Bitcoin's Value is Decentralization

http://paulbohm.com/bitcoin-decentralization/

by c3o • 15 years ago

78 32 15 years ago

paulbohm.com

dublinclontarf• 15 years ago

Distributed DNS is something that's being tried with namecoinds, not really taking off I think.

enki2• 15 years ago

author here: the cool part is that it's theoretically possible now. i have no idea whether it'll take off.

what do you think, are there gonna be sufficient incentives in the future to decentralize certain services?

_Lemon_• 15 years ago

> what do you think, are there gonna be sufficient incentives in the future to decentralize certain services?

You bring a very good point, one that I hadn't considered at all.

Although I'm not sure, I think the "work from at least 50% of honest nodes" is an issue. The more demand you have to create work for decentralised services, the more you split and weaken said services.

For example, if x is a major player with 33% of workin one decentralised system, they are more likely to have > 50% in smaller systems. So they would have power in smaller systems being able to usurp them at will.

One way around this would be to have a lot of players in each system, such that it would only be realistic to have a few % at a time (each). However, this again would most likely be undermined by any state actors who would ultimately be able to produce much more than anyone could if they wanted.

evanrmurphy• 15 years ago

Good thread on BitCoin-style distributed DNS: http://forum.bitcoin.org/?topic=1790.0

wibblenut• 15 years ago

DNS is distributed, so I think you meant to say decentralised?

But I'm baffled as to why anybody would want to use it? For it to become useful we'd need to go to the extraordinary lengths of replacing substantial infrastructure, at a very great cost - to replace proven technology that scales extremely well?

And it wouldn't surprise me if Harold Camping was mining Bitcoins on the church computer. The end is nigh!

weavejester2• 15 years ago

The DNS system is cached, but ultimately only has 13 roots. Additionally, governments can decide to cut off organisations they consider to be undesirable, and legislation like PROTECT IP would give similar power to private corporations as well.

Some might therefore consider it desirable to have a DNS system outside of this control to compliment the existing system.

drivebyacct2• 15 years ago

Wasn't this obvious? Wasn't this what everyone was saying when others were discussing the size of the economy and the size of transactions it could handle and threats from the government...

It's the first time people can actually truly freely trade without fear of monitoring or tracking. Of course that's its value.

mattmanser• 15 years ago

Huh? What was the author smoking when he wrote this as I want some!

jerf2• 15 years ago

The question isn't "Is BitCoin's value non-zero?" As a general critic, I freely say up front, yes, it's interesting and has some non-zero value. I won't even say I'm "admitting" it, because it was never my contention otherwise. But merely establishing that there is some aspect with a non-zero value isn't interesting. The question is, do the positives outweigh the negatives, and if so, do they outweigh them enough to fulfill the stated goals?

You can make anything look great by considering only the positives, you can make anything look terrible by only considering the negatives. The question at hand is about the balance, not whether BitCoin has any positives at all.

enki2• 15 years ago

Fully agree with your sentiment. Not trying to argue Bitcoin will succeed.

But it's very clear that it is interesting. It essentially solved globally consistent distributed naming and non-web-of-trust PKI on the side, and almost no one noticed.

llimllib• 15 years ago

I would say it sovled* gobally consistent distributed naming.

Where the asterisk means that it has not yet stood the test of time. It seems like a solution, but none of us should be quite sure yet that it actually works as advertised.

vladd• 15 years ago

I think you're confusing the Bitcoins' value with the value provided by the open source code implementation which has been open sourced.

The code can be forked and used to power another coin system, let's call it Webcoin, which will have the same properties. The cryptographic, decentralized and uniqueness properties are therefore a value of the code.

The value of Bitcoin is related to this specific implementation, i.e. the marketing that caused people to put their money in this specific fork of the code and permitted early adopters to cash in.

At some point in the future, a country might choose to use the code to power its own currency system and to back it with the economic activity performed within (which is taxed via taxation). That would give intrinsic value to the coins; today Bitcoins is just marketing implemented on top of a well-written open source decentralized code-base.

weavejester2• 15 years ago

There's also the block chain. Bitcoin is currently secured by a rather large amount of computing power, which makes it hard to double-spend. Any competing system would have to match this, which might be difficult unless you could somehow tempt miners away from Bitcoin.

jerf2• 15 years ago

"I think you're confusing the Bitcoins' value with the value provided by the open source code implementation which has been open sourced."

No... no, I don't think so. You seem to be using "value" as a synonym for "property", which is not at all how I meant it. I meant it as, errr, value. Both the code and the BitCoin network have positive entries on their value balance sheets, but I don't know that their total is positive, or that it will be positive enough to work.

