when this happens. Even bad actors who are secretly colluding in exercising force against the "general public" of bitcoin users don't get their way. If that's not the most tyranny-resistant form of an ethical, voluntary monetary system we can envision as a society, I don't know what is.
Ultimately, this is all just my opinion, I don't claim to be some magic oracle of absolute truth, and I think we should be skeptical of anyone who says they are.
I invite and accept all good-faith comments and criticism and want to open a dialogue for supporters, detractors, and neophytes alike. I hope we can all be kind, respectful, open-minded, and avoid name-calling and other childish gotchas.
> [PoS] enables the rich to seize control of the whole system, and that would enable them to start stealing people's money
This is no more true for PoS than it is for PoW. A 51% miner can't directly steal people's money, because users will reject a chain that does that, even if it's the longest chain. Same goes for a 51% staker. The attacker could double spend in both cases, but with Ethereum the attacker could only do that once, and then would lose all its stake.
And with Ethereum there are no particular "core wallet developer accounts." There's a protocol, an open research community, and a bunch of independent client teams which all have to agree on any changes. Their meetings are public. Ultimately, just as with Bitcoin, it's up to the users whether to run any updates or not.
What it actually is a negative sum game and all such are inherently scams.
The only disagreement is about whether the differences to a Ponzi is insignificant or are significant and we have a new kind of scam, a "Nakamoto scheme".
It is in the interest of those who bought in to praise the game because the only way they can profit is by praising it and passing their loss to a greater fool.
And no, gold and stocks are not such. Gold has buyers who create value added products (electronics, jewelry and so forth) and stocks can create dividends. None of that happens for any crypto with transaction fees.
> Bitcoin is a truly decentralized, voluntarist system
Doesn’t 1 pool account for more than 50% of the bitcoin netwoek?
It’s theoretically decentralized, but in truth, you can only meaningfully contribute to the network (and have a real chance of mining a block) if you are already wealthy enough to buy the hardware.
The issue, imo, with your stance is that it’s all rose tinted theory.
In theory, bitcoin is a decentralized store of value.
In reality it’s just another thing, akin to a collectible, that is bought and sold. Its value is based on what people are willing to pay, not based on what you can do with a bitcoin.
In theory, bitcoin is government proof, in reality governments all over the world place restrictions on trading crypto.
It’s so difficult to trade bitcoin for fiat without going through some kind of bank, that governments still have enough control as to make the “government proof” argument moot.
Just look at the price of monero after being delisted from Coinbase in anticipation of US regulation.
At worst, bitcoin (and crypto) is a greater fools game. You gain bitcoin with the only utility being that its price swings so much that you can sell it for a profit.
At best, it’s just another payment system owned by very wealthy people. (Like ethereum)
There’s a lot of theoretical benefits to decentralized currencies and governance free economies, but crypto (at least the cryptocurrencies we have today) embodies none of that and practically is a vehicle for gaming and scamming, as we’ve seen.
Those pools have thousands to millions of individual people just like you, who chose to join a pool to reduce the variance of block rewards. That doesn't mean they have any less share of the network.
In general, if you have a community with (say) 1,000,000 people, why would you expect any individual to have more than 0.000001% of the share? That doesn't mean it isn't for the people. It just means the world is a big place. And unlike an actual oligopoly, there's nothing stopping you from striking out on your own and claiming your fair and square 0.000001% if you're happy with the odds.
Thank you for offering your criticisms respectfully and in good faith.
>Doesn’t 1 pool account for more than 50% of the bitcoin network?
No. Another thing I love about Bitcoin is that it's totally open source, and the open source ethos carries through the whole ecosystem. Because all transactions conducted onchain are relatively transparent compared to say, SWIFT exchanges, there are a lot of resources online to verify things like this. At the time of writing, the largest pool (Digital Foundry) currently has less than 1/3 of the total network hashrate. See for yourself here. https://miningpoolstats.stream/bitcoin
>It’s theoretically decentralized, but in truth, you can only meaningfully contribute to the network (and have a real chance of mining a block) if you are already wealthy enough to buy the hardware.
