Oh, dear Lord. It's comments like this that make people skeptical about Bitcoin in the first place, because it demonstrates that BTC supporters don't understand what the economy, or even money, is.
Ok, when I studied history many years ago, I took a class in early modern Europe (think 15-16th centuries). That was when modern capitalism first gradually appeared. The most important thing to understand about the origins of modern capitalism is the change in society it required. That change was the transition from a face-to-face society (where you personally knew all the people you transacted with) to a society of strangers, where you had to put faith not only in complete strangers, but in people whom you'd never met and never would meet. Most importantly, you had to put faith in institutions. That was when the first institutions started, modeled after the oldest institution of all, the Roman Catholic Church. There was a time when there were no institutions (well, other than the church). People couldn't even understand the concept of an institution: they knew there was a guy named John and a guy named Paul, but what the hell is a group of people that has an identity of its own, and lasts more than its members?
Anyway, modern capitalism required institutions, most important among which were banks and insurers. Insurers reduced risks and encouraged investment while bankers lent money to support such investments. Now, when you put your money in the bank, it has to be loaned to others, otherwise the economy will come to a standstill. You have to put faith in the bank to get the money back to you. Same with insurance. You have to have faith in the insurer to pay your claim, or, at the very least, faith in the court to compel the insurer to pay up.
The way you look at BTC, disconnects money, a central instrument in the economy, from the economy at large. That doesn't make sense, and even if no one ever steals your money, your money won't "work", because there will be no economy to use it in. A modern economy is built on trust. Trust that in the long run, most people will be honest because that's what's best for them, and they know it. If we don't have trust in institutions, there will be no economy to speak of, or, rather, there will be a very primitive one (only, this time, with computers). In that case, I suggest you take good care of your machine, because in your utopia there will be no new models coming out. Sheesh, how some people, in time of crisis, cling to their laptops and algorithms.
Argh! It's comments like this that make me wonder if you history buffs out there will ever understand that we're entering a new phase of economic history: a trustless one.
All of these spectacular exchange failures out there have nothing to do with Bitcoin itself.
Go read up on trustless cryptographic systems, and understand that we're entering a different era. The failures that occur around the periphery of Bitcoin are nothing more than a fault line between the old system (trust in failing institutions) to a new one (trustless).
Signed,
A humanities major back in college (yeah, I studied economic history, too)
But algorithms don't create an economy – people do (and I actually have a degree in Mathematics). I don't have a problem with Bitcoin being hacked: that can and will be fixed. I do have a problem with the very notion of a "trustless" economy for two reasons: first, there ain't no such thing (it's like a worshipper-free religion). Economy equals trust. An economy needs credit and it needs insurance, and you can't have those without trust (heck, the word "credit" literally means "to believe"). Second, even if you could imagine such a thing, where a robot would compel you to pay up, or an algorithm would make decisions for you, why in god's name would you even want to? Why take away the freedom of people to come together and make collective decisions about the economy (say, like devaluating a currency) for their society's benefit? Why, because some people are crooks? The kind of society you picture is, literally, an autistic one.
While you don't want people to think that Bitcoin is failing after ceaseless thefts, you call our institutions "failing" based on what? I don't know about you, but my institutions aren't failing. They just require regular maintenance.
Also, if you think Bitcoin is about creating a new kind of trustless economy (in other words, the very same economy that existed prior to the modern one or in lawless frontiers like the Wild West), you are mistaken in believing that most people will follow you. That is precisely the libertarian politics that hangs around Bitcoin's neck, and if anything will choke it, this will be it. Forget about who's right and who's wrong. The reality is that most freedom-loving people aren't libertarian. They like their institutions and want to fix them. They don't want a trustless economy. We may be misguided; we might be wrong; but we're the vast, vast majority.
And if you like history, you probably know that people have been warning about the collapse of modern institutions pretty much since their inception. There were always those who wanted to grab their gold and head for the hills because the system is falling apart. And let me tell you that there were times the system was close to crumbling, but today we're not even close to such a big crisis. Nevertheless, the vast majority of people have put their faith in their institutions, and for about 500 years now, they've been right (well, more or less).
If you wrote more, probably online somewhere, about bitcoin and the like, I would probably read it because you seem smart and stuff. I really mean it. I hadn't considered the fact you can't loan out bitcoins the way you can regular money.
> you can't loan out bitcoins the way you can regular money
Why not? I mean sure, it would mean losing the anonymity, but the receiver would owe you the interest-adjusted amount just like someone you lent money to. A loan isn't magical boomerang money, it's a legally encumbered transfer, which can be done with dollars, bitcoins, tractors or anything else.
We actually have two money systems that are used on a day to day basis, cash and accounts. Bitcoins replace cash, but accounts are where the real magic of the economy happens.
