“Blockchain technology” has evolved into a sound Bitcoiners use to extract money from venture capitalists --- Love it.... This is so spot on...

I certainly don't think that the word "blockchain" is mana, and I agree that it is often used to hype ideas that are unlikely to benefit from its implementation. I also agree that many distributed architecture proposals are being labeled “blockchain”, yet they fail to embody the important traits that would make them remarkable.

Finally, I accept that you feel strongly that blockchains lend value only to money, because they solve the double spend problem. While I respect the way in which you build and defend an argument, I feel that your vision is limited by the fact that you have not yet considered other remarkable applications of an open-sourced, permissionless, peer-2-peer, ledger. The blockchain is already demonstrating transformative potential in applications that are far removed from cash or systems of payment and settlement.

Your are very bright -- I have nothing bad to say about you. You will come around, as you reconsider emerging blockchain applications.

Awesome.

Yes, in theory, Bitcoin should be insurmountable as digital money. Unfortunately, in practice, it is losing its network effect to other digital currencies for a number of reasons, principally because control of the Bitcoin network has gone over to a company whose business interest is to force transactions off of Bitcoin onto their own platform (yet to be delivered), supported by a censorious scammer who bans and deletes anyone who complains about the direction Bitcoin is headed on /r/Bitcoin or bitcointalk.

People are talking about blockchains because Bitcoin has foundered upon the shoals. Were it not for the failed leadership of Blockstream, your "hyperbitcoinization" prediction would most likely have already happened. Instead, the last new high for Bitcoin was almost three years ago! Now what is increasingly likely to happen is that a Bitcoin 2.0 platform designed for speed and scalability is very likely to suck the market cap right out of Bitcoin on its way to world domination. Ethereum is the most likely candidate, despite their current issue with the DAO theft.

"Unfortunately, in practice, it is losing its network effect to other digital currencies for a number of reasons"

False, the bitcoin domination index has not dropped below 80%, EVER...Other coins have been gaining momentum which is fine, bitcoin can't do everything, there is much left to invent. However the problem of sending value from A to B has been solved with bitcoin and NO other coin comes close to it's security.

"People are talking about blockchains because Bitcoin has foundered upon the shoals. "

False, people are talking about blockchains because wallstreet hates to use the word bitcoin.

"Were it not for the failed leadership of Blockstream, your "hyperbitcoinization" prediction would most likely have already happened. "

False, pure speculation. Blockstream and Core continue to push out innovative technology from segwit, to schnorr, to lightning, thunder, bolt, falcon and beyond. It's getting hard to keep up with all the scaling technology being built. However it takes a while to actually be implemented and be used by the ecosystem. Within 2 years time the scaling debate will be a distant memory.

If only....

If another cryptocurrency becomes bigger than Bitcoin, it would mean that both failed at becoming reliable long-term store-of-value monies, and are subject to volatile technology cycles instead. That would be the end of all cryptocurrencies and of the dream of escaping government-sanctionned inflationary currency. Money is a winner-takes-all zero-sum game. Whatever value Bitcoin is gaining is at the expense of dollars, euros, renminbi and gold. Value that other cryptocurrencies gain is usually at the expense of Bitcoin.

It is my opinion that the value that Bitcoin offers as money is better than that provided by centrally-issued currencies, and it has a good chance of displacing the latter as preferred store-of-value asset, if not also for day-to-day transactions. I think no other cryptocurrency can compete with Bitcoin in the long term, and will become irrelevant.

You are probably giving too much importance to the owner of Bitcoin.org... most people don't ever visit that site, nor they go to /r/Bitcoin. I read in there a couple of times, then I didn't really need it. People don't care about the technology behind Bitcoin, not while it's beginning to spread so quickly. It was important in the beginning, now it's not. I can bet 999 people on 1000 don't give a damn about Satoshi Nakamoto or the owner of Bitcoin.org, they just see there's so much traffic, trading, value, so they know it's solid to an extent, so they enter the circuit.
On the other side, you talk about Ethereum, which has far a smaller base than Bitcoin, far less investment and is far less known. You can't still buy shit with it anywhere, and the first flag app was a failure. Yet you promote it. And here it looks like a Cognitive Dissonance problem: you have proof that quakes shake Bitcoin and Bitcoin is still on the wave, and you have proof that the first quake happened to Ethereum practically killed it, and still you are fan of it.
I will agree that if there's a coin that can compete with Bitcoin it's Ethereum, but that's all but sure. Bitcoin is like what Windows was in the past: Windows was crap in respect to AmigaOS or MacOS, but it was THE STANDARD. Everybody had it, it worked everywhere, it wasn't dedicated.
Bitcoin is in the same situation: it came first, it's world spread.
Ethereum has still to born, nothing is around that uses Ethereum, NOTHING. At the moment it's vaporware, while Bitcoin has been adopted by some millions of people and its growth is going up geometrically.