This is a fair criticism, the average individual is not the typical profile of a miner. In truth, companies are the typical profiles of miners. For better or worse, this is how most of humanity collectively organizes efforts that require scale beyond what one person can offer, and that's increasingly true regardless of whether you're in a communist country or a capitalist one. A state-run enterprise is still an enterprise, after all. But it's not impossible for individuals to educate themselves for free, save up money for dedicated hardware, and participate. It may be financially restrictive to buy top of the line machines for people living in third world countries, but there are USB-scale ASIC miners that offer similar efficiency for under $100 USD. Now, the expected yield on these after electricity costs are factored in may be negative, so I'm not encouraging anyone to do this without doing their homework. A search engine query for "BTC mining profitability calculator" will bring you to many tools that let you specify your mining hardware and electricity prices for more precise estimates.
>The issue, imo, with your stance is that it’s all rose tinted theory.
Like I said, I am a biased partisan here, and I do tend to focus on the strongest presentation of what Bitcoin can be, this is a fair criticism.
>In theory, bitcoin is a decentralized store of value. In reality it’s just another thing, akin to a collectible, that is bought and sold. Its value is based on what people are willing to pay, not based on what you can do with a bitcoin.
I'm buying, even at all time highs, and I'm willing to pay, because I believe in what Bitcoin can be. If you think I'm the metaphorical "fool being parted from his money", I'd invite you to take the other side of the trade and profit from my willingness to buy what I see value in. That's how markets set prices, that's how we're supposed to do this.
>In theory, bitcoin is government proof, in reality governments all over the world place restrictions on trading crypto. It’s so difficult to trade bitcoin for fiat without going through some kind of bank, that governments still have enough control as to make the “government proof” argument moot.
I am sorry if I gave the impression that Bitcoin is completely and impregnably government proof. When I said that "Bitcoin makes it fundamentally and systemically difficult to exercise force against the network to shove in changes that the actual users of Bitcoin do not want", I didn't mean to suggest that makes it impossible, just fundamentally and systemically difficult - i.e. it has been deliberately designed to resist that pressure.
>Just look at the price of monero after being delisted from Coinbase in anticipation of US regulation.
Monero is a very different idea than Bitcoin, and while I am also a big fan of Monero, it is outside the scope of my advocacy for Bitcoin in the comment section of a post about Bitcoin.
>At worst, bitcoin (and crypto) is a greater fools game. You gain bitcoin with the only utility being that its price swings so much that you can sell it for a profit.
That's not the only utility I find in it. I will keep being the fool. I am buying at $75k+, I will be buying at $750k+, I will be buying at $7.5m+.
>At best, it’s just another payment system owned by very wealthy people. (Like ethereum)
This may be true from an objective point of view, but it's also true that the current alternative, the US dollar, is definitely not just owned, but controlled by the very wealthy, and is also used to coerce and internationally bully, in ways that Bitcoin does not allow.
>There’s a lot of theoretical benefits to decentralized currencies and governance free economies, but crypto (at least the cryptocurrencies we have today) embodies none of that and practically is a vehicle for gaming and scamming, as we’ve seen.
I'm familiar with Bitcoin's historical connection with scammers and bad actors. New technology tends to be adopted early by those who will profit from it. Pagers and cell phones were huge with drug dealers and sex workers. That isn't a condemnation of pagers and cell phones, is it?
By 'gaming', do you mean like 'gaming the system' / fraud, or like video games? If the latter, I'm not familiar with that. Could you please elaborate further?
> At the time of writing, the largest pool (Digital Foundry) currently has less than 1/3 of the total network hashrate. See for yourself here. https://miningpoolstats.stream/bitcoin
So 2 pools control >50% of the network.
Sorry, but when two entities can collude, push some malicious code, and cause widespread network issues that may result in a fork, you’re not really decentralized.