Lending -- as an institution, as opposed to as an individual -- is all about fractional reserve banking. The bank pools the money of its depositors and lends it out without restricting the ability of the depositors to access their money. This increases the money supply, and generally works OK because of a combination of (a) most people not needing most of their money most of the time and (b) a lot of transactions happen purely through the bank's internal ledger, without needing cash at all. If Alice writes a check to Bob, who immediately deposits it, the bank just updates their ledger and it doesn't matter whether they have cash on hand to cover it.
There's nothing preventing you from operating a traditional fractional reserve bank using Bitcoin instead of cash, and it would work the exact same way as a traditional bank with exactly the same advantages and problems. But if you're writing checks for Bitcoins instead of dollars which end up being processed entirely through a bank's internal ledger instead of through the Bitcoin network's blockchain... why? How is that really Bitcoin?
Thank you. Maybe I will. I think Bitcoin can be a very good, very useful, universal micropayment platform, and that's about it (well, that's plenty, really). And you can loan Bitcoin just as you do any other form of money; it just requires trust.
The problem with the more vociferous proponents of Bitcoin – and not only Bitcoin; you can see the same thing happen in the tech industry in discussions of women or minorities – is one of politics. The problem is this: many in the American tech industry don't know what politics is. According to Wikipedia, it "is the practice and theory of influencing other people on a civic or individual level;" it's a general term for managing powers and spheres of influence in society. Worse, they seem to shun it.
But politics can't be avoided. It is essential to human society. When people shy away from politics, a dangerous thing happens: they practice bad politics based on naturalistic fallacies. I think science oriented folk are particularly prone to that because science concerns itself with what is, while politics concerns itself with what ought to be. Science people might, and do, come to believe that what is, is what ought to be (or the only way to be).
In fact, Bitcoin is a very interesting example because it allows (actually, it is only imagined to allow) removing people out of the equation altogether, leaving algorithms. When you take power away from people and put it in the hands of mathematics you indeed lose politics (except, of course, for the original act of seizing that power). But then you lose a lot of what makes us human.
I think that there is in Bitcoin a confluence of tech people falling into naturalistic fallacies with a general lack of trust in institutions that has possibly been growing of late among Americans. It is interesting to watch, but the arguments, unfortunately, are no different from the old American-libertarian anti-government, pro-gold, arguments. The difference, this time, is not in political awareness (of which there is a dire lack), but in – here's that word again – power. American libertarians traditionally had little power. They have been a small minority of both the general population and even of the rich and influential. But now technology is not only a power (which it always was), but one with exceptionally low barriers to attain. Bitcoin supporters, by virtue of their part in the powerful Silicon Valley sphere of influence, actually do carry a not-insignificant political weight. This will be interesting to watch.
Whatever happens, even those who believe in institutions should welcome this challenge, because democratic institutions always benefit, in the long run, from worthwhile challenges. So far they've shown an incredible ability to adapt (though the rate still appears too slow to humans who only live about 80 years), and there's no reason to believe they will not evolve for the better as a result of this interesting challenge.
People talk about bit-coin being algorithms, at a practical level it's computer systems. While most people have some distrust of there government and banks I find the idea that computer systems are more trustworthy is laughable.
Sure banks fail and make mistakes but the FDIC has kept small depositors from losing all there money for a long time. Computers are hacked or mess up all the time and with Bitcoin such issues are unrecoverable which makes trusting computers seem like a terrible idea. For reference 1/2 the people I know had there WoW account stolen and that's worth less than 50$, if significant numbers of people where to try to hold significant amounts of bit-coins directly you could expect similar things. Right now bit-coins are small enough and fractured enough not to be a useful target but it just does not scale without 3rd party institutions.
> I don't know about you, but my institutions aren't failing. They just require regular maintenance.
There's the rub: do they get the regular maintenance they require, and who foots the bill when it breaks? What are the incentives to do so, and the consequences if you don't?
I don't believe institutions are 'failing' in the sense that they cannot operate, but that they are a net loss to society. The trustless economy is a response to the lack of trust in those who control the economy - whether by enacting policy or being too-big-to-fail - to operate for the greater good of society. It is not about distrusting people, it's that you shouldn't need to trust people. You may evade or buy your way out of the laws of the land, but you can never escape the laws of mathematics.
Of course the economy runs a lot better when you can trust everyone. There also exist better forms of government, if you ignore human fallibility or selfishness. But it's not about abolishing institutions, even if the purpose is to obsolete certain types.
> You may evade or buy your way out of the laws of the land, but you can never escape the laws of mathematics.
Very true, but the laws of mathematics don't have feelings, desires or empathy. That might be good, except for one thing: we're human and we do. As people, we should want to have the freedom to decide our own fate, not put it in the hands of an alien entity. That entity might be right but it won't be right for us.
>As people, we should want to have the freedom to decide our own fate, not put it in the hands of an alien entity.
