Topic: 8 Bitcoin Weaknesses that Affect the Economy (Read 2359 times)

And for very good reasons.  But this is a trade off, a decision that each person gets to make on their own, it isn't forced on anyone.


And just because you say so doesn't mean there is one.


Yup, they both suck, but you have to pick one.  Either your currency can be limited, in which case some people will accumulate it to the point that it could be unhealthy for the system.  Or your currency can be unlimited, which has all the same problems, plus a bunch of new ones.


No, cards are not fast.  They just look that way if you've only ever been on one side of them.  Charges can be reversed at pretty much any point in the future.  Months or years after the day you thought the deal was done.  A bitcoin transaction is fast in the sense that it is nearly irreversible a second after it is made.


No third parties are needed in the bitcoin system, but the bitcoin system can't do everything all at once.  There is room for third parties that do other things.  The real lesson from mybitcoin is that sometimes you get what you pay for.  Oh, and having third parties is not even in the same neighborhood as having a central authority.  You don't pretend that VISA is the central authority for dollars, so why do you pretend that they would be if they mediated transactions denominated in bitcoins?


I know that there was at least one pool in the past that had their policy set like that, but I can't find any doing it now.  Then again, I didn't look very hard.  If it turns out that there aren't any, you should start one as a public service.


Stability is an illusion.  It doesn't exist.  You might as well put your hopes on trading unicorn horns as currency.  The closest we can get is a currency with a fixed issue and gradual decline through loss.  All of the other options involve stealing from someone (or from everyone).

The closest we've ever come to having deflationary currencies in the real world is times when weak and fearful governments have kept their hands off the printing presses for a while as technology works it's unstoppable magic of making everything cheaper in real terms.  These periods usually end within about 60 years as the people with firsthand memories of the bloodshed of the last revolution die off.  By then the new government is powerful, a natural consequence of not fucking with the money, and the leaders feel themselves wiser than any that have come before, so they know they can print "just a little bit more, just this once".  Next thing you know, they are right back where they started.  History is the retelling of this cycle over and over again with different accents.


No one looks at an infant and says "Just think how much it is going to suck changing those diapers when this kid is 20".  Most of the problems with bitcoin, to the extent that they actually are problems and not differences of opinion, are caused by the newness of the system.  They aren't harbingers of doom to come as it matures.

@Rassah

> Mom, imagine your Bitcoin wallet is a stack of envelopes ...

Ok, yours was even funnier than mine.

> Regarding #3, personally, I think a few people with an ENORMOUS amount of money invested in a project have an ENORMOUS incentive to see the project succeed,

That's true, as long as they live long and prosper, and don't turn to the dark side

>In other words, had bitcoin started the way you suggested, we'd still have a few nerds with a little bit of cash

Or we'd have many with a little bit of cash. Bitcoin is attracting miners even at this extreme difficulty.
But it's not about mining, it's about commerce.
Having a handful of people that control a significant percentage of the entire money supply is not good.
I am not saying they shouldn't have made some money, but they sure took advantage of the position, and you can't blame them, but it didn't have to be that way and it's something the bitcoin economy will have to deal with, and it's not a selling point to the average joe.

>As for #4, Bitcoin is doing just fine on Android, and that OS has more users than iPhone, so even if Apple never allows any Bitcoin apps, it'll only hurt them (more) in the end.

I just used iPhone as a term to refer to people who can't or don't want to deal with anything technical not just those specific users.
Like the first MAC having only one button on the mouse. Two buttons were deemed too confusing.

@hugolp

>Op is an obvious troll.

When you don't agree with what someone says,
just label them a troll,
It's easy, just try it.
It saves you from having to come up with an intelligent response.
Simple, quick and easy.

@hugolp
>Some points even contradicted each other.

Just spouting that claim doesn't make it so.

>Other are just ridiculous (like number 2).

That's you're opinion.
I think you'll find many other people aggravated with having to deal with numerous addresses.

@evoorhees

> 1) It is pretty darn anonymous, actually. Find me the MyBitcoin thief,

For an individual to find that out, you are right, it's darn hard. I never said one person could do it (doesn't mean they can't though .  Multiple address will give you very good privacy but not anonymity.
If law enforcement chose to, they can subpoena all the traffic logs at the ISP. Get warrants, etc.
Alphabet agencies probably have their own logging at all major peering points on the Internet. Also placing enough peers on the bitcoin network can get you a lot of information.

