Blockchain Revolution: from the internet of information to the internet of value

[kneehighs]

@Shyheels I feel like that explains with deep psychological insight your resistance to new technologies.  It dates back to childhood?  I mean this with all due respect too.  Like I was abandoned by my biological parents and adopted, so love sometimes still to me causes me to fear loss.  

[Shyheels]

Not really, although I grew up in a very old-fashioned environment - a lot of my childhood was straight out of the 1920s. No deep psychological resistance of novelty or new technology. For example, much as I loved film photography (I started in the late 70s) and delighted in dabbling in the darkroom, I gave all that up in a heartbeat when digital came along and, fond though my memories are of those days of film, wouldn't ever entertain a return to it. Like most professional photographers I waited until digital was advanced enough to be widely accepted by magazines and editors - but one that was happening, I jumped and never looked back. 

Unlike Bitcoin I could see some very definite advantages to digital - once it had reached a point where one could reliably obtain professional quality images matching those in film (and now exceeding them by quite some margin!)  

I see no advantage to Bitcoin or cryptocurrencies. I am not engaging in dodgy transactions, not a spy, not a money launderer, or drug dealer and have no problems whatever with credit cards, cash, bank transfers or even PayPal. What is Bitcoin going to offer me?

 

 

  

[alphax]

About 10 years ago, I wondered why I would ever use PayPal outside of eBay. 

Now it's widely accepted by online merchants and I have used it many times, finding it more convenient than taking out my credit card.

Good move by eBay for splitting off PayPal after owning them for so long.

So small changes can make a big difference in adoption.

But you're right in that if bitcoin's no better than what you have today, then you shouldn't use it, but there's no reason to dismiss the idea that you will never use it in the future.

One advantage that I can put on Bitcoin is that it isn't owned by MasterCard or Visa.

So why's that important? Sites that deal with sexuality or controversial POVs or practices can be banned from "merchant services" i.e. credit card services by MC and Visa because of "liability" as defined by the U.S. Attorney General.  So called "extreme bondage" sites like Insex had to change because of this. FetLife banned Nazi Uniform fetish groups along with other groups because of this.

There's absolutely no regulation as to what the credit card giants can effectively censor and it can be completely arbitrary.

If MC/Visa wake up tomorrow and decide that freestylers are perverts or extreme heels cause foot injuries, then cut off this forum's access to credit cards, then they can do it and we have zero legal recourse.

[Shyheels]

They could wake up tomorrow and decide cyclists were bad news, or people who like cricket, or ban people who smoke from buying cigarettes with their cards, or ban anyone for any reason without so much as a by-your-leave. THat's true, but not very likely. Worrying about that is to borrow trouble. I have enough cares and concerns without feeling a need to borrow more.

[alphax]

Fortunately, general sexuality has been ruled as allowed under the First Amendment.

https://www.engadget.com/2015/12/02/paypal-square-and-big-bankings-war-on-the-sex-industry/

But taking the attitude that financial censorship is alright until it affects you personally isn't very smart.

And that was just an FDIC ruling from 2015. If the *ahem* Nazis come to power, things could change in a hurry.

Edited September 16, 2017 by alphax

[Shyheels]

I don't suggest financial censorship is all right, just extremely unlikely and if exercised likely to provoke a backlash that their risk-averse PR people would run a mile from.  

[meganiwish]

Does financial censorship happen?  Surely they're just happy to take your money regardless.

[kneehighs]

There are more than just currency benefits to bitcoin.  There are blockchain benefits.  Why use it?

1.  no international currency exchange fees when traveling

2.  no banking fees--you are the bank and store your crypto on USB or even paper.

3.  no fees on global transfers ever--it's peer to peer without intermediary's

4.  more secure than traditional banking.  Equifax maintained a single point of vulnerability.  140+ million accounts were hacked.  Blockchain solves

5.  increased privacy by increasing anonymity across transactions, but not totally eliminating traceability

 

[Shyheels]

The few quid you might save on bank fees can get eaten up pretty quickly when you're playing with a wildly unstable fluctuating currency that can swing up to 40% of its value at the drop of a hat. 

[kneehighs]

The biggest benefit of crypto is the benefits that come from blockchain.  My faith in crypto isn't based on bitcoin, it's based on the underlying technology: blockchain.

Blockchain currency replaces a singular authority like the US Federal Reserve or British Bank of England with the authority of consensus.  

Blockchain also replaces cows and cattle with a digital payment structure that enables the world's poorest (Kenya, Bangladesh, Somalia) to create revenue.  While fees may seem small to some, they are large to the very poor.  If someone in NYC wants to send money back home to Somalia, it's often not possible.  With crypto and just a cell phone, the transfer of money is now possible.  

