I personally think that decentralised peer to peer cryptocurrencies like Bitcoin have a very bright long term future. The linked documentary is well worth fifty minutes of your time in my honest opinion. As the film helps to show why cryptocurrencies are such a game changing paradigm shift and are actually vitally needed.
What is Bitcoin?
Sure—You know the history. As it spread from the geeky crypto community, Bitcoin sparked investor frenzy. Its “value” was driven by the confidence of early adopters that they hitched a ride on an early train, rather than commercial adoption. But, just like those zealous investors, you realize that it may ultimately reduce the costs of online commerce, if and when if it becomes widely accepted.
But what is Bitcoin, really? To what class of instruments does it belong?
• Ardent detractors see a sham: A pyramid scheme with no durable value; a house of cards waiting to tumble. This is the position of J.D, an IRS auditor who consults to The Cryptocurrency Standards Association. As devil’s advocate, he keeps us grounded.
• This week, MasterCard was only slightly less dour. They claim that the distributed nature of Bitcoin will ultimately cause it to unravel. They want us to believe in the necessity of a trusted authority as broker/guarantor/arbiter. I get it! After all, the block chain is a serious threat to the legacy model for moving money
• Many people recognize that it can be a useful transaction medium—similar to a prepaid gift card, but with a few added kicks: Decentralized, low cost and private.
• Or is it an equity asset, traded by a community of speculative investors, and subject to bubble psychology? If so, do the wild swings in its exchange rate diminish its potential to be used as a payment mechanism?
• Full-fledged ehthusiasts say that Bitcoin has the potential to be a full-fledged currency with a “real value” that floats based on supply and demand. Can something that lacks intrinsic value or the backing of a bank or government replace national currency?
Regardless of your opinion about Bitcoin, it does one thing that few pundits dispute: Sure, the exchange value fluctuates—but for those who don’t plan to retain holdings as an asset, it reduces transaction costs to —nearly zero. This characteristic, alone, is a dramatic breakthrough.
Peering Into the Future?
Removing friction is certainly what it is all about. As a transaction medium, Bitcoin achieves this, but so does any debit instrument, or any account in which a buyer has retained house “credit”.
Currently, there is a high bar to get money exchanged into and out of Bitcoin. It’s a mess: costly, time consuming and a big hassle. Seriously! Have you tried using an exchange? Even the most trusted one (Coinbase of San Francisco) makes it incredibly difficult to get money in and out of BTC, prior to establishing your account, identity and banking history. Fortunately, this situation is gradually improving.
Where Bitcoin really shines (or more accurately, when it will shine), occurs at the time when more vendors choose to leave revenues in BTC, pending their own purchases from suppliers, shareholder payouts, or simply as retained savings.
When this happens, all sorts of good things will follow…
• A growing fraction of sellers leave their bitcoin in their wallets, realizing that they will need to spend it for their own labor and materials.
• Gradually, wild exchange-rate gyrations diminish—not because fewer people are exchanging money, but because the Bitcoin supply/demand value is driven more by actual commerce than it is by speculation.
• Sellers begin pricing merchandise in Bitcoin rather than national currencies—because they are less anxious to exchange out of BTC immediately after each sale.
When sellers begin letting a fraction of bitcoin revenues ride—and as they begin pricing goods and services in BTC—a phenomenon will follow. I call it the tipping point…
• If goods and services are priced in BTC, then everyone involved saves money and engages in transactions more efficiently.
• If goods and services are priced in BTC, then the public will begin to perceive exchange rate volatility as a changing dollar rather than a changing bitcoin.*
• If buyers also begin to save their BTC (i.e. they do not worry about immediately moving it back to national currency), it means that Bitcoin is being perceived as a stored value—not just an exchange chit. That may seem to be a subtle footnote, but the ramifications are earth shaking. That earthquake is the world gradually moving away from centralized treasury-issued bank notes and toward a unified and currency that we can all trust.
People, everywhere, will one day place their trust in a far more robust and trustworthy mechanism than paper promissory notes printed by regional governments. A brilliantly crafted mechanism that is fully distributed, p2p, transaction verified (yet private), has a capped supply and is secure.
What Then?
O.K. So we believe that Bitcoin is the future of money and not just a replacement for credit cards. But what does this really mean? Can the series of cause-and-effect be extrapolated beyond widespread user adoption? Absolutely! …
Adoption of Bitcoin as a stored value (that means as a currency) leads to the gradual realization among governments that Bitcoin is not a threat to sovereignty nor even to tax policy. Instead it presents unbounded opportunity: The opportunity to stabilize markets, eliminate inflation, reduce costs and restore public trust. In short, Bitcoin will ultimately level the playing field, revive entire economies, transform the role of government, and save consumers and businesses billions of dollars each year.
Did I mention that Bitcoin is the future of commerce and a very possible successor to legacy currencies? Aristotle must be smiling.
* We tend to think of the dollar as more ‘real’ than Bitcoin. It is not! It has only one advantage. At the end of the day, taxpayers must settle their debts in the currency demanded of their nation. But as Bitcoin adoption gains traction—even if only as a transmitting medium—fiat currencies will gradually become marginalized as play money. That’s because they are susceptible to inflation, politics and manipulation. Bitcoin is held to a higher standard. It is governed by pure math. Despite high-profile news of the day, Bitcoin will even become more resistant to loss and theft than dollars, once tools and practices become well established.
Philip Raymond is Co-Chair of The Cryptocurrency Standards Association. He advises banks on new
age currency. Raymond was master of ceremonies and 1st speaker at The Bitcoin Event in New York.
