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Bitcoin The Almighty Buck

A Rebuttal To Charles Stross About Bitcoin 396

Posted by Soulskill
from the opinions-are-like-cryptocurrencies dept.
New submitter buddha379 writes "Over the holidays we discussed a story from SF author Charles Stross called 'Why I Want Bitcoin to Die in a Fire,' just as Bitcoin's price collapsed on news of the Chinese government's cautious approach to the fledgling internet currency. Well known economist Paul Krugman quoted the piece in a NY Times blog post called 'Bitcoin is Evil'. Now, with U.S. regulators reaffirming their hands off approach, U.S. companies embracing it and prices surging again, Bitcoin Magazine returns with a rebuttal called 'Why Charles Stross Doesn't Know a Thing about Bitcoin.' The article notes that like many other popular pieces, Stross' story seems to 'completely miss the point on why Bitcoin is a revolutionary concept.'"
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A Rebuttal To Charles Stross About Bitcoin

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  • by Anonymous Coward on Wednesday January 08, 2014 @07:38PM (#45902633) will still be unstable with respect to any other currency, since other currencies can also be used to buy real things, and the price of the real things will simply be very different from one day to the next in bitcoin.

    Stability has nothing to do with usage and everything to do with expectations.

  • by purpledinoz (573045) on Wednesday January 08, 2014 @08:26PM (#45903105)
    From Charles Stross' arguments:

    You think our wonderful investment bankers aren't paying their fair share of taxes? Bitcoin is pretty much designed for tax evasion.

    This really pisses me off. Our wonderful investment bankers are defrauding us, our government, and are paying a smaller share of taxes thanks to lower taxes for investment income and dividends, helping terrorists and drug cartels move money, etc.... the list is long. Which world does he live in? The fact that Bitcoin is hard to control is the whole idea. When a few people have so much power, it pretty much automatically corrupts. Look what's happening in the US. The Fed prints money, gives it to rich people, everyone else suffers with higher energy and food prices.

  • by DanielRavenNest (107550) on Wednesday January 08, 2014 @08:30PM (#45903129)

    > Once the last coins are mined, what happens?

    Miners also get transaction fees included in the block, so they still have incentive to search for block hashes.

    > how do you set fee levels such that people will validate little transactions as well as big ones?

    Fees are *user defined*. If you are in a hurry, slap a big fee on it. If you can wait, put a small fee on it. The bitcoin software allows zero-fee transactions if you meet some conditions, and some miners will include zero fee transactions in a block if there is room. In the long run, many small transactions will move "off chain". For example, Coinbase processes bitcoin transactions for merchants, accepting BTC payments on their behalf and depositing local currency to their bank account. Conversely they sell BTC to individuals and pull money from bank accounts to pay for it. When a Coinbase user uses their online wallet to pay a Coinbase merchant, that can be all internal to Coinbase, and never reach the Block Chain. Eventually such processors will arrange to settle with each other in bulk transactions, gathering up many little ones and posting it as one big transaction on the block chain. That both avoids bloating the block chain, and makes small transactions easier to process.

    > the value over which some country's national labs or universities turn on their supercomputers and mine almost everything

    Custom chips (ASICs) that do nothing but the particular calculation for bitcoin mining are 100 times more efficient than GPU's, and 1000's of times more efficient than general CPUs. Supercomputers are useless for bitcoin mining. The world's top 500 supercomputers combined process 250 million GFLOPS ( [] ). The Bitcoin Network at the moment is running at 78 billion GFLOPs, which is over 300 times faster. Custom hardware and monetary incentive wins big time. The downside is the ASICs are absolutely useless for any other calculation, because it is hardwired into the chip.

  • Re:History of Fiat (Score:3, Informative)

    by Anonymous Coward on Wednesday January 08, 2014 @09:54PM (#45903651)

    We have run plenty of experiments with government-run fiat currencies. Every single one, without exception, has become totally worthless, or worth a lot less than when it originally started. In the 100 years since the formation of the Federal Reserve, the US dollar has fallen in value by a factor of 23 as measured by the consumer price index ( [] ) , an average rate of -3.2% per year. Many nations do worse. For example India has had an average inflation rate of 7.5% over the last 50 years, Argentina has varied from zero to 40% per year over the last 20 years. If bitcoin can improve on this record, it would be a good thing.

