Wences Casares, founder and CEO of Xapo, a Bitcoin storage company, has posted another gentle guide to Bitcoin. Rather than a wide-ranging FAQ (like this one), Casares tackles the overriding question in many people's minds: why should the world take the word of Bitcoiners that their "currency" will eventually win broad acceptance as a means of exchange around the world?
Casares goes over the main attributes of currency systems that historically have proven successful. Rather than start with copper coins or gold nuggets, he changes things up a bit by introducing us to the Micronesian island of Yap, where residents used stones for money; his LinkedIn piece reads like a business book parable but was apparently based on actual history. The stones worked, says Casares, because they were scarce (to the islanders), durable, came in different size denominations for convenience, and could be easily exchanged in commerce.
One idiosyncracy of the Yap system was that high denomination stones (huge boulders) were not actually moved, but left in place, and understood to belong to a certain individual; even stones that were lost during transport by canoe would be honored by the villagers' recollection. While this detail arguably doesn't add much to Casares' argument, it's a nice storyteller's touch.
Of course, there have been a number of major changes in currency systems through the ages, including the invention of paper money by the Chinese, and the introduction of credit cards in the 20th century. Casares compares Bitcoin against cash and gold using the aforementioned criteria (durability, scarcity, etc). He then explains why a technology such as Bitcoin is necessary for frictionless worldwide commerce:
Money is information, but while information has become freer and faster, money is still much harder to move than information. With the costless stroke of a key, someone in Chicago can send an email to someone in Jakarta in real time. Yet, if that same person in Chicago wants to send ¢1 to the same person in Jakarta, it could take days or weeks to get there, not to mention cost anywhere from ¢50 to $50. So while money is and always has been information, the information revolution has really not changed money much at all – electronic money continues to have many of the disadvantages of physical money.
(Score: 0) by Anonymous Coward on Saturday November 22 2014, @08:03PM
Come on, that's all this BS is. Stop with promoting this absolute shit that solves no problems and sets up a whooooooole bunch more.
(Score: 1) by dlb on Saturday November 22 2014, @08:42PM
Money is information, but while information has become freer and faster, money is still much harder to move than information.
When I send an email, I'm usually not concerned about the data being handled properly. If the message gets lost, I'll simply send another one. If I send money, however, and that vanishes into thin cyber space, I've just lost money. Making it "much harder to move" is not necessarily a bad thing.
(Score: 2) by PizzaRollPlinkett on Saturday November 22 2014, @08:44PM
Nothing establishes credibility like a "LinkedIn piece"...
(E-mail me if you want a pizza roll!)
(Score: 1) by Horse With Stripes on Saturday November 22 2014, @09:21PM
Someone who benefits from the storage and use of Bitcoins is advocating the use of Bitcoins? What's next, the Govenor of NJ coming out in favor of gambling in Atlantic City?
(Score: 1) by tftp on Saturday November 22 2014, @08:57PM
And how much will that cost to send ¢1 (28 µBTC) via the Bitcoin network? You cannot transfer this little without a fee: "the reference implementation will round up the transaction size to the next thousand bytes and add a fee of 0.1 mBTC (0.0001 BTC) per thousand bytes." This means that if you send 0.028 mBTC you have to add 0.1 mBTC (300% of the transfer amount.) This does not make any more sense than sending this over the SWIFT.
Bitcoin should not need enticement pieces, like this one, to win hearts and minds. If you pay me in gold coins, I will take them. If you pay me in Euros or USD, I will take them. If you pay me in Zimbabwean dollars ... or Bitcoins... I may need to think about it.
By the way, it was very easy to use Mt. Gox. Where is all that money now?
Early adopters used their advantage to mine many BTCs. It was trivially easy at that time. Now they want to exchange them for some other currency, but without crashing the market. For that purpose they need many new fools with money. As BTC does not solve any real world problems, it is a non-event.
(Score: 0) by Anonymous Coward on Saturday November 22 2014, @09:07PM
Just an added nit: the cents symbol goes after the number while the dollar symbol goes before.
(Score: 2) by cafebabe on Saturday November 22 2014, @09:10PM
I don't need to think about it. I accept a wide range of ridiculous currencies - with an equally ridiculous surcharge to cover my inconvenience and risk.
1702845791×2
(Score: 1) by Horse With Stripes on Saturday November 22 2014, @09:19PM
Do you accept Itchy & Scratchy Money? ;-)
(Score: 2) by cafebabe on Saturday November 22 2014, @10:14PM
I had to check to see if Itchy & Scratchy money existed. Unfortunately, no. Regardless, I accept Disney Dollars [wikipedia.org] and Canadian Tire Money [wikipedia.org] at parity with the US Dollar and the Canadian Dollar respectively. I also accept payment in loom bands. However, the market has crashed since Aug 2014 and they're worth about 1/3 of their previous value.
1702845791×2
(Score: 2) by Snow on Saturday November 22 2014, @09:18PM
So your argument is that it would cost 3 cents to send one cent, and that you would prefer to use swift because of that? How much would it cost to send a cent over swift?