EDIT: I forgot to add the obvious.  Overall, bitcoin value is consistently increasing over time, as it's user base grows.  As with any new tech, it fluctuates, sure.  Further, new bitcoin is created via a process called mining.  Mining uses high powered computer processing to create new currency.  One will pay upwards of 1K to mine a new bitcoin (electricity and computing power).  It's unlike FIAT currency of the US or Pound which basically costs just ink and paper to mint.  There is value in choice to use crypto.

Edited September 17, 2017 by kneehighs

[Shyheels]

Extolling the virtues of Bitcoin and block chain by describing how easy it is for a guy in NYC to transfer money to Somalia with just a mobile phone is probably not the best salesmanship these days - unless your audience is one that operates on the dangerous fringes of society. 

 

Edited September 17, 2017 by Shyheels

[Shyheels]

What exactly is "mined" by all this computer processing and how does it have or acquire value? The concept of a currency whose value is established by consensus on the internet is a scary ne indeed. Ever read the comments section below virtually any news story on any website? There is a world of nutters out there... And they are all on line... Do we really want them at the helm of our economy, working the levers and making things happen?

Wikapedia has a hard enough time keeping its entries legit. 

Edited September 17, 2017 by Shyheels

[kneehighs]

7 hours ago, Shyheels said:

Extolling the virtues of Bitcoin and block chain by describing how easy it is for a guy in NYC to transfer money to Somalia with just a mobile phone is probably not the best salesmanship these days - unless your audience is one that operates on the dangerous fringes of society. 

 

Transfering money from NYC to Somalia in this context is an example of an international remittance.

International remittances amounted to 429 billion in 2016, according to the World Bank.  

“Remittances are an important source of income for millions of families in developing countries. As such, a weakening of remittance flows can have a serious impact on the ability of families to get health care, education or proper nutrition,” said Rita Ramalho, Acting Director of the World Bank’s Global Indicators Group.

"The global average cost of sending $200 remained flat at 7.45 percent in the first quarter of 2017"  That's 31 billion in fees for Western Union and other remittance companies.  For those in poor countries, 7.45 percent cumulative over years adds up to thousands of dollars and the equivalent of years of annual salaries spent in fees.  It's a high cost for the world's poor.  

"By disintermediating traditional third parties and radically simplifying processes, blockchain can finally enable instant, frictionless payments, so that people don't wait in line for an hour or more, travel great distances, or risk life and limb venturing into dangerous neighborhoods at night just to send money" Don Tapscott, Blockchain Revolution

So from a perspective that respects the world's poor, from a humanitarian and philanthropic perspective that has heart for those who are less fortunate, bitcoin and blockchain stand to benefit them in some of the biggest ways possible.

Edited September 18, 2017 by kneehighs

[meganiwish]

I can spill syllables with the best of them, but mining means real human beings going into dangerous places in unpleasant situations.

[Shyheels]

Oh, I am well aware of money transfers and their importance to folks back home - my point was that Somalia was probably not exactly the best example to use. Poor, sure, but with loads of terrorist and piracy connotations as well. Malawi might have been a more sympathetic example.

But even so, a 7.45% cut pales beside the losses you could suffer given the volatility and wild fluctuations in Bitcoin. The past fortnight is a case in point. I'll take a 7.45% hit every time over a 40% fall in value.

[las]

On 18/09/2017 at 2:30 AM, Shyheels said:

Oh, I am well aware of money transfers and their importance to folks back home - my point was that Somalia was probably not exactly the best example to use. Poor, sure, but with loads of terrorist and piracy connotations as well. Malawi might have been a more sympathetic example.

But even so, a 7.45% cut pales beside the losses you could suffer given the volatility and wild fluctuations in Bitcoin. The past fortnight is a case in point. I'll take a 7.45% hit every time over a 40% fall in value.

This is a fair point, but I'd counter the traditional fees issue that not all recipients of transferred money will be looking to spend it immediately; taking Bitcoin as the example, whilst is is incredibly volatile, it is generally on an upward trajectory as far as value is concerned, and for those that can afford to wait (and essentially gamble on its future worth) it is a good outlet for this - whilst still being able to handle remittances too.

If I transfer you $10 today (and I cover any transfer fees), it'll still be available as $10 in your bank account tomorrow, next week and next year. $10 of Bitcoin will fluctuate - isn't that exciting?

[Shyheels]

It’s exciting if it fluctuates upwards. Not so much if/when the bottom falls out. And not everyone really wants to speculate on the currency market. People like certainty, especially when it comes to income.

