[PycptN2MH]

The inventor said it well:

"The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible."

Most agree that Bitcoin privacy is currently unsatisfactory. If it is not improved it should not be adopted generally. Legal recourse and low-cost transactions are layered onto the base protocol.

[arcticbull]

The inventor was trivially wrong, though. This was all born out of looking at a complex system, failing to understand it, declaring you've got a better idea, then learning over the course of a decade why the current system exists and that in fact you did not have a better idea.

(1) Trust is not a problem, it's a huge optimization. The sheer power consumption of cryptocurrencies is hard, demonstrable proof that trust is an efficiency.

(2) Debasing money (aka inflation) is a feature. It's a regular haircut for unproductive capital, and is, as designed, completely irrelevant to people who invest their capital. Even in most people's biggest investment, their own homes.

(3) Banks are trusted and regulated. Exchanges are totally unrelated fly-by-night banks set up because being your own bank sucks. This is not an improvement.

(4) Fractional reserve lending is fine because the FDIC guarantees the funds in the event of a run. This is a further efficiency, allowing the economy to move faster with freer access to capital.

(5) Identity thieves draining your account at a traditional bank has recourse. As we've seen in crypto, that's where this is a real risk - you've got nobody to hold accountable.

(6) Micropayments aren't something people want as it turns out.

[michaelscott]

> (1) Trust is not a problem, it's a huge optimization. The sheer power consumption of cryptocurrencies is hard, demonstrable proof that trust is an efficiency.

This is a conflation. Trust can certainly be a problem, and the demonstrable proof is the 2008 bubble and any other historical bubble with similar features.

> (3) Banks are trusted and regulated.

Again, until they're not or they collude. This isn't slippery slope stuff, this has actually happened in the recent past.

> (4) Fractional reserve lending is fine because the FDIC guarantees the funds in the event of a run.

It's difficult to judge whether this is true because as far as I know it's never been put to the test. Historically, banks aren't great at guaranteeing funds during a run no matter what they say (Great Depression).

The majority of your arguments centre around efficiency over trust (i.e. you trust in the system enough that efficiency has become your only concern when it comes to transacting with value). For most day-to-day operations you're probably in the right here. The problem is when you're wrong (and there are always these events in economic history where the "system" fails) then you're really wrong.

[Firadeoclus]

> The problem is when you're wrong (and there are always these events in economic history where the "system" fails) then you're really wrong.

And that is not a problem cryptocurrencies solve. These systems can also fail.

[michaelscott]

Well cryptocurrencies do solve those specific issues, i.e. the ones inherent to centralised, government-backed financial systems. Of course, as you say, they introduce a raft of their own issues to deal with, but this would be a separate set that I imagine (in a reasonable economic system) would be hedged against by using our pre-existing financial system, and vice versa.

[jammygit]

Good points, but I would argue that micropayments would be great if they required micro effort and no overhead. They would transform the ability of non profits to fundraise.

Not that bitcoin offers that iirc, just saying.

[arcticbull]

It's a tempting premise, though my counterargument is decision paralysis. Making any decision has some amount of fixed overhead in the human mind and eventually you just don't want to deal with making a decision - period - no matter how small. This is why Netflix/Spotify/Apple Music is so popular; you may well save money buying/renting via iTunes but you just don't want to deal with it.

Micropayments can exist, as simple ledger entries. You pre-load a, for instance, PayPal account then PayPal can allocate pennies or fractions of pennies on your behalf. There's no technical mystery. It feels like this hasn't been done due to lack of desire for it rather than any inability to execute.

[michaelt]

  It feels like this hasn't been done due
  to lack of desire for it rather than
  any inability to execute.

I always assumed it was three reasons:

1. A chicken-and-egg problem, where users don't join micropayment platforms because they don't have major content producers, and content producers don't join platforms because they don't have users.

2. There are actually a bunch of different visions for micropayments (articles costing $0.50 vs $0.05 vs $0.005 vs $0.0005; voluntary vs paywalls; drm-free vs drm; ad-free vs ads vs ad-blockers; articles vs music vs video; automatic vs manual payment vs automatic-with-refunds; quality professional journalism vs anyone can take part; free speech vs not funding hate groups....) and as your product vision becomes clearer, more and more stakeholders notice your vision isn't quite their vision.

3. If you're making a stored-value account in my country there's a bunch of regulation due to a history of scams. Presumably you would have to comply with regulations in every country you operate in, which would be nontrivial.

[lokedhs]

If you look at a country like Sweden, which is pretty much cashless, we can see that electronic micropayments are indeed transforming a society, but it can also be shown that this is actually not an ideal situation. There was an article on this very site a few days ago discussing this.

[TACIXAT]

Link?

[pjc50]

The problem with micropayments is microfraud, which can be scaled up to large amounts. It's bad enough with ad click fraud already, and that's a semi-closed system.