> When I said that "Bitcoin makes it fundamentally and systemically difficult to exercise force against the network to shove in changes that the actual users of Bitcoin do not want", I didn't mean to suggest that makes it impossible, just fundamentally and systemically difficult
Practically, this doesn’t matter. Who cares if you can’t double spend bitcoin, when your country bans the sale of bitcoin. (Assuming you don’t want to intentionally break laws)
Unfortunately, the real world trumps the crypto world.
> If you think I'm the metaphorical "fool being parted from his money", I'd invite you to take the other side of the trade and profit from my willingness to buy what I see value in. That's how markets set prices, that's how we're supposed to do this.
I’m sorry, but just because you’re a fool, so to speak, does not mean that there’s value in bitcoin.
Just value in separating fools from their money (which I hear happens quite easily)
Market prices shouldn’t be set solely on the speculation of retail investors…
> Monero is a very different idea than Bitcoin
Not with regards to my argument. Implementation details don’t really matter.
> but controlled by the very wealthy, and is also used to coerce and internationally bully, in ways that Bitcoin does not allow.
I don’t think this is true. Most ways to abuse the dollar and bitcoin are similar.
Get someone to believe some falsehood, and profit off of it.
The consensus algo for bitcoin specifically avoids double spending, but other than that, what abuses are you specifically referring to?
What can be abused for fraud in USD that absolutely can not with bitcoin?
> That's not the only utility I find in it
I am genuinely curious as to what utility that is.
> By 'gaming', do you mean like 'gaming the system'
No, sorry. I meant “gambling” but I am typing on my phone, so autocorrect must’ve got me.
I understand the promise of cryptocurrency, but I also understand that, practically, current implementations don’t provide that promise.
I used to see a lot of talk about decentralized internet pre 2020, but that seems to have almost entirely faded away since speculative markets are more viral.
Not only is the technology not solving any problems it set out to solve, but the whole crypto community is infested with scams and those preying on greater fools.
The technology isn’t there and the community (at least the loudest voices) are gross.
That’s why you get such visceral outcry against crypto too, imo.
> I'm familiar with Bitcoin's historical connection with scammers and bad actors
Way to downplay it. I’ve never seen another technology be used solely for scams the way crypto markets have.
Sure. I’ll bite as someone who was formerly “into” crypto.
> Bitcoin is essentially a permissionless (third world citizens, political outcasts, people governments don't like are still able to use it without the government being able to cut them off)
It is not substantially more useful than any other transferable assets for those that need to worry about governments. At the end of the day, those governments still have the ability to jail or kill you. Bitcoin won’t help. Ironically, the more accepted and “integrated” with the financial system in the West it becomes, the less this holds true.
> non-inflationary (inflation is everywhere and always a monetary phenomenon - the result of too many units of currency chasing too few goods and services, almost always a result of rampant currency debasement, not possible with bitcoin's hard-coded 21 million cap)
There’s been an infinite number of arguments written about inflation and why we moved to fiat currencies in the first place, I won’t rehash them. Instead I’ll put forth my pet definitions.
Money is the ability to get work done. A country’s money supply should grow with their ability to get work done, otherwise the pressure is deflationary as the economy becomes more efficient and capable. We know all the reasons deflationary currencies are bad.
> universal (every country can trust it because no one country can control it) currency.
As long as they can control you access to the internet, they can control your access to your crypto.
> currency
This is where we diverge most. Bitcoin isn’t a currency and the network will not support it becoming one. It is, as bitcoiners love to put it, a store of value. Which makes it like any other commodity, except it has no intrinsic value which makes it a purely speculative asset and it’s price is directly correlated not with usefulness but with capital seeking (higher risk) returns. This becomes more clear as institutional money goes into bitcoin, not for the purpose of transacting, but to seek gains/hedge other areas of the market.
Ironically, the more people invest in bitcoin, the worse it is as a currency, and the lower the value is to me.
> This enables a framework for the working class to start saving in ways government cannot steal back from them through inflation.
There are other assets for this.
