[gwern]

Thanks for reading; your summary is pretty decent.

But obviously I differ about the elegance and following. Elegance is not optional; elegance is useful; elegance has important practical consequences.

Go back to rpg's original paper and one of his examples - the difference between ITS and Unix in system calls was not one of mere aesthetic elegance, but a case where Unix programs were incorrect and could, and did, fail! Like freeing memory in memory management, it's easy to omit the check whether the system call failed.

This applies to each of your points:

- the anonymous vs pseudonymous distinction - you can build anonymity on top of the pseudonymity (I spent a couple links and cites establishing this with the mix material!) but you can easily not succeed in getting the anonymity you wanted. Just like you can easily not check system call success on Unix.

- the centralized infrastructure: anyone who wants to be a full miner peer can... they just have to buy the GPU power. Like writing a secure & bug-free Unix C program, it'll cost you. (One in money, the other in time & skill.)

- meaningless as currency: I am actually not sure how elegance plays into that at all, so I have no cute analogy to rpg's Unix/ITS system calls. The wasted computing power is inherent to the system of avoiding double-spending (I also spent some time discussing this), but that's not related to Bitcoin being worthless or not as a currency. Any damn thing can be currency, after all; currencies are as currencies do.

[tptacek]

The point Ben is making is not simply that Bitcoin is wasteful, although it is.

The point is that a $101 certificate for the smoke from $100 in burnt five dollar bills isn't worth $101. Or $100. Or $5. Or $0.01.

You can declare by fiat that as a proof of effort, the smoke certificate is worth something. You can try to convince people that certificates representing smoke function as a medium of exchange. But as a medium of exchange, it must reside on a continuum with all the other media of exchange, ranked by the certitude that it will in the long run be convertible to other media. And in that ranking, "smoke from burnt dollar bills" fares poorly.

There are obviously many types of Bitcoin advocates. The ones we see most often on HN are of the nerd clade. Nerdly Bitcoin advocates are fixated on the fact that "any damn thing can be a currency". This fixation presupposes that being a currency is interesting. The problem is, it isn't interesting. Toenails can be a currency. Belly button lint can be a currency. Burnt dollar bill certificates can be a currency. What's interesting is, what are good currencies.

Here the nerdly Bitcoin advocate handwaves around the fact that we actually have notions of what it means to be a "good" or "bad" currency. Dollar bills are highly liquid and have a relatively predictable valuation over time. To a lesser extent, so does gold. Bitcoin does not. It's volatilee, it has illusory liquidity (it is liquid only so long as the "exchanges" on which it trades decide to keep trading Bitcoins --- or decide not to succumb to their numerous security flaws), and it is in no place a native medium of exchange, such that some person somewhere will ever need it to e.g. pay their taxes.

To all that, add the critiques you sourced of Bitcoin; that while it has impressive virality, it largely fails at its security goal by making the cost to defend transaction integrity greater than the cost of attacking it; that it largely fails at its anonymity goal by requiring a complete audit log be made available to everyone simply in order to function; that it largely fails at its decentralization goal by requiring resources comparable to that of a Visa or a Mastercard just to scale.

What are you left with? Colorless, odorless tulips.

[gwern]

Your economic points seem to be just reiterating the claim 'currencies must have a backing!', which is something people can disagree on and not relevant to the essay. (If some random country adopted Bitcoin as its currency, would it suddenly cease to be Worse is Better and just be Better is Better? Or vice versa? If not, then the tough economics/philosophy question of whether a currency needs backing to be a 'currency' is not relevant.)

> To all that, add the critiques you sourced of Bitcoin; that while it has impressive virality, it largely fails at its security goal by making the cost to defend transaction integrity greater than the cost of attacking it; that it largely fails at its anonymity goal by requiring a complete audit log be made available to everyone simply in order to function; that it largely fails at its decentralization goal by requiring resources comparable to that of a Visa or a Mastercard just to scale.

It's true that the cost of defense is similar to attack, the audit log is public, and the scaling story is not good. But does it fail? That's the question, and so far it seems to bumble along, with all the major problems being in things surrounding Bitcoin (MtGox, MyBitcoin, that Polish exchange) but not actually Bitcoin. Bitcoin fails on a lot of properties, but it's still there. Unix failed at a lot of things too, but somehow it's still around.

That's kind of the essence of Worse is Better - maybe those security properties or software properties are not as important and valuable as people judging the elegance thought that they were.

[a3_nm]

> Here the nerdly Bitcoin advocate handwaves around the fact that we actually have notions of what it means to be a "good" or "bad" currency.

Like we had notions of what it means to be a "good" or "bad" encyclopedia before Wikipedia came out. Saying that Bitcoin is bad as a traditional currency does not prove that it is useless.

