Item — HN Reader

I travelled to Argentina around this time and, plane ticket aside, I used Bitcoins for everything. I bought BTC from localbitcoins, travelled there, paid for my stay and some meals in BTC (there was a website that showed restaurants and cafes that accepted it) and exchanged BTC for ARS for the rest of expenses from someone whom I met via localbitcoins there (could be you!).

This was peak crypto actually. It was useful, peer-to-peer, actually allowed people to opt out of the monetary system, it felt like a community, there was this sense of excitement.

Then all the crypto ICO pump and dumpers with frog avatars came and it was over.

5 comments

It wasn't just ICO pump and dumpers that got rid of this utility.

The people coordinating Bitcoin made an explicit technical decision to focus on it being a store-of-value, which made it too expensive to use as a means-of-exchange.

Smaller transactions like the ones you described became too slow and expensive to be viable anymore, because of these decisions.

Transaction costs did become a huge drag on the system and a drain on wealth [edit: what I mean is, at some point they overwhelmed the initial value of cutting out the middleman in other types of digital currency transfers], although I don't think this was a conscious or coordinated decision; it was a result of the inherent limit in block size / mining capacity. Basically, "Satoshi" never imagined so many people would be trying to trade so frequently... so perhaps this focus on storage of value was in a sense baked in unwittingly. I was for BCH becoming the "main" branch. Honestly, though, I don't think making it easier or harder or more or less expensive to trade had any impact on whether or not con artists used it to con people.

Satoshi explicitly was making bitcoin as a medium of exchange, as described in his paper, but apparently couldn't do the math to realize that his system would never manage more than a few hundred transactions a day. That's a pretty massive oversight IMO, and evidence that satoshi is just a normal dude, not some prophet or messiah.

The decision to not expand block size limits was 100% coordinated by a huge amount of chinese mining capacity because the ingress routes to their networks of miners would not have handled the higher throughput, and like six dudes who controlled 80% of the miners sat up on a stage together and talked about it. How is that not coordinated? Bitcoin had every chance to improve it's ability to be a currency, but guess what, the oligarchs who controlled all the mining thought it would give them less money to go that route, so they stopped it. It's almost like a system that allows you directly more power based on how much wealth you personally control doesn't work "For the people"

Satoshi as far as I know never indicated he meant bitcoin to be an ultimate solution and not an incremental stepping stone. It seems weird to expect some anonymous guy to create a perfect end-all and be a failure if he merely ended up with something with some merits that can be improved on.

Satoshi did the math just fine, and later I repeated his calculations with more detail. There were no inherent problems with scaling Bitcoin up beyond the question of how to pay for mining post-inflation subsidy, which could be solved with assurance contracts.

> It's almost like a system that allows you directly more power based on how much wealth you personally control doesn't work "For the people"

That's proof of stake. Mining isn't about how much wealth you control but about how much hardware.

How much hardware you can get and how cheaply you can get electricity is decided by how much wealth you control.

That's not entirely true. When I was mining in Vietnam, we were not rich. We just picked a country where power was cheap and it was close to China so that we could get hardware into the country more easily and inexpensively. The Vietnam govt wasn't using the excess power and they were happy to have someone filling their datacenter spaces.

> which made it too expensive to use as a means-of-exchange.

But wouldn't this have happened over time anyway as transaction size and network volume increased? The exponential increases in electricity usage to mine BTC would have to be paid for somehow?

Not at all. For example Ethereum and Monero etc have floating blocksizes that will adjust due to market demand. The fee market can get pricey for a while, but it quickly adapts to new volume. In the early days Satoshi begrudgingly put in a 1mb block size limit to prevent DOS, and later through some underhanded political BS, that limit was basically made permanent.

Also you seem to think that network usage is related to some way to electricity usage. Even today, a single person with a laptop could be the only miner, and the network would still run just fine.

