Topic: Why Bitcoin is ultimately doomed to fail (not today or tomorrow) - page 31. (Read 40866 times)

So we already have a third party confirming the transaction between your friends. And it seems that it should get confirmed not just by one third party... How come?

adam transfers 1btc to bob offline

bob logs in to internet, this transaction is now in process of being confirmed

once a transaction is confirmed the coin cannot be spent again. It's a lot more complicated than this but this is what I understand of it.

could someone could explain how one could protect themselves from being sold a coin that is double spent?

I thought we need at least a few confirmations to make a transaction, depending on the amount transacted. What did I get wrong?

And that Bitcoin based bank which has attracted some amount of coins into deposits now issues credit in virtual BTCs (backed in some part by real coins) and accepts the same virtual BTCs, so we have those virtual BTCs driving real BTCs out of circulation. And we are back to where we once were...

Decentralization (or more correctly the ability to transaction without a trusted third party) is the core reason for Bitcoin.   It still doesn't change the reality that transaction in gold was a complete pain in the ass.  The first gold based banks didn't offer interest, depositors had to PAY to deposit gold.  Gold back notes became a popular alternative to physical gold simply because gold was such a complete nightmare to use in transactions.

Prior to 1933 one could at will convert US notes into physical gold at any bank.  Almost nobody did.  Why?  It was a complete pain to conduct business in physical gold. 

Bitcoin has no such disadvantages.  This isn't to say Bitcoin based bank won't be created but the massive drive for an alternative to heavy, hard to authenticate, hard to store, hard to transport gold won't exist.

Ok, you receive your house-worth amount of BTC into your personal wallet and tomorrow your computer fails. If your wallet is actually a bank account (which most certainly would be) you are still there, not knowing if the bank really has those coins...

So now you press on a Bitcoin standard with the difference that there are no banks... Ok, do you know why gold standard failed?

You're like that guy who insisted that decentralization was the main virtue behind Bitcoin, though this time you say it is transactions that make Bitcoin so appealing (Visa and MasterCard will be rather surprised)

Which increased in purchasing power.  Oh noes.  I only have the same number of Bitcoins but now they buy 10x as much stuff and I unlike my neighbor I didn't lose everything when the wildcat bank failed.   What ever will I do with all this new found wealth.

Not for large purchases by individuals or companies. Suppose you are selling a house. Would you prefer to accept BTC or a bank credit denominated in BTC? Far more likely the former. c.f. cash or even gold.

Wow only 1/3 went bankrupt and depositors lost everything.  I am sure people will be flocking to put their money into Bitcoin banks which have a 1/3rd chance of failing. 

You could just enter "free banking era" in your favorite search engine and look for yourself. Not all banks failed and not all of them inflated their "dollars". As far as I remember, only one third of them went bankrupt...

If the bank doesn't fail you get your bitcoins back plus interest. Without a bank there you wouldn't get anything, just saved your bitcoins...

I did explain the problem with your logic.

GOLD IS HARD TO  USE IN TRANSACTIONS.  It has significant disadvantages and cost.   This is what lead to the usage of gold backed notes.  Bitcoin suffer no such disadvantages.  Bitcoin banks using Bitcoins as a reserve to issue private script are unlikely to be popular as simply holding real Bitcoins is easier and less risky.  Unlike gold there isn't a compelling reason to take on the additional counterparty risk.

You just say in more detail what I didn't say in my opening post... Still don't see where my description is wrong. Or do you just think that adding more detail to someone's description makes the short version somewhat incorrect or even outright wrong?

Inflation would only be in some "moneys" and you never knew in advance which bank would cheat... This is not my system, I just describe what actually happened back then and show the origin of the term. Is this really so hard to understand?

And I have already seen ads which promise to pay interest in BTC for investing some bitcoins...

During the free banking era all the banks were issuing 'dollars' and, by law, trading them with the general public equally for specie.

Because in reality a bank on unsteady financial footing issued 'dollars' that were worth *LESS* than their denomination in specie, people who had silver or gold would sell to different banks at different rates due to the risk that the bank would collapse and their 'dollars' would be worthless.

The result was that if a bank's financial outlook appeared rocky, all of its 'bad' money (printed currency) would go to the people who sold them specie, and all of its 'good' money (the specie itself) would get sold to the general public at mandated rates, who could then take it to a different bank and get the same number of (more valuable) dollars.  The bad money in the bank drove out the good, and when they had no gold left, the bank collapsed.

If the currencies had been allowed to 'float' against each other, the bank with money that was worth less could have give an exchange rate of, say, 80 cents of someone else's dollars for one of its own, just as the miners did with their gold trade.  They (and people holding their bills) would still have financial problems, but the problems are now ordinary business problems rather than the effects of Gresham's law.

But you just said there would be inflation and the inflation would be higher than the interest.  I would simply keep my real Bitcoins and while the nominal number won't change the purchasing power of it will.   Your system assumes everyone is stupid and opt for inflationary non-Bitcoin tokens instead of the "real thing".  Even if people temporarily did that, the scenario requires them to be stupid over an extended period of time. They would need to see that year in and year out they have a decline in real purchasing power and continue to not act by taking the very easy step of taking their coins out of the bank.

Simple version:
a) Bitcoins in bank = losing purchasing power daily.
b) Bitcoins not in bank = gaining purchasing power daily.
Your conclusion: The vast majority of people will knowingly opt for "a".

Also without a central bank able to print infinite amounts of money and be the lender of last resort many of those banks will fail and when they fail depositors will lose everything.  This will further reduce the real return.   Net change in purchasing power = interest - inflation - losses.

People didn't opt to deposit gold in banks for interest.  People opted to put gold in banks and use gold notes because ....
GOLD IS HEAVY.
GOLD IS HARD TO AUTHENTICATE.
GOLD IS EASILY STOLEN.
GOLD IS HARD TO TRANSPORT SAFELY.

The benefits of secure storage outweighed the cost.  Bitcoin significantly mitigates those concerns.  The "need" for Bitcoin based fractional reserve banks is less and people have a VERY EASY way to "opt out" ... don't deposit your coins.

You're right, but in that case you would be losing interest which you could potentially earn by depositing your gold in the bank. The same holds true for Bitcoin... Nothing important has actually changed since those times, greed is still here!!!

Or you could just keep your gold and were immune to the inflationary effect.  Of course paying with gold was difficult, keeping your gold safe was also difficult.  Bitcoin however makes paying direct with Bitcoin easy.  There is no need to put you Bitcoins in some bank which will issue fiat currency using it as a reserve.  Of course you are free to CHOOSE to do so but others are free to not.  If these fiat issued currencies end up inflationary well it will make people less likely to choose that option.