[kiba]

The point is that a $101 certificate for the smoke from $100 in burnt five dollar bills isn't worth $101. Or $100. Or $5. Or $0.01. You can declare by fiat that as a proof of effort, the smoke certificate is worth something. You can try to convince people that certificates representing smoke function as a medium of exchange. But as a medium of exchange, it must reside on a continuum with all the other media of exchange, ranked by the certitude that it will in the long run be convertible to other media. And in that ranking, "smoke from burnt dollar bills" fares poorly.

I still do not understand. Bitcoin's value is not based on making smokes.

[kiba]

- meaningless as currency: I am actually not sure how elegance plays into that at all, so I have no cute analogy to rpg's Unix/ITS system calls. The wasted computing power is inherent to the system of avoiding double-spending (I also spent some time discussing this), but that's not related to Bitcoin being worthless or not as a currency. Any damn thing can be currency, after all; currencies are as currencies do.

It would be great if tptacek actually explained what he means. It seems to be a muddled economic argument. I do not understand "meaningless as currencies goes".

[tptacek]

In this comment I would like to propose "Flitcoin". Flitcoin is nearly identical to bitcoin, with exactly one difference. In Flitcoin, instead of brute forcing a nonce through SHA-256(x) to find hashes with a suitable prefix of 0's, Flitcoin brute forces a nonce through HMAC-SHA256("bananas", x) to find hashes with a suitable suffix of 1's.

Please explain to me why my Flitcoin is inferior to your Bitcoin.

As you do so, note that all the world's Bitcoin software is trivially upgradable to Flitcoin; in fact, it requires less than 10 lines of code to do so.

[a3_nm]

In this comment I would like to propose "PTTH". PTTH is nearly identical to HTTP, except you replace all occurrences of "HTTP" in the protocol by "PTTH". Why is this inferior to HTTP? Why are people investing time and money to provide HTTP service and not PTTH service? You are right when you say that the artificially imposed scarcity on Bitcoins does not entail a scarcity on digital currencies in general, but, as it stands, your argument seems weird.

Actually, I believe that Bitcoin's (possibly short-lived) fame has created some sort of value in the sense that there would probably be, for quite some time, people interested in hoarding Bitcoins just as a kind of souvenir ("hey, remember, people used to get excited over this"); not so with Flitcoin. I am not saying that this is something reasonable to base a currency on, just that it is wrong to assume that Bitcoin and Flitcoin are strictly equivalent.

[nrp]

Bitcoin has a long hash chain already in existence and a large amount of computing power currently lengthening it. Bitcoin may or may not be valuable, but the amount of total CPU time invested into it and the current rate of CPU use are criteria one can use to decide if one proof of work network is superior to another.

[icebraining]

Bitcoin already has users and Flitcoin doesn't?

[tptacek]

So, marketing? Ok! I'll just run a 2-for-1 sale on Flitcoin.

Less snarkily: why are people using Bitcoin? What's the intrinsic value they see in Bitcoin? Based on what evidence can they predict that Bitcoins purchased today will be convertible to gold, dollars, or even toenails at any valuation? You've begged the question.

[browep]

Here's a nice concrete example. You start a content/news blog/site. Instead of selling adspace you charge for your content by the pageview. Now how much are people willing to spend per pageview ? Probably not very much. Let's say < 1 cent. You start looking around for ways to charge people < 1 cent. Turns out it's ridiculous idea, no credit/online banking proposition is interested in < 1 cent transactions, it just doenst exist because of transactions costs. Hola Bitcoin. I can send you < 1 cent for every pageview I consume with 0 transaction costs.

The tools to do this are currently in the pipeline or are really not that hard to devise. This is what bitcoin offers that others don't. Forget anonymity or libertarian arguments, 0 transaction costs are extremely disruptive.

[tptacek]

This is an application of Bitcoin. It says, "well, people want something that promises what Bitcoin promises; therefore, Bitcoin must be intrinsically valuable". But it's obvious why that isn't true. Flitcoin promises precisely the same things.

[icebraining]

>You've begged the question.

No, you just asked a different question.

>What's the intrinsic value they see in Bitcoin?

Well, free transfers, for one, and not being subject to having your money frozen by online payment companies (e.g. Paypal).

[tptacek]

"Free transfers" isn't an intrinsic value of Bitcoin. It's a benefit you get by supposing that Bitcoin has some intrinsic value.

What's the intrinsic value? Why is Bitcoin unlikely to be worth $0 in 10 years? Because it is spectacularly unlikely that gold will be worth $0 in 10 years, and similarly unlikely that a dollar will be. Virtually any trader in the world would take the other side of that bet.