Hi Art,

Great headline and opening description about the different kinds of Fiat money. I disagree with a few of your points on the Bitcoin protocol and the choices you see being available, although I very much agree with the conclusion of your argument.

  1. It isn’t Blockchains that are slow or fast, it depends on the clearing algorithm used. If we’re comparing Bitcoin’s clearing time to the speed of a SWIFT transfer, it’s way faster, but slower if we’re comparing them to Tap’n’Pay or Cash unless the POS has zero-confirmation approval like Bitpay. Ethereum’s clearing times are faster than Bitcoin’s, and Ripple’s are even faster than Ethereum’s.
  2. It is not the case that ,”it takes time to synchronize transactions between lots of copies of the same ledger, and the more copies, the harder it gets.”
    There is no increasing difficulty in synchronizing blocks in nodes as the size of the blockchain increases. It’s 1mb every 10 minutes which even bad data connections (like mine in Bali, Indonesia) can handle. The memory size does increase though, but as I have an old 160GB drive I’m using for the purpose of maintaining a node, that will last me a few more years unless there is a blocksize increase, at which time I’ll use another old hard drive for the job.
  3. It’s incorrect to state that “…the longer the blockchain grows, with the more tokens issued, the longer it takes for each peer to validate each transaction…” It does not take longer for Peers to validate blocks as the blockchain size grows. Peers share blocks of transactions that have been validated by miners through the network to Nodes. People making transactions rely on Nodes to help get their transactions into blocks faster, and help prevent 51% attacks by spreading valid copies of the blockchain around the world. In 2139, the year before no new coins are created, it will take just as long to propagate a block as it does now, assuming the protocol does not change.
  4. It is not the case that “…the blockchain requires majority consensus across many copies of a single a global ledger…” Once the proof of greatest effort has been proven by the peers and the block added to the blockchain and reward given to the miner, the block propagates through the network protocol as easily as updating a DNS change. Consensus is not required across all copies of all blockchains on all nodes, only between those competing on processing transactions to go into a block.

Although I agree that Bitcoin is a financial system, and a network of banks under a Central Bank is also a financial system, there are very different purposes. Satoshi Nakamoto and her/his team were not simply trying to recreate the existing system, they made a number of important changes to how currency is issued. Although it’s not the often-touted ideal of Mutual Credit, where the credit we grant to others and others to us becomes the money supply of the economy, it’s not “…exactly how banks do it.” Let’s not confuse financial system architectures with methods of money creation. Banks create money by issuing loans at debt with interest, Bitcoin issues money as an incentive to transaction-confirming computers, which reduces by half every 420,000 blocks until no new creation rewards are given and only transaction fees are charged.

The only reason we’re able to discuss and compare these systems, and not be conducting a post-mortem on how the Central Banks of the world annihilated Bitcoin, is due to the radically decentralized structure of Bitcoin, and yes, its power.

Therefore I disagree that it’s “useless computation”: proof-of-work is essential to Bitcoin’s existence, and that “we’ve just replaced an elite class of banksters, with an elite class of hacksters…” The scores of people who have contributed to Bitcoin’s open source code do not receive any direct compensation for their effort, and they do not receive any more structural power than anyone else. In fact, as we’ve seen recently, even core programmers can be punished collectively.

This doesn’t lead us to a choice between Chinese Bitcoin miners or the Banksters in a few ways, 1, technology is being developed (Bitcoin Unlimited .12) to level the mining playing field by giving miners outside of the Great Firewall of China faster access to completed blocks, and if blocks are stuffed full and the system starts to clog up, then it works against the miner’s interests, and they will turn to support a block size increase.

As fellow currency designers working in this field the past two decades and more, we’re both agreed on Bitcoin’s ability to “ignite people’s imagination about what is possible with decentralized currencies, data, and applications”, and I’ve been telling everyone I know about you and y/our team’s work with Ceptr.org because I think it’s where technological and social change is leading us.

Towards that end, we need to be correct about how Bitcoin works to form correct positions on where Bitcoin doesn’t work, (and there are areas where it doesn’t) so that they can be included into next generations of blockchain technology development leading towards Ceptr.

We also need to remember that financial systems do not like competition, and the Central Banks would have killed Bitcoin just as they have many other people-oriented monetary initiatives in the past. It’s the very robust and decentralized architecture of Bitcoin that has guaranteed its survival to the present with a fiat-exchange valuation of around 9 billion dollars.

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