I think the South Sea Company or tulip mania are good analogies.
The fundamentals of how it works can be changed. It is true that entrenched actors may dig in their heels and prevent it from changing, and so some other more fast moving cryptocurrency may take over. An alternative is a hard fork. I think it's possible that a hard fork that has figured out the "right way" will do better than a fresh cryptocurrency doing the right thing but from scratch, because by hard forking you don't have to convince everyone to bootstrap. I accept it may equally go the other way; we'll have to wait and see.
> Transactions cost too much, take too long, and require too much proof of work.
Let's see what the lightning network brings.
As for requiring too much proof of work, I think that's a fallacy. You're looking at it backwards. "Much" proof of work isn't required; that miners compete by providing it is a consequence of the current value of the block reward and transaction fees. Relatively little hash power is actually required to maintain the network. The reason the current hash rate is so high is because hash rate follows price rather than the other way round. The high value of the mining rewards has attracted many miners. In the future, when the block reward becomes zero and the lightning network has relieved congestion on the main blockchain, traders (actually probably just parties seeking clearing) won't have to bid against each other so hard in fees to get their transactions confirmed. Then transaction fees will drop, so the reward for finding the next block will also drop, unprofitable miners will leave, and so will the hash rate.
So: 1) transactions cost too much and take too long is currently true but if the lightning network effort succeeds then this will no longer be a problem; and 2) too much proof of work is not actually "required".
I agree. I did say that :)
The underlying _why_ for these "first movers" fail are not related at all since it's a totally different vertical.
The deflation and high transaction fees seem to favor btc bc miners wouldn't shift to somthing less profitable and those using btc as a value store profit from deflation long term.
I have faith in the overall Bitcoin architecture. Its greatest threat is a malicious actor taking over enough processing power to alter the blockchain.
I doubt that Bitcoin itself will be the dominant cryptocurrency due to the reasons I mentioned in my original post. These are two different issues and I appreciate your pointing that out.
https://torrentfreak.com/spotifys-beta-used-pirate-mp3-files...
These sites also cater to the leaks scene. Every single hot album to drop recently was leaked 24-72 hours before dropping on "official" sources like Spotify. This makes even those people that have Spotify accounts look for MP3s.
NB: Eternal September was in 1993, when Usenet went mainstream. Facebook, Twitter, etc weren't invented for another decade. Since then, they've both toppled dictators and elected a reality TV star to the Presidency. Change happens gradually, then suddenly.
Other than that minor detail, I generally agree with your comment.
That seems wrong. I'm not an accountant, but I have a damn hard time believing that accounting practices haven't changed significantly since the Italian Renaissance...
this is the currently-accepted way of doing accounting
Another way to think about it is with cars. Cars today bear no resemblance to what they looked like or were capable of when they were invented, but nothing around the core idea of putting an engine on wheels has changed. The airplane was different. (But so was the Segway)
Historically, being early on a new financial technology has rarely gone well for the participants.
There were large markets in car loan and commercial real estate mortgage CDOs that didn't see a crash anywhere near as large as that seen in residential real estate CDOs and construction loans, and that's because they were not subject to GSE loan guarantees and FDIC deposit guarantees, respectively.
New financial tech takes awhile to become popular enough to become dangerous. So while CDOs were invented in the late 80s, it wasn't until 2000 or so that they started to become a craze that lead to dangerous conditions.
The government through GSEs and FDIC did, as you say, constantly blow air into the housing bubble. CDOs were also a big compounding factor in that they were willing to back an enormous amount of low-interest high-risk loans. Exactly the loans which blew up.
I'm not sure that this now oft repeated meme isn't entirely misleading in regards to accounting. Accounting system audit trails have always been immutable in concept and design, and Bitcoin and block chain brings no change to double-entry accounting and current accounting principles.
In terms of general accounting systems, all block chain represents is a strong encryption based means of ensuring immutability of the audit trail - a feature simply not required.
That said, how fucking sci-fi is this?! Remember in the old games and novels how 'energy credits' would be a currency unit in the future. Well, looks like we are in the future then. Bitcoin is pretty much a 'baby' energy credit, it's also more than that, but it is an energy credit in a nascent way. I mean, that's pretty cool to teenager me.
We're not going to stay in that relatively narrow band for long though, with the growth of this thing. There's only so much "spare" on the grid, off-peak, and this whole thing relies on wasteful means of energy production, storage and transmission.
So on one hand (hopefully) the opportunity to scavenge for cheap CPU cycles is going to contract, while the market for bitcoin expands? Yikes.
> transaction fees that are charged to the customer by the Bitcoin network have skyrocketed this year,
topping out at close to $20 a transaction last week (compared to roughly $0.20 when we initially enabled Bitcoin).
On the other hand, the high valuation can only be justified by the expectation of it being a really good tool for transactions (or, alternatively, the greater fool theory) and becoming bad at transactions means it'll eventually become also a bad store of value; so a technical solution to transaction cost is highly needed.
Adam Ludwin, the CEO of Chain, talks about how when the dot-com bubble happened, everyone knew at least to an extent that online retail would be a thing. Social networks would be a thing. Digital media would be a thing. The required ingredients were competition, Moore's Law, and time.
Bitcoin is different for a few reasons. It doesn't solve economic problems for most people in developed countries. It's also a development far deeper in the technology stack, a change in ledger management and accounting procedures. The last major update to this was double entry in the Italian Renaissance, which allowed the formation of corporations. The one before that was the invention of zero.
We don't know what the implications of Bitcoin will be. I think a much better analogy for the current bubble is the South Sea Company, since that was essentially people speculating on a new asset class (equity) that was poorly understood at the time. But saying that it's a bad investment because the use cases are not immediately obvious misses the forest for the trees.