The current block reward on Bitcoin is 900 coins per day, so the upper bound on electricity usage is however much power 900 BTC will get you. That number gets cut in half every 4 years, so generally, the max electricity expenditure is actually going down, except that the price of BTC is currently going up faster than the rewards are going down.

Energy usage is directly correlated to price, not utility. There is a loose connection between utility and price, but since utility got capped in 2015 or so, the price has continued to go up, so that connection is pretty tenuous.

> through some underhanded political BS

There is this weird assumption that Bitcoin was "managed" or that political forces were at work. It was simply a war between some developers and others.

Not to you specifically, but in this thread: I find it troubling, this new reflex of ascribing to dark conspiracies what are banal historical facts.

The growth of the blocksize was inevitable once it took off; now we have lots of shitcoins, and a few that are stores of value and some that are means of exchange. Lots of hucksters showed up, but no one planned anything. (And looking at the state of things now, it clearly shows).

https://www.theguardian.com/technology/2015/aug/17/bitcoin-x...

never ascribe to conspiracy what can be ascribed to stupidity.

Unless they were actually at "war" shooting guns and killing people, groups of people using non-violent means to achieve an end is politics. One of Carl von Clausewitz most famous quotes is "Der Krieg ist eine bloße Fortsetzung der Politik mit anderen Mitteln" or "War is merely the continuation of politics by other means".

A conspiracy is just a group of people working towards a goal and keeping most of their actions secret, i.e. many groups.

There is always politics any time more than one person coordinates to do something. Bitcoin was definitely not an exception.

There's politics implicit in any situation where one person can stand to gain over others. The instinct to call it a conspiracy may come from the strong beliefs some have that Bitcoin was 'neutral' and designed to not be dominated by a small number of parties.

Mining for rewards is not the only way mining can occur. It can also occur from fees. And since the total number of bitcoins is capped, it will soon only happen via fees.

The amount of fees is unlimited, and the total possible energy usage is currently unlimited and will remain unlimited, and scales with use.

> it will soon only happen via fees

The year 2140 isn't my definition of soon.

I'm not sure this entirely follows...?

My (admittedly, limited) understanding is that standard fiat currencies are stores of value, media of exchange, and units of account. Being a store of value doesn't mean it needs to appreciate in value, just that it doesn't depreciate to nothing over reasonable timescales.

From what I've seen, the main problem with Bitcoin specifically as a currency is that it makes a terrible unit of account: its volatility compared to regular currencies means that no one's going to denominate any prices in BTC.

That's right, a volatile currency is bad for businesses, because the revenue from sales will likely exceed by a lot or fall well below the cost of sales, increasing the likelihood of bankruptcy.

This concern is way overblown. Over the past month the average transaction fee has hovered around a dollar, at level at which it's entirely reasonable to perform international money changing as the people you replied to were doing.

If you transact on Lightning network, it's much cheaper still.

I don't think you're accurately disputing what I said.

Bitcoin went through a period when transaction fees were very high, and wait times were unreasonably long. During this period, they essentially lost all their users who were using Bitcoin for retail-type transactions: moving money across borders, sending payments to friends and family, making small illicit purchases, paying sex workers, etc.

Some they lost to Monero and other altcoins. Some went back to traditional finance. Some went to new non-crypto fintech. Those people did not come back to Bitcoin (they may have held some, but no longer use it for transactions).

The lower prices now reflect not only that some of the issues were resolved, but also the vastly reduced demand. Today, the vast majority of flows are related to speculation, or the use of Bitcoin in other parts of the crypto economy.

The median fee in each block over the last while has been $0.03-0.06 - if you're paying 1 dollar you're doing something very wrong

Whatever the first site that popped up on Google was lied to me :(

Anyway that just makes my point even stronger.

Excellent comment.

