Why we need more than a few investors

The reason that Bitcoin has had some growing pains is because most people fear change even though they may end up liking the result of the new technology or object much more than how life was before the invention. It is in human nature to resist the unknown out of self preservation and survival instincts but it is also very primitive to do so. With Bitcoin however, some risks need to be taken as this sis one of those ideas that will transform our economy for the better. 

John Biggs is CEO of stealth bitcoin startup Freemit and a former editor at TechCrunch. His work has appeared in publications such as The New York Times, Gizmodo and Men’s Health.

In this opinion piece, Biggs argues that the bitcoin community has become complacent in its quest for financial change, standing by as institutions seek to stamp out its revolutionary impulses.


You say you want a revolution. Fine. But act like it’s coming, not like petulant nerds intent on destroying a burgeoning industry from the inside.

At this point in the bitcoin lifecycle, the fear, uncertainty and doubt (FUD) and naysaying we’ve been hearing is mostly true. The network is abysmally slow. The use cases are half-baked and consumers will receive no implicit benefit from bitcoin over, say, swiping their Visa card.

The bitcoin 1.0 experiment is, in short, over.

But, I would argue – and you will probably agree – that bitcoin and related technologies aren’t an experiment any more than TCP/IP was an experiment or HTML was a shot in the dark. Just as the first web pages looked ugly as sin, the current state of bitcoin is in the same position.

These technologies point the way to the future, but we’re letting that future be controlled by those who will be quickest to destroy it.

Death by distraction

Transferwise, Revolut and the banks with their “blockchain-like contracts” are sucking up the oxygen necessary to go forward with a true Internet of Value.

While we dick around over block size and who is angry at whom, the powers that be are quickly and mercilessly tearing into everything that we have worked hard to build.

I have watched this industry move from “To the moon!” optimism to a world in which big banks pay lip service to [bitcoin creator] Satoshi Nakamoto even as they strip out the best parts of his work for themselves and leave the “uncertainty” to the idiots who still believe bitcoin is a currency.

At the same time, incumbent FinTech plays have gotten into bed with banks and are attempting to replicate bitcoin’s benefits through financial trickery and loss-leader tactics.

False hopes

Then, there are the bitcoin 1.0 companies, the dozens of startups that are nothing more than another crypto wallet.

They’re basically software layers that allow these companies to route around regulation by claiming to be software solutions.

Bullshit. These companies need to put up or shut up.

In short, there are banks who are working hard to steal our ideas and nervous CEOs who refuse to release real products humans can use. Old-timey bitcoin companies are clamoring for the world’s focus even as they fumble the ball when it comes to general bitcoin adoption.

Why are we letting them?

I’m all for happy cooperation between existing financial institutions and bitcoin. This is imperative to move forward.

If big banks want to hire blockchain consultants who will work on routing around the potential damage bitcoin can cause to their fee structure until enough of the old guard retire and enough intelligent blockchain users replace them, then that is just fine. The Internet of Value will be waiting for them.

But the longer they wait the longer they will spend money on Quixotic tools because they are afraid.

Old lessons

I’m reminded again and again of a story my friend Roy told me about his experience with the early web. In about 1999, he was tasked with maintaining Web filters for a South Korean company.

The filters cut out everything, from external email to porn. But they kept failing. He would come in every week and find that the filters were literally burning up – all of the porn was burning the filters. He’d order a new server, install it and a week later get another call.

After a few servers burnt out, he’d get a call every few days. Then once a day.

Seoul at that time was far ahead of the US in terms of web access, and users were watching TV, downloading data and communicating in ways that we hadn’t yet dreamed of online. And filters were needed, obviously, to keep workers from connecting with the outside world.

The filter was designed to keep the users from cyberloafing. But the filters actually just caused more downtime, frustrated more connectivity and prevented people from doing real work.

A company that filtered the Internet in 1999 was considered cautious. A company that filters the Internet today is considered dumb.

Read more at: http://www.coindesk.com/land-1000-bitcoin-wallets/

How to deal with Bitcoin’s issues of scope

Often, the greatest ideas take quite a while to really take off due to this fun thing called “Scope creep”. It’s when the scope of an idea often escapes the person who came up with it and the full logistics and consequences of implementing the idea begin to creep into existence, inhibiting its growth. This is something that Bitcoin seems to be having some issues with at the moment. Here’s how some people have called to deal with Bitcoin’s growing future. 