This is what I don't understand about your argument: the governance of cryptocurrencies is the same democracy you're advocating elsewhere. The difference is replacing the fallible human element with a set of mathematical rules. Noone is saying the rules cannot change (or altcoins would not exist). The entire purpose of the cryptocurrency experiment is to find rules that everyone will like and aren't based promises from politicians, corporatists, or plutocrats.
Altcoins precisely prove that finding rules everyone would like is impossible (or close enough). So suppose you'll settle for a majority. How will you persuade people? If there's a lot at stake, and the system is complex enough, you can't expect everyone to be well versed in the details, so you'll need professional politicians and a representative democracy.
I think you're reading too much into what cryptocurrency is. It is simply a somewhat-elegant solution to the problem of building a decentralized, digital cash. That's it. It doesn't try to find new ways to run the economy, although some of its supporters do because that's their politics. It doesn't even prove that this is, indeed, a serious practical problem, but that's what some of its supporters believe.
What you call fallible, others might call "free". For example, I would like to give the government the freedom to quickly devalue the currency in a time of a job crisis. What you're proposing either takes away that freedom altogether, or places a serious bureaucratic burden on the process, so that it might not be feasible. You're basically suggesting a system with an unbreakable bureaucracy which is just about the only thing worse than the current situation. There will be no one to talk to – hey, it's just the algorithm – other than somehow convince a majority of anonymous account holders, with whom you can't bargain because they're unlikely to reveal their true interests.
The difference between us, I think, is this: we both don't like politicians plutocrats and corporations. But you believe that they can be eliminated through some elusive algorithm, while I think society contains within it endless cycles of many concurrent power struggles, and each of us must find their place in it, and fight for the values they believe in, knowing full well that the fight is never truly over.
Yes our viewpoints do diverge greatly. I believe that people should be free to choose which society to contribute towards not based on arbitrary geographical bounds. However, this will never be possible if there is no separation of government and society (which there is no concept in mainstream politics). To that end mainstream cryptocurrency adoption is the next step to this goal.
I don't understand what you mean. "Government" simply means the system by which a society is governed. If there's no government, there's no governing. Now, I wouldn't mind anarchy, but we must adopt it, if we choose to, with our eyes open: it does mean an end to collectively putting our resources together towards common goals (and you can't say that you can collectively organize without government because that's an oxymoron, as government means the way in which a society chooses to organize).
I do think, though, that almost any imaginable form of society has been thought of at one point or another, and I would suggest that you learn about those atecedents and how they played out. A "society... not based on arbitrary geographical bounds" was the slogan of communism, a beautiful ideal that didn't quite live up to expectations.
Also, I would suggest that if you have revolution in mind, get out more and learn what people really want. I'm not saying that you'll change your mind, but that's how revolutions happen: by organizing lots and lots (and lots) of people.
Please, please learn more about the system you're trying to topple and how it came to be this way (trace the whole process). Not that that would mean success, necessarily. When the communists wanted to established their own world order, not based on national borders, they actually thought about this problem a lot: how the world came to be this way. They even came up with the right answer: all human conflict is a result of an unequal distribution of resources. The only thing they missed (which turned out to be crucial), is that humans, by virtue of their evolutionary wiring, probably, like it that way. So conflict is a result of inequality, but we want inequality. Illogical, but that's what we are. Also, conflict, while brutal, does tend to bring out the creativity in people, which is another thing they missed.
As an observer, I'd love to see a revolution take place ('cause that's cool), but I'd hate it to bring about something worse. So please, think it through, preferably with the help of some history.
Revolution is thoroughly overrated. There is very little point in trying to force change upon an existing system. A system that will replace the current one has to be backwards compatible with the status quo while being forwards compatible with the ideal. The communists made one additional mistake: they wanted to breakdown the existing system and force people to change. That kind of change takes generations to accomplish while the cryptocurrency system is feasible within my lifetime.
But at least the communists laid down a detailed system, at least seemingly feasible, that they wanted to achieve. I don't understand what the "cryptocurrency system" is and how it proposes to address the issues that face humanity. Well, I've heard some notions, but all, unlike communism's, are quite juvenile, and when you get right down to the bottom of them, you get the exact same system we have now.
Even look at the comments on this page. Someone suggests a loan system; another suggests insurance. And when asked, well, how will the different interests and values of people be managed, you get something like "we'll figure out a way".
Well, that's a legitimate answer, but you can't say "we'll figure out a way" and at the same time call it a "cryptocurrency system". Either you have a system or an outline of one (it can be general, but it must be forward-thinking, and it can't discard politics just like communism couldn't discard psychology – politics is a part of us) or you can play the wingnut game like Glen Beck and talk about FEMA takeovers and other conspiracies, but you can't have it both ways.
Seriously, some of the stuff you were saying in other comments actually made sense, but all you're doing is losing credibility when you go off the deep end and start with the 'fear the machine' nonsense.