Your style of writing really gives away the fact that you like to sound a lot smarter than you really are. If you do not see the value of smart contracts then you are just an idiot with an opinion... Seriously. Also, if you think bitcoin is going to replace fiat you are wrong there as well. Bitcoin is evolving into more of a commodity than a currency due to the fact that it is very illiquid, I don't see that changing anytime soon.

Sure, smart contracts have their uses. Bitcoin has an embedded smart-contract system because they are useful. Every Bitcoin transaction is in fact a smart contract.

Now turing-complete internet-of-things-enabled autonomous-socialist-utopian quantum-computer-mined proof-of-awesome world-wide-distributed super-computer with infinite memory and processing power, that has to be *really* useful.

Regarding BTC being illiquid, is it easier to pay $98.76 in cash or credit card ? Some (self?) education on the part of the seller and customer is needed for sure but wouldn't it be easier to pay in BTC than via credit card (,especially with the rapidly improving UI) ?

Other reasons are

1. Government compliance that can be bypassed like KYC norms.
2. Paperwork and other hoops required to jump through tie up with a credit card company (or private sector compliance).
3. No need for credit history for either party.

BTC has both the advantages of cash and credit card. The only disadvantage it shares with credit cards is the need for electricity and data transmission connectivity.

The value of my bitcoin holdings exceed the amount of money in my bank account so I do believe in bitcoin. However.... The bitcoin network is VERY far from being capable of processing the number of transactions that Visa can. I don't mind the volatility either, but it would need to become more stable (which will take years).

Why should a smart contract have to reside on a blockchain ? It could easily reside on a redundant array of independent disks on servers around the world.

"redundant array of independent disks on servers around the world" = blockchain.

McDolans - I agree with the commodity/illiquidity aspect of BTC. For now. But that can change in a very short time. This "commodity" could surpass the liquidity of the USD, or any other fiat currency quite soon.

I believe it will become more liquid as well. But technically bitcoin is also not capable of dealing with large numbers of transactions (not enough to be used as a mainstream currency anyway). Perhaps improvements can be made.

McDolans: To whom are are you referring? -To the original author? -Or to reader feedback in one of these comments?

I was referring to the original author. I just find the views a bit simplistic and narrow minded.

This article made me realize that the nakamoto institution is a sham not based on reason and logic.

:)

Thanks for the giggles. This is one of the funniest and most spectacular outpourings of sour grapes I've come across in all my years on the interweb. The argument that BitCoin is (and will be) the only valid use case for a consensus-based write-only data storage mechanism is laughable.

What if a government knows and tries to replicate this monetary approach, for its own interest. Say: Limit the money supply and make it regular and predictible... In order to separate the government from [the church] banking system.
How can this government take advantage of the Bitcoin (or from its blokchchain)?

Your term "hallucination" and telling people that their preferences "are not aligned (paraphrase)" -- leave alone "should not be aligned" -- with those of the nation ("They manage the currency in the national interest, which is not always the same thing as your interest.") places you next to governments. If money is a shared "hallucination", then surely its value is directly proportional to the hallucinations that determine a society's entire altruistic morals, which are well removed from the morals of individuality. No libertarian in history has ever been able to command people's beliefs and preferences to a comparable degree, and you cannot either. The expectation of reciprocity is not a hallucination, but a belief. Gold is even less of a hallucination, yet it has been replaced by a more socially acceptable token time and time again. Likewise, if it poses serious competition, Bitcoin will be outdone by a similar token that can be manipulated in greater accordance to society's values, just as Bitcoin can be manipulated according to the Bitcoin community's values by simply changing the code (http://moraluniversal.com/w.... As you say, it's all about the money.
I still do appreciate your articles; they are very informative and thoughtful.

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Who should NPR Planet Money call about the Bitcoin they sent but it never showed up? http://www.npr.org/sections...

Great article Daniel !
Jerome

Daniel Krawisz' article has sent me into self-reflection and considerable thought. I am a columnist and consultant that believes strongly in blockchain-based solutions--and NOT just to solve the double-spend problem.

I was host and MC of The Bitcoin Event (New York). This Fall, I am teaching Blockchain concepts at several New England schools. I am also co-chair of The Cryptocurrency Standards Association. I recently wrote an article that strongly criticizes the rush to invest in or announce blockchain-based services that are not both permissionless and fully distributed among users who generate or "own" the data: Is a Blockchain a Blockchain if it Isn't? http://awildduck.com/?p=4393

The article is cautionary—it warns that many Blockchain proposals convey little or no advantage—But it falls far short of claiming that a Blockchain is useful only for Bitcoin or applications with a double-spend problem. This just isn't the case! I think that Krawisz may be limited by narrow vision…

The statement about the double-spend problem may be technically correct, but what Krawisz fails to consider is that many processes and mechanisms are substantively analogous to this same problem.

