Bill Gates: Bitcoin Is 'Better Than Currency'

Bill Gates: Bitcoin Is 'Better Than Currency'(entrepreneur.com)

78 points by outrightfree 11 years ago | 46 comments

danbruc 11 years ago |

At the moment Bitcoin is not better than other currencies because it is a layer on top of existing currencies and their related infrastructure. Because almost nobody accepts Bitcoins there is a constant need to convert back and forth between Bitcoins and other currencies. While I really liked the idea of Bitcoin when it came into existence I now tend to believe that Bitcoin will die slowly because it does not solve any important problem for the average person. Anonymity is not important for almost all transactions. Relying on banks is not an issue for most people. Transaction are executed fast enough and are cheap enough in most cases. There is just not enough incentive to adopt Bitcoin.

forthefuture 11 years ago | |

This is especially true for online purchases. Right now the entire ecosystem of Amazon / Paypal with banking services directly linked or through credit / debit cards, works pretty flawlessly. You can buy anything on the internet immediately with real money linked to FDIC insured banks running through two huge easily trusted middlemen, with little to no setup other than having bank account.

brighton36 11 years ago | | |

You are clearly an American :) Also, Amazon would approximately double its profit if it were not forced to pay the 2% markup on credit card charges. And before you criticize coinbase for their 1% conversion fee circle is here with 0% :)

bobbyhotpockets 11 years ago |

I feel like bitcoin supporters, in talking about things like the convenience and simplicity of transactions, while not incorrect, are missing the critical issues that are going to determine bitcoin's fate.

If we look at bitcoin vs. US banknotes, a paypal balance, a pile of gold bars in a bunker, whatever, if we're looking at how bitcoin performs vs. all these things at the moment in time when we're transferring them to someone else, bitcoin is superior in every case. The problem is this window is brief. Non-transactional moments in the life of bitcoin is where the problem lies.

Looking at historic pricing of bitcoin, and seeing a peak at a little over $1k, what does the future price need to be for people to feel comfortable receiving bitcoins and just holding onto and forgetting about them, in the same way they could with, say, 100 bucks in their wallet? Being divisible down to 8 decimal places might rationally address the issue of how to spend something where the base unit costs as much as an Xbox. But even if bitcoin could somehow split at something like 300 or 500:1, to make a bitcoin roughly equal to a US dollar or a Euro, does that really solve the problem of perception? The historical chart, with the accelerated volume and insane swings in both directions, might never recede from the mind of the public.

I just have a hard time understanding what a path to acceptance as a legitimate currency looks like. Years of price stability would be a great start. But the beginning of that period hasn't even begun. In the past month alone, the price has moved by 30%, and daily volatility regularly sees the price change by 5%. I can sort of squint my eyes and imagine scenarios where bitcoin, the currency, wins. What I can't see is how bitcoin, the speculative investment, also does well. That these two things are at odds leads to other issues, too, but this is already unnecessarily long.

vobios 11 years ago | |

> I can sort of squint my eyes and imagine scenarios where bitcoin, the currency, wins. What I can't see is how bitcoin, the speculative investment, also does well. That these two things are at odds leads to other issues, too, but this is already unnecessarily long.

I don't think those two things are are necessarily at odds. Many people trade well-established currencies for investment purposes. Forex is bigger than futures or equities markets with USD as the most popular currency.

bobbyhotpockets 11 years ago | | |

The speculation and trading of bitcoin, if it succeeds as a currency is a given, I think. But right now, some of its most vocal/visible supporters view it as a long term, buy and hold investment, and not just as a hedge.

With equities, no matter how far a stock price declines, profit is still there to be returned to shareholders. Other currencies don't provide the same kind of guarantees, but the backing of governments and inertia might be more valuable. Once people grow concerned that the only thing propping up the long term value of bitcoin is the person next to them believing in it, a quick reversal of sentiment, with ugly consequences, seems likely.

hnnewguy 11 years ago |

“Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”

Yes, bitcoin has some specific traits that are superior to carrying wads of cash. Much like many other forms of digital exchange. This is not really news.

aaron-lebo 11 years ago | |

Yes, this is a horribly misleading title (from the article itself). "x is better than y [at a subset of things]" could be misused in so many ways.

It's tempting to completely ignore the article after seeing such a blatant distortion. However, there is some interesting stuff here.

> "Bitcoin is better than currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient."

So the first feature is already covered by any bank, or Paypal, or numerous other services. I don't understand the second, though...at what point does it become cost prohibitive to make large transactions? Gates is dealing with a totally different level of money than anyone here, so he must have some insight.

> “The customers we’re talking about aren’t trying to be anonymous,” he told Schatzker. “They’re willing to be known, so Bitcoin technology is key and you can add to it or you could build a similar technology where there’s enough attribution where people feel comfortable that this is nothing to do with terrorism or any type of money laundering.”

It sounds like Gates is talking about a system either used as the protocol between financial institutions or something akin to Paypal, without any anonymity. At this point I'm not sure what Bitcoin is doing better than a number of existing services, and if the ledger is public, then privacy is completely out the window (due to Gates suggesting that even the pseudoanonymity in Bitcoin is undesirable). At least with bank transactions I know only my bank and maybe the government can know my purchases. I don't want the whole world having access to that data.

fdsary 11 years ago |

I mean, anyone who ever used bitcoin will see how it's clearly superior than going to a bank office, getting an account, waiting days for it all to work out. And then transactions take a night (at least in the countries I've lived in).

Bitcoin transactions show up instantly. There's no need to a trusted middle man. Anyone I show it to is swooned, because it's simply really really cool.

zwegner 11 years ago |

I tend to shudder when people talk about bitcoin being "cheap". There's a massive amount of energy wasted to maintain the public ledger. It became much more clear to me how this impacts the cost of transacting bitcoins after reading this article: http://letstalkbitcoin.com/blog/post/how-many-bitcoins-does-...

...and particularly after seeing this graph: https://blockchain.info/charts/cost-per-transaction

I'm more excited about proof-of-stake, as there isn't this arms race to throw more and more computing power to generate bitcoins. I'm not sure why it hasn't seen more adoption, but I will admit that I don't pay a lot of attention to the cryptocurrency space...

jamoes 11 years ago | |

Proof-of-stake isn't being adopted because it simply doesn't solve the Byzayntine General's problem [1].

[1] http://download.wpsoftware.net/bitcoin/pos.pdf

zwegner 11 years ago | | |

Interesting, thanks. I see the problem, but this paper takes as a given that individuals can introduce transactions that tilt the system in their favor. I can't immediately see a solution to this, but I don't think it's necessarily impossible.

An additional problem I just thought of, however, is that there will be some number of stakeholders that leave the network, lose their keys, etc., and there is a chance that they are the only ones chosen to sign a given history extension. So there has to be some way to recover from this, while still being resistant to denial-of-service attacks.