>The block chain is unreliable in court, because coins can change ownership without the blockchain knowing (see Bitbills, for starters)

How can you make a blanket claim like that?
The prosecution presents evidence against an accused embezzler. From the wallet taken off his computer, from the computer taken from his house, they show all the transactions and huge amounts of money being transferred from and to various addresses contained in the wallet.
You are saying all the defense has to do is say it's not his wallet?

Another example.
A wife copies her husbands wallet and other info from his computer and then instigates divorce proceedings. Claims infidelity. She hires a P.I. who finds messages to a call-girl in info from husband's computer. To connect call-girl address to husband's wallet he sends payment to an address in the wallet he thinks is hers. Then contacts her and says hey you get my payment? When can we meet? She says, "Sure Hon". Now imagine if her wallet get's subpoenaed.

> 2) Solved with time and user-friendly, trusted online wallets.

So it's back to trusting a central authority. An entire peer-to-peer set-up so we can layer central authorities on top of it.

>3) Don't be jealous of other people who discovered the value of Bitcoin before others. I fail to understand why an "unequal" distribution of coins is a problem for anyone who's not ideologically a communist.

How much 'work' had to be done when mining with a low difficulty as compared to now? It would have nothing to do with "unequal" distribution, but fairness. They earned 50 bitcoin for doing a miniscule fraction of work compared to today, but that is NOT the point I was making. I never mentioned fairness, or unequal, or equal in my post. I was pointing out that a very few people are sitting on massive hoards of the entire money supply. I am saying that is not good. I am saying it wasn't necessary. It would be much better for the bitcoin community to not have huge hoards and instead have many more people holding the coins instead and that an equal reward for the same amount of work would have been the best way to do it.

> 4) Again solved with time and user-friendly, trusted online wallets.

Same reply. See above

>5) With "green addresses" and trusted nodes and a modicum of creativity this problem is solved. Legit e-wallets will arise that can certainly be trusted for small common lighting-quick transactions. Doesn't mean you need to store your savings there.

Again you've stepped away from bitcoin to using a central authority you need to trust.

> 6) I can send a micro-payment right now pretty easily. When there are "millions" of these payments, you can assume the price per bitcoin will be significant and thus processing issues will not be too problematic.

How do you do that? When I try to send 0.000005 it won't let me without forcing me to pay a transaction fee.

> 7) Over time (long-run) the price of Bitcoin will stabilize. And Bitcoin is actually inflationary, just not as fast as government fiat currencies. This inflation approaches zero, but Bitcoin will never be "deflationary" unless many people are losing their coins.

I disagree. Unless they change the limit of no more than 21 million coins, there will be deflation as more and more people use it. Plus there will always be some small but constant coin losses, due to accident, error, etc.
Imagine if over then next five years 10 million users start using it. On average all of them want to save a mere 2 bitcoins as a reserve they never spend, sort of a virtual savings.

> And deflation, as an economic problem, is contentious.

Yes, that is why I asked if anyone has ever studied a currency or economy that had perpetual deflation.

> Observe that you buy computers frequently, even though you know they'll be cheaper and more powerful in 2 months.

Computers are not used as a medium of exchange. That makes a huge difference. If they were they would be inflationary because as time goes by they are worth less.

"too smart" too see the issues"  - Too smart to fail.

@timmey

>> 1) It is NOT anonymous at all.
>  That Bitcoin is anonymous is what the media told you and not what bitcoin.org says.

Yes you are right. But I didn't say Bitcoin.org said it was anonymous. Don't put words in my mouth. That's unsanitary.
I was pointing it out because so many people think it is, for whatever reason, and use it as a selling point. It's really the opposite.
The forensics you can do with the block chain and a wallet are incredible.
It's like your medical records. They are private and it's quite difficult for just anyone to get a look at them, but they are not anonymous.

>Bitcoin is still Beta and not ready for mainstream adoption.

Oh ok.

>> 8 ) Since bitcoin is like cash, it's a thief's dream come true, because once you send the bitcoins, they're gone. The scammers and con artists will ceaselessly zerg the Internet from the
>> convenience of their terminals in far away lands, in their never ending quest to steal anything they can.
> As you said...it's like cash and cash can be stolen from you.

Yep, an unfortunate fact.