Related:
The National Security Agency knows Edward Snowden disclosed many of its innermost secrets when he revealed how aggressive its surveillance tactics are. What it doesn’t know is just how much information the whistleblower took with him when he left.
For all of its ability to track our telecommunications, the NSA seemingly has little clue exactly what documents, or even how many documents, Snowden gave to the media. Like most large organizations, the NSA had tools in place to track who accessed what data and when. But Snowden, a system administrator, apparently was able to cover his tracks by deleting or modifying the log files that tracked that access. Read more
Bitcoin survived a wild youth marked by drug trafficking, money laundering, theft, bankruptcy, and political spats. Now, the digital currency is getting cleaned up and heading to grad school.
A fledgling project at the Massachusetts Institute of Technology Media Lab is offering researchers and software developers a quiet home to work on bitcoin’s core technology, a computer science breakthrough that lets people trade money securely without paying a middleman. Read more
Cryptocurrency aficionados have been discussing Bitcoin limitations ever since the blockchain buzz hit the street. Geeks toss around ideas for clearing transactions faster, resisting potential attacks, rewarding miners after the last coin is mined, and supporting anonymity (or the opposite—if you lean toward the 
dark side). There are many areas in which Bitcoin could be improved, or made more conducive to one camp or another.
Distinguished Penn State professor, John Carroll, believes that Bitcoin may eventually be marginalized due to its early arrival. He believes that its limitations will eventually be overcome by newer “altcoins”, presumably with improved mechanisms.
So, does progress in any of these areas threaten the reigning champ? It’s unlikely…
More than any other individual, Andreas Antonopoulos is the face of Bitcoin. We discussed this very issue in the outer lobby of the MIT Bitcoin Expo at which he was keynote speaker (March 2015). Then, we discussed it again, when I hosted his presentation at The Bitcoin Event in New York (also in March). He clearly and succinctly explained to me why it is unlikely that an altcoin will replace Bitcoin as the dominant—and eventually surviving—cryptocurrency…
It is not simply that Bitcoin was first or derived from Satoshi’s original paper, although this clearly established precedent, propelled it into the media, and ignited a grassroots industry. More importantly, Bitcoin is unlikely to be surpassed by an altcoin because:
Bitcoin has achieved a two-sided network effect, just like Acrobat PDF. Unseating an entrenched two-sided network requires disruptive technology and implementation with clear benefits. But in the case of a widely distributed, trusted and universally adopted tool (such as a public-use monetary instrument), a contender must be open source. The Cryptocurrency Standards Association, The Bitcoin Foundation and the leading wallet vendors have always been open and eager to incorporate the best open source ideas into Bitcoin.
Even if Bitcoin were replaced by an altcoin or by “Bitcoin 2.0”, it is likely that the public would only migrate to the enhanced coin if it were tied to the original equity corpus of earned and mined coins from the Bitcoin era. That is, we all know that Satoshi may have thousands of original Bitcoins, but few among us would tolerate (a) losing all of our Bitcoin value, and (b) rewarding a blockchain wannabe who declares that his coins are worth more than the grassroots legacy of vested millions that came before.
Consider Prof Carroll’s analogy: “Who will use an acoustic string telephone when he could access a mobile phone.” A more accurate analogy is the evolution of the 32 year old AMPS phone network (the first widely deployed cell phone network). In 1983, the original phones were analogue and limited to 400 channels. Like their non-cellular predecessors, user equipment was bulky. Phones were divided into bulky components in the trunk, under the seat and a corded handset. They lacked GPS, LTE and many signaling features that we now take for granted. Yet carriers, equipment manufacturers and users were never forced to throw away equipment and start over. The network grew, adopted, and yielded incentives for incremental user-equipment upgrade.
With all due respect to the distinguished Penn State professor, John Carroll, I stand with Andreas. Bitcoin need’t relinquish the throne. It is evolving!
Philip Raymond is Co-Chair of The Cryptocurrency Standards Association and CEO of Vanquish Labs.
This is his first article for Lifeboat Foundation
Posted in bitcoin, computing, cryptocurrencies, encryption
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“When you combine Bitcoin’s global scope, its extreme divisibility and its ability to verify transactions without third parties, you end up with a system where engaging in exchanges of economic value becomes nearly as friction-free as tweeting or texting.” Read more
“But if Bitcoin is ever used by enough people so that blocks are 90 or even 100 percent full, the network could become congested to the point of unusability. The solution, Andresen believes, is to increase the size of each block to 20 megabytes by 2016. How? By changing Bitcoin’s underlying protocol and splitting the blockchain into two different versions—one using 1 megabyte blocks and the other using 20 megabyte blocks.” Read more
Posted in bitcoin
By Felix Salmon — Mother Jones
Nathaniel Popper’s new book, Digital Gold, is as close as you can get to being the definitive account of the history of Bitcoin. As its subtitle proclaims, the book tells the story of the “misfits” (the first generation of hacker-libertarians) and “millionaires” (the second generation of Silicon Valley venture capitalists) who were responsible for building Bitcoin, mining it, hyping it, and, in at least some cases, getting rich off it.
The tale is selective, of course: Not everybody involved with Bitcoin talked to Popper, and the identity of Bitcoin’s inventor, Satoshi Nakamoto, remains a mystery. But Popper did talk to most of the important people in the cryptocurrency crowd, and he tells me that he put real effort into trying “to find a woman who was involved in some substantive way.” Read more
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