If we look at bitcoin vs. US banknotes, a paypal balance, a pile of gold bars in a bunker, whatever, if we're looking at how bitcoin performs vs. all these things at the moment in time when we're transferring them to someone else, bitcoin is superior in every case. The problem is this window is brief. Non-transactional moments in the life of bitcoin is where the problem lies.
Looking at historic pricing of bitcoin, and seeing a peak at a little over $1k, what does the future price need to be for people to feel comfortable receiving bitcoins and just holding onto and forgetting about them, in the same way they could with, say, 100 bucks in their wallet? Being divisible down to 8 decimal places might rationally address the issue of how to spend something where the base unit costs as much as an Xbox. But even if bitcoin could somehow split at something like 300 or 500:1, to make a bitcoin roughly equal to a US dollar or a Euro, does that really solve the problem of perception? The historical chart, with the accelerated volume and insane swings in both directions, might never recede from the mind of the public.
I just have a hard time understanding what a path to acceptance as a legitimate currency looks like. Years of price stability would be a great start. But the beginning of that period hasn't even begun. In the past month alone, the price has moved by 30%, and daily volatility regularly sees the price change by 5%. I can sort of squint my eyes and imagine scenarios where bitcoin, the currency, wins. What I can't see is how bitcoin, the speculative investment, also does well. That these two things are at odds leads to other issues, too, but this is already unnecessarily long.
I don't think those two things are are necessarily at odds. Many people trade well-established currencies for investment purposes. Forex is bigger than futures or equities markets with USD as the most popular currency.
With equities, no matter how far a stock price declines, profit is still there to be returned to shareholders. Other currencies don't provide the same kind of guarantees, but the backing of governments and inertia might be more valuable. Once people grow concerned that the only thing propping up the long term value of bitcoin is the person next to them believing in it, a quick reversal of sentiment, with ugly consequences, seems likely.
Yes, bitcoin has some specific traits that are superior to carrying wads of cash. Much like many other forms of digital exchange. This is not really news.
It's tempting to completely ignore the article after seeing such a blatant distortion. However, there is some interesting stuff here.
> "Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient."
So the first feature is already covered by any bank, or Paypal, or numerous other services. I don't understand the second, though...at what point does it become cost prohibitive to make large transactions? Gates is dealing with a totally different level of money than anyone here, so he must have some insight.
> “The customers we’re talking about aren’t trying to be anonymous,” he told Schatzker. “They’re willing to be known, so Bitcoin technology is key and you can add to it or you could build a similar technology where there’s enough attribution where people feel comfortable that this is nothing to do with terrorism or any type of money laundering.”
It sounds like Gates is talking about a system either used as the protocol between financial institutions or something akin to Paypal, without any anonymity. At this point I'm not sure what Bitcoin is doing better than a number of existing services, and if the ledger is public, then privacy is completely out the window (due to Gates suggesting that even the pseudoanonymity in Bitcoin is undesirable). At least with bank transactions I know only my bank and maybe the government can know my purchases. I don't want the whole world having access to that data.
The point being that the power is in the hands of individuals, you needn't rely on services (though reality is most will rely on services like Circle or Coinbase)
Bitcoin transactions show up instantly. There's no need to a trusted middle man. Anyone I show it to is swooned, because it's simply really really cool.
- Bitcoin wallets are under constant cyberattack and there is nobody to compensate you if the money is stolen. - There is no good way to evaluate the integrity of bitcoins software for end users - Even the most user friendly hosted wallets (e.g. Coinbase) are not faster or simpler than a well designed bank (e.g. Simple) - Almost no ordinary merchants accept Bitcoin - The Bitcoin exchange rate is like the Zimbabwe Dollar
I think all these problems can be solved, and I personally hold Bitcoins, but let's not be delusional about the current state of affairs.
I've been interested enough to try cryptocurrencies. I have never been able to buy a BitCoin. Why? Because the blockchain is so big I've never been able to download it. I leave my client open for a couple of weeks and then give up. I managed to get some Doge a year or so ago but that's because the blockchain was much smaller and it only took a couple of days to download. And when I did get Doge working I had to give out a very long address (what is this? can people steal from my account with it?) and I had to place trust in the stranger I was buying the coins from that they would deliver.
Banks suck but they offer convenience and a level of trust I don't see how BitCoin is going to be able to match. Transactions and transfers where I live through a bank are now instant. They offer useful mobile apps that are quite decent and online banking has gotten good enough that I believe more than half of my banks branches (one of the most popular banks in the country) have closed.
I'm not saying there is no use for BitCoin but for most people I don't see how it will replace banks.
See alternative wallets:
...and particularly after seeing this graph: https://blockchain.info/charts/cost-per-transaction
I'm more excited about proof-of-stake, as there isn't this arms race to throw more and more computing power to generate bitcoins. I'm not sure why it hasn't seen more adoption, but I will admit that I don't pay a lot of attention to the cryptocurrency space...
An additional problem I just thought of, however, is that there will be some number of stakeholders that leave the network, lose their keys, etc., and there is a chance that they are the only ones chosen to sign a given history extension. So there has to be some way to recover from this, while still being resistant to denial-of-service attacks.