You could of just as easily sent a million dollars for that 3 cents. Also I can send directly it to you. With swift, you have to be a bank to use the network, and that is the real world problem bitcoin solves.
Most bitcoin believers start out as bitcoin skeptics.
(Score: 0) by Anonymous Coward on Saturday November 22 2014, @11:11PM
Bitcoin solves no problems and is no more than a pump and dump. Stop being delusional
(Score: 2) by Dunbal on Saturday November 22 2014, @11:39PM
You have no idea how much your bitcoins will be worth next week. Bitcoin is extremely volatile, with 5-10% changes in value being common. As a merchant how the hell are you supposed to price items with such a volatile currency? As a purchaser how do you know when to buy something - as the item may get cheaper for you (or more expensive!) if you wait just a day. If you're a saver how would you like that roller-coaster ride, every damned day? Not to mention that the overall trend for Bitcoin has been DOWN since it hit its peak. Yeah, put your savings there.
The volatility issues are a great, great obstacle to popular adoption. Yes paper fiat currencies can also swing. But usually they do not swing that much in so short a period of time.
(Score: 2) by deimtee on Sunday November 23 2014, @09:54AM
You are comparing two things, and claiming that bitcoin is volatile because the relationship varies. It could just as easily be be argued that bitcoin is stable and the dollar is fluctuating wildly.
Ok, I kid (at this point), but long term that may actually be the case.
What you are missing in your statement "You have no idea how much your bitcoins will be worth next week." is that bitcoin proponents want to replace the dollar. At that point a bitcoin will be worth a bitcoin.
Asking how many dollars is a bitcoin worth will be the same as asking how many denarii is a dollar worth.
If you cough while drinking cheap red wine it really cleans out your sinuses.
(Score: 1) by tftp on Sunday November 23 2014, @01:31AM
It's an illustration of the fact that BTC pushers are saying things that are not quite true. Sending one cent in BTC will not be free. But, of course, in practice it doesn't matter because nobody sends one cent. SWIFT (bank wire transfer) charges are fixed fee, and they are optimal for large transfers. Will you be brave enough to send one million dollars over BTC? This is routinely done via SWIFT because it is a trusted network that keeps records.
BTC pushers also conveniently ignore the fact that to send currency over the BTC network one has to buy BTC first and pay some considerable fee to the exchange - and take loss on half of the buy/sell spread. Then the recipient has to sell BTC to get the currency back, paying another fee to another exchange and taking loss on another half of the spread. When you want to send N dollars you do not know how much you have in fact sent until the recipient reports back. What happens if you sent not enough? What happens if you sent too much? Businesses cannot just pocket extra money or forgive insufficient fees. At the same time other people are not required to get the best deal on YOUR BTC. What if they sell way below the exchange rate and keep the difference? Will you send more BTC to cover the missing money?
As I have explained above, you cannot send me a million dollars. You can only send me 30,000 bitcoins, and then it will be MY HEADACHE to convert them to dollars. Do you think it is free to search for an exchange that can buy BTC$ 30K without crashing the buy price through the floor? Note that exchanges are not banks, they are just meeting places for buyers and sellers (though exchanges can hold other people's money and trade BTC themselves.) There is absolutely no guarantee that I can sell my new BTC any time soon, and I have no idea how much in USD I can get for them. What a rotten deal! I will not sell you a product on those conditions.
At the same time if you send me USD $1M via SWIFT, my bank will notify me that the transfer is complete. That's all that I need to do to come into possession of $1M. What method is easier and more reliable? Do you believe that I can sell 30K of BTC and not lose more than $40 on my time and exchange fees and spread? Have a look at the exchange fees here [coincompare.com]. In the most favorable scenario (0.2%) the fees alone will be 0.4% - and from $1M that would be USD $4000. A typical bank transfer fee is $40. What is cheaper?
As it appears from the comparison above, those exchanges are set up to openly and brazenly fleece the people who are bad at math.
BTC is not supposed to be a religion. But apparently, for some, it is. For rationally thinking people, though, BTC is an overly complicated mechanism that does not add anything worthwhile to our daily lives. I have no use for it, and so do many other people - who are, probably, not sending one cent to China every other day. If you do, YMMV, it's your undisputed right to use whatever the tool you think is best for *that* job.
(Score: 1) by Stuntbutt on Sunday November 23 2014, @01:08AM
Uh, I can transfer coins for free, as BTC - I don't have to do a bank transfer, which requires a fee. I can print out the damn chain for my coin and email it to someone, who can then input it.
(Score: 1) by tftp on Sunday November 23 2014, @01:49AM
Do you know what would be the surcharge for "inputting it" ? Accountants are not working for free; what is OK between friends is not OK between businesses. Banks exist to formalize the process of payments; banks do all the "inputting", and they charge very little for their services because they have it highly automated. As a seller, you cannot afford to investigate propagation of bits through the network that is owned by no one in particular. You only want to know if the money is here or not. The bank provides you with that bit. As a seller, you cannot afford to buy in one currency and sell in another. (It is equivalent to FOREX speculation.) Banks relieve you from that duty.