    Except that BTC blantantly hasn't outperformed anything. The value of Bitcoin - measured against USD, EUR, CHF, loaves of bread, goats, airplanes or anything - has rocketed up and down on a weekly basis by far more than 3.2%. And the measure of a currency isn't whether you can dig a hole in the ground, bury some notes in a barrel Walter White-style, and dig them up in a hundred years. A better measure would be looking at what short-term interest-bearing US notes have yielded over that time frame, as they have minimal liquidity/fair-value risk, equivalent credit risk and are actually investments, rather than a currency. Critizing USD notes because they are not a good long-term 'investment' is like critizing them for not being attractive wall-paper - you're missing the point.

  • by tftp (111690) on Wednesday January 08, 2014 @10:26PM (#45903829) Homepage

    Whether it trades at $600 or $1200 today, a pair of trading partners in different countries can save a fucking fortune (in bank fees, not taxes) by buying BTC, denominating the trade in BTC, and converting back to the local currency.

    According to Mt. Gox fee schedule [], each conversion will cost you 0.60% (under 100 BTC.) Then two conversions (say, USD to BTC to USD) will cost you 1.20%. A wire transfer through a US bank costs $40 (a fixed fee) and you can transfer as much as you need. Let's say 1 BTC = USD 1000, and you want to send 100 BTC. Then the bank fees will be 40/100000 = 0.04%. The Bitcoin method is 30 times as expensive!

    If you transfer less money, at some point BTC method and the bank method will be equally expensive. (Obviously, 40/x = 1.2%, and then x=40/0.012 = USD 3333.) Below that sum you will be better off using BTC; above that you will want to use your bank.

  • Re:History of Fiat (Score:5, Informative)

    by AthanasiusKircher (1333179) on Wednesday January 08, 2014 @10:37PM (#45903881)

    In the 100 years since the formation of the Federal Reserve, the US dollar has fallen in value by a factor of 23 as measured by the consumer price index ( [] ) , an average rate of -3.2% per year.

    Umm, for the most part, that's by design. Since the Depression in the 1930s, the Fed's general policy has mostly been to encourage gradual inflation. Why? Well, a lot has to do with details of economic theory, but in simple terms, it encourages people to invest and spend money in the economy.

    You can disagree with this idea (and there are people who do), but in the case of the dollar at least, it seems to have been effective. Between the Depression of the 1930s and 2008, we had nothing like the series of financial "panics" of the 1800s in the U.S.

    When currency value rises (deflation), people hoard cash. They save. There's nothing inherently wrong with that, but it doesn't encourage investment or innovation. Why should I bother taking a chance funding my brother's new small business (or even some crazy guy's cool new idea) if I can effectively increase my assets simply by hiding them under my mattress?

    If deflation could occur at any moment, investors are also skittish. At a moment's notice, they could sense things decreasing in value and try to "cash out" of any investments, as happened in 2008. The main reason we don't experience such severe "runs on the market" (or actually runs from the market) every few years is because long-term investors believe that they'll still likely make a profit in the long run, at least due to the gradual rise in prices.

    A targeted small rate of inflation makes it so the cash savers don't lose a lot of value, but the investors are encouraged. This is all by design.

    Again, you can disagree with this strategy (and there are good reasons to question some assumptions), but that's what the Fed DESIGNED the system to do. You can't come back and say this is an inherent property of fiat currencies, since it isn't.

    (And, by the way, all currencies that exceed their natural inherent value are effectively "fiat" -- if it weren't for speculation and some irrational attraction to shiny rocks, gold's value would be a lot lower. Thus, a "gold standard" is not inherently more stable, even if endorsed by a government -- lots of severe financial panics and depressions occurred while many countries were still under the gold standard. Contrary to popular belief, what makes a currency behave differently from a "fiat" currency isn't merely scarcity -- lots of things are scarce, and most of them have little to no value. In the long run and in dire circumstances, neither shiny rocks nor green pieces of paper nor Bitcoins are guaranteed to be of use -- only actual useful commodities that can be traded are.)

  • by tftp (111690) on Thursday January 09, 2014 @02:55AM (#45904725) Homepage

    have you ever tried to transfer 100k USD?

    Yes. Many businesses do that daily. Many private investors do that all the time. People gather up money for houses or expensive cars. (How did you pay for your house, with cash? I used a wire transfer, IIRC.) Nothing stops you from transferring money. The transactions will be reported, but as long as the money is sufficiently traced you will never hear a peep from anyone.

    I got caught in those moving savings between banks

    Sorry to hear. But in my experience it's smooth sailing. Banks are not in business of interfering with your money. The government might be, but the banks do their best to keep the government out of your pants. People with money are subtle and quick to anger.

Suburbia is where the developer bulldozes out the trees, then names the streets after them. -- Bill Vaughn