5 stars based on
As cybercommerce begins it will lead inevitably to cyber-money. The hype surrounding Bitcoin has gone off the charts in the past year. Other enthusiasts think that Bitcoin is the ultimate solution for all payments. In my opinion as an interested party in the digital currency sector, the only thing that makes Bitcoin unique is triple entry accounting bitcoin news governments cannot shut it down.
However, this is not a feature that makes Bitcoin well suited as a mainstream retail payment system. It is a feature designed triple entry accounting bitcoin news the black market — not that I am necessarily opposed to the existence of black markets. All the other features of Bitcoin were done first by other people or companies, and in many cases done better. Todd Boyle s was first to explore public ledger accounting, and he and Ian Grigg independently originated the idea of triple entry accounting.
MPesa, a money system on the phones in Kenya, has the most users today. The market price of Bitcoin is telling us that freedom from financial coercion and control is far more valuable than anyone would have guessed. Bitcoin was presumably intended to be a dark-net for money, but venture capital firms and the Bitcoin Foundation are trying to dress it up and turn it into a mainstream payment system. In my opinion, Bitcoin, with one foot in both worlds, serves neither market very well.
Money transmitter licenses are very expensive to obtain. The high cost of government compliance has removed most of the competition from the payment services market and Balkanized the market, limiting financial services to certain countries. Banks, PayPal, Visa and Western Union are all triple entry accounting bitcoin news of the hierarchical central banking monopoly around the world. None of them can move money from point A to point B in real time or at low cost.
All of them charge high fees and deliver poor service. The result is a slow, bloated, inefficient, insecure and extremely expensive banking system, one that took us to the brink of economic collapse in and still threatens us today. Bitcoin is growing rapidly because it has low entry costs and transaction fees. Compared to the banks Bitcoin seems fast and cheap. If you invest money in trying to make Bitcoin a mainstream payment system, you may be confusing the things Bitcoin does no better than other digital currency systems payments, clearing, etcwhile missing triple entry accounting bitcoin news secret sauce that made Bitcoin what it is — freedom from coercion, which is freedom from government licensure and regulation.
That freedom comes with a different kind of cost. The governments shut down e-gold and similar systems by triple entry accounting bitcoin news the exchange agents. Now that the governments and central banks have noticed Bitcoin, we are seeing the same sort of regulatory attacks against Bitcoin exchanges in the USA, China, India, Taiwan and many other locales.
Anyone who invests in Bitcoin-related companies needs to understand that fact up front. You are investing in a system that only thrives because it is resistant to government control triple entry accounting bitcoin news means of low barrier to entry. It is only inexpensive because it is not paying for banking and money transmitter licenses, and because its costs are being paid for by mining rewards, which require increases in demand to offset them.
However, this benefit comes at a cost, as governments attack the fixed nodes in the network and bring them down. Bitcoin is pseudonymous, not anonymous. You have accounts rather than coins, per se. And account histories are preserved forever in the blockchain.
Your transaction log tells you who people have labelled themselves as triple entry accounting bitcoin news which is not necessarily who they really are. You can trace the stolen Bitcoins in the blockchain in the hopes of recovering it. However, it is much preferable not to have your money stolen or tricked out of your hands in the first place.
To do that you need a reliable identity verification and dispute resolution system. Incidentally, The Silk Road achieved reliability by using bonding instead of identity, showing there is more than one way to create a reliable user community. Bitcoin is the perfect Hell of a persistent history that is public and never goes away, yet it is not nymous enough to give you confidence that you are dealing with the person that you think triple entry accounting bitcoin news are.
The spate of IRS prosecutions that will come out of Bitcoin in five years is going to be terrible to behold. The blockchain is forever.
Bitcoin may be invulnerable to government control, but it fails to protect its users from government control. Bitcoin is not sufficiently anonymous to serve the needs of the triple entry accounting bitcoin news, but neither does it have an identity and dispute resolution model sufficient to serve the retail mass market. With one foot in both worlds, it is not the best solution triple entry accounting bitcoin news either. Zerocoin goes a step further than Bitcoin by truly anonymizing the transaction system.
Zerocoin was submitted to the Bitcoin Foundation for consideration triple entry accounting bitcoin news be added to the Bitcoin Protocol but after one year, nothing has happened. The rejection of Zerocoin is not surprising because the Bitcoin Foundation is furiously working to shed the black market reputation of Bitcoin. Bitcoin Foundation wants Bitcoin to become mainstream, legitimate and well-regulated.
However that defeats the primary strength of Bitcoin — it is accessible to all because it cannot be controlled. If you submit Bitcoin to regulation it will become triple entry accounting bitcoin news accessible and more expensive. Because they did not have the capital to build a global network of exchange agents themselves, and they were not willing to open up their system to third party exchange agents. We are already seeing the cost of regulatory compliant Bitcoin exchanges in the six week wait time for new users to get triple entry accounting bitcoin news at licensed exchanges like Kraken and Mt.