It is curious that so many BTC aficionados use transfer of money to some faraway locations as a prime example of worth of BTC. But those examples miss the point because very few people need this service. Even if you buy from China - which is, probably, the most exotic location for a US-based customer - you do it quickly and easily via PayPal, and it takes just a few seconds. There is no clear and obvious use case of BTC, outside of a few contrived examples, like sending 1 cent and getting away with just a 300% surcharge. Most of money is received and spent locally. If you are after the payment to an Arab Sheik for that tanker full of oil, relax - the BTC won't get it. For now it's USD - and tomorrow it will be gold. There are big interests involved in big payments, and BTC has no support in that crowd.
(Score: 2) by maxwell demon on Saturday November 22 2014, @09:46PM
If some government institution (of whatever country) will ever be interested in destroying Bitcoin, it will have no problem getting enough computing power to take over half of the network. And then they can single-handedly destroy the network.
The Tao of math: The numbers you can count are not the real numbers.
(Score: 2) by Thexalon on Saturday November 22 2014, @10:26PM
Or any major corporation, for that matter. For example, Goldman Sachs or Deutschebank have enough computing power and capital to control the Bitcoin market if they wanted to.
But that's not the real reason Bitcoins aren't safe. The real reason Bitcoins aren't safe is that the only reason they have any value at all is because people agree to exchange useful stuff for them. The moment they stop, Bitcoins become worthless. By contrast, government-backed currencies have legal force (backed up by guys with guns) demanding that they be exchangeable for useful things (if nothing else, the ability to not go to jail for failure to pay taxes).
Gold has the same problem: Yes, it has inherent value, but most of its dollar price has nothing to do with its inherent value. You can tell this because substitute metals sell for a fraction of the price that gold does: gold is about 6000 times more expensive than copper, 750 times more expensive than silver, and 600 times more expensive than brass.
The only thing that stops a bad guy with a compiler is a good guy with a compiler.
(Score: 1) by NotSanguine on Saturday November 22 2014, @09:54PM
Bitcoin is awesome and everyone should use it.
Whether Bitcoin is the greatest thing since the sliced loaf or not, do we really need to have shill articles here? If I want that, I can go back to slashdot.
Just sayin'
No, no, you're not thinking; you're just being logical. --Niels Bohr
(Score: 0) by Anonymous Coward on Sunday November 23 2014, @12:09AM
s/t
(Score: 2) by novak on Sunday November 23 2014, @01:30AM
I think bitcoin is a good thing, at least on a conceptual level. I am all for distributing power to the people. However, it certainly has problems. Volatility is a big one, theirs also the power usage issue, and another is the 51% tyranny which could be disastrous. As it is, it may be more of an experiment which will lead to even more improvements.
Also, someone mentioned Mt. Gox. No one really had any respect for them, they were always shady and inept. The name stands for "Magic the Gathering online exchange" for crying out loud. The reason they were the first bitcoin exchange is because they were already trading not-real-money for money.
One of the problems is that instead of using bitcoins as money, people want to use it as a get-rich-quick scheme. So most of the bitcoin sales right now are just idiots and wannabe nerds "speculating" and treating bitcoin like some kind of stock. That's a big part of why it's so volatile right now. Bitcoin is a lot less useless than it was a year or so ago, you can pay with bitcoins on overstock.com and newegg, and paypal is trying to work it into their system as well. I guess we'll see if it goes anywhere.
So I guess to get back to the question "should we take bitcoin seriously?" I would answer: Yes, although possibly more as an experiment than a final end currency. Anyhow, we should take it much more seriously than people who blog on linkedin.
novak
(Score: 2) by mtrycz on Sunday November 23 2014, @03:16PM
There are bigger problems with traditional currencies.
Full&lengthy Disclaimer: I'm following loosely the bitcoin news, and some alternative currencies, namely Pandacoin because of its great comunity and technical merits (and I run a site that accepts PND as payment). I do not sell gold or are affiliated with the poeple in the following link (they DO sell gold), and I'm even not capable of veryfing all the claims; maybe some smart people here can validate or disprove the following info.
https://www.youtube.com/watch?v=iFDe5kUUyT0 [youtube.com]
It's a very interesting vid about how currencies work, and it's not even about bitcoin. The essence is that the rich/powerful have *designed* the economic/financial system to work for them giving them more riches/power. it explains the quirks in great detail.
As of late, even the Bank of England lately addmited something similar:
http://www.theguardian.com/commentisfree/2014/mar/18/truth-money-iou-bank-of-england-austerity [theguardian.com]
On another note, the recent G20 decided that banks (in case of trouble) are not obliged to pay you back all your money they own
http://www.examiner.com/article/bank-deposits-will-soon-no-longer-be-considered-money-but-paper-investments [examiner.com]
I could go on, obviously.
I find there is a necessity for a "grassroots"/alternative method of payment. I don't know it it will be bitcoin or what, but I can see the need of a change.
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