If you'd like my long term view.. crypto does have value. I've said this since 2009 or so. Its value is the difference of its transaction fees versus middle parties like credit card companies, plus whatever local currency restrictions are in place which it can circumvent. Take that total and divide it by the number of Bitcoins in the world, that's the maximum logical non-hyped potential value of Bitcoin. It's only worth what it's valuable for as a means of exchange. Its relative value happens to be much more under extreme local circumstances which crop up in various parts of the world. But I do think it serves an otherwise ignored niche.

All those ICO people came much later...

Yeah my early thoughts around crypto were that it's so nice to have another floor on how expensive it is to transfer value between two parties. Other than ETH L1 transfers are generally sub 10 cents

That was totally the original value, I thought. That and being able to take it for blackjack and poker without trusting the holding to LibertyCoin or some shady bullshit outfit like that.

> Then all the crypto ICO pump and dumpers with frog avatars came and it was over.

If cryptocurrency doesn't survive being misused for stuff like that and gets dragged down because of it, then it deserves it.

But it seems to be ticking along even despite of that, just like the US Dollar, so the future seems unclear still.

BTC had always been a means of avoiding regulations, and that's fine imo, because let's be frank... US regulations are on par with the CCP in execution with stupid rules like double taxation and mandated rules for foreign banks not in their jurisdiction.

But they control the loud speakers and have much stronger global enforcement, ie they are the biggest gangsters around so they set the rules.

The double taxation thing really is a bitch. Not to mention, giving up one's US citizenship triggers the equivalent of an estate tax as if you died.

Still, it's a democracy and some people voted for those things; it also doesn't explicitly force people to stop speaking their native language or abandon their religion, or throw people in prison for waving a sign in the street. So I keep my US passport and pay my taxes.

The US is one of the few countries in the world where people do collectively have power to make drastic and enduring changes to the system without needing to start a cycle of violence to accomplish their aims.

>where people do collectively have power to make drastic and enduring changes to the system without needing to start a cycle of violence to accomplish their aims.

Tell that to me again after the financial system, immense legal corruption and healthcare has been fixed. These are all problems known for decades beyond some people's lifespans and consecutive presidents haven't been able to fix it...hell many go again their election promises with lame duck excuses.

If I had to compare both shitty superpowers, China would be "can't change the party but you can change the policy", while the US would be "you can change the party, but not the policy"

Both are dystopian in their own ways, difference being China is an obvert dystopia, while the US is covert one drugging their populace to numb discontent etc.

I don't want to get into some kind of political debate that could be determined to be a "flame" thing - I'm on probation over here. But don't you think the Affordable Care Act (aka Obamacare) was a pretty major stick in the eye of the insurance-industrial-complex? Sure, it's nothing remotely approaching the kind of social medicine available in France or New Zealand, but it was provably the result of large numbers of people voting for change against the prevailing moneyed structure that was in place. Policy doesn't necessarily swing 180º with every new administration; that's probably for the best. Isn't this an example of policy being shifted democratically?

I hesitate to get into the pull-out from Afghanistan or the judicial decision to rescind Roe v Wade; those are both things I strongly, vociferously disagree with. But they're both examples of public pressure changing policy (for better or worse) through the application of democratic processes available to all citizens.

It always boils down to who are you comparing it too?

Cheering those minuscule changes are akin to praising the CCP for beingat open to change with them ending there zero-covid policy.

At the end of the day these policies are slow and usually ineffective - all of your examples included.

> it also doesn't explicitly force people to stop speaking their native language or abandon their religion, or throw people in prison for waving a sign in the street

I don't mean to get all edgy, and not to detract from your general point, but please don't forget that the U.S. supports (and has even installed) foreign regimes that do these (and worse) things - albeit to people in other countries.