Some prescient organizations (IMO, most are entrepreneurial, but a few are big legacy companies) will reap rewards from their ability to recognize *which* problems in affairs of business, social interaction, scientific research and politics can be positively transformed by injecting a Blockchain database or other distributed, permsionless, crowd-sourced, authoritative component.

Ellery Davies - Could it be that you believe blockchain technology has as yet untapped, but profound, value because the alternative would leave you with no career?

I certainly appreciate that a career incentive might seem to be a cause for my positive outlook. However, the facts are the other way around... I am transitioning away from a lucrative career to focus on bitcoin because of the potential that my analysis has led me to believe in -- and not the other way around.

the desire to turn anything and everything into capital has a meeting with destiny. Bitcoin value tokens are a commodity, the Bitcoin protocol is a consensus mechanism which is rat poison to capital finance - they want the technology that produces the value tokens (because it is money) but, yet, it is their nemesis. As soon as you run a meaningful blockchain it is based on - and enforced by - consensus, then who needs the "runner" of that blockchain? If the consensus is only that of a centralized party, then a SAP database is both cheaper and faster - the R3 (or IBM or Fed) "blockchain" is only a pretence.

Commodity charts go up and down according to social mood and with no observable correlation to news or fundamentals. Not only is Bitcoin a citizen programmable money, its a paradigm shift with revolutionary bias in favor of the non-centralized.

Good luck to them, they're consuming large doses of a power laxative that Satoshi designed with the centralized authority, specifically, in mind.

No mention of the crippling 3tx/s capacity limit....The author should stop projecting so much.

As a value repository, that limit is more than enough. Most transactions to day are done by traders. Bitcoin is, today, like a reserve currency. It's network is not good to make everyday shopping, but it's more than enough to save your wealth from your failing currency if you live in Venezuela or in Russia in example.
So just don't make the mistake to consider Bitcoin as a method of payment: it's not. It's not NOW and it's not necessary now. People look at it as different things: investment, wealth saving, mostly.
So that limit is unimportant. And the proof of this is that adopters keep growing despite that limit.

"As a value repository, that limit is more than enough."

That is a fallacy.

The "value repository" function requires capacity too.

The 3tx/s limit, inherently cripples all the potential this system have, because it limits the number of participants who can transact.

You are wrong. I have some BTC and I am not touching them, and like me, there's millions of people out there already that have bought into it.
And until we are here, and there's no reason why we shouldn't, Bitcoin will have value, and until that day, more people will buy it.
I don't need to make transactions with it, not now. I bought it as an investment. People from countries in crisis like Venezuela or Brasil or Russia or China are buying it also to escape their countries currency inflation.
We don't need more than that number of transactions.
And the proof of what I say is that the userbase keeps expanding.
Maybe Bitcoin will never become a network to make real time payments, also because while the userbase expands, transaction time probably will increase, but it will surely hold up as a repository of value, there's no escape to that, nothing in the world can beat it.
There are a couple of ways to destroy it, one is to cut off internet, the other I won't say here and to nobody, but it's very unlikely to happen anyway.

Currently there are way less than 10M Bitcoin owners....if only a fraction of the potential users (internet connected people) wanted to obtain BTC we would experience a week or not months long backlog rendering the system useless.

Also, there is no such thing as sitting on an asset indefinitely. I'm not even sure how people imagine this to work?

Bitcoin is valuable because it's useful. The store of value function distills from it's usefulness.

If you cripple the network, you destroy the store of value aspect on the long term.

Bitcoin is a payment system, a new form of money. Small blockers go against the very fundamentals of the system.

The reason small blockers didn't create their own "store of value scheme" is the fact that it would fail because it would lack network effect and utility.

Also, you seem to think that Bitcoin exists in a vacuum. While nobody would be incentivized to own bitcoin (more like cripplecoin currently), while there is another system which has a cap on issuance AND utility.

I've actually written a book about Bitcoin, so, no, I don't think it "exists in a vacuum".
https://www.amazon.co.uk/dp...
Still, the network is there, inefficient, and Bitcoin is gaining adopters. You can't deny it, so what are you talking about?
I see a Cognitive Dissonance problem here: you have PROOF that Bitcoin is being adopted, with all its network problems, and despite this you WISH Bitcoin sucks because the network is not so efficient.
My dear, Bitcoin is efficient enough for its actual function: subtract people from central banks shit fiat currency. People buy it as an investment, they don't need to exchange over and over.
That problem may arise in the future, but solutions are being designed already, as you probably well know.
Your opinion is different, ok, but I really see a Cognitive Dissonance problem here.