_delirium• 15 years ago

This doesn't really follow:

> Bitcoins have intrinsic value if they enable desirable interactions that are not possible without them.

Yes, any fiat currency has the 'intrinsic' value of enabling some kinds of interactions that are not possible without them. For example, hard-to-counterfeit pieces of paper have an intrinsic value. The problem is that such things are often substitutable: the real value of most paper currencies comes, circularly, from the fact that we've decided to settle on this set of hard-to-counterfeit pieces of paper, not a different one. That's why it's fiat currency, because its value as currency fundamentally derives from the fact that people have agreed to use it as currency.

The same applies for Bitcoin; the general idea could be a good one, but Bitcoin is not the only possible implementation. If we settle on this implementation over others (perhaps because it was first), it is for reasons closer to fiat money than for reasons advocated by "hard money" proponents that they have value.

jzila• 15 years ago

I agree with you, but I think the spirit of the article is to acknowledge the value of bitcoin as a technical solution to a problem we thought was simply unsolvable.

It probably shouldn't have gone into the economic value of bitcoin specifically, since it doesn't address most of the economic arguments against bitcoins.

RockyMcNuts2• 15 years ago

can't help wondering how much of gold's value is derived from the fact that, circularly, people think it has value.

or for that matter, any human activity's.

william42• 15 years ago

It is. Gold's actually a particularly good example since its speculative value is much higher than its actual value.

ignifero2• 15 years ago

You implying that there are things that have intrinsic, non-(social|market)-determined monetary value?

hollerith• 15 years ago

>the real value of most paper currencies comes, circularly, from the fact that we've decided to settle on this set of hard-to-counterfeit pieces of paper, not a different one.

We can get more specific than this. US citizens use the US dollar because the law says that US taxes must be paid in dollars and because whenever a credible competitor to the dollar has arisen (like the use of casino chips in Las Vegas) the US Secret Service shuts it down.

Steko• 15 years ago

Given recent events I take it we're no longer emphasizing stability and security as features of bitcoin. I jest, clearly decentralization is the new killer feature. Money quote:

"Bitcoin makes it feasible to pay for internet relays that anonymize or reroute traffic - that is, it makes it easier to remove central control and fight censorship"

And who doesn't want to fight censorship amirite? Surely there are no negative repercussions to letting people reroute traffic anonymously.

bdhe• 15 years ago

Given recent events I take it we're no longer emphasizing stability and security as features of bitcoin.

I understand where such a snarky statement comes from, but let's take a step back. Bitcoin has generate such enormous debate because it is not clear to anyone---security researchers, economists, or otherwise---what Bitcoin entails. It has some desirable properties, some undesirable properties, and has, imho, made people think a lot about the concept of fiat currency and how to go about extending the advantages paper currency has to the "digital domain" (and I use that phrase loosely).

I think it is great that lot of people are looking at Bitcoin in many different angles and since this is the first of its kind, I am sure people and society (including governments) will learn from pitfalls (security, economics or otherwise) to build a better system tomorrow. So let's not attack people who are trying to explore what Bitcoin gives us and what it doesn't.

sbov• 15 years ago

Their method of decentralization seems pretty costly though, and that cost will not abate over time, since the costliness is what makes it work. If widely adopted, I don't look forward to the day when a large percentage of all computing resources in the world is spent meaninglessly churning bits in the name of a decentralized system.

sehugg• 15 years ago

Agreed, and since it seems that the price of bitcoins will converge to the average cost of computing bitcoins, won't the ones with an economic advantage will either be those with efficient hardware/software or those with free computing resources (botnet operators)?

DavidSJ3• 15 years ago

the price of bitcoins will converge to the average cost of computing bitcoins

Actually, it's the other way around. Since rate of supply is fixed by the protocol, the cost of producing that supply has no influence on the price.

But the price does have an influence on how much the suppliers are willing to pay. Hence total bitcoin computation power follows price (with a delay due to time to acquire new hardware or repurpose existing hardware).

DavidSJ3• 15 years ago

Every market has friction and costs associated with its security. This is fundamentally no different than a bank hiring a security guard. If someone comes up with a solution to this problem which lacks this cost, it would of course be preferable, but no one has yet done so.

RockyMcNuts2• 15 years ago

So... if I want to settle a $40b transaction, like a big merger, in <24h with bitcoins, assuming the level of fragmentation you could expect if bitcoins became ubiquitous in everyday transactions, what kind of server farm are we talking about?

Bitcoin's Value is Decentralization

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