> This enables trustless
This is the one that drives me nuts with crypto. Somewhere in a transaction, something has to happen in the real world. There is not interface between the blockchain and the real world that is truly trustless. You must depend on reality being correctly reported on.
In fact, almost all of the rent seeking in our existing system is built on adding buffers based on the amount of trust in the transaction.
Everything in the real world either depends on either trust (and the associated systems to manage risk) or power (where the whole government institution part of money comes in).
> It's worth acknowledging in good faith that these computational costs have electrical load costs, which often do have carbon emitting costs, too.
Kind of downplaying the sheer size of the carbon emitting costs here…
> (inflation is everywhere and always a monetary phenomenon - the result of too many units of currency chasing too few goods and services, almost always a result of rampant currency debasement, not possible with bitcoin's hard-coded 21 million cap)
Except when it's not, like in Japan which has had a growing money supply but near-zero inflation—and even bouts of deflation—over the last few years/decades:
> In this paper I will argue why the common misconception that “inflation is always and everywhere a monetary phenomenon” cannot be used to explain most historical hyperinflations. I will argue that “money printing” is often the response to exogenous and unusual events and not the direct cause of the hyperinflation.
> Currently, it appears impossible to forge or fake Proof of Work, the way governments can forge and fake new currency into existence with a few keystrokes, which again, is the ultimate cause of inflation.
Except it's not governments, or even central banks, that create money, it is banks through credit creation:
As we've (re-)learned recently, "high" inflation (say >4%?) is also not great. So we're in the range of 0-4% to consider. It may be thought that 0% inflation is ideal, but that is impossible to achieve. You'd think that having a fixed currency supply would do this (e.g., gold standard) but this actually moves deflation as the 1930s showed:
> The initial contractions in the United States and France were largely self-inflicted wounds; no binding external constraint forced the United States to deflate in 1929, and it would certainly have been possible for the French government to grant the Bank of France the power to conduct expansionary open market operations. However, Temin (1989) argues that, once these destabilizing policy measures had been taken, little could be done to avert deflation and depression, given the commitment of central banks to maintenance of the gold standard. Once the deflationary process had begun, central banks engaged in competitive deflation and a scramble for gold, hoping by raising cover ratios to protect their currencies against speculative attack. Attempts by any individ- ual central bank to reflate were met by immediate gold outflows, which forced the central bank to raise its discount rate and deflate once again. According to Temin, even the United States, with its large gold reserves, faced this con- straint. Thus Temin disagrees with the suggestion of Friedman and Schwartz (1963) that the Federal Reserve's failure to protect the U.S. money supply was due to misunderstanding of the problem or a lack of leadership; instead, he claims, given the commitment to the gold standard (and, presumably, the absence of effective central bank cooperation), the Fed had little choice but to let the banks fail and the money supply fall.
So if <0% doesn't work, and >4% does not work, and 0% does not work, we're left in the situation of going for an interval of (0,4).
Further a fixed currency supply ties the hands of policy which leads to stability. You want to be able to create money when economies slowdown and private aggregate demand drops:
> I would summarize the Keynesian view in terms of four points:
> 1. Economies sometimes produce much less than they could, and employ many fewer workers than they should, because there just isn’t enough spending. Such episodes can happen for a variety of reasons; the question is how to respond.
> 2. There are normally forces that tend to push the economy back toward full employment. But they work slowly; a hands-off policy toward depressed economies means accepting a long, unnecessary period of pain.
> 3. It is often possible to drastically shorten this period of pain and greatly reduce the human and financial losses by “printing money”, using the central bank’s power of currency creation to push interest rates down.
> 4. Sometimes, however, monetary policy loses its effectiveness, especially when rates are close to zero. In that case temporary deficit spending can provide a useful boost. And conversely, fiscal austerity in a depressed economy imposes large economic losses.
After the 2008 GFC it took many years for unemployment rate to go down in the US because there was no fiscal stimulus (due to GOP hampering it). Post-COVID, with giant stimulus the unemployment rate is the lowest its been in decades: that's what monetary flexibility gives you: options to help get the economy going again.