Kristov Atlas is a network security and privacy researcher who studies cryptocurrencies. He is currently a security engineer for bitcoin wallet provider Blockchain and co-founder of the Open Bitcoin Privacy Project. 

In this opinion piece, Atlas discusses bitcoin’s ongoing block size debate, arguing that the economic analysis of potential changes to the system has been largely ignored by network developers.

diagram, chart

As many writers have proffered their short-term suggestions for addressing bitcoin’s transaction throughput, I’d like to take a step back and explore how we think about, discuss, and plan the future of bitcoin.

To date, much of the discussion around Bitcoin’s scalability has suffered from two major problems:

    1. We lack a systematic process to set and achieve goals with respect to security, censorship resistance and the overloaded term “decentralization”.
    2. We have a poor understanding of the relationship between engineering decisions and their economic consequences (“cryptoeconomics”). By “we,” I mean myself foremost, but I can fairly include many stakeholders in the ecosystem including some protocol developers, wallet providers, miners, exchange operators, writers, and enthusiasts.

Because we lack these tools, we are ill-equipped to make protocol decisions and to plan bitcoin’s software future.

In this post, I’d like to focus on the second deficit in the list: economics.

What is crypto-economics?

I define crypto-economics as the study of the production, distribution and consumption of goods and services in cryptographic consensus networks. In particular, it is the study of the economic implications of cryptographic design choices in such networks (like bitcoin).

For example, suppose you created a cryptocurrency that did not have a predetermined supply algorithm for the currency units, but was instead determined on a month-to-month basis by majority vote among a few human keyholders.

How would this system compare to bitcoin?

Another example. A wallet client sending a bitcoin transaction must communicate the transaction data to bitcoin miners to be included in a block. What incentive do uncompensated nodes have to relay this data from the client to a miner?

These are questions for cryptoeconomics.

The snooze button

First, I want to acknowledge that economics, like other fields of study, can be very boring. I can appreciate those who would prefer to avoid the topic and focus on other aspects of cryptocurrencies. These systems are so complicated that, less than a decade after their birth, we require specialization.

I would recommend, however, that avoiders of cryptoeconomics get a taste, simply so that they can remain aware of the boundaries of the subject they wish to avoid.

Austrian economist Murray Rothbard said this best:

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”

Economics, to date, has been a very odd realm of study. It is a study of human action, but one conducted by a society deeply in denial about the profound impact of a few economic planners on the decisions of the many.

Economists are like doctors of medicine charged with studying and optimizing the health of a room full of lepers, and then advising the rest of the world on how best to maintain health.

The minority of economists who have dared to challenge preconditions of central planning have had few opportunities to test their theories because there is nowhere in the world to find humans who trade in its absence. This long-standing state of scientific befuddlement has damaged technologists’ trust in the study.

Still, economists have had several centuries to construct basic principles and models of economic interaction, such as the laws of supply and demand, elasticity and marginal utility.

Although the many hours wasted by economists on how best to direct the power granted to human central planners will be useless to bitcoin, many of the fundamental principles of economics will act as lighthouses in efficiently allocating resources in bitcoin.

Why now?

Bitcoin creator Satoshi Nakamoto set a powerful precedent for bitcoin by making economic thought a centerpiece of its design.

For example, Satoshi improved on the design of fiat currencies by establishing a predictable currency supply. However, he also created many points of economic rigidity into the initial design.

These points of rigidity have worked well enough, but will increasingly reveal themselves as the number of participants in the system grows. One of the points of rigidity, introduced as a temporary security mechanism, has been repurposed as an economic control. In spite of Satoshi’s legacy of holding economic considerations as a primary value, this has not persisted with all of his successors.

Prior to 2009, practically everyone in history who made decisions about the design of other people’s currency arrived there through a political process.

Bitcoin was the first successful software project that allowed economically meaningful interaction according to rules set in an open-source software ecosystem. This advent is not just an opportunity – but a mandate – to apply free market principles to software consensus rules.

Other currencies can compete with bitcoin at a historically low cost; any currency that fails to apply efficient market mechanisms will underperform and eventually become defunct.

Read more at: http://www.coindesk.com/bitcoin-blockchain-central-planning-digital-money/