[baddox]

> (1) Trust is not a problem, it's a huge optimization.

This feels like a response to a straw man, or at the very least an uncharitable interpretation of pro-cryptocurrency views. The problem cryptocurrencies intend to solve isn’t that trust is bad, but rather that in the real world you are effectively forced to trust a single entity or a small group of entities. I don’t think any cryptocurrency advocate claims that cryptocurrency is great because there’s no need to trust the parties on the other end of your transactions.

[arcticbull]

"Forcing" a trusted party into the exchange is the optimization, and it only works because everyone does it. This is like pre-existing conditions. You only get coverage for them if everyone agrees to be covered all the time in the first place. As soon as one entity opts out and you have to build a system to accommodate it, the efficiency is rendered void/unworkable.

Your optional-trust model is effectively what we have now, with bitcoin + exchanges. You can opt to trust an exchange, and yes, that does reduce load on the network, however the network is still wildly inefficient because it needs to also support the use case of zero-trust transactions. Traditional banking is an exchanges-mandatory system, which is why it's so much more efficient.

NOTE: This is not an equivocation of the wild-west unregulated crazy-town exchanges of the crypto space and real banks, just the roles they play in their respective systems.

[baddox]

I don’t see how it is comparable to preexisting conditions. Two people using one payment system does not prevent two other people from using some other payment system.

We already have limited options with different features regarding fraud/chargebacks, like paying for something with cash versus with a credit card. Clearly both cash and credit cards can exist together.

[arcticbull]

I was attempting to make the analogy that a system designed to support both untrusted peer to peer payments and exchanges must support the lowest common denominator, the peer to peer untrusted payment which forces huge inefficiency into the system.

Similarly a health care system designed to support people with and without preexisting conditions must be designed to support the lowest common denominator, those without cover, which forces huge inefficiency into the system.

Maybe a poor analogy.

Cash and credit aren’t really analogous to exchange and peer-to-peer as in crypto the former is built on top of the latter. Credit isn’t built on top of cash in the same way, as a trusted intermediary abstracts the two concepts. To some extent they’re both eventually built on top of ACH.

[CryptoPunk]

>>"Forcing" a trusted party into the exchange is the optimization, and it only works because everyone does it.

The point you're skipping over is that there are network effects in the role of trusted third party, leading to monopolies/oligopolies, which can extract artificially high fees.

This is where distributed consensus has an advantage: it can provide the same and even stronger guarantees on the integrity of records, while preventing any third party from using their monopolistic position to extract high fees.

[PycptN2MH]

(1) Not trust is bad, but how much trust and in whom and for what.

(2) Not inflation is bad, but trusting others to choose the value of your money.

(3) Cryptocurrency exchanges are not Bitcoin - just as a Stock Exchange is not a $100 dollar bill.

(4) Not fractional reserve lending is bad; but trusting good behaviour and recovering after bad behaviour has caused harm.

(5) This argument works for all private property not held by a trusted third-party.

(6) Micropayments are more likely to be used for resource management between machines.

[stale2002]

Youve missed the most important usecase. Censorship resistant financial transactions.

If you don't find that useful, then you should consider yourself fortunate and privileged. There are literally billions of people in the world living under authoritarian regimes right now.

[arcticbull]

Bitcoin doesn't solve that problem; you still have to obtain these tokens by exchanging your authoritarian currency for bitcoin, which can be made illegal very easily.

[stale2002]

> which can be made illegal very easily.

And yet here we are, living in a world where this isn't happening.

People are using cryptocurrencies, today, in regimes such as Venezuela, and yet your prediction of it being successfully banned, has yet to come to pass.

[arcticbull]

Really, nobody's using it anywhere, which is why governments haven't tried to stop it. The Venezuela case is the only currency less stable than BTC, but that aside, as a thought experiment consider: where did the BTC in question come from?

(1) If you can't move currency out of the country the whole thing is zero-sum. You're just buying bolivars from one guy and taking his BTC. You're leaving others within the country holding more bags of bolivars. The problem hasn't been solved at all just redistributed.

(2) If you can move money out of the country, you'd have done much better just buying USD and holding onto it, or using it there.

[stale2002]

> You're leaving others within the country holding more bags of bolivars. The problem hasn't been solved at all just redistributed.

The success of one's investment has nothing to do with censorship resistant financial transactions. It is irrelevant.

> If you can move money out of the country

You can move crypto of the country with the clip of a button.

Also, you can move it to the other side of the same country, quickly as well.

A financial transaction is an exchange of money, for a good or service. You send money to someone, and they give you a good. Crypto makes the money half of the transaction censorship resistant.

[Qworg]

People are also using USD, today, in regimes such as Venezuela. Enforcement is terrible and members of the government's inner circle are facilitating USD/Bolivar exchanges outside of the law already.

Why would they care about crypto?