Regulation throttles usability, causes delays and increases costs. In light of the decision or non-decision not to incorporate Zerocoin into Bitcoin, Zerocoin has announced they will fork Bitcoin. Soon Zerocoin will be the newest alt-coin, but unlike the other Bitcoin clones, Zerocoin actually brings something new to the table. Zerocoin is the one technology on the field today that can improve on what Bitcoin does best — create a digital currency system that government cannot control.
I would not be surprised to see Zerocoin overtake Bitcoin as the preferred black market coin within three years. Banks and credit cards are settled once in a batch at the end of the day. RTGS systems allow high velocities of money, while banks are known for delays, delays, delays.
Bitcoin transactions cannot be verified in less than five minutes on average because the blockchain only allows one new block to be generated every ten minutes. And to be really settled, you need to wait for six or more block verifications, which takes one hour. This feature of Bitcoin is a byproduct of the proof of work and decentralized blockchain. So the tradeoff triple entry accounting bitcoin news a decentralized uncontrolled currency unit is being times slower than typical RTGS digital currency systems.
The fact that it is still faster than banks tells you how ridiculously inefficient the banking system is….
At the POS in most stores the time limit is 6 seconds. If your payment system does not enable the customer to make the payment and get final settlement in 6 seconds the management will not allow it in their store.
Bitcoin verification is 5 minutes minimum, so you can be certain that Bitcoin will never be used at the point of sale for high traffic stores. Exchange trading for any kind of financial instrument, commodity or other good are subject to market timing attacks, as detailed in this paper about market timing attacks. With its five minute latency, Bitcoin will never be suitable for exchange markets. Mass transit payments at toll booths or subway stations need to clear in less than one second — same story.
Exchange trading, retail POS and mass triple entry accounting bitcoin news are three applications it is not designed for. However, other digital currency systems can process transactions fast enough to serve these markets. Bitcoin is too slow to serve retail sales in the mass market because of the cost of its dark-net features. This situation will change once 21 million Bitcoins have been created and the blockchain reward falls to zero.
Once the Bitcoin mining reward falls to zero, the entire cost of Bitcoin mining transaction processing will have to be borne by transaction fees. So Bitcoin is not cheap, it just feels cheap because block rewards are currently covering the cost of mining transaction processing. Other digital currency systems like e-gold were able to issue precious metal contracts that were never diluted by inflation.
Their transaction fee was 0. People have need to trade many things, a universe of things. Money is simply one of the things they trade that is used as the poker chip for accounting the value of other things. Bitcoin welded the payment system bitcoin client to the issued value BTCso they are inseparable. However, people need to trade receipts for dollars, euros, gold, cereals, graphics cards, iPads, stock shares, bonds and lots of other things where commerce happens at a distance. We live in a world with over national currencies that are not going to go away in the next twenty years.
Online and on the street, stores need to accept transactions in a variety of currencies, especially outside of North America where countries are small and close together. Ventures are looking for ways to bring the world of altCoins together, and how to issue and trade financial instruments. Bitcoin lacks the flexibility to describe any other instrument but its own, though newer systems have made attempts.
This is the problem that Ian Grigg solved back in He built the first multi-instrument system that could operate without centralized control of the namespace and of the semantics of each issuance. Each can also be as expressive as one likes, there are no artifical limits imposed a failing of Ripple, which describes the currency in a block of hard-defined fields.
When investors look at digital markets, and digital payment systems that triple entry accounting bitcoin news these markets, they should ask themselves whether there is control over the issuance namespace, and whether the issuance contracts can support rich definitions of contract terms.
Bonds, for example, are very complicated little creatures. Bitcoin simply cannot support bond issuance and trading. Ricardo can and does. If your triple entry accounting bitcoin news is trading derivatives, there might be some concern if the derivatives are not easily expressed in all their richness. On the other hand if your goal is to benefit from the media attention in the space, and to be a first mover, then control may be your goal.
But that comes at the price of flexibility and power. Ultimately the system that supports the deepest ecosystem will win. Whatever happens, systems with the flexibility of multiple issuance such as Ricardo are more likely to become an international standard because they are also more capable of expressing complicated local regulatory situations.
They are more flexible than Bitcoin, settle faster, and allow for the multiverse of triple entry accounting bitcoin news and financial instruments that people use and trade in the real triple entry accounting bitcoin news. Bitcoin should be loved for what it does best — it cannot be controlled by the government.
It therefore enters best into markets where government control has raised the triple entry accounting bitcoin news too high.