I'm talking about the stone wall front of adoption in the form of the 1MB limit.

Not sure why can't you comprehend the implications of a 3tx/s limit.

You are the one who is delusional if you think that it's ok.

". People buy it as an investment, they don't need to exchange over and over."

But that needs capacity as well (to obtain it, and to use it when needed). Also, only a very few people can afford to sit on an asset infinitely.

The people who have savings keep them to:

1.) Have wealth to fall back on

2.) Spend it time to time on things they need

No you are the delusional one, or just plain idiot, because Bitcoin is not going to hell, it's growing and despite this you insist that there's a problem.
There's no problem.
People like it like it is, as I wrote (but Cognitive Dissonance doesn't allow you to see that), they keep adopting it, it's spreading everywhere, slowly, but it's happening.
Now I say goodbye to you, because you are just a waste of time. Hold onto you fiat currency, don't buy Bitcoin, I really don't give a damn :)

Oh the irony.

It cannot grow much more while it remains crippled!

Please try to compile the following data with your brain (if you still have a functioning one).

https://blockchain.info/cha...

http://www.coindesk.com/dat...

You are basically saying that the 3tx/s limit have nothing to do with the above, and it won't affect growth.

Sorry pal, but you are the one who is fucking retarded. :)

I just noticed this:

"Hold onto you fiat currency, don't buy Bitcoin, I really don't give a damn :)"

I've been holding and transacting with bitcoin since 2011. How about you? :)

"...you could just replace it with a distributed hash table."

Isn't the blockchain the only known way to "perfectly" secure the values in an always-on peer-to-peer hash table? Isn't "double spend" just a specific example of its ability to not have "accidental" overwrites in the database?

"There is an individual benefit to using money, and it’s very simple. The person who accepts money gets to defer his decisions about what to buy to a later time."
Another benefit is that it allows system-wide intelligence if it can be used only (or primarily) under the conditions required by the governing legal system. This enables society to reduce or prevent monopolies, tragedy of the commons, externalities, and wealth concentration (democracy resulting in progressive taxation for community benefits). This is why smart contracts are a smart companion to currency and why currencies are on a per-nation (legal force) basis. This is key to the Euro's problems.

In my opinion LTC has a lot of potencial for the sole reason that BTC price will grow beyond of the economic power of average Joe so when people realize they can't afford bitcoin then LTC comes in scene like second safe heaven just like gold and silver do.

How can that happen? How can the BTC price grow beyond the economic power of anyone? What is the mechanism by which that occurs? I can buy $5 worth of Bitcoin now, and I will be able to buy $5 worth of Bitcoin if it goes up a million times in value with respect to the US dollar. Your argument seems nonsensical.

Doesn't make sense.
While Bitcoin will keep growing, like the article explained, other coins will keep losing ground.
People will invest on the coin that grants more stability and growth.
If it's Bitcoin, and it is, people will migrate on it.
People that have LTC now will slowly sell it and buy BTC. There's no escape from this process, unless Bitcoin had to suffer some absurd drama.

If it grows more and can retain value over time, it won't be a "gamble" anymore but a safe haven investment, which is also very good. Also, we'll probably deal mainly in mBTC denomination in the future if the price goes very high.
Altcoins will probably retain their value over trading or because they are tied to particular services, but not much more.

Seriously, no. You write things like 'global macro-economics' but completely misinterpret the implications. I don't even know where to start. This "institution" has jumped the shark. Tell me how you write about the implications of a new gold standard and the macro-economic aspects and don't at all refer to 20 years of lectures and writing on the subject by the world's leading thinking/speaker on Ideal Money, John Nash.

How do you think you are smart when you ignore this? How can you claim to be reasonable when you completely go against the reasoning and rationality he laid forth?

You have to do your homework sir.

That's not an argument, sir.

"The fact that money has a positive feedback between demand and value implies
that there cannot normally be a stable equilibrium between two moneys. Any
initial imbalance between them would tend to expand. If one currency was
slightly more preferred than the other, people would react to this by
demanding slightly more. This makes the preferred even more preferable than
before. Any two moneys will interact in this way, thus leaving one to dominate
the rest."

Do you find this statement true in regard to reality? Do we not function in a world today with many and multiple currencies?

I find it true. We have many currencies only insofar as we have many countries and each demands taxes in their own fiat currency. Think of all fiat currencies as one currency bc in effect that is what it is: different flavors of the same currency. What are your currency options for paying for something within a country? Usually just one. Bitcoin is the first really new choice that achieved any kind of scale.