I’ve read a little about Bitcoin, and I don’t get it. I use credit cards and PayPal online. Why would I need Bitcoin? What benefit is there to using it for payments?
We don’t need it. The fact that one of the main uses (possibly the majority of uses) is criminals anonymizing their illicit transactions should tell you that.
Bitcoin’s only feature is that it’s decentralized. Imagine a future where all governments collapse, and there’s no central authority to mint or print money, and no central bank to control its supply. We could revert to a commodity currency like gold, or we could use something like bitcoin, which can exist without central control.
Why do we need it now, in a world with stable fiat currencies managed by central banks? We don’t, really.
I wonder who, in the post collapse world, will maintain the electronic infrastructure needed to access Bitcoin and other virtual currencies.
Well the internet is also mostly decentralized by design and can exist without governments as well.
I’m skeptical that in a world in which centralized governments collapsed, that the internet would continue to exist as we’re familiar with it. The organizations operating the root DNS servers, for instance, might collapse as well.
The internet isn’t that decentralized. Without electricity and other infrastructure that government facilitates, keeping major sections of the internet up is a pipe dream.
It’s the anonymity that’s the more salient feature. Relying on high tech infrastructure to power a decentralized money in a collapse of civilization is unrealistic, to say the least.
But anonymity isn’t a feature of crypto currencies. All transactions are forever public and traceable.
Bitcoin is intended to survive the collapse of a monetary system, not civilization itself. For example there’s some sort of military coup or other crisis that destabilizes the government. Services and industry still exist, just not the dollar (or a plausible successor). A system like Bitcoin can bootstrap itself with no central authority or oversight.
These are same things that made gold a suitable medium of exchange in years past, except you can’t transmit a gold coin to your buddy over the internet. (Not saying a gold standard is ideal or preferable, just noting it has a long history of real-world use).
Bitcoin is just one type of blockchain. Most blockchains purport to be some type of monetary system, but the best use cases for blockchain are actually unrelated to money. One good use case would be tracking ownership or land or real assets. NFTs are starting to explore this area, though for now folks are content to use it for laundering money via sham art sales.
One of the purported benefits of crypto is that it can break the Visa/Mastercard monopoly. And it’s true that some currencies can transmit money faster and cheaper (not Bitcoin, which is ludicrously expensive as I understand it). But there’s nothing about decentralization that makes this so. In fact, there’s nothing stopping a private (centralized) company from offering a barebones online transaction service (vis a vis PayPal) that promises low fees and zero consumer protections, which is what crypto offers. Except maybe the threat of regulation.
I’m not sold on the blockchain’s use as a ledger for showing proof of ownership for physical assets. Some central authority would still need to agree that the ledger has merit. That is to say, I can make my own block chain that shows I own the Brooklyn Bridge, but if nobody agrees and I can’t enforce it, who cares. If there’s a central authority that says yes, this blockchain is the authoritative record of ownership, then that authority can just keep its own records. The blockchain doesn’t bring anything to the party.
This already exists in the form of RT1, TIPS, etc. Bitcoin per se is slow, expensive, and explicitly not designed for high volume+low latency transactions. There were some words in the Bitcoin source code to the effect that it was an experiment in maintaining a currency network without a central bank, iirc. Now if you wanted to design a currency (say for micro-payments) that is really decentralised, really private, really free for users, and so on, you could do it, but Bitcoin is not it, and I have not seen any evidence it was intended as such.
I used to work with a guy who was big on Bitcoin. He would rail against “fiat currency” (currency not tied to anything of tangible value, like gold) and talk about how the international monetary system was about to collapse at any moment.
He may not have been quite on target with the imminent demise of the international monetary system, but he’s probably doing pretty well with his Bitcoin investments. About 5 years ago, to try to get us into Bitcoin, he gave everybody in our department a little certificate with a hash code printed on it that represented a portion of a Bitcoin worth about 48 cents at the time. I left it in my wallet, washed my pants with my wallet, and the little cert was destroyed. I looked up what it would currently be worth a few months ago, and it was around $27.
Bitcoin is fiat currency. People who prefer cryptocurrency because they think it isn’t fiat currency amuse me.
One reason criminals like cryptocurrencies is that they enable financial transactions outside of the normal banking systems. Banks won’t allow themselves to be used for illegal activities, and they’re required to report suspicious transactions to legal authorities.
Bitcoin’s primary use is as an investment. Very, very little of it is ever used as a transactional currency.
Not exactly, no. Fiat currency is currency issued by a government that is not representative (not backed by a tangible asset.) That’s where the “fiat” part of the term comes from; it is declared currency by fiat. Bitcoin is neither a fiat nor a representative currency.
To the layman it’s a kind of fuzzy distinction: they’ll see official fiat currency as worth something to the parties to a transaction as long as they trust that the polity that issued it will still be there backing it up, and backing up its value, when next needed to be used; and with crypto as that the parties have to take a similar leap of faith, only about a nongovernmental decentralized online infrastructure.
Let’s put it this way, then. Someone who objects to fiat currency because it’s not representative should have the same objection to Bitcoin.
Oh, I’d agree to that. BTC has LESS behind it than fiat currency.
It’s just a tulip craze, really, but at least tulips are pretty.
Well, for starters, blockchain doesn’t need to be backed by an authority. If enough people agree to treat it as authoritative, then it’s de facto an authority. This is why it was possible to exchange 1 bitcoin for $10,000 before any government ever formally decided Bitcoin was even a thing.
But blockchain actually does bring value even if it’s endorsed by the authority. It’s distributed and unfakeable. If a country wants to create a standardized registry of (for example) land ownership, but nobody trusts the government to keep good records, then the unfakeable blockchain can provide that necessary trust and transparency.
It’s important to realize that the process from “every government is fully functioning” to “complete civilizational collapse” is a long and bumpy one, and there are various things that might be useful at different points on the spectrum.
Bitcoin will not be useful in the state where all governments collapse. At that point you’re looking at canned food, ammunition, and antibiotics as the only important currencies. But you could easily have a case where most governments are mostly functional but inflation is very high and things like gold or (maybe) Bitcoin are useful.
I don’t think exchanging money is an apt analogy, as there are only two parties who need to agree that one bitcoin is with $10k and make that swap. The blockchain can satisfy to both parties that the bitcoin exist and ownership changed hands, but the actual value doesn’t require anyone else agreeing.
Physical goods are different, though. My ownership of my car is only as strong as my physical ability to keep it under my control. As it happens, I have no real means of doing so, and if you were to threaten me with a board with a nail in it I’d meekly hand over my keys.
My actual recourse, then, would be to appeal to an authority capable of using superior force with my proof of ownership. And in that case, the only opinion that matters is that authority’s. If they trust the blockchain proof of ownership I present, then that’s great. But as we can see in our non-blockchain world, it works just the same with a state issued vehicle title.
Maybe a just can’t picture a reality where land ownership is enforced via decentralized means. Otherwise… If I trust the government to kick squatters off my land for me, then I’d trust them to keep a record of ownership.