@ kjj

> 1. It would be trivial to delete old addresses when you are done with them.

The client does not support this by design. They could change it though. I think the reason they have it that way is that once the address is gone any coin sent to it from then on is good as gone too.

> 2. Nothing prevents anyone from using a single address for everything. 

If you do that anyone can see all your bitcoin transactions in the block chain. The creators recommend using different addresses.

>Oh, and I have never seen any indication that the multiple addresses scheme has ever caused any real problems for anyone, ever. 

Just because you haven't seen a problem with it doesn't mean there isn't one.

>Your story reminds me of late night infomercials full of actors pretending to be confounded by trivial every day tasks.

Interesting comment, but not germane to the actual issues.

>Oh, and Congress/the Fed has the ability to create new money out of thin air, without limit, so whatever problems you think this might cause for bitcoin are already true in the real world.

Yes, that's true. But wasn't one of the selling points of bitcoin that it's not like them? If you have a tiny handle full of people who control a significant percentage of the total money supply, a supply which is limited, and in fact will always be shrinking due to bitcoin loss.
Picking a catastrophic monetary system such as the Fed and saying bitcoin is better than that, isn't saying much.

>4. Yup.  And this is mostly caused by people living in first world countries, where responsibility is unheard of because almost nothing ever has any lasting consequences.

Well I don't know about that being the reason but thanks for agreeing.

>5. In the real world, you have two choices, instant and horribly inconvenient (cash), or slow and convenient (everything else). 

Well a credit/prepaid credit/debit card is fast and convenient.

>With bitcoin, you can make the fast/easy/cheap tradeoff on your own terms.

I don't know how you can do that without using a third party. Which again is the antithesis of the design of bitcoin, no central authority. I think no central authority is good. Because you can see what can happens with centralization, as in the case of mybitcoin.

>6. Miners and relays are allowed to set their own local policy for including/relaying transactions.  Oh, and if you really do want micropayments, just make sure your client is connected directly to one of the several mining pools that have a policy of including all valid incoming transactions.  And if you want to help make micropayments more useful for the world, set your own node to relay everything and publish the address so others can use it.

Can you explain how to do that? When I try to send 0.00008 the client demands a transaction fee of 0.001.
I can see why they are doing it, they want to prevent over load. If millions of micropayments were being done everyday the block chain would grow enormously.

>7. Many of us have studied plenty of economies that had inflation. 

Ok, but that's not what I asked. Many have studied the mating habits of the wildebeast. What does that have to do with deflation?
I said the best is stable, neither deflating nor inflating.

> perpetual inflation, because they always end.  Always.  And usually with a horrible mess and thousands dead.

I agree with that, I never proposed inflation.

>8. Wait a second.  Wasn't your first point that bitcoin isn't anonymous? 

Yes. But I did not say it's a thief's dream because it's anonymous. The point is not that they will do it because they are anonymous, they aren't. They can get caught just like with any other criminal activity. The point is the ease at which they can do it and the difficulty in getting it back. 

> Also, everything you say here is true right now in the real world.  It is just that in the real world, the costs of being careless are not paid by the careless, but by everyone, by way of higher prices and fees at vendors, banks and credit card companies.

Yes, I agree. Unfortunately it's a major problem with bitcoin. Look at the ripoffs that have happened already and it's only in its infancy. It's unavoidable. Any cash like currency will have to live with this problem.

https://market.android.com/details?id=de.schildbach.wallet

Granted, it's for Android, but "the iPhone crowds" have no problem with that UI and functionality.


It's as valid instantly as anything else we consider valid in day-to-day transactions. After an hour it's more valid than a credit card transaction is for months.

#2 is not ridiculous.  It is extremely freaking confusing to the average user.  Between that and the block chain not being up to date, there's a major confusion problem right off the bat for a new user.  Throw in "The transaction is over the size limit" pop-up when they are only sending 0.05 BTC, and the average person is going to give up with "I can't understand this crazy thing!"

The OP is not trolling, he's right on.  If you are "too smart" too see the issues, fine.  But we'll never get widespread adoption the way things are now.

