The Future of Cryptocurrencies 221
kierny writes "Today, Bitcoin, tomorrow, the dollar? Former Central Intelligence Agency CTO Gus Hunt says governments will learn from today's crypto currencies and use them to fashion future government-protected monetary systems. But along the way, expect first-movers such as Bitcoin to fall, in a repeat of the fate of AltaVista, Napster, and other early innovators. But the prospect of fashioning a better, more stable crypto currency system — and the likelihood that Bitcoin may one day burn — is good news for anyone who cares about crypto currencies, as well as the future and reliability of our monetary systems."
Re:What we've learned from Bitcoin (Score:5, Interesting)
IMO, this will be the ultimate nail in the coffin for Bitcoin, or any other cryptocurrency that relies on a single blockchain. Bitcoin advocates wax eloquently about the beauty of the BTC transaction verification system, but it has always struck me as profoundly stupid. It's as if someone said, "Hey, let's create a giant Excel spreadsheet, and have everyone in the world record their financial transactions on that one spreadsheet. Plus, your transactions won't be confirmed until a majority of people verify your math. Brilliant!"
No, it's stupid. If I want to buy a hot dog in New York, why should that matter to a guy who wants to buy a newspaper in Los Angeles? Why does my financial transaction have to be intertwined with his while we both queue up on the same blockchain? It is absolutely one of the most profoundly inefficient ways of spending money that anyone could have possibly invented.
Or put it this way: the BTC network can handle about 604,800 transactions a day. Assuming the average person buys or sells something with BTC an average of 5 times a day, that means the network hits its limit with 120,960 users ... worldwide. And this is the financial system that is supposedly going to replace all fiat currencies? It's laughable.
Of course, Bitcoin supporters will claim that the network can always be scaled up in speed. But what they don't point out is how quickly bandwidth and disk space requirements will explode if this happens. For example, scaling the network up to 2000 transactions per second would result in a Bitcoin node downloading about 1 MB per second. No big deal, until you realize that means each node will need about 2.6 TB of bandwidth each month, and that's just to handle the needs of 10% of the population of the United States, assuming 5 transactions per person per day.
The numbers don't make sense, and never will. Modern economies are far too complex to operate in the serial fashion that a blockchain mandates. Bitcoin will never be more than a niche player in the world financial system.
Re:BTC != Napster (Score:4, Interesting)
very few built the bit coin mining network. it was all just hackers throwing cpu power at it. however it is to the point where it is no longer cost effective to throw CPU power at it as the # of coins you get is worth less than the power to run them.
The problem of bit coin isn't whether or not it is useful but of it breaking down.
There are 44 quadrillion potential bit coins(21 million to the 8th power), but at the rate at which they are being permanently lost is just as staggering. every time someone loses 1 coin due to a lost password, bad hard drive etc, you really lose 8 potential coins. Real world currencies don't have to deal with "bit rot" (pun unintentional) You lose the combo to a physical vault there are other ways of opening it. even if the physical cash is destroyed you can always print more to replace.
Once a bit coin is gone. it is gone forever. Lastly we are already having to do transactions in milibits. what do we call .0000001 of a bit coin? Bit coin value has to go up in order to compensate for the inflation of number of coins and % of coins . however that means today's laptop at 1 BTC is worth .5 BTC tomorrow. People are already getting annoyed by such things. Purchase a product for 1 bit coin and two months later that one bit coin is worth 10 times what it was. Bitcoin might be a transactional currency, but it won't ever be a stable one. it's very design prevents such a situation from lasting more than a couple of years.