[exelius]

I don't see how Bitcoin enables any of this - you use the term "frictionless" but the truth is BTC is simply low friction. There is already very little friction in the transaction of stocks, bonds and dividends - HFT platforms process trillions of transactions per day with much less friction than BTC (the current iteration of the blockchain will never scale to that volume). Operating agreements are already codified in software in the form of ERP platforms. Organizations will never operate completely transparently because there is a strategic advantage in having asymmetric information.

[CyberDildonics]

Very low friction? Can you buy a stock in the next 10 minutes and get a dividend payout daily? You can't even buy middle man claim to a stock without signing up for an account over multiple days. To fund it? 4 days for checks to clear. To deposit your dividends...

This doesn't even go in to the implications of stocks not being able to be sold in a fractional reserve style, taking out all the middle men etc.

The financial services industry is 8% of the entire GDP of the US. That is close to 8% we could get back since there is very little that can't be hugely automated.

[exelius]

Actually, you already get dividend payments on a continual basis. The future expected dividend payout of a stock is built in to the price of the stock on a continuous basis. Sure, you have to sign up for a brokerage account, but do you think the SEC is really going to let people buy and trade stock anonymously? You're going to have to sign up for some sort of financially verified account even if Bitcoin is powering the transaction system. There will be money laundering laws that will require an institution to verify your identity and credit history (likely by signing your transaction, and by SEC/treasury rules that stock transactions are only legally binding if signed by a licensed identity verification service). The banks and government will never give up the control they have today, and there are ways of introducing such control into a blockchain-style system.

The parts of the financial services industry that can be automated are already automated. Financial services drives the bleeding edge of the technology industry - online banking has been a thing even before the Internet (you used to get a program on floppy from your bank and dial in to their systems through a modem). BTC (or rather, the blockchain) does have the capability to reduce the cost of this automation, but it's already highly automated.

That 8% of GDP in financial services? It's all salesmanship. In order to give someone a loan, you have to be able to sell that loan to an investor. The lower the rate you can convince your investors to take, the more margin you get to keep. Why does Goldman Sachs charge more to issue an IPO than other investment banks? Is it because they're better at filing SEC paperwork? No, it's because they can sell the IPO better by convincing investors of the growth potential of the company (the majority of IPOs are funded through large direct sales to institutional investors). I never said it was fair, but I don't know that you can ever get rid of it entirely either (the US financial services industry also serves most of the rest of the world, which is why it's so much larger than in other countries).

But bottom line, most people are not educated enough in finance to handle this stuff themselves without getting completely ripped off. That fact alone will support a very large, regulated financial services industry. That also precludes the utopian vision of many Bitcoin devotees - unless Grandma Nelly who works as a greeter at Wal-Mart can understand finance, you're always going to have intermediaries. Because those intermediaries aren't to be trusted, they will need to be regulated by the government. It doesn't matter what the transaction system is, people need to be able to trust the economy without knowing a whole lot about how it works.

[smokeyj]

Yes I mean low friction.

I think we're largely talking about different markets, see my comment: https://news.ycombinator.com/item?id=9313044

[exelius]

I just don't think digitized financial services "scale down" to that level, even with BTC. Some transactions just aren't worth enough to bother setting up the safeguards and equity splits (which, again, have to be negotiated and implemented somehow). Someone will feel screwed, and eventually legislation will arise that introduces the friction back into the transaction.

I'm also not convinced that the low-friction transaction model is considered a good thing globally. The US and EU are the exception with respect to having low-friction transactions: in most of the rest of the world, buyers get angry if they can't haggle on price, even over the cheapest items. It's a cultural thing. Compared to the friction of negotiating price, cash or credit cards aren't that bad.