Bitcoin's Revolution Is Over

Source:Pandodaily

Bitcoin's Radical Days Are Over. 
Here Is How to Make It Mainstream.

by David Wolman, WIRED

Done right, it could put small ecommerce sites on a level playing field with the likes of Amazon and Apple. Instead of running from Bitcoin, we should commandeer it from the radicals and make it work for the rest of us.

This cashlike quality largely results from Bitcoin’s fulfillment system. Picture a 19th-century shopkeeper’s ledger. Bitcoin works similarly, except that instead of the ledger sitting on one person’s desk, Bitcoin’s ledger—called the “block chain”—is distributed over the entire network. There’s a shared record of every Bitcoin-denominated transaction ever, with the user info concealed by encryption. So while all Bitcoin network activity is essentially public (to protect against double spending), identities are private.

t’s time to empower a central authority to help regulate Bitcoin as it grows. There’s already some precedent for such a move: Just this past summer, a group called the Digital Asset Transfer Authority formed to establish guidelines for digital currencies, including safeguards against money laundering. And leadership, despite all the rhetoric about decentralization, has already proven crucial to Bitcoin’s survival.

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Important Comment by Florian Bösch:

You still don't understand bitcoin in a few fundamental aspects, and that's inexcusable at this point.

Mining is the act of confirming transactions. Miners get rewarded for this activity in two ways, by the block reward and by the transaction fees. Currently the block reward is the majority of the compensation, but that is set to change in the next 4 years as the block reward tapers off, and, inevitably, transaction volume and fee goes up.

Mining isn't "inefficient". It's exactly as efficient as it needs to be. This is because it uses a concept called "proof of work". This is cruical to the security of the network as well as to the economic viability. Proof of work combined with the mining difficulty parameter, guarantees that nobody can credit themselves with infinite bitcoins out of thin air. It takes effort (the proof of work) to mine.

This is cruical because on the one hand, it incentivices miners to provide the network. Without miners, there wouldn't be a bitcoin network. Without a bitcoin network, the protocol would be useless. Mining also provides a certain fundamental value for bitcoin, because mining requires effort, i.e. expenses, it means that mining is an economic activity with expenses and profit. This is where the underlying value of bitcoin stems from.

Regarding a "central authority" for "price control". This would violate the principle that the network is self regulating. Because, it'd reqire creating bitcoins out of thin air. This would compromise the network, because miners couldn't trust that "authority", because miners have expenses, and they need to estimate those expenses far into the future to stay profitable. With a willy-nilly agency creating bitcoins out of thin air, mining would not be economically feasible, because at any time it can throw off your calculations of profitability. This would mean you end up controlling the price, but you've no longer got a network.

Bitcoin the protocol is useless without a network. And Bitcoin the currency is priced based on the trust and economics people place in that network. So if you create a central authority, you essentially destroyed bitcoin, completely.

But beyond that, it's not like there are no atlernative cryptocurrencies. There are countless, most of them clones of bitcoin with some variations. The matter of the fact is that, none of them are terribly popular, they're very much an excotic niche, and have remained to be that. The reason is that they either deviate too little from bitcoin as to make it seem worthwhile, or that they deviate so much that they're no longer bitcoin, and don't offer similar advantages.

And this is why you don't understand bitcoin, why you probably will never understand it, probably never write anything intelligble about it, and why your grand alternative schemes for some modified bitcoin that makes it "all work" are nothing but an uneducated pipedream.