[meganiwish]

I quite agree.  If it's excitement you want then back the horses or go to a casino.  I'm not morally opposed to gambling, but I am opposed to your gambling affecting  other people's lives.  Life can be hard enough for some without some pillock  affecting prices because he likes a thrill.

[kneehighs]

Some portfolios can tolerate the risk associated with Crypto and do so comfortably. Absolute certainty doesn't come with any investment.  

When it comes to risk, people deal with it on an emotional level, and really deal mostly with the potential for loss. "Diversifying across the spectrum of risks — particularly pursuing investments that face different conditions so that their success or failure is not all tied to the same market characteristics — is widely considered the best way to build a portfolio that can be depended on over time, because it ensures that no one risk will turn into the problem that kills a portfolio." MarketWatch.  

The value of Crypto only as a currency like Bitcoin or Ethereum also overlooks the many other values the underlying blockchain technology can bring.

Edited September 24, 2017 by kneehighs

[Cali]

On 9/23/2017 at 3:00 AM, Shyheels said:

It’s exciting if it fluctuates upwards. Not so much if/when the bottom falls out. And not everyone really wants to speculate on the currency market. People like certainty, especially when it comes to income.

When I went to Australia last year, their money had dipped and I got good value for my green backs. On the way out 3 weeks later the Australian dollar had gotten stronger so when I covered back to green backs I got more money back (except what I spend) even after paying the commissions both ways. That is currency also fluctuates.

[Shyheels]

Yes, the Australian dollar fluctuates more than most because of its association with mineral commodity prices. At that, though, it fluctuates considerably less than Bitcoin! 

[Gudulitooo]

On 17/09/2017 at 5:34 PM, kneehighs said:

The biggest benefit of crypto is the benefits that come from blockchain.  My faith in crypto isn't based on bitcoin, it's based on the underlying technology: blockchain.

Blockchain currency replaces a singular authority like the US Federal Reserve or British Bank of England with the authority of consensus.  

Blockchain also replaces cows and cattle with a digital payment structure that enables the world's poorest (Kenya, Bangladesh, Somalia) to create revenue.  While fees may seem small to some, they are large to the very poor.  If someone in NYC wants to send money back home to Somalia, it's often not possible.  With crypto and just a cell phone, the transfer of money is now possible.  

EDIT: I forgot to add the obvious.  Overall, bitcoin value is consistently increasing over time, as it's user base grows.  As with any new tech, it fluctuates, sure.  Further, new bitcoin is created via a process called mining.  Mining uses high powered computer processing to create new currency.  One will pay upwards of 1K to mine a new bitcoin (electricity and computing power).  It's unlike FIAT currency of the US or Pound which basically costs just ink and paper to mint.  There is value in choice to use crypto.

While Blockchain technology looks nice, it certainly has flaws and work arounds that will be discovered soon or later by people as skilled as the inventors.

The more complex the technology is though, the more complex it will be to address these flaws.

For exemple, something I just can't understand is the faith in the fact that only a definite number of bitcoins can be created. Rules are made to be broken.

Also the fact that it requires more and more computer power to create more bitcoins. Why would it require computer power to create a money with the prupose of exchange in the first place ?

All these people having faith in it as it was brought by some kind of new prophete, while most of this people hardly understand half of it from the obscure explanations in the media.

All these elements ring many bells in my mind.

Edited September 25, 2017 by Gudulitooo

[Shyheels]

Yup. I agree with you. Alarm bells are ringing - or at least they ought to be.

All of this reminds me of an bit of dialogue between father and son on an old sit com back in the 1980s. The teenage son was saying he couldn't be bothered about learning math because he was going to be a rock star and would never need it. The father points out that if he does indeed become a rock star he'll need maths to keep track of his riches. The son replies that's what accountants are for. To which the father wisely replies, son, if you can't count, and your accountant can count, you're going to have trouble...

I take little comfort in the idea that very clever techno-savvy people have created this bold new currency and will manage it wisely for the good of all mankind...

 

 

 

[kneehighs]

5 hours ago, Gudulitooo said:

....<snip>...

For exemple, something I just can't understand is the faith in the fact that only a definite number of bitcoins can be created. Rules are made to be broken.

....<snip>....

First of all, lets not forget that bitcoin is just one small aspect of blockchain.  Bitcoin is also only one version of a crypto currency among hundreds.  Other currencies exist like Ethereum and Litecoin, neither of which have received any attention in this discussion.   Furthermore, let's not forget my overlooked statement that people deal with risk emotionally and mostly from a potential for loss.  Risk diversification across different markets is the best long term strategy to maximize portfolio security without exposure to a single point of vulnerability in one market.