Take a deep breath, go get some food or something; you don't have to reply to every single comment.
(...and a considered comment is worth 10 flash responses that haven't been thought out~)
i think the problem is deflation, actually. which leads to 2 practical problems..lack of credit and hoarding.
shutting down the ability to spend newly created fiat money i suspect will reduce the amount of credit alot. that probably makes most businesses as we know them now unoperable.
hoarding is a social problem i guess. it just increases the wealth gap. not sure if most societies want that.
this is getting ridiculous, stating your degree just to tell people your argument is backed by studies that really don't help you that much (if at all) in economics (yes I have a degree in mathematics too).
"The trustless economy" must be like "the paperless office" because everywhere I look around Bitcoin I see people losing money because they trusted someone.
The new "trustless" systems don't seem to have solved the problem of transactions at all: bitcoin may be trustless, but if I'm purchasing something with them (such as USD) I need to have some sort of guarantee that it will arrive.
You speak as though zero-trust crypto currencies have a page in the history book already under proven economic technology. Bitcoin does not exist in a vacuum. It exists as a tangible implementation on top of physical infrastructure and, in the case of Bitcoin, infrastructure failure has many faces. You can balk at that by claiming special foresight or acknowledge that even good ideas take time to mature before they're viable.
You actually can't imagine this? Even in today's world, there are many cultures where debt is a rare resort for the unfortunate, not an acceptable status quo.
I imagined it and called it hand-to-mouth. It would be incredibly wasteful not to let others use resources you don't need at the moment in exchange for participating in their future proceeds. A large part of the resources in such a society would lie idle at all times.
There would be no insurance either, so everyone would be forced to save tons of money to cover adverse events that don't happen to most of them most of the time. For instance, everyone would have to save up enough to rebuild their home in case it burns down. That amount would be thousands of times what is needed to rebuild the homes that actually do burn down.
Why would there be no insurance? Surely we would just pool our money together in a big pot for when people have their houses burnt down? Kind of like we do now - except possibly without someone skimming a huge profit off the top.
While that is technically correct, don't you think to most people Bitcoin is rather more than the protocol - it is the entire eco-system of applications and services that have been built over the last few years.
If the "fault line" between this "trustless economy" and the vastly larger "normal" economy isn't pretty painless then I can't see much of a future for Bitcoin and exchanges seem to be a pretty important part of that interface.
While I do believe increasing reliance on 'trustless economy'-enabling concepts, I can't help but wonder how feasible, and by extent how constructive, the idea of thinking in terms of a big paradigm shift is in this regard.
Yes, bitcoin might be a nice pocket of 'trustless economy', but any practical use inevitably requires trust. There's the hardware, the OS/software, the ISP's, the exchanges, etc., that all, to a greater or lesser extend, require trust.
Now Snowden clearly exposed that this trust is not deserved, and that's a problem. But while working on increasing this 'trustless economy' is a worthy goal, I can't help but feel that the best approach is to both work at increasing trust where it can't be avoided, and decrease the need for it where possible.
But perhaps that's too defeatist. I'm following developments in this area with great interest!
Ok, when I studied history many years ago, I took a class in early modern Europe (think 15-16th centuries). That was when modern capitalism first gradually appeared. The most important thing to understand about the origins of modern capitalism is the change in society it required. That change was the transition from a face-to-face society (where you personally knew all the people you transacted with) to a society of strangers, where you had to put faith not only in complete strangers, but in people whom you'd never met and never would meet. Most importantly, you had to put faith in institutions. That was when the first institutions started, modeled after the oldest institution of all, the Roman Catholic Church. There was a time when there were no institutions (well, other than the church). People couldn't even understand the concept of an institution: they knew there was a guy named John and a guy named Paul, but what the hell is a group of people that has an identity of its own, and lasts more than its members?
Anyway, modern capitalism required institutions, most important among which were banks and insurers. Insurers reduced risks and encouraged investment while bankers lent money to support such investments. Now, when you put your money in the bank, it has to be loaned to others, otherwise the economy will come to a standstill. You have to put faith in the bank to get the money back to you. Same with insurance. You have to have faith in the insurer to pay your claim, or, at the very least, faith in the court to compel the insurer to pay up.
The way you look at BTC, disconnects money, a central instrument in the economy, from the economy at large. That doesn't make sense, and even if no one ever steals your money, your money won't "work", because there will be no economy to use it in. A modern economy is built on trust. Trust that in the long run, most people will be honest because that's what's best for them, and they know it. If we don't have trust in institutions, there will be no economy to speak of, or, rather, there will be a very primitive one (only, this time, with computers). In that case, I suggest you take good care of your machine, because in your utopia there will be no new models coming out. Sheesh, how some people, in time of crisis, cling to their laptops and algorithms.