You're dead on right. There's no excuse for those travesties. The primary difference is that our voters wouldn't accept those kinds of abuses in our own country. Yes, too many voters are willing to turn a blind eye to exporting those policies, but at least those who are aware of them are both able to agitate against them and, occasionally, able to stop them. There is no fundamental difference between Guantanamo and Russian or Chinese camps set up to torture Muslims. We do, however, still have the right to investigate and to protest; I believe this has limited the scale to one concentration camp as opposed to dozens or hundreds. The same applies to our foreign policy. And there are times where it makes sense to back the less-immediately-dangerous of two dictators, or even the one not aligned with our adversaries. Even in those cases, there's been an almost ridiculously naive American will to try to get them to accept free and fair elections, such as in Iraq. I don't think there's any other empire in history that would allow, let alone sanction such a thing, with the exception of the British who were also primarily interested in divesting themselves from their imperial holdings.

On the foreign stage, America does and has backed horrendous dictators and fascists. As does and has every other empire in history. There is, though, a certain underlying theory in American politics - both right and left - that is disgusted with the notion of engagement in foreign wars and doesn't have the will to occupy foreign territory. This is what you would hope for as a natural result of a functioning democracy where people had a short tolerance for the personal deprivations inflicted by a state bent on imperial expansion.

No, it ain't Switzerland. I wish it were. But speaking with Syrian refugees and Lebanese and Tibetan dissidents and South Vietnamese and Cubans I've known in my life, I've kind of come to the conclusion that international relations are a jungle where most states are predators and most individuals are prey. America does at least give lip service to the notion that individuals shouldn't be preyed upon, and tries to export that meme.

The acceptance of bitcoin payments at the grassroots level is still happening. With the Lightning Network, it's quite viable these days. I've been following https://btcmap.org/map off and on, and new merchants and sites seem to be slowly popping up. Interestingly, there seem to be tourist hotspots in some countries where Bitcoin is more widely accepted. It would be a fun idea to visit these places and try to pay for everything with bitcoin only.

Something I've been wondering about with regard to CBDCs; if you're in a Western country with low inflation and good banks there seems like little point. But what if it were an explicit goal to make a CBDC usable in other countries? Export US price stability to Argentina.

It's call "Dollarization". We called it "Convertibility". In Brazil it was the "Real Plan". It has tried in many other countries. Each one is slightly different, so if you have a lot of popcorn you can try to read each one and understand the differences https://en.wikipedia.org/wiki/Currency_substitution

The main problem is that the government has a deficit of 5%. All the solutions to fix the deficit are unpopular, so they prefer to keep emitting money. (Now they are trying a few unpopular fixes, but not too much, just to keep the inflation not too high.)

If you switch to 100% external currency, after a few month the government will have no money.

They can pay you a part of the salary of $1000 with the external currency, after a few months they will have to pay $900 in external currency and $100 in IOU. Later pay $800 in external currency and $200 in IOU. ... [1] The problem is that people will be unhappy with the increase of IOU.

So it's easier to pay the full $1000 in IOU, and ensure that you can exchange the $1000 IOU to $1000 in external currency. OK, now it's $999 of external currency. Never mind, $998. What about $997? ...

[1] Actually, we tried something like it too! In the 1990 each province had a local money and they paid the local employees a part in the national money and a part in the local money, or perhaps all in the local money. Initially it was fine, but after some months you got a haircut of 30% if you need to send money to another province or buy fuel or some other items not produced localy.

> if you're in a Western country with low inflation and good banks there seems like little point.

Not at all. Some EU countries aside, most western countries do not have a good inter-bank payment system and are still dependent on Mastercard, Visa and Paypal to handle merchant transaction settlements.

Local currency cash is the only thing a state has control over. As use of cash declines, it becomes important to have a centrally-administered digital cash alternative, just like paper cash.

> Local currency cash is the only thing a state has control over.

The state has control over its banks. You can't generally get a Mastercard or Visa card that isn't issued by a bank doing business in your jurisdiction.

How tightly the state holds the reins of the bank depends, but usually they're among the most regulated of the nominally private institutions we have.

Cash usually doesn't carry any fees, whereas electronic transactions incur large enough fees to make small transactions burdensome for small businesses. Payments are an important enough area IMO for countries to implement interoperable standards, rather than wait for the private sector, all competing among themselves, to offer one.