I haven't read your entire reply, but the top link has a graph relating CPI with M2 if I'm not mistaken. Is'nt CPI a terrible measurement since it uses units that change constantly. Bit like measuring distance with a meter stick that changes in length everyday.
> Is'nt CPI a terrible measurement since it uses units that change constantly.
CPI's "units" are what people buy in day to day life. It has to change because it is a model of what is happening in the real world, and while imperfect that doesn't mean it's not useful:
As a Canadian, StatCan regularly changes what's in the CPI basket of goods in my country, and that is a good thing. Because if they didn't, then we'd still be looking at video rental prices (removed in 2015), 35mm film (2013), and going back further lard (1967):
Things added over the years: ride share services, ISP prices, mobile phone plans, etc.
The goods and services that people use when living life change over the years/decades and their lifetime, so why shouldn't the CPI (which can determine the wage raises they get to pay for living) reflect that reality?
Bitcoin is not fool's gold. Bitcoin is essentially a permissionless (third world citizens, political outcasts, people governments don't like are still able to use it without the government being able to cut them off), non-inflationary (inflation is everywhere and always a monetary phenomenon - the result of too many units of currency chasing too few goods and services, almost always a result of rampant currency debasement, not possible with bitcoin's hard-coded 21 million cap) universal (every country can trust it because no one country can control it) currency.
The economic implications of these properties are incredibly powerful and difficult to overstate. This enables a framework for the working class to start saving in ways government cannot steal back from them through inflation. This enables trustless international trade settlement. This can prevent rising geopolitical tensions from currency wars over FIAT (backed by absolutely nothing, takes a a few key strokes to produce more) currency. Currently, it appears impossible to forge or fake Proof of Work, the way governments can forge and fake new currency into existence with a few keystrokes, which again, is the ultimate cause of inflation.
Proof of Work is not without drawbacks, it is computationally expensive, but again, that's the point - it takes a ton of work to do all the SHA256 hashing to get hash results with dozens of leading zeroes - governments don't appear to be able to cheat at this yet. It's worth acknowledging in good faith that these computational costs have electrical load costs, which often do have carbon emitting costs, too.
It's also worth acknowledging that there are alternative proposals to Proof of Work, such as Proof of Stake. While architecturally sound, PoS greatly simplifies and enables the rich to seize control of the whole system, and that would enable them to start stealing people's money. This is not theoretically impossible with Proof of Work, but Proof of Stake essentially streamlines that process, which is why a lot of folks like me distrust it.
I'm not opposed to the idea of pondering other alternatives to proof of work, but they will be critically analyzed, and if people like me find issue with them as I do with PoS, there's a real good possibility that they'll keep preferring PoW like I do, too.
Bitcoin is a truly decentralized, voluntarist system. Even if you seize control of the Bitcoin core wallet developer accounts, and start pushing major protocol changes, the Bitcoin community will most likely refuse to use your version, and keep the main chain intact. Bitcoin makes it fundamentally and systemically difficult to exercise force against the network to shove in changes that the actual users of Bitcoin do not want. The only way the network adopts changes is when the network likes them. Sometimes vocal minorities do play the intransigence card, and that's how we get forks like Bitcoin Cash, which anyone who wants to use is free to, but it's not Bitcoin, and the vocal minority interest hasn't fundamentally changed Bitcoin at all when this happens. Even bad actors who are secretly colluding in exercising force against the "general public" of bitcoin users don't get their way. If that's not the most tyranny-resistant form of an ethical, voluntary monetary system we can envision as a society, I don't know what is.
Ultimately, this is all just my opinion, I don't claim to be some magic oracle of absolute truth, and I think we should be skeptical of anyone who says they are.
I invite and accept all good-faith comments and criticism and want to open a dialogue for supporters, detractors, and neophytes alike. I hope we can all be kind, respectful, open-minded, and avoid name-calling and other childish gotchas.