Topic: "Failure to Understand Bitcoin Could Cost Investors Billions" (Bitcoin's flaws) - page 20. (Read 43254 times)

My answer: NO

Bitcoin is the the first cryptocurrency ever and it will continue to expand as long as its protocol is not compromised (which is very unlikely even in a distant future).

Do not underestimate the importance of network effect.
It's like VISA, which launched in 1950s as revolutionary payment service. Although now it's too primitive comparing to hundreds of new electronic payment systems, it still covers the most of the market.

Yes votes are in the lead?

Bet that wont last long

Update: please read this post for a clarification of the meaning of this "OP" (opening post).

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(Doug) Casey Research's Alex Daley (a former high ranked executive at Microsoft) penned a myopic rebuttal to internet pioneer, now venture capitalist Marc Andreessen's myopic fanboy regurgitation of the often repeated incorrect theories about Bitcoin's key innovation and future. It is important to read Alex's article first. These two and most of the Bitcoin community are far from understanding what is really going on. Thus expect the majority to vote "No" here, to reaffirm their myopia.

Daley essentially incorrectly argues that money can't exist without top-down corporate and government control (although he admits it could in a "wild west" mad max world which I think is to some extent where we are headed after 2016), yet correctly argues that Bitcoin has insurmountable (also) flaws for consumer payment without top-down take over while he failed to enumerate many of the reasons Bitcoin is vulnerable to top-down take over. Copying the myopia of most of the Bitcoin community, Andreessen fails to understand the reasons Bitcoin is doomed to a future of top-down control analogous to the top-down global money solutions being patented recently by the major banks.

Before enumerating the specifics, I want to first address the factors driving interest and adoption of Bitcoin. Foremost is the desire to end the mismatch of the fact that the internet enables bottom-up, decentralized freedom (of speech and enterprise) yet payment being top-down controlled by a few large corporations which also translates to control by the various governments, e.g. AML and KYC laws since the false-flag farce of terrorism was foisted on the world to fool the sheep. Not only does this mean more layers of tsuris and parasites when starting up and maintaining enterprise on the internet and a fractured global internet payment system, e.g. many sellers in third world countries can't accept Paypal nor credit card payments or have severe limits, it also means we fundamentally don't have any individual freedom without relying on governments and society remaining functional and sane. Unfortunately history has shown that periodically throughout all recorded history since Mesopotamia ALL governments and society eventually go insane (more on that later).

Secondly, given this breathtaking potential to fundamentally bring payment into coherence with the decentralized freedom of the internet, there is immense investment demand for the killer crypto-currency. This sustains an investment boom until everyone that is going to use or be involved with that ecosystem is already fully invested. During that investment boom, the payment system doesn't need to be superior in every way to existing fiat solutions that Daley mentioned, because the investment demand along with the myopic dream of that breathtaking potential creates demand and interest. Daley is correct in another way which he did not mention. If the underlying payment capabilities are not superior (nor have a killer feature such as anonymity [2] to make them more compelling) thus not scaling with the investment demand then when that investment demand is saturated, there is a bubble that will burst. Even CoinCube, Gary North (Ron Paul adviser), Henry Blodget, Peter Schiff, and others agree.

Bitcoin Take Over Threats

• Coming $Trillion(s) bubble burst will demand world government intervention & cooperation [1] (Bernie Madoff is so much smaller)
• Selfish mining attack confirmed by skeptics
• Those who were anonymous lose it ex post facto, when tax & law enforcement attack a.k.a. "coin taint" the numerous non-anonymous [2]
• 51% attack because mining is concentrated in a few pools
• 51% attack because mining is ASICs concentrated and ASICs foundries could be purchased with unlimited fiat. Note also ASICs can't be re-purposed as PCs can, i.e. each ASIC only works for a specific coin design.
• 51% attack because mining is not funded with perpetual debasement (new coins) to remain proportional to market value, instead transaction fees can not scale to market cap because even debit cards & ACH charge a flat-fee not a percentage of transaction value. Thus the world's rich (denominated in coin) grow more wealthy relative to the income of the miners.
• Non-zero transaction fees allows cartel take over via Transactions Withholding Attack and Spiraling Transaction Fees tragedy of the commons.
• Lack of perpetual debasement means 51% attack gets less expensive (proportional to market cap) over time.
• Pools can be attacked with Share Withholding Attack fixable with oblivious shares
• Blockchain requires increasingly powerful full clients as scale to billions of transaction, thus more centralization and vulnerability to 51% attack.
• Superior altcoin

Bitcoin Killer Altcoin

The Bitcoin killer will thus have at least the following features.