Mom, imagine your Bitcoin wallet is a stack of envelopes you store cash in. You can get as many envelopes as you want, and for all the cash you receive, you get to pick which envelope you store it in. If you don't care where the money came from, just stick all your cash into the same envelope. If you want to separate the money and track whether it came from Ted or Chris, just ask them to put the cash they send you into their own separate envelopes. You can even label those envelopes as "Cash from Ted" and "Cash from Chris." The only difference between actual envelopes and Bitcoin is that instead of you getting the cash and stuffing it into an envelope yourself, you give those envelopes to other people and ask them to put the money there themselves. Don't worry, they can only put money in. They can't take any of it out unless they ask you to put the money into one of their envelopes, and you do it yourself.


Regarding #3, personally, I think a few people with an ENORMOUS amount of money invested in a project have an ENORMOUS incentive to see the project succeed, so I actually see this as a strength. In other words, had bitcoin started the way you suggested, we'd still have a few nerds with a little bit of cash still stuck in their parent's basement (sorry for stereotyping, rich nerds   ), but instead we have a few nerds who suddenly have A LOT of cash to invest in developing this system.

As for #4, Bitcoin is doing just fine on Android, and that OS has more users than iPhone, so even if Apple never allows any Bitcoin apps, it'll only hurt them (more) in the end.

The only points I can see that seem to contradict each other are 1 (not anonymous) and 8 (thief's dream come true). Note that I say "seem" here: the reasons that they don't are that thieves are willing and able to put a lot more effort into obscuring their trail than honest folks are, and that getting away with theft only requires laundering the stolen money once whereas protecting your privacy is a much harder ongoing process that you have to think about every time you make a transaction.

Some points even contradicted each other. Other are just ridiculous (like number 2).

They don't seem to be trolling to me.. I coudl be wrong, ub tit seems as if they'rea ctually trying to find flaws and point them out, even if not successful.

Anyway, number 2 made me laugh, so it was worht my time reading it!

Op is an obvious troll.

Dont feed the trolls.

The current fee enforced by the official client is too big for micropayments, often bigger than the microamount people wanna transfer; and when bitcoins are worth significant more, if the mandatory fee is kept at a similar proportion of the value of 1BTC you would still be paying more in txfees than the micropayment itself.

They make my bitcoins more rare. 

How many of the early bitcoins have vanished into the bit bucket?

OP - Your concerns are actually more thoughtful than most on this forum. I don't mean to dismiss them out of hand, but I believe they are generally addressable.

1) It is pretty darn anonymous, actually. Find me the MyBitcoin thief, or any bitcoin thief for that matter, and I'll withdraw this statement. The block chain is unreliable in court, because coins can change ownership without the blockchain knowing (see Bitbills, for starters)

2) Solved with time and user-friendly, trusted online wallets.

3) Don't be jealous of other people who discovered the value of Bitcoin before others. I fail to understand why an "unequal" distribution of coins is a problem for anyone who's not ideologically a communist.

4) Again solved with time and user-friendly, trusted online wallets.

5) With "green addresses" and trusted nodes and a modicum of creativity this problem is solved. Legit e-wallets will arise that can certainly be trusted for small common lighting-quick transactions. Doesn't mean you need to store your savings there.

6) I can send a micro-payment right now pretty easily. When there are "millions" of these payments, you can assume the price per bitcoin will be significant and thus processing issues will not be too problematic.

7) Over time (long-run) the price of Bitcoin will stabilize. And Bitcoin is actually inflationary, just not as fast as government fiat currencies. This inflation approaches zero, but Bitcoin will never be "deflationary" unless many people are losing their coins. And deflation, as an economic problem, is contentious. Observe that you buy computers frequently, even though you know they'll be cheaper and more powerful in 2 months. "The Deflationary Spiral" is a chimera... or at the very least is an unproven problem.

Yes, freedom requires greater responsibility. Alternatively, you can use US fiat, and enjoy steady and continuous theft from the Federal Reserve.

@OP
Yeah I'm neutral with all of them besides #8 & #2 As of #8 you always got scammers everywhere. I lost a not insignificant amount of Euros on ebay for example. This has nothing to do with Bitcoins.

As of #2
!!!! This is particularly tedious! And unnecessary! I agree with you 100%. Have the user select their own return adress, if they wish for privacy so much. This "feature" renders labeling useless.
.

EDIT: typo

That Bitcoin is anonymous is what the media told you and not what bitcoin.org says.

Bitcoin is still Beta and not ready for mainstream adoption.

As you said...it's like cash and cash can be stolen from you.