Regarding your first concern, what you are talking about would be called a "fork".  One group of users would argue for code that enforces fixed supply.  Another group of users would  argue for new code that mines additional supply, subjecting Bitcoin to inflationary characteristics.  This rival group position would give bitcoin an inflationary characteristic. Inflationary characteristics are common to FIAT currencies like the British Pound or US dollar.  When new units get injected into the economy, the buying power of each dollar unit goes down.   This probably won't happen until around 2140, when most experts agree that the last bitcoin will be minted.  By then, a huge user base of Bitcoin will be accustomed to over a hundred years of Bitcoin's deflationary characteristics.  Psychologically, the odds of changing the fixed supply code are low.

If you think of dictionary definitions as code, you may better understand.  For hundreds of years, the Oxford English Dictionary has "coded" the word UP as "towards a higher place".  If suddenly they changed the code for UP to mean "towards a lower place" that wouldn't change the definition.  The huge user base would reject the new definition (code).  By consensus, people would just say the Oxford English Dictionary is wrong. Users would reject the new code because the benefits of the new definition would not outweigh the "broken compatibility" it would introduce into communications.  After over a hundred years, the Bitcoin network will realize it's fixed supply value and resulting deflationary characteristics are a key component of it's value. 

It will no longer be Bitcoin to add supply and change code.  Likely won't happen.  Furthermore, bitcoin has already thrived over time through 4 forks.  So even if another fork arrives, it will arguably thrive through that fork as well.

 

 

[Shyheels]

There are an awful lot of five-dollar words in there.

Everything may be just as you say, but until that amount of jargon is going to make anyone uneasy. It sounds too much like telling the tale, the fast double-talk talk the huckster with the three cups and one ball comes out with to distract you while you're trying to watch his hands.  

[kneehighs]

@Shyheels I had to respectfully laugh at your scenario.  It was worth a chuckle.  This is a good point though.  

To really understand bitcoin, one has to mentally labor to understand the technology and money.  Both come with their own jargon, that if not used, compromises the integrity of the message.  I am actively on the hunt for metaphors though.

[Shyheels]

I appreciate that. But I think that even if this new financial system proves to be the best thing since sliced bread, it is going to take decades, maybe generations, to be broadly accepted in favour of the status quo. The argument for it has to be not only compelling, but simple to understand and the benefits obvious to all. 

 

[kneehighs]

Of course it will take time and a lot of labor.  To doubt that would be naive.   It took the internet decades to catch on.  Yet new technology is getting cheaper, smaller, and faster.  And with social media enabling more rapid transmission of ideas--it will surely take time--transformation should be benchmarked alongside new communication systems too. 

[at9]

All money, except perhaps for commodity money, is a kind of con trick. It works because we're all willing to believe it works. The consequences of that going wrong are horrible - look at the hyperinflation periods in Germany, Hungary, Zimbabwe for example. Commodity money is relatively stable because it's based on something of intrinsic rarity (gold is the usual example) though this can be undermined by the discovery of large new supplies of the commodity.

As has been mentioned earlier in the thread, most current money is what is called fiat money. Fiat, from the latin "let it be". In otherwords it's decreed to be of value by a trusted authority, usually a central government.

Cryptocurrencies, of which Bitcoin the most famous, seem to belong in a category of their own. Commodity up to a point because of the cost of "mining" which is analagous to mining gold. Certainly not fiat, as there's no central authority decreeing that it shall be legal tender.

This focus on types of money can easily overlook what money is for. A means of exchange - I make phones and Fred makes high heeled shoes. It's a lot more convenient for both of us to transact in $$$ or £££ etc than barter phones for shoes. A store of value - whether as notes and coins, in a bank account etc. A handy way to hang on to our wealth to use in the future.

I'm not a professional economist or historian of money. The more I look, the more complicated it seems to get. I'm not talking about credit cards, online payments etc. It's the underlying psychology of acceptance and what causes that to fail on occasion.

I won't be using Bitcoin just yet. Not because I'm scared of it, more because I don't have a real use for it. Yet. When there is a compelling reason to use it I will probably do so. My partner held out against having a credit card for some years. But she does a fair bit of business travel and ran into problems when booking into hotels overseas. In many cases you need a credit card as a guarantee when checking in. A debit card isn't always accepted. So she had to get a credit card. She's set up a direct debit to pay it off in full every month. By contrast I got a credit card in the 1970s not long after I was legally able to do so. I found it a convenient way to manage expenditure and cashflow. And always pay in full every month.

Finally a little story about the futility of economics. Two guys are shipwrecked on an island. They make each other fabulously rich by taking in each other's laundry:-)

[Shyheels]

I think its the lack of any compelling reason to adopt the new medium of exchange that is its biggest stumbling block.