• provably cpu-only mining with botnet resistance (current proof-of-stake can't redistribute new coins to masses & I posit it isn't secure)
• built-in anonymity (to minimize non-anonymous users)
• small, reasonable perpetual debasement
• zero transaction fees (with economic transaction spam resistance)
• economically limited pool sizes
• oblivious shares
• selfish-mining fix
• mini block-chain design
• faster 1-confirmation block chain, e.g. 1 minute instead of Bitcoin's 10 min delay, if the orphan rate can be contained

Note the argument of an absolute network effect advantage for Bitcoin is illogical. The network effect can lead to more mass for Bitcoin but it can't entirely shut out altcoins, not in the way that for example an internet standard shuts out alternatives due to the inertia of modifying millions of servers. For example, my coolpage.com was first in 1998 with a million users by 2001 (roughly 1% of the internet at the time), Friendster followed 2002 later peaking with 100+ million, Myspace 2006, and then Facebook 2008. Last year Bitcoin was only at an estimated 350,000 users. We have a long way to go to 7 billion.

Since the Knowledge Age is rising [3], socialism is peaking into an economic collapse soon (maybe to rise even higher in future), thus we headed into a crazy period where the governments will try to fund the $150 trillion global debt bubble [4] by hunting down all private capital (G20 announced a database for this today, NSA will contribute and note this is the bankster business model for them to own everything), then as Bitcoin is taken over top-down then the alternative coin with the above features will take over and become the surviving private sector. For this new virtual economy, e.g. downloaded 3D printing designs which we print at home instead of going to store (and 3D printers can print numerous materials on the same object), there are many cases that don't need the consumer protection charge backs. You won't likely be paying a high enough price for a download to justify the hassle of charging it back any way. A 7 billion person market is huge, prices will decrease while profits for individual designers will rise! Prosperity!

Also Alex Daley apparently isn't aware of the scripting capability in Bitcoin which enables multi-party contracts, off-chain activity a.k.a. colored coins, and thus escrows and other forms of consumer protection are also possible.

Near-term it pays to hold the crypto-currency as a store-of-value as investment demand rises over perhaps the next decade or more, and after that as I explained [3] that Knowledge Age workers will prefer to store their capital in knowledge, e.g. offering bounties to more developers than storing in money, so money will shift more to a unit-of-exchange and away from a store-of-value (because new knowledge can't be driven in large-scale by usury finance of large, dumb capital) and in fact only Dark Ages have been associated with non-debased, hard, money as a store-of-value, thus the crypto-currency can be our unit-of-account and we won't need to exchange it in real-time to the dollar or SDR socialism world currency (as many merchants currently do with Bitpay for Bitcoin to get paid in fiat instead of bitcoins). The Knowledge Age economy can find sufficient scale to keep commerce denominated in the crypto-currency and rarely exchange out to fiat for those rarer physical purchases as the physical industrial economy fades away.

Footnotes

[1] https://bitcointalksearch.org/topic/m.4869474


[2] https://bitcointalksearch.org/topic/m.3837816
https://bitcointalksearch.org/topic/m.3845771
http://hackingdistributed.com/2013/11/19/why-da-man-loves-bitcoin/#untraceability-versus-anonymity
https://bitcointalksearch.org/topic/m.3385368
https://bitcointalksearch.org/topic/m.3944395
https://bitcointalksearch.org/topic/m.3525312

Gonzalo Lira explains why anonymity is so important but Bitcoin doesn't make most users anonymous.


[3] https://bitcointalksearch.org/topic/m.4926212
https://bitcointalksearch.org/topic/economic-devastation-355212
https://www.google.com.ph/search?q=oxford+university+predicts+47%25+technological+unemployment
https://bitcointalksearch.org/topic/m.4165741
https://bitcointalksearch.org/topic/m.4192799

[4] https://bitcointalksearch.org/topic/m.3902083

Errata

I am in the process of gathering links to my prior explanations of and math on why the people lose and wealth is concentrated under both deflation and inflation, and that debasement is not correlated to whether the people attain greater or less prosperity. Check back in this section later, as I will add them below.

https://bitcointalksearch.org/topic/m.4379076
https://bitcointalksearch.org/topic/m.3615848 (math)
https://bitcointalksearch.org/topic/m.3357270
http://armstrongeconomics.com/2013/01/10/why-hyperinflation-is-nonsense/

It is centralized control over debasement that is very detrimental to the people (because for example the Fed can make a hockey stick of the money supply chart at-will), whereas decentralized debasement is a boon to the people as explained in the above links. Unlike in the 1800s when we had more frequent bank runs and depressions, central banking has enabled delaying the debt defaults and write-downs so now even the IMF admits we are at a 200 year debt peak and thus is recommending that massive confiscation of wealth is required. Most people don't realize we had a depression in the USA in 1919, but we recovered in 2 years because the government did not delay the defaults. Whereas, the 1929 Great Depression lingered for decades and required a World War to resolve, because of FDR's New Deal and preventing the defaults and chaotic correction. Frequent defaults correct the economy before it gets "too big to fail" (TBTF). Now we potentially face an Apocalyptic or Mad Max outcome because we grew our debt to a 200 year high. My hope is that the better crypto-currency could help protect private capital from "socialism gone insane" so that the worst outcome can be avoided.